Johnson Controls International plc - Quarter Report: 2024 June (Form 10-Q)

Net income Less: Income attributable to noncontrolling interests Net income attributable to Johnson Controls$ $ $ $ Earnings per share attributable to Johnson ControlsBasic$ $ $ $ Diluted

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

Johnson Controls International plc

Consolidated Statements of Comprehensive Income

(in millions; unaudited)



	Three Months Ended June 30,		Nine Months Ended June 30,
	2024	2023	2024	2023

Net income	$	$	$	$

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	()	()	()
Realized and unrealized gains (losses) on derivatives			()
Pension and postretirement plans	()	()	()	()

Other comprehensive income (loss)	()	()	()

Total comprehensive income

Comprehensive income attributable to noncontrolling interests:
Net income

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	()	()	()	()
Realized and unrealized gains (losses) on derivatives				()
Other comprehensive loss	()	()	()	()
Comprehensive income attributable to noncontrolling interests

Ordinary shares, $ par value
Ordinary A shares, € par value
Preferred shares, $ par value
Ordinary shares held in treasury, at cost	()	()
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss	()	()
Shareholders’ equity attributable to Johnson Controls
Noncontrolling interests
Total equity
Total liabilities and equity	$	$

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

Johnson Controls International plc

Consolidated Statements of Cash Flows

(in millions; unaudited)


	Nine Months Ended June 30,
	2024	2023
Operating Activities
Net income attributable to Johnson Controls	$	$
Income attributable to noncontrolling interests
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Pension and postretirement benefit income	()	()
Pension and postretirement contributions	()	()
Equity in (earnings) losses of partially-owned affiliates, net of dividends received		()
Deferred income taxes	()	()
Noncash restructuring and impairment charges
Equity-based compensation
Other - net	()	()
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable	()	()
Inventories	()	()
Other assets	()	()
Restructuring reserves	()
Accounts payable and accrued liabilities		()
Accrued income taxes		()
Cash provided by operating activities

Investing Activities
Capital expenditures	()	()
Acquisition of businesses, net of cash acquired		()
Other - net
Cash used by investing activities	()	()

Financing Activities
Net proceeds (payments) from borrowings with maturities less than three months		()
Proceeds from debt
Repayments of debt	()	()
Stock repurchases and retirements	()	()
Payment of cash dividends	()	()
Employee equity-based compensation withholding taxes	()	()
Dividends paid to noncontrolling interests	()	()
Other - net	()
Cash used by financing activities	()	()

Effect of exchange rate changes on cash, cash equivalents and restricted cash		()
Decrease in cash, cash equivalents and restricted cash	()	()
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Less: Restricted cash
Cash and cash equivalents at end of period	$	$

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

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,
	2024	2023	2024	2023
Shareholders' Equity Attributable to Johnson Controls

Beginning Balance	$	$	$	$

Ordinary Shares - Beginning and ending balance

Ordinary Shares Held in Treasury, at Cost
Beginning balance	()	()	()	()
Employee equity-based compensation withholding taxes	()	()	()	()
Ending balance	()	()	()	()

Capital in Excess of Par Value
Beginning balance
Share-based compensation expense
Other, including options exercised
Ending balance

Retained Earnings
Beginning balance
Net income attributable to Johnson Controls
Cash dividends declared	()	()	()	()
Repurchases and retirements of ordinary shares	()	()	()	()
Ending balance

Accumulated Other Comprehensive Income (Loss)
Beginning balance	()	()	()	()
Other comprehensive income (loss)	()	()	()
Ending balance	()	()	()	()
Ending Balance

Shareholders' Equity Attributable to Noncontrolling Interests

Beginning Balance
Comprehensive income attributable to noncontrolling interests
Dividends attributable to noncontrolling interests	()	()	()	()
Other, including options exercised		—		—

Based on the total consideration expected from the sale, net of costs to sell, the Company recorded non-cash impairment charges on the allocated goodwill of $ million and the held for sale disposal group of $ million within restructuring and impairment costs in the consolidated statements of income during the three months ended June 30, 2024.

The business did not meet the criteria to be classified as a discontinued operation as the divestiture does not represent a strategic shift that will have a major effect on the Company's operations and financial results. The transaction is expected to close in the fourth quarter of fiscal 2024.

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 $ million and the Building Solutions Asia Pacific segment of $ 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. 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 was no longer probable that it would be sold in the next 12 months. The net assets were reclassified to held and used at the lower of fair value or adjusted carrying value, and due to prior period impairment charges recorded, there was no impact to the consolidated statements of income as a result of this reclassification.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $ $ $ Building Solutions EMEA/LA Building Solutions Asia Pacific Global Products Total$ $ $ $ $ $


	Nine Months Ended June 30,
	2024			2023
	Products & Systems	Services	Total	Products & Systems	Services	Total

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

Total	$	$	$	$	$	$

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,
	2024	2023	2024	2023
HVAC	$	$	$	$
Fire & Security
Industrial Refrigeration
Total	$	$	$	$

Building Solutions North AmericaBuilding Solutions EMEA/LABuilding Solutions Asia PacificGlobal ProductsTotalGoodwill$ $ $ $ Accumulated impairment loss()() ()()Balance at September 30, 2023 Impairments () ()

Foreign currency translation and other (1)

()()()Balance at June 30, 2024$ $ $ $ $

(1) Includes measurement period adjustments and the allocation of $ million of goodwill from Global Products to the ADTi disposal group classified as held for sale. Refer to Note 4, "Assets and Liabilities Held for Sale" of the notes to the consolidated financial statements for further information.

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.

During the second quarter of fiscal 2024, the Company determined a triggering event had occurred for one of its reporting units due to year-to-date results and projections for the remainder of fiscal 2024 being lower than the forecast used in the previous annual goodwill impairment test, 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 $ million within restructuring and impairment costs in the consolidated statements of income, which was determined by comparing the carrying amount of the reporting unit to its fair value. 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

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

million of goodwill for this reporting unit.

There were no other triggering events requiring an impairment assessment be conducted in the nine months ended June 30, 2024.

$()$ $ $()$ Customer relationships () () Miscellaneous () () () () Indefinite-lived intangible assetsTrademarks/trade names Total intangible assets$ $()$ $ $()$

Amortization of other intangible assets for the three months ended June 30, 2024 and 2023 was $ million and $ million, respectively. Amortization of other intangible assets for the nine months ended June 30, 2024 and 2023 was $ million and $ million, respectively.

$ Operating lease liabilities - current

Other current liabilities

Operating lease liabilities - noncurrent

Other noncurrent liabilities

2023 $

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

10.

$ Term loans Bank borrowings $ $ Weighted average interest rate on short-term debt outstanding % %

As of June 30, 2024, the Company had syndicated committed revolving credit facilities of $ billion which is scheduled to expire in December 2028 and $ million which is scheduled to expire in December 2024. There were draws on the facilities as of June 30, 2024.

In June 2024, the Company completed the debt tender offer to purchase $ million of its % Notes due 2045.

million unsecured, unsubordinated senior notes with an interest rate of % which is due April 2029.

11.

% to % of the notional amount of each of its known foreign exchange transactional exposures.

The Company enters into forward-starting interest-rate swaps in conjunction with anticipated note issuances. Forward-starting interest-rate swaps are terminated when the anticipated notes are issued. Accumulated amounts recorded in accumulated other comprehensive income (loss) ("AOCI") as of the date of the note issuance are amortized to interest expense over the life of the related note to reflect the difference between the swap's reference rate and the fixed rate of the note.

During the second quarter of fiscal 2024, the Company terminated $ million of forward-starting interest-rate swaps related to an anticipated note issuance that was no longer highly likely to occur. Accumulated amounts previously recorded in AOCI were not material and were recognized as net financing charges in the consolidated statements of income when the swaps were terminated.

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.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

Aluminum

Cash flow hedges under ASC 815, "Derivatives and Hedging," that hedge gains or losses due to changes in fair value are initially recorded as a component of 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 and commodity prices during the three and nine months ended June 30, 2024 and 2023.

Net Investment Hedges

The Company enters into cross-currency interest rate swaps and foreign currency denominated debt obligations to selectively hedge portions of its net investment in non-U.S. subsidiaries. The currency effects of the cross-currency interest rate swaps and debt obligations are reflected in the AOCI account within shareholders’ equity attributable to Johnson Controls ordinary shareholders where they offset gains and losses recorded on the Company’s net investments globally.

€ Yen-denominated debt designated as a net investment hedge in Japan¥ ¥ US dollar vs. Yen cross-currency interest rate swap designated as a net investment hedge in Japan¥ ¥

Derivatives Not Designated as Hedging Instruments

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $ Interest rate swaps Commodity derivatives Other noncurrent assetsCross-currency interest rate swap Total assets$ $ $ $ Other current liabilitiesForeign currency exchange derivatives$ $ $ $ Commodity derivatives Long-term debtForeign currency denominated debt Total liabilities$ $ $ $

Counterparty Credit Risk

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ )() $

Derivatives Impact on the Statements of Income and Statements of Comprehensive Income

$ $ $()Commodity derivatives () Interest rate swaps () Total$ $()$()$()

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 Cash Flow Hedging Relationships	Location of Gain (Loss) Reclassified from AOCI into Income	Three Months Ended June 30,			Nine Months Ended June 30,
		2024	2023		2024		2023
Foreign currency exchange derivatives	Cost of sales	$	$	()	$		$	()
Commodity derivatives	Cost of sales				()		()

Total		$	$	()	$	()	$	()

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	Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended June 30,				Nine Months Ended June 30,
		2024		2023		2024		2023
Foreign currency exchange derivatives	Cost of sales	$	()	$	()	$	()	$	()

Foreign currency exchange derivatives	SG&A
Foreign currency exchange derivatives	Net financing charges			()				()





Total		$		$	()	$		$	()

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $()$()

gains or losses were reclassified from CTA into income during the three and nine months ended June 30, 2024 and 2023.

12.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $ Commodity derivatives Other noncurrent assetsCross-currency interest rate swap Deferred compensation plan assets

Exchange traded funds (fixed income)(1)

Exchange traded funds (equity)(1)

Total assets$ $ $ $ Other current liabilitiesForeign currency exchange derivatives$ $ $ $ Commodity derivatives Contingent earn-out liabilities Other noncurrent liabilitiesContingent earn-out liabilities Total liabilities$ $ $ $

(1) Classified as restricted investments for payment of asbestos liabilities. See Note 21, "Commitments and Contingencies," of the notes to the consolidated financial statements for further details.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $

Interest rate swaps

Other noncurrent assetsCross-currency interest rate swap Deferred compensation plan assets

Exchange traded funds (fixed income)(1)

Exchange traded funds (equity)(1)

(1) Classified as restricted investments for payment of asbestos liabilities. See Note 21, "Commitments and Contingencies," of the notes to the consolidated financial statements for further details.

Payments()Reduction for change in estimates()

Balance at June 30, 2024

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $ Investments in exchange traded funds

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

$ Other long-term debt Total fair value of long-term debt$ $

13.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

Performance Share Awards

%%Expected volatility of the Company’s stock%%

Stock Options

Risk-free interest rate%%Expected volatility of the Company’s stock%%Expected dividend yield on the Company’s stock%%

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

14.

$ $ $ Weighted Average Shares OutstandingBasic weighted average shares outstanding Effect of dilutive securities:Stock options, unvested restricted stock and
unvested performance share awards Diluted weighted average shares outstanding Antidilutive SecuritiesStock options and unvested restricted stock

15.

million and $ million of its ordinary shares, respectively, on an open market. During the three and nine months ended June 30, 2023, the Company repurchased and immediately retired $ million and $ million of its ordinary shares, respectively, on an open market.

As of June 30, 2024, approximately $ billion remains available under the Company's share repurchase program, which was approved by the Company's Board of Directors in March 2021. The share repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

)$()$()$()Aggregate adjustment for the period()()() Balance at end of period()()()()Realized and unrealized gains (losses) on derivativesBalance at beginning of period () ()Current period changes in fair value ()()

Reclassification to income (1)

() Net tax impact ()()()Balance at end of period () ()Pension and postretirement plansBalance at beginning of period() Reclassification to income()()()()Net tax impact Balance at end of period()()()()Accumulated other comprehensive loss, end of period$()$()$()$()

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

16.

$ $ $ Expected return on plan assets()()()()Net actuarial loss (gain) () Settlement loss Net periodic benefit credit$()$()$()$()

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $ Interest cost Expected return on plan assets()()()()Net periodic benefit cost$ $ $ $


	Postretirement Benefits
	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023

Interest cost	$		$		$		$
Expected return on plan assets	()		()		()		()
Amortization of prior service credit	()		()		()		()
Net periodic benefit credit	$	()	$	()	$	()	$	()

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

17.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ Building Solutions EMEA/LA Building Solutions Asia Pacific Global Products Corporate Total $ $ )) ))

18.

% and was higher than the statutory tax rate of % primarily due to the tax impact of the water systems Aqueous Film Forming Foam ("AFFF") insurance proceeds and tax rate differentials, partially offset by the benefits of continuing global tax planning.

For the nine months ended June 30, 2024, the Company's effective tax rate was % and was lower than the statutory tax rate of % primarily due to the net tax impact of the water systems AFFF settlement costs and insurance proceeds, Swiss tax reform, and the benefits of continuing global tax planning, partially offset by the tax impact of an impairment charge, the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain consolidated subsidiaries and tax rate differentials.

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

)% and was lower than the statutory tax rate of % primarily due to reserve adjustments resulting from tax audit developments and the benefits of continuing global tax planning, partially offset by tax rate differentials.

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

Refer to Note 21, "Commitments and Contingencies," of the notes to the consolidated financial statements for further disclosure related to the water systems AFFF settlement.

Uncertain Tax Positions

At September 30, 2023, the Company had gross tax-effected unrecognized tax benefits of $ billion, of which $ billion, if recognized, would impact the effective tax rate. Accrued interest, net at September 30, 2023 was approximately $ million (net of tax benefit). Interest accrued during the nine months ended June 30, 2024 and 2023 was approximately $ million and $ million (both net of tax benefit), respectively. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

It is reasonably possible that tax examinations and/or tax litigation will conclude within the next twelve months, which could have a material impact on tax expense. Based upon the circumstances surrounding these examinations, the impact is not currently quantifiable.

Impacts of Tax Legislation

On September 11, 2023, the Schaffhausen parliament approved a partial revision of the cantonal act on direct taxation: Immediate Minimum Taxation Measure (“IMTM”). On November 19, 2023, IMTM was approved in a public referendum in the canton of Schaffhausen, was published in the cantonal official gazette on December 8, 2023, and is effective starting January 1, 2024. The IMTM increased Switzerland's combined statutory income tax rate to approximately %. As a result, in the nine months ended June 30, 2024, the Company recorded a noncash discrete net tax benefit of $ million due to the remeasurement of deferred tax assets and liabilities related to Switzerland and the canton of Schaffhausen.

19.

reportable segments for financial reporting purposes.

The Company conducts its business through operating segments, all of which are reportable segments:

•Building Solutions North America which operates in the United States and Canada;

•Building Solutions EMEA/LA which operates in Europe, the Middle East, Africa and Latin America;

•Building Solutions Asia Pacific which operates in Asia Pacific; and

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $ Building Solutions EMEA/LA Building Solutions Asia Pacific Global Products Total net sales$ $ $ $

Johnson Controls International plc

Notes to Consolidated Financial Statements

June 30, 2024

(unaudited)

$ $ $ Building Solutions EMEA/LA Building Solutions Asia Pacific Global Products Total segment EBITA Corporate expenses Amortization of intangible assets Restructuring and impairment costs

Water systems AFFF settlement (1)

Water systems AFFF insurance recoveries (1)

() () Net mark-to-market gains()()()()Net financing charges Income before income taxes$ $ $ $

(1) Refer to Note 21, "Commitments and Contingencies," of the notes to the consolidated financial statements for further disclosure related to the water systems AFFF settlement.

20.

Accruals for warranties issued during the period Settlements made (in cash or in kind) during the period()

(1) Change is compared to June 30, 2023 (backlog) and the three months ended June 30, 2023 (orders) and excludes the impact of mergers, acquisitions, dispositions and foreign currency.

Remaining performance obligations were $ billion at June 30, 2024. Differences between the Company’s remaining performance obligations and backlog are primarily due to:

•Remaining performance obligations include large, multi-purpose contracts to construct hospitals, schools and other governmental buildings, which are services to be performed over the building's lifetime with average initial contract terms of 25 to 35 years for the entire term of the contract versus backlog which includes only the lifecycle period of these contracts which approximates five years;

•Remaining performance obligations exclude service contracts with an original expected duration of one year or less and contracts that are cancellable without substantial penalty versus backlog which includes short-term and cancellable contracts; and

•Remaining performance obligations include the full remaining term of service contracts with substantial termination penalties versus backlog which includes only one year for all outstanding service contracts.

The Company reports backlog, which it believes is a useful measure of evaluating the Company's operational performance and relationship to total orders.

Liquidity and Capital Resources

Working Capital


(in millions)	June 30, 2024		September 30, 2023		Change

Current assets	$	12,153	$	10,737
Current liabilities	12,724		11,084
Working capital	$	(571)	$	(347)	(65)	%

•Net debt and net debt as a percentage of net capitalization are non-GAAP financial measures. The Company believes the percentage of net debt to net capitalization is useful to understanding the Company’s financial condition as it provides a view of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders.

•As of June 30, 2024, approximately $2.1 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice. The Company expects to repurchase outstanding shares from time to time depending on market conditions, alternate uses of capital, liquidity, and the economic environment.

•The Company declared a dividend of $0.37 per common share in the quarter ended June 30, 2024 and intends to continue paying dividends throughout fiscal 2024.

•On April 12, 2024, Tyco Fire Products, a subsidiary of the Company, agreed to a settlement with a nationwide class of public water systems that detected PFAS in their drinking water systems that they allege to be associated with the use of AFFF. Under the terms of the agreement, Tyco Fire Products agreed to contribute $750 million to resolve these PFAS claims. Tyco Fire Products contributed an initial payment of $250 million in June 2024, with the remaining $500 million due by the first quarter of fiscal 2025. Prior to the date of the final contribution, Tyco Fire Products has agreed to contribute any applicable insurance recoveries in excess of the initial $250 million payment, up to the remaining $500 million due, within a specified period following the receipt of such recovery. During the three months ended June 30, 2024, the Company recorded expected insurance recoveries of $351 million in selling, general and administrative expenses in the consolidated statements of income, substantially all of the proceeds of which are expected to be received in the fourth quarter of fiscal 2024. In accordance with its agreement and recent insurance recovery, Tyco Fire Products will make an additional payment during the fourth quarter of fiscal 2024 of approximately $90 million, reducing its final payment to approximately $410 million. The amounts and timing of any additional insurance recoveries are uncertain. Refer to Note 21, "Commitments and Contingencies," of the notes to the consolidated financial statements for additional discussion of the water systems settlement.

•The Company believes its capital resources and liquidity position, including cash and cash equivalents of $862 million at June 30, 2024, are adequate to fund operations and meet its cash obligations for the foreseeable future.

–The Company manages its short-term debt position in the U.S. and euro commercial paper and bank loan markets. Commercial paper outstanding totaled $941 million as of June 30, 2024 and $200 million as of September 30, 2023.

–The Company maintains a shelf registration statement with the SEC under which it may issue additional debt securities, ordinary shares, preferred shares, depository shares, warrants purchase contracts and units that may be offered in one or more offerings on terms to be determined at the time of the offering. The Company anticipates that the proceeds of any offering would be used for general corporate purposes, including repayment of indebtedness, acquisitions, additions to working capital, repurchases of ordinary shares, dividends, capital expenditures and investments in the Company's subsidiaries.

–The Company also has the ability to draw on its $2.5 billion revolving credit facility which is scheduled to expire in December 2028 or its $0.5 billion revolving credit facility which is scheduled to expire in December 2024. There were no draws on the revolving credit facilities as of June 30, 2024 and September 30, 2023.

–In April 2024, the Company and its wholly-owned subsidiary, Tyco Fire & Security Finance S.C.A, co-issued $700 million unsecured, unsubordinated senior notes with an interest rate of 5.50% which is due April 2029. In June 2024, the Company completed a debt tender offer to purchase $119 million of its 5.125% Notes due 2045.

•The Company's ability to access the global capital markets and the related cost of financing is dependent upon, among other factors, the Company's credit ratings. As of June 30, 2024, the Company's credit ratings and outlook were as follows:

Rating Agency

Short-Term Rating

Long-Term Rating

Outlook

S&P

A-2

BBB+

Stable

Moody's

P-2

Baa2

Positive

The security ratings set forth above are issued by unaffiliated third party rating agencies and are not a recommendation to buy, sell or hold securities. The ratings may be subject to revision or withdrawal by the assigning rating organization at any time.

•Financial covenants in the Company's revolving credit facilities require a minimum consolidated shareholders’ equity attributable to Johnson Controls of at least $3.5 billion at all times. The revolving credit facility also limits the amount of debt secured by liens that may be incurred to a maximum aggregated amount of 10% of consolidated shareholders’ equity attributable to Johnson Controls for liens and pledges. For purposes of calculating these covenants, consolidated shareholders’ equity attributable to Johnson Controls is calculated without giving effect to (i) the application of Accounting Standards Codification ("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment. As of June 30, 2024, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future. None of the Company’s debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Company's credit rating.

•The Company earns a significant amount of its income outside of the parent company. Outside basis differences in these subsidiaries are deemed to be permanently reinvested except in limited circumstances. However, in the first quarter of fiscal 2024, the Company provided income tax expense related to a change in the Company's assertion over the outside basis differences of the Company’s investment in certain consolidated subsidiaries. The Company currently does not intend nor foresee a need to repatriate undistributed earnings included in the outside basis differences other than in tax efficient manners. The Company's intent is to reduce basis differences only when it would be tax efficient. The Company expects existing U.S. cash and liquidity to continue to be sufficient to fund the Company’s U.S. operating activities and cash commitments for investing and financing activities for at least the next twelve months and thereafter for the foreseeable future. In the U.S., should the Company require more capital than is generated by its operations, the Company could elect to raise capital in the U.S. through debt or equity issuances. The Company has borrowed funds in the U.S. and continues to have the ability to borrow funds in the U.S. at reasonable interest rates. In addition, the Company expects existing non-U.S. cash, cash equivalents, short-term investments and cash flows from operations to continue to be sufficient to fund the Company’s non-U.S. operating activities and cash commitments for investing activities, such as material capital expenditures, for at least the next twelve months and thereafter for the foreseeable future. Should the Company require more capital at its Luxembourg and Ireland holding and financing entities, other than amounts that can be provided in tax efficient methods, the Company could also elect to raise capital through debt or equity issuances. These alternatives could result in increased interest expense or other dilution of the Company’s earnings.

•The Company may from time to time purchase its outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

•Refer to Note 10, "Debt and Financing Arrangements," and Note 21, "Commitments and Contingencies" of the notes to the consolidated financial statements for additional information on debt balances, the water systems AFFF settlement agreement and items impacting capitalization.

Co-Issued Securities: Summarized Financial Information

The following information is provided in compliance with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934 with respect to the following unsecured, unsubordinated senior notes (collectively, ("the Notes) which were issued by Johnson Controls International plc ("Parent Company") and Tyco Fire & Security Finance S.C.A. (“TFSCA”):

•€500 million aggregate principal amount of 0.375% Senior Notes due 2027

•€600 million aggregate principal amount of 3.000% Senior Notes due 2028

•$700 million aggregate principal amount of 5.500% Senior Notes due 2029

•$625 million aggregate principal amount of 1.750% Senior Notes due 2030

•$500 million aggregate principal amount of 2.000% Sustainability-Linked Senior Notes due 2031

•€500 million aggregate principal amount of 1.000% Senior Notes due 2032

•$400 million aggregate principal amount of 4.900% Senior Notes due 2032

•€800 million aggregate principal amount of 4.25% Senior Notes due 2035

TFSCA is a corporate partnership limited by shares (société en commandite par actions) incorporated and organized under the laws of the Grand Duchy of Luxembourg (“Luxembourg”) and is a wholly-owned consolidated subsidiary of the Company that is 99.924% owned directly by the Parent Company and 0.076% owned by TFSCA’s sole general partner and manager, Tyco Fire & Security S.à r.l., which is itself wholly-owned by the Company. The Parent Company is incorporated and organized

under the laws of Ireland. TFSCA is incorporated and organized under the laws of Luxembourg. The bankruptcy, insolvency, administrative, debtor relief and other laws of Luxembourg or Ireland, as applicable, may be materially different from, or in conflict with, those of the United States, including in the areas of rights of creditors, priority of governmental and other creditors, ability to obtain post-petition interest and duration of the proceeding. The application of these laws, or any conflict among them, could adversely affect noteholders’ ability to enforce their rights under the Notes in those jurisdictions or limit any amounts that they may receive.

The following table presents the net loss attributable to the Parent Company and TFSCA (collectively, the "Obligor Group") and the net income (loss) attributable to intercompany transactions between the Obligor Group and subsidiaries of the Parent Company other than TFSCA (collectively, the "Non-Obligor Subsidiaries") which are excluded from the Net loss attributable to the Obligor Group (in millions):


	Nine Months Ended June 30, 2024		Year Ended September 30, 2023
Net loss attributable to the Obligor Group	$	404	$	458
Net income (loss) attributable to intercompany transactions	422		(139)

The Obligor Group does not have sales, gross profit or amounts attributable to noncontrolling interests.

The following table presents summarized balance sheet information of the Obligor Group and intercompany balances between the Obligor Group and the Non-Obligor Subsidiaries which are excluded from the Obligor Group amounts (in millions):


	Obligor Group				Intercompany Balances
	June 30, 2024		September 30, 2023		June 30, 2024		September 30, 2023
Current assets	$	927	$	26	$	785	$	5,608
Noncurrent assets	256		270		7,031		1,882
Current liabilities	5,912		3,652		4,457		9,289
Noncurrent liabilities	7,713		7,585		7,062		3,462

The same accounting policies as described in Note 1, "Summary of Significant Accounting Policies," of the Company's Annual Report on 10-K for the year ended September 30, 2023 are used by the Parent Company and each of its subsidiaries in connection with the summarized financial information presented above.

New Accounting Standards

Refer to Note 2, "New Accounting Standards," of the notes to the consolidated financial statements.

Critical Accounting Estimates

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). This requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. The Company’s critical accounting estimates requiring significant judgement that could materially impact the Company's results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023. Since the date of the Company’s most recent Annual Report, there have been no material changes in the Company’s critical accounting estimates or assumptions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2024, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in its Annual Report on Form 10-K for the year ended September 30, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of June 30, 2024. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the Commissions’ rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on such evaluations, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2024, the Company’s disclosure controls and procedures were not effective because of the material weakness in its internal control over financial reporting discussed below and described in the Company's Annual Report on Form 10-K for the year ended September 30, 2023. Notwithstanding the material weakness in internal control over financial reporting, management believes and has concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.

Remediation Plan for Material Weakness in Internal Control Over Financial Reporting

The Company is committed to remediating the above noted material weakness and has actively implemented measures designed to help ensure the material weakness is remediated as soon as possible. The Company’s remediation plan includes, among other things, the following:

•engaging security specialists to assist in the review, assessment and remediation of the Company's IT controls;

•additional strengthening of access requirements and unauthorized access detection to the Company's financial reporting systems; and

•implementing additional procedures to facilitate more effective backup and recovery of the Company's financial reporting systems.

As of June 30, 2024, the Company completed the design and implementation of most controls necessary to remediate the material weakness. The remediation plan is subject to oversight by the Audit Committee of the Board of Directors and the identified material weakness will not be considered remediated until the remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and the Company has concluded that newly implemented controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in the Company’s internal control over financial reporting during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Gumm v. Molinaroli, et al.

In May 2024, stockholders of Johnson Controls, Inc., filed a putative class action Complaint against Johnson Controls, Inc., certain former officers and directors of Johnson Controls, Inc., and two related entities (Jagara Merger Sub LLC and Johnson Controls International plc) in Wisconsin state court relating to the 2016 merger of Johnson Controls and Tyco (Gumm et al. v. Molinaroli et al., Case No. 30106, filed May 23, 2024 in the Circuit Court for Milwaukee County, Wisconsin). The filing of the state court Complaint follows the dismissal of a related lawsuit filed in federal court, which dismissal was affirmed on appeal in

November 2023. The 12-count state court Complaint asserts claims for (1) breach of fiduciary duty; (2) aiding and abetting breach of fiduciary duty; (3); unjust enrichment; (4) violations of Wisconsin Business Corporation Law §§ 180.1101-.1103; (5) breach of JCI’s Articles of Incorporation; (6) conversion; (7) violations of Wisconsin Securities Act §§ 551.501 and 551.509; (8) breach of covenant of good faith and fair dealing; (9) promissory estoppel; (10) tortious interference with contract; (11) negligent or intentional misrepresentation/equitable fraud; and (12) statutory fraud. Defendants’ response to the Complaint is due September 13, 2024. No other case deadlines have been set at this time.

Refer to Note 21, "Commitments and Contingencies," of the notes to the consolidated financial statements for discussion of environmental, asbestos, self-insured liabilities and other litigation matters, which is incorporated by reference herein and is considered an integral part of Part II, Item 1, "Legal Proceedings."

ITEM 1A. RISK FACTORS

The following should be read in conjunction with, and supplements and amends, the factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended September 30, 2023. Other than as described in this Item 1A, there have been no other material changes to our risk factors from the risk factors previously disclosed in the 2023 Annual Report.

The following updates and replaces the risk factor entitled “Divestitures of some of our businesses or product lines may materially adversely affect our financial condition, results of operations or cash flows".

We may not realize the benefits of our ongoing efforts to simplify our portfolio.

We continually evaluate the performance and strategic fit of all of our businesses and may sell businesses or product lines. Recently, we have been engaged in a strategic evaluation of our non-core product lines and have entered into separate agreements to divest our Air Distribution Technologies business and Residential and Light Commercial business. Divestitures such as these involve risks, including difficulties in the separation of operations, services, products and personnel, the diversion of management's attention from other business concerns, the disruption of our business, the potential loss of key employees and the retention of uncertain environmental or other contingent liabilities related to the divested business. We may also experience unfavorable reaction to the divestiture by customers, competitors, suppliers and employees, making it more difficult to maintain business and operational relationships. Some divestitures may be dilutive to earnings and we may not be successful in executing restructurings and other actions to minimize or offset dilution. We may also fail to achieve the strategic objectives of divestitures or not realize such objectives within the expected time frame, including our objective to simplify our portfolio to be a pure-play provider of comprehensive solutions for commercial buildings. In addition, divestitures may result in significant asset impairment charges, including those related to goodwill and other intangible assets, which could have a material adverse effect on our financial condition and results of operations. In the event we are unable to successfully divest a business or product line, we may be forced to wind down such business or product line, which could materially and adversely affect our results of operations and financial condition. We cannot assure you that we will be successful in managing these or any other significant risks that we encounter in divesting a business or product line, and any divestiture we undertake could materially and adversely affect our business, financial condition, results of operations and cash flows, and may also result in a diversion of management attention, operational difficulties and losses.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As of June 30, 2024, approximately $2.1 billion remains available under the share repurchase program which was authorized by the Company's Board of Directors in March 2021. The share repurchase authorization does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice. During the three and nine months ended June 30, 2024, the Company repurchased and immediately retired $402 million and $876 million of its ordinary shares, respectively, on an open market.

The following table presents information regarding the repurchase of the Company’s ordinary shares by the Company as part of its publicly announced program during the three months ended June 30, 2024.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased under the Programs
04/01/24 - 04/30/24	2,559,479	$	64.82	2,559,479	$	2,346,543,921
05/01/24 - 05/31/24	2,440,912	67.30		2,440,912	2,182,258,480
06/01/24 - 06/30/24	988,145	69.55		988,145	2,113,530,789

ITEM 5. OTHER INFORMATION

During the three months ended June 30, 2024, except as provided below, none of the Company's directors or Section 16 officers adopted, amended or terminated a “Rule 10b5–1 trading arrangement” or “non-Rule 10b5–1 trading arrangement” (as each term is defined in Item 408(a) of Regulation S-K).

George Oliver Rule 10b5-1 Plan

, , of the Company, entered into a arrangement with respect to ordinary shares of Company stock issuable upon the exercise of option awards scheduled to expire in 2024 (the “Oliver 10b5-1 Plan”). The Oliver 10b5-1 Plan was executed during the Company’s most recent open trading window and is expected to become effective on or about September 15, 2024. Under the Oliver 10b5-1 Plan, the options are expected to be exercised in regular intervals between the plan’s start date and termination date, provided that the market price of the Company’s ordinary shares exceeds the exercise price of the options at the time of exercise. With respect to the options to be exercised, a portion of the ordinary shares are expected to be sold in the market to cover the exercise price and taxes associated with the exercise of the options. The remaining ordinary shares underlying the options will be sold in the open market at the times and prices specified in the plan. All transactions under the Oliver 10b5-1 Plan, if they occur, are expected to be completed by or before November 25, 2024. The Oliver 10b5-1 Plan will automatically terminate upon the earlier of the completion of all transactions contemplated under the plan or .

ITEM 6. EXHIBITS

INDEX TO EXHIBITS


Exhibit No.			Description

4.1			Eleventh Supplemental Indenture, dated as of April 19, 2024, among Johnson Controls International plc, Tyco Fire & Security Finance S.C.A. and U.S. Bank Trust Company, National Association, as trustee (attaching form of the Notes) (incorporated by reference to Exhibit 4.2 to the registrant's Current Report on Form 8-K dated April 19, 2024)

10.1			Settlement Agreement for Water Systems by and among Tyco Fire Products LP, and the representatives of certain U.S. active public water systems as set forth therein, dated April 12, 2024 (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated April 12, 2024)*

31.1			Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2			Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1			Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

101			The following materials from Johnson Controls International plc's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Position, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity and (vi) Notes to Consolidated Financial Statements.

104			Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

*			The registrant has omitted certain schedules and other similar attachments to such agreement pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish a copy of such omitted documents to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	JOHNSON CONTROLS INTERNATIONAL PLC

Date: July 31, 2024	By:	/s/ Marc Vandiepenbeeck
		Marc Vandiepenbeeck
		Executive Vice President and Chief Financial Officer

Johnson Controls International plc - Quarter Report: 2024 June (Form 10-Q)

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