10-QPeriod: Q2 FY2010

Johnson Controls International plc Quarterly Report for Q2 Ended Mar 26, 2010

Filed April 27, 2010For Securities:JCI

Summary

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 billion, 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 billion, 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.

Financial Highlights

51 data points
Beta

Revenue

$4.09B

36.4% Gross Margin

Net Income

$310.00M

7.6% Net Margin

EPS (Diluted)

$0.65

Total Assets

$25.47B

Cash & Equivalents

$2.73B

Free Cash Flow

$632.00M

Financial Statements
Beta
Revenue$4.09B
Cost of Revenue$2.60B
Gross Profit$1.49B
SG&A Expenses$1.09B
Operating Income$425.00M
Interest Expense$75.00M
Net Income$310.00M
EPS (Basic)$0.65
EPS (Diluted)$0.65
Shares Outstanding (Basic)476.00M
Shares Outstanding (Diluted)478.00M

Key Highlights

  • 1Net 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.
  • 2Operating 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.
  • 3The 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.
  • 4For 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.
  • 5Operating income for the six months improved to $841 million, from an operating loss of $2.14 billion in the prior year period.
  • 6The company's cash and cash equivalents increased to $2.73 billion as of March 26, 2010, from $2.35 billion at September 25, 2009.
  • 7Standard & Poor's Rating Services raised the company's long-term debt rating to A- from BBB+ on April 12, 2010.

Frequently Asked Questions

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.

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.

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.

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.