Johnson Controls Reports Fiscal Q4 & Full Year Results, Demonstrating Continued Strong Execution In A Challenging Environment

CORK, Ireland, Nov. 3, 2020 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI) today reported fiscal fourth quarter 2020 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.60. Excluding these items, adjusted EPS from continuing operations was $0.76, down 3% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of nearly $6.0 billion decreased 5% compared to the prior year and declined 6% organically, reflecting the continued impact of the COVID-19 pandemic.  

GAAP net income from continuing operations was $441 million, earnings before interest and taxes ("EBIT") was $583 million and EBIT margin was 9.8%. Adjusted net income from continuing operations was $563 million, adjusted EBIT was $770 million and adjusted EBIT margin was 12.9%, in line with prior year results despite the revenue decline.

"Looking back on what was an extraordinary year, I am incredibly proud of how our teams responded in a time of a global pandemic and the progress that we made as an organization. We remained focused on executing on our priorities to support our customers with the most innovative products and solutions, including our OpenBlue digital platform, contributing to a more sustainable world while maintaining the health and safety of our employees and their families, our customers and partners," said George Oliver, chairman and CEO.  "In the fourth quarter, we performed very well across all of our end markets delivering revenue and EBIT above our prior guidance, with best in class decrementals.  This is a result of continued strong execution on our cost-out initiatives, while maintaining strong reinvestment into our growth platforms."

Oliver continued, "from a strategic perspective, we executed on the initiatives we set out to accomplish at the beginning of the year, all of which enhance the long-term competitiveness of our business.  I remain confident that Johnson Controls is well positioned to capitalize on the strong secular trends in buildings and infrastructure, providing innovative solutions enhancing air purification and health & safety, while delivering on our customers sustainability goals with industry leading energy management."  

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 fourth fiscal quarter and full fiscal year of 2019.

Organic sales growth, organic EBITA growth, segment EBITA, adjusted segment EBITA, adjusted corporate expense, EBIT, adjusted EBIT, adjusted net income from continuing operations, 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.

SEGMENT RESULTS

Building Solutions North America

Sales in the quarter of $2.2 billion, decreased 7% versus the prior year. Organic sales were down 6% versus the prior year, driven by a decline in project installations and, to a much lesser extent, service.  Growth in Performance Solutions was more than offset by a decline in Fire & Security and HVAC & Controls.         

Orders in the quarter, excluding M&A and adjusted for foreign currency, decreased 9% year-over-year driven by lower demand due to the COVID-19 pandemic.  Backlog at the end of the quarter of $5.9 billion was consistent with the prior year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $345 million, down 3% versus the prior year. Adjusted segment EBITA margin of 15.4% expanded 50 basis points versus the prior year driven by significant cost mitigation actions and restructuring benefits, which more than offset the volume decline and negative mix. 

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

Sales in the quarter of $906 million decreased 4% versus the prior year. Organic sales declined 7% versus the prior year driven by a decline in project installations and, to a much lesser extent, service.  Volume declined across all regions and platforms.          

Orders in the quarter, excluding M&A and adjusted for foreign currency, decreased 7% year-over-year driven by lower demand due to the COVID-19 pandemic.  Backlog at the end of the quarter of $1.6 billion increased 1% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $103 million, down 7% versus the prior year. Adjusted segment EBITA margin of 11.4% declined 30 basis points over the prior year, including a 20 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin declined 10 basis points as the impact of the volume decline more than offset positive mix and mitigating cost actions. 

Building Solutions Asia Pacific

Sales in the quarter of $661 million decreased 9% versus the prior year. Organic sales declined 10% versus the prior year primarily driven by a decline in project installations and, to a much lesser extent, service.  Although China continues to rebound, declines continue in certain other parts of the region.       

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 2% year-over-year driven by significantly improved demand in China.  Backlog at the end of the quarter of $1.7 billion increased 10% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $97 million, down 6% versus the prior year. Adjusted segment EBITA margin of 14.7% expanded 50 basis points over the prior, including a 20 basis point benefit from foreign currency.  Adjusting for foreign currency, the underlying margin improved 30 basis points as favorable mix and the benefit of mitigating cost actions more than offset the volume decline.    

Global Products

Sales in the quarter of $2.1 billion decreased 3% versus the prior year. Organic sales also declined 3% versus the prior year with a low-single digit decline in both Building Management Systems and HVAC & Refrigeration Equipment and a high-single digit decline in Specialty Products.

Adjusted segment EBITA was $381 million, down 9% versus the prior year. Adjusted segment EBITA margin of 17.8% declined 130 basis points versus the prior year as positive price/cost and the benefit of mitigating cost actions was more than offset by the volume decline and related absorption as well as negative mix. 

Corporate

Adjusted Corporate expense was $58 million in the quarter, a decrease of 35% compared to the prior year, driven primarily by mitigating cost actions, continued productivity savings and cost synergies, and cost reduction actions related to the Power Solutions sale.

OTHER ITEMS

• For the quarter, cash provided by operating activities from continuing operations was $1.0 billion and capital expenditures were $0.1 billion, resulting in free cash flow from continuing operations of $0.9 billion. Adjusted free cash flow was $1.0 billion, which excludes net cash outflows of $0.2 billion primarily related to restructuring and integration payments.
• For the full year, cash provided by operating activities from continuing operations was $2.5 billion and capital expenditures were $0.4 billion, resulting in a free cash flow from continuing operations of $2.0 billion. Adjusted free cash flow was $1.9 billion, which excludes net cash inflows of $0.1 billion primarily related to a non-recurring tax refund, partially offset by restructuring and integration payments.
• During the quarter, the Company repurchased 19 million shares for approximately $750 million. For the full year, the Company repurchased 55 million shares for $2.2 billion.
• During the quarter, the Company repaid $2.2 billion of European debt, bank loans and other current maturities, including a €750M Euro note originally due December 2020, and refinanced approximately $1.8 billion. As part of the refinancing, the Company issued two €500M European bonds (7 and 12-year maturities). The Company also issued a $625 million 10-year bond in its inaugural green bond offering.
• During the quarter, the Company recorded net pre-tax mark-to-market losses of $120 million related primarily to year-end pension adjustments as a result of lower interest rates.
• During the quarter, the Company recorded pre-tax integration costs of $28 million and an acquisition related compensation charge of $39 million.
• During the quarter, the Company recorded a tax benefit of $26 million related to net tax audit reserve adjustments.

FY21 FIRST QUARTER GUIDANCE 

The Company announced fiscal 2021 first quarter guidance:

• Organic revenue decline in the range of 5 to 7%
• Adjusted EBIT margin expansion of 20 to 40 basis points, year-over-year
• Adjusted EPS before special items of $0.39 to $0.41

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 100,000 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

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: Johnson Controls' ability to manage general economic, business, capital market and geopolitical conditions, including the impacts of natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; the strength of the U.S. or other economies; changes or uncertainty in laws, regulations, rates, policies or interpretations that impact Johnson Controls' business operations or tax status; the ability to develop or acquire new products and technologies that achieve market acceptance; changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions; maintaining the capacity, reliability and security of our enterprise and product information technology infrastructure; the risk of infringement or expiration of intellectual property rights; any delay or inability of Johnson Controls to realize the expected benefits and synergies of recent portfolio transactions such as its merger with Tyco and the disposition of the Power Solutions business;  the outcome of litigation and governmental proceedings; the ability to hire and retain key senior management; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; the availability of raw materials and component products; fluctuations in currency exchange rates; work stoppages, union negotiations, labor disputes and other matters associated with the labor force; the cancellation of or changes to commercial arrangements.  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 2019 fiscal year filed with the SEC on November 21, 2019, which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. The description of certain of these risks is supplemented in Item 1A of Part II of Johnson Controls' subsequently filed Quarterly Reports on Form 10-Q. 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 restructuring and impairment costs, transaction costs, integration costs, net mark-to-market adjustments, tax indemnification reserve release, environmental reserve, loss on extinguishment of debt, Power Solutions gain on sale (net of transaction and other costs), the impact of ceasing the depreciation / amortization expense for Power Solutions business as the business is held for sale, acquisition related compensation charges and discrete tax items. Financial information regarding organic sales, EBIT, EBIT margin, segment EBITA, adjusted segment EBITA, adjusted organic segment EBITA, adjusted segment EBITA margin, adjusted corporate expense, free cash flow, adjusted free cash flow, and adjusted net income (loss) from continuing operations are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as transaction costs, integration costs, environmental reserve and acquisition related compensation charges 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.  For further information on the calculation of thee non-GAAP measures and a reconciliation of these non-GAAP measures, refer to the attached footnotes.

SOURCE Johnson Controls International plc