XML 37 R20.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Stock-based Compensation (Notes) | 12 Months Ended
--- | ---
Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION On September 2, 2016, the shareholders of the Company approved the Johnson Controls International plc 2012 Share and Incentive Plan (the "Plan"). The original effective date of this Plan was October 1, 2012. The Plan was amended and restated as of November 17, 2014 and was amended and restated again in connection with the Merger that was consummated on September 2, 2016 (the “Amendment Effective Date”). The amendment and restatement is intended to reflect the assumption into this Plan of the remaining share reserves under the Johnson Controls, Inc. 2012 Omnibus Incentive Plan and the Johnson Controls, Inc. 2003 Stock Plan for Outside Directors (the “Legacy Johnson Controls Plans”) as of the Amendment Effective Date. Following the Amendment Effective Date, no further awards may be made under the Legacy Johnson Controls Plans. The types of awards authorized by the Plan comprise of stock options, stock appreciation rights, performance shares, performance units and other stock-based awards. The Compensation Committee of the Company's Board of Directors will determine the types of awards to be granted to individual participants and the terms and conditions of the awards. The Plan provides that 76 million shares of the Company's common stock are reserved for issuance under the 2012 Plan, and 45 million shares remain available for issuance at September 30, 2018. Pursuant to the Merger Agreement, outstanding stock options held by Tyco employees on September 2, 2016 (the “Merger Date”) were converted into options to acquire the Company's shares using a 0.955-for-one share consolidation ratio in a manner designed to preserve the intrinsic value of such awards. In addition, pursuant to the Merger Agreement, nonvested restricted stock held by Tyco employees on the Merger Date were converted into nonvested restricted stock of the Company using the 0.955-for-one share consolidation ratio in a manner designed to preserve the intrinsic value of such awards. Outstanding performance share awards held by Tyco employees on the Merger Date were converted to nonvested restricted stock of the Company at the target performance level, and adjusted to reflect the 0.955-for-one consolidation ratio. Except for the conversion of stock options, nonvested restricted stock and performance share awards discussed herein, the material terms of the awards remained unchanged. The modifications made to the awards upon the Merger Date constituted modifications under the authoritative guidance for accounting for stock compensation. This guidance requires the Company to revalue the awards upon the Merger close and allocate the revised fair value between purchase consideration and continuing expense based on the ratio of service performed through the Merger Date over the total service period of the awards. The revised fair value allocated to post-merger services resulted in incremental expense which is recognized over the remaining service period of the awards. The portion of Tyco awards earned as of the Merger Date included as purchase consideration was $224 million. The total value of Tyco awards not earned as of the Merger Date was $101 million, which will be expensed over the remaining future vesting period. Refer to Note 2, “Merger Transaction,” of the notes to consolidated financial statements for further information regarding the Merger. Pursuant to the Merger Agreement, outstanding stock options held by JCI Inc. employees on the Merger Date were converted one-for-one into options to acquire the Company's shares in a manner designed to preserve the intrinsic value of such awards. In addition, pursuant to the Merger Agreement, nonvested restricted stock held by JCI Inc. employees on the Merger Date was converted one-for-one into nonvested restricted stock of the Company in a manner designed to preserve the intrinsic value of such awards. Outstanding performance share awards held by JCI Inc. employees on the Merger Date were converted to nonvested restricted stock of the Company based on certain performance factors. Except for the conversion of stock options, nonvested restricted stock and performance share awards discussed herein, the material terms of the awards remained unchanged, and no incremental fair value resulted from the conversion. References to the Company’s stock throughout Note 12 refer to stock of JCI Inc. prior to the Merger Date and to stock of the Company subsequent to the Merger Date. 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, stock appreciation rights and nonvested restricted 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. The Company has four share-based compensation plans, which are described below. For the fiscal years ended September 30, 2018 and 2017, compensation cost charged against income for continuing operations, excluding the offsetting impact of outstanding equity swaps, for those plans was approximately $98 million and $134 million, respectively, all of which was recorded in selling, general and administrative expenses. For the fiscal year ended September 30, 2016, compensation cost charged against income for continuing operations, excluding the offsetting impact of outstanding equity swaps, for those plans was approximately $160 million, of which $121 million was recorded in selling, general and administrative expenses and $39 million was recorded in restructuring and impairment costs. The Company has elected to utilize the alternative transition method for calculating the tax effects of stock-based compensation. The total income tax benefit recognized for continuing operations in the consolidated statements of income for share-based compensation arrangements was approximately $25 million, $53 million and $56 million for the fiscal years ended September 30, 2018, 2017 and 2016, respectively. The tax expense from the exercise and vesting of equity settled awards was $3 million for the fiscal year ended September 30, 2018 and recorded as part of the income tax provision upon adoption of ASU 2016-09 during the first quarter of fiscal 2018. The tax benefit from the exercise and vesting of equity settled awards was $4 million and $11 million for the fiscal years ended 2017 and 2016, respectively, and were recorded in capital in excess of par value. The Company does not settle stock options granted under share-based payment arrangements to cash. 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 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 historical volatility of certain peer companies over the most recent period corresponding to the expected life as of the grant date. For fiscal 2016, the 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.
| Year Ended September 30,
| 2018 |  | 2017 |  | 2016
Expected life of option (years) | 6.5 |  | 4.75 & 6.5 |  | 6.4
Risk-free interest rate | 2.28% |  | 1.23% - 1.93% |  | 1.64% - 1.70%
Expected volatility of the Company’s stock | 23.70% |  | 24.60% |  | 36.00%
Expected dividend yield on the Company’s stock | 2.78% |  | 2.21% |  | 2.11%
A summary of stock option activity at September 30, 2018, and changes for the year then ended, is presented below:
| Weighted Average Option Price |  | Shares Subject to Option |  | Weighted Average Remaining Contractual Life (years) |  | Aggregate Intrinsic Value (in millions)
Outstanding, September 30, 2017 | $ | 32.76 |  |  | 19,730,443 |  |  |  |  |
Granted | 37.32 |  |  | 1,376,807 |  |  |  |  |
Exercised | 24.24 |  |  | (2,733,159 | ) |  |  |  |
Forfeited or expired | 38.62 |  |  | (538,029 | ) |  |  |  |
Outstanding, September 30, 2018 | $ | 34.24 |  |  | 17,836,062 |  |  | 4.2 |  | $ | 84 |
Exercisable, September 30, 2018 | $ | 31.22 |  |  | 14,329,210 |  |  | 3.3 |  | $ | 84 |
The weighted-average grant-date fair value of options granted during the fiscal years ended September 30, 2018, 2017 and 2016 was $7.04, $7.81 and $13.14, respectively. The total intrinsic value of options exercised during the fiscal years ended September 30, 2018, 2017 and 2016 was approximately $38 million, $81 million and $39 million, respectively. In conjunction with the exercise of stock options granted, the Company received cash payments for the fiscal years ended September 30, 2018, 2017 and 2016 of approximately $66 million, $157 million and $70 million, respectively. At September 30, 2018, the Company had approximately $13 million of total unrecognized compensation cost related to nonvested stock options granted for continuing operations. That cost is expected to be recognized over a weighted-average period of 1.6 years. Stock Appreciation Rights ("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. The assumptions used to determine the fair value of the SAR awards at September 30, 2018 were as follows:
Expected life of SAR (years) | 0.4 - 5.1
Risk-free interest rate | 2.29% - 2.94%
Expected volatility of the Company’s stock | 23.70%
Expected dividend yield on the Company’s stock | 2.78%
A summary of SAR activity at September 30, 2018, and changes for the year then ended, is presented below:
| Weighted Average SAR Price |  | Shares Subject to SAR |  | Weighted Average Remaining Contractual Life (years) |  | Aggregate Intrinsic Value (in millions)
Outstanding, September 30, 2017 | $ | 27.02 |  |  | 893,311 |  |  |  |  |
Granted | 25.78 |  |  | 12,119 |  |  |  |  |
Exercised | 26.13 |  |  | (256,900 | ) |  |  |  |
Forfeited or expired | 26.09 |  |  | (21,829 | ) |  |  |  |
Outstanding, September 30, 2018 | $ | 27.39 |  |  | 626,701 |  |  | 3.2 |  | $ | 5 |
Exercisable, September 30, 2018 | $ | 26.52 |  |  | 590,556 |  |  | 3.1 |  | $ | 5 |
In conjunction with the exercise of SARs granted, the Company made payments of $3 million, $4 million and $8 million during the fiscal years ended September 30, 2018, 2017 and 2016, respectively. 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 over 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 award is based on the closing market value of the Company’s ordinary shares on the date of grant. The fair value of each cash-settled restricted award is recalculated at the end of each reporting period based on the closing market value of the Company's ordinary shares at the end of the reporting period, and the liability and expense are adjusted based on the new fair value. A summary of the status of the Company’s nonvested restricted stock awards at September 30, 2018, and changes for the fiscal year then ended, is presented below:
| Weighted Average Price |  | Shares/Units Subject to Restriction
Nonvested, September 30, 2017 | $ | 44.48 |  |  | 6,961,706 |
Granted | 37.21 |  |  | 2,274,160 |
Vested | 39.84 |  |  | (3,819,581 | )
Forfeited | 39.38 |  |  | (414,768 | )
Nonvested, September 30, 2018 | $ | 45.14 |  |  | 5,001,517 |
At September 30, 2018, the Company had approximately $80 million of total unrecognized compensation cost related to nonvested restricted stock arrangements granted for continuing operations. That cost is expected to be recognized over a weighted-average period of 1.8 years. 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. For 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.
| Year Ended September 30,
| 2018 |  | 2017
Risk-free interest rate | 1.92% |  | 1.40%
Expected volatility of the Company’s stock | 21.70% |  | 21.00%
A summary of the status of the Company’s nonvested PSUs at September 30, 2018, and changes for the fiscal year then ended, is presented below:
| Weighted Average Price |  | Shares/Units Subject to PSU
Nonvested, September 30, 2017 | $ | 43.24 |  |  | 1,119,388 |
Granted | 37.36 |  |  | 496,478 |
Forfeited | 43.97 |  |  | (203,576 | )
Nonvested, September 30, 2018 | $ | 41.07 |  |  | 1,412,290 |

X
- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration