What is the primary strategic initiative discussed in this filing?

The primary strategic initiative is the planned separation of Johnson Controls International plc (formerly Tyco International Ltd.) into three independent, publicly traded companies: Tyco Healthcare, Tyco Electronics, and a combination of Tyco Fire and Security and Engineered Products and Services. This separation is expected to unlock value and position each business for future growth.

What are the expected costs associated with the proposed separation?

The company estimates that the total income statement charges to complete the Proposed Separation will be between $1.2 billion and $1.6 billion, after-tax. These costs include separation costs, debt refinancing, tax restructuring, professional services, and employee-related expenses.

What is the status of the company's internal controls?

The company identified a material weakness in its internal control over financial reporting related to accounting for income taxes as of September 29, 2006. Remediation plans are underway, involving enhancing tax account reconciliation policies and procedures, augmenting tax accounting resources, and strengthening communication between the Tax department and the Controller's group.

How did the company perform financially in fiscal year 2006?

In fiscal year 2006, Johnson Controls International plc reported net revenue of $40.9 billion, an increase of 4.2% compared to the prior year. However, operating income decreased by 5.1% to $5.5 billion. This decrease was largely due to charges for separation costs, stock-based compensation under SFAS No. 123R, and other restructuring and impairment charges.

What significant cash flow activities occurred in fiscal year 2006?

Key cash flow activities included $5.6 billion in net cash provided by operating activities, capital expenditures of $1.5 billion, and $2.5 billion returned to shareholders through share repurchases. The company also made significant acquisitions in its Healthcare segment and repaid $1.0 billion in public notes.

JCI 10-K FY2006 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K/A filed April 20, 2007. Cited figures are marked; the original filing is the authoritative source.

Johnson Controls International plc (JCI) filed its 2007 10-K/A, reporting on its fiscal year ended September 28, 2006.

A major theme of this filing is the ongoing strategic review and planned separation of the company into three distinct publicly traded entities: Tyco Healthcare (now Covidien Ltd.), Tyco Electronics, and a combined Tyco Fire and Security and Engineered Products and Services. This separation is expected to incur significant costs, estimated between $1.2 billion^a and $1.6 billion after-tax, and requires substantial management attention. The company also reported a material weakness in internal controls related to income tax accounting, with remediation plans in progress.

Despite these strategic shifts and control issues, the company achieved revenue growth across its segments in fiscal year 2006, though operating income saw a decrease due to various charges including separation costs and stock-based compensation. Significant recent developments include the completion of a $2.0 billion^b share repurchase program, the acquisition of several businesses within the Healthcare segment, and a substantial restructuring program launched in early 2007 with expected charges of approximately $600 million over two years.

The company also addressed past issues by receiving restitution from former executives and settling an SEC enforcement action. Investors should note the company's ongoing commitment to returning capital to shareholders through share repurchases and dividends, with expectations for all three spun-off entities to be dividend-paying.

02—Key points

Key Highlights

Planned separation of the company into three independent, publicly traded entities: Tyco Healthcare, Tyco Electronics, and Tyco Fire and Security/Engineered Products and Services.
Estimated separation costs between $1.2 billion and $1.6 billion (after-tax).
Identified a material weakness in internal controls over financial reporting related to income tax accounting.
Launched a company-wide restructuring program in Q1 2007 with an estimated $600 million in charges over two years.
Completed a $2.0 billion share repurchase program during fiscal year 2006.
Revenue grew by 4.2% to $40.9 billion in FY2006, but operating income decreased by 5.1% to $5.5 billion due to charges.
Received a total of $136 million in restitution from former executives Mark H. Swartz and L. Dennis Kozlowski.
Settled an SEC enforcement action for $50 million.

03—Questions

Frequently Asked Questions

What is the primary strategic initiative discussed in this filing?
The primary strategic initiative is the planned separation of Johnson Controls International plc (formerly Tyco International Ltd.) into three independent, publicly traded companies: Tyco Healthcare, Tyco Electronics, and a combination of Tyco Fire and Security and Engineered Products and Services. This separation is expected to unlock value and position each business for future growth.
What are the expected costs associated with the proposed separation?
The company estimates that the total income statement charges to complete the Proposed Separation will be between $1.2 billion and $1.6 billion, after-tax. These costs include separation costs, debt refinancing, tax restructuring, professional services, and employee-related expenses.
What is the status of the company's internal controls?
The company identified a material weakness in its internal control over financial reporting related to accounting for income taxes as of September 29, 2006. Remediation plans are underway, involving enhancing tax account reconciliation policies and procedures, augmenting tax accounting resources, and strengthening communication between the Tax department and the Controller's group.
How did the company perform financially in fiscal year 2006?
In fiscal year 2006, Johnson Controls International plc reported net revenue of $40.9 billion, an increase of 4.2% compared to the prior year. However, operating income decreased by 5.1% to $5.5 billion. This decrease was largely due to charges for separation costs, stock-based compensation under SFAS No. 123R, and other restructuring and impairment charges.
What significant cash flow activities occurred in fiscal year 2006?
Key cash flow activities included $5.6 billion in net cash provided by operating activities, capital expenditures of $1.5 billion, and $2.5 billion returned to shareholders through share repurchases. The company also made significant acquisitions in its Healthcare segment and repaid $1.0 billion in public notes.

04—Continue

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