Assets and Liabilities Held For Sale and Discontinued Operations

12 Months Ended

Sep. 30, 2024

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities Held For Sale and Discontinued Operations

ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS

In July 2024, the Company entered into a definitive agreement to sell its R&LC HVAC business, which includes the North America Ducted businesses and the global Residential joint venture with Hitachi, of which Johnson Controls owns 60% and Hitachi owns 40%, to Bosch Group for approximately $8.1 billion in cash with the Company’s portion of the aggregate consideration being approximately $6.7 billion, inclusive of an upfront royalty payment for the licensing of the York tradename. The transaction is expected to close in the fourth quarter of fiscal 2025, subject to required regulatory approvals and other customary closing conditions. The R&LC HVAC business, which was previously reported in the Global Products segment, meets the criteria to be classified as discontinued operations as it represents a strategic shift in the Company's operations and results in the exit of substantially all of its residential and light commercial HVAC businesses. As a result, results of the business are presented in discontinued operations for all periods presented.

The Company determined that the assets and liabilities for the R&LC HVAC business met the held for sale criteria during the fourth quarter of 2024. Accordingly, the businesses' assets and liabilities were reclassified in the consolidated balance sheets at September 30, 2024 and 2023 to held for sale, and the Company ceased recording depreciation and amortization for the held for sale assets.

The following table summarizes the results of the R&LC HVAC business which are reported as discontinued operations (in millions):


	Year Ended September 30,
	2024		2023		2022
Net sales	$	4,466	$	4,462	$	4,662
Cost of goods sold	3,300		3,295		3,409
Gross profit	1,166		1,167		1,253
Selling, general and administrative expenses	761		794		867
Restructuring and impairment costs	34		15		20
Net financing charges	17		23		8
Equity income	276		262		240
Income from discontinued operations before income taxes	630		597		598
Provision for income taxes on discontinued operations	141		145		169
Income from discontinued operations, net of tax	489		452		429
Income from discontinued operations attributable to noncontrolling interest, net of tax	191		165		176
Income from discontinued operations	$	298	$	287	$	253

The following table summarizes the assets and liabilities of the R&LC HVAC business which were classified as held for sale (in millions):


	September 30,
	2024		2023

Cash	$	5	$	7
Accounts receivable - net	592		512
Inventories	876		904
Other current assets	122		129
Current assets held for sale	1,595		1,552

Property, plant and equipment - net	793		762
Goodwill	1,182		1,164
Other intangible assets - net	96		116
Investments in partially-owned affiliates	949		905
Other noncurrent assets	190		158
Noncurrent assets held for sale	3,210		3,105
Total assets classified as held for sale	$	4,805	$	4,657


Short-term debt	$	—	$	24

Accounts payable	917		770
Accrued compensation and benefits	113		111
Deferred revenue	84		73
Other current liabilities	317		397
Current liabilities held for sale	1,431		1,375


Pension and postretirement benefit obligations	28		27
Other noncurrent liabilities	377		380
Noncurrent liabilities held for sale	405		407
Total liabilities classified as held for sale	$	1,836	$	1,782

Assets and liabilities classified as held for sale are required to be recorded at the lower of carrying value or fair value less costs to sell. As of September 30, 2024, the estimated fair value less costs to sell of the held for sale businesses exceeded their carrying value, and therefore, no adjustment was necessary.

During the year ended September 30, 2023, the Company recorded impairment charges for the Global Retail business of $438 million and the Building Solutions Asia Pacific segment of $60 million. The impairment charges were primarily due to reductions in the estimated fair values of the businesses to be disposed as a result of negotiations with potential buyers and were recorded within restructuring and impairment costs in the consolidated statements of income. During the third quarter of fiscal 2023, the Company concluded that its Global Retail business no longer met the criteria to be classified as held for sale, as it was no longer probable that it would be sold in the next 12 months. The net assets were reclassified to held and used at the lower of fair value or adjusted carrying value, and due to prior period impairment charges recorded, there was no impact to the consolidated statements of income as a result of this reclassification.