Johnson Controls International plc Quarterly Report for Q1 Ended Dec 31, 2017

Summary

Johnson Controls International plc (JCI) reported a decrease in net income attributable to the company for the quarter ending December 31, 2017, primarily due to increased restructuring and impairment costs, along with a higher income tax provision stemming from discrete tax charges related to the recent U.S. Tax Reform. Despite these factors, consolidated net sales saw a 5% increase, driven by favorable foreign currency translation, higher sales in the Power Solutions business, and growth in Building Technologies & Solutions segments. The company also noted a significant reduction in selling, general, and administrative expenses due to a gain on business divestiture and productivity savings. Key financial shifts include a substantial increase in cash provided by investing activities, largely due to proceeds from the Scott Safety divestiture, and a decrease in cash used by operating activities compared to the prior year, which was impacted by significant prior-year tax payments related to the Adient spin-off. The company's net debt decreased by 10%, reflecting a stronger balance sheet with a lower net debt to total capitalization ratio. Management remains confident in the company's liquidity and capital resources to meet future obligations.

Key Highlights

• 1Consolidated net sales increased by 5% to $7.435 billion, driven by foreign currency translation and growth in both the Power Solutions and Building Technologies & Solutions segments.
• 2Net income attributable to Johnson Controls decreased by 30% to $230 million, largely due to higher restructuring and impairment costs ($158 million) and a significant increase in the income tax provision (from a benefit of $27 million to a provision of $267 million).
• 3Selling, General, and Administrative (SG&A) expenses decreased by 10% to $1.417 billion, aided by a $114 million gain on the sale of the Scott Safety business and productivity savings.
• 4Cash provided by investing activities increased significantly to $1.774 billion, primarily due to $2.011 billion in proceeds from the divestiture of the Scott Safety business.
• 5Cash used by operating activities decreased substantially from $1.885 billion in the prior year to $129 million, due to favorable prior-year tax payments related to the Adient spin-off.
• 6Total debt decreased by 8% to $12.500 billion, leading to a 10% reduction in net debt to $11.948 billion.
• 7The company repurchased approximately $150 million of its ordinary shares during the quarter as part of its share repurchase program.

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