01—Abstract
Summary
Summary of the 10-K filed November 21, 2017. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) in its 2017 10-K filing detailed a significant period of transformation, marked by the completion of its merger with Tyco International plc in September 2016.
This strategic combination aimed to create a more diversified and robust industrial conglomerate. The company operates across two primary segments: Building Technologies & Solutions (BTS) and Power Solutions. The BTS segment, representing the larger portion of sales, offers a comprehensive range of building products and services, including HVAC, security, and fire management systems.
The Power Solutions segment is a leading global supplier of automotive batteries. Fiscal year 2017 demonstrated substantial sales growth, largely driven by the inclusion of Tyco's operations and organic growth within both segments, particularly in Power Solutions due to favorable pricing and volume increases.
Despite the integration efforts and associated costs, the company showed resilience. Investors should note the ongoing strategic realignment, including the spin-off of its automotive experience business (Adient) in late 2016, which has reshaped the company's focus towards its core building and energy solutions.
02—Key points
Key Highlights
- Completed the merger with Tyco International plc in September 2016, significantly expanding the company's scale and breadth across building technologies and services.
- Reported a substantial increase in net sales in fiscal year 2017 to $30.2 billion, a 45% increase driven primarily by the Tyco merger and growth in both Building Technologies & Solutions (BTS) and Power Solutions segments.
- The Building Technologies & Solutions segment accounted for 76% of total net sales, highlighting its importance as the primary revenue driver.
- The Power Solutions segment, representing 24% of net sales, experienced a 10% increase in net sales due to higher lead costs, favorable pricing, product mix, and increased volumes, particularly from start-stop battery growth.
- The company successfully managed its capital structure post-merger, with total debt increasing but remaining manageable relative to its capitalization.
- Significant restructuring and impairment costs were incurred in fiscal 2017 ($367 million) and fiscal 2016 ($288 million) as the company integrated operations and optimized its cost structure.
- Completed the spin-off of its Automotive Experience business to Adient plc in October 2016, a strategic move to focus on its core building and energy solutions platforms.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Johnson Controls International plc kept $0.07.
- Revenue$22.84B100.0%
- Cost of revenue−$15.30B67.0%
- Gross profit$7.53B33.0%
- Operating costs−$6.86B30.0%
- Operating income$672.0M2.9%
- Interest, other & tax$939.0M4.1%
- Net income$1.61B7.1%
Where FY2017 revenue went
$22.84B- Cost of revenue: $15.30B, 67% of revenue
- SG&A: $5.72B, 25% of revenue
- Operating income: $672.0M, 2.9% of revenue
- R&D: $307.0M, 1.3% of revenue
- Other operating costs: $828.0M, 3.6% of revenue
Kept 2.9% as operating incomeOperating income $672.0M · 2.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed November 21, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $22.84B$20.84B | +9.6% |
| Cost of Revenue | $15.30B$15.18B | +0.8% |
| Gross Profit | $7.53B$5.65B | +33.2% |
| R&D Expenses | $307.00M$158.00M | +94.3% |
| SG&A Expenses | $5.72B$4.19B | +36.6% |
| Operating Income | $672.00M$732.00M | −8.2% |
| Interest Expense | $446.00M$293.00M | +52.2% |
| Net Income | $1.61B-$868.00M | +285.6% |
| EPS (Basic) | $1.72$-1.30 | +232.3% |
| EPS (Diluted) | $1.71$-1.29 | +232.6% |
| Shares Outstanding (Basic) | 935.30M667.40M | +40.1% |
| Shares Outstanding (Diluted) | 944.60M672.60M | +40.4% |
05—Questions
Frequently Asked Questions
What was the primary impact of the Tyco merger on JCI's financial performance in fiscal year 2017?
The merger with Tyco, completed in September 2016, significantly boosted Johnson Controls' net sales in fiscal year 2017, resulting in a 45% increase to $30.2 billion. This growth was driven by the combined operations, including higher sales in both the Building Technologies & Solutions and Power Solutions segments, and also benefited from favorable foreign currency translations. The integration of Tyco also contributed to a 98% increase in Segment EBITA for the Building Technologies & Solutions segment.
How did the spin-off of the Automotive Experience business affect the company?
The spin-off of the Automotive Experience business to Adient plc in October 2016 was a strategic decision to focus Johnson Controls on its core building and energy solutions. While it reduced the company's overall size and diversification, it allowed for a more concentrated approach on its growth platforms. The spin-off resulted in a significant decrease in shareholders' equity attributable to Johnson Controls in fiscal year 2017 due to the divestiture of assets.
What are the main revenue-generating segments for Johnson Controls, and how did they perform in fiscal year 2017?
Johnson Controls operates primarily through two segments: Building Technologies & Solutions (BTS) and Power Solutions. In fiscal year 2017, the BTS segment was the dominant revenue generator, accounting for 76% of total net sales, with a 61% increase to $22.8 billion. The Power Solutions segment contributed 24% of net sales, showing a 10% increase to $7.3 billion. Both segments experienced growth, with BTS benefiting from the Tyco merger integration and Power Solutions driven by higher lead costs, favorable pricing, and increased volumes.
What is the company's stance on restructuring and integration costs following the Tyco merger?
Johnson Controls incurred significant restructuring and impairment costs in fiscal years 2017 ($367 million) and 2016 ($288 million). These costs were primarily related to workforce reductions, plant closures, and asset impairments aimed at integrating operations, optimizing the cost structure, and achieving synergies from the Tyco merger. Management expects these actions to yield substantial annual operating cost reductions.
06—Continue