CORK, Ireland, July 31, 2018 /PRNewswire/ -- Johnson Controls International plc JCI today reported fiscal third quarter 2018 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.78.  Excluding these items, adjusted EPS from continuing operations was $0.81, up 14% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $8.1 billion increased 6% compared to the prior year.  Excluding the impacts of M&A, foreign currency and lead prices, total sales also grew 6% organically.     

GAAP earnings before interest and taxes ("EBIT") was $1,011 million and EBIT margin was 12.5%. Adjusted EBIT was $1,062 million and adjusted EBIT margin was 13.1%, up 10 basis points over the prior year.   Excluding the impact of the Scott Safety divestiture, foreign currency and lead prices, the underlying adjusted EBIT margin increased 70 basis points.

"We delivered another quarter of strong results, with our commitment to execution driving continued operating momentum across the organization.  Organic sales growth accelerated to 6%, with solid growth in both Buildings and Power Solutions.  More disciplined operating fundamentals and processes are driving improved performance against all of our key initiatives, including service, pricing, orders, underlying margins and free cash flow," said George Oliver, chairman and chief executive officer. 

Additionally, I am very pleased with the significant progress we have made on the strategic review of our Power Solutions business, across multiple alternatives.  We expect to conclude the review by the release of our fourth quarter earnings," Oliver continued.    

"Based on our year-to-date performance and continued momentum in the businesses, we are tightening our full year guidance range for adjusted EPS from continuing operations to $2.80 to $2.82."      

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 third quarter of 2017.

Organic sales growth, adjusted segment EBITA, 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 were $2.2 billion, an increase of 5% versus the prior year quarter.  Excluding M&A and foreign currency, organic sales also increased 5% versus the prior year, driven primarily by strong growth in Fire & Security and HVAC & Controls.        

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 8% year-over-year.  Backlog at the end of the quarter of $5.4 billion increased 7% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $318 million, up 10% versus the prior year. Adjusted segment EBITA margin of 14.2% expanded 60 basis points driven by favorable volume and mix as well as cost synergies and productivity savings, partially offset by salesforce additions and, to a lesser extent, lower margin backlog conversion. 

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

Sales in the quarter were $926 million, an increase of 4% versus the prior year quarter.  Excluding M&A and foreign currency, organic sales were flat with the prior year as stronger service activity was offset primarily by continued softness in project installations in European HVAC and Industrial Refrigeration. By region, growth in Latin America and the Middle East was offset by declines in Europe.        

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 13% year-over-year.  Backlog at the end of the quarter of $1.6 billion increased 6% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $98 million, up 10% versus the prior year quarter. Adjusted segment EBITA margin of 10.6% expanded 60 basis points over the prior year, including a 40 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 100 basis points driven primarily by the benefit from cost synergies and productivity savings. 

Building Solutions Asia Pacific

Sales in the quarter were $681 million, an increase of 8% versus the prior year quarter.  Excluding M&A and foreign currency, organic sales increased 4% versus the prior year, with double-digit growth in service and low-single digit growth in project installations.        

Orders in the quarter, excluding M&A and adjusted for foreign currency, declined 1% year-over-year.  Backlog at the end of the quarter of $1.5 billion increased 9% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $97 million, up 15% versus the prior year. Adjusted segment EBITA margin of 14.2% expanded 90 basis points over the prior year, including a 50 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 140 basis points driven by the benefit of cost synergies and productivity savings as well as favorable volume and mix, partially offset by salesforce additions.    

Global Products

Sales in the quarter were $2.4 billion, an increase of 1% versus the prior year quarter.  Excluding M&A and foreign currency, organic sales increased 7% versus the prior year led by high-single digit growth in both HVAC & Refrigeration Equipment and Building Management Systems, and mid-single digit growth in Specialty Products.     

Adjusted segment EBITA was $441 million, down 1% versus the prior year, primarily attributable to the impact of the Scott Safety divestiture.  Adjusted segment EBITA margin of 18.2% declined 30 basis points over the prior year including a 90 basis point headwind related to the divestiture of the Scott Safety business. The underlying margin expanded 60 basis points as favorable volume leverage and the benefit of cost synergies and productivity savings was partially offset by product and channel investments. 

Power Solutions

Sales in the quarter were $1.8 billion, an increase of 14% versus the prior year quarter.  Excluding the impact of higher lead pass-through and foreign currency, organic sales increased 10% driven by higher unit volumes, as well as favorable price and technology mix. Global original equipment battery shipments increased 6%, outpacing overall market demand, benefitting from several recent business wins. Aftermarket shipments also grew 6% driven by strong growth in EMEA and China. Start-stop battery shipments increased 30% year-over-year, led by strong growth in China, EMEA and the Americas.  

Power Solutions adjusted segment EBITA was $310 million, a 2% increase compared to the prior year.  Adjusted segment EBITA margin of 16.9% decreased 200 basis points compared with the prior year, including a 150 basis point headwind related to the impact of higher lead prices and foreign currency. Power Solution's underlying margin declined 50 basis points as favorable volume mix and productivity savings were more than offset by higher transportation costs and planned incremental investments.    

Corporate

Adjusted Corporate expense was $102 million in the quarter, a decrease of 16% compared to the prior year quarter driven primarily by cost synergies and productivity savings.   

OTHER ITEMS

• Cash from operating activities less capex was $0.4 billion for the quarter and $0.5 billion year-to- date.  Adjusted free cash flow was $0.6 billion for the quarter and $1.0 billion year-to-date.  Adjusted free cash flow excludes net cash outflows of $0.2 billion in the quarter and $0.5 billion year-to-date primarily related to restructuring and integration costs and nonrecurring tax payments. 
• During the quarter, the Company repurchased 1.6 million shares for approximately $60 million; year-to-date share repurchases totaled 6.5 million shares for approximately $250 million.

About Johnson Controls:

Johnson Controls is a global diversified technology and multi industrial leader serving a wide range of customers in more than 150 countries. Our 120,000 employees create intelligent buildings, efficient energy solutions, integrated infrastructure and next generation transportation systems that work seamlessly together to deliver on the promise of smart cities and communities. Our commitment to sustainability dates back to our roots in 1885, with the invention of the first electric room thermostat. We are committed to helping our customers win and creating greater value for all of our stakeholders through strategic focus on our buildings and energy growth platforms. For additional information, please visit http://www.johnsoncontrols.com or follow us @johnsoncontrols on Twitter.

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 statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this communication, statements regarding Johnson Controls' future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures and debt levels are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Johnson Controls' control, that could cause Johnson Controls' actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: any delay or inability of Johnson Controls to realize the expected benefits and synergies of recent portfolio transactions such as the merger with Tyco and the spin-off of Adient, changes in tax laws (including but not limited to the recently enacted Tax Cuts and Jobs Act), regulations, rates, policies or interpretations, the loss of key senior management, the tax treatment of recent portfolio transactions, significant transaction costs and/or unknown liabilities associated with such transactions, the outcome of actual or potential litigation relating to such transactions, the risk that disruptions from recent transactions will harm Johnson Controls' business, the strength of the U.S. or other economies, changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency rates, cancellation of or changes to commercial arrangements, and with respect to the recently announced review of strategic alternatives for the Power Solutions business, which review is expected to conclude by the release of our fiscal 2018 fourth quarter earnings, uncertainties as to the structure and timing of any transaction and whether it will be completed, the possibility that closing conditions for a transaction may not be satisfied or waived, the impact of the strategic review and any transaction on Johnson Controls and the Power Solutions business on a standalone basis if a transaction is completed, and whether the strategic benefits of any transaction can be achieved. A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the 2017 fiscal year filed with the SEC on November 21, 2017, and its Quarterly Reports on Form 10-Q for the quarterly periods ended December 31, 2017 and March 31, 2018 filed with the SEC on February 2, 2018 and May 3, 2018, respectively, which are and available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. Shareholders, potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements. The forward-looking statements included in this communication are made only as of the date of this document, unless otherwise specified, and, except as required by law, Johnson Controls assumes no obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date of this communication.

Non-GAAP Financial Information

The Company's press release contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include mark-to-market for pension and postretirement plans, transaction/integration/separation costs, restructuring and impairment costs, nonrecurring purchase accounting impacts related to the Tyco merger, Scott Safety gain on sale and discrete tax items. Financial information regarding adjusted sales, organic sales, adjusted segment EBITA, adjusted segment EBITA margin and adjusted free cash flow are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as transaction/integration/separation costs and nonrecurring purchase accounting impacts because these costs are not considered to be directly related to the underlying operating performance of its business units.  Management believes that, when considered together with unadjusted amounts, these non-GAAP measures are useful to investors in understanding period-over-period operating results and business trends of the Company. Management may also use these metrics as guides in forecasting, budgeting and long-term planning processes and for compensation purposes. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure.

 

 

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SOURCE Johnson Controls