Johnson Controls Delivers Strong Q2 Order, Revenue, and EPS Growth Performance

FY22 Guidance Impacted by Delayed Backlog Conversion Resulting from Supply Chain Volatility 

  • GAAP EPS of $0.02; Adjusted EPS of $0.63, up 21% versus prior year
  • Reported sales +9% versus prior year; +9% organically
  • Field Orders +11% year-over-year, with broad-based strength across regions; Service orders +8%
  • Record Backlog of $10.9 billion, increased 12% organically year-over-year
  • Completed over $500 million in share repurchases in Q2; Over $1.0 billion year-to-date
  • Fiscal 2022 adjusted EPS guidance revised to $2.95 to $3.05, from $3.22 to $3.32 previously, an increase of 11% to 15% year-over-year

CORK, Ireland, May 4, 2022 /PRNewswire/ — Johnson Controls International plc (NYSE: JCI), a global leader for smart, healthy and sustainable buildings, today reported fiscal second quarter 2022 GAAP earnings per share (“EPS”) from continuing operations, including special items, of $0.02. Excluding special items, adjusted EPS from continuing operations was $0.63, up 21% versus the prior year period (see attached footnotes for non-GAAP reconciliation).

Sales of $6.1 billion increased 9% compared to the prior year on an as reported basis and grew 9% organically. GAAP net income from continuing operations was $11 million. Adjusted net income from continuing operations of $441 million increased 18% versus the prior year. Earnings before interest and taxes (“EBIT”) was $161 million and EBIT margin was 2.6%. Adjusted EBIT was $608 million and adjusted EBIT margin was 10.0%, up 40 basis points versus the prior year.

“Demand for innovative solutions that address urgent needs for sustainability, energy efficiency, and higher indoor environmental quality continues to accelerate,” said George Oliver, chairman and chief executive officer. “We delivered another quarter of strong order, revenue and profit growth in Q2. We are, however, experiencing more near-term supply chain disruptions than expected, which have negatively impacted the pace and mix of our backlog conversion.”

“The underlying fundamentals of our business remain strong, and I am confident in our ability to navigate the temporary headwinds impacting our profitability. We continue to make progress toward enabling our strategic vision to digitally transform the buildings industry, leveraging our OpenBlue digital platform to capitalize on the attractive global trends over the next decade.” Oliver continued.

“I remain encouraged by the momentum we are seeing across our portfolio, and believe we are positioned to deliver attractive order, backlog, revenue, and EPS growth this year and beyond,” said Olivier Leonetti, chief financial officer. “Near term uncertainties related to the lockdown in China and geopolitical instability, coupled with the impact of ongoing supply chain disruptions, warrant a more cautious outlook and a revision to our second half expectations. Looking ahead, the strength of our backlog and the improving margin profile, together with our cost savings programs, positions us to deliver on the financial targets we set for the medium term.”

Income and EPS amounts attributable to Johnson Controls ordinary shareholders

($ millions, except per-share amounts)

The financial highlights presented in the tables below are in accordance with GAAP, unless otherwise indicated. All comparisons are to the fiscal second quarter of 2021. Effective October 1, 2021, the Company’s Marine business, previously reported across the Building Solutions Asia Pacific, Global Products and Building Solutions EMEA/LA segments, is now managed and reported under the Building Solutions EMEA/LA segment. Historical information has been re-cast to present the comparative periods on a consistent basis.

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.

Fiscal Q2

GAAP

Adjusted

2021

2022

2021

2022

Sales

$5,594

$6,098

$5,594

$6,098

Segment EBITA

711

800

711

768

EBIT

650

161

537

608

Net income from continuing operations

343

11

373

441

Diluted EPS from continuing operations

$0.48

$0.02

$0.52

$0.63

 

SEGMENT RESULTS


Building Solutions North America

Fiscal Q2

GAAP

Adjusted

2021

2022

2021

2022

Sales

$2,092

$2,227

$2,092

$2,227

Segment EBITA

266

235

266

235

Segment EBITA Margin %

12.7%

10.6%

12.7%

10.6%

Sales in the quarter of $2.2 billion increased 6% versus the prior year. Organic sales increased 6% over the prior year, led by high-single digit growth in Service and strong growth in our HVAC & Controls platform.         

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 13% year-over-year. Backlog at the end of the quarter of $6.9 billion increased 14% compared to the prior year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $235 million, down 12% versus the prior year. Adjusted segment EBITA margin of 10.6% declined 210 basis points versus the prior year as the benefit of volume leverage and the SG&A/COGS actions were more than offset by continued investment spending and lower absorption related to supply chain challenges and reduced labor productivity.    

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

Fiscal Q2

GAAP

Adjusted

2021

2022

2021

2022

Sales

$934

$958

$934

$958

Segment EBITA

88

79

88

90

Segment EBITA Margin %

9.4%

8.2%

9.4%

9.4%

 

Sales in the quarter of $958 million increased 3% versus the prior year. Organic sales grew 8% versus the prior year with low double-digit growth in Service, and strong performance in our Fire & Security platforms. By region, strong growth in Europe and Latin America was partially offset by continued weakness in the Middle East.          

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 8% year-over-year. Backlog at the end of the quarter of $2.2 billion increased 9% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $90 million, up 2% versus the prior year. Adjusted segment EBITA margin of 9.4% was flat with the prior year, as the benefit of SG&A/COGS actions and positive price/cost were offset by supply chain disruptions, unfavorable mix, continued investment spending and lower equity income.

Building Solutions Asia Pacific

Fiscal Q2

GAAP

Adjusted

2021

2022

2021

2022

Sales

$594

$623

$594

$623

Segment EBITA

73

74

73

74

Segment EBITA Margin %

12.3%

11.9%

12.3%

11.9%

Sales in the quarter of $623 million increased 5% versus the prior year. Sales grew 7% organically versus the prior year, led by strong demand for Commercial Applied HVAC & Controls and Industrial Refrigeration equipment. China remains the primary source of growth, up high-teens in the quarter.       

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 8% year-over-year. Backlog at the end of the quarter of $1.8 billion increased 5% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $74 million, up 1% versus the prior year. Adjusted segment EBITA margin of 11.9% declined 40 basis points versus the prior year as the benefit of SG&A/COGS actions were more than offset by negative price/cost, supply chain disruptions and unfavorable mix.    

Global Products

Fiscal Q2

GAAP

Adjusted

2021

2022

2021

2022

Sales

$1,974

$2,290

$1,974

$2,290

Segment EBITA

284

412

284

369

Segment EBITA Margin %

14.4%

18.0%

14.4%

16.1%

Sales in the quarter of $2.3 billion increased 16% versus the prior year. Organic sales grew 14% versus the prior year driven by strong pricing and broad-based demand for Commercial and Residential HVAC and Fire & Security products. 

Adjusted segment EBITA was $369 million, up 30% versus the prior year. Adjusted segment EBITA margin of 16.1% expanded 170 basis points versus the prior year as volume leverage, positive mix, and the benefit of SG&A/COGS actions were partially offset by negative price/cost, continued investment spending and lower equity income.    

Corporate

Fiscal Q2

GAAP

Adjusted

2021

2022

2021

2022

Corporate Expense

($70)

($60)

($70)

($60)

Adjusted Corporate expense was $60 million in the quarter, a decrease of 14% compared to the prior year. 

OTHER ITEMS

During the quarter…

  • Cash used in operating activities from continuing operations was ($68) million and capital expenditures were ($125) million, resulting in a free cash outflow from continuing operations of ($193) million.
  • The Company repurchased approximately 7.3 million shares for $509 million. Year to date through March, the Company repurchased 14.5 million shares for approximately $1.0 billion.
  • The Company recorded net pre-tax mark-to-market gains of $89 million related primarily to the remeasurement of the Company’s pension and postretirement benefit plans.
  • The Company recorded pre-tax restructuring and impairment costs of $384 million, including the impairment of assets associated with a business classified as held for sale in the quarter. Additionally, the Company recorded $11 million in pre-tax charges associated with the suspension of operations in Russia.

THIRD QUARTER GUIDANCE 

The Company initiated fiscal 2022 third quarter guidance:

  • Organic revenue up high-single digits year-over year
  • Adjusted segment EBITA margin decline of 80 to 100 basis points, year-over-year
  • Adjusted EPS before special items of [$0.82 to $0.87]

FULL YEAR GUIDANCE

The Company revised fiscal 2022 full year EPS guidance:

  • Organic revenue growth of 8% to 10% year-over year
  • Adjusted segment EBITA margin flat to down 30 basis points, year-over-year
  • Adjusted EPS before special items of $2.95 to $3.05; representing 11% to 15% 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.

Building on a proud history of more than 135 years of innovation, we deliver the blueprint of the future for industries such as healthcare, schools, data centers, airports, stadiums, manufacturing and beyond through OpenBlue, our comprehensive digital offering. Today, with a global team of 100,000 experts in more than 150 countries, Johnson Controls offers the world`s largest portfolio of building technology and software as well as service solutions from some of the most trusted names in the industry. Visit www.johnsoncontrols.com for more information and follow @Johnson Controls on social platforms.

JOHNSON CONTROLS CONTACTS:

INVESTOR CONTACTS:                                             

MEDIA CONTACTS:

Ryan Edelman                                                             

Karen Tognarelli

Direct: +1 609.720.4545                                             

Direct: +1 571.214.7744

Email: [email protected]                                     

Email: [email protected]

Michael Gates                                                             

Michael Isaac                                      

Direct: +1 414.524.5785                                             

Direct: +41 79 694 14 62

Email: [email protected]                                   

Email: [email protected]

 

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, debt levels and market outlook 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, shortages impacting the availability of raw materials and component products and the current conflict between Russia and Ukraine; 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 economic sanctions, 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 2021 fiscal year filed with the SEC on November 15, 2021, 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

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, net mark-to-market adjustments, Silent-Aire transaction costs and other nonrecurring items, Silent-Aire earn-out adjustment, charges associated with the suspension of operations in Russia, 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. 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 Johnson Controls. 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.

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data; unaudited)

Three Months Ended March 31, 

2022

2021

Net sales

$               6,098

$               5,594

Cost of sales

4,141

3,651

Gross profit

1,957

1,943

Selling, general and administrative expenses

(1,454)

(1,253)

Restructuring and impairment costs

(384)

(96)

Net financing charges

(51)

(44)

Equity income

42

56

Income from continuing operations before income taxes

110

606

Income tax provision

58

209

Income from continuing operations

52

397

Income from discontinued operations, net of tax

Net income

52

397

Less: Income from continuing operations

attributable to noncontrolling interests

41

54

Less: Income from discontinued operations

attributable to noncontrolling interests

Net income attributable to JCI

$                    11

$                  343

Income from continuing operations

$                    11

$                  343

Income from discontinued operations

Net income attributable to JCI

$                    11

$                  343

Diluted earnings per share from continuing operations

$                 0.02

$                 0.48

Diluted earnings per share from discontinued operations

Diluted earnings per share

$                 0.02

$                 0.48

Diluted weighted average shares

702.7

721.3

Shares outstanding at period end

695.7

716.7

 

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data; unaudited)

Six Months Ended March 31,

2022

2021

Net sales

$              11,960

$               10,935

Cost of sales

8,112

7,264

Gross profit

3,848

3,671

Selling, general and administrative expenses

(2,823)

(2,547)

Restructuring and impairment costs

(433)

(96)

Net financing charges

(104)

(103)

Equity income

112

114

Income from continuing operations before income taxes

600

1,039

Income tax provision

129

270

Income from continuing operations

471

769

Income from discontinued operations, net of tax

124

Net income

471

893

Less: Income from continuing operations

attributable to noncontrolling interests

79

99

Less: Income from discontinued operations

attributable to noncontrolling interests

Net income attributable to JCI

$                   392

$                    794

Income from continuing operations

$                   392

$                    670

Income from discontinued operations

124

Net income attributable to JCI

$                   392

$                    794

Diluted earnings per share from continuing operations

$                  0.56

$                   0.93

Diluted earnings per share from discontinued operations

0.17

Diluted earnings per share

$                  0.56

$                   1.10

Diluted weighted average shares

706.2

723.9

Shares outstanding at period end

695.7

716.7

 

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions; unaudited)

March 31,

September 30,

2022

2021

ASSETS

Cash and cash equivalents

$           1,787

$            1,336

Accounts receivable – net

5,689

5,613

Inventories

2,515

2,057

Assets held for sale

386

Other current assets

1,235

992

Current assets

11,612

9,998

Property, plant and equipment – net

3,103

3,228

Goodwill

18,029

18,335

Other intangible assets – net

4,889

5,549

Investments in partially-owned affiliates

1,073

1,066

Noncurrent assets held for sale

1,079

156

Other noncurrent assets

3,206

3,558

Total assets

$         42,991

$          41,890

LIABILITIES AND EQUITY

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

$           2,284

$               234

Accounts payable and accrued expenses

4,809

4,754

Liabilities held for sale

326

Other current liabilities

4,235

4,110

Current liabilities

11,654

9,098

Long-term debt

7,366

7,506

Other noncurrent liabilities

6,055

6,533

Noncurrent liabilities held for sale

228

Shareholders’ equity attributable to JCI

16,536

17,562

Noncontrolling interests

1,152

1,191

Total liabilities and equity

$         42,991

$          41,890

 

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)

Three Months Ended March 31,

2022

2021

Operating Activities

Net income from continuing operations attributable to JCI

$                  11

$                343

Income from continuing operations attributable to noncontrolling interests

41

54

Net income from continuing operations

52

397

Adjustments to reconcile net income from continuing operations to cash provided by operating activities:

Depreciation and amortization

208

212

Pension and postretirement benefit expense (income)

31

(253)

Pension and postretirement contributions

(35)

(8)

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

38

(55)

Deferred income taxes

(65)

84

Non-cash restructuring and impairment costs

361

54

Other – net

(8)

(7)

Changes in assets and liabilities, excluding acquisitions and divestitures:

Accounts receivable

(231)

(57)

Inventories

(243)

(113)

Other assets

(143)

(20)

Restructuring reserves

(38)

10

Accounts payable and accrued liabilities

156

419

Accrued income taxes

(151)

(18)

Cash provided (used) by operating activities from continuing operations

(68)

645

Investing Activities

Capital expenditures

(125)

(106)

Acquisition of businesses, net of cash acquired

(16)

(10)

Business divestitures, net of cash divested

8

Other – net

27

26

Cash used by investing activities from continuing operations

(114)

(82)

Financing Activities

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

1,666

(13)

Stock repurchases and retirements

(509)

(315)

Payment of cash dividends

(239)

(187)

Dividends paid to noncontrolling interests

(118)

(101)

Proceeds from the exercise of stock options

5

102

Cash paid to acquire a noncontrolling interest

(14)

Employee equity-based compensation withholding taxes

(2)

(8)

Other – net

(2)

4

Cash provided (used) by financing activities from continuing operations

801

(532)

Discontinued Operations

Net cash used by operating activities

(1)

Net cash used by investing activities

Net cash used by financing activities

Net cash flows used by discontinued operations 

(1)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(21)

20

Changes in cash held for sale

Increase in cash, cash equivalents and restricted cash

$                598

$                  50

 

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)

Six Months Ended March 31,

2022

2021

Operating Activities

Net income from continuing operations attributable to JCI

$                392

$                670

Income from continuing operations attributable to noncontrolling interests

79

99

Net income from continuing operations

471

769

Adjustments to reconcile net income from continuing operations to cash provided by operating activities:

Depreciation and amortization

432

419

Pension and postretirement benefit income

(51)

(299)

Pension and postretirement contributions

(76)

(25)

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

20

(107)

Deferred income taxes

(97)

25

Non-cash restructuring and impairment costs

361

54

Other – net

(7)

(32)

Changes in assets and liabilities, excluding acquisitions and divestitures:

Accounts receivable

(306)

167

Inventories

(619)

(211)

Other assets

(206)

(90)

Restructuring reserves

(19)

(24)

Accounts payable and accrued liabilities

489

510

Accrued income taxes

(68)

4

Cash provided by operating activities from continuing operations

324

1,160

Investing Activities

Capital expenditures

(260)

(197)

Acquisition of businesses, net of cash acquired

(124)

(10)

Business divestitures, net of cash divested

16

19

Other – net

36

69

Cash used by investing activities from continuing operations

(332)

(119)

Financing Activities

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

2,059

(33)

Stock repurchases and retirements

(1,035)

(661)

Payment of cash dividends

(430)

(377)

Proceeds from the exercise of stock options

13

133

Dividends paid to noncontrolling interests

(118)

(101)

Cash paid to acquire a noncontrolling interest

(14)

Employee equity-based compensation withholding taxes

(49)

(29)

Other – net

4

3

Cash provided (used) by financing activities from continuing operations

444

(1,079)

Discontinued Operations

Net cash used by operating activities

(4)

(37)

Net cash used by investing activities

Net cash used by financing activities

Net cash flows used by discontinued operations 

(4)

(37)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

46

9

Changes in cash held for sale

Increase (decrease) in cash, cash equivalents and restricted cash

$                478

$                 (66)

 

FOOTNOTES

 1.  Financial Summary

The Company evaluates the performance of its business units primarily on segment earnings before interest, taxes and amortization (EBITA), which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, charges attributable to the suspension of operations in Russia, Silent-Aire earn-out adjustment, and the net mark-to-market adjustments related to restricted asbestos investments and pension and postretirement plans. The financial results shown below are for continuing operations and exclude the Power Solutions business. Historical information has been re-cast for changes in the composition of reportable segments effective October 1, 2021, to present the comparative periods on a consistent basis.

(in millions; unaudited)

Three Months Ended March 31,

Six Months Ended March 31,

2022

2021

2022

2021

Actual

Adjusted
Non-GAAP

Actual

Adjusted
Non-GAAP

Actual

Adjusted
Non-GAAP

Actual

Adjusted
Non-GAAP

Net sales (1)

Building Solutions North America

$    2,227

$    2,227

$   2,092

$   2,092

$   4,379

$   4,379

$    4,126

$   4,126

Building Solutions EMEA/LA

958

958

934

934

1,917

1,917

1,882

1,882

Building Solutions Asia Pacific

623

623

594

594

1,298

1,298

1,198

1,198

Global Products

2,290

2,290

1,974

1,974

4,366

4,366

3,729

3,729

               Net sales

$    6,098

$    6,098

$   5,594

$   5,594

$ 11,960

$ 11,960

$  10,935

$ 10,935

Segment EBITA (1)

Building Solutions North America

$       235

$       235

$      266

$      266

$      485

$      485

$       521

$      521

Building Solutions EMEA/LA

79

90

88

88

183

194

186

186

Building Solutions Asia Pacific

74

74

73

73

142

142

150

150

Global Products

412

369

284

284

713

670

496

496

               Segment EBITA

800

768

711

711

1,523

1,491

1,353

1,353

Corporate expenses

(60)

(60)

(70)

(70)

(130)

(130)

(137)

(137)

Amortization of intangible assets (2)

(106)

(100)

(104)

(104)

(224)

(211)

(208)

(208)

Net mark-to-market adjustments (3)

(89)

209

(32)

230

Restructuring and impairment costs (4)

(384)

(96)

(433)

(96)

               EBIT (5)

161

608

650

537

704

1,150

1,142

1,008

               EBIT margin

2.6%

10.0%

11.6%

9.6%

5.9%

9.6%

10.4%

9.2%

Net financing charges

(51)

(51)

(44)

(44)

(104)

(104)

(103)

(103)

Income from continuing operations before income taxes

110

557

606

493

600

1,046

1,039

905

Income tax provision (6)

(58)

(75)

(209)

(66)

(129)

(141)

(270)

(122)

Income from continuing operations

52

482

397

427

471

905

769

783

Income from continuing operations attributable to 

     noncontrolling interests (7)

(41)

(41)

(54)

(54)

(79)

(84)

(99)

(99)

Net income from continuing operations attributable to JCI

$         11

$       441

$      343

$      373

$      392

$      821

$       670

$      684

 

(1) The Company’s press release contains financial information regarding adjusted net sales, segment EBITA, adjusted segment EBITA and adjusted segment EBITA margins, which are non-GAAP performance measures. The Company’s definition of adjusted net sales and adjusted segment EBITA excludes special items because these costs are not considered to be directly related to the underlying operating performance of its businesses. Management believes these non-GAAP measures are useful to investors in understanding the ongoing operations and business trends of the Company. 

A reconciliation of segment EBITA to income from continuing operations is shown earlier within this footnote. For the three months and six months ended March 31, 2022 and 2021, there were no items excluded from the calculation of adjusted net sales. The following is the three months ended March 31, 2022 and 2021 reconciliation of segment EBITA and segment EBITA margin as reported to adjusted segment EBITA and adjusted segment EBITA margin (unaudited):

 

(in millions)

 Building Solutions
North America 

 Building Solutions
EMEA/LA 

 Building Solutions
Asia Pacific 

 Global Products 

 Consolidated
JCI plc 

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Segment EBITA as reported

$     235

$       266

$         79

$        88

$        74

$        73

$      412

$       284

$      800

$      711

Segment EBITA margin as reported

10.6%

12.7%

8.2%

9.4%

11.9%

12.3%

18.0%

14.4%

13.1%

12.7%

Adjusting items:

Silent-Aire earn-out adjustment

(43)

(43)

Charges attributable to the suspension of operations in Russia

11

11

Adjusted segment EBITA

$     235

$       266

$         90

$        88

$        74

$        73

$      369

$       284

$      768

$      711

Adjusted segment EBITA margin

10.6%

12.7%

9.4%

9.4%

11.9%

12.3%

16.1%

14.4%

12.6%

12.7%

The following is the six months ended March 31, 2022 and 2021 reconciliation of segment EBITA and segment EBITA margin as reported to adjusted segment EBITA and adjusted segment EBITA margin (unaudited):

 

(in millions)

 Building Solutions
North America 

 Building Solutions
EMEA/LA 

 Building Solutions
Asia Pacific 

 Global Products 

 Consolidated
JCI plc 

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Segment EBITA as reported

$     485

$       521

$       183

$      186

$      142

$      150

$      713

$       496

$   1,523

$   1,353

Segment EBITA margin as reported

11.1%

12.6%

9.5%

9.9%

10.9%

12.5%

16.3%

13.3%

12.7%

12.4%

Adjusting items:

Silent-Aire earn-out adjustment

(43)

(43)

Charges attributable to the suspension of operations in Russia

11

11

Adjusted segment EBITA

$     485

$       521

$       194

$      186

$      142

$      150

$      670

$       496

$   1,491

$   1,353

Adjusted segment EBITA margin

11.1%

12.6%

10.1%

9.9%

10.9%

12.5%

15.3%

13.3%

12.5%

12.4%

 

(2) Adjusted amortization of intangible assets for the three months ended March 31, 2022 excludes $6 million of nonrecurring intangible asset amortization related to Silent-Aire purchase accounting. Adjusted amortization of intangible assets for the six months ended March 31, 2022 excludes $13 million of nonrecurring intangible asset amortization related to Silent-Aire purchase accounting.

(3) The three months ended March 31, 2022 exclude the net mark-to-market adjustments on restricted investments and pension and postretirement plans of $89 million. The six months ended March 31, 2022 exclude the net mark-to-market adjustments on restricted investments and pension and postretirement plans of $32 million. The three months ended March 31, 2021 exclude the net mark-to-market adjustments on restricted investments and pension and postretirement plans of $209 million. The six months ended March 31, 2021 exclude the net mark-to-market adjustments on restricted investments and pension and postretirement plans of $230 million.

(4) Restructuring and impairment costs for the three months ended March 31, 2022 of $384 million are excluded from the adjusted non-GAAP results. Restructuring and impairment costs for the six months ended March 31, 2022 of $433 million are excluded from the adjusted non-GAAP results. The restructuring actions and impairment costs for the three and six months ended March 31, 2022 are related primarily to the impairment of assets associated with a business classified as held for sale, workforce reductions and other asset impairments. Restructuring and impairment costs for the three and six months ended March 31, 2021 of $96 million are excluded from the adjusted non-GAAP results. The restructuring actions and impairment costs for the three and six months ended March 31, 2021, are related primarily to workforce reductions and asset impairments.

(5) Management defines earnings before interest and taxes (EBIT) as income (loss) from continuing operations before net financing charges, income taxes and noncontrolling interests. EBIT is a non-GAAP performance measure. Management believes this non-GAAP measure is useful to investors in understanding the ongoing operations and business trends of the Company. A reconciliation of EBIT to income from continuing operations is shown earlier within this footnote.

(6) Adjusted income tax provision for the three months ended March 31, 2022 excludes tax benefits related to net mark-to-market adjustments of $21 million, restructuring and impairment costs of $7 million, Silent-Aire nonrecurring intangible asset amortization of $1 million and charges related to the suspension of operations in Russia of $1 million, partially offset by tax provisions related to APB23 adjustments attributable to a business classified as held for sale of $13 million. Adjusted income tax provision for the six months ended March 31, 2022 excludes tax benefits related to restructuring and impairment costs of $14 million, net mark-to-market adjustments of $7 million, Silent-Aire nonrecurring intangible asset amortization of $3 million and charges related to the suspension of operations in Russia of $1 million, partially offset by tax provisions related to APB23 adjustments attributable to a business classified as held for sale of $13 million. Adjusted income tax provision for the three months ended March 31, 2021 excludes tax provisions related to a Mexico valuation allowance adjustment of $105 million and net mark-to-market adjustments of $53 million, partially offset by tax benefits related to restructuring and impairment costs of $15 million. Adjusted income tax provision for the six months ended March 31, 2021 excludes tax provisions related to a Mexico valuation allowance adjustment of $105 million and net mark-to-market adjustments of $58 million, partially offset by tax benefits related to restructuring and impairment costs of $15 million.

(7) Adjusted income from continuing operations attributable to noncontrolling interests for the six months ended March 31, 2022 excludes $5 million impact from restructuring and impairment costs.

 

 2.  Diluted Earnings Per Share Reconciliation

The Company’s press release contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include net mark-to-market adjustments, restructuring and impairment costs, Silent-Aire transaction costs and other nonrecurring costs, Silent-Aire earn-out adjustment, charges related to the suspension of operations in Russia, Power Solutions divestiture reserve adjustment, 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 adjusted diluted earnings per share for the respective periods is shown below (unaudited):

 Net Income Attributable to JCI plc 

 Net Income Attributable to JCI plc from
Continuing Operations 

 Net Income Attributable to JCI plc 

 Net Income Attributable to JCI plc from
Continuing Operations 

Three Months Ended

Three Months Ended

Six Months Ended

Six Months Ended

March 31,

March 31,

March 31,

March 31,

2022

2021

2022

2021

2022

2021

2022

2021

Earnings per share as reported for JCI plc

$    0.02

$      0.48

$      0.02

$     0.48

$     0.56

$     1.10

$     0.56

$      0.93

Adjusting items:

  Net mark-to-market adjustments

0.13

(0.29)

0.13

(0.29)

0.05

(0.32)

0.05

(0.32)

  Related tax impact

(0.03)

0.07

(0.03)

0.07

(0.01)

0.08

(0.01)

0.08

  Restructuring and impairment costs

0.55

0.13

0.55

0.13

0.61

0.13

0.61

0.13

  Related tax impact

(0.01)

(0.02)

(0.01)

(0.02)

(0.02)

(0.02)

(0.02)

(0.02)

  NCI impact of restructuring and impairment costs

(0.01)

(0.01)

  Power Solutions divestiture reserve adjustment

(0.21)

  Related tax impact

0.04

  Silent-Aire transaction costs and other nonrecurring costs

0.01

0.01

0.02

0.02

  Silent-Aire earn-out adjustment

(0.06)

(0.06)

(0.06)

(0.06)

  Charges attributable to the suspension of operations in Russia

0.01

0.01

0.01

0.01

  Discrete tax items

0.02

0.15

0.02

0.15

0.02

0.15

0.02

0.15

Adjusted earnings per share for JCI plc*

$    0.63

$      0.52

$      0.63

$     0.52

$     1.16

$     0.94

$     1.16

$      0.94

* May not sum due to rounding

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

Three Months Ended

Six Months Ended

March 31,

March 31,

2022

2021

2022

2021

Weighted average shares outstanding for JCI plc

Basic weighted average shares outstanding

699.1

717.1

701.8

720.1

Effect of dilutive securities:

  Stock options, unvested restricted stock 

    and unvested performance share awards

3.6

4.2

4.4

3.8

Diluted weighted average shares outstanding

702.7

721.3

706.2

723.9

The Company has presented forward-looking statements regarding adjusted corporate expense, adjusted EPS, organic revenue, adjusted EBITA margin and free cash flow conversion, which are non-GAAP financial measures. These non-GAAP financial measures are derived by excluding certain amounts, expenses, or income from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period, including but not limited to the high variability of the net mark-to-market adjustments and the effect of foreign currency exchange fluctuations. Our fiscal 2022 full year and third quarter guidance for organic revenue also excludes the effect of acquisitions, divestitures and foreign currency. We are unable to present a quantitative reconciliation of the aforementioned forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available and management cannot reliably predict all of the necessary components of such GAAP measures without unreasonable effort or expense. The unavailable information could have a significant impact on the Company’s third quarter and full year 2022 GAAP financial results.

 

 3.  Organic Growth Reconciliation

The components of the change in net sales for the three months ended March 31, 2022 versus the three months ended March 31, 2021, including organic growth, are shown below (unaudited):

(in millions)

Net Sales for the
Three Months Ended
March 31, 2021

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Net
Sales for the Three Months Ended
March 31, 2021

Acquisitions

Organic Growth

Net Sales for the
Three Months Ended
March 31, 2022

Building Solutions North America

$                       2,092

$            –

$           –

$                        2,092

$          4

$     131

6%

$  2,227

6%

Building Solutions EMEA/LA

934

(8)

-1%

(45)

-5%

881

7

1%

70

8%

958

3%

Building Solutions Asia Pacific

594

(17)

-3%

577

9

2%

37

7%

623

5%

               Total field

3,620

(8)

(62)

-2%

3,550

20

1%

238

7%

3,808

5%

Global Products

1,974

(48)

-2%

1,926

98

5%

266

14%

2,290

16%

               Total net sales

$                       5,594

$          (8)

$     (110)

-2%

$                        5,476

$      118

2%

$     504

9%

$  6,098

9%

The components of the change in net sales for the six months ended March 31, 2022 versus the six months ended March 31, 2021, including organic growth, are shown below (unaudited):

(in millions)

Net Sales for the
Six Months Ended
March 31, 2021

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Net
Sales for the Six
Months Ended
March 31, 2021

Acquisitions

Organic Growth

Net Sales for the
Six Months Ended
March 31, 2022

Building Solutions North America

$                       4,126

$            –

$          6

$                        4,132

$          9

$     238

6%

$  4,379

6%

Building Solutions EMEA/LA

1,882

(9)

(67)

-4%

1,806

15

1%

96

5%

1,917

2%

Building Solutions Asia Pacific

1,198

(1)

(23)

-2%

1,174

18

2%

106

9%

1,298

8%

               Total field

7,206

(10)

(84)

-1%

7,112

42

1%

440

6%

7,594

5%

Global Products

3,729

(71)

-2%

3,658

204

6%

504

14%

4,366

17%

               Total net sales

$                      10,935

$        (10)

$     (155)

-1%

$                      10,770

$      246

2%

$     944

9%

$11,960

9%

The Company’s earnings presentation presents organic growth for each of the periods re-casted as a result of changes in the composition of reportable segments effective October 1, 2021. The components of the change in adjusted net sales, including organic growth, are shown below for the three months ended December 31, 2020 versus the three months ended December 31, 2019, the three months ended March 31, 2021 versus the three months ended March 31, 2020, the three months ended June 30, 2021 versus the three months ended June 30, 2020, the three months ended September 30, 2021 versus the three months ended September 30, 2020, and the twelve months ended September 30, 2021 versus the twelve months ended September 30, 2020 (unaudited).

(in millions)

Adjusted Net Sales
for the Three
Months Ended
December 31, 2019

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Net
Sales for the Three Months Ended
December 31, 2019

Acquisitions

Organic Growth

Adjusted Net Sales
for the Three
Months Ended
December 31, 2020

Building Solutions North America

$                       2,167

$            –

$          3

$                        2,170

$           –

$    (136)

-6%

$  2,034

-6%

Building Solutions EMEA/LA

970

24

2%

994

9

1%

(55)

-6%

948

-2%

Building Solutions Asia Pacific

620

(2)

28

5%

646

(42)

-7%

604

-3%

               Total field

3,757

(2)

55

1%

3,810

9

(233)

-6%

3,586

-5%

Global Products

1,819

(71)

-4%

35

2%

1,783

(28)

-2%

1,755

-4%

               Total net sales

$                       5,576

$        (73)

-1%

$        90

2%

$                        5,593

$          9

$    (261)

-5%

$  5,341

-4%

(in millions)

Adjusted Net Sales
for the Three
Months Ended
March 31, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments – Foreign Currency

Adjusted Base Net
Sales for the Three Months Ended
March 31, 2020

Acquisitions

Organic Growth

Adjusted Net Sales
for the Three
Months Ended
March 31, 2021

Building Solutions North America

$                       2,175

$            –

$        13

1%

$                        2,188

$           –

$      (96)

-4%

$  2,092

-4%

Building Solutions EMEA/LA

891

44

5%

935

4

(5)

-1%

934

5%

Building Solutions Asia Pacific

518

(2)

29

6%

545

49

9%

594

15%

               Total field

3,584

(2)

86

2%

3,668

4

(52)

-1%

3,620

1%

Global Products

1,860

(62)

-3%

49

3%

1,847

127

7%

1,974

6%

               Total net sales

$                       5,444

$        (64)

-1%

$      135

2%

$                        5,515

$          4

$       75

1%

$  5,594

3%

(in millions)

Adjusted Net Sales
for the Three
Months Ended
June 30, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Net
Sales for the Three Months Ended
June 30, 2020

Acquisitions

Organic Growth

Adjusted Net Sales
for the Three
Months Ended
June 30, 2021

Building Solutions North America

$                       2,020

$            –

$        21

1%

$                        2,041

$           –

$     171

8%

$  2,212

10%

Building Solutions EMEA/LA

795

60

8%

855

10

1%

136

16%

1,001

26%

Building Solutions Asia Pacific

579

(3)

-1%

40

7%

616

87

14%

703

21%

               Total field

3,394

(3)

121

4%

3,512

10

394

11%

3,916

15%

Global Products

1,949

(54)

-3%

44

2%

1,939

80

4%

409

21%

2,428

25%

               Total net sales

$                       5,343

$        (57)

-1%

$      165

3%

$                        5,451

$        90

2%

$     803

15%

$  6,344

19%

(in millions)

Adjusted Net Sales
for the Three
Months Ended
September 30, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Net
Sales for the Three Months Ended
September 30, 2020

Acquisitions

Organic Growth

Adjusted Net Sales
for the Three
Months Ended
September 30, 2021

Building Solutions North America

$                       2,243

$            –

$        12

1%

$                        2,255

$          4

$       88

4%

$  2,347

5%

Building Solutions EMEA/LA

957

17

2%

974

14

1%

13

1%

1,001

5%

Building Solutions Asia Pacific

651

(2)

18

3%

667

48

7%

715

10%

               Total field

3,851

(2)

47

1%

3,896

18

149

4%

4,063

6%

Global Products

2,103

(79)

-4%

10

2,034

132

6%

166

8%

2,332

11%

               Total net sales

$                       5,954

$        (81)

-1%

$        57

1%

$                        5,930

$      150

3%

$     315

5%

$  6,395

7%

(in millions)

Adjusted Net Sales
for the Twelve
Months Ended
September 30, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Net
Sales for the Twelve Months Ended
September 30, 2020

Acquisitions

Organic Growth

Adjusted Net Sales
for the Twelve
Months Ended
September 30, 2021

Building Solutions North America

$                       8,605

$            –

$        49

1%

$                        8,654

$          4

$       27

$  8,685

1%

Building Solutions EMEA/LA

3,613

145

4%

3,758

37

1%

89

2%

3,884

8%

Building Solutions Asia Pacific

2,368

(9)

115

5%

2,474

142

6%

2,616

10%

               Total field

14,586

(9)

309

2%

14,886

41

258

2%

15,185

4%

Global Products

7,731

(266)

-3%

138

2%

7,603

212

3%

674

9%

8,489

10%

               Total net sales

$                      22,317

$      (275)

-1%

$      447

2%

$                      22,489

$      253

1%

$     932

4%

$23,674

6%

The organic growth reconciliations presented earlier within this footnote contain financial information regarding adjusted net sales. The following is the reconciliation of net sales as re-casted to adjusted net sales for the three months ended December 31, 2020 and 2019, the three months ended March 31, 2021 and 2020, the three months ended June 30, 2021 and 2020, the three months ended September 30, 2021 and 2020, and the twelve months ended September 30, 2021 and 2020 (unaudited):

Three Months Ended

Twelve Months Ended

December 31, 

March 31,

June 30,

September 30,

September 30,

(in millions)

2020

2019

2021

2020

2021

2020

2021

2020

2021

2020

Net sales as re-casted

Building Solutions North America

$   2,034

$    2,167

$    2,092

$   2,175

$   2,212

$   2,020

$   2,347

$    2,243

$   8,685

$   8,605

Building Solutions EMEA/LA

948

970

934

891

1,001

795

1,001

957

3,884

3,613

Building Solutions Asia Pacific

604

620

594

518

703

579

715

651

2,616

2,368

Global Products

1,755

1,819

1,974

1,860

2,425

1,949

2,329

2,103

8,483

7,731

               Net sales as re-casted

5,341

5,576

5,594

5,444

6,341

5,343

6,392

5,954

23,668

22,317

Adjusting items (1)

Building Solutions North America

Building Solutions EMEA/LA

Building Solutions Asia Pacific

Global Products

3

3

6

               Adjusting items

3

3

6

Adjusted net sales

Building Solutions North America

2,034

2,167

2,092

2,175

2,212

2,020

2,347

2,243

8,685

8,605

Building Solutions EMEA/LA

948

970

934

891

1,001

795

1,001

957

3,884

3,613

Building Solutions Asia Pacific

604

620

594

518

703

579

715

651

2,616

2,368

Global Products

1,755

1,819

1,974

1,860

2,428

1,949

2,332

2,103

8,489

7,731

               Adjusted net sales

$   5,341

$    5,576

$    5,594

$   5,444

$   6,344

$   5,343

$   6,395

$    5,954

$ 23,674

$ 22,317

(1) Adjusting items to net sales relate to nonrecurring Silent-Aire purchase accounting impacts.

The Company’s earnings presentation presents service revenue and organic growth for the three months ended March 31, 2022. The components of the change in service revenue, including organic growth, are shown below (unaudited):

(in millions)

Proforma Service
Revenue for the
Three Months Ended
March 31, 2021

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments – Foreign Currency

Adjusted Base Service
Revenue for the Three Months Ended
March 31, 2021

Acquisitions

Organic Growth

Service Revenue
for the
Three Months Ended
March 31, 2022

Building Solutions North America

$                          820

$            –

$         (1)

$                           819

$          4

$       61

7%

$     884

8%

Building Solutions EMEA/LA

407

(8)

-2%

(20)

-5%

379

1

42

11%

422

4%

Building Solutions Asia Pacific

171

(8)

-5%

163

2

1%

10

6%

175

2%

               Total field

1,398

(8)

-1%

(29)

-2%

1,361

7

1%

113

8%

1,481

6%

Global Products

               Total net sales

$                       1,398

$          (8)

-1%

$       (29)

-2%

$                        1,361

$          7

1%

$     113

8%

$  1,481

6%

The Company’s earnings presentation presents proforma service revenue and organic growth for the three months ended December 31, 2020, the three months ended March 31, 2021, the three months ended June 30, 2021, the three months ended September 30, 2021, and the twelve months ended September 30, 2021. The components of the change in proforma service revenue, including organic growth, for each period for which proforma financial information is presented are shown below (unaudited).

(in millions)

Proforma Service
Revenue for the
Three Months Ended
December 31, 2019

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Service
Revenue for the Three Months Ended
December 31, 2019

Acquisitions

Organic Growth

Proforma Service Revenue for the
Three Months Ended
December 31, 2020

Building Solutions North America

$                          811

$            –

$          1

$                           812

$           –

$      (20)

-2%

$     792

-2%

Building Solutions EMEA/LA

414

5

1%

419

3

1%

(5)

-1%

417

1%

Building Solutions Asia Pacific

165

(2)

-1%

7

4%

170

(2)

-1%

168

2%

               Total field

1,390

(2)

13

1%

1,401

3

(27)

-2%

1,377

-1%

Global Products

               Total service revenue

$                       1,390

$          (2)

$        13

1%

$                        1,401

$          3

$      (27)

-2%

$  1,377

-1%

(in millions)

Proforma Service
Revenue for the
Three Months Ended
March 31, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Service
Revenue for the Three Months Ended
March 31, 2020

Acquisitions

Organic Growth

Proforma Service Revenue for the
Three Months Ended
March 31, 2021

Building Solutions North America

$                          818

$            –

$          4

$                           822

$           –

$        (2)

$     820

Building Solutions EMEA/LA

396

16

4%

412

2

(7)

-2%

407

3%

Building Solutions Asia Pacific

160

(2)

-1%

11

7%

169

2

1%

171

7%

               Total field

1,374

(2)

31

2%

1,403

2

(7)

1,398

2%

Global Products

               Total service revenue

$                       1,374

$          (2)

$        31

2%

$                        1,403

$          2

$        (7)

$  1,398

2%

(in millions)

Proforma Service
Revenue for the
Three Months Ended
June 30, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Service
Revenue for the Three Months Ended
June 30, 2020

Acquisitions

Organic Growth

Proforma Service Revenue for the
Three Months Ended
June 30, 2021

Building Solutions North America

$                          770

$            –

$          9

1%

$                           779

$           –

$       78

10%

$     857

11%

Building Solutions EMEA/LA

349

26

7%

375

4

1%

48

13%

427

22%

Building Solutions Asia Pacific

156

(3)

-2%

12

8%

165

18

11%

183

17%

               Total field

1,275

(3)

47

4%

1,319

4

144

11%

1,467

15%

Global Products

               Total service revenue

$                       1,275

$          (3)

$        47

4%

$                        1,319

$          4

$     144

11%

$  1,467

15%

(in millions)

Proforma Service
Revenue for the
Three Months Ended
September 30, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Service
Revenue for the Three Months Ended
September 30, 2020

Acquisitions

Organic Growth

Proforma Service Revenue for the
Three Months Ended
September 30, 2021

Building Solutions North America

$                          835

$            –

$          4

$                           839

$          3

$       62

7%

$     904

8%

Building Solutions EMEA/LA

435

6

1%

441

1

(9)

-2%

433

Building Solutions Asia Pacific

180

(2)

-1%

4

2%

182

2

1%

184

2%

               Total field

1,450

(2)

14

1%

1,462

4

55

4%

1,521

5%

Global Products

               Total service revenue

$                       1,450

$          (2)

$        14

1%

$                        1,462

$          4

$       55

4%

$  1,521

5%

(in millions)

Proforma Service
Revenue for the
Twelve Months
Ended
September 30, 2020

Base Year Adjustments –
 Divestitures and Other

Base Year Adjustments –
Foreign Currency

Adjusted Base Service
Revenue for the
Twelve Months Ended
September 30, 2020

Acquisitions

Organic Growth

Proforma Service
Revenue for the
Twelve Months
Ended
September 30, 2021

Building Solutions North America

$                       3,234

$            –

$        18

1%

$                        3,252

$          3

$     118

4%

$  3,373

4%

Building Solutions EMEA/LA

1,594

53

3%

1,647

10

1%

27

2%

1,684

6%

Building Solutions Asia Pacific

661

(9)

-1%

34

5%

686

20

3%

706

7%

               Total field

5,489

(9)

105

2%

5,585

13

165

3%

5,763

5%

Global Products

               Total service revenue

$                       5,489

$          (9)

$      105

2%

$                        5,585

$        13

$     165

3%

$  5,763

5%

 

 

 4. Free Cash Flow Conversion

The Company’s press release contains financial information regarding free cash flow and free cash flow conversion, which are non-GAAP performance measures. Free cash flow is defined as cash provided by operating activities less capital expenditures. Free cash flow conversion is defined as free cash flow divided by adjusted net income attributable to JCI. Management believes these non-GAAP measures are useful to investors in understanding the strength of the Company and its ability to generate cash. These non-GAAP measures can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity.

The following is the three months and six months ended March 31, 2022 and 2021 reconciliation of free cash flow and free cash flow conversion for continuing operations (unaudited):

Three Months Ended

Six Months Ended

(in millions)

March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021

Cash provided (used) by operating activities from    continuing operations

$                           (68)

$                           645

$                          324

$                        1,160

Capital expenditures

(125)

(106)

(260)

(197)

Reported free cash flow

$                         (193)

$                           539

$                            64

$                           963

Adjusted net income from continuing operations

  attributable to JCI

$                          441

$                           373

$                          821

$                           684

Adjusted free cash flow conversion

-44%

144%

8%

141%

 

 5.  Net Debt to EBITDA

The Company provides financial information regarding net debt to adjusted EBITDA, which is a non-GAAP performance measure. The Company believes the total net debt to adjusted EBITDA ratio is useful to understanding the Company’s financial condition as it provides a review of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders. The following is the March 31, 2022 calculation of net debt to adjusted EBITDA (unaudited):

(in millions)

March 31, 2022

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

$                       2,284

Long-term debt

7,366

Total debt

9,650

Less: cash and cash equivalents

1,787

Total net debt

$                       7,863

Last twelve months adjusted EBITDA

$                       3,660

Total net debt to adjusted EBITDA

 2.1x 

The following is the last twelve months ended March 31, 2022 reconciliation of income from continuing operations to adjusted EBIT and adjusted EBITDA, which are non-GAAP performance measures (unaudited):

(in millions)

 Last Twelve Months
Ended
March 31, 2022 

Income from continuing operations

$                       1,448

Income tax provision

727

Net financing charges

207

EBIT

2,382

Adjusting items:

   Net mark-to-market adjustments

(140)

   Restructuring and impairment costs

579

   Silent-Aire transaction and other nonrecurring costs

36

   Silent-Aire earn-out adjustment

(43)

   Charges attributable to the suspension of operations in Russia

11

Adjusted EBIT (1)

2,825

Depreciation and amortization

835

Adjusted EBITDA (1)

$                       3,660

(1) The Company’s definition of adjusted EBIT and adjusted EBITDA excludes special items because these costs are not considered to be directly related to the underlying operating performance of its businesses. Management believes this non-GAAP measure is useful to investors in understanding the ongoing operations and business trends of the Company.  

 

 6.  Trade Working Capital as a Percentage of Net Sales

The Company provides financial information regarding trade working capital as a percentage of net sales, which is a non-GAAP performance measure. Trade working capital is defined as current assets less current liabilities, excluding cash, short-term debt, the current portion of long-term debt, the current portion of assets and liabilities held for sale, accrued compensation and benefits, and other current assets and liabilities.  Management believes this non-GAAP measure, which excludes financing-related items, non-trade related items and businesses to be divested, is a more useful measurement of the Company’s operating performance. The following is the March 31, 2022 and March 31, 2021 calculation of trade working capital as a percentage of net sales (unaudited):

(in millions)

March 31, 2022

March 31, 2021

Current assets

$                      11,612

$                      10,204

Current liabilities

(11,654)

(8,740)

Total working capital

(42)

1,464

Less:  cash and cash equivalents

(1,787)

(1,883)

Less:  assets held for sale

(386)

Less:  other current assets

(1,235)

(1,160)

Add:  short-term debt

2,044

248

Add:  current portion of long-term debt

240

196

Add:  accrued compensation and benefits

708

817

Add:  liabilities held for sale

326

Add:  other current liabilities

2,264

2,352

Trade working capital

$                       2,132

$                        2,034

Last twelve months net sales

$                      24,693

$                      22,232

Trade working capital as a percentage of net sales

8.6%

9.1%

 

 7.  Income Taxes

The Company’s effective tax rate from continuing operations before consideration of net mark-to-market adjustments, restructuring and impairment costs, Silent-Aire nonrecurring intangible asset amortization, charges related to the suspension of operations in Russia and discrete tax items for the three and six months ending March 31, 2022 and March 31, 2021 is approximately 13.5%.

 

 8.  Restructuring and Impairment Costs

The three months ended March 31, 2022 include restructuring and impairment costs of $384 million related primarily to the impairment of assets associated with a business classified as held for sale, workforce reductions and other asset impairments. The six months ended March 31, 2022 include restructuring and impairment costs of $433 million related primarily to the impairment of assets associated with a business classified as held for sale, workforce reductions and other asset impairments. The three and six months ended March 31, 2021 include restructuring and impairment costs of $96 million related primarily to workforce reductions and asset impairments.

 

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

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/johnson-controls-delivers-strong-q2-order-revenue-and-eps-growth-performance-301539155.html

SOURCE Johnson Controls

Johnson Controls Delivers Strong Q2 Order, Revenue, and EPS Growth Performance WeeklyReviewer

PR Newswire Business News

World Reviewer Staff
World Reviewer Staffhttps://weeklyreviewer.com/
The first logical thought has to be "no way". I'm the World Observer! Ill find and share important news all day.

Latest articles

Earnings Disclosure

WeeklyReviewer earns primarily through affiliates and ads. We don’t encourage anyone to click on ads for any other purpose but your own. We recommend products and services often for our readers, and through many we will earn commissions through affiliate programs.

Related articles

WeeklyReviewer