Johnson Controls reports double digit increase in 2016 second quarter adjusted earnings per share; raises fiscal year 2016 earnings guidance

MILWAUKEE, April 21, 2016 /PRNewswire/ -- For the second quarter of fiscal 2016, Johnson Controls (NYSE:JCI), a global multi-industrial company, reported $9.0 billion in revenues and a net loss from continuing operations of $530 million, which includes several non-recurring items. Adjusted non-GAAP diluted earnings per share from continuing operations for the quarter were $0.86, up 18 percent from the prior year quarter. Prior year financial statements reflect Global Workplace Solutions, a divested business, as a discontinued operation.

Excluding transaction / integration / separation costs and other non-recurring items in the fiscal second quarter, continuing operations highlights include:

• Net revenues of $9.0 billion versus $9.2 billion in fiscal Q2 2015, due primarily to the deconsolidation of the Company's Automotive Interiors business and foreign exchange, partially offset by higher organic volumes across the business (up 3 percent) and incremental revenues from its Johnson Controls-Hitachi (JCH) joint venture
• Segment income from continuing operations of $833 million compared with $698 million in the prior year quarter, up 19 percent (up 22 percent excluding foreign exchange), including the contribution of the JCH joint venture
• Segment income margins 160 basis points higher than the fiscal 2015 second quarter
• Diluted earnings per share of $0.86, up 18 percent versus $0.73 in the same quarter last year

Non-recurring items that impacted reported fiscal Q2 2016 and Q2 2015 income from continuing operations include:

2016 second quarter (net charge of $1.68 per share)

• Transaction, integration and separation costs of $131 million ($121 million after tax and non-controlling interest) related to the spin-off of Adient, the Tyco merger and the JCH joint venture integration
• Restructuring and non-cash impairment charges of $229 million ($206 million after tax and non-controlling interest) primarily related to cost reduction initiatives consisting of workforce reductions, plant closures and asset impairments
• Non-cash tax charge of $780 million related to the Company's change in assertion over permanently reinvested earnings as a result of the proposed spin-off of Adient
• Non-cash tax benefit of $15 million related to the fiscal Q1 2016 impact of the reduction in the effective tax rate from 19 percent to 17 percent

2015 second quarter (net charge of $0.05 per share)

• Transaction and integration costs of $18 million ($16 million after tax)
• Non-cash tax charge of $17 million related to a Japanese tax law change

"I could not be more proud of the continued execution by our team," said Alex Molinaroli, Johnson Controls chairman, president and chief executive officer. "This quarter we drove organic growth in each of our businesses while delivering significant margin expansion. Automotive Experience generated record profitability while our China investments in Power Solutions resulted in record battery shipments in the region. In Building Efficiency, the Johnson Controls-Hitachi joint venture is exceeding our expectations and we continue to see positive momentum in our Systems and Services North America business with 9 percent organic revenue growth in the quarter. As we continue through this historic transformation, we are serving our customers and consistently delivering long-term shareholder value."

Business results (excluding transaction / integration / separation costs and non-recurring items)

Building Efficiency sales in the fiscal second quarter of 2016 were $3.2 billion, up 33 percent versus the prior year second quarter. Excluding the incremental revenue associated with JCH and the impact of foreign currency, revenues increased 3 percent as higher revenues in North America and Asia were partially offset by lower revenues in Europe and Latin America.

Orders in the quarter, excluding the JCH joint venture and adjusted for foreign exchange, were 5 percent higher year-over-year. Order growth in Systems and Service North America of 7 percent and Asia of 9 percent (excluding JCH and foreign exchange), driven by continued share gains, was partially offset by weakness in Latin America. Excluding the impact of foreign exchange, the backlog at the end of the quarter improved to $4.7 billion, an increase of 2 percent from the prior year.

The Company announced it has been awarded a 23 year, $67.8 million contract for energy improvements at Norfolk Naval Base. In addition, it announced a partnership to replace HVAC rooftop equipment at 225 Target® stores to maximize energy savings and a $15 million energy performance contract with Arkansas State University.

Building Efficiency segment income was $245 million, up 42 percent from $173 million in the fiscal 2015 second quarter primarily as a result of incremental segment income from the JCH joint venture and higher volumes, partially offset by product and salesforce investments. Overall Building Efficiency segment margins in the fiscal 2016 second quarter increased 50 basis points compared with last year.

Power Solutions sales in the fiscal second quarter of 2016 were $1.6 billion, level with prior year quarter. Excluding the impact of foreign exchange and lower lead pass-through costs, sales increased 5 percent, with higher volumes in the Americas and Asia, partially offset by lower volumes in Europe. Both global original equipment battery shipments and aftermarket shipments increased 3 percent in the quarter versus the prior year. Global shipments of premium AGM batteries for start-stop vehicles increased 18 percent compared with the prior year quarter.

Power Solutions segment income of $264 million was level with prior year fiscal 2015 second quarter (up 3 percent excluding foreign exchange). Higher volumes were offset by launch costs incurred in the quarter associated with the addition of new capacity in China. Segment margins were 16.7 percent in the quarter, up 10 basis points from the prior year quarter.

In the quarter, Power Solutions achieved a record 2.6 million batteries shipped in China up 60 percent from 1.7 million in the prior year quarter. In addition, the business received several service and quality awards from leading customers such as O'Reilly Auto Parts®, Autozone®, General Motors® and Polaris Industries®.

Automotive Experience revenues in the fiscal second quarter of 2016 were $4.3 billion, down 18 percent compared to the prior year quarter, due to the deconsolidation of the Interiors business and the impact of foreign exchange. Excluding the impact of the Interiors deconsolidation and foreign exchange, sales grew 2 percent, with growth in North America and Asia partially offset by softness in Europe and South America. Revenues in China, which are primarily generated through non-consolidated joint ventures, increased 51 percent to $2.9 billion (up 9 percent excluding the impact of the Interiors joint venture and foreign exchange).

Automotive Experience segment income was a second quarter record at $324 million, an increase of 24 percent versus the prior year second quarter. Excluding the impact of foreign exchange, segment income increased 26 percent in the quarter primarily due to higher seating volumes, restructuring savings and operational efficiencies. Segment margins were up 250 basis points in the quarter (up 140 basis points adjusting for the impact of the deconsolidation of the Interiors joint venture).

Automotive seating order wins continued to accelerate during the first half of fiscal 2016 with awards nearly equal to the full year fiscal 2015 levels. In addition, the Interiors joint venture has secured $7.0 billion in new business awards since the announcement of the joint venture last year.

Increased full year earnings guidance and separation update

Johnson Controls raised its full year fiscal 2016 guidance from $3.70 - $3.90 to $3.85 - $4.00 reflecting stronger operational performance and a reduction of the Company's annual effective tax rate from 19 percent to 17 percent. The Company expects 2016 fiscal third quarter earnings per diluted share of $1.01 - $1.04. Quarterly and fiscal year guidance excludes transaction, integration and separation costs and other non-recurring items.

The Company announced that the Adient spin-off remains on track, with the initial Form 10 expected to be filed by the end of April. In addition, the Company said the estimated tax rate for Adient is expected to range from 10 to 12 percent and associated separation costs are expected to be in-line with previous estimates.

As noted in the first quarter earnings release, Johnson Controls confirmed it expects to resume its previously authorized share repurchase program with plans to repurchase $500 million before the end of the fiscal year.

"This is a truly historic time for our company. We continue to make significant progress on our path to building two leading, independent global companies. The merger between Johnson Controls and Tyco is expected to close October 1, 2016. My confidence that this powerful combination will create a world leader in buildings and energy technologies with significant strategic value for our customers, employees and shareholders just continues to grow," said Molinaroli. "Adient is on track for its separation on October 31, 2016 and will be the global leader in automotive seating. As we progress toward the exciting future of two great companies, we remain firmly focused on execution and delivering increasing growth, profitability and long-term shareholder value."

ABOUT JOHNSON CONTROLS

Johnson Controls is a global diversified technology and industrial leader serving customers in more than 150 countries. Our 150,000 employees create quality products, services and solutions to optimize energy and operational efficiencies of buildings; lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles; and seating components and systems for automobiles. Our commitment to sustainability dates back to our roots in 1885, with the invention of the first electric room thermostat. Through our growth strategies and by increasing market share we are committed to delivering value to shareholders and making our customers successful. In 2015, Corporate Responsibility Magazine recognized Johnson Controls as the #14 company in its annual "100 Best Corporate Citizens" list. For additional information, please visit http://www.johnsoncontrols.com. Follow Johnson Controls Investor Relations on Twitter at www.twitter.com/JCI_IR.

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SOURCE Johnson Controls

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