18 Jul 2012 13:56
Honeywell Second Quarter 2012 Sales Up 4% To $9.4 Billion; EPS Up 12% To $1.14
Per Share
-- 14% Earnings Growth From Continuing Operations Driven By Strong Sales Conversion
-- Continued Robust Americas And Emerging Region Performance, Europe As Expected
-- Strong Margin Expansion - Segment Margin Up 150 bps, Operating Income Margin Up 70 bps
-- Raising 2012 Proforma EPS Guidance to $4.40 - $4.55, Up From $4.35 - $4.55
MORRIS TOWNSHIP, N.J., July 18, 2012 -- Honeywell today announced its results for the second quarter of 2012:
Total Honeywell ($ Millions, except Earnings Per Share) 2Q 2011 2Q 2012
Change Sales 9,086 9,435 4% Segment Margin 14.3% 15.8% 150 bps Operating Income Margin 12.9% 13.6% 70 bps
Earnings Per Share from Continuing Operations $1.00 $1.14
14% Earnings Per Share $1.02 $1.14 12% Cash Flow from Operations 1,138 973 (14%) Free Cash Flow* 995 1,040 5%
* Free Cash Flow (cash flow from operations less capital expenditures) prior to cash pension contributions
"Honeywell had another terrific quarter, capping off a very strong first halfof 2012," said Honeywell Chairman and CEO Dave Cote. "Despite a morechallenging macro environment, particularly in Europe, Honeywell deliveredstrong sales conversion and double-digit earnings growth in the second quarterand executed well against our growth and productivity playbook. Our short cyclebusinesses, such as ESS and Advanced Materials, were strong in the U.S., andour long cycle businesses continued to grow globally, benefitting fromfavorable macro trends and strong backlog. As such, we're raising the low endof our 2012 guidance by $0.05, with the expectation of continued marginexpansion in the second half driving our strong full-year outlook. Given theincreasingly uncertain global economic environment, we'll remain flexible, butalso continue to invest in sustainable growth through seed planting in newproducts and technologies, geographic expansion, and our key processinitiatives, all supporting our Great Positions in Good Industries throughoutthe world."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 $38.0 - 38.6B $37.8 - 38.4B 3% - 5% Segment Margin 15.3 - 15.5% 15.4 - 15.6% 70 - 90 bps Operating Income Margin(1) 13.2 - 13.5% 13.4 - 13.6% 140 - 160 bps Earnings Per Share from Continuing Operations(2) $4.35 - $4.55 $4.40 - $4.55 10% - 14% Earnings Per Share(1) $4.35 - $4.55 $4.40 - $4.55 9% - 12% Free Cash Flow(3) ~$3.5B ~$3.5B ~100% conversion
1. Proforma, V% / BPS Excludes Any Pension Mark to Market Adjustment 2. Proforma (Cont. Operations); Excludes Any Pension Mark to Market
Adjustment; V% Also Excludes 3Q11 Repo and Other Actions Funded by Gain on Sale
of CPG Business (in Disc. Ops.)
3. Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior
to Any NARCO Related Payments and Cash Pension Contributions
Second Quarter Segment Performance Aerospace ($ Millions) 2Q 2011 2Q 2012 % Change Sales 2,810 3,027 8% Segment Profit 451 562 25% Segment Margin 16.0% 18.6% 260 bps
* Sales were up 8% compared with the second quarter of 2011. Organic growth
was 7%, or 4% organic excluding the absence of prior year payments to
Business and General Aviation customers to offset preproduction costs (OE
payments). Aerospace growth was driven by an 18% increase in our Commercial
end markets, partially offset by lower Defense and Space revenue.
Commercial original equipment (OE) sales were up 38%, or 16% excluding the
impact of the EMS acquisition and lower OE payments year over year.
Commercial aftermarket sales were up 9% with growth in both spares and
repair and overhaul sales.
* Segment profit was up 25%, and segment margins expanded 260 bps to 18.6%,
primarily due to the absence of prior year OE payments, higher commercial
volumes, commercial excellence and productivity net of inflation, partially
offset by higher investments in research and development to support future
growth.
Automation and Control Solutions ($ Millions) 2Q 2011 2Q 2012 % Change Sales 3,880 3,962 2% Segment Profit 496 525 6% Segment Margin 12.8% 13.3% 50 bps
* Sales were up 2%, 4% organic, compared with the second quarter of 2011
driven by volume growth and the favorable impact of acquisitions, partially
offset by foreign exchange headwinds. Process Solutions, Building Solutions and Distribution, and Energy, Safety and Security all grew on an organic basis. The ACS long cycle businesses saw continued good global
growth, while the short cycle businesses had good growth in the Americas,
partially offset by continued declines in Europe. ACS continues to benefit
from new product introductions, geographic expansion, and favorable macro
trends such as safety, security, and energy efficiency.
* Segment profit was up 6% and segment margins were up 50 bps to 13.3% driven
by higher productivity benefits net of inflation.
Performance Materials and Technologies ($ Millions) 2Q 2011 2Q 2012 % ChangeSales 1,406 1,546 10% Segment Profit 281 350 25% Segment Margin 20.0% 22.6% 260 bps
* Sales were up 10%, 4% organic, compared with the second quarter of 2011,
resulting from strong UOP licensing, equipment, and service sales, the
phenol plant acquisition, and strong volumes in Resins & Chemicals (R&C),
offsetting decreased UOP catalyst sales primarily due to timing of
deliveries, and the impact of more challenging global end market conditions
for Fluorine Products.
* Segment profit was up 25% and segment margins increased 260 bps to 22.6%, a
record for PMT, primarily due to higher UOP licensing and service revenues,
R&C volumes, and productivity, partially offset by more challenging end
market conditions. Transportation Systems ($ Millions) 2Q 2011 2Q 2012 % ChangeSales 990 900 (9%) Segment Profit 129 114 (12%) Segment Margin 13.0% 12.7% (30) bps
* Sales were down (9%), (1%) organic, compared with the second quarter of
2011, due to the unfavorable impact of foreign exchange and significantly
lower European light vehicle production volume and aftermarket sales, partially offset by new platform launches, including higher turbo gas penetration in North America. * Segment profit was down (12%) and segment margins decreased (30) bps to
12.7% primarily driven by inflation and the impact of 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 9:00 a.m. EDT. To participate, please dial (631) 291-4830 a fewminutes before the 9:00 a.m. EDT start. Please mention to the operator that youare dialing in for Honeywell's investor conference call. The live webcast ofthe investor call will be available through the "Investor Relations" section ofthe company's Website (http://www.honeywell.com/investor ). Investors can accessa replay of the conference call from 12:00 p.m. EDT, July 18, until midnight,July 25, by dialing (404) 537-3406. The access code is 77820901.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 performance 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 Relations Robert 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 Six Months Ended Ended June 30, June 30, 2012 2011 2012 2011 Product sales $7,475 $7,146 $14,852 $13,959Service sales 1,960 1,940 3,890 3,799 Net sales 9,435 9,086 18,742 17,758 Costs, expenses and other Cost of products sold (A) 5,582 5,425 11,153 10,619 Cost of services sold (A) 1,340 1,239 2,649 2,469 6,922 6,664 13,802 13,088
Selling, general and administrative
expenses (A) 1,226 1,248
2,457 2,480
Other (income) expense (23) (22) (38) (51) Interest and other financial charges 87 96 176 195 8,212 7,986 16,397 15,712 Income from continuing operations before taxes 1,223 1,100
2,345 2,046 Tax expense 318 304 615 560
Income from continuing operations after taxes 905 796
1,730 1,486
Income from discontinued operations after taxes - 14
- 32 Net income 905 810 1,730 1,518 Less: Net income attributable to the noncontrollinginterest 3 -
5 3
Net income attributable to Honeywell $ 902 $ 810
$ 1,725 $ 1,515
Amounts attributable to Honeywell: Income from continuing operations less net income attributable to the noncontrolling interest 902 796
1,725 1,483
Income from discontinued operations - 14
- 32
Net income attributable to Honeywell $ 902 $ 810
$ 1,725 $ 1,515
Earnings per share of common stock - basic: Income from continuing operations 1.15 1.01 2.21 1.89 Income from discontinued operations - 0.02 - 0.04 Net income attributable to Honeywell $ 1.15 $ 1.03
$ 2.21 $ 1.93
Earnings per share of common stock - assuming dilution: Income from continuing operations
1.14 1.00 2.19 1.86 Income from discontinued operations - 0.02 - 0.04 Net income attributable to Honeywell $ 1.14 $ 1.02
$ 2.19 $ 1.90
Weighted average number of shares outstanding-basic 781.4 785.0
779.3 785.2
Weighted average number of shares outstanding -
assuming dilution 790.5 797.3 789.3 797.5
(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 expense, and stock compensation expense
Honeywell International Inc Segment Data (Unaudited) (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, Net Sales 2012 2011 2012 2011 Aerospace $ 3,027 $ 2,810 $ 5,977 $ 5,506 Automation and Control Solutions 3,962 3,880 7,750 7,536 Performance Materials and Technologies 1,546 1,406 3,161 2,761 Transportation Systems 900 990 1,854 1,955 Corporate - - - - Total $ 9,435 $ 9,086 $ 18,742 $ 17,758 Reconciliation of Segment Profit to Income From Continuing Operations Before Taxes Three Months Ended Six Months Ended June 30, June 30, Segment Profit 2012 2011 2012 2011 Aerospace $ 562 $ 451 $ 1,096 $ 918
Automation and Control Solutions 525 496 1,016
955
Performance Materials and Technologies 350 281 669
565 Transportation Systems 114 129 234 247 Corporate (58) (56) (107) (124) Total Segment Profit 1,493 1,301 2,908 2,561 Other income (A) 9 8 14 28
Interest and other financial charges (87) (96) (176) (195)Stock compensation expense (B) (40) (42) (91)
(91)
Pension ongoing expense (B) (9) (22) (22)
(57)
Other postretirement income/(expense) (B) (9) 45 (32)
27
Repositioning and other charges (B) (134) (94) (256) (227)
Income from continuing operations before taxes $ 1,223 $ 1,100 $ 2,345 $
2,046
(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) June 30, December 31, 2012 2011 ASSETS Current assets: Cash and cash equivalents $ 4,221 $ 3,698 Accounts, notes and other receivables 7,250 7,228 Inventories 4,342 4,264 Deferred income taxes 269 460 Investments and other current assets 562 484 Total current assets 16,644 16,134
Investments and long-term receivables 566 494 Property, plant and equipment - net 4,735 4,804 Goodwill 11,837 11,858 Other intangible assets - net 2,325 2,477 Insurance recoveries for asbestos related liabilities 672 709 Deferred income taxes 2,164 2,132 Other assets 1,231 1,200 Total assets $ 40,174 $ 39,808
LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Accounts payable $ 4,547 $ 4,738 Short-term borrowings 65 60 Commercial paper 948 599 Current maturities of long-term debt 620 15 Accrued liabilities 6,632 6,863 Total current liabilities 12,812 12,275 Long-term debt 6,342 6,881 Deferred income taxes 681 676
Postretirement benefit obligations other than
pensions 1,365 1,417 Asbestos related liabilities 1,522 1,499 Other liabilities 5,369 6,158 Shareowners' equity 12,083 10,902 Total liabilities and shareowners' equity $ 40,174 $ 39,808 Honeywell International Inc Consolidated Statement of Cash Flows (Unaudited) (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, 2012 2011 2012 2011
Cash flows from operating activities: Net income attributable to Honeywell $
902 $ 810 $ 1,725 $ 1,515
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: Depreciation and amortization 225 236 455 478 Loss/(gain) on sale of non-strategic businesses and assets 1 (2) 1 (46) Repositioning and other charges 134 94 256 227 Net payments for repositioning and other charges (122) (98) (226) (207) Pension and other postretirement expense 18 (22) 54 32 Pension and other postretirement benefit payments (308) (32) (597) (1,082) Stock compensation expense 40 42 91 91 Deferred income taxes 57 90 189 158 Excess tax benefits from share based payment arrangements (4) (17) (16) (30) Other (97) 32 (104) 140 Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables 20 (365) (20) (537) Inventories 30 (59) (78) (389) Other current assets 13 (9) (15) (23) Accounts payable 12 264 (191) 260 Accrued liabilities 52 174 (355) 108
Net cash provided by operating activities
973 1,138 1,169 695
Cash flows from investing activities: Expenditures for property, plant and equipment
(200) (165) (352) (289)
Proceeds from disposals of property, plant and equipment
- 2 1 3
Increase in investments
(161) (65) (245) (229)
Decrease in investments
66 114 158 176
Cash paid for acquisitions, net of cash acquired
(63) (1) (64) (8)
Proceeds from sales of businesses, net of fees paid
18 (2) 18 215
Other (81) 27 (59) 58 Net cash used for investing activities
(421) (90) (543) (74)
Cash flows from financing activities:
Net increase in commercial paper - 50 349 51 Net increase/(decrease) in short-term borrowings 4 7 11 (2) Proceeds from issuance of common stock 26 99 116 200 Proceeds from issuance of long-term debt 40 3 42 1,384 Payments of long-term debt - (2) - (439) Excess tax benefits from share based payment arrangements 4 17 16 30 Repurchases of common stock - (504) - (504) Cash dividends paid (291) (266) (582) (530) Net cash (used for)/provided by financing activities
(217) (596) (48) 190
Effect of foreign exchange rate changes on cash and cash equivalents
(102) 20 (55) 87 Net increase in cash and cash equivalents 233 472 523 898 Cash and cash equivalents at beginning of period 3,988 3,076 3,698 2,650 Cash and cash equivalents at end of period $
4,221 $ 3,548 $ 4,221 $ 3,548 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 June 30, 2012 2011
Cash provided by operating activities $ 973 $
1,138
Expenditures for property, plant and equipment (200)
(165) Free cash flow $ 773 $ 973 Cash pension contributions 267 22
Free cash flow, prior to cash pension contributions $ 1,040 $
995
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, repay debt obligations prior to their maturities, or make cash pension contributions. 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
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 Six Months Ended Ended June 30, June 30, 2012 2011 2012 2011 Segment Profit $1,493 $1,301 $ 2,908 $ 2,561
Stock compensation expense (A) (40) (42) (91) (91) Repositioning and other (A,B) (148) (108) (280) (250) Pension ongoing expense (A) (9) (22) (22) (57) Other postretirement income/(expense) (A) (9) 45 (32)
27 Operating Income $ 1,287 $1,174 $ 2,483 $ 2,190 Segment Profit $ 1,493 $1,301 $ 2,908 $ 2,561 · Sales $ 9,435 $9,086 $18,742 $17,758Segment Profit Margin % 15.8% 14.3% 15.5% 14.4% Operating Income $ 1,287 $1,174 $ 2,483 $ 2,190 · Sales $ 9,435 $9,086 $18,742 $17,758Operating Income Margin % 13.6% 12.9% 13.2% 12.3% 2011 2012 Guidance Segment Profit $ 5,357 ~$5,800 - $6,000
Stock compensation expense (A) (168) ~(200) Repositioning and other (A,B) (794) ~(400) Pension ongoing expense (A) (105) ~(100) Pension mark to market adjustment (A) (1,802) TBD Other postretirement income/(expense) (A) 86 ~(100)
Operating Income $ 2,574 ~$5,000 - $5,200
Pension mark to market adjustment (A) $ (1,802) TBD Operating Income excluding pension mark to market adjustment $ 4,376 ~$5,000 - $5,200 Segment Profit $ 5,357 ~$5,800 - $6,000 · Sales $36,529 $37,800 - $38,400 Segment Profit Margin % 14.7% 15.4 - 15.6% Operating Income $ 2,574 ~$5,000 - $5,200 · Sales $36,529 $37,800 - $38,400 Operating Income Margin % 7.0% 13.4 - 13.6% Operating Income excluding pension mark to market adjustment $ 4,376 ~$5,000 - $5,200 · Sales $36,529 $37,800 - $38,400 Operating Income Margin excluding pension mark to market adjustment % 12.0% 13.4 -
13.6%
(A) Included in cost of products and services sold and selling, general and
administrative expenses
(B) Includes repositioning, asbestos, environmental expense 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 adjustment and third quarter 2011 repositioning and other actions funded by CPG Gain $ 4.01 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
XLON