10-QPeriod: Q3 FY2012

Johnson Controls International plc Quarterly Report for Q3 Ended Jun 29, 2012

Filed July 31, 2012For Securities:JCI

Summary

Tyco International Ltd. reported a net revenue of $4.46 billion 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 million 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.

Financial Highlights

51 data points
Beta

Revenue

$2.65B

36.5% Gross Margin

Net Income

$246.00M

9.3% Net Margin

EPS (Diluted)

$0.52

Total Assets

$27.07B

Cash & Equivalents

$922.00M

Free Cash Flow

$270.00M

Financial Statements
Beta
Revenue$2.65B
Cost of Revenue$1.69B
Gross Profit$970.00M
SG&A Expenses$829.00M
Operating Income$118.00M
Interest Expense$59.00M
Net Income$246.00M
EPS (Basic)$0.53
EPS (Diluted)$0.52
Shares Outstanding (Basic)463.00M
Shares Outstanding (Diluted)470.00M

Key Highlights

  • 1Net revenue increased by 3.9% to $4.46 billion for the quarter ended June 29, 2012, compared to the prior year period.
  • 2Operating 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.
  • 3Net 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.
  • 4The company is actively pursuing the separation into three independent entities, with its flow control business set to merge with Pentair.
  • 5Cash flow from operations remained strong, totaling $1.83 billion for the nine months ended June 29, 2012.
  • 6The company's backlog of unfilled orders increased to $10.19 billion as of June 29, 2012, indicating future revenue potential.
  • 7ADT North American Residential saw a 4.2% increase in net revenue, driven by growth in recurring customer revenue.

Frequently Asked Questions

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.

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.

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.

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.