01—Abstract
Summary
Summary of the 10-Q filed May 3, 2019. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) reported its financial results for the quarter ended March 31, 2019.
The company demonstrated solid revenue growth, with net sales increasing by 3%a year-over-year for both the three-month and six-month periods, driven by higher organic sales across most segments. A significant event during the period was the classification of the Power Solutions business as a discontinued operation, with the sale to BCP Acquisitions LLC closing on April 30, 2019. This strategic move is expected to allow JCI to focus on its core Building Technologies & Solutions business.
Net income attributable to Johnson Controls saw a substantial increase of 18%b for the quarter and 30% year-to-date, reflecting improved operational efficiency, lower restructuring costs compared to the prior year, and the positive impact of discontinued operations. The company also continued its commitment to shareholder returns through share repurchases and dividends. Despite some headwinds like unfavorable foreign currency translation impacts and increased inventory levels, the company maintained adequate liquidity and strong capital resources, positioning itself for future growth and strategic focus on intelligent buildings and energy solutions.
02—Key points
Key Highlights
- Consolidated net sales increased by 3% year-over-year for both the three and six months ended March 31, 2019, reaching $5.8 billion and $11.2 billion, respectively.
- Net income attributable to Johnson Controls surged by 18% to $515 million for the quarter and 30% to $870 million year-to-date, driven by operational improvements and discontinued operations.
- The Power Solutions business was classified as a discontinued operation, with its sale to BCP Acquisitions LLC closing on April 30, 2019, for $13.2 billion.
- Total debt increased by 13% to $12.4 billion as of March 31, 2019, with net debt increasing to $12.1 billion, but the company maintained adequate liquidity and adequate capital resources.
- Selling, general, and administrative (SG&A) expenses decreased by 2% for the quarter, attributed to productivity savings and cost synergies.
- The company continued its robust share repurchase program, buying back $1 billion worth of shares in the first six months of fiscal 2019, with an additional $8.5 billion authorization upon the completion of the Power Solutions sale.
- Diluted earnings per share (EPS) improved to $0.57 for the quarter and $0.95 year-to-date, up from $0.47 and $0.72 in the prior year periods, respectively.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2019, Johnson Controls International plc kept $0.09.
- Revenue$5.78B100.0%
- Cost of revenue−$3.94B68.1%
- Gross profit$1.84B31.9%
- Operating costs−$1.50B25.9%
- Operating income$347.0M6.0%
- Interest, other & tax$168.0M2.9%
- Net income$515.0M8.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed May 3, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $5.78B$5.63B | +2.6% |
| Cost of Revenue | $3.94B$3.81B | +3.4% |
| Gross Profit | $1.84B$1.82B | +1.1% |
| SG&A Expenses | $1.46B$1.49B | −2.1% |
| Operating Income | $347.00M$109.00M | +218.3% |
| Interest Expense | $97.00M$99.00M | −2.0% |
| Net Income | $515.00M$438.00M | +17.6% |
| EPS (Basic) | $0.57$0.47 | +21.3% |
| EPS (Diluted) | $0.57$0.47 | +21.3% |
| Shares Outstanding (Basic) | 902.50M926.20M | −2.6% |
| Shares Outstanding (Diluted) | 905.90M932.50M | −2.9% |
05—Questions
Frequently Asked Questions
What is the impact of the Power Solutions business divestiture on Johnson Controls' financial statements?
The Power Solutions business has been classified as a discontinued operation starting in the first quarter of fiscal 2019. Its historical financial results are reported separately. The sale of this business for $13.2 billion closed on April 30, 2019, with net cash proceeds of $11.6 billion after taxes and expenses. This divestiture allows Johnson Controls to strategically focus on its core Building Technologies & Solutions segment.
How did the company's revenue performance fare in the quarter, and what were the key drivers?
Consolidated net sales increased by 3% to $5.8 billion for the three months ended March 31, 2019, and by 3% to $11.2 billion for the six months. This growth was primarily driven by higher organic sales across most segments, particularly in Building Solutions North America and Asia Pacific, due to increased volumes in installation/service and product sales, partially offset by unfavorable foreign currency translation and divestitures.
What is the company's current financial health and liquidity situation?
Johnson Controls maintains adequate liquidity and capital resources. As of March 31, 2019, the company had $239 million in cash and cash equivalents. Total debt increased by 13% to $12.4 billion, resulting in net debt of $12.1 billion. However, the company stated it believes its capital resources are adequate to meet projected needs for working capital, capital expenditures, dividends, and debt maturities, and has access to significant revolving credit facilities and commercial paper markets.
How is the company returning value to shareholders?
Johnson Controls continues to actively return value to shareholders. In the first six months of fiscal 2019, the company repurchased $1 billion of its ordinary shares. Additionally, the Board of Directors approved significant increases to the share repurchase authorization. The company also paid cash dividends to its ordinary shareholders.
06—Continue