Johnson Controls International Plc · NYSE:JCI

Johnson Controls International — Q3 FY2018 Earnings Presentation

37 slides from Johnson Controls International's earnings presentation, Jul 31, 2018

  1. Slide 1: Fiscal 2018 Third Quarter Results

    Fiscal 2018 Third 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: Q3 FY18 Strategic Highlights

    Q3 FY18 Strategic Highlights  Momentum continues… - Ongoing traction increasing sales capacity - Accelerating Field orders in Buildings – contributing to organic growth - Improved secured margins in Buildings - Strong organic revenue growth in Products - Accelerating service growth - Strong OE and

  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 — July 31, 2018

  5. Slide 5: Buildings Field Order Growth

    Buildings Field Order Growth Organic Field Orders 8% 7% 5% 3% 3% 0% 0% Q1 FY17 Q2 FY17 Q3 FY17 Q4FY17 Q1 FY18 Q2 FY18 Q3 FY18 Strong Order Growth Converting to Increased Sales 5 Johnson Controls International plc — July 31, 2018

  6. Slide 6: Q3 FY18 Financial Summary

    Q3 FY18 Financial Summary* ADJUSTED NET SALES ADJUSTED EPS $8,120M $0.81  +6% $0.71 $7,669M Reported  +14%  +6% Reported Organic Q3 FY17 Q3 FY18 Q3 FY17 Q3 FY18 ADJUSTED EBIT & MARGIN ADJUSTED FCF $1,062M $1.0B  10bps $1,000M Reported $0.6B 13.0% 13.1%  70bps $0.2B $0.2B Excluding FX, Lead and

  7. Slide 7: Q3 FY18 Results vs. Prior Year

    Q3 FY18 Results vs. Prior Year* EPS BRIDGE $0.08 $0.81 $0.06 $0.71 ($0.04) $0.00 Q3 FY17 SYNERGIES & VOLUME/ INVESTMENTS/ FX/TAX/ Q3 FY18 ACTUAL PRODUCTIVITY MIX SALESFORCE OTHER ACTUAL ADDITIONS *Non-GAAP excludes special items. See footnotes for reconciliation. 7 Johnson Controls International plc

  8. Slide 8: Buildings

    Buildings* ($ in millions)  Organic sales up 5% Q3 FY17 Q3FY18 Change - Products up 7% Sales $6,060 $6,282 4% - Field up 4%; driven by strong 5% service Segment EBITA $908 $954 5% growth across all geographies EBITA Margin % 15.0% 15.2% 20bps  Sales headwind from M&A of 3% partially offset by 2% f

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

    Segment Results: Building Solutions North America* ($ in millions)  Organic sales up 5% Q3 FY17 Q3 FY18 Change - HVAC & Controls up mid-single digits Sales $2,135 $2,246 5% - Fire & Security up mid-single digits Segment EBITA $290 $318 10% - Solutions down low-single digits EBITA Margin % 13.6% 14.

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

    Segment Results: Building Solutions EMEA/LA* ($ in millions)  Organic sales flat Q3 FY17 Q3 FY18 Change - Europe – down low-single digits driven Sales $889 $926 4% by lower installation in HVAC and Segment EBITA $89 $98 10% Industrial Refrigeration EBITA Margin % 10.0% 10.6% 60bps - Middle East & A

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

    Segment Results: Building Solutions Asia Pacific* ($ in millions)  Organic sales up 4% Q3 FY17 Q3 FY18 Change - Double-digit growth in service Sales $630 $681 8% - Low-single digit growth in installation Segment EBITA $84 $97 15% EBITA Margin % 13.3% 14.2% 90bps  Foreign currency favorably impacte

  12. Slide 12: Segment Results: Global Products

    Segment Results: Global Products*  Organic sales up 7% ($ in millions) Q3 FY17 Q3 FY18 Change - High-single digit growth in Building Sales $2,406 $2,429 1% Management Systems Segment EBITA $445 $441 (1%) - High-single digit growth in HVAC & Refrigeration Equipment EBITA Margin % 18.5% 18.2% (30bps)

  13. Slide 13: Segment Results: Power Solutions

    Segment Results: Power Solutions* ($ in millions)  Organic sales up 10% Q3 FY17 Q3 FY18 Change - Higher unit volumes Sales $1,609 $1,838 14% - Favorable price and technology mix Segment EBITA $304 $310 2% EBITA Margin % 18.9% 16.9% (200bps)  Sales favorably impacted 2% related to foreign currency

  14. Slide 14: Corporate Expense

    Corporate Expense*   Ongoing realization of cost synergies and 16% productivity savings ($ in millions) $122  Expect full year Corporate expense to be approximately $415 million $102 Q3 FY17 Q3 FY18 *Non-GAAP excludes special items. See footnotes for reconciliation. 14 Johnson Controls Internatio

  15. Slide 15: Free Cash Flow

    Free Cash Flow Q3 Q3 YTD YTD  Q3 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 $1.0 billion, up $0.8 billion vs. $0.2 $0.7 $(1.3) $1.3 operating activities prior year Capital expenditures (0.4) (0.3) (

  16. Slide 16: Balance Sheet

    Balance Sheet Capital Structure Q2 FY18 Q3 FY18 Short-term debt and $1,136 $1,583 current portion of long-term debt Long-term debt 10,962 10,373 Total debt 12,098 11,956 Less: cash and cash 268 283 equivalents Net debt $11,830 $11,673 Net debt/EBITDA leverage 2.5x 2.4x Net debt/Cap 36.2% 36.0% Share

  17. Slide 17: Other Items: Effective Tax Rate & New Revenue Accounting Standard

    Other Items Effective Tax Rate & New Revenue Accounting Standard  Expect FY18 full year and Q4 effective tax rate to be 13%, excluding special items  New Accounting Standard – ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” - Clarifies the principles for recognizing revenue wh

  18. Slide 18: Impact of Tariffs

    Impact of Tariffs U.S. Section 232 U.S. Section 301 Steel and Aluminum Tariffs Tariffs on Chinese Original Goods  Enacted March 2018  First phase enacted in early July  Retaliatory tariffs announced 2018 end of May - Additional proposal released in  Total steel and aluminum annual mid-July; unde

  19. Slide 19: Full Year Guidance

    Full Year Guidance* FY18 EPS WALK Full Year Guidance  Various puts and takes to full $0.06 $2.81 year guidance $2.80 ($0.03) ($0.01) ($0.01)  Stronger operations offset by increased investments and FX ($0.04) transportation costs NFC $0.02 Tax $0.03  Tightening full year EPS* NCI ($0.02) guidance

  20. Slide 20: 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

  21. Slide 21: FY18 Guidance

    FY18 Guidance Guidance (May) Updated Guidance (July) Change Driver Sales $31.0B to $31.5B ~$31.3B Higher organic growth +3% to +5% reported ~+4% reported Lower FX benefit Low-single digit Organic Growth Low to mid-single digit Organic Growth Lower lead benefit FX Benefit ~$550M / Divestitures ~($750

  22. Slide 22: Building Solutions Global 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

  23. Slide 23: FY18 Third Quarter Financial Results (continuing operations)

    FY18 Third Quarter Financial Results (continuing operations) ($ in millions, except earnings per share) Q3 FY17 Q3 FY18 Q3 FY17 * Q3 FY18* % Change GAAP GAAP NON-GAAP NON-GAAP NON-GAAP Sales $7,683 $8,120 $7,669 $8,120 6% Gross profit 2,431 2,472 2,420 2,472 2% % of sales 31.6% 30.4% 31.6% 30.4% SG&

  24. Slide 24: Special Items (continuing operations)

    Special Items (continuing operations) $ In millions, except EPS Pre-tax Income Tax (Expense) NCI (Expense) After-tax Income Q3 FY18 (Expense) Benefit Benefit (Expense) EPS Impact Transaction costs $(2) $- $- $(2) $- Integration costs (49) 6 - (43) (0.05) Discrete income tax items - 13 - 13 0.01 Tota

  25. Slide 25: Third Quarter Restructuring and Impairment Costs

    Third Quarter Restructuring and Impairment Costs $ In millions Business Unit Cash Non-cash Total Q3 FY17 Q3FY18 Q3 FY17 Q3FY18 Q3 FY17 Q3FY18 Buildings $6 $- $27 $- $33 $- Power Solutions - - 4 - 4 - Corporate 12 - - - 12 - Total pre-tax charge $18 $- $31 $- $49 $- Tax benefit (15) - Total after-tax

  26. Slide 26: 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

  27. Slide 27: 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’

  28. Slide 28: 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 June 30, 2018 2017 Net sales $ 8,120 $ 7,683 Cost of sales 5,648 5,252 Gross profit 2,472 2,431 Selling, general and administrative expenses (1,527) (1,60

  29. Slide 29: Condensed Consolidated Statements of Income, Nine Months

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Nine Months Ended June 30, 2018 2017 Net sales $ 23,030 $ 22,036 Cost of sales 16,169 15,210 Gross profit 6,861 6,826 Selling, general and administrative expenses (4,532) (4

  30. Slide 30: Condensed Consolidated Statements of Financial Position

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions; unaudited) June 30, September 30, 2018 2017 ASSETS Cash and cash equivalents $ 283 $ 321 Accounts receivable - net 6,895 6,666 Inventories 3,509 3,209 Assets held for sale 12 189 Other current as

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

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Three Months Ended June 30, 2018 2017 Operating Activities Net income attributable to JCI $ 723 $ 555 Income from continuing operations attributable to noncontrolling interests 81 74 Income fr

  32. Slide 32: Condensed Consolidated Statements of Cash Flows, Nine Months

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Nine Months Ended June, 2018 2017 Operating Activities Net income attributable to JCI $ 1,391 $ 736 Income from continuing operations attributable to noncontrolling interests 167 147 Income fr

  33. Slide 33: 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

  34. Slide 34: Footnote 1: 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

  35. Slide 35: Footnote 8: Adjusted Income Tax Provision

    (8) Adjusted income tax provision for the three months ended June 30, 2018 excludes the tax benefits of the change in effective tax rate from 14% to 13% on the first and second quarters of $13 million and integration costs of $6 million. Adjusted income tax provision for the nine months ended June 3

  36. Slide 36: 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 June 30, 2018 versus the three months ended June 30, 2017, including organic net sales, is shown below (unaudited): Adjusted Net Sales Adjusted Base Net Adjusted Net Sal

  37. Slide 37: 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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