Johnson Controls International plc

Previous wording

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 develop or acquire new products and technologies that achieve market acceptance and meet applicable quality and regulatory requirements; the ability to manage general economic, business and capital market conditions, including the impact of recessions, economic downturns and global price inflation; fluctuations in the cost and availability of public and private financing for the Company's customers; the ability to innovate and adapt to emerging technologies, ideas and trends in the marketplace, including the incorporation of technologies such as artificial intelligence; the ability to manage macroeconomic and geopolitical volatility, including shortages impacting the availability of raw materials and component products and the conflicts between Russia and Ukraine and Israel and Hamas; managing the risks and impacts of potential and actual security breaches, cyberattacks, privacy breaches or data breaches, including business, service, or operational disruptions, the unauthorized access to or disclosure of data, financial loss, reputational damage, increased response and remediation costs, legal, and regulatory proceedings or other unfavorable outcomes; the Company's ability to remediate its material weakness; 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; changes to laws or policies governing foreign trade, including economic sanctions, tariffs, foreign exchange and capital controls, import/export controls or other trade restrictions; fluc…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 develop or acquire new products and technologies that achieve market acceptance and meet applicable quality and regulatory requirements; the ability to manage general economic, business and capital market conditions, including the impact of recessions, economic downturns and global price inflation; fluctuations in the cost and availability of public and private financing for the Company's customers; the ability to innovate and adapt to emerging technologies, ideas and trends in the marketplace, including the incorporation of technologies such as artificial intelligence; the ability to manage macroeconomic and geopolitical volatility, including shortages impacting the availability of raw materials and component products and the conflicts between Russia and Ukraine and Israel and Hamas; managing the risks and impacts of potential and actual security breaches, cyberattacks, privacy breaches or data breaches, including business, service, or operational disruptions, the unauthorized access to or disclosure of data, financial loss, reputational damage, increased response and remediation costs, legal, and regulatory proceedings or other unfavorable outcomes; the Company's ability to remediate its material weakness; 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; changes to laws or policies governing foreign trade, including economic sanctions, tariffs, foreign exchange and capital controls, import/export controls or other trade restrictions; fluc…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The following information should be read in conjunction with the September 30, 2023 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the year ended September 30, 2023 filed with the SEC on December 14, 2023. References in the following discussion and analysis to "Three Months," "First Quarter" or similar language refer to the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Current wording

The following information should be read in conjunction with the September 30, 2023 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the year ended September 30, 2023 filed with the SEC on December 14, 2023. References in the following discussion and analysis to "Three Months," "Second Quarter" or similar language refer to the three months ended March 31, 2024 compared to the three months ended March 31, 2023, while "Year-to-Date" refers to six months ended March 31, 2024 compared to the six months ended March 31, 2023.

Previous wording

Much of the demand for the Company’s products and solutions is driven by construction, facility expansion, retrofit and maintenance projects within the commercial, institutional, industrial, data center, governmental and residential sectors. Construction projects are heavily dependent on general economic conditions, localized demand for real estate and the availability of credit, public funding or other financing sources. Positive or negative fluctuations in construction, industrial facility expansion, retrofit activity, maintenance projects and other capital investments in buildings within the sectors that the Company serves, as well as availability of credit, financing or funding for such projects, could have a corresponding impact on the Company’s financial condition, results of operations and cash flows. During the three months ended December 31, 2023, the Company observed a softening of economic conditions in China, negatively impacting the performance of the Building Solutions Asia Pacific segment. The Company expects economic conditions in China to remain soft throughout the remainder of fiscal 2024, which could impact the performance of the Building Solutions Asia Pacific segment.

Current wording

Much of the demand for the Company’s products and solutions is driven by construction, facility expansion, retrofit and maintenance projects within the commercial, institutional, industrial, data center, governmental and residential sectors. Construction projects are heavily dependent on general economic conditions, localized demand for real estate and the availability of credit, public funding or other financing sources. Positive or negative fluctuations in construction, industrial facility expansion, retrofit activity, maintenance projects and other capital investments in buildings within the sectors that the Company serves, as well as availability of credit, financing or funding for such projects, could have a corresponding impact on the Company’s financial condition, results of operations and cash flows. During the six months ended March 31, 2024, the Company observed continued softening of economic conditions in China, negatively impacting the performance of the Building Solutions Asia Pacific segment. The Company expects economic conditions in China to remain soft throughout the remainder of fiscal 2024, which could impact the performance of the Building Solutions Asia Pacific segment.

Previous wording

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 the three months ended December 31, 2023, revenue and profits were positively impacted by movements in foreign exchange rates against the U.S. dollar.

Current wording

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. Revenue and profits were negatively impacted by movements in foreign exchange rates against the U.S. dollar during the three and six months ended March 31, 2024.

Previous wording

The Company has experienced, and could continue to experience, increased 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, geopolitical and economic tensions, including the conflict between Russia and Ukraine and Israel and Hamas, 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 favorable to 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 observed improved margins as supply chain disruptions have largely been resolved and higher priced backlog is converted to sales, but this improvement has been offset by lower volumes. Although the Company has experienced recent improvement, further disruptions, shortages and cost increases could occur in the future, the effect of which will depend on the Company’s ability to successfully mitigate and offset the impact of these events.

Current wording

The Company has experienced, and could continue to experience, increased 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, geopolitical and economic tensions, including the conflict between Russia and Ukraine and Israel and Hamas, 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 favorable to revenue due to increased demand and price increases to offset inflation, while negatively impacting margins primarily due to ongoing cost pressures. Although the Company has experienced recent improvement, further disruptions, shortages and cost increases could occur in the future, the effect of which will depend on the Company’s ability to successfully mitigate and offset the impact of these events.

Previous wording

The cybersecurity incident consisted of unauthorized access, data exfiltration and deployment of ransomware by a third party to a portion of the Company’s internal IT infrastructure. The incident caused disruptions and limitation of access to portions of the Company’s business applications supporting aspects of the Company’s operations and corporate functions, which disruptions and limitations continued into the early portion of the first quarter of fiscal 2024. To date, the Company has restored the impacted applications and systems.

Current wording

During the weekend of September 23, 2023, the Company experienced a cybersecurity incident impacting its internal information technology ("IT") infrastructure and applications. The cybersecurity incident consisted of unauthorized access, data exfiltration and deployment of ransomware by a third party to a portion of the Company's internal IT infrastructure. The incident caused disruptions and limitation of access to portions of the Company's business applications supporting aspects of the Company's operations and corporate functions, which disruptions and limitations continued into the early portion of the first quarter of fiscal 2024. The Company has contained the unauthorized access and restored the impacted applications and systems.

Previous wording

During the weekend of September 23, 2023, the Company experienced a cybersecurity incident impacting its internal information technology ("IT") infrastructure and applications. The incident was detected shortly after receiving reports of outages to certain of the Company’s systems. Promptly after detecting the issue, the Company implemented its incident management and response plan and business continuity plans, including implementing remediation measures to mitigate the impact of the incident and restore affected systems and functions. The Company also engaged leading cybersecurity experts and other specialized consultants to assist in its investigation and remediation of the incident, as well as the restoration of impacted applications and systems. The Company’s investigation and remediation efforts remain ongoing, including the analysis of data accessed, exfiltrated or otherwise impacted during the cybersecurity incident. Based on the information reviewed to date, the Company believes the unauthorized activity has been contained and has not observed evidence of any impact to its digital products, services and solutions, including OpenBlue and Metasys.

Current wording

The Company’s investigation and remediation efforts remain ongoing, including the analysis of data accessed, exfiltrated or otherwise impacted during the cybersecurity incident. Based on the information reviewed to date, the Company has not observed evidence of any impact to its digital products, services and solutions, including OpenBlue and Metasys.

Previous wording

The impact on net income for the three months ended December 31, 2023 of lost and deferred revenues, net of revenues deferred at the end of fiscal 2023 and recognized in the first quarter of fiscal 2024, and expenses during the quarter was approximately $27 million. These impacts were primarily attributable to expenses associated with the response to, and remediation of, the incident, and are net of insurance recoveries.

Current wording

The impact on net income for the six months ended March 31, 2024 was approximately $29 million. The impact is primarily attributable to expenses associated with the response to, and remediation of, the incident, and is net of insurance recoveries and revenues deferred at the end of fiscal 2023 which were recognized in the first half of fiscal 2024. Additional expenses are expected in the remainder of the fiscal year, but are not expected to be material.

Previous wording

The Company expects to incur additional expenses associated with the response to, and remediation of, the incident throughout fiscal 2024, most of which the Company expects to incur in the first half of the year. These expenses include third-party expenditures, including IT recovery and forensic experts and others performing professional services to investigate and remediate the incident, as well as incremental operating expenses incurred from the resulting disruption to the Company’s business operations. Further, the cybersecurity incident caused disruptions to certain of the Company’s billing systems, which negatively impacted cash provided from operations during the first quarter of fiscal 2024. The overall impact of the cybersecurity incident in fiscal 2024 is not expected to be material to net income, net of insurance recoveries, or cash flows from continuing operations; however, the timing of recognizing the insurance recoveries may differ from the timing of recognizing the associated expenses.

Current wording

Expenses include third-party expenditures, including IT recovery and forensic experts and others performing professional services to investigate and remediate the incident, as well as incremental operating expenses incurred from the resulting disruption to the Company’s business operations. The overall impact of the cybersecurity incident in fiscal 2024 is not expected to be material to net income, net of insurance recoveries, or cash flows from continuing operations; however, the timing of recognizing the insurance recoveries may differ from the timing of recognizing the associated expenses.

Previous wording

In the third and fourth quarters of fiscal 2023, the Company developed a restructuring plan which included workforce reductions and other actions focused on continued scaling of selling, general and administrative expenses ("SG&A") to its planned growth. The costs of the plan were recorded to restructuring and impairment costs in the consolidated statements of income. An additional $39 million of restructuring charges related to this plan were incurred in the three months ended December 31, 2023. Additional restructuring charges are expected in subsequent quarters. The Company expects savings from the restructuring initiatives to be substantially offset by incremental ongoing operating costs and investments to grow the business.

Current wording

In the third and fourth quarters of fiscal 2023, the Company developed a restructuring plan which included workforce reductions and other actions focused on continued scaling of selling, general and administrative expenses ("SG&A") to its planned growth. The costs of the plan were recorded to restructuring and impairment costs in the consolidated statements of income. In the three and six months ended March 31, 2024, an additional $24 million and $63 million, respectively, of restructuring charges related to this plan were incurred. Additional restructuring charges are expected in subsequent quarters. The Company expects savings from the restructuring initiatives to be substantially offset by incremental ongoing operating costs and investments to grow the business.

Previous wording

•The increase in Building Solutions EMEA/LA was primarily due to growth in Service.

Current wording

For the three months ended March 31, 2024, higher organic sales ($76 million) and the net impact of acquisitions and divestitures ($21 million) were substantially offset by the unfavorable impact of foreign currency translation ($84 million). Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 1% over the prior year, primarily attributable to growth in Service, which was partially offset by continued weakness in China's Systems/Install business and declines in Residential HVAC.

Previous wording

The increase in consolidated net sales for the three-month period ended December 31, 2023 was due to the net impact of acquisitions and divestitures ($41 million) and the favorable impact of foreign currency translation ($28 million), partially offset by lower organic sales ($43 million). Excluding the impact of foreign currency translation and business acquisitions and divestitures, consolidated net sales decreased 1% as compared to the prior year, primarily attributable to lower volumes, partially offset by higher pricing. Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment.

Current wording

Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment.

Previous wording

Cost of sales increased and gross profit decreased for the three-month period ended December 31, 2023, and gross profit as a percentage of sales decreased by 180 basis points. Gross profit and gross profit as a percentage of sales both decreased due to lower volumes, partially offset by favorable price/cost. Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings before interest, taxes and amortization ("EBITA").

Current wording

Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings before interest, taxes and amortization ("EBITA").

Previous wording

Refer to Note 4, "Assets and Liabilities Held for Sale," and Note 17, "Restructuring and Related Costs," of the notes to the consolidated financial statements for further disclosure related to the Company's restructuring plans and impairment costs.

Current wording

Refer to Note 4, "Assets and Liabilities Held for Sale," Note 8, "Goodwill and Other Intangible Assets," and Note 17, "Restructuring and Related Costs," of the notes to the consolidated financial statements for further disclosure related to the Company's restructuring actions and impairment costs.

Previous wording

The decrease in the effective tax rate for the three-month period ended December 31, 2023 was primarily due to Swiss tax reform and the benefits of continuing global tax planning, partially offset by the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain consolidated subsidiaries and tax rate differentials. Refer to Note 18, "Income Taxes," of the notes to the consolidated financial statements for further detail.

Current wording

Refer to Note 18, "Income Taxes" of the notes to the consolidated financial statements for further disclosure related to the Company's income taxes.

Previous wording

Management evaluates the performance of its business units based primarily on segment EBITA, which represents income 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.

Current wording

Management evaluates the performance of its segments primarily on segment earnings before interest, taxes and amortization ("EBITA"), which represents income before income taxes and noncontrolling interests, excluding corporate expenses, amortization of intangible assets, restructuring and impairment costs, the water systems AFFF settlement costs, net mark-to-market gains and losses related to pension and postretirement plans and restricted asbestos investments, and net financing charges.

Previous wording

•The increase in Building Solutions EMEA/LA was primarily due to the favorable impact of foreign currency translation ($42 million), organic growth, including higher prices ($18 million) and incremental sales related to business acquisitions ($6 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales growth was led by continued momentum in Applied HVAC & Controls and Fire & Security, led by high-single digit growth in Service.

Current wording

•The increase in Building Solutions North America was primarily due to organic growth, including higher prices ($196 million), incremental sales related to business acquisitions ($16 million) and the favorable impact of foreign currency translation ($7 million). Excluding the impacts of foreign currency translation and business acquisitions, sales growth was led by high-teens growth in Applied HVAC & Controls.

Previous wording

•The decrease in Building Solutions Asia Pacific was primarily due to organic sales declines ($131 million) and the unfavorable impact of foreign currency translation ($10 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales decreased as mid single-digit Service growth was more than offset by accelerating weakness in the China Install business.

Current wording

•The decrease in Building Solutions Asia Pacific was primarily due to organic sales declines ($143 million) and the unfavorable impact of foreign currency translation ($33 million). Excluding the impacts of foreign currency translation, sales decreased as high single-digit Service growth was more than offset by continued weakness in the China Systems/Install business.

Previous wording

•The increase in Building Solutions North America was primarily due to organic growth, including higher prices ($98 million), incremental sales related to business acquisitions ($16 million) and the favorable impact of foreign currency translation ($6 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales growth was led by double-digit growth in Applied HVAC & Controls.

Current wording

•The increase in Building Solutions North America was primarily due to organic growth, including higher prices ($294 million), incremental sales related to business acquisitions ($32 million) and the favorable impact of foreign currency translation ($13 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales growth was led by growth in Applied HVAC & Controls.

Previous wording

•The decrease in Global Products was due to the net impact of lower volumes and higher prices ($28 million) and the unfavorable impact of foreign currency translation ($10 million), partially offset by the net impact of business acquisitions and divestitures ($20 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales decreased as low single-digit growth in Commercial HVAC was more than offset by declines in global Residential sales.

Current wording

•The decrease in Global Products was due to the unfavorable impact of foreign currency translation ($64 million) and the net impact of lower volumes and higher prices ($41 million), partially offset by the net impact of business acquisitions and divestitures ($24 million). Excluding the impacts of foreign currency translation and business acquisitions and divestitures, sales decreased as growth in Applied and Commercial HVAC was more than offset by declines in Residential HVAC.

Previous wording

•The decrease in Building Solutions Asia Pacific was primarily due to continued weakness in the China Install business.

Current wording

•The decrease in Building Solutions Asia Pacific was primarily due to continued weakness in the Systems/Install business in China.

Previous wording

•The decrease in Global Products was primarily due to lower volumes driving unfavorable manufacturing absorption and unfavorable mix, partially offset by favorable price and an uninsured loss associated with a fire at a leased warehouse facility in the prior year.

Current wording

•The decrease in Global Products was primarily due to unfavorable mix, a charge related to a product quality issue, and the more favorable impact of an acquisition earn-out liability adjustment in the prior year, partially offset by the absence of the prior year loss associated with a fire at a leased warehouse facility.

Previous wording

At December 31, 2023, remaining performance obligations were $19.9 billion, which is $6.2 billion higher than the Company's backlog of $13.7 billion. Differences between the Company’s remaining performance obligations and backlog are primarily due to:

Current wording

Remaining performance obligations were $21.2 billion at March 31, 2024. Differences between the Company’s remaining performance obligations and backlog are primarily due to:

Previous wording

•Remaining performance obligations exclude certain customer contracts with a term of one year or less or contracts that are cancellable without substantial penalty versus backlog which includes short-term and cancellable contracts; and

Current wording

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

Previous wording

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

Current wording

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

Previous wording

•The decrease in cash used by investing activities was primarily due to lower capital expenditures and acquisitions.

Current wording

•The decrease in cash used by investing activities was primarily due to greater cash usage in the prior year for acquisitions.

Previous wording

•The increase in cash provided by financing activities was primarily due to increases in commercial paper and other short-term debt and the lack of share repurchases in the three months ended December 31, 2023.

Current wording

•The increase in cash provided by financing activities was primarily due to changes in net debt activity, partially offset by higher share repurchases in the six months ended March 31, 2024.

Previous wording

•As of December 31, 2023, approximately $3.0 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice. The Company expects to repurchase outstanding shares from time to time depending on market conditions, alternate uses of capital, liquidity, and the economic environment.

Current wording

•As of March 31, 2024, approximately $2.5 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice. The Company expects to repurchase outstanding shares from time to time depending on market conditions, alternate uses of capital, liquidity, and the economic environment.

Previous wording

•The Company believes its capital resources and liquidity position, including cash and cash equivalents of $1.8 billion at December 31, 2023, are adequate to fund operations and meet its obligations for the foreseeable future. The Company expects requirements for working capital, capital expenditures, dividends, minimum pension contributions, debt maturities and any potential acquisitions or stock repurchases in the remainder of fiscal 2024 will be funded from operations, supplemented by short- and long-term borrowings, if required.

Current wording

•The Company believes its capital resources and liquidity position, including cash and cash equivalents of $843 million at March 31, 2024, are adequate to fund operations and meet its cash obligations for the foreseeable future.

Previous wording

–The Company manages its short-term debt position in the U.S. and euro commercial paper and bank loan markets. Commercial paper outstanding totaled $1.4 billion as of December 31, 2023 and $0.2 billion as of September 30, 2023.

Current wording

–The Company manages its short-term debt position in the U.S. and euro commercial paper and bank loan markets. Commercial paper outstanding totaled $1.8 billion as of March 31, 2024 and $0.2 billion as of September 30, 2023.

Previous wording

•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 Accounting Standards Codification ("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment. As of December 31, 2023, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future. None of the Company’s debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Company's credit rating.

Current wording

•Financial covenants in the Company's revolving credit facilities require a minimum consolidated shareholders’ equity attributable to Johnson Controls of at least $3.5 billion at all times. The revolving credit facility also limits the amount of debt secured by liens that may be incurred to a maximum aggregated amount of 10% of consolidated shareholders’ equity attributable to Johnson Controls for liens and pledges. For purposes of calculating these covenants, consolidated shareholders’ equity attributable to Johnson Controls is calculated without giving effect to (i) the application of Accounting Standards Codification ("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment. As of March 31, 2024, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future. None of the Company’s debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Company's credit rating.

Previous wording

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

Current wording

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

Previous wording

•Refer to Note 10, "Debt and Financing Arrangements," of the notes to the consolidated financial statements for additional information on debt balances and items impacting capitalization.

Current wording

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