HON.L Regulatory News (HON)

Honeywell Reports Third Quarter 2013 Sales of $9.6 Billion; EPS of $1.24 Per Share -- EPS Up 3% Year-Over-Year Reported, Up 10% Using Normalized Tax Rate -- Continued Proactive Funding Of Repositioning To Align With Global Growth Outlook -- Increasing EPS Guidance To $4.90 - $4.95, From $4.85 - $4.95 MORRIS TOWNSHIP, N.J., Oct. 18, 2013 -- Honeywell (NYSE: HON) today announced its results for the thirdquarter of 2013: Total Honeywell--------------- ($ Millions, except Earnings Per Share) 3Q 2012 3Q 2013 Change ------- ------- ------Sales 9,342 9,647 3% Segment Margin 15.8% 16.7% 90 bpsOperating Income Margin 13.9% 15.2% 130 bps Earnings Per Share (EPS) $1.20 $1.24 3%Earnings Per Share (At 26.5% Tax Rate) $1.14 $1.25 10% Cash Flow from Operations 999 1,070 7%Free Cash Flow * 1,021 937 (8%) * Free Cash Flow (cash flow from operations less capital expenditures) prior to any NARCO Trust establishment payments and cash pension contributions "Honeywell executed well in the quarter, building on the momentum we've seenthroughout 2013," said Honeywell Chairman and CEO Dave Cote. "We deliveredanother quarter of double digit EPS growth (when normalized for tax). Despitelower than expected sales in the quarter, primarily related to the delay inclosing Intermec and lower Defense & Space sales, strong execution across theportfolio helped drive earnings at the high-end of our guidance range. Ourshort-cycle businesses, particularly Energy, Safety and Security, and TurboTechnologies, are benefitting from improving end markets, new productintroductions, and geographic expansion, while our long-cycle businesses aremaintaining a robust backlog, driven by favorable macro trends and strong winrates. Productivity was impressive across the portfolio, enabling furthersegment margin expansion in all four businesses and continued proactive fundingof new repositioning projects. As a result of the year-to-date performance, weare raising the low-end of our 2013 EPS outlook by $0.05 to $4.90-4.95, whichis the high-end of the initial guidance range we provided almost a year ago.Looking ahead to 2014, we are planning for a continued slow growth macroenvironment, but see a path to strong earnings growth driven by our relentlessseed planting in new products and technologies, continued penetration of highgrowth regions, and growing traction on key process initiatives." Third quarter 2013 EPS reflect a 27.2% effective tax rate compared to 22.7%last year. Using the 2012 actual / 2013 expected full-year tax rate of 26.5%before any pension mark-to-market adjustment, EPS growth was 10%. The company is updating its full-year 2013 guidance and now expects: Full-Year Guidance------------------ 2013 2013 Change Prior Guidance Revised Guidance vs. 2012 -------------- ---------------- --------Sales $38.9 - $39.3B $38.8 - $39.0B 3 - 4%Segment Margin 16.0 - 16.2% 16.2 - 16.3% 60 - 70 bpsOperating Income Margin(1) 14.5 - 14.7% 14.7 - 14.8% 110 - 120 bps Earnings Per Share(1) $4.85 - $4.95 $4.90 - $4.95 9 - 11% Free Cash Flow(2) ~$3.7B ~$3.7B ~ Flat 1. Proforma, V% / BPS exclude any pension mark-to-market adjustment 2. Free Cash Flow (cash flow from operations less capital expenditures) priorto any NARCO Trust establishment payments and cash pension contributions Third Quarter Segment Performance--------------------------------- Aerospace---------($ Millions) 3Q 2012 3Q 2013 % Change ------- ------- --------Sales 3,043 2,973 (2%)Segment Profit 582 602 3%Segment Margin 19.1% 20.2% 110 bps * Sales were down (2%) compared with the third quarter of 2012 driven by an (11%) decline in Defense & Space sales as a result of planned ramp downs and program delays, as well as supply chain constraints, partially offset by Commercial growth. Commercial OE sales were up 3% in the quarter driven by continued strong OE build rates and favorable platform mix. Commercial Aftermarket growth of 5% was driven by improved flight hour growth and strong RMU (Repairs, Modifications, and Upgrades) sales. * Segment profit was up 3%, and segment margins expanded 110 bps to 20.2%, driven by commercial growth, including productivity net of inflation and commercial excellence, partially offset by lower Defense & Space volume. Automation and Control Solutions--------------------------------($ Millions) 3Q 2012 3Q 2013 % Change ------- ------- --------Sales 3,958 4,129 4%Segment Profit 571 631 11%Segment Margin 14.4% 15.3% 90 bps * Sales were up 4% reported, 3% organic, compared with the third quarter of 2012, primarily driven by growth in Energy, Safety, and Security due to strong residential end markets, improving commercial retrofit activity, new product introductions, and the favorable impact of acquisitions net of divestitures. * Segment profit was up 11% and segment margins expanded 90 bps to 15.3% driven by strong sales conversion, commercial excellence, and productivity net of inflation. Performance Materials and Technologies--------------------------------------($ Millions) 3Q 2012 3Q 2013 % Change ------- ------- --------Sales 1,478 1,629 10%Segment Profit 275 305 11%Segment Margin 18.6% 18.7% 10 bps * Sales were up 10% reported, but down (1%) organic, compared with the third quarter of 2012, driven by the favorable impact of the Thomas Russell acquisition, partially offset by challenging global market conditions in Advanced Materials. * Segment profit was up 11% and segment margins increased 10 bps to 18.7%, driven by the favorable margin impact of higher UOP licensing and productivity partially offset by inflation and continued investments for growth. Transportation Systems----------------------($ Millions) 3Q 2012 3Q 2013 % Change ------- ------- --------Sales 863 916 6%Segment Profit 104 128 23%Segment Margin 12.1% 14.0% 190 bps * Sales were up 6% reported, 5% organic, compared with the third quarter of 2012, driven by strong growth from new platform launches and higher turbo gas penetration in all regions, partially offset by slightly lower European light vehicle production and lower off-highway sales in the U.S. * Segment profit was up 23% and segment margins increased 190 bps to 14.0% primarily driven by strong Turbo material productivity and volume leverage, and operational improvements in Friction Materials, partially offset by unfavorable price. Honeywell will discuss its results during its investor conference call todaystarting at 9:30 a.m. EDT. To participate, please dial (800) 862-9098(domestic) or (785) 424-1051 (international) a few minutes before the 9:30 a.m.EDT start. Please mention to the operator that you are dialing in forHoneywell's third quarter 2013 investor conference call or provide theconference code HONQ313. The live webcast of the investor call as well asrelated presentation materials will be available through the "InvestorRelations" section of the company's Website (http://www.honeywell.com/investor ).Investors can access a replay of the conference call from 12:00 p.m. EDT,October 18, until 11:59 p.m. EDT, October 25, by dialing (800) 283-4799(domestic) or (402) 220-0860 (international). 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;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 visitwww.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. We identify the principal risks and uncertaintiesthat affect our performance in our Form 10-K and other filings with theSecurities and Exchange Commission. Contacts:Media Investor RelationsRobert C. Ferris Elena Doom(973) 455-3388 (973) 455-2222rob.ferris@honeywell.com elena.doom@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, ------------- ------------- 2013 2012 2013 2012 ---- ---- ---- ---- Product sales $7,693 $7,332 $22,911 $22,184Service sales 1,954 2,010 5,757 5,900 ----- ----- ----- -----Net sales 9,647 9,342 28,668 28,084 ----- ----- ------ ------ Costs, expenses and other Cost of products sold (A) 5,722 5,474 17,039 16,627 Cost of services sold (A) 1,220 1,334 3,713 3,983 ----- ----- ----- ----- 6,942 6,808 20,752 20,610 Selling, general and administrative expenses (A) 1,242 1,238 3,752 3,695 Other (income) expense (1) (16) (53) (54) Interest and other financial charges 80 88 244 264 --- --- --- --- 8,263 8,118 24,695 24,515 ----- ----- ------ ------ Income before taxes 1,384 1,224 3,973 3,569Tax expense 377 278 975 893 --- --- --- --- Net income 1,007 946 2,998 2,676 Less: Net income attributable to the noncontrolling interest 17 (4) 21 1 --- --- --- --- Net income attributable to Honeywell $990 $950 $2,977 $2,675 ==== ==== ====== ====== Earnings per share of common stock - basic $1.26 $1.21 $3.78 $3.43 ===== ===== ===== ===== Earnings per share of common stock - assuming dilution $1.24 $1.20 $3.73 $3.38 ===== ===== ===== ===== Weighted average number of shares outstanding-basic 786.3 783.6 786.6 780.7 ===== ===== ===== ===== Weighted average number of shares outstanding - assuming dilution 797.1 792.5 797.5 790.4 ===== ===== ===== ===== (A) Cost of products and services sold and selling, general and administrative expenses include amounts forrepositioning and other charges, pension and other postretirement (income) 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 2013 2012 2013 2012--------- ---- ---- ---- ---- Aerospace $2,973 $3,043 $8,881 $9,020 Automation and Control Solutions 4,129 3,958 11,980 11,708 Performance Materials and Technologies 1,629 1,478 5,030 4,639 Transportation Systems 916 863 2,777 2,717 Total $9,647 $9,342 $28,668 $28,084 ====== ====== ======= ======= Reconciliation of Segment Profit to Income Before Taxes ------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ------------- -------------Segment Profit 2013 2012 2013 2012-------------- ---- ---- ---- ---- Aerospace $602 $582 $1,736 $1,678 Automation and Control Solutions 631 571 1,739 1,587 Performance Materials and Technologies 305 275 999 944 Transportation Systems 128 104 365 338 Corporate (51) (57) (157) (164) --- --- ---- ---- Total segment profit 1,615 1,475 4,682 4,383 Other income (expense) (A) (10) 4 22 18Interest and other financial charges (80) (88) (244) (264)Stock compensation expense (B) (38) (40) (129) (131)Pension ongoing income (expense) (B) 22 (7) 68 (29)Other postretirement expense (B) (5) (20) (7) (52)Repositioning and other charges (B) (120) (100) (419) (356) ---- ---- ---- ---- Income before taxes $1,384 $1,224 $3,973 $3,569 ====== ====== ====== ====== (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, 2013 2012 ---- ---- ASSETSCurrent assets: Cash and cash equivalents $5,499 $4,634 Accounts, notes and other receivables 7,950 7,429 Inventories 4,455 4,235 Deferred income taxes 707 669 Investments and other current assets 693 631 Total current assets 19,304 17,598 Investments and long-term receivables 830 623Property, plant and equipment - net 5,107 5,001Goodwill 13,230 12,425Other intangible assets - net 2,590 2,449Insurance recoveries for asbestos related liabilities 653 663Deferred income taxes 1,457 1,889Other assets 1,235 1,205 ----- ----- Total assets $44,406 $41,853 LIABILITIES AND SHAREOWNERS' EQUITYCurrent liabilities: Accounts payable $4,791 $4,736 Short-term borrowings 88 76 Commercial paper 2,099 400 Current maturities of long-term debt 632 625 Accrued liabilities 7,053 7,208 Total current liabilities 14,663 13,045 Long-term debt 5,789 6,395Deferred income taxes 719 628Postretirement benefit obligations other than pensions 995 1,365Asbestos related liabilities 1,089 1,292Other liabilities 5,917 5,913Redeemable noncontrolling interest 161 150Shareowners' equity 15,073 13,065 ------ ------ Total liabilities, redeemable noncontrolling interest and shareowners' equity $44,406 $41,853 Honeywell International Inc Consolidated Statement of Cash Flows (Unaudited) ----------------------------------------------- (Dollars in millions) Three Months Nine Months Ended Ended September 30, September 30, ------------- ------------- 2013 2012 2013 2012 ---- ---- ---- ---- Cash flows from operating activities: Net income $1,007 $946 $2,998 $2,676 Less: Net income attributable to the noncontrolling interest 17 (4) 21 1 --- --- --- --- Net income attributable to Honeywell 990 950 2,977 2,675 Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: Depreciation and amortization 245 226 740 681 Gain on sale of non-strategic businesses and assets - (4) - (3) Repositioning and other charges 120 100 419 356 Net payments for repositioning and other charges (220) (126) (517) (352) Pension and other postretirement (income) expense (17) 27 (61) 81 Pension and other postretirement benefit payments (40) (291) (253) (888) Stock compensation expense 38 40 129 131 Deferred income taxes 72 130 257 319 Excess tax benefits from share based payment arrangements (20) (12) (101) (28) Other 169 143 35 39 Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (187) (140) (382) (160) Inventories (58) 25 (94) (53) Other current assets (32) (62) (28) (77) Accounts payable (2) (29) (32) (220) Accrued liabilities 12 22 (422) (333)Net cash provided by operating activities 1,070 999 2,667 2,168 ----- --- ----- ----- Cash flows from investing activities: Expenditures for property, plant and equipment (203) (234) (547) (586) Proceeds from disposals of property, plant and equipment 1 1 7 2 Increase in investments (243) (237) (703) (482) Decrease in investments 272 129 648 287 Cash paid for acquisitions, net of cash acquired (603) 2 (1,063) (62) Proceeds from sales of businesses, net of fees paid - - - 18 Other 85 17 104 (42)Net cash used for investing activities (691) (322) (1,554) (865) ---- ---- ------ ---- Cash flows from financing activities: Net increase (decrease) in commercial paper 899 (49) 1,699 300 Net (decrease) increase in short-term borrowings (3) 8 18 19 Proceeds from issuance of common stock 59 63 362 179 Proceeds from issuance of long-term debt 14 44 27 86 Payments of long-term debt (3) - (604) - Excess tax benefits from share based payment arrangements 20 12 101 28 Repurchases of common stock (167) - (769) - Cash dividends paid (330) (298) (995) (880) Other 28 - 28 -Net cash provided by (used for) financing activities 517 (220) (133) (268) --- ---- ---- ---- Effect of foreign exchange rate changes on cash and cash equivalents 54 82 (115) 27 --- --- ---- ---Net increase in cash and cash equivalents 950 539 865 1,062Cash and cash equivalents at beginning of period 4,549 4,221 4,634 3,698Cash and cash equivalents at end of period $5,499 $4,760 $5,499 $4,760 ====== ====== ====== ====== Honeywell International Inc Calculation of EPS at 26.5% Tax Rate (Unaudited) ----------------------------------------------- (Dollars in millions, except per share amounts) Three Months Ended September 30, ------------- 2013 2012 ---- ---- Income before taxes $1,384 $1,224 Taxes at 26.5% 367 324 --- --- Net income at 26.5% tax rate $1,017 $900 Less: Net income attributable to the noncontrolling interest 17 (4) --- --- Net income attributable to Honeywell at 26.5% tax rate $1,000 $904 ====== ==== Weighted average number of shares outstanding - assuming dilution 797.1 792.5 ===== ===== EPS at 26.5% tax rate $1.25 $1.14 ===== ===== We believe EPS adjusted to expected full-year tax rate at 26.5% is a measure that is useful to investors andmanagement in understanding our ongoing operations and in analysis of ongoing operating trends. Honeywell International Inc Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) ------------------------------------------------------------------------------------ (Dollars in millions) Three Months Ended September 30, ------------- 2013 2012 ---- ---- Cash provided by operating activities $1,070 $999 Expenditures for property, plant and equipment (203) (234) ---- ---- $867 $765 Cash pension contributions 8 256 NARCO Trust establishment payments 62 - --- --- Free cash flow $937 $1,021 ==== ====== We define free cash flow as cash provided by operating activities, less cash expenditures for property,plant and equipment, cash pension contributions and NARCO Trust establishment payments. 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, or repaydebt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flowfrom 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 (Unaudited) ------------------------------------------------------------------------------------ (Dollars in millions) Twelve Months Ended December 31, 2012 2013 Guidance ---- ------------- Cash provided by operating activities $3.5 ~$4.4 Expenditures for property, plant and equipment (0.9) ~(1.0) ---- ----- $2.6 ~$3.4 Cash pension contributions 1.1 ~0.2 NARCO Trust establishment payments - ~0.2 --- ---- Free cash flow $3.7 ~$3.7 ==== ===== We define free cash flow as cash provided by operating activities, less cash expenditures for property, plantand equipment, cash pension contributions and NARCO Trust establishment payments. 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 growth throughnew business development activities or acquisitions, and to pay dividends, repurchase stock, or repay debtobligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flowfrom 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, 2013 2012 ---- ----Segment Profit $ 1,615 $ 1,475Stock compensation expense (A) (38) (40)Repositioning and other (A, B) (131) (112)Pension ongoing income (expense) (A) 22 (7)Other postretirement expense (A) (5) (20) --- --- Operating Income $ 1,463 $ 1,296 Segment Profit $ 1,615 $ 1,475÷ Sales $ 9,647 $ 9,342 ------ -----Segment Profit Margin % 16.7% 15.8%Operating Income $ 1,463 $ 1,296÷ Sales $ 9,647 $ 9,342Operating Income Margin % 15.2% 13.9% ==== ==== (A) Included in cost of products and services sold and selling, general andadministrative expenses.(B) Includes repositioning, asbestos, environmental expenses and equityincome adjustment. We believe these measures are useful to investors and management inunderstanding our operations and in analysis of ongoing operating trends. Honeywell International Inc Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market Adjustment and Calculation of Segment Profit and Operating Income Margins Excluding Pension Mark-to-Market Adjustment (Unaudited) (Dollars in millions) Twelve Months Ended December 31, 2012 ----Segment Profit $ 5,879Stock compensation expense (A) (170)Repositioning and other (A, B) (488)Pension ongoing expense (A) (36)Pension mark-to-market adjustment (A) (957)Other postretirement expense (A) (72) --- Operating Income $ 4,156Pension mark-to-market adjustment (A) $ (957) ---Operating Income excluding pension mark-to-market adjustment $ 5,113 ------ Segment Profit $ 5,879÷ Sales $ 37,665 ------Segment Profit Margin % 15.6% ---- Operating Income $ 4,156÷ Sales $ 37,665 ------Operating Income Margin % 11.0% ==== Operating Income excluding pension mark-to-market adjustment $ 5,113÷ Sales $ 37,665 ------Operating Income Margin excluding pension mark-to-market adjustment % 13.6% ==== (A) Included in cost of products and services sold and selling, general andadministrative expenses.(B) Includes repositioning, asbestos, environmental expenses and equity incomeadjustment. We believe these measures are useful to investors and management inunderstanding our ongoing operations and in analysis of ongoing operatingtrends. Honeywell International Inc Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market Adjustment and Calculation of Segment Profit and Operating Income Margins Excluding Pension Mark-to-Market Adjustment (Unaudited) (Dollars in billions) 2013 Guidance -------------Segment Profit ~$6.3Stock compensation expense (A) ~(0.2)Repositioning and other (A, B) ~(0.5)Pension ongoing income (A) ~0.1Pension mark-to-market adjustment (A) TBDOther postretirement expense (A) ~(0.0) ---- Operating Income ~$5.7Pension mark-to-market adjustment (A) TBD ---Operating Income excluding pension mark-to-market adjustment ~$5.7 ==== Segment Profit ~$6.3÷ Sales $38.8 - 39.0 ------------Segment Profit Margin % 16.2 - 16.3% =========== Operating Income ~$5.7÷ Sales $38.8 - 39.0 ------------Operating Income Margin % 14.7 - 14.8% =========== Operating Income excluding pension mark-to-market adjustment ~$5.7÷ Sales $38.8 - 39.0 ------------Operating Income Margin excluding pension mark-to-market adjustment % 14.7 - 14.8% =========== (A) Included in cost of products and services sold and selling, general andadministrative expenses.(B) Includes repositioning, asbestos, environmental expenses and equity incomeadjustment. We believe these measures are useful to investors and management inunderstanding our ongoing operations and in analysis of ongoing operatingtrends. Honeywell International Inc Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark-to-Market Adjustment (Unaudited) ------------------------------------------------------------------------------------------------------------------ Twelve Months Ended December 31, 2012 ---- EPS $3.69 Pension mark-to-market adjustment 0.79 ---- EPS, excluding pension mark-to-market adjustment $4.48 ===== We believe EPS, excluding pension mark-to-market adjustment is a measure that is useful to investorsand management in understanding our ongoing operations and in analysis of ongoing operating trends. EPS utilizes weighted average shares outstanding - assuming dilution of 791.9 million. Mark-to-market usesa blended tax rate of 35.0%.