Johnson Controls International plc 10-Q for FY2023 Q3

Johnson Controls International plc (JCI)

10-Q 2023-08-02 For: 2023-06-30

Added on April 03, 2026

About this 10-Q

Johnson Controls International plc filed this 10-Q on August 2, 2023, covering the quarter ended June 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $7.13B; up 7.8% from $6.61B a year earlier
Net income: $1.05B; up 176.8% from net income of $379M a year earlier
Diluted EPS: $1.53; up 178.2% from $0.55 a year earlier

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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)


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


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


			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



	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


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	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


	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


	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


	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


	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


	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


	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


	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


	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		%


	Volume Outstanding as of
Commodity	June 30, 2023	September 30, 2022

Copper	3,493	3,629
Aluminum	7,860	6,758


	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 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


	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 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


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



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


	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


	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		22		—		—


Other noncurrent assets

Deferred compensation plan assets	46		46		—		—
Exchange traded funds (fixed income)(1)	86		86		—		—
Exchange traded funds (equity)(1)	131		131		—		—



Total assets	$	339	$	285	$	54	$	—
Other current liabilities
Foreign currency exchange derivatives	$	51	$	—	$	51	$	—
Commodity derivatives	10		—		10		—
Contingent earn-out liabilities	30		—		—		30
Other noncurrent liabilities
Contingent earn-out liabilities	30		—		—		30
Total liabilities	$	121	$	—	$	61	$	60



Balance at September 30, 2022	$	60
Acquisitions	36
Payments	(4)
Reduction for change in estimates	(36)
Currency translation	1
Balance at June 30, 2023	$	57


	U.S. Pension Plans
	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022


Interest cost	$	21	$	17	$	62	$	38
Expected return on plan assets	(34)		(37)		(101)		(119)
Net actuarial loss (gain)	(6)		106		17		124
Settlement loss	—		2		1		3
Net periodic benefit cost (credit)	$	(19)	$	88	$	(21)	$	46


	Non-U.S. Pension Plans
	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022

Service cost	$	4	$	5	$	11	$	16
Interest cost	18		10		51		30
Expected return on plan assets	(20)		(20)		(57)		(62)

Net actuarial gain	—		(19)		—		(20)
Settlement loss (gain)	—		(1)		—		7
Net periodic benefit cost (credit)	$	2	$	(25)	$	5	$	(29)


	Postretirement Benefits
	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022


Interest cost	$	1	$	—	$	3	$	1
Expected return on plan assets	(3)		(3)		(7)		(7)
Amortization of prior service credit	(1)		(1)		(3)		(3)
Net periodic benefit credit	$	(3)	$	(4)	$	(7)	$	(9)


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

Building Solutions North America	$	10	$	16
Building Solutions EMEA/LA	40		61
Building Solutions Asia Pacific	6		12
Global Products	15		42
Corporate	10		31
Total	$	81	$	162


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

Restructuring costs	$	114	$	20	$	28	$	162
Utilized—cash	(51)		—		(15)		(66)
Utilized—noncash	—		(20)		(2)		(22)

Balance at June 30, 2023	$	63	$	—	$	11	$	74


Tax Jurisdiction						Tax Years Covered
Belgium						2015 - 2021

Germany						2007 - 2021
Luxembourg						2017 - 2018
Mexico						2015 - 2017

United Kingdom						2014 - 2015; 2018; 2020 - 2021


	Segment EBITA
	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022

Building Solutions North America	$	385	$	260	$	967	$	745
Building Solutions EMEA/LA	90		83		234		266
Building Solutions Asia Pacific	102		85		249		227
Global Products	593		570		1,463		1,283
Total segment EBITA	1,170		998		2,913		2,521

Corporate expenses	(122)		(96)		(362)		(226)
Amortization of intangible assets	(111)		(102)		(319)		(326)
Restructuring and impairment costs	(81)		(121)		(844)		(554)
Net mark-to-market adjustments	17		(126)		16		(158)
Net financing charges	(80)		(49)		(218)		(153)
Income before income taxes	$	793	$	504	$	1,186	$	1,104


	June 30, 2023		September 30, 2022

Restricted
Cash	$	26	$	6
Investments	240		239
Total restricted assets	266		245
Insurance receivables for asbestos-related liabilities	51		55
Total asbestos-related assets	$	317	$	300


	Three Months Ended June 30,						Nine Months Ended June 30,
(in millions)	2023		2022		Change		2023		2022		Change

Net sales	$	7,133	$	6,614	8	%	$	19,887	$	18,574	7	%


	Nine Months Ended June 30, 2023		Year Ended September 30, 2022
Net sales	$	—	$	—
Gross profit	—		—

Net loss	(390)		(268)
Income attributable to noncontrolling interests	—		—
Net loss attributable to the entity	(390)		(268)


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
4/01/23 - 4/30/23	1,832,478	$	57.80	1,832,478	3,261,601,104
5/01/23 - 5/31/23	2,170,203	61.33		2,170,203	3,128,511,988
6/01/23 - 06/30/23	1,985,277	63.98		1,985,277	3,001,499,914


Exhibit No.			Description



4.1			Tenth Supplemental Indenture, dated as of May 23, 2023, among Johnson Controls International plc, Tyco Fire & Security Finance S.C.A., U.S. Bank Trust Company, National Association, as trustee and Elavon Financial Services DAC, as paying agent (attaching form of the 4.250% Senior Notes due 2035).(incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 23, 2023)

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, 2023, 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)