01—Abstract
Summary
Summary of the 10-Q filed August 2, 2018. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc reported solid financial results for the third quarter and nine months ended June 30, 2018.
Net sales saw a notable increase, driven by growth in both the Building Technologies & Solutions and Power Solutions segments, bolstered by favorable foreign currency translation. The company demonstrated improved profitability, with net income attributable to Johnson Controls rising significantly year-over-year.
This was supported by effective cost management, including reduced selling, general, and administrative expenses and lower restructuring costs. The company also maintained a strong liquidity position with a healthy cash flow from operations and a reduced net debt to total capitalization ratio, reflecting its ongoing commitment to financial discipline and strategic operational improvements.
02—Key points
Key Highlights
- Consolidated net sales increased by 6% for the three months and 5% for the nine months ended June 30, 2018, compared to the prior year periods.
- Net income attributable to Johnson Controls significantly increased by 30% for the three months and 89% for the nine months ended June 30, 2018.
- Diluted earnings per share improved to $0.78 for the three months and $1.49 for the nine months ended June 30, 2018, up from $0.59 and $0.78 in the prior year periods, respectively.
- Selling, general, and administrative expenses decreased by 5% for the three months and 8% for the nine months, reflecting productivity savings and cost synergies.
- Total debt decreased by 12% to $11.96 billion as of June 30, 2018, and net debt as a percentage of total capitalization improved to 36.0% from 39.3%.
- The company reported $1.26 billion in cash provided by operating activities for the nine months ended June 30, 2018, a significant improvement from the prior year period.
- Significant restructuring and impairment costs decreased by 30% for the nine months ended June 30, 2018, indicating progress in cost optimization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Johnson Controls International plc kept $0.12.
- Revenue$6.28B100.0%
- Cost of revenue−$4.19B66.8%
- Gross profit$2.09B33.2%
- Operating costs−$1.50B24.0%
- Operating income$583.0M9.3%
- Interest, other & tax$140.0M2.2%
- Net income$723.0M11.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed August 2, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $6.28B$6.17B | +1.8% |
| Cost of Revenue | $4.19B$5.25B | −20.1% |
| Gross Profit | $2.09B$2.43B | −14.1% |
| SG&A Expenses | $1.44B$1.61B | −10.4% |
| Operating Income | $583.00M$779.00M | −25.2% |
| Interest Expense | $106.00M$115.00M | −7.8% |
| Net Income | $723.00M$555.00M | +30.3% |
| EPS (Basic) | $0.78$0.59 | +32.2% |
| EPS (Diluted) | $0.78$0.59 | +32.2% |
| Shares Outstanding (Basic) | 925.60M935.40M | −1.0% |
| Shares Outstanding (Diluted) | 930.70M944.40M | −1.5% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the increase in net sales?
The increase in consolidated net sales was driven by higher sales in both the Building Technologies & Solutions business and the Power Solutions business. Favorable foreign currency translation also contributed to the growth. Higher volumes across segments in Building Technologies & Solutions and favorable pricing and product mix in Power Solutions were key internal drivers.
How did the company manage its expenses?
Johnson Controls effectively managed its expenses, with a notable decrease in selling, general, and administrative (SG&A) expenses due to productivity savings, cost synergies, and business divestitures. Restructuring and impairment costs also decreased significantly, indicating progress in operational efficiency initiatives.
What is the company's financial position regarding debt and liquidity?
The company's financial position shows improvement. Total debt decreased, and consequently, net debt as a percentage of total capitalization improved. Cash flow from operating activities was strong, and the company believes its capital resources and liquidity are adequate to meet its projected needs for the foreseeable future.
What impact did the US Tax Reform have on the company's financial results?
The US Tax Reform enacted in December 2017 had a mixed impact. The company recorded a discrete non-cash tax benefit of $101 million due to the remeasurement of U.S. deferred tax assets and liabilities. However, it also recorded a discrete tax charge of $305 million due to a one-time transition tax on deemed repatriated earnings of certain non-U.S. subsidiaries. The effective tax rate for the nine months ended June 30, 2018, was 22%, higher than the statutory rate primarily due to these discrete tax items.
06—Continue