19 Oct 2012 12:47
Honeywell Reports Third Quarter 2012 Sales of $9.3 Billion; EPS Up 9% to $1.20 Per Share
- 9% EPS Growth Driven By Strong Operational Performance And Sales Conversion
- Continued Americas And High Growth Region Expansion, Europe As Expected
- Segment Margin Increase Of 110 Bps To 15.8%, Operating Margin Up 360 Bps
- Narrowing 2012 Proforma EPS Guidance To $4.45 - $4.50, From $4.40 - $4.55
MORRIS TOWNSHIP, N.J., Oct. 19, 2012 -- Honeywell today announced its results for the third quarter of 2012:
Total Honeywell---------------($ Millions, except Earnings Per Share) 3Q 2011 3Q 2012 Change ------- ------- ------Sales 9,298 9,342 ~ flat Segment Margin 14.7% 15.8% 110 bpsOperating Income Margin 10.3% 13.9% 360 bps Earnings Per Share from Continuing Operations $0.87 $1.20 38%Earnings Per Share $1.10 $1.20 9% Cash Flow from Operations 661 999 51%Free Cash Flow * 922 1,021 11%
* Free Cash Flow (cash flow from operations less capital expenditures) prior to cash pension contributions
"Honeywell delivered 2% organic sales growth, strong sales conversion andhigher earnings per share in the third quarter," said Honeywell Chairman andCEO Dave Cote. "Our balanced mix of long- and short-cycle businesses, combinedwith growth in new products and continued expansion in high growth regions,offset European weakness, lower demand for products in some of our short-cyclebusinesses in China and the U.S., and foreign exchange headwinds in thequarter. Further, we maintained strong backlogs with new platform wins acrossa number of our businesses. We continue to be encouraged by the commercialaerospace outlook, increasing infrastructure spending, and oil and gasinvestments. These trends, combined with our great positions in goodindustries, leverage to other macro-trends like safety and security, energyefficiency, and clean energy generation are expected to drive our continuedoutperformance. Looking ahead to 2013, we are planning for a continuedchallenging macro environment, but expect to deliver good growth driven by newproducts, geographic expansion, and traction on key initiatives. Further, wewill remain flexible and adhere to our disciplined focus on cost andproductivity."Third quarter 2012 Earnings Per Share (EPS) reflects a 22.7% effective tax ratecompared to 23.2% last year. Adjusting for a normalized tax rate of 26.5% in2011 and 2012, EPS growth would be 8%. The tax rate favorability in the thirdquarter of this year, representing $0.06 of EPS relative to guidance, isexpected to be offset in the fourth quarter, with an estimated full year 2012effective tax rate of 26.5%.The company is updating its full-year 2012 sales and EPS guidance and nowexpects:Full Year Guidance------------------ 2012 2012 Change Prior Guidance Revised Guidance vs. 2011 -------------- ---------------- --------Sales $37.8 - $38.4B $37.5 - $37.7B ~ 3% Segment Margin 15.4 - 15.6% 15.6 - 15.7% 90 - 100 bpsOperating Income Margin(1) 13.4 - 13.6%
13.5 - 13.7% 150 - 170 bps
Earnings Per Share from Continuing Operations(2) $4.40 - $4.55 $4.45 - $4.50 11% - 12% Earnings Per Share(1)
$4.40 - $4.55
$4.45 - $4.50 10% - 11%
Free Cash Flow(3) ~$3.5B
~$3.5 - $3.6B ~100% Conversion
1. Proforma, V% / BPS Excludes Any Pension Mark to Market Adjustment
2. Proforma (Cont. Operations); Excludes Any Pension Mark to Market Adjustment; V% Also Excludes 3Q11 Repo and Other Actions Funded by Gain on Sale of CPG Business (in Disc. Ops)
3. Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior to Any NARCO Related Payments and Cash Pension Contributions
Third Quarter Segment Performance
Aerospace---------($ Millions) 3Q 2011 3Q 2012 % Change ------- ------- --------Sales 2,922 3,043 4%Segment Profit 532 582 9%Segment Margin 18.2% 19.1% 90 bps
* Sales were up 4% compared with the third quarter of 2011 driven by a 9%
increase in our Commercial end markets, partially offset by a (1%) decline
in Defense and Space. Commercial original equipment (OE) sales were up 14%
driven by increased production rates at our major OE customers. Commercial
aftermarket sales were up 6% with growth in both business jet spares and
repair and overhaul events. * Segment profit was up 9%, and segment margins expanded 90 bps to 19.1%, primarily due to higher commercial volumes and productivity net of inflation and increased investments to support future growth. Automation and Control Solutions--------------------------------($ Millions) 3Q 2011 3Q 2012 % Change ------- ------- --------Sales 3,948 3,958 ~ flatSegment Profit 544 571 5%Segment Margin 13.8% 14.4% 60 bps
* Sales were approximately flat, up 2% on an organic basis, compared with the
third quarter of 2011. Volume growth and the favorable impact of
acquisitions were offset by foreign exchange headwinds. Process Solutions
and Building Solutions and Distribution grew on an organic basis reflecting
increased conversion of sales from backlog and increased sales volume in
our Fire and Security Distribution business in the Americas. Energy,
Safety, and Security was flat organically due to weak industrial end
markets globally.
* Segment profit was up 5% and segment margins were up 60 bps to 14.4% driven
by commercial excellence and productivity benefits net of inflation.
Performance Materials and Technologies--------------------------------------($ Millions) 3Q 2011 3Q 2012 % Change ------- ------- --------Sales 1,468 1,478 1%Segment Profit 254 275 8%Segment Margin 17.3% 18.6% 130 bps
* Sales were up 1%, reported and organic, compared with the third quarter of
2011, resulting from higher licensing and equipment sales in UOP and new
products and applications in Specialty Products and Electronic Materials,
partially offset by challenging global end market conditions in Fluorine
Products and Resins and Chemicals.
* Segment profit was up 8% and segment margins increased 130 bps to 18.6%,
primarily due to higher sales at UOP and productivity net of inflation and
continued growth investments, partially offset by challenging global end
market conditions in Fluorine Products and Resins and Chemicals.
Transportation Systems----------------------($ Millions) 3Q 2011 3Q 2012 % Change ------- ------- --------Sales 960 863 (10%)Segment Profit 121 104 (14%)Segment Margin 12.6% 12.1% (50) bps
* Sales were down (10%), down (2%) organic, compared with the third quarter
of 2011, as new platform launches and higher turbo gas penetration in the
U.S. nearly offset the unfavorable impact of foreign exchange, and lower
European light vehicle production volume and aftermarket sales.
* Segment profit was down (14%) and segment margins decreased (50) bps to
12.1% primarily driven by unfavorable foreign exchange, lower sales, and
ongoing projects to drive operational improvement in the Friction Materials
business, partially offset by productivity benefits.
Honeywell will discuss its results during its investor conference call todaystarting at 9:30 a.m. EDT. To participate, please dial (877) 303-4382(domestic) or (631) 291-4830 (international) a few minutes before the 9:30 a.m.EDT start. Please mention to the operator that you are dialing in forHoneywell's investor conference call. The live webcast of the investor callwill be available through the "Investor Relations" section of the company'sWebsite (http://www.honeywell.com/investor). Investors can access a replay ofthe conference call from 12:30 p.m. EDT, October 19, until midnight, October26, dialing (855) 859-2056 (domestic) or (404) 537-3406 (international). Theaccess code is 18261327.Honeywell (www.honeywell.com) is a Fortune 100 diversified technology andmanufacturing leader, serving customers worldwide with aerospace products andservices; control technologies for buildings, homes, and industry; automotiveproducts; turbochargers; and specialty materials. Based in Morris Township,N.J., Honeywell's shares are traded on the New York, London, and Chicago StockExchanges. For more news and information on Honeywell, please visit www.honeywellnow.com.This release contains certain statements that may be deemed "forward-lookingstatements" within the meaning of Section 21E of the Securities Exchange Act of1934. All statements, other than statements of historical fact, that addressactivities, events or developments that we or our management intends, expects,projects, believes or anticipates will or may occur in the future areforward-looking statements. Such statements are based upon certain assumptionsand assessments made by our management in light of their experience and theirperception 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 anumber of material risks and uncertainties, including but not limited toeconomic, competitive, governmental, and technological factors affecting ouroperations, markets, products, services and prices. Such forward-lookingstatements are not guarantees of future performance, and actual results,developments and business decisions may differ from those envisaged by suchforward-looking statements. Contacts:Media Investor RelationsRobert C. Ferris Elena Doom(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com elena.doom@honeywell.com
Honeywell International Inc. Consolidated Statement of Operations (Unaudited) ----------------------------------------------- (In millions, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2012 2011 2012 2011 ---- ---- ---- ---- Product sales $7,332 $7,308 $22,184 $21,267Service sales 2,010 1,990 5,900 5,789 ----- ----- ----- -----Net sales 9,342 9,298 28,084 27,056 ----- ----- ------ ------
Costs, expenses and other
Cost of products sold (A) 5,474
5,739 16,627 16,358
Cost of services sold (A) 1,334 1,294 3,983 3,763 ----- ----- ----- ----- 6,808 7,033 20,610 20,121
Selling, general and administrative expenses (A) 1,238 1,303 3,695 3,783
Other (income) expense (16)
(21) (54) (72)
Interest and other financial charges 88 90 264 285 --- --- --- --- 8,118 8,405 24,515 24,117 ----- ----- ------ ------ Income from continuing operations before taxes 1,224 893 3,569 2,939Tax expense 278 207 893 767 --- --- --- --- Income from continuing operations after taxes 946
686 2,676 2,172
Income from discontinued operations after taxes - 177 - 209 --- --- --- --- Net income 946 863 2,676 2,381 Less: Net (loss) income attributable to thenoncontrolling interest (4) 1 1 4 --- --- --- --- Net income attributable to Honeywell $950
$862 $2,675 $2,377
====
==== ====== ======
Amounts attributable to Honeywell:
Income from continuing operations less net income attributable to the noncontrolling interest 950 685 2,675 2,168 Income from discontinued operations - 177 - 209 Net income attributable to Honeywell $950 $862 $2,675 $2,377 ==== ==== ====== ====== Earnings per share of common stock - basic:Income from continuing operations 1.21 0.88 3.43 2.77Income from discontinued operations - 0.23 - 0.27Net income attributable to Honeywell $1.21
$1.11 $3.43 $3.04
=====
===== ===== =====
Earnings per share of common stock -assumingdilution:Income from continuing operations 1.20 0.87 3.38 2.73Income from discontinued operations - 0.23 - 0.26Net income attributable to Honeywell $1.20
$1.10 $3.38 $2.99
=====
===== ===== =====
Weighted average number of shares outstanding-basic 783.6
778.2 780.7 782.9
=====
===== ===== =====
Weighted average number of shares outstanding -
assuming dilution 792.5 786.9 790.4 794.0 ===== ===== ===== ===== (A) Cost of products and services sold and selling, general and administrative expenses include amountsfor repositioning and other charges, pension and other postretirement expense, and stock compensationexpense. Honeywell International Inc. Segment Data (Unaudited) ----------------------- (Dollars in millions) Three Months Ended Nine Months Ended September 30, September 30, ------------- -------------Net Sales 2012 2011 2012 2011--------- ---- ---- ---- ---- Aerospace $3,043 $2,922 $9,020 $8,428
Automation and Control Solutions 3,958 3,948 11,708 11,484
Performance Materials and Technologies 1,478 1,468 4,639 4,229
Transportation Systems 863 960 2,717 2,915 Corporate - - - - --- --- --- --- Total $9,342 $9,298 $28,084 $27,056 ====== ====== ======= =======
Reconciliation of Segment Profit to Income From Continuing Operations Before Taxes
-----------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, ------------- -------------Segment Profit 2012 2011 2012 2011-------------- ---- ---- ---- ---- Aerospace $582 $532 $1,678 $1,450 Automation and Control Solutions 571 544 1,587
1,499
Performance Materials and Technologies 275 254 944 819 Transportation Systems 104 121 338 368 Corporate (57) (84) (164) (208) --- --- ---- ---- Total Segment Profit 1,475 1,367 4,383 3,928 Other income (A) 4 8 18 36Interest and other financial charges (88) (90) (264)
(285)
Stock compensation expense (B) (40) (38) (131)
(129)
Pension ongoing expense (B) (7) (26) (29)
(83)
Other postretirement income/(expense) (B) (20) 82 (52)
109
Repositioning and other charges (B) (100) (410) (356)
(637)
---- ---- ----
----
Income from continuing operations before taxes $1,224 $893 $3,569 $2,939
====== ==== ======
======
(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, 2012 2011 ---- ----ASSETSCurrent assets: Cash and cash equivalents $4,760 $3,698 Accounts, notes and other receivables 7,388 7,228 Inventories 4,314 4,264 Deferred income taxes 573 460 Investments and other current assets 711 484 --- --- Total current assets 17,746 16,134 Investments and long-term receivables 600
494
Property, plant and equipment - net 4,830
4,804
Goodwill 11,916
11,858
Other intangible assets - net 2,281
2,477
Insurance recoveries for asbestos relatedliabilities 654 709Deferred income taxes 1,766 2,132Other assets 1,281 1,200 ----- ----- Total assets $41,074 $39,808 ======= ======= LIABILITIES AND SHAREOWNERS' EQUITYCurrent liabilities: Accounts payable $4,518 $4,738 Short-term borrowings 75 60 Commercial paper 899 599 Current maturities of long-term debt 624 15 Accrued liabilities 6,597 6,863 ----- ----- Total current liabilities 12,713 12,275 Long-term debt 6,391 6,881Deferred income taxes 679
676
Postretirement benefit obligations otherthan pensions 1,346 1,417Asbestos related liabilities 1,531 1,499Other liabilities 5,195 6,158Shareowners' equity 13,219 10,902 ------ ------ Total liabilities and shareowners' equity $41,074 $39,808 ======= =======
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
-----------------------------------------------
(Dollars in millions)
Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2012 2011 2012 2011 ---- ---- ---- ----Cash flows from operating activities: Net income attributable to Honeywell
$950 $862 $2,675 $2,377
Adjustments to reconcile net income attributable to Honeywell to net
cash provided by operating activities:
Depreciation and amortization 226 226 681 704 Gain on sale of non-strategic businesses and assets (4) (307) (3) (353) Repositioning and other charges 100 410 356 637 Net payments for repositioning and other charges (126) (128) (352) (335) Pension and other postretirement expense 27 (56) 81 (24) Pension and other postretirement benefit payments (291) (486) (888) (1,568) Stock compensation expense 40 38 131 129 Deferred income taxes 130 39 319 197 Excess tax benefits from share based payment arrangements (12) (1) (28) (31) Other 143 (84) 39 56 Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (140) 104 (160) (433) Inventories 25 (51) (53) (440) Other current assets (62) (30) (77) (53) Accounts payable (29) 105 (220) 365 Accrued liabilities 22 20 (333) 128Net cash provided by operating activities
999 661 2,168 1,356
--- --- ----- -----
Cash flows from investing activities:
Expenditures for property, plant and equipment
(234) (177) (586) (466)
Proceeds from disposals of property, plant and equipment 1 - 2 3 Increase in investments (237) (93) (482) (322) Decrease in investments 129 112 287 288 Cash paid for acquisitions, net of cash acquired
2 (619) (62) (627)
Proceeds from sales of businesses, net of fees paid
- 955 18 1,170
Other 17 9 (42) 67Net cash (used for)/provided by investing activities
(322) 187 (865) 113
---- --- ---- ---
Cash flows from financing activities:
Net(decrease)/increase in commercial paper
(49) 350 300 401
Net increase/(decrease) in short-term borrowings
8 (2) 19 (4)
Proceeds from issuance of common stock
63 32 179 232
Proceeds from issuance of long-term debt
44 5 86 1,389
Payments of long-term debt - - - (439) Excess tax benefits from share based payment arrangements
12 1 28 31
Repurchases of common stock
- (505) - (1,009)
Cash dividends paid (298) (266) (880) (796)Net cash used for financing activities
(220) (385) (268) (195)
---- ---- ---- ----
Effect of foreign exchange rate changes on cash and cash equivalents 82 (126) 27 (39)
--- ---- --- ---Net increase in cash and cash equivalents 539 337 1,062 1,235Cash and cash equivalents at beginning of period 4,221 3,548 3,698 2,650Cash and cash equivalents at end of period $4,760 $3,885 $4,760 $3,885 ====== ====== ====== ====== Honeywell International Inc. Reconciliation of Cash Provided by Operating
Activities to Free Cash Flow,
Prior to Cash Pension Contributions (Unaudited) (Dollars in millions) --- Three Months Ended September 30, ------------- 2012 2011 2012E ---- ---- ----- Cash provided by operating activities $999 $661 ~$3,500 - 3,600Expenditures for property, plant and equipment (234) (177) ~(1,000) ---- ---- -------Free cash flow $765 $484 ~$2,500 - 2,600Cash pension contributions 256 438 ~1,000 --- --- ------
Free cash flow, prior to cash pension contributions $1,021 $922
~$3,500 - 3,600
====== ====
===============
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 businessoperations that will be used to repay scheduled debt maturities and can be used to invest in future growththrough new business development activities or acquisitions, and to pay dividends, repurchase stock, repaydebt obligations prior to their maturities, or make cash pension contributions. This metric can also be usedto evaluate our ability to generate cash flow from business operations and the impact that this cash flowhas on our liquidity. In reference to free cash flow conversion on page 2, we define free cash flow conversion as free cash flowprior to any NARCO related payments and cash pension contributions divided by net income attributable toHoneywell excluding pension mark to market adjustment. Honeywell International Inc. Reconciliation of Segment Profit to Operating Income Excluding
Pension Mark to Market
Adjustment and Calculation of Segment Profit and Operating
Income Margin Excluding Pension
Mark to Market Adjustment (Unaudited) (Dollars in millions) Three Months Ended September 30, ------------- 2012 2011 ---- ---- Segment Profit $1,475 $1,367 Stock compensation expense (A) (40) (38)Repositioning and other (A, B) (112) (423)Pension ongoing expense (A) (7) (26)Other postretirement income/(expense) (A) (20) 82 --- --- Operating Income $1,296 $962 ====== ==== Segment Profit $1,475 $1,367· Sales $9,342 $9,298 ------ ------Segment Profit Margin % 15.8% 14.7% ==== ==== Operating Income $1,296 $962· Sales $9,342 $9,298 ------ ------Operating Income Margin % 13.9% 10.3% ==== ==== 2011 2012 Guidance ---- -------------Segment Profit
$5,357 ~$5,800 - $5,900
Stock compensation expense (A) (168) ~(175)Repositioning and other (A, B) (794) ~(425) - (450)Pension ongoing expense (A) (105) ~(50)Pension mark to market adjustment (A) (1,802) TBDOther postretirement income/(expense) (A) 86 ~(75) --- ---- Operating Income $2,574 ~$5,075 - $5,150Pension mark to market adjustment (A) $(1,802) TBD ------- ---Operating Income excluding pension mark to market adjustment $4,376 ~$5,075 - $5,150 Segment Profit $5,357 ~$5,800 - $5,900· Sales $36,529 $37,500 - $37,700 ------- -----------------
Segment Profit Margin % 14.7% 15.6 - 15.7% ==== =========== Operating Income $2,574 ~$5,075 - $5,150· Sales $36,529 $37,500 - $37,700 ------- -----------------Operating Income Margin % 7.0% 13.5 - 13.7% === =========== Operating Income excluding pension mark to market adjustment $4,376 ~$5,075 - $5,150· Sales $36,529 $37,500 - $37,700
------- ----------------- Operating Income Margin excluding pension mark to market adjustment % 12.0% 13.5 - 13.7%
==== ===========
(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.
Honeywell International Inc. Reconciliation of Earnings Per Share to Earnings Per Share,
Excluding Pension
Mark to Market Adjustment and Third Quarter 2011 Repositioning and Other Actions Funded by Gain on Sale of CPG Business (CPG Gain) 2011 ---- EPS - continuing operations assuming dilution $2.35 Pension mark to market adjustment $1.44 -----
EPS - continuing operations assuming dilution, excluding pension mark to market adjustment $3.79
Third quarter 2011 repositioning and other actions funded by CPG Gain
$0.22 -----
EPS - continuing operations assuming dilution, excluding pension mark to market
$4.01 adjustment and third quarter 2011 repositioning and other actions funded by CPG Gain 2011 ---- EPS - Total Honeywell assuming dilution $2.61 Pension mark to market adjustment $1.44 -----
EPS - Total Honeywell assuming dilution, excluding pension mark to market adjustment
$4.05 ===== We believe EPS, excluding pension mark to market adjustment and third quarter 2011 repositioning and other actions funded by CPG Gain, is a metric that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
EPS utilizes weighted average shares outstanding of 791.6 million and the effective tax rate for the period. Mark to market uses a blended tax rate of 36.9%.
SOURCE Honeywell
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