Johnson Controls International Plc · NYSE:JCI

Johnson Controls International — Q3 2017 Earnings Presentation

37 slides from Johnson Controls International's earnings presentation, Jul 27, 2017

  1. Slide 1: Quarterly Update FY17 Third Quarter

    Quarterly Update FY17 Third Quarter July 27, 2017 1 Johnson Controls plc. – July 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 Third 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, Executi

  5. Slide 5: Continuing To Execute Despite Slower Top-line Growth

    Continuing To Execute Despite Slower Top-line Growth  Solid quarter of earnings per share growth  Strong margin expansion  Integration and productivity savings continue to track to high-end of range  Slower than expected top-line growth  Cash conversion below planned levels  Full Year guided t

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

    FY17 Third Quarter Earnings from Continuing Operations* NET SALES DILUTED EPS $7.7 B $0.71 $7.6 B +1% Reported $0.61 +16% +1% Organic FY17 Q3 FY16 Q3 COMBINED FY17 Q3 FY16 Q3 COMBINED EBIT EBIT Margin $1,000 M $872 M +15%Reported +150bps Reported +15% Excluding FX +170bps Excluding FX and Lead and L

  7. Slide 7: Integration Update

    Integration Update  New organizational structure now in place - Significant number of leaders in new roles - Building depth & expertise  Continued cross-selling wins  Solid progress in quarter with cost synergies / productivity savings; expect to be at high-end of range FY17 Expected Synergies/Pr

  8. Slide 8: Building Technologies & Solutions

    Building Technologies & Solutions* Strong Margin Expansion NET SALES  Organic sales growth of +2% $6.1B $6.1B  Field +1% Flat Reported - Applied HVAC up mid-single digits - Fire & Security down low-single digits +2% Organic  Products +4% - Resi / light-commercial HVAC up high-single digits - Hita

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

    Building Technologies & Solutions Orders & Backlog  Orders secured +1% vs prior year (ex. FX and M&A) - Field flat - Products +4%  Backlog $8.4B, +3% vs prior year (ex. FX and M&A) COMBINED Y-o-Y Q3 FY17 Q3 FY16 Ex. FX and M&A Backlog $8.4B $8.2B +3% 9 Johnson Controls plc. – July 27, 2017

  10. Slide 10: Power Solutions

    Power Solutions* Increased Profitability and Margins NET SALES  OE shipments (down 6%); lower production $1.6 B in US and EMEA $1.5 B  Aftermarket (down 2%); market expectation +6%Reported for lead price reductions  Global shipments of start-stop +17% (2%)Organic - - China +79% Americas +47% FY17

  11. Slide 11: Corporate Expense

    Corporate Expense* CORPORATE EXPENSE  Ongoing realization of synergy and $145 M productivity savings $122 M  Continue to expect full year Corporate expense to be at lower (16%) end of the $480M to $500M range (~11% improvement vs prior year) FY17 Q3 FY16 Q3 COMBINED *Non-GAAP excludes special item

  12. Slide 12: FY17 Third Quarter Financial Highlights

    FY17 Third Quarter Financial Highlights (continuing operations) COMBINED % 2017 2017 * 2016 * (in millions) GAAP NON-GAAP NON-GAAP Change Sales $7,683 $7,669 $7,597 1% Gross profit 2,431 2,420 2,412 - % of sales 31.6% 31.6% 31.7% SG&A expenses 1,609 1,489 1,585 (6%) Restructuring & impairment costs

  13. Slide 13: FY17 Third Quarter Financial Highlights (continuing operations)

    FY17 Third Quarter Financial Highlights (continuing operations) COMBINED 2017 2017 * 2016 * (in millions, except earnings per share) GAAP NON-GAAP NON-GAAP EBIT $842 $1,000 $872 Net financing charges 124 124 110 Income before income taxes 718 876 762 Income tax provision 89 131 130 Net income 629 74

  14. Slide 14: FY17 Q3 Results vs. Prior Year

    FY17 Q3 Results vs. Prior Year* EPS BRIDGE $0.03 $0.02 $0.71 $0.07 ($0.01) ($0.01)  Delivered cost $0.61 synergies & productivity savings  Favorable mix in Buildings and Power FY17 FY16 SYNERGIES & VOLUME/ TAX INVESTMENTS FX Q3 Q3 PRODUCTIVITY MIX RATE ACTUAL* COMBINED* *Non-GAAP excludes special

  15. Slide 15: Free Cash Flow

    Free Cash Flow $ In billions FY17 Q3 Q3 YTD  Adjusted free cash flow of $0.2 Cash (used) / provided by operating billion year-to-date; impacted by activities $ 0.2 $(1.3) several items Capital expenditures (0.3) (1.0) - Continued PS inventory build of $0.4B Reported free cash flow (0.1) (2.3) - Def

  16. Slide 16: Balance Sheet

    Balance Sheet  Net debt to capital: 40.3% as of 3/31/17 vs. 41.2% at 6/30/17  Share repurchases - Q3: 7.3M shares; $307M - YTD: 10.2M shares; $426M - Full year expectation: $650 to $750M 16 Johnson Controls plc. – July 27, 2017 Note: Net debt = Total debt less cash

  17. Slide 17: Other Items

    Other Items  Q4 Special items - Restructuring and impairment costs - Transaction / integration costs - Pension / OPEB mark-to-market - Income taxes  Buildings reportable segment change expected in Q4 - Will provide quarterly new segments for fiscal 2017 with Q4 earnings  Previously announced dive

  18. Slide 18: FY17 Q4 Guidance vs. Prior Year

    FY17 Q4 Guidance vs. Prior Year* FY17 Q4 OUTLOOK EPS BRIDGE Sales $8.1B to $8.2B $0.86 - $0.09 $0.01 $0.02 $0.88 Organic Growth 2% to 3% $0.76 ($0.01) FX Headwind neutral Net M&A Activity ~($70M) Incl. Divestiture EBIT Margin Expansion +70 to 90 bps Diluted Shares ~940M FY16 Q4 SYNERGIES & PRODUCTIV

  19. Slide 19: 2017 Full Year Guidance

    2017 Full Year Guidance APRIL GUIDANCE CURRENT GUIDANCE Sales $30.0B to $30.2B $30.1B to $30.2B Organic Growth ~3% ~2% FX Headwind ~($380M) ~($160M) Net M&A Activity ~($250M) ~($250M) Incl. Divestiture EBIT Margin Expansion +80 to 110bps ~90bps Diluted Shares ~945M ~945M $2.60 to $2.68 $2.60 to $2.6

  20. Slide 20: Appendix

    Appendix 20 Johnson Controls plc. – July 27, 2017

  21. Slide 21: Building Technologies & Solutions Segment Detail

    Building Technologies & Solutions Segment Detail Sales Growth Orders Growth (Organic) (Organic) FY17 Q3 FY17 Q3 Building Efficiency Systems & Services North America 2% (1%) Products North America 2% 3% Asia 9% 11% Rest of World 1% 2% 4% 5% Tyco (1%) (4%) Buildings 2% 1% 21 Johnson Controls plc. – Ju

  22. Slide 22: 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 22 Joh

  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 Q3 (Expense) Benefit Benefit (Expense) EPS Impact* Transaction Costs ($16) $2 $- ($14) ($0.01) Integration Costs (54) 9 - (45) (0.05) Restructuring & Impairment Costs (49) 15 -

  24. Slide 24: Third Quarter YTD FY17 Restructuring and Impairment Costs

    Third Quarter YTD FY17 Restructuring and Impairment Costs $ In millions Business Unit Cash Non-cash Total Q3 YTD Q3 YTD Q3 YTD Building Technologies & Solutions $6 $94 $27 $49 $33 $143 Power Solutions - - 4 4 4 4 Corporate 12 62 - 17 12 79 Total pre-tax charge $18 $156 $31 $70 $49 $226 Tax impact (1

  25. Slide 25: 2017 Full Year Foreign Exchange Impact

    2017 Full Year Foreign Exchange Impact April FX Guidance Current FX Guidance FY17 Q2 Earnings Call FY17 Q3 Earnings Call 2017 Sales ($380M) ($160M) Headwind (~1%) (~1%) 2017 EPS ($0.05) ($0.03) Headwind Top Foreign Currency Exposures March FX Rates Current FX Rates FY17 Q2 Earnings Call FY17 Q3 Earn

  26. Slide 26: johnsoncontrols.com/investors

    johnsoncontrols.com/investors @JCI_IR 26 Johnson Controls plc. – July 27, 2017

  27. Slide 27: Condensed Consolidated Statements of Income (Three Months)

    July 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Three Months Ended June 30, 2017 2016 Net sales $ 7,683 $ 5,154 Cost of sales 5,252 3,732 Gross profit 2,431 1,422 Selling, general and administrative expenses

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

    July 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data; unaudited) Nine Months Ended June 30, 2017 2016 Net sales $ 22,036 $ 14,583 Cost of sales 15,210 10,617 Gross profit 6,826 3,966 Selling, general and administrative expen

  29. Slide 29: Condensed Consolidated Statements of Financial Position

    July 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions; unaudited) June 30, September 30, 2017 2016 ASSETS Cash and cash equivalents $ 458 $ 579 Accounts receivable - net 6,443 6,394 Inventories 3,384 2,888 Assets held for sale 2,082 5,8

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

    July 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Three Months Ended June 30, 2017 2016 Operating Activities Net income attributable to JCI $ 555 $ 383 Income from continuing operations attributable to noncontrolling interests 7

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

    July 27, 2017 JOHNSON CONTROLS INTERNATIONAL PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions; unaudited) Nine Months Ended June 30, 2017 2016 Operating Activities Net income attributable to JCI $ 736 $ 303 Income from continuing operations attributable to noncontrolling interests 14

  32. Slide 32: Footnotes: Financial Summary

    July 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 a

  33. Slide 33: Footnotes: Segment EBITA Reconciliation

    July 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 costs

  34. Slide 34: Footnotes

    July 27, 2017 (4) The three months ended June 30, 2017 pension mark-to-market loss of $45 million and the nine months ended June 30, 2017 pension mark-to-market gain of $90 million due to lump sum payouts for certain U.S. pension plans are excluded from the adjusted non-GAAP results. (5) The three a

  35. Slide 35: Amounts Adjusted for Certain Special Items

    July 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 spe

  36. Slide 36: Organic Adjusted Net Sales Growth Reconciliation

    July 27, 2017 3. Organic Adjusted Net Sales Growth Reconciliation The components of the changes in adjusted net sales for the three months ended June 30, 2017 versus the three months ended June 30, 2016, including organic net sales, is shown below (unaudited): Combined Adjusted Net Sales for the Thr

  37. Slide 37: Forward-Looking Non-GAAP Adjusted EPS Note

    July 27, 2017 The Company has presented forward-looking statements regarding adjusted EPS from continuing operations for the fourth quarter of 2017 and the full fiscal year of 2017, which is a non-GAAP financial measure. This non–GAAP financial measure is derived by excluding certain amounts, expens

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