Cautionary Statements for Forward-Looking Information
Unless otherwise indicated, references to "
The Company has made statements in this document 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 document, statements regardingJohnson 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 beyondJohnson Controls' control, that could causeJohnson 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, capital market and geopolitical conditions, including global price inflation;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 theU.S. or other economies; changes or uncertainty in laws, regulations, rates, policies or interpretations that impactJohnson Controls' business operations or tax status; the ability to develop or acquire new products and technologies that achieve market acceptance; changes to laws or policies governing foreign trade, including increased tariffs or trade restrictions; maintaining the capacity, reliability and security ofJohnson Controls' enterprise and product information technology infrastructure; the risk of infringement or expiration of intellectual property rights; any delay or inability ofJohnson Controls to realize the expected benefits and synergies of recent portfolio transactions such as its merger with Tyco and the disposition of the Power Solutions business; the outcome of litigation and governmental proceedings; the ability to hire and retain key senior management; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; the availability of raw materials and component products; 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 toJohnson Controls' business is included in the section entitled "Risk Factors" inJohnson Controls' Annual Report on Form 10-K for the year endedSeptember 30, 2020 filed with theUnited States Securities and Exchange Commission ("SEC") onNovember 16, 2020 , which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. The forward-looking statements included in this document 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 document.
Overview
Johnson Controls International plc , headquartered inCork, Ireland , is a global diversified technology and multi industrial leader serving a wide range of customers in more than 150 countries. The Company's products and solutions enable smart, energy efficient, sustainable buildings that work seamlessly together to advance the safety, comfort and intelligence of spaces to power its customers' mission. The Company is committed to helping its customers win and creating greater value for all of its stakeholders through its strategic focus on buildings.Johnson Controls was originally incorporated in the state ofWisconsin in 1885 asJohnson Electric Service Company to manufacture, install and service automatic temperature regulation systems for buildings. The Company was renamed toJohnson Controls, Inc. in 1974. In 2005, the Company acquiredYork International , a global supplier of heating, ventilating, air-conditioning ("HVAC") and refrigeration equipment and services. In 2014, the Company acquiredAir Distribution Technologies, Inc. , one of the largest independent providers of air distribution and ventilation products inNorth America . In 2015, the Company formed a joint venture with Hitachi to expand its building related product offerings. In 2016,Johnson Controls, Inc. and Tyco completed their combination (the "Merger"), combiningJohnson Controls portfolio of building efficiency solutions with Tyco's portfolio of fire and security solutions. Following the Merger, Tyco changed its name to "Johnson Controls International plc ." 45 -------------------------------------------------------------------------------- In 2016,Johnson Controls completed the spin-off of its automotive business into Adient plc, an independent, publicly traded company. In 2019, the Company sold its Power Solutions business toBCP Acquisitions LLC , an entity controlled by investment funds managed byBrookfield Capital Partners LLC , completing the Company's transformation into a pure-play building technologies and solutions provider. The Company is a global leader in engineering, manufacturing and commissioning building products and systems, including residential and commercial HVAC equipment, industrial refrigeration systems, controls, security systems, fire detection systems and fire suppression solutions. The Company further serves customers by providing technical services, including maintenance, repair, retrofit and replacement of equipment (in the HVAC, security and fire-protection space), energy-management consulting and data-driven "smart building" services and solutions powered by its digital platforms and capabilities. The Company continues to observe trends demonstrating increased interest and demand for safe, efficient and sustainable buildings, and seeks to capitalize on these trends to drive growth by developing and delivering technologies and solutions to create healthy buildings. In 2020, the Company launched OpenBlue, a digitally driven suite of connected solutions that delivers impactful sustainability, new occupant experiences, and respectful safety and security by combining the Company's building expertise with cutting-edge technology, including AI-powered service solutions such as remote diagnostics, predictive maintenance, compliance monitoring and advanced risk assessments. InJanuary 2021 , the Company committed to invest 75 percent of its new product research and development in climate-related innovation to develop sustainable products and services. The following information should be read in conjunction with theSeptember 30, 2020 consolidated financial statements and notes thereto, along with management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year endedSeptember 30, 2020 filed with theSEC onNovember 16, 2020 . References in the following discussion and analysis to "Three Months" (or similar language) refer to the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 , while "Year-to-Date" refers to the nine months endedJune 30, 2021 compared to the nine months endedJune 30, 2020 .
Impact of COVID-19 pandemic
The global outbreak of COVID-19 severely restricted the level of economic activity around the world and caused a significant contraction in the global economy. The Company's affiliates, employees, suppliers, customers and others have been and may continue to be restricted or prevented from conducting normal business activities, including as a result of shutdowns, travel restrictions and other actions that may be requested or mandated by governmental authorities. Although shutdown orders and similar restrictions have been lifted in many jurisdictions in conjunction with the global distribution of vaccines, challenges in achieving sufficient vaccination levels and the spread of new variants of COVID-19 have caused some governments to extend or reinstitute restrictions in impacted areas. While a substantial portion of the Company's businesses have been classified as essential businesses in jurisdictions in which facility closures have been mandated, some of its facilities have at times nevertheless been ordered to close, and we can give no assurance that there will not be additional closures in the future or that the Company's businesses will be classified as essential in each of the jurisdictions in which it operates. In response to the challenges presented by COVID-19, the Company has focused its efforts on preserving the health and safety of its employees and customers, as well as maintaining the continuity of its operations. The Company modified its business practices in response to the COVID-19 outbreak, including restricting non-essential employee travel, implementation of remote work protocols, and limiting physical participation in meetings, events and conferences. The Company also instituted preventive measures at its facilities, including enhanced health and safety protocols, temperature screening, requiring face coverings for all unvaccinated employees and encouraging employees to follow similar protocols when away from work. The Company has adopted a multifaceted framework to guide its decision making as it reopens its offices and facilities to employees, and will continue to monitor and audit its facilities to ensure that they are in compliance with the Company's COVID-19 safety requirements. The Company initially experienced a decline in demand and volumes in its global businesses as a result of the impact of efforts to contain the spread of COVID-19. Specifically, the Company experienced lower demand due to restricted access to customer sites to perform service and installation work as well as reduced discretionary capital spending by the Company's customers. In fiscal 2021, the Company has experienced increases in both demand and volumes as governments have distributed vaccines and lifted COVID-19-related restrictions, leading to increases in retrofit activity and, to a lesser extent, commercial building construction. The global pandemic has also provided the Company with the opportunity to help its customers prepare to re-open by delivering solutions and support that enhance the safety and increase the efficiency of their operations. As a result of the pandemic, the Company has seen an increase in demand for its products and solutions that promote building health and 46 --------------------------------------------------------------------------------
optimize customers' infrastructure, including thermal cameras, indoor air quality, location-based services for contact tracing and touchless access control.
However, the Company continues to be influenced by COVID-19 related trends impacting site access, the labor force and the global supply chain, which have and may continue to negatively impact the Company's revenues and margins. Challenges in achieving sufficient vaccination levels to achieve herd immunity and the introduction of new variants of COVID-19 have caused some governments to extend or reinstitute lockdowns and similar restrictive measures, which, in some cases, have limited the Company's ability to access customer sites to install and maintain its products and deliver services. In addition, the Company has experienced and continues to experience labor shortages at certain facilities as the Company expands its production capacity to meet increased customer demand. Although the Company is mitigating these shortages through focused recruitment efforts and competitive compensation packages, the Company could continue to experience such shortages in the future. In addition, the Company has experienced, and expects to continue to experience, increased input material costs and component shortages, as well as disruptions and delays in its supply chain, as a result of government-mandated actions and increased demand. While actions taken by the Company to mitigate supply chain issues, including expanding and redistributing its supplier network, supplier financing, price increases and productivity improvements, have generally been successful in mitigating these trends, the Company could experience further disruptions, shortages and price increases in the future. In the third and fourth quarter of fiscal 2020, the Company executed temporary and permanent cost mitigation actions to offset a portion of the impact of COVID-19 on the demand for its products and services. As a result of these actions, including the Company's 2020 restructuring plan, the Company experienced a positive impact on its results of operations in the first half of fiscal 2021, but the Company has experienced, and expects to experience, a negative impact on its results of operations in the second half of fiscal 2021 as the temporary cost reduction actions reverse. Although the Company has largely ceased temporary cost mitigation actions initiated in fiscal 2020, the necessity of future cost mitigation actions will depend on the continued impact of COVID-19, which is highly uncertain.
During portions of fiscal 2020, the Company experienced temporary reductions of
its manufacturing and operating capacity, particularly in
During fiscal 2020, the Company determined that it had triggering events requiring assessment of impairment for certain of its indefinite-lived intangible assets due to declines in revenue directly attributable to the COVID-19 pandemic and for certain of its indefinite-lived intangible assets, long-lived assets and goodwill due to declines in revenue and further declines in forecasted cash flows in its North America Retail reporting unit. As a result, the Company recorded an impairment charge of$62 million related primarily to the Company's retail business indefinite-lived intangible assets and an impairment charge of$424 million related to the Company'sNorth America Retail reporting unit's goodwill. There were no triggering events requiring that an impairment assessment be conducted for indefinite-lived intangible assets or goodwill in the nine months endedJune 30, 2021 . However, it is possible that future changes in circumstances, including a more prolonged and/or severe COVID-19 pandemic, would require the Company to record additional non-cash impairment charges. The Company continues to actively monitor its liquidity position and working capital needs. The Company believes that, following its implementation of liquidity and cost mitigation actions in fiscal 2020, it remains in a solid overall capital resources and liquidity position that is adequate to meet its projected needs. The extent to which the COVID-19 pandemic continues to impact the Company's results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the resurgence of COVID-19 and its variants in regions recovering from the impacts of the pandemic, the effectiveness of COVID-19 vaccines and the speed at which populations are vaccinated around the globe, the impact of COVID-19 on economic activity, and regulatory actions taken to contain its impact on public health and the global economy. See Part I, Item 1A, of the Company's Annual Report on Form 10-K for the year endedSeptember 30, 2020 for an additional discussion of risks related to COVID-19.
Restructuring and Cost Optimization Initiatives
To better align its resources with its growth strategies and reduce the cost structure of its global operations in certain underlying markets, the Company has committed to various restructuring plans. In fiscal 2021, the Company announced its plans to optimize its cost structure through broad-based SG&A actions focused on simplification, standardization and centralization, with the intent to deliver annualized savings of$300 million by fiscal 2023. Additionally, the Company announced cost of sales actions to drive$250 million in annual run rate savings by fiscal 2023. For more information on the Company's restructuring plans, see "Liquidity and Capital Resources-Restructuring". 47 --------------------------------------------------------------------------------
Net Sales Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Net sales$ 6,341 $ 5,343 19 %$ 17,276 $ 16,363 6 % The increase in consolidated net sales for the three months endedJune 30, 2021 was due to higher organic sales ($803 million ), the favorable impact of foreign currency translation ($165 million ) and incremental sales from acquisitions ($90 million ), partially offset by lower sales due to business divestitures ($57 million ) and the impact of nonrecurring purchase accounting adjustments ($3 million ). Excluding the impact of foreign currency translation, business acquisitions and divestitures and nonrecurring adjustments, consolidated net sales increased 15% as compared to the prior year, primarily attributable to the increased demand generated by the COVID-19 pandemic recovery. Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment. The increase in consolidated net sales for the nine months endedJune 30, 2021 was due to higher organic sales ($617 million ), the favorable impact of foreign currency translation ($390 million ) and incremental sales from acquisitions ($103 million ), partially offset by lower sales due to business divestitures ($194 million ) and the impact of nonrecurring purchase accounting adjustments ($3 million ). Excluding the impact of foreign currency translation, business acquisitions and divestitures and nonrecurring adjustments, consolidated net sales increased 4% as compared to the prior year, primarily attributable to the increased demand generated by the COVID-19 pandemic recovery. Refer to the "Segment Analysis" below within this Item 2 for a discussion of net sales by segment.
Cost of Sales / Gross Profit
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021
2020 Change
Cost of sales$ 4,144 $ 3,511 18 %$ 11,408 $ 10,927 4 % Gross profit 2,197 1,832 20 % 5,868 5,436 8 % % of sales 34.6 % 34.3 % 34.0 % 33.2 % Cost of sales and gross profit increased for the three month period endedJune 30, 2021 , and gross profit as a percentage of sales increased by 30 basis points. Gross profit increased due to organic sales growth, business acquisitions and favorable year-over-year impact of net pension mark-to-market adjustments ($34 million ), partially offset by business divestitures. Foreign currency translation had an unfavorable impact on cost of sales of approximately$111 million . Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings before interest, taxes and amortization ("EBITA") by segment. Cost of sales and gross profit increased for the nine month period endedJune 30, 2021 , and gross profit as a percentage of sales increased by 80 basis points. Gross profit increased due to organic sales growth, favorable year-over-year impact of net pension mark-to-market adjustments ($83 million ) and business acquisitions, partially offset by business divestitures. Foreign currency translation had an unfavorable impact on cost of sales of approximately$269 million . Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA by segment. 48 --------------------------------------------------------------------------------
Selling, General and Administrative Expenses
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Selling, general and administrative expenses$ 1,367 $ 1,334 2 %$ 3,914 $ 4,212 -7 % % of sales 21.6 % 25.0 % 22.7 % 25.7 % Selling, general and administrative expenses ("SG&A") for the three month period endedJune 30, 2021 increased$33 million , and SG&A as a percentage of sales decreased by 340 basis points. The increase in SG&A was primarily due to prior year temporary cost mitigation actions and the unfavorable impact of foreign currency translation, partially offset by favorable year-over-year impact of net mark-to-market adjustments on pension plans ($179 million ). Foreign currency translation had an unfavorable impact on SG&A of$36 million . Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA by segment. SG&A for the nine month period endedJune 30, 2021 decreased$298 million , and SG&A as a percentage of sales decreased by 300 basis points. The decrease in SG&A was primarily due to favorable year-over-year impact of net mark-to-market adjustments on pension plans ($337 million ) and favorable impacts of cost mitigation actions and reductions in discretionary spend in the current year, partially offset by an unfavorable impact of foreign currency translation. Foreign currency translation had an unfavorable impact on SG&A of$88 million . Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA by segment.
Restructuring and Impairment Costs
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Restructuring and impairment costs$ 79 $ 610 -87 %$ 175 $ 783 -78 % Refer to Note 10, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements and "Restructuring" below within this Item 2 for further disclosure related to the Company's restructuring plans and impairment costs. Net Financing Charges Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Net financing charges$ 56 $ 58 -3 %$ 159 $ 169 -6 %
Refer to Note 13, "Debt and Financing Arrangements," of the notes to consolidated financial statements for further disclosure related to the Company's net financing charges.
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Equity Income Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Equity income$ 74 $ 47 57 %$ 188 $ 110 71 % The increase in equity income for the three months endedJune 30, 2021 was primarily due to higher income at certain partially-owned affiliates of theJohnson Controls - Hitachi joint venture. Foreign currency translation had a favorable impact on equity income of$4 million for the three months endedJune 30, 2021 . Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA by segment. The increase in equity income for the nine months endedJune 30, 2021 was primarily due to higher income at certain partially-owned affiliates of theJohnson Controls - Hitachi joint venture. Foreign currency translation had a favorable impact on equity income of$8 million for the nine months endedJune 30, 2021 . Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment EBITA by segment.
Income Tax Provision
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Income tax provision (benefit)$ 108 $ (1) *$ 378 $ 77 * Effective tax rate 14 % 1 % 21 % 20 % * Measure not meaningful In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. The statutory tax rate inIreland is being used as a comparison since the Company is domiciled inIreland . For the three months endedJune 30, 2021 , the Company's effective tax rate for continuing operations was 14% and was higher than the statutory tax rate of 12.5% primarily due to the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives. For the nine months endedJune 30, 2021 , the Company's effective tax rate for continuing operations was 21% and was higher than the statutory tax rate of 12.5% primarily due to valuation allowance adjustments, the income tax effects of mark-to-market adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives. For the three months endedJune 30, 2020 , the Company's effective tax rate for continuing operations was 1% and was lower than the statutory tax rate of 12.5% primarily due to tax audit reserve adjustments, the income tax effects of mark-to-market adjustments and the benefits of continuing global tax planning initiatives, partially offset by the tax impact of an impairment charge and tax rate differentials. For the nine months endedJune 30, 2020 , the Company's effective tax rate for continuing operations was 20% and was higher than the statutory tax rate of 12.5% primarily due to a discrete tax charge related to the remeasurement of deferred tax assets and liabilities as a result of Swiss tax reform, the tax impact of an impairment charge and tax rate differentials, partially offset by tax audit reserve adjustments, the income tax effects of mark-to-market adjustments and the benefits of continuing global tax planning initiatives. The effective tax rate for the nine months endedJune 30, 2021 increased as compared to the nine months endedJune 30, 2020 primarily due to the discrete tax items. Refer to Note 11, "Income Taxes," of the notes to consolidated financial statements for further detail. 50 --------------------------------------------------------------------------------
Income From Discontinued Operations, Net of Tax
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change
Income from discontinued operations, net of tax $ - $ - *$ 124 $ - * * Measure not meaningful
Refer to Note 4, "Discontinued Operations," of the notes to consolidated financial statements for further information regarding the Company's discontinued operations.
Income Attributable to Noncontrolling Interests
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Income from continuing operations attributable to noncontrolling interests$ 87 $ 60 45 %$ 186 $ 115 62 % The increase in income from continuing operations attributable to noncontrolling interests for the three and nine months endedJune 30, 2021 was primarily due to higher net income at certain partially-owned affiliates within the Global Products segment.
Net Income (Loss) Attributable to
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Net income (loss) attributable to Johnson Controls$ 574 $ (182) *$ 1,368 $ 190 * * Measure not meaningful The increase in net income attributable toJohnson Controls for the three months endedJune 30, 2021 was primarily due to lower restructuring and impairment costs and higher gross profit, partially offset by higher income tax provision. The increase in net income attributable toJohnson Controls for the nine months endedJune 30, 2021 was primarily due to lower restructuring and impairment costs, higher gross profit, lower SG&A and the current year income from discontinued operations, partially offset by higher income tax provision. Diluted earnings (loss) per share attributable toJohnson Controls for the three months endedJune 30, 2021 was$0.80 compared to$(0.24) for the three months endedJune 30, 2020 . Diluted earnings per share attributable toJohnson Controls for the nine months endedJune 30, 2021 was$1.89 compared to$0.25 for the nine months endedJune 30, 2020 .
Comprehensive Income (Loss) Attributable to
Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 Change Comprehensive income (loss) attributable to Johnson Controls$ 633 $ (104) *$ 1,793 $ 42 * 51
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* Measure not meaningful
The increase in comprehensive income attributable toJohnson Controls for the three months endedJune 30, 2021 was due to higher net income attributable toJohnson Controls ($756 million ), partially offset by a decrease in other comprehensive income attributable toJohnson Controls ($19 million ) resulting primarily from the realized and unrealized losses on derivatives. The increase in comprehensive income attributable toJohnson Controls for the nine months endedJune 30, 2021 was due to higher net income attributable toJohnson Controls ($1,178 million ) and an increase in other comprehensive income attributable toJohnson Controls ($573 million ) resulting primarily from favorable currency translation adjustments. The year-over-year favorable foreign currency translation adjustments were primarily driven by the strengthening of the British pound, Canadian dollar and Mexican peso against theU.S. dollar in the current year. Segment Analysis Management evaluates the performance of its business units based primarily on segment EBITA, which represents income from continuing operations before income taxes and noncontrolling interests, excluding general corporate expenses, intangible asset amortization, net financing charges, restructuring and impairment costs, and net mark-to-market adjustments related to pension and postretirement plans and restricted asbestos investments.Net Sales Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 ChangeBuilding Solutions North America$ 2,212 $ 2,020 10 %$ 6,338 $ 6,362 - % Building Solutions EMEA/LA 962 756 27 % 2,765 2,534 9 %Building Solutions Asia Pacific 712 588 21 % 1,930 1,742 11 % Global Products 2,455 1,979 24 % 6,243 5,725 9 %$ 6,341 $ 5,343 19 %$ 17,276 $ 16,363 6 % Three Months: •The increase inBuilding Solutions North America was due to higher volumes ($171 million ) and the favorable impact of foreign currency translation ($21 million ). The increase in volumes was primarily attributable to the increased demand generated by the COVID-19 pandemic recovery. •The increase inBuilding Solutions EMEA/LA was due to higher volumes ($140 million ), the favorable impact of foreign currency translation ($56 million ) and incremental sales related to business acquisitions ($10 million ). The increase in volumes was primarily attributable to the increased demand generated by the COVID-19 pandemic recovery. •The increase inBuilding Solutions Asia Pacific was due to favorable volumes ($86 million ) and the favorable impact of foreign currency translation ($41 million ), partially offset by business divestitures ($3 million ). The increase in volumes was primarily attributable to the increased demand generated by the COVID-19 pandemic recovery. •The increase in Global Products was due to favorable volumes ($406 million ), incremental sales related to business acquisitions ($80 million ) and the favorable impact of foreign currency translation ($47 million ), partially offset by business divestitures ($54 million ) and the impact of nonrecurring purchase accounting adjustments ($3 million ). The increase in volumes was primarily attributable to the increased demand generated by the COVID-19 pandemic recovery. 52 --------------------------------------------------------------------------------
Year-to-Date:
•The decrease inBuilding Solutions North America was due to lower volumes ($61 million ), partially offset by the favorable impact of foreign currency translation ($37 million ). The decrease in volumes was primarily attributable to the unfavorable impact of the COVID-19 pandemic in the first half of the year. •The increase inBuilding Solutions EMEA/LA was due to the favorable impact of foreign currency translation ($119 million ), higher volumes ($89 million ) and incremental sales related to business acquisitions ($23 million ). The increase in volumes was primarily attributable to the COVID-19 pandemic recovery. •The increase inBuilding Solutions Asia Pacific was due to the favorable impact of foreign currency translation ($99 million ) and favorable volumes ($96 million ), partially offset by business divestitures ($7 million ). The increase in volumes was primarily attributable to the COVID-19 pandemic recovery. •The increase in Global Products was due to favorable volumes ($493 million ), the favorable impact of foreign currency translation ($135 million ) and incremental sales related to business acquisitions ($80 million ), partially offset by business divestitures ($187 million ) and the impact of nonrecurring purchase accounting adjustments ($3 million ). The increase in volumes was primarily attributable to the COVID-19 pandemic recovery. Segment EBITA Three Months Ended Nine Months Ended June 30, June 30, (in millions) 2021 2020 Change 2021 2020 ChangeBuilding Solutions North America$ 326 $ 307 6 %$ 847 $ 816 4 % Building Solutions EMEA/LA 103 62 66 % 284 237 20 %Building Solutions Asia Pacific 84 92 -9 % 237 229 3 % Global Products 507 378 34 % 1,005 797 26 %$ 1,020 $ 839 22 %$ 2,373 $ 2,079 14 % Three Months: •The increase inBuilding Solutions North America was due to favorable volumes and productivity savings, net of prior year temporary cost mitigation actions ($13 million ), prior year integration costs ($4 million ) and the favorable impact of foreign currency translation ($2 million ). •The increase inBuilding Solutions EMEA/LA was due to favorable volumes ($34 million ), the favorable impact of foreign currency translation ($4 million ), higher equity income ($2 million ) and higher income due to business acquisitions ($1 million ). •The decrease inBuilding Solutions Asia Pacific was due to prior year temporary cost mitigation actions, net of favorable volumes ($12 million ) and lower income due to business divestitures ($1 million ), partially offset by the favorable impact of foreign currency translation ($5 million ). •The increase in Global Products was due to favorable volumes and productivity savings, net of prior year temporary cost mitigation actions ($97 million ), higher equity income ($19 million ) driven primarily by certain partially-owned affiliates of theJohnson Controls - Hitachi joint venture, the favorable impact of foreign currency translation ($11 million ), prior year integration costs ($7 million ) and incremental income related to business acquisitions ($4 million ), partially offset by Silent-Aire transaction costs and nonrecurring purchase accounting adjustments ($7 million ) and lower income due to business divestitures ($2 million ).
Year-to-Date:
•The increase in
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•The increase in
•The increase inBuilding Solutions Asia Pacific was due to the favorable impact of foreign currency translation ($11 million ), partially offset by lower income due to business divestitures ($2 million ) and prior year temporary cost mitigation actions, net of productivity savings and favorable volumes ($1 million ). •The increase in Global Products was due to favorable volumes and productivity savings, net of prior year temporary cost mitigation actions ($131 million ), higher equity income ($64 million ) driven primarily by certain partially-owned affiliates of theJohnson Controls - Hitachi joint venture, the favorable impact of foreign currency translation ($22 million ), prior year integration costs ($8 million ) and incremental income related to business acquisitions ($4 million ), partially offset by lower income due to business divestitures ($14 million ) and Silent-Aire transaction costs and nonrecurring purchase accounting adjustments ($7 million ). Backlog The Company's backlog is applicable to its sales of systems and services. AtJune 30, 2021 , the backlog was$10.5 billion , of which$10.0 billion was attributable to the field business. The backlog amount outstanding at any given time is not necessarily indicative of the amount of revenue to be earned in the upcoming fiscal year. AtJune 30, 2021 , remaining performance obligations were$15.6 billion , which is$5.1 billion higher than the Company's backlog of$10.5 billion . Differences between the Company's remaining performance obligations and backlog are primarily due to: •Remaining performance obligations include large, multi-purpose contracts to construct hospitals, schools and other governmental buildings, which are services to be performed over the building's lifetime with initial contract terms of 25 to 35 years for the entire term of the contract versus backlog which includes only the lifecycle period of these contracts which approximates five years; •The Company has elected to exclude from remaining performance obligations certain contracts with customers with a term of one year or less or contracts that are cancelable without substantial penalty while these contracts are included within backlog; and •Remaining performance obligations include the full remaining term of service contracts with substantial termination penalties versus backlog which includes one year for all outstanding service contracts.
The Company will continue to report backlog as it believes it is a useful measure of evaluating the Company's operational performance and relationship to total orders.
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Liquidity and Capital Resources
Working Capital June 30, September 30, (in millions) 2021 2020 Change Current assets$ 10,310 $ 10,053 Current liabilities (9,285) (8,248) 1,025 1,805 -43 % Less: Cash (1,450) (1,951) Add: Short-term debt 265 31 Add: Current portion of long-term debt 196 262 Working capital (as defined)$ 36 $ 147 -76 % Accounts receivable - net$ 5,668 $ 5,294 7 % Inventories 2,064 1,773 16 % Accounts payable 3,719 3,120 19 % •The Company defines working capital as current assets less current liabilities, excluding cash, short-term debt, the current portion of long-term debt, and the current portions of assets and liabilities held for sale. Management believes that this measure of working capital, which excludes financing-related items and businesses to be divested, provides a more useful measurement of the Company's operating performance. •The decrease in working capital atJune 30, 2021 as compared toSeptember 30, 2020 , was primarily due to an increase in accounts payable and accrued compensation and benefits liabilities, partially offset by an increase in inventory to meet anticipated customer demand, an increase in accounts receivable, and the favorable resolution of certain post-closing working capital and net debt adjustments related to the Power Solutions sale. •The Company's days sales in accounts receivable atJune 30, 2021 andSeptember 30, 2020 were 61 days and 63 days, respectively. There has been no significant adverse changes in the level of overdue receivables or significant changes in revenue recognition methods.
•The Company's inventory turns for the three months ended
•Days in accounts payable at
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