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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ To _____
Commission File Number: 001-13836 
 
JOHNSON CONTROLS INTERNATIONAL PLC
(Exact name of registrant as specified in its charter
Ireland98-0390500
(Jurisdiction of Incorporation)(I.R.S. Employer Identification No.)
One Albert Quay, Cork, Ireland, T12 X8N6
(353) 21-423-5000
(Address of Principal Executive Offices and Postal Code)(Registrant's Telephone Number)
Securities Registered Pursuant to Section 12(b) of the Exchange Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Ordinary Shares, Par Value $0.01JCINew York Stock Exchange
 1.000% Senior Notes due 2023  JCI23A New York Stock Exchange
 3.625% Senior Notes due 2024  JCI24A New York Stock Exchange
 1.375% Notes due 2025  JCI25A New York Stock Exchange
 3.900% Notes due 2026  JCI26A New York Stock Exchange
0.375% Senior Notes due 2027JCI27New York Stock Exchange
3.000% Senior Notes due 2028JCI28New York Stock Exchange
1.750% Senior Notes due 2030JCI30New York Stock Exchange
2.000% Sustainability-Linked Senior Notes due 2031JCI31New York Stock Exchange
1.000% Senior Notes due 2032JCI32New York Stock Exchange
4.900% Senior Notes due 2032JCI32ANew York Stock Exchange
 6.000% Notes due 2036  JCI36A New York Stock Exchange
 5.70% Senior Notes due 2041  JCI41B New York Stock Exchange
 5.250% Senior Notes due 2041  JCI41C New York Stock Exchange
 4.625% Senior Notes due 2044  JCI44A New York Stock Exchange
 5.125% Notes due 2045  JCI45B New York Stock Exchange
 6.950% Debentures due December 1, 2045  JCI45A New York Stock Exchange
 4.500% Senior Notes due 2047  JCI47 New York Stock Exchange
 4.950% Senior Notes due 2064  JCI64A New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerþAccelerated filerSmaller reporting company
Non-accelerated filer¨Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOrdinary Shares Outstanding at December 31, 2022
Ordinary Shares, $0.01 par value per share687,231,016



JOHNSON CONTROLS INTERNATIONAL PLC
FORM 10-Q
Report Index
  
Page
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Statements of Income for the Three Month Periods Ended December 31, 2022 and 2021
Consolidated Statements of Comprehensive Income for the Three Month Periods Ended December 31, 2022 and 2021
Consolidated Statements of Financial Position at December 31, 2022 and September 30, 2022
Consolidated Statements of Cash Flows for the Three Month Periods Ended December 31, 2022 and 2021
Consolidated Statements of Shareholders' Equity for the
       Three Month Periods Ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
Signatures



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Johnson Controls International plc
Consolidated Statements of Income
(in millions, except per share data; unaudited)
Three Months Ended
December 31,
20222021
Net sales
Products and systems$4,556 $4,420 
Services1,512 1,442 
6,068 5,862 
Cost of sales
Products and systems3,113 3,153 
Services864 818 
3,977 3,971 
Gross profit2,091 1,891 
Selling, general and administrative expenses(1,571)(1,369)
Restructuring and impairment costs(345)(49)
Net financing charges(67)(53)
Equity income62 70 
Income before income taxes170 490 
Income tax provision14 71 
Net income 156 419 
Income attributable to noncontrolling interests38 38 
Net income attributable to Johnson Controls$118 $381 
Earnings per share attributable to Johnson Controls
Basic$0.17 $0.54 
Diluted$0.17 $0.54 


















The accompanying notes are an integral part of the consolidated financial statements.
3


Johnson Controls International plc
Consolidated Statements of Comprehensive Income
(in millions; unaudited)
Three Months Ended
December 31,
 20222021
Net income $156 $419 
Other comprehensive income, net of tax:
Foreign currency translation adjustments90 86 
Realized and unrealized gains (losses) on derivatives(17)7 
Pension and postretirement plans(1)(1)
Other comprehensive income72 92 
Total comprehensive income228 511 
Comprehensive income attributable to noncontrolling interests:
Net income38 38 
Other comprehensive income, net of tax:
Foreign currency translation adjustments31 2 
Realized and unrealized gains (losses) on derivatives(6)3 
Other comprehensive income25 5 
Comprehensive income attributable to noncontrolling interests63 43 
Comprehensive income attributable to Johnson Controls$165 $468 

























The accompanying notes are an integral part of the consolidated financial statements.
4


Johnson Controls International plc
Consolidated Statements of Financial Position
(in millions, except par value; unaudited)
December 31, 2022September 30, 2022
Assets
Cash and cash equivalents$1,509 $2,031 
Accounts receivable, less allowance for
      expected credit losses of $74 and $62, respectively
5,722 5,528 
Inventories2,895 2,510 
Current assets held for sale 418 387 
Other current assets1,293 1,229 
Current assets11,837 11,685 
Property, plant and equipment - net3,098 3,042 
Goodwill17,684 17,328 
Other intangible assets - net4,673 4,641 
Investments in partially-owned affiliates1,053 963 
Noncurrent assets held for sale 588 751 
Other noncurrent assets3,864 3,748 
Total assets$42,797 $42,158 
Liabilities and Equity
Short-term debt$1,026 $669 
Current portion of long-term debt937 865 
Accounts payable4,138 4,241 
Accrued compensation and benefits912 978 
Deferred revenue1,774 1,768 
Current liabilities held for sale310 236 
Other current liabilities2,466 2,482 
Current liabilities11,563 11,239 
Long-term debt7,784 7,426 
Pension and postretirement benefits354 358 
Noncurrent liabilities held for sale62 62 
Other noncurrent liabilities5,791 5,671 
Long-term liabilities13,991 13,517 
Commitments and contingencies (Note 21)
Ordinary shares, $0.01 par value
7 7 
Ordinary A shares, €1.00 par value
  
Preferred shares, $0.01 par value
  
Ordinary shares held in treasury, at cost(1,233)(1,203)
Capital in excess of par value17,262 17,224 
Retained earnings874 1,151 
Accumulated other comprehensive loss(864)(911)
Shareholders’ equity attributable to Johnson Controls16,046 16,268 
Noncontrolling interests1,197 1,134 
Total equity17,243 17,402 
Total liabilities and equity$42,797 $42,158 



The accompanying notes are an integral part of the consolidated financial statements.
5


Johnson Controls International plc
Consolidated Statements of Cash Flows
(in millions; unaudited)
Three Months Ended December 31,
 20222021
Operating Activities of Continuing Operations
Net income attributable to Johnson Controls$118 $381 
Income attributable to noncontrolling interests38 38 
Net income156 419 
Adjustments to reconcile net income to cash provided (used) by operating activities:
Depreciation and amortization203 224 
Pension and postretirement benefit income(6)(82)
Pension and postretirement contributions(9)(41)
Equity in earnings of partially-owned affiliates, net of dividends received(56)(18)
Deferred income taxes(92)(32)
Noncash restructuring and impairment charges294  
Equity-based compensation30 29 
Other - net(27)(28)
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable(88)(75)
Inventories(348)(376)
Other assets(68)(63)
Restructuring reserves14 19 
Accounts payable and accrued liabilities(338)333 
Accrued income taxes39 83 
Cash provided (used) by operating activities from continuing operations(296)392 
Investing Activities of Continuing Operations
Capital expenditures(134)(135)
Sale of property, plant and equipment27 7 
Acquisition of businesses, net of cash acquired(79)(108)
Business divestitures, net of cash divested 16 
Changes in long-term investments(3)2 
Cash used by investing activities from continuing operations(189)(218)
Financing Activities of Continuing Operations
Increase in short-term debt - net267 394 
Increase in long-term debt154  
Stock repurchases and retirements(154)(526)
Payment of cash dividends(241)(191)
Employee equity-based compensation withholding taxes(30)(47)
Other - net13 13 
Cash provided (used) by financing activities from continuing operations9 (357)
Discontinued Operations
Cash used by operating activities (4)
Cash used by discontinued operations (4)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(14)67 
Decrease in cash, cash equivalents and restricted cash(490)(120)
Cash, cash equivalents and restricted cash at beginning of period2,066 1,342 
Cash, cash equivalents and restricted cash at end of period1,576 1,222 
Less: Restricted cash67 15 
Cash and cash equivalents at end of period$1,509 $1,207 


The accompanying notes are an integral part of the consolidated financial statements.
6


Johnson Controls International plc
Consolidated Statements of Shareholders' Equity
(in millions, except per share data; unaudited)
Three Months Ended
December 31,
 20222021
Shareholders' Equity Attributable to Johnson Controls
Beginning Balance$16,268 $17,562 
Ordinary Shares
Beginning balance7 7 
Ending balance7 7 
Ordinary Shares Held in Treasury, at Cost
Beginning balance(1,203)(1,152)
Employee equity-based compensation withholding taxes(30)(47)
Ending balance(1,233)(1,199)
Capital in Excess of Par Value
Beginning balance17,224 17,116 
Share-based compensation expense19 — 
Other, including options exercised19 34 
Ending balance17,262 17,150 
Retained Earnings
Beginning balance1,151 2,025 
Net income attributable to Johnson Controls118 381 
Cash dividends declared(241)(242)
Repurchases and retirements of ordinary shares(154)(526)
Ending balance874 1,638 
Accumulated Other Comprehensive Income (Loss)
Beginning balance(911)(434)
Other comprehensive income47 87 
Ending balance(864)(347)
Ending Balance16,046 17,249 
Shareholders' Equity Attributable to Noncontrolling Interests
Beginning Balance1,134 1,191 
Comprehensive income attributable to noncontrolling interests63 43 
Change in noncontrolling interest share— 7 
Ending Balance1,197 1,241 
Total Shareholders' Equity$17,243 $18,490 
Cash Dividends Declared per Ordinary Share$0.35 $0.34 











The accompanying notes are an integral part of the consolidated financial statements.
7


Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2022
(unaudited)

1.Basis of Presentation

The consolidated financial statements include the consolidated accounts of Johnson Controls International plc, a public limited company organized under the laws of Ireland, and its subsidiaries (Johnson Controls International plc and all its subsidiaries, hereinafter collectively referred to as the "Company," or "Johnson Controls"). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). 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.

Nature of Operations

Johnson Controls International plc, headquartered in Cork, Ireland, is a global leader in smart, healthy and sustainable buildings, serving a wide range of customers in more than 150 countries. The Company’s products, services, systems and solutions advance the safety, comfort and intelligence of spaces to serve people, places and the planet. The Company is committed to helping its customers win and creating greater value for all of its stakeholders through its strategic focus on buildings.

The Company is a global leader in engineering, manufacturing, commissioning and retrofitting building products and systems, including residential and commercial heating, ventilating, air-conditioning ("HVAC") equipment, industrial refrigeration systems, controls, security systems, fire-detection systems and fire-suppression solutions. The Company further serves customers by providing technical services, including maintenance, management, repair, retrofit and replacement of equipment (in the HVAC, industrial refrigeration, controls, security and fire-protection space), energy-management consulting and data-driven “smart building” services and solutions powered by its OpenBlue software platform and capabilities. The Company partners with customers by leveraging its broad product portfolio and digital capabilities powered by OpenBlue, together with its direct channel service and solutions capabilities, to deliver outcome-based solutions across the lifecycle of a building that address customers’ needs to improve energy efficiency, enhance security, create healthy environments and reduce greenhouse gas emissions.

Principles of Consolidation

The consolidated financial statements include the consolidated accounts of Johnson Controls International plc and its subsidiaries that are consolidated in conformity with U.S. GAAP. All significant intercompany transactions have been eliminated. The results of companies acquired or disposed of during the reporting period are included in the consolidated financial statements from the effective date of acquisition or up to the date of disposal. Investments in partially-owned affiliates are accounted for by the equity method when the Company exercises significant influence, which typically occurs when its ownership interest exceeds 20%, and the Company does not have a controlling interest.

The Company consolidates variable interest entities ("VIE") when it has the power to direct the significant activities of the entity and the obligation to absorb losses or receive benefits from the entity that may be significant. 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 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.

8


Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2022
(unaudited)
2.      New Accounting Standards

Recently Issued Accounting Pronouncements

In September 2022, the FASB issued ASU 2022-04, "Disclosure of Supplier Finance Program Obligations", which is intended to enhance the transparency surrounding the use of supplier finance programs. Supplier finance programs may also be referred to as reverse factoring, payables finance, or structured payables arrangements. The amendments require a buyer that uses supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period, and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The Company expects to adopt the new disclosures, other than the rollforward disclosure, as required at the beginning of fiscal 2024. The rollforward disclosures will be adopted as required at the beginning of fiscal 2025.

Other recently issued accounting pronouncements are not expected to have a material impact on the Company's consolidated financial statements.

3.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. In connection with the acquisitions, the Company recorded goodwill of $53 million within the Global Products segment and $2 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. 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.

4.     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.
9


Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2022
(unaudited)
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):
 December 31, 2022September 30, 2022
Accounts receivable - net$220 $199 
Inventories157 155 
Other current assets28 21 
Current assets held for sale$405 $375 
Property, plant and equipment - net$191 $89 
Goodwill 22 
Other intangible assets - net 322 514 
Other noncurrent assets72 72 
Noncurrent assets held for sale$585 $697 
Accounts payable$129 $127 
Accrued compensation and benefits16 25 
Deferred revenue38 36 
Other current liabilities 116 33 
Current liabilities held for sale$299 $221 
Other noncurrent liabilities$61 $61 
Noncurrent liabilities held for sale$61 $61 

5.     Revenue Recognition

Disaggregated Revenue

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,
20222021
Products & SystemsServicesTotalProducts & SystemsServicesTotal
Building Solutions North America$1,451 $916 $2,367 $1,299 $853 $2,152 
Building Solutions EMEA/LA552 423 975 544 415 959 
Building Solutions Asia Pacific473 173 646 501 174 675 
Global Products2,080  2,080 2,076  2,076 
Total$4,556 $1,512 $6,068 $4,420 $1,442 $5,862 

10


Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2022
(unaudited)
The following table presents further disaggregation of Global Products segment revenues by product type (in millions):
Three Months Ended
December 31,
20222021
HVAC$1,440 $1,483 
Fire & Security570 544 
Industrial Refrigeration70 49 
Total$2,080 $2,076 

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 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. 

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 balancesDecember 31, 2022September 30, 2022
Contract assets - currentAccounts receivable - net$2,019 $2,020 
Contract assets - noncurrentOther noncurrent assets83 79 
Contract liabilities - currentDeferred revenue(1,774)(1,768)
Contract liabilities - noncurrentOther noncurrent liabilities(293)(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.

Performance Obligations

A performance obligation is a distinct good, service, or a bundle of goods and services promised in a contract. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When contracts with customers require significant and complex integration, contain goods or services which are highly interdependent or interrelated, or are goods or services which significantly modify or customize other promises in the contracts and, therefore, are not distinct, then the entire contract is accounted for as a single performance obligation. For any contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation.

Performance obligations are satisfied at a point in time or over time. 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, 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.

11


Johnson Controls International plc
Notes to Consolidated Financial Statements
December 31, 2022
(unaudited)
Costs to Obtain or Fulfill a Contract

The Company recognizes the incremental costs incurred to obtain or fulfill a contract with a customer as an asset when these costs are recoverable. These costs consist primarily of sales commissions and design costs that relate to a contract or an anticipated contract that we expect to recover. Costs to obtain or fulfill a contract are capitalized and amortized over the period of contract performance.

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, 2022September 30, 2022
Other current assets$148 $139 
Other noncurrent assets191 174 
Total$339 $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.

6.    Accounts Receivable

The Company enters into various factoring agreements to sell certain accounts receivable to third-party financial institutions. For the majority of these agreements, for ease of administration, the Company collects customer payments related to the factored receivables on behalf of the financial institutions but otherwise maintains no continuing involvement with respect to the factored receivables. 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 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.

7.     Inventories

Inventories consisted of the following (in millions):
December 31, 2022September 30, 2022
Raw materials and supplies$1,162 $1,009 
Work-in-process215 196 
Finished goods1,518 1,305 
Inventories$2,895 $2,510 

12


8.    Goodwill and Other Intangible Assets

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
Building Solutions North AmericaBuilding Solutions EMEA/LABuilding Solutions Asia PacificGlobal ProductsTotal
Goodwill$9,630 $1,772 $1,116 $5,591 18,109 
Accumulated impairment loss(659)(47) (75)(781)
Balance at beginning of period8,971 1,725 1,116 5,516 17,328 
Acquisitions 2  53 55 
Foreign currency translation and other8 139 62 92 301 
Balance at end of period$8,979 $1,866 $1,178 $5,661 $17,684 

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. 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, 2022September 30, 2022
 Gross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization
Net
Definite-lived intangible assets
Technology$1,415 $(699)$716 $1,353 $(658)$695 
Customer relationships2,793 (1,330)1,463 2,742 (1,254)1,488 
Miscellaneous780 (407)373 756 (386)370 
4,988 (2,436)2,552 4,851 (2,298)2,553 
Indefinite-lived intangible assets
Trademarks/trade names2,121 — 2,121 2,088 — 2,088 
2,121 — 2,121 2,088 — 2,088 
Total intangible assets$7,109 $(2,436)$4,673 $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.

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

13


9.    Leases

The following table presents supplemental consolidated statement of financial position information (in millions):
Location of lease balancesDecember 31, 2022September 30, 2022
Operating lease right-of-use assets
Other noncurrent assets
$1,311 $1,271 
Operating lease liabilities - current
Other current liabilities
290 280 
Operating lease liabilities - noncurrent
Other noncurrent liabilities
1,018 987 

The following table presents supplemental noncash operating lease activity, excluding leases acquired in business combinations (in millions):
Three Months Ended
December 31,
20222021
Right-of-use assets obtained in exchange for operating lease liabilities$110 $55 

10.    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.

Net Financing Charges

Net financing charges consisted of the following (in millions):
Three Months Ended
December 31,
20222021
Interest expense, net of capitalized interest costs$69 $55 
Other financing charges10 5 
Interest income(4)(2)
Net foreign exchange results for financing activities(8)(5)
Net financing charges$67 $53 

14


11.    Derivative Instruments and Hedging Activities

The Company selectively uses derivative instruments to reduce market risk associated with changes in foreign currency, commodities and interest rates. Under Company policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized by the Company to manage risk is included in the following paragraphs. In addition, refer to Note 12, "Fair Value Measurements," of the notes to the consolidated financial statements for information related to the fair value measurements and valuation methods utilized by the Company for each derivative type.

Cash Flow Hedges

The Company has global operations and participates in foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. The Company selectively hedges anticipated transactions that are subject to foreign exchange rate risk primarily using foreign currency exchange forward contracts. The Company hedges 70% to 90% of the notional amount of each of its known foreign exchange transactional exposures.

The Company selectively hedges anticipated transactions that are subject to commodity price risk, primarily using commodity hedge contracts, to minimize overall price risk associated with the Company’s purchases of copper and aluminum in cases where commodity price risk cannot be naturally offset or hedged through supply base fixed price contracts. Commodity risks are systematically managed pursuant to policy guidelines. The maturities of the commodity hedge contracts coincide with the expected purchase of the commodities.

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.

The Company had the following outstanding contracts to hedge forecasted commodity purchases (in metric tons):
 Volume Outstanding as of
CommodityDecember 31, 2022September 30, 2022
Copper4,218 3,629 
Aluminum 10,362 6,758 

Net Investment Hedges

The Company enters into foreign currency denominated debt obligations to selectively hedge portions of its net investment in non-U.S. subsidiaries. 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.

The following table summarizes net investment hedges (in billions):
December 31,September 30,
20222022
Euro-denominated bonds designated as net investment hedges in Europe2.9 2.9 
Yen-denominated debt designated as a net investment hedge in Japan¥30 ¥30 

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Derivatives Not Designated as Hedging Instruments

The Company holds certain foreign currency forward contracts not designated as hedging instruments under ASC 815 to hedge foreign currency exposure resulting from monetary assets and liabilities denominated in nonfunctional currencies. The changes in fair value of these foreign currency forward exchange derivatives are recorded in the consolidated statements of income where they offset foreign currency transactional gains and losses on the nonfunctional currency denominated assets and liabilities being hedged.

Fair Value of Derivative Instruments

The following table presents the location and fair values of derivative instruments and hedging activities included in the Company’s consolidated statements of financial position (in millions):
 Derivatives and Hedging Activities 
Designated as Hedging Instruments under ASC 815
Derivatives and Hedging Activities Not
Designated as Hedging Instruments under ASC 815
 December 31,September 30,December 31,September 30,
2022202220222022
Other current assets
Foreign currency exchange derivatives$26 $30 $ $24 
Commodity derivatives2    
Total assets$28 $30 $ $24 
Other current liabilities
Foreign currency exchange derivatives$50 $24 $14 $27 
        Commodity derivatives2 10   
Long-term debt
Foreign currency denominated debt3,346 3,077   
Total liabilities$3,398 $3,111 $14 $27 

Counterparty Credit Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk. The Company has established policies and procedures to limit the potential for counterparty credit risk, including establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. 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. The Company enters into ISDA master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. The Company has not elected to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position.

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. The Company's exposure to credit risk associated with its derivative instruments is measured on an individual counterparty basis, as well as by groups of counterparties that share similar attributes. The Company does not anticipate any non-performance by any of its counterparties, and the concentration of risk with financial institutions does not present significant credit risk to the Company.

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The gross and net amounts of derivative assets and liabilities were as follows (in millions):
 Fair Value of AssetsFair Value of Liabilities
 December 31,September 30,December 31,September 30,
2022202220222022
Gross amount recognized$28 $54 $3,412 $3,138 
Gross amount eligible for offsetting(17)(42)(17)(42)
Net amount$11 $12 $3,395 $3,096 
Derivatives Impact on the Statements of Income and Statements of Comprehensive Income

The following table presents the pre-tax gains (losses) recorded in other comprehensive income (loss) related to cash flow hedges (in millions):    
Derivatives in ASC 815 Cash Flow
 Hedging Relationships
Three Months Ended December 31,
20222021
Foreign currency exchange derivatives$(21)$