Johnson Controls International plc is recording a one-time net charge of $200 million following the passage of federal tax reform, but a spokesman said after the law was passed the company has no plans to change its domicile.
Johnson Controls is operated from offices in Glendale but is based for tax purposes in Cork, Ireland. The company moved its official headquarters or domicile to Ireland as part of a merger between Johnson Controls Inc. and Tyco International that closed in 2016. When the deal was first announced, the company said it would save $150 million annually in taxes by being based in Ireland.
When federal tax changes dropped the U.S. corporate tax rate from 35 percent to 21 percent, BizTimes asked Johnson Controls if the lower rate would prompt a return of the company’s headquarters to Wisconsin. Fraser Engerman, a JCI spokesman, said at the time the company had no plans to change, but declined to comment further citing a company quite period.
“We have no plans at this time to change the domicile of our company,” he reiterated in an email Wednesday.
As part of its earnings report for the first quarter of fiscal 2018, Johnson Controls is recording a net tax charge of $200 million that will be payable over eight years. The charge includes about $300 million in increased taxes on foreign earnings and a benefit of $100 million on the remeasurement of the company’s U.S. deferred tax liabilities.
The company projected its fiscal 2018 effective tax rate would remain at 14 percent, but projected its fiscal 2019 tax rate would increase to 16 percent to 18 percent as more provisions of the legislation become effective.
The tax charge cut into Johnson Controls’ earnings for the quarter, which were down from 35 to 25 cents per diluted share. Adjusted earnings from continuing operations were up 1 cent to 54 cents per share.
Johnson Controls also reported revenue growth of 5 percent to $7.4 billion. After accounting for merges and acquisitions, foreign currency exchange and lead prices, sales were up 3 percent organically.
“We are seeing solid traction around our efforts to increase sales capacity and gross margins on orders are beginning to improve, both of which support our confidence in delivering fiscal 2018 adjusted earnings per share guidance of $2.75 to $2.85,” said George Oliver, Johnson Controls chairman and chief executive officer.
Oliver, who announced plans in November to add 400 sales position in fiscal 2018, said the company had added 180 sales people in the first quarter to go with about 50 added in the fourth quarter of fiscal 2017.
He reiterated the company is focused on improving its profitability and would focus on controlling things within its power to control.
“We have made the structural changes necessary to make sure the focus on execution is felt deep into the organization,” he said.
