Johnson Controls reports strong start to the fiscal year and reaffirms full year guidance

– GAAP EPS from continuing operations of $0.21 per share, including special items

– Adjusted EPS from continuing operations of $0.40, up 54% versus prior year

– Sales of $5.6 billion, up 2%, reflecting organic growth of 3%; Field up 2% with organic growth of 4%; Products up 1% with organic growth of 2%

– Field orders flat organically versus strong prior year; Backlog up 6% organically versus prior year

– Repurchased approximately 15 million shares in the quarter for $651 million

– Reaffirms fiscal 2020 adjusted EPS from continuing operations guidance of $2.50 to $2.60, representing a year-over-year increase of 28% to 33%

Johnson Controls International plc (NYSE: JCI) reported fiscal first quarter 2020 GAAP earnings per share („EPS“) from continuing operations, including special items, of $0.21.  Excluding these items, adjusted EPS from continuing operations was $0.40, up 54% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $5.6 billion increased 2% compared to the prior year and grew 3% organically.

GAAP earnings before interest and taxes („EBIT“) was $308 million and EBIT margin was 5.5%. Adjusted EBIT was $448 million and adjusted EBIT margin was 8.0%, up 70 basis points over the prior year.  Excluding the impact of M&A and foreign currency, the underlying adjusted EBIT margin increased 80 basis points.

„Our first quarter results reflect a strong start to fiscal 2020, marking the fifth consecutive quarter of organic double-digit adjusted EBIT growth as a pure-play buildings technology company.  Our performance in the quarter reflects a continued commitment to solid execution and to improving the underlying fundamentals of our business, which is shared throughout the organization,“ said George Oliver, chairman and CEO.  „We deliver the safest, most secure and sustainable solutions for our customers given our robust portfolio of products and services.  This, along with our strong balance sheet, positions us well to continue to deliver long-term shareholder value,“ Oliver added.

Income and EPS amounts attributable to Johnson Controls ordinary shareholders
($ millions, except per-share amounts)

The financial highlights presented in the tables below are in accordance with GAAP, unless otherwise indicated. All comparisons are to the fiscal first quarter of 2019.  The results of Power Solutions are reported as discontinued operations in all periods presented.

Organic sales growth, organic EBITA growth, segment EBITA, adjusted segment EBITA, EBIT, adjusted EBIT, adjusted EPS from continuing operations and adjusted free cash flow are non-GAAP financial measures. For a reconciliation of these non-GAAP measures and detail of the special items, refer to the attached footnotes.  A slide presentation to accompany the results can be found in the Investor Relations section of Johnson Controls‘ website at http://investors.johnsoncontrols.com.

BUSINESS RESULTS

Building Solutions North America

Sales in the quarter of $2.2 billion, increased 2% versus the prior year.  Organic sales increased 3% versus the prior year led by strength in Fire & Security and, to a lesser extent, HVAC & Controls.  This growth was partially offset by a decline in Performance Solutions.

Orders in the quarter, excluding M&A and adjusted for foreign currency, decreased 1% year-over-year off a strong prior year and due to timing between quarters.  Backlog at the end of the quarter of $5.8 billion increased 7% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $259 million, up 2% versus the prior year. Adjusted segment EBITA margin of 12.0% was consistent with the prior year as favorable volume leverage as well as productivity savings and cost synergies, were offset by Retail mix.

Building Solutions EMEA/LA (Europe, Middle East, Africa/Latin America)

Sales in the quarter of $928 million increased 2% versus the prior year.  Organic sales grew 7% versus the prior year driven by strong growth in project installations and service.  Growth was positive across all regions and across HVAC & Controls, Fire & Security and Industrial Refrigeration.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 4% year-over-year.  Backlog at the end of the quarter of $1.7 billion increased 8% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $90 million, up 17% versus the prior year. Adjusted segment EBITA margin of 9.7% expanded 120 basis points over the prior year, including a 10 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 130 basis points driven by favorable volume leverage as well as the benefit from productivity savings and cost synergies.

Building Solutions Asia Pacific

Sales in the quarter of $629 million increased 3% versus the prior year.  Organic sales also increased 3% versus the prior year driven by growth in project installations, particularly in Fire & Security.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 1% year-over-year.  Backlog at the end of the quarter of $1.6 billion increased 2% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $72 million, up 9% versus the prior year. Adjusted segment EBITA margin of 11.4% expanded 60 basis points over the prior year driven by favorable volume leverage and the benefit of productivity savings and cost synergies.

Global Products

Sales in the quarter of $1.9 billion increased 1% versus the prior year. Organic sales increased 2% versus the prior year led by strong growth in Building Management Systems and, to a lesser extent, Specialty Products. Sales of HVAC & Refrigeration Equipment were consistent with the prior year.

Adjusted segment EBITA was $204 million, up 5% versus the prior year. Adjusted segment EBITA margin of 11.0% expanded 40 basis points over the prior year, including a 10 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 50 basis points driven by positive price/cost as well as the benefit of productivity savings and cost synergies.

Corporate

Adjusted Corporate expense was $81 million in the quarter, a decrease of 13% compared to the prior year, driven primarily by continued productivity savings and cost synergies, as well as cost reductions related to the Power Solutions sale.

OTHER ITEMS

• As expected during the quarter, the Company received an income tax refund of $0.6 billion.
• Cash provided by operating activities from continuing operations was $0.5 billion and capital expenditures were $0.1 billion in the quarter, resulting in free cash flow from continuing operations of $0.4 billion. Adjusted free cash flow was an outflow of $0.1 billion, which excludes net cash inflows of $0.4 billion primarily related to an income tax refund partially offset by integration costs.
• During the quarter, the Company repurchased approximately 15 million shares for $651 million.
• During the quarter, the Company recorded a pre-tax restructuring and impairment charge of $111 million primarily related to workforce reductions, plant closures and asset impairments.
• During the quarter, the Company adopted Accounting Standards Codification (ASC) 842, Leases, which resulted in an increase to other noncurrent assets of $1.1 billion, other current liabilities of $0.3 billion and other noncurrent liabilities of $0.8 billion.

About Johnson Controls:

At Johnson Controls, we transform the environments where people live, work, learn and play. From optimizing building performance to improving safety and enhancing comfort, we drive the outcomes that matter most. We deliver our promise in industries such as healthcare, education, data centers, and manufacturing. With a global team of 105,000 experts in more than 150 countries and over 130 years of innovation, we are the power behind our customers‘ mission. Our leading portfolio of building technology and solutions includes some of the most trusted names in the industry, such as Tyco^®, YORK^®, Metasys^®, Ruskin^®, Titus^®, Frick^®, PENN^®, Sabroe^®, Simplex^®, Ansul^® and Grinnell^®. For more information, visit www.johnsoncontrols.com or follow us @johnsoncontrols on Twitter