10-QPeriod: Q1 FY2013

Johnson Controls International plc Quarterly Report for Q1 Ended Dec 28, 2012

Filed January 29, 2013For Securities:JCI

Summary

Johnson Controls International plc (JCI), for the fiscal quarter ended December 28, 2012, reported net revenue of $2.6 billion, a 4.9% increase compared to the prior year quarter. This growth was driven by its Global Products segment and a 1.2% organic revenue growth, partially offset by unfavorable foreign currency impacts. Operating income saw a significant rise of 26.3% to $235 million, reflecting improved segment performance and lower corporate expenses following the 2012 Separation. The company's strategic separation of its former flow control and North American residential security businesses as discontinued operations is now fully reflected in the current and prior period comparables. The core continuing operations are now organized into three segments: North America Installation & Services, Rest of World Installation & Services, and Global Products. Despite challenges in specific segments like organic revenue decline in ROW Installation & Services and increased investment costs in Global Products impacting its operating margin, the overall financial performance demonstrates resilience and progress in restructuring efforts.

Financial Highlights

52 data points
Beta

Revenue

$2.60B

61.4% Gross Margin

Net Income

$163.00M

6.3% Net Margin

EPS (Diluted)

$0.34

Total Assets

$12.13B

Cash & Equivalents

$501.00M

Free Cash Flow

-$39.00M

Financial Statements
Beta
Revenue$2.60B
Cost of Revenue$1.00B
Gross Profit$1.60B
SG&A Expenses$682.00M
Operating Income$235.00M
Interest Expense$24.00M
Net Income$163.00M
EPS (Basic)$0.35
EPS (Diluted)$0.34
Shares Outstanding (Basic)466.00M
Shares Outstanding (Diluted)473.00M

Key Highlights

  • 1Net revenue for the quarter was $2.6 billion, up 4.9% year-over-year, with organic revenue growth of 1.2%.
  • 2Operating income increased significantly by 26.3% to $235 million, and operating margin improved to 9.0% from 7.5%.
  • 3The company completed the 2012 Separation, with former flow control and North American residential security businesses classified as discontinued operations.
  • 4Interest expense decreased significantly due to debt redemptions related to the 2012 Separation.
  • 5The NA Installation & Services segment showed strong operating income growth, driven by higher service revenue mix and efficiency improvements.
  • 6Global Products segment experienced robust revenue growth (16.1%) but a slight decrease in operating income due to increased R&D and SG&A investments.
  • 7Cash and cash equivalents decreased to $501 million from $844 million, primarily due to operational activities and investing cash outflows.

Frequently Asked Questions

The 2012 Separation, which involved the spin-off of ADT and Pentair, led to the classification of these former businesses as discontinued operations in all periods presented. This restructuring impacted the comparability of prior periods and has resulted in a smaller corporate footprint, contributing to lower corporate expenses in the current quarter.

Net revenue grew in all segments on a reported basis. NA Installation & Services saw 1.5% growth driven by service revenue. ROW Installation & Services grew 3.2% but had a slight organic decline of 0.4%. Global Products experienced the strongest growth at 16.1%, fueled by new products and acquisitions, although its operating margin decreased due to increased investments.

The company believes its cash position, availability under its credit facility, commercial paper program, and cash generated from operations are sufficient to meet its foreseeable needs. Cash and cash equivalents decreased to $501 million due to operating and investing activities, and the company continues to balance capital allocation through investments, dividends, and share repurchases.

The company is involved in legacy legal matters related to former management, environmental remediation, asbestos claims, and tax litigation. While most of these are being actively managed or contested, the company notes that the ultimate resolution of tax matters is uncertain and could have a material adverse impact. Provisions have been made for estimated environmental costs.