Johnson Controls International Plc · NYSE:JCI

Johnson Controls International — Q2 2017 Earnings Presentation

38 slides from Johnson Controls International's earnings presentation, Apr 27, 2017

1. Slide 1: Quarterly Update FY17 Second Quarter

   Quarterly Update FY17 Second Quarter April 27, 2017 1 Johnson Controls, plc. – April 27, 2017

2. Slide 2: Cautionary Statement Regarding Forward-Looking Statements

   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 statemen

3. Slide 3: Non GAAP Financial Information

   Non GAAP Financial Information This presentation contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include mark-to-market for pension plans, transaction/integration/separation costs, restructuring and impairment costs,

4. Slide 4: Agenda

   Agenda Introduction 1 Antonella Franzen, Vice President, Investor Relations Second quarter highlights 2 Alex Molinaroli, Chairman and Chief Executive Officer Integration update & business results 3 George Oliver, President and Chief Operating Officer Financial review & guidance 4 Brian Stief, Execut

5. Slide 5: Demonstrating Solid Progress Towards Our FY17 Priorities

   Executing Our Plan Demonstrating Solid Progress Towards Our FY17 Priorities  Strong quarter of earnings per share growth  Continued focus on productivity and “self-help” initiatives  Strong progress with integration efforts and related savings  Accelerating organic growth in Buildings  Strategi

6. Slide 6: FY17 Second Quarter Earnings from Continuing Operations

   FY17 Second Quarter Earnings from Continuing Operations* NET SALES DILUTED EPS $7.2 B $7.1 B $0.50 +3% Reported $0.45 +11% +2% Organic FY17 Q2 FY16 Q2 COMBINED FY17 Q2 FY16 Q2 COMBINED EBIT EBIT Margin $711 M $680 M +5% +20bps Reported Reported +7% Excluding FX +60bps Excluding FX and Lead and Lead

7. Slide 7: Integration Update

   Integration Update  Significant progress on Buildings organizational structure  Several cross-selling wins with pipeline of opportunities  Solid progress in quarter with cost synergies / productivity savings; expect to be at high-end of range FY17 Expected Synergies/Productivity Q1 FY17 Q2 FY17 Q

8. Slide 8: Building Technologies & Solutions: Accelerating Organic Sales Growth

   Building Technologies & Solutions* Accelerating Organic Sales Growth NET SALES  Organic sales growth of +3% $5.5 B $5.5 B  Field +4% - Applied HVAC up mid-single digits $5.2 B 1% - Fire & Security up low-single digits Reported  Products down 1% 3% Organic - Resi / light-commercial HVAC up high-te

9. Slide 9: Building Technologies & Solutions Orders & Backlog

   Building Technologies & Solutions Orders & Backlog  Orders secured +2% vs prior year (ex. FX and M&A) - Field +3% - Products down 1%  Backlog $8.3B, +6% vs prior year (ex. FX and M&A) COMBINED Y-o-Y Q2 FY17 Q2 FY16 Ex. FX and M&A Backlog $8.3B $8.1B +6% 9 Johnson Controls, plc. – April 27, 2017

10. Slide 10: Power Solutions: Increased Profitability

    Power Solutions* Increased Profitability NET SALES  Lower volumes in North America and China  OE shipments (flat); Aftermarket (down 3%) $1.7 B $1.6 B related to customer demand patterns +7%Reported  Global shipments of start-stop +36% - China +93% (1%)Organic - Americas +60% FY17 Q2 FY16 Q2 - EM

11. Slide 11: Corporate Expense

    Corporate Expense*  Includes executive management, public CORPORATE EXPENSE company costs and functional administrative $128 M $130 M costs that support the enterprise  Sequential Q2 increase related to the timing (2%) of expenses  Expect full year Corporate expense to be at lower end of the $480

12. Slide 12: FY17 Second Quarter Financial Highlights

    FY17 Second Quarter Financial Highlights (continuing operations) COMBINED % 2017 2017 * 2016 * (in millions) GAAP NON-GAAP NON-GAAP Change Sales $7,267 $7,237 $7,058 3% Gross profit 2,281 2,246 2,219 1% % of sales 31.4% 31.0% 31.4% SG&A expenses 1,726 1,588 1,579 1% Restructuring & 99 - - impairment

13. Slide 13: FY17 Second Quarter Financial Highlights (continued)

    FY17 Second Quarter Financial Highlights (continuing operations) COMBINED 2017 2017 * 2016 * (in millions, except earnings per share) GAAP NON-GAAP NON-GAAP EBIT $509 $711 $680 Net financing charges 116 116 114 Income before income taxes 393 595 566 Income tax provision 508 89 96 Net (loss) income (

14. Slide 14: FY17 Q2 Results vs. Prior Year

    FY17 Q2 Results vs. Prior Year* EPS BRIDGE  Solid cost synergies & productivity $0.01 $0.01 $0.06 $0.50 savings $0.45 ($0.02) ($0.01)  Continued investments in Buildings and Power FY16 SYNERGIES & AMORTIZATION TAX INVESTMENTS FX FY17 Q2 PRODUCTIVITY EXPENSE RATE Q2 COMBINED* ACTUAL* *Non-GAAP excl

15. Slide 15: Free Cash Flow

    Free Cash Flow $ In billions FY17 Q1 Q2  Adjusted free cash flow of $0.3 Actual Actual Cash (used) / provided by operating billion in the quarter activities $(1.9) $ 0.4 Capital expenditures* (0.4) (0.3)  Capex of $0.3 billion in-line with Reported free cash flow (2.3) 0.1 expectations  Transacti

16. Slide 16: Balance Sheet

    Balance Sheet  Net debt to capital consistent: 39.7% as of 12/31/16 vs. 40.3% at 3/31/17  Recent debt offerings / refinancing - Q2 2017, raised ~$1.6B in debt: Principal Interest Rate and Maturity $500 million 4.5% Notes; 30 year term €1 billion 1.0% Notes; 6.5 year term - Proceeds used for repaym

17. Slide 17: Other Items

    Other Items  Announced divestiture of Scott Safety business; classified as held-for-sale  Completed sale of ADT South Africa Security business for ~$130 million  Special items - Restructuring and impairment costs - Transaction / integration / separation costs - Pension / OPEB mark-to-market - Inc

18. Slide 18: Announced Divestiture of Scott Safety

    Announced Divestiture of Scott Safety Impact of Announced ~5% of total Divestiture revenue  $2.0B cash transaction Transaction  13X trailing 12 month EBITDA Terms  Net cash proceeds of $1.8B to $1.9B  Sales ~$570M Financial  EBITDA ~$155M Impact  $0.07 dilutive to earnings Expected Closing  R

19. Slide 19: FY17 Q3 Guidance vs. Prior Year

    FY17 Q3 Guidance vs. Prior Year* FY17 Q3 OUTLOOK EPS BRIDGE Sales ~$7.7B $0.70 - $0.03 $0.02 $0.73 $0.07 Organic Growth ~3% $0.61 ($0.01) ($0.01) FX Headwind ~($140M) Net M&A Activity ~($70M) Incl. Divestiture EBIT Margin Expansion +110 to +140 bps Diluted Shares ~945M FY16 SYNERGIES & VOLUME/ TAX R

20. Slide 20: 2017 Full Year Guidance

    2017 Full Year Guidance Initial Guidance Updated Guidance Sales $29.7B to $30.2B $30.0B to $30.2B Organic Growth 2.5% to 4.5% ~3% FX Headwind ~($430M) ~($380M) Net M&A Activity ~($300M) ~($250M) Incl. Divestiture EBIT Margin Expansion +80 to 110bps +80 to 110bps Diluted Shares ~940M ~945M $2.60 to $

21. Slide 21: Appendix

    Appendix 21 Johnson Controls, plc. – April 27, 2017

22. Slide 22: Building Technologies & Solutions Segment Detail

    Building Technologies & Solutions Segment Detail Sales Growth Orders Growth (Organic) (Organic) FY17 Q2 FY17 Q2 Building Efficiency Systems & Services North America +2% +6% Products North America +8% +8% Asia +1% (1%) Rest of World +7% +9% +3% +4% Tyco +1% (2%) Buildings +3% +2% 22 Johnson Controls,

23. Slide 23: Buildings Reportable Segment Change

    Buildings Reportable Segment Change NA Systems & Service PRIOR NA Products & Distribution Asia  Global Products ROW  Building Solutions North America  Building Solutions + EMEA / LA  Building Solutions Asia Pacific NA Installation & Service PRIOR ROW Installation & Service Global Products 23 Joh

24. Slide 24: Second Quarter Special Items

    Second Quarter Special Items (continuing operations) $ In millions, except EPS Pre-tax Income Tax (Expense) NCI (Expense) After-tax Income 2017 (Expense) Benefit Benefit (Expense) EPS Impact* Transaction, Integration & Separation Costs ($138) $31 $- ($107) ($0.11) Restructuring & Impairment Costs (9

25. Slide 25: Second Quarter FY17 Restructuring and Impairment Costs

    Second Quarter FY17 Restructuring and Impairment Costs $ In millions Business Unit Cash Non-cash Total Building Technologies & Solutions $76 $21 $97 Corporate - 2 2 Total pre-tax charge $76 $23 $99 Tax impact (20) Total after-tax charge $79 Restructuring and Non-cash Impairment Charges Primarily Rel

26. Slide 26: 2017 Full Year Foreign Exchange Impact

    2017 Full Year Foreign Exchange Impact Original FX Guidance Current FX Guidance December Investor Day FY17 Q2 Earnings Call 2017 Sales ($430M) ($380M) Headwind (~2%) (~1%) 2017 EPS ($0.07) ($0.05) Headwind Top Foreign Currency Exposures Original FX Rates March FX Rates December Investor Day FY17 Q2

27. Slide 27: johnsoncontrols.com/investors

    johnsoncontrols.com/investors @JCI_IR 27 Johnson Controls, plc. – April 27, 2017

28. Slide 28: Condensed Consolidated Statements of Income (Three Months)

    April 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Three Months Ended March 31, 2017 2016 Net sales $ 7,267 $ 4,733 Cost of sales 4,986 3,446 Gross profit 2,281 1,287 Selling, general and administrative expens

29. Slide 29: Condensed Consolidated Statements of Income (Six Months)

    April 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Six Months Ended March 31, 2017 2016 Net sales $ 14,353 $ 9,429 Cost of sales 9,958 6,885 Gross profit 4,395 2,544 Selling, general and administrative expense

30. Slide 30: Condensed Consolidated Statements of Financial Position

    April 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions; unaudited) March 31, September 30, 2017 2016 ASSETS Cash and cash equivalents $ 412 $ 579 Accounts receivable - net 6,094 6,394 Inventories 3,138 2,888 Assets held for sale 2,037 5

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

    April 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Three Months Ended March 31, 2017 2016 Operating Activities Net loss attributable to JCI $ (148) $ (530) Income from continuing operations attributable to noncontrolling interes

32. Slide 32: Condensed Consolidated Statements of Cash Flows (Six Months)

    April 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Six Months Ended March 31, 2017 2016 Operating Activities Net income (loss) attributable to JCI $ 181 $ (80) Income from continuing operations attributable to noncontrolling int

33. Slide 33: Footnotes: Financial Summary

    April 27, 2017 FOOTNOTES 1. Financial Summary In the first quarter of fiscal 2017, the Company began evaluating 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

34. Slide 34: Reconciliation of Adjusted Sales and Segment EBITA

    April 27, 2017 (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 cost

35. Slide 35: Footnotes on Special Items

    April 27, 2017 (4) The three and six months ended March 31, 2017 pension mark-to-market gains of $18 million and $135 million, respectively, due to lump sum payouts for certain U.S. pension plans are excluded from the adjusted non- GAAP results. (5) The three and six months ended March 31, 2017 rest

36. Slide 36: Amounts Adjusted for Certain Special Items

    April 27, 2017 Amounts Adjusted for Certain Special Items The supplemental combined information includes line items, such as net sales, income from continuing operations before income taxes, income tax provision, noncontrolling interest, net income and diluted EPS, that have been adjusted for the sp

37. Slide 37: Organic Adjusted Net Sales Growth Reconciliation

    April 27, 2017 3. Organic Adjusted Net Sales Growth Reconciliation The components of the changes in adjusted net sales for the three months ended March 31, 2017 versus the three months ended March 31, 2016, including organic net sales, is shown below (unaudited): Combined Adjusted Net Sales for the

38. Slide 38: Weighted Average Shares Outstanding Reconciliation

    April 27, 2017 The following table reconciles the denominators used to calculate basic and diluted earnings per share for JCI plc (in millions; unaudited): Three Months Ended Six Months Ended March 31, March 31, 2017 2016 2017 2016 Weighted Average Shares Outstanding for JCI plc Basic weighted avera

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