Honeywell Reports
Strong Fourth Quarter And 2017 Results, Raises 2018 Guidance To
Reflect Lower Tax Rate
- Exceeded Fourth-Quarter Earnings
Per Share Guidance on Stronger Margins
- Fourth-Quarter Reported Sales Up
9%; Organic Sales Up 6%, Driven by Strength in Aerospace
Aftermarket, UOP, Advanced Materials, and Intelligrated
- Segment Margin Expansion Driven by
Strong Top-Line Growth, Productivity, and Repositioning
Benefits
- Fourth-Quarter Operating Cash Flow
of $2.2B; Free Cash Flow of
$1.8B, Conversion of 123% in the
Fourth Quarter and 90% for the Full Year(1)
- Funded More Than $350 Million in Repositioning, Repurchased
$2.9B of Honeywell Shares in 2017
MORRIS PLAINS, N.J.,
Jan. 26, 2018 -- Honeywell
(NYSE: HON) today announced financial results for the fourth
quarter and full year of 2017, and raised its 2018
earnings2 guidance by 20
cents to a new range of $7.75
- $8.00 to reflect an expected lower
tax rate due to the U.S. Tax Cuts and Jobs Act of 2017.
"Honeywell delivered a strong fourth quarter, capping an
exceptional year for the company," said Darius Adamczyk, president and chief executive
officer of Honeywell. "Fourth-quarter sales grew six percent
organically, leading to full-year organic sales growth of four
percent, driven by robust growth in Aerospace aftermarket, UOP,
Advanced Materials, and Intelligrated. We leveraged HOS Gold to
drive outstanding growth and expand segment margins by 70 basis
points for the year. Earnings per share3 were
$1.85 in the fourth quarter and
$7.11 for the full year, up 10
percent year over year, excluding the fourth-quarter charge related
to U.S. tax reform and other items, as a result of our strong focus
on growth and productivity. Our businesses achieved exceptional
free cash flow, with 123 percent conversion in the fourth quarter
and 90 percent conversion for the full year, exceeding the high end
of our guidance for 2017.
"While delivering outstanding 2017 results, we also made
significant investments in our future, including funding more than
$350 million in restructuring
projects," Adamczyk continued. "We generated significant value for
our shareowners in 2017 through a 12 percent increase in our
dividend; $2.9 billion in share
repurchases, including $1.6 billion
in the fourth quarter; and the closing of three acquisitions. Our
financial performance and aggressive capital deployment led to a
total shareowner return of 35 percent, well ahead of the S&P's
total shareowner return of 22 percent and the median return of our
multi-industry peers of 24 percent.
"Honeywell's transformation to a software-industrial leader is
well underway, and in 2018, we expect to complete the spin-offs of
our Homes and Global Distribution business, and our Transportation
Systems business, which will position Honeywell for future growth
and margin expansion. After the spins, these businesses will be
better positioned to maximize shareowner value through focused
strategic decision making and capital allocation tailored for their
end markets," Adamczyk said.
"I am confident in Honeywell's future, and our ability to
continue to deliver for our shareowners and our employees. Our
strong performance in 2017, together with the enactment of new U.S.
tax legislation, has enabled us to increase our 401(k) match in the
U.S. This is a sustained, annual benefit that will provide a more
secure retirement for our employees. We believe that enhancing this
benefit is extremely valuable and important to our employees over
the long term," Adamczyk concluded.
The Company recorded a provisional charge of $3.8 billion in the fourth quarter to reflect the
estimated impacts of the U.S. Tax Cuts and Jobs Act of 2017,
including the U.S. tax on deemed repatriated earnings of non-U.S.
subsidiaries, the writedown of net U.S. deferred tax liabilities at
lower enacted corporate tax rates, and the effects of the
implementation of the territorial tax system. The impacts of the
legislation may differ from this estimate, possibly materially (and
the amount of the provisional charge may accordingly be adjusted
over the course of 2018), due to changes in interpretations and
assumptions the Company has made, guidance that may be issued, and
actions the Company may take as a result of the tax legislation.
Honeywell has been a strong supporter of this legislation and is
encouraged by the significantly enhanced capital mobility, lower
U.S. corporate income tax rates, and more appealing investment
environment in the U.S., which the legislation enables.
Honeywell updated its 2018 guidance to reflect 2017 results and
the anticipated impact of the U.S. tax reform. The company now
expects that its 2018 effective tax rate will be between 22 percent
and 23 percent. Full-year earnings per share4 are now
expected to be between $7.75 and
$8.00, up 9 percent to 13 percent. A
summary of the guidance changes can be found in the table
below.
Honeywell will discuss its results during an investor conference
call today starting at 8 a.m. Eastern
Standard Time.
Fourth-Quarter Performance
Honeywell sales for the fourth quarter were up six
percent on an organic basis and up nine percent on a reported
basis. The difference between reported and organic sales relates to
the impact of foreign currency translation. The fourth-quarter
financial results can be found in Tables 2 and 3, below.
Aerospace sales for the fourth quarter were up five
percent on an organic basis driven by growth in the commercial
aftermarket and U.S. defense, and demand for light vehicle gas and
commercial vehicle turbochargers in Transportation Systems. Segment
margin expanded 270 bps to 22.9 percent, primarily driven by higher
Commercial Aftermarket volumes, productivity net of inflation,
lower year-over-year customer incentives, and commercial
excellence.
Home and Building Technologies sales for the fourth
quarter were up three percent on an organic basis driven
bycontinued demand in Products for fire and building offerings in
Europe, as well as continued
strength in Global Distribution and robust growth in China. Segment margin contracted 40 bps to
17.6 percent, driven by lower Security volumes and investments for
growth, partially offset by commercial excellence.
Performance Materials and Technologies sales for the
fourth quarter were up nine percent on an organic basis driven by
strong growth across all businesses. UOP grew 12 percent on an
organic basis driven by robust gas processing, catalyst, and
equipment growth, and Advanced Materials grew 19 percent on an
organic basis driven by continued demand for Solstice®
low-global-warming products.Short-cycle demand in Process Solutions
was strong as well. Segment margin contracted 180 bps to 21.3
percent, primarily driven by an unplanned plant outage and a
different year-over-year mix impact of catalyst sales combined with
stronger equipment volumes in UOP versus our guidance, partly
offset by productivity net of inflation and commercial
excellence.
Safety and Productivity Solutions sales for the fourth
quarter were up 12 percent on an organic basis driven by
double-digit organic sales growth at Intelligrated; higher volumes
in industrial safety products, sensing controls, and voice-enabled
workflow solutions; and strong Retail demand. Segment margin
expanded 140 bps to 15.7 percent, primarily driven by higher
volumes and productivity net of inflation.
To participate on the conference call, please dial (866)
548-4713 (domestic) or (323) 794-2093 (international) approximately
ten minutes before the 8 a.m. EST
start. Please mention to the operator that you are dialing in
for Honeywell's fourth quarter 2017 earnings call or provide the
conference code HON4Q17. The live webcast of the investor call as
well as related presentation materials will be available through
the "Investor Relations" section of the company's Website
(www.honeywell.com/investor). Investors can hear a replay of the
conference call from 1 p.m. EST,
January 26, until 1 p.m. EST, February
2, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 9224317.
Table 1: FULL-YEAR 2018
GUIDANCE5
|
Previous Guidance |
Current Guidance |
Sales |
$41.8B - $42.5B |
$41.8B - $42.5B |
Organic Growth |
2% - 4% |
2% - 4% |
Segment Margin |
19.2% - 19.5% |
19.3% - 19.6% |
Expansion |
Up 30 - 60 bps |
Up 30 - 60 bps |
Earnings Per Share |
$7.55 - $7.80 |
$7.75 - $8.00 |
Earnings Growth |
6% - 10% |
9% - 13% |
Free Cash Flow6 |
$5.2B - $5.9B |
$5.2B - $5.9B |
TABLE 2: SUMMARY OF FINANCIAL RESULTS – TOTAL
HONEYWELL
(Sales, Cash Flow In $ Millions)
|
FY 2016 |
FY 2017 |
Change |
Sales |
39,302 |
40,534 |
3% |
Organic |
|
|
4% |
Segment Margin |
18.3% |
19.0% |
70 bps |
Operating Income Margin |
17.0% |
17.6% |
60 bps |
Earnings Per Share |
|
|
|
Reported |
$6.20 |
$2.14 |
(65%) |
Ex-Pension MTM, 2016 Divestitures, Separation
Costs,
4Q16 Debt Refinancing and Tax Reform Charge |
$6.46 |
$7.11 |
10% |
Cash Flow From Operations |
5,498 |
5,966 |
9% |
Free Cash Flow6 |
4,403 |
4,935 |
12% |
|
|
|
|
|
4Q 2016 |
4Q 2017 |
Change |
Sales |
9,985 |
10,843 |
9% |
Organic |
|
|
6% |
Segment Margin |
19.0% |
19.3% |
30 bps |
Operating Income Margin |
16.2% |
15.8% |
(40) bps |
Earnings/Loss Per Share |
|
|
|
Reported |
$1.34 |
($3.18) |
(337%) |
Ex-Pension MTM, Separation Costs,
4Q16 Debt Refinancing and Tax Reform Charge |
$1.74 |
$1.85 |
6% |
Cash Flow From Operations |
2,042 |
2,172 |
6% |
Free Cash Flow6 |
1,696 |
1,754 |
3% |
|
|
|
|
TABLE 3: SUMMARY OF FINANCIAL RESULTS – SEGMENTS
(Sales, Segment Profit In $ Millions)
|
|
|
|
|
|
|
|
|
AEROSPACE |
FY 2016 |
FY 2017 |
Change |
Sales |
14,751 |
14,779 |
~Flat |
Organic |
|
|
2% |
Segment Profit |
2,991 |
3,288 |
10% |
Segment Margin |
20.3% |
22.2% |
190 bps |
|
|
|
|
|
4Q 2016 |
4Q 2017 |
|
Sales |
3,666 |
3,902 |
6% |
Organic |
|
|
5% |
Segment Profit |
739 |
893 |
21% |
Segment Margin |
20.2% |
22.9% |
270 bps |
|
|
|
|
|
|
|
|
HOME AND BUILDING TECHNOLOGIES |
FY 2016 |
FY 2017 |
Change |
Sales |
9,490 |
9,777 |
3% |
Organic |
|
|
2% |
Segment Profit |
1,621 |
1,650 |
2% |
Segment Margin |
17.1% |
16.9% |
(20) bps |
|
|
|
|
|
4Q 2016 |
4Q 2017 |
|
Sales |
2,488 |
2,615 |
5% |
Organic |
|
|
3% |
Segment Profit |
449 |
461 |
3% |
Segment Margin |
18.0% |
17.6% |
(40) bps |
|
|
|
|
|
|
|
|
PERFORMANCE MATERIALS AND TECHNOLOGIES |
FY 2016 |
FY 2017 |
Change |
Sales |
10,436 |
10,339 |
(1)% |
Organic |
|
|
8% |
Segment Profit |
2,112 |
2,206 |
4% |
Segment Margin |
20.2% |
21.3% |
110 bps |
|
|
|
|
|
4Q 2016 |
4Q 2017 |
|
Sales |
2,540 |
2,854 |
12% |
Organic |
|
|
9% |
Segment Profit |
587 |
607 |
3% |
Segment Margin |
23.1% |
21.3% |
(180) bps |
|
|
|
|
|
|
|
|
SAFETY AND PRODUCTIVITY SOLUTIONS |
FY 2016 |
FY 2017 |
Change |
Sales |
4,625 |
5,639 |
22% |
Organic |
|
|
5% |
Segment Profit |
680 |
852 |
25% |
Segment Margin |
14.7% |
15.1% |
40 bps |
|
|
|
|
|
4Q 2016 |
4Q 2017 |
|
Sales |
1,291 |
1,472 |
14% |
Organic |
|
|
12% |
Segment Profit |
185 |
231 |
25% |
Segment Margin |
14.3% |
15.7% |
140 bps |
|
|
|
|
Honeywell (www.honeywell.com) is a Fortune 100
software-industrial company that delivers industry specific
solutions that include aerospace and automotive products and
services; control technologies for buildings, homes, and industry;
and performance materials globally. Our technologies help
everything from aircraft, cars, homes and buildings, manufacturing
plants, supply chains, and workers become more connected to make
our world smarter, safer, and more sustainable. For more news
and information on Honeywell, please visit
www.honeywell.com/newsroom.
This release contains certain statements that may be deemed
"forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934. All statements, other than
statements of historical fact, that address activities, events or
developments that we or our management intends, expects, projects,
believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are based upon certain
assumptions and assessments made by our management in light of
their experience and their perception of historical trends, current
economic and industry conditions, expected future developments and
other factors they believe to be appropriate. The forward-looking
statements included in this release are also subject to a number of
material risks and uncertainties, including but not limited to
economic, competitive, governmental, and technological factors
affecting our operations, markets, products, services and prices,
as well as the ability to effect the separations. Such
forward-looking statements are not guarantees of future
performance, and actual results, developments and business
decisions may differ from those envisaged by such forward-looking
statements, including with respect to any changes in or abandonment
of the proposed separations. We identify the principal risks and
uncertainties that affect our performance in our Form 10-K and
other filings with the Securities and Exchange Commission.
Information regarding the impact of the Tax Cuts and Jobs Act of
2017 ("Tax Legislation") consists of preliminary estimates which
are forward-looking statements and are subject to change, possibly
materially, as the firm completes its financial statements.
Information regarding the impact of Tax Legislation is based on our
current calculations, as well our current interpretations,
assumptions and expectations relating to Tax Legislation, which are
subject to further change.
This release contains financial measures presented on a non-GAAP
basis. Honeywell's non-GAAP financial measures used in this release
are as follows: segment profit, on an overall Honeywell basis, a
measure by which we assess operating performance, which we define
as operating income adjusted for certain items as presented in the
Appendix; segment margin, on an overall Honeywell basis, which we
define as segment profit divided by sales; organic sales growth,
which we define as sales growth less the impacts from foreign
currency translation and acquisitions and divestitures for the
first 12 months following transaction date; free cash flow, which
we define as cash flow from operations less capital expenditures
and which we adjust to exclude separation costs and with respect to
forward looking measures, adjustments to the provisional charge
related to Tax Legislation, if and as noted in the release; free
cash flow conversion, which we define as free cash flow divided by
net income attributable to Honeywell excluding pension
mark-to-market expenses, separation costs, the provisional charge
related to Tax Legislation, and with respect to forward looking
measures, adjustments to such provisional charge; and earnings per
share, which we adjust to exclude pension mark-to-market expenses,
as well as for other components, such as divestitures, debt
refinancings, and exclusion of separation costs, the provisional
charge related to Tax Legislation, and with respect to forward
looking measures, adjustments to such provisional charge, if and as
noted in the release. Other than references to reported earnings
per share, all references to earnings per share in this release are
so adjusted. The respective tax rates applied when adjusting
earnings per share for these items are identified in the release or
in the reconciliations presented in the Appendix. Management
believes that, when considered together with reported amounts,
these measures are useful to investors and management in
understanding our ongoing operations and in the analysis of ongoing
operating trends. These metrics should be considered in addition
to, and not as replacements for, the most comparable GAAP measure.
Refer to the Appendix attached to this release for reconciliations
of non-GAAP financial measures to the most directly comparable GAAP
measures. Forward looking quantitative reconciliations herein
exclude separation costs because management cannot reliably predict
or precisely estimate, without unreasonable effort, those costs
given the preliminary nature of the estimates and exclude any
adjustments to the provisional charge related to Tax Legislation as
such charge is provisional.
1 Free cash flow is cash flow from operations less
capital expenditures; free cash flow conversion is free cash flow
divided by net income attributable to Honeywell excluding pension
mark-to-market expenses, separation costs related to the spin-offs
of the Homes and Transportation Systems businesses and the
provisional charge related to the Tax Cuts and Jobs Act of 2017
2 EPS excludes pension mark-to-market, separation costs,
and adjustments to the provisional charge related to the Tax Cuts
and Jobs Act of 2017
3 EPS, EPS V% exclude pension mark-to-market, 2016
divestitures, 4Q16 debt refinancing, separation costs, and the
provisional charge related to the Tax Cuts and Jobs Act of 2017
4 EPS, EPS V% exclude pension mark-to-market, 2016
divestitures, 4Q16 debt refinancing, separation costs related to
the spin-offs of the Homes and Transportation Systems businesses,
the provisional charge related to the Tax Cuts and Jobs Act of 2017
and adjustments to such charge
5 EPS, EPS V% exclude pension mark-to-market, 2016
divestitures, 4Q16 debt refinancing, separation costs related to
the spin-offs of the Homes and Transportation Systems businesses,
the provisional charge related to the Tax Cuts and Jobs Act of 2017
and adjustments to such charge; free cash flow, free cash flow V%
exclude separation costs and impacts from the Tax Cuts and Jobs Act
of 2017
6 Cash flow from operations less capital
expenditures
Contacts: |
|
|
|
Media |
Investor Relations |
Scott Sayres |
Mark Macaluso |
(480) 257-8921 |
(973) 455-2222 |
scott.sayres@honeywell.com |
mark.macaluso@honeywell.com |
Honeywell International
Inc. |
Consolidated Statement
of Operations (Unaudited) |
(Dollars in millions,
except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Product sales |
$
8,646 |
|
$ 7,964 |
|
$ 32,317 |
|
$ 31,362 |
Service sales |
2,197 |
|
2,021 |
|
8,217 |
|
7,940 |
Net sales |
10,843 |
|
9,985 |
|
40,534 |
|
39,302 |
|
|
|
|
|
|
|
|
|
Costs, expenses and other |
|
|
|
|
|
|
|
Cost of products
sold (A) |
6,114 |
|
5,625 |
|
22,659 |
|
22,170 |
Cost of services
sold (A) |
1,382 |
|
1,254 |
|
4,916 |
|
4,980 |
|
|
7,496 |
|
6,879 |
|
27,575 |
|
27,150 |
Selling, general
and administrative expenses (A) |
1,631 |
|
1,493 |
|
5,808 |
|
5,469 |
Other (income)
expense |
18 |
|
95 |
|
(67) |
|
(102) |
Interest and other
financial charges |
81 |
|
86 |
|
316 |
|
338 |
|
|
9,226 |
|
8,553 |
|
33,632 |
|
32,855 |
|
|
|
|
|
|
|
|
|
Income before taxes |
1,617 |
|
1,432 |
|
6,902 |
|
6,447 |
Tax expense |
4,016 |
|
387 |
|
5,204 |
|
1,601 |
|
|
|
|
|
|
|
|
|
Net income (loss) |
(2,399) |
|
1,045 |
|
1,698 |
|
4,846 |
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
12 |
|
11 |
|
43 |
|
37 |
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to
Honeywell |
$ (2,411) |
|
$ 1,034 |
|
$ 1,655 |
|
$ 4,809 |
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common
stock - basic |
$
(3.18) |
|
$ 1.36 |
|
$
2.17 |
|
$
6.29 |
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common
stock - assuming dilution |
$
(3.18) |
|
$ 1.34 |
|
$
2.14 |
|
$
6.20 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - basic |
758.8 |
|
762.4 |
|
762.1 |
|
764.3 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - assuming dilution |
758.8 |
(B) |
772.3 |
|
772.1 |
|
775.3 |
|
|
|
|
|
|
|
|
|
(A) Cost of products and services sold
and selling, general and administrative expenses include amounts
for repositioning and other charges, pension and other
postretirement (income) expense, and stock compensation
expense. |
(B) Due to a loss for the period, no
incremental shares are included because the effect would be
antidilutive. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below is a reconciliation of earnings
per share to earnings per share, excluding pension mark-to-market
expense, debt refinancing expense, separation costs, impact from
the Tax Cuts and Jobs Act of 2017 ("Tax Reform"), and
earnings attributable to 2016 divestitures. We believe this
measure is useful to investors and management in understanding our
ongoing operations and in analysis of ongoing operating trends. For
the three months ended December 31, 2017, earnings per share
utilizes weighted average number of shares outstanding, assuming
dilution of 769.0 million. |
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common stock -
assuming dilution |
$
(3.18) |
|
$ 1.34 |
|
$
2.14 |
|
$
6.20 |
|
Pension mark-to-market expense (1) |
0.09 |
|
0.28 |
|
0.09 |
|
0.28 |
|
Debt refinancing expense (2) |
- |
|
0.12 |
|
- |
|
0.12 |
|
Separation costs |
0.02 |
|
- |
|
0.02 |
|
- |
|
Impacts from Tax Reform |
4.88 |
|
- |
|
4.86 |
|
- |
|
Earnings attributable to 2016 divestitures
(3) |
- |
|
- |
|
- |
|
(0.14) |
|
Impact of dilution of weighted average number of
shares outstanding |
0.04 |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock - assuming
dilution, excluding pension |
|
|
|
|
|
|
|
|
mark-to-market expense, debt refinancing expense,
separation costs, impacts from |
|
|
|
|
|
|
|
|
Tax Reform, and 2016 divestitures |
$
1.85 |
|
$ 1.74 |
|
$
7.11 |
|
$
6.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Pension mark-to-market expense
uses a blended tax rate of 23% and 21.3% for 2017 and 2016. |
|
(2) Debt refinancing expense uses a
tax rate of 26.5% for 2016. |
|
(3) Earnings attributable to 2016
divestitures use a blended tax rate of 33.9% for 2016. |
Honeywell
International Inc. |
Segment Data
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
Net Sales |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
3,902 |
|
$
3,666 |
|
$ 14,779 |
|
$
14,751 |
|
|
|
|
|
|
|
|
|
Home and Building Technologies |
2,615 |
|
2,488 |
|
9,777 |
|
9,490 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
2,854 |
|
2,540 |
|
10,339 |
|
10,436 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
1,472 |
|
1,291 |
|
5,639 |
|
4,625 |
|
|
|
|
|
|
|
|
|
Total |
$ 10,843 |
|
$
9,985 |
|
$ 40,534 |
|
$
39,302 |
|
|
|
|
|
|
|
|
|
Reconciliation of
Segment Profit to Income Before Taxes |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
Segment Profit |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
893 |
|
$
739 |
|
$
3,288 |
|
$
2,991 |
|
|
|
|
|
|
|
|
|
Home and Building Technologies |
461 |
|
449 |
|
1,650 |
|
1,621 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
607 |
|
587 |
|
2,206 |
|
2,112 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
231 |
|
185 |
|
852 |
|
680 |
|
|
|
|
|
|
|
|
|
Corporate |
(96) |
|
(61) |
|
(306) |
|
(218) |
|
|
|
|
|
|
|
|
|
Total segment
profit |
2,096 |
|
1,899 |
|
7,690 |
|
7,186 |
|
|
|
|
|
|
|
|
|
Other income (expense) (A) |
(26) |
|
(103) |
|
28 |
|
71 |
Interest and other financial
charges |
(81) |
|
(86) |
|
(316) |
|
(338) |
Stock compensation expense (B) |
(43) |
|
(39) |
|
(176) |
|
(184) |
Pension ongoing income (B) |
167 |
|
154 |
|
713 |
|
601 |
Pension mark-to-market expense
(B) |
(87) |
|
(273) |
|
(87) |
|
(273) |
Other postretirement income (B) |
5 |
|
8 |
|
21 |
|
32 |
Repositioning and other charges
(B) |
(414) |
|
(128) |
|
(971) |
|
(648) |
|
|
|
|
|
|
|
|
|
Income before taxes |
$
1,617 |
|
$
1,432 |
|
$
6,902 |
|
$
6,447 |
|
|
|
|
|
|
|
|
|
(A) |
Equity income (loss) of affiliated
companies is included in segment profit. |
(B) |
Amounts included in cost of products
and services sold and selling, general and administrative
expenses. |
|
|
|
|
|
|
|
|
|
|
Honeywell International
Inc. |
Consolidated Balance
Sheet (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
2017 |
|
2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
|
$
7,059 |
|
$
7,843 |
Short-term
investments |
|
3,758 |
|
1,520 |
Accounts receivable
- net |
|
8,866 |
|
8,177 |
Inventories |
|
4,613 |
|
4,366 |
Other current
assets |
|
1,706 |
|
1,152 |
|
Total current assets |
|
26,002 |
|
23,058 |
|
|
|
|
|
|
Investments and long-term
receivables |
|
667 |
|
587 |
Property, plant and equipment -
net |
|
5,926 |
|
5,793 |
Goodwill |
|
18,277 |
|
17,707 |
Other intangible assets - net |
|
4,496 |
|
4,634 |
Insurance recoveries for asbestos
related liabilities |
|
411 |
|
417 |
Deferred income taxes |
|
236 |
|
347 |
Other assets |
|
3,372 |
|
1,603 |
|
|
|
|
|
|
|
Total assets |
|
$ 59,387 |
|
$ 54,146 |
|
|
|
|
|
|
LIABILITIES AND SHAREOWNERS'
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts
payable |
|
$
6,584 |
|
$
5,690 |
Commercial paper
and other short-term borrowings |
|
3,958 |
|
3,366 |
Current maturities
of long-term debt |
|
1,351 |
|
227 |
Accrued
liabilities |
|
6,968 |
|
7,048 |
|
Total current liabilities |
|
18,861 |
|
16,331 |
|
|
|
|
|
|
Long-term debt |
|
12,573 |
|
12,182 |
Deferred income taxes |
|
2,894 |
|
486 |
Postretirement benefit obligations
other than pensions |
|
512 |
|
473 |
Asbestos related liabilities |
|
1,173 |
|
1,014 |
Other liabilities |
|
5,930 |
|
4,110 |
Redeemable noncontrolling
interest |
|
5 |
|
3 |
Shareowners' equity |
|
17,439 |
|
19,547 |
|
|
|
|
|
|
|
Total liabilities, redeemable
noncontrolling interest and shareowners' equity |
|
$ 59,387 |
|
$ 54,146 |
Honeywell International
Inc. |
Consolidated
Statement of Cash Flows (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ (2,399) |
|
$ 1,045 |
|
$ 1,698 |
|
$ 4,846 |
Less: Net income attributable
to the noncontrolling interest |
|
12 |
|
11 |
|
43 |
|
37 |
Net income (loss) attributable
to Honeywell |
|
(2,411) |
|
1,034 |
|
1,655 |
|
4,809 |
Adjustments to reconcile net
income (loss) attributable to Honeywell to net |
|
|
|
|
|
|
|
|
cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
183 |
|
180 |
|
717 |
|
726 |
Amortization |
|
100 |
|
77 |
|
398 |
|
304 |
(Gain)
loss on sale of non-strategic businesses and assets |
|
7 |
|
(2) |
|
7 |
|
(178) |
Repositioning and other charges |
|
438 |
|
128 |
|
1,021 |
|
695 |
Net
payments for repositioning and other charges |
|
(234) |
|
(205) |
|
(628) |
|
(625) |
Pension
and other postretirement (income) expense |
|
(85) |
|
111 |
|
(647) |
|
(360) |
Pension
and other postretirement benefit payments |
|
(35) |
|
(33) |
|
(106) |
|
(143) |
Stock
compensation expense |
|
43 |
|
39 |
|
176 |
|
184 |
Deferred income taxes |
|
2,370 |
|
(70) |
|
2,294 |
|
76 |
Other |
|
1,680 |
|
227 |
|
1,642 |
|
194 |
Changes
in assets and liabilities, net of the effects of |
|
|
|
|
|
|
|
|
acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(274) |
|
(55) |
|
(682) |
|
(547) |
Inventories |
|
141 |
|
215 |
|
(259) |
|
(18) |
Other
current assets |
|
(581) |
|
(106) |
|
(568) |
|
(106) |
Accounts payable |
|
520 |
|
272 |
|
924 |
|
254 |
Accrued liabilities |
|
310 |
|
230 |
|
22 |
|
233 |
Net cash provided by operating activities |
|
2,172 |
|
2,042 |
|
5,966 |
|
5,498 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Expenditures for property,
plant and equipment |
|
(418) |
|
(346) |
|
(1,031) |
|
(1,095) |
Proceeds from disposals of
property, plant and equipment |
|
40 |
|
17 |
|
86 |
|
21 |
Increase in investments |
|
(2,594) |
|
(871) |
|
(6,743) |
|
(3,954) |
Decrease in investments |
|
1,621 |
|
1,023 |
|
4,414 |
|
3,681 |
Cash paid for acquisitions, net
of cash acquired |
|
(10) |
|
(5) |
|
(82) |
|
(2,573) |
Proceeds from sales of
businesses, net of fees paid |
|
- |
|
(8) |
|
- |
|
296 |
Other |
|
(22) |
|
124 |
|
(218) |
|
282 |
Net cash used for investing activities |
|
(1,383) |
|
(66) |
|
(3,574) |
|
(3,342) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of
commercial paper and other short-term borrowings |
|
4,893 |
|
2,848 |
|
13,701 |
|
18,997 |
Payments of commercial paper
and other short-term borrowings |
|
(4,924) |
|
(4,887) |
|
(13,532) |
|
(21,461) |
Proceeds from issuance of
common stock |
|
57 |
|
23 |
|
520 |
|
409 |
Proceeds from issuance of
long-term debt |
|
1,199 |
|
4,735 |
|
1,238 |
|
9,245 |
Payments of long-term debt |
|
(223) |
|
(2,361) |
|
(292) |
|
(2,839) |
Repurchases of common
stock |
|
(1,554) |
|
(213) |
|
(2,889) |
|
(2,079) |
Cash dividends paid |
|
(565) |
|
(505) |
|
(2,119) |
|
(1,915) |
Payments to purchase the
noncontrolling interest |
|
- |
|
- |
|
- |
|
(238) |
AdvanSix pre-separation
funding |
|
- |
|
- |
|
- |
|
269 |
AdvanSix pre-spin
borrowing |
|
- |
|
- |
|
- |
|
38 |
AdvanSix cash at spin-off |
|
- |
|
- |
|
- |
|
(38) |
Other |
|
(12) |
|
(2) |
|
(143) |
|
(42) |
Net cash (used for) provided by financing
activities |
|
(1,129) |
|
(362) |
|
(3,516) |
|
346 |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash
and cash equivalents |
|
10 |
|
(202) |
|
340 |
|
(114) |
Net (decrease) increase in cash and cash
equivalents |
|
(330) |
|
1,412 |
|
(784) |
|
2,388 |
Cash and cash equivalents at beginning of
period |
|
7,389 |
|
6,431 |
|
7,843 |
|
5,455 |
Cash and cash equivalents at end of period |
|
$ 7,059 |
|
$ 7,843 |
|
$ 7,059 |
|
$ 7,843 |
Honeywell International
Inc. |
Reconciliation of
Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income Margins (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ 2,096 |
|
$ 1,899 |
|
$
7,690 |
|
$
7,186 |
|
|
|
|
|
|
|
|
|
Stock compensation expense (A) |
|
(43) |
|
(39) |
|
(176) |
|
(184) |
Repositioning and other (B, C) |
|
(422) |
|
(136) |
|
(1,010) |
|
(679) |
Pension ongoing income (A) |
|
167 |
|
154 |
|
713 |
|
601 |
Pension mark-to-market expense (A) |
|
(87) |
|
(273) |
|
(87) |
|
(273) |
Other postretirement income (A) |
|
5 |
|
8 |
|
21 |
|
32 |
|
|
|
|
|
|
|
|
|
Operating Income |
|
$ 1,716 |
|
$ 1,613 |
|
$
7,151 |
|
$
6,683 |
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ 2,096 |
|
$ 1,899 |
|
$
7,690 |
|
$
7,186 |
÷ Sales |
|
10,843 |
|
9,985 |
|
40,534 |
|
39,302 |
Segment Profit Margin % |
|
19.3% |
|
19.0% |
|
19.0% |
|
18.3% |
|
|
|
|
|
|
|
|
|
Operating Income |
|
$ 1,716 |
|
$ 1,613 |
|
$
7,151 |
|
$
6,683 |
÷ Sales |
|
10,843 |
|
9,985 |
|
40,534 |
|
39,302 |
Operating Income Margin % |
|
15.8% |
|
16.2% |
|
17.6% |
|
17.0% |
|
|
|
|
|
|
|
|
|
(A) Included in cost of products and
services sold and selling, general and administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and
equity income adjustment.
(C) Included in cost of products and services sold, selling,
general and administrative expenses, and other income/expense. |
|
We define segment profit as operating
income, excluding stock compensation expense, pension ongoing
income or expense, pension mark-to-market expense, other
postretirement income or expense, and repositioning and other
charges. We believe these measures are useful to investors
and management in understanding our ongoing operations and in
analysis of ongoing operating trends. |
|
|
|
|
|
|
|
|
|
A quantitative reconciliation of
segment profit, on an overall Honeywell basis, to operating income
has not been provided for all forward-looking measures of segment
profit and segment margin included herewithin. Management
cannot reliably predict or estimate, without unreasonable effort,
the impact and timing on future operating results arising from
items excluded from segment profit, particularly pension
mark-to-market expense as it is dependent on macroeconomic factors,
such as interest rates and the return generated on invested pension
plan assets. The information that is unavailable to provide a
quantitative reconciliation could have a significant impact on our
reported financial results. To the extent quantitative
information becomes available without unreasonable effort in the
future, and closer to the period to which the forward-looking
measures pertain, a reconciliation of segment profit to operating
income will be included within future filings. |
Honeywell International
Inc. |
Reconciliation of
Organic Sales % Change (Unaudited) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2017 |
|
2017 |
|
Honeywell |
|
|
|
|
|
Reported sales % change |
|
9% |
|
3% |
|
Less: Foreign currency translation |
|
3% |
|
- |
|
Less: Acquisitions and divestitures, net |
|
- |
|
(1)% |
|
Organic sales % change |
|
6% |
|
4% |
|
|
|
|
|
|
|
Aerospace |
|
|
|
|
|
Reported sales % change |
|
6% |
|
- |
|
Less: Foreign currency translation |
|
1% |
|
- |
|
Less: Acquisitions and divestitures, net |
|
- |
|
(2)% |
|
Organic sales % change |
|
5% |
|
2% |
|
|
|
|
|
|
|
Home and Building Technologies |
|
|
|
|
|
Reported sales % change |
|
5% |
|
3% |
|
Less: Foreign currency translation |
|
2% |
|
- |
|
Less: Acquisitions and divestitures, net |
|
- |
|
1% |
|
Organic sales % change |
|
3% |
|
2% |
|
|
|
|
|
|
|
Performance Materials and Technologies |
|
|
|
|
|
Reported sales % change |
|
12% |
|
(1)% |
|
Less: Foreign currency translation |
|
3% |
|
- |
|
Less: Acquisitions and divestitures, net |
|
- |
|
(9)% |
|
Organic sales % change |
|
9% |
|
8% |
|
|
|
|
|
|
|
Safety and Productivity Solutions |
|
|
|
|
|
Reported sales % change |
|
14% |
|
22% |
|
Less: Foreign currency translation |
|
2% |
|
- |
|
Less: Acquisitions and divestitures, net |
|
- |
|
17% |
|
Organic sales % change |
|
12% |
|
5% |
|
|
|
|
|
|
|
We define organic sales percent as the
year-over-year change in reported sales relative to the comparable
period, excluding the impact on sales from foreign currency
translation and acquisitions, net of divestitures. We believe
this measure is useful to investors and management in understanding
our ongoing operations and in analysis of ongoing operating
trends. |
|
|
|
|
|
|
A quantitative reconciliation of
reported sales percent change to organic sales percent change has
not been provided for forward-looking measures of organic sales
percent change because management cannot reliably predict or
estimate, without unreasonable effort, the fluctuations in global
currency markets that impact foreign currency translation, nor is
it reasonable for management to predict the timing, occurrence and
impact of acquisition and divestiture transactions, all of which
could significantly impact our reported sales percent change. |
Honeywell International
Inc. |
Reconciliation of
Organic Sales % Change (Unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
December 31, |
|
|
2017 |
UOP |
|
|
Reported sales % change |
|
15% |
Less: Foreign currency translation |
|
3% |
Less: Acquisitions and divestitures, net |
|
- |
Organic sales % change |
|
12% |
|
|
|
AM |
|
|
Reported sales % change |
|
22% |
Less: Foreign currency translation |
|
3% |
Less: Acquisitions and divestitures, net |
|
- |
Organic sales % change |
|
19% |
|
|
|
|
|
|
We define organic sales percent as the
year-over-year change in reported sales relative to the comparable
period, excluding the impact on sales from foreign currency
translation and acquisitions, net of divestitures. We believe
this measure is useful to investors and management in understanding
our ongoing operations and in analysis of ongoing operating
trends. |
Honeywell International
Inc. |
Reconciliation of Cash
Provided by Operating Activities to Free Cash Flow and Calculation
of Free Cash Flow Conversion, Excluding Pension Mark-to-Market
Expense, Separation Costs, and Impacts from Tax Reform
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2017 |
|
2017 |
|
|
|
|
Cash provided by operating activities |
$
2,172 |
|
$
5,966 |
Expenditures for property, plant and
equipment |
(418) |
|
(1,031) |
|
|
|
|
Free cash flow |
$
1,754 |
|
$
4,935 |
|
|
|
|
Net income (loss), attributable to Honeywell |
$
(2,411) |
|
$
1,655 |
Pension mark-to-market expense, net of tax
(A) |
67 |
|
67 |
Impacts from separation costs, net of tax |
14 |
|
14 |
Impacts from Tax Reform |
3,754 |
|
3,754 |
Net income, attributable to Honeywell, excluding
pension mark-to-market expense, |
|
|
|
separation costs and Tax Reform |
$
1,424 |
|
$
5,490 |
|
|
|
|
Cash provided by operating activities |
$
2,172 |
|
$
5,966 |
÷ Net income (loss) attributable to Honeywell |
$
(2,411) |
|
$
1,655 |
Operating cash flow conversion |
-90% |
|
360% |
|
|
|
|
Free cash flow |
$
1,754 |
|
$
4,935 |
÷ Net income attributable to Honeywell, excluding
pension mark-to-market expense, |
|
|
|
separation costs and impacts from Tax
Reform |
$
1,424 |
|
$
5,490 |
|
|
|
|
Free cash flow conversion %, excluding pension
mark-to-market expense, |
|
|
|
separation costs and impacts from Tax Reform |
123% |
|
90% |
|
|
|
|
|
|
|
|
(A) Pension mark-to-market expense
uses a blended tax rate of 23% and 21.3% for 2017 and 2016. |
|
|
|
|
|
We define free cash flow as cash
provided by operating activities less cash expenditures for
property, plant and equipment. |
|
|
|
|
|
We believe that this metric is useful
to investors and management as a measure of cash generated by
business operations that will be used to repay scheduled debt
maturities and can be used to invest in future growth through new
business development activities or acquisitions, pay dividends,
repurchase stock or repay debt obligations prior to their
maturities. This metric can also be used to evaluate our ability to
generate cash flow from business operations and the impact that
this cash flow has on our liquidity. |
Honeywell International
Inc. |
Reconciliation of Cash
Provided by Operating Activities to Free Cash Flow (Unaudited) |
|
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2016 |
|
2016 |
|
|
|
|
|
|
|
Cash provided by operating activities |
|
$
2,042 |
|
$
5,498 |
|
Expenditures for property, plant and
equipment |
|
(346) |
|
(1,095) |
|
|
|
|
|
|
|
Free cash flow |
|
$
1,696 |
|
$
4,403 |
|
|
|
|
|
|
|
We define free cash flow as cash
provided by operating activities less cash expenditures for
property, plant and equipment. |
|
|
|
|
|
|
|
We believe that this metric is useful
to investors and management as a measure of cash generated by
business operations that will be used to repay scheduled debt
maturities and can be used to invest in future growth through new
business development activities or acquisitions, pay dividends,
repurchase stock or repay debt obligations prior to their
maturities. This metric can also be used to evaluate our ability to
generate cash flow from business operations and the impact that
this cash flow has on our liquidity. |
|
Honeywell International
Inc. |
Reconciliation of
Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Expense, Separation Costs and Impacts from Tax
Reform (Unaudited) |
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2017 (1) |
|
2018 |
|
|
|
|
Earnings per share of common stock - assuming
dilution (EPS) |
$2.14 |
|
TBD |
|
|
|
|
Pension mark-to-market expense |
0.09 |
|
TBD |
Separation costs |
0.02 |
|
TBD |
Impacts from Tax Reform |
4.86 |
|
TBD |
|
|
|
|
EPS, excluding pension mark-to-market expense,
separation costs, and impacts from Tax Reform |
$7.11 |
|
$7.75- $8.00 |
|
|
|
|
|
|
|
|
(1) Utilizes weighted average shares
of approximately 772.1 million for full year. Pension
mark-to-market expense uses a blended tax rate of 23%. |
|
|
|
|
|
We believe earnings per share,
excluding pension mark-to-market expense, separation costs and
impacts from Tax Reform is a measure that is useful to investors
and management in understanding our ongoing operations and in
analysis of ongoing operating trends. For forward looking
information, management cannot reliably predict or estimate,
without unreasonable effort, the pension mark-to-market expense as
it is dependent on macroeconomic factors, such as interest rates
and the return generated on invested pension plan assets, the
separation costs given the preliminary nature of the estimates, and
any adjustments to charges from Tax Reform as the charges are
provisional. We therefore do not include an estimate for the
pension mark-to-market expense, separation costs, or adjustments to
charges from Tax Reform in this reconciliation. Based on economic
and industry conditions, future developments and other relevant
factors, these assumptions are subject to change. |
Honeywell International
Inc. |
Reconciliation of Cash
Provided by Operating Activities to Free Cash Flow Excluding
Separation Costs and Impacts from Tax Reform (Unaudited) |
(Dollars in
billions) |
|
|
Twelve Months Ended |
|
December 31, |
|
2018 |
|
|
Cash provided by operating activities |
TBD |
Separation costs |
TBD |
Impacts from Tax Reform |
TBD |
Expenditures for property, plant and
equipment |
~(0.9) |
|
|
Free cash flow |
~$5.2 - $5.9 |
|
|
We define free cash flow as cash
provided by operating activities less cash expenditures for
property, plant and equipment. |
|
We believe that this metric is useful
to investors and management as a measure of cash generated by
business operations that will be used to repay scheduled debt
maturities and can be used to invest in future growth through new
business development activities or acquisitions, pay dividends,
repurchase stock or repay debt obligations prior to their
maturities. This metric can also be used to evaluate our ability to
generate cash flow from business operations and the impact that
this cash flow has on our liquidity. For forward looking
information, management cannot reliably predict or estimate,
without unreasonable effort, the separation costs given the
preliminary nature of the estimates or the amounts from Tax Reform
as the charges are provisional. We therefore do not include
an estimate for the separation costs or impacts from Tax Reform in
this reconciliation. |