Johnson Controls International : Second Quarter 2020 Earnings Conference Call

Fiscal 2020

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May 1, 2020

Forward Looking/Cautionary Statements & Non-GAAP Financial Information

Johnson Controls International plc Cautionary Statement Regarding Forward-Looking Statements

Johnson Controls International plc has made statements in this communication that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this communication, statements regarding Johnson Controls' future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures and debt levels are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Johnson Controls' control, that could cause Johnson Controls' actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: Johnson Controls' ability to manage general economic, business and geopolitical conditions, including the impacts of natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; 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 disposition of the Power Solutions business, changes in tax laws (including but not limited to the Tax Cuts and Jobs Act enacted in December 2017), 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, changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, maintaining the capacity, reliability and security of our information technology infrastructure, the risk of infringement or expiration of intellectual property rights, work stoppages, union negotiations, labor disputes and other matters associated with the labor force, the outcome of litigation and governmental proceedings and cancellation of or changes to commercial arrangements. A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the year ended September 30, 2019 filed with the United States Securities and Exchange Commission ("SEC") on November 21, 2019, which is available at www.sec.govand www.johnsoncontrols.comunder 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 presentation contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include restructuring and impairment costs, transaction costs, integration costs, net mark-to-market adjustments, and discrete tax items. Financial information regarding organic sales, EBIT, EBIT margin, segment EBITA, adjusted segment EBITA, adjusted organic segment EBITA, adjusted segment EBITA margin, free cash flow, adjusted free cash flow, adjusted free cash flow conversion and net debt are also presented, which are non-GAAP performance measures. Adjusted segment EBITA excludes special items such as transaction costs and integration costs because these costs are not considered to be directly related to the underlying operating performance of its business units. Management believes that, when considered together with unadjusted amounts, these non-GAAP measures are useful to investors in understanding period-over-period operating results and business trends of the Company. Management may also use these metrics as guides in forecasting, budgeting and long-term planning processes and for compensation purposes. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. For further information on the calculation of thee non-GAAP measures and a reconciliation of these non-GAAP measures, refer to the attached footnotes.

2 Johnson Controls International plc - May 1, 2020

Navigating Unprecedented Times

• Our employees and customers remain our first priority
• Macro economic uncertainty related to COVID-19
• On the front lines executing essential services
• Taking decisive actions to mitigate; contingency/scenario planning
• Strong Balance Sheet and liquidity
• Quarterly dividend maintained

Leadership Position In Response To

COVID-19 Pandemic

3 Johnson Controls International plc - May 1, 2020

COVID-19 Crisis Response With Essential Services

Johnson Controls is committed to serving the healthcare community during the COVID-19 crisis.

We have the global experience, national

workforce and healthcare expertise to quickly expand hospital capacity and enhance caregiver response for COVID-19

Providing Urgent COVID-19

Healthcare Solutions

• Expanding hospital capacity to serve more patients
• Converting hotel rooms to modified isolation rooms to ensure patient safety and comfort
• Controlling the flow of contaminated air in laboratories to ensure the safety of researchers
• Deploying designs in hours, not days - with our Center of Excellence global engineering design team
• Integrating fever detection systems into building solutions
• Enhancing video capabilities to bridge communications between quarantine zones and operations and help protect the health of front line healthcare teams with the influx of patients

4 Johnson Controls International plc - May 1, 2020

Essential Products With Enhanced Innovation

	Applied Products	Ducted Systems
			Controls Products
		Pre-Configured Air	"Limited Touch"		Room Pressure Monitoring
		Handling Units	Residential Replacement		System
					Systems

Security Products

Air Distribution

Frictionless Access Control

Thermal Detection & Scanning

Envirco ISOCLEAN

5 Johnson Controls International plc - May 1, 2020

COVID-19 Mitigating Actions

Complete

• Immediate flexing of Mfg and Field Ops to new demand
• Implemented unpaid time-off / furloughs; hiring freeze
• Decreased contactor spend and contingent workforce
• Curtailed all discretionary spend, including travel
• Reduced indirect spend with increased threshold for approval

In Process

• Executing permanent cost structure changes
• Additional working capital actions
• Deferring/reducing capital expenditures
• Improving productivity in Mfg and Field Ops

Immediate Actions Addressing Our Cost Structure

6 Johnson Controls International plc - May 1, 2020

Emerging From COVID-19 With A Stronger Supply & Mfg Network

China & Rest of APAC

United States & Canada

Europe & Middle East

▪

Employees: >10k

▪

Employees: >10k

▪

Employees: >4k

▪

# Plants & DC's: 14/7

▪

# Plants & DC's: 37/16

▪

# Plants & DC's: 15/12

▪

Plant Revenue: $1.9B

▪

Plant Revenue: $2.1B

▪

PlantRevenue: $0.9B

Status

Status

Status

▪

Manufacturing

▪

Manufacturing

▪

Manufacturing

▪

Supply Chain

▪

Supply Chain

▪

Supply Chain

▪

Logistics

▪

Logistics

▪

Logistics

Japan

India

▪

Employees: >3k

Mexico & LATAM

▪

Employees: >3k

▪

# Plants & DC's: 2/0

▪

Employees: >5k

▪

# Plants & DC's: 2/1

▪

Plant Revenue: $1.7B

▪

# Plants & DC's: 14/1

▪

Plant Revenue:$0.4B

Status

▪

Plant Revenue: $1.6B

Status

▪

Manufacturing

▪

Supply Chain

Status

▪

Manufacturing

▪

Manufacturing

▪

Supply Chain

▪

Logistics

▪

Supply Chain

▪

Logistics

▪

Logistics

	>90% vs. Baseline
DC's = Distribution Centers	75-90% vs. Baseline
<75% vs. Baseline

7 Johnson Controls International plc - May 1, 2020

Estimated Q2 COVID-19 Financial Impact (continuing operations)

Q2	Actuals*	COVID-19
Net Impact
Sales	$5,444M	($350 - 390M)
Organic Growth	(5%)	(6 to 7 pts of organic
growth headwind)
Segment EBITA	$619M	($90 - 110M)
EBIT	$440M	($80 - 100M)
Noncontrolling	($12M)	$20 - 25M
Interest
Net income	$317M	($49 - 62M)
attributable to JCI
EPS	$0.42	($0.05 - 0.07)

*Non-GAAP excludes special items. See footnotes for reconciliation.

8 Johnson Controls International plc - May 1, 2020

Q2 FY20 Financial Summary* (continuing operations)

Estimated COVID-19

Net Impact

NET SALES			($350 - 390M)
$5,779M			(6%)
$5,444M	

EPS

($0.05 - 0.07)

$0.42

	Reported
	(5%)
	Organic

$0.32

 +31%

Reported

	Q2 FY19	Q2 FY20
EBIT & MARGIN			($80 - 100M)
	$469M	$440M
		↔	FLAT
						Reported
8.1%	8.1%		↔	FLAT
						Organic
	Q2 FY19	Q2 FY20

*Non-GAAP excludes special items. See footnotes for reconciliation.

Q2 FY19

Q2 FY20

FCF

	$0.2B			$0.2B				Normal
	($0.2B)			($0.1B)				Seasonal
							Pattern
								Q2
H1 FY19	H1 FY20			Q1

9 Johnson Controls International plc - May 1, 2020

Q2 FY20 Results vs. Prior Year* (continuing operations)

EPS BRIDGE

								$0.07
							($0.01)
							$0.02
$0.32					$0.04
		$0.04
	$0.04

Estimated

COVID-19 Net Impact ($0.05 - 0.07)

$0.42

($0.10)

Q2 FY19	VOLUME /	SYNERGIES /	COVID-19	NFC	NCI	SHARE	OTHER	Q2 FY20
ACTUAL	MIX	PRODUCTIVITY	ACTIONS			COUNT		ACTUAL

*Non-GAAP excludes special items. See footnotes for reconciliation.

10 Johnson Controls International plc - May 1, 2020

Balance Sheet

Capital Structure	Q1 FY20	Q2 FY20
Short-term debt and	$1,362	$1,430
current portion of long-term debt
Long-term debt	5,920	5,640

Total debt	7,282	7,070
Less: cash and cash	2,160	1,006
equivalents
Net debt*	$5,122	$6,064
Net debt / EBITDA*	1.5x	1.8x

*Non-GAAP measure. See footnotes for reconciliation.

11 Johnson Controls International plc - May 1, 2020

Capital Structure: Strong Liquidity Position

Recent Debt Repayment and Issuances

• In March, repaid $500 million bond maturity with existing cash (5.0% interest rate)
• In April, raised $675 million via European financing arrangements (average interest rate of 1.0%, 6-month term)
• In April, raised $575 million in bank term loans (average interest rate of 2.7%, 1-year term)

Undrawn Senior Revolving Credit Facilities

• $500 million one-year facility
• $2.5 billion five-year facility

Additional Liquidity Items

• Repurchased 21 million shares for $816 million in quarter; suspended program mid-March
• Substantial operating cash flow expected to be generated in second half of fiscal year
• Reduced capital expenditures
• Maintain active shelf registration statement
• Well positioned to refinance upcoming debt maturities

12 Johnson Controls International plc - May 1, 2020

Free Cash Flow* (continuing operations)

	Q2	Q2		H1	H1
(in $ billions)	FY19	FY20		FY19	FY20
Cash provided by	$0.2	$0.2	$0.1	$0.7
operating activities
Capital expenditures	(0.1)	(0.1)	(0.3)	(0.3)
Reported FCF**	$0.1	$0.0		$(0.2)	$0.4
Integration/transaction	0.1	-		0.1	0.2
costs
Restructuring payments		0.1		0.1	0.1
Nonrecurring tax	-	-			(0.6)
refunds
Adjustments	$0.1	$0.1	$0.2	(0.3)
Adjusted FCF**	$0.2	$0.2	$0.0	$0.1

• Q2 adjusted FCF from continuing operations of $0.2 billion
• YTD adjusted FCF of $0.1 billion
• Expect FY20 adjusted free cash flow conversion of >100%
• • Excludes one-time cash outflows of ~$0.3 billion
  • Excludes ~$0.6 billion tax refund received in Q1 FY20

*Non-GAAP excludes special items. See footnotes for reconciliation. **May not sum due to rounding

13 Johnson Controls International plc - May 1, 2020

Segment Results*

Estimated COVID-19

Net Impact

Sales		Segment EBITA		Segment EBITA Margin
(5%)		(7%)				(20)
($350 - 390M)		($90 - 110M)
Organic	Organic			bps
				Organic
$5,779M		$671M		11.6%	11.4%
$5,444M
$619M

Q2 FY19	Q2 FY20	Q2 FY19	Q2 FY20	Q2 FY19	Q2 FY20
			EBITA Margin

11.6%+50bps11.4%

+60bps

(10bps)

(120bps)

Q2 FY19	Volume / Mix	COVID-19	Synergies /	Other	Q2 FY20
		Actions	Productivity

*Non-GAAP excludes special items. See footnotes for reconciliation.

14 Johnson Controls International plc - May 1, 2020

Segment Results*

	Sales	EBITA Margin	Comments
($M)	Organic % yoy	Change yoy
North America	$2,175	11.6%	Service +2% / Install (2%)
FLAT	-20bps	Orders (7%); Backlog $5.8B +4%
EMEALA	$850	10.0%	Service +2% / Install (4%)
(1%)	+80bps	Orders (4%); Backlog $1.7B +6%
Asia Pac	$525	12.4%	Service (7%) / Install (20%)
(14%)	+30bps	Orders (11%); Backlog $1.5B +3%
Global Products	$1,894	11.4%	Building Mgmt Flat
HVAC Equipment (LDD)
(8%)	-80bps
	Specialty Products (MSD)

• Orders declined 7% year-over-year
• Backlog up 4% organically to $9.0 billion

*Non-GAAP excludes special items. See footnotes for reconciliation.

15 Johnson Controls International plc - May 1, 2020

Corporate Expense* (continuing operations)



21%

($ in millions)

$104M

$82M

• Realization of cost synergies and productivity savings
• COVID-19cost actions
• Ongoing cost reductions related to Power Solutions sale

Q2 FY19

Q2 FY20

*Non-GAAP excludes special items. See footnotes for reconciliation.

16 Johnson Controls International plc - May 1, 2020

2nd Half Fiscal 2020 Framework*

	2nd Half FY20
Organic Revenue Decline	(15 - 20%)
Mitigating Cost Actions	$400 - 450M
(including Corporate)
Net Decrementals on	(Low 20s)
Revenue Decline

Mitigating Actions

• Comp & Benefits ~60%
• Indirect Spend ~30%
• Facilities ~10%

Previous FY20 Guidance Withdrawn

* Non-GAAP excludes special items.

17 Johnson Controls International plc - May 1, 2020

Appendix:

Supplemental Information

Click to edit text

Direct Material Supply Base

Americas

EMEALA

APAC

United States

Europe

China



# of Suppliers

~1,100



# of Suppliers

~700



# of Suppliers

~400



Supply Chain Spend

$2.2B



Supply Chain Spend

$420M



Supply Chain Spend

$1.0B

Mexico

Middle East

India



# of Suppliers

~100



# of Suppliers

~100



# of Suppliers

~100



Supply Chain Spend

$250M



Supply Chain Spend

$75M



Supply Chain Spend

$175M

LATAM

Malaysia



# of Suppliers

~100



Supply Chain Spend

$50M



# of Suppliers

~100



Supply Chain Spend

$60M

19 Johnson Controls International plc - May 1, 2020

Segment End Market Performance*

Field	North America	EMEALA	APAC
Organic Revenue	FLAT	(1%)	(14%)
Service	+2%	+2%	(7%)
Install	(2%)	(4%)	(20%)
HVAC & Controls	+LSD	(MSD)	(HT)
Fire & Security	(LSD)	(LSD)	(LSD)
Performance Contracting	+MSD	-	-
Industrial Refrigeration	-	+MSD	-
Global Products	Building Management	HVAC Equipment	Specialty Products
Organic Growth	Flat	(LDD)	(MSD)
Residential	-	(MT); NA (>20%)	-
Light Commercial	-	(MSD); NA (MSD)	-
Applied Equipment	-	(MT)	-
VRF	-	(LSD)	-
Industrial Refrigeration	-	(MSD)	-

*Non-GAAP excludes special items. See footnotes for reconciliation.

20 Johnson Controls International plc - May 1, 2020

FY20 Second Quarter

Financial Results (continuing operations)

	($ in millions, except earnings per share)	Q2 FY19		Q2 FY20			Q2 FY19*		Q2 FY20*		% Change
		GAAP		GAAP			NON-GAAP		NON-GAAP		NON-GAAP
	Sales	$5,779	$5,444		$5,779	$5,444	(6%)
	Gross profit	1,844	1,801		1,844	1,801	(2%)
	% of sales	31.9%	33.1%		31.9%	33.1%
	SG&A expenses	1,458	1,451		1,408	1,381	(2%)
	Restructuring & impairment costs	-	62		-	-
	Equity income	33	20		33	20	(39%)
	EBIT
	419	308		469	440	(6%)
	EBIT margin	7.3%	5.7%		8.1%	8.1%
	Net financing charges	98	59		98	59	(40%)
	Income before income taxes
	321	249		371	381	3%
	Income tax provision	47	13		50	52	4%
	Net income
	274	236		321	329	2%
	Income attributable to noncontrolling interests	34	23		34	12	(65%)
	Net income attributable to JCI
	$240	$213		$287	$317	10%
	Diluted EPS	$0.26	$0.28		$0.32	$0.42	31%

*Non-GAAP excludes special items. See footnotes for reconciliation.

21 Johnson Controls International plc - May 1, 2020

FY20 Second Quarter

Special Items (continuing operations)

$ In millions, except EPS
Q2 FY20	Pre-tax Income		Tax (Expense)	NCI (Expense)	After-tax/NCI	EPS Impact
(Expense)		Benefit	Income	Income (Expense)
Integration costs	$(38)		$6	$-	$(32)	$(0.04)
Net mark-to-market adjustments	(32)		7	-	(25)	(0.03)
Impairment charge	(62)		4	-	(58)	(0.08)
Discrete income tax items	-		22	(11)	11	0.01
Total	$(132)	$39	$(11)	$(104)	$(0.14)

Q2 FY19	Pre-tax Income		Tax (Expense)	NCI (Expense)	After-tax Income	EPS Impact
(Expense)		Benefit	Income	(Expense)
Transaction costs	$(2)		$1	$-	$(1)	$ -
Integration costs	(68)		7	-	(61)	(0.07)
Net mark-to-market adjustments	20		(5)	-	15	0.02
Total	$(50)	$3	$-	$(47)	$(0.05)

22 Johnson Controls International plc - May 1, 2020

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JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data; unaudited)

		Three Months Ended March 31,
		2020		2019
Net sales	$	5,444	$	5,779
Cost of sales		3,643		3,935
Gross profit		1,801		1,844
Selling, general and administrative expenses		(1,451)		(1,458)
Restructuring and impairment costs		(62)		-
Net financing charges		(59)		(98)
Equity income		20		33
Income from continuing operations before income taxes		249		321
Income tax provision		13		47
Income from continuing operations		236		274
Income from discontinued operations, net of tax		-		284
Net income		236		558
Less: Income from continuing operations
attributable to noncontrolling interests		23		34
Less: Income from discontinued operations
attributable to noncontrolling interests		-		9
Net income attributable to JCI	$	213	$	515
Income from continuing operations	$	213	$	240
Income from discontinued operations		-		275
Net income attributable to JCI	$	213	$	515
Diluted earnings per share from continuing operations	$	0.28	$	0.26
Diluted earnings per share from discontinued operations		-		0.30
Diluted earnings per share*	$	0.28	$	0.57
Diluted weighted average shares		757.1		905.9
Shares outstanding at period end		743.9		898.1

* May not sum due to rounding.

24

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data; unaudited)

		Six Months Ended March 31,
Net sales	$	11,020	$	11,243
Cost of sales		7,416		7,674
Gross profit		3,604		3,569
Selling, general and administrative expenses		(2,878)		(2,896)
Restructuring and impairment costs		(173)		-
Net financing charges		(111)		(183)
Equity income		63		75
Income from continuing operations before income taxes		505		565
Income tax provision		78		155
Income from continuing operations		427		410
Income from discontinued operations, net of tax		-		547
Net income		427		957
Less: Income from continuing operations
attributable to noncontrolling interests		55		63
Less: Income from discontinued operations
attributable to noncontrolling interests		-		24
Net income attributable to JCI	$	372	$	870
Income from continuing operations	$	372	$	347
Income from discontinued operations		-		523
Net income attributable to JCI	$	372	$	870
Diluted earnings per share from continuing operations	$	0.49	$	0.38
Diluted earnings per share from discontinued operations		-		0.57
Diluted earnings per share	$	0.49	$	0.95
Diluted weighted average shares		765.6		915.6
Shares outstanding at period end

25

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions; unaudited)

		March 31,	September 30,
		2020		2019
ASSETS
Cash and cash equivalents	$	1,006	$	2,805
Accounts receivable - net		5,492		5,770
Inventories		2,030		1,814
Assets held for sale		91		98
Other current assets		1,336		1,906
Current assets		9,955		12,393
Property, plant and equipment - net		3,274		3,348
Goodwill		18,072		18,178
Other intangible assets - net		5,391		5,632
Investments in partially-owned affiliates		869		853
Noncurrent assets held for sale		46		60
Other noncurrent assets		2,795		1,823
Total assets	$	40,402	$	42,287
LIABILITIES AND EQUITY
Short-term debt and current portion of long-term debt	$	1,430	$	511
Accounts payable and accrued expenses		3,813		4,535
Liabilities held for sale		39		44
Other current liabilities		4,227		3,980
Current liabilities		9,509		9,070
Long-term debt		5,640		6,708
Other noncurrent liabilities		6,165		5,680
Shareholders' equity attributable to JCI		18,084		19,766
Noncontrolling interests		1,004		1,063
Total liabilities and equity	$	40,402	$	42,287

26

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)

		Three Months Ended March 31,
		2020		2019
Operating Activities
Net income attributable to JCI from continuing operations	$	213	$	240
Income from continuing operations attributable to noncontrolling interests		23		34
Net income from continuing operations		236		274
Adjustments to reconcile net income from continuing operations to cash provided by
operating activities:
Depreciation and amortization		207		211
Pension and postretirement benefit income		(40)		(28)
Pension and postretirement contributions		(15)		(16)
Equity in earnings of partially-owned affiliates, net of dividends received		(19)		(31)
Deferred income taxes		(58)		460
Non-cash restructuring and impairment costs		62		-
Other - net		40		5
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable		7		(285)
Inventories		(147)		(99)
Other assets		(58)		34
Restructuring reserves		(71)		(34)
Accounts payable and accrued liabilities		(107)		209
Accrued income taxes		118		(518)
Cash provided by operating activities from continuing operations		155		182
Investing Activities
Capital expenditures		(124)		(125)
Acquisition of businesses, net of cash acquired		(10)		-
Other - net		19		2
Cash used by investing activities from continuing operations		(115)		(123)
Financing Activities
Increase (decrease) in short and long-term debt - net		(177)		530
Stock repurchases		(816)		(533)
Payment of cash dividends		(199)		(239)
Dividends paid to noncontrolling interests		-		(89)
Proceeds from the exercise of stock options		18		38
Employee equity-based compensation withholding		(12)		(2)
Cash used by financing activities from continuing operations		(1,186)		(295)
Discontinued Operations
Net cash provided (used) by operating activities		(14)		309
Net cash used by investing activities		-		(87)
Net cash used by financing activities		-		(17)
Net cash flows provided (used) by discontinued operations		(14)		205
Effect of exchange rate changes on cash, cash equivalents and restricted cash		7		5
Changes in cash held for sale		-		(28)
Decrease in cash, cash equivalents and restricted cash	$	(1,153)	$	(54)

27

JOHNSON CONTROLS INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)

		Six Months Ended March 31,
		2020		2019
Operating Activities
Net income attributable to JCI from continuing operations	$	372	$	347
Income from continuing operations attributable to noncontrolling interests		55		63
Net income from continuing operations		427		410
Adjustments to reconcile net income from continuing operations to cash provided by
operating activities:
Depreciation and amortization		414		422
Pension and postretirement benefit income		(80)		(57)
Pension and postretirement contributions		(27)		(37)
Equity in earnings of partially-owned affiliates, net of dividends received		(11)		(67)
Deferred income taxes		(61)		503
Non-cash restructuring and impairment costs		116		-
Other - net		56		33
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable		244		(139)
Inventories		(261)		(321)
Other assets		(150)		(29)
Restructuring reserves		(38)		(59)
Accounts payable and accrued liabilities		(605)		(17)
Accrued income taxes		642		(539)
Cash provided by operating activities from continuing operations		666		103
Investing Activities
Capital expenditures		(250)		(278)
Acquisition of businesses, net of cash acquired		(58)		(13)
Business divestitures, net of cash divested		-		6
Other - net		20		26
Cash used by investing activities from continuing operations		(288)		(259)
Financing Activities
Increase (decrease) in short and long-term debt - net		(167)		1,544
Stock repurchases		(1,467)		(1,000)
Payment of cash dividends		(402)		(479)
Proceeds from the exercise of stock options		39		51
Dividends paid to noncontrolling interests		(5)		(132)
Employee equity-based compensation withholding		(32)		(23)
Other - net		(2)		-
Cash used by financing activities from continuing operations		(2,036)		(39)
Discontinued Operations
Net cash provided (used) by operating activities		(208)		502
Net cash used by investing activities		-		(153)
Net cash used by financing activities		-		(28)
Net cash flows provided (used) by discontinued operations		(208)		321
Effect of exchange rate changes on cash, cash equivalents and restricted cash		64		(38)
Changes in cash held for sale		-		(30)
Increase (decrease) in cash, cash equivalents and restricted cash	$	(1,802)	$	58

28

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, 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.

(in millions; unaudited)			Three Months Ended March 31,				Six Months Ended March 31,
		2020			2019			2020			2019
			Adjusted			Adjusted			Adjusted			Adjusted
		Actual	Non-GAAP		Actual	Non-GAAP		Actual	Non-GAAP		Actual	Non-GAAP
Net sales
Building Solutions North America	$	2,175	$	2,175	$	2,187	$	2,187	$	4,342	$	4,342	$	4,303	$	4,303
Building Solutions EMEA/LA		850		850		878		878		1,778		1,778		1,785		1,785
Building Solutions Asia Pacific		525		525		628		628		1,154		1,154		1,241		1,241
Global Products		1,894		1,894		2,086		2,086		3,746		3,746		3,914		3,914
Net sales	$	5,444	$	5,444	$	5,779	$	5,779	$	11,020	$	11,020	$	11,243	$	11,243
Segment EBITA (1)
Building Solutions North America	$	251	$	253	$	257	$	259	$	509	$	512	$	507	$	512
Building Solutions EMEA/LA		85		85		80		81		175		175		157		158
Building Solutions Asia Pacific		65		65		76		76		137		137		142		142
Global Products		216		216		251		255		419		420		441		449
Segment EBITA		617		619		664		671		1,240		1,244		1,247		1,261
Corporate expenses (2)		(118)		(82)		(167)		(104)		(236)		(163)		(303)		(197)
Amortization of intangible assets		(97)		(97)		(98)		(98)		(193)		(193)		(195)		(195)
Net mark-to-market adjustments (3)		(32)		-		20		-		(22)		-		(1)		-
Restructuring and impairment costs (4)		(62)		-		-		-		(173)		-		-		-
EBIT (5)		308		440		419		469		616		888		748		869
EBIT margin		5.7%		8.1%		7.3%		8.1%		5.6%		8.1%		6.7%		7.7%
Net financing charges		(59)		(59)		(98)		(98)		(111)		(111)		(183)		(183)
Income from continuing operations before income taxes		249		381		321		371		505		777		565		686
Income tax provision (6)		(13)		(52)		(47)		(50)		(78)		(105)		(155)		(93)
Income from continuing operations		236		329		274		321		427		672		410		593
Income from continuing operations attributable to
noncontrolling interests		(23)		(12)		(34)		(34)		(55)		(49)		(63)		(63)
Net income from continuing operations attributable to JCI	$	213	$	317	$	240	$	287	$	372	$	623	$	347	$	530

1. The Company's press release contains financial information regarding segment EBITA, adjusted segment EBITA and adjusted segment EBITA margins, which are non-GAAP performance measures. The Company's definition of adjusted segment EBITA excludes special items because these costs are not considered to be directly related to the underlying operating performance of its 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 earler within this footnote. The following is the three months ended March 31, 2020 and 2019 reconciliation of segment EBITA and segment EBITA margin as reported to adjusted segment EBITA and adjusted segment EBITA margin (unaudited):

		Building Solutions		Building Solutions		Building Solutions						Consolidated
(in millions)		North America		EMEA/LA		Asia Pacific		Global Products		JCI plc
		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
Segment EBITA as reported	$	251	$	257	$	85	$	80	$	65	$	76	$	216	$	251	$	617	$	664
Segment EBITA margin as reported		11.5%		11.8%		10.0%		9.1%		12.4%		12.1%		11.4%		12.0%		11.3%		11.5%
Adjusting items:
Integration costs		2		2		-		1		-		-		-		4		2		7
Adjusted segment EBITA	$	253	$	259	$	85	$	81	$	65	$	76	$	216	$	255	$	619	$	671
Adjusted segment EBITA margin		11.6%		11.8%		10.0%		9.2%		12.4%		12.1%		11.4%		12.2%		11.4%		11.6%

29

The following is the six months ended March 31, 2020 and 2019 reconciliation of segment EBITA and segment EBITA margin as reported to adjusted segment EBITA and adjusted segment EBITA margin (unaudited):

		Building Solutions		Building Solutions		Building Solutions						Consolidated
(in millions)		North America		EMEA/LA		Asia Pacific		Global Products		JCI plc
		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
Segment EBITA as reported	$	509	$	507	$	175	$	157	$	137	$	142	$	419	$	441	$	1,240	$	1,247
Segment EBITA margin as reported		11.7%		11.8%		9.8%		8.8%		11.9%		11.4%		11.2%		11.3%		11.3%		11.1%
Adjusting items:
Integration costs		3		5		-		1		-		-		1		8		4		14
Adjusted segment EBITA	$	512	$	512	$	175	$	158	$	137	$	142	$	420	$	449	$	1,244	$	1,261
Adjusted segment EBITA margin		11.8%		11.9%		9.8%		8.9%		11.9%		11.4%		11.2%		11.5%		11.3%		11.2%

1. Adjusted Corporate expenses excludes special items because these costs are not considered to be directly related to the underlying operating performance of the Company's business. Adjusted Corporate expenses for the three months ended March 31, 2020 excludes $36 million of integration costs. Adjusted Corporate expenses for the six months ended March 31, 2020 excludes $73 million of integration costs. Adjusted Corporate expenses for the three months ended March 31, 2019 excludes $61 million of integration costs and $2 million of transaction costs. Adjusted Corporate expenses for the six months ended March 31, 2019 excludes $102 million of integration costs and $4 million of transaction costs.
2. The three months ended March 31, 2020 exclude the net mark-to-market adjustments on restricted investments of $32 million. The six months ended March 31, 2020 exclude the net mark-to-market adjustments on restricted investments of $22 million. The three months ended March 31, 2019 exclude the net mark-to-market adjustments on restricted investments of $20 million. The six months ended March 31, 2019 exclude the net mark-to-market adjustments on restricted investments of $1 million.
3. Restructuring and impairment costs for the three months ended March 31, 2020 of $62 million are excluded from the adjusted non-GAAP results. Restructuring and impairment costs for the six months ended March 31, 2020 of $173 million are excluded from the adjusted non-GAAP results. The restructuring actions and impairment costs related primarily to workforce reductions, plant closures and asset impairments.
4. Management defines earnings before interest and taxes (EBIT) as income 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.
5. Adjusted income tax provision for the three months ended March 31, 2020 excludes tax benefits from tax audit reserve adjustments of $22 million, net mark-to-market adjustments of $7 million, integration costs of $6 million, and restructuring and impairment costs of $4 million. Adjusted income tax provision for the six months ended March 31, 2020 excludes tax benefits from tax audit reserve adjustments of $22 million, restructuring and impairment costs of $20 million, integration costs of $11 million and net mark-to-market adjustments of $4 million, partially offset by tax provisions related to Switzerland tax reform of $30 million. Adjusted income tax provision for the three months ended March 31, 2019 excludes the tax benefits of integration costs of $7 million and transaction costs of $1 million, partially offset by the tax provision for net mark-to-market adjustments of $5 million. Adjusted income tax provision for the six months ended March 31, 2019 excludes the tax provision for valuation allowance adjustments of $76 million as a result of changes in U.S. tax law, partially offset by the tax benefits for integration costs of $13 million and transaction costs of $1 million.

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 transaction/integration costs, net mark-to-market adjustments, restructuring and impairment costs, impact of ceasing the depreciation and amortization expense for the Power Solutions business as the business is held for sale, 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					Net Income Attributable
	Net Income Attributable		to JCI plc from	Net Income Attributable		to JCI plc from
		to JCI plc		Continuing Operations		to JCI plc		Continuing Operations
		Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
		March 31,			March 31,		March 31,			March 31,
		2020	2019		2020		2019		2020	2019		2020		2019
Earnings per share as reported for JCI plc	$	0.28	$	0.57	$	0.28	$	0.26	$	0.49	$	0.95	$	0.49	$	0.38
Adjusting items:
Transaction costs		-		0.02		-		-		-		0.05		-		-
Related tax impact		-		-		-		-		-		(0.01)		-		-
Integration costs		0.05		0.08		0.05		0.08		0.10		0.13		0.10		0.13
Related tax impact		(0.01)		(0.01)		(0.01)		(0.01)		(0.01)		(0.01)		(0.01)		(0.01)
Net mark-to-market adjustments		0.04		(0.02)		0.04		(0.02)		0.03		-		0.03		-
Related tax impact		(0.01)		0.01		(0.01)		0.01		(0.01)		-		(0.01)		-
Restructuring and impairment costs		0.08		-		0.08		-		0.23		-		0.23		-
Related tax impact		(0.01)		-		(0.01)		-		(0.03)		-		(0.03)		-
NCI impact of restructuring and impairment		-		-		-		-		(0.01)		-		(0.01)		-
Cease of Power Solutions
depreciation / amortization expense		-		(0.07)		-		-		-		(0.10)		-		-
Related tax impact		-		0.02		-		-		-		0.03		-		-
Discrete tax items		(0.03)		-		(0.03)		-		0.01		0.16		0.01		0.08
NCI impact of discrete tax items		0.01		-		0.01		-		0.01		-		0.01		-
Adjusted earnings per share for JCI plc*	$	0.42	$	0.59	$	0.42	$	0.32	$	0.81	$	1.20	$	0.81	$	0.58
* May not sum due to rounding

30

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

Weighted average shares outstanding for JCI plc Basic weighted average shares outstanding Effect of dilutive securities:

Stock options, unvested restricted stock and unvested performance share awards

Diluted weighted average shares outstanding

Three Months Ended	Six Months Ended
March 31,	March 31,
2020	2019	2020	2019
754.8	902.5	762.4	912.1
2.3	3.4	3.2	3.5
757.1	905.9	765.6	915.6

The Company has presented forward-looking statements regarding organic net sales, net decrementals and adjusted free cash flow conversion, which are non-GAAP financial measures. These non-GAAP financial measures are derived by excluding certain amounts, expenses, income or cash flows 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 2020 framework for organic net sales also excludes the effect of acquisitions, divestitures and foreign currency. We are unable to present a quantitative reconciliation of the aforementioned forward-lookingnon-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 full year 2020 GAAP financial results.

3. Organic Growth Reconciliation

The components of the changes in net sales for the three months ended March 31, 2020 versus the three months ended March 31, 2019, including organic growth, is shown below (unaudited):

							Adjusted Base Net
	Net Sales for the Three					Sales for the Three										Net Sales for the Three
		Months Ended	Base Year Adjustments -		Months Ended											Months Ended
(in millions)		March 31, 2019	Divestitures and Other		March 31, 2019		Acquisitions			Foreign Currency		Organic Growth		March 31, 2020
Building Solutions North America	$	2,187	$	-	-	$	2,187	$	-	-	$	(2)	-	$	(10)	-	$	2,175	-1%
Building Solutions EMEA/LA		878		2	-		880		10	1%		(33)	-4%		(7)	-1%		850	-3%
Building Solutions Asia Pacific		628		-	-		628		2	-		(15)	-2%		(90)	-14%		525	-16%
Total field		3,693		2	-		3,695		12	-		(50)	-1%		(107)	-3%		3,550	-4%
Global Products		2,086		(7)	-		2,079		2	-		(13)	-1%		(174)	-8%		1,894	-9%
Total net sales	$	5,779	$	(5)	-	$	5,774	$	14	-	$	(63)	-1%	$	(281)	-5%	$	5,444	-6%

The components of the changes in net sales for the six months ended March 31, 2020 versus the six months ended March 31, 2019, including organic growth, is shown below (unaudited):

							Adjusted Base Net
		Net Sales for the Six					Sales for the										Net Sales for the Six
		Months Ended	Base Year Adjustments -		Six Months Ended											Months Ended
(in millions)		March 31, 2019	Divestitures and Other		March 31, 2019		Acquisitions			Foreign Currency		Organic Growth		March 31, 2020
Building Solutions North America	$	4,303	$	(2)	-	$	4,301	$	-	-	$	(2)	-	$	43	1%	$	4,342	1%
Building Solutions EMEA/LA		1,785		(23)	-1%		1,762		15	1%		(58)	-3%		59	3%		1,778	-
Building Solutions Asia Pacific		1,241		-	-		1,241		4	-		(20)	-2%		(71)	-6%		1,154	-7%
Total field		7,329		(25)	-		7,304		19	-		(80)	-1%		31	-		7,274	-
Global Products		3,914		(15)	-		3,899		3	-		(10)	-		(146)	-4%		3,746	-4%
Total net sales	$	11,243	$	(40)	-	$	11,203	$	22	-	$	(90)	-1%	$	(115)	-1%	$	11,020	-2%

31

The components of the changes in segment EBITA and EBIT for the three months ended March 31, 2020 versus the three months ended March 31, 2019, including organic growth, is shown below (unaudited):

																		Adjusted Segment
		Adjusted Segment				Adjusted Base Segment											EBITA / EBIT for
		EBITA / EBIT for the					EBITA / EBIT for the											the Three
	Three Months Ended	Base Year Adjustments -		Three Months Ended											Months Ended
(in millions)		March 31, 2019	Divestitures and Other		March 31, 2019		Acquisitions			Foreign Currency		Organic Growth		March 31, 2020
Building Solutions North America	$	259	$	-	-	$	259	$	-	-	$	-	-	$	(6)	-2%	$	253	-2%
Building Solutions EMEA/LA		81		-	-		81		2		2%	(6)	-7%		8	10%		85	5%
Building Solutions Asia Pacific		76		-	-		76		-	-		(1)	-1%		(10)	-13%		65	-14%
Total field		416		-	-		416		2	-		(7)	-2%		(8)	-2%		403	-3%
Global Products		255		(1)	-		254		-	-		(2)	-1%		(36)	-14%		216	-15%
Total adjusted segment EBITA		671		(1)	-		670	$	2	-	$	(9)	-1%	$	(44)	-7%		619	-8%
Corporate expenses		(104)		-			(104)											(82)	21%
Amortization of intangible assets		(98)		-			(98)											(97)	1%
Total adjusted EBIT	$	469	$	(1)		$	468										$	440	-6%
The components of the changes in segment EBITA and EBIT for the six months ended March 31, 2020 versus the six months ended March 31, 2019, including organic growth, is shown below (unaudited):
		Adjusted Segment				Adjusted Base Segment											Adjusted Segment
		EBITA / EBIT for the					EBITA / EBIT for the											EBITA / EBIT for
		Six Months Ended	Base Year Adjustments -		Six Months Ended										the Six Months Ended
(in millions)		March 31, 2019	Divestitures and Other		March 31, 2019		Acquisitions			Foreign Currency		Organic Growth		March 31, 2020
Building Solutions North America	$	512	$	-	-	$	512	$	-	-	$	-	-	$	-	-	$	512	-
Building Solutions EMEA/LA		158		(1)	-1%		157		3		2%	(9)	-6%		24	15%		175	11%
Building Solutions Asia Pacific		142		-	-		142		1		1%	(1)	-1%		(5)	-4%		137	-4%
Total field		812		(1)	-		811		4	-		(10)	-1%		19	2%		824	2%
Global Products		449		(1)	-		448		(1)	-		(3)	-1%		(24)	-5%		420	-6%
Total adjusted segment EBITA		1,261		(2)	-		1,259	$	3	-	$	(13)	-1%	$	(5)	-		1,244	-1%
Corporate expenses		(197)		-			(197)											(163)	17%
Amortization of intangible assets		(195)		-			(195)											(193)	1%
Total adjusted EBIT	$	869	$	(2)		$	867										$	888	2%

4. Adjusted Free Cash Flow Reconciliation

The Company's press release contains financial information regarding free cash flow, adjusted free cash flow and adjusted free cash flow conversion, which are non-GAAP performance measures. Free cash flow is defined as cash provided by operating activities less capital expenditures. Adjusted free cash flow excludes special items, as included in the table below, because these cash flows are not considered to be directly related to its underlying businesses. Adjusted free cash flow conversion is defined as adjusted free cash flow divided by adjusted net income. Management believes these non-GAAP measures are useful to investors in understanding the strength of the Company and its ability to generate cash.

The following is the three months and six months ended March 31, 2020 and 2019 reconciliation of free cash flow, adjusted free cash flow and adjusted free cash flow conversion for continuing operations (unaudited):

		Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
(in billions)		March 31, 2020		March 31, 2019		March 31, 2020		March 31, 2019
Cash provided by operating activities from continuing
operations	$	0.2	$	0.2	$	0.7	$	0.1
Capital expenditures		(0.1)		(0.1)		(0.3)		(0.3)
Reported free cash flow *		-		0.1		0.4		(0.2)
Adjusting items:
Transaction/integration costs		-		0.1		0.2		0.1
Restructuring payments		0.1		-		0.1		0.1
Nonrecurring tax refunds		-		-		(0.6)		-
Total adjusting items		0.1		0.1		(0.3)		0.2
Adjusted free cash flow *	$	0.2	$	0.2	$	0.1	$	-
Adjusted net income from continuing operations
attributable to JCI	$	0.3	$	0.3	$	0.6	$	0.5
Adjusted free cash flow conversion		67%		67%		17%		0%

* May not sum due to rounding

32

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, 2020 and December 31, 2019 calculation of net debt to adjusted EBITDA (unaudited):

(in millions)		March 31, 2020		December 31, 2019
Short-term debt and current portion of long-term debt	$	1,430	$	1,362
Long-term debt		5,640		5,920
Total debt		7,070		7,282
Less: cash and cash equivalents		1,006		2,160
Total net debt	$	6,064	$	5,122
Last twelve months adjusted EBITDA	$	3,326	$	3,359
Total net debt to adjusted EBITDA		1.8x		1.5x

The following is the last twelve months ended March 31, 2020 and December 31, 2019 reconciliation of income from continuing operations to adjusted EBIT and adjusted EBITDA, which are non-GAAP performance measures (unaudited):

		Last Twelve Months		Last Twelve Months
		Ended		Ended
(in millions)		March 31, 2020		December 31, 2019
Income from continuing operations	$	1,306	$	1,344
Income tax benefit		(310)		(276)
Net financing charges		278		317
EBIT		1,274		1,385
Adjusting items:
Transaction costs		7		9
Integration costs		267		297
Net mark-to-market adjustments		639		587
Restructuring and impairment costs		408		346
Tax indemnification reserve release		(226)		(226)
Environmental reserve		140		140
Adjusted EBIT (1)		2,509		2,538
Depreciation and amortization		817		821
Adjusted EBITDA (1)	$	3,326	$	3,359

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. Income Taxes

The Company's effective tax rate from continuing operations before consideration of transaction/integration costs, net mark-to-market adjustments, restructuring and impairment costs, and discrete tax items for the three and six months ending March 31, 2020 and March 31, 2019 is approximately 13.5%.

7. Restructuring and Impairment Costs

The three months ended March 31, 2020 include restructuring and impairment costs of $62 million related to indefinite-lived intangible asset impairments primarily related to the Company's retail business. The six months ended March 31, 2020 include restructuring and impairment costs of $173 million related primarily to workforce reductions, plant closures and asset impairments.

8. Leases

On October 1, 2019, the Company adopted ASU 2016-02, "Leases (Topic 842)," which requires recognition of operating leases as a lease asset and liabilities on the balance sheet. The adoption of the new guidance resulted in recognition of a right-of-use asset and related lease liabilities of $1.1 billion.

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