Johnson Controls International plc 10-Q for FY2020 Q1

Johnson Controls International plc (JCI)

10-Q 2020-01-31 For: 2019-12-31

Added on April 03, 2026

About this 10-Q

Johnson Controls International plc filed this 10-Q on January 31, 2020, covering the quarter ended December 31, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $5.58B; up 2.0% from $5.46B a year earlier
Net income: $159M; down 55.2% from net income of $355M a year earlier
Diluted EPS: $0.21; down 44.7% from $0.38 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →



Ireland		98-0390500
(Jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)



(353)	21-423-5000	Not Applicable
(Registrant’s telephone number)		(Former name, former address and former fiscal year, if changed since last report)



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Ordinary Shares, Par Value $0.01	JCI	New York Stock Exchange
5.000% Senior Notes due 2020	JCI20A	New York Stock Exchange
0.000% Senior Notes due 2020	JCI20B	New York Stock Exchange
4.25% Senior Notes due 2021	JCI21B	New York Stock Exchange
3.750% Senior Notes due 2021	JCI21C	New York Stock Exchange
4.625% Notes due 2023	JCI23	New York Stock Exchange
1.000% Senior Notes due 2023	JCI23A	New York Stock Exchange
3.625% Senior Notes due 2024	JCI24A	New York Stock Exchange
1.375% Notes due 2025	JCI25A	New York Stock Exchange
3.900% Notes due 2026	JCI26A	New York Stock Exchange
6.000% Notes due 2036	JCI36A	New York Stock Exchange
5.70% Senior Notes due 2041	JCI41B	New York Stock Exchange
5.250% Senior Notes due 2041	JCI41C	New York Stock Exchange
4.625% Senior Notes due 2044	JCI44A	New York Stock Exchange
5.125% Notes due 2045	JCI45B	New York Stock Exchange
6.950% Debentures due December 1, 2045	JCI45A	New York Stock Exchange
4.500% Senior Notes due 2047	JCI47	New York Stock Exchange
4.950% Senior Notes due 2064	JCI64A	New York Stock Exchange



Large accelerated filer	þ	Accelerated filer	☐	Smaller reporting company	☐
Non-accelerated filer	¨			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.					¨



Class		Ordinary Shares Outstanding at December 31, 2019
Ordinary Shares, $0.01 par value per share		764,047,226



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Page
Part I. Financial Information

Item 1. Financial Statements (unaudited)

Consolidated Statements of Financial Position at December 31, 2019 and September 30, 2019	3

Consolidated Statements of Income for the Three Month Periods Ended December 31, 2019 and 2018	4

Consolidated Statements of Comprehensive Income (Loss) for the Three Month Periods Ended December 31, 2019 and 2018	5

Consolidated Statements of Cash Flows for the Three Month Periods Ended December 31, 2019 and 2018	6

Consolidated Statements of Shareholders' Equity Attributable to Johnson Controls Ordinary Shareholders for the Three Month Periods Ended December 31, 2019 and 2018	7

Notes to Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3. Quantitative and Qualitative Disclosures About Market Risk	49

Item 4. Controls and Procedures	49

Part II. Other Information

Item 1. Legal Proceedings	49

Item 1A. Risk Factors	50

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 6. Exhibits	51

Signatures	52

Johnson Controls International plc Consolidated Statements of Financial Position (in millions, except par value; unaudited)


	December 31, 2019			September 30, 2019
Assets

Cash and cash equivalents	$	2,160		$	2,805
Accounts receivable - net	5,612			5,770
Inventories	1,953			1,814
Assets held for sale	87			98
Other current assets	1,508			1,906
Current assets	11,320			12,393

Property, plant and equipment - net	3,341			3,348
Goodwill	18,351			18,178
Other intangible assets - net	5,610			5,632
Investments in partially-owned affiliates	865			853
Noncurrent assets held for sale	46			60
Other noncurrent assets	2,980			1,823
Total assets	$	42,513		$	42,287

Liabilities and Equity

Short-term debt	$	20		$	10
Current portion of long-term debt	1,342			501
Accounts payable	3,336			3,582
Accrued compensation and benefits	844			953
Deferred revenue	1,495			1,407
Liabilities held for sale	44			44
Other current liabilities	2,611			2,573
Current liabilities	9,692			9,070

Long-term debt	5,920			6,708
Pension and postretirement benefits	1,013			1,044
Other noncurrent liabilities	5,457			4,636
Long-term liabilities	12,390			12,388

Commitments and contingencies (Note 21)

Ordinary shares, $0.01 par value	8			8
Ordinary A shares, €1.00 par value	—			—
Preferred shares, $0.01 par value	—			—
Ordinary shares held in treasury, at cost	(1,116		)	(1,086		)
Capital in excess of par value	16,848			16,812
Retained earnings	4,129			4,827
Accumulated other comprehensive loss	(540		)	(795		)
Shareholders’ equity attributable to Johnson Controls	19,329			19,766
Noncontrolling interests	1,102			1,063
Total equity	20,431			20,829
Total liabilities and equity	$	42,513		$	42,287

Johnson Controls International plc Consolidated Statements of Income (in millions, except per share data; unaudited)


	Three Months Ended December 31,
	2019			2018
Net sales
Products and systems	$	4,036		$	3,922
Services	1,540			1,542
	5,576			5,464
Cost of sales
Products and systems	2,866			2,824
Services	907			915
	3,773			3,739

Gross profit	1,803			1,725

Selling, general and administrative expenses	(1,427		)	(1,438		)
Restructuring and impairment costs	(111		)	—
Net financing charges	(52		)	(85		)
Equity income	43			42

Income from continuing operations before income taxes	256			244

Income tax provision	65			108

Income from continuing operations	191			136

Income from discontinued operations, net of tax (Note 4)	—			263

Net income	191			399

Income from continuing operations attributable to noncontrolling interests	32			29

Income from discontinued operations attributable to noncontrolling interests	—			15

Net income attributable to Johnson Controls	$	159		$	355

Amounts attributable to Johnson Controls ordinary shareholders:
Income from continuing operations	$	159		$	107
Income from discontinued operations	—			248
Net income	$	159		$	355

Basic earnings per share attributable to Johnson Controls
Continuing operations	$	0.21		$	0.12
Discontinued operations	—			0.27
Net income	$	0.21		$	0.39

Diluted earnings per share attributable to Johnson Controls
Continuing operations	$	0.21		$	0.12
Discontinued operations	—			0.27
Net income *	$	0.21		$	0.38



	Three Months Ended December 31,
	2019			2018
Operating Activities of Continuing Operations
Net income from continuing operations attributable to Johnson Controls	$	159		$	107
Income from continuing operations attributable to noncontrolling interests	32			29
Net income from continuing operations	191			136
Adjustments to reconcile net income from continuing operations to cash provided (used) by operating activities:
Depreciation and amortization	207			211
Pension and postretirement benefit income	(40		)	(29		)
Pension and postretirement contributions	(12		)	(21		)
Equity in earnings of partially-owned affiliates, net of dividends received	8			(36		)
Deferred income taxes	(3		)	43
Noncash restructuring and impairment charges	54			—
Equity-based compensation	23			18
Other - net	(7		)	10
Changes in assets and liabilities, excluding acquisitions and divestitures:
Accounts receivable	237			146
Inventories	(114		)	(222		)
Other assets	(92		)	(63		)
Restructuring reserves	33			(25		)
Accounts payable and accrued liabilities	(498		)	(226		)
Accrued income taxes	524			(21		)
Cash provided (used) by operating activities from continuing operations	511			(79		)

Investing Activities of Continuing Operations
Capital expenditures	(126		)	(153		)
Sale of property, plant and equipment	1			2
Acquisition of businesses, net of cash acquired	(48		)	(13		)
Business divestitures, net of cash divested	—			6
Proceeds for equity swap	—			7
Changes in long-term investments	—			15
Cash used by investing activities from continuing operations	(173		)	(136		)

Financing Activities of Continuing Operations
Increase in short-term debt - net	10			1,014
Debt financing costs	(4		)	—
Stock repurchases and retirements	(651		)	(467		)
Payment of cash dividends	(203		)	(240		)
Proceeds from the exercise of stock options	21			13
Employee equity-based compensation withholding taxes	(20		)	(21		)
Dividends paid to noncontrolling interests	(5		)	(43		)
Other - net	2			—
Cash provided (used) by financing activities from continuing operations	(850		)	256

Discontinued Operations
Cash provided (used) by operating activities	(194		)	193
Cash used by investing activities	—			(66		)
Cash used by financing activities	—			(11		)
Cash provided (used) by discontinued operations	(194		)	116
Effect of exchange rate changes on cash, cash equivalents and restricted cash	57			(43		)
Change in cash held for sale	—			(2		)
Increase (decrease) in cash, cash equivalents and restricted cash	(649		)	112
Cash, cash equivalents and restricted cash at beginning of period	2,821			200
Cash, cash equivalents and restricted cash at end of period	2,172			312
Less: Restricted cash	12			20
Cash and cash equivalents at end of period	$	2,160		$	292



	Three Months Ended December 31, 2018
	Total			Ordinary Shares		Capital in Excess of Par Value		Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Loss
At September 30, 2018	$	21,164		$	10	$	16,549	$	6,604		$	(1,053	)	$	(946	)
Comprehensive income (loss)	229			—		—		355			—			(126		)
Cash dividends Ordinary ($0.26 per share)	(240		)	—		—		(240		)	—			—
Repurchases of ordinary shares	(467		)	—		—		—			(467		)	—
Adoption of ASC 606	(45		)	—		—		(45		)	—			—
Adoption of ASU 2016-01	—			—		—		8			—			(8		)
Adoption of ASU 2016-16	(546		)	—		—		(546		)	—			—
Other, including options exercised	7			—		30		—			(23		)	—
At December 31, 2018	$	20,102		$	10	$	16,579	$	6,136		$	(1,543	)	$	(1,080	)



	Three Months Ended December 31, 2019
	Total			Ordinary Shares		Capital in Excess of Par Value		Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Loss
At September 30, 2019	$	19,766		$	8	$	16,812	$	4,827		$	(1,086	)	$	(795	)
Comprehensive income	414			—		—		159			—			255
Cash dividends Ordinary ($0.26 per share)	(201		)	—		—		(201		)	—			—
Repurchases and retirements of ordinary shares	(651		)	—		—		(651		)	—			—
Adoption of ASC 842	(5		)	—		—		(5		)	—			—
Other, including options exercised	6			—		36		—			(30		)	—
At December 31, 2019	$	19,329		$	8	$	16,848	$	4,129		$	(1,116	)	$	(540	)



	Three Months Ended December 31, 2019						Three Months Ended December 31, 2018
	Products & Systems		Services		Total		Products & Systems		Services		Total
Building Solutions North America	$	1,356	$	811	$	2,167	$	1,321	$	795	$	2,116
Building Solutions EMEA/LA	457		471		928		417		490		907
Building Solutions Asia Pacific	371		258		629		356		257		613
Global Products	1,852		—		1,852		1,828		—		1,828

Total	$	4,036	$	1,540	$	5,576	$	3,922	$	1,542	$	5,464



	Location of contract balances	December 31, 2019			September 30, 2019
Contract assets - current	Accounts receivable - net	$	1,465		$	1,389
Contract assets - noncurrent	Other noncurrent assets	99			90
Contract liabilities - current	Deferred revenue	(1,495		)	(1,407		)
Contract liabilities - noncurrent	Other noncurrent liabilities	(119		)	(117		)
Total		$	(50	)	$	(45	)



	Three Months Ended December 31,
	2019
Operating lease cost	$	99
Variable lease cost	40
Total lease costs	$	139



*	Certain items do not sum due to rounding.


2.	New Accounting Standards


3.	Acquisitions and Divestitures


5.	Revenue Recognition



	Location of lease balances	December 31, 2019
Operating lease right-of-use assets	Other noncurrent assets	$	1,091
Operating lease liabilities - current	Other current liabilities	322
Operating lease liabilities - noncurrent	Other noncurrent liabilities	790

Weighted-average remaining lease term		6 years
Weighted-average discount rate		2.3		%



	Three Months Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liability:
Operating cash outflows from operating leases	$	97
Noncash operating lease activity:
Right-of-use assets obtained in exchange for operating lease liabilities	74



	December 31, 2019
2020 (9 months)	$	264
2021	304
2022	217
2023	126
2024	85
After 2024	192
Total operating lease payments	1,188
Less interest	(76		)
Present value of lease payments	$	1,112



	September 30, 2019
2020	$	352
2021	287
2022	200
2023	111
2024	71
After 2024	172
Total minimum lease payments	$	1,193



	December 31, 2019		September 30, 2019

Raw materials and supplies	$	637	$	588
Work-in-process	167		176
Finished goods	1,149		1,050
Inventories	$	1,953	$	1,814



			Business Acquisitions		Currency Translation and Other
	September 30,						December 31,
	2019						2019

Building Solutions North America	$	9,588	$	—	$	12	$	9,600
Building Solutions EMEA/LA	1,849		12		67		1,928
Building Solutions Asia Pacific	1,194		—		36		1,230
Global Products	5,547		17		29		5,593
Total	$	18,178	$	29	$	144	$	18,351



	December 31, 2019							September 30, 2019
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets
Technology	$	1,328	$	(403	)	$	925	$	1,307	$	(370	)	$	937
Customer relationships	2,754		(817		)	1,937		2,722		(759		)	1,963
Miscellaneous	585		(231		)	354		584		(224		)	360
Total amortized intangible assets	4,667		(1,451		)	3,216		4,613		(1,353		)	3,260
Unamortized intangible assets
Trademarks/trade names	2,304		—			2,304		2,282		—			2,282
Miscellaneous	90		—			90		90		—			90
	2,394		—			2,394		2,372		—			2,372
Total intangible assets	$	7,061	$	(1,451	)	$	5,610	$	6,985	$	(1,353	)	$	5,632



	Employee Severance and Termination Benefits			Long-Lived Asset Impairments			Other		Total

Original reserve	$	54		$	54		$	3	$	111
Utilized—cash	(8		)	—			—		(8		)
Utilized—noncash	—			(54		)	—		(54		)
Balance at December 31, 2019	$	46		$	—		$	3	$	49



Tax Jurisdiction		Tax Years Covered

Belgium		2015 - 2018
China		2008 - 2016
Germany		2007 - 2016
Japan		2015 - 2018
Luxembourg		2016
United Kingdom		2012 - 2015



	U.S. Pension Plans
	Three Months Ended December 31,
	2019			2018

Interest cost	$	18		$	25
Expected return on plan assets	(44		)	(46		)
Net periodic benefit credit	$	(26	)	$	(21	)



	Non-U.S. Pension Plans
	Three Months Ended December 31,
	2019			2018

Service cost	$	6		$	5
Interest cost	9			14
Expected return on plan assets	(27		)	(27		)
Net periodic benefit credit	$	(12	)	$	(8	)



	Postretirement Benefits
	Three Months Ended December 31,
	2019			2018

Interest cost	$	1		$	2
Expected return on plan assets	(2		)	(2		)
Amortization of prior service credit	(1		)	—
Net periodic benefit credit	$	(2	)	$	—



	Three Months Ended December 31, 2019									Three Months Ended December 31, 2018
	Equity Attributable to Johnson Controls International plc			Equity Attributable to Noncontrolling Interests			Total Equity			Equity Attributable to Johnson Controls International plc			Equity Attributable to Noncontrolling Interests			Total Equity

Beginning balance, September 30,	$	19,766		$	1,063		$	20,829		$	21,164		$	1,294		$	22,458
Total comprehensive income:
Net income	159			32			191			355			44			399
Foreign currency translation adjustments	251			10			261			(127		)	9			(118		)
Realized and unrealized gains on derivatives	5			2			7			1			1			2
Pension and postretirement plans	(1		)	—			(1		)	—			—			—
Other comprehensive income (loss)	255			12			267			(126		)	10			(116		)
Comprehensive income	414			44			458			229			54			283

Other changes in equity:
Cash dividends—ordinary shares	(201		)	—			(201		)	(240		)	—			(240		)
Dividends attributable to noncontrolling interests	—			(5		)	(5		)	—			(43		)	(43		)
Repurchases and retirements of ordinary shares	(651		)	—			(651		)	(467		)	—			(467		)
Adoption of ASC 606	—			—			—			(45		)	—			(45		)
Adoption of ASU 2016-16	—			—			—			(546		)	—			(546		)
Adoption of ASC 842	(5		)	—			(5		)	—			—			—
Other, including options exercised	6			—			6			7			—			7
Ending balance, December 31,	$	19,329		$	1,102		$	20,431		$	20,102		$	1,305		$	21,407



	Volume Outstanding as of
Commodity	December 31, 2019	September 30, 2019

Copper	3,447	3,561
Aluminum	2,691	2,967



	Derivatives and Hedging Activities Designated as Hedging Instruments under ASC 815				Derivatives and Hedging Activities Not Designated as Hedging Instruments under ASC 815
	December 31,		September 30,		December 31,		September 30,
	2019		2019		2019		2019
Other current assets
Foreign currency exchange derivatives	$	10	$	16	$	37	$	19
Commodity derivatives	1		—		—		—
Other noncurrent assets
Equity swap	—		—		58		62
Total assets	$	11	$	16	$	95	$	81

Other current liabilities
Foreign currency exchange derivatives	$	8	$	23	$	1	$	—
Commodity derivatives	—		1		—		—
Long-term debt
Foreign currency denominated debt	2,602		2,544		—		—
Total liabilities	$	2,610	$	2,568	$	1	$	—



	Fair Value of Assets						Fair Value of Liabilities
	December 31,			September 30,			December 31,			September 30,
	2019			2019			2019			2019
Gross amount recognized	$	106		$	97		$	2,611		$	2,568
Gross amount eligible for offsetting	(7		)	(11		)	(7		)	(11		)
Net amount	$	99		$	86		$	2,604		$	2,557



Derivatives in ASC 815 Cash Flow Hedging Relationships	Three Months Ended December 31,
Derivatives in ASC 815 Cash Flow Hedging Relationships	2019		2018
Foreign currency exchange derivatives	$	9	$	—
Commodity derivatives	1		(6		)
Total	$	10	$	(6	)



Derivatives in ASC 815 Cash Flow Hedging Relationships	Location of Gain (Loss) Reclassified from AOCI into Income	Three Months Ended December 31,
Derivatives in ASC 815 Cash Flow Hedging Relationships	Location of Gain (Loss) Reclassified from AOCI into Income	2019			2018
Foreign currency exchange derivatives	Cost of sales	$	1		$	—
Foreign currency exchange derivatives	Income from discontinued operations	—			1
Commodity derivatives	Cost of sales	(1		)	(2		)
Commodity derivatives	Income from discontinued operations	—			(5		)
Total		$	—		$	(6	)



		Amount of Gain (Loss) Recognized in Income on Derivative
Derivatives Not Designated as Hedging Instruments under ASC 815	Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended December 31,
	Location of Gain (Loss) Recognized in Income on Derivative	2019			2018
Foreign currency exchange derivatives	Cost of sales	$	—		$	(4	)
Foreign currency exchange derivatives	Net financing charges	59			(21		)
Foreign currency exchange derivatives	Income from discontinued operations	—			26
Equity swap	Selling, general and administrative	(4		)	(9		)
Total		$	55		$	(8	)



	Fair Value Measurements Using:
	Total as of December 31, 2019		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	47	$	—	$	47	$	—
Exchange traded funds (fixed income)¹	38		38		—		—
Commodity derivatives	1		—		1		—
Other noncurrent assets
Deferred compensation plan assets	75		75		—		—
Exchange traded funds (fixed income)¹	119		119		—		—
Exchange traded funds (equity)¹	125		125		—		—
Equity swap	58		—		58		—
Total assets	$	463	$	357	$	106	$	—
Other current liabilities
Foreign currency exchange derivatives	$	9	$	—	$	9	$	—
Total liabilities	$	9	$	—	$	9	$	—