01—Abstract
Summary
Summary of the 10-K filed November 23, 2016. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) presents its 2016 10-K, detailing significant strategic transformations during the fiscal year.
The company completed its substantial combination with Tyco International plc in September 2016, a move intended to enhance its position in the building technologies and services sector. Furthermore, JCI completed the spin-off of its Automotive Experience business into Adient plc in October 2016, sharpening its focus on building and energy solutions.
The report highlights the operational and financial integration challenges and opportunities presented by these major transactions, with a strong emphasis on aligning its portfolio for future growth in intelligent buildings and efficient energy solutions. Investors should note the significant shift in the company's structure and strategic direction as it integrates Tyco and divests non-core assets.
02—Key points
Key Highlights
- Completed a significant combination with Tyco International plc on September 2, 2016, creating a more robust building solutions business.
- Spun off its Automotive Experience business into Adient plc on October 31, 2016, to focus on core building technologies and services.
- Reported a net loss attributable to Johnson Controls of $868 million for fiscal year 2016, impacted by significant merger, integration, and restructuring costs.
- Net sales for fiscal year 2016 were $37.7 billion, a slight increase of 1% over the prior year, driven by the Buildings and Power Solutions segments, partially offset by the Automotive Experience business and foreign currency impacts.
- Goodwill increased significantly to $23.4 billion, primarily due to the Tyco merger and the JCH joint venture.
- The company ended the fiscal year with a substantial debt load of $16.4 billion, largely reflecting financing for the Tyco acquisition.
- Restructuring and impairment costs totaled $620 million in fiscal year 2016, reflecting ongoing efforts to streamline operations.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2016, Johnson Controls International plc lost $0.04.
- Revenue$20.84B100.0%
- Cost of revenue−$15.18B72.9%
- Gross profit$5.65B27.1%
- Operating costs−$4.92B23.6%
- Operating income$732.0M3.5%
- Interest, other & tax−$1.60B7.7%
- Net income−$868.0M4.2%
Where FY2016 revenue went
$20.84B- Cost of revenue: $15.18B, 73% of revenue
- SG&A: $4.19B, 20% of revenue
- Operating income: $732.0M, 3.5% of revenue
- R&D: $158.0M, 0.8% of revenue
- Other operating costs: $574.0M, 2.8% of revenue
Kept 3.5% as operating incomeOperating income $732.0M · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed November 23, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $20.84B$17.10B | +21.9% |
| Cost of Revenue | $15.18B$12.57B | +20.8% |
| Gross Profit | $5.65B$4.53B | +24.8% |
| R&D Expenses | $158.00M$134.00M | +17.9% |
| SG&A Expenses | $4.19B$3.19B | +31.3% |
| Operating Income | $732.00M$884.00M | −17.2% |
| Interest Expense | $293.00M$275.00M | +6.5% |
| Net Income | -$868.00M$1.56B | −155.5% |
| EPS (Basic) | $-1.30$2.39 | −154.4% |
| EPS (Diluted) | $-1.29$2.36 | −154.7% |
| Shares Outstanding (Basic) | 667.40M655.20M | +1.9% |
| Shares Outstanding (Diluted) | 672.60M661.50M | +1.7% |
05—Questions
Frequently Asked Questions
What were the major strategic events for Johnson Controls in fiscal year 2016?
The most significant strategic events were the completion of the combination with Tyco International plc in September 2016 and the spin-off of the Automotive Experience business into Adient plc in October 2016. These actions fundamentally reshaped the company's structure and focus.
How did the Tyco merger impact the company's financial results?
The Tyco merger was accounted for as a reverse acquisition, with JCI Inc. being the accounting acquirer. The company incurred substantial transaction and integration costs, which, along with other factors, contributed to a net loss attributable to Johnson Controls of $868 million for fiscal year 2016. The merger also significantly increased goodwill and long-term debt.
What is the company's primary business focus after these strategic moves?
Following the Tyco merger and the spin-off of its automotive business, Johnson Controls is strategically focused on its Buildings business, which includes HVAC systems, controls, security, and fire detection products and services, as well as its Power Solutions business, which provides automotive batteries.
What are the key risks facing Johnson Controls in the near term?
Key risks include the successful integration of the Tyco business, managing the increased debt load, realizing expected synergies, potential impact of global economic conditions on construction and automotive sectors, commodity price volatility, and the ongoing process of aligning its global operations for efficiency and growth.
06—Continue