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8-K - 8-K - Johnson Controls International plca8-kq3resultsfy17.htm
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FOR IMMEDIATE RELEASE                                     

                    
CONTACT:
Investors:
Antonella Franzen
(609) 720-4665

Ryan Edelman
(609) 720-4545

Media:
Fraser Engerman
(414) 524-2733
Exhibit 99.1

Johnson Controls reports third quarter earnings
________________________________________________________________________________
GAAP earnings of $0.59 per share including special items
Adjusted EPS from continuing operations of $0.71, up 16 percent versus prior year
Adjusted sales of $7.7 billion, reflecting organic growth of 1 percent versus prior year
Adjusted EBIT margin expansion of 150 basis points year-over-year, to 13.0 percent
Fourth quarter adjusted EPS from continuing operations guidance range of $0.86 to $0.88, a 13 percent to 16 percent increase year-over-year
2017 adjusted EPS from continuing operations guidance range of $2.60 to $2.62, a 13 percent increase year-over-year
________________________________________________________________________________
CORK, Ireland, Jul. 27, 2017 -- Johnson Controls International, plc (NYSE: JCI) today reported fiscal third quarter 2017 GAAP earnings per share (“EPS”) from continuing operations, including special items, of $0.59 (see attached footnotes for non-GAAP reconciliation). Excluding these items, adjusted EPS from continuing operations was $0.71, up 16 percent versus the prior year period.
Adjusted sales of $7.7 billion increased 1 percent compared to the prior year on a combined basis. Excluding the impacts from net acquisition and divestiture activity, as well as foreign exchange and changes in lead prices, total company sales also grew 1 percent organically.
GAAP earnings before interest and taxes (“EBIT”) was $842 million and the EBIT margin was 11.0 percent. Adjusted EBIT was $1.0 billion, up 15 percent over last year with adjusted EBIT margin expansion of 150 basis points, to 13.0 percent.
“Strong margin expansion, primarily related to the benefit of cost synergies and productivity initiatives, drove our year-over-year double-digit EPS growth in the quarter,” said Alex Molinaroli, Johnson Controls chairman & CEO. “Although we continue to make significant strides with the merger integration, we have fallen short of our revenue growth expectations for the year and are guiding our full year adjusted earnings per share to the low end of the range previously provided. Given the very complex merger integration, I am very proud of what our global teams

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have accomplished to capture near term synergies and establish a strong strategic platform that will ultimately drive global growth and continued margin expansion across our businesses,” Molinaroli added.

Income and EPS amounts attributable to Johnson Controls ordinary shareholders ($ millions, except per-share amounts)
The financial highlights presented in the tables below are in accordance with GAAP, unless otherwise indicated. All comparisons are to the third quarter of 2016, which are adjusted to reflect the combination of Johnson Controls’ historical Building Efficiency business with historical Tyco results of operations as if these businesses had been operated together during the periods presented, along with certain other adjustments. For additional information, see the unaudited supplemental financial information included in the Current Report on Form 8-K filed by Johnson Controls with the SEC on Nov. 8, 2016 as well as the attached footnotes. The spin-off of Adient plc occurred on Oct. 31, 2016 and the results of this business are reported in discontinued operations for all historical periods presented.

 
 
GAAP
 
Adjusted
 
Adjusted
 
 
 
 
Q3 2017
 
Q3 2017
 
Q3 2016
 
Change
 
 
 
 
 
 
(Combined)
 
 
 
 
 
 
 
 
 
 
 
Sales
 
$7,683
 
$7,669
 
$7,597
 
+1%
 
 
 
 
 
 
 
 
 
Segment EBITA
 
1,216
 
1,212
 
1,126
 
+8%
 
 
 
 
 
 
 
 
 
EBIT
 
842
 
1,000
 
872
 
+15%
 
 
 
 
 
 
 
 
 
Net income from continuing operations
 
555
 
671
 
576
 
+16%
 
 
 
 
 
 
 
 
 
Diluted EPS from continuing operations
 
$0.59
 
$0.71
 
$0.61
 
+16%
Organic adjusted sales growth, adjusted segment EBITA, adjusted EBIT, and adjusted EPS from continuing operations 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 reviewing third quarter results can be found in the Investor Relations section of Johnson Controls’ website at http://investors.johnsoncontrols.com.









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BUSINESS RESULTS
Building Technologies & Solutions ("Buildings")
 
 
GAAP
 
Adjusted
 
Adjusted
 
 
 
 
Q3 2017
 
Q3 2017
 
Q3 2016
 
Change
 
 
 
 
 
 
(Combined)
 
 
 
 
 
 
 
 
 
 
 
Sales
 
$6,074
 
$6,060
 
$6,078
 
 
 
 
 
 
 
 
 
 
Segment EBITA
 
$912
 
$908
 
$845
 
+7%
 
 
 
 
 
 
 
 
 
Segment EBITA margin %
 
15.0%
 
15.0%
 
13.9%
 
+110bps
Buildings sales in the third quarter of 2017 were $6.1 billion, essentially flat versus the prior year quarter. Excluding net M&A and foreign exchange, organic sales increased 2 percent versus the prior year, reflecting 1 percent growth in our field businesses and 4 percent growth in product sales.
Orders in the quarter, excluding M&A and adjusted for foreign exchange, increased 1 percent year-over-year, with flat orders in the field businesses and 4 percent growth in products. Backlog at the end of the quarter of $8.4 billion was 3 percent higher year-over-year, excluding M&A and adjusted for foreign exchange.
Buildings adjusted segment EBITA was $908 million, up 7 percent versus the prior year. Adjusted segment EBITA margin of 15.0 percent improved 110 basis points over the prior year as the benefit of cost synergies and productivity savings, as well as modest volume leverage and favorable mix, more than offset planned product and channel investments.

Power Solutions
 
 
GAAP
 
Adjusted
 
Adjusted
 
 
 
 
Q3 2017
 
Q3 2017
 
Q3 2016
 
Change
 
 
 
 
 
 
(Combined)
 
 
 
 
 
 
 
 
 
 
 
Sales
 
$1,609
 
$1,609
 
$1,519
 
+6%
 
 
 
 
 
 
 
 
 
Segment EBITA
 
$304
 
$304
 
$281
 
+8%
 
 
 
 
 
 
 
 
 
Segment EBITA margin %
 
18.9%
 
18.9%
 
18.5%
 
+40bps
Power Solutions sales in the third quarter of 2017 were $1.6 billion, an increase of 6 percent versus the prior year. Excluding the impact of higher lead pass-through and foreign exchange, organic sales declined 2 percent versus the prior year, as favorable technology mix was more than offset by lower unit volumes across most regions. Global original equipment battery shipments declined 6 percent and aftermarket shipments declined 2 percent compared to the prior year. Start-Stop battery shipments increased 17 percent year-over-year, led by growth in China and the Americas.
Power Solutions adjusted segment EBITA was $304 million, up 8 percent from the prior year, due to favorable product mix and productivity savings, partially offset by lower volumes. Excluding the impact of foreign exchange and lead, adjusted segment EBITA increased 7 percent. Adjusted segment EBITA margin of 18.9 percent increased 40 basis points compared with the prior year, including a 120 basis point headwind related to the impact of lead. Excluding the impact of lead, adjusted segment EBITA margin increased 160 basis points year-over-year.

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Corporate
 
 
GAAP
 
Adjusted
 
Adjusted
 
 
 
 
Q3 2017
 
Q3 2017
 
Q3 2016
 
Change
 
 
 
 
 
 
(Combined)
 
 
 
 
 
 
 
 
 
 
 
Corporate expense
 
$(172)
 
$(122)
 
$(145)
 
16%
Adjusted corporate expense was $122 million in the third quarter, an improvement of 16 percent compared to the prior year driven primarily by cost synergies and productivity initiatives.

OTHER ITEMS

During the quarter, the Company repurchased 7.3 million shares for $307 million. Year-to-date, the Company has repurchased a total of 10.2M shares for $426 million. The Company expects to complete $650 to $750 million of share repurchases during fiscal 2017.

The Company expects the sale of the Scott Safety business to 3M to close in the first quarter of fiscal 2018. The net cash proceeds from the transaction are expected to approximate $1.8 to $1.9 billion, and will be used to repay a portion of the Tyco International Holding Sarl’s (“TSarl”) $4.0 billion of merger-related debt.

###
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

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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, 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, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, and 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 2016 year filed with the SEC on November 23, 2016, and in the quarterly reports on Form 10-Q filed with the SEC after such date, 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 plans, transaction/integration/separation costs, restructuring and impairment costs, nonrecurring purchase accounting impacts related to the Tyco merger and discrete tax items. Financial information regarding adjusted sales, organic sales, adjusted segment EBITA and adjusted segment EBITA margin are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as transaction/integration/separation costs and nonrecurring purchase accounting impacts because these costs are not considered to be directly related to the underlying operating performance of its business units. Management believes that, when considered together with unadjusted amounts, these non-GAAP measures are useful to investors in understanding period-over-period operating results and business trends of the Company. Management may also use these metrics as guides in forecasting, budgeting and long-term planning processes and for compensation purposes. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure.
###

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July 27, 2017

JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
 
 
Three Months Ended June 30,
 
 
2017
 
 
2016
 
 
 
 
 
 
Net sales
$
7,683

 
 
$
5,154

Cost of sales
5,252

 
 
3,732

 
Gross profit
2,431

 
 
1,422

 
 
 
 
 
 
Selling, general and administrative expenses
(1,609
)
 
 
(895
)
Restructuring and impairment costs
(49
)
 
 
(27
)
Net financing charges
(124
)
 
 
(65
)
Equity income
69

 
 
45

 
 
 
 
 
 
Income from continuing operations before income taxes
718

 
 
480

 
 
 
 
 
 
Income tax provision
89

 
 
78

 
 
 
 
 
 
Income from continuing operations
629

 
 
402

 
 
 
 
 
 
Income from discontinued operations, net of tax

 
 
57

 
 
 
 
 
 
Net income
629

 
 
459

 
 
 
 
 
 
Less: Income from continuing operations
     attributable to noncontrolling interests
74

 
 
55

Less: Income from discontinued operations
     attributable to noncontrolling interests

 
 
21

 
 
 
 
 
 
Net income attributable to JCI
$
555

 
 
$
383

 
 
 
 
 
 
Income from continuing operations
$
555

 
 
$
347

Income from discontinued operations

 
 
36

 
 
 
 
 
Net income attributable to JCI
$
555

 
 
$
383

 
 
 
 
 
 
Diluted earnings per share from continuing operations
$
0.59

 
 
$
0.53

Diluted earnings per share from discontinued operations

 
 
0.06

Diluted earnings per share
$
0.59

 
 
$
0.59

 
 
 
 
 
 
Diluted weighted average shares
944.4

 
 
649.7

Shares outstanding at period end
932.4

 
 
637.7




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July 27, 2017

JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
 
 
Nine Months Ended June 30,
 
 
2017
 
 
2016
 
 
 
 
 
 
Net sales
$
22,036

 
 
$
14,583

Cost of sales
15,210

 
 
10,617

 
Gross profit
6,826

 
 
3,966

 
 
 
 
 
 
Selling, general and administrative expenses
(4,905
)
 
 
(2,641
)
Restructuring and impairment costs
(226
)
 
 
(87
)
Net financing charges
(376
)
 
 
(202
)
Equity income
177

 
 
127

 
 
 
 
 
 
Income from continuing operations before income taxes
1,496

 
 
1,163

 
 
 
 
 
 
Income tax provision
570

 
 
202

 
 
 
 
 
 
Income from continuing operations
926

 
 
961

 
 
 
 
 
 
Loss from discontinued operations, net of tax
(34
)
 
 
(481
)
 
 
 
 
 
 
Net income
892

 
 
480

 
 
 
 
 
 
Less: Income from continuing operations
     attributable to noncontrolling interests
147

 
 
116

Less: Income from discontinued operations
     attributable to noncontrolling interests
9

 
 
61

 
 
 
 
 
 
Net income attributable to JCI
$
736

 
 
$
303

 
 
 
 
 
 
Income from continuing operations
$
779

 
 
$
845

Loss from discontinued operations
(43
)
 
 
(542
)
Net income attributable to JCI
$
736

 
 
$
303

 
 
 
 
 
 
Diluted earnings per share from continuing operations
$
0.82

 
 
$
1.30

Diluted loss per share from discontinued operations
(0.05
)
 
 
(0.83
)
Diluted earnings per share *
$
0.78

 
 
$
0.47

 
 
 
 
 
 
Diluted weighted average shares
946.8

 
 
651.5

Shares outstanding at period end
932.4

 
 
637.7


* May not sum due to rounding.







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July 27, 2017

JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
 
 
June 30,
2017
 
September 30,
2016
ASSETS
 
 
 
Cash and cash equivalents
$
458

 
$
579

Accounts receivable - net
6,443

 
6,394

Inventories
3,384

 
2,888

Assets held for sale
2,082

 
5,812

Other current assets
1,595

 
1,436

 
Current assets
13,962

 
17,109

 
 
 
 
 
Property, plant and equipment - net
5,870

 
5,632

Goodwill
19,619

 
21,024

Other intangible assets - net
6,727

 
7,540

Investments in partially-owned affiliates
1,159

 
990

Noncurrent assets held for sale

 
7,374

Other noncurrent assets
3,349

 
3,510

 
Total assets
$
50,686

 
$
63,179

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Short-term debt and current portion of long-term debt
$
2,499

 
$
1,706

Accounts payable and accrued expenses
4,768

 
5,333

Liabilities held for sale
247

 
4,276

Other current liabilities
4,001

 
5,016

 
Current liabilities
11,515

 
16,331

 
 
 
 
 
Long-term debt
11,772

 
11,053

Other noncurrent liabilities
6,595

 
6,583

Noncurrent liabilities held for sale

 
3,888

Redeemable noncontrolling interests
189

 
234

Shareholders' equity attributable to JCI
19,731

 
24,118

Noncontrolling interests
884

 
972

 
Total liabilities and equity
$
50,686

 
$
63,179


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July 27, 2017

JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
 
 
 
 
 
 
Three Months Ended June 30,
 
 
 
 
 
 
2017
 
 
2016
Operating Activities
 
 
 
 
Net income attributable to JCI
$
555

 
 
$
383

Income from continuing operations attributable to noncontrolling interests
74

 
 
55

Income from discontinued operations attributable to noncontrolling interests

 
 
21

 
 
 
 
 
 
 
 
 
 
Net income
629

 
 
459

 
 
 
 
 
 
 
 
 
 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
281

 
 
235

 
 
Pension and postretirement benefit expense (income)
18

 
 
(13
)
 
 
Pension and postretirement contributions
(17
)
 
 
(41
)
 
 
Equity in earnings of partially-owned affiliates, net of dividends received
(50
)
 
 
5

 
 
Deferred income taxes
(3
)
 
 
5

 
 
Non-cash restructuring and impairment costs
31

 
 
51

 
 
Gain on business divestitures

 
 
(14
)
 
 
Other - net
35

 
 
16

 
 
Changes in assets and liabilities, excluding acquisitions and divestitures:
 
 
 
 
 
 
 
 
Accounts receivable
(298
)
 
 
(188
)
 
 
 
 
Inventories
(215
)
 
 
(65
)
 
 
 
 
Other assets
(108
)
 
 
(181
)
 
 
 
 
Restructuring reserves
(25
)
 
 
1

 
 
 
 
Accounts payable and accrued liabilities
8

 
 
268

 
 
 
 
Accrued income taxes
(71
)
 
 
(463
)
 
 
 
 
 
Cash provided by operating activities
215

 
 
75

 
 
 
 
 
 
 
 
 
 
Investing Activities
 
 
 
 
Capital expenditures
(362
)
 
 
(279
)
Sale of property, plant and equipment
5

 
 
14

Business divestitures, net of cash divested

 
 
14

Other - net
(3
)
 
 
(3
)
 
 
 
 
 
Cash used by investing activities
(360
)
 
 
(254
)
 
 
 
 
 
 
 
 
 
 
Financing Activities
 
 
 
 
Increase in short and long-term debt - net
692

 
 
935

Debt financing costs
(1
)
 
 

Stock repurchases
(307
)
 
 
(475
)
Payment of cash dividends
(234
)
 
 
(188
)
Proceeds from the exercise of stock options
42

 
 
14

Dividends paid to noncontrolling interests

 
 
(13
)
Cash paid related to prior acquisitions
(38
)
 
 

Other - net

 
 
1

 
 
 
 
 
Cash provided by financing activities
154

 
 
274

Effect of exchange rate changes on cash and cash equivalents
37

 
 
14

Cash held for sale

 
 
(54
)
Increase in cash and cash equivalents
$
46

 
 
$
55


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July 27, 2017

JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
 
 
 
 
 
 
Nine Months Ended June 30,
 
 
 
 
 
 
2017
 
 
2016
Operating Activities
 
 
 
 
Net income attributable to JCI
$
736

 
 
$
303

Income from continuing operations attributable to noncontrolling interests
147

 
 
116

Income from discontinued operations attributable to noncontrolling interests
9

 
 
61

 
 
 
 
 
 
 
 
 
 
Net income
892

 
 
480

 
 
 
 
 
 
 
 
 
 
Adjustments to reconcile net income to cash provided (used) by operating activities:
 
 
 
 
 
 
Depreciation and amortization
919

 
 
680

 
 
Pension and postretirement benefit income
(184
)
 
 
(47
)
 
 
Pension and postretirement contributions
(275
)
 
 
(94
)
 
 
Equity in earnings of partially-owned affiliates, net of dividends received
(166
)
 
 
(202
)
 
 
Deferred income taxes
1,056

 
 
336

 
 
Non-cash restructuring and impairment costs
70

 
 
80

 
 
Gain on business divestitures

 
 
(14
)
 
 
Other - net
117

 
 
68

 
 
Changes in assets and liabilities, excluding acquisitions and divestitures:
 
 
 
 
 
 
 
 
Accounts receivable
(319
)
 
 
(113
)
 
 
 
 
Inventories
(585
)
 
 
(233
)
 
 
 
 
Other assets
(258
)
 
 
(47
)
 
 
 
 
Restructuring reserves
22

 
 
68

 
 
 
 
Accounts payable and accrued liabilities
(608
)
 
 
(43
)
 
 
 
 
Accrued income taxes
(2,002
)
 
 
(223
)
 
 
 
 
 
Cash provided (used) by operating activities
(1,321
)
 
 
696

 
 
 
 
 
 
 
 
 
 
Investing Activities
 
 
 
 
Capital expenditures
(996
)
 
 
(822
)
Sale of property, plant and equipment
23

 
 
28

Acquisition of businesses, net of cash acquired
(6
)
 
 
(133
)
Business divestitures, net of cash divested
180

 
 
54

Other - net
(33
)
 
 
2

 
 
 
 
 
Cash used by investing activities
(832
)
 
 
(871
)
 
 
 
 
 
 
 
 
 
 
Financing Activities
 
 
 
 
Increase in short and long-term debt - net
1,468

 
 
1,261

Debt financing costs
(18
)
 
 

Stock repurchases
(426
)
 
 
(475
)
Payment of cash dividends
(469
)
 
 
(544
)
Proceeds from the exercise of stock options
130

 
 
34

Dividends paid to noncontrolling interests
(78
)
 
 
(240
)
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
(2
)
 
 
4

 
 
 
 
 
Cash provided by financing activities
1,915

 
 
40

Effect of exchange rate changes on cash and cash equivalents
12

 
 
5

Cash held for sale
105

 
 
(76
)
Decrease in cash and cash equivalents
$
(121
)
 
 
$
(206
)

Page 10 of 16




July 27, 2017

FOOTNOTES
1. Financial Summary

In the first quarter of fiscal 2017, the Company began evaluating 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. Historical information has been revised to present the comparable periods on a consistent basis. Also in the first quarter of fiscal 2017, the Company began reporting the Automotive Experience business as a discontinued operation, which required retrospective application to previously reported financial information. As a result, the segment EBITA amounts shown below are for continuing operations and exclude the Automotive Experience business. In addition, the financial results for the three and nine months ended June 30, 2016 exclude the Tyco business.

 
Three Months Ended June 30,
(in millions; unaudited)
2017
 
2016
 
Actual
 
Adjusted Non-GAAP
 
Actual
 
Adjusted Non-GAAP
 
 
 
 
 
 
 
 
Net sales (1)
 
 
 
 
 
 
 
Building Technologies & Solutions
$
6,074

 
$
6,060

 
$
3,635

 
$
3,635

Power Solutions
1,609

 
1,609

 
1,519

 
1,519

               Net sales
$
7,683

 
$
7,669

 
$
5,154

 
$
5,154

 
 
 
 
 
 
 
 
Segment EBITA (1)
 
 
 
 
 
 
 
Building Technologies & Solutions
$
912

 
$
908

 
$
440

 
$
447

Power Solutions
304

 
304

 
280

 
281

               Segment EBITA
1,216

 
1,212

 
720

 
728

 
 
 
 
 
 
 
 
Corporate expenses (2)
(172
)
 
(122
)
 
(126
)
 
(94
)
Amortization of intangible assets (3)
(108
)
 
(90
)
 
(22
)
 
(22
)
Mark-to-market loss for pension plans (4)
(45
)
 

 

 

Restructuring and impairment costs (5)
(49
)
 

 
(27
)
 

               EBIT (6)
842

 
1,000

 
545

 
612

 
 
 
 
 
 
 
 
Net financing charges (7)
(124
)
 
(124
)
 
(65
)
 
(65
)
Income from continuing operations before income taxes
718

 
876

 
480

 
547

Income tax provision (8)
(89
)
 
(131
)
 
(78
)
 
(94
)
Income from continuing operations
629

 
745

 
402

 
453

Income from continuing operations attributable to
     noncontrolling interests (9)
(74
)
 
(74
)
 
(55
)
 
(57
)
Net income from continuing operations attributable
     to JCI
$
555

 
$
671

 
$
347

 
$
396


 
Nine Months Ended June 30,
(in millions; unaudited)
2017
 
2016
 
Actual
 
Adjusted Non-GAAP
 
Actual
 
Adjusted Non-GAAP
 
 
 
 
 
 
 
 
Net sales (1)
 
 
 
 
 
 
 
Building Technologies & Solutions
$
16,831

 
$
16,797

 
$
9,741

 
$
9,741

Power Solutions
5,205

 
5,205

 
4,842

 
4,842

               Net sales
$
22,036

 
$
22,002

 
$
14,583

 
$
14,583

 
 
 
 
 
 
 
 
Segment EBITA (1)
 
 
 
 
 
 
 
Building Technologies & Solutions
$
2,000

 
$
2,114

 
$
915

 
$
940

Power Solutions
996

 
997

 
922

 
923

               Segment EBITA
2,996

 
3,111

 
1,837

 
1,863

 
 
 
 
 
 
 
 
Corporate expenses (2)
(605
)
 
(358
)
 
(323
)
 
(237
)
Amortization of intangible assets (3)
(383
)
 
(285
)
 
(62
)
 
(62
)
Mark-to-market gain for pension plans (4)
90

 

 

 

Restructuring and impairment costs (5)
(226
)
 

 
(87
)
 

               EBIT (6)
1,872

 
2,468

 
1,365

 
1,564

 
 
 
 
 
 
 
 
Net financing charges (7)
(376
)
 
(359
)
 
(202
)
 
(202
)
Income from continuing operations before income taxes
1,496

 
2,109

 
1,163

 
1,362

Income tax provision (8)
(570
)
 
(316
)
 
(202
)
 
(235
)
Income from continuing operations
926

 
1,793

 
961

 
1,127

Income from continuing operations attributable to
     noncontrolling interests (9)
(147
)
 
(147
)
 
(116
)
 
(131
)
Net income from continuing operations attributable to JCI
$
779

 
$
1,646

 
$
845

 
$
996


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, fire detection and suppression products and services, and life safety products for the residential and non-residential building markets.

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.



Page 11 of 16



July 27, 2017

(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 June 30, 2017 and 2016 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 Technologies & Solutions
 
Power Solutions
 
Consolidated JCI plc
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Net sales as reported
$
6,074

 
$
3,635

 
$
1,609

 
$
1,519

 
$
7,683

 
$
5,154

 
 
 
 
 
 
 
 
 
 
 
 
Adjusting items:
 
 
 
 
 
 
 
 
 
 
 
  Nonrecurring purchase accounting impacts
(14
)
 

 

 

 
(14
)
 

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net sales
$
6,060

 
$
3,635

 
$
1,609

 
$
1,519

 
$
7,669

 
$
5,154

 
 
 
 
 
 
 
 
 
 
 
 
Segment EBITA as reported
$
912

 
$
440

 
$
304

 
$
280

 
$
1,216

 
$
720

Segment EBITA margin as reported
15.0
%
 
12.1
%
 
18.9
%
 
18.4
%
 
15.8
%
 
14.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusting items:
 
 
 
 
 
 
 
 
 
 
 
  Transaction costs
6

 

 

 
1

 
6

 
1

  Integration costs
14

 
7

 

 

 
14

 
7

  Nonrecurring purchase accounting impacts
(24
)
 

 

 

 
(24
)
 

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment EBITA
$
908

 
$
447

 
$
304

 
$
281

 
$
1,212

 
$
728

Adjusted segment EBITA margin
15.0
%
 
12.3
%
 
18.9
%
 
18.5
%
 
15.8
%
 
14.1
%

The following is the nine months ended June 30, 2017 and 2016 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 Technologies & Solutions
 
Power Solutions
 
Consolidated JCI plc
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Net sales as reported
$
16,831

 
$
9,741

 
$
5,205

 
$
4,842

 
$
22,036

 
$
14,583

 
 
 
 
 
 
 
 
 
 
 
 
Adjusting items:
 
 
 
 
 
 
 
 
 
 
 
  Nonrecurring purchase accounting impacts
(34
)
 

 

 

 
(34
)
 

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net sales
$
16,797

 
$
9,741

 
$
5,205

 
$
4,842

 
$
22,002

 
$
14,583

 
 
 
 
 
 
 
 
 
 
 
 
Segment EBITA as reported
$
2,000

 
$
915

 
$
996

 
$
922

 
$
2,996

 
$
1,837

Segment EBITA margin as reported
11.9
%
 
9.4
%
 
19.1
%
 
19.0
%
 
13.6
%
 
12.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusting items:
 
 
 
 
 
 
 
 
 
 
 
  Transaction costs
33

 
10

 
1

 
1

 
34

 
11

  Integration costs
44

 
15

 

 

 
44

 
15

  Nonrecurring purchase accounting impacts
37

 

 

 

 
37

 

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment EBITA
$
2,114

 
$
940

 
$
997

 
$
923

 
$
3,111

 
$
1,863

Adjusted segment EBITA margin
12.6
%
 
9.6
%
 
19.2
%
 
19.1
%
 
14.1
%
 
12.8
%

(2) Adjusted Corporate expenses for the three months ended June 30, 2017 excludes $40 million of integration costs and $10 million of transaction costs. Adjusted Corporate expenses for the nine months ended June 30, 2017 excludes $185 million of integration costs, $58 million of transaction costs and $4 million of separation costs. Adjusted Corporate expenses for the three months ended June 30, 2016 excludes $21 million of transaction costs and $11 million of separation costs. Adjusted Corporate expenses for the nine months ended June 30, 2016 excludes $46 million of separation costs and $40 million of transaction costs.

(3) Adjusted amortization of intangible assets for the three and nine months ended June 30, 2017 excludes $18 million and $98 million, respectively, of nonrecurring asset amortization related to Tyco purchase accounting.



Page 12 of 16



July 27, 2017

(4) The three months ended June 30, 2017 pension mark-to-market loss of $45 million and the nine months ended June 30, 2017 pension mark-to-market gain of $90 million due to lump sum payouts for certain U.S. pension plans are excluded from the adjusted non-GAAP results.

(5) The three and nine months ended June 30, 2017 restructuring and impairment charges of $49 million and $226 million, respectively, are excluded from the adjusted non-GAAP results. The three and nine months ended June 30, 2016 restructuring and impairment charges of $27 million and $87 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 nine months ended June 30, 2017 exclude $17 million of transaction costs related to the debt exchange offers.

(8) Adjusted income tax provision for the three months ended June 30, 2017 excludes the tax benefits of the pension mark-to-market loss of $18 million, restructuring and impairment costs of $15 million, integration costs of $9 million and transaction costs of $2 million, partially offset by the tax provision for Tyco nonrecurring purchase accounting impacts of $2 million. Adjusted income tax provision for the nine months ended June 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 and the tax provision for the pension mark-to-market net gain of $36 million, partially offset by the tax benefits of changes in entity tax status of $101 million, restructuring and impairment costs of $49 million, integration costs of $41 million, Tyco nonrecurring purchase accounting impacts of $36 million and transaction costs of $12 million. Adjusted income tax provision for the three months ended June 30, 2016 excludes the tax benefits of restructuring and impairment costs of $12 million, transaction costs of $3 million and integration costs of $1 million. Adjusted income tax provision for the nine months ended June 30, 2016 excludes the tax benefits of restructuring and impairment costs of $24 million, transaction costs of $6 million, integration costs of $2 million and separation costs of $1 million.

(9) Adjusted income from continuing operations attributable to noncontrolling interests for the three months ended June 30, 2016 excludes $2 million for the noncontrolling interest impact of integration costs. Adjusted income from continuing operations attributable to noncontrolling interests for the nine months ended June 30, 2016, excludes $9 million for the noncontrolling interest impact of transaction/integration costs and $6 million for the noncontrolling interest impact of restructuring and impairment costs.

2. 2016 Supplemental Combined Information

As a result of the reverse merger between JCI and Tyco, which closed on September 2, 2016, the Company is providing supplemental combined financial information. As supplemental information that management believes will be useful to investors, the Company has provided unaudited selected historical information which combines JCI’s historical Building Efficiency business with historical Tyco results of operations as if these businesses had been operated together during the periods presented.

The merger is accounted for as a reverse acquisition with JCI considered to be acquiring Tyco for accounting purposes. As a result, the amounts reflected in Column A in the below table present the historical results of JCI, revised for the reporting changes described within footnote 1 above. The amounts in Column B reflect the impact of the special items, as set forth in the notes to the table and within footnote 1 above. The amounts in Column C reflect the inclusion of Tyco’s historical results for the period prior to the merger on an adjusted basis.

For the avoidance of doubt, this supplemental combined information is not intended to be, and was not, prepared on a basis consistent with the unaudited pro forma condensed combined financial information in Exhibit 99.3 to the Company’s Current Report on Form 8-K/A filed October 3, 2016 with the U.S. Securities and Exchange Commission (the “Pro Forma 8-K/A Filing”), which provides the pro forma financial information required by Item 9.01(b) of Form 8-K. The supplemental combined information is intentionally different from, but does not supersede, the pro forma financial information in the Pro Forma 8-K/A Filing.

In addition, the supplemental combined information does not purport to indicate the results that actually would have been obtained had the JCI and Tyco businesses been operated together on the basis of the new segment structure during the periods presented, or which may be realized in the future.



Page 13 of 16




July 27, 2017

Amounts Adjusted for Certain Special Items

The supplemental combined information includes line items, such as net sales, income from continuing operations before income taxes, income tax provision, noncontrolling interest, net income and diluted EPS, that have been adjusted for the special items set forth in the notes to the table. Such amounts should be viewed in addition to, and not in lieu of, net sales, income from continuing operations before income taxes, income tax provision, noncontrolling interest, net income and diluted EPS and other financial measures on an unadjusted basis. In addition, per share amounts presented in the tables take into account the effects of (i) the issuance of ordinary shares to JCI shareholders in connection with the merger, and (ii) the consolidation of Tyco ordinary shares immediately prior to the merger. As a result, share counts reflect shares outstanding as of September 2, 2016 immediately following the consummation of the merger transaction.

The Company’s management believes that these adjusted amounts, when considered together with the unadjusted amounts, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionate positive or negative impact on results in any particular period. The Company’s management also believes that these adjusted amounts enhance the ability of investors to analyze trends in the Company’s underlying business and to better understand the Company’s performance. In addition, the Company may utilize adjusted amounts as guides in forecasting, budgeting and long-term planning processes and to measure operating performance for compensation purposes. Adjusted amounts should be considered in addition to, and not as a substitute for, or superior to, unadjusted amounts.

(in millions, except per share data; unaudited)
 
Three Months Ended June 30, 2016
 
 
A
 
B
 
C
 
D
Net sales
 
 
 
 
 
 
 
 
Building Technologies & Solutions
 
$
3,635

 
$

 
$
2,443

 
$
6,078

Power Solutions
 
1,519

 

 

 
1,519

               Net sales
 
$
5,154

 
$

 
$
2,443

 
$
7,597

 
 
 
 
 
 
 
 
 
Income from continuing operations
 
 
 
 
 
 
 
 
Building Technologies & Solutions
 
$
440

 
$
7

 
$
398

 
$
845

Power Solutions
 
280

 
1

 

 
281

               Segment EBITA
 
720

 
8

 
398

 
1,126

Corporate expenses
 
(126
)
 
32

 
(51
)
 
(145
)
Amortization of intangible assets
 
(22
)
 

 
(87
)
 
(109
)
Restructuring and impairment costs
 
(27
)
 
27

 

 

               EBIT
 
545

 
67

 
260

 
872

Net financing charges
 
(65
)
 

 
(45
)
 
(110
)
Income from continuing operations before income taxes
 
480

 
67

 
215

 
762

Income tax provision
 
(78
)
 
(16
)
 
(36
)
 
(130
)
Noncontrolling interest
 
(55
)
 
(2
)
 
1

 
(56
)
Net income
 
$
347

 
$
49

 
$
180

 
$
576

 
 
 
 
 
 
 
 
 
Diluted weighted average shares
 
649.7

 
 
 
 
 
940

Diluted earnings per share
 
$
0.53

 
 
 
 
 
$
0.61


(in millions, except per share data; unaudited)
 
Nine Months Ended June 30, 2016
 
 
A
 
B
 
C
 
D
Net sales
 
 
 
 
 
 
 
 
Building Technologies & Solutions
 
$
9,741

 
$

 
$
7,138

 
$
16,879

Power Solutions
 
4,842

 

 

 
4,842

               Net sales
 
$
14,583

 
$

 
$
7,138

 
$
21,721

 
 
 
 
 
 
 
 
 
Income from continuing operations
 
 
 
 
 
 
 
 
Building Technologies & Solutions
 
$
915

 
$
25

 
$
1,099

 
$
2,039

Power Solutions
 
922

 
1

 

 
923

               Segment EBITA
 
1,837

 
26

 
1,099

 
2,962

Corporate expenses
 
(323
)
 
86

 
(161
)
 
(398
)
Amortization of intangible assets
 
(62
)
 

 
(260
)
 
(322
)
Restructuring and impairment costs
 
(87
)
 
87

 

 

               EBIT
 
1,365

 
199

 
678

 
2,242

Net financing charges
 
(202
)
 

 
(133
)
 
(335
)
Income from continuing operations before income taxes
 
1,163

 
199

 
545

 
1,907

Income tax provision
 
(202
)
 
(33
)
 
(89
)
 
(324
)
Noncontrolling interest
 
(116
)
 
(15
)
 
2

 
(129
)
Net income
 
$
845

 
$
151

 
$
458

 
$
1,454

 
 
 
 
 
 
 
 
 
Diluted weighted average shares
 
651.5

 
 
 
 
 
940

Diluted earnings per share
 
$
1.30

 
 
 
 
 
$
1.55


A - Johnson Controls, as reported.

B - Adjusted to exclude special items because these costs 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 better understanding the ongoing operations and business trends of the Company. The special items are described by line item in footnote 1 above. The income tax provision and noncontrolling interest adjustments are a result of the special items discussed in footnote 1.

C - Includes Tyco adjusted non-GAAP results for the three and nine months ended June 30, 2016, as if the merger occurred October 1, 2015. Tyco’s first three fiscal quarters of 2016 ended on the last Friday of December, March and June, while JCI’s fiscal quarters ended on the last day of each such month. Because the historical statements of income of each company represent full and equivalent quarterly periods, no adjustments were made to align the fiscal quarters. The income tax provision also includes an adjustment to arrive at an annualized 17% tax rate for fiscal 2016 as a combined company.

D - Combined financial information as if the merger with Tyco was completed on October 1, 2015. Reflects annual 17% tax rate and 940 million share count.



Page 14 of 16




July 27, 2017


3. Organic Adjusted Net Sales Growth Reconciliation

The components of the changes in adjusted net sales for the three months ended June 30, 2017 versus the three months ended June 30, 2016, including organic net sales, is shown below (unaudited):
(in millions)
Combined Adjusted Net Sales for the Three Months Ended
June 30, 2016
 
Foreign Currency
 
Acquisitions/
Divestitures, Net
 
Lead Impact
 
Organic Net Sales
 
Adjusted Net Sales for the Three Months Ended
June 30, 2017
Building Technologies & Solutions
$
6,078
 
 
$
(76
)
 
-1.3
 %
 
$
(68
)
 
-1.1
 %
 
$

 

 
$
126

 
2.1
 %
 
$
6,060

 
-0.3
 %
Power Solutions
1,519
 
 
(5
)
 
-0.3
 %
 

 

 
124

 
8.2
%
 
(29
)
 
-1.9
 %
 
1,609

 
5.9
 %
Total net sales
$
7,597
 
 
$
(81
)
 
-1.1
 %
 
$
(68
)
 
-0.9
 %
 
$
124

 
1.6
%
 
$
97

 
1.3
 %
 
$
7,669

 
0.9
 %

The components of the changes in adjusted net sales for the nine months ended June 30, 2017 versus the nine months ended June 30, 2016, including organic net sales, is shown below (unaudited):
(in millions)
Combined Adjusted Net Sales for the Nine Months Ended
June 30, 2016
 
Foreign Currency
 
Acquisitions/
Divestitures, Net
 
Lead Impact
 
Organic Net Sales
 
Adjusted Net Sales for the Nine Months Ended
June 30, 2017
Building Technologies & Solutions
$
16,879
 
 
$
(143
)
 
-0.8
 %
 
$
(169
)
 
-1.0
 %
 
$

 

 
$
230

 
1.4
%
 
$
16,797

 
-0.5
 %
Power Solutions
4,842
 
 
(20
)
 
-0.4
 %
 

 

 
298

 
6.2
%
 
85

 
1.8
%
 
5,205

 
7.5
 %
Total net sales
$
21,721
 
 
$
(163
)
 
-0.8
 %
 
$
(169
)
 
-0.8
 %
 
$
298

 
1.4
%
 
$
315

 
1.5
%
 
$
22,002

 
1.3
 %


4. 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, nonrecurring purchase accounting impacts related to the Tyco merger, mark-to-market gain or loss for pension plans, restructuring and impairment costs, 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
 
Three Months Ended
 
Three Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share as reported for JCI plc
$
0.59

 
$
0.59

 
$
0.59

 
$
0.53

 
 
 
 
 
 
 
 
Adjusting items:
 
 
 
 
 
 
 
  Transaction costs
0.02

 
0.03

 
0.02

 
0.03

       Related tax impact

 

 

 

  Integration costs
0.06

 
0.01

 
0.06

 
0.01

       Related tax impact
(0.01
)
 

 
(0.01
)
 

  Separation costs

 
0.21

 

 
0.02

       Related tax impact

 
(0.02
)
 

 

  Nonrecurring purchase accounting impacts
(0.01
)
 

 
(0.01
)
 

       Related tax impact

 

 

 

  Mark-to-market loss for pension plans
0.05

 

 
0.05

 

       Related tax impact
(0.02
)
 

 
(0.02
)
 

  Restructuring and impairment costs
0.05

 
0.16

 
0.05

 
0.04

       Related tax impact
(0.02
)
 
(0.04
)
 
(0.02
)
 
(0.02
)
  Discrete tax items

 
0.13

 

 

 
 
 
 
 
 
 
 
Adjusted earnings per share for JCI plc
$
0.71

 
$
1.07

 
$
0.71

 
$
0.61


 
 Net Income Attributable
to JCI plc
 
 Net Income Attributable to
JCI plc from Continuing
Operations
 
Nine Months Ended
 
Nine Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share as reported for JCI plc
$
0.78

 
$
0.47

 
$
0.82

 
$
1.30