10-KPeriod: FY2018

Johnson Controls International plc Annual Report, Year Ended Sep 30, 2018

Filed November 20, 2018For Securities:JCI

Summary

Johnson Controls International plc's (JCI) 2018 10-K filing reveals a company undergoing significant strategic shifts, most notably the impending sale of its Power Solutions business for $13.2 billion. This move signifies a strategic pivot towards its core Building Technologies & Solutions (Buildings) segment, which accounted for 75% of net sales in fiscal year 2018. The Buildings segment demonstrated steady growth, with net sales increasing by 2% to $23.4 billion, driven by higher volumes and favorable foreign currency translation, though gross profit as a percentage of sales saw a slight decrease due to higher operating costs. Financially, JCI reported a 34% increase in net income attributable to shareholders, reaching $2.16 billion in FY2018, driven by improved operational performance, lower tax provisions, and reduced financing charges. The company also continued its share repurchase program, highlighting a commitment to returning value to shareholders. While the company navigates the sale of its automotive battery division, it remains focused on innovation and growth within its intelligent building solutions, aiming to capitalize on trends in smart cities and energy efficiency.

Financial Highlights

53 data points
Beta

Revenue

$23.40B

32.8% Gross Margin

Net Income

$2.16B

9.2% Net Margin

EPS (Diluted)

$2.32

Total Assets

$48.80B

Cash & Equivalents

$185.00M

Free Cash Flow

$1.52B

Financial Statements
Beta
Revenue$23.40B
Cost of Revenue$15.73B
Gross Profit$7.67B
R&D Expenses$310.00M
SG&A Expenses$5.64B
Operating Income$1.18B
Interest Expense$409.00M
Net Income$2.16B
EPS (Basic)$2.34
EPS (Diluted)$2.32
Shares Outstanding (Basic)925.70M
Shares Outstanding (Diluted)931.70M

Key Highlights

  • 1Johnson Controls International plc (JCI) announced the sale of its Power Solutions business for $13.2 billion, expected to close by June 30, 2019, with net proceeds of $11.4 billion.
  • 2The Building Technologies & Solutions (Buildings) segment generated 75% of the company's consolidated net sales in FY2018, with total segment sales of $23.4 billion, up 2% from the prior year.
  • 3Net income attributable to Johnson Controls increased by 34% to $2.16 billion in FY2018, compared to $1.61 billion in FY2017.
  • 4Diluted earnings per share (EPS) increased to $2.32 in FY2018 from $1.71 in FY2017.
  • 5The company repurchased approximately $300 million of its shares during FY2018 and had approximately $1.0 billion remaining under its share repurchase program as of September 30, 2018.
  • 6Effective tax rate decreased significantly to 18% in FY2018 from 28% in FY2017, largely due to U.S. Tax Reform impacts.
  • 7Restructuring and impairment costs decreased by 28% in FY2018 to $263 million, reflecting ongoing efforts to align resources with growth strategies.

Frequently Asked Questions

Following the sale of its Power Solutions business, Johnson Controls is strategically focusing on its Building Technologies & Solutions segment. This segment, which includes HVAC, controls, security, and fire protection systems, is targeted for growth, leveraging trends in smart buildings, energy efficiency, and integrated infrastructure solutions for smart cities.

In fiscal year 2018, Johnson Controls reported a 34% increase in net income attributable to shareholders, reaching $2.16 billion, with diluted EPS rising to $2.32 from $1.71 in fiscal year 2017. This improvement was driven by growth in the Buildings segment, favorable foreign currency translation, and a significant decrease in the effective tax rate following U.S. Tax Reform.

Johnson Controls continues to prioritize returning value to shareholders through its share repurchase program. In fiscal year 2018, the company repurchased approximately $300 million of its shares, with about $1.0 billion remaining available under its authorization. The company also paid dividends, increasing its annual dividend per share to $1.04 in FY2018.

The company is involved in several legal and environmental matters, including asbestos-related litigation and lawsuits concerning Aqueous Film-Forming Foam (AFFF) products. While the company is vigorously defending these claims and believes it has meritorious defenses, the ultimate financial exposure from these matters is difficult to predict, and there is no assurance that such exposure will not be material.