CORK, Ireland, Nov. 8, 2016 For the fourth quarter of fiscal 2016, Johnson Controls (NYSE: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 inEurope 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 (NYSE: 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.
