01—Abstract
Summary
Summary of the 10-Q filed August 3, 2017. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc reported its third-quarter fiscal 2017 results, with total net sales increasing by 49% year-over-year to $7.68 billiona, largely driven by the significant contribution from the Tyco merger completed in the prior year.
The company demonstrated improved profitability, with gross profit increasing by 71%b and net income attributable to Johnson Controls rising by 45%. This performance was supported by strong growth in the Building Technologies & Solutions segment, particularly in Asia, and continued solid performance in Power Solutions. The company is actively managing its restructuring efforts and has reaffirmed its liquidity position, indicating adequate resources to meet projected needs.
Key strategic developments during the quarter included ongoing integration efforts post-Tyco merger and a focus on streamlining operations. The company also provided an updated outlook on its restructuring plans, which are expected to yield significant annual cost reductions. Despite some headwinds from foreign currency fluctuations, the overall financial results indicate a positive trajectory following the transformative merger, positioning the company for continued operational improvements and value creation.
02—Key points
Key Highlights
- Total net sales increased by 49% to $7.68 billion for the three months ended June 30, 2017, significantly boosted by the Tyco merger.
- Gross profit increased by 71% to $2.43 billion, with gross profit margin improving to 31.6% from 27.6% in the prior year, largely due to merger synergies.
- Net income attributable to Johnson Controls grew by 45% to $555 million.
- Diluted earnings per share remained stable at $0.59 for the three months ended June 30, 2017.
- The Building Technologies & Solutions segment showed strong revenue growth, with the Tyco segment contributing significantly post-merger.
- Power Solutions segment net sales increased by 6% to $1.61 billion.
- Operating cash flow was negative at $(1.32) billion for the nine months ended June 30, 2017, primarily impacted by tax payments related to the Adient spin-off and working capital changes.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2017, Johnson Controls International plc kept $0.09.
- Revenue$6.17B100.0%
- Cost of revenue−$3.74B60.6%
- Gross profit$2.43B39.4%
- Operating costs−$1.65B26.8%
- Operating income$779.0M12.6%
- Interest, other & tax−$224.0M3.6%
- Net income$555.0M9.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed August 3, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $6.17B$5.15B | +19.8% |
| Cost of Revenue | $5.25B$3.73B | +40.7% |
| Gross Profit | $2.43B$1.42B | +71.0% |
| SG&A Expenses | $1.61B$895.00M | +79.8% |
| Operating Income | $779.00M$236.00M | +230.1% |
| Interest Expense | $115.00M$66.00M | +74.2% |
| Net Income | $555.00M$383.00M | +44.9% |
| EPS (Basic) | $0.59$0.59 | 0.0% |
| EPS (Diluted) | $0.59$0.59 | 0.0% |
| Shares Outstanding (Basic) | 935.40M644.90M | +45.0% |
| Shares Outstanding (Diluted) | 944.40M649.70M | +45.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in net sales?
The primary driver of the significant increase in net sales for the three months ended June 30, 2017, was the impact of the Tyco merger, which was completed in the prior fiscal year. This merger substantially increased the company's revenue base, particularly within the Building Technologies & Solutions segment.
How did the company's profitability change in this quarter?
Profitability improved significantly. Gross profit increased by 71% and the gross profit margin expanded to 31.6% from 27.6% year-over-year, largely due to the integration of Tyco and associated synergies. Net income attributable to Johnson Controls also saw a substantial increase of 45%.
What is the current status of the company's restructuring efforts?
Johnson Controls continued to implement significant restructuring plans in fiscal 2017, recording $226 million in restructuring and impairment costs for the nine months ended June 30, 2017. These actions are aimed at cost reduction initiatives across various business units and corporate functions, with the company expecting annual operating cost reductions of approximately $225 million upon full completion, primarily realized in fiscal 2018.
What is the company's liquidity and cash flow situation?
The company believes its capital resources and liquidity are adequate. However, operating cash flow was negative at $(1.32) billion for the nine months ended June 30, 2017, largely due to higher income tax payments related to the Adient spin-off and changes in working capital. Financing activities provided significant positive cash flow, primarily from debt issuances and spin-off related proceeds.
06—Continue