01—Abstract
Summary
Summary of the 10-Q filed April 27, 2010. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) reported its financial results for the quarter and six months ended March 26, 2010.
For the quarter, the company saw a slight increase in net revenue of 0.5% to $4.17 billiona, driven by favorable foreign currency fluctuations partially offset by volume declines and weakness in commercial markets. Operating income significantly improved to $427 million, a substantial rebound from the $2.55 billion operating loss in the prior year quarter, largely due to the absence of substantial goodwill and intangible asset impairment charges recorded in fiscal 2009. The company also announced its agreement to acquire Brink's Home Security Holdings, Inc. for approximately $2.0 billion, which is expected to be financed through a mix of cash and Tyco common shares and will be integrated into the ADT Worldwide segment.
For the six-month period, net revenue slightly decreased by 1.9% to $8.42 billionb, also impacted by unfavorable selling prices and market weakness, but cushioned by favorable currency movements. Operating income for the six months improved significantly to $841 million, compared to an operating loss of $2.14 billion in the prior year period, again benefiting from the lack of significant impairment charges and cost containment measures. The company maintained a strong cash position of $2.7 billion and focused on funding internal growth, strategic acquisitions like BHS, and returning capital to shareholders.
02—Key points
Key Highlights
- Net revenue for the quarter ended March 26, 2010, was $4.17 billion, a 0.5% increase year-over-year, primarily driven by favorable foreign currency exchange rates.
- Operating income for the quarter was $427 million, a significant improvement from the operating loss of $2.55 billion in the prior year quarter, due to the absence of large impairment charges.
- The company announced an agreement to acquire Brink's Home Security Holdings, Inc. (BHS) for approximately $2.0 billion, to be financed with cash and Tyco common shares.
- For the six months ended March 26, 2010, net revenue was $8.42 billion, a 1.9% decrease year-over-year, impacted by lower selling prices and market weakness, partially offset by currency benefits.
- Operating income for the six months improved to $841 million, from an operating loss of $2.14 billion in the prior year period.
- The company's cash and cash equivalents increased to $2.73 billion as of March 26, 2010, from $2.35 billion at September 25, 2009.
- Standard & Poor's Rating Services raised the company's long-term debt rating to A- from BBB+ on April 12, 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2010, Johnson Controls International plc kept $0.08.
- Revenue$4.09B100.0%
- Cost of revenue−$2.60B63.6%
- Gross profit$1.49B36.4%
- Operating costs−$1.07B26.0%
- Operating income$425.0M10.4%
- Interest, other & tax−$115.0M2.8%
- Net income$310.0M7.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2010filed April 27, 2010Financial Statements
Q2 FY2010 against Q2 FY2009
| Line item | Q2 FY2010Q2 FY2009 | Change |
|---|---|---|
| Revenue | $4.09B$4.07B | +0.6% |
| Cost of Revenue | $2.60B$1.86B | +39.9% |
| Gross Profit | $1.49B$1.42B | +5.2% |
| SG&A Expenses | $1.09B$1.20B | −8.8% |
| Operating Income | $425.00M-$2.55B | +116.6% |
| Interest Expense | $75.00M$78.00M | −3.8% |
| Net Income | $310.00M-$2.57B | +112.1% |
| EPS (Basic) | $0.65$-5.42 | +112.0% |
| EPS (Diluted) | $0.65$-5.42 | +112.0% |
| Shares Outstanding (Basic) | 476.00M473.00M | +0.6% |
| Shares Outstanding (Diluted) | 478.00M473.00M | +1.1% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant improvement in operating income compared to the prior year's quarter?
The significant improvement in operating income from a loss of $2.55 billion to income of $427 million for the quarter ended March 26, 2010, was largely due to the absence of substantial goodwill and intangible asset impairment charges. In the prior year quarter (March 27, 2009), the company recorded impairment charges totaling approximately $2.7 billion.
What are the key terms of the proposed acquisition of Brink's Home Security Holdings, Inc. (BHS)?
Tyco International Ltd. entered into a definitive agreement to acquire BHS for approximately $2.0 billion, or $42.50 per share. The acquisition is expected to be financed with up to approximately $600 million in cash and the issuance of Tyco common shares. The transaction is expected to close shortly after the BHS shareholder meeting scheduled for May 12, 2010, and BHS will be combined with Tyco's ADT Worldwide segment.
How did foreign currency fluctuations impact the company's results?
Favorable changes in foreign currency exchange rates had a significant positive impact on the company's results. For the quarter ended March 26, 2010, favorable currency movements contributed $275 million to net revenue and $36 million to operating income. For the six-month period, the impact was even larger, with $539 million to net revenue and $70 million to operating income.
What is the company's outlook for capital allocation and future investments?
The company plans to use its strong cash position, which stood at $2.7 billion as of March 26, 2010, to fund internal growth opportunities, improve productivity, make strategic acquisitions (such as BHS), and return capital to shareholders. They also expect to continue portfolio refinement efforts, including potential divestitures of underperforming businesses.
06—Continue