UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
     
 
Form 10-Q
     
  
(Mark One)
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20172018
OR
¨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
(Address of principal executive offices)
353-21-423-5000

(Registrant’s telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report) 
     
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 filerþ  Accelerated filer
¨

Non-accelerated filer
¨

(Do not check if a smaller Smaller reporting company
¨

  
 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Ordinary Shares Outstanding at June 30, 20172018
Ordinary Shares, $0.01 par value per share 932,398,758924,922,181
     

JOHNSON CONTROLS INTERNATIONAL PLC
FORM 10-Q
Report Index

  
Page
Part I. Financial Information 
  
Item 1. Financial Statements (unaudited) 
  
Consolidated Statements of Financial Position at June 30, 20172018 and September 30, 20162017
  
Consolidated Statements of Income for the Three and Nine Month Periods Ended June 30, 20172018 and 20162017
  
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Month Periods Ended June 30, 20172018 and 20162017
  
Consolidated Statements of Cash Flows for the Nine Month Periods Ended June 30, 20172018 and 20162017
  
Notes to Consolidated Financial Statements
  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
Item 4. Controls and Procedures
  
Part II. Other Information 
  
Item 1. Legal Proceedings
  
Item 1A. Risk Factors
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
Item 6. Exhibits
  
Signatures


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
Johnson Controls International plc
Consolidated Statements of Financial Position
(in millions, except par value; unaudited)
Johnson Controls International plc
Consolidated Statements of Financial Position
(in millions, except par value; unaudited)
Johnson Controls International plc
Consolidated Statements of Financial Position
(in millions, except par value; unaudited)
      
June 30, 2017 September 30, 2016June 30, 2018 September 30, 2017
Assets      
      
Cash and cash equivalents$458
 $579
$283
 $321
Accounts receivable - net6,443
 6,394
6,895
 6,666
Inventories3,384
 2,888
3,509
 3,209
Assets held for sale2,082
 5,812
12
 189
Other current assets1,595
 1,436
1,766
 1,907
Current assets13,962
 17,109
12,465
 12,292
      
Property, plant and equipment - net5,870
 5,632
6,093
 6,121
Goodwill19,619
 21,024
19,512
 19,688
Other intangible assets - net6,727
 7,540
6,424
 6,741
Investments in partially-owned affiliates1,159
 990
1,290
 1,191
Noncurrent assets held for sale
 7,374

 1,920
Other noncurrent assets3,349
 3,510
3,622
 3,931
Total assets$50,686
 $63,179
$49,406
 $51,884
      
Liabilities and Equity      
      
Short-term debt$1,956
 $1,078
$1,559
 $1,214
Current portion of long-term debt543
 628
24
 394
Accounts payable3,764
 4,000
4,410
 4,271
Accrued compensation and benefits1,004
 1,333
984
 1,071
Deferred revenue1,317
 1,279
Liabilities held for sale247
 4,276

 72
Other current liabilities4,001
 5,016
3,007
 3,553
Current liabilities11,515
 16,331
11,301
 11,854
      
Long-term debt11,772
 11,053
10,373
 11,964
Pension and postretirement benefits1,330
 1,550
777
 947
Noncurrent liabilities held for sale
 3,888

 173
Other noncurrent liabilities5,265
 5,033
4,915
 5,368
Long-term liabilities18,367
 21,524
16,065
 18,452
      
Commitments and contingencies (Note 22)

 

Commitments and contingencies (Note 20)

 

      
Redeemable noncontrolling interests189
 234
231
 211
      
Ordinary shares, $0.01 par value9
 9
9
 9
Ordinary A shares, €1.00 par value
 

 
Preferred shares, $0.01 par value
 

 
Ordinary shares held in treasury, at cost(481) (20)(1,004) (710)
Capital in excess of par value16,343
 16,105
16,501
 16,390
Retained earnings4,589
 9,177
6,075
 5,231
Accumulated other comprehensive loss(729) (1,153)(808) (473)
Shareholders’ equity attributable to Johnson Controls19,731
 24,118
20,773
 20,447
Noncontrolling interests884
 972
1,036
 920
Total equity20,615
 25,090
21,809
 21,367
Total liabilities and equity$50,686
 $63,179
$49,406
 $51,884

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


Johnson Controls International plc
Consolidated Statements of Income
(in millions, except per share data; unaudited)
Johnson Controls International plc
Consolidated Statements of Income
(in millions, except per share data; unaudited)
Johnson Controls International plc
Consolidated Statements of Income
(in millions, except per share data; unaudited)
              
Three Months Ended
June 30,
 Nine Months Ended
June 30,
Three Months Ended
June 30,
 Nine Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
Net sales              
Products and systems*$5,825
 $4,196
 $16,578
 $11,879
$6,565
 $6,172
 $18,507
 $17,526
Services*1,858
 958
 5,458
 2,704
1,555
 1,511
 4,523
 4,510
7,683
 5,154
 22,036
 14,583
8,120
 7,683
 23,030
 22,036
Cost of sales              
Products and systems*4,132
 3,068
 11,919
 8,759
4,778
 4,357
 13,644
 12,507
Services*1,120
 664
 3,291
 1,858
870
 895
 2,525
 2,703
5,252
 3,732
 15,210
 10,617
5,648
 5,252
 16,169
 15,210
              
Gross profit2,431
 1,422
 6,826
 3,966
2,472
 2,431
 6,861
 6,826
              
Selling, general and administrative expenses(1,609) (895) (4,905) (2,641)(1,527) (1,609) (4,532) (4,905)
Restructuring and impairment costs(49) (27) (226) (87)
 (49) (158) (226)
Net financing charges(124) (65) (376) (202)(101) (124) (332) (376)
Equity income69
 45
 177
 127
66
 69
 170
 177
              
Income from continuing operations before income taxes718
 480
 1,496
 1,163
910
 718
 2,009
 1,496
              
Income tax provision89
 78
 570
 202
106
 89
 451
 570
              
Income from continuing operations629
 402
 926
 961
804
 629
 1,558
 926
              
Income (loss) from discontinued operations, net of tax (Note 5)
 57
 (34) (481)
Loss from discontinued operations, net of tax (Note 4)
 
 
 (34)
              
Net income629
 459
 892
 480
804
 629
 1,558
 892
              
Income from continuing operations attributable to noncontrolling
interests
74
 55
 147
 116
81
 74
 167
 147
              
Income from discontinued operations attributable to noncontrolling
interests

 21
 9
 61

 
 
 9
              
Net income attributable to Johnson Controls$555
 $383
 $736
 $303
$723
 $555
 $1,391
 $736
              
Amounts attributable to Johnson Controls ordinary shareholders:              
Income from continuing operations$555
 $347
 $779
 $845
$723
 $555
 $1,391
 $779
Income (loss) from discontinued operations
 36
 (43) (542)
Loss from discontinued operations
 
 
 (43)
Net income$555
 $383
 $736
 $303
$723
 $555
 $1,391
 $736
              
Basic earnings (loss) per share attributable to Johnson Controls              
Continuing operations$0.59
 $0.54
 $0.83
 $1.31
$0.78
 $0.59
 $1.50
 $0.83
Discontinued operations0.00
 0.06
 (0.05) (0.84)
 
 
 (0.05)
Net income **$0.59
 $0.59
 $0.79
 $0.47
$0.78
 $0.59
 $1.50
 $0.79
              
Diluted earnings (loss) per share attributable to Johnson Controls              
Continuing operations$0.59
 $0.53
 $0.82
 $1.30
$0.78
 $0.59
 $1.49
 $0.82
Discontinued operations0.00
 0.06
 (0.05) (0.83)
 
 
 (0.05)
Net income **$0.59
 $0.59
 $0.78
 $0.47
$0.78
 $0.59
 $1.49
 $0.78

*Products and systems consist of Building Technologies & Solutions and Power Solutions products and systems. Services are Building Technologies & Solutions technical services.
**Certain items do not sum due to rounding.

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


Johnson Controls International plc
Consolidated Statements of Comprehensive Income (Loss)
(in millions; unaudited)
Johnson Controls International plc
Consolidated Statements of Comprehensive Income (Loss)
(in millions; unaudited)
Johnson Controls International plc
Consolidated Statements of Comprehensive Income (Loss)
(in millions; unaudited)
              
Three Months Ended
June 30,
 Nine Months Ended
June 30,
Three Months Ended
June 30,
 Nine Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
              
Net income$629
 $459
 $892
 $480
$804
 $629
 $1,558
 $892
              
Other comprehensive income (loss), net of tax:              
Foreign currency translation adjustments285
 (141) (166) (115)(614) 285
 (331) (166)
Realized and unrealized gains (losses) on derivatives(9) 4
 (13) 6
1
 (9) (10) (13)
Realized and unrealized gains (losses) on marketable securities(3) 
 6
 

 (3) (2) 6
              
Other comprehensive income (loss)273
 (137) (173) (109)(613) 273
 (343) (173)
              
Total comprehensive income902
 322
 719
 371
191
 902
 1,215
 719
              
Comprehensive income attributable to noncontrolling interests89
 74
 140
 185
22
 89
 159
 140
              
Comprehensive income attributable to Johnson Controls$813
 $248
 $579
 $186
$169
 $813
 $1,056
 $579

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


Johnson Controls International plc
Consolidated Statements of Cash Flows
(in millions; unaudited)
Nine Months Ended June 30,Nine Months Ended June 30,
2017 20162018 2017
Operating Activities      
Net income attributable to Johnson Controls$736
 $303
$1,391
 $736
Income from continuing operations attributable to noncontrolling interests147
 116
167
 147
Income from discontinued operations attributable to noncontrolling interests9
 61

 9
Net income892
 480
1,558
 892
Adjustments to reconcile net income to cash provided (used) by operating activities:      
Depreciation and amortization919
 680
844
 919
Pension and postretirement benefit income(184) (47)(108) (184)
Pension and postretirement contributions(275) (94)(54) (275)
Equity in earnings of partially-owned affiliates, net of dividends received(166) (202)(111) (166)
Deferred income taxes1,056
 336
(75) 1,056
Non-cash restructuring and impairment charges70
 80
30
 70
Gain on divestitures
 (14)
Fair value adjustment of equity investment
 (4)
Gain on Scott Safety business divestiture(114) 
Equity-based compensation114
 76
86
 114
Other3
 (4)(17) 3
Changes in assets and liabilities, excluding acquisitions and divestitures:      
Accounts receivable(319) (113)(282) (319)
Inventories(585) (233)(338) (585)
Other assets(258) (47)(64) (258)
Restructuring reserves22
 68
(63) 22
Accounts payable and accrued liabilities(608) (43)(198) (590)
Accrued income taxes(2,002) (223)167
 (2,002)
Cash provided (used) by operating activities(1,321) 696
1,261
 (1,303)
      
Investing Activities      
Capital expenditures(996) (822)(782) (996)
Sale of property, plant and equipment23
 28
23
 23
Acquisition of businesses, net of cash acquired(6) (133)(24) (6)
Business divestitures180
 54
2,101
 180
Changes in long-term investments(33) 
(14) (33)
Other
 2
Cash used by investing activities(832) (871)
Cash provided (used) by investing activities1,304
 (832)
      
Financing Activities      
Increase in short-term debt - net887
 2,085
350
 887
Increase in long-term debt1,553
 
886
 1,553
Repayment of long-term debt(972) (824)(2,760) (972)
Debt financing costs(18) 
(4) (18)
Stock repurchases(426) (475)(255) (426)
Payment of cash dividends(469) (544)(714) (469)
Proceeds from the exercise of stock options130
 34
39
 130
Employee equity-based compensation withholding taxes(39) (34)
Change in noncontrolling interest share8
 (2)15
 8
Dividends paid to noncontrolling interests(78) (240)(46) (78)
Dividend from Adient spin-off2,050
 

 2,050
Cash transferred to Adient related to spin-off(665) 

 (665)
Cash paid related to prior acquisitions(75) 

 (75)
Other(10) 6

 6
Cash provided by financing activities1,915
 40
Cash provided (used) by financing activities(2,528) 1,897
Effect of exchange rate changes on cash and cash equivalents12
 5
(84) 12
Cash held for sale105
 (76)
Change in cash held for sale9
 105
Decrease in cash and cash equivalents(121) (206)(38) (121)
Cash and cash equivalents at beginning of period579
 553
321
 579
Cash and cash equivalents at end of period$458
 $347
$283
 $458

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

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)



1.Financial Statements

The consolidated financial statements include the consolidated accounts of Johnson Controls International plc, a corporation organized under the laws of Ireland, and its subsidiaries (Johnson Controls International plc and all its subsidiaries, hereinafter collectively referred to as the "Company" or "Johnson Controls"). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP)("U.S. GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC)("SEC"). These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 20162017 filed with the SEC on November 23, 2016, portions of which (including Part I, Item 1. Business and Item 3. Legal Proceedings, and the following items from Part II of the Annual Report: Item 6. Selected Financial Data, Item 7. Management’s Discussion and Analysis, and Item 8. Financial Statements and Supplementary Data) were recast in the Company's Current Report on Form 8-K filed with the SEC on February 23,21, 2017. The results of operations for the three and nine month periods ended June 30, 20172018 are not necessarily indicative of results for the Company’s 20172018 fiscal year because of seasonal and other factors.

Nature of Operations

On September 2,Johnson Controls International plc, headquartered in Cork, Ireland, is a global diversified technology and multi industrial leader serving a wide range of customers in more than 150 countries. The Company creates intelligent buildings, efficient energy solutions, integrated infrastructure and next generation transportation systems that work seamlessly together to deliver on the promise of smart cities and communities. The Company is committed to helping our customers win and creating greater value for all of its stakeholders through strategic focus on our buildings and energy growth platforms.

In the fourth quarter of fiscal 2016, Johnson Controls, Inc. ("JCI Inc.") and Tyco International plc (“Tyco”("Tyco") completed their combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 24, 2016, as amended by Amendment No. 1, dated as of July 1, 2016, by and among JCI Inc., Tyco and certain other parties named therein, including Jagara Merger Sub LLC, an indirect wholly owned subsidiary of Tyco (“Merger Sub”). Pursuant to the terms of the Merger Agreement, on September 2, 2016, Merger Sub merged with and into JCI Inc., with JCI Inc. being the surviving corporation in the Merger andmerging with a wholly owned,wholly-owned, indirect subsidiary of Tyco (the “Merger”"Merger"). Following the Merger, Tyco changed its name to “Johnson Controls International plc.” The Merger changed the jurisdictionplc” and JCI Inc. is a wholly-owned subsidiary of organization from the United States to Ireland. The domicile to Ireland became effective on September 2, 2016.

Johnson Controls International plc. The Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805, "Business Combinations." JCI Inc. was the accounting acquirer for financial reporting purposes. Accordingly, the historical consolidated financial statements of JCI Inc. for periods prior to this transaction are considered to be the historic financial statements of the Company. Refer to Note 3, "Merger Transaction," of the notes to consolidated financial statements for further information.

On October 31, 2016,The Building Technologies & Solutions ("Buildings") business is a global market leader in engineering, developing, manufacturing and installing building products and systems around the world, including heating, ventilating, air-conditioning ("HVAC") equipment, HVAC controls, energy-management systems, security systems, fire detection systems and fire suppression solutions. The Buildings business further serves customers by providing technical services (in the HVAC, security and fire-protection space), energy-management consulting and data-driven solutions via its recently launch data-enabled business. Finally, the Company completed the spin-offis a North American market leader in residential air conditioning and heating systems and a global market leader in industrial refrigeration products.

The Power Solutions business is a leading global supplier of its Automotive Experience business by waylead-acid automotive batteries for virtually every type of the transfer of the Automotive Experience Business from Johnson Controls to Adient plcpassenger car, light truck and utility vehicle. The Company serves both automotive original equipment manufacturers and the issuance of ordinary shares of Adient directly to holders of Johnson Controls ordinary shares on a pro rata basis. Prior to the open of business on October 31, 2016, each of the Company's shareholders received one ordinary share of Adient plc for every 10 ordinary shares of Johnson Controls held as of the close of business on October 19, 2016, the record date for the distribution. Company shareholders received cash in lieu of fractional shares of Adient, if any. Following the separation and distribution, Adient plc is now an independent public company trading on the New York Stock Exchange (NYSE) under the symbol "ADNT."general vehicle battery aftermarket. The Company did not retain any equity interest in Adient plc. Adient’s historical financial results are reflected in the Company’s consolidated financial statements as a discontinued operation. Referalso supplies advanced battery technologies to Note 5, "Discontinued Operations," of the notes to consolidated financial statements for further information.power start-stop, hybrid and electric vehicles.

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 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’s interest exceeds 20% and the Company does not have a controlling interest.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Under certain criteria as provided for in Financial Accounting Standards Board (FASB)("FASB") ASC 810, "Consolidation," the Company may consolidate a partially-owned affiliate. To determine whether to consolidate a partially-owned affiliate, the Company first determines if the entity is a variable interest entity (VIE)("VIE"). An entity is considered to be a VIE if it has one of the following characteristics: 1) the entity is thinly capitalized; 2) residual equity holders do not control the entity; 3) equity holders are shielded from economic losses or do not participate fully in the entity’s residual economics; or 4) the entity was established with non-substantive voting rights. If the entity meets one of these characteristics, the Company then determines if it is the primary beneficiary of the VIE. The party with the power to direct activities of the VIE that most significantly impact the VIE’s economic performance and the potential to absorb benefits or losses that could be significant to the VIE is considered the primary beneficiary and consolidates the VIE. If the entity is not considered a VIE, then the Company applies the voting interest model to determine whether or not the Company shall consolidate the partially-owned affiliate.

Consolidated VIEs    

Based upon the criteria set forth in ASC 810, the Company has determined that it was not the primary beneficiary in any VIEs for the reporting period ended June 30, 2018 and that it was the primary beneficiary in one VIE for the reporting period ended JuneSeptember 30, 2017, and three VIEs for the reporting period ended  September 30, 2016, as the Company absorbsabsorbed significant economics of the entitiesentity and hashad the power to direct the activities that are considered most significant to the entities.

Two of the VIEs manufacture products in North America for the automotive industry. The Company funded the entities’ short-term liquidity needs through revolving credit facilities and had the power to direct the activities that were considered most significant to the entities through its key customer supply relationships. These VIE's were divested as a result of the Adient spin-off in the first quarter of fiscal 2017.entity.

In fiscal 2012, a pre-existing VIE accounted for under the equity method was reorganized into three separate investments as a result of the counterparty exercising its option to put its interest to the Company. The Company acquired additional interests in two of the reorganized group entities. The reorganized group entities are considered to be VIEs as the other owner party has been provided decision making rights but does not have equity at risk. The Company iswas considered the primary beneficiary of one of the entities due to the Company’s power pertaining to decisions over significant activities of the entity. As such, this VIE has beenwas consolidated within the Company’s consolidated statements of financial position.position as of September 30, 2017. During the quarter ended December 31, 2017, certain joint venture agreements were amended, and as a result, the Company can no longer make key operating decisions considered to be most significant to the VIE. As such, the Company is no longer considered the primary beneficiary of this entity, and the Company deconsolidated the entity during the quarter ended December 31, 2017. The impact of consolidation of the entity on the Company’s consolidated statements of income for the three and nine month periods ended June 30, 20172018 and 20162017 was not material.

The carrying amounts and classification of assets (none of which are restricted) and liabilities included in the Company’s consolidated statements of financial position for the consolidated VIE is as follows (in millions):
  
September 30,
2017
   
Current assets $2
Noncurrent assets 53
Total assets $55
   
Current liabilities $6
Noncurrent liabilities 42
Total liabilities $48

The Company did not have a significant variable interest in any other consolidated VIEs for the presented reporting periods.

Nonconsolidated VIEs

As mentioned previously within the "Consolidated VIEs" section above, in fisca1 2012, a pre-existing VIE was reorganized into three separate investments as a result of the counterparty exercising its option to put its interest to the Company. The reorganized group entities are considered to be VIEs as the other owner party has been provided decision making rights but does not have equity at risk. The VIEs are named as a co-obligorco-obligors under a third party debt agreement in the amount of $166$157 million, maturing in fiscal 2020, under which ita VIE could become subject to paying more than its allocated share of the third

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


party debt in the event of bankruptcy of one or more of the other co-obligors. The other co-obligors, all related parties in which the Company is an equity investor, consist of the remaining group entities involved in the reorganization. As part of the overall reorganization transaction, the Company has also provided financial support to the group entities in the form of loans totaling $37$38 million, which are subordinate to the third party debt agreement. The Company is a significant customer of certain co-obligors, resulting in a remote possibility of loss. Additionally, the Company is subject to a floor guaranty expiring in fiscal 2022; in the event that the other owner party no longer owns any part of the group entities due to sale or transfer, the Company has guaranteed that the proceeds received from the sale or transfer will not be less than $25 million. The Company has partnered with the group entities to design and manufacture battery components for the Power Solutions business.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


The carrying amounts and classification of assets (none of which are restricted) and liabilities included in the Company’s consolidated statements of financial position for the consolidated VIEs are as follows (in millions):
 
June 30,
2017
 September 30, 2016
    
Current assets$2
 $284
Noncurrent assets53
 98
Total assets$55
 $382
    
Current liabilities$4
 $230
Noncurrent liabilities43
 29
Total liabilities$47
 $259

The Company did not have a significant variable interest in any other consolidated VIEs for the presented reporting periods.

Nonconsolidated VIEs

As mentioned previously within the "Consolidated VIEs" section above, in fisca1 2012, a pre-existing VIE was reorganized into three separate investments as a result of the counterparty exercising its option to put its interest to the Company. The reorganized group entities are considered to be VIEs as the other owner party has been provided decision making rights but does not have equity at risk. The Company is not considered to be the primary beneficiary of three of the entities as of June 30, 2018 and two of the entities as of September 30, 2017, as the Company cannot make key operating decisions considered to be most significant to the VIEs. Therefore, the entities are accounted for under the equity method of accounting as the Company’s interest exceeds 20% and the Company does not have a controlling interest. The Company’s maximum exposure to loss includes the partially-owned affiliate investment balances of $63$42 million and $59$65 million at June 30, 20172018 and September 30, 20162017, respectively, as well as the subordinated loan from the Company, third party debt agreement and floor guaranty mentioned previously within the "Consolidated VIEs" section above. Current liabilities due to the VIEs are not material and represent normal course of business trade payables for all presented periods.

The Company did not have a significant variable interest in any other unconsolidated VIEs for the presented reporting periods.

Restricted Cash

At June 30, 2018, the Company held restricted cash of approximately $19 million, of which $10 million was recorded within other current assets in the consolidated statements of financial position and $9 million was recorded within other noncurrent assets in the consolidated statements of financial position. At September 30, 2017, the Company held restricted cash of approximately $37$31 million, of which $28$22 million was recorded within other current assets in the consolidated statements of financial position and $9 million was recorded within other noncurrent assets in the consolidated statements of financial position. These amounts were primarily related to cash restricted for payment of asbestos liabilities. At September 30, 2016, the Company held restricted cash of approximately $88 million, of which $79 million was recorded within other current assets in the consolidated statements of financial position and $9 million was recorded within other noncurrent assets in the consolidated statements of financial position. These amounts were primarily related to cash held in escrow from business divestitures and cash restricted for payment of asbestos liabilities.

Retrospective Changes

Certain amounts as of September 30, 2016 have been revised to conform to the current year’s presentation.

During the first quarter of fiscalEffective July 1, 2017, the Company determined thatreorganized the reportable segments within its Automotive ExperienceBuilding Technologies & Solutions business (Adient) met the criteria to be classified asalign with its new management reporting structure and business activities. Prior to this reorganization, Building Technologies & Solutions was comprised of five reportable segments for financial reporting purposes: Systems and Service North America, Products North America, Asia, Rest of World and Tyco. As a discontinued operation, which required retrospective application toresult of this change, Building Technologies & Solutions is now comprised of four reportable segments for financial information for all periods presented.reporting purposes: Building Solutions North America, Building Solutions EMEA/LA, Building Solutions Asia Pacific and Global Products. Refer to Note 5, "Discontinued Operations,18, “Segment Information,” of the notes to consolidated financial statements for further information. The net sales and cost of sales split of products and systems versus services in the consolidated statements of income has also been revised for the Building Technologies & Solutions reorganization.

In March 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." During the quarter ended December 31, 2017, the Company adopted ASU No. 2016-09. As a result, employee withholding taxes paid to taxing authorities for equity-based compensation transactions, previously classified as cash flows from operating activities, were reclassified to financing activities in the consolidated statements of cash flows for the nine months ended June 30, 2017. Refer to Note 2, "New Accounting Standards," of the notes to consolidated financial statements for further information regarding the Company's discontinued operations.

In the first quarter of fiscal 2017, the Company began evaluating the performance of its business segments primarily on segment earnings before interest, taxes and amortization (EBITA), which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


charges, significant restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans. Historical information has been revised to present the comparable periods on a consistent basis.

In April 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability.
During the quarter ended December 31, 2016, the Company adopted ASU No. 2015-03 and applied the change retrospectively to all periods presented. This change did not have an impact to any period presented on the consolidated statements of income. The financial statement impact of this change for the period ending September 30, 2016 was a decrease to noncurrent assets held for sale of $44 million, a decrease to noncurrent liabilities held for sale of $44 million, a decrease to other noncurrent assets of $30 million and a decrease to long-term debt of $30 million.information.
    
2. New Accounting Standards

Recently Adopted Accounting Pronouncements

In October 2016,March 2018, the FASB issued ASU No. 2016-17, "Consolidations2018-05, "Income Taxes (Topic 810): Interests Held through Related Parties that are under Common Control." The ASU changes how a single decision maker of a VIE that holds indirect interest in the entity through related parties that are under common control determines whether it is the primary beneficiary of the VIE. The new guidance amends ASU 2015-02, "Consolidation (Topic 810)740): Amendments to the Consolidation Analysis" issued in February 2015. ASUSEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 2016-17 was effective for the Company for the quarter ending December 31, 2016. The adoption of this guidance did not have an impact on the Company's consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)." ASU No. 2015-07 removes the requirement118" to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Such investments should be disclosed separate from the fair value hierarchy. ASU No. 2015-07 was effective retrospectively for the Company for the quarter ending December 31, 2016. The adoption of this guidance did not have an impact on the Company's consolidated financial statements, but did impact pension asset disclosures.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendmentsadd various SEC paragraphs pursuant to the Consolidation Analysis.issuance of SEC Staff Accounting Bulletin No. 118 ("SAB 118") to ASC 740 "Income Taxes." ASU No. 2015-02 amendsSAB 118 was issued by the analysis performedSEC in December 2017 to determine whether a reporting entity should consolidate certain types of legal entities. ASU No. 2015-02 was effective retrospectively for the Company for the quarter ending December 31, 2016. The adoption of this guidance did not have an impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In May 2017, the FASB issued ASU No. 2017-09, "Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting." The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require a reporting entity to apply modification accounting. ASU No. 2017-09 will be effective prospectively for the Company for the quarter ending December 31, 2018, with early adoption permitted. The impact of thisprovide immediate guidance for accounting implications of U.S. tax reform under the Company is dependent on any future share-based payment award changes, should they occur.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost"Tax Cuts and Net Periodic Postretirement Benefit Cost." The ASU requires the service cost component of net periodic benefit cost to be presented with other compensation costs. The other components of net periodic benefit cost are required to be presentedJobs Act" in the income statement separately from the service cost component and outside a subtotalperiod of income from operations, if one is presented. The ASU also allows only the service cost component of net periodic benefit cost to be eligible for capitalization. The guidance will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The guidance will be effective retrospectively except for the capitalization of the service cost component which should be applied prospectively. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements.

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


enactment. SAB 118 provides for a provisional one year measurement period for entities to finalize their accounting for certain income tax effects related to the "Tax Cuts and Jobs Act." The Company applied this guidance to its consolidated financial statements and related disclosures beginning in the quarter ended December 31, 2017. Refer to Note 9, "Income Taxes," of the notes to consolidated financial statements for further information.

In JanuaryAugust 2017, the FASB issued ASU No. 2017-04, "Intangibles—Goodwill2017-12, "Derivatives and OtherHedging (Topic 350)815): SimplifyingTargeted Improvements to Accounting for Hedging Activities." The ASU more closely aligns the Test for Goodwill Impairment," which eliminates the requirement to calculate the implied fair valueresults of goodwill to measure a goodwill impairment charge (Step 2) from the goodwill impairment test. Instead, an impairment charge will equal the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the amount of goodwill allocatedhedge accounting with risk management activities through amendments to the reporting unit. Thedesignation and measurement guidance will be effective prospectively forto better reflect a Company's hedging strategy and effectiveness. During the quarter ended December 31, 2017, the Company for the quarter ending December 31, 2020, with early adoption permitted after January 1, 2017.adopted ASU 2017-12. The impactadoption of this guidance for the Company will dependdid not have a material impact on the outcomes of future goodwill impairment tests.Company's consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU No. 2016-09 impacts certain aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. During the quarter ended December 31, 2017, the Company adopted ASU No. 2016-09. As a result, the Company recognized deferred tax assets of $179 million in the consolidated statements of financial position related to certain operating loss carryforwards resulting from the exercise of employee stock options and vested restricted stock on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of October 1, 2017. Additionally, employee withholding taxes paid to taxing authorities for equity-based compensation transactions, previously classified as cash flows from operating activities, were reclassified to financing activities in the consolidated statements of cash flows for the nine months ended June 30, 2017 for comparative purposes. The remaining provisions of ASU No. 2016-09 did not have a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)." The ASU requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented. The impact of this guidance for the Company will depend on the levels of restricted cash balances in the periods presented.

In October 2016, the FASB issued ASU No. 2016-16, "Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory." The ASU requires the tax effects of all intra-entity sales of assets other than inventory to be recognized in the period in which the transaction occurs. The guidance will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted but only in the first interim period of a fiscal year. The changes are required to be applied by means of a cumulative-effect adjustment recorded in retained earnings as of the beginning of the fiscal year of adoption. The Company is currently assessing the impact adoption of this guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." ASU No. 2016-15 provides clarification guidance on eight specific cash flow presentation issues in order to reduce the diversity in practice. ASU No. 2016-15 will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted. The guidance should be applied retrospectively to all periods presented, unless deemed impracticable, in which case prospective application is permitted. The Company is currently assessing the impact adoption of this guidance will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU No. 2016-13 changes the impairment model for financial assets measured at amortized cost, requiring presentation at the net amount expected to be collected. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts. Available-for-sale debt securities with unrealized losses will now be recorded through an allowance for credit losses. ASU No. 2016-13 will be effective for the Company for the quarter ended December 31, 2020, with early adoption permitted for the quarter ended December 31, 2019. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU No. 2016-09 impacts certain aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. ASU No. 2016-09 will be effective for the Company for the quarter ending December 31, 2017, with early adoption permitted. The Company is currently assessing the impact adoption of this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, "Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting." ASU No. 2016-07 eliminates the requirement for an investment that qualifies for the use of the equity method of accounting as a result of an increase in the level of ownership or degree of influence to adjust the investment, results of operations and retained earnings retrospectively. ASU No. 2016-07 will be effective prospectively for the Company for increases in the level of ownership interest or degree of influence that result in the adoption of the equity method that occur during or after the quarter ending December 31, 2017, with early adoption permitted. The impact of this guidance for the Company is dependent on any future increases in the level of ownership interest or degree of influence that result in the adoption of the equity method.

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." ASU No. 2016-02 requires recognition of operating leases as lease assets and liabilities on the balance sheet, and disclosure of key information about leasing arrangements. ASU No. 2016-02 will beThe original standard was effective retrospectively for the Company for the quarter ending December 31, 2019 with early adoption permitted.permitted; however in July 2018 the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements," which provides an additional transition method that permits changes to be applied by means of a cumulative-effect adjustment recorded in retained earnings as of the beginning of the fiscal year of adoption. The Company is currently

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


assessing the impact adoption of this guidance will have on its consolidated financial statements. The Company has started the assessment process by evaluating the population of leases under the revised definition of what qualifies as a leased asset. The Company is the lessee under various agreements for facilities and equipment that are currently accounted for as operating leases. The new guidance will require the Company to record operating leases on the balance sheet with a right-of-use asset and corresponding liability for future payment obligations. Additionally in January 2018, the FASB issued ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842," which provides an optional transition practical expedient for existing or expired land easements that were not previously recorded as leases. The Company expects the new guidance will have a material impact on its consolidated statements of financial position for the addition of right-of-use assets and lease liabilities, but the Company does not expect it to have a material impact on its consolidated statements of income.income and its consolidated statements of cash flows.
In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." ASU No. 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including marketable securities. ASU No. 2016-01 will be effective for the Company for the quarter ending December 31, 2018, and early adoption is not permitted, with certain exceptions. The changes are required to be applied by means of a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption. Additionally in February 2018, the FASB issued ASU No. 2018-03, "Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which provides additional clarification on certain topics addressed in ASU No. 2016-01. ASU No. 2018-01 will be effective for the Company when ASU No. 2016-01 is adopted. The impact of this guidance for the Company will depend on the magnitude of the unrealized gains and losses on the Company's marketable securities investments.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory." ASU No. 2015-11 requires inventory that is recorded using the first-in, first-out method to be measured at the lower of cost or net realizable value. ASU No. 2015-11 will be effective prospectively for the Company for the quarter ending December 31, 2017, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU No. 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. The original standard was effective retrospectively for the Company for the quarter ending December 31, 2017; however in August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers the effective date of ASU No. 2014-09 by one-year for all entities. The new standard will become effective retrospectively for the Company for the quarter ending December 31, 2018, with early adoption permitted, but not before the original effective date. Additionally, in March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," in April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing," in May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," and in December 2016, the FASB issued ASU No. 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers," all of which provide additional clarification on certain topics addressed in ASU No. 2014-09. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 follow the same implementation guidelines as ASU No. 2014-09 and ASU No. 2015-14. The Company has elected to adopt the new revenue guidance as of October 1, 2018.  In preparation for adoption2018 using the modified retrospective approach. Based on the Company’s initial evaluation of the new guidance, the Company has reviewed representative samples ofcurrent contracts and other formsrevenue streams, revenue recognition is expected to be mostly consistent under both the current and new standard, with the exception of agreements withPower Solutions business. Within the Power Solutions business, certain customers globally and isreturn battery cores which will be included in the process of evaluating the impact oftransaction price as noncash consideration under the new revenue standard. Based on its proceduresThis change is expected to date, theresult in an increase to annual Power Solutions revenue of approximately 10% - 15% and an immaterial impact to gross profit. The Company cannot quantify the potential impactdoes not expect the new revenue standard will have toa material impact on its consolidated statements of financial statements. The Company will decide which retrospective application to apply onceposition and its revenue standard assessment is finalized. consolidated statements of cash flows.

3.Merger Transaction

As discussed in Note 1, "Financial Statements," ofOther recently issued accounting pronouncements are not expected to have a material impact on the notes toCompany's consolidated financial statements, JCI Inc. and Tyco completed the Merger on September 2, 2016. The Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with ASC 805, "Business Combinations." Based on the structure of the Merger and other activities contemplated by the Merger Agreement, relative outstanding share ownership, the composition of the Company's board of directors and the designation of certain senior management positions of the Company, JCI Inc. was the accounting acquirer for financial reporting purposes.statements.

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Immediately prior to the Merger and in connection therewith, Tyco shareholders received 0.955 ordinary shares of Tyco (which shares are now referred to as shares of the Company, or “Company ordinary shares”) for each Tyco ordinary share they held by virtue of a 0.955-for-one share consolidation. In the Merger, each outstanding share of common stock, par value $1.00 per share, of JCI Inc. (“JCI Inc. common stock”) (other than shares held by JCI Inc., Tyco and certain of their subsidiaries) was converted into the right to receive either the cash consideration or the share consideration (each as described below), at the election of the holder, subject to proration procedures described in the Merger Agreement and applicable withholding taxes.  The election to receive the cash consideration was undersubscribed. As a result, holders of shares of JCI Inc. common stock that elected to receive the share consideration and holders of shares of JCI Inc. common stock that made no election (or failed to properly make an election) became entitled to receive, for each such share of JCI Inc. common stock, $5.7293 in cash, without interest, and 0.8357 Company ordinary shares, subject to applicable withholding taxes.  Holders of shares of JCI Inc. common stock that elected to receive the cash consideration became entitled to receive, for each such share of JCI Inc. common stock, $34.88 in cash, without interest, subject to applicable withholding taxes.  In the Merger, JCI Inc. shareholders received, in the aggregate, approximately $3.864 billion in cash. Immediately after the closing of, and giving effect to, the Merger, former JCI Inc. shareholders owned approximately 56% of the issued and outstanding Company ordinary shares and former Tyco stockholders owned approximately 44% of the issued and outstanding Company ordinary shares.

Tyco is a leading global provider of security products and services, fire detection and suppression products and services, and life safety products. The acquisition of Tyco brings together best-in-class product, technology and service capabilities across controls, fire, security, heating, ventilating and air conditioning (HVAC), power solutions and energy storage, to serve various end-markets including large institutions, commercial buildings, retail, industrial, small business and residential.  The combination of the Tyco and JCI Inc. buildings platforms is expected to create immediate opportunities for near-term growth through cross-selling, complementary branch and channel networks, and expanded global reach for established businesses. The new Company is also expected to benefit by combining innovation capabilities and pipelines involving new products, advanced solutions for smart buildings and cities, value-added services driven by advanced data and analytics and connectivity between buildings and energy storage through infrastructure integration.

Fair Value of Consideration Transferred

The total fair value of consideration transferred was approximately $19.7 billion. Total consideration is comprised of the equity value of the Tyco shares that were outstanding as of September 2, 2016 and the portion of Tyco's share awards and share options earned as of September 2, 2016 ($224 million). Share awards and share options not earned ($101 million) as of September 2, 2016 will be expensed over the remaining future vesting period.

The following table summarizes the total fair value of consideration transferred:
(in millions, except for share consolidation ratio and share data)  
   
Number of Tyco shares outstanding at September 2, 2016 427,181,743
Tyco share consolidation ratio 0.955
Tyco ordinary shares outstanding following the share consolidation
     and immediately prior to the Merger
 407,958,565
JCI Inc. converted share price (1) $47.67
Fair value of equity portion of the Merger consideration $19,447
Fair value of Tyco equity awards 224
   Total fair value of consideration transferred $19,671

(1)3.Amount equals JCI Inc. closing share priceAcquisitions and market capitalization at September 2, 2016 ($45.45 and $29,012 million, respectively) adjusted for the Tyco $3,864 million cash contribution used to purchase 110.8 million shares of JCI Inc. common stock for $34.88 per share.Divestitures


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


Fair Value of Assets Acquired and Liabilities Assumed

The Company accounted for the Merger with Tyco as a business combination using the acquisition method of accounting. The assets acquired and liabilities assumed were recorded at their preliminary respective fair values as of the acquisition date.

As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in fiscal 2017. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations. The finalization of the purchase accounting assessment may result in a change in the valuation of assets acquired and liabilities assumed and may have a material impact on the Company's results of operations and financial position.

The preliminary fair values of the assets acquired and liabilities assumed are as follows (in millions):
Cash and cash equivalents $489
Accounts receivable 2,084
Inventories 815
Other current assets 610
Property, plant, and equipment - net 1,219
Goodwill 16,203
Intangible assets - net 6,304
Other noncurrent assets 536
   Total assets acquired $28,260
   
Short-term debt $462
Accounts payable 725
Accrued compensation and benefits 312
Other current liabilities 1,444
Long-term debt 6,416
Long-term deferred tax liabilities 847
Long-term pension and postretirement benefits 774
Other noncurrent liabilities 1,436
   Total liabilities acquired $12,416
Noncontrolling interests 37
Net assets acquired $15,807
Cash consideration paid to JCI Inc. shareholders 3,864
   Total fair value of consideration transferred $19,671

In connection with the Merger, the Company recorded goodwill of $16.2 billion, which 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 Tyco. The goodwill created in the Merger is not deductible for tax purposes and is subject to potential significant changes as the purchase price allocation is completed. Goodwill has preliminarily been allocated to the Tyco segment based on how the business was reviewed by the Company's Chief Operating Decision Maker as shown in Note 8, "Goodwill and Other Intangible Assets." In connection with the Tyco Merger, the Company recorded a reduction in goodwill of $160 million inDuring the first nine months of fiscal 20172018, the Company completed certain acquisitions for a combined purchase price of $24 million, all of which was paid as of June 30, 2018. The acquisitions in the aggregate were not material to the Company’s consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $12 million within the Global Products segment.

In the second quarter of fiscal 2018, the Company completed the sale of a certain Global Products business. The selling price was $103 million, all of which was received in the three months ended March 31, 2018. In connection with the sale, the Company reduced goodwill by $20 million and realized an insignificant gain. The divestiture was not material to the Company's consolidated financial statements.

In the first quarter of fiscal 2018, the Company completed the sale of its Scott Safety business to 3M Company. The selling price, net of cash divested, was $2.0 billion, all of which was received as of December 31, 2017. In connection with the sale, the Company recorded a pre-tax gain of $114 million within selling, general and administrative expenses in the consolidated statements of income and reduced goodwill in assets held for sale by $1.2 billion. The gain, net of tax, recorded was $84 million. Net cash proceeds from the transaction of approximately $1.9 billion were used to repay a significant portion of the Tyco International Holding S.a.r.L.'s ("TSarl") $4.0 billion of merger-related debt. The Scott Safety business is included in the Global Products segment and was reported within assets and liabilities held for sale in the consolidated statements of financial position as of September 30, 2017. Refer to Note 4, "Discontinued Operations," of the notes to consolidated financial statements for further disclosure related to purchase price allocations.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


The preliminary purchase price allocation to identifiable intangiblethe Company's net assets acquired are as follows:
held for sale.
  Preliminary Fair Value (in millions) Weighted Average Life (in years)
Customer relationships $2,280
 12
Completed technology 1,580
 11
Other definite-lived intangibles 214
 7
Indefinite-lived trademarks 2,080
  
Other indefinite-lived intangibles 90
  
In-process research and development 60
  
Total identifiable intangible assets $6,304
  


4.Acquisitions and Divestitures

In the first nine months of fiscal 2017, the Company completed three acquisitions for a combined purchase price, net of cash acquired, of $9 million, $6 million of which was paid in the nine months ended June 30, 2017. The acquisitions in the aggregate were not material to the Company’s consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $2 million.

In the second quarter of fiscal 2017, the Company announced it signed a definitive agreement to sell its Scott Safety business to 3M Company for approximately $2.0 billion. Net cash proceeds from the transaction are expected to approximate $1.8 to $1.9 billion. Scott Safety is a leader in the design, manufacture and sale of high performance respiratory protection, gas and flame detection, thermal imaging and other critical products for fire services, law enforcement, industrial, oil and gas, chemical, armed forces, and homeland defense end markets. The transaction is expected to close in the first quarter of fiscal 2018, subject to customary closing conditions including required regulatory approval. The Scott Safety business is included in the Tyco segment and is reported within assets and liabilities held for sale in the consolidated statements of financial position as of June 30, 2017. Refer to Note 5, "Discontinued Operations," of the notes to consolidated financial statements for further disclosure related to the Company's net assets held for sale.

In the second quarter of fiscal 2017, the Company completed the sale of its ADT security business in South Africa within the TycoBuilding Solutions EMEA/LA segment. The selling price, net of cash divested, was $129 million, all of which was received in the nine months ended June 30, 2017. In connection with the sale, the Company reduced goodwill in assets held for sale by $92 million. The divestiture was not material to the Company's consolidated financial statements.

In the first nine months of fiscal 2017, the Company completed one additional divestiture for a sales price of $4 million, all of which was received in the nine months ended June 30, 2017. The divestiture decreased the Company's ownership from a controlling to noncontrolling interest, and as a result, the Company deconsolidated cash of $5 million. The divestiture was not material to the Company's consolidated financial statements.

In the first nine months of fiscal 2017, the Company received $52 million in net cash proceeds related to prior year business divestitures.

In the first quarter of fiscal 2016, the Company formed a joint venture with Hitachi to expand its Building Efficiency product offerings. The Company acquired a 60% ownership interest in the new entity for approximately $208 million ($638 million purchase price less cash acquired of $430 million), $133 million of which wasdivestitures and paid in the nine months ended June 30, 2016 and $75 million was paid in the nine months ended June 30, 2017. In connection with the acquisition, the Company recorded goodwill of $253 million related to purchase price allocations.

In the first nine months of fiscal 2016, the Company completed one additional acquisition for a purchase price, net of cash acquired, of $3 million, none of which was paid as of June 30, 2016. The acquisition was not material to the Company's consolidated financial statements. In connection with the acquisition, the Company recorded goodwill of $4 million. The acquisition increased the Company's ownership from a noncontrolling to controlling interest. As a result, the Company recorded

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


a non-cash gain of $4 million in equity income for the Building Efficiency Rest of World segment to adjust the Company's existing equity investment in the partially-owned affiliate to fair value.

In the three months ended June 30, 2016, the Company completed a divestiture for a sales price of $16 million, $14 million of which was received as of June 30, 2016. The divestiture was not material to the Company's consolidated financial statements. In connection with the divestiture, the Company recorded a gain of $14 million within selling, general and administrative expenses on the consolidated statements of income and reduced goodwill by $3 million in the Building Efficiency Systems and Service North America segment.

In the first nine months of fiscal 2016, the Company received $40 million in cash proceeds related to prior year business divestitures.acquisitions.

5.4.Discontinued Operations

As discussed in Note 1, "Financial Statements," of the notes to consolidated financial statements, onOn October 31, 2016, the Company completed the spin-off of its Automotive Experience business by way of the transfer of the Automotive Experience Businessbusiness from Johnson Controls to Adient plc.plc and the issuance of ordinary shares of Adient directly to holders of Johnson Controls ordinary shares on a pro rata basis. Prior to the open of business on October 31, 2016, each of the Company's shareholders received one ordinary share of Adient plc for every 10 ordinary shares of Johnson Controls held as of the close of business on October 19, 2016, the record date for the distribution. Company shareholders received cash in lieu of fractional shares of Adient, if any. Following the separation and distribution, Adient plc is now an independent public company trading on the New York Stock Exchange ("NYSE") under the symbol "ADNT." The Company did not retain any equity interest in Adient plc. During the first quarter of fiscal 2017, the Company determined that Adient met the criteria to be classified as a discontinued operation and, as a result, Adient’s historical financial results are reflected in the Company’s consolidated financial statements as a discontinued operation, and assets and liabilities were retrospectively reclassified as assets and liabilities held for sale.operation. The Company did not allocate any general corporate overhead to discontinued operations.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


The following table summarizes the results of Adient, reclassified as discontinued operations for the nine month period ended June 30, 2017 and the three and nine month periods ended June 30, 2016 (in millions). As the Adient spin-off occurred on October 31, 2016, there is only one month of Adient results included in the nine month period ended June 30, 2017.
Three Months Ended June 30, Nine Months Ended
June 30,
Nine Months Ended
June 30,
2016 2017 20162017
      
Net sales$4,362
 $1,434
 $12,893
$1,434
      
Income from discontinued operations before income taxes185
 1
 520
1
Provision for income taxes on discontinued operations128
 35
 1,001
35
Income from discontinued operations attributable to noncontrolling
interests, net of tax
21
 9
 61
9
Income (loss) from discontinued operations$36
 $(43) $(542)
Loss from discontinued operations$(43)

For the nine months ended June 30, 2017, the income from discontinued operations before income taxes included separation costs of $79 million. For the three and nine months ended June 30, 2016, the income from discontinued operations before income taxes included separation costs of $127 million and $287 million, respectively.

For the nine months ended June 30, 2017, the effective tax rate was more than the U.S. federal statutory rate of 35% primarily due to the tax impacts of separation costs and Adient spin-off related tax expense, partially offset by non-U.S. tax rate differentials. For the three months ended June 30, 2016, the effective tax rate was more than the U.S. federal statutory rate of 35% primarily due to $85 million of income tax expense for changes in entity status, the jurisdictional mix of restructuring and impairment costs, and the tax impacts of separation costs, partially offset by non-U.S. tax rate differentials. For the nine months ended June 30, 2016, the effective tax rate was more than the U.S. federal statutory rate of 35% primarily due to $780 million of income tax expense recorded on foreign undistributed earnings of certain non-U.S. subsidiaries, $85 million of income tax expense for changes in entity status, the jurisdictional mix of restructuring and impairment costs, and the tax impacts of separation costs, partially offset by non-U.S. tax rate differentials.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


Assets and Liabilities Held for Sale

The following table summarizes the carrying value of Adient, reclassified as assets and liabilities held for sale at September 30, 2016 (in millions):
  September 30, 2016
   
Cash $105
Cash in escrow related to Adient debt 2,034
Accounts receivable - net 2,071
Inventories 672
Other current assets 756
   Assets held for sale $5,638
   
Property, plant and equipment - net $2,240
Goodwill 2,385
Other intangible assets - net 113
Investments in partially-owned affiliates 1,745
Other noncurrent assets 891
   Noncurrent assets held for sale $7,374
   
Short-term debt $41
Current portion of long-term debt 38
Accounts payable 2,764
Accrued compensation and benefits 430
Other current liabilities 975
   Liabilities held for sale $4,248
   
Long-term debt $3,441
Pension and postretirement benefits 188
Other noncurrent liabilities 259
   Noncurrent liabilities held for sale $3,888

The following table summarizes depreciation and amortization, capital expenditures, and significant operating and investing noncash items related to Adient for the nine month period ended June 30, 2017 and the three and nine month periods ended June 30, 2016 (in millions):
Three Months Ended June 30, Nine Months Ended
June 30,
Nine Months Ended
June 30,
2016 2017 20162017
      
Depreciation and amortization$86
 $29
 $257
$29
Equity in earnings of partially-owned affiliates(89) (31) (260)(31)
Deferred income taxes(9) 562
 756
562
Non-cash restructuring and impairment charges1
 
 15
Equity-based compensation4
 1
 11
1
Accrued income taxes
 (808) 
(808)
Capital expenditures(96) (91) (271)(91)


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


During the second quarter of fiscal 2017, the Company completed the divestiture of its ADT security business in South Africa within the Tyco segment. The assetsAssets and liabilities of this business were presented as heldLiabilities Held for sale in the consolidated statements of financial position as of September 30, 2016. The business did not meet the criteria to be classified as a discontinued operation.Sale

During the second quarter of fiscal 2017, the Company signed a definitive agreement to sell its Scott Safety business of the TycoGlobal Products segment to 3M Company. The transaction is expected to close in the first quarter of fiscal 2018, subject to customary closing conditions including required regulatory approval.closed on October 4, 2017. The assets and liabilities of this business wereare presented as held for sale in the consolidated statements of financial position as of JuneSeptember 30, 2017. The business did not meet the criteria to be classified as a discontinued operation as the divestiture of the Scott Safety business willdid not have a major effect on the Company’s operations and financial results.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


The following table summarizes the carrying value of the Tyco segmentScott Safety assets and liabilities held for sale at JuneSeptember 30, 2017 and September 30, 2016 (in millions):
June 30, 2017 September 30, 2016September 30, 2017
    
Cash$9
Accounts receivable - net$101
 $9
100
Inventories73
 7
75
Other current assets8
 3
5
Assets held for sale$189
 
Property, plant and equipment - net76
 15
$79
Goodwill1,270
 89
1,248
Other intangible assets - net554
 30
592
Other noncurrent assets
 4
1
Assets held for sale$2,082
 $157
Noncurrent assets held for sale$1,920
    
Accounts payable$34
 $9
$37
Accrued compensation and benefits10
 
10
Other current liabilities22
 19
25
Liabilities held for sale$72
 
Other noncurrent liabilities181
 
$173
Liabilities held for sale$247
 $28
Noncurrent liabilities held for sale$173

At SeptemberJune 30, 2016, $172018, $12 million of certain Corporate assets were classified as held for sale. The assets were sold during the second quarter of fiscal 2017.

6.5.Percentage-of-Completion Contracts

The Building Technologies & Solutions business records certain long-term contracts under the percentage-of-completion method of accounting. Under this method, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. The Company records costs and earnings in excess of billings on uncompleted contracts primarily within accounts receivable - net and billings in excess of costs and earnings on uncompleted contracts primarily within other current liabilitiesdeferred revenue in the consolidated statements of financial position. Costs and earnings in excess of billings related to these contracts were $951$1,025 million and $841$908 million at June 30, 20172018 and September 30, 2016,2017, respectively. Billings in excess of costs and earnings related to these contracts were $448$545 million and $431$451 million at June 30, 20172018 and September 30, 2016,2017, respectively.

6.Inventories

Inventories consisted of the following (in millions):
 June 30, 2018 September 30, 2017
    
Raw materials and supplies$953
 $919
Work-in-process578
 567
Finished goods1,978
 1,723
Inventories$3,509
 $3,209


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


7.Inventories

Inventories consisted of the following (in millions):
 June 30, 2017 September 30, 2016
    
Raw materials and supplies$800
 $852
Work-in-process683
 503
Finished goods1,901
 1,533
Inventories$3,384
 $2,888

8.Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill in each of the Company’s reportable segments for the nine month period ended June 30, 20172018 were as follows (in millions):
   Business Acquisitions Business Divestitures Currency Translation and Other  
 September 30,    June 30,
 2016    2017
          
Building Technologies & Solutions
         
  Building Efficiency         
     Systems and Service North America$975
 $
 $
 $
 $975
     Products North America1,697
 1
 
 2
 1,700
     Asia657
 
 
 (23) 634
     Rest of World301
 1
 
 4
 306
  Tyco16,308
 (160) (1,270) 40
 14,918
Power Solutions1,086
 
 
 
 1,086
Total$21,024
 $(158) $(1,270) $23
 $19,619
   Business Acquisitions Business Divestitures Currency Translation and Other  
 September 30,    June 30,
 2017    2018
          
Building Technologies & Solutions
         
     Building Solutions North America$9,637
 $
 $
 $(45) $9,592
     Building Solutions EMEA/LA2,012
 
 
 (53) 1,959
     Building Solutions Asia Pacific1,255
 
 
 2
 1,257
     Global Products5,687
 12
 (20) (70) 5,609
Power Solutions1,097
 
 
 (2) 1,095
Total$19,688
 $12
 $(20) $(168) $19,512

At September 30, 2016,2017, accumulated goodwill impairment charges included $47 million related to the Building Efficiency Rest of WorldSolutions EMEA/LA - Latin America reporting unit. The nine months ended June 30, 2017 Tyco business divestiture amount includes $1,270 million of goodwill transferred to assets held for sale on the consolidated statements of financial position. Refer to Note 5, "Discontinued Operations," of the notes to consolidated financial statements for further information regarding the Company's assets and liabilities held for sale.

The Company’s other intangible assets, primarily from business acquisitions valued based on independent appraisals, consisted of (in millions):
 June 30, 2017 September 30, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 Net 
Gross
Carrying
Amount
 
Accumulated
Amortization
 Net
Amortized intangible assets           
Technology$1,231
 $(129) $1,102
 $1,528
 $(24) $1,504
Customer relationships3,116
 (397) 2,719
 3,168
 (226) 2,942
Miscellaneous526
 (244) 282
 519
 (130) 389
Total amortized intangible assets4,873
 (770) 4,103
 5,215
 (380) 4,835
Unamortized intangible assets           
Trademarks/trade names2,497
 
 2,497
 2,555
 
 2,555
Miscellaneous127
 
 127
 150
 
 150
Total intangible assets$7,497
 $(770) $6,727

$7,920

$(380)
$7,540

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)

 June 30, 2018 September 30, 2017
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 Net 
Gross
Carrying
Amount
 
Accumulated
Amortization
 Net
Amortized intangible assets           
Technology$1,326
 $(233) $1,093
 $1,328
 $(137) $1,191
Customer relationships3,091
 (605) 2,486
 3,168
 (486) 2,682
Miscellaneous457
 (181) 276
 389
 (147) 242
Total amortized intangible assets4,874
 (1,019) 3,855
 4,885
 (770) 4,115
Unamortized intangible assets           
Trademarks/trade names2,447
 
 2,447
 2,483
 
 2,483
Miscellaneous122
 
 122
 143
 
 143
 2,569
 
 2,569
 2,626
 
 2,626
Total intangible assets$7,443
 $(1,019) $6,424

$7,511

$(770)
$6,741

Amortization of other intangible assets included within continuing operations for the three month periods ended June 30, 2018 and 2017 and 2016 was $108$100 million and $22$108 million, respectively. Amortization of other intangible assets included within continuing operations for the nine month periods ended June 30, 2018 and 2017 and 2016 was $383$288 million and $62$383 million, respectively. Excluding the impact of any future acquisitions, the Company anticipates amortization for fiscal 2018, 2019, 2020, 2021, 2022 and 20222023 will be approximately $389$388 million, $379$380 million, $366$371 million, $367$365 million and $360$344 million per year, respectively.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


9.8.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.

In fiscal 2017,2018, the Company committed to a significant restructuring plan (2017(2018 Plan) and recorded $226$158 million of restructuring and impairment costs in the consolidated statements of income, of which $78 millionincome. This was recorded in the first quarter, $99 million was recorded in the second quarter and $49 million was recorded in the third quarter of fiscal 2017. This is the total amount incurred to date and the total amount expected to be incurred for this restructuring plan. The restructuring actions related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures and asset impairments. Of the restructuring and impairment costs recorded, $79 million related to Corporate, $73$76 million related to the TycoGlobal Products segment, $27$32 million related to the Building Efficiency Products North AmericaSolutions EMEA/LA segment, $20$24 million related to the Building Efficiency Rest of World segment,Corporate, $14 million related to the Building Efficiency Systems and Service North AmericaSolutions Asia Pacific segment, $9$8 million related to the Building Efficiency AsiaSolutions North America segment and $4 million related to the Power Solutions segment. The restructuring actions are expected to be substantially complete in 2020.

The following table summarizes the changes in the Company’s 2018 Plan reserve, included within other current liabilities in the consolidated statements of financial position (in millions):
 Employee Severance and Termination Benefits Long-Lived Asset Impairments Other Total
        
Original reserve$125
 $30
 $3
 $158
Utilized—noncash
 (30) 
 (30)
Balance at December 31, 2017$125
 $
 $3
 $128
Utilized—cash(8) 
 (1) (9)
Balance at March 31, 2018$117
 $
 $2
 $119
Utilized—cash(12) 
 (1) (13)
Balance at June 30, 2018$105
 $
 $1
 $106

In fiscal 2017, the Company committed to a significant restructuring plan (2017 Plan) and recorded $367 million of restructuring and impairment costs in the consolidated statements of income. This was the total amount incurred to date and the total amount expected to be incurred for this restructuring plan. The restructuring actions related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures and asset impairments. Of the restructuring and impairment costs recorded, $166 million related to Corporate, $74 million related to the Building Solutions EMEA/LA segment, $59 million related to the Building Solutions North America segment, $32 million related to the Global Products segment, $20 million related to the Power Solutions segment and $16 million related to the Building Solutions Asia Pacific segment. The restructuring actions are expected to be substantially complete in 2018.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


The following table summarizes the changes in the Company’s 2017 Plan reserve, included within other current liabilities in the consolidated statements of financial position (in millions):

 Employee Severance and Termination Benefits Long-Lived Asset Impairments Other Total
        
Original reserve$62
 $15
 $1
 $78
Utilized—noncash
 (15) (1) (16)
Balance at December 31, 2016$62

$

$

$62
Additional restructuring costs67
 23
 9
 99
Utilized—cash(13) 
 
 (13)
Utilized—noncash
 (23) 
 (23)
Balance at March 31, 2017$116

$

$9

$125
Additional restructuring costs16
 31
 2
 49
Utilized—cash(34) 
 
 (34)
Utilized—noncash
 (31) (1) (32)
Balance at June 30, 2017$98
 $
 $10
 $108


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)

 Employee Severance and Termination Benefits Long-Lived Asset Impairments Other Currency
Translation
 Total
          
Original reserve$276
 $77
 $14
 $
 $367
Utilized—cash(75) 
 
 
 (75)
Utilized—noncash
 (77) (1) 
 (78)
   Adjustment to restructuring reserves25
 
 
 
 25
Balance at September 30, 2017$226

$

$13

$

$239
Utilized—cash(142) 
 (4) 
 (146)
Utilized—noncash
 
 
 (1) (1)
Balance at June 30, 2018$84
 $
 $9

$(1) $92

In fiscal 2016, the Company committed to a significant restructuring plan (2016 Plan) and recorded $288 million of restructuring and impairment costs in the consolidated statements of income. This was the total amount incurred to date and the total amount expected to be incurred for this restructuring plan. The restructuring actions related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures, asset impairments and change-in-control payments. Of the restructuring and impairment costs recorded, $161 million related to Corporate, $66 million related to the Power Solutions segment, $26$44 million related to the Global Products segment and $17 million related to the Building Efficiency Asia segment, $16 million related to the Building Efficiency Rest of World segment, $9 million related to the Building Efficiency Products North America segment, $8 million related to the Tyco segment, and $2 million related to the Building Efficiency Systems and Service North AmericaSolutions EMEA/LA segment. The restructuring actions are expected to be substantially complete in fiscal 2018. Included in the 2016 Planreserve is $74$56 million of committed restructuring actions taken by Tyco for liabilities assumed as part of the Tyco acquisition.

Additionally, the Company recorded $332 million of restructuring and impairment costs within discontinued operations related to Adient in fiscal 2016.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


The following table summarizes the changes in the Company’s 2016 Plan reserve, included within other current liabilities and Adient liabilities held for sale in the consolidated statements of financial position (in millions):

Employee Severance and Termination Benefits Long-Lived Asset Impairments Other Currency
Translation
 TotalEmployee Severance and Termination Benefits Long-Lived Asset Impairments Other Currency
Translation
 Total
                  
Original reserve$368
 $190
 $62
 $
 $620
$368
 $190
 $62
 $
 $620
Acquired Tyco restructuring
reserves
78
 
 
 
 78
78
 
 
 
 78
Utilized—cash(32) 
 
 
 (32)(32) 
 
 
 (32)
Utilized—noncash
 (190) (32) 1
 (221)
 (190) (32) 1
 (221)
Balance at September 30, 2016$414
 $
 $30
 $1
 $445
$414
 $
 $30
 $1
 $445
Adient spin-off impact(194) 
 (22) 
 (216)(194) 
 (22) 
 (216)
Utilized—cash(56) 
 (2) 
 (58)(86) 
 (2) 
 (88)
Utilized—noncash
 
 
 (1) (1)
 
 
 1
 1
Adjustment to restructuring
reserves
(25) 
 
 
 (25)
Transfer to liabilities held for sale(3) 
 
 
 (3)(3) 
 
 
 (3)
Adjustment to acquired Tyco
restructuring reserves
(4) 
 
 
 (4)(22) 
 
 
 (22)
Balance at June 30, 2017$157
 $
 $6
 $
 $163
Balance at September 30, 2017$84
 $
 $6
 $2
 $92
Utilized—cash(16) 
 (2) 
 (18)
Balance at June 30, 2018$68
 $
 $4
 $2
 $74

The Company's fiscal 2018, 2017 and 2016 restructuring plans included workforce reductions of approximately 5,4009,200 employees (4,300(7,300 for the Building Technologies & Solutions business, 1,700 for Corporate and 1,100200 for Corporate)Power Solutions). 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 June 30, 2017,2018, approximately 1,4004,300 of the employees have been separated from the Company pursuant to the restructuring plans. In addition, the restructuring plans included twelveeleven plant closures in the Building Technologies & Solutions business. As of June 30, 2017, four2018, six of the twelveeleven plants have been closed.

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.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


10.9.Income Taxes

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The U.S. federal statutory tax rate in Ireland is being used as a comparison since the Company was a U.S.is domiciled company for 11 months of 2016 and due to the Company's current legal entity structure.in Ireland. For the three months ended June 30, 2018 and 2017, the Company's effective tax rate for continuing operations was 12%consistent with the statutory tax rate of 12.5%. TheFor the nine months ended June 30, 2018, the Company's effective tax rate was lower22% and was higher than the U.S. federal statutory tax rate of 35%12.5% primarily due to the discrete net impacts of U.S. Tax Reform, final income tax effects of the completed divestiture of the Scott Safety business and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives and non-U.S. tax rate differentials, partially offset by the jurisdictional mix of Tyco Merger transaction and integration costs.audit closures. For the nine months ended June 30, 2017, the Company's effective tax rate for continuing operations was 38%. The effective and was higher

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


than the statutory tax rate was higher than the U.S. federal statutory rate of 35%12.5% primarily due to the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries related to the pending divestiture of the Scott Safety business, the income tax effects of pension mark-to-market gains and tax rate differentials, partially offset by the jurisdictional mix of significant restructuring and impairment costs, and Tyco Merger transaction /integrationand integration costs, and purchase accounting impacts, partially offset by the benefits of continuing global tax planning initiatives, non-U.S. tax rate differentials andadjustments, a tax benefit due to changes in entity tax status. For the threestatus and nine months ended June 30, 2016, the Company's effective tax rate for continuing operations was 16% and 17%, respectively. The effective rate was lower than the U.S. federal statutory rate of 35% primarily due to the benefits of continuing global tax planning initiatives and non-U.S. tax rate differentials, partially offset by the tax impact of transaction and separation costs.initiatives.

Valuation Allowance

The Company reviews the realizability of its deferred tax assets 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.

Uncertain Tax Positions

At September 30, 2016, exclusive of items included in noncurrent liabilities held for sale,2017, the Company had gross tax effected unrecognized tax benefits of $1,706$2,173 million, of which $1,604$2,047 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 20162017 was approximately $55$99 million (net of tax benefit). The interest and penalties accrued during the nine months ended June 30, 2018 and 2017 and 2016 were not material.immaterial. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

In the first quarter of fiscal 2018, tax audit resolutions resulted in a $25 million net benefit to income tax expense.

In the U.S., fiscal years 20102015 through 20142016 are currently under exam by the Internal Revenue Service ("IRS"). Additionally, the Company is currently under exam in the following major non-U.S. jurisdictions:
Tax Jurisdiction Tax Years Covered
   
Belgium 2015 - 2016
BrazilChina 20112008 - 2012
Canada2012 - 20142016
France 2010 - 2012; 2015 - 2016
Germany 2007 - 2015
Spain 2010 - 2012
Switzerland2011 - 2014
United Kingdom 2011 - 20142015

ItImpacts of Tax Legislation

On December 22, 2017, the “Tax Cuts and Jobs Act” (H.R. 1) was enacted and significantly revises U.S. corporate income tax by, among other things, lowering corporate income tax rates, imposing a one-time transition tax on deemed repatriated earnings of non-U.S. subsidiaries, and implementing a territorial tax system and various base erosion minimum tax provisions.

In the first quarter of fiscal 2018, as a result of the enacted legislation, the Company recorded a discrete non-cash tax benefit of $101 million due to the remeasurement of U.S. deferred tax assets and liabilities. The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is reasonably possible thatgenerally 21% or the blended fiscal 2018 rate of 24.5%. This tax benefit is provisional as the Company is still analyzing certain tax examinations and/or tax litigation will conclude withinaspects of the next twelve months,legislation and refining calculations, which could potentially materially affect the measurement of these amounts or give rise to new deferred tax amounts.

In the first quarter of fiscal 2018, the Company also recorded a discrete tax charge of $305 million due to the one-time transition tax on deemed repatriated earnings of certain non-U.S. subsidiaries. This charge is inclusive of relevant non-U.S. withholding taxes and U.S. state income tax on the portion of the earnings expected to be up to a $200 million impact torepatriated. This one-time transition tax expense.is based

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Impactson the Company’s post-1986 earnings and profits (“E&P”) not previously subjected to U.S. taxation. This tax charge is provisional as the Company has not yet finally determined its post-1986 non-U.S. E&P. Further, the transition tax is based in part on the amount of Tax Legislationthose earnings held in cash and other specified assets. Given the varying tax rates (15.5% on cash and 8% on other property), this amount may change when the Company completes the calculation of post-1986 non-U.S. E&P previously deferred from U.S. federal taxation and concludes on the amounts held in cash versus other specified assets.

Various impacts of the enacted legislation are still being evaluated by the Company and may materially differ from the estimated impacts recognized in the first quarter of fiscal 2018 due to future treasury regulations, tax law technical corrections, and other potential guidance, notices, rulings, refined computations, actions the Company may take as a result of the tax legislation, and other items. The SEC has issued rules that allow for a measurement period of up to one year after the enactment date of the legislation to finalize the recording of the related tax impacts. 

On October 13, 2016, the U.S. Treasury and the IRS released final and temporary Section 385 regulations. These regulations address whether certain instruments between related parties are treated as debt or equity. The Company does not expect that the regulations will have a material impact on its consolidated financial statements.

During the nine months ended June 30, 20172018 and 2016,2017, other tax legislation was adopted in various jurisdictions. These law changes did not have a material impact on the Company's consolidated financial statements.

Other Tax Matters

In the third quarter of fiscal 2018, the Company recorded $51 million of transaction and integration costs. These costs generated a $6 million tax benefit which reflects the Company's current tax position in these jurisdictions.

In the second quarter of fiscal 2018, the Company recorded $64 million of transaction and integration costs. These costs generated a $9 million tax benefit which reflects the Company’s current tax position in these jurisdictions.

In the first quarter of fiscal 2018, the Company completed the sale of its Scott Safety business to 3M Company. Refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements for additional information. In connection with the sale, the Company recorded a pre-tax gain of $114 million and income tax expense of $30 million.

In the first quarter of fiscal 2018, the Company recorded $50 million of transaction and integration costs. These costs generated a $7 million tax benefit which reflects the Company’s current tax position in these jurisdictions.

In the first quarter of fiscal 2018, the Company recorded $158 million of significant restructuring and impairment costs. Refer to Note 8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $24 million tax benefit, which reflects the Company’s current tax position in these jurisdictions.

In the third quarter of fiscal 2017, the Company recorded $70 million of transaction and integration costs which generated an $11 million tax benefit.

In the third quarter of fiscal 2017, the Company recorded pension mark-to-market losses of $45 million which generated an $18 million tax benefit.

In the third quarter of fiscal 2017, the Company recorded $49 million of significant restructuring and impairment costs. Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $15 million tax benefit.

In the second quarter of fiscal 2017, the Company recorded a discrete non-cash tax charge of $457 million related to establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries of the Scott Safety business. This business is now reported as net assets held for sale given the announced sale


Johnson Controls International plc
Notes to 3M Company in calendar 2017. Refer to Note 4, "Acquisitions and Divestitures" and Note 5, "Discontinued Operations," of the notes to consolidated financial statements for additional information.Consolidated Financial Statements
June 30, 2018
(unaudited)


In the second quarter of fiscal 2017, the Company recorded $138 million of transaction and integration costs which generated a $31 million tax benefit.

In the second quarter of fiscal 2017, the Company recorded pension mark-to-market gains of $18 million, which resulted in tax expense of $8 million.

In the second quarter of fiscal 2017, the Company recorded $99 million of significant restructuring and impairment costs. Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $20 million tax benefit, which was impacted byreflects the Company’s current tax position in these jurisdictions.

In the first quarter of fiscal 2017, the Company recorded a discrete tax benefit of $101 million due to changes in entity tax status.

In the first quarter of fiscal 2017, the Company recorded pension mark-to-market gains of $117 million, which resulted in tax expense of $46 million.

In the first quarter of fiscal 2017, the Company recorded $130 million of transaction and integration costs which generated an $11 million tax benefit.

In the first quarter of fiscal 2017, the Company recorded $78 million of significant restructuring and impairment costs. Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $14 million tax benefit, which was impacted byreflects the Company’s current tax position in these jurisdictions.

In the third quarter of fiscal 2016, the Company recorded $27 million of significant restructuring and impairment costs. Refer to Note 9, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $12 million tax benefit, which was impacted by the geographic mix and the Company’s current tax position in these jurisdictions.

In the second quarter of fiscal 2016, the Company recorded $60 million of significant restructuring and impairment costs. Refer to Note 9, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $12 million tax benefit, which was impacted by the geographic mix, the Company’s current tax position in these jurisdictions and the underlying tax basis in the impaired assets.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


11.10.Pension and Postretirement Plans

The components of the Company’s net periodic benefit costs from continuing operations associated with its defined benefit pension and postretirement plans are shown in the tables below in accordance with ASC 715, "Compensation – Retirement Benefits" (in millions):
U.S. Pension PlansU.S. Pension Plans
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
              
Service cost$4
 $4
 $13
 $12
$4
 $4
 $11
 $13
Interest cost28
 26
 85
 76
27
 28
 80
 85
Expected return on plan assets(57) (47) (174) (139)(58) (57) (172) (174)
Net actuarial (gain) loss45
 
 (90) 

 45
 
 (90)
Settlement (gain) loss1
 
 (8) 

 1
 
 (8)
Net periodic benefit cost (credit)$21
 $(17) $(174) $(51)$(27) $21
 $(81) $(174)


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


Non-U.S. Pension PlansNon-U.S. Pension Plans
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
              
Service cost$8
 $4
 $24
 $9
$6
 $8
 $18
 $24
Interest cost13
 7
 36
 19
14
 13
 43
 36
Expected return on plan assets(23) (7) (68) (22)(29) (23) (87) (68)
Net periodic benefit cost (credit)$(2) $4
 $(8) $6
Net periodic benefit credit$(9) $(2) $(26) $(8)

Postretirement BenefitsPostretirement Benefits
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
              
Service cost$
 $1
 $1
 $1
$
 $
 $1
 $1
Interest cost1
 2
 4
 5
2
 1
 5
 4
Expected return on plan assets(2) (3) (7) (7)(2) (2) (7) (7)
Amortization of prior service credit
 
 
 (1)
Net periodic benefit credit$(1) $
 $(2) $(2)$
 $(1) $(1) $(2)

During the three and nine months ended June 30, 2017, the amount of lump sum payouts triggered a remeasurement event for certain U.S. pension plans resulting in the recognition of net actuarial (gains) losses of $45 million and $(90) million, respectively.

11.Debt and Financing Arrangements

In October 2017, the Company completed the previously announced sale of its Scott Safety business to 3M. Net cash proceeds from the transaction of approximately $1.9 billion were used to repay a significant portion of the TSarl $4.0 billion of merger-related debt. In addition, in March 2018, the Company repaid $26 million in principal amount, plus accrued interest and in April 2018, the Company refinanced approximately $400 million in principal amount, plus accrued interest of the TSarl merger-related debt with commercial paper.

In March 2018, the Company increased the committed credit limit from $1.0 billion to $1.25 billion on TSarl's committed revolving credit facility scheduled to expire in August 2020. As of June 30, 2018, there were no draws on the facility.

In March 2018, the Company entered into a 364-day $250 million committed revolving credit facility scheduled to expire in March 2019. As of June 30, 2018, there were no draws on the facility.

In March 2018, a 364-day $150 million committed revolving credit facility expired. The Company entered into a new $150 million committed revolving credit facility scheduled to expire in February 2019. As of June 30, 2018, there were no draws on the facility.

In February 2018, a 364-day $150 million committed revolving credit facility expired. The Company entered into a new $150 million committed revolving credit facility scheduled to expire in February 2019. As of June 30, 2018, there were no draws on the facility.

In January 2018, a 364-day $250 million committed revolving credit facility expired. The Company entered into a new $200 million committed revolving credit facility scheduled to expire in January 2019. As of June 30, 2018, there were no draws on the facility.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


12.Debt and Financing Arrangements

Debt exchangeIn January 2018, the Company retired $67 million in principal amount, plus accrued interest, of its 3.75% fixed rate notes that expired in January 2018.

In connection with the Tyco Merger, on December 28, 2016, the Company completed its offers to exchange all validly tendered and accepted notes of certain series (the "existing notes") issued by JCI Inc. or Tyco International Finance S.A. ("TIFSA"), as applicable, each of which is a wholly owned subsidiary of the Company, for new notes (the New Notes) to be issued by the Company, and the related solicitation of consents to amend the indentures governing the existing notes (the offers to exchange and the related consent solicitation together the "exchange offers"). Pursuant to the exchange offers, the Company exchanged approximately $5.6 billion of $6.0 billion in aggregate principal amount of dollar denominated notes and approximately 423 million euro of 500 million euro in aggregate principal amount of euro denominated notes. All validly tendered and accepted existing notes have been canceled. Immediately following such cancellation, $380.9 million aggregate principal amount of existing notes (not including the TIFSA Euro Notes) remained outstanding across seventeen series of dollar-denominated existing notes and 77.4 million euro aggregate principal amount of TIFSA Euro Notes remained outstanding across one series. In connection with the settlement of the exchange offers, the New Notes were registered under the Securities Act of 1933 and their terms are described in the Company’s Prospectus dated December 19, 2016, as filed with the SEC under Rule 424(b)(3) of the Act on that date. The issuance of the New Notes occurred on December 28, 2016. The New Notes are unsecured and unsubordinated obligations of the Company and will rank equally with all other unsecured and unsubordinated indebtedness of the Company issued from time to time.

Other financing arrangements

In June 2017, the Company partially repaid $135a 364-day 150 million of the $4.0 billioneuro floating rate term loan, plus accrued interest, scheduled to mature in March 2020.September 2018.

In MarchNovember 2017, the Company issued one billion750 million euro in principal amount of 1.0%0.0% senior unsecured fixed rate notes due in fiscal 2023.December 2020. Proceeds from the issuance were used to repay existing debt and for other general corporate purposes.

In March 2017, the Company entered into a 364-day $150 million committed revolving credit facility scheduled to expire in March 2018. As of June 30, 2017, there were no draws on the facility.

In MarchNovember 2017, the Company retired $46$300 million in principal amount, plus accrued interest, of its 2.355%1.4% fixed rate notes that matured in March 2017.

In March and February 2017, the Company repurchased, at a discount, 15 million euro of its TIFSA 1.375% fixed rate notes, plus accrued interest, scheduled to mature in February 2025.

In February 2017, the Company issued $500 million aggregate principal amount of 4.5% senior unsecured fixed rate notes due in fiscal 2047. Proceeds from the issuance were used to repay outstanding commercial paper borrowings and for other general corporate purposes.

In February 2017, the Company entered into a 364-day $150 million committed revolving credit facility scheduled to expire in February 2018. As of June 30, 2017, there were no draws on the facility.

In January 2017, the Company entered into a 364-day $250 million committed revolving credit facility scheduled to expire in January 2018. As of June 30, 2017, there were no draws on the facility outstanding.
In December 2016, the Company retired $400 million in principal amount, plus accrued interest, of its 2.6% fixed rate notes that matured in December 2016.

In December 2016, the Company entered into a 364-day 100 million euro floating rate term loan scheduled to mature in December 2017. Proceeds from the term loan were used for general corporate purposes. Principal and accrued interest were fully repaid in March 2017.

In December 2016, a $100 million committed revolving credit facility expired. There were no draws on the facility.

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


In November 2016, the Company fully repaid its 37 billion yen syndicated floating rate term loan, plus accrued interest, scheduled to mature in June 2020.

In November 2016, a $35 million committed revolving credit facility expired. There were no draws on the facility.

In October 2016, the Company repaid two ten-month floating rate term loans totaling $325 million, plus accrued interest, scheduled to mature in October 2016.

In October 2016, the Company repaid a nine-month $100 million floating rate term loan, plus accrued interest, scheduled to matureexpired in November 2016.

In October 2016, the Company repaid a nine-month 100 million euro floating rate term loan, plus accrued interest, scheduled to mature in October 2016.2017.

Net Financing Charges

The Company's net financing charges line item in the consolidated statements of income for the three and nine month periodsmonths ended June 30, 20172018 and 20162017 contained the following components (in millions):
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
              
Interest expense, net of capitalized interest costs$115
 $66
 $343
 $203
$110
 $115
 $328
 $343
Banking fees and bond cost amortization14
 7
 55
 19
14
 14
 41
 55
Interest income(4) (4) (16) (8)(10) (4) (24) (16)
Net foreign exchange results for financing activities(1) (4) (6) (12)(13) (1) (13) (6)
Net financing charges$124
 $65
 $376
 $202
$101
 $124
 $332
 $376

Net financing charges for the nine month period ended June 30, 2017, included $17 million of transaction costs related primarily to the prior year debt exchange offers.offer fees.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


13.12.Stock-Based Compensation

References to the Company's stock throughout Note 13 refer to stock of JCI Inc. prior to the Tyco Merger date of September 2, 2016 (the "Merger Date") and to ordinary shares of the Company subsequent to the Merger Date.

During September 2016, the Board of Directors of the Company approved amendments to the Johnson Controls International plc 2012 Share and Incentive Plan (the "Plan"). The types of awards authorized by the Plan comprise of stock options, stock appreciation rights, performance shares, performance units and other stock-based compensation awards. The Compensation 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. Awards are typically granted annually in the Company’s fiscal first quarter. A summary of the stock-based awards granted during the nine month periods ended June 30, 20172018 and 20162017 is presented below:
Nine Months Ended June 30,Nine Months Ended June 30,
2017 20162018 2017
Number Granted Weighted Average Grant Date Fair Value Number Granted Weighted Average Grant Date Fair ValueNumber Granted Weighted Average Grant Date Fair Value Number Granted Weighted Average Grant Date Fair Value
              
Stock options2,841,686
 $7.81
 961,705
 $13.14
1,376,807
 $7.04
 2,841,686
 $7.81
Stock appreciation rights15,693
 8.28
 54,749
 13.15

 
 15,693
 8.28
Restricted stock/units1,671,677
 41.75
 2,290,575
 43.68
2,188,131
 37.26
 1,671,677
 41.75
Performance shares846,725
 48.40
 
 
496,478
 36.31
 846,725
 48.40

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 assumptions noted in the following table. The expected life of options represents the period of time that options granted are expected to be outstanding, assessed separately for executives and non-executives. 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. For fiscal 2017,2018, the expected volatility is based on the historical volatility of the Company’s stock after the Adient spin-off blended with the historical volatility of certain peer companies’ stock prior to the Adient spin-off over the most recent period corresponding to the expected life as of the grant date. For fiscal 2017, the expected volatility is based on the historical volatility of certain peer companies over the most recent period corresponding to the expected life as of the grant date. For fiscal 2016, expected volatility is based on the historical volatility of the Company's stock and other factors. 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.
Nine Months Ended
June 30,
Nine Months Ended
June 30,
2017 20162018 2017
Expected life of option (years)4.75 & 6.5 6.46.5 4.75 & 6.5
Risk-free interest rate1.23% - 1.93% 1.64%2.28% 1.23% - 1.93%
Expected volatility of the Company’s stock24.60% 36.00%23.7% 24.60%
Expected dividend yield on the Company’s stock2.21% 2.11%2.78% 2.21%


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Stock Appreciation Rights (SARs)("SARs")

SARs vest under the same terms and conditions as stock option awards; however, they 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 described 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.

Restricted (Nonvested) Stock / Units

The Plan provides for the award of restricted stock or restricted stock units to certain employees. These awards are typically share settled unless the employee is a non-U.S. employee or elects to defer settlement until retirement at which point the award would be settled in cash. Restricted awards typically vest afterover a period of three years from the grant date. The Plan allows for different vesting terms on specific grants with approval by the Board of Directors. The fair value of each share-settled restricted awardsaward 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

The Plan permits the grant of performance-based share unit ("PSU") awards. The PSUs are generally contingent on the achievement of pre-determined performance goals over a three-year performance period as well as on the award holder's continuous employment until the vesting date. The PSUs are also indexed to the achievement of specified levels of total shareholder return versus a peer group over the performance period. Each PSU that is earned will be settled with shares of the Company's ordinary shares following the completion of the performance period, unless the award holder elected to defer a portion or all of the award until retirement which would then be settled in cash.

The fair value of each PSU is estimated on the date of grant using a Monte Carlo simulation that uses the assumptions noted in the following table. 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. ExpectedFor fiscal 2018, the expected volatility is based on the historical volatility of the Company’s stock after the Adient spin-off blended with the historical volatility of certain peer companies’ stock prior to the Adient spin-off over the most recent three-year period as of the grant date. For fiscal 2017, the expected volatility is based on historical volatility of certain peer companies over the most recent three-year period as of the grant date.

Nine Months Ended
June 30, 2017
Risk-free interest rate1.40%
Expected volatility of the Company’s stock21.00%

Spin-off Modification

In connection with the Adient spin-off, pursuant to the Employee Matters Agreement between the Company and Adient, outstanding stock options and SARs held on October 31, 2016 (the “Spin Date”) by employees remaining with the Company were converted into options and SARs of the Company using a 1.085317-for-one share ratio, which is based on the pre-spin and post-spin closing prices of the Company’s ordinary shares. The exercise prices for options and SARs were converted using the inverse ratio in a manner designed to preserve the intrinsic value of such awards. In addition, pursuant to the Employee Matters Agreement, nonvested restricted stock held on the Spin Date by employees remaining with the Company were converted into nonvested restricted stock of the Company using the 1.085317-for-one share ratio in a manner designed to preserve the intrinsic value of such awards. There were no performance share awards outstanding as of the Spin Date. Employees remaining with the Company did not receive stock-based compensation awards of Adient as a result of the spin-off. Except for the conversion of awards and related exercise prices discussed herein, the material terms of the awards remained unchanged. No incremental fair value resulted from the conversion of the awards; therefore, no additional compensation expense was recorded related to the award modification.    

Also in connection with the spin-off transaction, pursuant to the Employee Matters Agreement, employees of Adient were entitled to receive stock-based compensation awards of the Company and Adient in replacement of previously outstanding awards of the Company granted prior to the Spin Date. These awards include stock options, SARs and nonvested restricted

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


stock. Upon the Spin Date, the existing awards held by Adient employees were converted into new awards of the Company and Adient on a pro rata basis and further adjusted based on a formula designed to preserve the intrinsic value of such awards. Additional compensation expense, if any, resulting from the modification of awards held by Adient employees is to be recorded by Adient.
 Nine Months Ended
June 30,
 2018 2017
Risk-free interest rate1.92% 1.40%
Expected volatility of the Company’s stock21.7% 21.0%

14.13.Earnings Per Share

The Company presents both basic and diluted earnings per share (EPS)("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 and any windfall tax benefits that would be credited to capital in excess of par value when the award generates a tax deduction. If there would be a shortfall resulting in a charge to capital in excess of par value, such an amount would be a reduction of the proceeds.recognized. For unvested restricted stock and unvested performance share awards, assumed proceeds under the treasury stock method would include unamortized compensation cost and windfall tax benefits or shortfalls.cost.

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)



The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share (in millions):
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
Income Available to Ordinary Shareholders
              
Income from continuing operations$555
 $347
 $779
 $845
$723
 $555
 $1,391
 $779
Income (loss) from discontinued operations
 36
 (43) (542)
Loss from discontinued operations
 
 
 (43)
Basic and diluted income available to
shareholders
$555
 $383
 $736
 $303
$723
 $555
 $1,391
 $736
              
Weighted Average Shares Outstanding              
Basic weighted average shares outstanding935.4
 644.9
 937.2
 647.0
925.6
 935.4
 926.0
 937.2
Effect of dilutive securities:              
Stock options, unvested restricted stock and
unvested performance share awards
9.0
 4.8
 9.6
 4.5
5.1
 9.0
 6.1
 9.6
Diluted weighted average shares outstanding944.4
 649.7
 946.8
 651.5
930.7
 944.4
 932.1
 946.8
              
Antidilutive Securities              
Options to purchase shares0.1
 0.1
 0.1
 0.2
2.1
 0.1
 1.5
 0.1

During the three months ended June 30, 20172018 and 2016,2017, the Company declared a dividend of $0.25$0.26 and $0.29,$0.25, respectively, per share. During the nine months ended June 30, 20172018 and 2016,2017, the Company declared dividends totalingof $0.78 and $0.75, and $0.87, respectively, per share. The Company paid all dividends in the month subsequent to the end of each fiscal quarter.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


15.14.Equity and Noncontrolling Interests

Other comprehensive income includes activity relating to discontinued operations. The following schedules present changes in consolidated equity attributable to Johnson Controls and noncontrolling interests (in millions, net of tax):
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016Three Months Ended June 30, 2018 Three Months Ended June 30, 2017
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
 
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
 
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
                      
Beginning balance, March 31$19,388
 $813
 $20,201
 $9,984
 $898
 $10,882
$20,874
 $1,006
 $21,880
 $19,388
 $813
 $20,201
Total comprehensive income (loss):           
Total comprehensive income:           
Net income555
 66
 621
 383
 59
 442
723
 71
 794
 555
 66
 621
Foreign currency translation adjustments268
 3
 271
 (141) 3
 (138)(557) (44) (601) 268
 3
 271
Realized and unrealized gains (losses) on derivatives(7) (1) (8) 6
 (2) 4
3
 (1) 2
 (7) (1) (8)
Realized and unrealized losses on marketable securities(3) 
 (3) 
 
 

 
 
 (3) 
 (3)
Other comprehensive income (loss)258
 2
 260
 (135) 1
 (134)(554) (45) (599) 258
 2
 260
Comprehensive income813
 68
 881
 248
 60
 308
169
 26
 195
 813
 68
 881
                      
Other changes in equity:                      
Cash dividends—ordinary shares(234) 
 (234) (189) 
 (189)(240) 
 (240) (234) 
 (234)
Dividends attributable to noncontrolling interests
 
 
 
 (35) (35)
Repurchases of ordinary shares(307) 
 (307) (475) 
 (475)(56) 
 (56) (307) 
 (307)
Change in noncontrolling interest share
 3
 3
 
 1
 1

 4
 4
 
 3
 3
Other, including options exercised71
 
 71
 31
 
 31
26
 
 26
 71
 
 71
Ending balance, June 30$19,731
 $884
 $20,615
 $9,599
 $924
 $10,523
$20,773
 $1,036
 $21,809
 $19,731
 $884
 $20,615

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Nine Months Ended June 30, 2017 Nine Months Ended June 30, 2016Nine Months Ended June 30, 2018 Nine Months Ended June 30, 2017
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
 
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
 
Equity
Attributable to
Johnson Controls International plc
 
Equity
Attributable to
Noncontrolling
Interests
 
Total
Equity
                      
Beginning balance, September 30$24,118
 $972
 $25,090
 $10,376
 $163
 $10,539
Total comprehensive income (loss):           
Beginning balance, September 30,$20,447
 $920
 $21,367
 $24,118
 $972
 $25,090
Total comprehensive income:           
Net income736
 127
 863
 303
 129
 432
1,391
 132
 1,523
 736
 127
 863
Foreign currency translation adjustments(150) (22) (172) (126) 12
 (114)(331) 3
 (328) (150) (22) (172)
Realized and unrealized gains (losses) on derivatives(13) 1
 (12) 9
 (1) 8
(2) 1
 (1) (13) 1
 (12)
Realized and unrealized gains on marketable securities6
 
 6
 
 
 
Realized and unrealized gains (losses) on marketable securities(2) 
 (2) 6
 
 6
Other comprehensive income (loss)(157) (21) (178) (117) 11
 (106)(335) 4
 (331) (157) (21) (178)
Comprehensive income579
 106
 685
 186
 140
 326
1,056
 136
 1,192
 579
 106
 685
                      
Other changes in equity:                      
Cash dividends—ordinary shares(705) 
 (705) (566) 
 (566)(722) 
 (722) (705) 
 (705)
Dividends attributable to noncontrolling interests
 (47) (47) 
 (71) (71)
 (43) (43) 
 (47) (47)
Repurchases of ordinary shares(426) 
 (426) (475) 
 (475)(255) 
 (255) (426) 
 (426)
Change in noncontrolling interest share
 (9) (9) 
 692
 692

 23
 23
 
 (9) (9)
Adoption of ASU 2016-09179
 
 179
 
 
 
Spin-off of Adient(4,038) (138) (4,176) 
 
 

 
 
 (4,038) (138) (4,176)
Other, including options exercised203
 
 203
 78
 
 78
68
 
 68
 203
 
 203
Ending balance, June 30$19,731
 $884
 $20,615
 $9,599
 $924
 $10,523
$20,773
 $1,036
 $21,809
 $19,731
 $884
 $20,615

As previously disclosed, during the quarter ended December 31, 2017, the Company adopted ASU No. 2016-09. As a result, the Company recognized deferred tax assets of $179 million related to certain operating loss carryforwards resulting from the exercise of employee stock options and restricted stock vestings on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of October 1, 2017.

As previously disclosed, on October 31, 2016, the Company completed the Adient spin-off. As a result of the spin-off, the Company divested net assets of $4,038 million.

As previously disclosed, on October 1, 2015, the Company formed a joint venture with Hitachi. In connection with the acquisition, the Company recorded equity attributable to noncontrolling interests of $679 million.approximately $4.0 billion.

Following the Tyco Merger, the Company adopted, subject to the ongoing existence of sufficient distributable reserves, the existing Tyco International plc $1 billion share repurchase program in September 2016. In December 2017, the Company's Board of Directors approved an $1 billion increase to its share repurchase authorization. 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. For the three and nine month periodperiods ended June 30, 2017 and 2016,2018, the Company repurchased $307$56 million and $475$255 million of its ordinary shares, respectively. For the three and nine month periods ended June 30, 2017, and 2016, the Company repurchased $426$307 million and $475$426 million of its ordinary shares, respectively.

In April 2017, As of June 30, 2018, approximately $1.1 billion remains available under the Company announced its intention to utilize up to $750 million of the $1 billion authorization during fiscal 2017. Shares may be repurchased from time to time in open market purchases at prevailing market prices, in negotiated transactions off the market, or pursuant to a trading plan in accordance with applicable regulations.share repurchase program.

The Company consolidates certain subsidiaries in which the noncontrolling interest party has within its control the right to require the Company to redeem all or a portion of its interest in the subsidiary. The redeemable noncontrolling interests are reported at their estimated redemption value. Any adjustment to the redemption value impacts retained earnings but does not impact net income. Redeemable noncontrolling interests which are redeemable only upon future events, the occurrence of which is not currently probable, are recorded at carrying value.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


The following schedules present changes in the redeemable noncontrolling interests (in millions):
Three Months Ended
June 30,
Three Months Ended
June 30,
2017 20162018 2017
      
Beginning balance, March 31$168
 $237
$235
 $168
Net income8
 17
10
 8
Foreign currency translation adjustments14
 (3)(13) 14
Realized and unrealized losses on derivatives(1) 
(1) (1)
Ending balance, June 30$189
 $251
$231
 $189
   
Nine Months Ended
June 30,
Nine Months Ended
June 30,
2017 20162018 2017
      
Beginning balance, September 30$234
 $212
$211
 $234
Net income29
 48
35
 29
Foreign currency translation adjustments6
 (1)(3) 6
Realized and unrealized losses on derivatives(1) (2)(9) (1)
Dividends(43) (6)(3) (43)
Spin-off of Adient(36) 

 (36)
Ending balance, June 30$189
 $251
$231
 $189

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


The following schedules present changes in accumulated other comprehensive income (AOCI)("AOCI") attributable to Johnson Controls (in millions, net of tax):
Three Months Ended June 30,
Three Months Ended
June 30,
2017 20162018 2017
      
Foreign currency translation adjustments   
Foreign currency translation adjustments ("CTA")   
Balance at beginning of period$(1,007) $(1,032)$(255) $(1,007)
Aggregate adjustment for the period (net of tax effect of $(5) and $(5))268
 (141)
Aggregate adjustment for the period (net of tax effect of $0 and $(5))(557) 268
Balance at end of period(739) (1,173)(812) (739)
      
Realized and unrealized gains (losses) on derivatives      
Balance at beginning of period14
 (4)1
 14
Current period changes in fair value (net of tax effect of $(1) and $(1))(1) (3)
Reclassification to income (net of tax effect of $(5) and $1) *(6) 9
Current period changes in fair value (net of tax effect of $1 and $(1))5
 (1)
Reclassification to income (net of tax effect of $(2) and $(5)) **(2) (6)
Balance at end of period7
 2
4
 7
      
Realized and unrealized gains (losses) on marketable securities      
Balance at beginning of period8
 
2
 8
Current period changes in fair value (net of tax effect of $1)(3) 
Current period changes in fair value (net of tax effect of $0 and $1)1
 (3)
Reclassification to income (net of tax effect of $(1) and $0) ***(1) 
Balance at end of period5
 
2
 5
      
Pension and postretirement plans      
Balance at beginning of period(2) (3)(2) (2)
Reclassification to income (net of tax effect of $0) **
 
Other changes
 
Balance at end of period(2) (3)(2) (2)
      
Accumulated other comprehensive loss, end of period$(729) $(1,174)$(808) $(729)

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Nine Months Ended
June 30,
   
2017 2016
Nine Months Ended
June 30,
   2018 2017
Foreign currency translation adjustments   
   
CTA   
Balance at beginning of period$(1,152) $(1,047)$(481) $(1,152)
Aggregate adjustment for the period (net of tax effect of $0 and $(4))(150) (126)
Aggregate adjustment for the period (net of tax effect of $1 and $0) *(331) (150)
Adient spin-off impact (net of tax effect of $0)563
 

 563
Balance at end of period(739) (1,173)(812) (739)
      
Realized and unrealized gains (losses) on derivatives      
Balance at beginning of period4
 (7)6
 4
Current period changes in fair value (net of tax effect of $3 and $(2))6
 (9)
Reclassification to income (net of tax effect of $(12) and $5) *(19) 18
Adient spin-off impact (net of tax effect of $6 and $0)16
 
Current period changes in fair value (net of tax effect of $2 and $3)7
 6
Reclassification to income (net of tax effect of $(4) and $(12)) **(9) (19)
Adient spin-off impact (net of tax effect of $0 and $6)
 16
Balance at end of period7
 2
4
 7
      
Realized and unrealized gains (losses) on marketable securities      
Balance at beginning of period(1) 
4
 (1)
Current period changes in fair value (net of tax effect of $1)6
 
Current period changes in fair value (net of tax effect of $0 and $1)(1) 6
Reclassification to income (net of tax effect of $(1) and $0) ***(1) 
Balance at end of period5
 
2
 5
      
Pension and postretirement plans      
Balance at beginning of period(4) (3)(2) (4)
Reclassification to income (net of tax effect of $0) **
 (1)
Adient spin-off impact (net of tax effect of $0)2
 

 2
Other changes (net of tax effect of $0)
 1
Balance at end of period(2) (3)(2) (2)
      
Accumulated other comprehensive loss, end of period$(729) $(1,174)$(808) $(729)

* During the nine months ended June 30, 2018, $12 million of cumulative CTA was recognized as part of the divestiture-related gain recognized as part of the divestiture of Scott Safety.

** Refer to Note 16,15, "Derivative Instruments and Hedging Activities," of the notes to consolidated financial statements for disclosure of the line items onin the consolidated statements of income affected by reclassifications from AOCI into income related to derivatives.

** Refer to Note 11, "Pension and Postretirement Plans," of*During the notes to consolidated financial statements for disclosure of the components of the Company's net periodic benefit costs associated with its defined benefit pension and postretirement plans. For the three and nine months ended June 30, 2016,2018, the amounts reclassified from AOCI into incomeCompany sold certain marketable common stock for pension and postretirement plans were primarilyapproximately $3 million. As a result, the Company recorded in$2 million of realized gains within selling, general and administrative expenses on the consolidated statements of income.expenses.

16.15.Derivative Instruments and Hedging Activities

The Company selectively uses derivative instruments to reduce market risk associated with changes in foreign currency, commodities, stock-based compensation liabilities and interest rates. Under Company policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized by the Company to manage risk is included in the following paragraphs. In addition, refer to Note 17,16, "Fair Value Measurements," of the notes to consolidated financial statements for information related to the fair value measurements and valuation methods utilized by the Company for each derivative type.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Cash Flow Hedges

The Company has global operations and participates in the 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 hedge contracts. The Company hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. As cash flow hedges under ASC 815, "Derivatives and Hedging," the effective portion of 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. Any ineffective portion of the hedge is reflected in the consolidated statements of income. These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates during the three and nine months ended June 30, 20172018 and 2016.2017.

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 lead, copper, tin, aluminum and polypropylene 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 cash flow hedges, the effective portion of 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, typically sales, occur and affect earnings. Any ineffective portion of the hedge is reflected in the consolidated statements of income. The maturities of the commodity hedge contracts coincide with the expected purchase of the commodities. These contracts were highly effective in hedging the variability in future cash flows attributable to changes in commodity prices during the three and nine months ended June 30, 20172018 and 2016.2017.

The Company had the following outstanding contracts to hedge forecasted commodity purchases:purchases (in metric tons):
    Volume Outstanding as of
Commodity Units June 30, 2017 September 30, 2016
       
Copper Pounds 6,200,000
 5,849,000
Polypropylene Pounds 18,000,000
 
Lead Metric Tons 8,645
 5,185
Aluminum Metric Tons 2,860
 2,620
Tin Metric Tons 2,225
 185

In September 2005, the Company entered into three forward treasury lock agreements to reduce the market risk associated with changes in interest rates associated with the Company’s anticipated fixed-rate note issuance to finance the acquisition of York International (cash flow hedge). The three forward treasury lock agreements, which had a combined notional amount of $1.3 billion, fixed a portion of the future interest cost for 5-year, 10-year and 30-year notes. The fair value of each treasury lock agreement, or the difference between the treasury lock reference rate and the fixed rate at time of note issuance, is amortized to interest expense over the life of the respective note issuance. In January 2006, in connection with the Company’s debt refinancing, the three forward treasury lock agreements were terminated.
  Volume Outstanding as of
Commodity June 30, 2018 September 30, 2017
     
Copper 2,948
 1,962
Polypropylene 8,540
 19,563
Lead 31,009
 24,705
Aluminum 3,885
 2,169
Tin 2,276
 1,715

Fair Value Hedges

The Company selectively uses interest rate swaps to reduce market risk associated with changes in interest rates for its fixed-rate bonds. As fair value hedges, the interest rate swaps and related debt balances are valued under a market approach using publicized swap curves. Changes in the fair value of the swap and hedged portion of the debt are recorded in the consolidated statements of income. In the third quarterAs of fiscal 2014,September 30, 2016, the Company entered intohad four fixed to floating interest rate swaps totaling $400 million to hedge the coupon of its 2.6% notes that matured in December 2016, three fixed to floating interest rate swaps totaling $300 million to hedge the coupon of its 1.4% notes maturing November 2017 and one fixed to floating interest rate swap totaling $150 million to hedge the coupon of its 7.125% notes maturing July 2017. In December 2016, the four remaining outstanding interest rate swaps were terminated. The Company had no interest rate swaps outstanding at June 30, 2017. There were eight interest rate swaps outstanding as of2018 and September 30, 2016.2017, respectively.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


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. At June 30, 2017,2018, the Company had one billion euro, 750 million euro, 423 million euro and 48558 million euro bonds designated as net investment hedges in the Company's net investment in Europe. At September 30, 2016, the Company had 37Europe and 35 billion yen of foreign denominated debt designated as net investment hedge in the Company's net investment in Japan andJapan. At September 30, 2017, the Company had one billion euro, 423 million euro and 50058 million euro bonds designated as net investment hedges in the Company's net investment in Europe.Europe and 35 billion yen of foreign denominated debt designated as net investment hedge in the Company's net investment in Japan.

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. As of June 30, 2018, the Company hedged approximately 1.8 million shares of its ordinary shares, which have a cost basis of $73 million. As of September 30, 2017, the Company hedged approximately 1.4 million shares of its ordinary shares. Asshares, which have a cost basis of September 30, 2016, the Company had no equity swaps outstanding.$58 million.

The Company also holds certain foreign currency forward contracts which do not qualify for hedge accounting treatment. The change in fair value of foreign currency exchange derivatives not designated as hedging instruments under ASC 815 are recorded in the consolidated statements of income.

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):
Derivatives and Hedging Activities Designated
as Hedging Instruments under ASC 815
 
Derivatives and Hedging Activities Not
Designated as Hedging Instruments under ASC 815
Derivatives and Hedging Activities Designated
as Hedging Instruments under ASC 815
 
Derivatives and Hedging Activities Not
Designated as Hedging Instruments under ASC 815
June 30, September 30, June 30, September 30,June 30, September 30, June 30, September 30,
2017 2016 2017 20162018 2017 2018 2017
Other current assets              
Foreign currency exchange derivatives$7
 $41
 $26
 $49
$8
 $27
 $11
 $
Commodity derivatives3
 4
 
 
2
 9
 
 
Other noncurrent assets              
Interest rate swaps
 1
 
 
Equity swap
 
 59
 

 
 60
 55
Total assets$10
 $46
 $85
 $49
$10
 $36
 $71
 $55
              
Other current liabilities              
Foreign currency exchange derivatives$6
 $48
 $13
 $18
$7
 $21
 $22
 $25
Commodity derivatives1
 
 
 
3
 1
 
 
Liabilities held for sale       
Foreign currency exchange derivatives
 
 
 5
Current portion of long-term debt       
Fixed rate debt swapped to floating
 551
 
 
Long-term debt              
Foreign currency denominated debt1,693
 938
 
 
2,916
 2,058
 
 
Fixed rate debt swapped to floating
 301
 
 
Noncurrent liabilities held for sale       
Foreign currency denominated debt
 1,119
 
 
Total liabilities$1,700
 $2,957
 $13
 $23
$2,926
 $2,080
 $22
 $25


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


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)("ISDA") master netting agreements with substantially all of its counterparties. 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 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. Collateral is generally not required of the Company or the counterparties under the master netting agreements. As of June 30, 20172018 and September 30, 2016,2017, no cash collateral was received or pledged under the master netting agreements.

The gross and net amounts of derivative assets and liabilities were as follows (in millions):
Fair Value of Assets Fair Value of Liabilities Fair Value of Assets Fair Value of Liabilities
June 30, September 30, June 30, September 30, June 30, September 30, June 30, September 30,
2017 2016 2017 2016 2018 2017 2018 2017
Gross amount recognized$95
 $95
 $1,713
 $2,980
 $81
 $91
 $2,948
 $2,105
Gross amount eligible for offsetting(18) (21) (18) (21) (18) (16) (18) (16)
Net amount$77
 $74
 $1,695
 $2,959
 $63
 $75
 $2,930
 $2,089
    
Derivatives Impact on the Statements of Income and Statements of Comprehensive Income

The following table presents the effective portion of pre-tax gains (losses) recorded in other comprehensive income (loss) related to cash flow hedges for the three and nine months ended June 30, 20172018 and 20162017 (in millions):
Derivatives in ASC 815 Cash Flow Hedging Relationships Three Months Ended June 30, Nine Months Ended June 30, Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016 2018 2017 2018 2017
Foreign currency exchange derivatives $(3) $(5) $3
 $(11) $6
 $(3) $7
 $3
Commodity derivatives 1
 1
 6
 
 
 1
 2
 6
Total $(2) $(4) $9
 $(11) $6
 $(2) $9
 $9

The following tables present the location and amount of the effective portion of pre-tax gains (losses) on cash flow hedges reclassified from AOCI into the Company’s consolidated statements of income for the three and nine months ended June 30, 20172018 and 20162017 (in millions):
Derivatives in ASC 815 Cash Flow
Hedging Relationships
 
Location of Gain (Loss) Reclassified
from AOCI into Income
 Three Months Ended June 30, Nine Months Ended June 30, Location of Gain (Loss) Reclassified from AOCI into Income Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016 2018 2017 2018 2017
Foreign currency exchange derivatives Cost of sales $8
 $2
 $24
 $11
 Cost of sales $2
 $8
 $2
 $24
Foreign currency exchange derivatives Loss from discontinued operations 
 (10) 
 (24)
Commodity derivatives Cost of sales 3
 (2) 7
 (11) Cost of sales 2
 3
 11
 7
Forward treasury locks Net financing charges 
 
 
 1
Total $11
 $(10) $31
 $(23) $4
 $11
 $13
 $31


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


 The following table presents the location and amount of pre-tax gains (losses) on fair value hedges recognized in the Company’s consolidated statements of income for the three and nine months ended June 30, 20172018 and 20162017 (in millions):
Derivatives in ASC 815 Fair Value
Hedging Relationships
 
Location of Gain (Loss)
Recognized in Income on Derivative
 Three Months Ended June 30, Nine Months Ended June 30, Location of Gain (Loss) Recognized in Income on Derivative Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016 2018 2017 2018 2017
Interest rate swap Net financing charges $
 $
 $(1) $(3) Net financing charges $
 $
 $
 $(1)
Fixed rate debt swapped to floating Net financing charges 
 
 2
 3
 Net financing charges 
 
 
 2
Total $
 $
 $1
 $
 $
 $
 $
 $1

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 for the three and nine months ended June 30, 20172018 and 20162017 (in millions):
   Amount of Gain (Loss) Recognized in Income on Derivative   
Amount of Gain (Loss) Recognized in
Income on Derivative
Derivatives Not Designated as Hedging Instruments under ASC 815 
Location of Gain (Loss)
Recognized in Income on Derivative
 Three Months Ended June 30, Nine Months Ended June 30, 
Location of Gain (Loss)
Recognized in Income on Derivative
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
2017 2016 2017 2016 2018 2017 2018 2017
Foreign currency exchange derivatives Cost of sales $(4) $1
 $(1) $4
 Cost of sales $(4) $(4) $(6) $(1)
Foreign currency exchange derivatives Net financing charges 51
 (14) 60
 (21) Net financing charges (27) 51
 (26) 60
Foreign currency exchange derivatives Income tax provision 1
 5
 (2) 5
 Income tax provision 
 1
 2
 (2)
Foreign currency exchange derivatives Income (loss) from discontinued operations 
 (5) 5
 (16) Income (loss) from discontinued operations 
 
 
 5
Equity swap Selling, general and administrative 2
 20
 2
 12
 Selling, general and administrative (3) 2
 (10) 2
Total $50
 $7
 $64
 $(16) $(34) $50
 $(40) $64

The effective portion of pre-tax gains (losses) recorded in foreign currency translation adjustment ("CTA") within other comprehensive income (loss) related to net investment hedges were $(105) million and $(36) million for the three months ended June 30, 2017 and 2016, respectively. The effective portion of pre-tax gains (losses) recorded in CTA within other comprehensive income (loss) related to net investment hedges were $(77)$165 million and $(62)$(105) million for the three months ended June 30, 2018 and 2017, respectively. The pre-tax gains (losses) recorded in CTA within other comprehensive income (loss) related to net investment hedges were $29 million and $(77) million for the nine months ended June 30, 20172018 and 2016,2017, respectively. For the three and nine months ended June 30, 20172018 and 2016,2017, no gains or losses were reclassified from CTA into income for the Company’s outstanding net investment hedges, and no gains or losses were recognized in income for the ineffective portion of cash flow hedges.

17.16.Fair Value Measurements

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;markets for identical assets or liabilities;

Level 2: Inputs,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.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Recurring Fair Value Measurements

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value as of June 30, 20172018 and September 30, 20162017 (in millions):
Fair Value Measurements Using:Fair Value Measurements Using:
Total as of
June 30, 2017
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Total as of
June 30, 2018
 
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$33
 $
 $33
 $
$19
 $
 $19
 $
Commodity derivatives3
 
 3
 
2
 
 2
 
Exchange traded funds (fixed income)1

14
 14
 
 
14
 14
 
 
Other noncurrent assets              
Investments in marketable common stock15
 15
 
 
4
 4
 
 
Deferred compensation plan assets89
 89
 
 
97
 97
 
 
Exchange traded funds (fixed income)1
154
 154
 
 
148
 148
 
 
Exchange traded funds (equity)1
96
 96
 
 
112
 112
 
 
Equity swap59
 59
 
 
60
 

 60
 
Total assets$463
 $427
 $36
 $
$456
 $375
 $81
 $
Other current liabilities              
Foreign currency exchange derivatives$19
 $
 $19
 $
$29
 $
 $29
 $
Commodity derivatives1
 
 1
 
3
 
 3
 
Long-term debt       
Foreign currency denominated debt1,693
 1,693
 
 
Total liabilities$1,713
 $1,693
 $20
 $
$32
 $
 $32
 $
 
 Fair Value Measurements Using:
 
Total as of
September 30, 2017
 
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$27
 $
 $27
 $
Commodity derivatives9
 
 9
 
Exchange traded funds (fixed income)1
14
 14
 
 
Other noncurrent assets       
Investments in marketable common stock10
 10
 
 
Deferred compensation plan assets92
 92
 
 
Exchange traded funds (fixed income)1
155
 155
 
 
Exchange traded funds (equity)1
100
 100
 
 
Equity swap55
 
 55
 
Total assets$462
 $371
 $91
 $
Other current liabilities       
Foreign currency exchange derivatives$46
 $
 $46
 $
Commodity derivatives1
 
 1
 
Total liabilities$47
 $
 $47
 $


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


 Fair Value Measurements Using:
 
Total as of
September 30, 2016
 
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$90
 $
 $90
 $
Commodity derivatives4
 
 4
 
Exchange traded funds (fixed income)1
15
 15
 
 
Other noncurrent assets       
Interest rate swaps1
 
 1
 
Investments in marketable common stock3
 3
 
 
Deferred compensation plan assets81
 81
 
 
Exchange traded funds (fixed income)1
163
 163
 
 
Exchange traded funds (equity)1
86
 86
 
 
Total assets$443
 $348
 $95
 $
Other current liabilities       
Foreign currency exchange derivatives$66
 $
 $66
 $
Liabilities held for sale       
Foreign currency exchange derivatives5
 
 5
 
Current portion of long-term debt       
Fixed rate debt swapped to floating551
 
 551
 
Long-term debt       
Foreign currency denominated debt938
 938
 
 
Fixed rate debt swapped to floating301
 
 301
 
Noncurrent liabilities held for sale       
Foreign currency denominated debt1,119
 1,119
 
 
Total liabilities$2,980
 $2,057
 $923
 $

1 Classified as restricted investments for payment of asbestos liabilities. See Note 22,20, "Commitments and Contingencies," of the notes to consolidated financial statements for further details.

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.

Interest rate swaps and related debt: The interest rate swaps and related debt balances are valued under a market approach using publicized swap curves.

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.




Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


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.

Investments in marketable common stock and exchange traded funds: Investments in marketable common stock and exchange traded funds are valued using a market approach based on the quoted market prices, where available, or broker/dealer quotes of identical or comparable instruments. There was anThe Company recorded unrealized gain recordedgains of $20 million and unrealized losses of $18 million on these investments of $5 million as of June 30, 2018 within AOCI in the consolidated statements of financial position. The Company recorded unrealized gains of $10 million and unrealized losses of $6 million on these investments as of September 30, 2017 within AOCI in the consolidated statements of financial position. There was an unrealized loss recorded on these investments of $1 million as of September 30, 2016 within AOCI inDuring the consolidated statements of financial position.

Foreign currency denominated debt: The Company has entered into a foreign currency denominated debt obligation to selectively hedge portions of its net investment in non-U.S. subsidiaries. The currency effect of the debt obligation are reflected in the AOCI account within shareholders’ equity attributable to Johnson Controls ordinary shareholders where they offset gains and losses recorded on the Company’s net investments globally. The foreign denominated debt obligation is remeasured to current exchange rates under a market approach using publicized spot prices. Atnine months ended June 30, 2017,2018, the Company had one billion euro and 485 million euro bonds designated as net investment hedges in the Company's net investment in Europe. At September 30, 2016,sold certain marketable common stock for approximately $3 million. As a result, the Company had 37 billion yenrecorded $2 million of foreign denominated debt designated as net investment hedge in the Company's net investment in Japanrealized gains within selling, general and one billion euro and 500 million euro bonds designated as net investment hedges in the Company's net investment in Europe.administrative expenses.

The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values. The fair value of long-term debt was $12.6$10.4 billion and $15.7$12.7 billion at June 30, 20172018 and September 30, 2016,2017, respectively. The fair value of public debt was $8.7 billion and $9.7$8.6 billion, at June 30, 20172018 and September 30, 2016,2017, respectively, which was determined primarily using market quotes classified as Level 1 inputs within the ASC 820 fair value hierarchy. The fair value of other long-term debt was $3.9$1.7 billion and $6.0$4.1 billion at June 30, 20172018 and September 30, 2016,2017, respectively, which was determined based on quoted market prices for similar instruments classified as Level 2 inputs within the ASC 820 fair value hierarchy.

18.17.Impairment of Long-Lived Assets

The Company reviews long-lived assets, including tangible assets and other intangible assets with definitive lives, 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.Assets," ASC 350-30, "General Intangibles Other than Goodwill" and ASC 985-20, "Costs of software to be sold, leased, or marketed." ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate 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. ASC 350-30 requires intangible assets acquired in a business combination that are used in research and development activities to be 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 shall not be amortized but shall be 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, an entity shall recognize an impairment loss in an amount equal to that excess. ASC 985-20 requires the unamortized capitalized costs of a computer software product be compared to the net realizable value of that product. The amount by which the unamortized capitalized costs of a computer software product exceed the net realizable value of that asset shall be written off.

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)



In the first quarter of fiscal 2018, the Company concluded it had a triggering event requiring assessment of impairment for certain of its long-lived assets in conjunction with its restructuring actions announced in fiscal 2018. As a result, the Company reviewed the long-lived assets for impairment and recorded $30 million of asset impairment charges within restructuring and impairment costs in the consolidated statements of income. Of the total impairment charges, $23 million related to the Global Products segment, $5 million related to Corporate assets and $2 million related to the Power Solutions segment. Refer to Note 8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The impairments were measured under a market approach utilizing an appraisal to determine fair values of the impaired assets. This method is consistent with the methods the Company employed in prior periods to value other long-lived assets. 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."

In the first, second and third quarters of fiscal 2017, the Company concluded it had triggering events requiring assessment of impairment for certain of its long-lived assets in conjunction with its restructuring actions announced in fiscal 2017. As a result, the Company reviewed the long-lived assets for impairment and recorded $69 million of asset impairment charges within restructuring and impairment costs onin the consolidated statements of income, of which $15 million was recorded in the first quarter, $23 million was recorded in the second quarter and $31 million was recorded in the third quarter. Of the total impairment charges, $27$28 million related to the TycoBuildings North America segment, $20 million related to the Building EfficiencyGlobal Products North America segment, $17 million related to Corporate assets and $4 million related to the Power Solutions segment, and $1 million related to the Building Efficiency Systems and Services North America segment. Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The impairments were measured, depending on the asset, under either an income approach utilizing forecasted discounted cash flows or a market approach utilizing an appraisal to determine fair values of the impaired assets. These methods are consistent with the methods the Company employed in prior periods to value other long-lived assets. 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."

In the second and third quarters of fiscal 2016, the Company concluded it had a triggering event requiring assessment of impairment for certain of its long-lived assets in conjunction with its restructuring actions announced in fiscal 2016. As a

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


result, the Company reviewed the long-lived assets for impairment and recorded $65 million of asset impairment charges within restructuring and impairment costs on the consolidated statements of income, of which $15 million was recorded in the second quarter and $50 million was recorded in the third quarter. Of the total impairment charge, $50 million related to Corporate assets, $8 million related to the Building Efficiency Products North America segment, $4 million related to the Building Efficiency Asia segment and $3 million related to the Building Efficiency Rest of World segment. In addition, the Company recorded $15 million of asset impairments within discontinued operations related to Adient in fiscal 2016. Refer to Note 9, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The impairments were measured, depending on the asset, under either an income approach utilizing forecasted discounted cash flows or a market approach utilizing an appraisal to determine fair values of the impaired assets. These methods areThis method is consistent with the methods the Company employed in prior periods to value other long-lived assets. 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."

At June 30, 20172018 and 2016,2017, the Company concluded it did not have any other triggering events requiring assessment of impairment of its long-lived assets.

19.18.Segment Information


DuringASC 280, "Segment Reporting," establishes the first quarterstandards for reporting information about segments in financial statements. In applying the criteria set forth in ASC 280, the Company has determined that it has
five reportable segments for financial reporting purposes. The Company’s five reportable segments are presented in the context of fiscalits two primary businesses – Building Technologies & Solutions and Power Solutions.

Effective July 1, 2017, the Company determined thatreorganized the Automotive Experiencereportable segments within its Building Technologies & Solutions business metto align with its new management reporting structure and business activities. Prior to this reorganization, Building Technologies & Solutions was comprised of five reportable segments for financial reporting purposes: Systems and Service North America, Products North America, Asia, Rest of World and Tyco. As a result of this change, Building Technologies & Solutions is now comprised of four reportable segments for financial reporting purposes: Building Solutions North America, Building Solutions EMEA/LA, Building Solutions Asia Pacific and Global Products. Historical information has been revised to reflect the criteria to be classified as a discontinued operation, which required retrospective application to financial information for all periods presented. Refer to Note 5, "Discontinued Operations,"new Building Technologies & Solutions segments.

A summary of the notes to consolidated financial statements for further information regardingsignificant Building Technologies & Solutions reportable segment changes is as follows:
The “Systems and Service North America” segment is now part of the Company's discontinued operations.new “Building Solutions North America” reportable segment.

InThe North America Unitary Products business, Air Distribution Technologies business and refrigeration systems business, as well as HVAC products installed for Marine customers, previously included in the first quarter“Products North America” segment, are now part of fiscal 2017,the new reportable segment “Global Products.” The systems and products installation business for U.S. Navy customers, previously included in the “Products North America” segment, is now part of the new “Building Solutions North America” reportable segment.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


The systems and service business within the former “Asia” segment is now part of the new “Building Solutions Asia Pacific” reportable segment. The HVAC products manufacturing business and the Johnson Controls-Hitachi joint venture, previously part of the “Asia” segment, are now part of the new “Global Products” reportable segment.

The systems and service businesses in Europe, the Middle East and Latin America within the former “Rest of World” segment are now part of the new “Building Solutions EMEA/LA” reportable segment. The HVAC products manufacturing businesses, previously part of the “Rest of World” segment, are now part of the new “Global Products” reportable segment.

As the Company began evaluatinghas integrated the legacy Tyco business with its legacy Building Efficiency business for segment reporting purposes, Tyco is no longer a separate reportable segment. The Tyco businesses are now included throughout the new reportable segments.

Building Technologies & Solutions

Building Solutions North America designs, sells, installs, and services HVAC and controls systems, integrated electronic security systems (including monitoring), and integrated fire detection and suppression systems for commercial, industrial, retail, small business, institutional and governmental customers in North America.  Building Solutions North America also provides energy efficiency solutions and technical services, including inspection, scheduled maintenance, and repair and replacement of mechanical and control systems, to non-residential building and industrial applications in the North American marketplace.

Building Solutions EMEA/LA designs, sells, installs, and services HVAC, controls, refrigeration, integrated electronic security, integrated fire detection and suppression systems, and provides technical services to markets in Europe, the Middle East, Africa and Latin America.

Building Solutions Asia Pacific designs, sells, installs, and services HVAC, controls, refrigeration, integrated electronic security, integrated fire detection and suppression systems, and provides technical services to the Asia Pacific marketplace.

Global Products designs and produces heating and air conditioning for residential and commercial applications, and markets products and refrigeration systems to replacement and new construction market customers globally. The Global Products business also designs, manufactures and sells fire protection and security products, including intrusion security, anti-theft devices, and access control and video management systems, for commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide. Global Products also includes the Johnson Controls-Hitachi joint venture, which was formed October 1, 2015, and included the Scott Safety business, prior to its sale on October 4, 2017. 

Power Solutions

Power Solutions services both automotive original equipment manufacturers and the battery aftermarket by providing advanced battery technology, coupled with systems engineering, marketing and service expertise.

Management evaluates the performance of its business segments primarily on segment EBITA,earnings before interest, taxes and amortization ("EBITA"), which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, significant restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans. Historical information has been revised to present the comparable periods on a consistent basis.

ASC 280, "Segment Reporting," establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in ASC 280, the Company has determined that it has six reportable segments for financial reporting purposes. The Company’s six reportable segments are presented in the context of its two primary businesses – Building Technologies & Solutions and Power Solutions.

Building Technologies & Solutions

Building Efficiency

Building Efficiency designs, produces, markets and installs HVAC and control systems that monitor, automate and integrate critical building segment equipment and conditions including HVAC, fire-safety and security in commercial buildings and in various industrial applications.

Systems and Service North America provides products and services to non-residential building and industrial applications in the North American marketplace. The products and services include HVAC and controls systems, energy efficiency solutions and technical services, including inspection, scheduled maintenance, and repair and replacement of mechanical and control systems.

Products North America designs and produces heating and air conditioning solutions for residential and light commercial applications, and also markets products and refrigeration systems to the replacement and new construction markets in the North American marketplace. Products North America also includes HVAC products installed for Navy and Marine customers globally.

Asia provides HVAC, controls and refrigeration systems and technical services to the Asian marketplace. Asia also includes the Johnson Controls-Hitachi Air Conditioning joint venture, which was formed October 1, 2015.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 20172018
(unaudited)


Rest of World provides HVAC, controls and refrigeration systems and technical services to markets in Europe, the Middle East and Latin America.

Tyco

Tyco designs, sells, installs, services and monitors integrated electronic security systems and integrated fire detection and suppression systems for commercial, industrial, retail, small business, institutional and governmental customers. The Tyco business also designs, manufactures and sells fire protection, security and life safety products, including intrusion security, anti-theft devices, breathing apparatus and access control and video management systems, for commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide.

Power Solutions

Power Solutions services both automotive original equipment manufacturers and the battery aftermarket by providing advanced battery technology, coupled with systems engineering, marketing and service expertise.

Financial information relating to the Company’s reportable segments is as follows (in millions):
 Net Sales
 Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 2017 2016 2017 2016
Building Technologies & Solutions       
   Building Efficiency       
      Systems and Service North America$1,128
 $1,113
 $3,103
 $3,131
      Products North America698
 690
 1,826
 1,793
      Asia1,456
 1,361
 3,671
 3,515
      Rest of World456
 471
 1,278
 1,302
 3,738
 3,635
 9,878
 9,741
   Tyco2,336
 
 6,953
 
 6,074
 3,635
 16,831
 9,741
Power Solutions1,609
 1,519
 5,205
 4,842
   Total net sales$7,683
 $5,154
 $22,036
 $14,583

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


 Net Sales
 Three Months Ended
June 30,
 Nine Months Ended
June 30,
 2018 2017 2018 2017
Building Technologies & Solutions       
      Building Solutions North America$2,246
 $2,142
 $6,355
 $6,181
      Building Solutions EMEA/LA926
 896
 2,748
 2,669
      Building Solutions Asia Pacific681
 630
 1,864
 1,767
      Global Products2,429
 2,406
 6,250
 6,214
 6,282
 6,074
 17,217
 16,831
Power Solutions1,838
 1,609
 5,813
 5,205
        
   Total net sales$8,120
 $7,683
 $23,030
 $22,036
 Segment EBITA
 Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 2017 2016 2017 2016
Building Technologies & Solutions       
   Building Efficiency       
      Systems and Service North America$126
 $142
 $291
 $342
      Products North America98
 96
 192
 176
      Asia246
 180
 483
 368
      Rest of World26
 22
 25
 29
 496
 440
 991
 915
   Tyco416
 
 1,009
 
 912
 440
 2,000
 915
Power Solutions304
 280
 996
 922
      Segment EBITA$1,216
 $720
 $2,996
 $1,837
        
Corporate expenses(172) (126) (605) (323)
Amortization of intangible assets(108) (22) (383) (62)
Restructuring and impairment costs(49) (27) (226) (87)
Net mark-to-market adjustments on pension
     plans
(45) 
 90
 
Net financing charges(124) (65) (376) (202)
Income from continuing operations before
     income taxes
$718
 $480
 $1,496
 $1,163

 Segment EBITA
 Three Months Ended
June 30,
 Nine Months Ended
June 30,
 2018 2017 2018 2017
Building Technologies & Solutions       
      Building Solutions North America$314
 $290
 $780
 $741
      Building Solutions EMEA/LA96
 100
 242
 238
      Building Solutions Asia Pacific97
 85
 242
 215
      Global Products435
 437
 949
 806
 942
 912
 2,213
 2,000
Power Solutions310
 304
 1,008
 996
        
      Total segment EBITA$1,252
 $1,216
 $3,221
 $2,996
        
Corporate expenses$(141) $(172) $(434) $(605)
Amortization of intangible assets(100) (108) (288) (383)
Restructuring and impairment costs
 (49) (158) (226)
Net mark-to-market adjustments on pension
   plans

 (45) 
 90
Net financing charges(101) (124) (332) (376)
Income from continuing operations
   before income taxes
$910
 $718
 $2,009
 $1,496

20.19.Guarantees

Certain of the Company's subsidiaries at the business segment level have guaranteed the performance of third-parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from the current fiscal year through the completion of such transactions and would typically be triggered in the event of nonperformance. Performance under the guarantees, if required, would not have a material effect on the Company's financial position, results of operations or cash flows.

The Company offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. A typical warranty program requires that the Company replace defective products within a specified time period from the date of sale. The Company records an estimate for future warranty-related costs based on actual historical return

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


rates and other known factors. Based on analysis of return rates and other factors, the Company’s warranty provisions are adjusted as necessary. The Company monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates.

The Company’s product warranty liability for continuing operations is recorded in the consolidated statements of financial position in other current liabilities if the warranty is less than one year and in other noncurrent liabilities if the warranty extends longer than one year.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


The changes in the carrying amount of the Company’s total product warranty liability, for continuing operations, including extended warranties for which deferred revenue is recorded, for the nine months ended June 30, 20172018 and 20162017 were as follows (in millions):
 Nine Months Ended
June 30,
 2017 2016
    
Balance at beginning of period$374
 $288
Accruals for warranties issued during the period221
 230
Accruals from acquisition and divestitures (1)2
 53
Accruals related to pre-existing warranties(5) (7)
Settlements made (in cash or in kind) during the period(199) (220)
Currency translation(1) 2
Balance at end of period$392
 $346

(1) The nine months ended
June 30, 2017 includes $13 million of product warranties transferred to liabilities held for sale on the consolidated statements of financial position. Refer to Note 5, "Discontinued Operations," of the notes to consolidated financial statements for further information regarding the Company's disposal groups classified as held for sale.
 Nine Months Ended
June 30,
 2018 2017
    
Balance at beginning of period$409
 $374
Accruals for warranties issued during the period225
 221
Accruals from acquisition and divestitures1
 2
Accruals related to pre-existing warranties(24) (5)
Settlements made (in cash or in kind) during the period(212) (199)
Currency translation
 (1)
Balance at end of period$399
 $392

As a result of the Tyco Merger in the fourth quarter of fiscal 2016, the Company recorded, as part of the acquired liabilities of Tyco, $290 million of post sale contingent tax indemnification liabilities which is generally recorded within other noncurrent liabilities in the consolidated statements of financial position. The liabilities are recorded at fair value and relate to certain tax related matters borne by the buyer of previously divested subsidiaries of Tyco which Tyco has indemnified certain parties and the amounts are probable of being paid. At June 30, 2018 and September 30, 2017, the Company recorded liabilities of $276 million and $290 million, respectively. Of the $290$276 million recorded as of September 30, 2016 and June 30, 2017, $2552018, $235 million is related to prior divested businesses and the remainder relates to Tyco’s tax sharing agreements from its 2007 and 2012 spin-off transactions. These are certain guarantees or indemnifications extended among Tyco, Medtronic, TE Connectivity, ADT and Pentair in accordance with the terms of the 2007 and 2012 separation and tax sharing agreements. In addition, the Company has recorded $11 million of tax indemnification liabilities as of June 30, 2017 related to other divestitures.

21.Tyco International Finance S.A.

TIFSA, a 100% owned subsidiary of the Company, has public debt securities outstanding which, as of September 30, 2016, were fully and unconditionally guaranteed by Johnson Controls and by Tyco Fire & Security Finance S.C.A. ("TIFSCA"), a wholly owned subsidiary of the Company and parent company TIFSA. During the first quarter of fiscal 2017, the guarantees were removed in connection with the previously disclosed debt exchange. The following tables present condensed consolidating financial information for Johnson Controls, TIFSCA, TIFSA and all other subsidiaries. Condensed financial information for the Company, TIFSCA and TIFSA on a stand-alone basis is presented using the equity method of accounting for subsidiaries.

The TIFSA public debt securities were assumed as part of the Tyco acquisition. Therefore, no consolidating financial information for the period ended June 30, 2016 is presented related to the guarantee of the TIFSA public debt securities. Additional information regarding TIFSA and TIFSCA for the period ended June 24, 2016 can be found in Tyco's Quarterly report on Form 10-Q filed with the SEC on July 29, 2016.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Three Months Ended June 30, 2017

(in millions)
Johnson Controls
International plc
 Tyco Fire & Security Finance SCA Tyco International Finance S.A. Other Subsidiaries Consolidating Adjustments Total
            
Net sales$
 $
 $
 $7,683
 $
 $7,683
Cost of sales
 
 

 5,252
 
 5,252
            
Gross profit
 
 
 2,431
 
 2,431
            
Selling, general and administrative
     expenses
(1) 
 
 (1,608) 
 (1,609)
Restructuring and impairment costs
 
 
 (49) 
 (49)
Net financing charges(59) (1) (3) (61) 
 (124)
Equity income626
 468
 68
 69
 (1,162) 69
Intercompany interest and fees(11) 89
 (5) (73) 
 
            
Income from continuing
   operations before income taxes
555
 556
 60
 709
 (1,162) 718
            
Income tax provision
 
 
 89
 
 89
Net income555
 556
 60
 620
 (1,162) 629
            
Income from continuing operations
   attributable to noncontrolling
   interests

 
 
 74
 
 74
            
Net income attributable to Johnson
   Controls
$555
 $556
 $60
 $546
 $(1,162) $555


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended June 30, 2017

(in millions)
Johnson Controls
International
plc
 Tyco Fire & Security Finance SCA Tyco International Finance S.A. Other Subsidiaries Consolidating Adjustments Total
            
Net income$555
 $556
 $60
 $620
 $(1,162) $629
Other comprehensive income (loss),
   net of tax
           
     Foreign currency translation
        adjustments
268
 (30) (4) 319
 (268) 285
     Realized and unrealized losses
       on derivatives
(7) 
 
 (9) 7
 (9)
     Realized and unrealized gains
       (losses) on marketable securities
(3) 
 (6) 3
 3
 (3)
            
Other comprehensive income (loss)258
 (30) (10) 313
 (258) 273
            
Total comprehensive income813
 526
 50
 933
 (1,420) 902
            
Comprehensive income attributable
   to noncontrolling interests

 
 
 89
 
 89
            
Comprehensive income
   attributable to Johnson Controls
$813
 $526
 $50
 $844
 $(1,420) $813


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Nine Months Ended June 30, 2017

(in millions)
Johnson Controls
International plc
 Tyco Fire & Security Finance SCA Tyco International Finance S.A. Other Subsidiaries Consolidating Adjustments Total
            
Net sales$
 $
 $
 $22,036
 $
 $22,036
Cost of sales
 
 
 15,210
 
 15,210
            
Gross profit
 
 
 6,826
 
 6,826
            
Selling, general and administrative
     expenses
(7) 
 
 (4,898) 
 (4,905)
Restructuring and impairment costs
 
 
 (226) 
 (226)
Net financing charges(137) (1) (17) (221) 
 (376)
Equity income (loss)841
 (32) (433) 177
 (376) 177
Intercompany interest and fees39
 162
 32
 (233) 
 
            
Income (loss) from continuing
   operations before income taxes
736
 129
 (418) 1,425
 (376) 1,496
            
Income tax provision
 
 
 570
 
 570
            
Income (loss) from continuing
   operations
736
 129
 (418) 855
 (376) 926
            
Income (loss) from sale of
   intercompany investment, net of
   tax

 
 (935) 
 935
 
            
Loss from discontinued
   operations, net of tax

 
 
 (34) 
 (34)
            
Net income (loss)736
 129
 (1,353) 821
 559
 892
            
Income from continuing operations
   attributable to noncontrolling
   interests

 
 
 147
 
 147
Income from discontinued
   operations attributable to
   noncontrolling interests

 
 
 9
 
 9
            
Net income (loss) attributable to
   Johnson Controls
$736
 $129
 $(1,353) $665
 $559
 $736


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
For the Nine Months Ended June 30, 2017

(in millions)
Johnson Controls
International
plc
 Tyco Fire & Security Finance SCA Tyco International Finance S.A. Other Subsidiaries Consolidating Adjustments Total
            
Net income (loss)$736
 $129
 $(1,353) $821
 $559
 $892
Other comprehensive income (loss),
   net of tax
           
     Foreign currency translation
        adjustments
(150) (37) 22
 (151) 150
 (166)
     Realized and unrealized losses
       on derivatives
(13) 
 
 (13) 13
 (13)
     Realized and unrealized gains
       on marketable securities
6
 
 1
 5
 (6) 6
            
Other comprehensive income (loss)(157) (37) 23
 (159) 157
 (173)
            
Total comprehensive income (loss)579
 92
 (1,330) 662
 716
 719
            
Comprehensive income attributable
   to noncontrolling interests

 
 
 140
 
 140
            
Comprehensive income (loss) attributable to Johnson Controls$579
 $92
 $(1,330) $522
 $716
 $579


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
As of June 30, 2017
(in millions)
Johnson Controls
International
 plc
 Tyco Fire & Security Finance SCA Tyco International Finance S.A. Other Subsidiaries Consolidating Adjustments Total
            
Assets           
Cash and cash equivalents$
 $
 $318
 $388
 $(248) $458
Accounts receivable - net
 
 
 6,443
 
 6,443
Inventories
 
 
 3,384
 
 3,384
Intercompany receivables1,857
 1,786
 38
 8,279
 (11,960) 
Assets held for sale
 
 
 2,082
 
 2,082
Other current assets40
 
 2
 1,553
 
 1,595
Current assets$1,897
 $1,786
 $358
 $22,129
 $(12,208) $13,962
            
Property, plant and equipment - net
 
 
 5,870
 
 5,870
Goodwill243
 
 32
 19,344
 
 19,619
Other intangible assets - net
 
 
 6,727
 
 6,727
Investments in partially-owned
   affiliates

 
 
 1,159
 
 1,159
Investments in affiliates18,098
 29,456
 22,515
 
 (70,069) 
Intercompany loans receivable17,862
 4,140
 2,836
 4,688
 (29,526) 
Other noncurrent assets59
 
 12
 3,278
 
 3,349
Total assets$38,159
 $35,382
 $25,753
 $63,195
 $(111,803) $50,686
            
Liabilities and Equity           
Short-term debt$1,592
 $76
 $
 $536
 $(248) $1,956
Current portion of long-term debt444
 
 18
 81
 
 543
Accounts payable
 
 
 3,764
 
 3,764
Accrued compensation and benefits1
 
 
 1,003
 
 1,004
Liabilities held for sale
 
 
 247
 
 247
Intercompany payables3,911
 1,037
 6,001
 1,011
 (11,960) 
Other current liabilities350
 3
 24
 3,624
 
 4,001
Current liabilities6,298
 1,116
 6,043
 10,266
 (12,208) 11,515
            
Long-term debt7,442
 
 153
 4,177
 
 11,772
Pension and postretirement benefits
 
 
 1,330
 
 1,330
Intercompany loans payable4,688
 17,862
 
 6,976
 (29,526) 
Other noncurrent liabilities
 
 24
 5,241
 
 5,265
Long-term liabilities12,130
 17,862
 177
 17,724
 (29,526) 18,367
            
Redeemable noncontrolling interests
 
 
 189
 
 189
Ordinary shares9
 
 
 
 
 9
Ordinary shares held in treasury(481) 
 
 
 
 (481)
Other shareholders' equity20,203
 16,404
 19,533
 34,132
 (70,069) 20,203
Shareholders’ equity attributable to Johnson Controls19,731
 16,404
 19,533
 34,132
 (70,069) 19,731
Noncontrolling interests
 
 
 884
 
 884
Total equity19,731
 16,404
 19,533
 35,016
 (70,069) 20,615
Total liabilities and equity$38,159
 $35,382
 $25,753
 $63,195
 $(111,803) $50,686


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 2017
(in millions)
Johnson Controls
International plc
 Tyco Fire & Security Finance SCA Tyco International Finance S.A. Other Subsidiaries Consolidating Adjustments Total
            
Operating Activities           
Net cash provided (used) by operating
   activities
$136
 $
 $97
 $(1,554) $
 $(1,321)
            
Investing Activities           
Capital expenditures
 
 
 (996) 
 (996)
Sale of property, plant and equipment
 
 
 23
 
 23
Acquisition of businesses, net of cash
   acquired

 
 (6) 
 
 (6)
Business divestitures
 
 
 180
 
 180
Changes in long-term investments
 
 (11) (22) 
 (33)
Net change in intercompany loans receivable
 
 10
 357
 (367) 
Increase in intercompany investment
   in subsidiaries
(1,924) (1,716) (76) 
 3,716
 
     Net cash used by investing activities(1,924) (1,716) (83) (458) 3,349
 (832)
            
Financing Activities           
Increase (decrease) in short-term debt - net1,592
 76
 
 (533) (248) 887
Increase in long-term debt1,544
 
 
 9
 
 1,553
Repayment of long-term debt(46) 
 (16) (910) 
 (972)
Debt financing costs(17) 
 
 (1) 
 (18)
Stock repurchases(426) 
 
 
 
 (426)
Payment of cash dividends(469) 
 
 
 
 (469)
Proceeds from the exercise of stock options56
 
 
 74
 
 130
Net change in intercompany loans payable(357) 
 
 (10) 367
 
Increase in equity from parent
 1,640
 76
 2,000
 (3,716) 
Change in noncontrolling interest share
 
 
 8
 
 8
Dividends paid to noncontrolling interests
 
 
 (78) 
 (78)
Dividend from Adient spin-off(87) 
 
 2,137
 
 2,050
Cash transferred to Adient related to spin-off
 
 
 (665) 
 (665)
Cash paid related to prior acquisitions
 
 
 (75) 
 (75)
Other(13) 
 
 3
 
 (10)
     Net cash provided by financing activities1,777
 1,716
 60
 1,959
 (3,597) 1,915
Effect of exchange rate changes on
   cash and cash equivalents

 
 
 12
 
 12
Changes in cash held for sale
 
 
 105
 
 105
Increase (decrease) in cash and
   cash equivalents
(11) 
 74
 64
 (248) (121)
Cash and cash equivalents at
   beginning of period
11
 
 244
 324
 
 579
Cash and cash equivalents at
   end of period
$
 $
 $318
 $388
 $(248) $458

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)



CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
As of September 30, 2016
(in millions)
Johnson Controls
International
 plc
 Tyco Fire & Security Finance SCA Tyco International Finance S.A. Other Subsidiaries Consolidating Adjustments Total
            
Assets           
Cash and cash equivalents$11
 $
 $244
 $324
 $
 $579
Accounts receivable - net
 
 
 6,394
 
 6,394
Inventories
 
 
 2,888
 
 2,888
Intercompany receivables16
 
 2
 6,188
 (6,206) 
Assets held for sale
 
 
 5,812
 
 5,812
Other current assets6
 
 1
 1,429
 
 1,436
Current assets$33
 $
 $247
 $23,035
 $(6,206) $17,109
            
Property, plant and equipment - net
 
 
 5,632
 
 5,632
Goodwill
 
 274
 20,750
 
 21,024
Other intangible assets - net
 
 
 7,540
 
 7,540
Investments in partially-owned affiliates
 
 
 990
 
 990
Investments in affiliates12,460
 31,142
 27,643
 
 (71,245) 
Intercompany loans receivable18,680
 
 13,336
 15,631
 (47,647) 
Noncurrent assets held for sale
 
 
 7,374
 
 7,374
Other noncurrent assets
 
 
 3,510
 
 3,510
Total assets$31,173
 $31,142
 $41,500
 $84,462
 $(125,098) $63,179
            
Liabilities and Equity           
Short-term debt$
 $
 $
 $1,078
 $
 $1,078
Current portion of long-term debt
 
 
 628
 
 628
Accounts payable1
 
 
 3,999
 
 4,000
Accrued compensation and benefits
 
 
 1,333
 
 1,333
Liabilities held for sale
 
 
 4,276
 
 4,276
Intercompany payables3,873
 
 2,315
 18
 (6,206) 
Other current liabilities3
 2
 32
 4,979
 
 5,016
Current liabilities3,877
 2
 2,347
 16,311
 (6,206) 16,331
            
Long-term debt
 
 2,413
 8,640
 
 11,053
Pension and postretirement benefits
 
 
 1,550
 
 1,550
Intercompany loans payable3,178
 18,680
 12,453
 13,336
 (47,647) 
Noncurrent liabilities held for sale
 
 
 3,888
 
 3,888
Other noncurrent liabilities
 
 22
 5,011
 
 5,033
Long-term liabilities3,178
 18,680
 14,888
 32,425
 (47,647) 21,524
            
Redeemable noncontrolling interest
 
 
 234
 
 234
Ordinary shares9
 
 
 
 
 9
Ordinary shares held in treasury(20) 
 
 
 
 (20)
Other shareholders' equity24,129
 12,460
 24,265
 34,520
 (71,245) 24,129
Shareholders’ equity attributable to
    Johnson Controls
24,118
 12,460
 24,265
 34,520
 (71,245) 24,118
Noncontrolling interests
 
 
 972
 
 972
Total equity24,118
 12,460
 24,265
 35,492
 (71,245) 25,090
Total liabilities and equity$31,173
 $31,142
 $41,500
 $84,462
 $(125,098) $63,179

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


22.20.Commitments and Contingencies

Environmental Matters

The Company accrues for potential environmental liabilities when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. As of June 30, 2017,2018, reserves for environmental liabilities totaled $48$43 million, of which $12$14 million was recorded within other current liabilities and $36$29 million was recorded within other noncurrent liabilities in the consolidated statements of financial position. Reserves for environmental liabilities for continuing operations totaled $51 million at September 30, 2016.2017, of which $10 million was recorded within other current liabilities and $41 million was recorded within other noncurrent liabilities in the consolidated statements of financial position. Such potential liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. They do, however, take into account the likely share other parties will bear at remediation sites. 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. Nevertheless, the Company does not currently believe that any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. In addition, the Company has identified asset retirement obligations for environmental matters that are expected to be

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


addressed at the retirement, disposal, removal or abandonment of existing owned facilities. At June 30, 20172018 and September 30, 2016,2017, the Company recorded conditional asset retirement obligations of $72$48 million and $74$61 million, respectively.

Asbestos Matters

The Company and certain of its 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 have typically involved 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.

As of June 30, 2017,2018, the Company's estimated asbestos related net liability recorded on a discounted basis within the Company's consolidated statements of financial position was $147$180 million. The net liability within the consolidated statements of financial position was comprised of a liability for pending and future claims and related defense costs of $535$557 million, of which $35$54 million was recorded in other current liabilities and $500$503 million was recorded in other noncurrent liabilities. The Company also maintained separate cash, investments and receivables related to insurance recoveries within the consolidated statements of financial position of $388$377 million, of which $52$41 million was recorded in other current assets, and $336 million was recorded in other noncurrent assets. Assets included $28$10 million of cash and $264$274 million of investments, which have all been designated as restricted. In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable; the amount of such recoveries recorded at June 30, 20172018 was $96$93 million. As of September 30, 2016,2017, the Company's estimated asbestos related net liability recorded on a discounted basis within the Company's consolidated statements of financial position was $148$181 million. The net liability within the consolidated statements of financial position was comprised of a liability for pending and future claims and related defense costs of $548$573 million, of which $35$48 million was recorded in other current liabilities and $513$525 million was recorded in other noncurrent liabilities. The Company also maintained separate cash, investments and receivables related to insurance recoveries within the consolidated statements of financial position of $400$392 million, of which $41$53 million was recorded in other current assets, and $359$339 million was recorded in other noncurrent assets. Assets included $16$22 million of cash and $264$269 million of investments, which have all been designated as restricted. In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable; the amount of such recoveries recorded at September 30, 20162017 was $120$101 million. The Company believes that the asbestos related liabilities and insurance related receivables recorded as of June 30, 2017 and September 30, 2016 are appropriate.

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 20692068 (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). Asbestos related defense costs are included in the asbestos liability. The Company's legal strategy for resolving claims also impacts

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


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 2069. Annually,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.

The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions. Key variables and assumptions include the number and type of new claims that are filed each year, the average cost of resolution of claims, the identity of defendants, the resolution of coverage issues with insurance carriers, amount of insurance, and the solvency risk with respect to the Company's insurance carriers. Many of these factors are closely linked, such that a change in one variable or assumption will impact one or more of the others, and no single variable or assumption predominately influences the determination of the Company's asbestos-related liabilities and insurance-related assets. Furthermore, predictions with respect to these variables are subject to greater uncertainty in the later portion of the projection period. Other factors that may affect the Company's liability and cash payments for asbestos-related matters include uncertainties surrounding

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


the litigation process from jurisdiction to jurisdiction and from case to case, reforms of state or federal tort legislation and the applicability of insurance policies among subsidiaries. As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company's calculations vary significantly from actual results.

Insurable Liabilities

The Company records liabilities for its workers' compensation, product, general, property 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. At June 30, 20172018 and September 30, 2016,2017, the insurable liabilities for continuing operations totaled $488$444 million and $422$445 million, respectively, of which $86$80 million and $60$122 million was recorded within other current liabilities, $30$25 million and $28$22 million was recorded within accrued compensation and benefits, and $372$339 million and $334$301 million was recorded within other noncurrent liabilities in the consolidated statements of financial position, respectively. The Company records receivables from third party insurers when recovery has been determined to be probable. The amount of such receivables recorded at June 30, 20172018 was $49$21 million, of which $30$6 million was recorded within other current assets and $19$15 million was recorded within other noncurrent assets. InsuranceThe amount of such receivables recorded at September 30, 2016 were $212017 was $46 million, primarilyof which $31 million was recorded within other current assets and $15 million was recorded within other noncurrent assets. The Company maintains captive insurance companies to manage certain of its insurable liabilities.

Arbitration Award

In September 2017, the Company was subject to an unfavorable arbitration award of approximately $50 million relating to a contractual dispute with a subcontractor used by the Company at an airport construction project in Doha, Qatar. In connection with the unfavorable arbitration award, the Company recorded a charge of $50 million within selling, general and administrative expenses in the consolidated statements of income in the fourth quarter of fiscal 2017. The airport project is being managed by a steering committee. The Company and the subcontractor were working jointly to document claims for increased costs against the steering committee when the subcontractor initiated the arbitration proceeding against the Company. Pursuant to its arbitration proceeding against the Company, the subcontractor sought to recover costs it alleges it incurred due to project delays, additional work and related financing costs. The Company has filed annulment proceedings with respect to the arbitration award in the local court in Qatar. While the award remains outstanding, a portion of the balance will accrue interest at a statutory rate of 9.56%.

In a related action, the Company has initiated an arbitration claim against the steering committee related to costs it incurred in connection with delays of the airport construction project, including costs related to the above award. The arbitrator is expected to issue a decision on the Company’s claims against the steering committee by the end of fiscal 2018.

Aqueous Film-Forming Foam ("AFFF") Litigation

Two of our subsidiaries, Chemguard, Inc. ("Chemguard") and Tyco Fire Products L.P. ("Tyco Fire Products"), have been named, along with other defendant manufacturers, in a number of class action lawsuits relating to the use of fire-fighting foam products by the U.S. Department of Defense (the "DOD") and others for fire suppression purposes and related training exercises. Plaintiffs generally allege that the firefighting foam products manufactured by defendants contain or break down into the chemicals perfluorooctane sulfonate ("PFOS") and perfluorooctanoic acid ("PFOA") and that the use of these products by others at various airbases and airports resulted in the release of these chemicals into the environment and ultimately into communities’ drinking water supplies neighboring those airports and airbases. PFOA and PFOS are being studied by the United States Environmental Protection Agency (EPA) and other environmental and health agencies and researchers. The EPA has not issued regulatory limits, however; while those studies continue, the EPA has issued a health advisory level for PFOA and PFOS in drinking water. Both PFOA and PFOS are types of synthetic chemical compounds that have been present in firefighting foam. However, both are also present in many existing consumer products. According to EPA, PFOA and PFOS have been used to make carpets, clothing, fabrics for furniture, paper packaging for food and other materials (e.g., cookware) that are resistant to water, grease or stains.

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


Plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, and alleged diminution in property values, and also seek punitive damages and injunctive relief to address remediation of the alleged contamination. As of August 2, 2018, the Company is named in 16 putative class actions in federal courts in six states as set forth below:
    Colorado
District of Colorado - Bell et al. v. The 3M Company et al., filed September 18, 2016.
District of Colorado - Bell et al. v. The 3M Company et al., filed September 18, 2016.
District of Colorado - Davis et al. v. The 3M Company et al., filed September 22, 2016.

The above cases have been consolidated in the U.S. District Court for the District of Colorado, and a hearing on the plaintiffs’ motion for class certification is expected in 2018 with a trial date schedule for April 2019.
Delaware
District of Delaware - Anderson v. The 3M Company et al., filed June 12, 2018 in the United States District Court District of Delaware.

Massachusetts
District of Massachusetts - Civitarese et al. v. The 3M Company et al., filed April 18, 2018 in the United States District Court of Massachusetts.

Washington
Eastern District of Washington - Ackerman et al. v. The 3M Company et al., filed April 5, 2018 in the United States District Court, Eastern District of Washington.

New York
Eastern District of New York - Green et al. v. The 3M Company et al., filed March 27, 2017 in Supreme Court of the State of New York, Suffolk County, prior to removal to federal court.
Southern District of New York - Adamo et al. v. The Port Authority of NY and NJ et al., filed August 11, 2017 in Supreme Court of the State of New York, Orange County, prior to removal to federal court.
Southern District of New York - Fogarty et al. v. The Port Authority of NY and NJ et al., filed August 11, 2017 in Supreme Court of the State of New York, Orange County, prior to removal to federal court.
Southern District of New York - Miller et al. v. The Port Authority of NY and NJ et al., filed August 11, 2017 in Supreme Court of the State of New York, Orange County, prior to removal to federal court.
Supreme Court of the State of New York, Suffolk County - Singer et al. v. The 3M Company et al., filed October 10, 2017.
Supreme Court of the State of New York, Suffolk County - Shipman et al. v. The 3M Company et al., filed March 21, 2018.

Pennsylvania
Eastern District of Pennsylvania - Bates et al. v. The 3M Company et al., filed September 15, 2016.
Eastern District of Pennsylvania - Grande et al. v. The 3M Company et al., filed October 13, 2016.
Eastern District of Pennsylvania - Yockey et al. v. The 3M Company et al., filed October 24, 2016.
Eastern District of Pennsylvania - Fearnley et al. v. The 3M Company et al., filed December 9, 2016.

The above cases have been consolidated in the U.S. District Court for the Eastern District of Pennsylvania. The defendants' motion to dismiss the complaint in the consolidated proceeding was denied without prejudice and the cases are currently stayed pending the appeal of an action in which the Company is not a party.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


In June 2018, the State of New York filed a lawsuit in New York state court (State of New York v. 3M Co., No. 904029-18 (N.Y. Sup. Ct., Albany County) against a number of manufacturers, including affiliates of the Company, with respect to alleged PFOS and PFOA contamination purportedly resulting from firefighting foams used at locations across New York, including Stewart Air National Guard Base in Newburgh and Gabreski Air National Guard Base in Southampton, Plattsburgh Air Force Base in Plattsburgh, Griffiss Air Force Base in Rome, and unspecified “other” sites throughout the State. The lawsuit seeks to recover costs and natural resource damages associated with contamination at these sites.

In addition, as of August 2, 2018, there were a total of 51 individual or “mass” actions filed in state court in Colorado (41 cases), New York (1 case) and Pennsylvania (9 cases) against Chemguard and Tyco Fire Products and other defendants in which the plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, and alleged diminution in property values. The cases involve approximately 7,000 plaintiffs in Colorado, 26 plaintiffs in New York and 13 plaintiffs in Pennsylvania. The Company is also on notice of approximately 622 other possible individual product liability claims and 3 possible municipal claims by filings made in Pennsylvania state court, but complaints have not been filed in those matters, and, under Pennsylvania’s procedural rules, they may or may not result in lawsuits.

Chemguard and Tyco Fire Products are also defendants in three municipal cases pending in the U.S. District Court for the District of Massachusetts: Town of Barnstable v. the 3M. Co., et al, (filed Nov. 21, 2016), County of Barnstable v. the 3M. Co., et al, (filed January 9, 2017) and City of Westfield v. the 3M Co., et al., (filed on February 24, 2018), as well as two municipal cases pending in the Eastern District of New York: Suffolk County Water Auth. v. 3M Co. (filed November 30, 2017) and Hampton Bays Water Dist. v. 3M Co. (filed Feb. 21, 2018), and one municipal case pending in the Northern District of Florida: Emerald Coast Utilities Auth. v. 3M Co. (filed June 22, 2018). These municipal plaintiffs generally allege that the use of the defendants’ fire-fighting foam products at fire training academies, municipal airports, Air National Guard bases, or Navy bases released PFOS and PFOA into public water supply wells, allegedly requiring remediation of public property. The defendants have filed motions to dismiss in County of Barnstable and City of Westfield.
In May 2018, the Company was also notified by the Widefield Water and Sanitation District in Colorado Springs, Colorado that it may assert claims regarding its remediation costs in connection with PFOS and PFOA contamination allegedly resulting from the use of those products at the Peterson Air Force Base. In addition, three water districts in Pennsylvania, Horsham Water and Sewer Authority, Warminster Municipal Authority, and Warrington Township have filed praecipes for summons against Chemguard and Tyco Fire Products and other AFFF manufacturers relating to alleged PFOS and PFOA contamination. These praecipes are not active suits, but have the effect of tolling the statute of limitations.

Other AFFF Matters

Tyco Fire Products, in coordination with the Wisconsin Department of Natural Resources (WDNR) and the Wisconsin Department of Health Services (DHS), has been conducting an environmental assessment of its Fire Technology Center (FTC) located in Marinette, Wisconsin and surrounding areas in the City of Marinette and Town of Peshtigo, Wisconsin. In connection with the assessment, PFOS and PFOA have been detected at the FTC and in groundwater and surface water outside of the boundaries of the FTC. Tyco Fire Products continues to investigate the extent of potential migration of these compounds and is working closely with WDNR and DHS to develop interim measures to remove these compounds from certain areas where they have been detected.

The Company is vigorously defending these cases and believes that it has meritorious defenses to class certification and the claims asserted. However, there are numerous factual and legal issues to be resolved in connection with these claims, and it is extremely difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, but there can be no assurance that any such exposure will not be material. The Company is also pursuing insurance coverage for these matters.
The Company is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, environmental, safety and health, intellectual property, employment, commercial and contractual matters, and various other casualty matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, it is management’s opinion that none of these will have a material adverse effect on the Company’s financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented.


Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)


23.21.Related Party Transactions

In the ordinary course of business, the Company enters into transactions with related parties, such as equity affiliates. Such transactions consist of facility management services, the sale or purchase of goods and other arrangements.

The net sales to and purchases from related parties for continuing operations included in the consolidated statements of income were $272$256 million and $45 million, respectively, for the three months ended June 30, 2018; and $251 million and $64 million, respectively, for the three months ended June 30, 2017; and $277 million and $48 million, respectively, for the three months ended June 30, 2016.2017. The net sales to and purchases from related parties for continuing

Johnson Controls International plc
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)


operations included in the consolidated statements of income were $726$720 million and $137 million, respectively, for the nine months ended June 30, 2018; and $705 million and $165 million, respectively, for the nine months ended June 30, 2017; and $747 million and $131 million, respectively, for the nine months ended June 30, 2016.2017.

The following table sets forth the amount of accounts receivable due from and payable to related parties for continuing operations in the consolidated statements of financial position (in millions):
 June 30, 2017 September 30, 2016
 June 30, 2018 September 30, 2017
        
Receivable from related parties $99
 $66
 $109
 $108
Payable to related parties 22
 11
 51
 50

The Company has also provided financial support to certain of its VIE's; see Note 1, "Financial Statements," of the notes to consolidated financial statements for additional information.



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statements for Forward-Looking Information

Unless otherwise indicated, references to "Johnson Controls," the "Company," "we," "our" and "us" in this Quarterly Report on Form 10-Q 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 Johnson Controls' future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures and debt levels 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. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Johnson Controls’ control, that could cause Johnson Controls’ actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: any delay or inability of Johnson Controls to realize the expected benefits and synergies of recent portfolio transactions such as the merger with Tyco International plc ("Tyco"), the spin-off of Adient, and the expected sale of the Scott Safety business, changes in tax laws (including but not limited to the recently enacted Tax Cuts and Jobs Act), regulations, rates, policies or interpretations, the loss of key senior management, the tax treatment of recent portfolio transactions, significant transaction costs and/or unknown liabilities associated with such transactions, the outcome of actual or potential litigation relating to such transactions, the risk that disruptions from recent transactions will harm Johnson Controls’ business, the strength of the U.S. or other economies, changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, and cancellation of or changes to commercial arrangements.arrangements, and with respect to the recently announced review of strategic alternatives for the Power Solutions business which review is expected to conclude by the release of our fiscal 2018 fourth quarter earnings, uncertainties as to the structure and timing of any transaction and whether it will be completed, the possibility that closing conditions for a transaction may not be satisfied or waived, the impact of the strategic review and any transaction on Johnson Controls and the Power Solutions business on a standalone basis if a transaction is completed, and whether the strategic benefits of any transaction can be achieved. A detailed discussion of risks related to Johnson Controls' business is included in Item 1A of Part I of the Company's most recent Annual Report on Form 10-K for the year ended September 30, 20162017 filed with the United States Securities and Exchange Commission (SEC)("SEC") on November 23, 201621, 2017 and available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. The description of certain of these risks is supplemented in Item 1A of Part II of Forms 10-Q for the quarterly periods ending December 31, 2017 and March 31, 2018 filed with the SEC on February 2, 2018 and May 3, 2018, respectively. Shareholders, potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements. The forward-looking statements included in this document are made only made 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.

Overview

Johnson Controls International plc, headquartered in Cork, Ireland, is a global diversified technology and multi industrial leader serving a wide range of customers in more than 150 countries. The Company creates intelligent buildings, efficient energy solutions, integrated infrastructure and next generation transportation systems that work seamlessly together to deliver on the promise of smart cities and communities. The Company is committed to helping our customers win and creating greater value for all of its stakeholders through strategic focus on our buildings and energy growth platforms.

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. The Company was renamed to Johnson Controls, Inc. in 1974. In 1978, the Company acquired Globe-Union, Inc., a Wisconsin-based manufacturer of automotive batteries for both the replacement and original equipment markets. The Company entered the automotive seating industry in 1985 with the acquisition of Michigan-based Hoover Universal, Inc. In 2005, the Company acquired York International, a global supplier of heating, ventilating, air-conditioning and refrigeration equipment and services. In 2014, the Company acquired Air Distribution Technologies, Inc. (ADTi)("ADTi"), one of the largest independent providers of air distribution and ventilation products in North America. On October 1, 2015, the Company formed a joint venture with Hitachi to expand its Building Technologies & Solutionsbuilding product offerings.



In the fourth quarter of fiscal 2016, Johnson Controls, Inc. ("JCI Inc.") and Tyco completed their combination, with JCI Inc. merging with a wholly owned, indirect subsidiary of Tyco (the "Merger"). Following the Merger, Tyco changed its name to “Johnson Controls International plc” and JCI Inc. is a wholly-owned subsidiary of Johnson Controls International plc. The Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805, "Business Combinations." JCI Inc. was the accounting acquirer for financial reporting purposes.


Accordingly, the historical consolidated financial statements of JCI Inc. for periods prior to this transaction are considered to be the historic financial statements of the Company. Refer to Note 3, "Merger Transaction," of the notes to consolidated financial statements for additional information.

The acquisition of Tyco brings together best-in-class product, technology and service capabilities across controls, fire, security, HVAC, power solutions and energy storage, to serve various end-markets including large institutions, commercial buildings, retail, industrial, small business and residential. The combination of the Tyco and Johnson Controls buildings platforms is expected to createcreates immediate opportunities for near-term growth through cross-selling, complementary branch and channel networks, and expanded global reach for established businesses. The new Company is also expected to benefitbenefits by combining innovation capabilities and pipelines involving new products, advanced solutions for smart buildings and cities, value-added services driven by advanced data and analytics and connectivity between buildings and energy storage through infrastructure integration.

On October 31, 2016, the Company completed the spin-off of its Automotive Experience business by way of the transfer of the Automotive Experience Business from Johnson Controls to Adient plc ("Adient") and the issuance of ordinary shares of Adient directly to holders of Johnson Controls ordinary shares on a pro rata basis. Prior to the open of business on October 31, 2016, each of the Company's shareholders received one ordinary share of Adient plc for every 10 ordinary shares of Johnson Controls held as of the close of business on October 19, 2016, the record date for the distribution. Company shareholders received cash in lieu of fractional shares of Adient, if any. Following the separation and distribution, Adient plc is now an independent public company trading on the New York Stock Exchange (NYSE)("NYSE") under the symbol "ADNT." The Company did not retain any equity interest in Adient plc. Adient’s historical financial results are reflected in the Company’s consolidated financial statements as a discontinued operation.

The Building EfficiencyTechnologies & Solutions ("Buildings") business is a global market leader in designing, producing, marketingengineering, developing, manufacturing and installing integrated heating, ventilatingbuilding products and air conditioning (HVAC) systems building managementaround the world, including HVAC equipment, HVAC controls, energy-management systems, controls,security systems, fire detection systems and fire suppression solutions. The Buildings business further serves customers by providing technical services (in the HVAC, security and mechanical equipment. In addition,fire-protection space), energy-management consulting and data-driven solutions via its recently launch data-enabled business. Finally, the Buildings business provides technical services and energy management consulting. The Company also providesis a North American market leader in residential air conditioning and heating systems and industrial refrigeration products.

The Tyco business is a global market leader in providing security products and services, fire detection and suppression products and services, and life and safetyindustrial refrigeration products. Tyco designs, sells, installs, services and monitors electronic security systems and fire detection and suppression systems. In addition, Tyco manufactures and sells fire protection, security and life safety products, including intrusion security, anti-theft devices, breathing apparatus and access control and video management systems. The products and services are for commercial, industrial, retail, residential, small business, institutional and governmental customers worldwide.

The Power Solutions business is a leading global supplier of lead-acid automotive batteries for virtually every type of passenger car, light truck and utility vehicle. The Company serves both automotive original equipment manufacturers (OEMs)("OEMs") and the general vehicle battery aftermarket. The Company also supplies advanced battery technologies to power start-stop, hybrid and electric vehicles.

The following information should be read in conjunction with the September 30, 20162017 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended September 30, 20162017 filed with the SEC on November 23, 2016, portions of which (including Part I, Item 1. Business and Item 3. Legal Proceedings, and the following items from Part II of the Annual Report: Item 6. Selected Financial Data, Item 7. Management’s Discussion and Analysis, and Item 8. Financial Statements and Supplementary Data) were recast in the Company's Current Report on Form 8-K filed with the SEC on February 23,21, 2017. References in the following discussion and analysis to "Three Months"(or similar language) refer to the three months ended June 30, 20172018 compared to the three months ended June 30, 2016,2017, while references to "Year-to-Date" referrefers to the nine months ended June 30, 20172018 compared to the nine months ended June 30, 2016.2017.



Liquidity and Capital Resources

The Company believes its capital resources and liquidity position at June 30, 2017 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 2017 will continue 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 and its wholly-owned indirect subsidiary, Tyco International Holding S.à.r.l ("TSarl"), are unable to issue commercial paper, they would have the ability to draw on their $2.0 billion and $1.0 billion revolving credit facilities, respectively. Both facilities mature in August 2020. There were no draws on the revolving credit facilities as of June 30, 2017. As such, the Company believes it has sufficient financial resources to fund operations and meet its obligations for the foreseeable future.

The Company’s debt financial covenant in its revolving credit facility 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. TSarl's, revolving credit facility contains customary terms and conditions, and a financial covenant that limits the ratio of TSarl's debt to earnings before interest, taxes, depreciation, and amortization as adjusted for certain items set forth in the agreement to 3.5x. The TSarl's revolving credit facility also limits its ability to incur subsidiary debt or grant liens on its and its subsidiaries' property. As of June 30, 2017, the Company and TSarl were in compliance with all covenants and other requirements set forth in their credit agreements and the indentures, governing their notes, and expect to remain in compliance for the foreseeable future. None of the Company’s or TSarl's debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the respective borrower's credit rating.

The key financial assumptions used in calculating the Company’s pension liability are determined annually, or whenever plan assets and liabilities are re-measured as required under accounting principles generally accepted in the U.S., including the expected rate of return on its plan assets. In fiscal 2017, the Company believes the long-term rate of return will approximate 7.50%, 3.40% and 5.60% for U.S. pension, non-U.S. pension and postretirement plans, respectively. During the first nine months of fiscal 2017, the Company made approximately $275 million in total pension and postretirement contributions. In total, the Company expects to contribute approximately $317 million in cash to its defined benefit pension plans in fiscal 2017. The Company expects to contribute $4 million in cash to its postretirement plans in fiscal 2017.

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company committed to a significant restructuring plan in fiscal 2017 and recorded $226 million of restructuring and impairment costs in the consolidated statements of income. The restructuring action related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures and asset impairments. The Company currently estimates that upon completion of the restructuring action, the fiscal 2017 restructuring plan will reduce annual operating costs from continuing operations by approximately $225 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs, depreciation and amortization expense. The Company expects the annual benefit of these actions will be substantially realized in fiscal 2018. For fiscal 2017, the savings from continuing operations, net of execution costs, are expected to be approximately 50% of the expected annual operating cost reduction. The restructuring action is expected to be substantially complete in fiscal 2018. The restructuring plan reserve balance of $108 million at June 30, 2017 is expected to be paid in cash.

To better align its resources with its growth strategies and reduce the cost structure of its global operations to address the softness in certain underlying markets, the Company committed to a significant restructuring plan in fiscal 2016 and recorded $288 million of restructuring and impairment costs in the consolidated statements of income within continuing operations. The restructuring action related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures, asset impairments and change-in-control payments. The Company currently estimates that upon completion of the restructuring action, the fiscal 2016 restructuring plan will reduce annual operating costs from continuing operations by approximately $135 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs, depreciation and amortization expense. The Company expects the annual benefit of these actions will be substantially realized by the end of fiscal 2018. For fiscal 2017, the savings from continuing operations, net of execution costs, are expected to be approximately 35% of


the expected annual operating cost reduction. The restructuring action is expected to be substantially complete in fiscal 2018. The restructuring plan reserve balance of $163 million at June 30, 2017 is expected to be paid in cash.

Net Sales

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


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


(in millions)2017 2016 Change 2017 2016
Change2018 2017 Change 2018 2017
Change

      







      







Net sales$7,683
 $5,154
 49% $22,036
 $14,583

51%$8,120
 $7,683
 6% $23,030
 $22,036

5%

The increase in consolidated net sales for the three months ended June 30, 20172018 was due to higher sales in the Building Technologies & Solutions business ($2,469284 million) and the Power Solutions business ($95192 million), partially offset byand the unfavorablefavorable impact of foreign currency translation ($35139 million), partially offset by lower sales due to business divestitures ($178 million). IncrementalThe increased sales resulted fromin the Tyco Merger, the impactBuilding Technologies & Solutions business, net of divestitures, primarily related to higher lead costs on pricingvolumes across all segments. Increased sales in the Power Solutions business andprimarily resulted from higher volumes across all Building Efficiency segments.and favorable price and product mix. Excluding the impactsimpact of the Tyco Merger and foreign currency translation, impact of lead costs on pricing and business divestitures, consolidated net sales increased 4%6% as compared to the prior year. Refer to the "Segment Analysis" below within Item 2 for a discussion of net sales by segment.

The increase in consolidated net sales for the nine months ended June 30, 20172018 was due to the favorable impact of foreign currency translation ($622 million) and higher sales in the Building Technologies & Solutions business ($7,089558 million) and the Power Solutions business ($383380 million), partially offset by the unfavorable impact of foreign currency translationlower sales due to business divestitures ($19566 million). IncrementalThe increased sales in the Building Technologies & Solutions business, net of divestitures, primarily related to higher volumes across all segments. Increased sales in the Power Solutions business primarily resulted from the Tyco Merger, the impact of higher lead costs on pricing in the Power Solutions business and higher volumes across all Building Efficiency segments.pricing. Excluding the impactsimpact of the Tyco Merger and foreign currency translation, impact of lead costs on pricing and business divestitures, consolidated net sales increased 4%3% as compared to the prior year. Refer to the "Segment Analysis" below within Item 2 for a discussion of net sales by segment.

Cost of Sales / Gross Profit
Three Months Ended
June 30,
   Nine Months Ended
June 30,
  Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change2018 2017 Change 2018 2017 Change
                      
Cost of sales$5,252
 $3,732
 41% $15,210
 $10,617
 43%$5,648
 $5,252
 8% $16,169
 $15,210
 6%
Gross profit2,431
 1,422
 71% 6,826
 3,966
 72%2,472
 2,431
 2% 6,861
 6,826
 1%
% of sales31.6% 27.6%   31.0% 27.2%  30.4% 31.6%   29.8% 31.0%  

Cost of sales for the three month period ended June 30, 20172018 increased as compared to the three month period ended June 30, 2016,2017, and gross profit as a percentage of sales increaseddecreased by 400120 basis points primarily as a result of the Tyco Merger.points. Gross profit in the Building Technologies & Solutions business increased due to the incremental gross profit related to the Tyco Merger and higher volumes across alland favorable mix in the Global Products and Building Efficiency segments.Solutions North America segments, partially offset by business divestitures and prior year nonrecurring purchase accounting adjustments ($14 million). Gross profit in the Power Solutions business was impacted by favorable pricing and product mix net of lead cost increases,higher operating costs primarily driven by efforts to satisfy customer demand, partially offset by higher operating costs. Net mark-to-market adjustments on pension plansvolumes. Foreign currency translation had an unfavorable impact on cost of sales of $3 million primarily due to a decrease in discount rates. Foreign currency translation had a favorable impact on cost of sales of approximately $24$100 million. Refer to the "Segment Analysis" below within Item 2 for a discussion of segment earnings before interest, taxes and amortization (EBITA)("EBITA") by segment.

Cost of sales for the nine month period ended June 30, 20172018 increased as compared to the nine month period ended June 30, 2016,2017, and gross profit as a percentage of sales increaseddecreased by 380120 basis points primarily as a result of the Tyco Merger.points. Gross profit in the Building Technologies & Solutions business increased due to the incremental gross profit related to the Tyco Mergerprior year nonrecurring purchase accounting adjustments ($68 million), and higher volumes and favorable mix in the Global Products and Building Efficiency Asia segment,Solutions North America segments, partially offset by business divestitures and higher operating costs in the Building Efficiency Systems and Service North America and Asia segments as a result of product and channel investments.costs. Gross profit in the Power Solutions business was impacted by higher operating costs primarily driven by efforts to satisfy customer demand, partially offset by favorable pricing and product mix net of lead cost increases, partially offset by higher operating costs. Net mark-to-market adjustments on pension plans had a favorable impact on cost of sales of $12 million primarily due to an increase in discount rates.mix. Foreign currency translation had a favorablean unfavorable impact on cost of sales of approximately $9$457 million. Refer to the "Segment Analysis" below within Item 2 for a discussion of segment EBITA by segment.


Selling, General and Administrative Expenses
Three Months Ended
June 30,
   Nine Months Ended
June 30,
  Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change2018 2017 Change 2018 2017 Change
                      
Selling, general and administrative
expenses
$1,609
 $895
 80% $4,905
 $2,641
 86%$1,527
 $1,609
 -5 % $4,532
 $4,905
 -8 %
% of sales20.9% 17.4%   22.3% 18.1%  18.8% 20.9%   19.7% 22.3%  

Selling, general and administrative expenses (SG&A)("SG&A") for the three month period ended June 30, 2017 increased 80%2018 decreased 5% as compared to the three month period ended June 30, 2016.2017. The increasedecrease in SG&A was primarily due to incremental SG&A related to the Tyco Mergerproductivity savings and costs synergies, business divestitures and net mark-to-market adjustments on pension plans partially offset by productivity savings and costs synergies. The net mark-to-market adjustmentswhich had ana prior year unfavorable impact on SG&A of $42 million primarily due to a decrease in discount rates. Foreign currency translation had a favorablean unfavorable impact on SG&A of $4$24 million. Refer to the "Segment Analysis" below within Item 2 for a discussion of segment EBITA by segment.

SG&A for the nine month period ended June 30, 2017 increased 86%2018 decreased 8% as compared to the nine month period ended June 30, 2016.2017. The increasedecrease in SG&A was primarily due to incremental SG&A related to the Tyco Merger, partially offset by productivity savings and costs synergies, as well asbusiness divestitures and a gain on sale of Scott Safety in the Building Technologies & Solutions Global Products segment ($114 million), partially offset by net mark-to-market adjustments on pension plans. The net mark-to-market adjustmentsplans which had a prior year favorable impact on SG&A of $78 million primarily due to an increase in discount rates. Foreign currency translation had an unfavorable impact on SG&A of $3$95 million. Refer to the "Segment Analysis" below within Item 2 for a discussion of segment EBITA by segment.

Restructuring and Impairment Costs
Three Months Ended
June 30,
   Nine Months Ended
June 30,
 Three Months Ended
June 30,
 Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change2018 2017 Change 2018 2017 Change
                      
Restructuring and impairment costs$49
 $27
 81% $226
 $87
 *$
 $49
 * $158
 $226
 -30 %

* Measure not meaningful

Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for further disclosure related to the Company's restructuring plans.

Net Financing Charges

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


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


(in millions)2017 2016 Change 2017 2016 Change2018 2017 Change 2018 2017 Change

                      
Net financing charges$124
 $65
 91% $376
 $202
 86%$101
 $124
 -19 % $332
 $376
 -12 %

Net financing charges were higher for the three month period ended June 30, 2017 primarily dueRefer to higher interest rates,Note 11, "Debt and higher average borrowing levels as a resultFinancing Arrangements," of the debt assumed withnotes to consolidated financial statements for further disclosure related to the Tyco Merger and new debt issuances in the second quarter of fiscal 2017. NetCompany's net financing charges were higher for the nine month period ended June 30, 2017 primarily due to higher interest rates, higher average borrowing levels as a result of the debt assumed with the Tyco Merger and new debt issuances in the second quarter of fiscal 2017, and debt exchange offer fees.charges.



Equity Income

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


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


(in millions)2017 2016 Change 2017 2016 Change2018 2017 Change 2018 2017 Change

                      
Equity income$69
 $45
 53% $177
 $127
 39%$66
 $69
 -4 % $170
 $177
 -4 %

The increasedecrease in equity income for the three and nine months ended June 30, 20172018 was primarily due to higherlower income at certain partially-owned affiliates ofin the Power Solutions business, and the Johnson Controls - Hitachi (JCH) joint venturepartially offset by higher income at partially-owned affiliates in the Building Technologies & Solutions business. Refer to the "Segment Analysis" below within Item 2 for a discussion of segment EBITA by segment.

Income Tax Provision
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change
            
Income tax provision$89
 $78
 14% $570
 $202
 *
Effective tax rate12% 16%   38% 17%  

* Measure not meaningful
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2018 2017 Change 2018 2017 Change
            
Income tax provision$106
 $89
 19% $451
 $570
 -21 %
Effective tax rate12% 12%   22% 38%  

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the annualactual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The U.S. federal statutory tax rate in Ireland is being used as a comparison since the Company was a U.S.is domiciled company for 11 months of 2016 and due to the Company's current legal entity structure.in Ireland. For the three months ended June 30, 2018 and 2017, the Company's effective tax rate for continuing operations was 12%consistent with the statutory tax rate of 12.5%. TheFor the nine months ended June 30, 2018, the Company's effective tax rate was lower22% and was higher than the U.S. federal statutory tax rate of 35%12.5% primarily due to the discrete net impacts of U.S. Tax Reform, final income tax effects of the completed divestiture of the Scott Safety business and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives and non-U.S. tax rate differentials, partially offset by the jurisdictional mix of Tyco Merger transaction and integration costs.audit closures. For the nine months ended June 30, 2017, the Company's effective tax rate for continuing operations was 38%. The effective tax rate and was higher than the U.S. federal statutory tax rate of 35%12.5% primarily due to the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries related to the pending divestiture of the Scott Safety business, the income tax effects of pension mark-to-market gains and tax rate differentials, partially offset by the jurisdictional mix of significant restructuring and impairment costs, and Tyco Merger transaction /and integration costs, and purchase accounting impacts, partially offset by the benefits of continuing global tax planning initiatives, non-U.S. tax rate differentials andadjustments, a tax benefit due to changes in entity tax status. For the threestatus and nine months ended June 30, 2016, the Company's effective tax rate for continuing operations was 16% and 17%, respectively. The effective rate was lower than the U.S. federal statutory rate of 35% primarily due to the benefits of continuing global tax planning initiatives and non-U.S. tax rate differentials, partially offset by the tax impact of transaction and separation costs.initiatives. The effective tax rate for the nine months ended June 30, 2017, increased2018 decreased as compared to the nine months ended June 30, 2016,2017, primarily due to the discrete tax items described below partially offset byand tax planning initiatives. The global tax planning initiatives related primarily to foreign tax credit planning, global financing structures and alignment of our global business functions in a tax efficient manner.

In the third quarter of fiscal 2018, the Company recorded $51 million of transaction and integration costs. These costs generated a $6 million tax benefit which reflects the Company’s current tax position in these jurisdictions.

In the second quarter of fiscal 2018, the Company recorded $64 million of transaction and integration costs. These costs generated a $9 million tax benefit which reflects the Company’s current tax position in these jurisdictions.

On December 22, 2017, the “Tax Cuts and Jobs Act” (H.R. 1) was enacted and significantly revises U.S. corporate income tax by, among other things, lowering corporate income tax rates, imposing a one-time transition tax on deemed repatriated earnings of non-U.S. subsidiaries, and implementing a territorial tax system and various base erosion minimum tax provisions.

In the first quarter of fiscal 2018, as a result of the enacted legislation, the Company recorded a discrete non-cash tax benefit of $101 million due to the remeasurement of U.S. deferred tax assets and liabilities. The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% or the blended fiscal 2018 rate of 24.5%. This tax benefit is provisional as the Company is still analyzing certain aspects of the legislation and


refining calculations, which could potentially materially affect the measurement of these amounts or give rise to new deferred tax amounts.

In the first quarter of fiscal 2018, the Company also recorded a discrete tax charge of $305 million due to the one-time transition tax on deemed repatriated earnings of certain non-U.S. subsidiaries. This charge is inclusive of relevant withholding taxes. This one-time transition tax is based on the Company’s post-1986 earnings and profits (“E&P”) not previously subjected to U.S. taxation. This tax charge is provisional as the Company has not yet finally determined its post-1986 non-U.S. E&P. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. Given the varying tax rates (15.5% on cash and 8% on other property), this amount may change when the Company completes the calculation of post-1986 non-U.S. E&P previously deferred from U.S. federal taxation and concludes on the amounts held in cash versus other specified assets.

Various impacts of the enacted legislation are still being evaluated by the Company and may materially differ from the estimated impacts recognized in the first quarter of fiscal 2018 due to future treasury regulations, tax law technical corrections, and other potential guidance, notices, rulings, refined computations, actions the Company may take as a result of the tax legislation, and other items. The SEC has issued rules that allow for a measurement period of up to one year after the enactment date of the legislation to finalize the recording of the related tax impacts. 

In the first quarter of fiscal 2018, tax audit resolutions resulted in a net $25 million benefit to income tax expense.

In the first quarter of fiscal 2018, the Company completed the sale of its Scott Safety business to 3M Company. Refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements for additional information. In connection with the sale, the Company recorded a pre-tax gain of $114 million and income tax expense of $30 million.

In the first quarter of fiscal 2018, the Company recorded $50 million of transaction and integration costs. These costs generated a $7 million tax benefit which reflects the Company’s current tax position in these jurisdictions.

In the first quarter of fiscal 2018, the Company recorded $158 million of significant restructuring and impairment costs. Refer to Note 8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $24 million tax benefit, which reflects the Company’s current tax position in these jurisdictions.

In the third quarter of fiscal 2017, the Company recorded $70 million of transaction and integration costs which generated an $11 million tax benefit.

In the third quarter of fiscal 2017, the Company recorded pension mark-to-market losses of $45 million which generated an $18 million tax benefit.

In the third quarter of fiscal 2017, the Company recorded $49 million of significant restructuring and impairment costs. Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $15 million tax benefit.




In the second quarter of fiscal 2017, the Company recorded a discrete non-cash tax charge of $457 million related to establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries of the Scott Safety business. This business is now reported as net assets held for sale given the announced sale to 3M Company in calendar 2017. Refer to Note 4, "Acquisitions and Divestitures" and Note 5, "Discontinued Operations," of the notes to consolidated financial statements for additional information.

In the second quarter of fiscal 2017, the Company recorded $138 million of transaction and integration costs which generated a $31 million tax benefit.

In the second quarter of fiscal 2017, the Company recorded pension mark-to-market gains of $18 million, which resulted in tax expense of $8 million.



In the second quarter of fiscal 2017, the Company recorded $99 million of significant restructuring and impairment costs. Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $20 million tax benefit, which was impacted byreflects the Company’s current tax position in these jurisdictions.

In the first quarter of fiscal 2017, the Company recorded a discrete tax benefit of $101 million due to changes in entity tax status.

In the first quarter of fiscal 2017, the Company recorded pension mark-to-market gains of $117 million, which resulted in tax expense of $46 million.

In the first quarter of fiscal 2017, the Company recorded $130 million of transaction and integration costs which generated an $11 million tax benefit.

In the first quarter of fiscal 2017, the Company recorded $78 million of significant restructuring and impairment costs. Refer to Note 9,8, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $14 million tax benefit, which was impacted byreflects the Company’s current tax position in these jurisdictions.

In the third quarter of fiscal 2016, the Company recorded $27 million of significant restructuring and impairment costs. Refer to Note 9, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $12 million tax benefit, which was impacted by the geographic mix and the Company’s current tax position in these jurisdictions.

In the second quarter of fiscal 2016, the Company recorded $60 million of significant restructuring and impairment costs. Refer to Note 9, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The restructuring costs generated a $12 million tax benefit, which was impacted by the geographic mix, the Company’s current tax position in these jurisdictions and the underlying tax basis in the impaired assets.

Income (Loss)Loss From Discontinued Operations, Net of Tax

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

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

(in millions)2017 2016 Change 2017 2016
Change2018 2017 Change 2018 2017
Change

      






      






Income (loss) from discontinued
operations, net of tax
$
 $57
 * $(34) $(481) *
Loss from discontinued operations,
net of tax
$
 $
 * $
 $(34) *

* Measure not meaningful

Refer to Note 5,4, "Discontinued Operations," of the notes to consolidated financial statements for further information regarding the Company's discontinued operations.



Income Attributable to Noncontrolling Interests

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


(in millions)2017 2016 Change 2017 2016
Change

      







Income from continuing operations attributable to noncontrolling interests$74
 $55
 35% $147
 $116
 27 %
Income from discontinued operations attributable to noncontrolling interests
 21
 *
 9
 61
 -85 %

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


(in millions)2018 2017 Change 2018 2017
Change

      







Income from continuing operations
attributable to noncontrolling
interests
$81
 $74
 9% $167
 $147
 14%
Income from discontinued
    operations attributable to
    noncontrolling interests

 
 *
 
 9
 *

* Measure not meaningful

The increase in income from continuing operations attributable to noncontrolling interests for the three and nine months ended June 30, 2017,2018 was primarily due to higher net income related to the JCHJohnson Controls - Hitachi joint venture in the Building Technologies & Solutions business.business and higher net income at a Power Solutions partially-owned affiliate.

Refer to Note 5,4, "Discontinued Operations," of the notes to consolidated financial statements for further information regarding the Company's discontinued operations.



Net Income Attributable to Johnson Controls
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change
            
Net income attributable to
     Johnson Controls
$555
 $383
 45% $736
 $303
 *

* Measure not meaningful
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2018 2017 Change 2018 2017 Change
            
Net income attributable to
     Johnson Controls
$723
 $555
 30% $1,391
 $736
 89%

The increase in net income attributable to Johnson Controls for the three months ended June 30, 20172018 was primarily due to incremental operatinglower SG&A, lower restructuring and impairment costs, lower net financing charges and higher gross profit. The increase in net income as a result ofattributable to Johnson Controls for the Tyco Merger, partially offset bynine months ended June 30, 2018 was primarily due to higher gross profit, lower SG&A, income tax provision due to higher discrete period net tax charges in the prior year and lower net financing charges. Diluted earnings per share attributable to Johnson Controls for the three months ended June 30, 2017 and 20162018 was $0.59.

The increase in net income attributable$0.78 compared to Johnson Controls$0.59 for the ninethree months ended June 30, 2017 was primarily due to incremental operating income as a result of the Tyco Merger and a prior year loss from discontinued operations, partially offset by an increase in the income tax provision and higher net financing charges.2017. Diluted earnings per share attributable to Johnson Controls for the nine months ended June 30, 20172018 was $0.78$1.49 compared to $0.47$0.78 for the nine months ended June 30, 2016.2017.

Comprehensive Income Attributable to Johnson Controls
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change
            
Comprehensive income
     attributable to Johnson Controls
$813
 $248
 * $579
 $186
 *

* Measure not meaningful
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2018 2017 Change 2018 2017 Change
            
Comprehensive income
     attributable to Johnson Controls
$169
 $813
 -79 % $1,056
 $579
 82%

The increasedecrease in comprehensive income attributable to Johnson Controls for the three months ended June 30, 20172018 was primarily due to an increasea decrease in other comprehensive income attributable to Johnson Controls ($393812 million) resulting primarily from favorableunfavorable foreign currency translation adjustments, andpartially offset by higher net income attributable to Johnson Controls ($172168 million). These year-over-year favorableunfavorable foreign currency translation adjustments were primarily driven by the strengtheningweakening of the British pound and euro currencycurrencies against the U.S. dollar.


The increase in comprehensive income attributable to Johnson Controls for the nine months ended June 30, 20172018 was primarily due to higher net income attributable to Johnson Controls ($433655 million), partially offset by a decreasean increase in other comprehensive loss attributable to Johnson Controls ($40178 million) resulting primarily from unfavorable foreign currency translation adjustments. These year-over-year unfavorable foreign currency translation adjustments were primarily driven by the weakening of the Japanese yen currencyBritish pound and euro currencies against the U.S. dollar.

Segment Analysis

Management evaluates the performance of its business units based primarily on segment EBITA, which is defined as income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, significant restructuring and impairment costs, and the net mark-to-market adjustments related toon pension and postretirement plans.

Building Technologies & Solutions - Net Sales
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016
Change 2017 2016 Change









      
Building Efficiency           
   Systems and Service North America$1,128
 $1,113
 1 % $3,103
 $3,131
 -1 %
   Products North America698
 690
 1 % 1,826
 1,793
 2 %
   Asia1,456
 1,361
 7 % 3,671
 3,515
 4 %
   Rest of World456
 471
 -3 % 1,278
 1,302
 -2 %
 3,738
 3,635
 3 % 9,878
 9,741
 1 %
Tyco2,336
 
 *
 6,953
 
 *

$6,074
 $3,635
 67 % $16,831
 $9,741
 73 %
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2018 2017
Change 2018 2017 Change









      
Building Solutions North America$2,246
 $2,142
 5% $6,355
 $6,181
 3%
Building Solutions EMEA/LA926
 896
 3% 2,748
 2,669
 3%
Building Solutions Asia Pacific681
 630
 8% 1,864
 1,767
 5%
Global Products2,429
 2,406
 1% 6,250
 6,214
 1%
 $6,282
 $6,074
 3% $17,217
 $16,831
 2%
* Measure not meaningful


Three Months:

The increase in Systems and ServiceBuilding Solutions North America was due to higher volumes ($103 million) and the favorable impact of controls systems and serviceforeign currency translation ($228 million), partially offset by athe impact of prior year business divestiturenonrecurring purchase accounting adjustments ($47 million). The increase in volumes was primarily attributable to higher HVAC, controls, fire and security sales.

The increase in Building Solutions EMEA/LA was due to the unfavorablefavorable impact of foreign currency translation ($33 million) and higher volumes ($4 million), partially offset by the impact of prior year nonrecurring purchase accounting adjustments ($7 million).

The increase in Building Solutions Asia Pacific was due to higher volumes ($28 million) and the favorable impact of foreign currency translation ($26 million), partially offset by lower volumes related to a business divestiture ($3 million). The increase in volumes was primarily attributable to market growth.higher service sales.

The increase in Global Products North America was due to higher volumes ($12 million), partially offset by a prior year business divestiture ($2163 million) and the unfavorablefavorable impact of foreign currency translation ($235 million), partially offset by lower volumes related to business divestitures ($175 million). The increase in volumes was primarily attributable to new product offerings.

The increase in Asia was due to higher volumes ofbuilding management, HVAC and refrigeration equipment, and control systems ($119 million) and higher service volumes ($4 million), partially offset by the unfavorable impact of foreign currency translation ($17 million) and lower volumes related to a business deconsolidation ($11 million). The increase in volumes was primarily due to new product offerings and favorable local market conditions.

The decrease in Rest of World was due to a prior year business divestiture ($11 million), the unfavorable impact of foreign currency translation ($8 million) and lower volumes in Latin America ($3 million), partially offset by higher volumes in Europe ($5 million) and in the Middle East ($2 million).

The increase in Tyco was due to incremental sales related to the Tyco Merger ($2,336 million).specialty products sales.

Year-to-Date:

The decrease in Systems and Service North America was due to a prior year business divestiture ($32 million), partially offset by higher volumes of controls systems and service ($4 million).



The increase in ProductsBuilding Solutions North America was due to higher volumes ($44 million), partially offset by a prior year business divestiture ($7176 million) and the unfavorablefavorable impact of foreign currency translation ($428 million), partially offset by the impact of prior year nonrecurring purchase accounting adjustments ($30 million). The increase in volumes was primarily attributable to market share changeshigher HVAC, controls, fire and new product offerings.security sales.

The increase in AsiaBuilding Solutions EMEA/LA was due to higher volumes of equipment and control systems ($136 million), higher service volumes ($25 million) and the favorable impact of foreign currency translation ($24161 million) and higher volumes ($9 million), partially offset by lower volumes related to a business deconsolidationdivestiture ($2980 million) and the impact of prior year nonrecurring purchase accounting adjustments ($11 million).

The increase in Building Solutions Asia Pacific was due to the favorable impact of foreign currency translation ($75 million), higher volumes ($33 million) and the impact of prior year nonrecurring purchase accounting adjustments ($1 million), partially offset by lower volumes related to a business divestiture ($12 million). The increase in volumes was primarily dueattributable to new product offerings and favorable local market conditions.higher service sales.

The decreaseincrease in Rest of WorldGlobal Products was due to a prior year business divestiturehigher volumes ($27374 million), the unfavorablefavorable impact of foreign currency translation ($19130 million) and lower volumes in the Middle Eastimpact of prior year nonrecurring purchase accounting adjustments ($156 million), partially offset by higherlower volumes in Europerelated to business divestitures ($30474 million) and Latin America ($7 million).

The increase in Tycovolumes was dueprimarily attributable to incremental sales related to the Tyco Merger ($6,953 million).higher building management, HVAC and refrigeration equipment, and specialty products sales.

Building Technologies & Solutions - Segment EBITA
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change
            
Building Efficiency           
   Systems and Service North America$126
 $142
 -11 % $291
 $342
 -15 %
   Products North America98
 96
 2 % 192
 176
 9 %
   Asia246
 180
 37 % 483
 368
 31 %
   Rest of World26
 22
 18 % 25
 29
 -14 %
 496
 440
 13 % 991
 915
 8 %
Tyco416
 
 *
 1,009
 
 *
 $912
 $440
 *
 $2,000
 $915
 *
 Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2018 2017 Change 2018 2017 Change
            
Building Solutions North America$314
 $290
 8 % $780
 $741
 5%
Building Solutions EMEA/LA96
 100
 -4 % 242
 238
 2%
Building Solutions Asia Pacific97
 85
 14 % 242
 215
 13%
Global Products435
 437
  % 949
 806
 18%
 $942
 $912
 3 % $2,213
 $2,000
 11%
* Measure not meaningful


Three Months:

The decreaseincrease in Systems and ServiceBuilding Solutions North America was due to afavorable volumes / mix ($33 million), prior year gain on business divestitureintegration costs ($1410 million), higherlower selling, general and administrative expenses ($52 million), currentprior year transaction costs ($2 million) and current year integration coststhe favorable impact of foreign currency translation ($1 million), partially offset by higherprior year nonrecurring purchase accounting adjustments ($12 million), incremental investments ($8 million) and current year integration costs ($4 million).

The decrease in Building Solutions EMEA/LA was due to prior year nonrecurring purchase accounting adjustments ($11 million), incremental investments ($5 million) and current year integration costs ($2 million), partially offset by lower selling, general and administrative expenses ($8 million), and favorable volumes / mix ($6 million).

The increase in Building Solutions Asia Pacific was due to lower selling, general and administrative expenses ($9 million), higher volumes / mix ($5 million) and the favorable impact of foreign currency translation ($1 million), partially offset by incremental investments ($2 million) and prior year nonrecurring purchase accounting adjustments ($1 million).

The decrease in Global Products was due to lower income due to business divestitures ($47 million), higher selling, general and administrative expenses and operating costs including planned incremental global product and channel investments ($44 million), and current year integration costs ($6 million), partially offset by favorable volumes / mix ($69 million), higher equity income ($10 million), the favorable impact of foreign currency translation ($8 million), prior year transaction costs ($4 million) and prior year integration costs ($4 million).

Year-to-Date:

The increase in Building Solutions North America was due to favorable volumes / mix ($5 million), higher volumes ($3 million) and higher equity income ($1 million), partially offset by higher selling, general and administrative expenses ($4 million), current year transaction costs ($2 million) and current year integration costs ($1 million).

The increase in Asia was due to higher volumes ($35 million), higher equity income ($9 million), lower operating costs ($749 million), prior year integration costs ($724 million), lower selling, general and administrative expensesprior year transaction costs ($613 million), and favorable mix ($4 million), partially offset by the unfavorable impact of foreign currency translation ($2 million).

The increase in Rest of World was due to lower selling, general and administrative expenses ($5 million), lower operating costs ($3 million) and higher volumes ($1 million), partially offset by a prior year business divestiture ($2 million), the unfavorablefavorable impact of foreign currency translation ($2 million) and, partially offset by prior year nonrecurring purchase accounting adjustments ($23 million), current year transactionintegration costs ($118 million) and incremental investments ($16 million).

The increase in TycoBuilding Solutions EMEA/LA was due to incremental income related to the Tyco Merger ($405 million) and thefavorable impact of nonrecurring purchasing accounting adjustmentsforeign currency translation ($2413 million), partially offset by current year integration costsfavorable volumes / mix ($1210 million) and current year transaction costs ($1 million).

Year-to-Date:

The decrease in Systems and Service North America was due to higher operating costs as a result of channel investments ($29 million), a prior year gain on business divestiture ($14 million), current year transaction costs ($5 million), current


year integration costs ($4 million) and a prior year business divestiture ($2 million), partially offset by lower selling, general and administrative expenses ($3 million).

The increase in Products North America was due to lower operating costs as a result of cost reduction initiatives ($158 million), higher volumesprior year transaction costs ($105 million), and favorable mixprior year integration costs ($74 million), partially offset by currentprior year transaction costsnonrecurring purchase accounting adjustments ($514 million), incremental investments ($8 million), current year integration costs ($5 million), higher selling, generaloperating costs ($5 million), lower income due to a business divestiture ($2 million) and administrative expenses ($4 million), and the unfavorable impact of foreign currency translationlower equity income ($2 million).

The increase in Building Solutions Asia Pacific was due to higher volumes / mix ($4413 million), lower selling, general and administrative expenses as a result of productivity and synergy savings ($3211 million), higher equity incomeprior year nonrecurring purchase accounting adjustments ($233 million), prior year integration costs ($153 million), prior year transaction costs ($10 million), andthe favorable mix ($4 million), partially offset by higher operating costs due to product investments ($11 million) and the unfavorable impact of foreign currency translation ($2 million).

The decrease in Rest of World was due to lower equity income ($8 million), a prior year gain on acquisition of a partially-owned affiliate ($4 million), the unfavorable impact of foreign currency translation ($4 million), a prior year business divestiture ($3 million), current year integration costs ($1 million) and currentprior year transaction costs ($12 million), partially offset by lower selling, generalunfavorable pricing ($4 million) and administrative expenses as a result of productivity and synergy savingsincremental investments ($14 million), and higher volumes ($34 million).

The increase in TycoGlobal Products was due to incrementalfavorable volumes / mix ($136 million), a gain on sale of Scott Safety ($114 million), prior year nonrecurring purchase accounting adjustments ($71 million), the favorable impact of foreign currency translation ($23 million), higher equity income related to the Tyco Merger ($1,10221 million), prior year integration costs ($13 million) and prior year transaction costs ($13 million). These items were partially offset by the impact of nonrecurring purchasing accounting adjustmentslower income due to business divestitures ($37121 million), higher selling, general and administrative expenses and operating expenses including planned incremental global product and channel investments partially offset by productivity savings and an insignificant gain on a business divestiture ($106 million), and current year integration costs ($35 million) and current year transaction costs ($21 million).

Power Solutions
Three Months Ended
June 30,
   Nine Months Ended
June 30,
  Three Months Ended
June 30,
   Nine Months Ended
June 30,
  
(in millions)2017 2016 Change 2017 2016 Change2018 2017 Change 2018 2017 Change
                      
Net sales$1,609
 $1,519
 6% $5,205
 $4,842
 7%$1,838
 $1,609
 14% $5,813
 $5,205
 12%
Segment EBITA304
 280
 9% 996
 922
 8%310
 304
 2% 1,008
 996
 1%



Three Months:

Net sales increased due to the favorable impact of higher volumes ($121 million), favorable pricing and product mix ($40 million), foreign currency translation ($37 million) and the impact of higher lead costs on pricing ($124 million), and favorable pricing and product mix ($27 million), partially offset by lower volumes ($56 million) and the unfavorable impact of foreign currency translation ($531 million). The decreaseincrease in volumes was driven by changes in customer demand patterns in Europe, growth in China and North America, partially offset by an increase in start-stop battery volumes. Additionally, higher start-stop volumes contributed to favorable product mix.

Segment EBITA increased due to favorable pricing and product mix net of lead cost increaseshigher volumes ($4135 million), lower selling, general and administrative expenses as a resultdue to lower employee related expenses and cost reduction initiatives ($27 million), and the favorable impact of productivity savingsforeign currency translation ($155 million), partially offset by higher operating costs primarily driven by efforts to satisfy customer demand including higher transportation costs ($40 million), lower equity income ($12 million) and incremental investments ($9 million).

Year-to-Date:

Net sales increased due to the impact of higher lead costs on pricing ($230 million), the favorable impact of foreign currency translation ($228 million), favorable pricing and product mix ($119 million), and higher volumes ($31 million). The increase in volumes was driven by growth in China and an increase in start-stop battery volumes, partially offset by changes in customer demand patterns in North America. Additionally, higher start-stop volumes contributed to favorable product mix.

Segment EBITA increased due to lower selling, general and administrative expenses from productivity savings and a gain on a business deconsolidation ($56 million), favorable pricing and product mix ($48 million), the favorable impact of foreign currency translation ($29 million), higher volumes ($5 million) and prior year transaction costs ($1 million), partially offset by higher operating costs primarily driven by efforts to satisfy customer demand including higher transportation costs ($2772 million), lower volumesequity income ($1528 million) and the unfavorable impact of foreign currency translationincremental investments ($327 million).

Year-to-Date:

Net sales increased due to the impact of higher lead costs on pricing ($298 million), and favorable pricing and product mix ($85 million), partially offset by the unfavorable impact of foreign currency translation ($20 million). Higher start-stop volumes contributed to favorable product mix.

Segment EBITA increased due to favorable pricing and product mix net of lead cost increases ($81 million), higher equity income ($30 million), lower selling, general and administrative expenses as a result of productivity savings ($24 million), and prior year transaction costs ($1 million), partially offset by higher operating costs primarily driven by efforts to satisfy customer demand ($56 million), the unfavorable impact of foreign currency translation ($5 million) and transaction costs ($1 million).


Backlog

The Company's backlog relating to the Building Technologies & Solutions business is applicable to its sales of systems and services. At June 30, 2017,2018, the backlog was $8.4 billion and reflects harmonization of the Company's method for determining backlog subsequent to the Tyco Merger.$8.8 billion. The backlog amount outstanding at any given time is not necessarily indicative of the amount of revenue to be earned during the fiscal year.


Financial Condition
Liquidity and Capital Resources

Working Capital
June 30, September 30,  June 30, September 30,  
(in millions)2017 2016 Change2018 2017 Change
          
Current assets$13,962
 $17,109
  $12,465
 $12,292
  
Current liabilities(11,515) (16,331)  (11,301) (11,854)  
2,447
 778
 *
1,164
 438
 *
          
Less: Cash(458) (579)  (283) (321)  
Add: Short-term debt1,956
 1,078
  1,559
 1,214
  
Add: Current portion of long-term debt543
 628
  24
 394
  
Less: Assets held for sale(2,082) (5,812)  (12) (189)  
Add: Liabilities held for sale247
 4,276
  
 72
  
Working capital (as defined)$2,653
 $369
 *
$2,452
 $1,608
 52%
          
Accounts receivable - net$6,443
 $6,394
 1 %$6,895
 $6,666
 3%
Inventories3,384
 2,888
 17 %3,509
 3,209
 9%
Accounts payable3,764
 4,000
 -6 %4,410
 4,271
 3%
          
* Measure not meaningful          

The Company defines working capital as current assets less current liabilities, excluding cash, short-term debt, the current portion of long-term debt, and the current portion of 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 underlying operating performance.

Excluding the impact of amounts classified as held for sale, theThe increase in working capital at June 30, 2017,2018 as compared to September 30, 2016,2017, was primarily due to income tax payments related to the Adient spin-off, an increase in inventory to meet anticipated customer demand and a decrease in accounts payable due to timing and mix of supplier payments.other current liabilities.

The Company’s days sales in accounts receivable at June 30, 20172018 were 6563 days, higherlower than 6165 days at September 30, 2016.2017. There havehas been no significant adverse changes in the level of overdue receivables or changes in revenue recognition methods. Increased volumes in certain of the segments and seasonality contributed to the increase.

The Company’s inventory turns for the three months ended June 30, 20172018 were significantly lower than the comparable period ended September 30, 2016,2017, primarily due to a build of Power Solutionschanges in inventory levels to meet customer demand.production levels.

Days in accounts payable at June 30, 20172018 were 6372 days, slightly lower than 6973 days at the comparable period ended September 30, 2016 due primarily to the mix of payables.2017.



Cash Flows
 Nine Months Ended
June 30,
 Nine Months Ended June 30,
(in millions) 2017 2016 2018 2017
        
Cash provided (used) by operating activities $(1,321) $696
 $1,261
 $(1,303)
Cash used by investing activities (832) (871)
Cash provided by financing activities 1,915
 40
Cash provided (used) by investing activities 1,304
 (832)
Cash provided (used) by financing activities (2,528) 1,897
Capital expenditures (996) (822) (782) (996)

The increase in cash usedprovided by operating activities for the nine months ended June 30, 20172018 was primarily due to favorable movements in working capital balances, higher prior year income tax payments primarily duerelated to the Adient spin-off ($1.2 billion in the first quarter of fiscal 2017), and prior year operating cash outflows in the movementAutomotive Experience business before the Adient spin-off, change in trade working capital balances.control pension payments and transaction/integration related payments.

The decreaseincrease in cash usedprovided by investing activities for the nine months ended June 30, 20172018 was primarily due to net cash proceeds received from athe Scott Safety business divestiture in the current year and cash paid for the JCH joint venture in the prior year, partially offset by an increasea decrease in capital expenditures.

The increase in cash providedused by financing activities for the nine months ended June 30, 20172018 was primarily due to the prior year net dividend proceeds from the Adient spin-off, and an increase inhigher current year borrowings.repayments of long-term debt and a decrease in debt borrowings, partially offset by cash transferred in the prior year to Adient related to the spin-off.

The increasedecrease in capital expenditures for the nine months ended June 30, 20172018 primarily relates to Tycolower capital investments in the current year in the Building Technologies & Solutions business and higherprior year capital investments in the Building Efficiency and Power Solutions businesses.

Deferred Taxes

The Company reviewsAutomotive Experience business before the realizability of its deferred tax assets 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.

The Company has certain subsidiaries, mainly located in Australia, Belgium, Brazil, China, France, Spain, Switzerland, Luxembourg and the United Kingdom, which have generated net operating loss carryforwards and, in certain circumstances, have limited loss carryforward periods. In accordance with ASC 740, "Income Taxes," the Company is required to record a valuation allowance when it is more likely than not the Company will not utilize deductible amounts or net operating losses for each legal entity or consolidated group based on the tax rules in the applicable jurisdiction, evaluating both positive and negative historical evidences as well as expected future events and tax planning strategies.

Long-Lived Assets

The Company reviews long-lived assets 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 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate 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.

In the first, second and third quarters of fiscal 2017, the Company concluded it had triggering events requiring assessment of impairment for certain of its long-lived assets in conjunction with its restructuring actions announced in fiscal 2017. As a result, the Company reviewed the long-lived assets for impairment and recorded $69 million of asset impairment charges within restructuring and impairment costs on the consolidated statements of income, of which $15 million was recorded in the first quarter, $23 million was recorded in the second quarter and $31 million was recorded in the third quarter. Of the total impairment charges, $27 million related to the Tyco segment, $20 million related to the Building Efficiency Products North America segment, $17


million related to Corporate assets, $4 million related to the Power Solutions segment, and $1 million related to the Building Efficiency Systems and Services North America segment. Refer to Note 9, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The impairments were measured, depending on the asset, under either an income approach utilizing forecasted discounted cash flows or a market approach utilizing an appraisal to determine fair values of the impaired assets. These methods are consistent with the methods the Company employed in prior periods to value other long-lived assets. 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."

In the second and third quarters of fiscal 2016, the Company concluded it had a triggering event requiring assessment of impairment for certain of its long-lived assets in conjunction with its restructuring actions announced in fiscal 2016. As a result, the Company reviewed the long-lived assets for impairment and recorded $65 million of asset impairment charges within restructuring and impairment costs on the consolidated statements of income, of which $15 million was recorded in the second quarter and $50 million was recorded in the third quarter. Of the total impairment charge, $50 million related to Corporate assets, $8 million related to the Building Efficiency Products North America segment, $4 million related to the Building Efficiency Asia segment and $3 million related to the Building Efficiency Rest of World segment. In addition, the Company recorded $15 million of asset impairments within discontinued operations related to Adient in fiscal 2016. Refer to Note 9, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. The impairments were measured, depending on the asset, under either an income approach utilizing forecasted discounted cash flows or a market approach utilizing an appraisal to determine fair values of the impaired assets. These methods are consistent with the methods the Company employed in prior periods to value other long-lived assets. 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."

At June 30, 2017 and 2016, the Company concluded it did not have any other triggering events requiring assessment of impairment of its long-lived assetsspin-off.

Capitalization
June 30, September 30,  June 30, September 30,  
(in millions)2017 2016 Change2018 2017 Change
          
Short-term debt$1,956
 $1,078
  $1,559
 $1,214
  
Current portion of long-term debt543
 628
  24
 394
  
Long-term debt11,772
 11,053
  10,373
 11,964
  
Total debt14,271
 12,759
 12 %11,956
 13,572
 -12 %
Less: cash and cash equivalents283
 321
  
Total net debt11,673
 13,251
 -12 %
          
Shareholders’ equity attributable to Johnson Controls
ordinary shareholders
19,731
 24,118
 -18 %20,773
 20,447
 2 %
     
Total capitalization$34,002
 $36,877
 -8 %$32,446
 $33,698
 -4 %
          
Total debt as a % of total capitalization42% 35%  
Total net debt as a % of total capitalization36.0% 39.3%  

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 review of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders.

Shareholders' equity attributable to Johnson Controls ordinary shareholders decreased as a result of the Adient spin-off in October 2016. Refer to Note 5, "Discontinued Operations," of the notes to consolidated financial statements for further information.

In connection with the Tyco Merger, on December 28, 2016, the Company completed its offers to exchange all validly tendered and accepted notes of certain series (the "existing notes") issued by JCI Inc. or Tyco International Finance S.A. ("TIFSA"), as applicable, each of which is a wholly owned subsidiary of the Company, for new notes (the New Notes) to be issued by the Company, and the related solicitation of consents to amend the indentures governing the existing notes (the offers to exchange and the related consent solicitation together the "exchange offers"). Pursuant to the exchange offers, the Company exchanged approximately $5.6 billion of $6.0 billion in aggregate principal amount of dollar denominated notes and approximately 423 million euro of 500 million euro in aggregate principal amount of euro denominated notes. All validly tendered and accepted existing notes have been canceled. Immediately following such cancellation, $380.9 million aggregate


principal amount of existing notes (not including the TIFSA Euro Notes) remained outstanding across seventeen series of dollar-denominated existing notes and 77.4 million euro aggregate principal amount of TIFSA Euro Notes remained outstanding across one series. In connection with the settlement of the exchange offers, the New Notes were registered under the Securities Act of 1933 and their terms are described in the Company’s Prospectus dated December 19, 2016, as filed with the SEC under Rule 424(b)(3) of the Act on that date. The issuance of the New Notes occurred on December 28, 2016. The New Notes are unsecured and unsubordinated obligations of the Company and will rank equally with all other unsecured and unsubordinated indebtedness of the Company issued from time to time.

In June 2017, the Company partially repaid $135 million of the $4.0 billion floating rate term loan scheduled to mature in March 2020.

In March 2017, the Company issued one billion euro in principal amount of 1.0% senior unsecured fixed rate notes due in fiscal 2023. Proceeds from the issuance were used to repay existing debt and for other general corporate purposes.

In March 2017, the Company entered into a 364-day $150 million committed revolving credit facility scheduled to expire in March 2018. As of June 30, 2017, there were no draws on the facility.

In March 2017, the Company retired $46 million in principal amount, plus accrued interest, of its 2.355% fixed rate notes that matured in March 2017.

In March 2017 and February 2017, the Company repurchased, at a discount, 15 million euro of its TIFSA 1.375% fixed rate notes, plus accrued interest, scheduled to mature in February 2025.

In February 2017, the Company issued $500 million aggregate principal amount of 4.5% senior unsecured fixed rate notes due in fiscal 2047. Proceeds from the issuance were used to repay outstanding commercial paper borrowings and for other general corporate purposes.

In February 2017, the Company entered into a 364-day $150 million committed revolving credit facility scheduled to expire in February 2018. As of June 30, 2017, there were no draws on the facility.

In January 2017, the Company entered into a 364-day $250 million committed revolving credit facility scheduled to expire in January 2018. As of June 30, 2017, there were no draws on the facility outstanding.
In December 2016, the Company retired $400 million in principal amount, plus accrued interest, of its 2.6% fixed rate notes that matured in December 2016.

In December 2016, the Company entered into a 364-day 100 million euro floating rate term loan scheduled to mature in December 2017. Proceeds from the term loan were used for general corporate purposes. Principal and accrued interest were fully repaid in March 2017.

In December 2016, a $100 million committed revolving credit facility expired. There were no draws on the facility.

In November 2016, the Company fully repaid its 37 billion yen syndicated floating rate term loan, plus accrued interest, scheduled to mature in June 2020.

In November 2016, a $35 million committed revolving credit facility expired. There were no draws on the facility.

In October 2016, the Company repaid two ten-month floating rate term loans totaling $325 million, plus accrued interest, scheduled to mature in October 2016.

In October 2016, the Company repaid a nine-month $100 million floating rate term loan, plus accrued interest, scheduled to mature in November 2016.

In October 2016, the Company repaid a nine-month 100 million euro floating rate term loan, plus accrued interest, scheduled to mature in October 2016.



The Company also selectively makes use of short-term credit lines other than its revolving credit facilities at the Company and TSarl. The Company estimates that, as of June 30, 2017, it could borrow up to $1.4 billion based on average borrowing levels during the quarter on committed credit lines.

The Company believes its capital resources and liquidity position at June 30, 20172018 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 the remainder of fiscal 20172018 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 and TSarlTyco


International Holding S.à.r.l ("TSarl") are unable to issue commercial paper, they would have the ability to draw on their $2.0 billion and $1.0$1.25 billion revolving credit facilities, respectively. Both facilities mature in August 2020. There were no draws on the revolving credit facility as of June 30, 20172018 and September 30, 2016.2017. The Company also selectively makes use of short-term credit lines other than its revolving credit facilities at the Company and TSarl. The Company estimates that, as of June 30, 2018, it could borrow up to $1.6 billion based on average borrowing levels during the quarter on committed credit lines. As such, the Company believes it has sufficient financial resources to fund operations and meet its obligations for the foreseeable future.

The Company earns a significant amount of its operating income outside of the parent company. Outside basis differences in these subsidiaries are deemed to be permanently reinvested. However, in fiscal 2017, the Company provided income tax expense related to a change in the Company’s assertion over the outside basis difference of the Scott Safety business as a result of the pending divestiture. 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. However, in fiscal 2016, the Company did provide income tax expense related to a change in the Company's assertion over a portion of the permanently reinvested earnings as a result of the planned spin-off of the Automotive Experience business. Except as noted, 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 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 in the U.S. than is generated by operations in the U.S., the Company could elect to raise capital in the U.S. through debt or equity issuances. In addition, 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. This alternative could result in increased interest expense or other dilution of the Company’s earnings.

The Company’s debt financial covenant in its revolving credit facility 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)("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment. TSarl's revolving credit facility contains customary terms and conditions, and a financial covenant that limits the ratio of TSarl's debt to earnings before interest, taxes, depreciation, and amortization as adjusted for certain items set forth in the agreement to 3.5x. The TSarl's revolving credit facility also limits its ability to incur subsidiary debt or grant liens on its and its subsidiaries' property. As of June 30, 2017,2018, the Company and TSarl were in compliance with all covenants and other requirements set forth in their credit agreements and the indentures, governing their notes, and expect to remain in compliance for the foreseeable future. None of the Company’s or TSarl's debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the respective borrower's credit rating.

The key financial assumptions used in calculating the Company’s pension liability are determined annually, or whenever plan assets and liabilities are re-measured as required under accounting principles generally accepted in the U.S., including the expected rate of return on its plan assets. In fiscal 2018, the Company believes the long-term rate of return will approximate 7.50%, 5.35% and 5.65% for U.S. pension, non-U.S. pension and postretirement plans, respectively. During the first nine months of fiscal 2018, the Company made approximately $54 million in total pension and postretirement contributions. In total, the Company expects to contribute approximately $100 million in cash to its defined benefit pension plans in fiscal 2018. The Company expects to contribute $5 million in cash to its postretirement plans in fiscal 2018.

The Company earns a significant amount of its operating income outside of the parent company. Outside basis differences in consolidated subsidiaries are deemed to be permanently reinvested except in limited circumstances. However, in fiscal 2018, due to U.S. Tax Reform, the Company provided income tax related to the change in the Company’s assertion over the outside basis difference of certain non-U.S. subsidiaries owned directly or indirectly by U.S. subsidiaries. Under U.S. Tax Reform, the U.S. has adopted a territorial tax system that provides an exemption for dividends received by U.S. corporations from 10% or more owned non-U.S. corporations. However, certain non-U.S, U.S. state and withholding taxes may still apply when closing an outside basis difference via distribution or other transactions. The Company currently does not intend nor foresee a need to repatriate undistributed earnings or reduce outside basis differences other than as noted above or in tax efficient manners. 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 a tax efficient manner, 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.

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company committed to a significant restructuring plan in fiscal 2018 and recorded $158 million of restructuring and impairment costs in the consolidated statements of income. The restructuring action related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures and asset impairments. The Company currently estimates that upon completion of the restructuring action, the fiscal 2018 restructuring plan will reduce annual operating costs by approximately $150 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to


reduced employee-related costs, depreciation and amortization expense. The Company expects the annual benefit of these actions will be substantially realized in 2020. For fiscal 2018, the savings, net of execution costs, are expected to be approximately 45% of the expected annual operating cost reduction. The restructuring action is expected to be substantially complete in 2020. The restructuring plan reserve balance of $106 million at June 30, 2018 is expected to be paid in cash.

To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company committed to a significant restructuring plan in fiscal 2017 and recorded $367 million of restructuring and impairment costs in the consolidated statements of income. The restructuring action related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures and asset impairments. The Company currently estimates that upon completion of the restructuring action, the fiscal 2017 restructuring plan will reduce annual operating costs by approximately $280 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs, depreciation and amortization expense. The Company expects the annual benefit of these actions will be substantially realized in fiscal 2019. For fiscal 2018, the savings, net of execution costs, are expected to be approximately 85% of the expected annual operating cost reduction. The restructuring action is expected to be substantially complete in 2018. The restructuring plan reserve balance of $92 million at June 30, 2018 is expected to be paid in cash.

To better align its resources with its growth strategies and reduce the cost structure of its global operations to address the softness in certain underlying markets, the Company committed to a significant restructuring plan in fiscal 2016 and recorded $288 million of restructuring and impairment costs in the consolidated statements of income. The restructuring action related to cost reduction initiatives in the Company’s Building Technologies & Solutions and Power Solutions businesses and at Corporate. The costs consist primarily of workforce reductions, plant closures, asset impairments and change-in-control payments. The Company currently estimates that upon completion of the restructuring action, the fiscal 2016 restructuring plan will reduce annual operating costs by approximately $135 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs, depreciation and amortization expense. The Company expects the annual benefit of these actions will be substantially realized in fiscal 2019. For fiscal 2018, the savings, net of execution costs, are expected to be approximately 75% of the expected annual operating cost reduction. The restructuring action is expected to be substantially complete in 2018. The restructuring plan reserve balance of $74 million at June 30, 2018 is expected to be paid in cash.

Refer to Note 11, "Debt and Financing Arrangements," of the notes to consolidated financial statements for additional information on items impacting capitalization.

New Accounting Standards

Recently AdoptedRefer to Note 2, "New Accounting Pronouncements

In October 2016, the FASB issued Accounting Standards, Update (ASU) No. 2016-17, "Consolidations (Topic 810): Interests Held through Related Parties that are under Common Control." The ASU changes how a single decision maker of a VIE that holds indirect interest in the entity through related parties that are under common control determines whether it is the primary beneficiary of the VIE. The new guidance amends ASU 2015-02, "Consolidation (Topic 810): Amendmentsnotes to the Consolidation Analysis" issued in February 2015. ASU No. 2016-17 was effective for the Company for the quarter ending December 31, 2016. The adoption of this guidance did not have an impact on the Company's consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)." ASU No. 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Such investments should be disclosed separate from the fair value hierarchy. ASU No. 2015-07 was effective retrospectively for the Company for the quarter ending December 31, 2016. The adoption of this guidance did not have an impact on the Company's consolidated financial statements, but did impact pension asset disclosures.

In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability. ASU No. 2015-03 was effective retrospectively for the Company for the quarter ending December 31, 2016. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." ASU No. 2015-02 amends the analysis performed to determine whether a reporting entity should consolidate certain types of legal entities. ASU No. 2015-02 was effective retrospectively for the Company for the quarter ending December 31, 2016. The adoption of this guidance did not have an impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In May 2017, the FASB issued ASU No. 2017-09, "Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting." The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require a reporting entity to apply modification accounting. ASU No. 2017-09 will be effective prospectively for the Company for the quarter ending December 31, 2018, with early adoption permitted. The impact of this guidance for the Company is dependent on any future share-based payment award changes, should they occur.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The ASU requires the service cost component of net periodic benefit cost to be presented with other compensation costs. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The ASU also allows only the service cost component of net periodic benefit cost to be eligible for capitalization. The guidance will be effective for the Company for the quarter ending December 31, 2018. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The guidance will be effective retrospectively except for the capitalization of the service cost component which should be applied prospectively. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2) from the goodwill impairment test. Instead, an impairment charge will equal the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. The guidance will be effective prospectively for the Company for the quarter ending December 31, 2020, with early adoption permitted after January 1, 2017. The impact of this guidance for the Company will depend on the outcomes of future goodwill impairment tests.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)." The ASU requires amounts generally described as restricted cash and restricted cash


equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented. The impact of this guidance for the Company will depend on the levels of restricted cash balances in the periods presented.

In October 2016, the FASB issued ASU No. 2016-16, "Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory." The ASU requires the tax effects of all intra-entity sales of assets other than inventory to be recognized in the period in which the transaction occurs. The guidance will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted but only in the first interim period of a fiscal year. The changes are required to be applied by means of a cumulative-effect adjustment recorded in retained earnings as of the beginning of the fiscal year of adoption. The Company is currently assessing the impact adoption of this guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." ASU No. 2016-15 provides clarification guidance on eight specific cash flow presentation issues in order to reduce the diversity in practice. ASU No. 2016-15 will be effective for the Company for the quarter ending December 31, 2018, with early adoption permitted. The guidance should be applied retrospectively to all periods presented, unless deemed impracticable, in which case prospective application is permitted. The Company is currently assessing the impact adoption of this guidance will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU No. 2016-13 changes the impairment model for financial assets measured at amortized cost, requiring presentation at the net amount expected to be collected. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts. Available-for-sale debt securities with unrealized losses will now be recorded through an allowance for credit losses. ASU No. 2016-13 will be effective for the Company for the quarter ended December 31, 2020, with early adoption permitted for the quarter ended December 31, 2019. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU No. 2016-09 impacts certain aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. ASU No. 2016-09 will be effective for the Company for the quarter ending December 31, 2017, with early adoption permitted. The Company is currently assessing the impact adoption of this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, "Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting." ASU No. 2016-07 eliminates the requirement for an investment that qualifies for the use of the equity method of accounting as a result of an increase in the level of ownership or degree of influence to adjust the investment, results of operations and retained earnings retrospectively. ASU No. 2016-07 will be effective prospectively for the Company for increases in the level of ownership interest or degree of influence that result in the adoption of the equity method that occur during or after the quarter ending December 31, 2017, with early adoption permitted. The impact of this guidance for the Company is dependent on any future increases in the level of ownership interest or degree of influence that result in the adoption of the equity method.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." ASU No. 2016-02 requires recognition of operating leases as lease assets and liabilities on the balance sheet, and disclosure of key information about leasing arrangements. ASU No. 2016-02 will be effective retrospectively for the Company for the quarter ending December 31, 2019, with early adoption permitted. The Company is currently assessing the impact adoption of this guidance will have on its consolidated financial statements. The Company has started the assessment process by evaluating the population of leases under the revised definition of what qualifies as a leased asset. The Company is the lessee under various agreements for facilities and equipment that are currently accounted for as operating leases. The new guidance will require the Company to record operating leases on the balance sheet with a right-of-use asset and corresponding liability for future payment obligations. The Company expects the new guidance will have a material impact on its consolidated statements of financial position for the addition of right-of-use assets and lease liabilities, but the Company does not expect it to have a material impact on its consolidated statements of income.
In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." ASU No. 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including marketable securities. ASU No. 2016-01 will be effective for the Company for the quarter ending December 31, 2018, and early adoption is not permitted, with certain exceptions. The changes


are required to be applied by means of a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption. The impact of this guidance for the Company will depend on the magnitude of the unrealized gains and losses on the Company's marketable securities investments.
In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory." ASU No. 2015-11 requires inventory that is recorded using the first-in, first-out method to be measured at the lower of cost or net realizable value. ASU No. 2015-11 will be effective prospectively for the Company for the quarter ending December 31, 2017, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU No. 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. The original standard was effective retrospectively for the Company for the quarter ending December 31, 2017; however in August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers the effective date of ASU No. 2014-09 by one-year for all entities. The new standard will become effective retrospectively for the Company for the quarter ending December 31, 2018, with early adoption permitted, but not before the original effective date. Additionally, in March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," in April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing," in May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," and in December 2016, the FASB issued ASU No. 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers," all of which provide additional clarification on certain topics addressed in ASU No. 2014-09. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 follow the same implementation guidelines as ASU No. 2014-09 and ASU No. 2015-14. The Company has elected to adopt the new revenue guidance as of October 1, 2018.  In preparation for adoption of the new guidance, the Company has reviewed representative samples of contracts and other forms of agreements with customers globally and is in the process of evaluating the impact of the new revenue standard. Based on its procedures to date, the Company cannot quantify the potential impact the new revenue standard will have to its consolidated financial statements. The Company will decide which retrospective application to apply once its revenue standard assessment is finalized.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 20172018, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in the Company's Annual Report on Form 10-K for the year ended September 30, 2016.2017.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act)("Exchange Act"). Based upon their evaluation of these disclosure controls and procedures, the principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of June 30, 20172018 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.



Changes in Internal Control Over Financial Reporting

There have been no significant changes in the Company’s internal control over financial reporting during the three months ended June 30, 20172018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Environmental MattersEC Lead Recycler Investigation

As notedpreviously disclosed, an investigation by the European Commission ("EC") related to European lead recyclers’ procurement practices was commenced in Item 12012, with the Company named as one of several companies subject to review. On June 24, 2015, the EC initiated proceedings and adopted a statement of objections alleging infringements of competition rules in Europe against the Company and certain other companies. The EC subsequently scheduled consultation meetings with the Advisory Committee on Restrictive Practices and Dominant Positions, concluded its investigation and announced its decision with respect to the Company’s Annual Reportmatter on Form 10-K forFebruary 8, 2017. According to the year ended September 30, 2016, liabilities potentially arise globally under various environmental laws and worker safety laws for activities that are not in compliance with such laws and for the cleanup of sites where Company-related substances have been released into the environment.

Currently,EC's announcement, the Company is responding to allegations thatwill not be fined because it is responsible for performing environmental remediation, or forrevealed the repayment of costs spent by governmental entities or others performing remediation, at approximately 45 sites in the United States. Many of these sites are landfills used by the Company in the past for the disposal of waste materials; others are secondary lead smelters and lead recycling sites where the Company returned lead-containing materials for recycling; a few involve the cleanup of Company manufacturing facilities; and the remaining fall into miscellaneous categories. The Company may face similar claims of liability at additional sites in the future. Where potential liabilities are alleged, the Company pursues a course of action intended to mitigate them.

The Company accrues for potential environmental liabilities when it is probable a liability has been incurred and the amountexistence of the liability is reasonably estimable. As of June 30, 2017, reserves for environmental liabilities totaled $48 million, of which $12 million was recorded within other current liabilities and $36 million was recorded within other noncurrent liabilities in the consolidated statements of financial position. Such potential liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. They do, however, take into account the likely share other parties will bear at remediation sites. It is difficult to estimate the Company’s ultimate level of liability at many remediation sites duecartel 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. Nevertheless, theEC. The Company does not currently believe thatanticipate any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on its business or financial condition as a result of this matter. The Company’s policy is to comply with antitrust and competition laws and, if a violation of any such laws is found, to take appropriate remedial action and to cooperate fully with any related governmental inquiry. Competition and antitrust law investigations may continue for several years and can result in substantial fines depending on the Company’s financial position, resultsgravity and duration of operations or cash flows.the violations. In addition, the Company has identified asset retirement obligations for environmental matters that are expectedas a result of such violations we could be subject to be addressed at the retirement, disposal, removallawsuits brought by customers or abandonment of existing owned facilities. At June 30, 2017, the Company recorded conditional asset retirement obligations of $72 million.other parties alleging economic harm from such violations.

Asbestos Matters

The Company and certain of its 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 have typically involved 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.

As of June 30, 2017, the Company's estimated asbestos related net liability recorded on a discounted basis within the Company's consolidated statements of financial position was $147 million. The net liability within the consolidated statements of financial position was comprised of a liability for pending and future claims and related defense costs of $535 million, of which $35 million was recorded in other current liabilities and $500 million was recorded in other noncurrent liabilities. The Company also maintained separate cash, investments and receivables related to insurance recoveries within the consolidated statements of financial position of $388 million, of which $52 million was recorded in other current assets, and $336 million was recorded in other noncurrent assets. Assets included $28 million of cash and $264 million of investments, which have all been designated as restricted. In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable; the amount of such recoveries recorded at June 30, 2017 was $96 million. The Company believes that the asbestos related liabilities and insurance related receivables recorded as of June 30, 2017 are appropriate.

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 2069 (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). 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 2069. 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.

The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions. Key variables and assumptions include the number and type of new claims that are filed each year, the average cost of resolution of claims, the identity of defendants, the resolution of coverage issues with insurance carriers, amount of insurance, and the solvency risk with respect to the Company's insurance carriers. Many of these factors are closely linked, such that a change in one variable or assumption will impact one or more of the others, and no single variable or assumption predominately influences the determination of the Company's asbestos-related liabilities and insurance-related assets. Furthermore, predictions with respect to these variables are subject to greater uncertainty in the later portion of the projection period. Other factors that may affect the Company's liability and cash payments for asbestos-related matters include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms of state or federal tort legislation and the applicability of insurance policies among subsidiaries. As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company's calculations vary significantly from actual results.

Insurable Liabilities

The Company records liabilities for its workers' compensation, product, general, property 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. At June 30, 2017, the insurable liabilities for continuing operations totaled $488 million, of which $86 million was recorded within other current liabilities, $30 million was recorded within accrued compensation and benefits, and $372 million and was recorded within other noncurrent liabilities in the consolidated statements of financial position, respectively. The Company records receivables from third party insurers when recovery has been determined to be probable. The amount of such receivables recorded at June 30, 2017 was $49 million, of which $30 million was recorded within other current assets and $19 million was recorded within other noncurrent assets. The Company maintains captive insurance companies to manage certain of its insurable liabilities.

Other MattersLaufer v. Johnson Controls, Inc., et al.

On May 20, 2016, a putative class action lawsuit, Laufer v. Johnson Controls, Inc., et al., Docket No. 2016CV003859, was filed in the Circuit Court of Wisconsin, Milwaukee County, naming Johnson Controls, Inc., the individual members of its board of directors, the Company and the Company's merger subsidiary as defendants. The complaint alleged that Johnson Controls Inc.'s directors breached their fiduciary duties in connection with the merger between Johnson Controls Inc. and the Company's merger subsidiary by, among other things, failing to take steps to maximize shareholder value, seeking to benefit themselves improperly and failing to disclose material information in the joint proxy statement/prospectus relating to the merger. The complaint further alleged that the Company aided and abetted Johnson Controls Inc.'s directors in the breach of their fiduciary duties. The complaint sought, among other things, to enjoin the merger. On August 8, 2016, the plaintiffs agreed to settle the action and release all claims that were or could have been brought by plaintiffs or any member of the putative class of Johnson Controls Inc.'s shareholders. The settlement is conditioned upon, among other things, the execution of an appropriate stipulation of settlement. On November 10, 2016, the parties filed a joint status report notifying the court they had reached such agreement. On November 22, 2016, the court ordered that a proposed stipulation of settlement be filed by March 15, 2017 and scheduled a status hearing for April 20, 2017. On March 10, 2017, the parties filed a joint letter requesting that the filing and hearing be adjourned and that the parties be allowed an additional 90 days to update the court in light of the Gumm v. Molinaroli action proceeding in federal court, discussed below. The status hearing has subsequently been rescheduled for November 28, 2017.August 2018. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement. In either event, or certain other circumstances, the settlement could be terminated. 

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. Although the Company believes it has substantial defenses to plaintiffs’ claims, it is not able to predict the outcome of this action.

The CompanyRefer to Note 20, "Commitments and Contingencies," of the notes to consolidated financial statements for discussion of environmental, asbestos, insurable liabilities and other litigation matters, which is involved in various lawsuits, claimsincorporated by reference herein and proceedings incident to the operationis considered an integral part of its businesses, including those pertaining to product liability, environmental, safety and health, intellectual property, employment, commercial and contractual matters, and various other casualty matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, it is management’s opinion that none of these will have a material adverse effect on the Company’s financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented.Part II, Item 1, "Legal Proceedings."

ITEM 1A. RISK FACTORS

There have been no material changes to the disclosure regardingThe description of certain risk factors presenteddescribed under “Risk Factors” in Part I, Item 1A, toof the Company’s Annual Report on Form 10-K for the year ended September 30, 2016.

2017 was supplemented in Item 1A of Part II of Forms 10-Q for the quarterly periods ending December 31, 2017 filed with the SEC on February 2, 2018 and March 31, 2018 filed with the SEC on May 3, 2018. Other than as described in this Item 1A, there have been no other material changes to our risk factors from the risk factors previously disclosed in the 2017 Annual Report, the First Quarter Form 10-Q or the Second Quarter Form 10-Q.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Following the Tyco Merger, the Company adopted, subject to the ongoing existence of sufficient distributable reserves, the existing Tyco International plc $1 billion share repurchase program in September 2016. In December 2017, the Company's Board of Directors approved a $1 billion increase to its share repurchase authorization. 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.

In April 2017, During the three and nine months ended June 30, 2018, the Company announced its intention to utilize up to $750repurchased approximately $56 million and $255 million of its shares, respectively. As of June 30, 2018, approximately $1.1 billion remains available under the $1 billion authorization during fiscal 2017. Shares may be repurchased from time to time in open market purchases at prevailing market prices, in negotiated transactions off the market, or pursuant to a trading plan in accordance with applicable regulations.share repurchase program.

From time to time, the Company uses equity swaps to reduce market risk associated with 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 equity swaps move in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount.

In connection with equity swap agreements, the counterparty may purchase unlimited shares of the Company’s stock in the market or in privately negotiated transactions. Under these arrangements, the Company disclaims that the counterparty in the agreement is an "affiliated purchaser" of the Company as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act or that the counterparty is purchasing any shares for the Company.



The following table presents information regarding the repurchase of the Company’s ordinary shares by the Company as part of the publicly announced repurchase program and purchases of the Company’s ordinary shares by counterparties under equity swap agreements during the three months ended June 30, 2017.2018.
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
Total Number of
Shares Purchased
 
Average Price
Paid per Share
 
Total Number of
Shares Purchased as
Part of the Publicly
Announced Program
 
Approximate Dollar
Value of Shares that
May Yet be
Purchased under the
Programs
4/1/17 - 4/30/17       
4/1/18 - 4/30/18       
Purchases by Company2,297,518
 $41.56
 2,297,518
 $323,713,654
486,500
 $34.19
 486,500
 $1,133,352,334
5/1/17 - 5/31/17       
5/1/18 - 5/31/18       
Purchases by Company2,323,600
 42.02
 2,323,600
 226,081,436
628,000
 35.68
 628,000
 1,110,943,327
6/1/17 - 6/30/17       
6/1/18 - 6/30/18       
Purchases by Company2,725,244
 41.85
 2,725,244
 112,026,022
500,000
 34.47
 500,000
 1,093,707,645
4/1/17 - 4/30/17       
4/1/18 - 4/30/18       
Purchases by affiliated purchaser
 
 
 NA

 
 
 NA
5/1/17 - 5/31/17       
5/1/18 - 5/31/18       
Purchases by affiliated purchaser1,372,000
 42.21
 
 NA

 
 
 NA
6/1/17 - 6/30/17       
6/1/18 - 6/30/18       
Purchases by affiliated purchaser
 
 
 NA

 
 
 NA

During the three months ended June 30, 2018, 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.

ITEM 6. EXHIBITS

Reference is made to the separate exhibit index contained on page 8066 filed herewith.


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  JOHNSON CONTROLS INTERNATIONAL PLC
  
Date: August 3, 20172, 2018 By:/s/ Brian J. Stief
   Brian J. Stief
  
Executive Vice President and
Chief Financial Officer




JOHNSON CONTROLS INTERNATIONAL PLC
Form 10-Q
INDEX TO EXHIBITS
 
Exhibit No.Description
  
31.1
  
31.2
  
32.1
  
101
The following materials from Johnson Controls International plc's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017,2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Position, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.

* Management contract or compensatory plan.


8066