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FOR IMMEDIATE RELEASE
CONTACT: Investors:
Antonella Franzen
(609) 720-4665
Ryan Edelman
(609) 720-4545
Media:
Fraser Engerman
(414) 524-2733
Johnson Controls reports 2016 fiscal fourth quarter and full year earnings
Company completes multi-industrial transformation
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.
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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.
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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.
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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 Oct. 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. 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
Page 5 of 15
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.
###
November 8, 2016
2016 2015
Net sales 10,198$ 8,749$
Cost of sales 8,133 7,190
Gross profit 2,065 1,559
Selling, general and administrative expenses (1,914) (1,031)
Restructuring and impairment costs (289) (397)
Net financing charges (103) (73)
Equity income 144 100
Income (loss) from continuing operations before income taxes (97) 158
Income tax provision 1,035 135
Net income (loss) from continuing operations (1,132) 23
Income from discontinued operations, net of tax - 346
Net income (loss) (1,132) 369
Less: Income from continuing operations
attributable to noncontrolling interests 39 20
Net income (loss) attributable to JCI (1,171)$ 349$
Income (loss) from continuing operations (1,171)$ 3$
Income from discontinued operations - 346
Net income (loss) attributable to JCI (1,171)$ 349$
Diluted earnings (loss) per share from continuing operations (1.61)$ -$
Diluted earnings per share from discontinued operations - 0.53
Diluted earnings (loss) per share (1.61)$ 0.53$
Diluted weighted average shares 728.3 655.2
Shares outstanding at period end 935.8 647.4
JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Three Months Ended September 30,
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November 8, 2016
2016 2015
Net sales 37,674$ 37,179$
Cost of sales 30,360 30,732
Gross profit 7,314 6,447
Selling, general and administrative expenses (5,325) (3,986)
Restructuring and impairment costs (620) (397)
Net financing charges (314) (288)
Equity income 531 375
Income from continuing operations before income taxes 1,586 2,151
Income tax provision 2,238 600
Net income (loss) from continuing operations (652) 1,551
Income from discontinued operations, net of tax - 128
Net income (loss) (652) 1,679
Less: Income from continuing operations
attributable to noncontrolling interests 216 112
Less: Income from discontinued operations
attributable to noncontrolling interests - 4
Net income (loss) attributable to JCI (868)$ 1,563$
Income (loss) from continuing operations (868)$ 1,439$
Income from discontinued operations - 124
Net income (loss) attributable to JCI (868)$ 1,563$
Diluted earnings (loss) per share from continuing operations (1.30)$ 2.18$
Diluted earnings per share from discontinued operations - 0.19
Diluted earnings (loss) per share * (1.30)$ 2.36$
Diluted weighted average shares 667.4 661.5
Shares outstanding at period end 935.8 647.4
* May not sum due to rounding.
JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Twelve Months Ended September 30,
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November 8, 2016
September 30, September 30,
2016 2015
ASSETS
Cash and cash equivalents 684$ 597$
Cash in escrow related to Adient debt 2,034 -
Accounts receivable - net 8,018 5,751
Inventories 3,560 2,377
Assets held for sale 174 55
Other current assets 2,654 1,689
Current assets 17,124 10,469
Property, plant and equipment - net 7,872 5,870
Goodwill 23,432 6,824
Other intangible assets - net 7,684 1,516
Investments in partially-owned affiliates 2,735 2,143
Other noncurrent assets 4,639 2,800
Total assets 63,486$ 29,622$
LIABILITIES AND EQUITY
Short-term debt and current portion of long-term debt 1,747$ 865$
Accounts payable and accrued expenses 8,542 6,264
Liabilities held for sale 28 42
Other current liabilities 6,098 3,275
Current liabilities 16,415 10,446
Long-term debt 14,606 5,745
Other noncurrent liabilities 7,141 2,721
Redeemable noncontrolling interests 234 212
Shareholders' equity attributable to JCI 24,118 10,335
Noncontrolling interests 972 163
Total liabilities and equity 63,486$ 29,622$
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
JOHNSON CONTROLS INTERNATIONAL PLC
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November 8, 2016
Three Months Ended September 30,
2016 2015
Operating Activities
Net income (loss) attributable to JCI (1,171)$ 349$
Income from continuing operations attributable to noncontrolling interests 39 20
Net income (loss) (1,132) 369
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization 273 213
Pension and postretirement benefit expense 507 412
Pension and postretirement contributions (43) (332)
Equity in earnings of partially-owned affiliates, net of dividends received (48) 95
Deferred income taxes (1,773) (321)
Non-cash restructuring and impairment costs 141 183
Gain on business divestitures (12) (1,140)
Other - net 75 17
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable (231) (241)
Inventories 234 74
Other assets 180 21
Restructuring reserves 73 176
Accounts payable and accrued liabilities 456 537
Accrued income taxes 2,499 674
Cash provided by operating activities 1,199 737
Investing Activities
Capital expenditures (427) (315)
Sale of property, plant and equipment 4 12
Acquisition of businesses, net of cash acquired 486 -
Business divestitures, net of cash divested (22) 1,505
Other - net (57) (30)
Cash provided (used) by investing activities (16) 1,172
Financing Activities
Decrease in short and long-term debt - net (503) (934)
Debt financing costs (45) -
Stock repurchases (26) (362)
Payment of cash dividends (371) (170)
Proceeds from the exercise of stock options 36 44
Dividends paid to noncontrolling interests (66) (25)
Other - net 2 (21)
Cash used by financing activities (973) (1,468)
Effect of exchange rate changes on cash and cash equivalents 7 (57)
Increase in cash and cash equivalents 217$ 384$
JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
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November 8, 2016
Twelve Months Ended September 30,
2016 2015
Operating Activities
Net income (loss) attributable to JCI (868)$ 1,563$
Income from continuing operations attributable to noncontrolling interests 216 112
Income from discontinued operations attributable to noncontrolling interests - 4
Net income (loss) (652) 1,679
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization 953 860
Pension and postretirement benefit expense 460 396
Pension and postretirement contributions (137) (409)
Equity in earnings of partially-owned affiliates, net of dividends received (250) (144)
Deferred income taxes (1,437) 327
Non-cash restructuring and impairment costs 221 183
Gain on business divestitures (26) (1,340)
Other - net 143 89
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable (344) (297)
Inventories 1 (99)
Other assets 133 (113)
Restructuring reserves 141 (6)
Accounts payable and accrued liabilities 413 348
Accrued income taxes 2,276 126
Cash provided by operating activities 1,895 1,600
Investing Activities
Capital expenditures (1,249) (1,135)
Sale of property, plant and equipment 32 37
Acquisition of businesses, net of cash acquired 353 (22)
Business divestitures, net of cash divested 32 1,646
Other - net (55) (56)
Cash provided (used) by investing activities (887) 470
Financing Activities
Increase in short and long-term debt - net 758 40
Debt financing costs (45) -
Stock repurchases (501) (1,362)
Payment of cash dividends (915) (657)
Proceeds from the exercise of stock options 70 275
Dividends paid to noncontrolling interests (306) (68)
Other - net 6 (49)
Cash used by financing activities (933) (1,821)
Effect of exchange rate changes on cash and cash equivalents 12 (81)
Cash held for sale - 20
Increase in cash and cash equivalents 87$ 188$
JOHNSON CONTROLS INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
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November 8, 2016
FOOTNOTES
(in millions)
2016 2015 % 2016 2015 %
(unaudited) (unaudited)
Net Sales
Building Efficiency 3,635$ 2,903$ 25% 13,376$ 10,510$ 27%
Tyco 808 - * 808 - *
Power Solutions 1,811 1,685 7% 6,653 6,590 1%
Automotive Experience 3,944 4,161 -5% 16,837 20,079 -16%
Net sales 10,198$ 8,749$ 37,674$ 37,179$
Segment EBIT (1)
Building Efficiency 279$ 340$ -18% 1,036$ 923$ 12%
Tyco (17) - * (17) - *
Power Solutions 386 340 14% 1,253 1,153 9%
Automotive Experience 150 370 -59% 751 1,182 -36%
Segment EBIT (2) 798$ 1,050$ 3,023$ 3,258$
Restructuring and impairment costs (289)$ (397)$ (620)$ (397)$
Net financing charges (103) (73) (314) (288)
Mark-to-market charge for pension and postretirement plans (503) (422) (503) (422)
Income (loss) from continuing operations before income taxes (97)$ 158$ 1,586$ 2,151$
Net Sales
Products and systems 8,863$ 7,742$ 14% 33,635$ 33,513$ 0%
Services 1,335 1,007 33% 4,039 3,666 10%
10,198$ 8,749$ 37,674$ 37,179$
Cost of Sales
Products and systems 7,256$ 6,492$ 12% 27,625$ 28,214$ -2%
Services 877 698 26% 2,735 2,518 9%
8,133$ 7,190$ 30,360$ 30,732$
* Metric not meaningful
(1) Management evaluates the performance of the business units based primarily on segment earnings before interest and taxes (EBIT), which represents income from continuing operations before income taxes and noncontrolling interests,
excluding net financing charges, significant restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans.
Building Efficiency - Provides facility systems and services including comfort, energy and security management for the non-residential buildings market and provides heating, ventilating, and air conditioning products and services for the
residential and non-residential building markets.
Three Months Ended
September 30,
Twelve Months Ended
September 30,
Tyco - Provides security products and services, fire detection and suppression products and services, and life safety products.
Automotive Experience - Designs and manufactures interior systems and products for passenger cars and light trucks, including vans, pick-up trucks and sport/crossover utility vehicles.
Power Solutions - Services both automotive original equipment manufacturers and the battery aftermarket by providing advanced battery technology, coupled with systems engineering, marketing and service expertise.
(2) The Company's press release contains financial information regarding adjusted sales, adjusted segment EBIT and adjusted segment EBIT margin, which are non-GAAP performance measures. The Company's definition of adjusted
segment EBIT excludes special items because these costs are not considered to be directly related to the operating performance of its business units. Management believes these non-GAAP measures are useful to investors in understanding
the ongoing operations and business trends of the Company.
1. Business Unit Summary
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November 8, 2016
The following is the fourth quarter reconciliation of sales, segment EBIT and segment EBIT margin as reported to adjusted sales, adjusted segment EBIT and adjusted segment EBIT margin (unaudited):
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Sales as reported 3,635$ $ 2,903 808$ $ - 1,811$ $ 1,685 3,944$ $ 4,161 10,198$ $ 8,749
Adjusting items:
Nonrecurring purchase accounting impacts - - 20 - - - - - 20 -
Adjusted sales 3,635$ 2,903$ 828$ -$ 1,811$ 1,685$ 3,944$ 4,161$ 10,218$ 8,749$
Segment EBIT as reported 279$ 340$ (17)$ -$ 386$ 340$ 150$ 370$ 798$ 1,050$
Segment EBIT margin as reported 7.7% 11.7% -2.1% * 21.3% 20.2% 3.8% 8.9% 7.8% 12.0%
Adjusting items:
Transaction/integration/separation costs 126 11 29 - - - 126 23 281 34
Nonrecurring purchase accounting impacts - - 74 - - - - - 74 -
Gain on business divestiture - - - - - - - (145) - (145)
Other - net 5 - - - 8 - 5 - 18 -
Adjusted segment EBIT 410$ 351$ 86$ (3) -$ 394$ 340$ 281$ 248$ 1,171$ 939$
Adjusted segment EBIT margin 11.3% 12.1% 10.4% * 21.8% 20.2% 7.1% 6.0% 11.5% 10.7%
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Sales as reported 13,376$ $ 10,510 808$ $ - 6,653$ 6,590$ 16,837$ 20,079$ 37,674$ $ 37,179
Adjusting items:
Nonrecurring purchase accounting impacts - - 20 - - - - - 20 -
Adjusted sales 13,376$ 10,510$ 828$ -$ 6,653$ 6,590$ 16,837$ 20,079$ 37,694$ 37,179$
Segment EBIT as reported 1,036$ 923$ (17)$ -$ 1,253$ 1,153$ 751$ 1,182$ 3,023$ 3,258$
Segment EBIT margin as reported 7.7% 8.8% -2.1% * 18.8% 17.5% 4.5% 5.9% 8.0% 8.8%
Adjusting items:
Transaction/integration/separation costs 191 37 29 - 1 - 459 54 680 91
Nonrecurring purchase accounting impacts - - 74 - - - - - 74 -
Gain on business divestiture - - - - - - - (145) - (145)
Other - net 5 - - - 8 - 5 - 18 -
Adjusted segment EBIT 1,232$ 960$ 86$ (3) -$ 1,262$ 1,153$ 1,215$ 1,091$ 3,795$ 3,204$
Adjusted segment EBIT margin 9.2% 9.1% 10.4% * 19.0% 17.5% 7.2% 5.4% 10.1% 8.6%
* Metric not meaningful
Consolidated JCI plc
Consolidated JCI plc Tyco
Tyco
Automotive Experience Building Efficiency
Building Efficiency Automotive Experience
(3) Includes $21 million of incremental recurring intangible asset amortization expense. Excluding this incremental amortization expense, adjusted segment EBIT is $107 million and adjusted segment EBIT margin is 12.9%.
The following is the year-to-date reconciliation of sales, segment EBIT and segment EBIT margin as reported to adjusted sales, adjusted segment EBIT and adjusted segment EBIT margin (unaudited):
Power Solutions
Power Solutions
Page 12 of 15
November 8, 2016
2. Diluted Earnings Per Share Reconciliation
2016 2015 2016 2015 2016 2015 2016 2015
Earnings per share as reported for JCI plc (1.61)$ 0.53$ (1.61)$ -$ (1.30)$ 2.36$ (1.30)$ 2.18$
Adjusting items:
Mark-to-market for pension and
postretirement plans/settlement losses 0.68 0.64 0.68 0.64 0.75 0.64 0.75 0.64
Related tax impact (0.20) (0.25) (0.20) (0.25) (0.22) (0.25) (0.22) (0.25)
Transaction/integration/separation costs 0.40 0.13 0.40 0.05 1.01 0.27 1.01 0.14
Related tax impact (0.04) (0.02) (0.04) (0.01) (0.09) (0.05) (0.09) (0.02)
Restructuring and impairment costs 0.39 0.61 0.39 0.61 0.91 0.60 0.91 0.60
Related tax impact (0.07) (0.13) (0.07) (0.13) (0.14) (0.13) (0.14) (0.13)
Nonrecurring purchase accounting impacts 0.10 - 0.10 - 0.11 - 0.11 -
Related tax impact (0.03) - (0.03) - (0.03) - (0.03) -
Gain on business divestitures - (1.66) - (0.22) - (1.94) - (0.22)
Related tax impact - 0.62 - 0.16 - 0.72 - 0.16
Discrete tax items 1.50 0.61 1.50 0.19 2.93 1.35 2.93 0.33
Adjusted earnings per share for JCI plc* 1.14$ 1.07$ 1.14$ 1.04$ 3.94$ 3.58$ 3.94$ 3.42$
Less: Adjusted September results for Tyco (4) (0.08) (0.08) (0.09) (0.09)
Adjusted earnings per share for JCI plc excluding Tyco 1.06$ 1.06$ 3.85$ 3.85$
Adjusted JCI plc diluted shares outstanding (in millions) 735.2 735.2 672.6 672.6
Adjusted net income attributable to JCI Inc. (in millions) (5), (6) 776$ 776$ 2,587$ 2,587$
Adjusted JCI Inc. diluted shares (in millions) 643.1 643.1 649.4 649.4
Adjusted earnings per share for JCI Inc.* 1.21$ 1.21$ 3.98$ 3.98$
* May not sum due to rounding.
Twelve Months EndedThree Months Ended Three Months Ended
Net Income Attributable to
JCI plc
Net Income Attributable to
JCI plc from Continuing
Operations
Net Income Attributable to
JCI plc
Net Income Attributable to
JCI plc from Continuing
Operations
September 30,
(unaudited)
Twelve Months Ended
September 30,
(unaudited)
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 gain on business divestitures, nonrecurring purchase accounting impacts related to the Tyco merger and discrete tax items. The Company
excludes these items because they are not considered to be directly related to the operating performance of the Company. Management believes these non-GAAP measures are useful to investors in understanding the ongoing operations and
business trends of the Company.
A reconciliation of the differences between earnings per share as reported and adjusted earnings per share provided on a forward-looking basis is not available due to the high variability of the net mark-to-market adjustments related to pension
and postretirement plans and unpredictability of any other potential adjusting items.
(4) Amount calculated based on adjusted Tyco segment EBIT of $86 million less Tyco's net financing charges of $14 million, income tax expense of $9 million and noncontrolling interest impact of $1 million for the month of September.
(5) The three months ended September 30, 2016 includes $1,171 million for JCI plc adjusted segment EBIT less $86 million of Tyco adjusted segment EBIT, $77 million of net financing charges ($103 million for JCI plc less $14 million for Tyco
and $12 million related to separation and integration costs), $172 million income tax expense ($1,035 million for JCI plc less $854 million related to tax impacts of adjusted segment EBIT and discrete tax items as well as $9 million for the tax
impact of Tyco's adjusted earnings) and $60 million for the impact of noncontrolling interest ($39 million of expense for JCI plc plus the noncontrolling interest impact of adjusted segment EBIT items of $22 million less the Tyco noncontrolling
interest impact of $1 million).
(6) The twelve months ended September 30, 2016 includes $3,795 million for JCI plc adjusted segment EBIT less $86 million of Tyco adjusted segment EBIT, $288 million of net financing charges ($314 million for JCI plc less $14 million for
Tyco and $12 million related to separation and integration costs), $582 million income tax expense ($2,238 million for JCI plc less $1,647 million related to tax impacts of adjusted segment EBIT and discrete tax items as well as $9 million for the
tax impact of Tyco's adjusted earnings) and $252 million for the impact of noncontrolling interest ($216 million of expense for JCI plc plus the noncontrolling interest impact of adjusted segment EBIT items of $37 million less the Tyco
noncontrolling interest impact of $1 million).
A reconciliation of diluted earnings per share as reported to diluted adjusted earnings per share for the respective quarter and year-to-date periods is shown below.
September 30, September 30,
(unaudited) (unaudited)
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November 8, 2016
The following table reconciles the denominators used to calculate basic and diluted earnings per share for JCI plc (in millions):
2016 2015 2016 2015
(unaudited) (unaudited)
Weighted Average Shares Outstanding for JCI plc
Basic weighted average shares outstanding 728.3 650.2 667.4 655.2
Effect of dilutive securities:
Stock options, unvested restricted stock
and unvested performance share awards - 5.0 - 6.3
Diluted weighted average shares outstanding 728.3 655.2 667.4 661.5
2016 2015 2016 2015
Adjusted diluted weighted average shares outstanding for JCI plc 735.2 655.2 672.6 661.5
Effect of merger share conversion (90.4) - (22.7) -
Tyco dilutive securities impact (1.7) - (0.5) -
Adjusted diluted weighted average shares outstanding for JCI Inc. 643.1 655.2 649.4 661.5
3. Mark-to-Market of Pension and Postretirement Plans
4. Acquisitions and Divestitures
On October 1, 2015, the Company formed a joint venture with Hitachi to expand its Building Efficiency product offerings. The Company acquired a 60 percent ownership stake in the new entity for approximately $133 million ($563 million
purchase price less cash acquired of $430 million).
Three Months Ended Twelve Months Ended
September 30, September 30,
On September 1, 2015, the Company completed the sale of its Global Workplace Solutions (GWS) business to CBRE Group, Inc. for $1.4 billion and recorded a net gain of $940 million ($643 million after tax) within discontinued operations. The
GWS business met the criteria to be classified as a discontinued operation in the condensed consolidated statements of income for the year ending September 30, 2015.
On July 2, 2015, the Company completed its global automotive interiors joint venture with Yanfeng Automotive Trim Systems. The Company holds a 30 percent equity interest in the joint venture. The Company recorded a net gain of $145
million ($38 million after tax) related to the Interiors business divestiture.
For the three and twelve months ended September 30, 2016, the total number of potential dilutive shares due to stock options, unvested restricted stock and unvested performance share awards was 6.9 million and 5.2 million, respectively.
However, these items were not included in the computation of diluted loss per share for the three and twelve months ended September 30, 2016, since to do so would decrease the loss per share. On an adjusted diluted outstanding share basis,
inclusion of the effect of dilutive securities results in diluted weighted average shares outstanding of 735.2 million and 672.6 million for the three and twelve months ended September 30, 2016, respectively.
September 30, September 30,
Twelve Months Ended
The following table reconciles the denominators used to calculate adjusted diluted earnings per share for JCI Inc. (i.e. JCI plc excluding the impact of the Tyco merger). The JCI Inc. shares represent the JCI plc shares adjusted to exclude the
merger share conversion and September Tyco dilutive securities impact. Amounts below are shown in millions.
The pension and postretirement mark-to-market gain or loss for each period is excluded from adjusted diluted earnings per share. The fiscal 2016 fourth quarter includes a mark-to-market charge for pension and postretirement plans of $503
million. The fiscal 2015 fourth quarter includes a mark-to-market charge for pension and postretirement plans of $422 million.
On September 2, 2016, JCI Inc. and Tyco completed their combination which was announced on January 25, 2016. The merger is accounted for as a reverse acquisition using the acquisition method of accounting in accordance with ASC 805,
"Business Combinations." JCI Inc. is the accounting acquirer for financial reporting purposes. Accordingly, the historical consolidated financial statements of JCI Inc. for periods prior to this transaction are considered to be the historical financial
statements of the Company. The total fair value of the consideration transferred is $19.7 billion. As part of the transaction, the Company recorded $16.4 billion of goodwill and $6.2 billion of intangible assets, of which $3.9 billion are subject to
amortization.
(unaudited) (unaudited)
Three Months Ended
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November 8, 2016
5. Income Taxes
6. Restructuring
The Company's effective tax rate from continuing operations before consideration of mark-to-market for pension and postretirement plans/settlement losses, transaction/integration/separation costs, restructuring and impairment costs,
significant gain on business divestitures, nonrecurring purchase accounting impacts related to the Tyco merger and discrete tax items for the quarter and year ending September 30, 2016 and 2015 is approximately 17 percent and 19 percent,
respectively. The fiscal 2016 fourth quarter includes $1,103 million ($1.50) of one-time tax charges associated with the spin-off of the Automotive Experience business and merger with Tyco, which primarily relate to the repatriation of cash as a
result of the spin-off transaction. A significant portion of the charge will result in cash tax payments in the first quarter of fiscal 2017, which are substantially recoverable in fiscal 2018 and 2019. The fiscal 2015 fourth quarter includes $124 million
($0.19) of tax charges within continuing operations and $278 million ($0.42) in discontinued operations, which are primarily attributable to the divestitures of the Interiors and GWS businesses, respectively.
During the quarter ended December 31, 2015, the Company early adopted Accounting Standards Update (ASU) No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes." ASU No. 2015-17 requires that
deferred tax liabilities and assets be classified as noncurrent in the consolidated statements of financial position. The change has been reported through retrospective application of ASU No. 2015-17 to all periods presented.
The fiscal 2016 fourth quarter includes restructuring and impairment costs of $289 million related to workforce reductions and asset impairments in the Automotive Experience, Tyco and Power Solutions businesses and at Corporate. The fiscal
2015 fourth quarter includes restructuring and impairment costs of $397 million related to workforce reductions, plant closures and asset impairments in the Automotive Experience, Building Efficiency and Power Solutions businesses and at
Corporate.
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