Johnson Controls International Plc · NYSE:JCI

Johnson Controls International — Q2 FY2018 Earnings Presentation

36 slides from Johnson Controls International's earnings presentation, May 1, 2018

  1. Slide 1: Fiscal 2018 Second Quarter

    Fiscal 2018 Second Quarter If you can read this Click on the icon to choose a If you can read this Click on the icon to choose a Results picture or Reset the slide. picture or Reset the slide. To Reset: Right click on the slide To Reset: Right click on the slide thumbnail and select ‘reset slide’ or

  2. Slide 2: Forward Looking/Cautionary Statements & Non-GAAP Financial Information

    Forward Looking/Cautionary Statements & Non-GAAP Financial Information 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

  3. Slide 3: Q2 FY18 Strategic Highlights

    Q2 FY18 Strategic Highlights  Growth investments paying off - Strong traction increasing sales capacity - Accelerating field orders and improved secured margins in Buildings - Product growth momentum - Increasing service growth - OE and aftermarket wins in Power  Continued strong synergy and produ

  4. Slide 4: Macro Environment

    Macro Environment EUROPE NORTH AMERICA   Buildings CHINA   Buildings   Power   Buildings   Power AFRICA & M.E.   Power LATIN   Buildings ASIA PACIFIC AMERICA   Power   Buildings  Buildings    Power  Power  4 Johnson Controls International plc — May 1, 2018

  5. Slide 5: Buildings Field Order Growth

    Buildings Field Order Growth Organic Field Orders +7% +5% +3% +3% +0% +0% Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2FY18 Continued Strong Order Growth Converting To Increased Sales in 2nd Half 5 Johnson Controls International plc — May 1, 2018

  6. Slide 6: Q2 FY18 Financial Summary

    Q2 FY18 Financial Summary* ADJUSTED NET SALES ADJUSTED EPS $7,475M $0.53 $7,237M  +3% $0.50 Reported  +6%  +1% Reported Organic Q2 FY17 Q2 FY18 Q2 FY17 Q2 FY18 ADJUSTED EBIT & MARGIN ADJUSTED FCF $740M $0.6B  10bps $711M Reported $0.3B $0.3B 9.9% 9.8%  30bps Excluding FX, $0.0B Lead and Scott Q

  7. Slide 7: Q2 FY18 Results vs. Prior Year: EPS Bridge

    Q2 FY18 Results vs. Prior Year* EPS BRIDGE $0.05 $0.02 $0.01 $0.53 $0.50 ($0.02) ($0.03) Q2 FY17 SYNERGIES & VOLUME/ GROSS MARGIN INVESTMENTS / FX / Other Q2 FY18 ACTUAL PRODUCTIVITY MIX PRESSURE SALESFORCE ACTUAL ADDITIONS *Non-GAAP excludes special items. See footnotes for reconciliation. 7 Johnso

  8. Slide 8: Buildings

    Buildings* ($ in millions)  Organic sales up 2% Q2 FY17 Q2 FY18 Change - Products up 6% Sales $5,541 $5,630 2% - Field down 1%; driven by timing of Segment EBITA $628 $630 0% project flow-through EBITA Margin % 11.3% 11.2% (10bps) • Solid service growth +3%  Sales headwind from M&A of 4% was fully

  9. Slide 9: Segment Results: Building Solutions North America

    Segment Results: Building Solutions North America* ($ in millions)  Organic sales up 1% Q2 FY17 Q2 FY18 Change - HVAC & Controls up low-single digits Sales $2,074 $2,097 1% - Fire & Security up modestly Segment EBITA $229 $244 7% - Solutions down low-single digits EBITA Margin % 11.0% 11.6% 60bps 

  10. Slide 10: Segment Results: Building Solutions EMEA/LA

    Segment Results: Building Solutions EMEA/LA* ($ in millions)  Organic sales down 3% Q2 FY17 Q2 FY18 Change - Europe – low single-digit decline driven Sales $891 $907 2% by lower installation in HVAC and Segment EBITA $79 $78 (1%) Industrial Refrigeration EBITA Margin % 8.9% 8.6% (30bps) - Middle Ea

  11. Slide 11: Segment Results: Building Solutions Asia Pacific

    Segment Results: Building Solutions Asia Pacific* ($ in millions)  Organic sales down 2% Q2 FY17 Q2 FY18 Change - High-single digit growth in service Sales $562 $586 4% - High-single digit decline in installation Segment EBITA $67 $71 6% related to the timing of large project flow- EBITA Margin % 1

  12. Slide 12: Segment Results: Global Products

    Segment Results: Global Products*  Organic sales up 6% ($ in millions) Q2 FY17 Q2 FY18 Change - Mid-single digit growth in Building Sales $2,014 $2,040 1% Management Segment EBITA $253 $237 (6%) - Mid-single digit growth in HVAC & Refrigeration Equipment EBITA Margin % 12.6% 11.6% (100bps) • Reside

  13. Slide 13: Segment Results: Power Solutions

    Segment Results: Power Solutions* ($ in millions)  Organic sales down 2% Q2 FY17 Q2 FY18 Change - Lower volumes Sales $1,696 $1,845 9% - Favorable price and technology mix Segment EBITA $303 $314 4% EBITA Margin % 17.9% 17.0% (90bps)  Sales favorably impacted 7% related to foreign currency and 4%

  14. Slide 14: Corporate Expense

    Corporate Expense*   Ongoing realization of cost synergies and 14% productivity savings ($ in millions) $128  Expect full year Corporate expense to be in the range of $425 to $440 million $110 Q2 FY17 Q2 FY18 *Non-GAAP excludes special items. See footnotes for reconciliation. 14 Johnson Controls

  15. Slide 15: Free Cash Flow

    Free Cash Flow Q2 Q2 H1 H1  Q2 adjusted free cash flow of $0.6 billion (in $ billions) FY17 FY18 FY17 FY18 - FY18 year-to-date adjusted free cash Cash provided (used) by flow up $0.3 billion vs. prior year $0.4 $0.7 $(1.5) $0.5 operating activities Capital expenditures (0.3) (0.3) (0.6) (0.5) - Ear

  16. Slide 16: Balance Sheet

    Balance Sheet Capital Structure Q1 FY18 Q2 FY18 Short-term debt and $1,605 $1,136 current portion of long-term debt Long-term debt 10,895 10,962 Total debt 12,500 12,098 Less: cash and cash 552 268 equivalents Net debt $11,948 $11,830 Net debt/EBITDA leverage 2.6x 2.5x Net debt/Cap 36.8% 36.2% Share

  17. Slide 17: Impact of Tariffs

    Impact of Tariffs Section 232 Steel and Aluminum U.S. Section 301 Tariffs on Chinese Tariffs (Enacted) Original Goods (Proposed)  Enacted March 2018  Under comment period –  Total steel and aluminum annual monitoring developments spend ~$225 million  Evaluating potential impact - All steel suppl

  18. Slide 18: FY18 Guidance Update

    FY18 Guidance Update Initial Guidance (Nov) Updated Guidance (May) Sales $30.1B to $30.7B $31.0B to $31.5B Flat to +2% reported +3% to +5% reported Low-single digit Organic Growth Low-single digit Organic Growth Segment Details: Organic Growth Organic Growth Buildings Low-single digits Low-single di

  19. Slide 19: Appendix

    Appendix If you can read this Click If you can read this Click on the icon to choose a on the icon to choose a picture or picture or Reset the slide. Reset the slide. To Reset: Right click on the slide To Reset: Right click on the slide thumbnail and select ‘reset slide’ or thumbnail and select ‘res

  20. Slide 20: Building Technologies & Solutions Segment Structure

    Building Technologies & Solutions Segment Structure  Controls  Fire Detection  Security Building Global Solutions Products Field / Direct Channel Indirect Channel ~$15B Europe Building Management ~$8B FY17 Sales ME& HVAC/R FY17 Sales Africa Equipment Latin  Chillers America  Unitary  Hitachi F

  21. Slide 21: FY18 Second Quarter Financial Results (continuing operations)

    FY18 Second Quarter Financial Results (continuing operations) ($ in millions, except earnings per share) Q2 FY17 Q2 FY18 Q2 FY17 * Q2 FY18* % Change GAAP GAAP NON-GAAP NON-GAAP NON-GAAP Sales $7,267 $7,475 $7,237 $7,475 3% Gross profit 2,281 2,220 2,246 2,220 (1%) % of sales 31.4% 29.7% 31.0% 29.7%

  22. Slide 22: Special Items (continuing operations)

    Special Items (continuing operations) $ In millions, except EPS Pre-tax Income Tax (Expense) NCI (Expense) After-tax Income Q2 FY18 (Expense) Benefit Benefit (Expense) EPS Impact Transaction costs $(3) $- $- $(3) $- Integration costs (61) 9 - (52) (0.06) Total* $(64) $9 $- $(55) $(0.06) Pre-tax Inco

  23. Slide 23: Second Quarter Restructuring and Impairment Costs

    Second Quarter Restructuring and Impairment Costs $ In millions Business Unit Cash Non-cash Total Q2 FY17 Q2FY18 Q2 FY17 Q2FY18 Q2 FY17 Q2FY18 Buildings $76 $- $21 $- $97 $- Power Solutions - - - - - - Corporate - - 2 - 2 - Total pre-tax charge $76 $- $23 $- $99 $- Tax benefit (20) - Total after-tax

  24. Slide 24: 1st Half / 2nd Half Bridge Items

    1ST Half / 2nd Half Bridge Items 1st Half 2nd Half y-o-y y-o-y Bridge Items  Product/Channel Investments  Salesforce Investments  Gross Margin Pressure – Backlog ($0.02) $0.13 $0.15  Gross Margin Pressure – Headwind Tailwind Delta Price/Cost  Transportation (Power)  Synergies/Productivity Savi

  25. Slide 25: Reorganized Segment Financial Information

    Reorganized Segment Financial Information* Q1FY17 Q2FY17 Q3FY17 Q4FY17 FY17 Building Solutions North America $ 1,942 $ 2,074 $ 2,135 $ 2,165 $ 8,316 Building Solutions EMEA / LA 878 891 889 921 3,579 Building Solutions Asia Pacific 576 562 630 677 2,445 Global Products 1,800 2,014 2,406 2,241 8,461

  26. Slide 26: johnsoncontrols.com/investors

    johnsoncontrols.com/investors @JCI_IR If you can read this Click If you can read this Click on the icon to choose a on the icon to choose a picture or picture or Reset the slide. Reset the slide. To Reset: Right click on the slide To Reset: Right click on the slide thumbnail and select ‘reset slide’

  27. Slide 27: Condensed Consolidated Statements of Income, Three Months

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Three Months Ended March 31, 2018 2017 Net sales $ 7,475 $ 7,267 Cost of sales 5,255 4,986 Gross profit 2,220 2,281 Selling, general and administrative expenses (1,588) (1,7

  28. Slide 28: Condensed Consolidated Statements of Income, Six Months

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Six Months Ended March 31, 2018 2017 Net sales $ 14,910 $ 14,353 Cost of sales 10,521 9,958 Gross profit 4,389 4,395 Selling, general and administrative expenses (3,005) (3,

  29. Slide 29: Condensed Consolidated Statements of Financial Position

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions; unaudited) March 31, September 30, 2018 2017 ASSETS Cash and cash equivalents $ 268 $ 321 Accounts receivable - net 6,679 6,666 Inventories 3,565 3,209 Assets held for sale 22 189 Other current a

  30. Slide 30: Condensed Consolidated Statements of Cash Flows, Three Months

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Three Months Ended March 31, 2018 2017 Operating Activities Net income (loss) attributable to JCI $ 438 $ (148) Income from continuing operations attributable to noncontrolling interests 45 33

  31. Slide 31: Condensed Consolidated Statements of Cash Flows, Six Months

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Six Months Ended March 31, 2018 2017 Operating Activities Net income attributable to JCI $ 668 $ 181 Income from continuing operations attributable to noncontrolling interests 86 73 Income fro

  32. Slide 32: Footnotes: Financial Summary

    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 e

  33. Slide 33: Adjusted Net Sales and Segment EBITA Reconciliation

    (1) The Company's press release contains financial information regarding adjusted net sales, 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 consi

  34. Slide 34: Adjusted Income Tax Provision Footnote

    (8) Adjusted income tax provision for the three months ended March 31, 2018 excludes the tax benefit for integration costs of $9 million. Adjusted income tax provision for the six months ended March 31, 2018 excludes the net tax provision related to the U.S. Tax Reform legislation of $204 million an

  35. Slide 35: Organic Adjusted Net Sales Growth Reconciliation

    3. Organic Adjusted Net Sales Growth Reconciliation The components of the changes in adjusted net sales for the three months ended March 31, 2018 versus the three months ended March 31, 2017, including organic net sales, is shown below (unaudited): Adjusted Net Sales Adjusted Base Net Adjusted Net S

  36. Slide 36: Net Debt to Capitalization

    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 financi

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