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 June 30, 2023

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) 

Ireland	98-0390500
(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 Class	Trading Symbol	Name of Each Exchange on Which Registered
Ordinary Shares, Par Value $0.01	JCI	New 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 2027	JCI27	New York Stock Exchange
3.000% Senior Notes due 2028	JCI28	New York Stock Exchange
1.750% Senior Notes due 2030	JCI30	New York Stock Exchange
2.000% Sustainability-Linked Senior Notes due 2031	JCI31	New York Stock Exchange
1.000% Senior Notes due 2032	JCI32	New York Stock Exchange
4.900% Senior Notes due 2032	JCI32A	New York Stock Exchange
4.250% Senior Notes due 2035	JCI35	New 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 filer	þ	Accelerated filer	☐	Smaller 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.

Class	Ordinary Shares Outstanding at June 30, 2023
Ordinary Shares, $0.01 par value per share	680,320,034

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 and Nine Month Periods Ended June 30, 2023 and 2022	3
Consolidated Statements of Comprehensive Income for the        Three and Nine Month Periods Ended June 30, 2023 and 2022	4
Consolidated Statements of Financial Position at June 30, 2023 and September 30, 2022	5
Consolidated Statements of Cash Flows for the Nine Month Periods Ended June 30, 2023 and 2022	6
Consolidated Statements of Shareholders' Equity for the        Three and Nine Month Periods Ended June 30, 2023 and 2022	7
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3. Quantitative and Qualitative Disclosures About Market Risk	54
Item 4. Controls and Procedures	54
Part II. Other Information
Item 1. Legal Proceedings	54
Item 1A. Risk Factors	55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 5. Other Information	55
Item 6. Exhibits	57
Signatures	58

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 June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
Net sales
Products and systems	$	5,431	$	5,082	$	15,070	$	14,119
Services	1,702		1,532		4,817		4,455
	7,133		6,614		19,887		18,574
Cost of sales
Products and systems	3,708		3,549		10,337		9,996
Services	994		865		2,787		2,530
	4,702		4,414		13,124		12,526
Gross profit	2,431		2,200		6,763		6,048
Selling, general and administrative expenses	(1,555)		(1,589)		(4,705)		(4,412)
Restructuring and impairment costs	(81)		(121)		(844)		(554)
Net financing charges	(80)		(49)		(218)		(153)
Equity income	78		63		190		175
Income before income taxes	793		504		1,186		1,104
Income tax (benefit) provision	(329)		61		(266)		190
Net income	1,122		443		1,452		914
Income attributable to noncontrolling interests	73		64		152		143
Net income attributable to Johnson Controls	$	1,049	$	379	$	1,300	$	771
Earnings per share attributable to Johnson Controls
Basic	$	1.54	$	0.55	$	1.90	$	1.10
Diluted	1.53		0.55		1.89		1.10

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 June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
Net income	$	1,122	$	443	$	1,452	$	914
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(72)		(356)		28		(286)
Realized and unrealized gains (losses) on derivatives	4		(22)		7		(5)
Pension and postretirement plans	(1)		—		(2)		(2)
Other comprehensive income (loss)	(69)		(378)		33		(293)
Total comprehensive income	1,053		65		1,485		621
Comprehensive income attributable to noncontrolling interests:
Net income	73		64		152		143
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(47)		(58)		(5)		(66)
Realized and unrealized gains (losses) on derivatives	2		(3)		(3)		1
Other comprehensive loss	(45)		(61)		(8)		(65)
Comprehensive income attributable to noncontrolling interests	28		3		144		78
Comprehensive income attributable to Johnson Controls	$	1,025	$	62	$	1,341	$	543

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)

	June 30, 2023		September 30, 2022
Assets
Cash and cash equivalents	$	1,057	$	2,031
Accounts receivable, less allowance for       expected credit losses of $89 and $66, respectively	6,540		5,727
Inventories	3,092		2,665
Other current assets	1,317		1,262
Current assets	12,006		11,685
Property, plant and equipment - net	3,187		3,131
Goodwill	17,644		17,350
Other intangible assets - net	4,831		5,155
Investments in partially-owned affiliates	988		963
Other noncurrent assets	4,124		3,874
Total assets	$	42,780	$	42,158
Liabilities and Equity
Short-term debt	$	186	$	669
Current portion of long-term debt	1,081		865
Accounts payable	4,296		4,368
Accrued compensation and benefits	954		1,003
Deferred revenue	1,918		1,804
Other current liabilities	2,693		2,530
Current liabilities	11,128		11,239
Long-term debt	8,497		7,426
Pension and postretirement benefits	334		358
Other noncurrent liabilities	5,358		5,733
Long-term liabilities	14,189		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	(1,237)		(1,203)
Capital in excess of par value	17,325		17,224
Retained earnings	1,099		1,151
Accumulated other comprehensive loss	(870)		(911)
Shareholders’ equity attributable to Johnson Controls	16,324		16,268
Noncontrolling interests	1,139		1,134
Total equity	17,463		17,402
Total liabilities and equity	$	42,780	$	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)

	Nine Months Ended June 30,
	2023		2022
Operating Activities of Continuing Operations
Net income attributable to Johnson Controls	$	1,300	$	771
Income attributable to noncontrolling interests	152		143
Net income	1,452		914
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	621		633
Pension and postretirement benefit expense (income)	(23)		8
Pension and postretirement contributions	(38)		(83)
Equity in earnings of partially-owned affiliates, net of dividends received	(27)		(25)
Deferred income taxes	(270)		(241)
Noncash restructuring and impairment charges	701		430
Equity-based compensation	92		79
Other - net	(104)		(47)
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable	(667)		(637)
Inventories	(383)		(761)
Other assets	(214)		(276)
Restructuring reserves	33		(2)
Accounts payable and accrued liabilities	(127)		788
Accrued income taxes	(215)		31
Cash provided by operating activities from continuing operations	831		811
Investing Activities of Continuing Operations
Capital expenditures	(366)		(430)
Sale of property, plant and equipment	28		38
Acquisition of businesses, net of cash acquired	(260)		(236)
Other - net	22		40
Cash used by investing activities from continuing operations	(576)		(588)
Financing Activities of Continuing Operations
Net proceeds from borrowings with maturities less than three months	(248)		1,693
Proceeds from debt	1,171		544
Repayments of debt	(536)		(3)
Stock repurchases and retirements	(613)		(1,427)
Payment of cash dividends	(729)		(674)
Dividends paid to noncontrolling interests	(149)		(121)
Other - net	(7)		17
Cash provided (used) by financing activities from continuing operations	(1,111)		29
Discontinued Operations - Cash used by operating activities	—		(4)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(67)		(49)
Increase (decrease) in cash, cash equivalents and restricted cash	(923)		199
Cash, cash equivalents and restricted cash at beginning of period	2,066		1,342
Cash, cash equivalents and restricted cash at end of period	1,143		1,541
Less: Restricted cash	86		35
Cash and cash equivalents at end of period	$	1,057	$	1,506

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 June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
Shareholders' Equity Attributable to Johnson Controls
Beginning Balance	$	15,890	$	16,536	$	16,268	$	17,562
Ordinary Shares - Beginning and ending balance	7		7		7		7
Ordinary Shares Held in Treasury, at Cost
Beginning balance	(1,235)		(1,200)		(1,203)		(1,152)
Employee equity-based compensation withholding taxes	(2)		(1)		(34)		(49)
Ending balance	(1,237)		(1,201)		(1,237)		(1,201)
Capital in Excess of Par Value
Beginning balance	17,295		17,174		17,224		17,116
Share-based compensation expense	22		—		66		—
Other, including options exercised	8		25		35		83
Ending balance	17,325		17,199		17,325		17,199
Retained Earnings
Beginning balance	669		900		1,151		2,025
Net income attributable to Johnson Controls	1,049		379		1,300		771
Cash dividends declared	(253)		(242)		(739)		(724)
Repurchases and retirements of ordinary shares	(366)		(392)		(613)		(1,427)
Ending balance	1,099		645		1,099		645
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(846)		(345)		(911)		(434)
Other comprehensive income	(24)		(317)		41		(228)
Ending balance	(870)		(662)		(870)		(662)
Ending Balance	16,324		15,988		16,324		15,988
Shareholders' Equity Attributable to Noncontrolling Interests
Beginning Balance	1,188		1,152		1,134		1,191
Comprehensive income attributable to noncontrolling interests	28		3		144		78
Dividends attributable to noncontrolling interests	(77)		—		(139)		(121)
Change in noncontrolling interest share	—		—		—		7
Ending Balance	1,139		1,155		1,139		1,155
Total Shareholders' Equity	$	17,463	$	17,143	$	17,463	$	17,143
Cash Dividends Declared per Ordinary Share	$	0.37	$	0.35	$	1.08	$	1.04

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

7

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(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 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

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.

8

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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 nine months ended June 30, 2022. Interim and annual amounts for the year ended September 30, 2022 and annual amounts for the years ended September 30, 2021 and 2020 were similarly impacted. Prior period amounts will be revised with future Quarterly Reports on Form 10-Q and Annual Report on Form 10-K filings. Cash provided by financing activities and the total increase (decrease) in cash, cash equivalents and restricted cash were unchanged for all affected periods. The Company does not believe the impact of incorrect presentation is material to any periods.

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 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.

9

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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.

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 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. 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.

10

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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 June 30,
	2023						2022
	Products & Systems		Services		Total		Products & Systems		Services		Total
Building Solutions North America	$	1,636	$	1,029	$	2,665	$	1,481	$	945	$	2,426
Building Solutions EMEA/LA	571		474		1,045		537		415		952
Building Solutions Asia Pacific	537		199		736		493		172		665
Global Products	2,687		—		2,687		2,571		—		2,571
Total	$	5,431	$	1,702	$	7,133	$	5,082	$	1,532	$	6,614

	Nine Months Ended June 30,
	2023						2022
	Products & Systems		Services		Total		Products & Systems		Services		Total
Building Solutions North America	$	4,641	$	2,911	$	7,552	$	4,123	$	2,682	$	6,805
Building Solutions EMEA/LA	1,705		1,346		3,051		1,617		1,252		2,869
Building Solutions Asia Pacific	1,489		560		2,049		1,442		521		1,963
Global Products	7,235		—		7,235		6,937		—		6,937
Total	$	15,070	$	4,817	$	19,887	$	14,119	$	4,455	$	18,574

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

	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
HVAC	$	1,973	$	1,889	$	5,170	$	5,030
Fire & Security	626		610		1,819		1,732
Industrial Refrigeration	88		72		246		175
Total	$	2,687	$	2,571	$	7,235	$	6,937

Contract Balances

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed. Contract liabilities relate to customer payments received in advance of satisfaction of performance obligations under the contract. Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period. 

11

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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	June 30, 2023		September 30, 2022
Contract assets - current	Accounts receivable - net	$	2,080	$	2,067
Contract assets - noncurrent	Other noncurrent assets	79		79
Contract liabilities - current	Deferred revenue	1,918		1,804
Contract liabilities - noncurrent	Other noncurrent liabilities	292		282

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

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 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. 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 service contracts with an original expected duration of one year or less.

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):

	June 30, 2023		September 30, 2022
Other current assets	$	159	$	139
Other noncurrent assets	212		174
Total	$	371	$	313

12

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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.

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 $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 $397 million and $476 million as of June 30, 2023 and September 30, 2022, respectively.

7.     Inventories

Inventories consisted of the following (in millions):

	June 30, 2023		September 30, 2022
Raw materials and supplies	$	1,261	$	1,040
Work-in-process	259		203
Finished goods	1,572		1,422
Inventories	$	3,092	$	2,665

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):

	Nine Months Ended June 30, 2023
	Building Solutions North America		Building Solutions EMEA/LA		Building Solutions Asia Pacific		Global Products		Total
Goodwill	$	9,630	$	1,794	$	1,116	$	5,591	18,131
Accumulated impairment loss	(659)		(47)		—		(75)		(781)
Balance at beginning of period	8,971		1,747		1,116		5,516		17,350
Acquisitions (1)	—		12		51		121		184
Impairments	—		—		—		(184)		(184)
Foreign currency translation and other	17		174		21		82		294
Balance at end of period	$	8,988	$	1,933	$	1,188	$	5,535	$	17,644

(1) Includes measurement period adjustments

The Company tests goodwill for impairment annually as of July 31 or more frequently if events or changes in circumstances indicate the asset might be impaired. In the second quarter of fiscal 2023, management completed an updated comprehensive review of the Silent-Aire reporting unit, including its current quarter results and its nearer term

13

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

forecast. 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 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 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):

	June 30, 2023						September 30, 2022
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Definite-lived intangible assets
Technology	$	1,479	$	(771)	$	708	$	1,481	$	(728)	$	753
Customer relationships	2,975		(1,451)		1,524		3,011		(1,340)		1,671
Miscellaneous	878		(422)		456		949		(425)		524
	5,332		(2,644)		2,688		5,441		(2,493)		2,948
Indefinite-lived intangible assets
Trademarks/trade names	2,143		—		2,143		2,207		—		2,207
	2,143		—		2,143		2,207		—		2,207
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 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 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.

9.    Leases

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

	Location of lease balances	June 30, 2023		September 30, 2022
Operating lease right-of-use assets	Other noncurrent assets	$	1,423	$	1,332
Operating lease liabilities - current	Other current liabilities	321		288
Operating lease liabilities - noncurrent	Other noncurrent liabilities	1,111		1,040

14

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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

	Nine Months Ended June 30,
	2023		2022
Right-of-use assets obtained in exchange for operating lease liabilities	$	347	$	263

10.    Debt and Financing Arrangements

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

	June 30,			September 30,
	2023			2022
Bank borrowings	$	23		$	10
Commercial paper	—			172
Term loans	163			487
	$	186		$	669
Weighted average interest rate on short-term debt outstanding	3.8		%	0.5		%

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

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

•March 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.

15

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

Net Financing Charges

Net financing charges consisted of the following (in millions):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
Interest expense, net of capitalized interest costs	$	79	$	54	$	219	$	165
Other financing charges	13		6		34		16
Interest income	(10)		(2)		(17)		(5)
Net foreign exchange results for financing activities	(2)		(9)		(18)		(23)
Net financing charges	$	80	$	49	$	218	$	153

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 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	June 30, 2023	September 30, 2022
Copper	3,493	3,629
Aluminum	7,860	6,758

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

16

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

issuances. 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

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):

	June 30,		September 30,
	2023		2022
Euro-denominated bonds designated as net investment hedges in Europe	€	2.9	€	2.9
Yen-denominated debt designated as a net investment hedge in Japan	¥	30	¥	30

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
	June 30,		September 30,		June 30,		September 30,
	2023		2022		2023		2022
Other current assets
Foreign currency exchange derivatives	$	14	$	30	$	34	$	24
Total assets	$	14	$	30	$	34	$	24
Other current liabilities
Foreign currency exchange derivatives	$	18	$	24	$	21	$	27
Commodity derivatives	4		10		—		—
Long-term debt
Foreign currency denominated debt	3,376		3,077		—		—
Total liabilities	$	3,398	$	3,111	$	21	$	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

17

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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.

The gross and net amounts of derivative assets and liabilities were as follows (in millions):

	Fair Value of Assets				Fair Value of Liabilities
	June 30,		September 30,		June 30,		September 30,
	2023		2022		2023		2022
Gross amount recognized	$	48	$	54	$	3,419	$	3,138
Gross amount eligible for offsetting	(16)		(42)		(16)		(42)
Net amount	$	32	$	12	$	3,403	$	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 June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
Foreign currency exchange derivatives	$	3	$	3	$	(9)	$	26
Commodity derivatives	(6)		(24)		1		(20)
Interest rate swaps	1		—		6		—
Total	$	(2)	$	(21)	$	(2)	$	6

The following table presents the location and amount of the pre-tax gains (losses) on cash flow hedges reclassified from AOCI into the Company’s consolidated statements of income (in millions):

Derivatives in ASC 815 Cash Flow Hedging Relationships	Location of Gain (Loss) Reclassified from AOCI into Income	Three Months Ended June 30,				Nine Months Ended June 30,
		2023		2022		2023		2022
Foreign currency exchange derivatives	Cost of sales	$	(6)	$	14	$	(2)	$	25
Commodity derivatives	Cost of sales	1		(4)		(7)		(9)
Interest rate swaps	Net financing charges	—		(1)		—		(2)
Total		$	(5)	$	9	$	(9)	$	14

18

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

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

Derivatives Not Designated as Hedging Instruments under ASC 815	Location of Gain Recognized in Income on Derivative	Three Months Ended June 30,				Nine Months Ended June 30,
		2023		2022		2023		2022
Foreign currency exchange derivatives	Cost of sales	$	(9)	$	1	$	(17)	$	8
Foreign currency exchange derivatives	Net financing charges	(54)		(16)		(118)		72
Equity swap	Selling, general and administrative	—		(4)		—		(5)
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 $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.

12.    Fair Value Measurements

ASC 820, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

19

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

Recurring Fair Value Measurements

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value (in millions):

	Fair Value Measurements Using:
	Total as of June 30, 2023		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	48	$	—	$	48	$	—
Other noncurrent assets
Deferred compensation plan assets	46		46		—		—
Exchange traded funds (fixed income)(1)	80		80		—		—
Exchange traded funds (equity)(1)	160		160		—		—
Total assets	$	334	$	286	$	48	$	—
Other current liabilities
Foreign currency exchange derivatives	$	39	$	—	$	39	$	—
Commodity derivatives	4		—		4		—
Contingent earn-out liabilities	35		—		—		35
Other noncurrent liabilities
Contingent earn-out liabilities	22		—		—		22
Total liabilities	$	100	$	—	$	43	$	57

20

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

	Fair Value Measurements Using:
	Total as of September 30, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	54	$	—	$	54	$	—
Exchange traded funds (fixed income)(1)	22