Johnson Controls reports 2016 fiscal fourth quarter and full year earnings

CORK, Ireland, Nov. 8, 2016 /PRNewswire/ -- For the fourth quarter of fiscal 2016, Johnson Controls JCI, reported $10.2 billion in sales, segment EBIT of $798 million and a GAAP net loss from continuing operations of $1.2 billion, which includes one month of Tyco results (merger completed Sept. 2, 2016) as well as several special items. GAAP diluted loss per share from continuing operations for the quarter was $1.61 compared to breakeven in the prior year quarter.

Adjusting for special items and excluding the Tyco results, non-GAAP adjusted diluted earnings per share from continuing operations increased 16 percent to $1.21 from $1.04 in the prior year quarter. Financial highlights from continuing operations for the quarter include:

• Adjusted net sales of $9.4 billion versus $8.7 billion in the prior year quarter, with the increase due primarily to incremental sales from the Johnson Controls-Hitachi joint venture.
• Adjusted segment EBIT from continuing operations of $1,085 million compared with $939 million in the prior year quarter, up 16 percent, reflecting the contribution of the Hitachi joint venture and ongoing Johnson Controls Operating System benefits.
• Adjusted segment EBIT margin of 11.6 percent was 90 basis points higher than the prior year quarter.  
• Adjusted diluted EPS of $1.21 exceeded guidance of $1.17 to $1.20.

Special items that impacted reported fourth quarter 2016 and 2015 income from continuing operations include:

2016 fourth quarter (net charge of $2.82 per share)

• Tyco's September adjusted income of $72 million ($62 million after-tax and non-controlling interest)
• Non-cash mark-to-market pension/postretirement and settlement losses of $514 million ($357 million after-tax and non-controlling interest)
• Transaction, integration and separation costs of $293 million ($263 million after-tax and non-controlling interest) related to the spin-off of Adient and the Tyco merger
• Restructuring and non-cash impairment charges of $296 million ($232 million after-tax and non-controlling interest) primarily related to workforce reductions and asset impairments
• Non-recurring portion of purchase accounting expenses of $74 million ($54 million after-tax) associated with the Tyco merger
• Tax expense of $1.1 billion primarily related to the Adient spin-off

2015 fourth quarter (net charge of $1.04 per share)

• Non-cash mark-to-market pension and postretirement losses of $422 million ($257 million after-tax)
• Transaction, integration and separation costs of $34 million ($28 million after-tax)
• Restructuring and non-cash impairment charges of $397 million ($310 million after-tax) primarily related to Automotive Seating plant restructuring as well as asset impairments
• Net gain from divested businesses of $145 million ($38 million after-tax)
• Tax expense of $124 million primarily related to business divestitures

"We delivered another strong quarter and an exceptional 2016, continuing the strong performance we have seen throughout the year," said Alex Molinaroli, Johnson Controls chairman & CEO. "Earnings per share growth of 16 percent was driven by double-digit profitability improvements across all businesses."

Business results

Building Efficiency sales in the fourth quarter of 2016 were $3.6 billion, up 25 percent versus the prior year quarter. Excluding M&A and the impact of foreign currency, sales increased 2 percent versus the prior year quarter with higher sales in North America Products and Asia.

Orders in the quarter, excluding M&A and adjusted for foreign exchange, were 6 percent higher year-over-year driven by Systems and Services North America up 6 percent, Products North America up 7 percent and Asia up 7 percent. Backlog at the end of the quarter of $4.8 billion increased 5 percent versus the prior year, excluding the impact of the Hitachi joint venture and foreign exchange.

Building Efficiency adjusted segment EBIT was $410 million, up 17 percent from $351 million in the prior year quarter.  As expected, the segment EBIT margin of 11.3 percent decreased 80 basis points year-over-year primarily resulting from the mix related to the lower margin Hitachi joint venture contribution, as well as ongoing product and sales force investments.

Power Solutions sales in the fourth quarter of 2016 were $1.8 billion, up 7 percent from the prior year.  Excluding the impact of foreign exchange and lower lead pass-through costs, sales increased 8 percent, with higher volumes in all regions. Global original equipment battery shipments increased 2 percent and aftermarket shipments increased 9 percent in the quarter versus the prior year.

Power Solutions adjusted segment EBIT of $394 million increased 16 percent from the prior year quarter due primarily to higher volumes, mix, and cost reduction initiatives. Segment EBIT margin of 21.8 percent in the quarter increased 160 basis points from the prior year quarter.

Automotive Experience sales in the fourth quarter of 2016 were $3.9 billion, down 5 percent compared to the prior year quarter, as growth in Asia was more than offset by declines in Europe and the Americas.  Sales in China, which are primarily generated through non-consolidated joint ventures, increased 26 percent to $2.9 billion (up 31 percent excluding the impact of foreign exchange).

Automotive Experience adjusted segment EBIT was $281 million, an increase of 13 percent versus the prior year quarter primarily due to restructuring savings, cost reduction initiatives, and operational efficiencies, partially offset by volume declines. Segment EBIT margin of 7.1 percent increased 110 basis points from the prior year quarter.

The Tyco merger was completed on Sept. 2, 2016 and, therefore, the results include one month of Tyco.  Sales for September 2016 were $0.8 billion.  Tyco adjusted segment EBIT was $86 million, and the segment EBIT margin was 10.4 percent.  This includes incremental recurring amortization expense of $21 million.

Full year 2016 results

For the full year, Johnson Controls reported $37.7 billion in sales, segment EBIT of $3.0 billion and a GAAP net loss from continuing operations of $868 million, which includes one month of Tyco results as well as several special items.  GAAP diluted loss per share from continuing operations for the year was $1.30 compared to earnings per share from continuing operations of $2.18 in the prior year.

Adjusting for special items and excluding the Tyco results, non-GAAP adjusted diluted earnings per share from continuing operations increased 16 percent to $3.98 from $3.42 in the prior year.  Financial highlights from continuing operations for the full year include:

• Adjusted net sales of $36.9 billion versus $37.2 billion in the prior year.  Increased volume and incremental sales from the Hitachi joint venture were more than offset by the impact of the Automotive Interiors deconsolidation.  Excluding the impact of these items and foreign exchange, adjusted sales increased 1 percent. 
• Adjusted segment EBIT of $3.7 billion compared with $3.2 billion in the prior year, up 16 percent.  Excluding the impact of the Hitachi joint venture, foreign exchange and the Automotive Interiors deconsolidation, adjusted segment EBIT increased 9 percent.
• Adjusted segment EBIT margin of 10.1 percent was 150 basis points higher than the prior year.  
• Adjusted diluted EPS of $3.98 was at the high end of the guidance range of $3.95 to $3.98.

2016 was a year of transformation for Johnson Controls.  The Company successfully executed on several actions to improve long-term shareholder value, including:

• Formation of the Hitachi joint venture on October 1, 2015
• Merger with Tyco on Sept. 2, 2016
• Separation of the Automotive Experience business creating Adient ADNT on Oct. 31, 2016

"We have significantly transformed our portfolio of businesses while at the same time exceeding our external commitments.  This is a true testament to the dedication and leadership of all of our employees around the globe," said Molinaroli. "2016 was truly a momentous year in which a new Johnson Controls has emerged as the global leader in building technologies, integrated solutions and energy storage.  We believe the company is well-positioned strategically for long term success and to operationally deliver strong growth and profitability in 2017." 

About Johnson Controls:

Johnson Controls is a global diversified technology and multi industrial leader serving a wide range of customers in more than 150 countries. Our 135,000 employees create intelligent buildings, efficient energy solutions, integrated infrastructure and next generation transportation systems that work seamlessly together to deliver on the promise of smart cities and communities. Our commitment to sustainability dates back to our roots in 1885, with the invention of the first electric room thermostat. We are committed to helping our customers win and creating greater value for all of our stakeholders through strategic focus on our buildings and energy growth platforms. For additional information, please visit http://www.johnsoncontrols.com or follow us @johnsoncontrols on Twitter.

Johnson Controls International plc Cautionary Statement Regarding Forward-Looking Statements

Johnson Controls International plc has made statements in this communication that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this communication, statements regarding Johnson Controls' future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures and debt levels are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Johnson Controls' control, that could cause Johnson Controls' actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: any delay or inability of Johnson Controls to realize the expected benefits and synergies of recent portfolio transactions such as the merger with Tyco and the spin-off of Adient, changes in tax laws, regulations, rates, policies or interpretations, the loss of key senior management, the tax treatment of recent portfolio transactions, significant transaction costs and/or unknown liabilities associated with such transactions, the outcome of actual or potential litigation relating to such transactions, the risk that disruptions from recent transactions will harm Johnson Controls' business, the strength of the U.S. or other economies, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, and cancellation of or changes to commercial arrangements. A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in each of Johnson Controls, Inc.'s and Tyco International plc's Annual Reports on Form 10-K for the 2015 fiscal year filed with the SEC on November 18, 2015 and November 13, 2015, respectively, and in the quarterly reports on Form 10-Q filed by each company with the SEC after such date, and available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab, as well as the Form 10 registration statement filed by Adient Limited and the amendments thereto. 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

The Company's press release contains financial information regarding adjusted earnings per share, which is a non-GAAP performance measure. The adjusting items include mark-to-market for pension and postretirement plans/settlement losses, transaction/integration/separation costs, restructuring and impairment costs, significant gains or losses on business divestitures, nonrecurring purchase accounting impacts related to the Tyco merger and discrete tax items. Financial information regarding adjusted sales, adjusted segment EBIT and adjusted segment EBIT margin are also presented, which are non-GAAP performance measures. Adjusted segment EBIT excludes special items such as transaction/integration/separation costs, nonrecurring purchase accounting impacts and significant gains or losses on business divestiture because these costs are not considered to be directly related to the 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.

 

 

 

 

 

 

 

 

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SOURCE Johnson Controls