10-QPeriod: Q2 FY2019

Johnson Controls International plc Quarterly Report for Q2 Ended Mar 31, 2019

Filed May 3, 2019For Securities:JCI

Summary

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% 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% 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.

Financial Highlights

53 data points
Beta

Revenue

$5.78B

31.9% Gross Margin

Net Income

$515.00M

8.9% Net Margin

EPS (Diluted)

$0.57

Total Assets

$48.49B

Cash & Equivalents

$239.00M

Free Cash Flow

$182.00M

Financial Statements
Beta
Revenue$5.78B
Cost of Revenue$3.94B
Gross Profit$1.84B
SG&A Expenses$1.46B
Operating Income$347.00M
Interest Expense$97.00M
Net Income$515.00M
EPS (Basic)$0.57
EPS (Diluted)$0.57
Shares Outstanding (Basic)902.50M
Shares Outstanding (Diluted)905.90M

Key Highlights

  • 1Consolidated 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.
  • 2Net 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.
  • 3The 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.
  • 4Total 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.
  • 5Selling, general, and administrative (SG&A) expenses decreased by 2% for the quarter, attributed to productivity savings and cost synergies.
  • 6The 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.
  • 7Diluted 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.

Frequently Asked Questions

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.

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.

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.

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.