Honeywell Delivers
Strong Earnings With 370 Basis Points Of Operating Margin Expansion
And 180 Basis Points Of Segment Margin Expansion; Raises 2019
Full-Year Earnings And Margin Guidance(1)
- Reported Earnings per Share of
$2.23; Adjusted Earnings per Share(2)
of $2.08, up 9% Ex-Spins(2)
- Reported Sales Down 16% Due to
Impact of 2018 Spin-Offs; Organic Sales up 3% Driven by Aerospace,
Process Solutions, and Building Technologies
- Operating Income Margin up 370
Basis Points to 19.3%; Segment Margin up 180 Basis Points to
21.2%
- Deployed $1.0 Billion in Capital to Share Repurchases;
Announced 10% Dividend Increase
CHARLOTTE, N.C., Oct. 17, 2019 /PRNewswire/ -- Honeywell (NYSE:
HON) today announced its financial results for the third
quarter of 2019 and raised its full-year segment margin and
adjusted earnings per share financial guidance1,
narrowed its sales guidance and reaffirmed its cash flow
guidance.
"We continue to deliver strong results and returns for our
shareowners, even with the ongoing uncertainty in the macroeconomic
environment," said Darius Adamczyk,
chairman and chief executive officer of Honeywell. "We delivered
adjusted earnings per share2 of $2.08, up 9%, excluding the impact of the
spin-offs2, which was above the high end of our
third-quarter guidance range. Organic sales growth of 3% was driven
by strength across Aerospace, continued demand for commercial fire
products in Building Technologies, and broad-based growth in
Process Solutions. In addition, Honeywell Connected Enterprise
drove double-digit connected software growth, continuing our
transformation into a premier software industrial company. Our
productivity rigor and the favorable impact of the 2018 spin-offs
also contributed to our strong results and expanded segment margin,
which was up 180 basis points to 21.2% in the quarter."
"We remain on track to meet our cash flow commitments for the
year, and we continued to execute on our capital deployment
strategy in the third quarter. We repurchased $1.0 billion in Honeywell shares, bringing total
repurchases in the first nine months of 2019 to $3.7 billion. We also acquired TruTrak Flight
Systems, made three strategic investments within Honeywell
Ventures, and announced a 10% dividend increase, the tenth
consecutive double-digit dividend increase. Additionally, during
the quarter, we issued $2.7 billion
of senior notes to refinance October debt maturities at attractive
rates, further strengthening our balance sheet," said Adamczyk.
"Overall, we had a strong third quarter, which was a
continuation of very strong performance year-to-date. We are well
positioned in attractive end markets with multiple levers for value
creation heading into 2020. We remain committed to delivering
outstanding returns for our customers, shareowners, and employees
over the long-term," concluded Adamczyk.
As a result of the company's performance in the first three
quarters and management's outlook for the remainder of the year,
Honeywell updated its full-year financial guidance1.
Organic sales growth is now expected to be in the range of 4% to
5%; segment margin1 is now expected to be 20.9% to
21.0%, up 20 basis points from the low end of the prior guidance
range; and adjusted earnings per share1 is now expected
to be $8.10 to $8.15, up fifteen
cents from the low end of the prior guidance range.
A summary of the company's full-year guidance changes can be
found in Table 1.
Third-Quarter Performance
Honeywell sales for the third quarter were down 16% on a
reported basis and up 3% on an organic basis. The difference
between reported and organic sales primarily relates to the
spin-offs of the Transportation Systems business (formerly in
Aerospace) and the Homes and ADI Global Distribution business
(formerly in Honeywell Building Technologies) as well as the impact
of foreign currency translation. The third-quarter financial
results can be found in Tables 2 and 3.
Aerospace sales for the third quarter were up 10% on an
organic basis driven by continued double-digit growth in the
Defense and Space business, strength in the commercial aftermarket,
and original equipment demand across air transport and business
aviation. Segment margin expanded 350 basis points to 25.6%,
primarily driven by commercial excellence, productivity, net of
inflation, and the favorable impact from the spin-off of the
Transportation Systems business in 2018.
Honeywell Building Technologies sales for the third
quarter were up 3% on an organic basis driven by continued demand
for commercial fire and building management products, and building
projects across the Americas. Segment margin expanded 390 basis
points to 21.0% driven by the favorable impact from the spin-off of
the Homes and ADI Global Distribution business in 2018.
Performance Materials and Technologies sales for the
third quarter were up 3% on an organic basis driven by robust
demand for services, gas products, and automation projects in
Process Solutions, double-digit software growth driven by demand
for Honeywell Forge for Industrial, and strength in licensing and
refining catalysts in UOP. This was partially offset by lower gas
processing sales in UOP and declines in Advanced Materials, which
was impacted by continued illegal imports of hydrofluorocarbons
(HFCs) into Europe. Segment margin
expanded 60 basis points to 21.8%, primarily driven by
productivity, net of inflation, and commercial excellence.
Safety and Productivity Solutions sales for the third
quarter were down 8% on an organic basis driven by distributor
destocking that resulted in lower sales volumes in productivity
products and the impact of major systems project timing in
Intelligrated, which more than offset continued demand for gas
sensing and detection products. Segment margin contracted 320 basis
points to 13.4%, primarily driven by lower sales volumes in
productivity products and higher sales of lower margin
products.
Conference Call Details
Honeywell will discuss its third-quarter results and updated
full-year guidance during an investor conference call starting at
8:30 a.m. Eastern Daylight Time
today. To participate on the conference call, please dial (800)
239-9838 (domestic) or (323) 794-2551 (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 2019 earnings call or provide the
conference code HON3Q19. 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 17, until 12:30 p.m. EDT, October
24, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 7673176.
TABLE 1: FULL-YEAR 2019 GUIDANCE1
|
|
Previous Guidance |
|
Current Guidance |
Sales |
|
$36.7B - $37.2B |
|
$36.7B - $36.9B |
Organic Growth |
|
4% - 6% |
|
4% - 5% |
Segment Margin |
|
20.7% - 21.0% |
|
20.9% - 21.0% |
Expansion |
|
Up 110 - 140 bps |
|
Up 130 - 140 bps |
Expansion Ex-Spins3 |
|
Up 30 - 60 bps |
|
Up 50 - 60 bps |
Adjusted Earnings Per Share4 |
|
$7.95 - $8.15 |
|
$8.10 - $8.15 |
Earnings Growth Ex-Spins |
|
8% - 10% |
|
~ 10% |
Operating Cash Flow |
|
$6.2B - $6.5B |
|
$6.2B - $6.5B |
Adjusted Free Cash Flow5 |
|
$5.7B - $6.0B |
|
$5.7B - $6.0B |
Conversion |
|
98% - 100% |
|
98% - 100% |
TABLE 2: SUMMARY OF HONEYWELL
FINANCIAL RESULTS
|
|
3Q 2018 |
|
3Q 2019 |
|
Change |
Sales |
|
10,762 |
|
9,086 |
|
(16)% |
Organic Growth |
|
|
|
|
|
3% |
Segment Margin |
|
19.4% |
|
21.2% |
|
180 bps |
Operating Income Margin |
|
15.6% |
|
19.3% |
|
370 bps |
Reported Earnings Per Share |
|
$3.11 |
|
$2.23 |
|
(28)% |
Adjusted Earnings Per Share
Ex-Spins6 |
|
$1.90 |
|
$2.08 |
|
9% |
Cash Flow from Operations |
|
1,878 |
|
1,471 |
|
(22)% |
Adjusted Free Cash Flow7 |
|
1,809 |
|
1,286 |
|
(29)% |
TABLE 3: SUMMARY OF SEGMENT FINANCIAL
RESULTS
AEROSPACE |
|
3Q 2018 |
|
3Q 2019 |
|
Change |
Sales |
|
4,030 |
|
3,544 |
|
(12)% |
Organic Growth |
|
|
|
|
|
10% |
Segment Profit |
|
891 |
|
908 |
|
2% |
Segment Margin |
|
22.1% |
|
25.6% |
|
350 bps |
HONEYWELL BUILDING TECHNOLOGIES |
|
|
|
|
|
|
Sales |
|
2,517 |
|
1,415 |
|
(44)% |
Organic Growth |
|
|
|
|
|
3% |
Segment Profit |
|
430 |
|
297 |
|
(31)% |
Segment Margin |
|
17.1% |
|
21.0% |
|
390 bps |
PERFORMANCE MATERIALS AND TECHNOLOGIES |
|
|
|
|
|
|
Sales |
|
2,640 |
|
2,670 |
|
1% |
Organic Growth |
|
|
|
|
|
3% |
Segment Profit |
|
560 |
|
582 |
|
4% |
Segment Margin |
|
21.2% |
|
21.8% |
|
60 bps |
SAFETY AND PRODUCTIVITY SOLUTIONS |
|
|
|
|
|
|
Sales |
|
1,575 |
|
1,457 |
|
(7)% |
Organic Growth |
|
|
|
|
|
(8)% |
Segment Profit |
|
262 |
|
195 |
|
(26)% |
Segment Margin |
|
16.6% |
|
13.4% |
|
(320) bps |
|
1As discussed in the notes
to the attached reconciliations, we do not provide guidance for
margin or EPS on a GAAP basis. |
2Adjusted EPS and adjusted
EPS V% ex-spins exclude 3Q18 after-tax separation costs related to
the spin-offs of Resideo and Garrett, the 3Q18 after-tax segment
profit contribution from Resideo and Garrett, net of the spin
indemnification impacts assuming both indemnification agreements
were effective in 3Q18, and adjustments to the charges taken in
connection with the 4Q17 U.S. tax legislation charge. |
3Segment margin expansion
ex-spins guidance excludes sales and segment profit contribution
from Resideo and Garrett in 2018. |
4Adjusted EPS and adjusted
EPS V%, ex-spins, guidance excludes pension mark-to-market,
adjustments to the charges taken in connection with the 4Q17 U.S.
tax legislation charge, 2018 after-tax separation costs related to
the spin-offs of Resideo and Garrett, and the 2018 after-tax
segment profit contribution from the spin-offs, net of spin
indemnification impacts assuming both indemnification agreements
were effective for all of 2018, of $0.62. |
5Adjusted free cash flow
guidance and associated conversion exclude estimated payments of
~$0.3B for separation costs incurred in 2018 related to the
spin-offs of Resideo and Garrett. Adjusted free cash flow
conversion guidance also excludes pension mark-to-market and
adjustments to the charges taken in connection with the 4Q17 U.S.
tax legislation charge. As discussed in the notes to the attached
reconciliations, we do not provide cash flow conversion guidance on
a GAAP basis. |
6Adjusted EPS ex-spins and
adjusted EPS V% ex-spins exclude 3Q18 after-tax separation costs
related to the spin-offs of Resideo and Garrett of $233M, and the
favorable adjustments to the charges taken in connection with the
4Q17 U.S. tax legislation charge of $114M in 3Q19 and $1,047M in
3Q18. Also excludes the 3Q18 after-tax segment profit contribution
from the spin-offs, net of spin indemnification impacts assuming
both indemnification agreements were effective in 3Q18, of
$0.13. |
7Adjusted free cash flow
and adjusted free cash flow V% exclude impacts from separation
costs related to the spin-offs of $7M in 3Q19 and $114M in
3Q18. |
|
|
|
|
|
|
|
|
Honeywell (http://www.honeywell.com/) is a Fortune 100
technology company that delivers industry specific solutions that
include aerospace products and services; control technologies for
buildings and industry; and performance materials globally. Our
technologies help everything from aircraft, 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.
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. 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 and which we adjust to
exclude sales and segment profit contribution from Resideo and
Garrett in 2018, if and as noted in the release; 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; 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, and
adjustments to the charges taken in connection with the 4Q17 U.S.
tax legislation 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, adjustments to the
charges taken in connection with the 4Q17 U.S. tax legislation
charge, and after-tax segment profit contribution from Resideo and
Garrett in the periods noted in the release, net of spin
indemnification impacts assuming both indemnification agreements
were effective in such periods, if and as noted in the release. 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.
Honeywell
International Inc. |
Consolidated Statement
of Operations (Unaudited) |
(Dollars in millions,
except per share amounts) |
|
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Product sales |
$ |
6,793 |
|
|
$ |
8,477 |
|
|
$ |
20,496 |
|
|
$ |
25,414 |
|
Service sales |
2,293 |
|
|
2,285 |
|
|
6,717 |
|
|
6,659 |
|
Net sales |
9,086 |
|
|
10,762 |
|
|
27,213 |
|
|
32,073 |
|
Costs, expenses and other |
|
|
|
|
|
|
|
Cost of products sold (1) |
4,775 |
|
|
6,127 |
|
|
14,244 |
|
|
18,234 |
|
Cost of services sold (1) |
1,263 |
|
|
1,429 |
|
|
3,767 |
|
|
4,127 |
|
|
6,038 |
|
|
7,556 |
|
|
18,011 |
|
|
22,361 |
|
Selling, general and administrative expenses
(1) |
1,296 |
|
|
1,524 |
|
|
4,046 |
|
|
4,527 |
|
Other (income) expense |
(311) |
|
|
(275) |
|
|
(901) |
|
|
(859) |
|
Interest and other financial charges |
96 |
|
|
99 |
|
|
266 |
|
|
277 |
|
|
7,119 |
|
|
8,904 |
|
|
21,422 |
|
|
26,306 |
|
Income before taxes |
1,967 |
|
|
1,858 |
|
|
5,791 |
|
|
5,767 |
|
Tax expense (benefit) |
319 |
|
|
(498) |
|
|
1,151 |
|
|
679 |
|
Net income |
1,648 |
|
|
2,356 |
|
|
4,640 |
|
|
5,088 |
|
Less: Net income attributable to the
noncontrolling interest |
24 |
|
|
18 |
|
|
59 |
|
|
44 |
|
Net income attributable to Honeywell |
$ |
1,624 |
|
|
$ |
2,338 |
|
|
$ |
4,581 |
|
|
$ |
5,044 |
|
Earnings per share of common stock - basic |
$ |
2.26 |
|
|
$ |
3.15 |
|
|
$ |
6.33 |
|
|
$ |
6.76 |
|
Earnings per share of common stock - assuming
dilution |
$ |
2.23 |
|
|
$ |
3.11 |
|
|
$ |
6.25 |
|
|
$ |
6.67 |
|
Weighted average number of shares outstanding -
basic |
717.6 |
|
|
741.8 |
|
|
723.5 |
|
|
746.0 |
|
Weighted average number of shares outstanding -
assuming dilution |
726.7 |
|
|
752.0 |
|
|
732.8 |
|
|
756.0 |
|
|
|
(1) |
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
September 30, |
|
Nine Months
Ended
September 30, |
Net Sales |
2019 |
|
2018 |
|
2019 |
|
2018 |
Aerospace |
$ |
3,544 |
|
|
$ |
4,030 |
|
|
$ |
10,393 |
|
|
$ |
12,065 |
|
Honeywell Building Technologies |
1,415 |
|
|
2,517 |
|
|
4,254 |
|
|
7,496 |
|
Performance Materials and
Technologies |
2,670 |
|
|
2,640 |
|
|
7,977 |
|
|
7,872 |
|
Safety and Productivity Solutions |
1,457 |
|
|
1,575 |
|
|
4,589 |
|
|
4,640 |
|
Total |
$ |
9,086 |
|
|
$ |
10,762 |
|
|
$ |
27,213 |
|
|
$ |
32,073 |
|
|
Reconciliation of
Segment Profit to Income Before Taxes |
|
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30, |
Segment Profit |
2019 |
|
2018 |
|
2019 |
|
2018 |
Aerospace |
$ |
908 |
|
|
$ |
891 |
|
|
$ |
2,653 |
|
|
$ |
2,702 |
|
Honeywell Building Technologies |
297 |
|
|
430 |
|
|
868 |
|
|
1,273 |
|
Performance Materials and
Technologies |
582 |
|
|
560 |
|
|
1,790 |
|
|
1,676 |
|
Safety and Productivity Solutions |
195 |
|
|
262 |
|
|
598 |
|
|
760 |
|
Corporate |
(54) |
|
|
(53) |
|
|
(202) |
|
|
(181) |
|
Total segment profit |
1,928 |
|
|
2,090 |
|
|
5,707 |
|
|
6,230 |
|
Interest and other financial
charges |
(96) |
|
|
(99) |
|
|
(266) |
|
|
(277) |
|
Stock compensation expense (1) |
(37) |
|
|
(41) |
|
|
(112) |
|
|
(131) |
|
Pension ongoing income (2) |
150 |
|
|
247 |
|
|
449 |
|
|
745 |
|
Other postretirement income (2) |
12 |
|
|
12 |
|
|
35 |
|
|
24 |
|
Repositioning and other charges
(3,4) |
(96) |
|
|
(299) |
|
|
(306) |
|
|
(756) |
|
Other (5) |
106 |
|
|
(52) |
|
|
284 |
|
|
(68) |
|
Income before taxes |
$ |
1,967 |
|
|
$ |
1,858 |
|
|
$ |
5,791 |
|
|
$ |
5,767 |
|
|
|
(1) |
Amounts included in Selling, general
and administrative expenses. |
(2) |
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). |
(3) |
Amounts included in Cost of products
and services sold, Selling, general and administrative expenses,
and Other income/expense. |
(4) |
Includes repositioning, asbestos, and
environmental expenses. |
(5) |
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,
2019 |
|
December 31,
2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
10,908 |
|
|
$ |
9,287 |
|
Short-term investments |
1,456 |
|
|
1,623 |
|
Accounts receivable - net |
7,583 |
|
|
7,508 |
|
Inventories |
4,601 |
|
|
4,326 |
|
Other current assets |
1,640 |
|
|
1,618 |
|
Total current assets |
26,188 |
|
|
24,362 |
|
Investments and long-term receivables |
631 |
|
|
742 |
|
Property, plant and equipment - net |
5,240 |
|
|
5,296 |
|
Goodwill |
15,426 |
|
|
15,546 |
|
Other intangible assets - net |
3,787 |
|
|
4,139 |
|
Insurance recoveries for asbestos related
liabilities |
412 |
|
|
437 |
|
Deferred income taxes |
241 |
|
|
382 |
|
Other assets |
8,179 |
|
|
6,869 |
|
Total assets |
$ |
60,104 |
|
|
$ |
57,773 |
|
LIABILITIES |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
5,522 |
|
|
$ |
5,607 |
|
Commercial paper and other short-term
borrowings |
3,422 |
|
|
3,586 |
|
Current maturities of long-term debt |
4,088 |
|
|
2,872 |
|
Accrued liabilities |
6,883 |
|
|
6,859 |
|
Total current liabilities |
19,915 |
|
|
18,924 |
|
Long-term debt |
11,101 |
|
|
9,756 |
|
Deferred income taxes |
1,366 |
|
|
1,713 |
|
Postretirement benefit obligations other than
pensions |
329 |
|
|
344 |
|
Asbestos related liabilities |
2,195 |
|
|
2,269 |
|
Other liabilities |
6,885 |
|
|
6,402 |
|
Redeemable noncontrolling interest |
7 |
|
|
7 |
|
Shareowners' equity |
18,306 |
|
|
18,358 |
|
Total liabilities, redeemable noncontrolling
interest and shareowners' equity |
$ |
60,104 |
|
|
$ |
57,773 |
|
Honeywell
International Inc. |
Consolidated Statement
of Cash Flows (Unaudited) |
(Dollars in
millions) |
|
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
$ |
1,648 |
|
|
$ |
2,356 |
|
|
$ |
4,640 |
|
|
$ |
5,088 |
|
Less: Net income attributable to the
noncontrolling interest |
24 |
|
|
18 |
|
|
59 |
|
|
44 |
|
Net income attributable to Honeywell |
1,624 |
|
|
2,338 |
|
|
4,581 |
|
|
5,044 |
|
Adjustments to reconcile net income attributable
to Honeywell to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation |
165 |
|
|
186 |
|
|
500 |
|
|
558 |
|
Amortization |
98 |
|
|
100 |
|
|
319 |
|
|
304 |
|
Repositioning and other charges |
96 |
|
|
299 |
|
|
306 |
|
|
756 |
|
Net payments for repositioning and other
charges |
(72) |
|
|
(191) |
|
|
(157) |
|
|
(519) |
|
Pension and other postretirement income |
(162) |
|
|
(259) |
|
|
(484) |
|
|
(769) |
|
Pension and other postretirement benefit
payments |
(5) |
|
|
(23) |
|
|
(50) |
|
|
(67) |
|
Stock compensation expense |
37 |
|
|
41 |
|
|
112 |
|
|
131 |
|
Deferred income taxes |
(342) |
|
|
(596) |
|
|
(298) |
|
|
(482) |
|
Other |
93 |
|
|
(241) |
|
|
98 |
|
|
(163) |
|
Changes in assets and liabilities, net of the
effects of acquisitions and divestitures: |
|
|
|
|
|
|
|
Accounts receivable |
(176) |
|
|
34 |
|
|
(78) |
|
|
131 |
|
Inventories |
(3) |
|
|
(270) |
|
|
(276) |
|
|
(459) |
|
Other current assets |
171 |
|
|
182 |
|
|
(68) |
|
|
356 |
|
Accounts payable |
(81) |
|
|
242 |
|
|
(89) |
|
|
466 |
|
Accrued liabilities |
28 |
|
|
36 |
|
|
(133) |
|
|
(412) |
|
Net cash provided by (used for) operating
activities |
1,471 |
|
|
1,878 |
|
|
4,283 |
|
|
4,875 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Expenditures for property, plant and
equipment |
(192) |
|
|
(183) |
|
|
(504) |
|
|
(522) |
|
Proceeds from disposals of property, plant and
equipment |
31 |
|
|
1 |
|
|
41 |
|
|
4 |
|
Increase in investments |
(944) |
|
|
(1,095) |
|
|
(3,218) |
|
|
(2,882) |
|
Decrease in investments |
1,155 |
|
|
1,126 |
|
|
3,318 |
|
|
4,634 |
|
Cash paid for acquisitions, net of cash
acquired |
(4) |
|
|
(51) |
|
|
(4) |
|
|
(51) |
|
Other |
175 |
|
|
30 |
|
|
245 |
|
|
250 |
|
Net cash provided by (used for) investing
activities |
221 |
|
|
(172) |
|
|
(122) |
|
|
1,433 |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from issuance of commercial paper and
other short-term borrowings |
3,178 |
|
|
6,551 |
|
|
10,292 |
|
|
19,300 |
|
Payments of commercial paper and other short-term
borrowings |
(3,178) |
|
|
(7,001) |
|
|
(10,293) |
|
|
(19,153) |
|
Proceeds from issuance of common stock |
47 |
|
|
115 |
|
|
425 |
|
|
242 |
|
Proceeds from issuance of long-term debt |
2,696 |
|
|
21 |
|
|
2,725 |
|
|
26 |
|
Payments of long-term debt |
(36) |
|
|
(26) |
|
|
(120) |
|
|
(1,303) |
|
Repurchases of common stock |
(1,000) |
|
|
(604) |
|
|
(3,650) |
|
|
(2,308) |
|
Cash dividends paid |
(595) |
|
|
(553) |
|
|
(1,798) |
|
|
(1,669) |
|
Pre-separation funding |
— |
|
|
1,604 |
|
|
— |
|
|
1,604 |
|
Other |
(40) |
|
|
(23) |
|
|
(72) |
|
|
(141) |
|
Net cash provided by (used for) financing
activities |
1,072 |
|
|
84 |
|
|
(2,491) |
|
|
(3,402) |
|
Effect of foreign exchange rate changes on cash
and cash equivalents |
(81) |
|
|
(69) |
|
|
(49) |
|
|
(162) |
|
Net increase (decrease) in cash and cash
equivalents |
2,683 |
|
|
1,721 |
|
|
1,621 |
|
|
2,744 |
|
Cash and cash equivalents at beginning of
period |
8,225 |
|
|
8,082 |
|
|
9,287 |
|
|
7,059 |
|
Cash and cash equivalents at end of period |
$ |
10,908 |
|
|
$ |
9,803 |
|
|
$ |
10,908 |
|
|
$ |
9,803 |
|
Honeywell International
Inc. |
Reconciliation of
Organic Sales % Change (Unaudited) |
|
|
Three Months
Ended September
30, 2019 |
Honeywell |
|
Reported sales % change |
(16)% |
Less: Foreign currency translation |
(1)% |
Less: Acquisitions, divestitures and other,
net |
(18)% |
Organic sales % change |
3% |
|
|
Aerospace |
|
Reported sales % change |
(12)% |
Less: Foreign currency translation |
—% |
Less: Acquisitions, divestitures and other,
net |
(22)% |
Organic sales % change |
10% |
|
|
Honeywell Building Technologies |
|
Reported sales % change |
(44)% |
Less: Foreign currency translation |
(1)% |
Less: Acquisitions, divestitures and other,
net |
(46)% |
Organic sales % change |
3% |
|
|
Performance Materials and Technologies |
|
Reported sales % change |
1% |
Less: Foreign currency translation |
(2)% |
Less: Acquisitions, divestitures and other,
net |
—% |
Organic sales % change |
3% |
|
|
Safety and Productivity Solutions |
|
Reported sales % change |
(7)% |
Less: Foreign currency translation |
(1)% |
Less: Acquisitions, divestitures and other,
net |
2% |
Organic sales % change |
(8)% |
|
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
Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income Margins (Unaudited) |
(Dollars in
millions) |
|
|
Three Months Ended
September 30, |
|
2019 |
|
2018 |
Segment profit |
$ |
1,928 |
|
|
$ |
2,090 |
|
Stock compensation expense (1) |
(37) |
|
|
(41) |
|
Repositioning, Other (2,3) |
(109) |
|
|
(313) |
|
Pension and other postretirement service costs
(4) |
(30) |
|
|
(54) |
|
Operating income |
$ |
1,752 |
|
|
$ |
1,682 |
|
Segment profit |
$ |
1,928 |
|
|
$ |
2,090 |
|
÷ Net sales |
$ |
9,086 |
|
|
$ |
10,762 |
|
Segment profit margin % |
21.2 |
% |
|
19.4 |
% |
Operating income |
$ |
1,752 |
|
|
$ |
1,682 |
|
÷ Net sales |
$ |
9,086 |
|
|
$ |
10,762 |
|
Operating income margin % |
19.3 |
% |
|
15.6 |
% |
|
|
(1) |
Included in Selling, general and
administrative expenses. |
(2) |
Includes repositioning, asbestos,
environmental expenses and equity income adjustment. |
(3) |
Included in Cost of products and
services sold, Selling, general and administrative expenses and
Other income/expense. |
(4) |
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. |
Honeywell
International Inc. |
Reconciliation of
Earnings per Share to Adjusted Earnings per Share and Adjusted
Earnings per Share Excluding Spin-off Impact (Unaudited) |
|
|
Three Months Ended
September 30, |
|
Twelve Months
Ended
December 31, |
|
2019 |
|
2018 |
|
2018 |
Earnings per share of common stock -
assuming dilution (1) |
$ |
2.23 |
|
|
$ |
3.11 |
|
|
$ |
8.98 |
|
Pension mark-to-market expense
(2) |
— |
|
|
— |
|
|
0.04 |
|
Separation costs (3) |
— |
|
|
0.31 |
|
|
0.97 |
|
Impacts from U.S. Tax Reform |
(0.15) |
|
|
(1.39) |
|
|
(1.98) |
|
Adjusted earnings per share of common
stock - assuming dilution |
$ |
2.08 |
|
|
$ |
2.03 |
|
|
$ |
8.01 |
|
Less: EPS, attributable to
spin-offs |
|
|
0.13 |
|
|
0.62 |
|
Adjusted earnings per share of common
stock - assuming dilution, excluding spin-off impact |
|
|
$ |
1.90 |
|
|
$ |
7.39 |
|
|
|
(1) |
For the three months ended September
30, 2019 and 2018, adjusted earnings per share utilizes weighted
average shares of approximately 726.7 million and 752.0 million.
For the twelve months ended December 31, 2018, adjusted earnings
per share utilizes weighted average shares of approximately 753.0
million. |
(2) |
Pension mark-to-market expense uses a
blended tax rate of 24% for 2018. |
(3) |
For the three months ended September
30, 2018, separation costs of $248 million ($233 million net of
tax) 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 net of tax) of other separation
costs. For the twelve months ended December 31, 2018, separation
costs of $732 million including net tax impacts. |
|
We believe adjusted earnings per
share, excluding spin-off impact, 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. We
therefore do not include an estimate for the pension mark-to-market
expense. 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 and
Calculation of Adjusted Free Cash Flow Conversion (Unaudited) |
(Dollars in
millions) |
|
|
Three Months
Ended
September 30,
2019 |
|
Three Months
Ended
September 30,
2018 |
Cash provided by operating activities |
$ |
1,471 |
|
|
$ |
1,878 |
|
Expenditures for property, plant and
equipment |
(192) |
|
|
(183) |
|
Free cash flow |
1,279 |
|
|
1,695 |
|
Separation cost payments |
7 |
|
|
114 |
|
Adjusted free cash flow |
$ |
1,286 |
|
|
$ |
1,809 |
|
Net income attributable to Honeywell |
$ |
1,624 |
|
|
$ |
2,338 |
|
Separation costs, includes net tax impacts |
— |
|
|
233 |
|
Impacts from U.S. Tax Reform |
(114) |
|
|
(1,047) |
|
Adjusted net income attributable to Honeywell |
$ |
1,510 |
|
|
$ |
1,524 |
|
Cash provided by operating activities |
$ |
1,471 |
|
|
$ |
1,878 |
|
÷ Net income (loss) attributable to Honeywell |
$ |
1,624 |
|
|
$ |
2,338 |
|
Operating cash flow conversion |
91 |
% |
|
80 |
% |
Adjusted free cash flow |
$ |
1,286 |
|
|
$ |
1,809 |
|
÷ Adjusted net income attributable to
Honeywell |
$ |
1,510 |
|
|
$ |
1,524 |
|
Adjusted free cash flow conversion % |
85 |
% |
|
119 |
% |
|
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
Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income Margins (Unaudited) |
(Dollars in
millions) |
|
|
Twelve Months
Ended
December 31,
2018 |
Segment profit |
$ |
8,190 |
|
|
|
Stock compensation expense (1) |
(175) |
|
Repositioning, Other (2,3) |
(1,100) |
|
Pension and other postretirement service costs
(4) |
(210) |
|
|
|
Operating income |
$ |
6,705 |
|
|
|
Segment profit |
$ |
8,190 |
|
÷ Net sales |
$ |
41,802 |
|
Segment profit margin % |
19.6 |
% |
|
|
Operating income |
$ |
6,705 |
|
÷ Net sales |
$ |
41,802 |
|
Operating income margin % |
16.0 |
% |
|
|
(1) |
Included in Selling, general and
administrative expenses. |
(2) |
Includes repositioning, asbestos,
environmental expenses and equity income adjustment. |
(3) |
Included in Cost of products and
services sold, Selling, general and administrative expenses and
Other income/expense. |
(4) |
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 margin, on an overall Honeywell basis, to operating
income margin has not been provided for all forward-looking
measures of segment profit margin included herewithin, however,
operating income margin is expected to be up 230 to 240 bps in 2019
full year, with the differences between segment profit margin and
operating income margin driven by expected full year stock
compensation expense, repositioning and other, and pension and
other postretirement service costs. For forward looking
information, a reconciliation of segment profit margin to operating
income margin is not provided as management cannot reliably predict
or estimate, without unreasonable effort, the apportionment of the
amount attributable to the reconciling items between segment profit
margin and operating income margin due to the uncertainty of each
respective item. |
Honeywell International
Inc. |
Calculation of Segment
Profit Excluding Spin-off Impact and Segment Margin Excluding
Spin-off Impact |
(Dollars in
millions) |
|
|
Twelve Months
Ended
December 31,
2018 |
Segment profit |
$ |
8,190 |
|
Spin-off impact (1) |
(1,011) |
|
Segment profit excluding spin-off impact |
$ |
7,179 |
|
|
|
Sales |
$ |
41,802 |
|
Spin-off impact (1) |
(6,551) |
|
Sale excluding spin-off impact |
$ |
35,251 |
|
|
|
Segment profit margin % excluding spin-off
impact |
20.4 |
% |
|
|
(1) |
Amount computed as the portion of
Aerospace and Honeywell Building Technologies segment profit and
sales in the applicable prior year period for Transportation
Systems and Homes and Global Distribution spin-off businesses. |
Honeywell International
Inc. |
Reconciliation of Cash
Provided by Operating Activities to Adjusted Free Cash Flow
(Unaudited) |
|
|
Twelve Months
Ended
December 31,
2019(E) ($B) |
Cash provided by operating activities |
~$6.2 - $6.5 |
Expenditures for property, plant and
equipment |
~(0.8) |
Free cash flow |
~5.4 - 5.7 |
Separation cost payments |
~0.3 |
Adjusted free cash flow |
~$5.7 - $6.0 |
|
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, we do not provide cash flow conversion guidance on a
GAAP basis as 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. |
Contacts: |
|
|
|
Media |
Investor Relations |
Nina Krauss |
Mark Bendza |
(704) 627-6035 |
(704) 627-6200 |
nina.krauss@honeywell.com |
mark.bendza@honeywell.com |