01—Abstract
Summary
Summary of the 10-Q filed August 4, 2022. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) reported its results for the third quarter and first nine months of fiscal year 2022, ending June 30, 2022.
For the quarter, net sales increased by 4% to $6.614 billiona, driven by higher organic sales and acquisitions, partially offset by foreign currency impacts. However, net income attributable to Johnson Controls saw a significant decrease of 34% to $379 million, or $0.55 per diluted share, compared to the prior year. This decline was attributed to increased Selling, General, and Administrative (SG&A) expenses, higher restructuring and impairment costs, and unfavorable foreign currency translation, despite a lower income tax provision.
For the nine-month period, net sales rose by 8% to $18.574 billionb, also benefiting from organic growth and acquisitions but impacted by foreign currency headwinds. Net income attributable to Johnson Controls declined 44% to $771 million, or $1.10 per diluted share.
The company highlighted ongoing efforts to mitigate supply chain disruptions and cost inflation, which have impacted margins. Management believes the company's capital resources and liquidity are adequate to meet its projected needs.
02—Key points
Key Highlights
- Net sales for the third quarter increased by 4% to $6.614 billion, driven by organic sales growth and acquisitions, despite unfavorable foreign currency translation.
- Net income attributable to Johnson Controls decreased by 34% to $379 million for the quarter, impacted by higher SG&A expenses and restructuring costs.
- Diluted EPS for the quarter was $0.55, down from $0.80 in the prior year's quarter.
- For the nine-month period, net sales grew by 8% to $18.574 billion, with similar drivers as the quarterly results.
- Nine-month net income attributable to Johnson Controls decreased by 44% to $771 million, with diluted EPS at $1.10.
- The company is actively managing supply chain disruptions and cost inflation, which have impacted gross profit margins.
- Johnson Controls has approximately $3.6 billion remaining under its share repurchase authorization as of June 30, 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2022, Johnson Controls International plc kept $0.06.
- Revenue$6.61B100.0%
- Cost of revenue−$4.41B66.7%
- Gross profit$2.20B33.3%
- Operating costs−$1.43B21.6%
- Operating income$771.0M11.7%
- Interest, other & tax−$392.0M5.9%
- Net income$379.0M5.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2022filed August 4, 2022Financial Statements
Q3 FY2022 against Q3 FY2021
| Line item | Q3 FY2022Q3 FY2021 | Change |
|---|---|---|
| Revenue | $6.61B$6.34B | +4.3% |
| Cost of Revenue | $4.41B$4.14B | +6.5% |
| Gross Profit | $2.20B$2.20B | +0.1% |
| SG&A Expenses | $1.59B$1.37B | +16.2% |
| Operating Income | $771.00M$1.24B | −38.0% |
| Interest Expense | $54.00M$55.00M | −1.8% |
| Net Income | $379.00M$574.00M | −34.0% |
| EPS (Basic) | $0.55$0.80 | −31.2% |
| EPS (Diluted) | $0.55$0.80 | −31.2% |
| Shares Outstanding (Basic) | 692.20M714.50M | −3.1% |
| Shares Outstanding (Diluted) | 694.90M719.70M | −3.4% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the year-over-year decrease in net income?
The decrease in net income for the quarter was primarily driven by higher Selling, General, and Administrative (SG&A) expenses, increased restructuring and impairment costs, and unfavorable foreign currency translation. These factors outweighed the benefits of higher gross profit and a lower income tax provision.
How is Johnson Controls addressing supply chain disruptions and cost inflation?
Johnson Controls is implementing strategies to mitigate these challenges, including expanding and redistributing its supplier network, supplier financing, price increases, and productivity improvements. While these actions have helped offset some impacts, the company notes that supply chain inefficiencies and price/cost pressures continue to affect margins.
What is the status of Johnson Controls' share repurchase program?
As of June 30, 2022, Johnson Controls had approximately $3.6 billion remaining under its share repurchase authorization. The company repurchased $392 million of its ordinary shares during the third quarter of fiscal year 2022.
Are there any significant environmental or legal contingencies that investors should be aware of?
Johnson Controls is involved in several significant legal and environmental matters. Notably, the company faces litigation related to PFAS contamination from firefighting foam (AFFF), environmental remediation at facilities in Wisconsin (including PFAS and arsenic), and asbestos claims. While the company is defending itself vigorously and believes it has meritorious defenses, the ultimate outcome and financial exposure for these matters remain uncertain and could potentially be material.
06—Continue