Market Overview

Johnson Controls reports solid fourth quarter and full year earnings and provides fiscal 2018 guidance

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- GAAP earnings from continuing operations for the quarter of $0.93 per share including special items; $1.75 for the full year

- Adjusted EPS from continuing operations for the quarter of $0.87, up 14 percent versus prior year; $2.60 for the full year, up 13 percent versus prior year

- Adjusted sales for the quarter of $8.1 billion, reflecting organic growth of 2 percent; $30.1 billion for the full year, also reflecting organic growth of 2 percent

- Adjusted EBIT margin expansion for the quarter of 80 basis points year-over-year, to 13.9 percent; 90 basis points expansion for the full year, to 11.9 percent

- Fiscal 2018 adjusted EPS from continuing operations guidance range of $2.75 to $2.85, a year-over-year increase of 6 percent to 10 percent

CORK, Ireland, Nov. 9, 2017 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI) today reported fiscal fourth quarter 2017 GAAP earnings per share ("EPS") from continuing operations, including special items, of $0.93 (see attached footnotes for non-GAAP reconciliation).  Excluding these items, adjusted EPS from continuing operations was $0.87, up 14 percent versus the prior year period.

Sales of $8.1 billion increased 4 percent compared to the prior year on a combined basis.  Excluding the impacts from net acquisition and divestiture activity, as well as foreign exchange and changes in lead prices, total company sales grew 2 percent organically.     

GAAP earnings before interest and taxes ("EBIT") was $1.2 billion and the EBIT margin was 14.5 percent. Adjusted EBIT was $1.1 billion, up 10 percent over last year with adjusted EBIT margin expansion of 80 basis points, to 13.9 percent.

"During the first year as a combined company, we have made significant progress bringing two market leading companies together as one," said George Oliver, Johnson Controls chairman & CEO.  "We have integrated across geographies and businesses and are off to a strong start in streamlining our cost structure, which drove our 13 percent adjusted earnings per share growth for the year.  I am proud of how our teams have come together and the tremendous amount of work that has been completed to date.  As we look to 2018, there is plenty of work to be done with our priorities centered on organic revenue growth, expanding margins, delivering cost synergies, and improving free cash flow conversion.  I am humbled and honored to now be leading Johnson Controls and creating value for our customers, shareholders and employees," Oliver added.

Income and EPS amounts attributable to Johnson Controls ordinary shareholders
($ millions, except per-share amounts)

The financial highlights presented in the tables below are in accordance with GAAP, unless otherwise indicated.  All comparisons are to the fourth quarter and full year of 2016, which are adjusted to reflect the combination of Johnson Controls' historical Building Efficiency business with historical Tyco results of operations as if these businesses had operated together during the periods presented, along with certain other adjustments.  For additional information, see the unaudited supplemental financial information included in the Current Report on Form 8-K filed by Johnson Controls with the SEC on Nov. 8, 2016 as well as the attached footnotes.  The spin-off of Adient plc occurred on Oct. 31, 2016 and the results of this business are reported in discontinued operations for all historical periods presented. 


GAAP

Adjusted

Adjusted



GAAP

Adjusted

Adjusted




Q4 2017

Q4 2017

Q4 2016

Change


FY 2017

FY 2017

FY 2016

Change




(Combined)





(Combined)


Sales

$8,136

$8,136

$7,848

+4%


$30,172

$30,138

$29,569

+2%

Segment EBITA

1,262

1,335

1,276

+5%


4,258

4,446

4,238

+5%

EBIT

1,182

1,131

1,025

+10%


3,054

3,599

3,267

+10%

Net income from continuing operations

875

813

719

+13%


1,654

2,459

2,173

+13%

Diluted EPS from continuing operations

$0.93

$0.87

$0.76

+14%


$1.75

$2.60

$2.31

+13%

Adjusted sales, adjusted organic sales growth, adjusted segment EBITA, adjusted segment EBITA margin, adjusted corporate expense, adjusted EBIT, adjusted EPS from continuing operations, free cash flow and adjusted free cash flow are non-GAAP financial measures. For a reconciliation of these non-GAAP measures and detail of the special items, refer to the attached footnotes.  A slide presentation reviewing fourth quarter results can be found in the Investor Relations section of Johnson Controls' website at http://investors.johnsoncontrols.com.

BUSINESS RESULTS

Building Technologies & Solutions ("Buildings")



GAAP

Adjusted

Adjusted



GAAP

Adjusted

Adjusted



Q4 2017

Q4 2017

Q4 2016

Change


FY 2017

FY 2017

FY 2016

Change




(Combined)





(Combined)


Sales

$6,004

$6,004

$6,037

(1%)


$22,835

$22,801

$22,916

(1%)

Segment EBITA

$831

$904

$863

+5%


$2,831

$3,018

2,902

+4%

Segment EBITA margin %

13.8%

15.1%

14.3%

+80bps


12.4%

13.2%

12.7%

+50bps

Buildings sales in the fourth quarter of 2017 were $6.0 billion, down 1 percent versus the prior year quarter.  Organic sales increased 1 percent versus the prior year, as a 1 percent decline in our field businesses was more than offset by 3 percent growth in product sales.    

Orders in the quarter, excluding M&A and adjusted for foreign exchange, increased 2 percent year-over-year, with flat orders in the field businesses and 5 percent growth in products.  Backlog at the end of the quarter of $8.5 billion was 4 percent higher year-over-year, excluding M&A and adjusted for foreign exchange.

Buildings adjusted segment EBITA was $904 million, up 5 percent versus the prior year.  Adjusted segment EBITA margin of 15.1 percent improved 80 basis points over the prior year as the benefit of cost synergies and productivity savings more than offset price cost pressure and planned product and channel investments. 

Adjusted sales for the full year were $22.8 billion, down 1 percent versus the prior year, with organic sales growth of 1 percent.  Adjusted segment EBITA was $3.0 billion and the EBITA margin improved 50 basis points to 13.2 percent.     

Power Solutions



GAAP

Adjusted

Adjusted



GAAP

Adjusted

Adjusted



Q4 2017

Q4 2017

Q4 2016

Change


FY 2017

FY 2017

FY 2016

Change




(Combined)





(Combined)


Sales

$2,132

$2,132

$1,811

+18%


$7,337

$7,337

$6,653

+10%

Segment EBITA

$431

$431

$413

+4%


$1,427

$1,428

$1,336

+7%

Segment EBITA margin %

20.2%

20.2%

22.8%

(260bps)


19.4%

19.5%

20.1%

(60bps)

Power Solutions sales in the fourth quarter of 2017 were $2.1 billion, an increase of 18 percent versus the prior year.  Excluding the impact of higher lead pass-through and foreign exchange, organic sales grew 9 percent versus the prior year, driven by higher unit volumes and favorable mix across all regions.  Global original equipment battery shipments declined 5 percent, in-line with lower production in the US and EMEA, and aftermarket shipments increased 8 percent with growth across all regions.  Start-Stop battery shipments increased 30 percent year-over-year, led by growth in China and the Americas.  

Power Solutions adjusted segment EBITA was $431 million, up 4 percent from the prior year.  Excluding the impact of foreign exchange and lead, adjusted segment EBITA increased 5 percent.  Adjusted segment EBITA margin of 20.2 percent decreased 260 basis points compared with the prior year, including a 170 basis point headwind related to the impact of lead and a 10 basis point headwind related to the impact of foreign exchange.  Excluding these impacts, adjusted segment EBITA margin decreased 80 basis points year-over-year as the benefit from productivity initiatives was more than offset by incremental product investments and increased logistics and distribution costs, including hurricane disruptions.      

Sales for the full year were $7.3 billion, up 10 percent versus the prior year, with organic sales growth of 4 percent.  Adjusted segment EBITA was $1.4 billion and the EBITA margin decreased 60 basis points to 19.5 percent, including a 150 basis point headwind related to the impact of lead and a 10 basis point headwind related to the impact of foreign exchange.  Excluding these impacts, adjusted segment EBITA margin increased 100 basis points year-over-year.       

Corporate



GAAP

Adjusted

Adjusted



GAAP

Adjusted

Adjusted



Q4 2017

Q4 2017

Q4 2016

Change


FY 2017

FY 2017

FY 2016

Change




(Combined)





(Combined)


Corporate expense

($163)

($107)

($143)

25%


($768)

($465)

($541)

14%

Adjusted corporate expense was $107 million in the fourth quarter, an improvement of 25 percent compared to the prior year driven primarily by cost synergies and productivity initiatives. 

For the full year, adjusted corporate expense was $465 million, an improvement of 14 percent compared to the prior year.   

OTHER ITEMS

  • For the quarter, cash from operating activities was $1.3 billion and free cash flow was $1.0 billion. Adjusted free cash flow was $1.1 billion for the quarter which excluded cash outflows of $0.1 billion, primarily attributable to transaction and integration costs. For the full year, cash from operating activities was nil and free cash flow was an outflow of $1.3 billion. Adjusted free cash flow was $1.3 billion for the year which excluded cash outflows of $2.6 billion, primarily due to transaction related tax, integration, and
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