Johnson Controls International plc (NYSE:JCI)

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

Johnson Controls International plc, effective income tax rate (EITR) reconciliation

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
	Ireland statutory rate	12.50%	12.50%	12.50%	12.50%	12.50%	12.50%
	Effective tax rate	-19.00%	-1.00%	33.00%	12.00%	-22.00%	18.00%

The effective income tax rate exhibits extreme volatility over the six-year period ending September 30, 2023, characterized by frequent swings between significant positive and negative percentages. While the statutory benchmark remains constant, the actual tax burden fluctuates independently of the domestic rate.

Statutory Tax Baseline: The Ireland statutory rate remained unchanged at 12.50% throughout the entire period from 2018 to 2023, providing a stable regulatory benchmark against which the effective rate is measured.
Effective Tax Rate Volatility: The effective tax rate demonstrates a non-linear trend, oscillating between a peak of 33.00% in 2021 and a low of -22.00% in 2019. The occurrence of negative effective rates in 2019, 2022, and 2023 indicates periods where tax benefits, credits, or deferred tax adjustments exceeded the company's current tax obligations.
Recent Performance Trends: Following a sharp increase to 33.00% in 2021, a downward trajectory is observed, with the effective rate dropping to -1.00% in 2022 and further declining to -19.00% in 2023. This pattern suggests a shift toward significant tax recoveries or the utilization of tax assets in the most recent fiscal years.

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

Johnson Controls International plc, components of deferred tax assets and liabilities

US$ in millions

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
Accrued expenses and reserves	507)	376)	407)	474)	437)	490)
Employee and retiree benefits	71)	77)	148)	286)	265)	193)
Property, plant and equipment	629)	444)	369)	182)	—)	—)
Net operating loss and other credit carryforwards	6,748)	6,472)	6,293)	6,306)	5,664)	6,510)
Research and development	171)	52)	42)	112)	106)	93)
Operating lease liabilities	348)	309)	334)	—)	—)	—)
Other, net	38)	58)	28)	99)	—)	—)
Deferred tax assets	8,512)	7,788)	7,621)	7,459)	6,472)	7,286)
Valuation allowances	(6,378)	(5,967)	(5,853)	(5,518)	(5,068)	(5,195)
Deferred tax assets, less valuation allowances	2,134)	1,821)	1,768)	1,941)	1,404)	2,091)
Property, plant and equipment	—)	—)	—)	—)	(139)	(172)
Subsidiaries, joint ventures and partnerships	(446)	(338)	(346)	(730)	(499)	(306)
Intangible assets	(252)	(730)	(776)	(734)	(759)	(713)
Operating lease right-of-use assets	(348)	(309)	(334)	—)	—)	—)
Other, net	—)	—)	—)	—)	(43)	(72)
Deferred tax liabilities	(1,046)	(1,377)	(1,456)	(1,464)	(1,440)	(1,263)
Net deferred tax asset (liability)	1,088)	444)	312)	477)	(36)	828)

The analysis of deferred tax components from 2018 to 2023 reveals a general expansion of gross deferred tax assets, offset by substantial and increasing valuation allowances, resulting in a volatile but ultimately positive net deferred tax asset position.

Deferred Tax Asset Trends: Gross deferred tax assets increased from 7,286 million US$ in 2018 to 8,512 million US$ in 2023. This growth is primarily driven by net operating loss and other credit carryforwards, which remained the largest component, peaking at 6,748 million US$ in 2023. Additionally, deferred tax assets related to property, plant, and equipment showed a consistent upward trajectory starting in 2020, rising from 182 million US$ to 629 million US$ by 2023. Conversely, assets related to employee and retiree benefits declined significantly from a peak of 286 million US$ in 2020 to 71 million US$ in 2023.
Valuation Allowances and Net Recoverability: There is a persistent and increasing reliance on valuation allowances to offset deferred tax assets. Valuation allowances grew from -5,195 million US$ in 2018 to -6,378 million US$ in 2023. This indicates a conservative accounting approach regarding the realizability of the tax benefits. Consequently, the deferred tax assets, less valuation allowances, fluctuated between a low of 1,404 million US$ in 2019 and a high of 2,134 million US$ in 2023.
Deferred Tax Liability Components: Total deferred tax liabilities experienced an overall decrease, moving from -1,263 million US$ in 2018 to -1,046 million US$ in 2023. A notable shift occurred in liabilities related to intangible assets, which dropped sharply from -730 million US$ in 2022 to -252 million US$ in 2023. Liabilities stemming from subsidiaries, joint ventures, and partnerships peaked in 2020 at -730 million US$ before moderating to -446 million US$ by 2023. Furthermore, operating lease right-of-use assets introduced a new liability component starting in 2021, stabilizing at -348 million US$ in 2023.
Net Deferred Tax Position: The net deferred tax position transitioned from an asset of 828 million US$ in 2018 to a slight liability of -36 million US$ in 2019. However, the position recovered and strengthened in subsequent years, culminating in a net deferred tax asset of 1,088 million US$ in 2023. This final increase is attributed to the combined effect of growing gross deferred tax assets and a reduction in total deferred tax liabilities.

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

Johnson Controls International plc, deferred tax assets and liabilities, classification

US$ in millions

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
	Deferred tax assets (included in Other noncurrent assets)	1,499)	944)	755)	862)	552)	1,591)
	Deferred tax liabilities (included in Other noncurrent liabilities)	411)	500)	443)	385)	588)	763)

The analysis of deferred tax accounts between fiscal years 2018 and 2023 reveals significant volatility in asset recognition and a general downward trajectory in liabilities.

Deferred Tax Assets Trends: A substantial contraction in deferred tax assets occurred between 2018 and 2019, where values decreased from 1,591 million US$ to 552 million US$. Following this period, a recovery trend is observed, with assets increasing to 1,499 million US$ by September 30, 2023. This indicates a significant accumulation of future tax benefits toward the end of the period, nearly returning to the levels seen in 2018.
Deferred Tax Liabilities Trends: Deferred tax liabilities exhibited a general decline over the six-year period, falling from 763 million US$ in 2018 to 411 million US$ in 2023. While a moderate increase was noted between 2020 and 2022, peaking at 500 million US$, the long-term trend reflects a reduction in the company's deferred tax obligations.
Net Deferred Tax Position: The net position shifted from a strong net asset in 2018 to a nearly neutral state in 2019, where assets and liabilities were closely aligned. From 2020 onward, the divergence increased as assets grew and liabilities generally declined, resulting in a maximized net deferred tax asset position by 2023. This trend suggests an improving balance sheet profile regarding future tax implications.

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Johnson Controls International plc, Financial Data: Reported vs. Adjusted

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

Johnson Controls International plc, adjustments to financial statements

US$ in millions

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
Adjustment to Total Assets
Total assets (as reported)	42,242)	42,158)	41,890)	40,815)	42,287)	48,797)
Less: Noncurrent deferred tax assets, net	1,499)	944)	755)	862)	552)	1,591)
Total assets (adjusted)	40,743)	41,214)	41,135)	39,953)	41,735)	47,206)
Adjustment to Total Liabilities
Total liabilities (as reported)	24,548)	24,756)	23,137)	22,282)	21,458)	26,339)
Less: Noncurrent deferred tax liabilities, net	411)	500)	443)	385)	588)	763)
Total liabilities (adjusted)	24,137)	24,256)	22,694)	21,897)	20,870)	25,576)
Adjustment to Shareholders’ Equity Attributable To Johnson Controls
Shareholders’ equity attributable to Johnson Controls (as reported)	16,545)	16,268)	17,562)	17,447)	19,766)	21,164)
Less: Net deferred tax assets (liabilities)	1,088)	444)	312)	477)	(36)	828)
Shareholders’ equity attributable to Johnson Controls (adjusted)	15,457)	15,824)	17,250)	16,970)	19,802)	20,336)
Adjustment to Net Income Attributable To Johnson Controls
Net income attributable to Johnson Controls (as reported)	1,849)	1,532)	1,637)	631)	5,674)	2,162)
Add: Deferred income tax expense (benefit)	(676)	(141)	36)	(537)	612)	(636)
Net income attributable to Johnson Controls (adjusted)	1,173)	1,391)	1,673)	94)	6,286)	1,526)

The removal of deferred taxes consistently reduces both the reported total assets and total liabilities across the analyzed period from 2018 to 2023. This adjustment indicates that the company maintains a significant volume of deferred tax accounts that influence the reported financial position, with the assets reduction typically exceeding the liability reduction.

Balance Sheet Asset and Liability Impact: A consistent downward adjustment is observed in total assets. The variance between reported and adjusted assets peaked in 2018 at 1,591 million US$ and again in 2023 at 1,499 million US$, suggesting fluctuations in the valuation or recognition of deferred tax assets. Similarly, total liabilities are consistently lower in the adjusted figures, although the magnitude of this reduction is smaller than that of the assets, ranging from a minimum of 385 million US$ in 2020 to a maximum of 763 million US$ in 2018.
Equity Trends and Adjustments: Adjusted shareholders' equity is generally lower than reported equity, reflecting the net impact of removing deferred tax assets and liabilities. A notable exception occurred in 2019, where adjusted equity slightly exceeded reported equity. However, a widening gap is evident by 2023, where reported equity of 16,545 million US$ was adjusted downward to 15,457 million US$, a difference of 1,088 million US$. This trend indicates an increasing reliance on deferred tax assets to bolster the reported equity position over time.
Net Income Volatility: The removal of deferred taxes introduces significant volatility into the net income figures. In 2019 and 2021, the adjusted net income was higher than the reported net income, implying that deferred tax expenses were removed. Conversely, in 2018, 2020, 2022, and 2023, adjusted net income was lower than reported, indicating the removal of deferred tax benefits. The most pronounced divergence occurred in 2020, where reported net income of 631 million US$ was reduced to an adjusted net income of 94 million US$, demonstrating that reported earnings were heavily supported by deferred tax adjustments in that period.

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Johnson Controls International plc, Financial Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

Johnson Controls International plc, adjusted financial ratios

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
Net Profit Margin
Reported net profit margin	6.90%	6.06%	6.92%	2.83%	23.67%	6.89%
Adjusted net profit margin	4.38%	5.50%	7.07%	0.42%	26.23%	4.86%
Total Asset Turnover
Reported total asset turnover	0.63	0.60	0.57	0.55	0.57	0.64
Adjusted total asset turnover	0.66	0.61	0.58	0.56	0.57	0.67
Financial Leverage
Reported financial leverage	2.55	2.59	2.39	2.34	2.14	2.31
Adjusted financial leverage	2.64	2.60	2.38	2.35	2.11	2.32
Return on Equity (ROE)
Reported ROE	11.18%	9.42%	9.32%	3.62%	28.71%	10.22%
Adjusted ROE	7.59%	8.79%	9.70%	0.55%	31.74%	7.50%
Return on Assets (ROA)
Reported ROA	4.38%	3.63%	3.91%	1.55%	13.42%	4.43%
Adjusted ROA	2.88%	3.38%	4.07%	0.24%	15.06%	3.23%

An analysis of the financial ratios from 2018 to 2023 reveals significant volatility in profitability metrics, contrasted by relative stability in operational efficiency and a gradual increase in financial leverage. The removal of deferred taxes creates a notable divergence between reported and adjusted performance, particularly during periods of extreme fluctuation.

Profitability and Return Metrics: Net profit margins, Return on Equity (ROE), and Return on Assets (ROA) exhibit a synchronized pattern characterized by a sharp peak in 2019 followed by a severe contraction in 2020. The reported net profit margin surged to 23.67% in 2019 before dropping to 2.83% in 2020. A similar trajectory is observed in ROE, which reached a reported high of 28.71% in 2019 and a low of 3.62% in 2020. While these metrics recovered by 2023, the adjusted figures consistently underperform the reported figures in the final two years of the period, with the adjusted ROE falling to 7.59% compared to a reported 11.18% in 2023.
Impact of Deferred Tax Adjustments: The variance between reported and adjusted ratios indicates that deferred taxes have had a fluctuating impact on the bottom line. In 2019, adjusted ratios were higher than reported ratios (e.g., adjusted net profit margin of 26.23% versus reported 23.67%), suggesting that deferred tax expenses weighed down reported earnings. Conversely, in 2020, the adjusted figures show a much more acute decline, with the adjusted ROA dropping to 0.24% against a reported 1.55%, indicating that deferred tax benefits likely buffered the reported results during the downturn.
Asset Utilization and Efficiency: Total asset turnover remained relatively stable throughout the six-year period, fluctuating within a narrow range. Reported turnover declined from 0.64 in 2018 to a low of 0.55 in 2020, before recovering to 0.63 by 2023. The adjusted asset turnover follows a nearly identical trend, suggesting that deferred tax adjustments have negligible impact on efficiency ratios, as these metrics are primarily driven by revenue and total assets rather than net income.
Financial Leverage Trends: A consistent upward trend is observed in financial leverage. Reported leverage increased from 2.31 in 2018 to 2.55 in 2023. This trend is mirrored in the adjusted financial leverage, which rose from 2.32 to 2.64 over the same period. This indicates a steady increase in the company's reliance on debt relative to equity, which has contributed to the reported ROE recovery despite the lower adjusted net profit margins in recent years.

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Johnson Controls	1,849)	1,532)	1,637)	631)	5,674)	2,162)
Net sales	26,793)	25,299)	23,668)	22,317)	23,968)	31,400)
Profitability Ratio
Net profit margin¹	6.90%	6.06%	6.92%	2.83%	23.67%	6.89%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Johnson Controls	1,173)	1,391)	1,673)	94)	6,286)	1,526)
Net sales	26,793)	25,299)	23,668)	22,317)	23,968)	31,400)
Profitability Ratio
Adjusted net profit margin²	4.38%	5.50%	7.07%	0.42%	26.23%	4.86%

2023 Calculations

¹ Net profit margin = 100 × Net income attributable to Johnson Controls ÷ Net sales
= 100 × 1,849 ÷ 26,793 = 6.90%

² Adjusted net profit margin = 100 × Adjusted net income attributable to Johnson Controls ÷ Net sales
= 100 × 1,173 ÷ 26,793 = 4.38%

Profitability metrics for the period between 2018 and 2023 exhibit significant volatility, characterized by a substantial peak in 2019 followed by a sharp contraction in 2020 and a subsequent period of gradual fluctuation.

Adjusted Net Profit Margin Trends: The adjusted net profit margin experienced an extreme expansion in 2019, reaching a peak of 26.23%. This was followed by a precipitous decline to 0.42% in 2020, representing the lowest point in the analyzed period. Although a recovery occurred in 2021 with a margin of 7.07%, a consistent downward trend has been observed thereafter, with the margin receding to 5.50% in 2022 and further to 4.38% in 2023.
Reported versus Adjusted Profitability: A divergence between reported and adjusted net profit margins is evident. In 2019, the adjusted margin exceeded the reported margin of 23.67%. Conversely, in 2020, the adjusted margin fell significantly below the reported margin of 2.83%. By 2023, this gap widened again, with the reported net profit margin remaining relatively stable at 6.90% while the adjusted margin declined to 4.38%.
Net Income Fluctuations: Adjusted net income showed extreme variance, surging to US$ 6,286 million in 2019 before collapsing to US$ 94 million in 2020. While reported net income also fluctuated, it maintained a higher floor during the 2020 downturn, recording US$ 631 million. From 2021 to 2023, adjusted net income has followed a steady decline, falling from US$ 1,673 million to US$ 1,173 million, whereas reported net income has remained more resilient, ending the period at US$ 1,849 million.

Overall, the analysis indicates that while reported margins have returned to levels similar to those seen in 2018 and 2021, the adjusted metrics reveal a diminishing trend in underlying profitability over the last three fiscal years.

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net sales	26,793)	25,299)	23,668)	22,317)	23,968)	31,400)
Total assets	42,242)	42,158)	41,890)	40,815)	42,287)	48,797)
Activity Ratio
Total asset turnover¹	0.63	0.60	0.57	0.55	0.57	0.64
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales	26,793)	25,299)	23,668)	22,317)	23,968)	31,400)
Adjusted total assets	40,743)	41,214)	41,135)	39,953)	41,735)	47,206)
Activity Ratio
Adjusted total asset turnover²	0.66	0.61	0.58	0.56	0.57	0.67

2023 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 26,793 ÷ 42,242 = 0.63

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 26,793 ÷ 40,743 = 0.66

The analysis of asset utilization between 2018 and 2023 reveals a period of asset base contraction followed by a stabilization phase and a subsequent recovery in operational efficiency. The overall trend indicates a strategic shift or restructuring that initially reduced the total asset footprint before improving the productivity of the remaining assets.

Total Asset Base Evolution: Reported total assets experienced a significant decline from 48,797 million USD in 2018 to a low of 40,815 million USD in 2020. Following this period of contraction, the asset base stabilized and showed modest growth, reaching 42,242 million USD by September 30, 2023. Adjusted total assets followed a nearly identical trajectory, decreasing from 47,206 million USD in 2018 to 39,953 million USD in 2020, before ending the period at 40,743 million USD.
Asset Turnover Efficiency Trends: A U-shaped trend is evident in the asset turnover ratios. The adjusted total asset turnover fell from 0.67 in 2018 to 0.56 in 2020, indicating a temporary decrease in the company's ability to generate revenue relative to its asset base. However, a consistent recovery trend was observed from 2021 onward, with the ratio increasing to 0.58 in 2021, 0.61 in 2022, and peaking at 0.66 in 2023, effectively returning to near-2018 efficiency levels.
Comparison of Reported and Adjusted Metrics: Adjusted asset turnover consistently exceeded reported asset turnover throughout the analyzed period, with the exception of 2019 where they converged at 0.57. The divergence is most notable in 2018 (0.67 adjusted vs 0.64 reported) and 2023 (0.66 adjusted vs 0.63 reported). This suggests that the adjustments made to the asset base remove certain components that otherwise weigh down the reported efficiency of the organization's operations.

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Total assets	42,242)	42,158)	41,890)	40,815)	42,287)	48,797)
Shareholders’ equity attributable to Johnson Controls	16,545)	16,268)	17,562)	17,447)	19,766)	21,164)
Solvency Ratio
Financial leverage¹	2.55	2.59	2.39	2.34	2.14	2.31
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	40,743)	41,214)	41,135)	39,953)	41,735)	47,206)
Adjusted shareholders’ equity attributable to Johnson Controls	15,457)	15,824)	17,250)	16,970)	19,802)	20,336)
Solvency Ratio
Adjusted financial leverage²	2.64	2.60	2.38	2.35	2.11	2.32

2023 Calculations

¹ Financial leverage = Total assets ÷ Shareholders’ equity attributable to Johnson Controls
= 42,242 ÷ 16,545 = 2.55

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity attributable to Johnson Controls
= 40,743 ÷ 15,457 = 2.64

Between September 30, 2018, and September 30, 2023, a general contraction in the asset base and shareholders' equity was observed. Reported total assets decreased from 48,797 million USD to 42,242 million USD, while adjusted total assets followed a similar downward trajectory, falling from 47,206 million USD to 40,743 million USD. Shareholders' equity experienced a more pronounced decline; reported equity fell from 21,164 million USD to 16,545 million USD, and adjusted equity decreased from 20,336 million USD to 15,457 million USD over the six-year period.

Financial Leverage Trends: The reported financial leverage ratio demonstrated an overall upward trend, moving from 2.31 in 2018 to 2.55 in 2023, despite a temporary dip to 2.14 in 2019. The adjusted financial leverage ratio exhibited a more aggressive increase, rising from 2.32 in 2018 to 2.64 in 2023. This indicates that the company's proportional reliance on equity to fund its assets decreased over the analyzed period.
Comparative Analysis of Reported versus Adjusted Leverage: A widening gap is observable between reported and adjusted financial leverage ratios starting in 2020. While the ratios were nearly identical in 2018 and 2019, the adjusted leverage ratio consistently exceeded the reported ratio from 2020 onward. This divergence is driven by the fact that adjusted shareholders' equity declined more sharply than reported equity, thereby increasing the adjusted leverage ratio relative to the reported figure.
Asset and Equity Correlation: The increase in leverage ratios occurred despite the absolute reduction in total assets. This suggests that the contraction in shareholders' equity outweighed the reduction in the asset base, resulting in a higher leverage profile by the end of the period in 2023.

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Johnson Controls	1,849)	1,532)	1,637)	631)	5,674)	2,162)
Shareholders’ equity attributable to Johnson Controls	16,545)	16,268)	17,562)	17,447)	19,766)	21,164)
Profitability Ratio
ROE¹	11.18%	9.42%	9.32%	3.62%	28.71%	10.22%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Johnson Controls	1,173)	1,391)	1,673)	94)	6,286)	1,526)
Adjusted shareholders’ equity attributable to Johnson Controls	15,457)	15,824)	17,250)	16,970)	19,802)	20,336)
Profitability Ratio
Adjusted ROE²	7.59%	8.79%	9.70%	0.55%	31.74%	7.50%

2023 Calculations

¹ ROE = 100 × Net income attributable to Johnson Controls ÷ Shareholders’ equity attributable to Johnson Controls
= 100 × 1,849 ÷ 16,545 = 11.18%

² Adjusted ROE = 100 × Adjusted net income attributable to Johnson Controls ÷ Adjusted shareholders’ equity attributable to Johnson Controls
= 100 × 1,173 ÷ 15,457 = 7.59%

The financial performance from 2018 to 2023 is characterized by significant volatility in adjusted profitability and a gradual reduction in the adjusted equity base. The Adjusted Return on Equity (ROE) exhibits extreme fluctuations, peaking in 2019 before experiencing a sharp contraction in 2020, followed by a period of moderate stabilization and a subsequent slow decline.

Adjusted Profitability Volatility: Adjusted net income experienced a substantial surge in 2019, reaching 6,286 million US$, which drove the Adjusted ROE to a peak of 31.74%. This was followed by a severe decline in 2020, where adjusted net income fell to 94 million US$, resulting in a near-zero Adjusted ROE of 0.55%.
Equity Base Erosion: A consistent downward trend is observed in adjusted shareholders' equity, which decreased from 20,336 million US$ in 2018 to 15,457 million US$ by 2023. This reduction in the capital base indicates a narrowing of the equity denominator over the six-year period.
Post-2021 Performance Trajectory: Following a recovery in 2021, where Adjusted ROE reached 9.70%, a steady downward trajectory is evident. Adjusted ROE declined to 8.79% in 2022 and further to 7.59% in 2023, returning the ratio to a level nearly identical to the 7.50% recorded in 2018.
Disparity Between Reported and Adjusted Metrics: The variance between reported and adjusted figures is most pronounced during the 2019-2020 period. In 2019, adjusted net income significantly exceeded reported net income. Conversely, in 2020, adjusted net income was substantially lower than reported net income, indicating that non-recurring adjustments had a heavily negative impact on the adjusted profitability for that fiscal year.

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Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

	Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Johnson Controls	1,849)	1,532)	1,637)	631)	5,674)	2,162)
Total assets	42,242)	42,158)	41,890)	40,815)	42,287)	48,797)
Profitability Ratio
ROA¹	4.38%	3.63%	3.91%	1.55%	13.42%	4.43%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Johnson Controls	1,173)	1,391)	1,673)	94)	6,286)	1,526)
Adjusted total assets	40,743)	41,214)	41,135)	39,953)	41,735)	47,206)
Profitability Ratio
Adjusted ROA²	2.88%	3.38%	4.07%	0.24%	15.06%	3.23%

2023 Calculations

¹ ROA = 100 × Net income attributable to Johnson Controls ÷ Total assets
= 100 × 1,849 ÷ 42,242 = 4.38%

² Adjusted ROA = 100 × Adjusted net income attributable to Johnson Controls ÷ Adjusted total assets
= 100 × 1,173 ÷ 40,743 = 2.88%

The financial performance from 2018 to 2023 is characterized by significant volatility in net income and return on assets, contrasted against a relatively stable asset base following an initial contraction. While reported figures show a moderate recovery in recent years, adjusted metrics reveal a diverging trend in profitability efficiency.

Net Income Volatility: Reported net income experienced a substantial peak in 2019 at 5,674 million US$, followed by a sharp decline to 631 million US$ in 2020. Since 2021, reported earnings have stabilized between 1,532 million US$ and 1,849 million US$. In contrast, adjusted net income exhibits more extreme fluctuations, peaking at 6,286 million US$ in 2019 before dropping to a low of 94 million US$ in 2020. Unlike the reported figures, adjusted net income has shown a consistent downward trajectory from 2021 (1,673 million US$) to 2023 (1,173 million US$).
Asset Base Stability: Total assets underwent a reduction between September 30, 2018, and September 30, 2019, decreasing from 48,797 million US$ to 42,287 million US$. Following this adjustment, the asset base remained remarkably consistent, fluctuating within a narrow range between approximately 40,800 million US$ and 42,200 million US$ through 2023. The parity between reported and adjusted total assets indicates a minimal impact of adjusting entries on the overall balance sheet scale.
Return on Assets (ROA) Trends: Reported ROA mirrors the volatility of net income, reaching a high of 13.42% in 2019 and a low of 1.55% in 2020, before settling into a range of 3.63% to 4.38% from 2021 to 2023. Adjusted ROA shows more pronounced variance; it outperformed reported ROA in 2019 at 15.06% but fell significantly lower than reported ROA in 2020 (0.24%) and 2023 (2.88%).
Comparative Analysis of Adjusted vs. Reported ROA: A divergence is observed in the final year of the period. As of September 30, 2023, the reported ROA stands at 4.38%, while the adjusted ROA is lower at 2.88%. This indicates that the adjustments made to the net income for the 2023 fiscal year had a negative impact on the perceived efficiency of asset utilization, contrasting with the 2019 period where adjustments enhanced the ROA.

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