Summary
Johnson Controls International plc (JCI) reported its financial results for the third quarter and first nine months of fiscal year 2006. The company experienced a 5.1% increase in net revenue for the quarter, reaching $10.5 billion, and a 2.8% increase for the nine-month period to $30.2 billion. However, operating income saw a significant decline of 28.4% for the quarter to $1.33 billion and 16.5% for the nine months to $3.97 billion, primarily due to a $100 million charge related to a Voluntary Replacement Program for fire sprinkler heads, incremental stock option expenses from the adoption of SFAS No. 123R, and separation costs related to the planned split of the company. The company also announced its intention to separate into three independent publicly traded companies: Tyco Healthcare, Tyco Electronics, and a combination of Tyco Fire and Security and Engineered Products and Services, expected in the first quarter of calendar 2007. Financially, JCI continued to focus on strengthening its balance sheet and returning capital to shareholders. During the first nine months of 2006, debt was reduced by $1.9 billion through debt exchanges and note repayments, and $1.9 billion was used for share repurchases. The company's cash position decreased to $2.1 billion from $3.2 billion at the beginning of the fiscal year. Significant legal matters, including class-action lawsuits and governmental investigations related to past corporate actions, continue to be a factor, with the company unable to estimate the ultimate liability for many of these items.
Key Highlights
- 1Net revenue increased by 5.1% year-over-year to $10.5 billion for the third quarter and by 2.8% to $30.2 billion for the nine-month period ended June 30, 2006.
- 2Operating income declined significantly by 28.4% for the quarter to $1.33 billion and by 16.5% for the nine months to $3.97 billion.
- 3A $100 million charge related to a Voluntary Replacement Program for fire sprinkler heads impacted operating income.
- 4The adoption of SFAS No. 123R for share-based payments resulted in incremental compensation expenses of $38 million for the quarter and $132 million for the nine months.
- 5The company announced a plan to separate into three independent publicly traded companies, expected in the first quarter of calendar 2007, with associated separation costs of $56 million for the quarter and $89 million for the nine months.
- 6Total debt decreased by $2.5 billion in the nine months ended June 30, 2006, to $10.0 billion, due to debt repayments and convertible debt conversion.
- 7The company repurchased $1.9 billion of its common shares in the first nine months of fiscal 2006.