Johnson Controls reports strong start to the fiscal year and reaffirms full year guidance

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- GAAP EPS from continuing operations of $0.21 per share, including special items

CORK, Ireland, Jan. 31, 2020 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI) today reported fiscal first quarter 2020 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.21.  Excluding these items, adjusted EPS from continuing operations was $0.40, up 54% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $5.6 billion increased 2% compared to the prior year and grew 3% organically.     

GAAP earnings before interest and taxes ("EBIT") was $308 million and EBIT margin was 5.5%. Adjusted EBIT was $448 million and adjusted EBIT margin was 8.0%, up 70 basis points over the prior year.  Excluding the impact of M&A and foreign currency, the underlying adjusted EBIT margin increased 80 basis points.

"Our first quarter results reflect a strong start to fiscal 2020, marking the fifth consecutive quarter of organic double-digit adjusted EBIT growth as a pure-play buildings technology company.  Our performance in the quarter reflects a continued commitment to solid execution and to improving the underlying fundamentals of our business, which is shared throughout the organization," said George Oliver, chairman and CEO.  "We deliver the safest, most secure and sustainable solutions for our customers given our robust portfolio of products and services.  This, along with our strong balance sheet, positions us well to continue to deliver long-term shareholder value," Oliver added. 

Income and EPS amounts attributable to Johnson Controls ordinary shareholders
($ millions, except per-share amounts)

The financial highlights presented in the tables below are in accordance with GAAP, unless otherwise indicated. All comparisons are to the fiscal first quarter of 2019.  The results of Power Solutions are reported as discontinued operations in all periods presented.

Organic sales growth, organic EBITA growth, segment EBITA, adjusted segment EBITA, EBIT, adjusted EBIT, adjusted EPS from continuing operations and adjusted free cash flow are non-GAAP financial measures. For a reconciliation of these non-GAAP measures and detail of the special items, refer to the attached footnotes.  A slide presentation to accompany the results can be found in the Investor Relations section of Johnson Controls' website at http://investors.johnsoncontrols.com.



GAAP

GAAP


Adjusted

Adjusted



Q1 2019

Q1 2020


Q1 2019

Q1 2020

Change

Sales

$5,464

$5,576


$5,464

$5,576

+2%

Segment EBITA

583

623


590

625

+6%

EBIT

329

308


400

448

+12%

Net income from

continuing operations

107

159


243

306

+26%

Diluted EPS from continuing operations

$0.12

$0.21


$0.26

$0.40

+54%

BUSINESS RESULTS

Building Solutions North America


GAAP

GAAP


Adjusted

Adjusted



Q1 2019

Q1 2020


Q1 2019

Q1 2020

Change

Sales

$2,116

$2,167


$2,116

$2,167

2%

Segment EBITA

$250

$258


$253

$259

2%

Segment EBITA margin %

11.8%

11.9%


12.0%

12.0%

-

Sales in the quarter of $2.2 billion, increased 2% versus the prior year.  Organic sales increased 3% versus the prior year led by strength in Fire & Security and, to a lesser extent, HVAC & Controls.  This growth was partially offset by a decline in Performance Solutions.         

Orders in the quarter, excluding M&A and adjusted for foreign currency, decreased 1% year-over-year off a strong prior year and due to timing between quarters.  Backlog at the end of the quarter of $5.8 billion increased 7% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $259 million, up 2% versus the prior year. Adjusted segment EBITA margin of 12.0% was consistent with the prior year as favorable volume leverage as well as productivity savings and cost synergies, were offset by Retail mix. 

Building Solutions EMEA/LA (Europe, Middle East, Africa/Latin America)


GAAP

GAAP


Adjusted

Adjusted



Q1 2019

Q1 2020


Q1 2019

Q1 2020

Change

Sales

$907

$928


$907

$928

2%

Segment EBITA

$77

$90


$77

$90

17%

Segment EBITA margin %

8.5%

9.7%


8.5%

9.7%

120bps

Sales in the quarter of $928 million increased 2% versus the prior year.  Organic sales grew 7% versus the prior year driven by strong growth in project installations and service.  Growth was positive across all regions and across HVAC & Controls, Fire & Security and Industrial Refrigeration. 

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 4% year-over-year.  Backlog at the end of the quarter of $1.7 billion increased 8% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $90 million, up 17% versus the prior year. Adjusted segment EBITA margin of 9.7% expanded 120 basis points over the prior year, including a 10 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 130 basis points driven by favorable volume leverage as well as the benefit from productivity savings and cost synergies.  

Building Solutions Asia Pacific


GAAP

GAAP


Adjusted

Adjusted



Q1 2019

Q1 2020


Q1 2019

Q1 2020

Change

Sales

$613

$629


$613

$629

3%

Segment EBITA

$66

$72


$66

$72

9%

Segment EBITA margin %

10.8%

11.4%


10.8%

11.4%

60bps

Sales in the quarter of $629 million increased 3% versus the prior year.  Organic sales also increased 3% versus the prior year driven by growth in project installations, particularly in Fire & Security.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 1% year-over-year.  Backlog at the end of the quarter of $1.6 billion increased 2% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $72 million, up 9% versus the prior year. Adjusted segment EBITA margin of 11.4% expanded 60 basis points over the prior year driven by favorable volume leverage and the benefit of productivity savings and cost synergies.    

Global Products


GAAP

GAAP


Adjusted

Adjusted



Q1 2019

Q1 2020


Q1 2019

Q1 2020

Change

Sales

$1,828

$1,852


$1,828

$1,852

1%

Segment EBITA

$190

$203


$194

$204

5%

Segment EBITA margin %

10.4%

11.0%


10.6%

11.0%

40bps

Sales in the quarter of $1.9 billion increased 1% versus the prior year. Organic sales increased 2% versus the prior year led by strong growth in Building Management Systems and, to a lesser extent, Specialty Products. Sales of HVAC & Refrigeration Equipment were consistent with the prior year.     

Adjusted segment EBITA was $204 million, up 5% versus the prior year. Adjusted segment EBITA margin of 11.0% expanded 40 basis points over the prior year, including a 10 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 50 basis points driven by positive price/cost as well as the benefit of productivity savings and cost synergies. 

Corporate


GAAP

GAAP


Adjusted

Adjusted



Q1 2019

Q1 2020


Q1 2019

Q1 2020

Change

Corporate expense

($136)

($118)


($93)

($81)

(13%)

Adjusted Corporate expense was $81 million in the quarter, a decrease of 13% compared to the prior year, driven primarily by continued productivity savings and cost synergies, as well as cost reductions related to the Power Solutions sale.

OTHER ITEMS

  • As expected during the quarter, the Company received an income tax refund of $0.6 billion.
  • Cash provided by operating activities from continuing operations was $0.5 billion and capital expenditures were $0.1 billion in the quarter, resulting in free cash flow from continuing operations of $0.4 billion. Adjusted free cash flow was an outflow of $0.1 billion, which excludes net cash inflows of $0.4 billion primarily related to an income tax refund partially offset by integration costs.
  • During the quarter, the Company repurchased approximately 15 million shares for $651 million.
  • During the quarter, the Company recorded a pre-tax restructuring and impairment charge of $111 million primarily related to workforce reductions, plant closures and asset impairments.
  • During the quarter, the Company adopted Accounting Standards Codification (ASC) 842, Leases, which resulted in an increase to other noncurrent assets of $1.1 billion, other current liabilities of $0.3 billion and other noncurrent liabilities of $0.8 billion.

About Johnson Controls:

At Johnson Controls, we transform the environments where people live, work, learn and play. From optimizing building performance to improving safety and enhancing comfort, we drive the outcomes that matter most. We deliver our promise in industries such as healthcare, education, data centers, and manufacturing. With a global team of 105,000 experts in more than 150 countries and over 130 years of innovation, we are the power behind our customers' mission. Our leading portfolio of building technology and solutions includes some of the most trusted names in the industry, such as Tyco®, YORK®, Metasys®, Ruskin®, Titus®, Frick®, PENN®, Sabroe®, Simplex®, Ansul® and Grinnell®. For more information, visit www.johnsoncontrols.com or follow us @johnsoncontrols on Twitter

Johnson Controls International plc Cautionary Statement Regarding Forward-Looking Statements

Johnson Controls International plc has made statements in this communication 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 communication, 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 and the disposition of the Power Solutions business, changes in tax laws (including but not limited to the Tax Cuts and Jobs Act enacted in December 2017), 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, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, maintaining the capacity, reliability and security of our information technology infrastructure, the risk of infringement or expiration of intellectual property rights, work stoppages, union negotiations, labor disputes and other matters associated with the labor force, the outcome of litigation and governmental proceedings and cancellation of or changes to commercial arrangements.  A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the 2019 fiscal year filed with the SEC on November 21, 2019, which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. 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 communication are made only 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 communication.

Non-GAAP Financial Information

The Company's press release contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include restructuring and impairment costs, transaction costs, integration costs, net mark-to-market adjustments, and discrete tax items. Financial information regarding organic sales, EBIT, EBIT margin, segment EBITA, adjusted segment EBITA, adjusted organic segment EBITA, adjusted segment EBITA margin, free cash flow and adjusted free cash flow, are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as transaction costs and integration costs because these costs are not considered to be directly related to the underlying operating performance of its business units.  Management believes that, when considered together with unadjusted amounts, these non-GAAP measures are useful to investors in understanding period-over-period operating results and business trends of the Company. Management may also use these metrics as guides in forecasting, budgeting and long-term planning processes and for compensation purposes. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure.  For further information on the calculation of thee non-GAAP measures and a reconciliation of these non-GAAP measures, refer to the attached footnotes.

JOHNSON CONTROLS INTERNATIONAL PLC







CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data; unaudited)















Three Months Ended December 31, 



2019



2018







Net sales

$ 5,576



$ 5,464

Cost of sales

3,773



3,739


Gross profit

1,803



1,725







Selling, general and administrative expenses

(1,427)



(1,438)

Restructuring and impairment costs

(111)



-

Net financing charges

(52)



(85)

Equity income

43



42







Income from continuing operations before income taxes

256



244







Income tax provision

65



108







Income from continuing operations

191



136







Income from discontinued operations, net of tax

-



263







Net income

191



399







Less: Income from continuing operations






attributable to noncontrolling interests

32



29







Less: Income from discontinued operations






attributable to noncontrolling interests

-



15







Net income attributable to JCI

$    159



$    355







Income from continuing operations

$    159



$    107

Income from discontinued operations

-



248







Net income attributable to JCI

$    159



$    355







Diluted earnings per share from continuing operations

$   0.21



$   0.12

Diluted earnings per share from discontinued operations

-



0.27

Diluted earnings per share*

$   0.21



$   0.38







Diluted weighted average shares

774.0



925.2

Shares outstanding at period end

764.0



912.7







* May not sum due to rounding.





 

JOHNSON CONTROLS INTERNATIONAL PLC








CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


(in millions; unaudited)
















December 31,


September 30,




2019


2019


ASSETS






Cash and cash equivalents

$           2,160


$           2,805


Accounts receivable - net

5,612


5,770


Inventories

1,953


1,814


Assets held for sale

87


98


Other current assets

1,508


1,906



Current assets

11,320


12,393








Property, plant and equipment - net

3,341


3,348


Goodwill


18,351


18,178


Other intangible assets - net

5,610


5,632


Investments in partially-owned affiliates

865


853


Noncurrent assets held for sale

46


60


Other noncurrent assets

2,980


1,823



Total assets

$         42,513


$         42,287








LIABILITIES AND EQUITY





Short-term debt and current portion of long-term debt

$           1,362


$              511


Accounts payable and accrued expenses

4,180


4,535


Liabilities held for sale

44


44


Other current liabilities

4,106


3,980



Current liabilities

9,692


9,070








Long-term debt

5,920


6,708


Other noncurrent liabilities

6,470


5,680


Shareholders' equity attributable to JCI

19,329


19,766


Noncontrolling interests

1,102


1,063



Total liabilities and equity

$         42,513


$         42,287

 

JOHNSON CONTROLS INTERNATIONAL PLC











CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)



























Three Months Ended December 31,







2019



2018

Operating Activities





Net income attributable to JCI from continuing operations

$  159



$  107

Income from continuing operations attributable to noncontrolling interests

32



29











Net income from continuing operations

191



136











Adjustments to reconcile net income from continuing operations to cash provided by operating activities:











Depreciation and amortization

207



211



Pension and postretirement benefit income

(40)



(29)



Pension and postretirement contributions

(12)



(21)



Equity in earnings of partially-owned affiliates, net of dividends received

8



(36)



Deferred income taxes

(3)



43



Non-cash restructuring and impairment costs

54



-



Other - net

16



28



Changes in assets and liabilities, excluding acquisitions and divestitures:









Accounts receivable

237



146





Inventories

(114)



(222)





Other assets

(92)



(63)





Restructuring reserves

33



(25)





Accounts payable and accrued liabilities

(498)



(226)





Accrued income taxes

524



(21)






Cash provided (used) by operating activities from continuing operations

511



(79)











Investing Activities





Capital expenditures

(126)



(153)

Acquisition of businesses, net of cash acquired

(48)



(13)

Business divestitures, net of cash divested

-



6

Other - net

1



24






Cash used by investing activities from continuing operations

(173)



(136)











Financing Activities





Increase in short and long-term debt - net

10



1,014

Stock repurchases

(651)



(467)

Payment of cash dividends

(203)



(240)

Dividends paid to noncontrolling interests

(5)



(43)

Proceeds from the exercise of stock options

21



13

Employee equity-based compensation withholding

(20)



(21)

Other - net

(2)



-






Cash provided (used) by financing activities from continuing operations

(850)



256











Discontinued Operations





Net cash provided (used) by operating activities

(194)



193

Net cash used by investing activities

-



(66)

Net cash used by financing activities

-



(11)






Net cash flows provided (used) by discontinued operations 

(194)



116











Effect of exchange rate changes on cash, cash equivalents and restricted cash

57



(43)

Changes in cash held for sale

-



(2)

Increase (decrease) in cash, cash equivalents and restricted cash

$(649)



$  112

 

FOOTNOTES

 1.  Financial Summary

































































The Company evaluates the performance of its business units 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 charges, restructuring and impairment costs, and the net mark-to-market adjustments related to restricted asbestos investments and pension and postretirement plans. The financial results shown below are for continuing operations and exclude the Power Solutions business.



































(in millions; unaudited)



Three Months Ended December 31,





















2019


2018























Actual


Adjusted
Non-GAAP


Actual


Adjusted
Non-GAAP
























Net sales

































Building Solutions North America



$2,167


$   2,167


$2,116


$   2,116
























Building Solutions EMEA/LA



928


928


907


907
























Building Solutions Asia Pacific



629


629


613


613
























Global Products



1,852


1,852


1,828


1,828
























               Net sales



$5,576


$   5,576


$5,464


$   5,464

























































Segment EBITA (1)

































Building Solutions North America



$   258


$      259


$   250


$      253
























Building Solutions EMEA/LA



90


90


77


77
























Building Solutions Asia Pacific



72


72


66


66
























Global Products



203


204


190


194
























               Segment EBITA



623


625


583


590
























Corporate expenses (2)



(118)


(81)


(136)


(93)
























Amortization of intangible assets



(96)


(96)


(97)


(97)
























Net mark-to-market adjustments (3)



10


-


(21)


-
























Restructuring and impairment costs (4)



(111)


-


-


-
























               EBIT (5)



308


448


329


400
























               EBIT margin



5.5%


8.0%


6.0%


7.3%
























Net financing charges



(52)


(52)


(85)


(85)
























Income from continuing operations before income taxes


256


396


244


315
























Income tax provision (6)



(65)


(53)


(108)


(43)
























Income from continuing operations



191


343


136


272
























Income from continuing operations attributable to noncontrolling interests



(32)


(37)


(29)


(29)
























Net income from continuing operations attributable to JCI


$   159


$      306


$   107


$      243

























































(1) The Company's press release contains financial information regarding segment EBITA, adjusted segment EBITA and adjusted segment EBITA margins, which are non-GAAP performance measures. The Company's definition of adjusted segment EBITA excludes special items because these costs are not considered to be directly related to the underlying operating performance of its businesses. Management believes these non-GAAP measures are useful to investors in understanding the ongoing operations and business trends of the Company. 



































A reconciliation of segment EBITA to income from continuing operations is shown earlier within this footnote. The following is the three months ended December 31, 2019 and 2018 reconciliation of segment EBITA and segment EBITA margin as reported to adjusted segment EBITA and adjusted segment EBITA margin (unaudited):



































(in millions)

 Building Solutions
North America 


 Building Solutions
EMEA/LA 


 Building Solutions
Asia Pacific 


 Global Products 


 Consolidated
JCI plc 











2019


2018


2019


2018


2019


2018


2019


2018


2019


2018














Segment EBITA as reported

$ 258


$   250


$        90


$     77


$        72


$  66


$      203


$190


$623


$583














Segment EBITA margin as reported

11.9%


11.8%


9.7%


8.5%


11.4%


10.8%


11.0%


10.4%


11.2%


10.7%















































Adjusting items:

































  Integration costs

1


3


-


-


-


-


1


4


2


7















































Adjusted segment EBITA

$ 259


$   253


$        90


$     77


$        72


$  66


$      204


$194


$625


$590














Adjusted segment EBITA margin

12.0%


12.0%


9.7%


8.5%


11.4%


10.8%


11.0%


10.6%


11.2%


10.8%















































(2) Adjusted Corporate expenses excludes special items because these costs are not considered to be directly related to the underlying operating performance of the Company's business. Adjusted Corporate expenses for the three months ended December 31, 2019 excludes $37 million of integration costs. Adjusted Corporate expenses for the three months ended December 31, 2018 excludes $41 million of integration costs and $2 million of transaction costs.  




(3) The three months ended December 31, 2019 exclude the net mark-to-market adjustments on restricted investments of $10 million. The three months ended December 31, 2018 exclude the net mark-to-market adjustments on restricted investments of $21 million. 



































(4) Restructuring and impairment costs for the three months ended December 31, 2019 of $111 million are excluded from the adjusted non-GAAP results. The restructuring actions and impairment costs related primarily to workforce reductions, plant closures and asset impairments.



































(5) Management defines earnings before interest and taxes (EBIT) as income from continuing operations before net financing charges, income taxes and noncontrolling interests. EBIT is a non-GAAP performance measure. Management believes this non-GAAP measure is useful to investors in understanding the ongoing operations and business trends of the Company. A reconciliation of EBIT to income from continuing operations is shown earlier within this footnote.



































(6) Adjusted income tax provision for the three months ended December 31, 2019 excludes tax provisions related to Switzerland tax reform of $30 million and net mark-to-market adjustments of $3 million, partially offset by tax benefits for restructuring and impairment costs of $16 million and integration costs of $5 million. Adjusted income tax provision for the three months ended December 31, 2018 excludes the tax provision for valuation allowance adjustments of $76 million as a result of changes in U.S. tax law, partially offset by the tax benefits for integration costs of $6 million and net mark-to-market adjustments of $5 million.


































 2.  Diluted Earnings Per Share Reconciliation





























































The Company's press release contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include transaction/integration costs, net mark-to-market adjustments, restructuring and impairment costs, impact of ceasing the depreciation and amortization expense for the Power Solutions business as the business is held for sale, and discrete tax items. The Company excludes these items because they are not considered to be directly related to the underlying operating performance of the Company. Management believes these non-GAAP measures are useful to investors in understanding the ongoing operations and business trends of the Company. 



































A reconciliation of diluted earnings per share as reported to adjusted diluted earnings per share for the respective periods is shown below (unaudited):


















































 Net Income Attributable
to JCI plc 


 Net Income Attributable
to JCI plc from
Continuing Operations 























Three Months Ended


Three Months Ended























December 31,


December 31,























2019


2018


2019


2018



























































Earnings per share as reported for JCI plc

$0.21


$  0.38


$     0.21


$  0.12



























































Adjusting items:

































  Transaction costs

-


0.03


-


-


























  Integration costs

0.05


0.05


0.05


0.05


























  Related tax impact

(0.01)


(0.01)


(0.01)


(0.01)


























  Net mark-to-market adjustments

(0.01)


0.02


(0.01)


0.02


























  Related tax impact

-


(0.01)


-


(0.01)


























  Restructuring and impairment costs

0.14


-


0.14


-


























  Related tax impact

(0.02)


-


(0.02)


-


























  NCI impact of restructuring and impairment

(0.01)


-


(0.01)


-


























Cease of Power Solutions depreciation / amortization expense

-


(0.03)


-


-


























  Related tax impact

-


0.01


-


-


























  Discrete tax items

0.04


0.16


0.04


0.08



























































Adjusted earnings per share for JCI plc*

$0.40


$  0.61


$     0.40


$  0.26



























































* May not sum due to rounding































































The following table reconciles the denominators used to calculate basic and diluted earnings per share for JCI plc (in millions; unaudited): 




















































Three Months Ended





























December 31,





























2019


2018






























Weighted average shares outstanding for JCI plc

































Basic weighted average shares outstanding

769.9


921.6






























Effect of dilutive securities:

































   Stock options, unvested restricted stock and unvested performance share awards

4.1


3.6






























Diluted weighted average shares outstanding

774.0


925.2































































The Company has presented forward-looking statements regarding adjusted EPS from continuing operations, organic net sales growth, organic adjusted EBITA growth, organic adjusted EBIT growth, adjusted segment EBITA margin, adjusted EBIT margin and adjusted free cash flow conversion for the full fiscal year of 2020, which are non-GAAP financial measures. These non-GAAP financial measures are derived by excluding certain amounts, expenses, income or cash flows from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period, including but not limited to the high variability of the net mark-to-market adjustments and the effect of foreign currency exchange fluctuations. Our fiscal 2020 outlook for organic net sales and adjusted EBITA and EBIT growth also excludes the effect of acquisitions, divestitures and foreign currency. We are unable to present a quantitative reconciliation of the aforementioned forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available and management cannot reliably predict all of the necessary components of such GAAP measures without unreasonable effort or expense. The unavailable information could have a significant impact on the Company's full year 2020 GAAP financial results.


































 3.  Organic Growth Reconciliation































































The components of the changes in net sales for the three months ended December 31, 2019 versus the three months ended December 31, 2018, including organic growth, is shown below (unaudited):







































(in millions)

Net Sales for the
Three Months Ended
December 31, 2018


Base Year Adjustments -
Divestitures and Other


Adjusted Base Net
Sales for the
Three Months Ended
December 31, 2018


Acquisitions


Foreign Currency


Organic Growth


Net Sales for the
Three Months Ended
December 31, 2019






Building Solutions North America

$               2,116


$        (2)


-


$                 2,114


$           -


-


$     -


-


$  53


3%


$2,167


3%






Building Solutions EMEA/LA

907


(25)


-3%


882


5


1%


(25)


-3%


66


7%


928


5%






Building Solutions Asia Pacific

613


-


-


613


2


-


(5)


-1%


19


3%


629


3%






               Total field

3,636


(27)


-1%


3,609


7


-


(30)


-1%


138


4%


3,724


3%






Global Products

1,828


(8)


-


1,820


1


-


3


-


28


2%


1,852


2%






               Total net sales

$               5,464


$       (35)


-1%


$                 5,429


$          8


-


$ (27)


-


$166


3%


$5,576


3%







































The components of the changes in segment EBITA and EBIT for the three months ended December 31, 2019 versus the three months ended December 31, 2018, including organic growth, is shown below (unaudited):







































(in millions)

Adjusted Segment
EBITA / EBIT for the
Three Months Ended
December 31, 2018


Base Year Adjustments -
Divestitures and Other


Adjusted Base Segment
EBITA / EBIT for the
Three Months Ended
December 31, 2018


Acquisitions


Foreign Currency


Organic Growth


Adjusted Segment
EBITA / EBIT for the
Three Months Ended
December 31, 2019






Building Solutions North America

$                  253


$          -


-


$                    253


$           -


-


$     -


-


$    6


2%


$   259


2%






Building Solutions EMEA/LA

77


(1)


-1%


76


1


1%


(3)


-4%


16


21%


90


18%






Building Solutions Asia Pacific

66


-


-


66


1


2%


-


-


5


8%


72


9%






               Total field

396


(1)


-


395


2


1%


(3)


-1%


27


7%


421


7%






Global Products

194


-


-


194


(1)


-1%


(1)


-1%


12


6%


204


5%






               Total adjusted segment EBITA

590


(1)


-


589


$          1


-


$   (4)


-1%


$  39


7%


625


6%







































Corporate expenses

(93)


-




(93)














(81)


13%






Amortization of intangible assets

(97)


-




(97)














(96)


1%






               Total adjusted EBIT

$                  400


$        (1)




$                    399














$   448


12%






































 4.  Adjusted Free Cash Flow Reconciliation





























































The Company's press release contains financial information regarding free cash flow, adjusted free cash flow and adjusted free cash flow conversion, which are non-GAAP performance measures. Free cash flow is defined as cash provided by operating activities less capital expenditures. Adjusted free cash flow excludes special items, as included in the table below, because these cash flows are not considered to be directly related to its underlying businesses. Adjusted free cash flow conversion is defined as adjusted free cash flow divided by adjusted net income. Management believes these non-GAAP measures are useful to investors in understanding the strength of the Company and its ability to generate cash.



































The following is the three months ended December 31, 2019 and 2018 reconciliation of free cash flow, adjusted free cash flow and adjusted free cash flow conversion for continuing operations (unaudited):



































(in billions)

 Three Months Ended
December 31, 2019 


 Three Months Ended
December 31, 2018 






















Cash provided by operating activities from continuing operations

$                   0.5


$                       (0.1)






















Capital expenditures

(0.1)


(0.2)






















Reported free cash flow

0.4


(0.3)















































Adjusting items:

































 Transaction/integration costs

0.1


0.1






















  Income tax refunds

(0.6)


-






















  Total adjusting items *

(0.4)


0.1






















Adjusted free cash flow *

$                  (0.1)


$                       (0.2)























































Adjusted net income from continuing operations

































  attributable to JCI

$                   0.3


$                        0.2






















Adjusted free cash flow conversion



-33%




-100%



























































* May not sum due to rounding






























































 5.  Net Debt to Capitalization






























































The Company provides financial information regarding net debt as a percentage of total capitalization, which is a non-GAAP performance measure. 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. The following is the December 31, 2019 and September 30, 2019 calculation of net debt as a percentage of total capitalization (unaudited):



































(in millions)

December 31, 2019


 September 30, 2019 


























Short-term debt and current portion of long-term debt

$               1,362


$                       511


























Long-term debt

5,920


6,708


























Total debt

7,282


7,219


























Less: cash and cash equivalents

2,160


2,805


























Total net debt

5,122


4,414


























Shareholders' equity attributable to JCI

19,329


19,766


























Total capitalization

$             24,451


$                  24,180



























































Total net debt as a % of total capitalization

20.9%


18.3%


























































 6.  Income Taxes































































The Company's effective tax rate from continuing operations before consideration of transaction/integration costs, net mark-to-market adjustments, restructuring and impairment costs, and discrete tax items for the three months ending December 31, 2019 and 2018 is approximately 13.5%.


































 7.  Restructuring and Impairment Costs






























































The three months ended December 31, 2019 include restructuring and impairment costs of $111 million related primarily to workforce reductions, plant closures and asset impairments.


































 8.  Leases





























































On October 1, 2019, the Company adopted ASU 2016-02, "Leases (Topic 842)," which requires recognition of operating leases as a lease asset and liabilities on the balance sheet.  The adoption of the new guidance resulted in recognition of a right-of-use asset and related lease liabilities of $1.1 billion. 

 

CONTACT:

Investors:


Antonella Franzen


(609) 720-4665 




Ryan Edelman


(609) 720-4545 




Media:


Fraser Engerman


(414) 524-2733

 

Johnson Controls Logo. (PRNewsFoto/JOHNSON CONTROLS, INC.) (PRNewsFoto/)

 

SOURCE Johnson Controls

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