Johnson Controls 2014 Annual Report Download - page 79

79
Volume Outstanding as of
Commodity Units September 30, 2014 September 30, 2013
Copper Pounds 9,536,000 14,705,000
Lead Metric Tons 5,200 23,900
Aluminum Metric Tons — 2,709
Tin Metric Tons 2,070 2,052
The Company selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans,
such as its deferred compensation plans. These equity compensation liabilities increase as the Company’s stock price increases
and decrease as the Company’s stock price decreases. In contrast, the value of the swap agreement moves in the opposite direction
of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. As of September 30, 2014 and 2013,
the Company had hedged approximately 4.4 million shares of its common stock.
The Company selectively uses interest rate swaps to reduce market risk associated with changes in interest rates for its fixed-rate
notes. As fair value hedges, the interest rate swaps and related debt balances are valued under a market approach using publicized
swap curves. Changes in the fair value of the swap and hedged portion of the debt are recorded in the consolidated statements of
income. In the second quarter of fiscal 2011, the Company entered into a fixed to floating interest rate swap totaling $100 million
to hedge the coupon of its 5.8% notes which matured November 2012, two fixed to floating interest rate swaps totaling $300
million to hedge the coupon of its 4.875% notes which matured September 2013 and five fixed to floating interest rate swaps
totaling $450 million to hedge the coupon of its 1.75% notes matured March 2014. In the fourth quarter of fiscal 2013, the Company
entered into a fixed to floating interest rate swap totaling approximately $125 million to hedge the coupon of its 7.70% notes
maturing March 2015 and four fixed to floating interest rate swaps totaling $800 million to hedge the coupon of its 5.50% notes
maturing January 2016. In the third quarter of fiscal 2014, the Company entered into four fixed to floating interest rate swaps
totaling $400 million to hedge the coupon of its 2.6% notes maturing December 2016, three fixed to floating interest rate swaps
totaling $300 million to hedge the coupon of its 1.4% notes maturing November 2017 and one fixed to floating interest rate swap
totaling $150 million to hedge the coupon of its 7.125% notes maturing July 2017. There were thirteen interest rate swaps outstanding
as of September 30, 2014 and ten interest rate swaps outstanding as of September 30, 2013.
In September 2005, the Company entered into three forward treasury lock agreements to reduce the market risk associated with
changes in interest rates associated with the Company’s anticipated fixed-rate note issuance to finance the acquisition of York
International Corp. (cash flow hedge). The three forward treasury lock agreements, which had a combined notional amount of
$1.3 billion, fixed a portion of the future interest cost for 5-year, 10-year and 30-year notes. The fair value of each treasury lock
agreement, or the difference between the treasury lock reference rate and the fixed rate at time of note issuance, is amortized to
interest expense over the life of the respective note issuance. In January 2006, in connection with the Company’s debt refinancing,
the three forward treasury lock agreements were terminated.
The following table presents the location and fair values of derivative instruments and hedging activities included in the Company’s
consolidated statements of financial position (in millions):