Johnson Controls International Plc · NYSE:JCI

Johnson Controls International — Q4 2018 Earnings Presentation

35 slides from Johnson Controls International's earnings presentation, Nov 8, 2018

  1. Slide 1: Fiscal 2018 Fourth Quarter

    Fiscal 2018 Fourth 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: 2018 In Review: Executing Our Commitments

    2018 In Review Executing Our Commitments  Significant progress related to target metrics  Executed disciplined capital allocation  Reduced debt by $2.6 billion  $300 million of share buybacks, offsetting normal stock option dilution  Delivered strong free cash flow improvement supported by Cash

  4. Slide 4: Significant Progress Related to Target Metrics

    Significant Progress Related to Target Metrics Original Target FY18 Results  Increased sales capacity 400 950   Accelerating Field orders in Buildings +7%   Accelerating service growth +4%   Accelerating Buildings organic growth +LSD +5%   Strong OE and aftermarket growth in Power +L/MSD +3

  5. Slide 5: Buildings Field Order Growth

    Buildings Field Order Growth Organic Field Orders 9% 8% 7% 5% 3% 3% 0% 0% Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Strong Order Growth Converting To Increased Sales 5 Johnson Controls International plc — November 8, 2018

  6. Slide 6: Q4 FY18 Financial Summary

    Q4 FY18 Financial Summary* ADJUSTED NET SALES ADJUSTED EPS $8,370M $0.93 $8,136M  +3% Reported $0.87  +7%  +6% Reported Organic Q4 FY17 Q4 FY18 Q4 FY17 Q4 FY18 ADJUSTED EBIT & MARGIN ADJUSTED FCF 88% $1,172M $2.3B Conversion $1,131M  10bps $1.3B Reported $1.1B 13.9% 14.0% $1.3B  50bps Excluding

  7. Slide 7: Q4 FY18 Results vs. Prior Year: EPS Bridge

    Q4 FY18 Results vs. Prior Year* EPS BRIDGE $0.07 $0.07 $0.93 $0.87 ($0.03) ($0.05) Transport ($0.01) FX ($0.02) Divest ($0.02) NCI ($0.01) Tax $0.01 Q4 FY17 SYNERGIES & VOLUME/ INVESTMENTS/ FX/TAX/ Q4 FY18 ACTUAL PRODUCTIVITY MIX SALESFORCE OTHER ACTUAL ADDITIONS *Non-GAAP excludes special items. Se

  8. Slide 8: Buildings

    Buildings* ($ in millions) Q4 FY17 Q4 FY18 Change  Organic sales up 8% - Products up 9% Sales $6,004 $6,183 3% - Field up 7%; service growth of 6% and Segment EBITA $904 $939 4% installation growth of 7% EBITA Margin % 15.1% 15.2% 10bps  Sales headwinds from M&A of 3% and foreign currency of 1% EB

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

    Segment Results: Building Solutions North America* ($ in millions) Q4 FY17 Q4 FY18 Change  Organic sales up 8% - Install up 10% / Service up 4% Sales $2,165 $2,324 7% - HVAC & Controls up mid-single digits Segment EBITA $315 $336 7% - Fire & Security up high-single digits EBITA Margin % 14.5% 14.5%

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

    Segment Results: Building Solutions EMEA/LA* ($ in millions) Q4 FY17 Q4 FY18 Change  Organic sales up 6% - Install up 4% / Service up 8% Sales $921 $948 3% - Europe – up high-single digits driven by Segment EBITA $95 $103 8% rebound in Industrial Refrigeration and EBITA Margin % 10.3% 10.9% 60bps H

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

    Segment Results: Building Solutions Asia Pacific* ($ in millions) Q4 FY17 Q4 FY18 Change  Organic sales up 4% - Install up 1% Sales $677 $689 2% - Service up 10% Segment EBITA $109 $105 (4%) EBITA Margin % 16.1% 15.2% (90bps)  Foreign currency negatively impacted sales by 2%  Orders increased 8%

  12. Slide 12: Segment Results: Global Products

    Segment Results: Global Products* ($ in millions) Q4 FY17 Q4 FY18 Change  Organic sales up 9% - Building Management Systems up high- Sales $2,241 $2,222 (1%) teens with strength across all businesses Segment EBITA $385 $395 3% • Controls, Fire Detection and Security EBITA Margin % 17.2% 17.8% 60bps

  13. Slide 13: Segment Results: Power Solutions

    Segment Results: Power Solutions* ($ in millions) Q4 FY17 Q4 FY18 Change  Organic sales up 2% - Modest decline in units Sales $2,132 $2,187 3% - Favorable price and technology mix Segment EBITA $431 $424 (2%) EBITA Margin % 20.2% 19.4% (80bps)  Sales favorably impacted 2% related to lead prices, p

  14. Slide 14: Corporate Expense

    Corporate Expense*   Ongoing realization of cost synergies and 11% productivity savings ($ in millions) $107 $95 Q4 FY17 Q4 FY18 *Non-GAAP excludes special items. See footnotes for reconciliation. 14 Johnson Controls International plc — November 8, 2018

  15. Slide 15: Free Cash Flow

    Free Cash Flow Q4 Q4  Q4 adjusted free cash flow of $1.3 billion (in $ billions) FY17 FY18 FY17 FY18  FY18 adjusted free cash flow of $2.3 Cash provided by $1.3 $1.3 $- $2.5 billion, 88% conversion operating activities Capital expenditures (0.3) (0.2) (1.3) (1.0) - Disciplined capex spend – $1.03

  16. Slide 16: Balance Sheet

    Balance Sheet Capital Structure Q3 FY18 Q4 FY18 Short-term debt and $1,583 $1,341 current portion of long-term debt Long-term debt 10,373 9,654 Total debt 11,956 10,995 Less: cash and cash 283 200 equivalents Net debt $11,673 $10,795 Net debt/EBITDA leverage 2.4x 2.2x Net debt/Cap 36.0% 33.8% Share

  17. Slide 17: Other Items

    Other Items Effective Tax Rate & New Revenue Accounting Standard  U.S. Tax Reform will increase effective tax rate in FY19; expect full year effective tax rate for continuing operations to be 16%, excluding special items, compared to previous range provided of 16% to 18%  New Accounting Standard –

  18. Slide 18: Fiscal 2019 Guidance: EPS Walk

    Fiscal 2019 Guidance* FY19 EPS WALK Up 7% to 13% $0.23 $2.90 to $3.05 $2.83 $0.28 $2.71 ($0.08) ($0.07) ($0.07) ($0.12) NFC ($0.04) NCI ($0.01) Pension ($0.03) Amort ($0.02) Shares $0.03 FY18 TAX RATE FY18 OPERATIONS SYNERGIES / FX INVESTMENTS OTHER FY19 ACTUAL NORMALIZED PRODUCTIVITY ITEMS GUIDANCE

  19. Slide 19: Fiscal 2019 Guidance

    Fiscal 2019 Guidance* Consolidated Adjusted Free Cash Flow Conversion ~90% Sales $33.2 - $33.7B Buildings Power** Mid-single Digit Organic Growth Impact of Up Up Accounting 4% - 6% $9.1B 3% - 5% Change organic organic $23.4B EBIT Margin** $8.0B +40 to +40 to +70bps +60bps 11.9% - 12.2% 13.2% 17.9% 1

  20. Slide 20: Appendix: Supplemental Information

    Appendix: Supplemental Information 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

  21. Slide 21: Normalized Financial Information

    Normalized Financial Information* Reflects New Accounting Standard – ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” Q1FY18 Q2FY18 Q3FY18 Q4FY18 FY18 Organic Organic Organic Organic Organic BT&S - North America 2,012 3.1% 2,097 0.6% 2,246 4.8% 2,324 7.7% 8,679 4.1% BT&S - EMEA/L

  22. Slide 22: FY18 Fourth Quarter Financial Results (continuing operations)

    FY18 Fourth Quarter Financial Results (continuing operations) ($ in millions, except earnings per share) Q4 FY17 Q4 FY18 Q4 FY17 * Q4 FY18* % Change GAAP GAAP NON-GAAP NON-GAAP NON-GAAP Sales $8,136 $8,370 $8,136 $8,370 3% Gross profit 2,513 2,519 2,453 2,535 3% % of sales 30.9% 30.1% 30.1% 30.3% SG

  23. Slide 23: Special Items (continuing operations)

    Special Items (continuing operations) $ In millions, except EPS Pre-tax Income Tax (Expense) NCI (Expense) After-tax Income Q4 FY18 (Expense) Benefit Income (Expense) EPS Impact Transaction costs $(12) $2 $- $(10) $(0.01) Restructuring & impairment costs (105) 14 - (91) (0.10) Integration costs (57)

  24. Slide 24: Fourth Quarter Restructuring and Impairment Costs

    Fourth Quarter Restructuring and Impairment Costs $ In millions Business Unit Cash Non-cash Total Q4 FY17 Q4FY18 Q4 FY17 Q4FY18 Q4 FY17 Q4 FY18 Buildings $35 $67 $3 $8 $38 $75 Power Solutions 13 - 3 4 16 4 Corporate 85 26 2 - 87 26 Total pre-tax charge $133 $93 $8 $12 $141 $105 Tax benefit (14) (14)

  25. Slide 25: johnsoncontrols.com/investors @JCI_IR

    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’

  26. Slide 26: Condensed Consolidated Statements of Income, Three Months Ended September 30

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Three Months Ended September 30, 2018 2017 Net sales $ 8,370 $ 8,136 Cost of sales 5,851 5,623 Gross profit 2,519 2,513 Selling, general and administrative expenses (1,478)

  27. Slide 27: Condensed Consolidated Statements of Income, Twelve Months Ended September 30

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Twelve Months Ended September 30, 2018 2017 Net sales $ 31,400 $ 30,172 Cost of sales 22,020 20,833 Gross profit 9,380 9,339 Selling, general and administrative expenses (6,

  28. Slide 28: Condensed Consolidated Statements of Financial Position

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions; unaudited) September 30, September 30, 2018 2017 ASSETS Cash and cash equivalents $ 200 $ 321 Accounts receivable - net 7,065 6,666 Inventories 3,224 3,209 Assets held for sale - 189 Other curren

  29. Slide 29: Condensed Consolidated Statements of Cash Flows, Three Months

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Three Months Ended September 30, 2018 2017 Operating Activities Net income attributable to JCI $ 771 $ 875 Income from continuing operations attributable to noncontrolling interests 54 52 Net

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

    JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Twelve Months Ended September 30, 2018 2017 Operating Activities Net income attributable to JCI $ 2,162 $ 1,611 Income from continuing operations attributable to noncontrolling interests 221 1

  31. Slide 31: 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

  32. Slide 32: Footnote 1: Non-GAAP Reconciliation of Net Sales and Segment EBITA

    (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

  33. Slide 33: Footnotes 7-8: Adjusted Financing Charges and Income Tax

    (7) Adjusted net financing charges for the twelve months ended September 30, 2017 exclude $17 million of transaction costs related to the debt exchange offers. (8) Adjusted income tax provision for the three months ended September 30, 2018 excludes the tax benefits for changes in entity tax status o

  34. Slide 34: Forward-Looking Non-GAAP Measures

    The Company has presented forward-looking statements regarding adjusted EPS from continuing operations, adjusted EBIT orgranic growth, adjusted EBIT margin, organic adjusted net sales growth and adjusted free cash flow conversion for the full fiscal year of 2019, which are non-GAAP financial measure

  35. Slide 35: 5. 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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