Attached files
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8-K - 8-K - Johnson Controls International plc | a17-3457_48k.htm |
EXHIBIT 99.1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Tyco Merger
On September 2, 2016, Johnson Controls, Inc. (JCI Inc.) and Tyco International plc (Tyco) completed their combination pursuant to the Agreement and Plan of Merger (the Merger Agreement), dated as of January 24, 2016, as amended by Amendment No. 1, dated as of July 1, 2016, by and among JCI Inc., Tyco and certain other parties named therein, including Jagara Merger Sub LLC, an indirect wholly owned subsidiary of Tyco (Merger Sub). Pursuant to the terms of the Merger Agreement, on September 2, 2016, Merger Sub merged with and into JCI Inc., with JCI Inc. being the surviving corporation in the merger and a wholly owned, indirect subsidiary of Tyco (the Merger). Following the Merger, Tyco changed its name to Johnson Controls International plc (Johnson Controls).
The Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. JCI Inc. was 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 historic financial statements of Johnson Controls.
Spin-Off of Adient
On October 31, 2016 (the Distribution Date), Johnson Controls completed the spin-off of its automotive seating and interiors business, Adient, to its shareholders (the Spin-Off). On October 31, 2016, each of Johnson Controls shareholders of record as of the close of business on October 19, 2016 (the Record Date) received one ordinary share of Adient for every ten ordinary shares of Johnson Controls held at the close of business on the Record Date. Johnson Controls shareholders received cash in lieu of fractional shares of Adient (if any). Adient is now an independent public company trading under the symbol ADNT on the New York Stock Exchange.
After the Distribution Date, Johnson Controls does not beneficially own any ordinary shares of Adient and will no longer consolidate Adient within its financial results. Beginning in the first quarter of fiscal 2017, Adients historical financial results for periods prior to the Distribution Date will be reflected in Johnson Controls consolidated financial statements as a discontinued operation (the Adient Discontinued Operations).
Unaudited Pro Forma Consolidated Financial Information
The following unaudited pro forma consolidated financial statements as of September 30, 2016, and for the years ended September 30, 2016, 2015 and 2014, reflect adjustments to Johnson Controls historical financial results related to the:
· Merger. The unaudited pro forma consolidated statement of income for the year ended September 30, 2016 gives effect to the Merger as if it occurred at the beginning of this period on October 1, 2015.
· Adient Discontinued Operations. The unaudited pro forma consolidated statements of income reflect the removal of the Adient Discontinued Operations in all periods presented.
· Spin-Off and related events. The unaudited pro forma consolidated statements of income for the year ended September 30, 2016 give effect to the Spin-Off and related events as if they occurred at the beginning of this period on October 1, 2015. The unaudited pro forma consolidated statement of financial position gives effect to the Spin-Off and related events as if they occurred as of September 30, 2016, Johnson Controls latest balance sheet date.
The unaudited pro forma consolidated statements of income (i) are presented based on information currently available, (ii) are intended for informational purposes only, (iii) are not necessarily indicative of and do not
purport to represent what Johnson Controls operating results would have been had the Merger and Spin-Off occurred as described or what Johnson Controls future operating results will be after giving effect to these events, and (iv) do not reflect all actions that may be undertaken by Johnson Controls after the Merger and Spin-Off.
The unaudited pro forma consolidated financial statements and the accompanying notes should be read together with the historical financial statements of Johnson Controls as of and for the year ended September 30, 2016 and the related notes included in Johnson Controls Annual Report on Form 10-K for the year ended September 30, 2016 that Johnson Controls filed with the SEC on November 23, 2016.
In the enclosed unaudited pro forma consolidated statements of income and unaudited pro forma consolidated statement of financial position, the amounts reflected in the columns presented are described below:
Historical Johnson Controls
This column reflects Johnson Controls historical financial statements for the periods presented and does not reflect any adjustments related to the Spin-Off and related events.
The historical Johnson Controls consolidated statement of financial position as of September 30, 2016 and the consolidated statement of income for the years ended September 30, 2016, 2015 and 2014 were derived from Johnson Controls audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended September 30, 2016.
As discussed in Johnson Controls Annual Report on Form 10-K, on September 2, 2016, JCI Inc. and Tyco completed their combination pursuant to the Merger Agreement. The Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations. JCI Inc. was the accounting acquirer for financial reporting purposes. Accordingly, (1) the historical consolidated financial statements of JCI Inc. for periods prior to September 3, 2016 are considered to be the historic financial statements of Johnson Controls for such periods, and (2) the financial results for Tyco are included in the historic financial statements of Johnson Controls for periods on and after September 3, 2016.
Impact of Tyco Merger
The unaudited pro forma consolidated financial information primarily gives effect to the following:
· Tycos results of operations for the eleven months ended September 2, 2016;
· adjustments to conform the accounting policies of Tyco to those of Johnson Controls;
· application of the acquisition method of accounting in connection with the Merger;
· issuance of new equity in connection with the Merger; and
· Tycos 0.955 for 1 share consolidation in connection with the Merger.
The unaudited pro forma consolidated statement of income has been presented for informational purposes only and is not necessarily indicative of what Johnson Controls results of operations actually would have been had the combination been completed as of the date indicated. In addition, the unaudited pro forma consolidated statement of income does not purport to project the future operating results of Johnson Controls. The accompanying unaudited pro forma consolidated statement of income does not include any pro forma adjustments to reflect
expected cost savings or restructuring actions which may be achievable or the impact of any non-recurring activity and one-time transaction or integration related costs.
The unaudited pro forma consolidated statement of income has been prepared using the acquisition method of accounting under existing U.S. GAAP standards. Johnson Controls is the acquirer in the Merger for accounting purposes and Tyco is the acquiree. As Johnson Controls finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in fiscal 2017. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact Johnson Controls results of operations. The finalization of the purchase accounting assessment may result in a change in the valuation of assets acquired and liabilities assumed and may have a material impact on Johnson Controls results of operations and financial position.
Adient Discontinued Operations
The unaudited pro forma financial information related to the Adient Discontinued Operations has been prepared in accordance with the discontinued operations guidance in ASC 205, Financial Statement Presentation and therefore does not reflect what Johnson Controls or Adients results of operations would have been on a stand-alone basis and are not necessarily indicative of Johnson Controls or Adients future results of operations. As such, the unaudited pro forma combined financial statements of income do not allocate any general corporate overhead expenses of Johnson Controls to Adient.
The information in the Adient Discontinued Operations column in the unaudited pro forma consolidated statements of income was prepared based on the Johnson Controls annual audited financial statements and only include costs that are directly attributable to the operating results of Adient.
Spin-Off Pro Forma Adjustments
The unaudited pro forma consolidated financial statements as of and for the year ended September 30, 2016 include the following additional pro forma adjustments which are further described in the accompanying notes:
· Adjustment to remove non-recurring Spin-Off separation costs incurred to date from the unaudited pro forma consolidated statements of income.
· Recognition of the recapitalization of equity to reflect the distribution of the Adient net assets, including a $3,000 million dividend from Adient to Johnson Controls.
JOHNSON CONTROLS INTERNATIONAL PLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED SEPTEMBER 30, 2016
(in millions, except share data)
|
|
Historical |
|
Impact |
|
Pro |
|
Adient |
|
Spin-Off |
|
Pro Forma |
| ||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Products and systems |
|
$ |
33,635 |
|
$ |
5,288 |
|
$ |
38,923 |
|
$ |
(16,837 |
) |
$ |
|
|
$ |
22,086 |
|
Services |
|
4,039 |
|
3,522 |
|
7,561 |
|
|
|
|
|
7,561 |
| ||||||
|
|
37,674 |
|
8,810 |
|
46,484 |
|
(16,837 |
) |
|
|
29,647 |
| ||||||
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Products and systems |
|
27,625 |
|
3,363 |
|
30,988 |
|
(15,177 |
) |
|
|
15,811 |
| ||||||
Services |
|
2,735 |
|
1,881 |
|
4,616 |
|
|
|
|
|
4,616 |
| ||||||
|
|
30,360 |
|
5,244 |
|
35,604 |
|
(15,177 |
) |
|
|
20,427 |
| ||||||
Gross profit |
|
7,314 |
|
3,566 |
|
10,880 |
|
(1,660 |
) |
|
|
9,220 |
| ||||||
Selling, general and administrative expenses |
|
(5,325 |
) |
(2,880 |
) |
(8,205 |
) |
1,135 |
|
51 |
(c) |
(7,019 |
) | ||||||
Restructuring and impairment costs |
|
(620 |
) |
(21 |
) |
(641 |
) |
332 |
|
|
|
(309 |
) | ||||||
Net financing charges |
|
(314 |
) |
(359 |
) |
(673 |
) |
25 |
|
|
|
(648 |
) | ||||||
Equity income |
|
531 |
|
112 |
|
643 |
|
(357 |
) |
|
|
286 |
| ||||||
Income from continuing operations before income taxes |
|
1,586 |
|
418 |
|
2,004 |
|
(525 |
) |
51 |
|
1,530 |
| ||||||
Income tax provision |
|
2,238 |
|
64 |
|
2,302 |
|
(2,041 |
) |
3 |
(d) |
264 |
| ||||||
Net income (loss) from continuing operations |
|
(652 |
) |
354 |
|
(298 |
) |
1,516 |
|
48 |
|
1,266 |
| ||||||
Income (loss) from continuing operations attributable to noncontrolling interests |
|
216 |
|
(3 |
) |
213 |
|
(84 |
) |
|
|
129 |
| ||||||
Net income (loss) from continuing operations attributable to Johnson Controls |
|
$ |
(868 |
) |
$ |
357 |
|
$ |
(511 |
) |
$ |
1,600 |
|
$ |
48 |
|
$ |
1,137 |
|
Basic earnings (loss) per share attributable to Johnson Controls from continuing operations |
|
$ |
(1.30 |
) |
|
|
$ |
(0.55 |
) |
|
|
|
|
$ |
1.22 |
| |||
Diluted earnings (loss) per share attributable to Johnson Controls from continuing operations |
|
$ |
(1.30 |
) |
|
|
$ |
(0.55 |
) |
|
|
|
|
$ |
1.20 |
| |||
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
|
667.4 |
|
|
|
935.5 |
(b) |
|
|
|
|
935.5 |
(b) | ||||||
Diluted |
|
667.4 |
|
|
|
935.5 |
(b) |
|
|
|
|
946.2 |
(b) |
JOHNSON CONTROLS INTERNATIONAL PLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED SEPTEMBER 30, 2015
(in millions, except share data)
|
|
Historical |
|
Adient |
|
Pro Forma |
| |||
Net sales |
|
|
|
|
|
|
| |||
Products and systems |
|
$ |
33,513 |
|
$ |
(20,079 |
) |
$ |
13,434 |
|
Services |
|
3,666 |
|
|
|
3,666 |
| |||
|
|
37,179 |
|
(20,079 |
) |
17,100 |
| |||
Cost of sales |
|
|
|
|
|
|
| |||
Products and systems |
|
28,214 |
|
(18,163 |
) |
10,051 |
| |||
Services |
|
2,518 |
|
|
|
2,518 |
| |||
|
|
30,732 |
|
(18,163 |
) |
12,569 |
| |||
Gross profit |
|
6,447 |
|
(1,916 |
) |
4,531 |
| |||
Selling, general and administrative expenses |
|
(3,986 |
) |
795 |
|
(3,191 |
) | |||
Restructuring and impairment costs |
|
(397 |
) |
182 |
|
(215 |
) | |||
Net financing charges |
|
(288 |
) |
14 |
|
(274 |
) | |||
Equity income |
|
375 |
|
(295 |
) |
80 |
| |||
Income from continuing operations before income taxes |
|
2,151 |
|
(1,220 |
) |
931 |
| |||
Income tax provision |
|
600 |
|
(529 |
) |
71 |
| |||
Net income from continuing operations |
|
1,551 |
|
(691 |
) |
860 |
| |||
Income from continuing operations attributable to noncontrolling interests |
|
112 |
|
(66 |
) |
46 |
| |||
Net income from continuing operations attributable to Johnson Controls |
|
$ |
1,439 |
|
$ |
(625 |
) |
$ |
814 |
|
Basic earnings per share attributable to Johnson Controls from continuing operations |
|
$ |
2.20 |
|
|
|
$ |
1.24 |
| |
Diluted earnings per share attributable to Johnson Controls from continuing operations |
|
$ |
2.18 |
|
|
|
$ |
1.23 |
| |
Weighted average number of shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
|
655.2 |
|
|
|
655.2 |
| |||
Diluted |
|
661.5 |
|
|
|
661.5 |
|
JOHNSON CONTROLS INTERNATIONAL PLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED SEPTEMBER 30, 2014
(in millions, except share data)
|
|
Historical |
|
Adient |
|
Pro Forma |
| |||
Net sales |
|
|
|
|
|
|
| |||
Products and systems |
|
$ |
34,978 |
|
$ |
(22,032 |
) |
$ |
12,946 |
|
Services |
|
3,771 |
|
|
|
3,771 |
| |||
|
|
38,749 |
|
(22,032 |
) |
16,717 |
| |||
Cost of sales |
|
|
|
|
|
|
| |||
Products and systems |
|
29,910 |
|
(20,039 |
) |
9,871 |
| |||
Services |
|
2,534 |
|
|
|
2,534 |
| |||
|
|
32,444 |
|
(20,039 |
) |
12,405 |
| |||
Gross profit |
|
6,305 |
|
(1,993 |
) |
4,312 |
| |||
Selling, general and administrative expenses |
|
(4,216 |
) |
1,222 |
|
(2,994 |
) | |||
Restructuring and impairment costs |
|
(324 |
) |
159 |
|
(165 |
) | |||
Net financing charges |
|
(244 |
) |
18 |
|
(226 |
) | |||
Equity income |
|
395 |
|
(285 |
) |
110 |
| |||
Income from continuing operations before income taxes |
|
1,916 |
|
(879 |
) |
1,037 |
| |||
Income tax provision |
|
407 |
|
(314 |
) |
93 |
| |||
Net income from continuing operations |
|
1,509 |
|
(565 |
) |
944 |
| |||
Income from continuing operations attributable to noncontrolling interests |
|
105 |
|
(67 |
) |
38 |
| |||
Net income from continuing operations attributable to Johnson Controls |
|
$ |
1,404 |
|
$ |
(498 |
) |
$ |
906 |
|
Basic earnings per share attributable to Johnson Controls from continuing operations |
|
$ |
2.11 |
|
|
|
$ |
1.36 |
| |
Diluted earnings per share attributable to Johnson Controls from continuing operations |
|
$ |
2.08 |
|
|
|
$ |
1.34 |
| |
Weighted average number of shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
|
666.9 |
|
|
|
666.9 |
| |||
Diluted |
|
674.8 |
|
|
|
674.8 |
|
JOHNSON CONTROLS INTERNATIONAL PLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 2016
(in millions)
|
|
Historical |
|
Adient |
|
Spin-Off |
|
|
|
Pro Forma |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
|
$ |
684 |
|
$ |
(105 |
) |
$ |
1,430 |
|
(c), (e) |
|
$ |
2,009 |
|
Cash in escrow related to Adient debt |
|
2,034 |
|
(2,034 |
) |
|
|
|
|
|
| ||||
Accounts receivablenet |
|
8,018 |
|
(2,071 |
) |
|
|
|
|
5,947 |
| ||||
Inventories |
|
3,560 |
|
(672 |
) |
|
|
|
|
2,888 |
| ||||
Assets held for sale |
|
174 |
|
|
|
|
|
|
|
174 |
| ||||
Other current assets |
|
2,639 |
|
(756 |
) |
|
|
|
|
1,883 |
| ||||
Current assets |
|
17,109 |
|
(5,638 |
) |
1,430 |
|
|
|
12,901 |
| ||||
Property, plant and equipmentnet |
|
7,872 |
|
(2,240 |
) |
|
|
|
|
5,632 |
| ||||
Goodwill |
|
23,409 |
|
(2,385 |
) |
|
|
|
|
21,024 |
| ||||
Other intangible assetsnet |
|
7,653 |
|
(113 |
) |
|
|
|
|
7,540 |
| ||||
Investments in partially-owned affiliates |
|
2,735 |
|
(1,745 |
) |
|
|
|
|
990 |
| ||||
Other noncurrent assets |
|
4,475 |
|
(935 |
) |
|
|
|
|
3,540 |
| ||||
Total assets |
|
$ |
63,253 |
|
$ |
(13,056 |
) |
$ |
1,430 |
|
|
|
$ |
51,627 |
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
| ||||
Short-term debt |
|
$ |
1,119 |
|
$ |
(41 |
) |
$ |
|
|
|
|
$ |
1,078 |
|
Current portion of long-term debt |
|
628 |
|
(38 |
) |
|
|
|
|
590 |
| ||||
Accounts payable |
|
6,764 |
|
(2,764 |
) |
|
|
|
|
4,000 |
| ||||
Accrued compensation and benefits |
|
1,763 |
|
(430 |
) |
|
|
|
|
1,333 |
| ||||
Liabilities held for sale |
|
28 |
|
|
|
|
|
|
|
28 |
| ||||
Other current liabilities |
|
5,991 |
|
(975 |
) |
|
|
|
|
5,016 |
| ||||
Current liabilities |
|
16,293 |
|
(4,248 |
) |
|
|
|
|
12,045 |
| ||||
Long-term debt |
|
14,606 |
|
(3,485 |
) |
|
|
|
|
11,121 |
| ||||
Pension and postretirement benefits |
|
1,738 |
|
(188 |
) |
|
|
|
|
1,550 |
| ||||
Other noncurrent liabilities |
|
5,292 |
|
(259 |
) |
|
|
|
|
5,033 |
| ||||
Long-term liabilities |
|
21,636 |
|
(3,932 |
) |
|
|
|
|
17,704 |
| ||||
Redeemable noncontrolling interests |
|
234 |
|
(34 |
) |
|
|
|
|
200 |
| ||||
Ordinary shares |
|
9 |
|
|
|
|
|
|
|
9 |
| ||||
Capital in excess of par value |
|
16,105 |
|
|
|
|
|
|
|
16,105 |
| ||||
Retained earnings |
|
9,177 |
|
(5,218 |
) |
1,430 |
|
(c), (e) |
|
5,389 |
| ||||
Ordinary shares held in treasury, at cost |
|
(20 |
) |
|
|
|
|
|
|
(20 |
) | ||||
Accumulated other comprehensive loss |
|
(1,153 |
) |
507 |
|
|
|
|
|
(646 |
) | ||||
Shareholders equity attributable to Johnson Controls |
|
24,118 |
|
(4,711 |
) |
1,430 |
|
|
|
20,837 |
| ||||
Noncontrolling interests |
|
972 |
|
(131 |
) |
|
|
|
|
841 |
| ||||
Total equity |
|
25,090 |
|
(4,842 |
) |
1,430 |
|
|
|
21,678 |
| ||||
Total liabilities and equity |
|
$ |
63,253 |
|
$ |
(13,056 |
) |
$ |
1,430 |
|
|
|
$ |
51,627 |
|
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements as of and for the year ended September 30, 2016 include the following adjustments:
(a) In order to reflect the occurrence of the acquisition on October 1, 2015, the unaudited pro forma results include adjustments to reflect, among other things, the incremental recurring intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset, the change in timing of defined benefit plans mark-to-market gain or loss recognition, interest expense from debt financing obtained to fund the cash consideration paid to JCI Inc. shareholders, and the elimination of merger transaction costs and nonrecurring purchasing accounting adjustments. These pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisition had occurred as of the beginning of the period presented or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings.
(b) The unaudited pro forma weighted average number of basic shares outstanding is calculated as follows (in millions, except share consolidation ratio and per share amounts):
Pre-merger Tyco shares outstanding |
|
427.2 |
| |
Share consolidation ratio |
|
0.955 |
| |
Post-share consolidation Tyco shares |
|
408.0 |
| |
Johnson Controls Inc. shares outstanding |
|
638.3 |
| |
Cash contributed by Tyco used to purchase shares of Johnson Controls Inc. |
|
$ |
3,864 |
|
Johnson Controls Inc. per share consideration |
|
$ |
34.88 |
|
Reduction in shares due to cash consideration paid by Tyco |
|
(110.8 |
) | |
Adjusted Johnson Controls Inc. shares outstanding (1:1 exchange ratio) |
|
527.5 |
| |
Shares outstanding |
|
935.5 |
|
The unaudited pro forma weighted average number of diluted shares outstanding is calculated by adding the effect of dilutive securities to the unaudited pro forma weighted average number of basic shares outstanding as follows (in millions):
Pro forma weighted basic shares outstanding |
|
935.5 |
|
Dilutive impact of Johnson Controls and Tyco awards outstanding |
|
10.7 |
|
Adjusted weighted average shares outstandingDiluted |
|
946.2 |
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(c) Removal of $51 million of Adient separation costs in the year ended September 30, 2016. These costs directly relate to the Spin-Off of Adient and will not recur and as such, have been removed from the unaudited pro forma consolidated statement of income. On the unaudited pro forma consolidated statement of financial position, we have reflected a pro forma accrual of approximately $70 million of estimated Adient separation costs that Johnson Controls expects to incur subsequent to September 30, 2016 to complete the Spin-Off.
(d) The tax effects of pro forma adjustment (c) reflect the tax benefit recorded at the time the costs were incurred.
(e) In connection with the Adient Spin-off, Adient has obtained $3,500 million in debt financing. Approximately $500 million of the proceeds of such financing remain with Adient following the Spin-Off, with approximately $3,000 million distributed to Johnson Controls prior to the completion of the Spin-Off. As of September 30, 2016, approximately $1,500 million was received by Johnson Controls.