19 Oct 2007 12:24
Honeywell Third Quarter Sales Up 10% to US$8.7 Billion; Earnings Per Share Up
23% to US$0.81 2007 EPS Guidance Moves to High End of Range
MORRIS TOWNSHIP, N.J., Oct. 19 -- Honeywell today announced that third quarter 2007 sales increased 10% to US$8.7 billion, driven by 9% organic sales growth. Earnings were US$0.81 per share versus US$0.66 last year, an increase of 23%. Cash flow from operations was US$910 million versus US$796 million last year, and free cash flow (cash flow from operations less capital expenditures) was up 16% to US$736 million versus US$634 million in the third quarter of 2006.
"We had strong organic sales growth in each of our businesses in the third quarter," said Honeywell Chairman and Chief Executive Officer Dave Cote. "Great positions in good industries are driving Honeywell's consistent performance and global growth. Customers are confident in Honeywell's differentiated technologies and we continue to win important new multi-year contracts. We believe that the company is well positioned for continued growth and we remain confident in our business outlook."
Honeywell raised its 2007 sales guidance by US$300 million to US$34.2 billion, an increase of approximately 9% from 2006. The company also raised its earnings per share and free cash flow guidance to the high end of previously- stated ranges. Honeywell is forecasting 2007 earnings per share of US$3.14 - 3.16, an increase of approximately 25% over the prior year, and 2007 free cash flow guidance of US$3.0 billion (cash flow from operations of US$3.8 billion), more than 20% over 2006.
Segment Highlights Aerospace -- Sales were up 9%, compared with the third quarter of 2006, driven by 9% growth in Commercial and 8% growth in Defense and Space sales. Commercial sales reflected growth of 8% in original equipment and 10% in aftermarket spares and services. Defense and Space sales included the positive impact of the Dimensions International acquisition. -- Segment profit grew 12% while segment margin increased by 50 bps to 18.1% driven by volume growth, price, and productivity gains, which more than offset the negative impact from inflation. -- Honeywell was selected by Airbus to provide the Extended Mechanical System Perimeter (EMSP) system for the A350 XWB aircraft. With a potential total program value of up to US$16 billion, this is the largest systems single-source contract ever awarded by Airbus. The EMSP system includes a range of Honeywell's mechanical product offerings, including the HGT1700 auxiliary power unit, environmental and cabin pressure control systems, supplemental cooling, ventilation and fans, bleed air systems, and wing anti-ice systems. -- Defense and Space signed a US$370 million Secondary Power Logistics Solution contract to provide logistics service and depot maintenance support to the U.S. Air Force. -- Honeywell received Federal Aviation Administration authorization for its Runway Awareness and Advisory System (RAAS) for all large cabin Gulfstream aircraft equipped with the PlaneView(R) flight deck featuring Honeywell's Primus Epic(R) architecture. RAAS will be an option for Gulfstream G450 and G550 aircraft in 2007. Automation and Control Solutions -- Sales were up 12%, compared with the third quarter of 2006, driven by 9% growth in the Products businesses and 19% growth in the Solutions businesses. -- Segment profit grew 13% while segment margin increased by 10 bps to 11.7% due to volume growth and productivity savings, which more than offset the negative impact of inflation and sales mix. -- Building Solutions was awarded an US$11.6 million, 12-year contract to implement a comprehensive energy efficiency program for the Denver Housing Authority. The program will help the housing authority improve its facilities and reduce its impact on the environment while saving approximately US$1.8 million in utility costs per year. -- Process Solutions announced a US$7 million contract to supply a process automation system to TOTAL's Lindsey Oil Refinery in North Lincolnshire, U.K. The business will integrate and centralize the various control and monitoring systems used in a single process automation system, providing plant operators with full view and control over the refinery's operations. -- Environmental and Combustion Controls (ECC) announced a definitive agreement to establish a joint venture with Lonon, a leading Chinese wiring devices and lighting business based in Guangdong Zhongshan, China. Transportation Systems -- Sales were up 10% compared with the third quarter of 2006, driven by increased sales in our Turbo business and the favorable impact of foreign exchange. -- Segment profit was down 4% while segment margin decreased 150 bps to 10.1% due to material inflation, operational issues in the Consumer Products Group, and investments in product development, including the support of key turbo program wins, which more than offset increased productivity, increased prices, and lower warranty expense. -- Turbo Technologies won four turbo diesel programs estimated at approximately US$100 million in annual revenues at full production. These vehicles will be introduced in Brazil, Europe, and the U.S. The first of these programs is expected to launch in 2008. -- Consumer Products Group launched Xtreme Sport(TM), a new line of premium spark plugs for the growing small engine segment such as ATVs, motorcycles, boats, and snowmobiles, and Xtreme Start(TM), a separate product line for lawn care equipment. The new plugs feature improved ignitability for faster fuel combustion and quicker starts. Specialty Materials -- Sales were up 6% compared with the third quarter of 2006, driven by strong UOP sales, which were partially offset by lower sales at Fluorine Products due to continued weak demand in the U.S. housing market and the impact of scheduled plant maintenance at Resins & Chemicals. -- Segment profit grew 43% while segment margin increased by 340 bps to 13.0% primarily due to increased UOP sales volume and productivity savings. -- UOP's ADS-37 adsorbent was used by KP Chemical Corp. to reload its Parex Process unit in Ulsan, South Korea. KP will use the adsorbents to significantly increase its capacity to produce para-xylene, a key component in making soft drink and water bottles. KP Chemical is the 15th Parex operator to use the ADS-37 adsorbents since UOP introduced it in 2004. -- Fluorine Products signed a multi-year agreement with Hisense Kelon, a leading home appliance manufacturer based in Guangdong Province, China, and extended an agreement with Whirlpool Corp., a leading global manufacturer and marketer of major home appliances, to supply Enovate(R) blowing agent used in energy-efficient rigid polyurethane foam to insulate refrigerators.
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 webcast starting at 11:00 a.m. EDT, October 19, until midnight EDT, October 26, by dialing (706) 645-9291. The access code is 15179046.
Honeywell International is a US$34 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 and Chicago 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 www.honeywell.com.
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 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.
Contacts: Media Investor Relations Robert C. Ferris Murray Grainger +1-973-455-3388 +1-973-455-2222 rob.ferris@honeywell.com murray.grainger@honeywell.com Honeywell International Inc. Consolidated Statement of Operations (Unaudited) (In millions except per share amounts) (All amounts in US dollars) Three Months Ended Nine Months Ended September 30, September 30, ----------------- ----------------- 2007 2006 2007 2006 ------- -------- -------- -------- Product sales $7,008 $6,334 $20,330 $18,521 Service sales 1,727 1,618 4,984 4,570 ------- -------- ------- -------- Net sales 8,735 7,952 25,314 23,091 ------- -------- ------- -------- Costs, expenses and other Cost of products sold (A) 5,450 4,973 15,778 14,470 Cost of services sold (A) 1,196 1,138 3,509 3,268 ------- -------- ------- -------- 6,646 6,111 19,287 17,738 Selling, general and administrative expenses (A) 1,144 1,037 3,360 3,125 Other (income) expense (16) (27) (47) (69) Interest and other financial charges 124 97 331 280 ------- -------- ------- -------- 7,898 7,218 22,931 21,074 ------- -------- ------- -------- Income from continuing operations before taxes 837 734 2,383 2,017 Tax expense 219 193 628 524 ------- -------- ------- -------- Income from continuing operations 618 541 1,755 1,493 Income from discontinued operations, net of taxes - - - 5 ------- ------- ------- - ------- Net income $618 $541 $1,755 $1,498 ======= ======= ======= ======== Earnings per share of common stock - basic: Income from continuing operations $0.83 $0.66 $2.28 $1.81 Income from discontinued operations - - - 0.01 ------- -------- ------- -------- Net income $0.83 $0.66 $2.28 $1.82 ======= ======= ======= ======== Earnings per share of common stock - assuming dilution: Income from continuing operations $0.81 $0.66 $2.25 $1.80 Income from discontinued operations - - - 0.01 ------- -------- ------- -------- Net income $0.81 $0.66 $2.25 $1.81 ======= ======== ======= ======== Weighted average number of shares outstanding-basic 748 817 770 824 ======= ======= ======= ======== Weighted average number of shares outstanding - assuming dilution 758 821 780 829 ======= ======= ======= ======== (A) Cost of products and services sold and selling, general and administrative expenses include amounts for repositioning and other charges, pension and other post-retirement benefits expense, and stock option expense. Honeywell International Inc. Segment Data (Unaudited) (Dollars in millions) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- Net Sales 2007 2006 2007 2006 --------- ------- -------- -------- ------- Aerospace $3,102 $2,854 $8,969 $8,169 Automation and Control Solutions 3,196 2,844 9,036 7,975 Specialty Materials 1,211 1,143 3,626 3,548 Transportation Systems 1,226 1,111 3,683 3,399 Corporate - - - - ------- -------- -------- -------- Total $8,735 $7,952 $25,314 $23,091 ======= ======== ======== ======== Reconciliation of Segment Profit to Income From Continuing Operations Before Taxes Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- Segment Profit 2007 2006 2007 2006 -------------- ------- -------- -------- ------- Aerospace $560 $501 $1,583 $1,354 Automation and Control Solutions 373 330 980 838 Specialty Materials 157 110 524 489 Transportation Systems 124 129 437 436 Corporate (47) (41) (144) (134) ------- -------- -------- ------- Total Segment Profit 1,167 1,029 3,380 2,983 Other income (expense) 16 27 47 69 Interest and other financial charges (124) (97) (331) (280) Stock option expense (A) (13) (20) (54) (61) Pension and other postretirement expense (A) (105) (100) (251) (344) Repositioning and other charges (A) (104) (105) (408) (350) ------- -------- -------- ------- Income from continuing operations before taxes $837 $734 $2,383 $2,017 ======= ======== ======== ======= (A) 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, 2007 2006 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $1,787 $1,224 Accounts, notes and other receivables 6,461 5,740 Inventories 3,919 3,588 Deferred income taxes 1,127 1,215 Other current assets 362 537 ------------ ------------ Total current assets 13,656 12,304 Investments and long-term receivables 526 382 Property, plant and equipment - net 4,770 4,797 Goodwill 8,784 8,403 Other intangible assets - net 1,336 1,247 Insurance recoveries for asbestos related liabilities 1,111 1,100 Deferred income taxes 997 1,075 Prepaid pension benefit cost 772 695 Other assets 950 938 ------------ ------------ Total assets $32,902 $30,941 ============ ============ LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Accounts payable $3,812 $3,518 Short-term borrowings 70 62 Commercial paper 1,977 669 Current maturities of long- term debt 415 423 Accrued liabilities 5,818 5,463 ------------ ------------ Total current liabilities 12,092 10,135 Long-term debt 5,391 3,909 Deferred income taxes 484 352 Postretirement benefit obligations other than pensions 2,092 2,090 Asbestos related liabilities 1,146 1,262 Other liabilities 3,442 3,473 Shareowners' equity 8,255 9,720 ------------ ------------ Total liabilities and shareowners' equity $32,902 $30,941 ============ ============ Honeywell International Inc. Consolidated Statement of Cash Flows (Unaudited) (Dollars in millions) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2007 2006 2007 2006 -------- ------- -------- ------ Cash flows from operating activities: Net income $618 $541 $1,755 $1,498 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 207 190 620 596 Repositioning and other charges 104 105 408 350 Net (payments) for repositioning and other charges (182) (181) (355) (335) Pension and other postretirement expense 105 100 251 344 Pension and other postretirement benefit payments (58) (80) (166) (258) Stock option expense 13 20 54 61 Deferred income taxes (28) 297 169 423 Excess tax benefits from share based payment arrangements (17) - (68) - Other 128 7 154 2 Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (251) (302) (603) (545) Inventories (88) (57) (290) (265) Other current assets - (48) 36 (6) Accounts payable 130 137 273 215 Accrued liabilities 229 67 233 (110) -------- ------- -------- ------ Net cash provided by operating activities 910 796 2,471 1,970 -------- ------- -------- ------ Cash flows from investing activities: Expenditures for property, plant and equipment (174) (162) (457) (433) Proceeds from disposals of property, plant and equipment 5 1 87 45 Increase in investments (20) - (20) - Cash paid for acquisitions, net of cash acquired (458) (15) (566) (623) Proceeds from sales of businesses, net of fees paid (1) 3 51 579 -------- ------- -------- ------ Net cash (used for) investing activities (648) (173) (905) (432) -------- ------- -------- ------ Cash flows from financing activities: Net increase/(decrease) in commercial paper (614) (279) 1,299 (385) Net increase/(decrease) in short-term borrowings 4 (5) 4 (215) Payment of debt assumed with acquisitions (40) - (40) (346) Proceeds from issuance of common stock 93 39 517 278 Proceeds from issuance of long-term debt 897 - 1,885 1,239 Payments of long-term debt (8) (18) (415) (371) Excess tax benefits from share based payment arrangements 17 - 68 - Repurchases of common stock (296) (192) (3,783) (1,020) Cash dividends paid on common stock (188) (184) (580) (560) -------- ------- -------- ------ Net cash (used for) financing activities (135) (639) (1,045) (1,380) -------- ------- -------- ------- Effect of foreign exchange rate changes on cash and cash equivalents 27 7 42 23 -------- ------- -------- ------ Net increase/(decrease) in cash and cash equivalents 154 (9) 563 181 Cash and cash equivalents at beginning of period 1,633 1,424 1,224 1,234 -------- -------- -------- ------- Cash and cash equivalents at end of period $1,787 $1,415 $1,787 $1,415 ======== ======= ======== ======= 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, ------------------ ----------------- 2007 2006 2007 2006 -------- -------- ------- ------- Cash provided by operating activities $910 $796 $2,471 $1,970 Expenditures for property, plant and equipment (174) (162) (457) (433) -------- -------- ------- -------- Free cash flow $736 $634 $2,014 $1,537 ======== ======== ======= ======== 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.
SOURCE Honeywell
10/19/2007
/CONTACT: Media, Robert C. Ferris, +1-973-455-3388, rob.ferris@honeywell.com, or Investor Relations, Murray Grainger,
+1-973-455-2222, murray.grainger@honeywell.com, both of Honeywell/
/Web site: http://www.honeywell.com /
(HON)
HONEYWELL INTERNATIONAL INC