01—Abstract
Summary
Summary of the 10-Q filed July 31, 2020. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc (JCI) reported a net loss of $182 milliona for the three months ended June 30, 2020, a significant shift from the net income of $4.19 billion in the prior year period.
This was primarily driven by the absence of a large gain from discontinued operations that was recognized in the prior year, coupled with increased restructuring and impairment costs and the ongoing impact of the COVID-19 pandemic. Net sales for the quarter decreased by 17% to $5.34 billionb, largely due to lower organic sales impacted by the pandemic. While gross profit as a percentage of sales improved slightly to 34.3%, substantial restructuring and impairment charges of $610 million negatively impacted profitability.
The company maintained a strong liquidity position, ending the quarter with $2.34 billionc in cash and cash equivalents. Despite the near-term challenges, JCI highlighted its focus on employee safety, operational continuity, and strategic initiatives like cost mitigation and resuming its share repurchase program.
For the nine-month period ended June 30, 2020, net income attributable to Johnson Controls was $190 milliond, down from $5.06 billion in the prior year, reflecting similar factors including the absence of prior year discontinued operations gains and increased restructuring costs. The company continues to navigate the uncertain economic environment driven by the COVID-19 pandemic while focusing on its strategic priorities.
02—Key points
Key Highlights
- Net loss of $182 million for the three months ended June 30, 2020, compared to a net income of $4.19 billion in the prior year, primarily due to the absence of discontinued operations gains.
- Net sales declined 17% to $5.34 billion for the quarter, impacted by COVID-19 related demand reduction across all segments.
- Significant increase in restructuring and impairment costs to $610 million for the quarter, compared to $235 million in the prior year, reflecting ongoing restructuring plans and asset impairments.
- Despite the net loss, the company ended the quarter with $2.34 billion in cash and cash equivalents, demonstrating a solid liquidity position.
- Company resumed its share repurchase program in the fourth quarter of fiscal 2020 after a temporary suspension due to COVID-19 uncertainty.
- Positive trends in gross profit margin, which increased to 34.3% for the quarter, indicating some operational efficiencies.
- The company recorded a goodwill impairment charge of $424 million related to its North America Retail reporting unit due to COVID-19 impacts.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2020, Johnson Controls International plc lost $0.03.
- Revenue$5.34B100.0%
- Cost of revenue−$3.51B65.7%
- Gross profit$1.83B34.3%
- Operating costs−$1.64B30.7%
- Operating income$190.0M3.6%
- Interest, other & tax−$372.0M7.0%
- Net income−$182.0M3.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed July 31, 2020Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $5.34B$6.45B | −17.2% |
| Cost of Revenue | $3.51B$4.31B | −18.5% |
| Gross Profit | $1.83B$2.14B | −14.6% |
| SG&A Expenses | $1.33B$1.39B | −3.9% |
| Operating Income | $190.00M$488.00M | −61.1% |
| Interest Expense | $58.00M$81.00M | −28.4% |
| Net Income | -$182.00M$4.19B | −104.3% |
| EPS (Basic) | $-0.24$4.81 | −105.0% |
| EPS (Diluted) | $-0.24$4.79 | −105.0% |
| Shares Outstanding (Basic) | 744.00M870.90M | −14.6% |
| Shares Outstanding (Diluted) | 744.00M875.20M | −15.0% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant year-over-year decrease in net income?
The primary driver for the significant year-over-year decrease in net income was the absence of a substantial gain from discontinued operations, specifically the sale of the Power Solutions business, which was recognized in the prior year's period. Additionally, higher restructuring and impairment costs and the negative impact of the COVID-19 pandemic on sales and operations contributed to the decline.
How has the COVID-19 pandemic impacted Johnson Controls' financial performance?
The COVID-19 pandemic has significantly impacted Johnson Controls' financial performance by reducing demand for its products and services across all segments, leading to lower net sales. The company has also experienced disruptions in its supply chain and has incurred additional costs for safety protocols and operational adjustments. The pandemic also triggered impairment charges related to goodwill and intangible assets.
What is the company's current liquidity and cash position?
Johnson Controls maintained a solid liquidity position, ending the quarter with $2.34 billion in cash and cash equivalents. The company also took proactive measures to enhance financial flexibility by raising additional debt financing. Management believes its capital resources and liquidity are adequate to meet projected needs.
What is the outlook for restructuring and impairment charges?
Johnson Controls incurred substantial restructuring and impairment costs in the current quarter ($610 million) and for the nine-month period ($783 million), primarily related to ongoing restructuring plans, cost reduction initiatives, and asset impairments driven partly by the pandemic. The company expects these restructuring actions to be substantially complete in fiscal years 2021 and 2020 respectively, with expected annual cost savings.
06—Continue