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EPG Conference 2017 Johnson Controls Alex Molinaroli Chairman & Chief Executive Officer
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Page 1: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

EPG Conference 2017Johnson ControlsAlex MolinaroliChairman & Chief Executive Officer

Page 2: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

2

Johnson Controls International plc Cautionary Statement Regarding Forward-Looking Statements

Johnson Controls International plc has made statements in this communication that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In this communication, statements regarding Johnson Controls’ future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures and debt levels are forward-looking statements. Words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “forecast,” “project” or “plan” and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Johnson Controls’ control, that could cause Johnson Controls’ actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: 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 JohnsonControls’ Annual Report on Form 10-K for the 2016 fiscal 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.

3

Non GAAP Financial Information

This presentation 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, adjusted segment EBITA margin and adjusted free cash flow 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 operating performance of its business units. Management believes that, when consideredtogether 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. Reconciliations of non-GAAP performance measures can be found in the attached footnotes.

Page 3: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

4

AT A GLANCE

World leader in buildings and energy solutions and technology with $30B in sales

Industry leading brands and innovative technologies

Global footprint and operating system allows for significant scale advantage

Strong investment-grade credit metrics with increasing financial flexibility

Uniquely positioned to provide most comprehensive portfolio of Building and Energy solutions

5

TWO STRONG CORE BUSINESSES POSITIONED FOR GROWTH

5*EBITA before special items is a non-GAAP measure. See appendix for reconciliation. Building Technologies & Solutions amounts are pro forma.

35%

Install31%

34%

Leading provider of building technology, products & solutions

SALES

$23B $2.9BEBITA*

BUILDING TECHNOLOGIES & SOLUTIONS

FY16 REVENUE

74%

OE26%

Global leader and largest manufacturer of automotive batteries, powering nearly every type of vehicle

POWER SOLUTIONS

SALES

$7B $1.3BEBITA*

FY16 REVENUE

Aftermarket

Products Service

Page 4: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

6

SIGNIFICANT VALUE CREATION

$1.2B+

EXPECTED TO CONTRIBUTE ˜$1.10 OF EPS BY FY20

WHAT WE SAID AT EPG 2016…

+Revenue

Synergies$500M(EBIT

Contribution ~$85M to $100M)

+$100M

INVESTOR DAY 2016 UPDATE…

Add’l Cost / Productivity

Opportunities

7

REALIZATION PROGRESSION

+Revenue

Synergies$500M

(EBIT Contribution ~$85M to $100M)

~$0.07

+Tax

Synergies$150M~$0.16

CostSynergies /Productivity

$1.0B~$0.88

$1.2B+~$1.10 EPS

2018$250M

2017$300M

2019$250M

2020$200M

CADENCE OF SAVINGS:

Page 5: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

8

WHERE WE ARE TODAY

Synergies / Productivity

TARGET:$300MFY17

YTD: $120M

Corporate organizational structure complete

Field organization structure substantially complete

Significant transformation in Field organization

CUSTOMERS AND MARKETS

CAPABILITIES

PEOPLE

40%

9

A DEEPER DIVE INTO BUILDINGS

Page 6: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

10

REALIGNING THE ORGANIZATION IN NORTH AMERICA

10

Newly Designed North America Structure

27 P&L managers

317 sales managers

95% sales reps aligned to manager who specializes in their type of selling

100% cross-sell capabilities are enabled through a combined organization across domains

+24%

Created Region Based Structure

1.Harmonize operating models

2.Drive sales focus

3.Streamline organizational structure

4.Leverage infrastructure and lower cost to serve

11

THE COMBINATION OF OUR BUSINESSES = OPPORTUNITY

High Complex Mid Complex Light Commercial / Residential

Campuses/ districts

Complexsingle siteprojects

Large buildings

Medium buildings

Light Commercial

Residential

SOURCE: JCI data; Tyco SG data: Tyco IS data; Team analysis

HVACequipment

Building controls

Fire panels and alarms

Fire sprinklers

Security

NA buildingsdirect revenue,

% of total

Page 7: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

12

$500M RUN-RATE SALES SYNERGIES IN FY20

NEAR-TERM

YEAR 1Immediate, tangible benefits

of cross-selling and strategic account management

Have the products and commercial capabilities in

place today

MID-TERM

YEAR 2-4Field integration - integrated

capabilities expand opportunities for integrated solutions and

value-added services

Tailored solutions built to serve specific vertical

markets

LONG-TERM

YEAR 4+ Advanced technology

solutions – new technology platforms for smart and

connected offerings

Well-positioned with technologies and expertise to lead

+Revenue

Synergies$500M

(EBIT Contribution ~$85M to $100M)

~$0.07

+Tax

Synergies$150M~$0.16

CostSynergies /Productivity

$1.0B~$0.88

$1.2B+~$1.10 EPS

13

~$3.61 to $4.01

~($0.15 to $0.20)

~($0.05) ~$1.10

~$0.45 to $0.80

$2.31

SIGNIFICANT VALUE CREATION THROUGH FY20

EPS BRIDGE TO FY20

13

Excludes Capital Deployment of

~$3B+ after Dividends

* EPS before special items is a non-GAAP measure. EPS amounts are based on weighted average diluted shares of 940M. See appendix for reconciliation. ** Sales growth CAGR of 3% to 4% at 17% to 20% incremental margin.

F Y 1 6 *P R O F O R M A

S Y N E R G I E S & P R O D U C T I V I T Y

O R G AN I CG R O W T H * *

I N V E S T M E N T S U N D E R L Y I N GT AX R AT E

F Y 2 0 F *

Page 8: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

14

Appendix

Page 9: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

1515

NO

N-

GA

AP

R

EC

ON

CI

LI

AT

IO

N

AA

AB

BC

DE

($ in

mill

ions

, exc

ept E

PS

)Q

uart

er E

nded

Year

End

edYe

ar E

nded

Year

End

edYe

ar E

nded

Dec

embe

r 31,

M

arch

31,

June

30,

Sept

embe

r 30,

Se

ptem

ber 3

0,

Sept

embe

r 30,

Se

ptem

ber 3

0,

Sept

embe

r 30,

20

1520

1620

1620

1620

1620

1620

1620

16

Sal

es$

8,92

9 $

9,03

1 $

9,51

6 $

10,1

98

$ 37

,674

$

37,6

94

$(8

,125

)$

29,5

69

Inco

me

from

Con

tinui

ng O

pera

tions

befo

re In

com

e Ta

xes

619

399

665

(97)

1,58

6 3,

493

(675

)2,

818

Inco

me

Tax

Exp

ense

(129

)(8

68)

(206

)(1

,035

)(2

,238

)(5

91)

112

(479

)

Non

cont

rollin

g In

tere

st(4

0)(6

1)(7

6)(3

9)(2

16)

(253

)87

(1

66)

Net

Inco

me

450

(530

)38

3 (1

,171

)(8

68)

2,64

9 (4

76)

2,17

3

Dilu

ted

EPS

$ (1

.30)

$ 3

.94

$ 2

.31

AH

isto

rical

Joh

nson

Con

trols

, Inc

. as

repo

rted

BJo

hnso

n C

ontro

ls In

tern

atio

nal p

lc a

s re

porte

dC

Adj

uste

d to

exc

lude

spe

cial

item

s be

caus

e th

ese

cost

s ar

e no

t con

side

red

to b

e di

rect

ly re

late

d to

the

unde

rlyin

g op

erat

ing

perfo

rman

ce o

f the

C

ompa

ny.

Man

agem

ent b

elie

ves

thes

e no

n-G

AA

P m

easu

res

are

usef

ul to

inve

stor

s in

bet

ter u

nder

stan

ding

the

ongo

ing

oper

atio

ns a

ndbu

sine

ss

trend

s of

the

Com

pany

. S

peci

al it

ems

incl

ude:

‐In

crea

se to

sal

es o

f $20

mill

ion

rela

ted

to n

onre

curr

ing

fair

valu

e ad

just

men

t of T

yco’

s de

ferre

d re

venu

e in

pur

chas

e ac

coun

ting

‐N

on-c

ash

mar

k-to

-mar

ket f

or p

ensi

on /

post

retir

emen

t pla

ns a

nd s

ettle

men

t los

ses

of $

514

mill

ion

($35

7 m

illio

n af

ter-

tax

and

non-

cont

rollin

g in

tere

st)

‐Tr

ansa

ctio

n, in

tegr

atio

n an

d se

para

tion

cost

s of

$69

2 m

illio

n ($

621

mill

ion

afte

r-ta

x an

d no

n-co

ntro

lling

inte

rest

)‐

Res

truct

urin

g an

d no

n-ca

sh im

pairm

ent c

harg

es o

f $62

7 m

illio

n ($

517

mill

ion

afte

r-ta

x an

d no

n-co

ntro

lling

inte

rest

)‐

Non

-rec

urrin

g po

rtion

of p

urch

ase

acco

untin

g ex

pens

es o

f $74

mill

ion

($54

mill

ion

afte

r-ta

x)

‐D

iscr

ete

inco

me

tax

expe

nse

of $

1,96

8 m

illio

nD

Incl

udes

Tyc

o N

on-G

AA

P re

sults

and

recu

rrin

g pu

rcha

se a

ccou

ntin

g ad

just

men

ts fo

r the

per

iod

Oct

ober

1, 2

015

thro

ugh

Sep

tem

ber 2

,201

6 le

ss

Adi

entr

esul

ts fo

r the

twel

ve m

onth

s en

ded

Sep

tem

ber 3

0, 2

016

on a

dis

cont

inue

d op

erat

ions

bas

is.

EP

ro F

orm

a fin

anci

al in

form

atio

n as

if A

dien

twas

refle

cted

as

a di

scon

tinue

d op

erat

ion

and

the

mer

ger w

ith T

yco

was

com

plet

ed o

n O

ctob

er 1

, 201

5.R

efle

cts

17%

tax

rate

and

940

mill

ion

shar

e co

unt.

PR

O

FO

RM

A

EP

S

–F

Y1

6

A re

conc

iliatio

n of

the

diffe

renc

es b

etw

een

earn

ings

per

sha

re re

porte

d an

d ad

just

ed e

arni

ngs

per s

hare

pro

vide

d on

a fo

rwar

d-lo

okin

g ba

sis

is n

ot a

vaila

ble,

due

to

the

high

var

iabi

lity

of th

e m

ark-

to-m

arke

t adj

ustm

ents

rela

ted

to p

ensi

on a

nd p

ost r

etire

men

t pla

ns a

nd u

npre

dict

abilit

y of

any

oth

er p

oten

tial a

djus

ting

item

s.

Page 10: EPG Conference 2017 - Johnson Controls/media/Files/J/Johnson-Cont… · , 2016 less Adient results for the twelve months ended Sept ember 30, 2016 on a discont inued operations basis.

1616

($ in

mill

ions

, exc

ept E

PS

)Q

uart

er E

nded

Year

End

edD

ecem

ber

31,

Mar

ch 3

1,Ju

ne 3

0,Se

ptem

ber

30,

Sept

embe

r 30

, 20

1520

1620

1620

1620

16

Sale

s

Bui

ldin

gs$

5,3

26

$

5,

475

$

6

,078

$

6,0

37

$

22

,916

Pow

er

1,74

0 1,

583

1,51

9 1,

811

6,65

3

7,06

6 7,

058

7,59

7 7,

848

29,5

69

Inco

me

from

Con

tinui

ng O

pera

tions

befo

re In

com

e Ta

xes

Bui

ldin

gs55

9 63

5 84

5 86

3 2,

902

Pow

er36

0 28

2 28

1 41

3 1,

336

Seg

men

t EB

IT91

9 91

7 1,

126

1,27

6 4,

238

Am

ortiz

atio

n of

Inta

ngib

les

(106

)(1

07)

(109

)(1

08)

(430

)

Cor

pora

te(1

23)

(130

)(1

45)

(143

)(5

41)

EB

IT

690

680

872

1,02

5 3,

267

Net

Fin

anci

ng C

harg

es

(111

)(1

14)

(110

)(1

14)

(449

)

Inco

me

Bef

ore

Tax

579

566

762

911

2,81

8

Inco

me

Tax

Exp

ense

(9

8)(9

6)(1

30)

(155

)(4

79)

Non

cont

rolli

ng In

tere

st(2

9)(4

4)(5

6)(3

7)(1

66)

Net

Inco

me

$

452

$

42

6 $

5

76

$

71

9 $

2,1

73

Dilu

ted

Sha

res

940

940

940

940

940

Dilu

ted

EP

S*

$

0.48

$

0.4

5 $

0

.61

$

0.7

6 $

2

.31

Tyco

's fi

rst t

hree

fisc

al q

uarte

rs o

f 201

6 en

ded

on th

e la

st F

riday

of D

ecem

ber,

Mar

ch, a

nd J

une,

whi

le J

CI's

fisc

al q

uarte

rsen

ded

on th

e la

st d

ay o

f eac

h su

ch m

onth

. B

ecau

se th

e hi

stor

ical

sta

tem

ents

of i

ncom

e of

eac

h co

mpa

ny re

pres

ent f

ull a

nd e

quiv

alen

t qu

arte

rly p

erio

ds, n

o ad

just

men

ts w

ere

mad

e to

alig

n th

e fis

cal q

uarte

rs.

NO

N-

GA

AP

R

EC

ON

CI

LI

AT

IO

N

PR

O

FO

RM

A

EP

S

–F

Y1

6

(C

ON

TI

NU

ED

)


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