01—Abstract
Summary
Summary of the 10-Q filed February 1, 2019. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc reported its financial results for the quarter ended December 31, 2018.
The company saw a 3% increase in net sales to $5.46 billiona, driven by organic sales growth across its segments, although this was partially offset by unfavorable foreign currency translation. Net income attributable to Johnson Controls increased significantly by 54% to $355 million, largely due to a substantial decrease in restructuring and impairment costs and a lower income tax provision, despite a reduction in income from discontinued operations. Operationally, the company is progressing with the planned divestiture of its Power Solutions business, which is now classified as a discontinued operation.
This strategic move is a key focus for investors, as it aims to streamline the company's portfolio. While gross profit margin saw a slight decrease, selling, general, and administrative expenses increased, partly due to prior year gains on divestitures. The company maintained a strong liquidity position and remains compliant with its debt covenants.
02—Key points
Key Highlights
- Consolidated net sales increased by 3% to $5.46 billion, driven by organic sales growth across all segments.
- Net income attributable to Johnson Controls saw a significant increase of 54% to $355 million compared to the prior year quarter.
- Restructuring and impairment costs decreased substantially to $0 from $154 million in the prior year period, positively impacting net income.
- The Power Solutions business was classified as a discontinued operation, with the sale to BCP Acquisitions LLC for $13.2 billion expected to close by June 30, 2019.
- The company repurchased $467 million of its shares during the quarter, demonstrating a commitment to returning capital to shareholders.
- Total debt increased by 9% to $11.9 billion, leading to a slight increase in net debt as a percentage of total capitalization to 36.6%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Johnson Controls International plc kept $0.06.
- Revenue$5.46B100.0%
- Cost of revenue−$3.74B68.4%
- Gross profit$1.73B31.6%
- Operating costs−$1.62B29.6%
- Operating income$107.0M2.0%
- Interest, other & tax$248.0M4.5%
- Net income$355.0M6.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed February 1, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $5.46B$5.30B | +3.0% |
| Cost of Revenue | $3.74B$3.61B | +3.7% |
| Gross Profit | $1.73B$1.70B | +1.6% |
| SG&A Expenses | $1.44B$1.32B | +9.0% |
| Operating Income | $107.00M-$75.00M | +242.7% |
| Interest Expense | $91.00M$102.00M | −10.8% |
| Net Income | $355.00M$230.00M | +54.3% |
| EPS (Basic) | $0.39$0.25 | +56.0% |
| EPS (Diluted) | $0.38$0.25 | +52.0% |
| Shares Outstanding (Basic) | 921.60M926.10M | −0.5% |
| Shares Outstanding (Diluted) | 925.20M926.10M | −0.1% |
05—Questions
Frequently Asked Questions
What is the significance of the Power Solutions business being classified as a discontinued operation?
The classification of the Power Solutions business as discontinued reflects Johnson Controls' strategic decision to divest this segment. The sale to BCP Acquisitions LLC for $13.2 billion, expected to close by June 30, 2019, aims to streamline the company's focus on its core buildings and energy platforms, potentially leading to improved operational efficiency and a more focused strategy for investors.
How did restructuring and impairment costs impact the company's profitability this quarter?
Restructuring and impairment costs decreased dramatically to $0 in the current quarter from $154 million in the prior year quarter. This significant reduction was a key driver for the substantial increase in net income attributable to Johnson Controls, as these costs previously weighed heavily on profitability.
What is the company's approach to returning capital to shareholders?
Johnson Controls demonstrated a commitment to returning capital through its share repurchase program. During the quarter, the company repurchased approximately $467 million of its ordinary shares, indicating confidence in its valuation and a desire to enhance shareholder value.
How is the company managing its debt levels?
The company's total debt increased by 9% to $11.9 billion. While this led to an increase in net debt as a percentage of total capitalization to 36.6%, management believes its capital resources and liquidity are adequate to meet projected needs. The company also confirmed compliance with its debt covenants and has revolving credit facilities in place.
06—Continue