Johnson Controls Reports Strong Start to Fiscal Year; Provides Fiscal 2021 Full Year and Q2 Guidance

CORK, Ireland, Jan. 29, 2021 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI), the global leader for smart, healthy and sustainable buildings, today reported fiscal first quarter 2021 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.45. Excluding these items, adjusted EPS from continuing operations was $0.43, up 8% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $5.3 billion decreased 4% compared to the prior year and declined 5% organically, reflecting the continued impact of the COVID-19 pandemic.  

GAAP net income from continuing operations was $327 million. Adjusted net income from continuing operations was $311 million, up 2% versus the prior year. Earnings before interest and taxes ("EBIT") was $492 million and EBIT margin was 9.2%. Adjusted EBIT was $471 million and adjusted EBIT margin was 8.8%, an increase of 80 basis points versus prior year results, despite the revenue decline.

"2021 is off to a strong start with solid financial performance in our fiscal first quarter, demonstrating our continued commitment to disciplined execution, in what remains a challenging market environment," said George Oliver, chairman and CEO. "The continued benefits from our actions taken in fiscal 2020 to reduce structural costs, combined with ongoing efforts to minimize discretionary expenses, enabled us to achieve record first quarter profitability and free cash flow. Although many of our end markets remain under pressure due to the ongoing impacts of the pandemic, we further advanced our strategic growth initiatives, with continued reinvestment in our businesses to ensure we are best positioned for the recovery.  As we progress into the second quarter, we expect to return to organic revenue growth, with strong margin expansion and year-over-year growth in earnings per share."

Mr. Oliver added, "Our OpenBlue digital technologies are reinventing the building landscape, creating dynamic smart facilities that help our customers meet their sustainability commitments, while delivering healthy places, enriched experiences and cost savings. Our vision for a healthy world centers on healthy buildings, which means delivering on the most critical elements to serve People, Places and the Planet. We believe we are uniquely positioned to lead the industry in translating new building technology capabilities into game-changing solutions that deliver on that vision."

In a separate press release issued today, Johnson Controls announced an ambitious set of new Environmental, Social & Governance (ESG) commitments, science-based targets as well as a net zero carbon pledge to support a healthy, more sustainable planet over the next two decades.

"Our commitments reinforce the urgency to make positive changes that will improve the health of our planet, and we believe we are uniquely positioned to help customers and suppliers achieve their sustainability goals, in addition to our own," said Katie McGinty, vice president & chief sustainability, government and regulatory affairs officer at Johnson Controls.  "We are excited to step up the role we play and will continue to innovate and uncover new pathways to meet our goals which will contribute to healthier people, healthier places and a healthier planet."

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 first fiscal quarter of 2020.

Organic sales, total segment EBITA, adjusted segment EBITA, adjusted corporate expense, EBIT, adjusted EBIT, adjusted net income from continuing operations, adjusted EPS from continuing operations and 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 $2.0 billion, decreased 6% versus the prior year. Organic sales also declined 6% versus the prior year, driven by a decline in project installations and, to a much lesser extent, service.  Strong 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 7% year-over-year driven by lower demand due to the COVID-19 pandemic. Backlog at the end of the quarter of $5.9 billion increased 1% compared to the prior year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $255 million, down 2% versus the prior year. Adjusted segment EBITA margin of 12.5% expanded 50 basis points versus the prior year driven by significant cost mitigation actions and restructuring benefits as well as positive mix, which more than offset the impact of the volume decline. 

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

Sales in the quarter of $906 million decreased 2% versus the prior year. Organic sales declined 5% versus the prior year driven by a decline in project installations. Volumes declined across all regions and platforms.          

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 2% year-over-year driven by service. Backlog at the end of the quarter of $1.8 billion increased 5% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $95 million, up 6% versus the prior year. Adjusted segment EBITA margin of 10.5% expanded 80 basis points over the prior year, including a 20 basis point headwind related to foreign currency. Adjusting for foreign currency, underlying EBITA margin expanded 100 basis points as positive mix and mitigating cost actions more than offset the impact of the volume decline. 

Building Solutions Asia Pacific

Sales in the quarter of $615 million decreased 2% versus the prior year. Organic sales declined 6% versus the prior year driven by a decline in project installations which more than offset growth in 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, decreased 1% year-over-year as growth in service was more than offset by a decline in project activity.  Significantly improved demand in China was offset by further declines in Japan, Hong Kong and South East Asia.  Backlog at the end of the quarter of $1.8 billion increased 12% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $79 million, up 10% versus the prior year. Adjusted segment EBITA margin of 12.8% expanded 140 basis points over the prior year as favorable mix and the benefit of mitigating cost actions more than offset the impact of the volume decline.    

Global Products

Sales in the quarter of $1.8 billion decreased 4% versus the prior year. Organic sales declined 2% versus the prior year as low double-digit growth in residential was more than offset by a decline in commercial HVAC, Fire & Security and Industrial Refrigeration. 

Adjusted segment EBITA was $213 million, up 4% versus the prior year. Adjusted segment EBITA margin of 11.9% expanded 90 basis points versus the prior year as positive price/cost and the benefit of mitigating cost actions more than offset the impact of the volume decline and negative mix. 

Corporate

Adjusted Corporate expense was $67 million in the quarter, a decrease of 17% compared to the prior year, driven primarily by mitigating cost actions and continuous structural cost reductions.

OTHER ITEMS

• For the quarter, cash provided by operating activities from continuing operations was $0.5 billion and capital expenditures were $0.1 billion, resulting in free cash flow from continuing operations of $0.4 billion.
• During the quarter, the Company repurchased 8 million shares for $346 million.
• During the quarter, the Company recorded a net $124 million divestiture reserve reversal in discontinued operations related to the sale of the Power Solutions business.

FY21 SECOND QUARTER AND FULL YEAR GUIDANCE

The Company initiated fiscal 2021 second quarter guidance:

• Organic revenue growth up slightly
• Adjusted EBITA margin expansion of 80 to 100 basis points, year-over-year
• Adjusted EPS before special items of $0.47 to $0.49; represents 12 to 17% growth year-over-year

The Company initiated fiscal 2021 full year guidance:

• Organic revenue growth up low-to-mid single digits
• Adjusted EBITA margin expansion of 40 to 60 basis points, year-over-year
• Adjusted EPS before special items of $2.45 to $2.55; represents 9 to 14% growth year-over-year

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

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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 2020 fiscal year filed with the SEC on November 16, 2020, which is 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.

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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, Power Solutions divestiture reserve adjustment and discrete tax items. Financial information regarding organic sales, EBIT, EBIT margin, adjusted EBIT, adjusted EBIT margin, total segment EBITA, adjusted segment EBITA, adjusted segment EBITA margin, adjusted corporate expense, 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 integration costs 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.

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SOURCE Johnson Controls International plc