Welcome, and thank you all for standing by. At this time all participants are in a listen-only mode until the question-and-answer session of today's conference call. Today's call is being recorded, if you have any objections you may disconnect at this point. Now I will hand the meeting over to your host, Mr. Glen Ponczak, sir you may begin.

Thanks, operator and welcome, everybody, to the review of Johnson Controls First Quarter 2015 Earnings. If you didn't already receive it, the slide presentation can be accessed at the Investors section at johnsoncontrols.com. This morning, Chairman and CEO, Alex Molinaroli, will provide some perspective on the quarter as well as some updates; and he'll be followed by Executive Vice President and Chief Financial Officer, Brian Stief, who will review the results of the individual businesses as well as the company's overall financial performance. Following those prepared remarks, we'll open up the call for questions, and we're scheduled to end at the top of the hour. Before we begin, just want to remind you that today's conference will include forward-looking statements that are subject to risks, uncertainties and assumptions that could cause the actual results to be materially different from those expressed or implied by such forward-looking statements. These factors that could cause results to differ are discussed in the cautionary statement included in today's news release and the presentation document. We also remind you to review the extended disclosures related to the proposed transaction with Tyco, which can also be found in the earnings document today. And with that, I'll turn it over to Alex. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Great. Thank you, Glen. I first want to acknowledge that this is probably the first time in years that Bruce McDonald hasn't been on the agenda, but just for everyone's sake, he's here, so when we get to the Q&A, we'll make sure that Bruce gets an opportunity to keep his string alive. What I'd like to do before we get started is just remind everyone, it's been a while since we had an opportunity to talk, and I wanted to remind everyone that in…

Thanks, Brian. Thanks, Alex. Operator, we're ready to take questions.

Thank you. We'll now begin the question-and-answer session. Our first question comes from the line of Mr. Robert Barry with Susquehanna. Sir, your line is now open.

Hey, guys. Good morning. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Hi, Rob.

Wanted to follow up on the comments on commercial HVAC in Asia, both China and elsewhere. It looks like orders were actually pretty good in the quarter, but you also cautioned that China weakness is kind of weighing on the outlook. So, could you maybe unpack a little more of kind of what you're seeing in commercial HVAC in Asia, China and elsewhere? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Yeah, so I think that – and you're right, I caution because you look across our businesses and just because you asked the question, I'll go ahead and answer it, but I'll also point out that we're really surprised with the strength in Auto and Power Solutions continue to gain share and grow dramatically there in China. But when we look at the Buildings business, there does seem to be some delays and some stickiness, and it's been pretty lumpy. If you remember, we had a couple of quarters where we were down. We had a real strong quarter, I think it was fourth quarter sales secured, and so it's pretty lumpy. And I think from our standpoint, it's probably just best for us to be cautious, and that's why when we talked about our guidance, we report on the top line. It's just become pretty hard to predict as it relates to the commercial business. I would tell you, though, that one of the real surprises we had, I was looking at the Hitachi sales and our VRF sales through Hisense, our – it's an unconsolidated joint venture in China, were up dramatically versus our plan. So I think it's more of a mix issue, and I think at the high-end infrastructure level some of the commercial projects we're doing moving a little slower than we thought. But our VRF sales are higher than what we expected. So, I think we're just going to have to continue to watch it. Thank goodness that North American market just seems to be kind of chugging along and gaining a little momentum. You didn't ask the question, but I looked inside our secured for North America, and it's truly institutional. If you look at within the institutional and also commercial, which we're seeing some benefit from the CB Richard Ellis relationship, within commercial and institutional, we're seeing that outpace some of the losses that we're seeing within the, essentially the manufacturing and retail segment.

Got you. Got you. Just sticking with BE on the margin side, you talked about seeing improvements in the remaining quarters after some pressure in 1Q. Is that just about investment spending moderating, or what's driving that? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: So as you look – and I'll let – get Brian get into some of the details, but if you look at the margins and you get into the new segments, you'll see that our product margins are under pressure, and that's where the investments are showing up. I think what our expectation is that we had some costs that won't repeat, but we certainly have reinvested in that business purposely, and you're going to see that pressure. It'll get offset, but you'll see that pressure is going to continue to be a little bit on the product side because that's where the investments show up. Brian J. Stief - Chief Financial Officer & Executive Vice President: Yeah, Rob, I would just add to that. I mean, if you recall, in Q4 we took a pretty good size restructuring charge in BE. And if we look at the timing of those actions, some of those are occurring during the first quarter and we'll just get full run rate benefit for the year in the back half. So there's some improvement in margins just as a result of the timing of some of the restructuring actions we had.

Got you. And then just one last one for me. The resumption of the share repurchase, does that add to the EPS target for this year versus what was factored in at the Analyst Day? Thank you. Brian J. Stief - Chief Financial Officer & Executive Vice President: Yeah, at Analyst Day we had an average share outstanding of 652 million, and at that time, we indicated we were going to pause it for six months and then reevaluate. We had built into the guidance that we had given that repurchase program coming in for the entire $1 billion in the back six months of the year, and now we're doing $500 million, but instead of doing $1 billion at $50 a share, which was what we had built into our plan, we're doing $500 million at $35 a share let's say, just to pick a stock price. And the net effect of that is about a penny or so in the guidance that we gave, Rob.

Got you. It benefits it by a penny. Brian J. Stief - Chief Financial Officer & Executive Vice President: Actually, it's the other way, right, because we had $1 billion in shares at $50 in what we guided, and it's going to be $535 million. So I think the net effect of that's a penny going the other way.

Got you. Great. Thank you. Brian J. Stief - Chief Financial Officer & Executive Vice President: Yeah. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Thanks, Rob.

Thank you. Our next question comes from the line of Mr. Jonny Wright with Nomura. Sir, your line is now open.

Hi, guys. Good morning. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Hi. Brian J. Stief - Chief Financial Officer & Executive Vice President: Good morning. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Good morning.

So just going to the Auto side maybe, I mean you guys are actually putting up some strong results despite certainly from some of the investors we've talked who seem more and more concerned about the Auto cycle. I know China's benefiting a little bit from the incentives that have been put in place there. But maybe you can talk about in developed markets what you're seeing, what you're hearing from companies and kind of your outlook for the remainder of 2016? Robert Bruce McDonald - Vice Chairman & Executive Vice President: Yeah, it's Bruce McDonald here. Yeah, I think if I just sort of run through it regionally, you're right. The incentives that we've put – that got put in place in China that last till the end of the fiscal year have been pretty effective. If just look at the production throughout our quarter, and it accelerated and it continues to be pretty strong. I think there are some questions whether or not after the Chinese New Year's here in early February whether that strength is going to continue. But for now, the production schedules that we have for China look pretty good, and I think people are feeling fairly optimistic and probably much more optimistic than people looking outside into China are feeling. The Auto sector is doing well and the stock market impact in terms of the how widespread that is, is much lower than people think. So I feel pretty good about the outlook for China for the balance of the year, probably more so than most people. In Europe, I would say, after a long period of soft volumes, we're seeing sort of double-digit increases in some of the more mature markets like, Spain, France, Italy, the UK, and Germany. Those are holding up pretty well. Our customers are doing better there. A lot of us have taken big restructurings in Europe and so I think we are positioned well, and you'll have seen that in our margins, we're positioned well to benefit from the better volumes. I'd also point out that in Europe, it's primarily where all the luxury vehicles are made for Audi, BMW, Mercedes and the demand globally for the luxury is strong and that's helping us particularly in our Interiors business and seats because there's a lot more content there. And then in North America, things are looking pretty good. We're, I would say, doing better than the industry because of the enhanced content in larger SUVs and pickup trucks, which as you know are sort of hard to keep in stock here right now. So, I don't think there's a lot of extra growth in the tank for North America this year, but we are seeing a richer mix on larger vehicles and that will be a good thing for Johnson Controls.

Great. Thanks for that, Bruce. And on Power Solutions, 3% growth excluding FX and the lead impact, I think you guys are looking at close to double digits. But some of the key drivers in that business, you have the China record order – record shipments in the month, the AGM up 41% – look pretty robust. Maybe what's different there versus your prior expectation and kind of how do you see that playing for the rest of the year? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Yeah, well, the numbers are so big when you get to Europe and North America. When you start talking about AGM growth at 41% and China being record sales, it doesn't – we can't get to the 9% to 10% without both mix and growth within primarily North America, I mean that's really where we need to see it. And so I think that, I mean, I think we feel good about where things are, but it's a little bit out of our control. Particularly when you start talking about the aftermarket and what the weather's going to be and what the timing of that is going to be, but that's what moves the needle when you look at North America. So I think we feel like we're in good position. A lot of it has to do with what our customers are seeing. We're not in a position we're going to gain any more share in North America and so what we really need to see is some – we need to see the weather help us out here little bit so...

Okay, guys. Just, Brian, reported free cash flow this year is $1 billion still the target? Brian J. Stief - Chief Financial Officer & Executive Vice President: Yes. Yeah, the guidance hasn't changed.

Okay. Thanks guys Brian J. Stief - Chief Financial Officer & Executive Vice President: Thank you. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Thanks, Jonny.

Thank you. Our next question comes from the line of Julian Mitchell with Credit Suisse. Sir, your line is now open. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Hi. Good morning. Thank you. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Good morning. Brian J. Stief - Chief Financial Officer & Executive Vice President: Good morning. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Just first a question on pricing within building efficiency. I guess firstly around – you talked about some of the private sector commercial activity maybe being a bit uneven. Have you seen any change in the ability of HVAC manufacturers to price? And then also on your margins what sort of affect do you see for price net of cost this year in BE? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: You're talking about based on commodities? Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Yeah and your pricing net of commodity costs, yes. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Yes. So I actually don't have that in front of me, so I will have to get back with you and make sure I understand our net hedge position, primarily around copper. We certainly are seeing some help as it relates to our transportation costs, but I don't have an update on that. So we'll follow up on that specifically just so I don't misrepresent it. As it relates to pricing, I was talking to Bill Jackson, our President at Building Efficiency and he seems to feel pretty good that pricing has been rational and probably because we're starting to see orders increase a little bit that we're not under as much pressure, particularly in North America. I think the opposite is the…

Thank you. Our next question comes from the line of Mr. Mike Wood with Macquarie. Sir, your line is now open. Mike Wood - Macquarie Capital (USA), Inc.: Hi. Thanks for taking my question. First, are Hitachi sales still expected to be about $3 billion for the full year? And is the lower run rate in fiscal first quarter just seasonality or is there something else there? Brian J. Stief - Chief Financial Officer & Executive Vice President: Yeah, so a couple of things there. The first quarter was $525 million, and it is seasonal to some extent. I would tell you that we had guided at about $3 billion of sales and $120 million a sync and in that $3 billion of sales there was an entity that's got about $250 million of sales that we were planning on consolidating. And as we got in and looked at the underlying agreements related to the joint venture itself, we determined from accounting standpoint that we weren't going to be able to consolidate that entity. So, instead of $3 billion for the year, our revenues related to Hitachi are going to be $2.75 billion or so, and that correspond where there's about $70 million in the quarter that was impacted as well. So that $525 million was originally targeted to be about $600 million. So, we are now looking at Hitachi for the year about $2.75 billion. And, yes, the $525 million in the first quarter reflects some seasonality in that business. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: I'd like to point out that the strong [exposed] you saw in China is in unconsolidated. So if you look at the topline growth, where we had the strongest sales, it happens to be – and where we saw the strength in China that was – representing earlier happens to be with Hisense which is unconsolidated. Mike Wood - Macquarie Capital (USA), Inc.: Great. Then approximately when should we expect to begin to see benefits of the restructuring in that resi business that you were planning? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: That's a great question. I think the next time we get together I'll be able to update. In fact I'll be at a steering committee meeting tonight. So I'll be able to report on that. So I'm anxious to be able to tell you what the plan is, but I want to make sure that I get it hot off the press. Mike Wood - Macquarie Capital (USA), Inc.: Great. Thank you.

Thank you. Our next question comes from the line of Mr. Josh Pokrzywinski with Buckingham Research. Sir, your line is now open.

Hi. Good morning, guys. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Hi, Josh. Brian J. Stief - Chief Financial Officer & Executive Vice President: Good morning. Robert Bruce McDonald - Vice Chairman & Executive Vice President: Good morning.

Just to follow up on some of the BE order momentum and maybe unpacking that growth algorithm to 10%. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: I'm sorry. We can't hear you.

Can guys hear me? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Yeah, go ahead.

Okay. Perfect. Just to come back to that 10% outlook for BE, obviously some puts and takes internationally, and it sounds like the bottom line is North America is still pretty solid. I guess, Alex, how do you think about North America underneath that 10%, and where does the bridge from here really need to get better to start to move closer to that? Maybe the 10% number is more aspirational just given where we started, but what needs to get better or chilled from here to start looking more achievable? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: If we continue to see the kind of momentum we have in the quarter, particularly the end of the quarter, I mean I think that at some point, in North America, I think that we can get there. I just get a little bit nervous about things that are outside our control. I mean it seems like the actual market is doing better than the financial markets, but at some point the financial markets will make their way to the investors and that – investments and that's what worries me. I'm pretty bullish on what I see in North America, with one caveat is that there is this cloud hanging around as it relates to the financial markets that just what you hope is it doesn't get our customers spooked as it relates to investments. But the institutional markets are gaining steam, which is our strength. So knock on wood, I'm hopeful to be able to report that we will continue to see that growth. Unfortunately the one thing that we were counting on that did not come back, at least didn't come back at the pace we wanted was, if you remember we got sidetracked at the end of Q4 with the federal government work, it was huge projects, and a lot of them. And we had significant impact to our backlog and to our topline because of that, and we haven't seen that come back, hopefully we'll see it at the end of this year, when it comes to that time again, but it's always been something we can count on, and I'm just not sure if we can count on it now or not.

Would that branch business look even stronger ex government this quarter? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Absolutely. The federal government – in fact earlier when I said that, I apologize, I said something about industrial – industrial and federal government together are the two ones that are off, not only where our backlog is, but we've seen that continue through the second quarter. Brian J. Stief - Chief Financial Officer & Executive Vice President: Yes, I mean just to put it in perspective, the government jobs that I referred to that are really out there that we aren't sure if they're going to now be able to execute or even if they will be awarded to JCI given some of the deferrals that are going on are in the $125 million to $150 million range in aggregate. So that certainly is a piece that we need to work through for the rest of the year here.

Got you. As I think about how that 10% broke down initially in December, it seemed like there were, if I'm recalling it right, about maybe three or four points of product – new product growth and channel penetration. How would you mark yourself against that bogie today? On track or there may be a bit of a gap there too? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: There's a gap there and when you talk to the teams, I mean there's two things that when you look at the new segments you'll be able to see that. The product growth wasn't what we expected, and the margins because the investments were a little lower. One of the things that was a challenge for us in the first quarter was that when we were going through the integration of ADTI, one of our brands, our significant brands, we relocated one of the production facilities, and I think we had a hard time catching up with deliveries. So hopefully that will fix itself a little bit, but that was one of the problems we had in the quarter. Brian J. Stief - Chief Financial Officer & Executive Vice President: I think with some of the product investments that we made in the first quarter, hopefully we will start to see some of that benefit in the back half of this year. But I mean just to kind of frame that you, between product investments and investments in sales resources, that number was almost $20 million in the quarter for BE, and you'll see that when you see the products North America segment data that's in the 8-K.

Got you. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: The other thing that this kind of a – to kind of pile on a little bit, the Hitachi channel work will show up in that number, too, which was – which is an investment that we have to put in place in order to get ready for sales for that particular product. So there was a significant amount of investments in the product North America business.

Okay. And just flipping over to Adient real quickly, it might be a little premature for this. I'll take a flyer. I guess with the new structure with Tyco one would imagine that Adient now comes out maybe a bit more tax advantaged than it would have otherwise pre-merger. Any way to maybe handicap what kind of tax synergies maybe versus the former imaginary case. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: It's a great question. It's a really good question, and I think as we work through that, we've talked about where we are and we just don't have it finally worked out. We will have it worked out by the time we get the Form 10 and the question you have is a great question, and I think that we are sorting through that now and we certainly will have that prepared between now and the Form 10 and so at the latest we will be able to have that then which is late March, early April.

Great. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Good question.

Thanks guys.

Thank you. Our next question comes from the line of Mr. Colin Langan with UBS Securities. Sir, your line is now open.

Great. Thanks for taking my question. Can I just clarify – I just want to understand the power solution outlook. I mean if we take out the impact of lead prices, does the outlook on your – for that segment actually really change? I mean is the sales-that's creating a sales headwind, but dollar margins seem like they're going to look better on a percentage basis, or is there some other underlying headwind there that we should also be considering. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: That's the way you should think about this business. So one of the things we wanted to make sure that we pointed out was that don't give us all the credit for the 260 basis points of margin improvement, because that's not all operational because as things move around, we may not be able to continue at that level. So that's why we point that out, that we are – because that's such a big part of that pass through that it does impact our margin. But you got it right. As lead prices go down, the margins go up. It doesn't impact us. There is a timing issue that flows through our books, but other than timing, it's kind of a net zero effect dollars wise.

And in terms of the outlook for Building Efficiency sales being at risk, you named three items, you quantified some like the federal jobs are maybe 1% of your growth. I mean if all of those items are issues what is sort of the bare case that you are looking at for that from that 9% to 11%? How bad do you think it will get if all of them come together at the same time. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Probably half that number.

Okay. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: I mean I think that's probably what we see now. I mean I guess it could get worse, but if we see – kind of if you look at where we are, when we talked about it, our backlog was actually down going into the year because of the federal government work. And so what you have to – what gets a little bit difficult to predict is if the product business doesn't grow, then we are really suspect to the revenue recognition of meeting a backlog and the flow-through to the work. So even if we are secured starts moving at the rate it's been growing at, we'll still have a revenue issue, and so we need to get those orders in now.

Okay. Very helpful. Brian J. Stief - Chief Financial Officer & Executive Vice President: But I would tell you, we've got a contingency plan as it relates to, if that were to happen, we've got actions that we can take to ensure that we still deliver the segment income and the margins and what we've kind of put out there for our full-year guidance. So, we're working the issue relative to top line and adjusting our cost structure accordingly. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Yeah, absolutely. So our investments will certainly mirror our top-line prospects. We have not changed our commitment regardless of where we fit in that revenue as it relates to our bottom line, because the other part of this is, it's not like you can't see it coming as it relates to revenue. If our backlog doesn't improve, we're certainly not going to be able to make the investment as quickly as we planned.

Thank you very much.

Thank you. Our next question comes from the line of Mr. Rod Lache with Deutsche Bank. Sir, your line is now open. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Hi, Rod.

Good morning, everyone. It's actually Pat Nolan on for Rod. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Hi, Pat.

Just a similar question on Power Solutions the organic growth, the 9% to 11%. I know it's not the biggest quarter this quarter but how are you – if things are tracking pretty much in line with what you're seeing at the end of the quarter, where do you think that 9% to 11% ends up for the year? And just a housekeeping. What was the actual revenue impact from lead in the quarter? Brian J. Stief - Chief Financial Officer & Executive Vice President: I'm sorry, the... Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Revenue impact on lead? Brian J. Stief - Chief Financial Officer & Executive Vice President: Revenue impact on lead was about $50 million in the quarter. And as far as where the 9% to 11% could go, I guess based upon what we've seen, it could go down to 7% to 8%, yeah, but again, I would tell you that if it goes down to that level, we've got plans in place to cover. So at this point in time, whatever shortfall we might see at BE and Power, we think Auto is over-performing, and so we're very comfortable with where we are for full-year guidance. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Yeah, and remember, as it relates to any of the lead impact to top line, it's not something that we should feel from a bottom line perspective.

Thanks, guys. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Okay. Operator, we've got time for one more.

Thank you. Our last question comes from the line of Noah Kaye with Oppenheimer. Sir, your line is now open. Noah Kaye - Oppenheimer & Co., Inc. (Broker): Yeah, thanks for taking the question. So with the Tyco merger now another major integration to manage, just wondering how, if at all, does that change your thinking about the capital allocation strategy once all these ducks are put in a row? Thank you. Alex A. Molinaroli - Chairman, President & Chief Executive Officer: Do you mean as it relates to after the... Noah Kaye - Oppenheimer & Co., Inc. (Broker): Yes after the spinoff and the dividend receipt, the influx of cash, how could all of this change any of your thinking about capital allocation say between M&A, share repurchase? Alex A. Molinaroli - Chairman, President & Chief Executive Officer: So I don't know that it changes anything except that we're going to have an awful lot going on. And so depending on where we are, and if you look at the cash flows that we look at, I mean, it's going to ramp up because we'll still have some trailing costs as it relates to integration moving into next year even the separation. So I think as our cash flows improve, depending on where we are with the integration, I would expect that we're going to make the right decision as it relates to whether we return that to the shareholders or make investments. I don't know that we've gotten that far, but one thing I can tell you for sure is around our dividend policy, we're both, at this point, we're both committed to making sure that at a minimum we continue the current dividend policies of both companies. And we have – just to make sure that you…

Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.