What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2023-02-01 · 338 added, 149 removed, 830 unchanged (37% of the section changed)

4 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Products and systems $ 5,083 $ 4,617 $ 9,639 $ 9,037

Services 1,603 1,481 3,115 2,923

6,686 6,098 12,754 11,960

Cost of sales

1 unchanged sentence

Services 929 847 1,793 1,665

4,445 4,141 8,422 8,112

Gross profit 2,241 1,957 4,332 3,848

16 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Net income $ 174 $ 52 $ 330 $ 471

Other comprehensive income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 10 ( 16 ) 100 70

Realized and unrealized gains (losses) on derivatives ( 17 ) 7

Realized and unrealized gains on derivatives 20 10 3 17

Pension and postretirement plans — ( 1 ) ( 1 ) ( 2 )

Other comprehensive income 72 92

Other comprehensive income (loss) 30 ( 7 ) 102 85

Total comprehensive income 204 45 432 556

1 unchanged sentence

Net income 41 41 79 79

Other comprehensive income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 11 ( 10 ) 42 ( 8 )

Realized and unrealized gains (losses) on derivatives 1 1 ( 5 ) 4

Other comprehensive income 25 5

Other comprehensive income (loss) 12 ( 9 ) 37 ( 4 )

Comprehensive income attributable to noncontrolling interests 53 32 116 75

4 unchanged sentences

(in millions, except par value;

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Cash and cash equivalents $ 1,975 $ 2,031

42 unchanged sentences

(in millions;

Three Months Ended December 31,

Six Months Ended March 31,

Operating Activities of Continuing Operations

2 unchanged sentences

Net income 330 471

Adjustments to reconcile net income to cash provided (used) by operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 409 432

13 unchanged sentences

Accrued income taxes 60 ( 68 )

Cash provided (used) by operating activities from continuing operations ( 296 ) 392

Cash provided by operating activities from continuing operations 18 324

Investing Activities of Continuing Operations

3 unchanged sentences

Business divestitures, net of cash divested — 16

Changes in long-term investments ( 3 ) 2

Other - net 2 1

Cash used by investing activities from continuing operations ( 314 ) ( 332 )

Financing Activities of Continuing Operations

Increase in short-term debt - net 267 394

Increase in long-term debt 154 —

Net proceeds from borrowings with maturities less than three months 1,288 1,517

Proceeds from debt 316 544

Repayments of debt ( 536 ) ( 2 )

Stock repurchases and retirements ( 247 ) ( 1,035 )

1 unchanged sentence

Employee equity-based compensation withholding taxes ( 32 ) ( 49 )

Dividends paid to noncontrolling interests ( 72 ) ( 118 )

Other - net 26 17

Cash provided (used) by financing activities from continuing operations 9 ( 357 )

Cash provided by financing activities from continuing operations 262 444

Discontinued Operations

2 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash 8 46

Decrease in cash, cash equivalents and restricted cash ( 490 ) ( 120 )

Increase (decrease) in cash, cash equivalents and restricted cash ( 26 ) 478

Cash, cash equivalents and restricted cash at beginning of period 2,066 1,342

7 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Shareholders' Equity Attributable to Johnson Controls

26 unchanged sentences

Comprehensive income attributable to noncontrolling interests 53 32 116 75

Dividends attributable to noncontrolling interests ( 62 ) ( 121 ) ( 62 ) ( 121 )

Change in noncontrolling interest share — — — 7

5 unchanged sentences

Notes to Consolidated Financial Statements

December 31, 2022

March 31, 2023

Basis of Presentation

4 unchanged sentences

These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2022 filed with the SEC on November 15, 2022.

The results of operations for the three month period ended December 31, 2022 are not necessarily indicative of results for the Company’s 2023 fiscal year because of seasonal and other factors.

The results of operations for the three and six month periods ended March 31, 2023 are not necessarily indicative of results for the Company’s 2023 fiscal year because of seasonal and other factors.

Nature of Operations

14 unchanged sentences

Restricted cash relates to amounts restricted for payment of asbestos liabilities and certain litigation and environmental matters.

Restricted cash is recorded within other current assets in the consolidated statements of financial position and totaled $ 67 million and $ 35 million at December 31, 2022 and September 30, 2022, respectively.

Restricted cash is recorded primarily within other current assets in the consolidated statements of financial position and totaled $ 65 million and $ 35 million at March 31, 2023 and September 30, 2022, respectively.

Johnson Controls International plc

Notes to Consolidated Financial Statements

December 31, 2022

March 31, 2023

Prior Period Revision – Statement of Cash Flows

The Company revised the amounts previously reported as net proceeds from borrowings with maturities less than three months and proceeds from debt for certain short-term debt transactions that were incorrectly presented on a net basis within the financing activities section of the consolidated statements of cash flows for the six months ended March 31, 2022.

Interim and annual amounts for the year ended September 30, 2022 and annual amounts for the years ended September 30, 2021 and 2020 were similarly impacted.

Prior period amounts will be revised with future Quarterly Reports on Form 10-Q and Annual Report on Form 10-K filings.

Cash provided by financing activities and the total increase (decrease) in cash, cash equivalents and restricted cash were unchanged for all affected periods.

The Company does not believe the impact of incorrect presentation is material to any periods.

New Accounting Standards

8 unchanged sentences

Acquisitions and Divestitures

During the first quarter of fiscal 2023, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $ 105 million, of which $ 79 million was paid as of December 31, 2022.

During the first six months of fiscal 2023, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $ 115 million, of which $ 89 million was paid as of March 31, 2023.

In connection with the acquisitions, the Company recorded goodwill of $ 53 million within the Global Products segment and $ 14 million within the Building Solutions EMEA/LA segment.

The Company completed no divestitures during the first quarter of fiscal 2023.

During the first quarter of fiscal 2022, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $ 142 million, of which $ 108 million was paid as of December 31, 2021.

In connection with the acquisitions, the Company recorded goodwill of $ 45 million within the Building Solutions Asia Pacific segment, $ 20 million within the Building Solutions North America segment, $ 19 million within the Building Solutions EMEA/LA segment and $ 10 million within the Global Products segment.

During the first quarter of fiscal 2022, the Company completed a divestiture within the Buildings Solutions EMEA/LA segment.

The selling price, net of cash divested, was $ 18 million, of which $ 16 million was received as of December 31, 2021.

The Company completed no divestitures during the first six months of fiscal 2023.

During the first six months of fiscal 2022, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $ 160 million, of which $ 124 million was paid as of March 31, 2022.

In connection with the acquisitions, the Company recorded goodwill of $ 45 million within the Building Solutions Asia Pacific segment, $ 24 million within the Building Solutions North America segment and $ 29 million within the Building Solutions EMEA/LA segment.

During the first six months of fiscal 2022, the Company completed a divestiture within the Buildings Solutions EMEA/LA segment.

The selling price, net of cash divested, was $ 18 million, of which $ 16 million was received as of March 31, 2022.

In connection with the divestiture, the Company reduced goodwill by $ 5 million.

Acquisitions and divestitures were not material individually or in the aggregate in the first quarter of fiscal 2023 or 2022.

Assets and Liabilities Held for Sale

During fiscal 2022, the Company determined that its Global Retail business within its Building Solutions North America, Building Solutions Asia Pacific and Building Solutions EMEA/LA segments and a business within the Building Solutions Asia Pacific segment both met the criteria to be classified as held for sale.

The assets and liabilities of both businesses are presented as held for sale in the consolidated statements of financial position as of December 31, 2022 and September 30, 2022.

Assets and liabilities held for sale are recorded at the lower of carrying value or fair value, less costs to sell in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets".

The carrying amount of any assets, including goodwill, that are part of the disposal group, but not in the scope of ASC 360-10, are tested for impairment under the relevant guidance prior to measuring the disposal group at fair value, less cost to sell.

During the three months ended December 31, 2022, the Company recorded impairment charges primarily due to reductions in the estimated fair values for the Global Retail business of $ 228 million and for the business in the Building Solutions Asia Pacific of $ 60 million.

All of the impairments were recorded within restructuring and impairment costs in the consolidated statements of income.

Acquisitions and divestitures were not material individually or in the aggregate during the first six months of fiscal 2023 or 2022.

Johnson Controls International plc

Notes to Consolidated Financial Statements

December 31, 2022

March 31, 2023

Assets and Liabilities Held for Sale

The assets and liabilities of both businesses are presented as held for sale in the consolidated statements of financial position as of March 31, 2023 and September 30, 2022.

Assets and liabilities held for sale are recorded at the lower of carrying value or fair value, less costs to sell in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets." The carrying amount of any assets, including goodwill, that are part of the disposal group, but not in the scope of ASC 360-10, are tested for impairment under the relevant guidance prior to measuring the disposal group at fair value, less cost to sell.

During the three and six months ended March 31, 2023, the Company recorded impairment charges for the Global Retail business of $ 210 million and $ 438 million, respectively.

During the three and six months ended March 31, 2023, the Company recorded impairment charges for a business in the Building Solutions Asia Pacific segment of $ 0 and $ 60 million, respectively.

The impairment charges were primarily due to reductions in the estimated fair values of the businesses to be disposed as a result of ongoing negotiations with potential buyers and were recorded within restructuring and impairment costs in the consolidated statements of income.

The divestiture of the businesses held for sale could result in a gain or loss on sale to the extent the ultimate selling prices differ from the current carrying value of the net assets recorded, which could be material.

2 unchanged sentences

The following table summarizes the carrying value of the Global Retail assets and liabilities held for sale (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Accounts receivable - net $ 242 $ 199

14 unchanged sentences

Noncurrent liabilities held for sale $ 58 $ 61

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Revenue Recognition

1 unchanged sentence

The following tables present the Company's revenues disaggregated by segment and by Products & Systems and Services revenue (in millions):

Three Months Ended December 31,

Three Months Ended March 31,

Products & Systems Services Total Products & Systems Services Total

4 unchanged sentences

Total $ 5,083 $ 1,603 $ 6,686 $ 4,617 $ 1,481 $ 6,098

Johnson Controls International plc

Notes to Consolidated Financial Statements

December 31, 2022

Six Months Ended March 31,

Products & Systems Services Total Products & Systems Services Total

Building Solutions North America $ 3,005 $ 1,882 $ 4,887 $ 2,642 $ 1,737 $ 4,379

Building Solutions EMEA/LA 1,134 872 2,006 1,080 837 1,917

Building Solutions Asia Pacific 952 361 1,313 949 349 1,298

Global Products 4,548 — 4,548 4,366 — 4,366

Total $ 9,639 $ 3,115 $ 12,754 $ 9,037 $ 2,923 $ 11,960

The following table presents further disaggregation of Global Products segment revenues by product type (in millions):

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

HVAC $ 1,757 $ 1,658 $ 3,197 $ 3,141

3 unchanged sentences

Contract Balances

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed and consist of unbilled receivables and costs in excess of billings.

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed.

Contract liabilities relate to customer payments received in advance of satisfaction of performance obligations under the contract.

Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

The following table presents the location and amount of contract balances in the Company's consolidated statements of financial position (in millions):

Location of contract balances December 31, 2022 September 30, 2022

Location of contract balances March 31, 2023 September 30, 2022

Contract assets - current Accounts receivable - net $ 2,026 $ 2,020

2 unchanged sentences

Contract liabilities - noncurrent Other noncurrent liabilities 292 282

For the three months ended December 31, 2022 and 2021, the Company recognized revenue of $ 846 million and $ 751 million, respectively, that was included in the beginning of period contract liability balance.

For the three months ended March 31, 2023 and 2022, the Company recognized revenue of $ 319 million and $ 308 million, respectively, that was included in the beginning of period contract liability balance.

For the six months ended March 31, 2023 and 2022, the Company recognized revenue of $ 1,165 million and $ 1,059 million, respectively, that was included in the beginning of period contract liability balance

Performance Obligations

6 unchanged sentences

The timing of satisfying the performance obligation is typically stipulated by the terms of the contract.

As of December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 18.4 billion, o f which approximatel y 65 % is ex pected to be recognized as revenue over the next two years .

As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 18.8 billion, of which approximately 65 % is expected to be recognized as revenue over the next two years .

The remaining performance obligations expected to be recognized in revenue beyond two years primarily relate to large, multi-purpose contracts to construct hospitals, schools and other governmental buildings, which include services to be performed over the building's lifetime, with initial contract terms of 25 to 35 years.

Future contract modifications could affect both the timing and the amount of the remaining performance obligations.

The Company excludes the value of remaining performance obligations for contracts with an original expected duration of one year or less.

Johnson Controls International plc

Notes to Consolidated Financial Statements

December 31, 2022

The Company excludes the value of remaining performance obligations for service contracts with an original expected duration of one year or less.

Costs to Obtain or Fulfill a Contract

3 unchanged sentences

The following table presents the location and amount of costs to obtain or fulfill a contract recorded in the Company's consolidated statements of financial position (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Other current assets $ 154 $ 139

1 unchanged sentence

Total $ 354 $ 313

For the three months ended December 31, 2022 and 2021, the Company recognized amortization expense of $ 61 million, and $ 50 million related to costs to obtain or fulfill a contract.

There were no impairment losses recognized in the three months ended December 31, 2022 and 2021.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

During the three months ended March 31, 2023 and 2022, the Company recognized amortization expense of $ 61 million and $ 47 million, respectively, related to costs to obtain or fulfill a contract.

During the six months ended March 31, 2023 and 2022, the Company recognized amortization expense of $ 122 million and $ 97 million, respectively, related to costs to obtain or fulfill a contract.

There were no impairment losses recognized in the three and six months ended March 31, 2023 and 2022.

Accounts Receivable

2 unchanged sentences

Sales of accounts receivable are reflected as a reduction of accounts receivable in the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows.

The Company sold $ 409 million and $ 134 million of accounts receivable under these factoring agreements during the three months ended December 31, 2022 and 2021, respectively.

The Company sold $ 427 million and $ 836 million of accounts receivable under these factoring agreements during the three and six months ended March 31, 2023, respectively.

The Company sold $ 234 million and $ 368 million of accounts receivable under these factoring agreements during the three and six months ended March 31, 2022, respectively.

The cost of factoring such receivables was not material.

Previously sold receivables still outstanding were $ 384 million and $ 476 million as of December 31, 2022 and September 30, 2022, respectively.

Previously sold receivables still outstanding were $ 402 million and $ 476 million as of March 31, 2023 and September 30, 2022, respectively.

Inventories consisted of the following (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Raw materials and supplies $ 1,215 $ 1,009

4 unchanged sentences

The changes in the carrying amount of goodwill in each of the Company’s reportable segments were as follows (in millions):

Three Months Ended December 31, 2022

Six Months Ended March 31, 2023

Building Solutions North America Building Solutions EMEA/LA Building Solutions Asia Pacific Global Products Total

3 unchanged sentences

Acquisitions (1)

Impairments — — — ( 184 ) ( 184 )

Foreign currency translation and other 8 183 53 102 346

Balance at end of period $ 8,979 $ 1,924 $ 1,169 $ 5,487 $ 17,559

(1) Includes measurement period adjustments

The Company tests goodwill for impairment annually as of July 31 or more frequently if events or changes in circumstances indicate the asset might be impaired.

There were no triggering events requiring an impairment assessment be conducted in the three months ended December 31, 2022.

In the second quarter of fiscal 2023, management completed an updated comprehensive review of the Silent-Aire reporting unit, including its current quarter results and its nearer term

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Due to current quarter results being lower than its business plan, and the nearer term forecast being revised to reflect lower margins and earnings, the Company determined a triggering event had occurred and a quantitative test of goodwill for possible impairment was necessary.

As a result of the goodwill impairment test, the Company recorded a non-cash impairment charge of $ 184 million within restructuring and impairment costs in the consolidated statements of income in the second quarter of fiscal 2023, which was determined by comparing the carrying amount of the reporting unit to its fair value.

The Silent-Aire reporting unit has no remaining goodwill balance as of March 31, 2023.

The Company used a discounted cash flow model to estimate the fair value of the reporting unit.

The primary assumptions used in the model were management's internal projections of future cash flows, the weighted-average cost of capital and the long-term growth rate, which are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." There were no other triggering events requiring an impairment assessment be conducted in the six months ended March 31, 2023.

However, it is possible that future changes in circumstances would require the Company to record additional non-cash impairment charges.

The Company’s other intangible assets, primarily from business acquisitions, consisted of (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Amount Accumulated

11 unchanged sentences

Total intangible assets $ 7,161 $ ( 2,528 ) $ 4,633 $ 6,939 $ ( 2,298 ) $ 4,641

Amortization of other intangible assets included within continuing operations for the three-month periods ended December 31, 2022 and 2021 was $ 104 million and $ 118 million, respectively.

Amortization of other intangible assets for the three-month periods ended March 31, 2023 and 2022 was $ 104 million and $ 106 million, respectively.

Amortization of other intangible assets for the six month periods ended March 31, 2023 and 2022 was $ 208 million and $ 224 million, respectively.

The Company tests indefinite-lived intangible assets for impairment annually as of July 31 or more frequently if events or changes in circumstances indicate the asset might be impaired.

There were no triggering events requiring that an impairment assessment be conducted in the three months ended December 31, 2022.

There were no triggering events requiring that an impairment assessment be conducted in the six months ended March 31, 2023.

However, it is possible that future changes in circumstances would require the Company to record additional non-cash impairment charges.

The following table presents supplemental consolidated statement of financial position information (in millions):

Location of lease balances December 31, 2022 September 30, 2022

Location of lease balances March 31, 2023 September 30, 2022

Operating lease right-of-use assets Other noncurrent assets

2 unchanged sentences

Operating lease liabilities - noncurrent Other noncurrent liabilities

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

The following table presents supplemental noncash operating lease activity, excluding leases acquired in business combinations (in millions):

Three Months Ended

Six Months Ended

Right-of-use assets obtained in exchange for operating lease liabilities $ 215 $ 152

Debt and Financing Arrangements

As of December 31, 2022, the Company had a syndicated $ 2.5 billion committed revolving credit facility, which is scheduled to expire in December 2024, and a syndicated $ 500 million committed revolving credit facility, which is scheduled to expire in November 2023.

As of December 31, 2022, there were no draws on the facilities.

In October 2022, the Company repaid a € 200 million ($ 196 million as of September 30, 2022) term loan with an interest rate of EURIBOR plus 0.5 % and entered into a € 150 million ($ 161 million as of December 31, 2022) term loan with an interest rate of EURIBOR plus 0.7 % which is due in April 2024.

The Company had $ 715 million and $ 172 million of commercial paper outstanding as of December 31, 2022 and September 30, 2022, respectively.

Short-term debt consisted of the following (in millions):

March 31, September 30,

Bank borrowings $ 20 $ 10

Commercial paper 1,554 172

Term loans 163 487

$ 1,737 $ 669

Weighted average interest rate on short-term debt outstanding 2.9 % 0.5 %

As of March 31, 2023, the Company had a syndicated $ 2.5 billion committed revolving credit facility, which is scheduled to expire in December 2024, and a syndicated $ 500 million committed revolving credit facility, which is scheduled to expire in November 2023.

As of March 31, 2023, there were no draws on the facilities.

Financing Activity

In October 2022, the Company repaid a € 200 million ($ 196 million as of September 30, 2022) term loan with an interest rate of EURIBOR plus 0.5 % and entered into a € 150 million ($ 163 million as of March 31, 2023) term loan with an interest rate of EURIBOR plus 0.7 % which is due in April 2024.

In January 2023, the Company repaid $ 32 million of outstanding 4.625 % Notes due 2023.

In March 2023, the Company repaid a € 150 million ($ 147 million as of September 30, 2022) term loan with an interest rate of 0.0 %, repaid a € 135 million ($ 133 million as of September 30, 2022) term loan with an interest rate of EURIBOR plus 0.5 % and entered into a € 150 million ($ 163 million as of March 31, 2023) term loan with an interest rate of EURIBOR plus 0.4 % which is due March 2024.

Net Financing Charges

1 unchanged sentence

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Interest expense, net of capitalized interest costs $ 71 $ 56 $ 140 $ 111

3 unchanged sentences

Net financing charges $ 71 $ 51 $ 138 $ 104

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Derivative Instruments and Hedging Activities

12 unchanged sentences

As cash flow hedges under ASC 815, "Derivatives and Hedging," hedge gains or losses due to changes in fair value are initially recorded as a component of accumulated other comprehensive income (loss) ("AOCI") and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings.

These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates during the three months ended December 31, 2022 and 2021.

These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates during the three and six months ended March 31, 2023 and 2022.

The Company had the following outstanding contracts to hedge forecasted commodity purchases (in metric tons):

Volume Outstanding as of

Commodity December 31, 2022 September 30, 2022

Commodity March 31, 2023 September 30, 2022

Copper 3,810 3,629

Aluminum 9,722 6,758

In March 2023, the Company entered into two forward-starting interest rate swaps with a combined notional amount of € 200 million to reduce the market risk associated with changes in interest rates on future potential debt issuances.

The interest rate swaps are designated as cash flow hedges.

If notes are issued, the fair value of each interest rate swap, which is the difference between the swap's reference rate and the fixed rate when the notes are issued, will be amortized to interest expense over the life of the respective note issuance.

Net Investment Hedges

2 unchanged sentences

The currency effects of the debt obligations are reflected in AOCI attributable to Johnson Controls ordinary shareholders where they offset currency gains and losses recorded on the Company's net investments globally.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

The following table summarizes net investment hedges (in billions):

December 31, September 30,

March 31, September 30,

Euro-denominated bonds designated as net investment hedges in Europe € 2.9 € 2.9

8 unchanged sentences

Designated as Hedging Instruments under ASC 815

December 31, September 30, December 31, September 30,

March 31, September 30, March 31, September 30,

2023 2022 2023 2022

1 unchanged sentence

Foreign currency exchange derivatives $ 23 $ 30 $ 5 $ 24

Interest rate swaps 5 — — —

Commodity derivatives 3 — — —

14 unchanged sentences

The Company has not elected to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

The Company's derivative contracts do not contain any credit risk related contingent features and do not require collateral or other security to be furnished by the Company or the counterparties.

3 unchanged sentences

Fair Value of Assets Fair Value of Liabilities

December 31, September 30, December 31, September 30,

March 31, September 30, March 31, September 30,

2023 2022 2023 2022

5 unchanged sentences

Derivatives in ASC 815 Cash Flow

Hedging Relationships Three Months Ended December 31,

Hedging Relationships Three Months Ended March 31, Six Months Ended March 31,

2023 2022 2023 2022

Foreign currency exchange derivatives $ 9 $ 10 $ ( 12 ) $ 23

Interest rate swaps 5 — 5 —

Commodity derivatives 3 6 7 4

2 unchanged sentences

Derivatives in ASC 815 Cash Flow Hedging Relationships Location of Gain (Loss) Reclassified from AOCI into Income Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Foreign currency exchange derivatives Cost of sales $ ( 5 ) $ 6 $ 4 $ 11

2 unchanged sentences

Total $ ( 7 ) $ 5 $ ( 4 ) $ 5

The following table presents the location and amount of pre-tax gains on derivatives not designated as hedging instruments recognized in the Company’s consolidated statements of income (in millions):

The following table presents the location and amount of pre-tax gains (losses) on derivatives not designated as hedging instruments recognized in the Company’s consolidated statements of income (in millions):

Derivatives Not Designated as Hedging Instruments under ASC 815 Location of Gain

Recognized in Income on Derivative Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Foreign currency exchange derivatives Cost of sales $ ( 6 ) $ ( 3 ) $ ( 8 ) $ 7

2 unchanged sentences

Total $ 9 $ ( 8 ) $ ( 72 ) $ 94

Pre-tax gains (losses) on net investment hedges recorded as foreign currency translation adjustments ("CTA") within other comprehensive income (loss) were $( 269 ) and $ 73 million for the three months ended December 31, 2022 and 2021, respectively.

No gains or losses were reclassified from CTA into income during the three months ended December 31, 2022 and 2021.

Pre-tax gains (losses) on net investment hedges recorded as foreign currency translation adjustments ("CTA") within other comprehensive income (loss) were $( 60 ) million and $ 50 million for the three months ended March 31, 2023 and 2022, respectively.

Pre-tax gains (losses) on net investment hedges recorded as foreign currency translation adjustments ("CTA")

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

within other comprehensive income (loss) were $( 329 ) million and $ 123 million for the six months ended March 31, 2023 and 2022, respectively.

No gains or losses were reclassified from CTA into income during the three and six months ended March 31, 2023 and 2022.

Fair Value Measurements

6 unchanged sentences

When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Recurring Fair Value Measurements

1 unchanged sentence

Fair Value Measurements Using:

December 31, 2022 Quoted Prices

March 31, 2023 Quoted Prices

(Level 1) Significant

2 unchanged sentences

Foreign currency exchange derivatives $ 28 $ — $ 28 $ —

Exchange traded funds (fixed income) 1

Interest rate swaps 5 — 5 —

Commodity derivatives 3 — 3 —

Exchange traded funds (fixed income) (1)

Other noncurrent assets

10 unchanged sentences

Total liabilities $ 100 $ — $ 49 $ 51

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Fair Value Measurements Using:

23 unchanged sentences

Payments ( 4 )

Currency translation 1

Balance at December 31, 2022

Reduction for change in estimates ( 30 )

Balance at March 31, 2023

Valuation Methods

3 unchanged sentences

The commodity derivatives are valued under a market approach using publicized prices, where available, or dealer quotes.

Interest rate swaps:

The fair value of interest rate swaps represent the difference between the swap's reference rate and the interest rate for a similar instrument as of the reporting period.

Interest rate swaps are valued under a market approach using publicized prices.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Deferred compensation plan assets :

7 unchanged sentences

The contingent earn-out liabilities were established using a Monte Carlo simulation based on the forecasted operating results and the earn-out formula specified in the purchase agreements.

The following table presents the portion of unrealized gains recognized in the consolidated statements of income that relate to equity securities still held at December 31, 2022 and 2021 (in millions):

Three Months Ended December 31,

The following table presents the portion of unrealized gains (losses) recognized in the consolidated statements of income that relate to equity securities still held at March 31, 2023 and 2022 (in millions):

Three Months Ended March 31, Six Months Ended March 31,

2023 2022 2023 2022

Deferred compensation plan assets $ 2 $ ( 3 ) $ 5 $ —

Investments in exchange traded funds 12 ( 20 ) 23 ( 6 )

All of the gains on investments in exchange traded funds related to restricted investments.

All of the gains (losses) on investments in exchange traded funds related to restricted investments.

The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values.

At December 31, 2022, the fair value of long-term debt was $ 7.9 billion, including public debt of $ 7.5 billion and other long-term debt of $ 0.4 billion.

At March 31, 2023, the fair value of long-term debt was $ 8.1 billion, including public debt of $ 7.7 billion and other long-term debt of $ 0.4 billion.

At September 30, 2022, the fair value of long-term debt was $ 7.3 billion, including public debt of $ 7.1 billion and other long-term debt of $ 0.2 billion.

2 unchanged sentences

Stock-Based Compensation

On March 10, 2021, the shareholders of the Company approved the Johnson Controls International plc 2021 Equity and Incentive Plan (the "Plan").

The Plan authorizes stock options, stock appreciation rights, restricted (non-vested) stock/units, performance share units and other stock-based awards.

The Johnson Controls International plc 2021 Equity and Incentive Plan authorizes stock options, stock appreciation rights, restricted (non-vested) stock/units, performance share units and other stock-based awards.

The Compensation and Talent Development Committee of the Company's Board of Directors determines the types of awards to be granted to individual participants and the terms and conditions of the awards.

1 unchanged sentence

A summary of the stock-based awards granted is presented below:

Three Months Ended December 31,

Six Months Ended March 31,

Number Granted Weighted Average Grant Date Fair Value Number Granted Weighted Average Grant Date Fair Value

2 unchanged sentences

Stock options 570,140 18.21 548,398 18.59

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Performance Share Awards

The following table summarizes the assumptions used in determining the fair value of performance share units granted:

Three Months Ended

Six Months Ended

Risk-free interest rate 4.04 % 0.99 %

2 unchanged sentences

The following table summarizes the assumptions used in determining the fair value of stock options granted:

Three Months Ended

Six Months Ended

Expected life of option (years) 5.8 6.0

5 unchanged sentences

Three Months Ended

Income Available to Ordinary Shareholders

Basic and diluted income available to

shareholders $ 118 $ 381

March 31, Six Months Ended

2023 2022 2023 2022

Net income attributable to Johnson Controls $ 133 $ 11 $ 251 $ 392

Weighted Average Shares Outstanding

6 unchanged sentences

Stock options and unvested restricted stock 0.3 0.3 0.3 0.2

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Share repurchase program

For the three months ended December 31, 2022 and 2021, the Company repurchased and immediately retired $ 154 million and $ 526 million of its ordinary shares, respectively.

As of December 31, 2022, approximately $ 3.5 billion re mains available under the Company's share repurchase program, which was approved by the Company's Board of Directors in March 2021.

During the three and six months ended March 31, 2023, the Company repurchased and immediately retired $ 93 million and $ 247 million of its ordinary shares, respectively.

For the three and six months ended March 31, 2022, the Company repurchased and immediately retired $ 509 million and $ 1,035 million of its ordinary shares, respectively.

As of March 31, 2023, approximately $ 3.4 billion re mains available under the Company's share repurchase program, which was approved by the Company's Board of Directors in March 2021.

The share repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

16 unchanged sentences

Accumulated other comprehensive loss, end of period $ ( 846 ) $ ( 345 )

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Six Months Ended

Foreign currency translation adjustments

Balance at beginning of period $ ( 901 ) $ ( 421 )

Aggregate adjustment for the period (net of tax effect of $ 0 and $ 0 )

Balance at end of period ( 843 ) ( 343 )

Realized and unrealized gains (losses) on derivatives

Balance at beginning of period ( 11 ) ( 17 )

Current period changes in fair value (net of tax effect of $ 1 and $ 6 )

Reclassification to income (net of tax effect of $ 0 and $( 2 )) (1)

Balance at end of period ( 3 ) ( 4 )

Pension and postretirement plans

Balance at beginning of period 1 4

Reclassification to income (net of tax effect of $( 1 ) and $( 1 ))

Balance at end of period — 2

Accumulated other comprehensive loss, end of period $ ( 846 ) $ ( 345 )

(1) Refer to Note 11, "Derivative Instruments and Hedging Activities," of the notes to the consolidated financial statements for disclosure of the line items in the consolidated statements of income affected by reclassifications from AOCI into income related to derivatives.

Pension and Postretirement Plans

The components of the Company’s net periodic benefit costs from continuing operations associated with its defined benefit pension and postretirement plans, which are primarily recorded in selling, general and administrative expenses in the consolidated statements of income, are shown in the tables below in accordance with ASC 715, "Compensation – Retirement Benefits" (in millions):

The components of the Company’s net periodic benefit cost (credit) associated with its defined benefit pension and postretirement plans, which are primarily recorded in selling, general and administrative expenses in the consolidated statements of income, are shown in the tables below in accordance with ASC 715, "Compensation – Retirement Benefits" (in millions):

Pension Plans

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Interest cost $ 20 $ 11 $ 41 $ 21

Expected return on plan assets ( 33 ) ( 41 ) ( 67 ) ( 82 )

Net actuarial loss (gain) 8 ( 42 )

Settlement gain — ( 1 )

Net periodic benefit credit $ ( 5 ) $ ( 74 )

Net actuarial loss 15 60 23 18

Settlement loss 1 2 1 1

Net periodic benefit cost (credit) $ 3 $ 32 $ ( 2 ) $ ( 42 )

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Pension Plans

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Service cost $ 4 $ 5 $ 7 $ 11

1 unchanged sentence

Expected return on plan assets ( 19 ) ( 21 ) ( 37 ) ( 42 )

Net actuarial gain — ( 1 ) — ( 1 )

Settlement loss — 8 — 8

Net periodic benefit cost (credit) $ 2 $ 1 $ 3 $ ( 4 )

1 unchanged sentence

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Interest cost $ 1 $ 1 $ 2 $ 1

2 unchanged sentences

Net periodic benefit credit $ ( 2 ) $ ( 2 ) $ ( 4 ) $ ( 5 )

During the three months ended December 31, 2022, the amount of cumulative fiscal 2023 lump sum payouts triggered a remeasurement event for certain U.S.

pension plans resulting in the recognition of net actuarial losses of $ 8 million, primarily due to decreases in discount rates, partially offset by favorable plan asset performance.

During the three months ended December 31, 2021, the amount of cumulative fiscal 2022 lump sum payouts triggered a remeasurement event for certain U.S.

pension plans resulting in the recognition of net actuarial gains of $ 42 million, primarily due to favorable plan asset performance.

Cumulative fiscal 2023 lump sum payouts triggered remeasurement events for certain pension plans in both the first and second quarters of fiscal 2023.

During the three and six months ended March 31, 2023, the Company recognized net actuarial losses of $ 15 million and $ 23 million, respectively, primarily due to decreases in discount rates, partially offset by favorable plan asset performance.

Cumulative fiscal 2022 lump sum payouts triggered remeasurement events for certain pension plans in both the first and second quarters of fiscal 2022.

During the three and six months ended March 31, 2022, the Company recognized net actuarial losses of $ 59 million and $ 17 million, respectively, primarily due to unfavorable plan asset performance, partially offset by increases in discount rates.

Significant Restructuring and Impairment Costs

3 unchanged sentences

The Company expects the restructuring activities to reduce cost of sales and SG&A due to reduced employee-related costs, depreciation and amortization expense.

During the three months ended December 31, 2022, the Company recorded $ 57 million of restructuring and impairment costs in the consolidated statements of income.

During the three and six months ended March 31, 2023, the Company recorded $ 24 million and $ 81 million of restructuring and impairment costs in the consolidated statements of income, respectively.

These charges relate to restructuring plans within the segments and at Corporate to reduce and optimize our cost structure.

Refer to Note 4, "Assets and Liabilities Held for Sale" of the notes to the consolidated financial statements for disclosure of other impairment costs.

In fiscal 2021, the Company committed to a significant multi-year restructuring plan ("2021 Plan").

The restructuring actions were substantially completed in fiscal 2022 and final payments, which are not material, will be made in fiscal 2023.

Refer to Note 4, "Assets and Liabilities Held for Sale," and Note 8, "Goodwill and Other Intangible Assets," of the notes to the consolidated financial statements for disclosure of other impairment costs.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

The following table summarizes restructuring and impairment costs (in millions):

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023 Six Months Ended March 31, 2023

Building Solutions North America $ 4 $ 6

2 unchanged sentences

Global Products 4 27

The following table summarizes changes in the restructuring reserve, which is included within other current liabilities in the consolidated statements of financial position, for new restructuring actions taken in the three months ended December 31, 2022 (in millions):

Corporate 15 21

Total $ 24 $ 81

Employee Severance and Termination Benefits Long-Lived Asset Impairments Other Total

3 unchanged sentences

Balance at December 31, 2022

Additional restructuring costs 17 4 3 24

Utilized—cash ( 32 ) — ( 8 ) ( 40 )

Utilized—noncash — ( 4 ) — ( 4 )

Balance at March 31, 2023

$ 12 $ — $ 11 $ 23

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The statutory tax rate in Ireland is being used as a comparison since the Company is domiciled in Ireland.

For the three months ended December 31, 2022, the Company's effective tax rate for continuing operations was 8.2 % and was lower than the statutory tax rate of 12.5 % primarily due to impairment and restructuring charges and the benefits of continuing global tax planning initiatives, partially offset by tax rate differentials.

For the three months ended December 31, 2021, the Company's effective tax rate for continuing operations was 14.5 % and was higher than the statutory tax rate of 12.5 % primarily due to the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives.

For the three months ended March 31, 2023, the Company's effective tax rate was 22.0 % and was higher than the statutory tax rate of 12.5 % primarily due to the tax impact of an impairment charge and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives.

For the six months ended March 31, 2023, the Company's effective tax rate was 16.0 % and was higher than the statutory tax rate of 12.5 % primarily due to the tax impact of an impairment charge and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives.

For the three months ended March 31, 2022, the Company's effective tax rate was 52.7 % and was higher than the statutory tax rate of 12.5 % primarily due to the tax impact of impairment charges, the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries as a result of the planned divestiture of its Global Retail business, and tax rate differentials, partially offset by the income tax effects of mark-to-market adjustments and the benefits of continuing global tax planning initiatives.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

For the six months ended March 31, 2022, the Company's effective tax rate was 21.5 % and was higher than the statutory tax rate of 12.5 % primarily due to the tax impact of impairment charges, the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries as a result of the planned divestiture of its Global Retail business, and tax rate differentials, partially offset by the income tax effects of mark-to-market adjustments and the benefits of continuing global tax planning initiatives.

Valuation Allowance

5 unchanged sentences

Accrued interest, net at September 30, 2022 was approximately $ 284 million (net of tax benefit).

Interest accrued during the three months ended December 31, 2022 and 2021 was approximately $ 26 million (net of tax benefit) and approximately $ 17 million (net of tax benefit), respectively.

Interest accrued during the six months ended March 31, 2023 and 2022 was approximately $ 56 million (net of tax benefit) and approximately $ 30 million (net of tax benefit), respectively.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

1 unchanged sentence

Additionally, the Company is currently under exam in the following major non-U.S.

jurisdictions for continuing operations:

jurisdictions:

Tax Jurisdiction Tax Years Covered

7 unchanged sentences

Other Tax Matters

The Company recorded restructuring and impairment costs of $ 345 million, which generated a $ 52 million tax benefit, during the three months ended December 31, 2022 and $ 49 million, which generated a $ 7 million tax benefit, during the three months ended December 31, 2021,

The Company recorded restructuring and impairment costs of $ 418 million, which generated a $ 35 million tax benefit, during the three months ended March 31, 2023 and $ 384 million, which generated a $ 7 million tax benefit, during the three months ended March 31, 2022.

The Company recorded restructuring and impairment costs of $ 763 million, which generated an $ 87 million tax benefit, during the six months ended March 31, 2023 and $ 433 million, which generated a $ 14 million tax benefit, during the six months ended March 31, 2022.

During the three and six months ended March 31, 2022, the Company recorded a deferred tax liability on the outside basis difference of the Company’s investment in certain subsidiaries as a result of the planned divestiture of its Global Retail business which resulted in a tax charge of $ 13 million.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Tax expenses and benefits for the above transactions reflect the Company’s current tax positions in the impacted jurisdictions.

1 unchanged sentence

Impacts of Tax Legislation

During the three months ended December 31, 2022 and 2021, tax legislation was adopted in various jurisdictions.

During the six months ended March 31, 2023 and 2022, tax legislation was adopted in various jurisdictions.

These law changes did not have a material impact on the Company's consolidated financial statements.

14 unchanged sentences

Global Products also includes the Johnson Controls-Hitachi joint venture.

Management evaluates the performance of its business segments primarily on segment earnings before interest, taxes and amortization ("EBITA"), which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans and restricted asbestos investments.

Management evaluates the performance of its business segments primarily on segment earnings before interest, taxes and amortization ("EBITA"), which represents income before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans and restricted asbestos investments.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Financial information relating to the Company’s reportable segments is as follows (in millions):

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Building Solutions North America $ 2,520 $ 2,227 $ 4,887 $ 4,379

5 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Building Solutions North America $ 315 $ 235 $ 582 $ 485

8 unchanged sentences

Net financing charges ( 71 ) ( 51 ) ( 138 ) ( 104 )

Income from continuing operations before income taxes $ 170 $ 490

Income before income taxes $ 223 $ 110 $ 393 $ 600

Certain of the Company's subsidiaries at the business segment level have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments.

7 unchanged sentences

The Company’s product warranty liability is recorded in the consolidated statements of financial position in other current liabilities if the warranty is less than one year and in other non-current liabilities if the warranty extends longer than one year.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

The changes in the carrying amount of the Company’s total product warranty liability were as follows (in millions):

Three Months Ended

Six Months Ended

Balance at beginning of period $ 179 $ 192

Accruals for warranties issued during the period 69 44

Accruals from acquisition and divestitures ( 1 ) —

Settlements made (in cash or in kind) during the period ( 57 ) ( 39 )

Accruals from acquisitions and divestitures — ( 1 )

Changes in estimates to pre-existing warranties 2 ( 8 )

Currency translation 4 ( 2 )

4 unchanged sentences

The following table presents the location and amount of reserves for environmental liabilities in the Company's consolidated statements of financial position (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Other current liabilities $ 42 $ 66

3 unchanged sentences

During the three months ended September 30, 2022, with the assistance of independent environmental consultants and taking into consideration investigation and remediation actions previously completed, new information available to the Company during the fourth quarter of fiscal 2022 and ongoing discussions with the Wisconsin Department of Natural Resources ("WDNR"), the Company completed a comprehensive long-term analysis and cost assessment related to the Company’s ongoing environmental remediation obligations.

As a result of this analysis, the Company increased its accrual for environmental liabilities by $ 228 million, which are recorded on an undiscounted basis.

As a result of this analysis, the Company increased its accrual for environmental liabilities by $ 228 million in the fourth quarter of fiscal 2022, which are recorded on an undiscounted basis.

The Company expects that it will pay the amounts recorded over an estimated period of up to 20 years.

2 unchanged sentences

(“Tyco Fire Products”) Fire Technology Center ("FTC") located in Marinette, Wisconsin and surrounding areas in the City of Marinette and Town of Peshtigo, Wisconsin, as well as the continued remediation of PFAS, arsenic and other contaminants at the Tyco Fire Products Stanton Street manufacturing facility also located in Marinette, Wisconsin (the “Stanton Street Facility”).

The increase in reserves was recorded as a result of several events that occurred in the three months ended September 30, 2022, including the completion and testing of the Groundwater Extraction and Treatment System (“GETS”) at the FTC (as further discussed below), the completion of resident surveys in Peshtigo regarding long-term drinking water solutions, correspondence with regulators on planned remediation activities, finalization of cost estimates for system upgrades and related long-term run rate costs in response to new permit requirements at the Stanton Street Facility, and the development of additional information through ongoing investigation and analysis.

These events allowed the Company to develop estimates of costs associated with the long-term remediation actions expected to be

performed over an estimated period of up to 20 years, including the continued operation of the GETS, the implementation of long-term drinking water solutions, continued monitoring and testing of the wells, the operation and wind-down of other legacy remediation and treatment systems and the completion of ongoing investigation obligations.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Street Facility, and the development of additional information through ongoing investigation and analysis.

These events allowed the Company to develop estimates of costs associated with the long-term remediation actions expected to be performed over an estimated period of up to 20 years, including the continued operation of the GETS, the implementation of long-term drinking water solutions, continued monitoring and testing of the wells, the operation and wind-down of other legacy remediation and treatment systems and the completion of ongoing investigation obligations.

The use of fire-fighting foams at the FTC was primarily for training and testing purposes to ensure that such products sold by the Company’s affiliates, Chemguard, Inc.

("Chemguard") and Tyco Fire Products, were effective at suppressing high intensity fires that may occur at military installations, airports, or elsewhere.

In May 2021, as part of Tyco Fire Products’ ongoing investigation and remediation program, the WDNR approved Tyco Fire Products’ proposed GETS, a permanent groundwater remediation system that will extract groundwater that contains PFAS, treat it using advanced filtration systems, and return the treated water to the environment.

In May 2021, as part of Tyco Fire Products’ ongoing investigation and remediation program, the WDNR approved Tyco Fire Products’ proposed GETS, a permanent groundwater remediation system that extracts groundwater containing PFAS, treats it using advanced filtration systems, and returns the treated water to the environment.

Tyco Fire Products has completed construction of the GETS, which is now in operation.

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PFOA, PFOS, and other PFAS compounds are being studied by EPA and other environmental and health agencies and researchers.

EPA has not issued binding regulatory limits, but had initially stated that it would propose regulatory standards for PFOS and PFOA in drinking water by the end of 2019, in accordance with its PFAS Action Plan released in February 2019, and issued interim recommendations for addressing PFOA and PFOS in groundwater in December 2019.

In March 2021, EPA published its final determination to regulate PFOS and PFOA in drinking water.

While those studies continue, EPA issued in June 2022 an updated set of interim health advisory levels for PFOA and PFOS in drinking water, as well as final health advisory levels for two other types of PFAS (PFBS and GenX chemicals).

EPA initially stated that it would propose regulatory standards for PFOS and PFOA in drinking water by the end of 2019, in accordance with its PFAS Action Plan released in February 2019, and issued interim recommendations for addressing PFOA and PFOS in groundwater in December 2019.

In March 2021, EPA published its final determination to regulate PFOS and PFOA in drinking water and in June 2022 an updated set of interim health advisory levels for PFOA and PFOS in drinking water, as well as final health advisory levels for two other types of PFAS (PFBS and GenX chemicals).

In November 2022, EPA added a class definition of PFAS to the final version of EPA's fifth Contaminant Candidate List (CCL 5), which is a list of substances not currently subject to national drinking water regulation, but which EPA believes may require future regulation.

In March 2023, EPA announced a proposed National Primary Drinking Water Regulation (“NPDWR”) for six PFAS compounds including PFOA and PFOS.

The NPDWR proposes establishing legally enforceable levels, called Maximum Contaminant Levels, of 4.0 parts per trillion for each of PFOA and PFOS.

EPA indicated that it anticipates finalizing the regulation by the end of 2023.

In October 2021, EPA released its "PFAS Strategic Roadmap:

EPA's Commitments to Action 2021-2024." The 2021-2024 Roadmap sets timelines by which EPA plans to take specific actions, including, among other items, publishing a national PFAS testing strategy, proposing to designate PFOA and PFOS as Comprehensive Environmental Response, Compensation and Liability Act hazardous substances, restricting PFAS discharges from industrial sources through Effluent Limitations Guidelines, publishing the final toxicity assessment for five additional PFAS, requiring water systems to test for 29 PFAS under the Safe Drinking Water Act, and publishing improved analytical methods in eight different environmental matrices to monitor 40 PFAS present in wastewater and stormwater discharges.

EPA's Commitments to Action 2021-2024." The 2021-2024 Roadmap sets timelines by which EPA plans to take specific actions, including, among other items, publishing a national PFAS testing strategy, proposing to designate PFOA and PFOS as Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) hazardous substances, restricting PFAS discharges from industrial sources through Effluent Limitations Guidelines, publishing the final toxicity assessment for five additional PFAS, requiring water systems to test for 29 PFAS under the Safe Drinking Water Act, and publishing improved analytical methods in eight different environmental matrices to monitor 40 PFAS present in wastewater and stormwater discharges.

Both PFOA and PFOS are types of synthetic chemical compounds that have been present in firefighting foam.

2 unchanged sentences

In August 2022, EPA published a proposed rule that would designate PFOA and PFOS as “hazardous substances” under CERCLA.

the investigations and remediation to be conducted, changes in environmental regulations, changes in permissible levels of specific compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural resource damages, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

It is difficult to estimate the Company’s ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the complexity of determining the relative liability among those parties, the financial viability of other potentially responsible parties and third-party indemnitors, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, changes in environmental regulations, changes in permissible levels of specific compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural resource damages, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur.

It is possible that technological, regulatory or enforcement developments, the results of additional environmental studies or other factors could change the Company's expectations with respect to future charges and cash outlays, and such changes could be material to the Company's future results of operations, financial condition or cash flows.

1 unchanged sentence

In addition, the Company has identified asset retirement obligations for environmental matters that are expected to be addressed at the retirement, disposal, removal or abandonment of existing owned facilities.

Conditional asset retirement obligations were $ 17 million at both December 31, 2022 and September 30, 2022.

Conditional asset retirement obligations were $ 17 million at both March 31, 2023 and September 30, 2022.

FTC-Related Remediation and Litigation

1 unchanged sentence

The WDHS recommended a groundwater enforcement standard for PFOA and PFOS of 20 parts per trillion.

Although Wisconsin recently approved final regulatory standards for PFOA and PFOS in drinking water and surface water, the Wisconsin Natural Resources Board did not approve WDNR's proposed standards for PFOA and PFOS in groundwater.

Although Wisconsin approved final regulatory standards for PFOA and PFOS in drinking water and surface water, the Wisconsin Natural Resources Board did not approve WDNR's proposed standards for PFOA and PFOS in groundwater.

In September 2022, the Governor of Wisconsin signed a scope statement setting out parameters for the WDNR to draft a final rule regarding groundwater quality standards for PFOA and PFOS, among other compounds.

8 unchanged sentences

In September 2021, the WDNR sent an additional “Notice of Noncompliance” to Tyco Fire Products and Johnson Controls, Inc.

concerning land-applied biosolids, which reviewed and responded to the Company’s biosolids investigation conducted to date.

Tyco Fire Products responded to the WDNR’s September 2021 notice by the December 27, 2021 deadline set by WDNR and submitted a Land Applied Biosolids Interim Site Status Update Report to WDNR on October 25, 2022.

concerning land-applied biosolids, which reviewed and responded to the Company’s biosolids investigation conducted to that date.

Tyco Fire Products responded to the WDNR’s September 2021 notice by the December 27, 2021 deadline set by WDNR and submitted additional updates to WDNR on October 25, 2022 and February 16, 2023.

On April 10, 2023, the WDNR issued a third “Notice of Noncompliance” to Tyco Fire Products and Johnson Controls, Inc.

concerning land-applied biosolids in the Marinette region.

Tyco Fire Products and Johnson Controls, Inc.

7 unchanged sentences

The WDOJ seeks monetary penalties and an injunction ordering these two subsidiaries to complete a site investigation and cleanup of PFAS contamination in accordance with the WDNR’s requests.

The lawsuit is presently at the beginning stages of litigation:

Tyco Fire Products and Johnson Controls, Inc.

each filed Answers to the Complaint on April 4, 2022 and the parties are proceeding with initial fact discovery.

The parties are proceeding with fact discovery and the court has

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

set a trial date of December 3, 2024.

The Company is vigorously defending this civil enforcement action and believes that it has meritorious defenses, but the Company is presently unable to predict the duration, scope, or outcome of this action.

10 unchanged sentences

The individuals seek monetary damages for their personal injury and/or property damage.

These lawsuits were removed to federal court on December 21, 2022, and were tagged to the MDL on December 22, 2022.

The Plaintiffs have opposed removal and transfer to the MDL.

These lawsuits have been transferred to the MDL.

These lawsuits are presently at the beginning stages of litigation.

10 unchanged sentences

Chemguard and Tyco Fire Products are named in 39 pending putative class actions in federal courts originating from 15 states and territories.

All but one of these cases have been direct-filed in or transferred to the MDL and it is anticipated that the remaining case will be transferred to the MDL.

All but two of these cases have been direct-filed in or transferred to the MDL and it is anticipated that the remaining cases will be transferred to the MDL.

AFFF Individual or Mass Actions

1 unchanged sentence

The cases involve plaintiffs from various states including approximately 7,000 plaintiffs in Colorado and more than 3,900 other plaintiffs.

The vast majority of these matters have been tagged for transfer to, transferred to, or directly-filed in the MDL, and it is anticipated that several newly filed state court actions will be similarly tagged and transferred.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

There are several matters that are proceeding in state courts, including actions in Arizona and Illinois.

5 unchanged sentences

The MDL court has set the first case for trial on June 5, 2023, ( City of Stuart (Florida) v.

) and has ordered the parties to conduct mediation of the water provider cases pending in the MDL.

On April 26, 2023, the parties entered a stipulation dismissing Chemguard with prejudice from the City of Stuart case, and it is expected that the parties will enter into a stipulation dismissing Tyco with prejudice from the City of Stuart case.

The MDL Court has ordered the parties to conduct mediation of the water provider cases pending in the MDL.

Tyco and Chemguard are also periodically notified by other municipal entities that those entities may assert claims regarding PFOS and/or PFOA contamination allegedly resulting from the use of AFFF.

24 unchanged sentences

This lawsuit has been removed to the United States District Court for the Northern District of Ohio and transferred to the MDL.

In addition, in May and June 2019, three other states filed lawsuits in their respective state courts against a number of manufacturers, including affiliates of the Company, with respect to PFOS and PFOA contamination allegedly resulting from the use of firefighting foams at various specified and unspecified locations across their jurisdictions ( State of New Hampshire v.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

from the use of firefighting foams at various specified and unspecified locations across their jurisdictions ( State of New Hampshire v.

The 3M Company et al.

23 unchanged sentences

In April 2022, the Attorney General of the State of Florida filed a lawsuit in Florida state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage to the State’s natural resources and public health allegedly resulting from the use of firefighting foams at various locations throughout the State.

It is anticipated that this complaint will be removed to federal court and transferred to the MDL.

In May 2022, the Attorney General of the Commonwealth of Massachusetts filed a lawsuit against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s natural resources, property, residents, and consumers allegedly resulting from the use of firefighting foams at various locations throughout the State.

This complaint has been removed to federal court and transferred to the MDL.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

State’s natural resources, property, residents, and consumers allegedly resulting from the use of firefighting foams at various locations throughout the State.

This complaint was direct-filed in the MDL in South Carolina.

2 unchanged sentences

In November 2022, the Attorney General of the State of California filed a lawsuit in California state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFOS and PFOA damage of the State’s land and natural resources allegedly resulting from the manufacture, use, marketing, or sale of PFAS-containing products, including firefighting foams, at various locations throughout the State.

On December 20, 2022, the case was removed to federal court and tagged to the MDL.

The Attorney General has opposed removal and transfer.

This complaint has been removed to federal court and transferred to the MDL.

In March 2023, the Attorney General of the State of Maine filed a lawsuit in Maine state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFAS damage of the State’s natural resources allegedly resulting from the manufacture, distribution, release, promotion, sale, and use of PFAS-containing AFFF within the state.

It is anticipated that this complaint will be removed to federal court and transferred to the MDL.

In March 2023, the Attorney General of the State of Illinois filed a lawsuit in Illinois state court against a number of manufacturers and other defendants, including affiliates of the Company, with respect to PFAS damage of the State’s environmental and natural resources allegedly resulting from the manufacture, storage, sale, distribution, marketing, and use of PFAS-containing AFFF within the State.

It is anticipated that this complaint will be removed to federal court and transferred to the MDL.

Other AFFF Related Matters

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This complaint has been transferred to the MDL.

The Company is vigorously defending the above matters and believes that it has meritorious defenses to class certification and the claims asserted, including statutes of limitations, the government contractor defense, various medical and scientific defenses, and other factual and legal defenses.

The Company is vigorously defending all of the above AFFF matters and believes that it has meritorious defenses to class certification and the claims asserted, including statutes of limitations, the government contractor defense, various medical and scientific defenses, and other factual and legal defenses.

The government contractor defense is a form of immunity available to government contractors that produced products for the United States government pursuant to the government’s specifications.

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However, there are numerous factual and legal issues to be resolved in connection with these claims, and it is extremely difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurance that any such exposure will not be material.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Asbestos Matters

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The following table presents the location and amount of asbestos-related assets and liabilities in the Company's consolidated statements of financial position (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Other current liabilities $ 58 $ 58

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The following table presents the components of asbestos-related assets (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Investments 253 239

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The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance receivable is warranted.

The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

Key variables and assumptions include the number and type of new claims that are filed each year, the average cost of resolution of claims, the identity of defendants, the resolution of coverage issues with insurance carriers, amount of insurance, and the solvency risk with respect to the Company's insurance carriers.

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The following table presents the location and amount of self-insured liabilities in the Company's consolidated statements of financial position (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Other current liabilities $ 92 $ 89

3 unchanged sentences

The following table presents the location and amount of insurance receivables in the Company's consolidated statements of financial position (in millions):

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Other current assets $ 10 $ 10

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements