Honeywell Delivers
Third-Quarter Reported Sales Growth Of 6%, Operating Cash Flow
Growth Of 33%
- Organic Sales up 7% Driven by Aerospace and Safety and
Productivity Solutions
- Operating Income Margin up 40 Basis Points, Segment
Margin up 70 Basis Points to 19.4%
- Reported Earnings per Share of
$3.11; Adjusted EPS(1) of
$2.03, up 17%
- Adjusted Free Cash Flow(2) up 51%, Conversion
119%
- Updated Guidance Reflects
Broad-Based Strength in Business Outlook and Impact from Two
Spin-Offs
MORRIS PLAINS, N.J.,
Oct. 19, 2018 /PRNewswire/ --
Honeywell (NYSE: HON) today announced financial
results for the third quarter of 2018 and revised its full-year
2018 guidance to reflect the impact of the spin-offs.
"Honeywell continued to build on its strong first-half
performance, delivering exceptional results across the board.
Organic sales were up 7 percent driven by continued double-digit
growth in our warehouse automation business; strong growth across
the Aerospace business; demand for Solstice® low
global-warming materials and short-cycle Process Solutions software
and services; and continued momentum in Homes and ADI global
distribution. The increased volumes, coupled with our operational
excellence initiatives, drove 70 basis points of segment margin
expansion, which is 20 basis points above the high end of our
guidance. This resulted in adjusted earnings per
share1 of $2.03, up 17 percent year-over-year," said
Darius Adamczyk, Chairman and Chief
Executive Officer of Honeywell. "In the third quarter, we generated
more than $1.8 billion of adjusted
free cash flow2, up 51 percent year-over-year,
with conversion of 119 percent. We also repurchased approximately
$600 million in Honeywell shares in
the third quarter and increased our dividend by 10 percent – the
ninth double-digit increase since 2010. Through the third quarter
of 2018, we have committed more than $4.5
billion in capital deployment through share repurchases,
dividends and acquisitions.
"This has been an exciting year for Honeywell. The portfolio
changes we announced at this time last year are nearly complete,
and we recently announced the acquisition of Transnorm, a leading
provider of warehouse automation solutions with a large and growing
installed base and an attractive aftermarket. We are well
positioned to deliver strong results in 2019 and are committed to
delivering outstanding returns for our shareowners over the long
term," Adamczyk concluded.
The company revised its full-year guidance3 to
reflect the strong operational performance in the first three
quarters of 2018, the completion of the spin-off of Garrett Motion
Inc. (NYSE: GTX), which separated from Honeywell on October 1, and the expected completion of the
spin-off of Resideo Technologies, Inc. on October 29. Sales are now expected to be
$41.7 billion to $41.8 billion; organic sales growth is now
expected to be approximately 6 percent; segment margin expansion is
now expected to be 50 to 60 basis points; and adjusted earnings per
share4 is now expected to be $7.95 to $8.00. The
new guidance range takes into account $0.27 of net earnings dilution from the
separation of the Garrett and Resideo businesses, partially offset
by a $0.07 increase to reflect the
company's improved fourth-quarter outlook.
The company also updated its cash flow guidance. A summary of
the company's full-year guidance changes can be found in Table
1.
Honeywell will discuss the results during an investor conference
call today starting at 8:30 a.m. Eastern
Daylight Time.
Third-Quarter Performance
Honeywell sales for the third quarter were up 6
percent on a reported basis and up 7 percent on an organic basis.
The difference between reported and organic sales primarily relates
to the impact of foreign currency translation. Third-quarter
reported earnings per share was $3.11, which includes $233
million of separation costs (including net tax impacts)
associated with the Garrett and Resideo spin-offs and a
$1 billion favorable adjustment to
the charge the company took in the fourth quarter of 2017 related
to U.S. tax legislation. The third-quarter financial results can be
found in Tables 2 and 3.
Aerospace sales for the third quarter were up 10
percent on an organic basis driven by robust demand from business
aviation original equipment manufacturers, continued strength in
the U.S. and international defense business, growth in the air
transport and business aviation aftermarket, and demand for light
vehicle gas turbochargers in Transportation Systems (which was
spun-off as Garrett Motion Inc. effective October 1). Segment margin expanded 80 basis
points to 22.1 percent, primarily driven by higher defense and
aftermarket volumes, Commercial Excellence and lower customer
incentives.
Home and Building Technologies sales for the third
quarter were up 3 percent on an organic basis driven by continued
strength in the ADI Global Distribution business, demand for
commercial fire products and residential thermal solutions, and
growth in Building Solutions. Segment margin expanded 10 basis
points to 17.1 percent, primarily driven by Commercial Excellence
and productivity (including benefits from previously funded and
executed restructuring), largely offset by inflation and
unfavorable mix.
Performance Materials and Technologies sales for
the third quarter were up 4 percent on an organic basis driven by
demand for Solstice® low global warming products in
Advanced Materials; short-cycle products, services and software
demand in Process Solutions; and growth in engineering sales in
UOP. Segment margin contracted, as anticipated, by 70 basis points
to 21.2 percent, primarily driven by unfavorable mix in UOP.
Safety and Productivity Solutions sales for the
third quarter were up 12 percent on an organic basis driven by
continued double-digit sales growth in the Intelligrated business,
strong demand for new mobility solutions in productivity products,
and higher volumes in sensing and industrial safety. Segment margin
expanded 150 basis points to 16.6 percent, primarily driven by
Commercial Excellence, productivity and higher sales volumes.
To participate on the conference call, please dial (866)
548-4713 (domestic) or (323) 794-2093 (international) approximately
ten minutes before the 8:30 a.m. EDT
start. Please mention to the operator that you are dialing in
for Honeywell's third quarter 2018 earnings call or provide the
conference code HON3Q18. 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 12:30 p.m. EDT,
October 19, until 12:30 p.m. EDT, October
26, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 5040626.
TABLE 1: FULL-YEAR 2018 GUIDANCE – NOW
UPDATED TO REFLECT SPIN-OFFS5
|
Previous Guidance |
Current Guidance |
Sales |
$43.1B - $43.6B |
$41.7B - $41.8B |
Organic Growth |
5% - 6% |
~ 6% |
Segment Margin |
19.4% - 19.6% |
19.5% - 19.6% |
Expansion |
Up 40 - 60 bps |
Up 50 - 60 bps |
Adjusted Earnings Per Share |
$8.10 - $8.20 |
$7.95 - $8.00 |
Earnings Growth |
13% - 15% |
11% - 12% |
Operating Cash Flow |
N/A |
$6.2B - $6.8B |
Growth |
|
4% - 14% |
Adjusted Free Cash Flow |
$5.6B - $6.2B |
$5.8B - $6.2B |
Growth |
13% - 26% |
18% - 26% |
TABLE 2: SUMMARY OF FINANCIAL RESULTS
– TOTAL HONEYWELL
|
3Q 2017 |
3Q 2018 |
Change |
Sales |
10,121 |
10,762 |
6% |
Organic |
|
|
7% |
Segment Margin |
18.7% |
19.4% |
70 bps |
Operating Income Margin |
15.2% |
15.6% |
40 bps |
Earnings Per Share |
|
|
|
Reported |
$1.74 |
$3.11 |
79% |
Adjusted (Excluding Separation Costs of $233M and
$1B
Favorable Adjustment to the 4Q17 U.S. Tax Legislation
Charge) |
$1.74 |
$2.03 |
17% |
Cash Flow from Operations |
1,407 |
1,878 |
33% |
Adjusted Free Cash Flow (Excluding Separation
Cost Impacts of $114M) |
1,195 |
1,809 |
51% |
TABLE 3: SUMMARY OF FINANCIAL RESULTS
– SEGMENTS
AEROSPACE |
3Q 2017 |
3Q 2018 |
Change |
Sales |
3,657 |
4,030 |
10% |
Organic |
|
|
10% |
Segment Profit |
780 |
891 |
14% |
Segment Margin |
21.3% |
22.1% |
80 bps |
HOME AND BUILDING TECHNOLOGIES |
|
|
|
Sales |
2,479 |
2,517 |
2% |
Organic |
|
|
3% |
Segment Profit |
421 |
430 |
2% |
Segment Margin |
17.0% |
17.1% |
10 bps |
PERFORMANCE MATERIALS AND TECHNOLOGIES |
|
|
|
Sales |
2,571 |
2,640 |
3% |
Organic |
|
|
4% |
Segment Profit |
563 |
560 |
~Flat |
Segment Margin |
21.9% |
21.2% |
(70) bps |
SAFETY AND PRODUCTIVITY SOLUTIONS |
|
|
|
Sales |
1,414 |
1,575 |
11% |
Organic |
|
|
12% |
Segment Profit |
213 |
262 |
23% |
Segment Margin |
15.1% |
16.6% |
150 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 Resideo separation. 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 Resideo separation. 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.
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, acquisitions and divestitures for the first
12 months following transaction date, and impacts from adoption of
the new accounting guidance on revenue from contracts with
customers that arise solely due to non-comparable accounting
treatment of contracts existing in the prior period; adjusted free
cash flow, which we define as cash flow from operations less
capital expenditures and which we adjust to exclude the impact of
separation costs related to the spin-offs of Resideo and Garrett,
if and as noted in the release; adjusted free cash flow conversion,
which we define as adjusted free cash flow divided by net income
attributable to Honeywell, excluding pension mark-to-market
expenses, separation costs related to the spin-offs, the 4Q17 U.S.
tax legislation charge, and adjustments to such charge, if and as
noted in the release; and adjusted earnings per share, which we
adjust to exclude pension mark-to-market expenses, as well as for
other components, such as separation costs related to the
spin-offs, the 4Q17 U.S. tax legislation charge, and adjustments to
such 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.
|
|
Contacts: |
|
|
|
Media |
Investor Relations |
Scott Sayres |
Mark Macaluso |
(480) 257-8921 |
(973) 455-2222 |
scott.sayres@honeywell.com |
mark.macaluso@honeywell.com |
1 Adjusted EPS and adjusted EPS V% excludes
separation costs related to the spin-offs of Resideo and Garrett,
and adjustments to the 4Q17 U.S. tax legislation charge.
2 Adjusted free cash flow, associated conversion
and adjusted free cash flow V% exclude impacts from separation
costs related to the spin-offs. Conversion also excludes
adjustments to the 4Q17 U.S. tax legislation charge.
3 As discussed in the attached reconciliations, we
do not publish margin or EPS guidance on a GAAP basis.
4 Adjusted EPS guidance excludes pension
mark-to-market, separation costs related to the spin-offs of
Resideo and Garrett, and adjustments to the 4Q17 U.S. tax
legislation charge.
5 Guidance reflects the completion of the spin-off
of Garrett Motion Inc. on Oct. 1 and
the expected completion of the spin-off of Resideo Technologies,
Inc. on Oct. 29. Guidance for EPS and
EPS V% excludes pension mark-to-market, separation costs related to
the spin-offs, and the 4Q17 U.S. tax legislation charge and
adjustments to such charge; guidance for adjusted free cash flow
and adjusted free cash flow V% exclude impacts from separation
costs related to the spin-offs. As discussed in the attached
reconciliation, we do not publish margin or EPS guidance on a GAAP
basis.
Honeywell International
Inc |
Consolidated Statement
of Operations (Unaudited) |
(Dollars in millions,
except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Product sales |
$
8,477 |
|
$ 8,052 |
|
$ 25,414 |
|
$ 23,671 |
Service sales |
2,285 |
|
2,069 |
|
6,659 |
|
6,020 |
Net sales |
10,762 |
|
10,121 |
|
32,073 |
|
29,691 |
|
|
|
|
|
|
|
|
|
Costs, expenses and
other |
|
|
|
|
|
|
|
Cost
of products sold (A) |
6,127 |
|
5,795 |
|
18,234 |
|
16,982 |
Cost
of services sold (A) |
1,429 |
|
1,259 |
|
4,127 |
|
3,622 |
|
|
7,556 |
|
7,054 |
|
22,361 |
|
20,604 |
Selling, general and administrative expenses (A) |
1,524 |
|
1,524 |
|
4,527 |
|
4,403 |
Other
(income) expense |
(275) |
|
(316) |
|
(859) |
|
(834) |
Interest and other financial charges |
99 |
|
81 |
|
277 |
|
235 |
|
|
8,904 |
|
8,343 |
|
26,306 |
|
24,408 |
|
|
|
|
|
|
|
|
|
Income before taxes |
1,858 |
|
1,778 |
|
5,767 |
|
5,283 |
Tax expense
(benefit) |
(498) |
|
416 |
|
679 |
|
1,188 |
|
|
|
|
|
|
|
|
|
Net income |
2,356 |
|
1,362 |
|
5,088 |
|
4,095 |
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to the noncontrolling interest |
18 |
|
17 |
|
44 |
|
31 |
|
|
|
|
|
|
|
|
|
Net income attributable
to Honeywell |
$
2,338 |
|
$ 1,345 |
|
$ 5,044 |
|
$ 4,064 |
|
|
|
|
|
|
|
|
|
Earnings per share of
common stock - basic |
$
3.15 |
|
$ 1.76 |
|
$
6.76 |
|
$
5.33 |
|
|
|
|
|
|
|
|
|
Earnings per share of
common stock - assuming dilution |
$
3.11 |
|
$ 1.74 |
|
$
6.67 |
|
$
5.26 |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares outstanding - basic |
741.8 |
|
762.2 |
|
746.0 |
|
763.1 |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares outstanding - assuming dilution |
752.0 |
|
771.4 |
|
756.0 |
|
773.1 |
|
|
|
|
|
|
|
|
|
(A) Cost of products and
services sold and selling, general and administrative expenses
include amounts for repositioning and other charges, the
service
cost component of pension and other postretirement (income)
expense, and stock compensation expense. |
Honeywell International
Inc |
Segment Data
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
Net Sales |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
4,030 |
|
$
3,657 |
|
$ 12,065 |
|
$ 10,877 |
|
|
|
|
|
|
|
|
|
Home and Building
Technologies |
2,517 |
|
2,479 |
|
7,496 |
|
7,162 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
2,640 |
|
2,571 |
|
7,872 |
|
7,485 |
|
|
|
|
|
|
|
|
|
Safety and Productivity
Solutions |
1,575 |
|
1,414 |
|
4,640 |
|
4,167 |
|
|
|
|
|
|
|
|
|
Total |
$ 10,762 |
|
$ 10,121 |
|
$ 32,073 |
|
$ 29,691 |
|
|
|
|
|
|
|
|
|
Reconciliation of
Segment Profit to Income Before Taxes |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
Segment Profit |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
891 |
|
$
780 |
|
$
2,702 |
|
$
2,395 |
|
|
|
|
|
|
|
|
|
Home and Building
Technologies |
430 |
|
421 |
|
1,273 |
|
1,189 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
560 |
|
563 |
|
1,676 |
|
1,599 |
|
|
|
|
|
|
|
|
|
Safety and Productivity
Solutions |
262 |
|
213 |
|
760 |
|
621 |
|
|
|
|
|
|
|
|
|
Corporate |
(53) |
|
(82) |
|
(181) |
|
(210) |
|
|
|
|
|
|
|
|
|
Total segment profit |
2,090 |
|
1,895 |
|
6,230 |
|
5,594 |
|
|
|
|
|
|
|
|
|
Interest and other
financial charges |
(99) |
|
(81) |
|
(277) |
|
(235) |
Stock compensation
expense (A) |
(41) |
|
(39) |
|
(131) |
|
(133) |
Pension ongoing income
(B) |
247 |
|
183 |
|
745 |
|
546 |
Other postretirement
income (B) |
12 |
|
6 |
|
24 |
|
16 |
Repositioning and other
charges (C,D) |
(299) |
|
(235) |
|
(756) |
|
(586) |
Other (E) |
(52) |
|
49 |
|
(68) |
|
81 |
|
|
|
|
|
|
|
|
|
Income before taxes |
$
1,858 |
|
$
1,778 |
|
$
5,767 |
|
$
5,283 |
|
|
|
|
|
|
(A) |
Amounts included in Selling, general and
administrative expenses. |
|
|
|
|
(B) |
Amounts included in Cost
of products and services sold and Selling, general and
administrative expenses (service
costs) and Other income/expense (non-service cost components). |
(C) |
Amounts included in Cost
of products and services sold, Selling, general and administrative
expenses, and Other
income/expense. |
(D) |
Includes repositioning,
asbestos, and environmental expenses. |
(E) |
Amounts include the other
components of Other income/expense not included within other
categories in this
reconciliation. Equity income (loss) of affiliated companies is
included in segment profit. |
Honeywell International
Inc |
Consolidated Balance
Sheet (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash
and cash equivalents |
|
$
9,803 |
|
$
7,059 |
Short-term investments |
|
1,850 |
|
3,758 |
Accounts receivable - net |
|
8,568 |
|
8,866 |
Inventories |
|
5,061 |
|
4,613 |
Other
current assets |
|
1,346 |
|
1,706 |
|
Total current assets |
|
26,628 |
|
26,002 |
|
|
|
|
|
|
Investments and long-term
receivables |
|
754 |
|
667 |
Property, plant and
equipment - net |
|
5,966 |
|
5,926 |
Goodwill |
|
18,186 |
|
18,277 |
Other intangible assets -
net |
|
4,202 |
|
4,496 |
Insurance recoveries for
asbestos related liabilities |
|
465 |
|
479 |
Deferred income
taxes |
|
376 |
|
251 |
Other assets |
|
5,350 |
|
3,372 |
|
|
|
|
|
|
|
Total assets |
|
$
61,927 |
|
$ 59,470 |
|
|
|
|
|
|
LIABILITIES AND SHAREOWNERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$
7,050 |
|
$
6,584 |
Commercial paper and other short-term borrowings |
|
3,977 |
|
3,958 |
Current maturities of long-term debt |
|
215 |
|
1,351 |
Accrued liabilities |
|
6,658 |
|
6,968 |
|
Total current liabilities |
|
17,900 |
|
18,861 |
|
|
|
|
|
|
Long-term debt |
|
14,059 |
|
12,573 |
Deferred income
taxes |
|
1,905 |
|
2,664 |
Postretirement benefit
obligations other than pensions |
|
440 |
|
512 |
Asbestos related
liabilities |
|
2,252 |
|
2,260 |
Other liabilities |
|
6,948 |
|
5,930 |
Redeemable noncontrolling
interest |
|
7 |
|
5 |
Shareowners' equity |
|
18,416 |
|
16,665 |
|
Total liabilities, redeemable noncontrolling interest
and shareowners' equity |
|
$
61,927 |
|
$ 59,470 |
Honeywell International
Inc |
Consolidated
Statement of Cash Flows (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ 2,356 |
|
$ 1,362 |
|
$ 5,088 |
|
$ 4,095 |
Less: Net income attributable to
the noncontrolling interest |
|
18 |
|
17 |
|
44 |
|
31 |
Net income attributable to
Honeywell |
|
2,338 |
|
1,345 |
|
5,044 |
|
4,064 |
Adjustments to reconcile net income
attributable to Honeywell to net |
|
|
|
|
|
|
|
|
cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
186 |
|
180 |
|
558 |
|
534 |
Amortization |
|
100 |
|
105 |
|
304 |
|
298 |
Repositioning and other charges |
|
299 |
|
236 |
|
756 |
|
586 |
Net
payments for repositioning and other charges |
|
(191) |
|
(130) |
|
(519) |
|
(394) |
Pension and
other postretirement income |
|
(259) |
|
(189) |
|
(769) |
|
(562) |
Pension and
other postretirement benefit payments |
|
(23) |
|
(24) |
|
(67) |
|
(71) |
Stock
compensation expense |
|
41 |
|
39 |
|
131 |
|
133 |
Deferred
income taxes |
|
(596) |
|
13 |
|
(482) |
|
(77) |
Other |
|
(241) |
|
(30) |
|
(163) |
|
(38) |
Changes in
assets and liabilities, net of the effects of |
|
|
|
|
|
|
|
|
acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
34 |
|
(132) |
|
131 |
|
(408) |
Inventories |
|
(270) |
|
(102) |
|
(459) |
|
(400) |
Other
current assets |
|
182 |
|
16 |
|
356 |
|
13 |
Accounts payable |
|
242 |
|
90 |
|
466 |
|
404 |
Accrued liabilities |
|
36 |
|
(10) |
|
(412) |
|
(288) |
Net cash provided by operating activities |
|
1,878 |
|
1,407 |
|
4,875 |
|
3,794 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Expenditures for property, plant
and equipment |
|
(183) |
|
(212) |
|
(522) |
|
(613) |
Proceeds from disposals of
property, plant and equipment |
|
1 |
|
21 |
|
4 |
|
46 |
Increase in investments |
|
(1,095) |
|
(1,820) |
|
(2,882) |
|
(4,149) |
Decrease in investments |
|
1,126 |
|
952 |
|
4,634 |
|
2,793 |
Cash paid for acquisitions, net of
cash acquired |
|
(51) |
|
(57) |
|
(51) |
|
(72) |
Other |
|
30 |
|
(83) |
|
250 |
|
(196) |
Net cash provided by (used for) investing
activities |
|
(172) |
|
(1,199) |
|
1,433 |
|
(2,191) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of
commercial paper and other short-term borrowings |
|
6,551 |
|
3,772 |
|
19,300 |
|
8,808 |
Payments of commercial paper and
other short-term borrowings |
|
(7,001) |
|
(3,773) |
|
(19,153) |
|
(8,608) |
Proceeds from issuance of common
stock |
|
115 |
|
87 |
|
242 |
|
463 |
Proceeds from issuance of long-term
debt |
|
21 |
|
23 |
|
26 |
|
39 |
Payments of long-term debt |
|
(26) |
|
(39) |
|
(1,303) |
|
(69) |
Repurchases of common stock |
|
(604) |
|
(343) |
|
(2,308) |
|
(1,335) |
Cash dividends paid |
|
(553) |
|
(505) |
|
(1,669) |
|
(1,554) |
Pre-separation funding |
|
1,604 |
|
- |
|
1,604 |
|
- |
Other |
|
(23) |
|
(26) |
|
(141) |
|
(131) |
Net cash provided by (used for) by financing
activities |
|
84 |
|
(804) |
|
(3,402) |
|
(2,387) |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and
cash equivalents |
|
(69) |
|
108 |
|
(162) |
|
330 |
Net increase (decrease) in cash and cash
equivalents |
|
1,721 |
|
(488) |
|
2,744 |
|
(454) |
Cash and cash equivalents at beginning of period |
|
8,082 |
|
7,877 |
|
7,059 |
|
7,843 |
Cash and cash equivalents at end of period |
|
$ 9,803 |
|
$ 7,389 |
|
$ 9,803 |
|
$ 7,389 |
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 |
|
Nine Months
Ended |
|
September 30, |
|
September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ 2,090 |
|
$ 1,895 |
|
$
6,230 |
|
$
5,594 |
|
|
|
|
|
|
|
|
|
Stock compensation expense (A) |
|
(41) |
|
(39) |
|
(131) |
|
(133) |
Repositioning and other (B,C) |
|
(313) |
|
(249) |
|
(753) |
|
(591) |
Pension and other postretirement service costs
(D) |
|
(54) |
|
(64) |
|
(161) |
|
(186) |
|
|
|
|
|
|
|
|
|
Operating income |
|
$ 1,682 |
|
$ 1,543 |
|
$
5,185 |
|
$
4,684 |
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ 2,090 |
|
$ 1,895 |
|
$
6,230 |
|
$
5,594 |
÷ Net sales |
|
$ 10,762 |
|
$ 10,121 |
|
$ 32,073 |
|
$ 29,691 |
Segment profit margin % |
|
19.4% |
|
18.7% |
|
19.4% |
|
18.8% |
|
|
|
|
|
|
|
|
|
Operating income |
|
$ 1,682 |
|
$ 1,543 |
|
$
5,185 |
|
$
4,684 |
÷ Net sales |
|
$ 10,762 |
|
$ 10,121 |
|
$ 32,073 |
|
$ 29,691 |
Operating income margin % |
|
15.6% |
|
15.2% |
|
16.2% |
|
15.8% |
|
(A) Included in 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.
(D) Included in Cost of products and services sold and Selling,
general and administrative expenses. |
|
We define segment profit
as operating income, excluding stock compensation expense, pension
and other postretirement service costs, 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. 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 |
|
|
September 30, 2018 |
Honeywell |
|
|
Reported sales % change |
|
6% |
Less: Foreign currency
translation |
|
(1)% |
Less: Acquisitions, divestitures and
other, net |
|
- |
Organic sales % change |
|
7% |
|
|
|
Aerospace |
|
|
Reported sales % change |
|
10% |
Less: Foreign currency
translation |
|
- |
Less: Acquisitions, divestitures and
other, net |
|
- |
Organic sales % change |
|
10% |
|
|
|
Home and Building Technologies |
|
|
Reported sales % change |
|
2% |
Less: Foreign currency
translation |
|
(1)% |
Less: Acquisitions, divestitures and
other, net |
|
- |
Organic sales % change |
|
3% |
|
|
|
Performance Materials and Technologies |
|
|
Reported sales % change |
|
3% |
Less: Foreign currency
translation |
|
(1)% |
Less: Acquisitions, divestitures and
other, net |
|
- |
Organic sales % change |
|
4% |
|
|
|
Safety and Productivity Solutions |
|
|
Reported sales % change |
|
11% |
Less: Foreign currency
translation |
|
(1)% |
Less: Acquisitions, divestitures and
other, net |
|
- |
Organic sales % change |
|
12% |
|
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, acquisitions, net of
divestitures, and non-comparable impacts from adoption of the new
revenue recognition standard. 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 Cash
Provided by Operating Activities to Adjusted Free Cash Flow and
Calculation of Adjusted Free Cash Flow Conversion (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
September 30, 2018 |
|
September 30, 2017 |
|
|
|
|
Cash provided by operating activities |
$
1,878 |
|
$
1,407 |
Expenditures for property, plant and equipment |
(183) |
|
(212) |
Free cash flow |
1,695 |
|
1,195 |
Separation cost payments |
114 |
|
- |
Adjusted free cash flow |
$
1,809 |
|
$
1,195 |
|
|
|
|
Net income attributable to Honeywell |
$
2,338 |
|
$
1,345 |
Separation costs, includes net tax impacts |
233 |
|
- |
Adjustments to 4Q17 U.S tax legislation charge |
(1,047) |
|
- |
Adjusted net income attributable to Honeywell |
$
1,524 |
|
$
1,345 |
|
|
|
|
Cash provided by operating activities |
$
1,878 |
|
$
1,407 |
÷ Net income attributable to Honeywell |
$
2,338 |
|
$
1,345 |
Operating cash flow conversion |
80% |
|
105% |
|
|
|
|
Adjusted free cash flow |
$
1,809 |
|
$
1,195 |
÷ Adjusted net income attributable to Honeywell |
$
1,524 |
|
$
1,345 |
Adjusted free cash flow conversion % |
119% |
|
89% |
|
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 Adjusted Earnings per Share (Unaudited) |
|
|
|
Three Months Ended |
|
|
September 30, |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
Earnings per share of common stock -
assuming dilution (1) |
$
3.11 |
|
$
1.74 |
|
Separation costs (2) |
0.31 |
|
- |
|
Adjustments to 4Q17 U.S. tax
legislation charge |
(1.39) |
|
- |
|
Adjusted earnings per share of common
stock - assuming dilution |
$
2.03 |
|
$
1.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) For the three months
ended September 30, 2018 and 2017, utilizes weighted average shares
of approximately 752 million and 771.4 million. |
|
|
|
|
|
(2) Separation costs of
$248 million ($233 million including net tax impacts) includes $132
million of tax costs we incurred in the restructuring of the
ownership of
various legal entities in anticipation of the spin-off transactions
("frictional tax costs") and $116 million ($101 million including
net tax impacts)of other separation
costs. |
|
|
|
|
|
We believe adjusted
earnings per share is a measure that is useful to investors and
management in understanding our ongoing operations and in analysis
of
ongoing operating trends |
|
Honeywell International
Inc |
Reconciliation of
Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income Margins (Unaudited) |
(Dollars in
millions) |
|
|
|
Twelve Months Ended
December 31, 2017 |
|
|
Segment profit |
$
7,690 |
|
|
Stock compensation expense (A) |
(176) |
Repositioning and other (B,C) |
(962) |
Pension and other postretirement service costs
(D) |
(249) |
Operating income |
$
6,303 |
|
|
Segment profit |
$
7,690 |
÷ Net sales |
$
40,534 |
Segment profit margin % |
19.0% |
|
|
Operating income |
$
6,303 |
÷ Net sales |
$
40,534 |
Operating income margin % |
15.5% |
|
|
(A) Included in 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.
(D) Included in Cost of products and services sold and Selling,
general and administrative expenses. |
|
|
We define segment profit
as operating income, excluding stock compensation expense, pension
and other postretirement service costs, 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
Earnings Per Share to Adjusted Earnings Per Share (Unaudited) |
|
|
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 (1) |
|
2018 |
|
|
|
|
|
|
Earnings per share of common stock -
assuming dilution (EPS) |
$ 2.00 |
|
TBD |
|
Pension mark-to-market expense |
0.09 |
|
TBD |
|
Separation costs |
0.02 |
|
TBD |
|
Adjustments to 4Q17 U.S. tax legislation
charge |
5.04 |
|
TBD |
|
Adjusted EPS |
$ 7.15 |
|
$7.95 - $8.00 |
|
|
|
|
|
|
|
|
|
|
|
(1) Utilizes weighted
average shares of approximately 772.1 million for full year.
Pension mark-to-market expense uses a blended tax rate of 23%. |
|
|
|
|
|
|
We believe adjusted
earnings per share is a measure that is useful to investors and
management in understanding our ongoing operations and in analysis
of ongoing operating
trends. For forward looking information, management cannot
reliably predict or estimate, without unreasonable effort, the
pension mark-to-market expense as it is dependent on
macroeconomic factors, such as interest rates and the return
generated on invested pension plan assets, the separation costs
given the inherent uncertainty in the estimates,
and any adjustments to the 4Q17 U.S. tax legislation charge as the
amounts are provisional. We therefore do not include an
estimate for the pension mark-to-market expense,
separation costs, or adjustments to 4Q17 U.S. tax legislation
charge in this reconciliation. Based on economic and industry
conditions, future developments and other relevant
factors, these assumptions are subject to change. |
|
Honeywell International
Inc |
Reconciliation of Cash
Provided by Operating Activities to Adjusted Free Cash Flow
(Unaudited) |
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
December 31, 2017 ($M) |
|
December 31, 2018 ($B) |
|
|
|
|
Cash provided by operating activities |
$ 5,966 |
|
~$6.2 - $6.8 |
Expenditures for property, plant and equipment |
(1,031) |
|
~(0.9) |
Free cash flow |
4,935 |
|
~5.3 - 5.9 |
Separation cost payments |
- |
|
~0.3 - 0.5 |
Adjusted free cash flow |
$
4,935 |
|
~$5.8 - $6.2 |
|
|
|
|
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 |
|
|
|
|