01—Abstract
Summary
Summary of the 10-Q filed July 30, 2021. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc reported a strong third quarter for fiscal year 2021, with net sales increasing by 19% to $6.3 billiona compared to the prior year.
This growth was driven by higher organic sales across all segments, particularly in Global Products and Building Solutions EMEA/LA, reflecting a recovery in demand post-COVID-19. Net income attributable to Johnson Controls significantly improved, reaching $574 millionb, a substantial turnaround from a net loss of $182 million in the same period last year. This improvement was largely due to lower restructuring and impairment costs, coupled with robust gross profit growth.
Operationally, the company demonstrated solid execution, with segment EBITA increasing by 22%c year-over-year. Cash flow from operating activities of continuing operations for the nine-month period saw a healthy increase, reflecting effective working capital management.
The company also continued its strategic capital allocation by repurchasing shares, demonstrating confidence in its financial position and future prospects. However, investors should note the ongoing risks related to supply chain disruptions, input cost inflation, and potential environmental liabilities, particularly concerning PFAS, which require ongoing monitoring.
02—Key points
Key Highlights
- Net sales increased 19% to $6.3 billion in Q3 FY2021 compared to Q3 FY2020, driven by strong organic sales growth and recovery post-COVID-19.
- Net income attributable to Johnson Controls swung to a profit of $574 million from a loss of $182 million in the prior year's quarter.
- Segment EBITA increased by 22% to $1.02 billion, showcasing improved profitability across all business segments.
- Cash provided by operating activities from continuing operations for the nine months ended June 30, 2021, was $2.02 billion, up from $1.50 billion in the prior year.
- The company acquired Silent-Aire for approximately $751 million in May 2021, adding goodwill of $235 million to the Global Products segment.
- Effective tax rate for continuing operations for the nine months ended June 30, 2021, was 21%, impacted by valuation allowance adjustments and mark-to-market effects.
- The company maintained a strong liquidity position with $1.5 billion in cash and cash equivalents as of June 30, 2021.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2021, Johnson Controls International plc kept $0.09.
- Revenue$6.34B100.0%
- Cost of revenue−$4.14B65.4%
- Gross profit$2.20B34.6%
- Operating costs−$953.0M15.0%
- Operating income$1.24B19.6%
- Interest, other & tax−$670.0M10.6%
- Net income$574.0M9.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed July 30, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $6.34B$5.34B | +18.7% |
| Cost of Revenue | $4.14B$3.51B | +18.0% |
| Gross Profit | $2.20B$1.83B | +19.9% |
| SG&A Expenses | $1.37B$1.33B | +2.5% |
| Operating Income | $1.24B$190.00M | +554.7% |
| Interest Expense | $55.00M$58.00M | −5.2% |
| Net Income | $574.00M-$182.00M | +415.4% |
| EPS (Basic) | $0.80$-0.24 | +433.3% |
| EPS (Diluted) | $0.80$-0.24 | +433.3% |
| Shares Outstanding (Basic) | 714.50M744.00M | −4.0% |
| Shares Outstanding (Diluted) | 719.70M744.00M | −3.3% |
05—Questions
Frequently Asked Questions
What was the main driver of Johnson Controls' revenue growth in the third quarter of fiscal year 2021?
The primary driver of Johnson Controls' revenue growth in the third quarter of fiscal year 2021 was higher organic sales, which increased by $803 million compared to the prior year. This growth was attributed to increased demand as markets recovered from the COVID-19 pandemic, particularly in the Global Products and Building Solutions segments.
How did Johnson Controls' profitability change in the third quarter of fiscal year 2021 compared to the previous year?
Profitability significantly improved. Net income attributable to Johnson Controls turned positive, reaching $574 million, a substantial increase from the net loss of $182 million reported in the same period of the prior year. This improvement was mainly due to a significant reduction in restructuring and impairment costs and higher gross profits.
What is the company's strategy regarding acquisitions and divestitures?
Johnson Controls continues to make strategic acquisitions and divestitures. Notably, they acquired Silent-Aire for approximately $751 million in May 2021 to bolster their data center cooling solutions. During the first nine months of fiscal 2021, the company also completed other smaller acquisitions and divestitures, primarily within the Building Solutions Asia Pacific segment.
What are the significant ongoing risks or contingencies mentioned in the filing?
Johnson Controls faces several ongoing risks and contingencies. These include potential environmental liabilities, particularly related to PFAS contamination from firefighting foams at the Tyco Fire Products facility, and numerous lawsuits concerning AFFF (Aqueous Film-Forming Foam) products. The company also notes potential risks related to supply chain disruptions, input cost inflation, and the ongoing impact of the COVID-19 pandemic.
06—Continue