Johnson Controls reports fiscal Q4 2018 and full year earnings with strong organic revenue growth and free cash flow conversion; announces an additional $1B share repurchase authorization

CORK, Ireland, Nov. 8, 2018 /PRNewswire/ -- Johnson Controls International plc JCI today reported fiscal fourth quarter 2018 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.83.  Excluding these items, adjusted EPS from continuing operations was $0.93, up 7% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $8.4 billion increased 3% compared to the prior year.  Excluding the impacts of M&A, foreign currency and lead prices, total sales grew 6% organically.     

GAAP earnings before interest and taxes ("EBIT") was $1.0 billion and EBIT margin was 12.0%. Adjusted EBIT was $1.2 billion and adjusted EBIT margin was 14.0%, 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 50 basis points.

The Company announced that the Board of Directors has approved an additional $1 billion share repurchase authorization.  There is currently $900 million remaining on a previous authorization.

"Solid fourth quarter results close out a year of significant progress for Johnson Controls, with positive momentum as we enter fiscal 2019," said George Oliver, chairman and CEO. "Our teams around the globe successfully delivered on our operating goals, with strong organic growth and cash flow performance."   

"We are in the final stages of the strategic review of our Power Solutions business.  We have assessed multiple options and have made significant progress toward making a final decision."

"As we look forward to fiscal 2019, we remain focused on driving execution across our portfolio to further enhance our growth trajectory supported by our strong backlog, order momentum and new business wins.  We expect our overall financial performance to continue to improve by intensely focusing on top-line growth, margin expansion and free cash flow conversion," Oliver continued. 

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 fourth quarter and fiscal year 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.



GAAP



ADJUSTED



GAAP



ADJUSTED



Q4

2017

Q4

2018



Q4

2017

Q4

2018



FY

2017

FY

2018



FY

2017

FY

2018

Sales

$8,136

$8,370



$8,136

$8,370



$30,172

$31,400



$30,138

$31,400

Segment EBITA

1,262

1,334



1,335

1,363



4,258

4,555



4,446

4,514

EBIT

1,182

1,001



1,131

1,172



3,054

3,342



3,599

3,722

Net income from continuing operations

875

771



813

870



1,654

2,162



2,459

2,633

Diluted EPS from continuing operations

$0.93

$0.83



$0.87

$0.93



$1.75

$2.32



$2.60

$2.83

BUSINESS RESULTS

Building Solutions North America



GAAP



ADJUSTED



GAAP



ADJUSTED



Q4

2017

Q4

2018



Q4

2017

Q4

2018



FY

2017

FY

2018



FY

2017

FY

2018

Sales

$2,160

$2,324



$2,165

$2,324



$8,341

$8,679



$8,316

$8,679

Segment EBITA

$298

$329



$315

$336



$1,039

$1,109



$1,070

$1,134

Segment EBITA margin %

13.8%

14.2%



14.5%

14.5%



12.5%

12.8%



12.9%

13.1%

Sales in the quarter were $2.3 billion, an increase of 7% versus the prior year.  Excluding M&A and foreign currency, organic sales increased 8% 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 6% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $336 million, up 7% versus the prior year. Adjusted segment EBITA margin of 14.5% was consistent with the prior year as favorable volume leverage as well as cost synergies and productivity savings, were offset by unfavorable mix and salesforce additions. 

Sales for the full year were $8.7 billion, representing organic growth of 4% versus the prior year.  Adjusted segment EBITA for the full year was $1.1 billion and adjusted segment EBITA margin expanded 20 basis points year-over-year to 13.1%.

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



GAAP



ADJUSTED



GAAP



ADJUSTED



Q4

2017

Q4

2018



Q4

2017

Q4

2018



FY

2017

FY

2018



FY

2017

FY

2018

Sales

$926

$948



$921

$948



$3,595

$3,696



$3,579

$3,696

Segment EBITA

$52

$102



$95

$103



$290

$344



$328

$350

Segment EBITA margin %

5.6%

10.8%



10.3%

10.9%



8.1%

9.3%



9.2%

9.5%

Sales in the quarter were $948 million, an increase of 3% versus the prior year.  Excluding M&A and foreign currency, organic sales grew 6% versus the prior year driven by stronger service growth. Growth was positive across all regions, led by Europe and Latin America.        

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 10% 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 $103 million, up 8% versus the prior year. Adjusted segment EBITA margin of 10.9% expanded 60 basis points over the prior year, including a 30 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 90 basis points driven by favorable volume and mix as well as the benefit from cost synergies and productivity savings, partially offset by salesforce additions. 

Sales for the full year were $3.7 billion, an increase of 3% versus the prior year, with organic growth of 2%.  Adjusted segment EBITA for the full year was $350 million and adjusted segment EBITA margin expanded 30 basis points year-over-year, including a 10 basis point headwind related to foreign currency to 9.5%.

Building Solutions Asia Pacific



GAAP



ADJUSTED



GAAP



ADJUSTED



Q4

2017

Q4

2018



Q4

2017

Q4

2018



FY

2017

FY

2018



FY

2017

FY

2018

Sales

$677

$689



$677

$689



$2,444

$2,553



$2,445

$2,553

Segment EBITA

$108

$105



$109

$105



$323

$347



$332

$347

Segment EBITA margin %

16.0%

15.2%



16.1%

15.2%



13.2%

13.6%



13.6%

13.6%

Sales in the quarter were $689 million, an increase of 2% versus the prior year.  Excluding M&A and foreign currency, organic sales increased 4% versus the prior year, with double-digit growth in service and modest growth in project installations.        

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 $1.5 billion increased 11% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $105 million, down 4% versus the prior year. Adjusted segment EBITA margin of 15.2% declined 90 basis points over the prior year as the benefit of cost synergies and productivity savings as well as favorable volume was more than offset by salesforce additions and expected underlying margin pressure.    

Sales for the full year were $2.6 billion, an increase of 4% versus the prior year, with organic growth of 3%.  Adjusted segment EBITA for the full year was $347 million and adjusted segment EBITA margin of 13.6% was consistent year-over-year, including a 30 basis point headwind related to foreign currency.

Global Products



GAAP



ADJUSTED



GAAP



ADJUSTED



Q4

2017

Q4

2018



Q4

2017

Q4

2018



FY

2017

FY

2018



FY

2017

FY

2018

Sales

$2,241

$2,222



$2,241

$2,222



$8,455

$8,472



$8,461

$8,472

Segment EBITA

$373

$389



$385

$395



$1,179

$1,338



$1,288

$1,251

Segment EBITA margin %

16.6%

17.5%



17.2%

17.8%



13.9%

15.8%



15.2%

14.8%

Sales in the quarter were $2.2 billion, a decrease of 1% versus the prior year. Excluding M&A and foreign currency, organic sales increased 9% versus the prior year led by high-single digit growth in HVAC & Refrigeration Equipment, high-teens growth in Building Management Systems, and low-double digit growth in Specialty Products.     

Adjusted segment EBITA was $395 million, up 3% versus the prior year. Adjusted segment EBITA margin of 17.8% expanded 60 basis points over the prior year, including a 100 basis point headwind related to the divestiture of the Scott Safety business. The underlying margin expanded 160 basis points driven by favorable volume and mix, positive price/cost as well as the benefit of cost synergies and productivity savings, partially offset by ongoing product and channel investments. 

Sales for the full year were $8.5 billion, consistent versus the prior year, with organic growth of 7%.  Adjusted segment EBITA for the full year was $1.3 billion and adjusted segment EBITA margin declined 40 basis points year-over-year to 14.8%, including a 100 basis point headwind related to the divestiture of Scott Safety.

Power Solutions



GAAP



ADJUSTED



GAAP



ADJUSTED



Q4

2017

Q4

2018



Q4

2017

Q4

2018



FY

2017

FY

2018



FY

2017

FY

2018

Sales

$2,132

$2,187



$2,132

$2,187



$7,337

$8,000



$7,337

$8,000

Segment EBITA

$431

$409



$431

$424



$1,427

$1,417



$1,428

$1,432

Segment EBITA margin %

20.2%

18.7%



20.2%

19.4%



19.4%

17.7%



19.5%

17.9%

Sales in the quarter were $2.2 billion, an increase of 3% versus the prior year. Excluding the impact of higher lead pass-through and foreign currency, organic sales increased 2% driven by favorable price and technology mix. Global original equipment battery shipments increased 5%, benefitting from several recent business wins. Aftermarket shipments declined 2% versus a tough prior year comparison. Start-stop battery shipments increased 20% year-over-year, led by strong growth in EMEA, the Americas and China.  

Power Solutions adjusted segment EBITA was $424 million, a 2% decline compared to the prior year.  Adjusted segment EBITA margin of 19.4% decreased 80 basis points compared with the prior year, including a 10 basis point headwind related to the impact of higher lead prices and foreign currency. Power Solution's underlying margin declined 70 basis points as volume leverage and productivity savings were more than offset by unfavorable mix, higher transportation costs and planned incremental investments.    

Sales for the full year were $8.0 billion, an increase of 9% versus the prior year, with organic growth of 3%.  Adjusted segment EBITA for the full year was $1.4 billion and adjusted segment EBITA margin declined 160 basis points year-over-year to 17.9%, including a 90 basis point headwind related to the impact of higher lead prices and foreign currency.  Excluding these items, Power Solution's underlying margin declined 70 basis points. 

Corporate



GAAP



ADJUSTED



GAAP



ADJUSTED



Q4

2017

Q4

2018



Q4

2017

Q4

2018



FY

2017

FY

2018



FY

2017

FY

2018

Corporate expense

($163)

($142)



($107)

($95)



($768)

($576)



($465)

($408)

Adjusted Corporate expense was $95 million in the quarter and $408 million for the year, a decrease of 11% and 12%, respectively, compared to the prior year. The decline in both periods primarily reflects cost synergies and productivity savings. 

OTHER ITEMS

  • Cash from operating activities less capex was $1.0 billion for the quarter and $1.5 billion for the year.  Adjusted free cash flow was $1.3 billion for the quarter and $2.3 billion for the year.  Adjusted free cash flow excludes net cash outflows of $0.3 billion in the quarter and $0.8 billion for the year primarily related to restructuring and integration costs and nonrecurring tax payments. 
  • During the quarter, the Company repurchased 1.2 million shares for approximately $45 million; fiscal year 2018 share repurchases totaled 7.7 million shares for approximately $300 million.
  • New Accounting Standard – ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which clarifies the principals for recognizing revenue will be adopted by the Company on a modified retrospective basis beginning in the first quarter of fiscal 2019.  There is not a material financial impact to Buildings and no material segment EBITA impact for Power Solutions, but battery core return classification increases revenue for Power Solutions resulting in segment EBITA margin rate dilution of approximately 200 basis points.   

FISCAL 2019 GUIDANCE

The Company also announced fiscal 2019 guidance:

  • Organic revenue growth in the mid-single digits.
  • Incremental synergy and productivity savings of $250 million.
  • Fiscal 2019 adjusted EPS before special items of $2.90 to $3.05, including a $0.12 headwind from an increased tax rate and an $0.08 headwind related to foreign currency.
  • Adjusted free cash flow conversion of approximately 90%, excluding special items. 

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 and cancellation of or changes to commercial arrangements, and with respect to the strategic review of the Power Solutions business, 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, March 31, 2018 and June 30, 2018 filed with the SEC on February 2, 2018, May 3, 2018 and August 2, 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, restructuring costs and discontinued operations losses in equity income, unfavorable arbitration award, Scott Safety gain on sale and discrete tax items. Financial information regarding adjusted sales, organic sales, adjusted segment EBITA, adjusted segment EBITA margin, adjusted free cash flow and adjusted free cash flow conversion are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as transaction/integration 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.

CONTACT:

Investors:

Antonella Franzen

(609) 720-4665



Ryan Edelman

(609) 720-4545



Media:

Fraser Engerman

(414) 524-2733

 

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)





(1,253)

Restructuring and impairment costs

(105)





(141)

Net financing charges

(109)





(120)

Equity income

65





63













Income from continuing operations before income taxes

892





1,062













Income tax provision

67





135













Income from continuing operations

825





927













Loss from discontinued operations, net of tax

-





-













Net income

825





927













Less: Income from continuing operations attributable to noncontrolling interests

54





52













Less: Income from discontinued operations attributable to noncontrolling interests

-





-













Net income attributable to JCI

$    771





$    875













Income from continuing operations

$    771





$    875

Loss from discontinued operations

-





-













Net income attributable to JCI

$    771





$    875













Diluted earnings per share from continuing operations

$   0.83





$   0.93

Diluted loss per share from discontinued operations

-





-

Diluted earnings per share

$   0.83





$   0.93













Diluted weighted average shares

930.5





938.0

Shares outstanding at period end

925.0





928.0

 

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

(6,010)





(6,158)

Restructuring and impairment costs

(263)





(367)

Net financing charges

(441)





(496)

Equity income

235





240













Income from continuing operations before income taxes

2,901





2,558













Income tax provision

518





705













Income from continuing operations

2,383





1,853













Loss from discontinued operations, net of tax

-





(34)













Net income 

2,383





1,819













Less: Income from continuing operations attributable to noncontrolling interests

221





199













Less: Income from discontinued operations attributable to noncontrolling interests

-





9

























Net income attributable to JCI

$   2,162





$   1,611













Income from continuing operations

$   2,162





$   1,654

Loss from discontinued operations

-





(43)













Net income attributable to JCI

$   2,162





$   1,611













Diluted earnings per share from continuing operations

$     2.32





$     1.75

Diluted loss per share from discontinued operations

-





(0.05)

Diluted earnings per share *

$     2.32





$     1.71













Diluted weighted average shares

931.7





944.6

Shares outstanding at period end

925.0





928.0













* May not sum due to rounding.









 

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 current assets

1,334



1,907





Current assets

11,823



12,292















Property, plant and equipment - net

6,171



6,121



Goodwill



19,473



19,688



Other intangible assets - net

6,348



6,741



Investments in partially-owned affiliates

1,301



1,191



Noncurrent assets held for sale

-



1,920



Other noncurrent assets

3,681



3,931





Total assets

$         48,797



$         51,884















LIABILITIES AND EQUITY









Short-term debt and current portion of long-term debt

$           1,341



$           1,608



Accounts payable and accrued expenses

5,790



5,342



Liabilities held for sale

-



72



Other current liabilities

4,119



4,832





Current liabilities

11,250



11,854















Long-term debt

9,654



11,964



Other noncurrent liabilities

5,435



6,315



Noncurrent liabilities held for sale

-



173



Redeemable noncontrolling interests

-



211



Shareholders' equity attributable to JCI

21,164



20,447



Noncontrolling interests

1,294



920





Total liabilities and equity

$         48,797



$         51,884

 

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 income

825





927





















Adjustments to reconcile net income to cash provided by operating activities:













Depreciation and amortization

241





269





Pension and postretirement benefit income

(48)





(384)





Pension and postretirement contributions

(3)





(72)





Equity in earnings of partially-owned affiliates, net of dividends received

(55)





(15)





Deferred income taxes

(561)





69





Non-cash restructuring and impairment costs

12





8





Other - net

(2)





18





Changes in assets and liabilities, excluding acquisitions and divestitures:















Accounts receivable

(231)





(201)







Inventories

246





187







Other assets

90





(222)







Restructuring reserves

55





67







Accounts payable and accrued liabilities

213





826







Accrued income taxes

470





(143)











Cash provided by operating activities

1,252





1,334





















Investing Activities









Capital expenditures

(248)





(347)

Sale of property, plant and equipment 

25





10

Acquisition of businesses, net of cash acquired

3





-

Business divestitures, net of cash divested

101





40

Other - net

30





(8)











Cash used by investing activities

(89)





(305)





















Financing Activities









Decrease in short and long-term debt - net

(962)





(755)

Stock repurchases

(45)





(225)

Payment of cash dividends

(240)





(233)

Proceeds from the exercise of stock options

27





27

Dividends paid to noncontrolling interests

-





(10)

Other - net

(4)





(3)











Cash used by financing activities

(1,224)





(1,199)

Effect of exchange rate changes on cash and cash equivalents

(22)





42

Cash held for sale

-





(9)

Decrease in cash and cash equivalents

$   (83)





$ (137)

 

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





199

Income from discontinued operations attributable to noncontrolling interests

-





9





















Net income

2,383





1,819





















Adjustments to reconcile net income to cash provided by operating activities:













Depreciation and amortization

1,085





1,188





Pension and postretirement benefit income

(156)





(568)





Pension and postretirement contributions

(57)





(347)





Equity in earnings of partially-owned affiliates, net of dividends received

(166)





(181)





Deferred income taxes

(636)





1,125





Non-cash restructuring and impairment costs

42





78





Gain on Scott Safety business divestiture

(114)





-





Other - net

67





135





Changes in assets and liabilities, excluding acquisitions and divestitures:

















Accounts receivable

(513)





(520)









Inventories

(92)





(398)









Other assets

26





(480)









Restructuring reserves

(8)





89









Accounts payable and accrued liabilities

15





236









Accrued income taxes

637





(2,145)











Cash provided by operating activities

2,513





31





















Investing Activities









Capital expenditures

(1,030)





(1,343)

Sale of property, plant and equipment 

48





33

Acquisition of businesses, net of cash acquired

(21)





(6)

Business divestitures, net of cash divested

2,202





220

Other - net

16





(41)











Cash provided (used) by investing activities

1,215





(1,137)





















Financing Activities









Increase (decrease) in short and long-term debt - net

(2,486)





713

Debt financing costs

(4)





(18)

Stock repurchases

(300)





(651)

Payment of cash dividends

(954)





(702)

Proceeds from the exercise of stock options

66





157

Dividends paid to noncontrolling interests

(46)





(88)

Dividend from Adient spin-off

-





2,050

Cash transferred to Adient related to spin-off

-





(665)

Cash paid related to prior acquisitions

-





(75)

Other - net

(28)





(23)











Cash provided (used) by financing activities

(3,752)





698

Effect of exchange rate changes on cash and cash equivalents

(106)





54

Change in cash held for sale

9





96

Decrease in cash and cash equivalents

$  (121)





$  (258)

 



































































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 expenses, intangible asset amortization, net financing charges, significant restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans.





































































(in millions; unaudited)





Three Months Ended September 30,



Twelve Months Ended September 30,





































2018



2017



2018



2017





































Actual



Adjusted

Non-GAAP



Actual



Adjusted

Non-GAAP



Actual



Adjusted Non-GAAP



Actual



Adjusted

Non-GAAP































Net sales (1)

































































Building Solutions North America





$2,324



$                   2,324



$2,160



$    2,165



$  8,679



$                   8,679



$  8,341



$                   8,316































Building Solutions EMEA/LA





948



948



926



921



3,696



3,696



3,595



3,579































Building Solutions Asia Pacific





689



689



677



677



2,553



2,553



2,444



2,445































Global Products





2,222



2,222



2,241



2,241



8,472



8,472



8,455



8,461































Total Building Technologies & Solutions





6,183



6,183



6,004



6,004



23,400



23,400



22,835



22,801































Power Solutions





2,187



2,187



2,132



2,132



8,000



8,000



7,337



7,337































               Net sales





$8,370



$                   8,370



$8,136



$    8,136



$31,400



$                 31,400



$30,172



$                 30,138

































































































Segment EBITA (1)

































































Building Solutions North America





$   329



$                      336



$   298



$       315



$  1,109



$                   1,134



$  1,039



$                   1,070































Building Solutions EMEA/LA





102



103



52



95



344



350



290



328































Building Solutions Asia Pacific





105



105



108



109



347



347



323



332































Global Products





389



395



373



385



1,338



1,251



1,179



1,288































Total Building Technologies & Solutions





925



939



831



904



3,138



3,082



2,831



3,018































Power Solutions





409



424



431



431



1,417



1,432



1,427



1,428































               Segment EBITA





1,334



1,363



1,262



1,335



4,555



4,514



4,258



4,446































Corporate expenses (2)





(142)



(95)



(163)



(107)



(576)



(408)



(768)



(465)































Amortization of intangible assets (3)





(96)



(96)



(106)



(97)



(384)



(384)



(489)



(382)































Mark-to-market gain for pension/postretirement plans (4)



10



-



330



-



10



-



420



-































Restructuring and impairment costs (5)





(105)



-



(141)



-



(263)



-



(367)



-































               EBIT (6)





1,001



1,172



1,182



1,131



3,342



3,722



3,054



3,599































               EBIT margin





12.0%



14.0%



14.5%



13.9%



10.6%



11.9%



10.1%



11.9%































Net financing charges (7)





(109)



(109)



(120)



(120)



(441)



(441)



(496)



(479)































Income from continuing operations before income taxes



892



1,063



1,062



1,011



2,901



3,281



2,558



3,120































Income tax provision (8)





(67)



(139)



(135)



(152)



(518)



(427)



(705)



(468)































Income from continuing operations





825



924



927



859



2,383



2,854



1,853



2,652































Income from continuing operations attributable to noncontrolling interests (9)





(54)



(54)



(52)



(46)



(221)



(221)



(199)



(193)































Net income from continuing operations attributable to JCI



$   771



$                      870



$   875



$       813



$  2,162



$                   2,633



$  1,654



$                   2,459

































































































Building Technologies & Solutions- Provides facility systems and services including comfort, energy and security management for the non-residential buildings market, and provides heating, ventilating, and air conditioning products and services, security products and services, and fire detection and suppression products and services.





































































Power Solutions- Services both automotive original equipment manufacturers and the battery aftermarket by providing advanced battery technology, coupled with systems engineering, marketing and service expertise.







































































































































(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 considered to be directly related to the underlying operating performance of its business units.  Management believes these non-GAAP measures are useful to investors in understanding the ongoing operations and business trends of the Company. 





































































The following is the three months ended September 30, 2018 and 2017 reconciliation of net sales, segment EBITA and segment EBITA margin as reported to adjusted net sales, adjusted segment EBITA and adjusted segment EBITA margin (unaudited):





































































(in millions)

 Building Solutions

North America 



 Building Solutions

EMEA/LA 



 Building Solutions

Asia Pacific 



 Global Products 



 Total Building

Technologies &

Solutions 



 Power Solutions 



 Consolidated JCI plc 













2018



2017



2018



2017



2018



2017



2018



2017



2018



2017



2018



2017



2018



2017











Net sales as reported

$  2,324



$2,160



$                      948



$   926



$       689



$     677



$                   2,222



$  2,241



$                   6,183



$  6,004



$2,187



$2,132



$  8,370



$  8,136













































































Adjusting items:

































































  Nonrecurring purchase accounting impacts

-



5



-



(5)



-



-



-



-



-



-



-



-



-



-













































































Adjusted net sales

$  2,324



$2,165



$                      948



$   921



$       689



$     677



$                   2,222



$  2,241



$                   6,183



$  6,004



$2,187



$2,132



$  8,370



$  8,136













































































Segment EBITA as reported

$     329



$   298



$                      102



$     52



$       105



$     108



$                      389



$     373



$                      925



$     831



$   409



$   431



$  1,334



$  1,262











Segment EBITA margin as reported

14.2%



13.8%



10.8%



5.6%



15.2%



16.0%



17.5%



16.6%



15.0%



13.8%



18.7%



20.2%



15.9%



15.5%













































































Adjusting items:

































































  Transaction costs

-



-



-



-



-



-



-



-



-



-



8



-



8



-











  Integration costs

7



18



1



2



-



2



6



12



14



34



-



-



14



34











  Restructuring costs and discontinued operations losses in equity income

-



-



-



-



-



-



-



-



-



-



7



-



7



-











  Unfavorable arbitration award

-



-



-



50



-



-



-



-



-



50



-



-



-



50











  Nonrecurring purchase accounting impacts

-



(1)



-



(9)



-



(1)



-



-



-



(11)



-



-



-



(11)













































































Adjusted segment EBITA

$     336



$   315



$                      103



$     95



$       105



$     109



$                      395



$     385



$                      939



$     904



$   424



$   431



$  1,363



$  1,335











Adjusted segment EBITA margin

14.5%



14.5%



10.9%



10.3%



15.2%



16.1%



17.8%



17.2%



15.2%



15.1%



19.4%



20.2%



16.3%



16.4%













































































The following is the twelve months ended September 30, 2018 and 2017 reconciliation of net sales, segment EBITA and segment EBITA margin as reported to adjusted net sales, adjusted segment EBITA and adjusted segment EBITA margin (unaudited):





































































(in millions)

 Building Solutions

North America 



 Building Solutions

EMEA/LA 



 Building Solutions

Asia Pacific 



 Global Products 



 Total Building

Technologies &

Solutions 



 Power Solutions 



 Consolidated JCI plc 













2018



2017



2018



2017



2018



2017



2018



2017



2018



2017



2018



2017



2018



2017











Net sales as reported

$  8,679



$8,341



$                   3,696



$3,595



$    2,553



$  2,444



$                   8,472



$  8,455



$                 23,400



$22,835



$8,000



$7,337



$31,400



$30,172













































































Adjusting items:

































































  Nonrecurring purchase accounting impacts

-



(25)



-



(16)



-



1



-



6



-



(34)



-



-



-



(34)













































































Adjusted net sales

$  8,679



$8,316



$                   3,696



$3,579



$    2,553



$  2,445



$                   8,472



$  8,461



$                 23,400



$22,801



$8,000



$7,337



$31,400



$30,138













































































Segment EBITA as reported

$  1,109



$1,039



$                      344



$   290



$       347



$     323



$                   1,338



$  1,179



$                   3,138



$  2,831



$1,417



$1,427



$  4,555



$  4,258











Segment EBITA margin as reported

12.8%



12.5%



9.3%



8.1%



13.6%



13.2%



15.8%



13.9%



13.4%



12.4%



17.7%



19.4%



14.5%



14.1%













































































Adjusting items:

































































  Transaction costs

-



13



-



5



-



2



-



13



-



33



8



1



8



34











  Integration costs

25



42



6



6



-



5



27



25



58



78



-



-



58



78











  Scott Safety gain on sale

-



-



-



-



-



-



(114)



-



(114)



-



-



-



(114)



-











  Restructuring costs and discontinued operations losses in equity income

-



-



-



-



-



-



-



-



-



-



7



-



7



-











  Unfavorable arbitration award

-



-



-



50



-



-



-



-



-



50



-



-



-



50











  Nonrecurring purchase accounting impacts

-



(24)



-



(23)



-



2



-



71



-



26



-



-



-



26













































































Adjusted segment EBITA

$  1,134



$1,070



$                      350



$   328



$       347



$     332



$                   1,251



$  1,288



$                   3,082



$  3,018



$1,432



$1,428



$  4,514



$  4,446











Adjusted segment EBITA margin

13.1%



12.9%



9.5%



9.2%



13.6%



13.6%



14.8%



15.2%



13.2%



13.2%



17.9%



19.5%



14.4%



14.8%













































































(2) Adjusted Corporate expenses for the three months ended September 30, 2018 excludes $43 million of integration costs and $4 million of transaction costs.  Adjusted Corporate expenses for the twelve months ended September 30, 2018 excludes $154 million of integration costs and $14 million of transaction costs.  Adjusted Corporate expenses for the three months ended September 30, 2017 excludes $56 million of integration costs.  Adjusted Corporate expenses for the twelve months ended September 30, 2017 excludes $241 million of integration costs, $58 million of transaction costs and $4 million of separation costs.  





































































(3) Adjusted amortization of intangible assets for the three and twelve months ended September 30, 2017 excludes $9 million and $107 million, respectively, of nonrecurring asset amortization related to Tyco purchase accounting.





































































(4) The three and twelve months ended September 30, 2018 pension and postretirement mark-to-market gain of $10 million is excluded from the adjusted non-GAAP results.  The three months ended September 30, 2017 pension and postretirement mark-to-market gain of $330 million and the twelve months ended September 30, 2017 gain of $420 million are excluded from the adjusted non-GAAP results.





































































(5) The three and twelve months ended September 30, 2018 restructuring and impairment costs of $105 million and $263 million, respectively, are excluded from the adjusted non-GAAP results.  The three and twelve months ended September 30, 2017 restructuring and impairment costs of $141 million and $367 million, respectively, are excluded from the adjusted non-GAAP results.





































































(6) Management defines earnings before interest and taxes (EBIT) as income from continuing operations before net financing charges, income taxes and noncontrolling interests.





































































(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 of $139 million, net tax provision changes related to the U.S. Tax Reform legislation of $96 million, restructuring and impairment costs of $14 million, mark-to-market pension and postretirement of $3 million, integration costs of $3 million and transaction costs of $2 million, partially offset by tax provisions related to legal entity restructuring associated with the Power Solutions business of $129 million and valuation allowance adjustments of $56 million.  Adjusted income tax provision for the twelve months ended September 30, 2018 excludes legal entity restructuring associated with the Power Solutions business of $129 million, net tax provision related to the U.S. Tax Reform legislation of $108 million, valuation allowance adjustments of $56 million and Scott Safety gain on sale of $30 million, partially offset by the tax benefits for changes in entity tax status of $139 million, restructuring and impairment costs of $38 million, tax audit settlements of $25 million, integration costs of $24 million, mark-to-market pension and postretirement of $3 million and transaction costs of $3 million.  Adjusted income tax provision for the three months ended September 30, 2017 excludes the tax benefits for tax audit settlements of $191 million, integration costs of $16 million and restructuring and impairment costs of $14 million, partially offset by the tax provisions for the pension and postretirement mark-to-market gain of $90 million, change in deferred tax liability related to the outside basis of certain nonconsolidated subsidiaries of $53 million, change in assertion over permanently reinvested earnings of $33 million, net valuation allowance adjustments in various legal entities of $27 million, and Tyco nonrecurring purchase accounting impacts of $1 million.  Adjusted income tax provision for the twelve months ended September 30, 2017 excludes the non-cash tax charge of $457 million related to establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries of the Scott Safety business, pension and postretirement mark-to-market gain of $126 million, change in deferred tax liability related to the outside basis of certain nonconsolidated subsidiaries of $53 million, change in assertion over permanently reinvested earnings of $33 million and net valuation allowance adjustments in various legal entities of $27 million, partially offset by the tax benefits of tax audit settlements of $191 million, changes in entity tax status of $101 million, restructuring and impairment costs of $63 million, integration costs of $57 million, Tyco nonrecurring purchase accounting impacts of $35 million and transaction costs of $12 million.





































































(9) Adjusted income from continuing operations attributable to noncontrolling interests for the three and twelve months ended September 30, 2017 excludes the noncontrolling interest impact of $4 million for mark-to-market pension gain and $2 million for valuation allowance adjustments.



































































 2.  Diluted Earnings Per Share Reconciliation



































































































































The Company's press release contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure.  The adjusting items include transaction/integration/separation costs, restructuring costs and discontinued operations losses in equity income, nonrecurring purchase accounting impacts related to the Tyco merger, mark-to-market gain for pension and postretirement plans, Scott Safety gain on sale, restructuring and impairment costs, unfavorable arbitration award and discrete tax items.  The Company excludes these items because they are not considered to be directly related to the underlying operating performance of the Company.  Management believes these non-GAAP measures are useful to investors in understanding the ongoing operations and business trends of the Company. 





































































A reconciliation of diluted earnings per share as reported to diluted adjusted earnings per share for the respective periods is shown below (unaudited):



































































































 Net Income Attributable

to JCI plc 



 Net Income Attributable

to JCI plc from

Continuing Operations 



 Net Income

Attributable to JCI plc 



 Net Income Attributable

to JCI plc from

Continuing Operations 





































Three Months Ended



Three Months Ended



Twelve Months Ended



Twelve Months Ended





































September 30,



September 30,



September 30,



September 30,





































2018



2017



2018



2017



2018



2017



2018



2017





































































































Earnings per share as reported for JCI plc

$    0.83



$  0.93



$                     0.83



$  0.93



$      2.32



$    1.71



$                     2.32



$    1.75





































































































Adjusting items:

































































  Transaction costs

0.01



-



0.01



-



0.02



0.12



0.02



0.12



































  Related tax impact

-



-



-



-



-



(0.01)



-



(0.01)



































  Integration costs

0.06



0.10



0.06



0.10



0.23



0.34



0.23



0.34



































  Related tax impact

-



(0.02)



-



(0.02)



(0.03)



(0.06)



(0.03)



(0.06)



































  Separation costs

-



-



-



-



-



0.09



-



-



































  Restructuring costs and discontinued operations losses in equity income

0.01



-



0.01



-



0.01



-



0.01



-



































  Nonrecurring purchase accounting impacts

-



-



-



-



-



0.14



-



0.14



































  Related tax impact

-



-



-



-



-



(0.04)



-



(0.04)



































  Mark-to-market gain for pension/postretirement plans

(0.01)



(0.35)



(0.01)



(0.35)



(0.01)



(0.44)



(0.01)



(0.44)



































  Related tax impact

-



0.10



-



0.10



-



0.13



-



0.13



































  Scott Safety gain on sale

-



-



-



-



(0.12)



-



(0.12)



-



































  Related tax impact

-



-



-



-



0.03



-



0.03



-



































  Restructuring and impairment costs

0.11



0.15



0.11



0.15



0.28



0.39



0.28



0.39



































  Related tax impact

(0.02)



(0.01)



(0.02)



(0.01)



(0.04)



(0.07)



(0.04)



(0.07)



































  Unfavorable arbitration award

-



0.05



-



0.05



-



0.05



-



0.05



































  Discrete tax items

(0.05)



(0.08)



(0.05)



(0.08)



0.14



0.32



0.14



0.30





































































































Adjusted earnings per share for JCI plc*

$    0.93



$  0.87



$                     0.93



$  0.87



$      2.83



$    2.67



$                     2.83



$    2.60





































































































* May not sum due to rounding.



































































































































The following table reconciles the denominators used to calculate basic and diluted earnings per share for JCI plc (in millions; unaudited): 











































































































Three Months Ended



Twelve Months Ended





















































September 30,



September 30,





















































2018



2017



2018



2017



















































Weighted Average Shares Outstanding for JCI plc































































Basic weighted average shares outstanding

924.8



929.4



925.7



935.3



















































Effect of dilutive securities:

































































       Stock options, unvested restricted stock and unvested performance share awards

5.7



8.6



6.0



9.3



















































Diluted weighted average shares outstanding

930.5



938.0



931.7



944.6





















































































































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 measures. These non-GAAP financial measures are derived by excluding certain amounts, expenses, income or cash flows from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period, including but not limited to the high variability of the net mark-to-market adjustments related to pension and postretirement plans and the effect of foreign currency exchange fluctuations.  Our fiscal 2019 outlook for organic adjusted net sales growth also excludes the effect of acquisitions and divestitures, and for our Power Solutions business, the impacts of lead price fluctuations.  We are unable to present a quantitative reconciliation of the aforementioned forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available and management cannot reliably predict all of the necessary components of such GAAP measures without unreasonable effort or expense. The unavailable information could have a significant impact on the Company's full year 2019 GAAP financial results.



































































 3.  Organic Adjusted Net Sales Growth Reconciliation

































































































































The components of the changes in adjusted net sales for the three months ended September 30, 2018 versus the three months ended September 30, 2017, including organic net sales, is shown below (unaudited):













































































(in millions)

Adjusted Net Sales

for the Three

Months Ended

September 30, 2017



Base Year Adjustments -

Acquisitions and

Divestitures



Adjusted Base Net

Sales for the Three

Months Ended

September 30, 2017



Foreign Currency



Lead Impact



Organic Net Sales



Adjusted Net Sales

for the Three

Months Ended

September 30, 2018











Building Solutions North America

$                   2,165



$                          -



0.0%



$                       2,165



$                        (8)



-0.4%



$                          -



0.0%



$   167



7.7%



$  2,324



7.3%











Building Solutions EMEA/LA

921



2



0.2%



923



(28)



-3.0%



-



0.0%



53



5.7%



948



2.7%











Building Solutions Asia Pacific

677



(2)



-0.3%



675



(14)



-2.1%



-



0.0%



28



4.1%



689



2.1%











Global Products

2,241



(189)



-8.4%



2,052



(24)



-1.2%



-



0.0%



194



9.5%



2,222



8.3%











Total Building Technologies & Solutions

6,004



(189)



-3.1%



5,815



(74)



-1.3%



-



0.0%



442



7.6%



6,183



6.3%











Power Solutions

2,132



-



0.0%



2,132



(32)



-1.5%



39



1.8%



48



2.3%



2,187



2.6%











Total net sales

$                   8,136



$                     (189)



-2.3%



$                       7,947



$                     (106)



-1.3%



$                        39



0.5%



$   490



6.2%



$  8,370



5.3%













































































The components of the changes in adjusted net sales for the twelve months ended September 30, 2018 versus the twelve months ended September 30, 2017, including organic net sales, is shown below (unaudited):













































































(in millions)

Adjusted Net Sales

for the Twelve

Months Ended

September 30, 2017



Base Year Adjustments -

Acquisitions and

Divestitures



Adjusted Base Net

Sales for the Twelve

Months Ended

September 30, 2017



Foreign Currency



Lead Impact



Organic Net Sales



Adjusted Net Sales

for the Twelve

Months Ended

September 30, 2018











Building Solutions North America

$                   8,316



$                          -



0.0%



$                       8,316



$                        20



0.2%



$                          -



0.0%



$   343



4.1%



$  8,679



4.4%











Building Solutions EMEA/LA

3,579



(78)



-2.2%



3,501



132



3.8%



-



0.0%



63



1.8%



3,696



5.6%











Building Solutions Asia Pacific

2,445



(14)



-0.6%



2,431



61



2.5%



-



0.0%



61



2.5%



2,553



5.0%











Global Products

8,461



(663)



-7.8%



7,798



103



1.3%



-



0.0%



571



7.3%



8,472



8.6%











Total Building Technologies & Solutions

22,801



(755)



-3.3%



22,046



316



1.4%



-



0.0%



1,038



4.7%



23,400



6.1%











Power Solutions

7,337



-



0.0%



7,337



196



2.7%



269



3.7%



198



2.7%



8,000



9.0%











Total net sales

$                  30,138



$                     (755)



-2.5%



$                     29,383



$                      512



1.7%



$                      269



0.9%



$1,236



4.2%



$31,400



6.9%











































































 4.  Adjusted Free Cash Flow Reconciliation



































































































































The Company's press release contains financial information regarding free cash flow, adjusted free cash flow and adjusted free cash flow conversion, which are non-GAAP performance measures.  Free cash flow is defined as cash used by operating activities less capital expenditures.  Adjusted free cash flow excludes special items, as included in the table below, because these cash flows are not considered to be directly related to its underlying business.  Adjusted free cash flow conversion is defined as adjusted free cash flow divided by adjusted net income from continuing operations attributable to JCI.  Management believes these non-GAAP measures are useful to investors in understanding the strength of the Company and its ability to generate cash. 





































































The following is the three and twelve months ended September 30, 2018 and 2017 reconciliation of free cash flow, adjusted free cash flow and adjusted free cash flow conversion (unaudited):



























































































(in billions)

 Three Months Ended

September 30, 2018 



 Three Months Ended

September 30, 2017 



 Twelve Months Ended

September 30, 2018 



 Twelve Months Ended

September 30, 2017 



































Cash provided by operating activities

$                       1.3



$                                         1.3



$                           2.5



$                                             -



































Capital expenditures

(0.2)



(0.3)



(1.0)



(1.3)



































Reported free cash flow *

1.0



1.0



1.5



(1.3)





















































































Adjusting items:

































































  Transaction/integration/separation costs

0.1



0.1



0.3



0.5



































  Nonrecurring tax payments

0.2



-



0.3



1.4



































  Adient cash outflow

-



-



-



0.3



































  Change in control pension payment

-



-



-



0.2



































  Restructuring payments

-



-



0.2



0.2



































  Total adjusting items 

0.3



0.1



0.8



2.6



































Adjusted free cash flow

$                       1.3



$                                         1.1



$                           2.3



$                                          1.3





































































































Adjusted net income from continuing operations

































































  attributable to JCI

$                       0.9



$                                         0.8



$                           2.6



$                                          2.5



































Adjusted free cash flow conversion





144%







138%







88%







52%





































































































* May not sum due to rounding

































































































































 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 financial condition as it provides a review of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders.  The following is the September 30, 2018 and September 30, 2017 calculation of net debt as a percentage of total capitalization (unaudited):





































































(in millions)

September 30, 2018



 September 30, 2017 



















































Short-term debt and current portion of long-term debt

$                   1,341



$                                     1,608



















































Long-term debt

9,654



11,964



















































Total debt

10,995



13,572



















































Less: cash and cash equivalents

200



321



















































Total net debt

10,795



13,251



















































Shareholders' equity attributable to JCI

21,164



20,447



















































Total capitalization

$                  31,959



$                                   33,698





















































































































Total net debt as a % of total capitalization

33.8%



39.3%



















































































































 6.  Mark-to-Market of Pension and Postretirement Plans

































































































































The pension and postretirement mark-to-market gain or loss for each period is excluded from adjusted diluted earnings per share.  The three and twelve months ended September 30, 2018 include a mark-to-market gain for pension and postretirement plans of $10 million.  The three and twelve months ended September 30, 2017 include a mark-to-market gain for pension and postretirement plans of $330 million and $420 million, respectively.



































































 7.  Divestitures



































































































































On March 16, 2017, the Company announced that it signed a definitive agreement to sell its Scott Safety business to 3M for approximately $2.0 billion.  The transaction closed on October 4, 2017.  Net cash proceeds from the transaction approximated $1.9 billion and the Company recorded a net gain of $114 million ($84 million after tax).  Scott Safety is a leader in the design, manufacture and sale of high performance respiratory protection, gas and flame detection, thermal imaging and other critical products for fire services, law enforcement, industrial, oil and gas, chemical, armed forces, and homeland defense end markets.  The Scott Safety business is included within assets held for sale and liabilities held for sale in the accompanying condensed consolidated statement of financial position as of September 30, 2017.





































































On October 31, 2016, the Company completed the spin-off of its Automotive Experience business by way of the transfer of the Automotive Experience business from JCI plc to Adient plc and the issuance of ordinary shares of Adient plc directly to holders of JCI plc ordinary shares on a pro rata basis.  Following the separation, Adient plc is now an independent public company trading on the New York Stock Exchange (NYSE) under the symbol "ADNT." The Company did not retain any equity interest in Adient plc.  Beginning in the first quarter of fiscal 2017, Adient's historical financial results are reflected in the Company's consolidated financial statements as a discontinued operation. 



































































 8.  Income Taxes



































































































































The Company's effective tax rate from continuing operations before consideration of the transaction/integration/separation costs, restructuring costs and discontinued operations losses in equity income, nonrecurring purchase accounting impacts related to the Tyco merger, mark-to-market gain for pension and postretirement plans, Scott Safety gain on sale, restructuring and impairment costs, an unfavorable arbitration award and discrete tax items for the three and twelve months ending September 30, 2018 and 2017 is approximately 13 percent and 15 percent, respectively.



































































 9.  Restructuring



































































































































The three and twelve months ended September 30, 2018 include restructuring and impairment costs of $105 million and $263 million, respectively, related primarily to workforce reductions, plant closures and asset impairments in the Building Technologies & Solutions and Power Solutions businesses, and at Corporate.  The three and twelve months ended September 30, 2017 include restructuring and impairment costs of $141 million and $367 million, respectively, related primarily to workforce reductions, plant closures and asset impairments in the Building Technologies & Solutions and Power Solutions businesses, and at Corporate.

 

Johnson Controls Logo. (PRNewsFoto/JOHNSON CONTROLS, INC.) (PRNewsFoto/)

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/johnson-controls-reports-fiscal-q4-2018-and-full-year-earnings-with-strong-organic-revenue-growth-and-free-cash-flow-conversion-announces-an-additional-1b-share-repurchase-authorization-300746335.html

SOURCE Johnson Controls

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