FORM 10-K JOHNSON CONTROLS INTERNATIONAL PLC

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☑

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

For the Fiscal Year Ended September 30, 2022

☐

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

4.625% Notes due 2023 JCI23 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

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

Securities Registered Pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 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

Accelerated filer

Non-accelerated filer ¨ Smaller reporting company

☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting

under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of March 31, 2022, the aggregate market value of Johnson Controls International plc Common Stock held by non-affiliates of the registrant was approximately $45.5 billion based on the

closing sales price as reported on the New York Stock Exchange. As of October 31, 2022, 686,703,889 ordinary shares, par value $0.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the annual general meeting of shareholders to be held on March 8, 2023 are incorporated by

reference into Part III.

JOHNSON CONTROLS INTERNATIONAL PLC

Index to Annual Report on Form 10-K

Year Ended September 30, 2022

Page

CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION ....................................................... 3

PART I.

ITEM 1. BUSINESS ................................................................................................................................................. 3

ITEM 1A. RISK FACTORS ........................................................................................................................................ 11

ITEM 1B. UNRESOLVED STAFF COMMENTS ..................................................................................................... 24

ITEM 2. PROPERTIES ............................................................................................................................................. 24

ITEM 3. LEGAL PROCEEDINGS ........................................................................................................................... 24

ITEM 4. MINE SAFETY DISCLOSURES .............................................................................................................. 25

EXECUTIVE OFFICERS OF THE REGISTRANT ................................................................................. 25

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES .......................................................................

ITEM 6. [RESERVED] ............................................................................................................................................. 28

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS ...................................................................................................................

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .......................... 45

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ........................................................... 46

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE .....................................................................................................................

109

ITEM 9A. CONTROLS AND PROCEDURES .......................................................................................................... 109

ITEM 9B. OTHER INFORMATION .......................................................................................................................... 110

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS .........

110

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ................................... 110

ITEM 11. EXECUTIVE COMPENSATION ............................................................................................................. 110

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS ................................................................................................

111

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE ......................................................................................................................................

111

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ............................................................................ 111

PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES .......................................................................... 112

ITEM 16.

FORM 10-K SUMMARY ..........................................................................................................................

112

INDEX TO EXHIBITS .............................................................................................................................. 113

SIGNATURES ........................................................................................................................................... 118

CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION

Unless otherwise indicated, references to "Johnson Controls," the "Company," "we," "our" and "us" in this Annual Report on

Form 10-K refer to Johnson Controls International plc and its consolidated subsidiaries.

The Company has made statements in this document that are forward-looking and therefore are subject to risks and

uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-

looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements

regarding the Company’s future financial position, sales, costs, earnings, cash flows, other measures of results of

operations, synergies and integration opportunities, capital expenditures, debt levels and market outlook are forward-looking

statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project"

or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the

absence of these words does not mean that a statement is not forward-looking. The Company cautions that these statements are

subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s

control, that could cause the Company’s actual results to differ materially from those expressed or implied by such forward-

looking statements, including, among others, risks related to: The Company’s ability to manage general economic, business and

capital market conditions, including the impact of recessions and economic downturns; the ability to manage macroeconomic

and geopolitical volatility, including global price inflation, shortages impacting the availability of raw materials and component

products and the conflict between Russia and Ukraine; the ability to develop or acquire new products and technologies that

achieve market acceptance and meet applicable regulatory requirements; the strength of the U.S. or other economies;

fluctuations in currency exchange rates; changes or uncertainty in laws, regulations, rates, policies or interpretations that impact

the Company’s business operations or tax status; changes to laws or policies governing foreign trade, including economic

sanctions, tariffs or trade restrictions; maintaining and improving the capacity, reliability and security of the Company's

enterprise information technology infrastructure; the ability to manage the lifecycle cybersecurity risk in the development,

deployment and operation of the Company's digital platforms and services; the outcome of litigation and governmental

proceedings; the risk of infringement or expiration of intellectual property rights; the Company's ability to manage the impacts

of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health

developments, such as the COVID-19 pandemic; the ability of the Company to drive organizational improvement; any delay or

inability of the Company to realize the expected benefits and synergies of recent portfolio transactions; the ability to hire and

retain senior management and other key personnel; the tax treatment of recent portfolio transactions; significant transaction

costs and/or unknown liabilities associated with such transactions; labor shortages, work stoppages, union negotiations, labor

disputes and other matters associated with the labor force; and the cancellation of or changes to commercial arrangements. A

detailed discussion of risks related to Johnson Controls’ business is included in the section entitled "Risk Factors" (refer to Part

I, Item 1A, of this Annual Report on Form 10-K). The forward-looking statements included in this document are made only as

of the date of this document, unless otherwise specified, and, except as required by law, Johnson Controls assumes no

obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date

of this document.

PART I

ITEM 1 BUSINESS

General

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.

Johnson Controls was originally incorporated in the state of Wisconsin in 1885 as Johnson Electric Service Company to

manufacture, install and service automatic temperature regulation systems for buildings and was renamed Johnson Controls,

Inc. in 1974. In 2005, Johnson Controls acquired York International, a global supplier of heating, ventilating, air-conditioning

("HVAC") and refrigeration equipment and services. In 2014, Johnson Controls acquired Air Distribution Technologies, Inc.,

one of the largest independent providers of air distribution and ventilation products in North America. In 2015, Johnson

Controls formed a joint venture with Hitachi to expand its building related product offerings. In 2016, Johnson Controls, Inc.

and Tyco International plc ("Tyco") completed their combination (the "Merger"), combining Johnson Controls' portfolio of

building efficiency solutions with Tyco’s portfolio of fire and security solutions. Following the Merger, Tyco changed its name

to “Johnson Controls International plc.”

In 2016, the Company completed the spin-off of its automotive business into Adient plc, an independent, publicly traded

company. In 2019, the Company closed the sale of its Power Solutions business, completing the Company’s transformation into

a pure-play building technologies and solutions provider.

The Company is a global leader in engineering, manufacturing and commissioning building products and systems, including

residential and commercial 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, security and

fire-protection space), and energy-management consulting. In 2020, the Company launched its OpenBlue software platform,

enabling enterprises to manage all aspects of their physical spaces by combining the Company's building products and services

with cutting-edge technology and digital capabilities to enable data-driven “smart building” services and solutions. 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.

Business Segments

The Company conducts its business through four business segments: Building Solutions North America, Building Solutions

EMEA/LA, Building Solutions Asia Pacific and Global Products.

Building Solutions North America: Building Solutions North America designs, sells, installs and services HVAC, controls,

building management, refrigeration, integrated electronic security and integrated fire-detection and suppression systems for

commercial, industrial, retail, small business, institutional and governmental customers in the United States and Canada.

Building Solutions North America also provides energy efficiency solutions and technical services, including inspection,

scheduled maintenance, and repair and replacement of mechanical and controls systems, as well as data-driven “smart building”

solutions, to non-residential building and industrial applications in the United States and Canadian marketplace.

Building Solutions EMEA/LA: Building Solutions EMEA/LA designs, sells, installs and services HVAC, controls, building

management, refrigeration, integrated electronic security, integrated fire-detection and suppression systems, and provides

technical services, including data-driven “smart building” solutions, to markets in Europe, the Middle East, Africa and Latin

America.

Building Solutions Asia Pacific: Building Solutions Asia Pacific designs, sells, installs and services HVAC, controls, building

management, refrigeration, integrated electronic security, integrated fire-detection and suppression systems, and provides

technical services, including data-driven “smart building” solutions, in the Asia Pacific marketplace.

Global Products: Global Products designs, manufactures and sells HVAC equipment, controls software and software services

for residential and commercial applications to commercial, industrial, retail, residential, small business, institutional and

governmental customers worldwide. In addition, Global Products designs, manufactures and sells refrigeration equipment and

controls globally. The Global Products business also designs, manufactures and sells fire protection, fire suppression and

security products, including intrusion security, anti-theft devices, access control, and video surveillance and management

systems, for commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide.

Global Products includes the Johnson Controls-Hitachi joint venture.

For more information on the Company’s segments, refer to Note 19, "Segment Information," of the notes to consolidated

financial statements.

Products, Systems, Services and Solutions

The Company sells and installs its commercial HVAC equipment and systems, control systems, security systems, fire-detection

and fire suppression systems, equipment and services primarily through its extensive direct channel, consisting of a global

network of sales and service offices. Significant sales are also generated through global third-party channels, such as

distributors of air-conditioning, controls, security and fire-detection and suppression products. The Company’s large base of

current customers leads to significant repeat business for the maintenance, retrofit and replacement markets. The Company is

also able to leverage its installed base to generate sales for its service business. Trusted building brands, such as YORK®,

Hitachi Air Conditioning, Metasys®, Ansul, Ruskin®, Titus®, Frick®, PENN®, Sabroe®, Silent-Aire®, Simplex® and

Grinnell®, together with the breadth and depth of the products, systems and solutions offered by the Company, give it what it

believes to be the most diverse portfolio in the building technology industry.

The Company has developed software platforms, including on-premises platforms and cloud-based software services, and

integrated its products and services with digital capabilities to provide data-driven solutions to create smarter, safer and more

sustainable buildings. The Company's OpenBlue platform enables enterprises to manage all aspects of their physical spaces

delivering sustainability, new occupant experiences, safety and security by combining the Company’s building expertise with

cutting-edge technology, including AI-powered service solutions such as remote diagnostics, predictive maintenance,

compliance monitoring and advanced risk assessments. The Company leverages its digital and data-driven products and

services to offer integrated and customizable solutions focused on delivering outcomes to customers, including OpenBlue

Buildings-as-a-Service, OpenBlue Net Zero Buildings-as-a-Service and OpenBlue Healthy Buildings. These services are

generally designed to generate recurring revenue for the Company as it supports its customers in achieving their desired

outcomes.

In fiscal 2022, approximately 37% of sales originated from product offerings, 39% of sales originated from installations and

24% of sales originated from service offerings.

Competition

The Company conducts its operations through a significant number of individual contracts that are either negotiated or awarded

on a competitive basis. Key factors in the award of contracts include system and service performance, quality, price, design,

reputation, technology, application engineering capability and construction or project management expertise. Competitors for

HVAC equipment, security, fire-detection, fire suppression and controls in the residential and non-residential marketplace

include many local, regional, national and international providers. Larger competitors include Honeywell International, Inc.;

Siemens Smart Infrastructure, an operating group of Siemens AG; Schneider Electric SA; Carrier Global Corporation; Trane

Technologies plc; Daikin Industries, Ltd.; Lennox International, Inc.; GC Midea Holding Co, Ltd. and Gree Electric

Appliances, Inc. In addition, the Company competes in a highly fragmented building services market. The Company also faces

competition from a diverse range of established companies, start-ups and other emerging entrants to the buildings industry in

the areas of digital services, software as a service and the Internet of Things. The loss of any individual contract or customer

would not have a material adverse effect on the Company.

Business Strategy

The Company’s business strategy is to sustain and expand its position as a leader in smart and sustainable building solutions by

offering a full spectrum of products and solutions for customer buildings across the globe. The Company’s core strategy

remains focused on creating growth platforms, driving operational improvements and creating a high-performance culture. The

Company has strong positions in attractive and growing end-markets across HVAC, controls, fire, security and services,

enhanced by its comprehensive product portfolio and substantial installed base. The Company believes that it is well positioned

to capitalize on the emerging and prevalent trends in the buildings industry, including sustainability, healthy buildings/indoor

environmental quality and smart buildings. To capitalize on these trends, the Company remains focused on maintaining leading

positions in commercial HVAC and building management systems, as well as enabling growth through digital, to develop and

leverage new digital technologies and capabilities into outcomes powered by its OpenBlue software platform. In furtherance of

these goals, the Company has three strategic priorities:

Capitalize on Key Growth Vectors: Sustainability, healthy buildings/indoor environmental quality and smart buildings represent

key growth opportunities for the Company. The Company seeks to leverage its existing portfolio breadth and investments in

product development, combined with the expansion of its digital products and capabilities powered by OpenBlue, to offer

differentiated solutions and innovative deal structures to help customers achieve their objectives. The Company intends to

expand its capabilities by investing in products and technologies, as well as expanding its partnerships, to power innovation that

will allow it to provide differentiated services that are tailored to its customers’ desired outcomes.

Accelerate in High Growth Digital Services, Regions and Verticals: The Company is focused on transforming its large service

business through its digital technologies, further enabled by the Company’s installed base, domain expertise and global

coverage. The Company is focused on developing and deploying connected equipment, systems and controls that will support

the provision of digital services and solutions. The Company further intends to expand its presence in high growth regions and

invest in high growth verticals within the markets it serves, including healthcare, commercial offices/campus, education and

data centers.

Sustain a High-Performance, Customer-Centric Culture: The Company recognizes that developing talent and creating positive

customer experiences is central to accomplishing its business strategies. The Company is investing in its talent to build a

diverse workforce that is digital capable, solutions oriented and focused on continuous learning and growth. The Company aims

to leverage its talent capabilities and training to create a customer-focused culture to drive customer loyalty and decisions.

To realize these priorities, the Company is leveraging its technology leadership, comprehensive product portfolio, global

presence, substantial installed base and strong channels to monetize the lifecycle opportunities of install, service, retrofit and

replacement which are established and delivered by the Company’s direct field businesses and third-party channels across the

globe. The Company is augmenting its strategic priorities with disciplined execution, productivity enhancements and

sustainable cost management to create a path to realize expanded margins and enhanced profitability.

Backlog

The Company’s backlog is applicable to its sales of systems and services. At September 30, 2022, the backlog was

$11.7 billion, of which $11.1 billion was attributable to the field business. The backlog amount outstanding at any given time is

not necessarily indicative of the amount of revenue to be earned in the upcoming fiscal year.

At September 30, 2022, remaining performance obligations were $17.5 billion, which is $5.8 billion higher than the Company's

backlog of $11.7 billion. Differences between the Company’s remaining performance obligations and backlog are primarily due

to the following:

• 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 certain customer contracts with a term of one year or less and contracts

that are cancelable without substantial penalty versus backlog which includes short-term and cancelable contracts; and

• Remaining performance obligations include the full remaining term of service contracts with substantial termination

penalties versus backlog which includes one year for all outstanding service contracts.

The Company will continue to report backlog as it believes it is a useful measure of evaluating the Company's operational

performance and relationship to total orders.

Raw Materials

Raw materials used by the Company’s businesses in connection with their operations include steel, aluminum, brass, copper,

polypropylene and certain flurochemicals used in fire suppression agents. The Company also uses semiconductors and other

electronic components in the manufacture of its products. During fiscal 2022, the Company experienced material cost increases

due to global inflation, supply chain disruptions, labor shortages, increased demand and other regulatory and macroeconomic

factors. These trends had an unfavorable impact on the Company’s results of operations in fiscal 2022, as discussed in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company believes that the

macroeconomic trends experienced in fiscal 2022 will continue into fiscal 2023. Therefore, the Company could experience

further disruptions, shortages and price inflation in the future, the effect of which will depend on the Company’s ability to

successfully mitigate and offset the impact of these events. In fiscal 2023, commodity prices and availability could fluctuate

throughout the year and could significantly affect the Company’s results of operations. For a more detailed description of the

risks related to the availability of raw materials, components and commodities, see Item 1A. Risk Factors.

Intellectual Property

Generally, the Company seeks statutory protection for strategic or financially important intellectual property developed in

connection with its business. Certain intellectual property, where appropriate, is protected by contracts, licenses, confidentiality

or other agreements. From time to time, the Company takes action to protect its businesses by asserting its intellectual property

rights against third-party infringers.

The Company owns numerous U.S. and non-U.S. patents (and their respective counterparts), the more important of which cover

those technologies and inventions embodied in current products or which are used in the manufacture of those products. While

the Company believes patents are important to its business operations and in the aggregate constitute a valuable asset, no single

patent, or group of patents, is critical to the success of the business. The Company, from time to time, grants licenses under its

patents and technology and receives licenses under patents and technology of others.

The Company’s trademarks, certain of which are material to its business, are registered or otherwise legally protected in the

U.S. and many non-U.S. countries where products and services of the Company are sold. The Company, from time to time,

becomes involved in trademark licensing transactions.

Most works of authorship produced for the Company, such as computer programs, catalogs and sales literature, carry

appropriate notices indicating the Company’s claim to copyright protection under U.S. law and appropriate international

treaties.

Environmental, Health and Safety Matters

Laws addressing the protection of the environment and workers’ safety and health govern the Company’s ongoing global

operations. They generally provide for civil and criminal penalties, as well as injunctive and remedial relief, for noncompliance

or require remediation of sites where Company-related materials have been released into the environment.

A portion of the Company’s products consume energy and use refrigerants. Increased public awareness and concern regarding

global climate change has resulted in more regulations designed to reduce greenhouse gas emissions. These regulations tend to

be implemented under global, national and sub-national climate objectives or policies, and target the global warming potential

(“GWP”) of refrigerants, equipment energy efficiency, and the combustion of fossil fuels as a heating source. The Company

continues to invest in its product portfolio to meet emerging emissions regulations and standards.

The Company has expended substantial resources globally, both financial and managerial, to comply with environmental laws

and worker safety laws and maintains procedures designed to foster and ensure compliance. Certain of the Company’s

businesses are, or have been, engaged in the handling or use of substances that may impact workplace health and safety or the

environment. The Company is committed to protecting its workers and the environment against the risks associated with these

substances.

The Company’s operations and facilities have been, and in the future may become, the subject of formal or informal

enforcement actions or proceedings for noncompliance with environmental laws and worker safety laws or for the remediation

of Company-related substances released into the environment. Such matters typically are resolved with regulatory authorities

through commitments to compliance, abatement or remediation programs and, in some cases, payment of penalties. See Note

21, "Commitments and Contingencies," of the notes to consolidated financial statements for further discussion of environmental

matters.

Government Regulation and Supervision

The Company's operations are subject to numerous federal, state and local laws and regulations, both within and outside the

United States, in areas such as consumer protection, government contracts, international trade, environmental protection, labor

and employment, tax, licensing and others. For example, most U.S. states and non-U.S. jurisdictions in which the Company

operates have licensing laws directed specifically toward the alarm and fire suppression industries. The Company's security

businesses currently rely extensively upon the use of wireline and wireless telephone service to communicate signals. Wireline

and wireless telephone companies in the U.S. are regulated by the federal and state governments. In addition, government

regulation of fire safety codes can impact the Company's fire businesses. The Company’s businesses may also be affected by

changes in governmental regulation of refrigerants and energy efficiency standards, noise regulation and product safety

regulations, including changes related to hydro fluorocarbons/emissions reduction efforts, energy conservation standards and

the regulation of fluorinated gases. These and other laws and regulations impact the manner in which the Company conducts its

business, and changes in legislation or government policies can affect the Company's worldwide operations, both favorably and

unfavorably. For a more detailed description of the various laws and regulations that affect the Company's business, see

Item 1A. Risk Factors.

Regulatory Capital Expenditures

The Company’s efforts to comply with numerous federal, state and local laws and regulations applicable to its business and

products often results in capital expenditures. The Company makes capital expenditures to design and upgrade its fire and

security products to comply with or exceed standards applicable to the alarm, fire suppression and security industries. The

Company also makes capital expenditures to meet or exceed energy efficiency standards, including the regulation of

refrigerants, hydro fluorocarbons/emissions reductions efforts and the regulation of fluorinated gasses, particularly with respect

to the Company’s HVAC products and solutions. The Company’s ongoing environmental compliance program also results in

capital expenditures. Regulatory and environmental considerations are a part of all significant capital expenditure decisions;

however, expenditures in fiscal 2022 related solely to regulatory compliance were not material. It is management’s expectation

that the amount of any future capital expenditures related to compliance with any individual regulation or grouping of related

regulations will not have a material adverse effect on the Company’s financial results or competitive position in any one year.

See Note 21, "Commitments and Contingencies," of the notes to consolidated financial statements for further discussion of

environmental matters.

Human Capital Management

Overview and Governance

The Company strives to continuously drive and develop its High-Performance Culture. The Company’s High-Performance

Culture represents the practices and behaviors, underpinned by the Company’s values, that lead to sustained growth, winning

results and satisfied customers.

The responsibility to develop and maintain a High-Performance Culture is owned, embedded and executed throughout the

Company. The Chief Human Resources Officer ("CHRO") is responsible for establishing the Company’s strategy to drive a

High-Performance Culture and ensuring its execution across the Company. The Compensation and Talent Development

Committee of the Board of Directors is the primary overseer of the Company’s High-Performance Culture strategy and

execution. The Chief Executive Officer ("CEO"), the CHRO, the Vice President of Diversity and Inclusion and other senior

leaders within the Company are responsible for the execution of the strategy and engage with the Compensation and Talent

Development Committee, the Governance and Sustainability Committee and the full Board of Directors on the critical

components driving the Company’s High-Performance Culture, including discussions of human capital trends, practices and

operations, diversity and inclusion, health and safety, leadership development and succession planning. Key components

driving the Company’s High-Performance Culture include:

Health and Safety

Health and Wellness, Safety and Environment are the three pillars of the Company’s Zero Harm vision. The Company’s health

and safety programs are designed around global standards with appropriate variations addressing multiple jurisdictions and

regulations, specific hazards and unique working environments of the Company’s manufacturing, service and install, and

headquarter operations. In its continuous efforts to ensure the health, safety and well-being of its employees and workplaces,

during fiscal 2022, the Company created new Zero Harm Well-Being and Zero Harm Sustainability Behaviors, each of them

consisting of ten guiding principles to protect employees and the environment. In addition, the Company launched a vehicle

telematics program to identify unsafe driving practices and further reduce the occurrence of motor vehicle accidents. Today, the

Company’s focus on employee well-being continues with the utilization of global and regional well-being councils, addressing

physical, mental, social and financial aspects of employee well-being.

The Company requires each of its locations to perform regular safety audits to ensure proper safety policies, program

procedures, analyses and training are in place. In addition, the Company engages an independent third-party conformity

assessment and certification vendor to audit selected operations for adherence to its global health and safety standards. Safety

culture and behavior-based safety initiatives have been deployed within the Company, including a multi-faceted policy focused

on preventing distracted driving and the design and rollout of a new style of platform ladder built to provide a safe working

platform for employees. One safety policy that applies to all employees around the globe, regardless of rank, is every individual

worker’s right to apply the “Stop Work” principle when uncertain about the health and safety of a particular task.

The Company utilizes a mixture of leading and lagging indicators to assess the health and safety performance of its operations.

Lagging indicators include the OSHA Total Recordable Incident Rate ("TRIR") and the Lost Time (or Lost Workday) Incident

Rate ("LTIR") based upon the number of incidents per 100 employees (or per 200,000 work hours). In fiscal 2022, the

Company had a TRIR of 0.40 and a LTIR of 0.14.

Diversity and Inclusion

Diversity and inclusion are embedded throughout the Company’s strategy to drive a High-Performance Culture. The Company

recognizes that an inclusive culture that is diverse adds value to the Company and its customers through: the creation and

delivery of innovative and outstanding products, services and outcomes; the cultivation of an engaged and empowered

environment where employee productivity drives company growth; and the onboarding of high-performing talent into the

organization to propel the Company's transformation and future. The Company believes that all employees and leaders are

responsible for creating a diverse and inclusive workplace. Employees are empowered to take an active role in creating a

culture that values uniqueness, celebrates creativity and drives innovation. The Company places a high value on inclusion,

engaging employees in Business Resource Groups ("BRGs") — employee-led voluntary organizations of people with similar

interests, experiences, or demographic characteristics. The Company maintains its BRG chapters worldwide across nine

categories: African American, Asia Pacific, LGBTQ+, Emerging Leaders, Hispanic, Disabilities, Veterans, Women and

Sustainability. The Company uses these groups to serve as a source of inclusion and to support the acquisition and development

of diverse talent internally and externally. Each BRG is open to all employees and sponsored and supported by senior leaders

across the enterprise. The Company’s BRG structure includes monthly learning series, an active recruitment platform, an

innovation hub, and community engagement. In fiscal 2022, the Company continued to realize meaningful growth in BRG

membership.

The Company has implemented several measures that focus on ensuring accountabilities exist for making progress in diversity:

• Diversity Performance Goals: The CEO and other senior leaders have diversity and inclusion objectives in their

annual performance goals.

• Attracting Diverse Talent: The Company commits to having a diverse talent pipeline by partnering with its business

units in their workforce planning forecasts, as well as external organizations, to develop initiatives and goals to recruit

diverse talent across all leadership and skill areas. In furtherance of this commitment, the Company continues to

enhance its Future Leaders Internship Program, an enterprise-wide internship program designed to build a sustainable,

diverse pipeline of talent with the critical skills needed to support the Company’s growth initiatives.

• Facilitating Engagement: The Company launched the Perspectives Listening Series to facilitate honest, courageous

and authentic conversations between colleagues on topics that are relevant and important to employees, communities

and society as a whole. Topics covered include next generation leadership, gender equality, the social justice

movement and fatherhood.

Talent Development

To maintain a High-Performance Culture, the Company must ensure the continued development and advancement of its people.

Strategic talent reviews and succession planning occur on a planned cadence annually – globally and across all business areas.

The Company continues to provide opportunities for the Company's employees to grow their careers, with approximately half

of open management positions filled internally during fiscal year 2022.

The Company believes that high performance is an outcome of a person’s ability to change, adapt, and grow their capabilities

throughout their career. The Company emphasizes real-life, real-time learning that enables a person to meet the demands of

challenging and changing work and focuses on reinforcing key principles that are designed to support an individual’s

effectiveness in his or her current job and in their future development. The Company provides technical and leadership training

to employees, customers and suppliers who work for or with the Company’s products and services. In particular, the

Company’s focus on employee development has been structured over the last several years through programs designed to

imbed essential skills and reinforce strategic goals that are aligned to the Company’s culture, including:

• Digital Transformation: In support of Company’s growth strategy, the Company is investing in developing digital

leadership with personalized and targeted training programs designed to create digitally capable leaders, salespersons

and technicians.

• Diversity and Inclusion: The Company has developed a structured diversity and inclusion training continuum across

the levels and stages of individuals' careers to develop and align employees with the Company’s diversity and

inclusion strategy and values.

• Organizational Health: The Company regularly assesses its progress using an Organizational Health Index survey

and develops annual health plans comprised of priority initiatives to drive key behaviors and practices that is informed

by the survey’s results. These plans are specifically tailored for each business unit and regularly assessed during the

year, with managers accountable for introducing and teaching new skills or toolsets to their teams.

In fiscal 2022, the Company offered a robust curriculum of over 232,000 learning activities available to employees, consisting

of videos, courses, e-learning, documentation, articles and books, including over 4,000 active (in person or virtual) learning

courses. In fiscal 2022, over 1.25 million learning activities were completed by approximately 93,000 employees. The total

learning hours consumed by employees was 1.02 million hours, averaging almost 11 hours per employee including time

invested in formal learning and standard time invested in self-paced reading or video consumption.

Employee Population and Demographics

As of September 30, 2022, the Company employed approximately 102,000 people worldwide, of which approximately 38,000

were employed in the United States and approximately 64,000 were outside the United States. Approximately 22,000

employees are covered by collective bargaining agreements or works councils and the Company believes that its relations with

its labor unions are generally positive.

Employee Diversity as of September 30, 2022

Employees Male Female Minority

(1)

Total 76% 24% 30%

Managers 80% 20% 21%

(1)

Male and female data represents all employees globally. Minority data represents U.S. employees only.

Seasonal Factors

Certain of the Company's sales are seasonal as the demand for residential air conditioning equipment and services generally

increases in the summer months. This seasonality is mitigated by the other products and services provided by the Company that

have no material seasonal effect.

Research and Development Expenditures

Refer to Note 1, "Summary of Significant Accounting Policies," of the notes to consolidated financial statements for research

and development expenditures. The Company has committed to invest a substantial portion of its new product research and

development in climate-related innovation to develop sustainable products and services. The Company invests in enhancements

to the capabilities of its product lines and services to support its strategy, meet consumer preferences and achieve regulatory

compliance. This includes investments in the development of the Company’s OpenBlue platform and related service offerings,

digital product capabilities, energy efficiency and low GWP refrigerants and technology.

Available Information

The Company’s filings with the U.S. Securities and Exchange Commission ("SEC"), including annual reports on Form 10-K,

quarterly reports on Form 10-Q, definitive proxy statements on Schedule 14A, current reports on Form 8-K, and any

amendments to those reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, are made available

free of charge through the Investor Relations section of the Company’s Internet website at http://www.johnsoncontrols.com as

soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. Copies of

any materials the Company files with the SEC can also be obtained free of charge through the SEC’s website at http://

www.sec.gov. The Company also makes available, free of charge, its Code of Ethics, Corporate Governance Guidelines, Board

of Directors committee charters and other information related to the Company on the Company’s Internet website or in printed

form upon request. The Company is not including the information contained on the Company’s website as a part of, or

incorporating it by reference into, this Annual Report on Form 10-K.

ITEM 1A RISK FACTORS

Provided below is a cautionary discussion of what we believe to be the most important risk factors applicable to the Company.

Discussion of these factors is incorporated by reference into and considered an integral part of Part II, Item 7, “Management’s

Discussion and Analysis of Financial Conditions and Results of Operations.” The disclosure of a risk should not be interpreted

to imply that such risk has not already materialized. Additional risks not currently known to the Company or that the Company

currently believes are immaterial may also impair the Company’s business, financial condition, results of operations and cash

flows.

Risks Related to Macroeconomic and Political Conditions

Economic, political, credit and capital market conditions could adversely affect our financial performance, our ability to

grow or sustain our business and our ability to access the capital markets.

We compete around the world in various geographic regions and product markets. Global economic and political conditions

affect each of our primary businesses and the businesses of our customers and suppliers. Recessions, economic downturns,

price instability, inflation, slowing economic growth and social and political instability in the industries and/or markets where

we compete could negatively affect our revenues and financial performance in future periods, result in future restructuring

charges, and adversely impact our ability to grow or sustain our business. For example, current macroeconomic and political

instability caused by the conflict between Russia and Ukraine, global supply chain disruptions, inflation and the strengthening

of the U.S. dollar, have and could continue to adversely impact our results of operations. Other potential consequences arising

from the Russia/Ukraine conflict and its effect on our business and results of operations as well as the global economy, cannot

be predicted. This may include further sanctions, embargoes, regional instability, geopolitical shifts, energy instability,

potential retaliatory action by the Russian government, increased cybersecurity attacks, increased tensions among countries in

which we operate.

The capital and credit markets provide us with liquidity to operate and grow our business beyond the liquidity that operating

cash flows provide. A worldwide economic downturn and/or disruption of the credit markets could reduce our access to capital

necessary for our operations and executing our strategic plan. If our access to capital were to become significantly constrained,

or if costs of capital increased significantly due to lowered credit ratings, prevailing industry conditions, the volatility of the

capital markets or other factors; then our financial condition, results of operations and cash flows could be adversely affected.

If we are unable to adequately react to negative economic impacts that decrease demand for our products and services and/or

negative movements in capital markets our results of operations, financial condition or liquidity could be adversely affected.

Some of the industries in which we operate are cyclical and, accordingly, demand for our products and services could be

adversely affected by downturns in these industries.

Much of the demand for installation of HVAC, security products, and fire detection and suppression solutions is driven by

commercial and residential construction and industrial facility expansion and maintenance projects. Commercial and residential

construction projects are heavily dependent on general economic conditions, localized demand for commercial and residential

real estate and availability of credit. Commercial and residential real estate markets are prone to significant fluctuations in

supply and demand. In addition, most commercial and residential real estate developers rely heavily on project financing in

order to initiate and complete projects. Declines in real estate values and increases in prevailing interest rates could lead to

significant reductions in the demand for and availability of project financing, even in markets where demand may otherwise be

sufficient to support new construction. These factors could in turn temper demand for new HVAC, fire detection and

suppression and security installations.

Levels of industrial capital expenditures for facility expansions and maintenance are dependent on general economic conditions,

economic conditions within specific industries we serve, expectations of future market behavior and available financing. The

businesses of many of our industrial customers are to varying degrees cyclical and have experienced periodic downturns.

During such economic downturns, customers in these industries tend to delay major capital projects, including greenfield

construction, maintenance projects and upgrades. Additionally, demand for our products and services may be affected by

volatility in energy, component and commodity prices, commodity and component availability and fluctuating demand

forecasts, as our customers may be more conservative in their capital planning, which may reduce demand for our products and

services as projects are postponed or cancelled. Although our industrial customers tend to be less dependent on project

financing than real estate developers, increases in prevailing interest rates or disruptions in financial markets and banking

systems could make credit and capital markets difficult for our customers to access and could significantly raise the cost of new

debt for our customers. Any difficulty in accessing these markets and the increased associated costs can have a negative effect

on investment in large capital projects, including necessary maintenance and upgrades, even during periods of favorable end-

market conditions.

Many of our customers inside and outside of the industrial and commercial sectors, including governmental and institutional

customers, have experienced budgetary constraints as sources of revenue have been negatively impacted by adverse or stagnant

economic conditions. These budgetary constraints have in the past, and may in the future, reduce demand for our products and

services among governmental and institutional customers.

Reduced demand for our products and services could result in the delay or cancellation of existing orders or lead to excess

capacity, which unfavorably impacts our absorption of fixed costs. This reduced demand may also erode average selling prices

in the industries we serve. Any of these results could materially and adversely affect our business, financial condition, results of

operations and cash flows.

Volatility in commodity prices may adversely affect our results of operations.

Increases in commodity costs can negatively impact the profitability of orders in backlog as prices on such orders are typically

fixed; therefore, in the short-term, our ability to adjust for changes in certain commodity prices is limited. In these cases, if we

are not able to recover commodity cost increases through price increases to our customers on new orders, then such increases

will have an adverse effect on our results of operations. In cases where commodity price risk cannot be naturally offset or

hedged through supply-based fixed-price contracts, we use commodity hedge contracts to minimize overall price risk associated

with our anticipated commodity purchases. Unfavorability in our hedging programs during a period of declining commodity

prices could result in lower margins as we reduce prices to match the market on a fixed commodity cost level. Additionally, to

the extent we do not or are unable to hedge certain commodities and the commodity prices substantially increase, such increases

will have an adverse effect on our results of operations.

We have experienced, and expect to continue to experience, increased commodity costs as a result of global macroeconomic

trends, including global price inflation, supply chain disruption and the Russia/Ukraine conflict. While we have taken action to

offset increasing commodity costs as described above, we have nonetheless experienced negative impacts on profitability as a

result of such increased costs. Continued increases in commodity costs could negatively impact our results of operations to the

extent we are unable to successfully mitigate and offset the impact of increased costs.

Risks associated with our non-U.S. operations could adversely affect our business, financial condition and results of

operations.

We have significant operations in a number of countries outside the U.S., some of which are located in emerging markets.

Long-term economic and geopolitical uncertainty in any of the regions of the world in which we operate, such as Asia, South

America, the Middle East, Europe and emerging markets, could result in the disruption of markets and negatively affect cash

flows from our operations to cover our capital needs and debt service requirements.

In addition, as a result of our global presence, a significant portion of our revenues and expenses is denominated in currencies

other than the U.S. dollar. We are therefore subject to non-U.S. currency risks and non-U.S. exchange exposure. While we

employ financial instruments to hedge some of our transactional foreign exchange exposure, these activities do not insulate us

completely from those exposures. Exchange rates can be volatile and a substantial weakening of foreign currencies against the

U.S. dollar could reduce our profit margin in various locations outside of the U.S. and adversely impact the comparability of

results from period to period. During 2022, we experienced a reduction in revenue and profits as a result of the significant

strengthening of the U.S. dollar against foreign currencies. The continued strength of the U.S. dollar could continue to

adversely impact our revenue and profit in non-U.S. jurisdictions.

There are other risks that are inherent in our non-U.S. operations, including the potential for changes in socio-economic

conditions, laws and regulations, including anti-trust, import, export, labor and environmental laws, and monetary and fiscal

policies; the ability to enforce rights, collect revenues and protect assets in foreign jurisdictions; protectionist measures that may

prohibit acquisitions or joint ventures, or impact trade volumes; unsettled or unstable political conditions; international conflict;

government-imposed plant or other operational shutdowns; backlash from foreign labor organizations related to our

restructuring actions; corruption; natural and man-made disasters, hazards and losses; violence, civil and labor unrest, and

possible terrorist attacks.

These and other factors may have a material adverse effect on our business and results of operations.

Impacts related to the COVID-19 pandemic could have an adverse effect on our business, financial condition, results of

operations and cash flows.

The COVID-19 global pandemic created significant volatility, uncertainty and economic disruption. In response to the

challenges presented by COVID-19, we modified our business practices and we may take further actions as may be required by

government authorities or that we determine are in the best interests of our employees, customers, partners and suppliers. These

actions, may cause us to experience increases in costs, reductions in productivity and disruptions to our business routines.

Vaccine mandates and testing requirements have been implemented in some jurisdictions where we operate. In addition, a

number of our customers have issued vaccine requirements with respect to our employees who provide on-site service at

customer facilities. Our efforts to comply with these or other mandates could result in increased labor attrition and disruption,

as well as difficulty securing future labor needs, and could materially impact our ability to deliver services to our customers,

which could in turn adversely impact our results of operations.

We may also experience impacts from market forces and changes in consumer behavior related to pandemic fears as a result of

COVID-19. Challenges in achieving sufficient vaccination levels and the introduction of new variants of COVID-19 have and

could continue to negatively impact our results of operations due to the extension or reinstitution of lockdowns and similar

restrictive measures, limited access to customer sites to perform installation and service work, the delay or abandonment of

projects on which we provide products and/or services, and the general adverse impacts on demand and sales volumes from

industries that are sensitive to economic downturns and volatility in commodity prices. For example, the Company has

experienced, and could continue to experience, disruptions to its business in China due to the application of lockdowns and

other restrictive measures under China's "zero-COVID" policy. Further, the COVID-19 pandemic could result in permanent

changes in the behaviors of our customers, including the increased prevalence of remote work and a corresponding decline in

demand for the construction and maintenance of commercial buildings. Any of these impacts could adversely affect our results

of operations.

The extent to which the COVID-19 pandemic continues to impact our results of operations and financial condition will depend

on future developments that are highly uncertain and cannot be predicted, including the resurgence of COVID-19 and its

variants, the effectiveness of COVID-19 vaccines and the speed at which populations are vaccinated, impacts on economic

activity and regulatory actions taken to mitigate the impacts of COVID-19. The impact of COVID-19 may also exacerbate other

risks discussed in Item 1A of this Annual Report on Form 10-K.

Risks Related to Our Business Operations

The ability of suppliers to deliver raw materials, parts and components to our manufacturing facilities, and our ability

to manufacture and deliver services without disruption, could affect our results of operations.

We use a wide range of materials (primarily steel, copper and aluminum) and components (including semiconductors and other

electronic components) in the global production of our products, which come from numerous suppliers around the world.

Because not all of our business arrangements provide for guaranteed supply and some key parts may be available only from a

single supplier or a limited group of suppliers, we are subject to supply and pricing risk. Our operations and those of our

suppliers are subject to disruption for a variety of reasons, including supplier plant shutdowns or slowdowns, transportation

delays, work stoppages, labor relations, labor shortages, global geopolitical instability, price inflation, governmental regulatory

and enforcement actions, intellectual property claims against suppliers, financial issues such as supplier bankruptcy,

information technology failures, and hazards such as fire, earthquakes, flooding, or other natural disasters. For example, we

expect to continue to be impacted by the following supply chain issues, due to economic, political and other factors largely

beyond our control: increased input material costs and component shortages; supply chain disruptions and delays and cost

inflation, all of which could continue or escalate in the future. In addition, some of our subcontractors have also experienced

supply chain and labor disruptions, which have continued to impact our ability to timely complete projects and convert our

backlog. Such disruptions have and could continue to interrupt our ability to manufacture or obtain certain products and

components, thereby adversely impacting our ability to provide products to customers, convert our backlog into revenue and

realize expected profit margins. Any significant disruption could materially and adversely affect our business, financial

condition, results of operations and cash flows.

Material supply shortages and delays in deliveries, along with other factors such as price inflation, can also result in increased

pricing. While many of our customers permit quarterly or other periodic adjustments to pricing based on changes in component

prices and other factors, we may bear the risk of price increases that occur between any such repricing or, if such repricing is

not permitted, during the balance of the term of the particular customer contract. The inability to timely convert our backlog due

to supply chain disruptions subjects us to pricing risk due to cost inflation occurring between the generation of backlog and its

conversion into revenue. If we are unable to effectively manage the impacts of price inflation and timely convert our backlog,

our results of operations, financial condition and cash flows could materially and adversely be affected.

Our future growth is dependent upon our ability to develop or acquire new products and technologies that achieve

market acceptance with acceptable margins.

Our future success depends on our ability to develop or acquire, manufacture and bring competitive, and increasingly complex,

products and services to market quickly and cost-effectively. Our ability to develop or acquire new products, services and

technologies requires the investment of significant resources. These acquisitions and development efforts divert resources from

other potential investments in our businesses, and they may not lead to the development of new technologies, products or

services on a timely basis. Moreover, as we introduce new products, we may be unable to detect and correct defects in the

design of a product or in its application to a specified use, which could result in loss of sales or delays in market acceptance.

Even after introduction, new or enhanced products may not satisfy customer preferences and product failures may cause

customers to reject our products. As a result, these products may not achieve market acceptance and our brand image could

suffer. We must also attract, develop and retain individuals with the requisite technical expertise and understanding of

customers’ needs to develop new technologies and introduce new products, particularly as we increase investment in our digital

services and solutions business and our OpenBlue software platform. The laws and regulations applicable to our products, and

our customers’ product and service needs, change from time to time, and regulatory changes may render our products and

technologies noncompliant. We must also monitor disruptive technologies and business models. In addition, the markets for our

products, services and technologies may not develop or grow as we anticipate. The failure of our technology, products or

services to gain market acceptance due to more attractive offerings by our competitors, the introduction of new competitors to

the market with new or innovative product offerings or the failure to address any of the above factors could significantly reduce

our revenues, increase our operating costs or otherwise materially and adversely affect our business, financial condition, results

of operations and cash flows.

Cybersecurity incidents impacting our IT systems and digital products could disrupt business operations, result in the

loss of critical and confidential information, and adversely impact our reputation and results of operations.

We rely upon the capacity, reliability and security of our IT and data security infrastructure and our ability to expand and

continually update this infrastructure in response to the changing needs of our business. As we implement new systems or

integrate existing systems, they may not perform as expected. We also face the challenge of supporting our older systems and

implementing necessary upgrades. In addition, we are relying on our IT infrastructure to support our employees’ ability to work

remotely. If we experience a problem with the functioning of an important IT system as a result of increased burdens placed on

our IT infrastructure or a security breach of our IT systems, the resulting disruptions could have an adverse effect on our

business.

Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to IT

systems to sophisticated and targeted measures known as advanced persistent threats directed at the Company, its products, its

customers and/or its third-party service providers, including cloud providers. These threats and incidents originate from many

sources globally and include malwares that take the form of computer viruses, ransomware, worms, Trojan horses, spyware,

adware, scareware, rogue software, and programs that act against the computer user. While we have experienced, and expect to

continue to experience, these types of threats and incidents, none of them to date has been material to the Company. Our

customers, including the U.S. government, are increasingly requiring cybersecurity protections and mandating cybersecurity

standards in our products, and we may incur additional costs to comply with such demands. We seek to deploy comprehensive

measures to deter, prevent, detect, respond to and mitigate these threats, including identity and access controls, data protection,

vulnerability assessments, product software designs which we believe are less susceptible to cyber-attacks, continuous

monitoring of our IT networks and systems, maintenance of backup and protective systems and the incorporation of

cybersecurity design throughout the lifecycle of our products. Despite these efforts, cybersecurity incidents, depending on their

nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and

confidential or proprietary information (our own or that of third parties) and the disruption of business operations. Such

incidents could remain undetected for an extended period of time, and the losses arising from such incidents could exceed our

available insurance coverage for such matters.

An increasing number of our products, services and technologies, including our OpenBlue software platform, are delivered with

digital capabilities and accompanying interconnected device networks, which include sensors, data, building management

systems and advanced computing and analytics capabilities. If we are unable to manage the lifecycle cybersecurity risk in

development, deployment and operation of our digital platforms and services, they could become susceptible to cybersecurity

incidents and lead to third-party claims that our product failures have caused damages to our customers. This risk is enhanced

by the increasingly connected nature of our products and the role they play in managing building systems.

The potential consequences of a material cybersecurity incident include financial loss, reputational damage, adverse health,

safety, and environmental consequences, exposure to legal claims or enforcement actions, theft of intellectual property, fines

levied by the Federal Trade Commission or other governmental organizations, diminution in the value of our investment in

research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could

materially and adversely affect our competitiveness and results of operations.

Data privacy, identity protection and information security compliance may require significant resources and presents

certain risks.

We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary business

information, personal data or other information that is subject to privacy and security laws, regulations and/or customer-

imposed controls. Despite our efforts to protect such data, our business and our products may be vulnerable to material security

breaches, theft, misplaced or lost data, programming errors, or errors that could potentially lead to compromising such data,

improper use of our products, systems, software solutions or networks, unauthorized access, use, disclosure, modification or

destruction of information, defective products, production downtimes and operational disruptions. A significant actual or

perceived risk of theft, loss, fraudulent use or misuse of customer, employee or other data, whether by us, our suppliers, channel

partners, customers or other third parties, as a result of employee error or malfeasance, or as a result of the imaging, software,

security and other products we incorporate into our products, as well as non-compliance with applicable industry standards or

our contractual or other legal obligations or privacy and information security policies regarding such data, could result in costs,

fines, litigation or regulatory actions, or could lead customers to select the products and services of our competitors. Any such

event could harm our reputation, cause unfavorable publicity or otherwise adversely affect certain potential customers’

perception of the security and reliability of our services as well as our credibility and reputation, which could result in lost sales.

In addition, we operate in an environment in which there are different and potentially conflicting data privacy laws in effect in

the various U.S. states and foreign jurisdictions in which we operate and we must understand and comply with each law and

standard in each of these jurisdictions while ensuring the data is secure. For example, proposed regulations restricting the use of

biometric security technology could impact the products and solutions offered by our security business. Government

enforcement actions can be costly and interrupt the regular operation of our business, and violations of data privacy laws can

result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial

statements.

Failure to increase organizational effectiveness through organizational improvements may reduce our profitability or

adversely impact our business.

Our results of operations, financial condition and cash flows are dependent upon our ability to drive organizational

improvement. We seek to drive improvements through a variety of actions, including integration activities, digital

transformation, business portfolio reviews, productivity initiatives, functionalization, executive management changes, and

business and operating model assessments. Risks associated with these actions include delays in execution, additional

unexpected costs, realization of fewer than estimated productivity improvements, and adverse effects on employee morale. We

may not realize the full operational or financial benefits we expect, the recognition of these benefits may be delayed, and these

actions may potentially disrupt our operations. In addition, our failure to effectively manage organizational changes may lead to

increased attrition and harm our ability to attract and retain key talent.

Infringement or expiration of our intellectual property rights, or allegations that we have infringed upon the intellectual

property rights of third parties, could negatively affect us.

We rely on a combination of trademarks, trade secrets, patents, copyrights, know-how, confidentiality provisions and licensing

arrangements to establish and protect our proprietary rights. We cannot guarantee, however, that the steps we have taken to

protect our intellectual property will be adequate to prevent infringement of our rights or misappropriation or theft of our

technology, trade secrets or know-how. For example, effective patent, trademark, copyright and trade secret protection may be

unavailable or limited in some of the countries in which we operate. In addition, while we generally enter into confidentiality

agreements with our employees and third parties to protect our trade secrets, know-how, business strategy and other proprietary

information, such confidentiality agreements could be breached or otherwise may not provide meaningful protection for our

trade secrets and know-how related to the design, manufacture or operation of our products. From time to time we resort to

litigation to protect our intellectual property rights. Such proceedings can be burdensome and costly, and we may not prevail.

Further, adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and

manufacturing expertise. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired, the

product is generally open to competition. Products under patent protection usually generate significantly higher revenues than

those not protected by patents. If we fail to successfully enforce our intellectual property rights, our competitive position could

suffer, which could harm our business, financial condition, results of operations and cash flows.

In addition, we are, from time to time, subject to claims of intellectual property infringement by third parties, including

practicing entities and non-practicing entities. Regardless of the merit of such claims, responding to infringement claims can be

expensive and time-consuming. The litigation process is subject to inherent uncertainties, and we may not prevail in litigation

matters regardless of the merits of our position. Intellectual property lawsuits or claims may become extremely disruptive if the

plaintiffs succeed in blocking the trade of our products and services and they may have a material adverse effect on our

business, financial condition, results of operations and cash flows.

We rely on our global direct installation channel for a significant portion of our revenue. Failure to maintain and grow

the installed base resulting from direct channel sales could adversely affect our business.

Unlike many of our competitors, we rely on a direct sales channel for a substantial portion of our revenue. The direct channel

provides for the installation of fire and security solutions, and HVAC equipment manufactured by us. This represents a

significant distribution channel for our products, creates a large installed base of our fire and security solutions and HVAC

equipment, and creates opportunities for longer term service and monitoring revenue. If we are unable to maintain or grow this

installation business, whether due to changes in economic conditions, a failure to anticipate changing customer needs, a failure

to introduce innovative or technologically advanced solutions, or for any other reason, our installation revenue could decline,

which could in turn adversely impact our product pull-through and our ability to grow service and monitoring revenue.

Our business success depends on attracting and retaining qualified personnel.

Our ability to sustain and grow our business requires us to hire, retain and develop a high-performance, customer-centric and

diverse management team and workforce. Continuous efficient and timely customer service, customer support and customer

intimacy are essential to enabling customer loyalty and driving our financial results. Our growth strategies require that we pivot

to new talent capability investments and build the workforce of the future, with an emphasis on developing skills in digital and

consultative, outcome-based selling. Failure to ensure that we have the leadership and talent capacity with the necessary skillset

and experience could impede our ability to deliver our growth objectives, execute our strategic plan and effectively transition

our leadership. Any unplanned turnover or inability to attract and retain key employees could have a negative effect on our

results of operations.

Our ability to convert backlog into revenue requires us to maintain a labor force that is sufficiently large enough to support our

manufacturing operations to meet customer demand, as well as provide on-site services and project support for our customers.

This includes recruiting, hiring and retaining skilled trade workers to support our direct channel field businesses. Recently, we

have experienced the impacts of shortages for both skilled and unskilled labor. While we have taken measures to mitigate the

impact of these shortages, we can provide no assurance that such efforts will be successful. The impacts of labor shortages

could limit our ability to convert backlog into revenue and negatively impact our results of operations.

A material disruption of our operations, particularly at our monitoring and/or manufacturing facilities, could adversely

affect our business.

If our operations, particularly at our monitoring facilities and/or manufacturing facilities, were to be disrupted as a result of

significant equipment failures, natural disasters, climate change, cybersecurity breaches, power outages, fires, explosions,

terrorism, sabotage, adverse weather conditions, public health crises (including COVID-19 related shutdowns), labor disputes,

labor shortages or other reasons, we may be unable to effectively respond to alarm signals, fill customer orders, convert our

backlog and otherwise meet obligations to or demand from our customers, which could adversely affect our financial

performance. For example, during the COVID-19 pandemic, we experienced disruptions in certain of our manufacturing

facilities resulting from government-mandated shutdowns and labor shortages. The continuation or recurrence of either of these

trends could adversely affect our financial performance.

Interruptions to production could increase our costs and reduce our sales. Any interruption in production capability could

require us to make substantial capital expenditures or purchase alternative material at higher costs to fill customer orders, which

could negatively affect our profitability and financial condition. We maintain property damage insurance that we believe to be

adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses

resulting from significant production interruption or shutdown caused by an insured loss. However, any recovery under our

insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations,

which could adversely affect our business, financial condition, results of operations and cash flows.

Our business may be adversely affected by work stoppages, union negotiations, labor disputes and other matters

associated with our labor force.

We employ approximately 102,000 people worldwide. Approximately 22% of these employees are covered by collective

bargaining agreements or works councils. Although we believe that our relations with the labor unions and works councils that

represent our employees are generally good and we have experienced no material strikes or work stoppages recently, no

assurances can be made that we will not experience in the future these and other types of conflicts with labor unions, works

councils, other groups representing employees or our employees generally, or that any future negotiations with our labor unions

will not result in significant increases in our cost of labor. Additionally, a work stoppage at one of our suppliers could

materially and adversely affect our operations if an alternative source of supply were not readily available. Work stoppages by

employees of our customers could also result in reduced demand for our products.

Risks Related to Government Regulations

Our businesses operate in regulated industries and are subject to a variety of complex and continually changing laws

and regulations.

Our operations and employees are subject to various U.S. federal, state and local licensing laws, codes and standards and

similar foreign laws, codes, standards and regulations. Changes in laws or regulations could require us to change the way we

operate or to utilize resources to maintain compliance, which could increase costs or otherwise disrupt operations. In addition,

failure to comply with any applicable laws or regulations could result in substantial fines or revocation of our operating permits

and licenses. Competition or other regulatory investigations can continue for several years, be costly to defend and can result in

substantial fines. If laws and regulations were to change or if we or our products failed to comply, our business, financial

condition and results of operations could be adversely affected.

Due to the international scope of our operations, the system of laws and regulations to which we are subject is complex and

includes regulations issued by the U.S. Customs and Border Protection, the U.S. Department of Commerce's Bureau of Industry

and Security, the U.S. Treasury Department's Office of Foreign Assets Control and various non U.S. governmental agencies,

including applicable export controls, anti-trust, customs, currency exchange control and transfer pricing regulations, laws

regulating the foreign ownership of assets, and laws governing certain materials that may be in our products. No assurances can

be made that we will continue to be found to be operating in compliance with, or be able to detect violations of, any such laws

or regulations.

Existing free trade laws and regulations, provide certain beneficial duties and tariffs for qualifying imports and exports, subject

to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of

foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture

products or from where we import products or raw materials (either directly or through our suppliers) could have an impact on

our competitive position, business and financial results. For example, the U.S., China and other countries continue to implement

restrictive trade actions, including tariffs, export controls, sanctions, legislation favoring domestic investment and other actions

impacting the import and export of goods, foreign investment and foreign operations in jurisdictions in which we operate.

Additional measures imposed by such countries on a broader range of imports or economic activity, or retaliatory trade

measures taken by other countries in response, could increase the cost of our products, create disruptions to our supply chain

and impair our ability to effectively operate and compete in such countries.

We are also subject to a complex network of tax laws and tax treaties that impact our effective tax rate. For more information

on risks related to tax regulation, see “Risks Related to Tax Matters” below.

We cannot predict the nature, scope or effect of future regulatory requirements to which our operations might be subject or the

manner in which existing laws might be administered or interpreted.

Global climate change and related regulations could negatively affect our business.

The effects of climate change create financial risks to our business. For example, the effects of climate change could disrupt our

operations by impacting the availability and cost of materials needed for manufacturing, exacerbate existing risks to our supply

chain and increase insurance and other operating costs. These factors may impact our decisions to construct new facilities or

maintain existing facilities in areas most prone to physical climate risks. We could also face indirect financial risks passed

through the supply chain and disruptions that could result in increased prices for our products and the resources needed to

produce them.

Increased public awareness and concern regarding global climate change has resulted in more regulations designed to reduce

greenhouse gas emissions. These regulations tend to be implemented under global, national and sub-national climate objectives

or policies, and target the global warming potential (“GWP”) of refrigerants, equipment energy efficiency, and the combustion

of fossil fuels as a heating source. Many of our products consume energy and use refrigerants. Regulations which seek to reduce

greenhouse gas emissions present a risk to our global products business, predominantly our HVAC business, if we do not

adequately prepare our product portfolio. As a result, we may be required to make increased research and development and

other capital expenditures to improve our product portfolio in order to meet new regulations and standards. Further, our

customers and the markets we serve may impose emissions or other environmental standards through regulation, market-based

emissions policies or consumer preference that we may not be able to timely meet due to the required level of capital

investment or technological advancement. While we have been committed to continuous improvements to our product portfolio

to meet and exceed anticipated regulations and preferences, there can be no assurance that our commitments will be successful,

that our products will be accepted by the market, that proposed regulation or deregulation will not have a negative competitive

impact or that economic returns will reflect our investments in new product development.

We are subject to emerging and competing climate regulations. There continues to be a lack of consistent climate legislation,

which creates economic and regulatory uncertainty. Such regulatory uncertainty extends to incentives, which if discontinued,

could adversely impact the demand for energy efficient buildings, and could increase costs of compliance. These factors may

impact the demand for our products, obsolescence of our products and our results of operations.

As of the date of this filing, we have made several public commitments regarding our intended reduction of carbon emissions,

including commitments to achieve net zero carbon emissions by 2040 and the establishment of science-based targets to reduce

carbon emissions from our operations and the operations of our customers. Although we intend to meet these commitments, we

may be required to expend significant resources to do so, which could increase our operational costs. Further, there can be no

assurance of the extent to which any of our commitments will be achieved, or that any future investments we make in

furtherance of achieving such targets and goals will meet investor expectations or any binding or non-binding legal standards

regarding sustainability performance. Moreover, we may determine that it is in the best interest of our company and our

shareholders to prioritize other business, social, governance or sustainable investments over the achievement of our current

commitments based on economic, regulatory and social factors, business strategy or pressure from investors, activist groups or

other stakeholders. If we are unable to meet these commitments, then we could incur adverse publicity and reaction from

investors, activist groups and other stakeholders, which could adversely impact the perception of our brand and our products

and services by current and potential customers, as well as investors, which could in turn adversely impact our results of

operations.

We are subject to requirements relating to environmental and safety regulations and environmental remediation

matters which could adversely affect our business, results of operation and reputation.

We are subject to numerous federal, state and local environmental laws and regulations governing, among other things, solid

and hazardous waste storage, treatment and disposal, and remediation of releases of hazardous materials. There are significant

capital, operating and other costs associated with compliance with these environmental laws and regulations. Environmental

laws and regulations may become more stringent in the future, which could increase costs of compliance or require us to

manufacture with alternative technologies and materials. For example, proposed federal, state and European Union legislative

action concerning the use and clean-up of fire-fighting foam products, including the United States Environmental Protection

Agency’s proposal to designate perfluorooctane sulfonate ("PFOS") and perfluorooctanoic acid ("PFOA") as hazardous

substances under the Comprehensive Environmental Response, Compensation, and Liability Act, could negatively impact our

fire-fighting business and our results of operations, thereby enhancing the risks to our business described under “Potential

liability for environmental contamination could result in substantial costs” below.

Federal, state and local authorities also regulate a variety of matters, including, but not limited to, health, safety laws governing

employee injuries, and permitting requirements in addition to the environmental matters discussed above. If we are unable to

adequately comply with applicable health and safety regulations and provide our employees with a safe working environment,

we may be subject to litigation and regulatory action, in addition to negatively impacting our ability to attract and retain talented

employees. New legislation and regulations may require us to make material changes to our operations, resulting in significant

increases to the cost of production. Additionally, violations of environmental, health and safety laws are subject to civil, and, in

some cases, criminal sanctions. As a result of these various uncertainties, we may incur unexpected interruptions to operations,

fines, penalties or other reductions in income which could adversely impact our business, financial condition and results of

operations.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and

similar anti-bribery laws around the world.

The U.S. Foreign Corrupt Practices Act (the "FCPA"), the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions

generally prohibit companies and their intermediaries from making improper payments to government officials or other persons

for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in

many parts of the world that are recognized as having governmental and commercial corruption and local customs and practices

that can be inconsistent with anti-bribery laws. We cannot assure you that our internal control policies and procedures will

preclude reckless or criminal acts committed by our employees or third-party intermediaries. In the event that we believe or

have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, or if we are

subject to allegations of any such violations, we will investigate the allegations and may engage outside counsel to investigate

the relevant facts and circumstances, which can be expensive and require significant time and attention from senior

management. Violations of these laws may result in criminal or civil sanctions, which could disrupt our business and result in a

material adverse effect on our reputation, business, financial condition, results of operations and cash flows. In addition, we

could be subject to commercial impacts such as lost revenue from customers who decline to do business with us as a result of

such compliance matters, which also could have a material adverse effect on our reputation, business, financial condition,

results of operations and cash flows.

We are subject to risks arising from regulations applicable to companies doing business with the U.S. government.

Our customers include many U.S. federal, state and local government authorities. Doing business with the U.S. federal, state

and local governments subjects us to certain particular risks, including dependence on the level of government spending and

compliance with and changes in governmental procurement and security regulations. Agreements relating to the sale of

products to government entities may be subject to termination, reduction or modification, either at the convenience of the

government or for failure to perform under the applicable contract. We are subject to potential government investigations of

business practices and compliance with government procurement and security regulations, which can be expensive and

burdensome. If we were charged with wrongdoing as a result of an investigation, we could be suspended from bidding on or

receiving awards of new government contracts, which could have a material adverse effect on our results of operations. In

addition, various U.S. federal and state legislative proposals have been made in the past that would deny governmental

contracts to U.S. companies that have moved their corporate location abroad. We are unable to predict the likelihood that, or

final form in which, any such proposed legislation might become law, the nature of regulations that may be promulgated under

any future legislative enactments, or the effect such enactments and increased regulatory scrutiny may have on our business.

Risks Related to Litigation

Potential liability for environmental contamination could result in substantial costs.

We have projects underway at multiple current and former manufacturing and testing facilities to investigate and remediate

environmental contamination resulting from past operations by us or by other businesses that previously owned or used the

properties, including our Fire Technology Center and Stanton Street manufacturing facility located in Marinette, Wisconsin.

These projects relate to a variety of activities, including arsenic, solvent, oil, metal, lead, PFOS, PFOA and/or other per- and

polyfluorinated substances ("PFAS") and other hazardous substance contamination cleanup; and structure decontamination and

demolition, including asbestos abatement. Because of uncertainties associated with environmental regulation and environmental

remediation activities at sites where we may be liable, future expenses that we may incur to remediate identified sites and

resolve outstanding litigation could be considerably higher than the current accrued liability on our consolidated statements of

financial position, which could have a material adverse effect on our business, results of operations and cash flows.

In addition, we have been named, along with others, in a number of class action and other lawsuits relating to the use of fire-

fighting foam products by the U.S. Department of Defense, the U.S. military and others for fire suppression purposes and

related training exercises. It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these

matters, and there can be no assurance that any such exposure will not be material. Such claims may also negatively affect our

reputation. See Note 21, “Commitments and Contingencies,” of the notes to consolidated financial statements for additional

information on these matters.

We are party to asbestos-related product litigation that could adversely affect our financial condition, results of

operations and cash flows.

We and certain of our subsidiaries, along with numerous other third parties, are named as defendants in personal injury lawsuits

based on alleged exposure to asbestos containing materials. These cases typically involve product liability claims based

primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were used

with asbestos containing components. We cannot predict with certainty the extent to which we will be successful in litigating or

otherwise resolving lawsuits on satisfactory terms in the future and we continue to evaluate different strategies related to

asbestos claims filed against us including entity restructuring and judicial relief. Unfavorable rulings, judgments or settlement

terms could have a material adverse impact on our business and financial condition, results of operations and cash flows. See

Note 21, “Commitments and Contingencies,” of the notes to consolidated financial statements for additional information on

these matters.

Legal proceedings in which we are, or may be, a party may adversely affect us.

We are currently, and may in the future, become subject to legal proceedings and commercial or contractual disputes. These are

typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes

with our suppliers or customers, intellectual property matters, third party liability, including product liability claims, and

employment claims. In addition, we may be exposed to greater risks of liability for employee acts or omissions, or system

failure, in our fire and security businesses than may not be inherent in other businesses. In particular, because many of our fire

and security products and services are intended to protect lives and real and personal property, we may have greater exposure to

litigation risks than other businesses. The nature of the services we provide exposes us to the risks that we may be held liable

for employee acts or omissions or system failures. As a result, such employee acts or omissions or system failures could have a

material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Relating to Strategic Transactions

We may be unable to successfully execute or effectively integrate acquisitions or joint ventures.

We expect acquisitions of businesses and assets, as well as joint ventures (or other strategic arrangements), to play a role in our

future growth and our ability to build capabilities in our products and services. We cannot be certain that we will be able to

identify attractive acquisition or joint venture targets, obtain financing for acquisitions on satisfactory terms, successfully

acquire identified targets or form joint ventures, or manage the timing of acquisitions with capital obligations across our

businesses.

Acquisitions and investments may involve significant cash expenditures, debt incurrences, equity issuances, operating losses

and expenses. Acquisitions and investments may be dilutive to earnings. Acquisitions involve numerous other risks, including:

the diversion of management attention to integration matters; difficulties in integrating operations and systems; challenges in

conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures;

difficulties in assimilating employees and in attracting and retaining key personnel; challenges in successfully integrating and

operating businesses with different characteristics than our current core businesses; challenges in keeping existing customers

and obtaining new customers; difficulties in achieving anticipated cost savings, synergies, business opportunities and growth

prospects; contingent liabilities (including contingent tax liabilities and earn-out obligations) that are larger than expected; and

potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with acquired companies.

The goodwill and intangible assets recorded with past acquisitions were significant and impairment of such assets could result

in a material adverse impact on our financial condition and results of operations. Competition for acquisition opportunities may

rise, thereby increasing our costs of making acquisitions or causing us to refrain from making further acquisitions.

Many of these factors are outside of our control, and any one of them could result in increased costs, decreased expected

revenues and diversion of management time and energy, which could materially and adversely impact our business, financial

condition and results of operations.

Risks associated with joint venture investments may adversely affect our business and financial results.

We have entered into several joint ventures and we may enter into additional joint ventures in the future. Our joint venture

partners may at any time have economic, business or legal interests or goals that are inconsistent with our goals or with the

goals of the joint venture. In addition, we may compete against our joint venture partners in certain of our other markets.

Disagreements with our business partners may impede our ability to maximize the benefits of our partnerships. Our joint

venture arrangements may require us, among other matters, to pay certain costs or to make certain capital investments or to seek

our joint venture partner’s consent to take certain actions. In addition, our joint venture partners may be unable or unwilling to

meet their economic or other obligations under the operative documents, and we may be required to either fulfill those

obligations alone to ensure the ongoing success of a joint venture or to dissolve and liquidate a joint venture. These risks could

result in a material adverse effect on our business and financial results.

Divestitures of some of our businesses or product lines may materially adversely affect our financial condition, results of

operations or cash flows.

We continually evaluate the performance and strategic fit of all of our businesses and may sell businesses or product lines.

Divestitures 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. Some divestitures may

be dilutive to earnings. 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.

Risks Related to Tax Matters

Future potential changes to the tax laws could adversely affect us and our affiliates.

Legislative and regulatory action may be taken in the U.S. and other jurisdictions in which we operate, which, if ultimately

enacted, could override tax treaties upon which we rely, or broaden the circumstances under which we would be considered a

U.S. resident, each of which could materially and adversely affect our effective tax rate. We cannot predict the outcome of any

specific legislative or regulatory proposals and such changes could have a prospective or retroactive application. However, if

proposals were enacted that had the effect of disregarding our incorporation in Ireland or limiting Johnson Controls

International plc’s ability, as an Irish company, to take advantage of tax treaties with the U.S., we could be subject to increased

taxation, potentially significant expense, and/or other adverse tax consequences.

The U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022, which, among other sections, creates a new

book minimum tax of at least 15% of consolidated GAAP pre-tax income for corporations with average book income in excess

of $1 billion. The book minimum tax will first apply to us in fiscal 2024. We do not expect the IRA to have a material impact

on our effective tax rate, however, it is possible that the U.S. Congress could advance other tax legislation proposals in the

future that could have a material impact on our tax rate. In addition, in October 2021, 136 out of 140 countries in the

Organization for Economic Co-operation and Development ("OECD") Inclusive Framework on Base Erosion and Profit

Shifting ("IF"), including Ireland, politically committed to potentially fundamental changes to the international corporate tax

system, including the potential implementation of a global minimum corporate tax rate. While the details of these

pronouncements remain unclear and timing of implementation uncertain, the impact of local country IF adoption could have a

material impact on our effective tax rate. It is also possible that jurisdictions in which we do business could react to such IF

developments unilaterally by enacting tax legislation that could adversely affect us or our affiliates. There is also general

uncertainty regarding the tax policies of the jurisdictions where we operate, and if changes are enacted, there could be a

resulting increase in our effective tax rate.

The Internal Revenue Service ("IRS") may not agree that we should be treated as a non-U.S. corporation for U.S.

federal tax purposes.

Under current U.S. federal tax law, a corporation is generally considered to be a tax resident in the jurisdiction of its

organization or incorporation. Because Johnson Controls International plc is an Irish incorporated entity, it would generally be

classified as a non-U.S. corporation (and, therefore, a non-U.S. tax resident) under these rules. However, Section 7874 of the

Code ("Section 7874") provides an exception to this general rule under which a non-U.S. incorporated entity may, in certain

circumstances, be treated as a U.S. corporation for U.S. federal tax purposes.

Under Section 7874, if (1) former Johnson Controls, Inc. shareholders owned (within the meaning of Section 7874) 80% or

more (by vote or value) of our ordinary shares after the Merger by reason of holding Johnson Controls, Inc. common stock

(such ownership percentage the "Section 7874 ownership percentage"), and (2) our "expanded affiliated group" did not have

"substantial business activities" in Ireland ("the substantial business activities test"), we will be treated as a U.S. corporation for

U.S. federal tax purposes. If the Section 7874 ownership percentage of the former Johnson Controls, Inc. shareholders after the

Merger was less than 80% but at least 60%, and the substantial business activities test was not met, we and our U.S. affiliates

(including the U.S. affiliates historically owned by Tyco) may, in some circumstances, be subject to certain adverse U.S. federal

income tax rules (which, among other things, could limit their ability to utilize certain U.S. tax attributes to offset U.S. taxable

income or gain resulting from certain transactions). The application of these rules could result in significant additional U.S. tax

liability and limit our ability to restructure or access cash earned by certain of our non-U.S. subsidiaries, in each case, without

incurring substantial U.S. tax liabilities.

Based on the terms of the Merger, the rules for determining share ownership under Section 7874 and certain factual

assumptions, we believe that former Johnson Controls, Inc. shareholders owned (within the meaning of Section 7874) less than

60% (by both vote and value) of our ordinary shares after the Merger by reason of holding shares of Johnson Controls, Inc.

common stock. Therefore, under current law, we believe that we should not be treated as a U.S. corporation for U.S. federal tax

purposes and that Section 7874 should otherwise not apply to us or our affiliates as a result of the Merger.

However, the determination of the Section 7874 ownership percentage is complex and is subject to factual and legal

uncertainties. Thus, there can be no assurance that the IRS will agree with the position that we should not be treated as a U.S.

corporation for U.S. federal tax purposes or that Section 7874 does not otherwise apply as a result of the Merger.

Regardless of any application of Section 7874, we are treated as an Irish tax resident for Irish tax purposes. Consequently, if we

were to be treated as a U.S. corporation for U.S. federal tax purposes under Section 7874, we could be liable for both U.S. and

Irish taxes, which could have a material adverse effect on our financial condition and results of operations.

Changes to the U.S. model income tax treaty could adversely affect us.

On February 17, 2016, the U.S. Treasury released a revised U.S. model income tax convention (the "new model"), which is the

baseline text used by the U.S. Treasury to negotiate tax treaties. If any or all of the modifications to the model treaty are

adopted in the main jurisdictions in which we do business, they could, among other things, cause double taxation, increase audit

risk and substantially increase our worldwide tax liability. We cannot predict the outcome of any specific modifications to the

model treaty, and we cannot provide assurance that any such modifications will not apply to us.

Negative or unexpected tax consequences could adversely affect our results of operations.

Adverse changes in the underlying profitability and financial outlook of our operations in several jurisdictions could lead to

additional changes in our valuation allowances against deferred tax assets and other tax reserves on our statement of financial

position, and the future sale of certain businesses could potentially result in the reversal of outside basis differences that could

adversely affect our results of operations and cash flows. Additionally, changes in tax laws in the U.S., Ireland or in other

countries where we have significant operations could materially affect deferred tax assets and liabilities on our consolidated

statements of financial position and our income tax provision in our consolidated statements of income.

We are also subject to tax audits by governmental authorities. Negative unexpected results from one or more such tax audits

could adversely affect our results of operations.

Risks Relating to Our Jurisdiction of Incorporation

Irish law differs from the laws in effect in the U.S. and may afford less protection to holders of our securities.

It may not be possible to enforce court judgments obtained in the U.S. against us in Ireland based on the civil liability

provisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland

would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities

provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have

been advised that the U.S. currently does not have a treaty with Ireland providing for the reciprocal recognition and

enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by

any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would

not automatically be enforceable in Ireland.

As an Irish company, Johnson Controls is governed by the Irish Companies Acts, which differ in some material respects from

laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested

director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company

generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action

against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited

circumstances. Accordingly, holders of Johnson Controls International plc securities may have more difficulty protecting their

interests than would holders of securities of a corporation incorporated in a jurisdiction of the U.S.

Transfers of Johnson Controls ordinary shares may be subject to Irish stamp duty.

For the majority of transfers of Johnson Controls ordinary shares, there is no Irish stamp duty. However, Irish stamp duty is

payable for certain share transfers. A transfer of Johnson Controls ordinary shares from a seller who holds shares beneficially

(i.e., through the Depository Trust Company ("DTC")) to a buyer who holds the acquired shares beneficially is not subject to

Irish stamp duty (unless the transfer involves a change in the nominee that is the record holder of the transferred shares). A

transfer of Johnson Controls ordinary shares by a seller who holds shares directly (i.e., not through DTC) to any buyer, or by a

seller who holds the shares beneficially to a buyer who holds the acquired shares directly, may be subject to Irish stamp duty

(currently at the rate of 1% of the price paid or the market value of the shares acquired, if higher) payable by the buyer. A

shareholder who directly holds shares may transfer those shares into his or her own broker account to be held through DTC

without giving rise to Irish stamp duty provided that the shareholder has confirmed to Johnson Controls transfer agent that there

is no change in the ultimate beneficial ownership of the shares as a result of the transfer and, at the time of the transfer, there is

no agreement in place for a sale of the shares.

We currently intend to pay, or cause one of our affiliates to pay, stamp duty in connection with share transfers made in the

ordinary course of trading by a seller who holds shares directly to a buyer who holds the acquired shares beneficially. In other

cases, Johnson Controls may, in its absolute discretion, pay or cause one of its affiliates to pay any stamp duty. Johnson

Controls Memorandum and Articles of Association provide that, in the event of any such payment, Johnson Controls (i) may

seek reimbursement from the buyer, (ii) may have a lien against the Johnson Controls ordinary shares acquired by such buyer

and any dividends paid on such shares and (iii) may set-off the amount of the stamp duty against future dividends on such

shares. Parties to a share transfer may assume that any stamp duty arising in respect of a transaction in Johnson Controls

ordinary shares has been paid unless one or both of such parties is otherwise notified by Johnson Controls.

Dividends paid by us may be subject to Irish dividend withholding tax.

In certain circumstances, as an Irish tax resident company, we will be required to deduct Irish dividend withholding tax

(currently at the rate of 25%) from dividends paid to our shareholders. Shareholders that are residents in the U.S., European

Union countries (other than Ireland) or other countries with which Ireland has signed a tax treaty (whether the treaty has been

ratified or not) generally should not be subject to Irish withholding tax so long as the shareholder has provided certain Irish

dividend withholding tax forms. However, some shareholders may be subject to withholding tax, which could adversely affect

the price of our ordinary shares.

Dividends received by you could be subject to Irish income tax.

Dividends paid in respect of Johnson Controls ordinary shares generally are not subject to Irish income tax where the beneficial

owner of these dividends is exempt from dividend withholding tax, unless the beneficial owner of the dividend has some

connection with Ireland other than his or her shareholding in Johnson Controls.

Johnson Controls shareholders who receive their dividends subject to Irish dividend withholding tax generally will have no

further liability to Irish income tax on the dividend unless the beneficial owner of the dividend has some connection with

Ireland other than his or her shareholding in Johnson Controls.

General Risk Factors

The potential insolvency or financial distress of third parties could adversely impact our business and results of

operations.

We are exposed to the risk that third parties to various arrangements who owe us money or goods and services, or who purchase

goods and services from us, will not be able to perform their obligations or continue to place orders due to insolvency or

financial distress. If third parties fail to perform their obligations under arrangements with us, we may be forced to replace the

underlying commitment at current or above market prices or on other terms that are less favorable to us. In such events, we may

incur losses, or our results of operations, financial condition or liquidity could otherwise be adversely affected.

Risks related to our defined benefit retirement plans may adversely impact our results of operations and cash flow.

Significant changes in actual investment return on defined benefit plan assets, discount rates, mortality assumptions and other

factors could adversely affect our results of operations and the amounts of contributions we must make to our defined benefit

plans in future periods. Because we mark-to-market our defined benefit plan assets and liabilities on an annual basis, large non-

cash gains or losses could be recorded in the fourth quarter of each fiscal year or when a remeasurement event occurs.

Generally accepted accounting principles in the U.S. require that we calculate income or expense for the plans using actuarial

valuations. These valuations reflect assumptions about financial markets and interest rates, which may change based on

economic conditions. Funding requirements for our defined benefit plans are dependent upon, among other factors, interest

rates, underlying asset returns and the impact of legislative or regulatory changes related to defined benefit funding obligations.

A downgrade in the ratings of our debt could restrict our ability to access the debt capital markets and increase our

interest costs.

Unfavorable changes in the ratings that rating agencies assign to our debt may ultimately negatively impact our access to the

debt capital markets and increase the costs we incur to borrow funds in the market or under our existing credit agreements. If

ratings for our debt fall below investment grade, our access to the debt capital markets would become restricted and the price

we pay to issue debt could increase. Historically, we have relied on our ability to issue commercial paper rather than to draw on

our credit facility to support our daily operations, which means that a downgrade in our ratings or volatility in the financial

markets causing limitations to the debt capital markets could have an adverse effect on our business or our ability to meet our

liquidity needs.

Further, an increase in the level of our indebtedness may increase our vulnerability to adverse general economic and industry

conditions and may affect our ability to obtain additional financing.

A variety of other factors could adversely affect the results of operations of our business.

Any of the following could materially and adversely impact the results of operations of our business: loss of, changes in, or

failure to perform under guaranteed performance contracts with our major customers; cancellation of, or significant delays in,

projects in our backlog; delays or difficulties in new product development; our ability to recognize the expected benefits of our

restructuring actions, products and services that we are unable to pass on to the market; changes in energy costs or

governmental regulations that would decrease the incentive for customers to update or improve their building control systems;

and natural or man-made disasters or losses that impact our ability to deliver products and services to our customers.

ITEM 1B UNRESOLVED STAFF COMMENTS

The Company has no unresolved written comments regarding its periodic or current reports from the staff of the SEC.

ITEM 2 PROPERTIES

The Company has properties in over 60 countries throughout the world, with its world headquarters located in Cork, Ireland and

its North American operational headquarters located in Milwaukee, Wisconsin USA. The Company’s wholly- and majority-

owned facilities primarily consist of manufacturing, sales and service offices, research and development facilities, monitoring

centers, and assembly and/or warehouse centers. At September 30, 2022, these properties totaled approximately 40 million

square feet of floor space of which 12 million square feet are owned and 28 million square feet are leased. The Company

considers its facilities to be suitable for their current uses and adequate for current needs. The majority of the facilities are

operating at normal levels based on capacity. The Company does not anticipate difficulty in renewing existing leases as they

expire or in finding alternative facilities.

ITEM 3 LEGAL PROCEEDINGS

Gumm v. Molinaroli, et al.

On August 16, 2016, a putative class action lawsuit, Gumm v. Molinaroli, et al., Case No. 16-cv-1093, was filed in the United

States District Court for the Eastern District of Wisconsin, naming Johnson Controls, Inc., the individual members of its board

of directors at the time of the merger with the Company’s merger subsidiary and certain of its officers, the Company and the

Company’s merger subsidiary as defendants. The complaint asserted various causes of action under the federal securities laws,

state law and the Taxpayer Bill of Rights, including that the individual defendants allegedly breached their fiduciary duties and

unjustly enriched themselves by structuring the merger among the Company, Tyco and the merger subsidiary in a manner that

would result in a United States federal income tax realization event for the putative class of certain Johnson Controls, Inc.

shareholders and allegedly result in certain benefits to the defendants, as well as related claims regarding alleged misstatements

in the proxy statement/prospectus distributed to the Johnson Controls, Inc. shareholders, conversion and breach of contract. The

complaint also asserted that Johnson Controls, Inc., the Company and the Company’s merger subsidiary aided and abetted the

individual defendants in their breach of fiduciary duties and unjust enrichment. The complaint seeks, among other things,

disgorgement of profits and damages. On September 30, 2016, approximately one month after the closing of the merger,

plaintiffs filed a preliminary injunction motion seeking, among other items, to compel Johnson Controls, Inc. to make certain

intercompany payments that plaintiffs contend will impact the United States federal income tax consequences of the merger to

the putative class of certain Johnson Controls, Inc. shareholders and to enjoin Johnson Controls, Inc. from reporting to the

Internal Revenue Service the capital gains taxes payable by this putative class as a result of the closing of the merger. The court

held a hearing on the preliminary injunction motion on January 4, 2017, and on January 25, 2017, the judge denied the

plaintiffs' motion. Plaintiffs filed an amended complaint on February 15, 2017, and the Company filed a motion to dismiss on

April 3, 2017. On October 17, 2019, the court heard oral arguments on the motion to dismiss and took the matter under

advisement. On November 3, 2021, the court granted the Company’s motion to dismiss the amended complaint. Plaintiffs

appealed to the United States Court of Appeals for the Seventh Circuit. Briefing and oral argument has been completed. The

court has yet to issue a ruling.

Refer to Note 21, "Commitments and Contingencies," of the notes to consolidated financial statements for discussion of

environmental, asbestos, insurable liabilities and other litigation matters, which is incorporated by reference herein and is

considered an integral part of Part I, Item 3, "Legal Proceedings."

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General Instruction G(3) of Form 10-K, the following list of executive officers of the Company as of November 15,

2022 is included as an unnumbered Item in Part I of this report in lieu of being included in the Company’s Proxy Statement

relating to the annual general meeting of shareholders to be held on March 8, 2023.

Tomas Brannemo, 51, has served as Vice President and President, Building Solutions, Europe, Middle East, Africa and

Latin America since September 2019. He previously served as Senior Vice President and President, Water Infrastructure

and Europe Commercial Team of Xylem Inc., a leading global water technology company. At Xylem, he also served as

Senior Vice President and President, Transport and Treatment, from 2017 to 2019 and other roles from 2010 to

2017. Between 2006 and 2010, he held various marketing, sales and engineering positions at Volvo Construction

Company.

Rodney Clark, 53, has served as the Company’s Chief Commercial Officer since June 2022. Prior to joining Johnson

Controls, Mr. Clark served in various management roles at Microsoft Corporation, a global technology company, including

as Corporate Vice President, Global Channel Sales and Channel Chief, from March 2021 to May 2022, Corporate Vice

President, IoT and Mixed Reality Sales, from August 2020 to March 2021, Vice President, IoT and Mixed Reality Sales,

from 2017 to August 2020, General Manager, IoT from 2013 to 2017 and other positions of increasing responsibility from

1998 through 2013. Mr. Clark also serves as a director on the board of Entegris, Inc., a supplier of advanced materials and

process solutions for the semiconductor and other high-technology industries.

John Donofrio, 60, has served as Executive Vice President and General Counsel of the Company since November 2017.

He previously served as Vice President, General Counsel and Secretary of Mars, Incorporated, a global food manufacturer

from October 2013 to November 2017. Before joining Mars in October 2013, Mr. Donofrio was Executive Vice President,

General Counsel and Secretary for The Shaw Group Inc., a global engineering and construction company, from October

2009 until February 2013. Prior to joining Shaw, Mr. Donofrio was Senior Vice President, General Counsel and Chief

Compliance Officer at Visteon Corporation, a global automotive supplier, a position he held from 2005 until October 2009.

Mr. Donofrio has been a Director of FARO Technologies, Inc., a designer, developer, manufacturer and marketer of

software driven, 3D measurement, imaging and realization systems, since 2008.

Michael J. Ellis, 66, has served as Executive Vice President and Chief Customer & Digital Officer since October 2019.

From May 2018 to October 2019, he served as a Managing Director at Accenture, a global provider of professional

services in strategy, consulting, digital, technology and operations. He previously served as Chairman and CEO of

ForgeRock, a global digital security software company, from 2012 to 2018. Prior to joining ForgeRock, from 2008 to 2012,

he held various senior executive roles at SAP SE, a global provider of enterprise software solutions. Previously, he also

served as Chief Executive Officer of Univa, a leading innovator in enterprise-grade workload management and

optimization solutions, and as Senior Vice President Business Development at i2 Technologies, a provider of supply chain

solutions. Mr. Ellis also served as a director on the board of CBRE Acquisition Holdings Inc. from 2021 to 2022.

Olivier Leonetti, 57, has served as Chief Financial Officer since November 2020. Prior to joining Johnson Controls, Mr.

Leonetti served as the Senior Vice President and Chief Financial Officer of Zebra Technologies, a provider of enterprise-

level data capture and automatic identification solutions, a position he had held since November 2016. Prior to joining

Zebra, Mr. Leonetti was the Executive Vice President and Chief Financial Officer of Western Digital, a provider of data

infrastructure solutions from 2014 to 2016. Prior to joining Western Digital, Mr. Leonetti served as Vice President of

Finance – Global Commercial Organization at Amgen, Inc. from 2011 to 2014. From 1997 to 2011, Mr. Leonetti served in

various senior finance positions with increasing responsibility at Dell Inc., including most recently as Vice President of

Finance. Prior to joining Dell Inc., Mr. Leonetti served in various worldwide finance capacities with Lex Rac Service plc

and the Gillette Company. Mr. Leonetti also serves as a director on the board of Eaton Corporation plc, a provider of power

management technologies and services.

Nathan Manning, 46, has served as Vice President and President, Building Solutions, North America since October

2020. He previously served as Vice President and General Manager, Field Operations, from March 2020 to October 2020

and Vice President and General Manager, HVAC and Controls Building Solutions North America, from January 2019 to

March 2020. Prior to joining Johnson Controls, he served in various roles at General Electric, a diversified industrial and

technology company, where he held the position of General Manager, Operational Excellence for General Electric’s GE

Power segment from August 2017 until December 2018 and the position of General Manager, Services of GE Energy

Connections, a division of GE Power, from November 2015 until August 2017. Prior to joining General Electric, Mr.

Manning served as Vice President, General Manager of Eaton Aerospace, a segment of Eaton Corporation plc, a provider

of power management technologies and services, from February 2014 until November 2015. Prior to joining Eaton, Mr.

Manning served in a number of roles with increasing responsibility in General Electric from his hire in January 2000,

including as President and Chief Executive Officer of Aviage Systems, a joint venture between General Electric and

Aviation Industry Corporation of China, from July 2012 until February 2014.

Daniel C. “Skip” McConeghy, 56, has served as Vice President, Chief Accounting and Tax Officer since June 2022.

Mr. McConeghy previously served as Vice President, Global Tax since October 2020 and as interim Controller since

February 2022. He also served as Vice President, Corporate Tax Planning, from July 2012 through October 2020. Prior to

joining Johnson Controls, Mr. McConeghy was a Tax Partner at PricewaterhouseCoopers, from July 1999 through June

2012.

George R. Oliver, 63, has served as Chief Executive Officer and Chairman of the Board since September 2017. He

previously served as our President and Chief Operating Officer following the completion of the merger of Johnson

Controls and Tyco in September 2016. Prior to that, Mr. Oliver was Tyco's Chief Executive Officer, a position he held

since September 2012. He joined Tyco in July 2006, and served as President of a number of operating segments from 2007

through 2011. Before joining Tyco, he served in operational leadership roles of increasing responsibility at several General

Electric divisions. Mr. Oliver also serves as a director on the board of Raytheon Technologies, an aerospace and defense

company.

Ganesh Ramaswamy, 54, has served as Vice President and President, Global Services for Johnson Controls since

December 2019. From 2015 to 2019, Mr. Ramaswamy served in various executive leadership roles at Danaher

Corporation, a diversified manufacturer of life sciences, diagnostics, and industrial products and services, including Senior

Vice President, High Growth markets—Beckman Coulter, President, Videojet Technologies, and, most recently, as

Danaher Vice President & Group Executive, Marking & Coding. From 2011 to 2015, Mr. Ramaswamy served in various

executive roles at Pentax Medical, a provider of endoscopic imaging devices and solutions, including as President of

Pentax Medical from 2013 to 2015. Earlier in his career, Mr. Ramaswamy served in various roles of increasing

responsibility with the General Electric Company across product development, service operations, and general

management. Mr. Ramaswamy also serves as a director on the board of PACCAR, a global manufacturer of heavy-duty

and medium-duty trucks.

Anu Rathninde, 52, has served as Vice President and President, Building Solutions, Asia Pacific since May 2022. Prior

to joining Johnson Controls, Mr. Rathninde served as President, Electrical Distribution Systems and Advanced Safety &

User Experience, Asia Pacific at Aptiv plc, and mobility architecture company primarily serving the automotive sector,

from November 2021 until May 2022 and as President, Electrical Distribution Systems from May 2016 until November

2021. Prior to joining Aptiv, Mr. Rathninde served as Vice President of the Automotive Products Group at Johnson

Electric, manufacturer of electric motors, actuators, motion subsystems and related electro-mechanical components.

Earlier in his career, Mr. Rathninde held progressive leadership positions at Aptiv in general management, engineering,

business development, strategy and business planning.

Lei Zhang Schlitz, 56, was appointed Vice President and President, Global Products, in November 2022. Prior to joining

Johnson Controls, Ms. Schlitz served as Executive Vice President, Automotive OEM of Illinois Tool Works Inc. (“ITW”),

a global manufacturer of a diversified range of industrial products and equipment, from 2019 until October 2022. Prior to

serving as Vice President, Automotive OEM, Ms. Schlitz served in various leadership roles at ITW, including Executive

Vice President, ITW Food Equipment Segment, from September 2015 until January 2020, Group President, Global Ware-

Wash and Refrigeration Businesses and Food Equipment Asia Pacific, from January 2014 until August 2015, Group

President, Worldwide Refrigeration & Weigh Wrap Business, from May 2011 until December 2013 and as Vice President,

ITW Technology Center from October 2008 until April 2011. Prior to joining ITW, Ms. Schlitz served in roles of

increasing responsibility at Siemens Energy & Automation from September 2001 until September 2008 and General

Electric from 1998 until September 2001. Ms. Schlitz serves on the Board of Directors for Archer Daniels Midland

Company, a leader in human and animal nutrition and agricultural origination and processing.

Marlon Sullivan, 48, became Executive Vice President and Chief Human Resources Officer in September 2021. Prior to

joining Johnson Controls, he served as the Senior Vice President of Human Resources at Delta Airlines from January 2021

to September 2021. Prior to joining Delta, Mr. Sullivan served in various human resources and talent development

leadership roles at Abbott Laboratories from December 2007 through December 2020. Earlier in his career, Mr. Sullivan

held a variety of human resources roles at The Home Depot.

There are no family relationships, as defined by the instructions to this item, among the Company’s executive officers.

PART II

ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES

The shares of the Company’s ordinary shares are traded on the New York Stock Exchange under the symbol "JCI."

Number of Record Holders

Title of Class as of October 31, 2022

Ordinary Shares, $0.01 par value

29,935

In March 2021, the Company's Board of Directors approved a $4.0 billion increase to the Company's share repurchase

authorization, adding to the $2.0 billion remaining as of December 31, 2020 under the prior share repurchase authorization

approved in 2019. 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 fiscal 2022, the Company repurchased approximately $1.4

billion of its ordinary shares on an open market. As of September 30, 2022, approximately $3.6 billion remains available under

the share repurchase authorization.

The following table presents information regarding the repurchase of the Company’s ordinary shares by the Company as part of

the publicly announced program during the three months ended September 30, 2022.

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

7/1/22 - 7/31/22

Purchases by Company

278,285 $ 48.31 278,285 $ 3,614,400,337

8/1/22 - 8/31/22

Purchases by Company

— — — —

9/1/22 - 9/30/22

Purchases by Company

— — — —

During the three months ended September 30, 2022, acquisitions of shares by the Company from certain employees in order to

satisfy employee tax withholding requirements in connection with the vesting of restricted shares were not material.

Equity compensation plan information is incorporated by reference from Part III, Item 12, "Security Ownership of Certain

Beneficial Owners and Management and Related Stockholder Matters," of this document and should be considered an integral

part of this Item 5.

The following information in Item 5 is not deemed to be "soliciting material" or to be "filed" with the SEC or subject to

Regulation 14A or 14C under the Securities Exchange Act of 1934 ("Exchange Act") or to the liabilities of Section 18 of the

Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the

Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing.

The line graph below compares the cumulative total shareholder return on the Company's ordinary shares with the cumulative

total return of companies on the Standard & Poor’s ("S&P’s") 500 Stock Index and the companies on the S&P 500 Industrials

Index. This graph assumes the investment of $100 on September 30, 2017 and the reinvestment of all dividends since that date.

ITEM 6 [RESERVED]

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

General

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 and commissioning building products and systems, including

residential and commercial 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, security and

fire-protection space), energy-management consulting and data-driven “smart building” services and solutions. The Company

partners with customers by leveraging its broad product portfolio and digital capabilities, including its OpenBlue platform,

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.

The Company's fiscal year ends on September 30. Unless otherwise stated, references to years in this report relate to fiscal years

rather than calendar years. This discussion summarizes the significant factors affecting the consolidated operating results,

financial condition and liquidity of the Company for the year ended September 30, 2022. This discussion should be read in

conjunction with Item 8, the consolidated financial statements and the notes to consolidated financial statements. A detailed

discussion of the 2021 to 2020 year-over-year changes are not included herein and can be found in the Management's

Discussion and Analysis section in the Company's 2021 Annual Report on Form 10-K filed November 15, 2021 under the

heading "Fiscal year 2021 compared to fiscal year 2020" which is incorporated herein by reference.

Macroeconomic Trends

Much of the demand for installation of the Company’s products and solutions is driven by commercial and residential

construction and industrial facility expansion and maintenance projects. Commercial and residential construction projects are

heavily dependent on general economic conditions, localized demand for commercial and residential real estate and availability

of credit. Positive or negative fluctuations in commercial and residential construction, industrial facility expansion and

maintenance projects and other capital investments in buildings could have a corresponding impact on the Company’s financial

condition, results of operations and cash flows.

As a result of the Company’s global presence, a significant portion of its revenues and expenses is denominated in currencies

other than the U.S. dollar. The Company is therefore subject to non-U.S. currency risks and non-U.S. exchange exposure. While

the Company employs financial instruments to hedge some of its transactional foreign exchange exposure, these activities do

not insulate it completely from those exposures. In addition, the currency exposure from the translation of non-U.S. dollar

functional currency subsidiaries are not able to be hedged. Exchange rates can be volatile and a substantial weakening or

strengthening of foreign currencies against the U.S. dollar could increase or reduce the Company’s profit margin, respectively,

and impact the comparability of results from period to period. During fiscal 2022, revenue and profits were adversely impacted

due to the significant strengthening of the U.S. dollar against foreign currencies. The continued strength of the U.S. dollar could

continue to adversely impact the Company's results.

The Company continues to observe trends demonstrating increased interest and demand for its products and services that enable

smart, safe, efficient and sustainable buildings. This demand is driven in part by government tax incentives, building

performance standards and other regulations designed to limit emissions and combat climate change. In particular, legislative

and regulatory initiatives such as the U.S. Climate Smart Buildings Imitative, U.S. Inflection Reduction Act and EU Energy

Performance of Buildings Directive include provisions designed to fund and encourage investment in decarbonization and

digital technologies for buildings. This demand is supplemented by an increase in commitments in both the public and private

sectors to reduce emissions and/or achieve net zero emissions. The Company seeks to capitalize on these trends to drive growth

by developing and delivering technologies and solutions to create smart, sustainable and healthy buildings. The Company is

investing in new digital and product capabilities, including its OpenBlue platform, to enable it to deliver sustainable, high-

efficiency products and tailored services to enable customers to achieve their sustainability goals. The Company is leveraging

its install base, together with data-driven products and services to offer outcome-based solutions to customers with a focus on

generating accelerated growth in services and recurring revenue.

The Company has experienced, and expects to continue to experience, increased input material cost inflation and component

shortages, as well as disruptions and delays in its supply chain, as a result of global macroeconomic trends, including increased

global demand, the conflict between Russia and Ukraine, government-mandated actions in response to COVID-19, particularly

in China, and labor shortages. Actions taken by the Company to mitigate supply chain disruptions and inflation, including

expanding and redistributing its supplier network, supplier financing, price increases and productivity improvements, have

generally been successful in offsetting some, but not all, of the impact of these trends. The collective impact of these trends has

been to positively impact revenue due to increased demand and price increases to offset inflation, while negatively impacting

margins due to supply chain disruptions and cost pressures. The Company has also experienced delays in converting its backlog

due to continued supply chain disruptions, negatively impacting both revenues and margins. Although the Company has

experienced recent improvement in its supply chain, the Company expects that these trends will continue to impact its results

into fiscal 2023. Therefore, the Company could experience further disruptions, shortages and cost increases in the future, the

effect of which will depend on the Company’s ability to successfully mitigate and offset the impact of these events.

During the second quarter of fiscal 2022, the Company suspended its operations in Russia in response to the conflict between

Russia and Ukraine. Although this decision has not had and is not expected to have a material impact on the Company’s

operating results, the broader consequences of this conflict, including heightened supply chain disruption, inflation, economic

instability and other factors have and could continue to adversely impact the Company’s results of operations.

Impact of COVID-19 Pandemic

The COVID-19 pandemic continues to impact aspects of the Company's operations and results. During fiscal 2022, the

Company's facilities generally operated at normal levels, however, the Company has experienced some disruptions to its

business in China due to government-mandated lockdowns in several major cities.

The Company has experienced increases in demand as governments have distributed vaccines and lifted COVID-19-related

restrictions, leading to increases in retrofit activity and commercial building construction. As a result of the pandemic, the

Company has seen an increase in demand for its products and solutions that promote building health and optimize customers’

infrastructure.

However, the Company continues to be influenced by COVID-19-related trends impacting site access and the labor force,

which have and may continue to negatively impact the Company’s revenues and margins. Challenges in reaching sufficient

vaccination levels and the introduction of new variants of COVID-19 have caused some governments to extend or reinstitute

lockdowns and similar restrictive measures, which, in some cases, have limited the Company’s ability to access customer sites

to install and maintain its products and deliver services. In addition, the Company has experienced and continues to experience

labor shortages at certain facilities as the Company expands its production capacity to meet increased customer demand.

Although the Company is mitigating these shortages through focused recruitment efforts and competitive compensation

packages, the Company could continue to experience such shortages in the future.

The extent to which the COVID-19 pandemic continues to impact the Company’s results of operations and financial condition

will depend on future developments that are highly uncertain and cannot be predicted. See Part I, Item 1A, of this Annual

Report on Form 10-K for an additional discussion of risks related to COVID-19.

Restructuring and Cost Optimization Initiatives

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying

markets, the Company commits to restructuring plans as necessary. In fiscal 2021, the Company announced its plans to

optimize its cost structure through broad-based SG&A actions focused on simplification, standardization and centralization,

with the intent to deliver annualized savings of $300 million by fiscal 2023 (the “2021 Plan”). Additionally, the Company

announced cost of sales actions to drive $250 million in annual run rate savings by fiscal 2023. The Company believes it is on

track to deliver and exceed the productivity savings by fiscal 2023. For more information on the Company’s restructuring plans,

see “Liquidity and Capital Resources—Restructuring.”

FISCAL YEAR 2022 COMPARED TO FISCAL YEAR 2021

Net Sales

Year Ended September 30,

(in millions) 2022 2021 Change

Net sales

$ 25,299 $ 23,668

7 %

The increase in net sales was due to higher organic sales ($2,033 million), incremental sales from acquisitions ($356 million)

and the impact of prior year nonrecurring purchase accounting adjustments ($6 million), partially offset by the unfavorable

impact of foreign currency translation ($741 million) and lower sales due to business divestitures ($23 million). Excluding the

impact of foreign currency translation, business acquisitions and divestitures and nonrecurring adjustments, consolidated net

sales increased 9% as compared to the prior year, attributable to higher volumes and increased pricing in response to inflation

pressures. Refer to the "Segment Analysis" below within Item 7 for a discussion of net sales by segment.

Cost of Sales / Gross Profit

Year Ended September 30,

(in millions) 2022 2021 Change

Cost of sales $ 16,956 $ 15,609 9 %

Gross profit 8,343 8,059 4 %

% of sales 33.0% 34.1%

Cost of sales and gross profit both increased and gross profit as a percentage of sales decreased by 110 basis points. Gross profit

increased due to organic sales growth and business acquisitions, partially offset by the unfavorable impact of foreign currency

translation ($229 million), supply chain inefficiencies, price/cost pressures and the unfavorable year-over-year impact of net

pension mark-to-market adjustments ($121 million). Gross profit as a percentage of sales decreased as the benefit of volume

leverage was more than offset by supply chain inefficiencies and price/cost pressures. Refer to the "Segment Analysis" below

within Item 7 for a discussion of segment earnings before interest, taxes and amortization ("EBITA").

Selling, General and Administrative Expenses

Year Ended September 30,

(in millions) 2022 2021 Change

Selling, general and administrative expenses $ 5,945 $ 5,258 13 %

% of sales 23.5% 22.2%

Selling, general and administrative expenses ("SG&A") increased by $687 million, and SG&A as a percentage of sales

increased by 130 basis points. The increase in SG&A on a percentage basis was primarily due to the current year environmental

remediation charge and related reserves ($255 million), the unfavorable year-over-year impact of net mark-to-market

adjustments on pension plans ($154 million), the unfavorable year-over-year impact of net mark-to-market adjustments on

restricted asbestos investments ($93 million), the absence of certain one-time cost mitigation actions and current year business

acquisitions, partially offset by a favorable earn-out liability adjustment ($43 million) and favorable foreign currency translation

($141 million). Refer to the "Segment Analysis" below within Item 7 for a discussion of segment EBITA.

Restructuring and Impairment Costs

Year Ended September 30,

(in millions) 2022 2021 Change

Restructuring and impairment costs $ 721 $ 242 *

* Measure not meaningful

Restructuring and impairment costs in fiscal 2022 included $419 million impairment costs related to businesses classified as

held-for-sale, $75 million impairment of goodwill attributable to the Silent-Aire reporting unit, $45 million impairment of long-

lived assets in the Building Solutions Asia Pacific segment reclassified from held for sale and $182 million in severance, long-

lived asset impairments and other costs associated with the 2021 Plan. All of the fiscal 2021 restructuring and impairment costs

were related to the 2021 Plan.

Refer to "Note 3, "Assets and Liabilities Held for Sale & Discontinued Operations," Note 8, "Goodwill and Other Intangible

Assets," and Note 17, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for

further disclosure related to the Company's restructuring plans and impairment costs.

Net Financing Charges

Year Ended September 30,

(in millions) 2022 2021 Change

Net financing charges $ 213 $ 206 3 %

Refer to Note 10, "Debt and Financing Arrangements," of the notes to consolidated financial statements for further disclosure

related to the Company's net financing charges.

Equity Income

Year Ended September 30,

(in millions) 2022 2021 Change

Equity income $ 246 $ 261 -6 %

The decrease in equity income was primarily due to lower income at certain partially-owned affiliates of the Johnson Controls -

Hitachi joint venture and at certain partially-owned affiliates within the Building Solutions North America segment. Refer to

the "Segment Analysis" below within Item 7 for a discussion of segment EBITA.

Income Tax Provision

Year Ended September 30,

(in millions) 2022 2021 Change

Income tax provision (benefit) $ (13) $ 868 *

Effective tax rate (1) % 33 %

* Measure not meaningful

The statutory tax rate in Ireland of 12.5% is being used as a comparison since the Company is domiciled in Ireland.

For fiscal 2022, the effective tax rate for continuing operations was (1)% and was lower than the statutory tax rate primarily due

to tax reserve adjustments as the result of expired statute of limitations for certain tax years and the benefits of continuing

global tax planning initiatives, partially offset by the income tax effects of impairment and restructuring charges, valuation

allowance adjustments, the establishment of a deferred tax liability on the outside basis difference of the Company's investment

in certain subsidiaries as a result of the planned divestitures and tax rate differentials.

For fiscal 2021, the effective tax rate for continuing operations was 33% and was higher than the statutory tax rate primarily

due to the tax impacts of an intercompany transfer of certain of the Company’s intellectual property rights, valuation allowance

adjustments, the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of

continuing global tax planning initiatives.

The fiscal 2022 effective tax rate decreased as compared to fiscal 2021 primarily due to the income tax effects of mark-to-

market adjustments, tax reserve adjustments as the result of expired statute of limitations for certain tax years and the benefits

of continuing global tax planning initiatives, partially offset by valuation allowance adjustments, the establishment of a deferred

tax liability on the outside basis difference of the Company's investment in certain subsidiaries as a result of the planned

divestitures, impairment and restructuring charges and tax rate differentials. Refer to Note 18, "Income Taxes," of the notes to

consolidated financial statements for further details.

The U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022, which, among other sections, creates a new

book minimum tax of at least 15% of consolidated GAAP pre-tax income for corporations with average book income in excess

of $1 billion. The book minimum tax will first apply to us in fiscal 2024. We do not expect the IRA to have a material impact

on our effective tax rate. In addition, in October 2021, 136 out of 140 countries in the Organization for Economic Co-operation

and Development ("OECD") Inclusive Framework on Base Erosion and Profit Shifting ("IF"), including Ireland, politically

committed to potentially fundamental changes to the international corporate tax system, including the potential implementation

of a global minimum corporate tax rate. While the details of these pronouncements presently remain unclear and timing of

implementation uncertain, the impact of local country IF adoption could have a material impact on the Company's effective tax

rate in future periods. It is also possible that jurisdictions in which the Company does business could react to such IF

developments unilaterally by enacting tax legislation that could adversely affect the Company or its affiliates.

Income From Discontinued Operations, Net of Tax

Year Ended September 30,

(in millions) 2022 2021 Change

Income from discontinued operations, net of tax $ — $ 124 *

* Measure not meaningful

Refer to Note 3, "Assets and Liabilities Held for Sale & Discontinued Operations," of the notes to consolidated financial

statements for further information.

Income Attributable to Noncontrolling Interests

Year Ended September 30,

(in millions) 2022 2021 Change

Income from continuing operations attributable

to noncontrolling interests $ 191 $ 233 -18 %

The decrease in income from continuing operations attributable to noncontrolling interests was primarily due to lower net

income at certain partially-owned affiliates of the Johnson Controls - Hitachi joint venture.

Net Income Attributable to Johnson Controls

Year Ended September 30,

(in millions) 2022 2021 Change

Net income attributable to Johnson Controls $ 1,532 $ 1,637 -6 %

The decrease in net income attributable to Johnson Controls was primarily due to higher SG&A, higher restructuring and

impairment costs and the non-recurrence of prior year income from discontinued operations, partially offset by lower income

tax provision and higher gross profit. Diluted earnings per share attributable to Johnson Controls was $2.19 for the year ended

September 30, 2022 compared to $2.27 for the year ended September 30, 2021.

Comprehensive Income Attributable to Johnson Controls

Year Ended September 30,

(in millions) 2022 2021 Change

Comprehensive income attributable to

Johnson Controls $ 1,055 $ 1,979 -47 %

The decrease in comprehensive income attributable to Johnson Controls was due to a decrease in other comprehensive income

attributable to Johnson Controls ($819 million) resulting primarily from foreign currency translation adjustments and lower net

income attributable to Johnson Controls ($105 million). The year-over-year unfavorable foreign currency translation

adjustments were primarily driven by the weakening of the British pound, euro and Canadian dollar in the current year

compared to strengthening of the British pound, Canadian dollar and Mexican peso against the U.S. dollar in the prior year.

SEGMENT ANALYSIS

Management evaluates the performance of its business units based primarily on segment EBITA, which represents income from

continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset

amortization, net financing charges, restructuring and impairment costs, and net mark-to-market adjustments related to pension

and postretirement plans and restricted asbestos investments.

Effective October 1, 2021, the Company's marine businesses previously included in the Building Solutions Asia Pacific and

Global Products reportable segments are now part of the Building Solutions EMEA/LA reportable segment. Historical

information has been re-cast to present the comparative periods on a consistent basis. This change was not material to the

segment presentation. Refer to Note 19, “Segment Information,” of the notes to the consolidated financial statements for further

information.

Beginning on October 1, 2021, the Company began reporting certain retrofit projects in the Building Solutions EMEA/LA and

Building Solutions Asia Pacific segments as products and systems revenue on a prospective basis as they have evolved to be

more aligned with other install offerings.

Net Sales

for the Year Ended

September 30,

Segment EBITA

for the Year Ended

September 30,

(in millions) 2022 2021 Change 2022 2021 Change

Building Solutions North America $ 9,367 $ 8,685 8 % $ 1,122 $ 1,204 -7 %

Building Solutions EMEA/LA 3,845 3,884 -1 % 358 401 -11 %

Building Solutions Asia Pacific 2,714 2,616 4 % 332 344 -3 %

Global Products 9,373 8,483 10 % 1,594 1,436 11 %

$ 25,299 $ 23,668 7 % $ 3,406 $ 3,385 1 %

Net Sales:

• The increase in Building Solutions North America was due to higher volumes and prices ($672 million) and

incremental sales related to business acquisitions ($22 million), partially offset by the unfavorable impact of foreign

currency translation ($12 million). The sales increase was led by strong growth in the HVAC & Controls platform.

• The decrease in Building Solutions EMEA/LA was due to the unfavorable impact of foreign currency translation

($269 million) and business divestitures ($22 million), partially offset by higher volumes and prices ($214 million) and

incremental sales related to business acquisitions ($38 million). Excluding the impacts of foreign currency translation

and business acquisitions and divestitures, sales increased, driven by growth in the Fire & Security platforms and the

HVAC & Controls platform. By region, strong growth in Europe and single digit growth in Latin America was

partially offset by growth decline in the Middle East.

• The increase in Building Solutions Asia Pacific was due to the net impact of higher prices and lower volumes ($178

million) and incremental sales related to business acquisitions ($42 million), partially offset by the unfavorable impact

of foreign currency translation ($121 million) and business divestitures ($1 million). The increase in sales was led by

strong demand for HVAC & Controls and Industrial Refrigeration equipment. By region, the sales growth was driven

by sales in China.

• The increase in Global Products was due to higher volumes and prices ($975 million) and incremental sales related to

business acquisitions ($254 million), partially offset by the unfavorable impact of foreign currency translation ($339

million). Sales growth was driven by broad-based demand for Commercial and Residential HVAC and Fire & Security

products and strong price realization.

Segment EBITA:

• The decrease in Building Solutions North America was primarily due to lower absorption related to supply chain

disruptions and labor constraints and the unfavorable impact of foreign currency translations, partially offset by

productivity savings.

• The decrease in Building Solutions EMEA/LA was primarily due to supply chain disruptions, the suspension of

operations in Russia ($11 million), and the unfavorable impact of foreign currency translation ($29 million), partially

offset by favorable price/cost and productivity savings.

• The decrease in Building Solutions Asia Pacific was primarily due to supply chain disruptions, unfavorable mix and

the unfavorable impact of foreign currency translation ($23 million), partially offset by favorable price/cost and

productivity savings.

• The increase in Global Products was primarily due to favorable volumes and mix, productivity savings and a favorable

earn-out liability adjustment ($43 million), partially offset by the current year environmental remediation charge ($222

million), the unfavorable impact of foreign currency translation ($37 million) and lower equity income driven

primarily by certain partially-owned affiliates of the Johnson Controls - Hitachi joint venture ($13 million).

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

September 30,

(in millions) 2022 2021 Change

Current assets $ 11,685 $ 9,998

Current liabilities (11,239) (9,098)

446 900 -50 %

Less: Cash and cash equivalents (2,031) (1,336)

Add: Short-term debt 669 8

Add: Current portion of long-term debt 865 226

Less: Current assets held for sale (387) —

Add: Current liabilities held for sale 236 —

Working capital (as defined) $ (202) $ (202) — %

Accounts receivable - net $ 5,528 $ 5,613 -2 %

Inventories 2,510 2,057 22 %

Accounts payable 4,241 3,746 13 %

• The Company defines working capital as current assets less current liabilities, excluding cash and cash equivalents,

short-term debt, the current portion of long-term debt, and current assets and liabilities held for sale. Management

believes that this measure of working capital, which excludes financing-related items and businesses to be divested,

provides a more useful measurement of the Company’s operating performance.

• Working capital at September 30, 2022 remained consistent as compared to September 30, 2021 as an increase in

inventory due to supply chain disruptions was offset by an increase in accounts payable.

• The Company’s days sales in accounts receivable at September 30, 2022 were 51, a decrease from 58 at September 30,

2021, primarily due to collection efforts and increased use of receivables factoring programs. There has been no

significant adverse change in the level of overdue receivables or significant changes in revenue recognition methods.

• The Company’s inventory turns for the year ended September 30, 2022 were lower than the comparable period ended

September 30, 2021 primarily due to supply chain disruptions.

• Days in accounts payable at September 30, 2022 were 85 days, higher from 76 days for the comparable period ended

September 30, 2021, primarily due to timing of payments.

Cash Flows From Continuing Operations

Year Ended September 30,

(in millions) 2022 2021

Cash provided by operating activities $ 1,990 $ 2,551

Cash used by investing activities (693) (1,090)

Cash used by financing activities (516) (2,131)

• The decrease in cash provided by operating activities was primarily due to the unfavorable impacts driven by supply

chain disruptions. This resulted in increases in inventory and higher unbilled receivables due to shipment delays, which

were partially offset by the benefit of receivables factoring activity and an increase in accounts payable due to timing of

payments.

• The decrease in cash used by investing activities was primarily due to lower cash payments made for acquisitions.

• The increase in cash provided by financing activities was primarily due to higher short-term and long-term debt

borrowings.

Capitalization

September 30,

(in millions) 2022 2021 Change

Short-term debt $ 669 $ 8

Current portion of long-term debt 865 226

Long-term debt 7,426 7,506

Total debt 8,960 7,740 16 %

Less: Cash and cash equivalents 2,031 1,336

Total net debt 6,929 6,404 8 %

Shareholders’ equity attributable to Johnson Controls 16,268 17,562 -7 %

Total capitalization $ 23,197 $ 23,966 -3 %

Total net debt as a % of total capitalization 29.9% 26.7%

• Net debt and net debt as a percentage of total capitalization are non-GAAP financial measures. The Company believes

the percentage of total net debt to total 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.

• The Company's material cash requirements primarily consist of working capital requirements, repayments of long-term

debt and related interest, operating leases, dividends, capital expenditures, potential acquisitions and share repurchases.

• Refer to Note 10, "Debt and Financing Arrangements," of the notes to consolidated financial statements for additional

information on debt obligations and maturities. Interest payable on long-term debt is $253 million in the twelve months

following September 30, 2022 and $3.5 billion thereafter.

• Refer to Note 9, "Leases," of the notes to consolidated financial statements for additional information on lease

obligations and maturities.

• As of September 30, 2022, purchase obligations are $1.5 billion payable in the next twelve months and $284 million

payable thereafter. These purchase obligations represent commitments under enforceable and legally binding

agreements, and do not represent the entire anticipated purchases in the future.

• As of September 30, 2022, the Company expects to contribute $41 million and $193 million to the global pension and

postretirement plans in the next twelve months and thereafter, respectively.

• As of September 30, 2022, approximately $3.6 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 economic environment.

• The Company declared dividends of $1.39 per share in fiscal 2022 and intends to continue paying quarterly dividends in

fiscal 2023.

• The Company believes its capital resources and liquidity position at September 30, 2022 are adequate to meet projected

needs. The Company believes requirements for working capital, capital expenditures, dividends, stock repurchases,

minimum pension contributions, debt maturities and any potential acquisitions in fiscal 2023 will continue to be funded

from operations, supplemented by short- and long-term borrowings, if required. The Company currently manages its

short-term debt position in the U.S. and euro commercial paper markets and bank loan markets. In the event the

Company is unable to issue commercial paper, it would have the ability to draw on its $2.5 billion revolving credit

facility which expires in December 2024 or its $0.5 billion 364-day revolving credit facility which expires in December

2022. There were no draws on the revolving credit facilities as of September 30, 2022 and 2021. The Company

estimates that as of September 30, 2022, it could borrow up to $2.0 billion based on average borrowing levels during

fiscal 2022 on committed credit lines. 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. In addition, the Company held cash and cash equivalents

of $2.0 billion as of September 30, 2022. As such, the Company believes it has sufficient financial resources to fund

operations and meet its obligations for the foreseeable future.

• 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 September 30, 2022, 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 Stable

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.

• The Company entered into the following new or modified debt arrangements in fiscal 2022:

◦ In November 2021, the Company entered into a €200 million ($196 million as of September 30, 2022) bank

term loan which had an interest rate of EURIBOR plus 0.5% and was due and paid in October 2022.

◦ In March 2022, the Company entered into two bank term loans totaling €285 million ($280 million as of

September 30, 2022) which both have an interest rate of EURIBOR plus 0.5% and are due in March 2023.

◦ In September 2022, the Company and its wholly owned subsidiary, TFSCA issued €600 million ($589 million

as of September 30, 2022) of bonds with an interest rate of 3.0%, which are due in September 2028 and $400

million of bonds with an interest rate of 4.9%, which are due in December 2032.

◦ In September 2022, the Company repaid a ¥25 billion ($181 million) term loan and entered into a ¥30 billion

($208 million as of September 30, 2022) term loan which is due in September 2027. Both the original and the

new debt have an interest rate of LIBOR plus 0.4%.

• Financial covenants in the Company's revolving credit facilities requires 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 ASC

715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment.

As of September 30, 2022, the Company was in compliance with all financial covenants set forth in its credit

agreements and the indentures governing its outstanding 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 fiscal 2022, the

Company recorded income tax expense related to a change in its assertion over the outside basis differences of its

investment in certain subsidiaries as a result of the planned divestitures. 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 the 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.

Restructuring

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying

markets, the Company commits to restructuring plans as necessary. Restructuring plans generally result in charges for

workforce reductions, plant closures, asset impairments and other related costs which are reported as restructuring and

impairment costs in the Company’s consolidated statements of income. The Company expects the restructuring actions to

reduce cost of sales and SG&A due to reduced employee-related costs, depreciation and amortization expense.

In fiscal 2021, the Company announced plans to optimize its cost structure through broad-based SG&A actions focused on

simplification, standardization and centralization, with the intent to deliver annualized savings of $300 million by fiscal 2023.

Additionally, the Company announced cost of sales actions intended to drive $250 million in annual run rate savings by fiscal

2023. The one-time pre-tax costs associated with these actions were originally expected to be approximately $385 million

across all segments and at Corporate through fiscal 2023. The Company has incurred and exceeded these costs during fiscal

2022 due to certain restructuring actions and expenses planned for fiscal 2023 being accelerated into fiscal 2022, which also

resulted in incremental savings. During the year ended September 30, 2022, the Company recorded $182 million and in total,

the Company has recorded $424 million of costs resulting from the 2021 restructuring plan, which is the total amount expected

to be incurred for this restructuring plan. The Company has outstanding restructuring reserves of $82 million at September 30,

2022, all of which is expected to be paid in cash.

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 (i) $625 million aggregate principal amount of 1.750% Senior Notes due 2030 (the “2030 Notes”), (ii)

€500 million aggregate principal amount of 0.375% Senior Notes due 2027 (the “2027 Notes”), (iii) €500 million aggregate

principal amount of 1.000% Senior Notes due 2032 (the “2032 Notes”), (iv) $500 million aggregate principal amount of

2.000% Sustainability-Linked Senior Notes due 2031 (the “2031 Notes”), (v) €600 million aggregate principal amount of

3.000% Senior Notes due 2028 (the “2028 Notes”) and (vi) $400 million aggregate principal amount of 4.900% Senior Notes

due 2032 (the “2032 Notes 2” and together with the 2032 Notes, the 2030 Notes, the 2028 Notes and the 2027 Notes, the

“Notes”), each issued by Johnson Controls International plc ("Parent Company") and TFSCA, a corporate partnership limited

by shares (société en commandite par actions) incorporated and organized under the laws of the Grand Duchy of Luxembourg

(“Luxembourg”). Refer to Note 10, "Debt and Financing Arrangements," of the notes to consolidated financial statements for

additional information.

TFSCA is a wholly-owned consolidated subsidiary of the Company that is 99.996% owned directly by the Parent Company and

0.004% 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 Notes are the Parent Company’s and TFSCA’s unsecured, unsubordinated obligations. The Parent Company

is incorporated and organized under the laws of Ireland and 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 tables set forth summarized financial information of the Parent Company and TFSCA (collectively, the “Obligor

Group”) on a combined basis after intercompany transactions have been eliminated, including adjustments to remove the

receivable and payable balances, investment in, and equity in earnings from, those subsidiaries of the Parent Company other

than TFSCA (collectively, the "Non-Obligor Subsidiaries").

The following table presents summarized income statement information for the year ended September 30, 2022 (in millions):

September 30, 2022

Net sales $ —

Gross profit —

Loss from continuing operations (268)

Net loss (268)

Income attributable to noncontrolling interests —

Net loss attributable to the entity (268)

Excluded from the table above are the intercompany transactions between the Obligor Group and Non-Obligor Subsidiaries as

follows (in millions):

September 30, 2022

Net sales $ —

Gross profit

—

Income from continuing operations

Net income 92

Income attributable to noncontrolling interests

—

Net income attributable to the entity 92

The following table presents summarized balance sheet information (in millions):

September 30, 2022

Current assets $ 1,231

Noncurrent assets 243

Current liabilities 5,463

Noncurrent liabilities 7,176

Noncontrolling interests —

Excluded from the table above are the intercompany balances between the Obligor Group and Non-Obligor Subsidiaries as

follows (in millions):

September 30, 2022

Current assets $ 455

Noncurrent assets 2,952

Current liabilities 2,538

Noncurrent liabilities 6,228

Noncontrolling interests —

The same accounting policies as described in Note 1, "Summary of Significant Accounting Policies," of the notes to

consolidated financial statements are used by the Parent Company and each of its subsidiaries in connection with the

summarized financial information presented above.

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 following estimates are considered by

management to be the most critical to the understanding of the Company's consolidated financial statements as they require

significant judgments that could materially impact the Company’s results of operations, financial position and cash flows.

Revenue Recognition

The Company recognizes revenue from certain long-term contracts on an over time basis, with progress towards completion

measured using a cost-to-cost input method based on the relationship between actual costs incurred and total estimated costs at

completion. Total estimated costs at completion are based primarily on estimated purchase contract terms, historical

performance trends and other economic projections. Factors that may result in a change to these estimates include unforeseen

engineering problems, construction delays, cost inflation, the performance of subcontractors and major material suppliers, and

weather conditions. As a result, changes to the original estimates may be required during the life of the contract. Such estimates

are reviewed monthly and any adjustments to the measure of completion are recognized as adjustments to sales and gross profit

using the cumulative catch-up method. Estimated losses are recorded when identified.

For agreements with multiple performance obligations, the Company allocates the transaction price of the contract to each

performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. In

order to estimate relative selling price, market data and transfer price studies are utilized. If the standalone selling price is not

directly observable, the Company estimates the standalone selling price using an adjusted market assessment approach or

expected cost plus margin approach.

The Company considers the contractual consideration payable by the customer and assesses variable consideration that may

affect the total transaction price, including discounts, rebates, refunds, credits or other similar sources of variable consideration,

when determining the transaction price of each contract. The Company includes variable consideration in the estimated

transaction price when it is probable that significant reversal of revenue recognized would not occur when the uncertainty

associated with variable consideration is subsequently resolved. These estimates are based on the amount of consideration that

the Company expects to be entitled to.

Goodwill and Indefinite-Lived Intangible Assets

The Company reviews goodwill for impairment annually as of July 31 or more frequently if events or changes in circumstances

indicate the asset might be impaired. The Company performs impairment reviews for its reporting units, which have been

determined to be the Company’s reportable segments or one level below the reportable segments in certain instances, using a

fair value method based on management’s judgments and assumptions or third party valuations. The fair value of a reporting

unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at

the measurement date. In estimating the fair value, the Company uses the multiples of earnings approach based on the average

of published multiples of earnings of comparable entities with similar operations and economic characteristics that are applied

to the Company's average of historical and future financial results. In certain instances, the Company uses discounted cash flow

analyses or estimated sales price to further support the fair value estimates. The assumptions included in the impairment tests

require judgment, and changes to these inputs could impact the results of the calculations. The key assumptions used in the

impairment tests were management's projections of future cash flows, weighted-average cost of capital and long-term growth

rates. Although the Company's cash flow forecasts are based on assumptions that are considered reasonable by management and

consistent with the plans and estimates management is using to operate the underlying businesses, there are significant

judgments in determining the expected future cash flows attributable to a reporting unit.

During its fiscal 2022 annual impairment test, the Company determined that its Silent-Aire reporting unit's goodwill was

impaired by $75 million. No other reporting unit was determined to be at risk of failing the goodwill impairment test.

Indefinite-lived intangible assets are also subject to at least annual impairment testing. Indefinite-lived intangible assets

primarily consist of trademarks and trade names and are tested for impairment using a relief-from-royalty method. A

considerable amount of management judgment and assumptions are required in performing the impairment tests. The key

assumptions used in the impairment tests were long-term revenue growth projections, weighted-average cost of capital, the

royalty rate and general industry, market and macro-economic conditions.

The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in

determining fair value. While the Company believes the judgments and assumptions used in the goodwill and indefinite-lived

intangible impairment tests are reasonable, different assumptions or changes in general industry, market and macro-economic

conditions could change the estimated fair values and, therefore, future impairment charges could be required, which could be

material to the consolidated financial statements.

Refer to Note 8, "Goodwill and other Intangible Assets," of the notes to consolidated financial statements for information

regarding the results of goodwill and indefinite-lived intangible assets impairment testing performed in fiscal 2022 and 2021.

Pension Plans

The Company provides a range of benefits to its employees and retired employees, including pensions. Plan assets and

obligations are measured annually, or more frequently if there is a significant remeasurement event, based on the Company’s

measurement date utilizing various actuarial assumptions such as discount rates, assumed rates of return and compensation

increases as of that date. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the

assumptions based on current rates and trends when appropriate.

The Company utilizes a mark-to-market approach for recognizing pension expenses, including measuring the market related

value of plan assets at fair value and recognizing actuarial gains and losses in the fourth quarter of each fiscal year or at the date

of a remeasurement event. Refer to Note 16, "Retirement Plans," of the notes to consolidated financial statements for disclosure

of the Company's pension plans.

U.S. GAAP requires that companies recognize in the statement of financial position a liability for plans that are underfunded or

unfunded, or an asset for plans that are over funded. U.S. GAAP also requires that companies measure the benefit obligations

and fair value of plan assets that determine a benefit plan’s funded status as of the date of the employer’s fiscal year end.

The Company considers the expected benefit payments on a plan-by-plan basis when setting assumed discount rates. As a

result, the Company uses different discount rates for each plan depending on the plan jurisdiction, the demographics of

participants and the expected timing of benefit payments. For the U.S. pension plans, the Company uses a discount rate

provided by an independent third party calculated based on an appropriate mix of high quality bonds. For the non-U.S. pension

plans, the Company consistently uses the relevant country specific benchmark indices for determining the various discount

rates. The Company’s weighted average discount rate on U.S. pension plans was 5.08% and 2.50% at September 30, 2022 and

2021, respectively. The Company’s weighted average discount rate on non-U.S. pension plans was 4.36% and 1.80% at

September 30, 2022 and 2021, respectively.

In estimating the expected return on plan assets, the Company considers the historical returns on plan assets, adjusted for

forward-looking considerations, inflation assumptions and the impact of the active management of the plans’ invested assets.

Reflecting the relatively long-term nature of the plans’ obligations, approximately 19% of the plans’ assets are invested in

equity securities and 66% in fixed income securities, with the remainder primarily invested in alternative investments. For the

years ended September 30, 2022 and 2021, the Company’s expected long-term return on U.S. pension plan assets used to

determine net periodic benefit cost was 7.00% and 6.50%, respectively. The actual rate of return on U.S. pension plans was

below 7.00% in fiscal 2022 and above 6.50% in fiscal 2021. For the years ended September 30, 2022 and 2021, the Company’s

weighted average expected long-term return on non-U.S. pension plan assets was 3.70% and 4.90%, respectively. The actual

rate of return on non-U.S. pension plans was below 3.70% in fiscal 2022 and above 4.90% in fiscal 2021.

Beginning in fiscal 2023, the Company believes the long-term rate of return will approximate 8.25% for U.S. pension plans and

3.70% for non-U.S. pension plans. Any differences between actual investment results and the expected long-term asset returns

will be reflected in net periodic benefit costs in the fourth quarter of each fiscal year or at the date of a significant

remeasurement event. If the Company’s actual returns on plan assets are less than the Company’s expectations, additional

contributions may be required.

In fiscal 2022, total employer contributions to the defined benefit pension plans were $93 million, none of which were

voluntary contributions made by the Company. The Company expects to contribute approximately $38 million in cash to its

defined benefit pension plans in fiscal 2023.

Based on information provided by its independent actuaries and other relevant sources, the Company believes that the

assumptions used are reasonable; however, changes in these assumptions could impact the Company’s financial position,

results of operations or cash flows.

Mark-to-market adjustments represent actuarial gains (losses) arising from changes in actuarial assumptions and actuarial

experiences different from those assumed that are used to value the plan assets and the benefit obligations. The primary factors

contributing to actuarial gains (losses) are changes in the discount rate used to value benefit obligations and the difference

between expected and actual returns on plan assets. Mark-to-market adjustments are highly volatile and are difficult to forecast.

Refer to Note 16, "Retirement Plans," of the notes to consolidated financial statements for further details.

The following chart illustrates the estimated increases (decreases) in projected benefit obligation and future ongoing pension

expense, which excludes any potential mark-to-market adjustments, assuming an increase of 25 basis points in the key

assumptions for the Company's pension plans (in millions):

Pension Benefits

U.S. Plans Non-U.S. Plans

Change in Projected

Benefit Obligation

Change in Ongoing

Pension Expense

Change in Projected

Benefit Obligation

Change in Ongoing

Pension Expense

Discount rate $ (31) $ 3 $ (39) $ 1

Expected return on plan assets — (4) — (3)

Loss Contingencies

Accruals are recorded for various contingencies including legal proceedings, environmental matters, self-insurance and other

claims that arise in the normal course of business. The accruals are based on judgment, the probability of losses and, where

applicable, the consideration of opinions of internal and/or external legal counsel and actuarially determined estimates.

Additionally, the Company records receivables from third party insurers when recovery has been determined to be probable.

The Company is subject to laws and regulations relating to protecting the environment. It is difficult to estimate the Company’s

ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the

complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the

investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various

choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite

lengthy periods over which eventual remediation may occur. It is possible that technological, regulatory or enforcement

developments, the results of additional environmental studies or other factors could change the Company's expectations with

respect to future charges and cash outlays, and such changes could be material to the Company's future results of operations,

financial condition or cash flows. Nevertheless, the Company does not currently believe that any claims, penalties or costs in

addition to the amounts accrued will have a material adverse effect on the Company’s financial position, results of operations or

cash flows. The Company provides for expenses associated with environmental remediation obligations when such amounts are

probable and can be reasonably estimated. During fiscal 2022, the Company increased its accrual for environmental

remediation liabilities by $228 million. Refer to Note 21, "Commitments and Contingencies," of the notes to consolidated

financial statements.

The Company records liabilities for its workers' compensation, product, general and auto liabilities. The determination of these

liabilities and related expenses is dependent on claims experience. For most of these liabilities, claims incurred but not yet

reported are estimated by utilizing actuarial valuations based upon historical claims experience. The Company records

receivables from third party insurers when recovery has been determined to be probable. The Company maintains captive

insurance companies to manage its insurable liabilities.

Asbestos-Related Contingencies and Insurance Receivables

The Company and certain of its subsidiaries along with numerous other companies are named as defendants in personal injury

lawsuits based on alleged exposure to asbestos-containing materials. The Company's estimate of the liability and corresponding

insurance recovery for pending and future claims and defense costs is based on the Company's historical claim experience, and

estimates of the number and resolution cost of potential future claims that may be filed and is discounted to present value from

2068 (which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-

related claims will be filed against Company affiliates). Estimated asbestos-related defense costs are included in the asbestos

liability. The Company's legal strategy for resolving claims also impacts these estimates. The Company considers various trends

and developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience

is used to estimate and value claims reasonably projected to be made through 2068. Annually, the Company assesses the

sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding

claims filed, settled and dismissed, and amounts paid in settlements. In addition to claims and settlement experience, the

Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the

Company's defense strategy. The Company also evaluates the recoverability of its insurance receivable on an annual basis. The

Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future

claims and defense costs or insurance receivable is warranted.

In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance

recoveries that are probable. The Company's estimate of asbestos-related insurance recoveries represents estimated amounts due

to the Company for previously paid and settled claims and the probable reimbursements relating to its estimated liability for

pending and future claims discounted to present value. In determining the amount of insurance recoverable, the Company

considers available insurance, allocation methodologies, solvency and creditworthiness of the insurers. Refer to Note 21,

"Commitments and Contingencies," of the notes to consolidated financial statements for a discussion on management's

judgments applied in the recognition and measurement of asbestos-related assets and liabilities.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial

statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss

carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in

the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation

allowance that primarily represents non-U.S. operating and other loss carryforwards for which realization is uncertain.

Management judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities,

and the valuation allowance recorded against the Company’s net deferred tax assets.

The Company reviews the realizability of its deferred tax assets and related valuation allowances on a quarterly basis, or

whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation

allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax

asset are considered, along with any other positive or negative evidence. Since future financial results may differ from previous

estimates, periodic adjustments to the Company’s valuation allowances may be necessary. At September 30, 2022, the

Company had a valuation allowance of $6.0 billion for continuing operations, of which $5.5 billion relates to net operating loss

carryforwards primarily in France, Germany, Ireland, Luxembourg, Mexico, Spain, United Kingdom and the U.S. for which

sustainable taxable income has not been demonstrated; and $0.5 billion for other deferred tax assets.

The Company’s federal income tax returns and certain non-U.S. income tax returns for various fiscal years remain under

various stages of audit by the IRS and respective non-U.S. tax authorities. Although the outcome of tax audits is always

uncertain, management believes that it has appropriate support for the positions taken on its tax returns and that its annual tax

provisions included amounts sufficient to pay assessments, if any, which may be proposed by the taxing authorities. At

September 30, 2022, the Company had recorded a liability of $2.5 billion for its best estimate of the probable loss on certain of

its tax positions, the majority of which is included in other noncurrent liabilities in the consolidated statements of financial

position. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may

differ materially from the amounts accrued for each year.

The Company does not generally provide additional U.S. or non-U.S. income taxes on outside basis differences of consolidated

subsidiaries included in shareholders’ equity attributable to Johnson Controls International plc, except in limited circumstances

including anticipated taxation on planned divestitures. The reduction of the outside basis differences via the sale or liquidation

of these subsidiaries and/or distributions could create taxable income. The Company’s intent is to reduce the outside basis

differences only when it would be tax efficient. Refer to "Capitalization" within the "Liquidity and Capital Resources" section

for discussion of U.S. and non-U.S. cash projections.

Refer to Note 18, "Income Taxes," of the notes to consolidated financial statements for the Company's income tax disclosures.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to the "New Accounting Pronouncements" section within Note 1, "Summary of Significant Accounting Policies," of the

notes to consolidated financial statements.

RISK MANAGEMENT

The Company selectively uses derivative instruments to reduce market risk associated with changes in foreign currency,

commodities, stock-based compensation and interest rates. All hedging transactions are authorized and executed pursuant to

clearly defined policies and procedures, which strictly prohibit the use of financial instruments for speculative purposes. At the

inception of the hedge, the Company assesses the effectiveness of the hedge instrument and designates the hedge instrument as

either (1) a hedge of a recognized asset or liability or of a recognized firm commitment (a fair value hedge), (2) a hedge of a

forecasted transaction or of the variability of cash flows to be received or paid related to an unrecognized asset or liability (a

cash flow hedge) or (3) a hedge of a net investment in a non-U.S. operation (a net investment hedge). The Company performs

hedge effectiveness testing on an ongoing basis depending on the type of hedging instrument used. All other derivatives not

designated as hedging instruments under ASC 815, "Derivatives and Hedging," are revalued in the consolidated statements of

income.

For all foreign currency derivative instruments designated as cash flow hedges, retrospective effectiveness is tested on a

monthly basis using a cumulative dollar offset test. The fair value of the hedged exposures and the fair value of the hedge

instruments are revalued, and the ratio of the cumulative sum of the periodic changes in the value of the hedge instruments to

the cumulative sum of the periodic changes in the value of the hedge is calculated. The hedge is deemed as highly effective if

the ratio is between 80% and 125%. For commodity derivative contracts designated as cash flow hedges, effectiveness is tested

using a regression calculation. Ineffectiveness is minimal as the Company aligns most of the critical terms of its derivatives

with the supply contracts.

For net investment hedges, the Company assesses its net investment positions in the non-U.S. operations and compares it with

the outstanding net investment hedges on a quarterly basis. The hedge is deemed effective if the aggregate outstanding principal

of the hedge instruments designated as the net investment hedge in a non-U.S. operation does not exceed the Company’s net

investment positions in the respective non-U.S. operation.

Equity swaps and any other derivative instruments not designated as hedging instruments under ASC 815 require no assessment

of effectiveness.

A discussion of the Company’s accounting policies for derivative financial instruments is included in Note 1, "Summary of

Significant Accounting Policies," of the notes to consolidated financial statements, and further disclosure relating to derivatives

and hedging activities is included in Note 11, "Derivative Instruments and Hedging Activities," and Note 12, "Fair Value

Measurements," of the notes to consolidated financial statements.

Foreign Exchange

The Company has manufacturing, sales and distribution facilities around the world and thus makes investments and enters into

transactions denominated in various foreign currencies. In order to maintain strict control and achieve the benefits of the

Company’s global diversification, foreign exchange exposures for each currency are netted internally so that only its net foreign

exchange exposures are, as appropriate, hedged with financial instruments.

The Company hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. The

Company primarily enters into foreign currency exchange contracts to reduce the earnings and cash flow impact of the variation

of non-functional currency denominated receivables and payables. Gains and losses resulting from hedging instruments offset

the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward

exchange contracts generally coincide with the settlement dates of the related transactions. Realized and unrealized gains and

losses on these contracts are recognized in the same period as gains and losses on the hedged items. The Company also

selectively hedges anticipated transactions that are subject to foreign exchange exposure, primarily with foreign currency

exchange contracts, which are designated as cash flow hedges in accordance with ASC 815.

The Company has entered into foreign currency denominated debt obligations to selectively hedge portions of its net

investment in non-U.S. subsidiaries. The currency effects of debt obligations are reflected in the accumulated other

comprehensive income ("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.

At September 30, 2022 and 2021, the Company estimates that an unfavorable 10% change in the exchange rates would have

decreased net unrealized gains by approximately $133 million and $213 million, respectively.

Interest Rates

Substantially all of the Company's outstanding debt has fixed interest rates, and, therefore, any fluctuation in market interest

rates is not expected to have a material effect on the Company's results of operations. A 20 basis point increase/decrease in the

average interest rate on the Company's variable rate debt would have an immaterial impact on interest expense.

Commodities

The Company uses commodity hedge contracts in the financial derivatives market 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. As a cash flow hedge, gains and losses resulting from the hedging instruments offset the gains or losses on

purchases of the underlying commodities that will be used in the business. The maturities of the commodity hedge contracts

coincide with the expected purchase of the commodities.

ENVIRONMENTAL, HEALTH AND SAFETY AND OTHER MATTERS

The Company’s global operations are governed by environmental laws and worker safety laws. Under various circumstances,

these laws impose civil and criminal penalties and fines, as well as injunctive and remedial relief, for noncompliance and

require remediation at sites where Company-related substances have been released into the environment.

The Company has expended substantial resources globally, both financial and managerial, to comply with applicable

environmental laws and worker safety laws and to protect the environment and workers. The Company believes it is in

substantial compliance with such laws and maintains procedures designed to foster and ensure compliance. However, the

Company has been, and in the future may become, the subject of formal or informal enforcement actions or proceedings

regarding noncompliance with such laws or the remediation of Company-related substances released into the environment.

Such matters typically are resolved with regulatory authorities through commitments to compliance, abatement or remediation

programs and in some cases payment of penalties. Historically, neither such commitments nor penalties imposed on the

Company have been material.

Refer to Note 21, "Commitments and Contingencies," of the notes to consolidated financial statements for additional

information.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Risk Management" included in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of

Operations.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) ............................................... 47

Consolidated Statements of Income for the years ended September 30, 2022, 2021 and 2020 ....................... 50

Consolidated Statements of Comprehensive Income for the years ended September 30, 2022, 2021 and

2020 ..................................................................................................................................................................

Consolidated Statements of Financial Position as of September 30, 2022 and 2021 ...................................... 52

Consolidated Statements of Cash Flows for the years ended September 30, 2022, 2021 and 2020 ................ 53

Consolidated Statements of Shareholders' Equity for the years ended September 30, 2022, 2021 and 2020 . 54

Notes to Consolidated Financial Statements .................................................................................................... 55

1. Summary of Significant Accounting Policies ......................................................................................... 55

2. Acquisitions and Divestitures .................................................................................................................. 64

3. Assets and Liabilities Held for Sale & Discontinued Operations ........................................................... 65

4. Revenue Recognition ...............................................................................................................................

5. Accounts Receivable ............................................................................................................................... 68

6. Inventories ............................................................................................................................................... 69

7. Property, Plant and Equipment ................................................................................................................ 69

8. Goodwill and Other Intangible Assets .................................................................................................... 70

9. Leases ...................................................................................................................................................... 72

10. Debt and Financing Arrangements ........................................................................................................ 73

11. Derivative Instruments and Hedging Activities .................................................................................... 75

12. Fair Value Measurements ...................................................................................................................... 79

13. Stock-Based Compensation ................................................................................................................... 81

14. Earnings Per Share ................................................................................................................................ 83

15. Equity .................................................................................................................................................... 83

16. Retirement Plans ....................................................................................................................................

17. Significant Restructuring and Impairment Costs ................................................................................... 92

18. Income Taxes ......................................................................................................................................... 93

19. Segment Information ............................................................................................................................. 97

20. Guarantees ............................................................................................................................................. 100

21. Commitments and Contingencies .......................................................................................................... 101

22. Subsequent Events ................................................................................................................................. 108

Schedule II - Valuation and Qualifying Accounts for the years ended September 30, 2022, 2021 and 2020 . 109

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Johnson Controls International plc

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of Johnson Controls International plc and its

subsidiaries (the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of income, of

comprehensive income, of shareholders' equity, and of cash flows for each of the three years in the period ended September 30,

2022, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as

the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of

September 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial

position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the

three years in the period ended September 30, 2022 in conformity with accounting principles generally accepted in the United

States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over

financial reporting as of September 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013)

issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for

leases as of October 1, 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal

control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included

in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to

express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial

reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the

audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,

whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material

respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement

of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated

financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal

control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the

risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based

on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the

circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and

expenditures of the company are being made only in accordance with authorizations of management and directors of the

company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or

disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial

statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or

disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or

complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate

opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Positions

As described in Note 18 to the consolidated financial statements, the Company has recorded liabilities for uncertain tax

positions totaling $2,537 million, primarily as a non-current liability, as of September 30, 2022. The Company is subject to

income taxes in the U.S. and numerous non-U.S. jurisdictions. Judgment is required by management in determining the

Company’s worldwide provision for income taxes and recording the related income tax assets and liabilities. In the ordinary

course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is

uncertain. As disclosed by management, a liability for the best estimate of the probable loss on certain of the Company's tax

positions has been recorded by management. The Company’s income tax filings for various fiscal years remain under various

stages of audit by the IRS and respective non-U.S. tax authorities. The amounts ultimately paid, if any, upon resolution of the

issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical

audit matter are (i) the significant judgment by management in identifying and recording the estimated probable loss for each

uncertain tax position; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the

identification and accurate measurement of uncertain tax positions, (iii) the evaluation of audit evidence available to support the

tax liabilities for uncertain tax positions is complex and resulted in significant auditor judgment as the nature of the evidence is

often highly subjective, and (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall

opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to

management’s assessment of uncertain tax positions, including controls over the identification and estimate of probable loss for

uncertain tax positions. These procedures also included, among others (i) for a sample of uncertain tax positions by jurisdiction,

testing the information used in the calculation of the estimate of probable loss and testing the calculation of the estimate of

probable loss; (ii) testing the completeness of management’s assessment of the identification of uncertain tax positions; and (iii)

evaluating the status and results of income tax audits with the relevant tax authorities, as applicable. Professionals with

specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the Company’s

uncertain tax positions, including evaluating the reasonableness of management’s assessment of whether tax positions are more-

likely-than-not of being sustained and the amount of potential benefit to be realized, and the application of relevant tax laws.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin

November 15, 2022

We have served as the Company’s auditor since 1957.

Johnson Controls International plc

Consolidated Statements of Income

Year Ended September 30,

(in millions, except per share data) 2022 2021 2020

Net sales

Products and systems $ 19,274 $ 17,202 $ 16,253

Services 6,025 6,466 6,064

25,299 23,668 22,317

Cost of sales

Products and systems 13,533 11,848 11,401

Services 3,423 3,761 3,505

16,956 15,609 14,906

Gross profit 8,343 8,059 7,411

Selling, general and administrative expenses (5,945) (5,258) (5,665)

Restructuring and impairment costs (721) (242) (783)

Net financing charges (213) (206) (231)

Equity income 246 261 171

Income from continuing operations before income taxes 1,710 2,614 903

Income tax provision (benefit) (13) 868 108

Income from continuing operations 1,723 1,746 795

Income from discontinued operations, net of tax (Note 3) — 124 —

Net income 1,723 1,870 795

Income from continuing operations attributable to noncontrolling interests 191 233 164

Net income attributable to Johnson Controls $ 1,532 $ 1,637 $ 631

Amounts attributable to Johnson Controls ordinary shareholders:

Income from continuing operations $ 1,532 $ 1,513 $ 631

Income from discontinued operations — 124 —

Net income $ 1,532 $ 1,637 $ 631

Basic earnings per share attributable to Johnson Controls

Continuing operations $ 2.20 $ 2.11 $ 0.84

Discontinued operations — 0.17 —

Net income $ 2.20 $ 2.28 $ 0.84

Diluted earnings per share attributable to Johnson Controls

Continuing operations $ 2.19 $ 2.10 $ 0.84

Discontinued operations — 0.17 —

Net income $ 2.19 $ 2.27 $ 0.84

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

Johnson Controls International plc

Consolidated Statements of Comprehensive Income

Year Ended September 30,

(in millions) 2022 2021 2020

Net income $ 1,723 $ 1,870 $ 795

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (603) 376 25

Realized and unrealized gains (losses) on derivatives 7 (18) 8

Pension and postretirement plans (3) 4 8

Other comprehensive income (loss) (599) 362 41

Total comprehensive income 1,124 2,232 836

Comprehensive income attributable to noncontrolling interests:

Net income 191 233 164

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (123) 19 18

Realized and unrealized gains on derivatives 1 1 4

Other comprehensive income (loss) (122) 20 22

Comprehensive income attributable to noncontrolling interests 69 253 186

Comprehensive income attributable to Johnson Controls $ 1,055 $ 1,979 $ 650

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

Johnson Controls International plc

Consolidated Statements of Financial Position

September 30,

(in millions, except par value and share data) 2022 2021

Assets

Cash and cash equivalents

$ 2,031 $ 1,336

Accounts receivable - net

5,528 5,613

Inventories

2,510 2,057

Current assets held for sale

387 —

Other current assets

1,229 992

Current assets

11,685 9,998

Property, plant and equipment - net

3,042 3,228

Goodwill

17,328 18,335

Other intangible assets - net

4,641 5,549

Investments in partially-owned affiliates

963 1,066

Noncurrent assets held for sale

751 156

Other noncurrent assets

3,748 3,558

Total assets

$ 42,158 $ 41,890

Liabilities and Equity

Short-term debt

$ 669 $ 8

Current portion of long-term debt

865 226

Accounts payable

4,241 3,746

Accrued compensation and benefits

978 1,008

Deferred revenue

1,768 1,637

Current liabilities held for sale

236 —

Other current liabilities

2,482 2,473

Current liabilities

11,239 9,098

Long-term debt

7,426 7,506

Pension and postretirement benefit obligations

358 628

Noncurrent liabilities held for sale

62 —

Other noncurrent liabilities

5,671 5,905

Noncurrent liabilities

13,517 14,039

Commitments and contingencies (Note 21)

Ordinary shares (par value $0.01; 2.0 billion shares authorized;

shares issued: 2022 - 717,726,243; 2021 - 737,090,363)

7 7

Ordinary A shares (par value €1.00; 40,000 shares authorized, none outstanding as of

September 30, 2022 and 2021)

— —

Preferred shares (par value $0.01; 200,000,000 shares authorized, none outstanding as of

September 30, 2022 and 2021)

— —

Ordinary shares held in treasury, at cost (shares held: 2022 - 29,029,475;

2021 - 28,356,889)

(1,203) (1,152)

Capital in excess of par value

17,224 17,116

Retained earnings

1,151 2,025

Accumulated other comprehensive loss

(911) (434)

Shareholders’ equity attributable to Johnson Controls

16,268 17,562

Noncontrolling interests

1,134 1,191

Total equity

17,402 18,753

Total liabilities and equity

$ 42,158 $ 41,890

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

Johnson Controls International plc

Consolidated Statements of Cash Flows

Year Ended September 30,

(in millions) 2022 2021 2020

Operating Activities of Continuing Operations

Net income from continuing operations attributable to Johnson Controls

$ 1,532 $ 1,513 $ 631

Income from continuing operations attributable to noncontrolling interests

191 233 164

Net income from continuing operations

1,723 1,746 795

Adjustments to reconcile net income from continuing operations to cash provided by operating

activities:

Depreciation and amortization

830 845 822

Pension and postretirement benefit expense (income)

(216) (551) 118

Pension and postretirement contributions

(96) (68) (61)

Equity in earnings of partially-owned affiliates, net of dividends received

30 (117) (36)

Deferred income taxes

(141) 36 (537)

Non-cash restructuring and impairment charges

555 98 582

Equity-based compensation expense

102 76 74

Other - net

(58) (85) (90)

Changes in assets and liabilities, excluding acquisitions and divestitures:

Accounts receivable

(427) (143) 534

Inventories

(773) (219) 45

Other assets

(362) (164) (52)

Restructuring reserves

(7) (44) (29)

Accounts payable and accrued liabilities

1,270 813 (717)

Accrued income taxes

(440) 328 1,031

Cash provided by operating activities from continuing operations

1,990 2,551 2,479

Investing Activities of Continuing Operations

Capital expenditures

(592) (552) (443)

Sale of property, plant and equipment

127 124 127

Acquisition of businesses, net of cash acquired

(269) (725) (77)

Business divestitures, net of cash divested

16 19 135

Other - net

25 44 —

Cash used by investing activities from continuing operations

(693) (1,090) (258)

Financing Activities of Continuing Operations

Increase (decrease) in short-term debt - net

923 (17) (33)

Increase in long-term debt

1,227 496 1,804

Repayment of long-term debt

(184) (507) (1,386)

Stock repurchases and retirements

(1,441) (1,307) (2,204)

Payment of cash dividends

(916) (762) (790)

Proceeds from the exercise of stock options

17 178 75

Dividends paid to noncontrolling interests

(121) (142) (114)

Employee equity-based compensation withholding taxes

(51) (33) (34)

Cash paid to acquire a noncontrolling interest

(1) (14) (132)

Other - net

31 (23) (10)

Cash used by financing activities from continuing operations

(516) (2,131) (2,824)

Discontinued Operations

Cash used by operating activities

(4) (64) (260)

Cash used by financing activities

— — (113)

Cash used by discontinued operations

(4) (64) (373)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(53) 116 115

Increase (decrease) in cash, cash equivalents and restricted cash

724 (618) (861)

Cash, cash equivalents and restricted cash at beginning of period

1,342 1,960 2,821

Cash, cash equivalents and restricted cash at end of period

2,066 1,342 1,960

Less: Restricted cash

35 6 9

Cash and cash equivalents at end of period

$ 2,031 $ 1,336 $ 1,951

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

Johnson Controls International plc

Consolidated Statements of Shareholders' Equity

Year Ended September 30,

(in millions) 2022 2021 2020

Shareholders' Equity Attributable to Johnson Controls

Beginning Balance $ 17,562 $ 17,447 $ 19,766

Ordinary Shares

Beginning balance 7 8 8

Repurchases and retirements of ordinary shares — (1) —

Ending balance 7 7 8

Ordinary Shares Held in Treasury, at Cost

Beginning balance (1,152) (1,119) (1,086)

Employee equity-based compensation withholding taxes (51) (33) (33)

Ending balance (1,203) (1,152) (1,119)

Capital in Excess of Par Value

Beginning balance 17,116 16,865 16,812

Change in noncontrolling interest share — (8) (83)

Share-based compensation expense 88 76 61

Other, including options exercised 20 183 75

Ending balance 17,224 17,116 16,865

Retained Earnings

Beginning balance 2,025 2,469 4,827

Net income attributable to Johnson Controls 1,532 1,637 631

Cash dividends declared (965) (771) (780)

Repurchases and retirements of ordinary shares (1,441) (1,306) (2,204)

Adoption of ASC 842 — — (5)

Adoption of ASU 2016-13 — (4) —

Ending balance 1,151 2,025 2,469

Accumulated Other Comprehensive Income (Loss)

Beginning balance (434) (776) (795)

Other comprehensive income (loss) (477) 342 19

Ending balance (911) (434) (776)

Ending Balance 16,268 17,562 17,447

Shareholders' Equity Attributable to Noncontrolling Interests

Beginning Balance 1,191 1,086 1,063

Comprehensive income attributable to noncontrolling interests 69 253 186

Dividends attributable to noncontrolling interests (131) (142) (114)

Change in noncontrolling interest share 5 (6) (49)

Ending Balance 1,134 1,191 1,086

Total Shareholders' Equity $ 17,402 $ 18,753 $ 18,533

Cash Dividends Declared per Ordinary Share $ 1.39 $ 1.07 $ 1.04

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

Johnson Controls International plc

Notes to Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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," "Johnson Controls" or "JCI plc").

The Company's fiscal year ends on September 30. Unless otherwise stated, references to years in this report relate to fiscal years

rather than calendar years.

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 and repair 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 accounting principles generally accepted in the United States of America

("U.S. GAAP"). All significant intercompany transactions have been eliminated. The results of companies acquired or disposed

of during the year 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 VIEs in its continuing operations for the presented reporting periods.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results

could differ from those estimates.

Fair Value of Financial Instruments

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.

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

carrying values.

Assets and Liabilities Held for Sale

Assets and liabilities (disposal groups) to be sold are classified as held for sale in the period in which all of the following

criteria are met:

• Management, having the authority to approve the action, commits to a plan to sell the disposal group;

• The disposal group is available for immediate sale in its present condition subject only to terms that are usual and

customary for sales of such disposal groups;

• An active program to locate a buyer and other actions required to complete the plan to sell the disposal group have

been initiated;

• Sale of the disposal group is probable and transfer of the disposal group is expected to qualify for recognition as a

completed sale within one year, except if events or circumstances beyond the Company's control extend the period of

time required to sell the disposal group beyond one year;

• The disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

and

• Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or

that the plan will be withdrawn.

The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value

less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are

met. Conversely, gains are not recognized on the sale of a disposal group until the date of sale. The Company assesses the fair

value of a disposal group, less any costs to sell, each reporting period it remains classified as held for sale and reports any

subsequent changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not

exceed the carrying value of the disposal group at the time it was initially classified as held for sale.

Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and

liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale in the consolidated

statements of financial position.

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with an original maturity of three months or less when purchased.

Restricted Cash

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

Restricted cash is recorded within other current assets in the consolidated statements of financial position and totaled

$35 million and $6 million at September 30, 2022 and 2021, respectively.

Receivables

Receivables consist of amounts billed and currently due from customers and unbilled costs and accrued profits related to

revenues on long-term contracts that have been recognized for accounting purposes but not yet billed to customers. The

Company extends credit to customers in the normal course of business and maintains an allowance for expected credit losses

resulting from the inability or unwillingness of customers to make required payments. The allowance for expected credit losses

is based on historical experience, existing economic conditions, reasonable and supportable forecasts, and any specific customer

collection issues the Company has identified. The Company evaluates the reasonableness of the allowance for expected credit

losses on a quarterly basis.

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.

Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method. Finished goods

and work-in-process inventories include material, labor and manufacturing overhead costs.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the respective

assets using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. The

estimated useful lives generally range from 3 to 40 years for buildings and improvements, up to 15 years for subscriber systems,

and from 3 to 15 years for machinery and equipment. Interest on borrowings is capitalized during the active construction period

of major capital projects, added to the cost of the underlying assets and amortized over the useful lives of the assets.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. Goodwill is

reviewed for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the

asset might be impaired. The Company performs impairment reviews for its reporting units, which have been determined to be

the Company’s reportable segments or one level below the reportable segments in certain instances, using a fair value method

based on management’s judgments and assumptions or third party valuations. The fair value of a reporting unit refers to the

price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement

date. In estimating the fair value, the Company uses the multiples of earnings approach based on the average of published

multiples of earnings of comparable entities with similar operations and economic characteristics and applies the multiples to

the Company's average of historical and future financial results for each reporting unit. In certain instances, the Company uses

discounted cash flow analyses or estimated sales price to further support the fair value estimates. The inputs utilized in the

analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The

estimated fair value is then compared to the carrying amount of the reporting unit, including recorded goodwill. The Company

is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value.

Indefinite-lived intangible assets are also subject to at least annual impairment testing. Indefinite-lived intangible assets

primarily consist of trademarks and trade names and are tested for impairment using a relief-from-royalty method. A

considerable amount of management judgment and assumptions are required in performing the impairment tests.

Leases

Lessee arrangements

The Company leases certain administrative, production and other facilities, fleet vehicles, information technology equipment

and other equipment under arrangements that are accounted for as operating leases. The Company determines whether an

arrangement contains a lease at contract inception based on whether the arrangement involves the use of a physically distinct

identified asset and whether the Company has the right to obtain substantially all of the economic benefits from the use of the

asset throughout the period as well as the right to direct the use of the asset.

The Company adopted ASU 2016-02, "Leases (Topic 842)" and the related amendments using a modified-retrospective

approach as of October 1, 2019.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its

obligation to make lease payments arising from the lease. Right-of-use assets and the corresponding lease liabilities are

recognized at commencement date based on the present value of lease payments for all leases with terms longer than twelve

months. The majority of the Company's leases do not provide an implicit interest rate. To determine the present value of lease

payments, the Company uses its incremental borrowing rate based on information available on the lease commencement date or

the implicit rate if it is readily determinable. The Company determines its incremental borrowing rate based on a comparable

market yield curve consistent with its credit rating, term of the lease and relative economic environment. The Company has

elected to combine lease and nonlease components for its leases.

Most leases contain options to renew or terminate the lease. Right-of-use assets and lease liabilities reflect only the options

which the Company is reasonably certain to exercise.

The Company has certain real estate leases that contain variable lease payments which are based on changes in the Consumer

Price Index (CPI). Additionally, the Company’s leases generally require it to pay for fuel, maintenance, repair, insurance and

taxes. These payments are not included in the right-of-use asset or lease liability and are expensed as incurred.

Lease expense is recognized on a straight-line basis over the lease term.

Lessor arrangements

The Company has monitoring services and maintenance agreements within its security business that include subscriber system

assets for which the Company retains ownership. These agreements contain both lease and nonlease components. The Company

has elected to combine lease and nonlease components for these arrangements where the timing and pattern of transfer of the

lease and nonlease components are the same and the lease component would be classified as an operating lease if accounted for

separately. The Company has concluded that in these arrangements the nonlease components are the predominant characteristic,

and as a result, the combined component is accounted for under the revenue guidance.

Impairment of Long-Lived Assets

Long-lived assets, including right-of-use assets under operating leases, other tangible assets and intangible assets with definitive

lives, are reviewed for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may

not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15,

"Impairment or Disposal of Long-Lived Assets," ASC 350-30, "General Intangibles Other than Goodwill" and ASC 985-20,

"Costs of Software to be Sold, Leased, or Marketed."

Assets and liabilities are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows

of other assets and liabilities and evaluates the asset group against the sum of the undiscounted future cash flows. If the

undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is

measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow

analysis or appraisals. Intangible assets acquired in a business combination that are used in research and development activities

are considered indefinite-lived until the completion or abandonment of the associated research and development efforts. During

the period that those assets are considered indefinite lived, they are not amortized but are tested for impairment annually and

more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If the

carrying amount of an intangible asset exceeds its fair value, the Company recognizes an impairment loss in an amount equal to

that excess. Unamortized capitalized costs of a computer software product are compared to the net realizable value of the

product. The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value

of that asset is written off.

Revenue Recognition

Revenue from certain long-term contracts to design, manufacture and install building products and systems as well as

unscheduled repair or replacement services is recognized on an over time basis, with progress towards completion measured

using a cost-to-cost input method based on the relationship between actual costs incurred and total estimated costs at

completion. The cost-to-cost input method is used as it best depicts the transfer of control to the customer that occurs as the

Company incurs costs. Changes to the original estimates may be required during the life of the contract and such estimates are

reviewed monthly. If contract modifications result in additional goods or services that are distinct from those transferred before

the modification, they are accounted for prospectively as if the Company entered into a new contract. If the goods or services in

the modification are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative

catch-up method for revisions in estimated total contract costs and contract values. Estimated losses are recorded when

identified. The Company does not adjust the promised amount of consideration for the effects of a significant financing

component as at contract inception the Company expects to receive the payment within twelve months of transfer of goods or

services.

The Company enters into extended warranties and long-term service and maintenance agreements with certain customers. For

these arrangements, revenue is recognized over time on a straight-line basis over the respective contract term.

The Company also sells certain HVAC and refrigeration products and services in bundled arrangements with multiple

performance obligations, such as equipment, commissioning, service labor and extended warranties. Approximately four to

twelve months separate the timing of the first deliverable until the last piece of equipment is delivered, and there may be

extended warranty arrangements with duration of one to five years commencing upon the end of the standard warranty period.

In addition, the Company sells security monitoring systems that may have multiple performance obligations, including

equipment, installation, monitoring services and maintenance agreements. Revenues associated with the sale of equipment and

related installations are recognized over time on a cost-to-cost input method, while the revenue for monitoring and maintenance

services are recognized over time as services are rendered. The transaction price is allocated to each performance obligation

based on the relative selling price method. In order to estimate relative selling price, market data and transfer price studies are

utilized. If the standalone selling price is not directly observable, the Company estimates the standalone selling price using an

adjusted market assessment approach or expected cost plus margin approach. For transactions in which the Company retains

ownership of the subscriber system asset, fees for monitoring and maintenance services are recognized over time on a straight-

line basis over the contract term. Non-refundable fees received in connection with the initiation of a monitoring contract, along

with associated direct and incremental selling costs, are deferred and amortized over the estimated life of the contract.

In all other cases, the Company recognizes revenue at the point in time when control over the goods or services transfers to the

customer.

The Company considers the contractual consideration payable by the customer and assesses variable consideration that may

affect the total transaction price, including discounts, rebates, refunds, credits or other similar sources of variable consideration,

when determining the transaction price of each contract. The Company includes variable consideration in the estimated

transaction price when it is probable that significant reversal of revenue recognized would not occur when the uncertainty

associated with variable consideration is subsequently resolved. These estimates are based on the amount of consideration that

the Company expects to be entitled to.

Shipping and handling costs billed to customers are included in sales and the related costs are included in cost of sales when

control transfers to the customer. The Company presents amounts collected from customers for sales and other taxes net of the

related amounts remitted.

Subscriber System Assets, Dealer Intangibles and Related Deferred Revenue Accounts

The Company considers assets related to the acquisition of new customers in its electronic security business in three asset

categories:

• Internally generated residential subscriber systems outside of North America

• Internally generated commercial subscriber systems (collectively referred to as subscriber system assets)

• Customer accounts acquired through the ADT dealer program, primarily outside of North America (referred to as

dealer intangibles)

Subscriber system assets include installed property, plant and equipment for which the Company retains ownership and

deferred costs directly related to the customer acquisition and system installation. Subscriber system assets represent capitalized

equipment (e.g. security control panels, touch pad, motion detectors, window sensors, and other equipment) and installation

costs associated with electronic security monitoring arrangements under which the Company retains ownership of the security

system assets in a customer's place of business, or outside of North America, residence. Installation costs represent costs

incurred to prepare the asset for its intended use. The Company pays property taxes on the subscriber system assets and upon

customer termination, may retrieve such assets. These assets embody a probable future economic benefit as they generate future

monitoring revenue for the Company.

Costs related to the subscriber system equipment and installation are categorized as property, plant and equipment rather than

deferred costs. Deferred costs associated with subscriber system assets represent direct and incremental selling expenses (such

as commissions) related to acquiring the customer. Commissions related to up-front consideration paid by customers in

connection with the establishment of the monitoring arrangement are determined based on a percentage of the up-front fees and

do not exceed deferred revenue. Such deferred costs are recorded as other current and noncurrent assets within the consolidated

statements of financial position.

Subscriber system assets and any deferred revenue resulting from the customer acquisition are accounted for over the expected

life of the subscriber. In certain geographical areas where the Company has a large number of customers that behave in a

similar manner over time, the Company accounts for subscriber system assets and related deferred revenue using pools, with

separate pools for the components of subscriber system assets and any related deferred revenue based on the same month and

year of acquisition. Pooled subscriber system assets and related deferred revenue are depreciated using a straight-line method

with lives up to 12 years and considering customer attrition. Non-pooled subscriber systems (primarily in Europe, Latin

America and Asia) and related deferred revenue are depreciated using a straight-line method with a 15-year life, with remaining

balances written off upon customer termination.

Certain contracts and related customer relationships result from purchasing residential security monitoring contracts from an

external network of independent dealers who operate under the ADT dealer program, primarily outside of North America.

Acquired contracts and related customer relationships are recorded at their contractually determined purchase price.

During the first 6 months (12 months in certain circumstances) after the purchase of the customer contract, any cancellation of

monitoring service, including those that result from customer payment delinquencies, results in a chargeback by the Company

to the dealer for the full amount of the contract purchase price. The Company records the amount charged back to the dealer as

a reduction of the previously recorded intangible asset.

Intangible assets arising from the ADT dealer program described above are amortized in pools determined by the same month

and year of contract acquisition on a straight-line basis over the period of the customer relationship. The estimated useful life of

dealer intangibles ranges from 12 to 15 years.

Research and Development Costs

Expenditures for research activities relating to product development and improvement are charged against income as incurred

and included within selling, general and administrative expenses in the consolidated statements of income. Such expenditures

for the years ended September 30, 2022, 2021 and 2020 were $295 million, $275 million and $274 million, respectively.

Stock-Based Compensation

Restricted (Non-vested) Stock /Units

Restricted stock and restricted stock units are typically settled in shares for employees in the U.S. and in cash for employees not

in the U.S. Restricted awards typically vest over a period of three years from the grant date. The Company's Compensation and

Talent Development Committee may approve different vesting terms on specific grants. The fair value of each share-settled

restricted award is based on the closing market value of the Company’s ordinary shares on the date of grant. The fair value of

each cash-settled restricted award is recalculated at the end of each reporting period based on the closing market value of the

Company's ordinary shares at the end of the reporting period, and the liability and expense are adjusted based on the new fair

value.

Performance Share Awards

Performance-based share unit ("PSU") awards are generally contingent on the achievement of predetermined performance goals

over a performance period of one to three years and on the award holder's continuous employment until the vesting date. The

majority of PSUs are also indexed to the achievement of specified levels of total shareholder return versus a peer group over the

performance period.

Upon completion of the performance period, earned PSUs are typically settled with shares of the Company's ordinary shares for

employees in the U.S. and in cash for employees not in the U.S.

The fair value of the portion of the PSU which is linked to the achievement of performance goals is based on the closing market

value of the Company's ordinary shares on the date of grant. Share-based compensation expense for these PSUs is recognized

over the performance period based on the probability of achieving the performance targets.

The fair value of the portion of the PSU that is indexed to total shareholder return is estimated on the date of grant using a

Monte Carlo simulation that uses the following assumptions:

• The risk-free interest rate for periods during the contractual life of the PSU is based on the U.S. Treasury yield curve in

effect at the time of grant.

• The expected volatility is based on the historical volatility of the Company's stock over the most recent three-year

period as of the grant date.

Share-based compensation expense for PSUs which are indexed to total shareholder return is not adjusted for changes in

performance subsequent to the grant date because the likelihood of achieving the market condition is incorporated in the grant

date fair value of the award.

Stock Options

Stock options are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock

option awards typically vest between two and three years after the grant date and expire ten years from the grant date.

The fair value of each option is estimated on the date of grant using a Black-Scholes option valuation model that uses the

following assumptions:

• The expected life of options represents the period of time that options granted are expected to be outstanding.

• The risk-free interest rate for periods during the contractual life of the option is based on the U.S. Treasury yield curve

in effect at the time of grant.

• Expected volatility is based on the historical volatility of the Company's stock since October 2016 blended with the

historical volatility of certain peer companies' stock prior to October 2016 over the most recent period corresponding

to the expected life as of the grant date.

• The expected dividend yield is based on the expected annual dividend as a percentage of the market value of the

Company’s ordinary shares as of the grant date.

The Company uses historical data to estimate option exercises and employee terminations within the valuation model.

Stock Appreciation Rights

SARs vest under the same terms and conditions as stock option awards, but are settled in cash for the difference between the

market price on the date of exercise and the exercise price. As a result, SARs are recorded in the Company’s consolidated

statements of financial position as a liability until the date of exercise.

The fair value of each SAR award is estimated using a similar method to that used for stock options. The fair value of each

SAR award is recalculated at the end of each reporting period and the liability and expense are adjusted based on the new fair

value.

Amounts related to SARs are not material.

Earnings Per Share

The Company presents both basic and diluted earnings per share ("EPS") amounts. Basic EPS is calculated by dividing net

income attributable to Johnson Controls by the weighted average number of ordinary shares outstanding during the reporting

period. Diluted EPS is calculated by dividing net income attributable to Johnson Controls by the weighted average number of

ordinary shares and ordinary equivalent shares outstanding during the reporting period that are calculated using the treasury

stock method for stock options, unvested restricted stock and unvested performance share awards. The treasury stock method

assumes that the Company uses the proceeds from the exercise of stock option awards to repurchase ordinary shares at the

average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that

the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized. For

unvested restricted stock and unvested performance share awards, assumed proceeds under the treasury stock method include

unamortized compensation cost.

Foreign Currency Translation

Substantially all of the Company’s international operations use the respective local currency as the functional currency. Assets

and liabilities of international entities have been translated at period-end exchange rates, and income and expenses have been

translated using average exchange rates for the period. Monetary assets and liabilities denominated in non-functional currencies

are adjusted to reflect period-end exchange rates. Aggregate transaction gains (losses), net of the impact of foreign currency

hedges, for the years ended September 30, 2022, 2021 and 2020 were $49 million, $56 million and $(32) million, respectively.

Derivative Financial Instruments

The Company has written policies and procedures that place all financial instruments under the direction of Corporate treasury

and restrict all derivative transactions to those intended for hedging purposes. The use of financial instruments for speculative

purposes is strictly prohibited. The Company selectively uses financial instruments to manage the market risk from changes in

foreign exchange rates, commodity prices, stock-based compensation liabilities and interest rates.

The fair values of all derivatives are recorded in the consolidated statements of financial position. The change in a derivative’s

fair value is recorded each period in current earnings or accumulated other comprehensive income ("AOCI"), depending on

whether the derivative is designated as part of a hedge transaction and if so, the type of hedge transaction.

Investments

Investments in debt and equity securities are are marked to market at the end of each accounting period. Unrealized gains and

losses on these securities are recognized in the Company's consolidated statements of income. The deferred compensation plan

assets are marked to market at the end of each accounting period and all unrealized gains and losses are recorded in the

consolidated statements of income.

Pension and Postretirement Benefits

The Company utilizes a mark-to-market approach for recognizing pension and postretirement benefit expenses, including

measuring the market related value of plan assets at fair value and recognizing actuarial gains and losses in the fourth quarter of

each fiscal year or at the date of a remeasurement event.

Loss Contingencies

Accruals are recorded for various contingencies including legal proceedings, environmental matters, self-insurance and other

claims that arise in the normal course of business. The accruals are based on judgment, the probability of losses and, where

applicable, the consideration of opinions of internal and/or external legal counsel and actuarially determined estimates.

Additionally, the Company records receivables from third party insurers when recovery has been determined to be probable.

The Company is subject to laws and regulations relating to protecting the environment. Expenses associated with environmental

remediation obligations are recognized when such amounts are probable and can be reasonably estimated.

Liabilities and expenses for workers' compensation, product, general and auto liabilities is dependent on claims experience. For

most of these liabilities, claims incurred but not yet reported are estimated by utilizing actuarial valuations based upon historical

claims experience. Receivables from third party insurers are recorded when recovery has been determined to be probable. The

Company maintains captive insurance companies to manage its insurable liabilities.

Asbestos-Related Contingencies and Insurance Receivables

The Company and certain of its subsidiaries, along with numerous other companies, are named as defendants in personal injury

lawsuits based on alleged exposure to asbestos-containing materials. The estimated liability and corresponding insurance

recovery for pending and future claims and defense costs is based on the Company's historical claim experience, and estimates

of the number and resolution cost of potential future claims that may be filed and is discounted to present value from 2068

(which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-related

claims will be filed against its affiliates). Estimated asbestos-related defense costs are included in the asbestos liability. The

Company's legal strategy for resolving claims also impacts these estimates. The Company considers various trends and

developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience is

used to estimate and value claims reasonably projected to be made through 2068. At least annually, the Company assesses the

sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding

claims filed, settled and dismissed, and amounts paid in settlements. In addition to claims and settlement experience, the

Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the

Company's defense strategy. The Company also evaluates the recoverability of its insurance receivable on an annual basis. The

Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future

claims and defense costs or insurance receivable is warranted.

In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance

recoveries that are probable. Estimated asbestos-related insurance recoveries represents estimated amounts due to the Company

for previously paid and settled claims and the probable reimbursements relating to its estimated liability for pending and future

claims discounted to present value. In determining the amount of insurance recoverable, the Company considers available

insurance, allocation methodologies, solvency and creditworthiness of the insurers.

Income Taxes

Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in

the consolidated financial statements. Deferred tax liabilities and assets are determined based on the differences between the

book and tax basis of particular assets and liabilities and operating loss carryforwards, using tax rates in effect for the years in

which the differences are expected to reverse. A valuation allowance is provided to reduce the carrying or book value of

deferred tax assets if, based upon the available evidence, including consideration of tax planning strategies, it is more-likely-

than-not that some or all of the deferred tax assets will not be realized.

Retrospective Changes

Effective October 1, 2021, the Company's marine businesses, which were previously included in the Building Solutions Asia

Pacific and Global Products segments, became part of the Building Solutions EMEA/LA segment. Historical information has

been re-cast to present the comparative periods on a consistent basis. This change was not material to the segment presentation.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets

and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities (e.g. deferred

revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in

accordance with ASC 606, “Revenue from Contracts with Customers.” Generally, this new guidance will result in the acquirer

recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts

were recognized by the acquirer at fair value in acquisition accounting. The guidance is applied prospectively to acquisitions

occurring on or after the effective date. The Company early adopted ASU No. 2021-08 at the beginning of fiscal 2022. The

adoption of the new standard did not have a material impact on the Company's consolidated financial statements.

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.

2. ACQUISITIONS AND DIVESTITURES

During fiscal 2022, the Company acquired several businesses for a combined purchase price, net of cash acquired, of

$323 million, of which $269 million was paid as of September 30, 2022. Intangible assets associated with these acquisitions

totaled $123 million and primarily relate to customer relationships and technology. In connection with these acquisitions, the

Company recorded goodwill of $194 million, of which $68 million was assigned to the Building Solutions EMEA/LA segment,

$45 million was assigned to the Global Products segment, $44 million was assigned to the Building Solutions APAC segment

and $36 million was assigned to the Building Solutions North America segment.

Silent-Aire Acquisition

In May 2021, the Company completed its acquisition of Silent-Aire, a global leader in hyperscale data center cooling and

modular critical infrastructure solutions, for approximately $755 million, net of cash acquired, which was comprised of an

upfront net cash payment of approximately $661 million, the estimated fair value at the acquisition date of contingent earn-out

liabilities of approximately $86 million and a working capital adjustment of $8 million. The contingent earn-out liabilities are

based upon the achievement of certain defined operating results in each of the three years following the acquisition, with a

maximum payout of approximately $250 million. The fair value of contingent earn-out liabilities is reassessed on a quarterly

basis and could differ materially from the initial estimates. Subsequent changes in the estimated fair value of contingent earn-

out liabilities are recorded in the consolidated statements of income when incurred. Earn-out payments that are less than or

equal to the contingent earn-out liabilities on the acquisition date are reflected as financing cash outflows and amounts paid in

excess of the contingent earn-out liabilities on the acquisition date are reflected as operating cash outflows. During the year

ended September 30, 2022, the Company recorded a reduction in the fair value of the contingent earn-out liability of

$43 million. No earn-out payments were made for the first twelve-month earn-out period ended April 30, 2022 as the

performance measures for the period were not achieved.

In connection with the acquisition, the Company recorded goodwill of $244 million in the Global Products segment. Goodwill

is attributable primarily to expected synergies, expanded market opportunities and other benefits that the Company believes will

result from combining its operations with the operations of Silent-Aire. The goodwill created in the acquisition is not deductible

for tax purposes.

The original fair values of the assets acquired and liabilities assumed related to Silent-Aire are as follows (in millions):

Cash and cash equivalents $ 5

Accounts receivable 141

Inventories 60

Other current assets 4

Property, plant, and equipment - net 33

Goodwill 244

Intangible assets - net 497

Other noncurrent assets 84

Total assets acquired 1,068

Accounts payable 62

Accrued compensation and benefits 6

Deferred revenue 32

Other current liabilities 12

Other noncurrent liabilities 196

Total liabilities acquired 308

Net assets acquired $ 760

The purchase price allocation to identifiable intangible assets acquired related to Silent-Aire is as follows:

Fair Value

(in millions)

Weighted Average

Life (in years)

Customer relationships $ 291 19

Technology 116 13

Other definite-lived intangibles 23 1

Indefinite-lived trademarks 67

Total identifiable intangible assets $ 497

Other acquisitions and divestitures were not material individually or in the aggregate in fiscal 2021 and 2020.

3. ASSETS AND LIABILITIES HELD FOR SALE & DISCONTINUED OPERATIONS

Assets and Liabilities Held for Sale

During fiscal 2022, the Company determined that its Global Retail business within its Building Solutions North America,

Building Solutions Asia Pacific and Building Solutions EMEA/LA segments and a business within the Building Solutions Asia

Pacific segment both met the criteria to be classified as held for sale. The assets and liabilities of both businesses are presented

as held for sale in the consolidated statements of financial position as of September 30, 2022. Assets and liabilities held for sale

are recorded at the lower of carrying value or fair value, less costs to sell in accordance with ASC 360-10-15, "Impairment or

Disposal of Long-Lived Assets". The carrying amount of any assets, including goodwill, that are part of the disposal group, but

not in the scope of ASC 360-10, are tested for impairment under the relevant guidance prior to measuring the disposal group at

fair value, less cost to sell.

As a result of classifying the Global Retail business as held for sale, during the year ended September 30, 2022, the Company

recorded impairment charges of $235 million to write down goodwill related to its North America Retail reporting unit and

$86 million to write down the disposal group to its estimated fair value, less costs to sell. The Company also fully impaired

$38 million of internal-use software projects that were no longer probable of being completed. Refer to Note 8, "Goodwill and

Other Intangible Assets," of the notes to the consolidated financial statements for further information regarding the goodwill

impairment charge.

An additional $60 million was recorded in the year ended September 30, 2022 to write down the business classified as held for

sale in the Building Solutions Asia Pacific segment to its estimated fair value, less costs to sell.

All of the impairments were recorded within restructuring and impairment costs in the consolidated statements of income. The

divestiture of the businesses held for sale could result in a gain or loss on sale to the extent the ultimate selling prices differ

from the current carrying value of the net assets recorded, which could be material. The businesses did not meet the criteria to

be classified as discontinued operations as neither divestiture represents a strategic shift that will have a major effect on the

Company's operations and financial results.

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

September 30, 2022

Accounts receivable - net $ 199

Inventories

155

Other current assets

Current assets held for sale

$ 375

Property, plant and equipment - net

$ 89

Goodwill

Other intangible assets - net

514

Other noncurrent assets

Noncurrent assets held for sale

$ 697

Accounts payable

$ 127

Accrued compensation and benefits

Deferred revenue

Other current liabilities

Current liabilities held for sale

$ 221

Other noncurrent liabilities

$ 61

Noncurrent liabilities held for sale

$ 61

During the third quarter of fiscal 2020, the Company determined that certain assets of the Building Solutions Asia Pacific

segment met the criteria to be classified as held for sale. During the fourth quarter of fiscal 2022, the Company determined that

these assets no longer met the criteria to be classified as held for sale as the Company can no longer assert that the sale of the

assets is probable within a year due to the real estate market downturn in China that has worsened in the period after the

COVID-19 lockdowns. As a result, the Company reclassified the held for sale assets to held and used as of September 30, 2022.

Upon reclassification, an impairment of $45 million was recorded within restructuring and impairment costs in the consolidated

statements of income to adjust the asset to the lower of its carrying value adjusted for depreciation and the fair value of the asset

as of September 30, 2022.

Discontinued Operations

The Company completed the sale of its Power Solutions business on April 30, 2019. In December 2020, the favorable

resolution of certain post-closing working capital and net debt adjustments resulted in income from discontinued operations of

$124 million, net of tax of $26 million, due to a reversal of a reserve established in connection with the sale.

There was no Power Solutions related activity in fiscal 2022 and 2020.

4. REVENUE RECOGNITION

Disaggregated Revenue

The following table presents the Company's revenues disaggregated by segment and by products and systems versus services

revenue (in millions):

Year Ended September 30,

2022 2021

Products &

Systems Services Total

Products &

Systems Services Total

Building Solutions North America $ 5,708 $ 3,659 $ 9,367 $ 5,312 $ 3,373 $ 8,685

Building Solutions EMEA/LA 2,188 1,657 3,845 1,929 1,955 3,884

Building Solutions Asia Pacific 2,005 709 2,714 1,478 1,138 2,616

Global Products 9,373 — 9,373 8,483 — 8,483

Total $ 19,274 $ 6,025 $ 25,299 $ 17,202 $ 6,466 $ 23,668

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

Year Ended September 30,

2022 2021

HVAC $ 6,756 $ 6,054

Fire & Security 2,367 2,192

Industrial Refrigeration 250 237

Total $ 9,373 $ 8,483

Contract Balances

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed and consist of

unbilled receivables and costs in excess of billings. Contract liabilities relate to customer payments received in advance of

satisfaction of performance obligations under the contract. Contract balances are classified as assets or liabilities on a contract-

by-contract basis at the end of each reporting period.

The following table presents the location and amount of contract balances in the Company's consolidated statements of

financial position (in millions):

September 30,

Location of contract balances 2022 2021

Contract assets - current Accounts receivable - net $ 2,020 $ 1,718

Contract assets - noncurrent Other noncurrent assets 79 99

Contract liabilities - current Deferred revenue (1,768) (1,637)

Contract liabilities - noncurrent Other noncurrent liabilities (282) (269)

The Company recognized revenue that was included in the beginning of period contract liability balance of approximately

$1.5 billion and $1.2 billion for the years ended September 30, 2022 and 2021, respectively.

Performance Obligations

A performance obligation is a distinct good, service, or 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 as of a point in time or over time. The timing of satisfying the performance obligation is

typically indicated by the terms of the contract. As of September 30, 2022, the aggregate amount of the transaction price

allocated to remaining performance obligations was approximately $17.5 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 average initial contract terms of 25 to 35

years. Future contract modifications could affect both the timing and the amount of the remaining performance obligations. The

Company excludes the value of remaining performance obligations for contracts with an original expected duration of one year

or less.

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 bid/proposal costs. Costs to obtain or fulfill a

contract are capitalized and amortized to revenue 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):

September 30,

2022 2021

Other current assets $ 139 $ 149

Other noncurrent assets 174 117

Total $ 313 $ 266

Amortization related to costs to obtain or fulfill a contract were $191 million and $173 million during the years ended

September 30, 2022 and 2021, respectively. There were no impairment losses recognized in the year ended September 30, 2022

or 2021.

5. ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the following (in millions):

September 30,

2022 2021

Accounts receivable $ 5,590 $ 5,723

Less: Allowance for expected credit losses (62) (110)

Accounts receivable, net $ 5,528 $ 5,613

The changes in the allowance for expected credit losses related to accounts receivable were as follows (in millions):

Year Ended September 30, 2022

2022 2021

Balance at beginning of period $ 110 $ 173

Benefit for expected credit losses (2) (3)

Write-offs charged against the allowance for expected credit losses (38) (65)

Currency translation (3) 1

Other (5) 4

Balance at end of period $ 62 $ 110

The Company sold receivables where it collected customer payments related to the factored receivables on behalf of the

financial institution but otherwise maintained no continuing involvement totaling $1,115 million and $129 million during the

years ended September 30, 2022 and 2021, respectively. The costs of factoring such receivables were not material. Outstanding

receivables sold under the factoring agreements were $476 million as of September 30, 2022 and $127 million as of September

30, 2021.

6. INVENTORIES

Inventories consisted of the following (in millions):

September 30,

2022 2021

Raw materials and supplies

$ 1,009 $ 769

Work-in-process

196 166

Finished goods

1,305 1,122

Inventories

$ 2,510 $ 2,057

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in millions):

September 30,

2022 2021

Buildings and improvements

$ 1,300 $ 1,313

Subscriber systems

733 802

Machinery and equipment

3,550 3,669

Construction in progress

512 500

Land

196 231

Total property, plant and equipment

6,291 6,515

Less: Accumulated depreciation

(3,249) (3,287)

Property, plant and equipment - net

$ 3,042 $ 3,228

8. GOODWILL AND OTHER INTANGIBLE ASSETS

Effective October 1, 2021, the Company's marine businesses previously included in the Building Solutions Asia Pacific and

Global Products reportable segments became part of the Building Solutions EMEA/LA reportable segment. Historical

information has been re-cast to present the comparative periods on a consistent basis. This change was not material to the

segment presentation or the allocation of goodwill.

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

September 30,

2020

Business

Acquisitions

Business

Divestitures Impairments

Currency

Translation

and Other

September 30,

2021

Building Solutions North America

$ 9,160 $ 21 $ — $ — $ 34 $ 9,215

Building Solutions EMEA/LA

1,987 35 — — 19 2,041

Building Solutions Asia Pacific

1,223 — (7) — 21 1,237

Global Products

5,562 244 — — 36 5,842

Total

$ 17,932 $ 300 $ (7) $ — $ 110 $ 18,335

September 30,

2021

Business

Acquisitions

Business

Divestitures

(1)

Impairments

Currency

Translation

and Other

September 30,

2022

Building Solutions North America

$ 9,215 $ 37 $ — $ (235) $ (46) $ 8,971

Building Solutions EMEA/LA

2,041 78 (98) — (296) 1,725

Building Solutions Asia Pacific

1,237 44 (29) — (136) 1,116

Global Products

5,842 60 — (75) (311) 5,516

Total

$ 18,335 $ 219 $ (127) $ (310) $ (789) $ 17,328

(1)

Business divestitures include $93 million and $29 million of goodwill within the Building Solutions EMEA/LA and Building

Solutions Asia Pacific reportable segments, respectively, transferred to noncurrent assets held for sale on the consolidated

statements of financial position.

As of September 30, 2022, the accumulated impairment loss totaled $781 million, of which $659 million related to the Building

Solutions North America segment, $75 million related to the Global Products segment and $47 million related to the Building

Solutions EMEA/LA segment.

As of September 30, 2021 and 2020, the accumulated impairment loss totaled $471 million, of which $424 million related to

the Building Solutions North America segment and $47 million related to the Building Solutions EMEA/LA segment.

The Company reviews goodwill for impairment annually as of July 31 or more frequently if events or changes in circumstances

indicate the asset might be impaired. During its fiscal 2022 annual impairment test, the Company determined that its Silent-Aire

reporting unit's goodwill was impaired. As a result, the Company recorded a non-cash impairment charge of $75 million within

restructuring and impairment costs in the consolidated statements of income in the fourth quarter of fiscal 2022, which was

determined by comparing the carrying amount of the reporting unit to its fair value. The Silent-Aire reporting unit has a

remaining goodwill balance of $183 million at September 30, 2022. 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 long-term growth rates, which are classified as Level 3 inputs

within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." Although the Company's cash flow forecasts

are based on assumptions that are considered reasonable by management and consistent with the plans and estimates

management is using to operate the underlying business, there was significant judgment in determining the expected future cash

flows attributable to the Silent-Aire reporting unit. Other than the Silent-Aire reporting unit that is recorded at fair value, no

other reporting unit was determined to be at risk of failing the goodwill impairment test.

In the second quarter of fiscal 2022, the Company concluded it had a triggering event requiring assessment of goodwill

impairment for its North America Retail reporting unit in conjunction with classifying its Global Retail business as held for

sale. Refer to Note 3, "Discontinued Operations & Assets and Liabilities Held for Sale," of the notes to the consolidated

financial statements for further disclosure related to the Global Retail assets held for sale. As a result, the Company recorded a

non-cash impairment charge of $235 million within restructuring and impairment costs in the consolidated statements of

income in the second quarter of fiscal 2022. The North America Retail reporting unit has no remaining goodwill balance as of

September 30, 2022. The Company used the market approach to estimate the fair value of the reporting unit based on the

relative estimated sales proceeds for the planned disposal of the Global Retail business attributable to the North America Retail

reporting unit. The inputs utilized in the analysis 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 fiscal 2022.

There were no goodwill impairments resulting from the fiscal 2021 and the fiscal 2020 annual impairment test and no reporting

unit was determined to be at risk of failing the goodwill impairment test as of September 30, 2021.

During fiscal 2020, the Company considered the deterioration in general economic and market conditions due to the COVID-19

pandemic and its impact on each of the Company’s reporting units’ performance. Due to declines in cash flow projections of

the North America Retail reporting unit in the third quarter of fiscal 2020 as a result of the COVID-19 pandemic, the Company

concluded a triggering event occurred requiring assessment of impairment for its North America Retail reporting unit. As a

result, the Company recorded a non-cash impairment charge of $424 million within restructuring and impairment costs in the

consolidated statements of income in the third quarter of fiscal 2020. The North America Retail reporting unit had a remaining

goodwill balance of $235 million at September 30, 2021. 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 long-term growth rates, which are classified as Level 3 inputs within the fair

value hierarchy as defined in ASC 820, "Fair Value Measurement."

The Company’s other intangible assets, primarily from business acquisitions, consisted of (in millions):

September 30,

2022 2021

Gross

Carrying

Amount

Accumulated

Amortization Net

Gross

Carrying

Amount

Accumulated

Amortization Net

Definite-lived intangible assets

Technology

$ 1,353 $ (658) $ 695 $ 1,464 $ (629) $ 835

Customer relationships

2,742 (1,254) 1,488 3,097 (1,191) 1,906

Miscellaneous

756 (386) 370 750 (354) 396

4,851 (2,298) 2,553 5,311 (2,174) 3,137

Indefinite-lived intangible assets

Trademarks/tradenames

2,088 — 2,088 2,332 — 2,332

Miscellaneous

— — — 80 — 80

2,088 — 2,088 2,412 — 2,412

Total intangible assets

$ 6,939 $ (2,298) $ 4,641 $ 7,723 $ (2,174) $ 5,549

The Company reviews indefinite-lived intangible assets for impairment during the fourth fiscal quarter or more frequently if

events or changes in circumstances indicate the asset might be impaired.

There were no indefinite-lived intangible asset impairments resulting from the fiscal 2022, 2021 and 2020 annual impairment

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

charges. For fiscal 2022, the estimated fair values of all indefinite-lived intangibles substantially exceeded their carrying values,

with the exception of the indefinite-lived trademarks related to the Company's Asia Pacific subscriber business. The estimated

fair value for the Asia Pacific indefinite-lived trademark was consistent with its carrying value of $54 million.

During the second and third quarters of fiscal 2020, the Company determined that it had a triggering event at each reporting

period end requiring assessment of impairment for certain of its indefinite-lived intangible assets due to declines in revenue

directly attributable to the COVID-19 pandemic. As a result, the Company recorded an impairment charge of $62 million

related primarily to the Company's retail business indefinite-lived intangible assets within restructuring and impairment costs in

the consolidated statements of income in the second quarter of fiscal 2020. No further impairment was required to be recorded

in the third quarter of fiscal 2020 as a result of the completed impairment assessment.

Amortization of other intangible assets included within continuing operations for the years ended September 30, 2022, 2021

and 2020 was $427 million, $435 million and $386 million, respectively.

The following table summarizes the expected amortization of definite-lived intangible assets, excluding the impact of future

acquisitions, by year (in millions):

2023 $ 414

2024 406

2025 382

2026 317

2027 282

9. LEASES

The following table presents the Company’s lease costs (in millions):

Year Ended September 30,

2022 2021 2020

Operating lease cost $ 352 $ 384 $ 399

Variable lease cost 165 130 145

Total lease costs $ 517 $ 514 $ 544

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

September 30,

Location of lease balances

2022 2021

Operating lease right-of-use assets Other noncurrent assets $ 1,271 $ 1,376

Operating lease liabilities - current Other current liabilities 280 319

Operating lease liabilities - noncurrent Other noncurrent liabilities 987 1,055

Weighted-average remaining lease term 7 years 7 years

Weighted-average discount rate 2.1 % 1.8 %

The following table presents supplemental cash flow information related to operating leases (in millions):

Year Ended September 30,

2022 2021 2020

Cash paid for amounts included in the measurement of lease liability:

Operating cash outflows from operating leases $ 367 $ 398 $ 397

Noncash operating lease activity:

Right-of-use assets obtained in exchange for operating lease liabilities 369 515 467

The following table presents maturities of operating lease liabilities (in millions):

September 30, 2022

2023 $ 301

2024 269

2025 203

2026 149

2027 109

After 2027 345

Total operating lease payments 1,376

Less: Interest (109)

Present value of lease payments $ 1,267

10. DEBT AND FINANCING ARRANGEMENTS

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

September 30,

2022 2021

Bank borrowings

$ 10 $ 8

Commercial paper

172 —

Term loans

487 —

$ 669 $ 8

Weighted average interest rate on short-term debt outstanding

0.5 % 0.2 %

As of September 30, 2022, the Company had a syndicated $2.5 billion committed revolving credit facility, which is scheduled

to expire in December 2024, and a syndicated $500 million committed revolving credit facility, which is scheduled to expire in

December 2022. There were no draws on the facilities as of September 30, 2022.

Long-term debt consisted of the following (in millions; due dates by fiscal year):

September 30,

2022 2021

Unsecured notes

JCI plc - Term Loan -¥25 billion; LIBOR JPY plus 0.40% due in 2022 $ — $ 223

JCI plc - 4.625% due in 2023 ($25 million par value) 25 25

Tyco International Finance S.A. ("TIFSA") - 4.625% due in 2023 ($7 million par value) 7 7

JCI plc - 1.00% due in 2023 (€846 million par value) 830 980

JCI plc - 3.625% due in 2024 ($453 million par value) 453 453

JCI Inc. - 3.625% due in 2024 ($31 million par value) 31 31

JCI plc - 1.375% due in 2025 (€423 million par value) 419 496

TIFSA - 1.375% due in 2025 (€54 million par value) 53 63

JCI plc - 3.90% due in 2026 ($487 million par value) 505 510

TIFSA - 3.90% due in 2026 ($51 million par value) 51 51

JCI plc - Term Loan - ¥30 billion; TORF plus 0.40% due in 2027 208 —

JCI plc and Tyco Fire & Security Finance S.C.A. ("TFSCA") - 0.375% due in 2027

(€500 million par value) 488 577

JCI plc and TFSCA - 3.00% due in 2028 (€600 million par value) 586 —

JCI plc and TFSCA - 1.75% due in 2030 ($625 million par value) 623 623

JCI plc and TFSCA - 2.00% due in 2031 ($500 million par value) 496 496

JCI plc and TFSCA - 1.00% due in 2032 (€500 million par value) 489 578

JCI plc and TFSCA - 4.90% due in 2032 ($400 million par value) 394 —

JCI plc - 6.00% due in 2036 ($342 million par value) 339 339

JCI Inc. - 6.00% due in 2036 ($8 million par value) 8 8

JCI plc - 5.70% due in 2041 ($190 million par value) 189 189

JCI Inc. - 5.70% due in 2041 ($30 million par value) 30 30

JCI plc - 5.25% due in 2042 ($155 million par value) 155 155

JCI Inc. - 5.25% due in 2042 ($6 million par value) 6 6

JCI plc - 4.625% due in 2044 ($444 million par value) 441 441

JCI Inc. - 4.625% due in 2044 ($6 million par value) 6 6

JCI plc - 5.125% due in 2045 ($477 million par value) 557 560

TIFSA - 5.125% due in 2045 ($23 million par value) 23 22

JCI plc - 6.95% due in 2046 ($32 million par value) 32 32

JCI Inc. - 6.95% due in 2046 ($4 million par value) 4 4

JCI plc - 4.50% due in 2047 ($500 million par value) 496 496

JCI plc - 4.95% due in 2064 ($341 million par value) 340 340

JCI Inc. - 4.95% due in 2064 ($15 million par value) 15 15

Other 25 8

Gross long-term debt

8,324 7,764

Less: current portion

865 226

Less: debt issuance costs

33 32

Long-term debt

$ 7,426 $ 7,506

The following table presents maturities of long-term debt as of September 30, 2022 (in millions):

2023 $ 865

2024 485

2025 473

2026 557

2027 697

After 2027 5,247

Total $ 8,324

As of September 30, 2022, the Company was in compliance with all financial covenants set forth in its credit agreements and

the indentures governing its outstanding notes, and expects to remain in compliance for the foreseeable future.

Total interest paid on both short and long-term debt for the years ended September 30, 2022, 2021 and 2020 was $226 million,

$242 million and $247 million, respectively.

Financing Arrangements

In November 2021, the Company entered into a €200 million ($196 million as of September 30, 2022) bank term loan which

had an interest rate of EURIBOR plus 0.5% and was due in October 2022.

In March 2022, the Company entered into two bank term loans totaling €285 million ($280 million as of September 30, 2022)

which both have an interest rate of EURIBOR plus 0.5% and are due in March 2023.

In September 2022, the Company and its wholly owned subsidiary, TFSCA issued €600 million ($589 million as of September

30, 2022) of bonds with an interest rate of 3.0%, which are due in September 2028 and $400 million of bonds with an interest

rate of 4.9%, which are due in December 2032.

In September 2022, the Company repaid a ¥25 billion ($181 million) term loan and entered into a ¥30 billion ($208 million as

of September 30, 2022) term loan which is due in September 2027. The new ¥30 billion loan has an interest rate of TORF plus

0.4%. The original ¥25 billion loan had an interest rate of LIBOR JPY plus 0.4%.

Net Financing Charges

The Company's net financing charges line item in the consolidated statements of income contained the following components

(in millions):

Year Ended September 30,

2022 2021 2020

Interest expense, net of capitalized interest costs $ 225 $ 219 $ 240

Other financing charges 27 25 26

Interest income (6) (9) (23)

Net foreign exchange results for financing activities (33) (29) (12)

Net financing charges $ 213 $ 206 $ 231

11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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," the 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 during the years ended September 30, 2022 and 2021.

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

Volume Outstanding as of September 30,

Commodity 2022 2021

Copper

3,629 2,656

Aluminum

6,758 5,159

The Company enters into forward-starting interest rate swaps in conjunction with anticipated note issuances. The following

table summarizes forward-starting interest rate swaps and the related anticipated note issuances (in millions):

Year Ended September 30,

2022 2021

US dollar denominated

Forward-starting interest swaps

$ 300 $ 500

Anticipated note issuance

400 500

Euro denominated

Forward-starting interest swap

€ 200 —

Anticipated note issuance

600 —

All of the forward-starting interest swaps were terminated when the anticipated notes were issued and none were outstanding at

September 30, 2022. Accumulated amounts recorded in 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.

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 the AOCI account within shareholders’

equity 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):

September 30,

2022 2021

Euro-denominated bonds designated as net investment hedges in Europe € 2.9 € 2.3

Yen-denominated debt designated as a net investment hedge in Japan

¥ 30 ¥ 25

Derivatives Not Designated as Hedging Instruments

The Company selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation

plans, such as its deferred compensation plans. These equity compensation liabilities increase as the Company’s stock price

increases and decrease as the Company’s stock price decreases. In contrast, the value of the swap agreement moves in the

opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. The Company

hedged approximately 0.3 million ordinary shares, which had a cost basis of $23 million, as of September 30, 2021. No shares

were hedged as of September 30, 2022.

The Company also 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 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):

Designated

as Hedging Instruments

Not Designated

as Hedging Instruments

September 30,

2022

September 30,

2021

September 30,

2022

September 30,

2021

Other current assets

Foreign currency exchange derivatives

$ 30 $ 15 $ 24 $ 17

Commodity derivatives

— 2 — —

Other noncurrent assets

Equity swap

— — — 23

Total assets

$ 30 $ 17 $ 24 $ 40

Other current liabilities

Foreign currency exchange derivatives

$ 24 $ 11 $ 27 $ 6

Commodity derivatives

10 1 — —

Long-term debt

Foreign currency denominated debt

3,077 2,918 — —

Total liabilities

$ 3,111 $ 2,930 $ 27 $ 6

Counterparty Credit Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk. The Company has established

policies and procedures to limit the potential for counterparty credit risk, including establishing limits for credit exposure and

continually assessing the creditworthiness of counterparties. As a matter of practice, the Company deals with major banks

worldwide having strong investment grade long-term credit ratings. To further reduce the risk of loss, the Company generally

enters into International Swaps and Derivatives Association ("ISDA") master netting agreements with substantially all of its

counterparties. The Company enters into ISDA master netting agreements with counterparties that permit the net settlement of

amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all

outstanding contracts with a counterparty in the case of an event of default or a termination event. The Company has not elected

to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position.

The Company's derivative contracts do not contain any credit risk related contingent features and do not require collateral or

other security to be furnished by the Company or the counterparties. The Company's exposure to credit risk associated with its

derivative instruments is measured on an individual counterparty basis, as well as by groups of counterparties that share similar

attributes. The Company does not anticipate any non-performance by any of its counterparties, and the concentration of risk

with financial institutions does not present significant credit risk to the Company.

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

Fair Value of Assets Fair Value of Liabilities

September 30,

2022

September 30,

2021

September 30,

2022

September 30,

2021

Gross amount recognized $ 54 $ 57 $ 3,138 $ 2,936

Gross amount eligible for offsetting (42) (16) (42) (16)

Net amount $ 12 $ 41 $ 3,096 $ 2,920

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 Cash Flow Hedging Relationships

Year Ended September 30,

2022 2021 2020

Foreign currency exchange derivatives

$ 26 $ 15 $ 1

Commodity derivatives

(21) 4 6

Interest rate swaps

16 (21) —

Total

$ 21 $ (2) $ 7

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

Year Ended September 30,

2022 2021 2020

Foreign currency exchange derivatives Cost of sales $ 25 $ 11 $ (5)

Commodity derivatives Cost of sales (7) 3 2

Interest rate swaps Net financing charges (2) — —

Total $ 16 $ 14 $ (3)

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

Year Ended September 30,

2022 2021 2020

Foreign currency exchange derivatives Cost of sales $ 10 $ (6) $ (1)

Foreign currency exchange derivatives Net financing charges 85 174 87

Foreign currency exchange derivatives Selling, general and administrative — (2) —

Foreign currency exchange derivatives Income tax provision — (1) —

Equity swap Selling, general and administrative (5) 28 (4)

Total $ 90 $ 193 $ 82

Pre-tax gains (losses) on net investment hedges recorded as foreign currency translation adjustment ("CTA") within other

comprehensive income (loss) were $470 million, $42 million and $(172) million for the years ended September 30, 2022, 2021

and 2020, respectively. No gains or losses were reclassified from CTA into income for the years ended September 30, 2022,

2021 and 2020.

12. 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

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)

22 22 — —

Other noncurrent assets

Deferred compensation plan assets 46 46 — —

Exchange traded funds (fixed income)

86 86 — —

Exchange traded funds (equity)

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

Fair Value Measurements Using:

Total as of

September 30, 2021

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 $ 32 $ — $ 32 $ —

Commodity derivatives 2 — 2 —

Other noncurrent assets

Deferred compensation plan assets 63 63 — —

Exchange traded funds (fixed income)

146 146 — —

Exchange traded funds (equity)

168 168 — —

Equity swap 23 — 23 —

Total assets $ 434 $ 377 $ 57 $ —

Other current liabilities

Foreign currency exchange derivatives $ 17 $ — $ 17 $ —

Commodity derivatives 1 — 1 —

Contingent earn-out liabilities 32 — — 32

Other noncurrent liabilities

Contingent earn-out liabilities

50 — — 50

Total liabilities $ 100 $ — $ 18 $ 82

Classified as restricted investments for payment of asbestos liabilities. Refer to Note 21, "Commitments and Contingencies" of the notes to

consolidated financial statements for further details.

The following table summarizes the changes in contingent earn-out liabilities, which are valued using significant unobservable

inputs (Level 3) (in millions):

Balance at September 30, 2021 $ 82

Acquisitions 29

Payments (5)

Reduction for change in estimates (43)

Currency translation (3)

Balance at September 30, 2022 $ 60

Valuation Methods

Foreign currency exchange derivatives: The foreign currency exchange derivatives are valued under a market approach using

publicized spot and forward prices.

Commodity derivatives: The commodity derivatives are valued under a market approach using publicized prices, where

available, or dealer quotes.

Equity swaps: The equity swaps are valued under a market approach as the fair value of the swaps is equal to the Company’s

stock price at the reporting period date.

Deferred compensation plan assets: Assets held in the deferred compensation plans will be used to pay benefits under certain of

the Company's non-qualified deferred compensation plans. The investments primarily consist of mutual funds which are

publicly traded on stock exchanges and are valued using a market approach based on the quoted market prices. Unrealized gains

(losses) on the deferred compensation plan assets are recognized in the consolidated statements of income where they offset

unrealized gains and losses on the related deferred compensation plan liability.

Investments in exchange traded funds: Investments in exchange traded funds are valued using a market approach based on

quoted market prices, where available, or broker/dealer quotes of identical or comparable instruments. Refer to Note 21,

"Commitments and Contingencies," of the notes to consolidated financial statements for further information.

Contingent earn-out liabilities: The contingent earn-out liabilities are typically established using a Monte Carlo simulation

based on the forecasted operating results and the earn-out formulas specified in the purchase agreements.

The following table presents the portion of unrealized gains (losses) recognized in the consolidated statements of income that

relate to equity securities still held at September 30, 2022 and 2021 (in millions):

Year Ended

September 30,

2022 2021

Deferred compensation plan assets $ (10) $ 7

Investments in exchange traded funds (55) 37

All of the gains and losses on investments in exchange traded funds related to restricted investments.

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

carrying values. At September 30, 2022, the fair value of long-term debt was $7.3 billion, including public debt of $7.1 billion

and other long-term debt of $0.2 billion. At September 30, 2021, the fair value of long-term debt was $8.5 billion, including

public debt of $8.3 billion and other long-term debt of $0.2 billion. The fair value of public debt was determined primarily

using market quotes which are classified as Level 1 inputs within the ASC 820 fair value hierarchy. The fair value of other

long-term debt was determined using quoted market prices for similar instruments and are classified as Level 2 inputs within

the ASC 820 fair value hierarchy.

13. STOCK-BASED COMPENSATION

On March 10, 2021, the shareholders of the Company approved the Johnson Controls International plc 2021 Equity and

Incentive Plan, which terminated the Johnson Controls International plc 2012 Share and Incentive Plan, as amended in

September 2016 (collectively, the "Plans"). Both Plans authorize stock options, stock appreciation rights, restricted (non-vested)

stock/units, performance shares, performance units and other stock-based awards. The Compensation and Talent Development

Committee of the Company's Board of Directors determines the types of awards to be granted to individual participants and the

terms and conditions of the awards. As of September 30, 2022, there were 55 million shares of the Company's common stock

reserved and 54 million shares available for issuance under the 2021 Equity and Incentive Plan.

The following table summarizes stock-based compensation related charges and benefits (in millions):

Year Ended September 30,

2022 2021 2020

Compensation expense

$ 104

$ 97 $ 66

Income tax benefit resulting from share-based compensation arrangements

24 16

Tax impact from exercise and vesting of equity settled awards

—

Compensation expense excludes the offsetting impact of equity swaps and is recorded in selling, general and administrative

expenses. The Company does not settle stock options granted under share-based payment arrangements in cash.

Restricted (Non-vested) Stock / Units

A summary of non-vested restricted stock awards at September 30, 2022, and changes for the year then ended, is presented

below:

Weighted

Average

Price

Shares/Units

Subject to

Restriction

Non-vested, September 30, 2021 $ 44.06 3,334,437

Granted 74.63 1,508,550

Vested 42.52 (1,497,497)

Forfeited 56.58 (396,296)

Non-vested, September 30, 2022 $ 58.78 2,949,194

At September 30, 2022, the Company had approximately $107 million of total unrecognized compensation cost related to non-

vested restricted stock arrangements granted for continuing operations which is expected to be recognized over a weighted-

average period of 2.0 years.

Performance Share Awards

The following table summarizes the assumptions used in determining the fair value of stock options granted:

Year Ended September 30,

2022 2021 2020

Risk-free interest rate 0.99% 0.20% 1.60%

Expected volatility of the Company’s stock 30.00% 30.90% 21.80%

A summary of the status of the Company’s non-vested PSUs at September 30, 2022, and changes for the year then ended, is

presented below:

Weighted

Average

Price

Shares/Units

Subject to

PSU

Non-vested, September 30, 2021 $ 43.11 1,196,318

Granted 82.88 482,030

Vested 36.35 (402,465)

Forfeited 60.02 (132,812)

Non-vested, September 30, 2022 $ 60.30 1,143,071

At September 30, 2022, the Company had approximately $37 million of total unrecognized compensation cost related to non-

vested performance-based share unit awards granted for continuing operations which is expected to be recognized over a

weighted-average period of 1.7 years.

Stock Options

The following table summarizes the assumptions used in determining the fair value of stock options granted:

Year Ended September 30,

2022 2021 2020

Expected life of option (years) 6.0 6.5 6.5

Risk-free interest rate 1.35% 0.60% 1.67%

Expected volatility of the Company’s stock 27.80% 27.60% 22.40%

Expected dividend yield on the Company’s stock 1.71% 2.28% 2.49%

A summary of stock option activity at September 30, 2022, and changes for the year then ended, is presented below:

Weighted

Average

Option Price

Subject to

Option

Weighted

Average

Remaining

Contractual

Life (years)

Aggregate

Intrinsic

Value

(in millions)

Outstanding, September 30, 2021 $ 38.84 5,951,011

Granted 79.54 548,398

Exercised 33.77 (542,903)

Forfeited or expired 50.97 (272,659)

Outstanding, September 30, 2022 $ 42.46 5,683,847 5.7 $ 52

Exercisable, September 30, 2022 $ 37.86 4,082,897 4.1 $ 47

The following table summarizes additional stock option information:

Year Ended September 30,

2022 2021 2020

Weighted-average grant-date fair value of options granted $ 18.59 $ 9.36 $ 7.29

Intrinsic value of options exercised (in millions) 19 94 30

At September 30, 2022, the Company had approximately $10 million of total unrecognized compensation cost related to non-

vested stock options granted for continuing operations which is expected to be recognized over a weighted-average period of

1.6 years.

14. EARNINGS PER SHARE

The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share (in

millions):

Year Ended September 30,

2022 2021 2020

Income Available to Ordinary Shareholders

Income from continuing operations

$ 1,532 $ 1,513 $ 631

Income from discontinued operations

— 124 —

Basic and diluted income available to shareholders

$ 1,532 $ 1,637 $ 631

Weighted Average Shares Outstanding

Basic weighted average shares outstanding 696.1 716.6 751.0

Effect of dilutive securities:

Stock options, unvested restricted stock and unvested

performance share awards 3.5 4.5 2.6

Diluted weighted average shares outstanding 699.6 721.1 753.6

Antidilutive Securities

Stock options and unvested restricted stock 0.4 — 1.4

15. EQUITY

Dividends

The authority to declare and pay dividends is vested in the Board of Directors. The timing, declaration and payment of future

dividends to holders of the Company's ordinary shares is determined by the Company's Board of Directors and depends upon

many factors, including the Company's financial condition and results of operations, the capital requirements of the Company's

businesses, industry practice and any other relevant factors.

Under Irish law, dividends may only be paid (and share repurchases and redemptions must generally be funded) out of

"distributable reserves." The creation of distributable reserves was accomplished by way of a capital reduction, which the Irish

High Court approved on December 18, 2014 and as acquired in conjunction with the Merger.

Share Repurchase Program

As of September 30, 2022, approximately $3.6 billion remained available under the 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.

The Company repurchased and retired its ordinary shares of approximately $1,441 million, $1,307 million and $2,204 million

during the years ended September 30, 2022, 2021 and 2020, respectively.

Accumulated Other Comprehensive Income

The following table includes changes in AOCI attributable to Johnson Controls (in millions, net of tax):

Year Ended September 30,

2022 2021 2020

Foreign currency translation adjustments

Balance at beginning of period $ (421) $ (778) $ (785)

Aggregate adjustment for the period (net of tax effect of $0, $0 and $1) (480) 357 7

Balance at end of period (901) (421) (778)

Realized and unrealized gains (losses) on derivatives

Balance at beginning of period (17) 2 (2)

Current period changes in fair value (net of tax effect of $2, $5 and $1) 18 (8) 3

Reclassification to income (net of tax effect of $(4), $(3) and $0)

(1)

(12) (11) 1

Balance at end of period (11) (17) 2

Pension and postretirement plans

Balance at beginning of period 4 — (8)

Reclassification to income (net of tax effect of $0, $0 and $(1)) (3) (3) (1)

Other changes (net of tax effect of $0, $(1) and $4) — 7 9

Balance at end of period 1 4 —

Accumulated other comprehensive loss, end of period $ (911) $ (434) $ (776)

(1)

Refer to Note 11, "Derivative Instruments and Hedging Activities," of the notes to 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. RETIREMENT PLANS

Pension Benefits

The Company has non-contributory defined benefit pension plans covering certain U.S. and non-U.S. employees. The benefits

provided are primarily based on years of service and average compensation or a monthly retirement benefit amount. Certain of

the Company’s U.S. pension plans have been amended to prohibit new participants from entering the plans and no longer

accrue benefits. Funding for U.S. pension plans equals or exceeds the minimum requirements of the Employee Retirement

Income Security Act of 1974. Funding for non-U.S. plans observes the local legal and regulatory limits. Also, the Company

makes contributions to union-trusteed pension funds for construction and service personnel.

The following table includes information for pension plans with accumulated benefit obligations ("ABO") in excess of plan

assets (in millions):

September 30,

2022 2021

Accumulated benefit obligation $ 2,004 $ 4,402

Fair value of plan assets 1,720 3,841

The following table includes information for pension plans with projected benefit obligations ("PBO") in excess of plan assets

(in millions):

September 30,

2022 2021

Projected benefit obligation $ 2,013 $ 4,519

Fair value of plan assets 1,729 3,954

During the year ended September 30, 2022, total employer contributions to the defined benefit pension plans were $93 million,

none of which were voluntary contributions made by the Company. The Company expects to contribute approximately $38

million in cash to its defined benefit pension plans in the year ended September 30, 2023. Projected benefit payments from the

plans as of September 30, 2022 are estimated as follows (in millions):

2023

$ 266

2024

248

2025

246

2026

245

2027

243

2028 - 2032

1,180

Postretirement Benefits

The Company provides certain health care and life insurance benefits for eligible retirees and their dependents primarily in the

U.S. and Canada. Most non-U.S. employees are covered by government sponsored programs. The cost to the Company is not

significant.

Eligibility for coverage is based on meeting certain years of service and retirement age qualifications. These benefits may be

subject to deductibles, co-payment provisions and other limitations. The Company has reserved the right to modify these

benefits.

The health care cost trend assumption does not have a significant effect on the amounts reported.

The following table includes information for postretirement plans with accumulated postretirement benefit obligations

("APBO") in excess of plan assets (in millions):

September 30,

2022 2021

Accumulated postretirement benefit obligation $ 68 $ 96

Fair value of plan assets 28 38

During the year ended September 30, 2022, total employer contributions to the postretirement plans were $3 million. The

Company expects to contribute approximately $3 million in cash to its postretirement plans in the year ended September 30,

2023. Projected benefit payments from the plans as of September 30, 2022 are estimated as follows (in millions):

2023

$ 11

2024

2025

2026

2027

2028 - 2032

Defined Contribution Plans

The Company sponsors various defined contribution savings plans that allow employees to contribute a portion of their pre-tax

and/or after-tax income in accordance with plan specified guidelines. Under specified conditions, the Company will contribute

to certain savings plans based on predetermined percentages of compensation earned by the employee and/or will match a

percentage of the employee contributions up to certain limits. The Company temporarily suspended certain contributions in

fiscal 2021 and 2020 in response to the COVID-19 pandemic. Defined contribution plan contributions charged to expense

amounted to $196 million, $118 million and $104 million during the years ended September 30, 2022, 2021 and 2020,

respectively.

Multiemployer Benefit Plans

The Company contributes to multiemployer benefit plans based on obligations arising from collective bargaining agreements

related to certain of its hourly employees in the U.S. These plans provide retirement benefits to participants based on their

service to contributing employers. The benefits are paid from assets held in trust for that purpose. The trustees typically are

responsible for determining the level of benefits to be provided to participants as well as for such matters as the investment of

the assets and the administration of the plans.

The risks of participating in these multiemployer benefit plans are different from single-employer benefit plans in the following

aspects:

• Assets contributed to the multiemployer benefit plan by one employer may be used to provide benefits to employees of

other participating employers.

• If a participating employer stops contributing to the multiemployer benefit plan, the unfunded obligations of the plan

may be borne by the remaining participating employers.

• If the Company stops participating in some of its multiemployer benefit plans, the Company may be required to pay

those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal

liability.

The Company participates in approximately 270 multiemployer benefit plans, none of which are individually significant to the

Company. The number of employees covered by the Company’s multiemployer benefit plans has remained consistent over the

past three years, and there have been no significant changes that affect the comparability of fiscal 2022, 2021 and 2020

contributions. The Company recognizes expense for the contractually-required contribution for each period. The Company

contributed $71 million, $67 million and $66 million to multiemployer benefit plans during the years ended September 30,

2022, 2021 and 2020, respectively.

Based on the most recent information available, the Company believes that the present value of actuarial accrued liabilities in

certain of these multiemployer benefit plans may exceed the value of the assets held in trust to pay benefits. Currently, the

Company is not aware of any significant multiemployer benefit plans for which it is probable or reasonably possible that the

Company will be obligated to make up any shortfall in funds. Moreover, if the Company were to exit certain markets or

otherwise cease making contributions to these funds, the Company could trigger a withdrawal liability. Currently, the Company

is not aware of any multiemployer benefit plans for which it is probable or reasonably possible that the Company will have a

significant withdrawal liability. Any accrual for a shortfall or withdrawal liability will be recorded when it is probable that a

liability exists and it can be reasonably estimated.

Plan Assets

The Company’s investment policies employ an approach whereby a mix of equities, fixed income and alternative investments

are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio primarily contains

a diversified blend of equity and fixed income investments. Equity investments are diversified across U.S. and non-U.S. stocks,

as well as growth, value and small to large capitalization. Fixed income investments include corporate and government issues,

with short-, mid- and long-term maturities, with a focus on investment grade when purchased and a target duration close to that

of the plan liability. Investment and market risks are measured and monitored on an ongoing basis through regular investment

portfolio reviews, annual liability measurements and periodic asset/liability studies. The majority of the real estate component

of the portfolio is invested in a diversified portfolio of high-quality, operating properties with cash yields greater than the

targeted appreciation. Investments in other alternative asset classes, including hedge funds and commodities, diversify the

expected investment returns relative to the equity and fixed income investments. As a result of the Company's diversification

strategies, there are no significant concentrations of risk within the portfolio of investments.

The Company’s actual asset allocations are in line with target allocations. The Company rebalances asset allocations as

appropriate, in order to stay within a range of allocation for each asset category.

The expected return on plan assets is based on the Company’s expectation of the long-term average rate of return of the capital

markets in which the plans invest. The average market returns are adjusted, where appropriate, for active asset management

returns. The expected return reflects the investment policy target asset mix and considers the historical returns earned for each

asset category.

The Company’s plan assets at September 30, 2022 and 2021, by asset category, are as follows (in millions):

Fair Value Measurements Using:

Asset Category

Total as of

September 30,

2022

Quoted Prices

in Active

Markets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

U.S. Pension

Cash and Cash Equivalents $ 40 $ — $ 40 $ —

Equity Securities

Large-Cap 160 160 — —

Small-Cap 175 175 — —

International - Developed 139 139 — —

International - Emerging 39 39 — —

Fixed Income Securities

Government 217 216 1 —

Corporate/Other 804 804 — —

Total Investments in the Fair Value Hierarchy 1,574 $ 1,533 $ 41 $ —

Real Estate Investments Measured at Net Asset Value

(1)

322

Due to Broker (166)

Total Plan Assets $ 1,730

Non-U.S. Pension

Cash and Cash Equivalents $ 150 $ 150 $ — $ —

Equity Securities

Large-Cap 45 8 37 —

International - Developed 43 12 31 —

International - Emerging 3 — 3 —

Fixed Income Securities

Government 650 50 600 —

Corporate/Other 418 277 141 —

Hedge Fund 18 — 18 —

Real Estate 9 9 — —

Total Investments in the Fair Value Hierarchy 1,336 $ 506 $ 830 $ —

Real Estate Investments Measured at Net Asset Value

(1)

Total Plan Assets $ 1,433

Postretirement

Cash and Cash Equivalents $ 13 $ 13 $ — $ —

Equity Securities

Global 66 — 66 —

Total Investments in the Fair Value Hierarchy 79 $ 13 $ 66 $ —

Multi-Credit Strategy Investments Measured at Net

Asset Value

(1)

Total Plan Assets $ 144

Fair Value Measurements Using:

Asset Category

Total as of

September 30,

2021

Quoted Prices

in Active

Markets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

U.S. Pension

Cash and Cash Equivalents $ 75 $ — $ 75 $ —

Equity Securities

Large-Cap 185 185 — —

Small-Cap 215 215 — —

International - Developed 182 182 — —

International - Emerging 34 34 — —

Fixed Income Securities

Government 286 98 188 —

Corporate/Other 1,279 1,279 — —

Total Investments in the Fair Value Hierarchy 2,256 $ 1,993 $ 263 $ —

Real Estate Investments Measured at Net Asset Value

(1)

280

Due to Broker (77)

Total Plan Assets $ 2,459

Non-U.S. Pension

Cash and Cash Equivalents $ 151 $ 151 $ — $ —

Large-Cap 197 23 174 —

International - Developed 128 30 98 —

International - Emerging 2 — 2 —

Fixed Income Securities

Government 1,123 77 1,046 —

Corporate/Other 597 320 277 —

Hedge Fund 27 — 27 —

Real Estate 14 14 — —

Total Investments in the Fair Value Hierarchy 2,239 $ 615 $ 1,624 $ —

Real Estate Investments Measured at Net Asset Value

(1)

105

Total Plan Assets $ 2,344

Postretirement

Cash and Cash Equivalents $ 5 $ 5 $ — $ —

Equity Securities

Large-Cap 24 — 24 —

Small-Cap 8 — 8 —

International - Developed 19 — 19 —

International - Emerging 12 — 12 —

Fixed Income Securities

Government 20 — 20 —

Corporate/Other 56 — 56 —

Commodities 17 — 17 —

Real Estate 11 — 11 —

Total Plan Assets $ 172 $ 5 $ 167 $ —

(1)

The fair value of certain real estate and multi-credit strategy investments do not have a readily determinable fair value and

require the fund managers to independently arrive at fair value by calculating net asset value ("NAV") per share. In order to

calculate NAV per share, the fund managers value the investments using any one, or a combination of, the following methods:

independent third party appraisals, discounted cash flow analysis of net cash flows projected to be generated by the investment

and recent sales of comparable investments. Assumptions used to revalue the investments are updated every quarter. Due to the

fact that the fund managers calculate NAV per share, the Company utilizes a practical expedient for measuring the fair value of

its real estate and multi-credit strategy investments, as provided for under ASC 820, "Fair Value Measurement." In applying the

practical expedient, the Company is not required to further adjust the NAV provided by the fund manager in order to determine

the fair value of its investments as the NAV per share is calculated in a manner consistent with the measurement principles of

ASC 946, "Financial Services - Investment Companies," and as of the Company's measurement date. The Company believes

this is an appropriate methodology to obtain the fair value of these assets. For the component of the real estate portfolio under

development, the investments are carried at cost until they are completed and valued by a third party appraiser. In accordance

with ASU No. 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its

Equivalent)," investments for which fair value is measured using the net asset value per share practical expedient are disclosed

separate from the fair value hierarchy. The fair value amounts presented in these tables are intended to permit reconciliation of

total plan assets to the amounts presented in the notes to consolidated financial statements.

The following is a description of the valuation methodologies used for assets measured at fair value. Certain assets are held

within commingled funds which are valued at the unitized NAV or percentage of the net asset value as determined by the

manager of the fund. These values are based on the fair value of the underlying net assets owned by the fund.

Cash and Cash Equivalents: The fair value of cash and cash equivalents is valued at cost.

Equity Securities: The fair value of equity securities is determined by direct quoted market prices. The underlying holdings are

direct quoted market prices on regulated financial exchanges.

Fixed Income Securities: The fair value of fixed income securities is determined by direct or indirect quoted market prices. If

indirect quoted market prices are utilized, the value of assets held in separate accounts is not published, but the investment

managers report daily the underlying holdings. The underlying holdings are direct quoted market prices on regulated financial

exchanges.

Commodities: The fair value of the commodities is determined by quoted market prices of the underlying holdings on regulated

financial exchanges.

Hedge Funds: The fair value of hedge funds is accounted for by the custodian. The custodian obtains valuations from

underlying managers based on market quotes for the most liquid assets and alternative methods for assets that do not have

sufficient trading activity to derive prices. The Company and custodian review the methods used by the underlying managers to

value the assets. The Company believes this is an appropriate methodology to obtain the fair value of these assets.

Real Estate: The fair value of real estate is determined by quoted market prices of the underlying Real Estate Investment Trusts

("REITs"), which are securities traded on an open exchange.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or

reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent

with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial

instruments could result in a different fair value measurement at the reporting date.

There were no Level 3 assets as of September 30, 2022 or 2021 or any Level 3 asset activity during fiscal 2022 or 2021.

Funded Status

The following table contains the ABO and reconciliations of the changes in the PBO, the changes in plan assets and the funded

status (in millions):

Pension Benefits

Postretirement

Benefits U.S. Plans Non-U.S. Plans

September 30, 2022 2021 2022 2021 2022 2021

Accumulated Benefit Obligation $ 1,822 $ 2,629 $ 1,417 $ 2,540 $ 89 $ —

Change in Projected Benefit Obligation

Projected benefit obligation at beginning of year $ 2,629 $ 3,217 $ 2,625 $ 2,726 $ 123 $ 146

Service cost — — 20 27 1 1

Interest cost 56 47 39 32 2 2

Plan participant contributions — — 2 3 3 3

Actuarial gain (587) (52) (651) (103) (25) (13)

Amendments made during the year — — (1) (6) — —

Benefits and settlements paid (276) (583) (166) (124) (14) (17)

Curtailment — — — (3) — —

Other — — (2) (2) — —

Currency translation adjustment — — (395) 75 (1) 1

Projected benefit obligation at end of year $ 1,822 $ 2,629 $ 1,471 $ 2,625 $ 89 $ 123

Change in Plan Assets

Fair value of plan assets at beginning of year $ 2,459 $ 2,706 $ 2,344 $ 2,213 $ 172 $ 153

Actual return on plan assets (454) 333 (459) 125 (20) 30

Employer and employee contributions 1 3 94 65 6 6

Benefits paid (85) (108) (74) (79) (14) (17)

Settlement payments (191) (475) (92) (45) — —

Other — — (2) (1) — —

Currency translation adjustment — — (378) 66 — —

Fair value of plan assets at end of year $ 1,730 $ 2,459 $ 1,433 $ 2,344 $ 144 $ 172

Funded status $ (92) $ (170) $ (38) $ (281) $ 55 $ 49

Amounts recognized in the statement of financial position consist of:

Prepaid benefit cost $ 37 $ 44 $ 151 $ 79 $ 95 $ 107

Accrued benefit liability (129) (214) (189) (360) (40) (58)

Net amount recognized $ (92) $ (170) $ (38) $ (281) $ 55 $ 49

Weighted Average Assumptions

(1)

Discount rate

(2)

5.08 % 2.50 % 4.36 % 1.80 % 4.92 % 2.30 %

Rate of compensation increase N/A N/A 3.00 % 2.85 % N/A N/A

Interest crediting rate N/A N/A 1.69 % 1.45 % N/A N/A

(1)

Plan assets and obligations are determined based on a September 30 measurement date at September 30, 2022 and 2021.

The Company considers the expected benefit payments on a plan-by-plan basis when setting assumed discount rates. As a

result, the Company uses different discount rates for each plan depending on the plan jurisdiction, the demographics of

participants and the expected timing of benefit payments. For the U.S. pension and postretirement plans, the Company uses a

discount rate provided by an independent third party calculated based on an appropriate mix of high quality bonds. For the non-

U.S. pension and postretirement plans, the Company consistently uses the relevant country specific benchmark indices for

determining the various discount rates. The Company has elected to utilize a full yield curve approach in the estimation of

service and interest components of net periodic benefit cost (credit) for pension and other postretirement for plans that utilize a

yield curve approach. The full yield curve approach applies the specific spot rates along the yield curve used in the

determination of the benefit obligation to the relevant projected cash flows.

The fiscal 2022 and fiscal 2021 net actuarial gains related to changes in the projected benefit obligation were primarily the

result of the increase in discount rates globally.

Net Periodic Benefit Cost

The following table contains the components of net periodic benefit costs, which are primarily recorded in selling, general and

administrative expenses in the consolidated statements of income (in millions):

Pension Benefits

Postretirement Benefits U.S. Plans Non-U.S. Plans

Year ended September 30, 2022 2021 2020 2022 2021 2020 2022 2021 2020

Components of Net Periodic

Benefit Cost (Credit):

Service cost $ — $ — $ — $ 20 $ 27 $ 25 $ 1 $ 1 $ 1

Interest cost 56 47 67 39 32 36 2 2 4

Expected return on plan assets (150) (171) (180) (81) (112) (111) (9) (8) (9)

Net actuarial (gain) loss 16 (214) 244 (116) (115) 43 4 (35) 2

Amortization of prior service

cost (credit) — — — — 1 1 (4) (4) (3)

Curtailment gain — — — — (3) (8) — — —

Settlement (gain) loss 1 — 6 5 (1) — — — —

Special termination benefit

cost — — — — 2 — — — —

Net periodic benefit cost

(credit) included in

continuing operations $ (77) $ (338) $ 137 $ (133) $ (169) $ (14) $ (6) $ (44) $ (5)

Expense Assumptions:

Discount rate 2.52 % 2.25 % 2.95 % 1.79 % 1.35 % 1.50 % 2.30 % 1.90 % 2.65 %

Expected return on plan assets 7.00 % 6.50 % 6.90 % 3.70 % 4.90 % 5.20 % 5.29 % 5.30 % 5.70 %

Rate of compensation increase N/A N/A N/A 2.85 % 2.75 % 2.80 % N/A N/A N/A

Interest crediting rate N/A N/A N/A 1.44 % 1.50 % 1.50 % N/A N/A N/A

17. SIGNIFICANT RESTRUCTURING AND IMPAIRMENT COSTS

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying

markets, the Company commits to restructuring plans as necessary. Restructuring plans generally result in charges for

workforce reductions, plant closures, asset impairments and other related costs which are reported as restructuring and

impairment costs in the Company’s consolidated statements of income. The other related costs consist primarily of consulting

costs incurred as a direct result of the restructuring initiatives. The Company expects the restructuring actions to reduce cost of

sales and SG&A due to reduced employee-related costs, depreciation and amortization expense.

In fiscal 2021, the Company committed to a significant multi-year restructuring plan ("2021 Plan") which is expected to be

completed during fiscal 2023. The Company originally expected to incur $385 million of restructuring costs across all segments

and at Corporate through fiscal 2023. The Company has incurred and exceeded these costs during fiscal 2022 due to certain

restructuring actions and expenses planned for fiscal 2023 being accelerated into fiscal 2022. In total, the Company recorded

$424 million of restructuring and impairment costs related to the 2021 Plan, which is the total amount expected to be incurred

for this restructuring plan.

The following table summarizes restructuring and impairment costs related to the 2021 Plan (in millions):

Year Ended

September 30, 2022

Inception to

September 30, 2022

Building Solutions North America

$ 41 $ 111

Building Solutions EMEA/LA

33 62

Building Solutions Asia Pacific

21 49

Global Products

75 166

Corporate

12 36

Total

$ 182 $ 424

The following table summarizes the changes in the Company’s 2021 Plan reserve, included primarily within other current

liabilities in the consolidated statements of financial position (in millions):

Employee

Severance and

Termination

Benefits

Long-Lived

Asset

Impairments

(1)

Other Total

Original reserve $ 68 $ 98 $ 76 $ 242

Utilized—cash (28) — (51) (79)

Utilized—noncash — (98) — (98)

Balance at September 30, 2021 40 — 25 65

Additional restructuring costs 116 17 49 182

Utilized—cash (81) — (66) (147)

Utilized—noncash — (17) — (17)

Currency translation (1) — — (1)

Balance at September 30, 2022 $ 74 $ — $ 8 $ 82

(1)

Of the $98 million of long-lived asset impairment charges in fiscal 2021, $50 million related to the Global Products segment,

$33 million related to the Building Solutions North America segment, $6 million related to Corporate assets, $5 million related

to the Building Solutions EMEA/LA segment and $4 million related to the Building Solutions Asia Pacific segment. Of the

$17 million of long-lived asset impairment charges in fiscal 2022, $6 million related to the Building Solutions Asia Pacific

segment, $5 million related to Corporate assets, $3 million related to the Global Products segment, $2 million related to the

Building Solutions EMEA/LA segment and $1 million related to the Building Solutions North America segment.

The 2021 Plan included workforce reductions of approximately 6,200 employees. Restructuring charges associated with

employee severance and termination benefits are paid over the severance period granted to each employee or on a lump sum

basis in accordance with individual severance agreements. As of September 30, 2022, approximately 4,000 of the employees

have been separated from the Company pursuant to the restructuring plans.

Company management closely monitors its overall cost structure and continually analyzes each of its businesses for

opportunities to consolidate current operations, improve operating efficiencies and locate facilities in close proximity to

customers. This ongoing analysis includes a review of its manufacturing, engineering and purchasing operations, as well as the

overall global footprint for all its businesses.

18. INCOME TAXES

The more significant components of the Company’s income tax provision from continuing operations are as follows (in

millions):

2022 2021 2020

Tax expense at Ireland statutory rate $ 214 $ 327 $ 113

U.S. state income tax, net of federal benefit (23) 34 8

Income subject to the U.S. federal tax rate (95) 3 (92)

Income subject to rates different than the statutory rate 125 30 99

Reserve and valuation allowance adjustments (274) 66 (70)

Intercompany intellectual property transfer — 417 —

Restructuring and impairment costs 40 (9) 50

Income tax provision (benefit) $ (13) $ 868 $ 108