01—Abstract
Summary
Summary of the 10-Q filed July 31, 2012. Cited figures are marked; the original filing is the authoritative source.
Tyco International Ltd. reported a net revenue of $4.46 billiona for the third quarter of fiscal year 2012, a 3.9% increase compared to the prior year's quarter, driven by growth across all segments.
However, operating income declined to $367 millionb from $475 million year-over-year, impacted by significant asbestos-related charges and costs associated with the planned 2012 separation of the company into three independent entities. The company also experienced a decrease in net income attributable to common shareholders to $242 million from $359 million. The company is undergoing a significant strategic transformation, including the planned spin-off of its North American residential security business (ADT) and the merger of its flow control business with Pentair.
These separation activities are incurring substantial costs, impacting short-term profitability. Despite these headwinds, the company continues to generate positive operating cash flow and maintains a solid backlog.
02—Key points
Key Highlights
- Net revenue increased by 3.9% to $4.46 billion for the quarter ended June 29, 2012, compared to the prior year period.
- Operating income decreased by 22.7% to $367 million, primarily due to a $114 million charge related to asbestos liabilities and $61 million in separation costs.
- Net income attributable to common shareholders decreased to $242 million, or $0.51 per diluted share, compared to $359 million, or $0.76 per diluted share, in the prior year.
- The company is actively pursuing the separation into three independent entities, with its flow control business set to merge with Pentair.
- Cash flow from operations remained strong, totaling $1.83 billion for the nine months ended June 29, 2012.
- The company's backlog of unfilled orders increased to $10.19 billion as of June 29, 2012, indicating future revenue potential.
- ADT North American Residential saw a 4.2% increase in net revenue, driven by growth in recurring customer revenue.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2012, Johnson Controls International plc kept $0.09.
- Revenue$2.65B100.0%
- Cost of revenue−$1.69B63.5%
- Gross profit$970.0M36.5%
- Operating costs−$852.0M32.1%
- Operating income$118.0M4.4%
- Interest, other & tax$128.0M4.8%
- Net income$246.0M9.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2012filed July 31, 2012Financial Statements
Q3 FY2012 against Q3 FY2011
| Line item | Q3 FY2012Q3 FY2011 | Change |
|---|---|---|
| Revenue | $2.65B$4.29B | −38.1% |
| Cost of Revenue | $1.69B$2.64B | −36.2% |
| Gross Profit | $970.00M$1.65B | −41.3% |
| SG&A Expenses | $829.00M$1.14B | −27.4% |
| Operating Income | $118.00M$475.00M | −75.2% |
| Interest Expense | $59.00M$59.00M | 0.0% |
| Net Income | $246.00M$359.00M | −31.5% |
| EPS (Basic) | $0.53$0.77 | −31.2% |
| EPS (Diluted) | $0.52$0.76 | −31.6% |
| Shares Outstanding (Basic) | 463.00M468.00M | −1.1% |
| Shares Outstanding (Diluted) | 470.00M475.00M | −1.1% |
05—Questions
Frequently Asked Questions
What is the main reason for the decrease in operating income and net income compared to the prior year?
The primary reasons for the decrease in operating income and net income are significant charges related to asbestos liabilities ($114 million) and costs associated with the planned 2012 separation of the company into three independent entities ($61 million). These one-time or significant charges outweighed the revenue growth and operational improvements.
What is the company's strategy regarding its business segments?
Tyco International is in the process of separating into three independent, publicly traded companies: its North American residential security business (ADT), its flow control business (which is merging with Pentair), and its commercial fire and security business. This strategic realignment aims to create more focused and agile businesses.
How is the ongoing separation impacting the company's financials?
The separation process is incurring significant costs, including professional fees and other expenses, which are impacting the operating income. While the long-term benefits of the separation are anticipated, the short-term financial results reflect these associated costs. The company is also managing debt related to these transactions, including tender offers for debt securities.
What is the outlook for revenue and backlog?
The company reported revenue growth across all segments, and its backlog of unfilled orders increased to over $10 billion as of June 29, 2012. This indicates a positive outlook for future revenue, particularly from recurring service contracts within the security and fire protection segments.
06—Continue