10-QPeriod: Q3 FY2018

Johnson Controls International plc Quarterly Report for Q3 Ended Jun 30, 2018

Filed August 2, 2018For Securities:JCI

Summary

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.

Financial Highlights

53 data points
Beta

Revenue

$6.28B

33.2% Gross Margin

Net Income

$723.00M

11.5% Net Margin

EPS (Diluted)

$0.78

Total Assets

$49.41B

Cash & Equivalents

$267.00M

Free Cash Flow

$728.00M

Financial Statements
Beta
Revenue$6.28B
Cost of Revenue$4.19B
Gross Profit$2.09B
SG&A Expenses$1.44B
Operating Income$583.00M
Interest Expense$106.00M
Net Income$723.00M
EPS (Basic)$0.78
EPS (Diluted)$0.78
Shares Outstanding (Basic)925.60M
Shares Outstanding (Diluted)930.70M

Key Highlights

  • 1Consolidated 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.
  • 2Net income attributable to Johnson Controls significantly increased by 30% for the three months and 89% for the nine months ended June 30, 2018.
  • 3Diluted 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.
  • 4Selling, general, and administrative expenses decreased by 5% for the three months and 8% for the nine months, reflecting productivity savings and cost synergies.
  • 5Total 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%.
  • 6The 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.
  • 7Significant restructuring and impairment costs decreased by 30% for the nine months ended June 30, 2018, indicating progress in cost optimization.

Frequently Asked Questions

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.

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.

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.

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.