01—Abstract
Summary
Summary of the 10-Q filed August 1, 2019. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) reported its financial results for the fiscal quarter ended June 30, 2019.
The company experienced a significant boost in net income, largely driven by the gain on the sale of its Power Solutions business, which closed on April 30, 2019. This divestiture resulted in net cash proceeds of $11.6 billiona. Excluding this significant event, the core business demonstrated modest revenue growth, with increases in net sales driven by higher volumes across all segments.
While the sale of Power Solutions provided a substantial financial uplift, investors should note the impact of ongoing restructuring and impairment charges and a notable increase in the effective tax rate, influenced by U.S. Tax Reform and other discrete tax items. The company continues to focus on its core building technologies and solutions, with a strategic emphasis on intelligent buildings and efficient energy solutions.
02—Key points
Key Highlights
- Completed the sale of the Power Solutions business for $13.2 billion, resulting in net cash proceeds of $11.6 billion and a significant gain recognized in discontinued operations.
- Reported a substantial increase in net income to $4.19 billion, primarily due to the Power Solutions divestiture, compared to $723 million in the prior year's period.
- Net sales for continuing operations increased by 3% to $6.45 billion for the quarter, driven by higher organic sales across all segments.
- The company incurred $235 million in restructuring and impairment costs, a significant increase from the prior year's comparable period, related to plans to dispose of a business within its Global Products segment.
- The effective tax rate for continuing operations increased significantly to 52% in the current quarter from 10% in the prior year, impacted by U.S. Tax Reform, tax audit adjustments, and other discrete charges.
- Total debt decreased significantly by 33% to $7.3 billion, and net debt decreased by 66% to $3.6 billion, reflecting the use of proceeds from the Power Solutions divestiture.
- Johnson Controls repurchased approximately $4.0 billion of its ordinary shares through a modified Dutch auction tender offer in June 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2019, Johnson Controls International plc kept $0.65.
- Revenue$6.45B100.0%
- Cost of revenue−$4.31B66.8%
- Gross profit$2.14B33.2%
- Operating costs−$1.66B25.7%
- Operating income$488.0M7.6%
- Interest, other & tax$3.70B57.4%
- Net income$4.19B65.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed August 1, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $6.45B$6.28B | +2.7% |
| Cost of Revenue | $4.31B$4.19B | +2.7% |
| Gross Profit | $2.14B$2.09B | +2.7% |
| SG&A Expenses | $1.39B$1.44B | −3.7% |
| Operating Income | $488.00M$583.00M | −16.3% |
| Interest Expense | $81.00M$106.00M | −23.6% |
| Net Income | $4.19B$723.00M | +479.8% |
| EPS (Basic) | $4.81$0.78 | +516.7% |
| EPS (Diluted) | $4.79$0.78 | +514.1% |
| Shares Outstanding (Basic) | 870.90M925.60M | −5.9% |
| Shares Outstanding (Diluted) | 875.20M930.70M | −6.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in net income for the quarter?
The primary driver of the significant increase in net income to $4.19 billion was the gain recognized from the sale of the Power Solutions business, which closed on April 30, 2019. This divestiture generated substantial proceeds and a significant gain, which is reported within discontinued operations.
How did the core business (continuing operations) perform in terms of sales?
Johnson Controls' core business (continuing operations) showed modest growth. Net sales increased by 3% to $6.45 billion for the quarter, primarily driven by higher organic sales across all segments, indicating growth in underlying business volumes.
What is the impact of the company's restructuring and impairment costs?
The company recorded $235 million in restructuring and impairment costs in the current quarter, a notable increase from the prior year. These costs are associated with actions to align resources with growth strategies and reduce the cost structure, including plans to dispose of a business within its Global Products segment and other cost-reduction initiatives.
How has the company's debt position changed?
The company's debt position has significantly improved. Total debt decreased by 33% to $7.3 billion, and net debt decreased by 66% to $3.6 billion. This reduction was largely due to the deployment of net cash proceeds from the Power Solutions sale, including significant debt repayments and a substantial share repurchase program.
06—Continue