HON.L Regulatory News (HON)

19 Apr 2006 12:01

Honeywell Reports First Quarter Sales Up 12% to $7.2 Billion; Earnings Up 24% to 52 Cents Per Share More Than a Full Point of Margin Expansion in the Quarter MORRIS TOWNSHIP, N.J., April 19 -- Honeywell (NYSE: HON) today announced first-quarter 2006 sales of $7.2 billion, up 12% over the prior year. Earnings per share were $0.52, a 24% increase versus 2005. Cash flow from operations was $239 million and free cash flow (cash flow from operations less capital expenditures) was $117 million. "Honeywell is off to a terrific start in what we expect to be another great year," said Honeywell Chairman and CEO Dave Cote. "The quarter's highlights include strong organic growth, margin expansion and better than expected earnings. Our first-quarter performance builds on the company's growing track record of strong operational execution and financial results. Honeywell's businesses are well positioned in attractive industries, and we remain confident in our outlook for 25 to 30% earnings growth in 2006." "We also completed the acquisition of First Technology plc at the end of the quarter and expect to complete the divestiture of the non-core First Technology Safety & Analysis business in the second quarter," continued Cote. "Together with last year's acquisition of Zellweger Analytics, First Technology positions our Automation and Control Solutions business as a global leader in gas sensing and detection technologies." First-Quarter Segment Highlights Aerospace * Sales were up 5% compared with the first quarter of 2005, with 10% growth in commercial sales partially offset by a 1% reduction in Defense and Space sales. * Segment margins were 16.7% compared with 15.1% a year ago, due to volume growth and realization of the expected savings from the 2005 Aerospace reorganization, partially offset by inflation. * Airbus selected Honeywell's HGT1500 auxiliary power unit (APU) for its new long-range, wide-body A350 aircraft. The agreement is valued at an estimated $4 billion in original equipment and aftermarket revenue for Honeywell over the life of the platform. * Honeywell received U.S. Federal Aviation Administration certification for its Nitrogen Generation System (NGS) for Boeing's 737 airplanes. NGS reduces the risk of flammability of an aircraft fuel tank by injecting nitrogen-enriched air into the tank. The certification came less than two months after the company received similar approval for the NGS on Boeing 747 airplanes. * Honeywell was selected by the Netherlands Ministry of Defense to provide a fully-integrated avionics cockpit for Boeing's CH-47F (NL) Chinook Helicopter fleet valued at an estimated $60 million over the life of the contract. Automation and Control Solutions * Sales were up 19%, compared with the first quarter of 2005, driven by the impact of acquisitions of 15% and organic sales growth of 4%, or 6% before the negative impact of foreign exchange. * Segment margins were 9.3% compared with 10.1% a year ago, due to planned ERP implementation costs and a charge related to liquidity issues being experienced by a Honeywell Building Solutions customer, which more than offset volume growth and productivity gains. * Sensing and Control won a $4.1 million project with BAE Systems to provide position sensing devices for more than 440 new M2A3 Bradley Fighting Vehicles used by the U.S. military. * Honeywell agreed to acquire Gardiner Groupe Europe, a leading distributor of CCTV systems, fire alarm, intrusion alarm, access control, public address and integrated systems. The acquisition, which is expected to close in the second quarter, will significantly enhance Honeywell Security Group's distribution footprint in Europe with more than 77 branch locations in 10 European countries. Transportation Systems * Sales were down 5%, compared with the first quarter of 2005, due to the negative impact of foreign exchange of 4%, an anticipated decline in European Turbo Technologies sales and the 2005 exit of the Friction Materials OE business in North America. * Segment margins were 13.0%, compared to 13.4% a year ago, due to planned unfavorable mix and higher raw material costs, partially offset by productivity gains, which include savings from previous restructuring actions. * Honeywell Turbo Technologies won several gas and diesel turbo contracts with expected total revenues of more than $200 million annually through their maturity. Additionally, Honeywell Turbo products are being featured on Ford's new gas turbo Territory SUV. * Honeywell's Consumer Products Group expanded its presence in the high-performance automotive aftermarket segment with the introduction of FRAM Boost(TM), a cold air intake system that increases engine torque and horsepower. Specialty Materials * Sales were up 44% compared with the first quarter of 2005, driven by the net impact of acquisitions and divestitures of 37% and organic sales growth of 7%. * Segment margins were 14.1% compared with 7.4% a year ago, due to the positive net impact of acquisitions and divestitures and price increases more than offsetting higher raw material costs. * UOP LLC announced an alliance for hydroprocessing technology with Albemarle Corp. focused on the petroleum refining industry. The alliance will offer a wide range of hydroprocessing technologies, catalysts and services to help refiners meet demand for refined products and ultra-low-sulfur fuels. * Fluorine Products announced a patented developmental refrigerant for automotive air conditioning applications that will meet 2011 European Union environmental standards for reducing use of global warming substances. Honeywell will discuss its results during its investor conference call today starting at 8:00 a.m. EDT. To participate, please dial (706) 643-7681 a few minutes before the 8:00 a.m. start. Please mention to the operator that you are dialing in for Honeywell's Investor Conference Call. The live webcast of the investor call will be available through the "Investor Relations" section of the company's Website (http://www.honeywell.com/investor). Investors can access a replay of the investor call starting at 11:00 a.m. EDT, April 19, until 5:00 p.m. EDT, April 26, by dialing (706) 645-9291. The access code is 7350377. Honeywell International is a $30 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell's shares are traded on the New York, London, Chicago and Pacific Stock Exchanges. It is one of the 30 stocks that make up the Dow Jones Industrial Average and is also a component of the Standard & Poor's 500 Index. For additional information, please visit http://www.honeywell.com. This release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management's assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. 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. Honeywell International Inc. Consolidated Statement of Operations (Unaudited) (In millions except per share amounts) Three Months Ended March 31, ---------------------------- 2006 2005(B) ------------ ------------ Product sales $5,806 $5,184 Service sales 1,435 1,265 ------------ ------------ 7,241 6,449 ------------ ------------ Costs, expenses and other Cost of products sold 4,566 (A) 4,166 (C) Cost of services sold 1,034 (A) 916 (C) Selling, general and administrative expenses 1,002 854 (C) (Gain) loss on sale of non-strategic businesses - (8)(D) Equity in (income) loss of affiliated companies 2 (31) Other (income) expense (27) (24) Interest and other financial charges 89 91 ------------ ------------ 6,666 5,964 ------------ ------------ Income from continuing operations before taxes 575 485 Tax expense 144 127 ------------ ------------ Income from continuing operations 431 358 Income from discontinued operations, net of taxes 5 - ------------ ------------ Net income $436 $358 ============ ============ Earnings per share of common stock - basic: Income from continuing operations $0.51 $0.42 Income from discontinued operations 0.01 - ------------ ------------ Net income $0.52 $0.42 ============ ============ Earnings per share of common stock - assuming dilution: Income from continuing operations $0.51 $0.42 Income from discontinued operations 0.01 - ------------ ------------ Net income $0.52 $0.42 ============ ============ Weighted average number of shares outstanding- basic 830 852 ============ ============ Weighted average number of shares outstanding - assuming dilution 836 856 ============ ============ (A) Cost of products and services sold includes a provision of $130 million for environmental, litigation and net repositioning charges (after-tax $87 million, or $0.10 per share). (B) Reflects application of our previously announced change in the method of accounting for aerospace sales incentives to recognize the cost of these incentives as provided. The effects on the statement of operations for the three months ended March 31, 2005 are a reduction in product sales of $4 million, a reduction in cost of products sold of $3 million, and a reduction of $1 million in income from continuing operations before taxes, income from continuing operations and net income, with no effect on earnings per share. (C) Cost of products and services sold and selling, general and administrative expenses include provisions (credits) of $102 and $(3) million, respectively, for environmental, litigation and net repositioning charges. Total pretax charges were $99 million (after-tax $70 million, or $0.08 per share). (D) Represents a pretax adjustment related to the sale of our Security Monitoring business, which was sold in 2004 (after-tax $5 million, or $0.01 per share). Honeywell International Inc. Segment Data (Unaudited) (Dollars in millions) Net Sales Three Months Ended March 31, ---------------------------- 2006 2005(A) ------------ ------------ Aerospace $2,629 $2,500 Automation and Control Solutions 2,365 1,992 Specialty Materials 1,152 801 Transportation Systems 1,095 1,156 Corporate - - ------------ ------------ Total $7,241 $6,449 ============ ============ Segment Profit Three Months Ended March 31, ---------------------------- 2006 2005(A) ------------ ------------ Aerospace $440 $378 Automation and Control Solutions 221 201 Specialty Materials 162 59 Transportation Systems 142 155 Corporate (45) (44) ------------ ------------ Total Segment Profit 920 749 Gain (loss) on sale of non-strategic businesses - 8 Equity in income (loss) of affiliated companies (2) 31 Other income 27 24 Interest and other financial charges (89) (91) Stock option expense (B) (25) - Pension and other postretirement expense (B) (126) (137) Repositioning and other charges (B) (130) (99) ------------ ------------ Income from continuing operations before taxes $575 $485 ============ ============ (A) Reflects application of our previously announced change in the method of accounting for aerospace sales incentives to recognize the cost of these incentives as provided. The effects on the segment data for the three months ended March 31, 2005 are a reduction in sales of $4 million and a reduction in segment profit of $1 million, for both aerospace and total. (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) March 31, December 31, 2006 2005 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $1,442 $1,234 Accounts, notes and other receivables 5,175 5,017 Inventories 3,630 3,401 Deferred income taxes 1,200 1,243 Other current assets 557 542 Assets held for disposal 174 525 ------------ ------------ Total current assets 12,178 11,962 Investments and long-term receivables 348 370 Property, plant and equipment - net 4,633 4,658 Goodwill 8,123 7,660 Other intangible assets - net 1,301 1,173 (A) Insurance recoveries for asbestos related liabilities 1,191 1,302 Deferred income taxes 746 730 (A) Prepaid pension benefit cost 2,679 2,716 Other assets 1,007 1,062 ------------ ------------ Total assets $32,206 $31,633 ============ ============ LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Accounts payable $3,056 $2,886 Due to First Technologies plc shareowners 454 - Short-term borrowings 103 275 Commercial paper 117 754 Current maturities of long-term debt 1,120 995 Accrued liabilities 5,039 5,359 Liabilities related to assets held for disposal 16 161 ------------ ------------ Total current liabilities 9,905 10,430 Long-term debt 3,964 3,082 Deferred income taxes 376 334 (A) Postretirement benefit obligations other than pensions 1,777 1,786 Asbestos related liabilities 1,558 1,549 Other liabilities 3,713 3,690 Shareowners' equity 10,913 10,762 (A) ------------ ------------ Total liabilities and shareowners' equity $32,206 $31,633 ============ ============ (A) Reflects application of our previously announced change in the method of accounting for aerospace sales incentives to recognize the cost of these incentives as provided. The effects of this accounting change on the balance sheet at December 31, 2005 are a reduction of $803 million in other intangible assets with an offset in retained earnings of $492 million, deferred income tax assets of $142 million and deferred income tax liabilities of $169 million. Honeywell International Inc. Consolidated Statement of Cash Flows (Unaudited) (Dollars in millions) Three Months Ended March 31, ---------------------- 2006 2005(A) ---------- ---------- Cash flows from operating activities: Net income $436 $358 Adjustments to reconcile net income to net cash provided by operating activities: (Gain) loss on sale of non-strategic assets and businesses (16) (8) Repositioning and other charges 130 99 Severance and exit cost payments (62) (32) Environmental payments (41) (43) Asbestos related liability payments (25) (92) Proceeds from sale of insurance receivable 100 - Insurance receipts for asbestos related liabilities 35 9 Depreciation and amortization 188 158 Undistributed earnings of equity affiliates 2 (23) Deferred income taxes 56 3 Pension and other postretirement expense 126 137 Pension contribution - Novar (62) - Other postretirement benefit payments (53) (42) Other (18) 4 Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (147) (9) Inventories (183) (85) Other current assets (11) 44 Accounts payable 10 (13) Accrued liabilities (226) (136) ---------- ---------- Net cash provided by operating activities 239 329 ---------- ---------- Cash flows from investing activities: Expenditures for property, plant and equipment (122) (135) Proceeds from disposals of property, plant and equipment 37 1 Decrease in investments - 285 Cash paid for acquisitions, net of cash acquired (265) 83 Proceeds from sales of businesses, net of fees paid 475 (5) ---------- ---------- Net cash provided by investing activities 125 229 ---------- ---------- Cash flows from financing activities: Net (decrease) increase in commercial paper (637) 120 Net (decrease) in short-term borrowings (180) (2) Proceeds from issuance of common stock 174 67 Proceeds from issuance of long-term debt 1,239 - Payments of long-term debt (237) (10) Repurchases of common stock (325) - Cash dividends on common stock (189) (176) ---------- ---------- Net cash (used for) financing activities (155) (1) ---------- ---------- Effect of foreign exchange rate changes on cash and cash equivalents (1) (47) ---------- ---------- Net increase in cash and cash equivalents 208 510 Cash and cash equivalents at beginning of period 1,234 3,586 ---------- ---------- Cash and cash equivalents at end of period $1,442 $4,096 ========== ========== (A) Reflects application of our previously announced change in method of accounting for aerospace sales incentives to recognize the cost of these incentives as provided. The effects on the statement of cash flows for the three months ended March 31, 2005 are a reduction in net income of $1 million, a reduction in depreciation and amortization of $9 million and an increase in other of $10 million. Honeywell International Inc. Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) (Dollars in millions) Three Months Ended March 31, ---------------------- 2006 2005 --------- --------- Cash provided by operating activities $239 $329 Expenditures for property, plant and equipment (122) (135) --------- --------- Free cash flow $117 $194 ========= ========= 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, and to 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. Contacts: Media Investor Relations Robert C. Ferris Nicholas Noviello 973-455-3388 973-455-2222 rob.ferris@honeywell.com nicholas.noviello@honeywell.comSOURCE Honeywell 04/19/2006 /CONTACT: Media: Robert C. Ferris, +1-973-455-3388, rob.ferris@honeywell.com, or Investor Relations: Nicholas Noviello, +1-973-455-2222, nicholas.noviello@honeywell.com, both of Honeywell/ /Web site: http://www.honeywell.com http://www.honeywell.com/investor / (HON) ENDHONEYWELL INTERNATIONAL INC