Johnson Controls reports solid fourth quarter and full year results; Initiates FY22 guidance

CORK, Ireland, Nov. 5, 2021 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI), the global leader for smart, healthy and sustainable buildings, today reported fiscal fourth quarter 2021 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.38. Excluding these items, adjusted EPS from continuing operations was $0.88, up 16% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $6.4 billion increased 7% compared to the prior year on an as reported basis, and up 5% organically. GAAP net income from continuing operations was $269 million. Adjusted net income from continuing operations of $628 million increased 12% versus the prior year. Earnings before interest and taxes ("EBIT") was $853 million and EBIT margin was 13.3%. Adjusted EBIT was $827 million and adjusted EBIT margin was 12.9%, consistent with prior year results.

"Fiscal 2021 was a pivotal year in the transformation of Johnson Controls, from a traditional buildings systems integrator into a smart buildings solutions leader," said George Oliver, chairman and CEO. "Our teams navigated an incredibly challenging environment, delivering solid financial performance while continuing to advance our strategic commitments," Oliver continued.

"Although supply chain disruptions and inflation headwinds are expected to continue near term, I am excited and encouraged by the pace of demand in many of our end markets and our record backlogs, both of which position us well for fiscal 2022. Looking ahead, we are intensifying our focus on accelerating our growth capabilities, leveraging innovative technologies, driving higher attachment of recurring services and capitalizing on our vectors of growth. Our OpenBlue digital platform is transforming our engagement with customers, and our ability to address arguably the most-pressing issues in buildings history – net zero carbon emissions and healthy environments. In addition, our cost programs are well underway and will help to boost profitability as conditions normalize," Oliver 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 fourth fiscal quarter and full fiscal year of 2020.

Organic sales, adjusted sales, total segment EBITA, adjusted segment EBITA, adjusted corporate expense, EBIT, adjusted EBIT, adjusted net income from continuing operations, adjusted EPS from continuing operations, free cash flow and free cash flow conversion 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 $2.3 billion increased 5% versus the prior year. Organic sales increased 4% over the prior year, led by high-single digit growth in Service with solid growth across HVAC & Controls, Fire & Security and Performance Infrastructure.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 11% year-over-year. Backlog at the end of the quarter of $6.5 billion increased 10% compared to the prior year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $357 million, up 3% versus the prior year. Adjusted segment EBITA margin of 15.2% declined 20 basis points versus the prior year as the benefit of volume leverage, favorable mix and the SG&A actions taken this year were more than offset by the non-recurrence of the temporary cost mitigation actions taken in the prior year.

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

Sales in the quarter of $962 million increased 6% versus the prior year. Organic sales grew 3% versus the prior year led by continued strong demand in Service activity. Growth was led by Fire & Security and Industrial Refrigeration. By region, Europe and Latin America experienced strong growth while the Middle East remained under pressure.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 7% year-over-year. Backlog at the end of the quarter of $1.9 billion increased 15% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $107 million, up 4% versus the prior year. Adjusted segment EBITA margin of 11.1% declined 30 basis points over the prior year, as the prior year included the favorable benefit related to a gain on sale. Excluding this benefit, the underlying margin performance improved year-over-year as favorable mix and the SG&A actions taken this year more than offset the non-recurrence of the other temporary cost mitigation actions taken in the prior year.

Building Solutions Asia Pacific

Sales in the quarter of $724 million increased 10% versus the prior year. Organic sales grew 7% versus the prior year with solid growth in both service and project installations, driven by strong growth in Commercial Applied HVAC & Controls. China remains the primary source of growth, with the rest of Asia mixed due to ongoing lockdown restrictions in many regions.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 4% year-over-year. Backlog at the end of the quarter of $1.8 billion increased 4% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $112 million, increased 15% versus the prior year. Adjusted segment EBITA margin of 15.5% expanded 80 basis points versus the prior year driven by a favorable reserve adjustment. Excluding this benefit, underlying margin was down year-over-year as volume leverage and net productivity was offset by unfavorable mix and price / cost.

Global Products

Sales in the quarter of $2.4 billion increased 10% versus the prior year. Organic sales grew 7% versus the prior year driven by strong growth across Commercial and Residential HVAC and Fire & Security products.

Adjusted segment EBITA was $442 million, up 16% versus the prior year. Adjusted segment EBITA margin of 18.7% expanded 90 basis points versus the prior year as volume leverage, positive mix, increased equity income and the benefit of SG&A actions taken this year more than offset the non-recurrence of the temporary cost mitigation actions taken in the prior year as well as price cost pressure.

Corporate

Adjusted Corporate expense was $83 million in the quarter, an increase of 43% compared to the prior year, driven primarily by the non-recurrence of the temporary cost mitigation actions taken in the prior year.

OTHER ITEMS

• For the quarter, cash provided by operating activities from continuing operations was $0.5 billion and capital expenditures were $0.2 billion, resulting in free cash flow from continuing operations of $0.3 billion.
• For the full year, cash provided by operating activities from continuing operations was $2.6 billion and capital expenditures were $0.6 billion, resulting in free cash flow from continuing operations of $2.0 billion, representing 105% conversion.
• During the quarter, the Company repurchased approximately 4.2 million shares for $306 million. For the full year, the Company repurchased 23.5 million shares for $1.3 billion.
• In September, the Company established an integrated sustainable finance framework and issued its first sustainability-linked bond that align with greenhouse gas emissions reduction targets, issuing $500 million in ten-year senior notes.
• During the quarter, the Company recorded a tax charge of $417 million related to the tax impacts of an intra-entity sale of certain of the Company's intellectual property as well as a tax benefit of $39 million related to valuation allowance adjustments.
• During the quarter, the Company recorded net pre-tax mark-to-market gains of $106 million related primarily to the remeasurement of the Company's pension and postretirement benefit plans.
• During the quarter, the Company recorded pre-tax restructuring and impairment costs of $67 million and acquisition related charges of $13 million.

FIRST QUARTER GUIDANCE

The Company announced fiscal 2022 first quarter guidance:

• Organic revenue up mid-single digits year-over-year
• Adjusted segment EBITA margin expansion of 40 to 50 basis points, year-over-year
• Adjusted EPS before special items of $0.52 to $0.54; represents 21 to 26% growth year-over-year

FULL YEAR GUIDANCE

The Company initiated fiscal 2022 full year guidance:

• Organic revenue growth of mid-to-high single digits year-over-year
• Adjusted segment EBITA margin expansion of 70 to 80 basis points, year-over-year
• Adjusted EPS before special items of $3.22 to $3.32; represents 22 to 25% growth year-over-year

CONFERENCE CALL & WEBCAST INFO

Johnson Controls will host a conference call to discuss this quarter's results at 8:30 a.m. ET today, which can be accessed by dialing 888-324-9610 (in the United States) or 630-395-0255 (outside the United States), or via webcast. The passcode is "Johnson Controls". A slide presentation will accompany the prepared remarks and has been posted on the investor relations section of the Johnson Controls website at https://investors.johnsoncontrols.com/news-and-events/events-and-presentations. A replay will be made available approximately two hours following the conclusion of the conference call.

About Johnson Controls:

At Johnson Controls (NYSE:JCI) we transform the environments where people live, work, learn and play. As the global leader in smart, healthy and sustainable buildings, our mission is to reimagine the performance of buildings to serve people, places and the planet.

With a history of more than 135 years of innovation, Johnson Controls delivers the blueprint of the future for industries such as healthcare, schools, data centers, airports, stadiums, manufacturing and beyond through its comprehensive digital offering OpenBlue. With a global team of 100,000 experts in more than 150 countries, Johnson Controls offers the world`s largest portfolio of building technology, software as well as service solutions with some of the most trusted names in the industry. For more information, visit www.johnsoncontrols.com or follow us @johnsoncontrols on Twitter.

JOHNSON CONTROLS CONTACTS:

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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 its control, that could cause its 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 global price inflation and shortages impacting the availability of raw materials and component products; Johnson Controls' ability to manage the impacts of natural disasters, climate change, 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 and meet applicable regulatory requirements; changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions; maintaining the capacity, reliability and security of Johnson Controls' enterprise information technology infrastructure; the ability to manage the lifecycle cybersecurity risk in the development, deployment and operation of Johnson Controls' digital platforms and services; 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; the outcome of litigation and governmental proceedings; the ability to hire and retain senior management and other key personnel; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; fluctuations in currency exchange rates; labor shortages, work stoppages, union negotiations, labor disputes and other matters associated with the labor force; and 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
This 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, integration costs, an acquisition related compensation charge, net mark-to-market adjustments, Silent-Aire transaction costs and other nonrecurring costs, Power Solutions divestiture reserve adjustment and discrete tax items. Financial information regarding organic sales, adjusted 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, free cash flow conversion and adjusted net income from continuing operations are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as integration costs, an acquisition related compensation charge, Silent-Aire transaction costs and other nonrecurring 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 the non-GAAP measures and a reconciliation of these non-GAAP measures, refer to the attached footnotes.

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