Johnson Controls International plc
For the period ended Sep 30, 2024. Filed Nov 19, 2024.
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FY2024 · Filed Nov 19, 2024
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13. Stock-Based Compensation
- STOCK-BASED COMPENSATION
Unless otherwise noted, all activities and amounts reported in this footnote include both continuing operations of the Company and activities and amounts related to the R&LC HVAC business. See Note 3, "Assets and Liabilities Held for Sale and Discontinued Operations" for additional details regarding divestiture of the R&LC HVAC business.
The Johnson Controls International plc 2021 Equity and Incentive Plan authorizes 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. Annual awards are typically granted in the first quarter of the fiscal year. As of September 30, 2024, there were 55 million shares of the Company's common stock reserved and 36 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, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Compensation expense | $100 | $101 | $104 |
| Income tax benefit resulting from share-based compensation arrangements | 25 | 25 | 26 |
| Tax impact from exercise and vesting of equity settled awards | 1 | 7 | 12 |
Compensation expense 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, 2024, and changes for the year then ended, is presented below:
| WeightedAveragePrice | Shares/UnitsSubject toRestriction | |
|---|---|---|
| Non-vested, September 30, 2023 | $64.90 | 2,807,113 |
| Granted | 55.05 | 2,090,092 |
| Vested | 63.75 | (1,315,306) |
| Forfeited | 61.42 | (677,796) |
| Non-vested, September 30, 2024 | $59.29 | 2,904,103 |
At September 30, 2024, the Company had approximately $120 million of total unrecognized compensation cost related to non-vested restricted stock arrangements granted which is expected to be recognized over a weighted-average period of 1.8 years.
Performance Share Awards (PSU's)
The following table summarizes the assumptions used in determining the fair value of performance share awards granted:
| Year Ended September 30, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Risk-free interest rate | 4.21% | 4.04% | 0.99% |
| Expected volatility of the Company’s stock | 27.20% | 33.50% | 30.00% |
A summary of the status of the Company’s non-vested PSU's at September 30, 2024, and changes for the year then ended, is presented below:
| WeightedAveragePrice | Shares/UnitsSubject toPSU | |
|---|---|---|
| Non-vested, September 30, 2023 | $71.77 | 867,524 |
| Granted | 54.13 | 370,307 |
| Vested | 50.53 | (299,746) |
| Forfeited | 73.83 | (142,452) |
| Non-vested, September 30, 2024 | $71.20 | 795,633 |
At September 30, 2024, the Company had approximately $27 million of total unrecognized compensation cost related to non-vested performance-based share unit awards which is expected to be recognized over a weighted-average period of 1.8 years.
Stock Options
The following table summarizes the assumptions used in determining the fair value of stock options granted:
| Year Ended September 30, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Expected life of option (years) | 5.7 | 5.8 | 6.0 |
| Risk-free interest rate | 3.86% | 3.59% | 1.35% |
| Expected volatility of the Company’s stock | 29.80% | 29.40% | 27.80% |
| Expected dividend yield on the Company’s stock | 2.77% | 2.10% | 1.71% |
A summary of stock option activity at September 30, 2024, and changes for the year then ended, is presented below:
| WeightedAverageOption Price | SharesSubject toOption | WeightedAverageRemainingContractualLife (years) | AggregateIntrinsicValue(in millions) | |
|---|---|---|---|---|
| Outstanding, September 30, 2023 | $45.44 | 4,919,916 | ||
| Granted | 53.52 | 652,702 | ||
| Exercised | 40.39 | (1,004,234) | ||
| Forfeited or expired | 63.47 | (323,602) | ||
| Outstanding, September 30, 2024 | $46.51 | 4,244,782 | 5.72 | $133 |
| Exercisable, September 30, 2024 | $41.21 | 3,141,132 | 4.16 | $115 |
The following table summarizes additional stock option information:
| Year Ended September 30, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Weighted-average grant-date fair value of options granted | $13.74 | $18.21 | $18.59 |
| Intrinsic value of options exercised (in millions) | 22 | 27 | 19 |
At September 30, 2024, the Company had approximately $9 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 1.6 years.
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