01—Abstract
Summary
Summary of the 10-Q filed April 30, 2021. Cited figures are marked; the original filing is the authoritative source.
Johnson Controls International plc reported solid financial performance for the quarter ending March 31, 2021, with a notable increase in net income attributable to shareholders and diluted earnings per share compared to the prior year.
Net sales saw a modest increase of 3%a for the quarter, driven by favorable foreign currency translation and organic growth, although the six-month period showed a slight decrease primarily due to COVID-19 impacts. The company demonstrated improved profitability, with gross profit increasing 8% for the quarter and 2% year-to-date, leading to an expansion in gross profit margin. Selling, general, and administrative (SG&A) expenses were significantly reduced, both in absolute terms and as a percentage of sales, primarily due to favorable pension mark-to-market adjustments and ongoing cost mitigation efforts.
The company also saw a substantial increase in income from discontinued operations, positively impacting the overall financial results for the six-month period. Johnson Controls continues to focus on its strategic direction, emphasizing smart, energy-efficient, and sustainable buildings.
The company is also actively managing its capital structure, with a strong liquidity position and significant capacity for share repurchases. However, investors should remain aware of ongoing legal proceedings and environmental matters, particularly those related to PFAS, which could present future financial risks.
02—Key points
Key Highlights
- Net income attributable to Johnson Controls increased by 61% to $343 million for the three months ended March 31, 2021, compared to $213 million in the prior year.
- Diluted earnings per share (EPS) rose to $0.48 for the three months ended March 31, 2021, from $0.28 in the same period last year.
- Consolidated net sales for the three months ended March 31, 2021, increased by 3% to $5.59 billion, driven by favorable foreign currency translation and organic sales growth.
- Gross profit increased by 8% to $1.94 billion for the three months ended March 31, 2021, with gross profit margin improving to 34.7% from 33.1% in the prior year.
- Selling, general, and administrative (SG&A) expenses decreased by 14% to $1.25 billion for the three months ended March 31, 2021, reflecting cost mitigation actions and favorable pension mark-to-market adjustments.
- The company generated $1.16 billion in cash from operating activities for the six months ended March 31, 2021, a significant increase from $666 million in the prior year.
- Johnson Controls announced a definitive agreement to acquire Silent-Aire for up to $870 million, expected to close in Q3 fiscal 2021, which will be reported within the Global Products segment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, Johnson Controls International plc kept $0.06.
- Revenue$5.59B100.0%
- Cost of revenue−$3.65B65.3%
- Gross profit$1.94B34.7%
- Operating costs−$1.27B22.8%
- Operating income$670.0M12.0%
- Interest, other & tax−$327.0M5.8%
- Net income$343.0M6.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed April 30, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $5.59B$5.44B | +2.8% |
| Cost of Revenue | $3.65B$3.64B | +0.2% |
| Gross Profit | $1.94B$1.80B | +7.9% |
| SG&A Expenses | $1.25B$1.45B | −13.6% |
| Operating Income | $670.00M$372.00M | +80.1% |
| Interest Expense | $53.00M$62.00M | −14.5% |
| Net Income | $343.00M$213.00M | +61.0% |
| EPS (Basic) | $0.48$0.28 | +71.4% |
| EPS (Diluted) | $0.48$0.28 | +71.4% |
| Shares Outstanding (Basic) | 717.10M754.80M | −5.0% |
| Shares Outstanding (Diluted) | 721.30M757.10M | −4.7% |
05—Questions
Frequently Asked Questions
What is the overall financial performance trend for Johnson Controls in this period?
Johnson Controls demonstrated a strong recovery in profitability, with net income and diluted EPS significantly increasing year-over-year for the quarter ending March 31, 2021. While net sales saw a modest increase, the company benefited from improved gross margins and substantial reductions in SG&A expenses. The six-month period also showed positive trends, bolstered by income from discontinued operations.
How is the company managing its costs and expenses?
The company has implemented effective cost management strategies. Selling, general, and administrative (SG&A) expenses were significantly reduced, partly due to favorable pension mark-to-market adjustments and ongoing cost mitigation actions. Restructuring plans aimed at optimizing cost structure are also in place, with annualized savings targets expected by fiscal 2023.
What are the key risks and legal matters facing Johnson Controls?
Johnson Controls faces several ongoing legal and environmental matters, including significant litigation related to Aqueous Film-Forming Foam (AFFF) products containing PFAS chemicals, as well as environmental assessments and remediation efforts in Wisconsin. While the company believes it has defenses and is pursuing insurance coverage, the ultimate financial exposure from these matters remains uncertain and could be material. The company also highlighted risks associated with the COVID-19 pandemic, supply chain disruptions, and global economic conditions.
What is the company's outlook on liquidity and capital resources?
Johnson Controls maintains a strong liquidity position with ample cash and cash equivalents and significant availability under its revolving credit facilities. The company believes its capital resources are adequate to meet projected needs for the foreseeable future, including working capital, capital expenditures, dividends, and potential acquisitions or share repurchases. Total debt remains stable as a percentage of total capitalization.
06—Continue