10-QPeriod: Q3 FY2009

Johnson Controls International plc Quarterly Report for Q3 Ended Jun 26, 2009

Filed July 30, 2009For Securities:JCI

Summary

Tyco International Ltd. reported a significant decline in net revenue for the third quarter of fiscal year 2009, down 18.7% to $4.24 billion from $5.21 billion in the prior year period. This decrease was largely attributed to unfavorable foreign currency exchange rate movements and lower sales volumes, particularly in the Electrical and Metal Products segment. The company also experienced a substantial drop in operating income, reporting $339 million compared to $577 million in the prior year. A major factor impacting profitability was a significant goodwill and intangible asset impairment charge of $2.7 billion recorded in the nine-month period, reflecting the challenging economic environment. Despite these headwinds, the company continued its restructuring efforts to improve efficiency and manage costs. The company also completed its change of domicile from Bermuda to Switzerland during the quarter. Financially, Tyco reported a net loss of $2.003 billion for the nine months ended June 26, 2009, a sharp contrast to the net income of $1.119 billion in the comparable prior period. This loss was heavily influenced by the aforementioned impairment charges and legacy legal settlements. The company's balance sheet showed total assets of $25.26 billion at June 26, 2009, down from $28.80 billion at September 26, 2008, with a significant reduction in goodwill. Shareholder equity also decreased to $12.6 billion from $15.5 billion. The company maintained a solid cash position, ending the period with $1.78 billion in cash and cash equivalents.

Financial Highlights

49 data points
Beta

Revenue

$4.15B

35.5% Gross Margin

Net Income

$287.00M

6.9% Net Margin

EPS (Diluted)

$0.60

Total Assets

$25.26B

Cash & Equivalents

$1.78B

Free Cash Flow

$641.00M

Financial Statements
Beta
Revenue$4.15B
Cost of Revenue$2.68B
Gross Profit$1.48B
SG&A Expenses$1.11B
Operating Income$334.00M
Interest Expense$74.00M
Net Income$287.00M
EPS (Basic)$0.61
EPS (Diluted)$0.60
Shares Outstanding (Basic)473.00M
Shares Outstanding (Diluted)475.00M

Key Highlights

  • 1Net revenue decreased by 18.7% to $4.24 billion in Q3 FY2009 compared to $5.22 billion in Q3 FY2008, primarily due to unfavorable currency impacts and lower volumes, especially in the Electrical and Metal Products segment.
  • 2Operating income significantly declined to $339 million in Q3 FY2009 from $577 million in Q3 FY2008.
  • 3The company recorded a substantial goodwill and intangible asset impairment charge of $2.7 billion during the nine months ended June 26, 2009, reflecting economic pressures.
  • 4A net loss of $2.003 billion was reported for the nine months ended June 26, 2009, a significant reversal from a net income of $1.119 billion in the same period last year.
  • 5Restructuring charges amounted to $34 million in the quarter and $142 million for the nine months ended June 26, 2009, as the company continued cost-saving initiatives.
  • 6Tyco International completed its change of domicile from Bermuda to Switzerland during the quarter.
  • 7Cash and cash equivalents stood at $1.78 billion at the end of the period, showing a healthy liquidity position.

Frequently Asked Questions

The primary drivers for the revenue decline were unfavorable foreign currency exchange rate movements, which negatively impacted reported revenue by $407 million for the quarter, and lower sales volumes, particularly in the Electrical and Metal Products segment due to a downturn in the non-residential construction market. Weakness in commercial markets, including the retailer end market, also affected the ADT Worldwide and Safety Products segments.

Tyco recorded a significant impairment charge of $2.7 billion due to a substantial decline in the fair value of certain reporting units, primarily in the ADT Worldwide, Fire Protection Services, Electrical and Metal Products, and Safety Products segments. This was triggered by factors such as a slowdown in commercial markets, downward revisions to forecasted results, restructuring actions, and weaker industry outlooks, all exacerbated by the ongoing economic downturn.

Tyco's financial position weakened in some key metrics. Total assets decreased to $25.26 billion from $28.80 billion, largely due to the goodwill impairment. Shareholder equity also declined to $12.6 billion from $15.5 billion, influenced by the net loss and currency impacts. However, the company maintained a strong liquidity position with cash and cash equivalents increasing to $1.78 billion.

The change of domicile from Bermuda to Switzerland was a strategic move completed in March 2009. While it did not materially impact the company's financial statements for this period, it was intended to align the company's legal structure with its global operations. The company noted that dividend payments might be affected by Swiss law and tax considerations until at least January 1, 2011.