01—Abstract
Summary
Summary of the 10-Q filed May 1, 2020. 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, 2020.
The company experienced a notable decrease in net sales, down 6%a for the quarter and 2% year-to-date, largely attributed to the impact of the COVID-19 pandemic and unfavorable foreign currency translation. Net income attributable to Johnson Controls declined significantly, reflecting the impact of lower sales, increased restructuring and impairment charges, and the absence of income from discontinued operations compared to the prior year.
Despite the headwinds, the company maintained a strong liquidity position with $1.0 billionb in cash and $3.0 billion in revolving credit facilities, and took proactive steps to bolster financial flexibility by raising additional debt and suspending its share repurchase program. Management is focusing on cost mitigation actions and believes its capital resources are adequate to meet projected needs.
02—Key points
Key Highlights
- Consolidated net sales decreased by 6% to $5.44 billion for the three months ended March 31, 2020, compared to $5.78 billion in the prior year, primarily due to lower organic sales (down 5% excluding currency and divestitures) impacted by COVID-19.
- Net income attributable to Johnson Controls decreased by 59% to $213 million for the three months ended March 31, 2020, down from $515 million in the prior year, impacted by lower sales and increased charges.
- Diluted earnings per share (EPS) decreased to $0.28 for the quarter, compared to $0.57 in the same period last year.
- The company reported restructuring and impairment costs of $62 million for the quarter, compared to none in the prior year's quarter, reflecting ongoing strategic initiatives and asset impairments.
- Cash provided by operating activities from continuing operations was $666 million for the six months ended March 31, 2020, an increase from $103 million in the prior year, driven by timing of tax payments and favorable changes in accounts receivable.
- Total debt remained relatively stable at $7.07 billion, but net debt increased by 37% to $6.06 billion due to a decrease in cash and cash equivalents.
- The company maintained a strong liquidity position, ending the quarter with $1.0 billion in cash and cash equivalents and $3.0 billion in available revolving credit facilities. Proactive measures to enhance liquidity were taken in April 2020, including raising additional debt and suspending share repurchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, Johnson Controls International plc kept $0.04.
- Revenue$5.44B100.0%
- Cost of revenue−$3.64B66.9%
- Gross profit$1.80B33.1%
- Operating costs−$1.43B26.2%
- Operating income$372.0M6.8%
- Interest, other & tax−$159.0M2.9%
- Net income$213.0M3.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed May 1, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $5.44B$5.78B | −5.8% |
| Cost of Revenue | $3.64B$3.94B | −7.4% |
| Gross Profit | $1.80B$1.84B | −2.3% |
| SG&A Expenses | $1.45B$1.46B | −0.5% |
| Operating Income | $372.00M$347.00M | +7.2% |
| Interest Expense | $62.00M$97.00M | −36.1% |
| Net Income | $213.00M$515.00M | −58.6% |
| EPS (Basic) | $0.28$0.57 | −50.9% |
| EPS (Diluted) | $0.28$0.57 | −50.9% |
| Shares Outstanding (Basic) | 754.80M902.50M | −16.4% |
| Shares Outstanding (Diluted) | 757.10M905.90M | −16.4% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in net sales?
The primary driver for the decrease in consolidated net sales was the unfavorable impact of the COVID-19 pandemic on organic sales, leading to a 5% decrease when excluding foreign currency translation and business divestitures. Unfavorable foreign currency translation also contributed to the decline.
How did the COVID-19 pandemic impact the company's financial results?
The COVID-19 pandemic significantly impacted Johnson Controls' financial results by reducing demand and volumes across its global businesses, disrupting supply chains, and necessitating cost mitigation actions such as limiting discretionary spending and furloughing employees. The company experienced a temporary reduction in manufacturing capacity in China and is adapting its business practices to mitigate ongoing disruptions.
What is the company's liquidity situation, especially in light of COVID-19?
Johnson Controls maintained a strong liquidity position with $1.0 billion in cash and cash equivalents and $3.0 billion in available revolving credit facilities as of March 31, 2020. In response to the uncertain economic environment, the company proactively raised additional debt in April 2020 and suspended its share repurchase program to further enhance financial flexibility.
What are the significant charges the company incurred during the quarter?
The company incurred $62 million in restructuring and impairment costs during the three months ended March 31, 2020, compared to no such costs in the prior year's quarter. These charges relate to ongoing restructuring plans and asset impairments, including $15 million for assets held for sale and $62 million for indefinite-lived intangible asset impairments due to the COVID-19 pandemic's impact on the retail business.
06—Continue