Honeywell Delivers
Earnings Per Share of $1.75 and Sales
of $10.1 Billion
- Reported Sales Up 3%; Organic Sales
Up 5% Driven by Strength in the Aerospace Aftermarket, Performance
Materials and Technologies, and Intelligrated
- Operating Income Margin Expansion of 220 bps, Segment
Margin Expansion of 120 bps
- Funded Approximately $120
Million in Restructuring and Other Projects
- Year-To-Date Operating Cash Flow Up 10% and Free Cash
Flow1 Up 18%; Third-Quarter Free Cash Flow Conversion of
~90%
MORRIS PLAINS, N.J.,
Oct. 20, 2017 -- Honeywell (NYSE:
HON) today announced financial results for the third quarter of
2017.
"Honeywell delivered another quarter of high-quality financial
results, with organic growth of five percent, segment margin
expansion of 120 basis points, and earnings per share of
$1.75, up 16
percent2 year-over-year," said Darius Adamczyk, President and Chief Executive
Officer of Honeywell. "This was a standout quarter for us when it
comes to organic growth. Our Aerospace aftermarket business grew
more than seven percent, our warehouse automation business
continued to grow at a double-digit pace, and there was broad
strength across Performance Materials and Technologies, led by 25
percent organic sales growth in UOP. We also saw good momentum in
orders and backlog, with double-digit backlog growth in UOP,
Intelligrated, Defense, and Honeywell Building Solutions,
positioning us for future growth.
"The investments we have made in people, capital expenditures,
research and development, and M&A are delivering outstanding
growth for our shareowners," Adamczyk said. "Also, we continue to
improve the cost structure of our businesses through ongoing
restructuring actions, and in the third quarter, we dedicated
approximately $120 million to new
projects.
"Last week, we announced our intention to spin our Homes and
Global Distribution business and our Transportation Systems
business into two independent public companies by the end of next
year. The spun businesses will benefit from being able to make
independent investment decisions that will better position them for
growth and value creation for decades to come. After completion of
the spins, Honeywell will have a more focused and growth-oriented
portfolio that benefits from cross-Honeywell synergies. These
actions will position the company to deliver sustained financial
outperformance," Adamczyk continued. "Honeywell is well positioned
in both the short and long term, and we anticipate a strong finish
to 2017."
Honeywell also reaffirmed its full-year earnings-per-share
guidance of $7.05 to $7.10, up nine
to 10 percent year-over-year, excluding divestitures, any pension
mark-to-market adjustments, and 2016 debt refinancing charges.
Earlier this month, the company raised the low end of the range by
five cents.
Honeywell will discuss the results during its investor
conference call today starting at 9:30 a.m.
Eastern Daylight Time.
Third Quarter Performance
Honeywell sales for the third quarter were up five
percent on an organic basis and up three percent on a reported
basis. The difference between reported and organic sales relates to
the 2016 spin-off of the former Resins and Chemicals business in
Performance Materials and Technologies and the 2016 divestiture of
the Aerospace government services business, partially offset by the
acquisition of Intelligrated in Safety and Productivity Solutions
and the impact of foreign currency translation. The third-quarter
financial results can be found in Tables 1 and 2, below.
Aerospace sales for the third quarter were up four
percent on an organic basis driven by growth in Commercial
Aftermarket and lower year-over-year customer incentives, strength
in U.S. defense, and continued recovery in commercial vehicles in
Transportation Systems. Segment margin expanded 290 bps to 21.3
percent, primarily driven by the lower customer incentives,
productivity net of inflation, and the favorable impact of the 2016
divestiture of the government services.
Home and Building Technologies sales for the third
quarter were up two percent on an organic basis driven by Smart
Energy program roll-outs, air and water product sales in
China, and continued growth in the
Distribution business. Segment margin expanded 10 bps to 16.4
percent, driven by restructuring benefits, productivity net of
inflation, and commercial excellence, partially offset by the
unfavorable impact of higher sales from lower margin products and
investments for growth, including research and development.
Performance Materials and Technologies sales for the
third quarter were up 10 percent on an organic basis driven by
strong growth in every business, including 25 percent growth in UOP
driven by robust catalyst, licensing, equipment, and gas processing
volumes; continued demand for Solstice®
low-global-warming products in Advanced Materials; and short-cycle
demand within Honeywell Process Solutions. Segment margin expanded
170 bps to 23.3 percent, primarily driven by commercial excellence,
productivity net of inflation, and the favorable impact from the
spin-off of the former Resins and Chemicals business.
Safety and Productivity Solutions sales for the third
quarter were up 3 percent on an organic basis driven by increased
demand for industrial safety products, voice-enabled workflow
solutions and Movilizer software, and double-digit organic sales
growth at Intelligrated, a leading provider of warehouse automation
solutions, which Honeywell acquired in 2016. Segment margin
expanded 40 bps to 15.1 percent, primarily driven by productivity
net of inflation, partially offset by acquisition amortization and
integration costs. Excluding the impact of acquisitions, segment
margin expanded 190 bps.
To participate on the conference call, please dial (866)
548-4713 (domestic) or (719) 457-1036 (international) approximately
ten minutes before the 9:30 a.m. EDT
start. Please mention to the operator that you are dialing in
for Honeywell's third quarter 2017 earnings call or provide the
conference code HON3Q17. 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 1:30 p.m. EDT,
October 20, until 1:30 p.m. EDT, October
27, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 1952662.
TABLE 1: SUMMARY OF FINANCIAL RESULTS
– TOTAL HONEYWELL
|
3Q 2016 |
3Q 2017 |
Change |
Sales |
9,804 |
10,121 |
3% |
Organic |
|
|
5% |
Segment Margin |
17.5% |
18.7% |
120 bps |
Operating Income Margin |
15.6% |
17.8% |
220 bps |
Earnings Per Share |
|
|
|
Reported |
$1.60 |
$1.75 |
9% |
Ex-Divestitures & Additional 3Q17
Restructuring, Normalized for Tax |
$1.51 |
$1.75 |
16% |
Cash Flow From Operations |
1,554 |
1,407 |
(9%) |
Free Cash Flow3 |
1,280 |
1,195 |
(7%) |
|
|
|
|
TABLE 2: SUMMARY OF FINANCIAL RESULTS
– SEGMENTS
|
|
|
|
|
|
|
|
AEROSPACE |
3Q 2016 |
3Q 2017 |
Change |
Sales |
3,601 |
3,657 |
2% |
Organic |
|
|
4% |
Segment Profit |
663 |
780 |
18% |
Segment Margin |
18.4% |
21.3% |
290 bps |
|
|
|
|
|
|
|
|
HOME AND BUILDING TECHNOLOGIES |
|
|
|
|
|
|
|
Sales |
2,701 |
2,790 |
3% |
Organic |
|
|
2% |
Segment Profit |
441 |
458 |
4% |
Segment Margin |
16.3% |
16.4% |
10 bps |
|
|
|
|
|
|
|
|
PERFORMANCE MATERIALS AND TECHNOLOGIES |
|
|
|
Sales |
2,329 |
2,260 |
(3%) |
Organic |
|
|
10% |
Segment Profit |
503 |
526 |
5% |
Segment Margin |
21.6% |
23.3% |
170 bps |
|
|
|
|
|
|
|
|
|
|
|
|
SAFETY AND PRODUCTIVITY SOLUTIONS |
|
|
|
Sales |
1,173 |
1,414 |
21% |
Organic |
|
|
3% |
Segment Profit |
172 |
213 |
24% |
Segment Margin |
14.7% |
15.1% |
40 bps |
Ex-M&A |
|
|
190 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.
1 Cash Flow From Operations Less Capital
Expenditures
2 Earnings per share variance excludes 2016 divestitures
and additional 3Q17 restructuring funding enabled by a lower than
planned effective tax rate, normalized for tax at 26
percent
3 Cash Flow From Operations Less Capital
Expenditures
Contacts: |
|
|
Media |
Investor Relations |
Scott Sayres |
Mark Macaluso |
(480) 257-5921 |
(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 |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Product sales |
$
8,052 |
|
$ 7,744 |
|
$ 23,671 |
|
$ 23,398 |
Service sales |
2,069 |
|
2,060 |
|
6,020 |
|
5,919 |
Net sales |
10,121 |
|
9,804 |
|
29,691 |
|
29,317 |
|
|
|
|
|
|
|
|
|
Costs, expenses and other |
|
|
|
|
|
|
|
Cost of products
sold (A) |
5,648 |
|
5,594 |
|
16,545 |
|
16,545 |
Cost of services
sold (A) |
1,225 |
|
1,309 |
|
3,534 |
|
3,726 |
|
|
6,873 |
|
6,903 |
|
20,079 |
|
20,271 |
Selling, general
and administrative expenses (A) |
1,447 |
|
1,367 |
|
4,177 |
|
3,976 |
Other (income)
expense |
(63) |
|
(180) |
|
(85) |
|
(197) |
Interest and other
financial charges |
81 |
|
82 |
|
235 |
|
252 |
|
|
8,338 |
|
8,172 |
|
24,406 |
|
24,302 |
|
|
|
|
|
|
|
|
|
Income before taxes |
1,783 |
|
1,632 |
|
5,285 |
|
5,015 |
Tax expense |
418 |
|
384 |
|
1,188 |
|
1,214 |
|
|
|
|
|
|
|
|
|
Net income |
1,365 |
|
1,248 |
|
4,097 |
|
3,801 |
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
17 |
|
8 |
|
31 |
|
26 |
|
|
|
|
|
|
|
|
|
Net income attributable to
Honeywell |
$
1,348 |
|
$ 1,240 |
|
$ 4,066 |
|
$ 3,775 |
|
|
|
|
|
|
|
|
|
Earnings per share of common stock -
basic |
$
1.77 |
|
$ 1.62 |
|
$
5.33 |
|
$
4.93 |
|
|
|
|
|
|
|
|
|
Earnings per share of common stock -
assuming dilution |
$
1.75 |
|
$ 1.60 |
|
$
5.26 |
|
$
4.86 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - basic |
762.2 |
|
763.7 |
|
763.1 |
|
765.0 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - assuming dilution |
771.4 |
|
774.4 |
|
773.1 |
|
776.3 |
|
|
|
|
|
|
|
|
|
(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. |
Honeywell International
Inc. |
Segment Data
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
Net Sales |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
3,657 |
|
$
3,601 |
|
$ 10,877 |
|
$ 11,085 |
|
|
|
|
|
|
|
|
|
Home and Building Technologies |
2,790 |
|
2,701 |
|
8,079 |
|
7,854 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
2,260 |
|
2,329 |
|
6,568 |
|
7,044 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
1,414 |
|
1,173 |
|
4,167 |
|
3,334 |
|
|
|
|
|
|
|
|
|
Total |
$ 10,121 |
|
$
9,804 |
|
$ 29,691 |
|
$ 29,317 |
|
|
|
|
|
|
|
|
|
Reconciliation of
Segment Profit to Income Before Taxes |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
Segment Profit |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
780 |
|
$
663 |
|
$
2,395 |
|
$
2,252 |
|
|
|
|
|
|
|
|
|
Home and Building Technologies |
458 |
|
441 |
|
1,267 |
|
1,213 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
526 |
|
503 |
|
1,521 |
|
1,484 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
213 |
|
172 |
|
621 |
|
495 |
|
|
|
|
|
|
|
|
|
Corporate |
(82) |
|
(59) |
|
(210) |
|
(157) |
|
|
|
|
|
|
|
|
|
Total segment
profit |
1,895 |
|
1,720 |
|
5,594 |
|
5,287 |
|
|
|
|
|
|
|
|
|
Other income (expense) (A) |
49 |
|
169 |
|
54 |
|
174 |
Interest and other financial
charges |
(81) |
|
(82) |
|
(235) |
|
(252) |
Stock compensation expense (B) |
(39) |
|
(49) |
|
(133) |
|
(145) |
Pension ongoing income (expense)
(B) |
183 |
|
146 |
|
546 |
|
447 |
Other postretirement income (expense)
(B) |
6 |
|
7 |
|
16 |
|
24 |
Repositioning and other charges
(B) |
(230) |
|
(279) |
|
(557) |
|
(520) |
|
|
|
|
|
|
|
|
|
Income before taxes |
$
1,783 |
|
$
1,632 |
|
$
5,285 |
|
$
5,015 |
|
|
|
|
|
|
|
|
|
(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) |
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
2017 |
|
2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
|
$
7,389 |
|
$
7,843 |
Short-term
investments |
|
2,781 |
|
1,520 |
Accounts receivable
- net |
|
8,587 |
|
8,177 |
Inventories |
|
4,751 |
|
4,366 |
Other current
assets |
|
1,136 |
|
1,152 |
|
Total current assets |
|
24,644 |
|
23,058 |
|
|
|
|
|
|
Investments and long-term
receivables |
|
643 |
|
587 |
Property, plant and equipment -
net |
|
5,757 |
|
5,793 |
Goodwill |
|
18,268 |
|
17,707 |
Other intangible assets - net |
|
4,587 |
|
4,634 |
Insurance recoveries for asbestos
related liabilities |
|
411 |
|
417 |
Deferred income taxes |
|
264 |
|
347 |
Other assets |
|
2,194 |
|
1,603 |
|
|
|
|
|
|
|
Total assets |
|
$ 56,768 |
|
$ 54,146 |
|
|
|
|
|
|
LIABILITIES AND SHAREOWNERS'
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts
payable |
|
$
6,061 |
|
$
5,690 |
Commercial paper
and other short-term borrowings |
|
3,932 |
|
3,366 |
Current maturities
of long-term debt |
|
1,398 |
|
227 |
Accrued
liabilities |
|
6,834 |
|
7,048 |
|
Total current liabilities |
|
18,225 |
|
16,331 |
|
|
|
|
|
|
Long-term debt |
|
11,453 |
|
12,182 |
Deferred income taxes |
|
300 |
|
486 |
Postretirement benefit obligations
other than pensions |
|
530 |
|
473 |
Asbestos related liabilities |
|
1,004 |
|
1,014 |
Other liabilities |
|
4,025 |
|
4,110 |
Redeemable noncontrolling
interest |
|
3 |
|
3 |
Shareowners' equity |
|
21,228 |
|
19,547 |
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling
interest and shareowners' equity |
|
$ 56,768 |
|
$ 54,146 |
Honeywell International
Inc. |
Consolidated
Statement of Cash Flows (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ 1,365 |
|
$ 1,248 |
|
$ 4,097 |
|
$ 3,801 |
Less: Net income attributable
to the noncontrolling interest |
|
17 |
|
8 |
|
31 |
|
26 |
Net income attributable to
Honeywell |
|
1,348 |
|
1,240 |
|
4,066 |
|
3,775 |
Adjustments to reconcile net
income attributable to Honeywell to net |
|
|
|
|
|
|
|
|
cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
180 |
|
182 |
|
534 |
|
546 |
Amortization |
|
105 |
|
78 |
|
298 |
|
227 |
(Gain)
loss on sale of non-strategic businesses and assets |
|
- |
|
(176) |
|
- |
|
(176) |
Repositioning and other charges |
|
230 |
|
302 |
|
583 |
|
567 |
Net
payments for repositioning and other charges |
|
(130) |
|
(154) |
|
(394) |
|
(420) |
Pension
and other postretirement income |
|
(189) |
|
(153) |
|
(562) |
|
(471) |
Pension
and other postretirement benefit payments |
|
(24) |
|
(29) |
|
(71) |
|
(110) |
Stock
compensation expense |
|
39 |
|
49 |
|
133 |
|
145 |
Deferred income taxes |
|
16 |
|
(36) |
|
(76) |
|
146 |
Other |
|
(30) |
|
(8) |
|
(38) |
|
(33) |
Changes
in assets and liabilities, net of the effects of |
|
|
|
|
|
|
|
|
acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(132) |
|
(135) |
|
(408) |
|
(492) |
Inventories |
|
(102) |
|
(21) |
|
(400) |
|
(233) |
Other
current assets |
|
16 |
|
138 |
|
13 |
|
- |
Accounts payable |
|
90 |
|
(18) |
|
404 |
|
(18) |
Accrued liabilities |
|
(10) |
|
295 |
|
(288) |
|
3 |
Net cash provided by operating activities |
|
1,407 |
|
1,554 |
|
3,794 |
|
3,456 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Expenditures for property,
plant and equipment |
|
(212) |
|
(274) |
|
(613) |
|
(749) |
Proceeds from disposals of
property, plant and equipment |
|
21 |
|
3 |
|
46 |
|
4 |
Increase in investments |
|
(1,820) |
|
(1,262) |
|
(4,149) |
|
(3,083) |
Decrease in investments |
|
952 |
|
873 |
|
2,793 |
|
2,658 |
Cash paid for acquisitions, net
of cash acquired |
|
(57) |
|
(1,484) |
|
(72) |
|
(2,568) |
Proceeds from sales of
businesses, net of fees paid |
|
- |
|
304 |
|
- |
|
304 |
Other |
|
(83) |
|
106 |
|
(196) |
|
158 |
Net cash used for investing activities |
|
(1,199) |
|
(1,734) |
|
(2,191) |
|
(3,276) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of
commercial paper and other short-term borrowings |
|
3,772 |
|
5,455 |
|
8,808 |
|
16,149 |
Payments of commercial paper
and other short-term borrowings |
|
(3,773) |
|
(3,656) |
|
(8,608) |
|
(16,574) |
Proceeds from issuance of
common stock |
|
87 |
|
143 |
|
463 |
|
386 |
Proceeds from issuance of
long-term debt |
|
23 |
|
37 |
|
39 |
|
4,510 |
Payments of long-term debt |
|
(39) |
|
(8) |
|
(69) |
|
(478) |
Repurchases of common
stock |
|
(343) |
|
(233) |
|
(1,335) |
|
(1,866) |
Cash dividends paid |
|
(505) |
|
(453) |
|
(1,554) |
|
(1,410) |
Payments to purchase the
noncontrolling interest |
|
- |
|
- |
|
- |
|
(238) |
AdvanSix pre-separation
funding |
|
- |
|
269 |
|
- |
|
269 |
AdvanSix pre-spin
borrowing |
|
- |
|
38 |
|
- |
|
38 |
AdvanSix cash at spin-off |
|
- |
|
(38) |
|
- |
|
(38) |
Other |
|
(26) |
|
(25) |
|
(131) |
|
(40) |
Net cash (used for) provided by financing
activities |
|
(804) |
|
1,529 |
|
(2,387) |
|
708 |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash
and cash equivalents |
|
108 |
|
37 |
|
330 |
|
88 |
Net (decrease) increase in cash and cash
equivalents |
|
(488) |
|
1,386 |
|
(454) |
|
976 |
Cash and cash equivalents at beginning of
period |
|
7,877 |
|
5,045 |
|
7,843 |
|
5,455 |
Cash and cash equivalents at end of period |
|
$ 7,389 |
|
$ 6,431 |
|
$ 7,389 |
|
$ 6,431 |
Honeywell International
Inc. |
Reconciliation of Cash
Provided by Operating Activities to Free Cash Flow (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities |
$
1,407 |
|
$
1,554 |
|
$
3,794 |
|
$
3,456 |
|
Expenditures for property, plant and
equipment |
(212) |
|
(274) |
|
(613) |
|
(749) |
|
|
|
|
|
|
|
|
|
|
Free cash flow |
$
1,195 |
|
$
1,280 |
|
$
3,181 |
|
$
2,707 |
|
|
|
|
|
|
|
|
|
|
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 and Calculation
of Free Cash Flow Conversion |
(Dollars in
millions) |
|
|
|
|
Three Months Ended |
|
|
September 30, |
|
|
2017 |
|
|
|
|
Cash provided by operating activities |
$
1,407 |
|
Expenditures for property, plant and
equipment |
(212) |
|
Free cash flow |
$
1,195 |
|
|
|
|
Cash provided by operating activities |
$
1,407 |
|
÷ Net income attributable to Honeywell |
$
1,348 |
|
Operating cash flow conversion |
104% |
|
|
|
|
Free cash flow |
$
1,195 |
|
÷ Net income attributable to Honeywell |
$
1,348 |
|
Free cash flow conversion % |
89% |
|
|
|
|
We define free cash flow as cash
provided by operating activities less cash expenditures for
property, plant and equipment. |
|
|
|
We define free cash flow conversion as
free cash flow divided by net income attributable to
Honeywell. |
|
|
|
|
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) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
Segment Profit |
|
$ 1,895 |
|
$ 1,720 |
|
|
|
|
|
|
|
Stock compensation expense (A) |
|
(39) |
|
(49) |
|
Repositioning and other (B, C) |
|
(244) |
|
(290) |
|
Pension ongoing income (A) |
|
183 |
|
146 |
|
Other postretirement income (A) |
|
6 |
|
7 |
|
Operating Income |
|
$ 1,801 |
|
$ 1,534 |
|
|
|
|
|
|
|
Segment Profit |
|
$ 1,895 |
|
$ 1,720 |
|
÷ Sales |
|
10,121 |
|
9,804 |
|
Segment Profit Margin % |
|
18.7% |
|
17.5% |
|
|
|
|
|
|
|
Operating Income |
|
$ 1,801 |
|
$ 1,534 |
|
÷ Sales |
|
10,121 |
|
9,804 |
|
Operating Income Margin % |
|
17.8% |
|
15.6% |
|
|
|
|
|
|
|
(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 believe these measures are useful
to investors and management in understanding our ongoing operations
and in analysis of ongoing operating trends. |
Honeywell International
Inc. |
Calculation of Segment
Profit Margin Excluding Mergers and Acqusitions (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2017 |
|
Safety and Productivity Solutions |
|
|
|
Segment Profit excluding mergers and
acquisitions |
|
$
202 |
|
÷ Sales excluding mergers and acquisitions |
|
$
1,219 |
|
Segment Profit Margin excluding mergers and
acquisitions % |
|
16.6% |
|
|
|
|
|
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
Organic Sales % Change (Unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
September 30, |
|
|
2017 |
Honeywell |
|
|
Reported sales % change |
|
3% |
Less: Foreign currency translation |
|
1% |
Less: Acquisitions and divestitures, net |
|
(3)% |
Organic sales % change |
|
5% |
|
|
|
Aerospace |
|
|
Reported sales % change |
|
2% |
Less: Foreign currency translation |
|
1% |
Less: Acquisitions and divestitures, net |
|
(3)% |
Organic sales % change |
|
4% |
|
|
|
Home and Building Technologies |
|
|
Reported sales % change |
|
3% |
Less: Foreign currency translation |
|
1% |
Less: Acquisitions and divestitures, net |
|
- |
Organic sales % change |
|
2% |
|
|
|
Performance Materials and Technologies |
|
|
Reported sales % change |
|
(3)% |
Less: Foreign currency translation |
|
1% |
Less: Acquisitions and divestitures, net |
|
(14)% |
Organic sales % change |
|
10% |
|
|
|
Safety and Productivity Solutions |
|
|
Reported sales % change |
|
21% |
Less: Foreign currency translation |
|
1% |
Less: Acquisitions and divestitures, net |
|
17% |
Organic sales % change |
|
3% |
|
|
|
We believe organic sales growth 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. |
Calculation of Earnings
Per Share at 26% Tax Rate Excluding 3Q17 Additional Restructuring
and 2016 Divestitures (Unaudited) |
(Dollars in millions,
except per share amounts) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
Income before taxes |
|
$ 1,783 |
|
$ 1,632 |
|
|
|
|
|
|
|
Taxes at 26% |
|
464 |
|
424 |
|
|
|
|
|
|
|
Net income at 26% tax rate |
|
$ 1,319 |
|
$ 1,208 |
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
|
17 |
|
8 |
|
|
|
|
|
|
|
Net income attributable to Honeywell at 26% tax
rate |
|
$ 1,302 |
|
$ 1,200 |
|
|
|
|
|
|
|
Weighted average number of shares outstanding -
assuming dilution |
|
771.4 |
|
774.4 |
|
|
|
|
|
|
|
Earnings per share at 26% tax rate |
|
$ 1.69 |
|
$ 1.55 |
|
Less: Earnings per share impact attributable to
2016 divestitures (1) |
|
- |
|
0.04 |
|
Less: Earnings per share attributable to
additional restructuring (2) |
|
(0.06) |
|
- |
|
Earnings per share of common stock - assuming
dilution, at 26% tax rate, |
|
|
|
|
|
excluding additional restructuring and 2016
divestitures |
|
$ 1.75 |
|
$ 1.51 |
|
|
|
|
|
|
|
Earnings per share of common stock - assuming
dilution |
|
$ 1.75 |
|
$ 1.60 |
|
Less: Earnings per share impact of normalizing to
26% tax rate |
|
0.06 |
|
0.05 |
|
Less: Earnings per share impact attributable to
2016 divestitures (1) |
|
- |
|
0.04 |
|
Less: Earnings per share attributable to
additional restructuring (2) |
|
(0.06) |
|
|
|
Earnings per share of common stock - assuming
dilution, at 26% tax rate, |
|
|
|
|
|
excluding additional restructuring and 2016
divestitures |
|
$ 1.75 |
|
$ 1.51 |
|
|
|
|
|
|
|
(1) Earnings per share attributable to
2016 divestitures utilizes weighted average shares of 774.4 million
and a
blended tax rate of 32.9% for the three months ended September 30,
2016. |
|
(2) The Company has and continues to
have an ongoing level of restructuring activities, for which there
is a
planned amount of restructuring-related charges. For the three
months ended September 30, 2017, the Company
funded approximately $60 million of additional restructuring
enabled by a lower than expected effective tax rate for
the period. We believe that the exclusion of this additional
restructuring provides a more comparable measure of
year-on-year results. Earnings per share attributable to additional
restructuring uses a tax rate of 26% for three
months ended September 30, 2017. |
|
|
|
|
|
|
|
We believe earnings per
share adjusted to normalize for the expected effective tax rate of
26% for the most
recently completed fiscal quarter (as presented in prior guidance
for such quarter) and to exclude the 2016
divestitures 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
Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Expense, Debt Refinancing Expense and
Earnings Attributable to 2016 Divestitures (Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended |
|
|
|
December 31, |
|
|
|
|
2017E (1) |
|
|
|
2016 (2) |
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock - assuming
dilution (EPS) |
|
|
TBD |
|
|
|
$
6.20 |
|
|
|
|
|
|
|
|
|
|
Pension mark-to-market expense |
|
|
TBD |
|
|
|
0.28 |
|
Debt refinancing expense |
|
|
- |
|
|
|
0.12 |
|
|
|
|
|
|
|
|
|
|
EPS, excluding pension mark-to-market expense and
debt refinancing expense |
|
|
$7.05 - $7.10 |
|
|
|
6.60 |
|
|
|
|
|
|
|
|
|
|
Earnings attributable to 2016 divestitures |
|
|
- |
|
|
|
(0.14) |
|
|
|
|
|
|
|
|
|
|
EPS, excluding pension mark-to-market expense,
debt refinancing expense and |
|
|
|
|
|
|
|
|
earnings attributable to 2016 divestitures |
|
|
$7.05 - $7.10 |
|
|
|
$
6.46 |
|
|
|
|
|
|
|
|
|
|
(1) Utilizes weighted average shares
of approximately 772 million and an expected effective tax rate of
approximately 22%. |
|
(2) Utilizes weighted
average shares of 775.3 million. Pension mark-to-market
expense uses a blended tax rate of 21.3%. Debt
refinancing
expense uses a tax rate of 26.5%. Earnings attributable to
2016 divestitures use a blended tax rate of 33.9%. |
|
|
|
|
|
|
|
|
|
|
|
We believe EPS, excluding pension
mark-to-market expense, debt refinancing expense and earnings
attributable to 2016 divestitures is a
measure that is useful to investors and management in understanding
our ongoing operations and in analysis of ongoing operating
trends.
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 in this
reconciliation. Management is not currently forecasting an
impact to earnings per
hare arising from a debt refinancing or divestiture
transaction. Based on economic and industry conditions,
future developments and other
relevant factors, these assumptions are subject to change. |
|