What changed in this filing

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Item 1. Financial Statements

2023-08-02 compared with 2023-05-05 · 285 added, 262 removed, 906 unchanged (38% of the section changed)

4 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

12 unchanged sentences

Income before income taxes 793 504 1,186 1,104

Income tax provision 49 58 63 129

Income tax (benefit) provision ( 329 ) 61 ( 266 ) 190

Net income 1,122 443 1,452 914

9 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

2 unchanged sentences

Foreign currency translation adjustments ( 72 ) ( 356 ) 28 ( 286 )

Realized and unrealized gains on derivatives 20 10 3 17

Realized and unrealized gains (losses) on derivatives 4 ( 22 ) 7 ( 5 )

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

6 unchanged sentences

Realized and unrealized gains (losses) on derivatives 2 ( 3 ) ( 3 ) 1

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

Other comprehensive loss ( 45 ) ( 61 ) ( 8 ) ( 65 )

Comprehensive income attributable to noncontrolling interests 28 3 144 78

4 unchanged sentences

(in millions, except par value;

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Cash and cash equivalents $ 1,057 $ 2,031

2 unchanged sentences

Inventories 3,092 2,665

Current assets held for sale 446 387

Other current assets 1,317 1,262

4 unchanged sentences

Investments in partially-owned affiliates 988 963

Noncurrent assets held for sale 378 751

Other noncurrent assets 4,124 3,874

6 unchanged sentences

Deferred revenue 1,918 1,804

Current liabilities held for sale 316 236

Other current liabilities 2,693 2,530

2 unchanged sentences

Pension and postretirement benefits 334 358

Noncurrent liabilities held for sale 59 62

Other noncurrent liabilities 5,358 5,733

16 unchanged sentences

(in millions;

Six Months Ended March 31,

Nine Months Ended June 30,

Operating Activities of Continuing Operations

4 unchanged sentences

Depreciation and amortization 621 633

Pension and postretirement benefit income ( 3 ) ( 51 )

Pension and postretirement benefit expense (income) ( 23 ) 8

Pension and postretirement contributions ( 38 ) ( 83 )

16 unchanged sentences

Acquisition of businesses, net of cash acquired ( 260 ) ( 236 )

Business divestitures, net of cash divested — 16

Other - net 22 40

6 unchanged sentences

Payment of cash dividends ( 729 ) ( 674 )

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

Dividends paid to noncontrolling interests ( 149 ) ( 121 )

Other - net ( 7 ) 17

Cash provided by financing activities from continuing operations 262 444

Discontinued Operations

Cash used by operating activities — ( 4 )

Cash used by discontinued operations — ( 4 )

Cash provided (used) by financing activities from continuing operations ( 1,111 ) 29

Discontinued Operations - Cash used by operating activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 67 ) ( 49 )

9 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

1 unchanged sentence

Beginning Balance $ 15,890 $ 16,536 $ 16,268 $ 17,562

Ordinary Shares

Beginning balance 7 7 7 7

Ending balance 7 7 7 7

Ordinary Shares - Beginning and ending balance

Ordinary Shares Held in Treasury, at Cost

29 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 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 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.

The results of operations for the three and nine month periods ended June 30, 2023 are not necessarily indicative of results for the Company’s 2023 fiscal year because of seasonal and other factors.

Assets and liabilities of the Global Retail business which were classified as held for sale in prior periods have been reclassified to conform with the current period presentation.

Refer to Note 4, "Assets and Liabilities Held for Sale," of the notes to the consolidated financial statements for further details.

Nature of Operations

12 unchanged sentences

The Company did not have any material consolidated or nonconsolidated VIE's for the presented reporting periods.

Restricted Cash

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

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

March 31, 2023

June 30, 2023

Restricted Cash

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

Restricted cash is recorded primarily within other current assets in the consolidated statements of financial position and totaled $ 86 million and $ 35 million at June 30, 2023 and September 30, 2022, respectively.

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.

12 unchanged sentences

Acquisitions and Divestitures

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 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.

During the first nine months of fiscal 2023, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $ 306 million, of which $ 260 million was paid as of June 30, 2023.

In connection with the acquisitions, the Company recorded goodwill of $ 51 million within the Building Solutions Asia Pacific segment, $ 12 million within the Building Solutions EMEA/LA segment and $ 121 million within the Global Products segment.

These amounts are based on the preliminary purchase price allocations and are subject to change as the purchase price allocations are completed.

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

During the first nine months of fiscal 2022, the Company completed certain acquisitions for a combined purchase price, net of cash acquired, of $ 287 million, of which $ 236 million was paid as of June 30, 2022.

In connection with the acquisitions, the Company recorded goodwill of $ 45 million within the Building Solutions Asia Pacific segment, $ 68 million within the Building Solutions EMEA/LA segment, $ 24 million within the Building Solutions North America segment and $ 45 million with the Global Products segment.

During the first nine 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 June 30, 2022.

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

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

March 31, 2023

June 30, 2023

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

Subsequent Event

On July 13, 2023, the Company acquired FM:Systems, a leading digital workplace management and Internet of Things (IoT) solutions provider for facilities and real estate professionals.

The base purchase price for the transaction was $ 455 million, plus up to $ 155 million in payments to be made subject to the achievement of post-closing earn-out milestones over the next two years .

Preliminary purchase accounting is not yet available due to the timing of close of the transaction.

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 March 31, 2023 and September 30, 2022.

The assets and liabilities of both businesses were presented as held for sale in the Company's consolidated statements of financial position as of September 30, 2022 and in previously filed quarterly financial statements.

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.

The businesses did not meet the criteria to be classified as discontinued operations as neither divestiture represents a strategic shift that will have a major effect on the Company's operations and financial results.

Both divestitures are expected to be finalized in fiscal 2023.

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

March 31, 2023 September 30, 2022

Accounts receivable - net $ 242 $ 199

Inventories 160 155

Other current assets 30 21

Current assets held for sale $ 432 $ 375

Property, plant and equipment - net $ 114 $ 89

Goodwill — 22

Other intangible assets - net 190 514

Other noncurrent assets 71 72

Noncurrent assets held for sale $ 375 $ 697

Accounts payable $ 126 $ 127

Accrued compensation and benefits 16 25

Deferred revenue 47 36

Other current liabilities 116 33

Current liabilities held for sale $ 305 $ 221

Other noncurrent liabilities $ 58 $ 61

Noncurrent liabilities held for sale $ 58 $ 61

The businesses did not meet the criteria to be classified as discontinued operations as neither planned divestiture represented a strategic shift that would have a major effect on the Company's operations and financial results.

During the third quarter of fiscal 2023, the Company concluded that its Global Retail business no longer met the criteria to be classified as held for sale, as it is no longer probable that it will be sold in the next 12 months.

As a result, the assets and liabilities were reclassified to held and used on the consolidated statements of financial position as of both June 30, 2023 and September 30, 2022.

The net assets were reclassified to held and used at the lower of fair value or adjusted carrying value in the current period, and due to prior period impairment charges recorded, there was no impact to the consolidated statements of income as a result of this reclassification.

No impairment charges were recorded during the three months ended June 30, 2023.

During the nine months ended June 30, 2023, the Company recorded impairment charges for the Global Retail business of $ 438 million and the Building Solutions Asia Pacific segment of $ 60 million.

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

The business in the Building Solutions Asia Pacific segment was sold on August 1, 2023.

The net assets were not significant to the consolidated statements of financial position.

The Company is finalizing its accounting for the transaction and any gain or loss on sale is not expected to be significant.

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 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 March 31,

Three Months Ended June 30,

Products & Systems Services Total Products & Systems Services Total

4 unchanged sentences

Total $ 5,431 $ 1,702 $ 7,133 $ 5,082 $ 1,532 $ 6,614

Six Months Ended March 31,

Nine Months Ended June 30,

Products & Systems Services Total Products & Systems Services Total

6 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

9 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 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 March 31, 2023 September 30, 2022

Location of contract balances June 30, 2023 September 30, 2022

Contract assets - current Accounts receivable - net $ 2,080 $ 2,067

2 unchanged sentences

Contract liabilities - noncurrent Other noncurrent liabilities 292 282

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

For the three months ended June 30, 2023 and 2022, the Company recognized revenue of $ 222 million and $ 193 million, respectively, that was included in the beginning of period contract liability balance.

For the nine months ended June 30, 2023 and 2022, the Company recognized revenue of $ 1,387 million and $ 1,252 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 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 .

As of June 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 19.2 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.

6 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):

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Other current assets $ 159 $ 139

3 unchanged sentences

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.

June 30, 2023

During the three months ended June 30, 2023 and 2022, the Company recognized amortization expense of $ 66 million and $ 48 million, respectively, related to costs to obtain or fulfill a contract.

During the nine months ended June 30, 2023 and 2022, the Company recognized amortization expense of $ 188 million and $ 145 million, respectively, related to costs to obtain or fulfill a contract.

There were no impairment losses recognized in the three and nine months ended June 30, 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 $ 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 Company sold $ 425 million and $ 1,261 million of accounts receivable under these factoring agreements during the three and nine months ended June 30, 2023, respectively.

The Company sold $ 244 million and $ 612 million of accounts receivable under these factoring agreements during the three and nine months ended June 30, 2022, respectively.

The cost of factoring such receivables was not material.

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

Previously sold receivables still outstanding were $ 397 million and $ 476 million as of June 30, 2023 and September 30, 2022, respectively.

Inventories consisted of the following (in millions):

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Raw materials and supplies $ 1,261 $ 1,040

4 unchanged sentences

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

Six Months Ended March 31, 2023

Nine Months Ended June 30, 2023

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

3 unchanged sentences

Acquisitions (1)

— 12 51 121 184

Impairments — — — ( 184 ) ( 184 )

6 unchanged sentences

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.

June 30, 2023

Due to actual 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 Silent-Aire reporting unit has no remaining goodwill balance as of June 30, 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.

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 that an impairment assessment be conducted in the nine months ended June 30, 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):

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Amount Accumulated

11 unchanged sentences

Total intangible assets $ 7,475 $ ( 2,644 ) $ 4,831 $ 7,648 $ ( 2,493 ) $ 5,155

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.

Amortization of other intangible assets for the three-month periods ended June 30, 2023 and 2022 was $ 111 million and $ 102 million, respectively.

Amortization of other intangible assets for the nine month periods ended June 30, 2023 and 2022 was $ 319 million and $ 326 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 six months ended March 31, 2023.

There were no triggering events requiring that an impairment assessment be conducted in the nine months ended June 30, 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 March 31, 2023 September 30, 2022

Location of lease balances June 30, 2023 September 30, 2022

Operating lease right-of-use assets Other noncurrent assets

4 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

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

Six Months Ended

Nine Months Ended

Right-of-use assets obtained in exchange for operating lease liabilities $ 347 $ 263

1 unchanged sentence

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

March 31, September 30,

June 30, September 30,

Bank borrowings $ 23 $ 10

1 unchanged sentence

Term loans 163 487

$ 1,737 $ 669

Weighted average interest rate on short-term debt outstanding 3.8 % 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.

As of June 30, 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 June 30, 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.

The Company entered into the following financing activities during the current fiscal year:

• October 2022

– Repaid a € 200 million ($ 196 million as of September 30, 2022) term loan with an interest rate of EURIBOR plus 0.5 %

– Issued 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

• January 2023 - Repaid $ 32 million of outstanding 4.625 % Notes due 2023

– 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 %

– Issued 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

• May 2023 - Together with its wholly owned subsidiary, Tyco Fire & Security Finance S.C.A., co-issued an € 800 million ($ 868 million as of June 30, 2023) bond with an interest rate of 4.25 % which is due May 2035.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

Net Financing Charges

1 unchanged sentence

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

4 unchanged sentences

Net financing charges $ 80 $ 49 $ 218 $ 153

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 and six months ended March 31, 2023 and 2022.

These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates during the three and nine months ended June 30, 2023 and 2022.

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

Volume Outstanding as of

Commodity March 31, 2023 September 30, 2022

Commodity June 30, 2023 September 30, 2022

Copper 3,493 3,629

Aluminum 7,860 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.

In March, April and May 2023, the Company entered into forward-starting interest rate swaps with a combined notional amount of € 400 million to reduce the market risk associated with changes in interest rates on future potential debt

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

The swaps were terminated in May 2023 when the anticipated debt was issued.

Accumulated amounts recorded in AOCI as of the date of the debt issuance are amortized to interest expense over the life of the respective debt.

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):

March 31, September 30,

June 30, 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

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

June 30, September 30, June 30, September 30,

2023 2022 2023 2022

1 unchanged sentence

Foreign currency exchange derivatives $ 14 $ 30 $ 34 $ 24

Interest rate swaps 5 — — —

Commodity derivatives 3 — — —

Total assets $ 14 $ 30 $ 34 $ 24

9 unchanged sentences

As a matter of practice, the Company deals with major banks worldwide having strong investment grade long-term credit ratings.

To further reduce the risk of loss, the Company generally enters into International Swaps and Derivatives Association ("ISDA") master netting agreements with substantially all of its counterparties.

To further reduce the risk of loss, the Company generally enters into International Swaps and Derivatives Association ("ISDA") master netting agreements with

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

substantially all of its counterparties.

The Company enters into ISDA master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts.

1 unchanged sentence

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

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

June 30, September 30, June 30, September 30,

2023 2022 2023 2022

5 unchanged sentences

Derivatives in ASC 815 Cash Flow

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

Hedging Relationships Three Months Ended June 30, Nine Months Ended June 30,

2023 2022 2023 2022

Foreign currency exchange derivatives $ 3 $ 3 $ ( 9 ) $ 26

Interest rate swaps 5 — 5 —

Commodity derivatives ( 6 ) ( 24 ) 1 ( 20 )

Interest rate swaps 1 — 6 —

Total $ ( 2 ) $ ( 21 ) $ ( 2 ) $ 6

1 unchanged sentence

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

June 30, Nine Months Ended

2023 2022 2023 2022

3 unchanged sentences

Total $ ( 5 ) $ 9 $ ( 9 ) $ 14

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

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):

1 unchanged sentence

Recognized in Income on Derivative Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

3 unchanged sentences

Total $ ( 63 ) $ ( 19 ) $ ( 135 ) $ 75

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.

Pre-tax gains (losses) on net investment hedges recorded as foreign currency translation adjustments ("CTA") within other comprehensive income (loss) were $ 30 million and $ 192 million for the three months ended June 30, 2023 and 2022, respectively.

Pre-tax gains (losses) on net investment hedges recorded as CTA within other comprehensive income (loss) were $( 299 ) million and $ 315 million for the nine months ended June 30, 2023 and 2022, respectively.

No gains or losses were reclassified from CTA into income during the three and nine months ended June 30, 2023 and 2022.

Fair Value Measurements

8 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

Recurring Fair Value Measurements

1 unchanged sentence

Fair Value Measurements Using:

March 31, 2023 Quoted Prices

June 30, 2023 Quoted Prices

(Level 1) Significant

2 unchanged sentences

Foreign currency exchange derivatives $ 48 $ — $ 48 $ —

Interest rate swaps 5 — 5 —

Commodity derivatives 3 — 3 —

Exchange traded funds (fixed income) (1)

Other noncurrent assets

12 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

Fair Value Measurements Using:

24 unchanged sentences

Reduction for change in estimates ( 36 )

Balance at March 31, 2023

Currency translation 1

Balance at June 30, 2023

Valuation Methods

8 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 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 (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,

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 June 30, 2023 and 2022 (in millions):

Three Months Ended June 30, Nine Months Ended June 30,

2023 2022 2023 2022

3 unchanged sentences

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

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 June 30, 2023, the fair value of long-term debt was $ 8.7 billion, including public debt of $ 8.5 billion and other long-term debt of $ 0.2 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.

6 unchanged sentences

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

Six Months Ended March 31,

Nine Months Ended June 30,

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

4 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

Performance Share Awards

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

Six Months Ended

Nine 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:

Six Months Ended

Nine Months Ended

Expected life of option (years) 5.8 6.0

5 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

10 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

Share repurchase program

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.

During the three and nine months ended June 30, 2023, the Company repurchased and immediately retired $ 366 million and $ 613 million of its ordinary shares, respectively.

For the three and nine months ended June 30, 2022, the Company repurchased and immediately retired $ 392 million and $ 1,427 million of its ordinary shares, respectively.

As of June 30, 2023, approximately $ 3.0 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.

5 unchanged sentences

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

( 25 ) ( 298 )

Balance at end of period ( 868 ) ( 641 )

11 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

Six Months Ended

June 30, 2023

Nine Months Ended

Foreign currency translation adjustments

17 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

1 unchanged sentence

Expected return on plan assets ( 34 ) ( 37 ) ( 101 ) ( 119 )

Net actuarial loss 15 60 23 18

Net actuarial loss (gain) ( 6 ) 106 17 124

Settlement loss — 2 1 3

2 unchanged sentences

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

Pension Plans

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

3 unchanged sentences

Net actuarial gain — ( 19 ) — ( 20 )

Settlement loss — 8 — 8

Settlement loss (gain) — ( 1 ) — 7

Net periodic benefit cost (credit) $ 2 $ ( 25 ) $ 5 $ ( 29 )

1 unchanged sentence

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

3 unchanged sentences

Net periodic benefit credit $ ( 3 ) $ ( 4 ) $ ( 7 ) $ ( 9 )

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

Cumulative fiscal 2023 lump sum payouts triggered remeasurement events for certain pension plans in each quarter of fiscal 2023.

During the three months ended June 30, 2023, the Company recognized net actuarial gains of $ 6 million, primarily due to increases in discount rates, partially offset by unfavorable asset performance.

During the nine months ended June 30, 2023, the Company recognized net actuarial losses of $ 17 million, primarily due to net decreases in discount rates, partially offset by net favorable plan asset performance.

Cumulative fiscal 2022 lump sum payouts triggered remeasurement events for certain pension plans in each quarter of fiscal 2022.

During the three and nine months ended June 30, 2022, the Company recognized net actuarial losses of $ 87 million and $ 104 million, respectively, primarily due to unfavorable plan asset performance, partially offset by increases in discount rates.

Restructuring Costs

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company commits to various restructuring activities as necessary.

Restructuring activities generally result in charges for workforce reductions, plant closures, asset impairments and other related costs which are reported as restructuring and impairment costs in the Company’s consolidated statements of income.

The other related costs consist primarily of consulting costs incurred as a direct result of the restructuring activities.

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

The Company expects the restructuring activities to reduce cost of sales and selling, general and administrative expenses ("SG&A") due to reduced employee-related costs, depreciation and amortization expense.

In the third quarter of fiscal 2023, the Company began developing a restructuring plan with certain actions focused on continued scaling of SG&A expenses to its planned growth.

Early actions of this plan were committed to during the third quarter and charges, primarily related to workforce reductions, were recorded to restructuring and impairment costs in the consolidated statements of income, and additional restructuring charges are expected in subsequent quarters.

The scope of the plan is expected to be finalized during the fourth quarter of fiscal 2023.

Restructuring charges incurred during the first and second quarters of fiscal 2023 were the result of other segment and Corporate-level restructuring plans.

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 March 31, 2023 Six Months Ended March 31, 2023

June 30, 2023

The following table summarizes restructuring costs (in millions):

Three Months Ended June 30, 2023 Nine Months Ended June 30, 2023

Building Solutions North America $ 10 $ 16

4 unchanged sentences

Total $ 81 $ 162

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 six months ended March 31, 2023 (in millions):

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

Original reserve $ 30 $ 6 $ 21 $ 57

Utilized—cash ( 3 ) — ( 5 ) ( 8 )

Utilized—noncash — ( 6 ) — ( 6 )

Balance at December 31, 2022

Additional restructuring costs 17 4 3 24

Restructuring costs $ 114 $ 20 $ 28 $ 162

Utilized—cash ( 51 ) — ( 15 ) ( 66 )

Utilized—noncash — ( 20 ) ( 2 ) ( 22 )

Balance at March 31, 2023

Balance at June 30, 2023

$ 63 $ — $ 11 $ 74

2 unchanged sentences

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

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.

For the three months ended June 30, 2023, the Company's effective tax rate was ( 41.5 %) and was lower than the statutory tax rate of 12.5 % primarily due to reserve adjustments resulting from tax audit developments and the benefits of continuing global tax planning, partially offset by tax rate differentials.

For the nine months ended June 30, 2023, the Company's effective tax rate was ( 22.4 %) and was lower than the statutory tax rate of 12.5 % primarily due to reserve adjustments resulting from tax audit developments and the benefits of continuing global tax planning, partially offset by the tax impact of an impairment charge and tax rate differentials.

For the three months ended June 30, 2022, the Company's effective tax rate was 12.1 % and was lower than the statutory tax rate of 12.5 % primarily due to the income tax effects of mark-to-market adjustments and the benefits of continuing global tax planning initiatives, partially offset by 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 divestitures and tax rate differentials.

For the nine months ended June 30, 2022, the Company's effective tax rate was 17.2 % and was higher than the statutory tax rate of 12.5 % primarily due to the tax impact of an impairment charge, the establishment of a deferred tax liability on the

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.

June 30, 2023

outside basis difference of the Company's investment in certain subsidiaries as a result of the planned divestitures 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 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.

Interest accrued during the nine months ended June 30, 2023 and 2022 was approximately $ 33 million (net of tax benefit) and approximately $ 40 million (net of tax benefit), respectively.

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

In the U.S., fiscal years 2017 through 2018 are currently under exam by the Internal Revenue Service (“IRS”) for certain legal entities.

During the three months ended June 30, 2023, as the result of tax audit resolutions, statute expirations, and remeasurements of ongoing controversy matters in various jurisdictions, the Company adjusted its reserve for uncertain tax positions which resulted in a $ 438 million net benefit to income tax expense.

In the U.S., fiscal years 2017 through 2018 are currently under exam by the Internal Revenue Service (“IRS”) for certain legal entities and the Company intends to take any unagreed issues that may result through the administrative appeals process.

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

9 unchanged sentences

Other Tax Matters

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.

The Company recorded restructuring and impairment costs of $ 81 million, which generated an $ 11 million tax benefit, during the three months ended June 30, 2023 and $ 121 million, which generated a $ 15 million tax benefit, during the three months ended June 30, 2022.

The Company recorded restructuring and impairment costs of $ 844 million, which generated a $ 98 million tax benefit, during the nine months ended June 30, 2023 and $ 554 million, which generated a $ 29 million tax benefit, during the nine months ended June 30, 2022.

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

Refer to Note 17, “Restructuring and Related Costs,” of the notes to the consolidated financial statements for additional information.

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.

Refer to Note 17, “Significant Restructuring and Impairment Costs,” of the notes to the consolidated financial statements for additional information.

June 30, 2023

Impacts of Tax Legislation

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

During the nine months ended June 30, 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.

15 unchanged sentences

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

June 30, Nine Months Ended

2023 2022 2023 2022

4 unchanged sentences

Total net sales $ 7,133 $ 6,614 $ 19,887 $ 18,574

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

Segment EBITA

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

19 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):

Six Months Ended

Nine Months Ended

Balance at beginning of period $ 180 $ 192

1 unchanged sentence

Settlements made (in cash or in kind) during the period ( 79 ) ( 79 )

Accruals from acquisitions and divestitures — ( 1 )

Changes in estimates to pre-existing warranties 12 ( 9 )

1 unchanged sentence

Balance at end of period $ 213 $ 179

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

Commitments and Contingencies

2 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):

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Other current liabilities $ 38 $ 66

8 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

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.

3 unchanged sentences

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

Tyco Fire Products is also in the process of completing the removal and disposal of PFAS-affected soil from the FTC.

In December 2022, Tyco Fire Products also began implementation of a long-term drinking water solution for some Peshtigo residents with the installation of the first deep aquifer private drinking wells.

Tyco Fire Products has also completed the removal and disposal of PFAS-affected soil from the FTC.

Tyco Fire Products is also in the process of implementing a long-term drinking water solution in the form of deep aquifer private drinking wells for certain Peshtigo residents.

On July 18, 2023, Tyco Fire Products announced that it plans to

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

discontinue the production and sale of fluorinated firefighting foams by June 2024, including AFFF products, and will transition to non-fluorinated foam alternatives.

Tyco Fire Products has been engaged in remediation activities at the Stanton Street Facility since 1990.

18 unchanged sentences

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

In April 2023, EPA issued an Advanced Notice of Proposed Rulemaking ("ANPR") seeking input on whether it should expand the proposed rule to designate as "hazardous substances" under CERCLA:

(1) seven additional PFAS;

(2) the precursors to PFOA, PFOS, and the seven additional PFAS;

or (3) entire categories of PFAS.

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

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

condition or cash flows.

Nevertheless, the Company does not currently believe that any claims, penalties or costs in addition to the amounts accrued will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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 March 31, 2023 and September 30, 2022.

Conditional asset retirement obligations were $ 13 million and $ 17 million at June 30, 2023 and September 30, 2022, respectively.

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 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.

Although Wisconsin approved final regulatory standards for PFOA and PFOS in drinking water and surface water in February 2022, the Wisconsin Natural Resources Board did not approve WDNR's proposed standards for PFOA and PFOS in groundwater.

In December 2022, the Governor of Wisconsin and WDNR approved a scope statement setting out parameters for the WDNR to draft a final rule regarding groundwater quality standards for PFOA and PFOS.

The WDNR is now in the process of drafting the rule.

20 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 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 parties are proceeding with fact discovery and the court has 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.

7 unchanged sentences

The Company plans to vigorously defend against this case and believes that it has meritorious defenses, but the Company is presently unable to predict the duration, scope, or outcome of this action.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

In November 2022, individuals filed six actions in Dane County, Wisconsin alleging personal injury and/or property damage against Tyco Fire Products, Johnson Controls Inc., Chemguard, Inc., and other unaffiliated defendants related to environmental matters at the FTC.

2 unchanged sentences

These lawsuits have been transferred to the MDL.

Subsequently, several additional plaintiffs have direct-filed in the MDL complaints with similar allegations.

These lawsuits are presently at the beginning stages of litigation.

10 unchanged sentences

Chemguard and Tyco Fire Products are named in 41 pending putative class actions in federal courts originating from 16 states and territories.

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.

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.

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 4,700 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

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.

2 unchanged sentences

Chemguard and Tyco Fire Products have been named as defendants in more than 600 cases involving municipal or water provider plaintiffs that were filed in state or federal courts originating from 33 states.

The vast majority of these cases have been transferred to or were directly filed in the MDL, and it is anticipated that the remaining cases will be transferred to the MDL.

The vast majority of these cases have been transferred to or were directly filed in the MDL, and it is anticipated that the remaining cases will be transferred to the

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

These municipal and water provider plaintiffs generally allege that the use of the defendants’ fire-fighting foam products at fire training academies, municipal airports, Air National Guard bases, or Navy or Air Force bases released PFOS and PFOA into public water supply wells and/or other public property, allegedly requiring remediation.

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

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.

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

On April 26, 2023, the parties entered a stipulation dismissing Chemguard with prejudice from the City of Stuart case, and on May 4, 2023 the parties entered into a stipulation dismissing Tyco with prejudice from the City of Stuart case.

On June 5, 2023, the MDL court continued the trial date for the City of Stuart case, and the parties remaining in that case later reached settlement.

The parties in the MDL are working to identify potential water provider and personal injury cases for additional bellwether phases.

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.

2 unchanged sentences

In June 2018, the State of New York filed a lawsuit in New York state court ( State of New York v.

The 3M Company et al No.

The 3M Company et al.

904029-18 (N.Y.

3 unchanged sentences

In February 2019, the State of New York filed a second lawsuit in New York state court ( State of New York v.

The 3M Company et al (N.Y.

The 3M Company et al.

Ct., Albany County)), against a number of manufacturers, including affiliates of the Company, with respect to alleged PFOS and PFOA contamination purportedly resulting from firefighting foams used at additional locations across New York.

1 unchanged sentence

In July 2019, the State of New York filed a third lawsuit in New York state court ( State of New York v.

The 3M Company et al (N.Y.

The 3M Company et al.

1 unchanged sentence

In November 2019, the State of New York filed a fourth lawsuit in New York state court ( State of New York v.

The 3M Company et al (N.Y.

The 3M Company et al.

5 unchanged sentences

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

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.

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.

The 3M Company et al.

4 unchanged sentences

All three of these suits have been removed to federal court and transferred to the MDL.

In September 2019, the government of Guam filed a lawsuit in the superior court of Guam 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 locations within its jurisdiction.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

from the use of firefighting foams at various locations within its jurisdiction.

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

17 unchanged sentences

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.

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 was direct-filed in the MDL in South Carolina.

1 unchanged sentence

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

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

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.

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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.

This complaint has been 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.

This complaint has been removed to federal court, and the JPML is considering Illinois's opposition to transfer to the MDL.

In May and June 2023, eleven other states and territories filed lawsuits, ten in their respective state courts, and one direct-filed in the MDL, 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 Arizona v.

The 3M Company et al.;

State of Arkansas v.

The 3M Company et al.;

Commonwealth of Kentucky v.

The 3M Company et al.;

State of Maryland v.

The 3M Company et al.;

State of New Mexico v.

The 3M Company et al.;

State of Oregon v.

The 3M Company et al.;

Commonwealth of Puerto Rico v.

The 3M Company et al.;

State of Rhode Island v.

The 3M Company et al.;

State of Tennessee v.

The 3M Company et al.;

State of Texas v.

The 3M Company et al.;

State of Washington v.

The 3M Company et al .).

It is anticipated the ten state court-filed complaints will be removed to federal court and transferred to the MDL.

In July 2023, the Attorney General of the District of Columbia filed a lawsuit in superior court in the District, against a number of manufacturers, including affiliates of the Company, with respect to PFAS damage of the District’s natural resources and public health allegedly resulting from the manufacture, distribution, release, and use of PFAS-containing AFFF within and adjacent to it ( District of Columbia v.

The 3M Company et al.

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

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This complaint has been transferred to the MDL.

In July 2023, the Fond du Lac Band of Lake Superior Chippewa (a federally recognized tribe) direct-filed a lawsuit in the MDL against a number of manufacturers, including affiliates of the Company, with respect to PFAS contamination allegedly resulting from the use and disposal of AFFF at Duluth Air National Guard Base in Duluth, Minnesota.

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.

In September 2022, the AFFF MDL Court declined to grant summary judgment on the government contractor defense, ruling that various factual issues relevant to the defense must be decided by a jury rather than the Court.

Tyco and Chemguard have insurance that has been in place for many years and the Company is pursuing this coverage for these matters.

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.

The government contractor defense is a form of immunity

Johnson Controls International plc

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 2023

available to government contractors that produced products for the United States government pursuant to the government’s specifications.

Tyco and Chemguard have insurance that has been in place for many years and the Company is pursuing this coverage for these matters in the event the Company is required to pay claims.

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):

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Other current liabilities $ 58 $ 58

6 unchanged sentences

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

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Cash $ 26 $ 6

Investments 240 239

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The Company considers various trends and developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience is used to estimate and value claims reasonably projected to be paid through 2068.

Annually, the Company assesses the sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding claims filed, settled and dismissed, and amounts paid in settlements.

Annually, the Company assesses the sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding claims filed, settled and

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

dismissed, and amounts paid in settlements.

In addition to claims and settlement experience, the Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the Company's defense strategy.

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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

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):

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Other current liabilities $ 77 $ 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):

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Other current assets $ 10 $ 10

1 unchanged sentence

Total insurance receivables $ 30 $ 30

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

Other Matters

3 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