10-QPeriod: Q2 FY2016

Johnson Controls International plc Quarterly Report for Q2 Ended Mar 25, 2016

Filed April 29, 2016For Securities:JCI

Summary

Johnson Controls International plc (JCI) reported its third quarter 2016 results, reflecting a period marked by significant strategic developments and ongoing operational performance. Net revenue for the quarter decreased by 4.1% year-over-year to $2.33 billion, influenced by unfavorable foreign currency impacts and divestitures, although acquisitions provided a partial offset. On an organic basis, net revenue saw a slight decline of 1.0%. The most prominent event during this period was the announcement and progression of the merger with Johnson Controls, Inc. This significant transaction is expected to create a larger, more diversified entity. While the merger introduces associated costs and integration challenges, it also presents opportunities for synergies and expanded market reach. The company is actively managing its operations amidst this transformative period, focusing on efficiency and strategic alignment.

Financial Highlights

54 data points
Beta

Revenue

$4.73B

27.2% Gross Margin

Net Income

-$530.00M

-11.2% Net Margin

EPS (Diluted)

$-0.81

Total Assets

$11.61B

Cash & Equivalents

$292.00M

Free Cash Flow

$634.00M

Financial Statements
Beta
Revenue$4.73B
Cost of Revenue$3.45B
Gross Profit$1.29B
SG&A Expenses$899.00M
Operating Income$225.00M
Interest Expense$65.00M
Net Income-$530.00M
EPS (Basic)$-0.82
EPS (Diluted)$-0.81
Shares Outstanding (Basic)648.20M
Shares Outstanding (Diluted)652.10M

Key Highlights

  • 1Net revenue for the quarter decreased by 4.1% to $2.33 billion compared to the prior year, with organic revenue declining by 1.0%.
  • 2The company incurred $26 million in merger costs related to the proposed combination with Johnson Controls.
  • 3Operating income saw a slight increase of 1.8% to $225 million, driven by reduced restructuring charges and legacy legal gains, partially offset by merger costs.
  • 4The ROW Integrated Solutions & Services segment experienced a significant revenue decline of 9.3%, largely due to foreign currency impacts, divestitures, and challenges in the high-hazard industrial sector.
  • 5The NA Integrated Solutions & Services segment showed modest growth with a net revenue increase of 0.3%, driven by integrated solutions revenue.
  • 6The company entered into a $4 billion term loan facility and a $1 billion revolving credit agreement to finance the pending merger with Johnson Controls.
  • 7A tentative settlement with the IRS regarding intercompany debt issues was reached, potentially resulting in a cash payment between $475 million and $525 million, shared among Tyco, Covidien, and TE Connectivity.

Frequently Asked Questions

The most significant event is the announcement and progression of the proposed merger with Johnson Controls, Inc. This transaction is expected to combine the two companies, creating a larger, diversified entity and leading to a name change for Tyco International plc to Johnson Controls plc.

Net revenue for the quarter decreased by 4.1% to $2.33 billion compared to the same period last year. This decline was attributed to unfavorable foreign currency exchange rates, divestitures, and a slight organic revenue decrease of 1.0%.

The company incurred $26 million in merger costs during the quarter, primarily related to financing, advisory, and professional fees. Additionally, JCI has secured a $4 billion term loan facility and a $1 billion revolving credit agreement to fund the cash portion of the merger consideration.

Yes, the company reached a tentative settlement with the IRS for intercompany debt issues dating back to 1997-2000, which is subject to further IRS review and congressional approval. The potential cash payment is estimated between $475 million and $525 million, shared among specific entities. A class action lawsuit related to the proposed merger was also filed, which the company believes to be without merit.