Honeywell International
Honeywell's First Quarter Earnings Per Share 42 Cents, up 24% versus Prior Year
on Sales of $6.5 Billion
Honeywell (NYSE: HON) today announced first-quarter earnings per share of 42
cents, an increase of 8 cents or 24% over the prior year. Sales of $6.5 billion
were up 4% on a reported basis, reflecting 6% organic sales growth offset by the
net impact of acquisitions and divestitures. Net income was $359 million for the
quarter, up from $295 million last year. Cash flow from operations was $329
million and free cash flow (cash flow from operations less capital expenditures)
was $194 million.
"We are very pleased with first-quarter results," said Dave Cote, Honeywell
Chairman and CEO. "This is a terrific start to the year. Organic growth and
strong operational execution contributed to better than expected performance in
the quarter. In addition, we completed the Novar acquisition, and are well on
the way to successfully integrating Novar's IBS business into Honeywell. We are
excited about the fit of IBS into our core fire, environmental controls,
security and services businesses, and the overall market and distribution
opportunities it brings to Honeywell."
"Each of the operating segments contributed to our strong first-quarter
performance," continued Cote. "Aerospace had an outstanding quarter, supported
by increased OE deliveries, aftermarket growth and continued growth in demand
for defense products and services. Automation and Control Solutions experienced
strong sales growth in the Security and Life Safety products businesses. In
Transportation Systems, continued growth in European turbo sales and increased
Class 8 heavy duty truck builds in the U.S. drove sales growth. While Specialty
Materials sales grew 5% organically, primarily from flourines demand and pricing
actions, that was more than offset by the impact of the Performance Fibers
divestiture resulting in a total 6% decline in reported sales."
First-Quarter Segment Highlights
Aerospace
-- Sales were up 9% compared with the first quarter of 2004, driven by 12%
growth in commercial markets and 5% growth in defense and space sales.
-- Segment margins were 15.1% compared with 13.3% a year ago, due to strong
volume growth and higher enforcement income, offset by increased
technology spending.
-- Singapore Airlines awarded Honeywell a 10-year maintenance service
agreement valued at up to $125 million for Honeywell's GTCP 331-500
auxiliary power unit for its fleet of Boeing 777 aircraft.
-- The U.S. Air Force selected Honeywell to provide maintenance and
engineering services for F-15 test systems in a nine-year contract
valued at more than $450 million.
-- Honeywell's HTS900 engine has been selected to power both the civil and
military versions of the Bell 407 helicopter.
Automation and Control Solutions
-- Sales were up 2%, compared with the first quarter of 2004, driven by
growth in Life Safety and Security, partially offset by prior year
divestitures.
-- Segment margins were 10.1% compared with 10.0% a year ago, due to
productivity initiatives offsetting the impact of ongoing investments.
-- The Novar transaction was completed on March 31. Integration of IBS is
underway, with more than 100 ACS leaders involved with the effort.
-- Building Solutions was awarded a $9 million integrated communications
and security services contract for a new Australian immigration
processing and detention center. The contract includes the installation
of photo ID, perimeter detection, CCTV, contraband detection, mobile
tracking duress systems, and other leading security technologies.
-- Process Solutions was awarded a new $7 million chemical production
facility-wide contract from long standing customer Oltchim, a Romanian
chemical producer, and received its first European lifecycle management
contract, worth $6.5 million, from Lyondell Chemical.
Transportation Systems
-- Sales were up 8%, compared with the first quarter of 2004, reflecting
continued growth in turbocharger sales and favorable foreign exchange.
-- Segment margins were 13.4%, equal to prior year, as increased volume and
pricing were offset by higher raw material costs.
-- At the Geneva Motor Show, Volkswagen launched its new Passat, which was
equipped with a new 2.0L, 170 hp diesel engine boosted by Honeywell
Turbo Technologies' third generation VNT(TM) turbo. This new turbo
technology will be launched on more than 20 additional models in 2005.
-- Consumer Products Group has experienced good customer acceptance of new
Prestone(R) All Makes/All Models antifreeze that is compatible with all
types of antifreeze/coolant, including conventional silicated, organic
acid and hybrid technology coolants.
Specialty Materials
-- Sales were down 6% on a reported basis, compared with the first quarter
of 2004, due to the loss of sales from the divested Performance Fibers
business, offset by 5% organic sales growth from demand for proprietary
fluorines technology and pricing actions.
-- Segment margins were 7.4% compared with 5.6% a year ago, due to price
increases and productivity actions offsetting higher raw material costs.
-- Honeywell Chemicals signed a cross-distribution agreement with Chata
Biosystems, a U.S.-based manufacturer of pre-packaged chemical solution
products, providing Honeywell with additional channels to market and
broaden its product offerings.
-- Electronic Materials opened a new 40,000-square-foot manufacturing
facility in Chandler, Az., which significantly increases its
capabilities to provide customized chemical solutions to semiconductor
manufacturers.
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, April 20, until 5:00 p.m. EDT,
April 27, by dialing (706) 645-9291. The access code is 5244264.
Honeywell International is a $26 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 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.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
----------------------------------------------------------------------
(In millions except per share amounts)
Three Months
Ended March 31,
--------------------------
2005 2004
---------- -------
Product sales $ 5,188 $ 4,939
Service sales 1,265 1,239
---------- -------
6,453 6,178
---------- -------
Costs, expenses and other
Cost of products sold 4,169 (A) 4,021 (C)
Cost of services sold 916 (A) 909 (C)
Selling, general and administrative
expenses 854 (A) 808 (C)
(Gain) loss on sale of non-strategic
businesses (8)(B) (32)(D)
Equity in (income) loss of affiliated
companies (31) (7)(C)
Other (income) expense (24) (10)
Interest and other financial charges 91 84
---------- -------
5,967 5,773
---------- -------
Income before taxes 486 405
Tax expense 127 110
---------- -------
Net income $ 359 $ 295
========== =======
Earnings per share of common stock - basic $ 0.42 $ 0.34
========== =======
Earnings per share of common stock -
assuming dilution $ 0.42 $ 0.34
========== =======
Weighted average number of shares
outstanding - basic 852 861
========== =======
Weighted average number of shares
outstanding - assuming dilution 856 864
========== =======
(A) 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).
(B) 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).
(C) Cost of products and services sold, selling, general and
administrative expenses and equity in (income) loss of affiliated
companies include provisions of $52, $2 and $2 million,
respectively, for environmental, litigation and net
repositioning charges. Total pretax charges were $56 million
(after-tax $35 million, or $0.04 per share).
(D) Represents the pretax gain on the sale of our VCSEL Optical
Products business (after-tax $14 million, or $0.02 per share).
Honeywell International Inc.
Segment Data (Unaudited)
---------------------------------------------------------------------
(Dollars in millions)
Net Sales Three Months Ended
--------- March 31,
---------------------
2005 2004
---------- ---------
Aerospace $ 2,504 $ 2,304
Automation and Control Solutions 1,992 1,947
Specialty Materials 801 856
Transportation Systems 1,156 1,071
Corporate - -
---------- ---------
Total $ 6,453 $ 6,178
========== =========
Segment Profit Three Months Ended
-------------- March 31,
----------------------
2005 2004
---------- ---------
Aerospace $ 379 $ 307
Automation and Control Solutions 201 195
Specialty Materials 59 48
Transportation Systems 155 143
Corporate (44) (39)
---------- ---------
Total Segment Profit 750 654
Gain on sale of non-strategic businesses 8 32
Equity in income of affiliated companies 31 7
Other income 24 10
Interest and other financial charges (91) (84)
Pension and other postretirement benefits
(expense) (A) (137) (160)
Repositioning, environmental and litigation
charges (A) (99) (54)
---------- ---------
Income before taxes $ 486 $ 405
========== =========
(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)
March December
31, 31,
2005 2004
--------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 4,096 $ 3,586
Accounts, notes and other receivables 4,424 4,243
Inventories 3,391 3,160
Assets held for disposal 1,242 -
Deferred income taxes 1,269 1,289
Other current assets 491 542
--------- ----------
Total current assets 14,913 12,820
Investments and long-term receivables 482 542
Property, plant and equipment - net 4,386 4,331
Goodwill 7,575 6,013
Other intangible assets - net 1,265 1,241
Insurance recoveries for asbestos related
liabilities 1,476 1,412
Deferred income taxes 611 613
Prepaid pension benefit cost 2,902 2,985
Other assets 1,050 1,105
--------- ----------
Total assets $ 34,660 $ 31,062
========= ==========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 2,644 $ 2,564
Short-term borrowings 739 28
Commercial paper 340 220
Current maturities of long-term debt 948 956
Liabilities related to assets held for disposal 242 -
Due to Novar plc shareowners 1,800 -
Accrued liabilities 4,838 4,971
--------- ----------
Total current liabilities 11,551 8,739
Long-term debt 4,042 4,069
Deferred income taxes 447 397
Postretirement benefit obligations other than
pensions 1,713 1,713
Asbestos related liabilities 2,029 2,006
Other liabilities 3,447 2,886
Shareowners' equity 11,431 11,252
--------- ----------
Total liabilities and shareowners'
equity $ 34,660 $ 31,062
========= ==========
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
-----------------------------------------------
(Dollars in millions)
Three Months
Ended
March 31,
---------------
2005 2004
------- -------
Cash flows from operating activities:
Net income $ 359 $ 295
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of non-strategic
businesses (8) (32)
Repositioning, environmental and litigation
charges 99 56
Severance and exit cost payments (32) (50)
Environmental and non-asbestos litigation
payments (43) (37)
Asbestos related liability payments (92) (101)
Insurance receipts for asbestos related
liabilities 9 18
Depreciation and amortization 167 167
Undistributed earnings of equity affiliates (23) (8)
Deferred income taxes 3 29
Pension and other postretirement benefits
expense 137 160
Other postretirement benefit payments (42) (48)
Other (6) (20)
Changes in assets and liabilities, net of the
effects of acquisitions and divestitures:
Accounts, notes and other receivables (9) (168)
Inventories (85) (46)
Other current assets 44 (14)
Accounts payable (13) 75
Accrued liabilities (136) 61
------- -------
Net cash provided by operating activities 329 337
------- -------
Cash flows from investing activities:
Expenditures for property, plant and equipment (135) (135)
Proceeds from disposals of property, plant and
equipment 1 -
Decrease in investments 285 80
Cash acquired in acquisition of Novar plc 86 -
Cash paid for acquisitions (3) (96)
Proceeds from sales of businesses (5) 71
------- -------
Net cash provided by (used for) investing activities 229 (80)
------- -------
Cash flows from financing activities:
Net increase in commercial paper 120 365
Net (decrease) increase in short-term borrowings (2) 3
Proceeds from issuance of common stock 67 26
Payments of long-term debt (10) (20)
Repurchases of common stock - (229)
Cash dividends on common stock (176) (161)
------- -------
Net cash (used for) financing activities (1) (16)
------- -------
Effect of foreign exchange rate changes on cash and
cash equivalents (47) 9
------- -------
Net increase in cash and cash equivalents 510 250
Cash and cash equivalents at beginning of period 3,586 2,950
------- -------
Cash and cash equivalents at end of period $4,096 $3,200
======= =======
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash
Flow (Unaudited)
---------------------------------------------------------------------
(Dollars in millions)
Three Months Ended
March 31,
-------------------
2005 2004
-------- --------
Cash provided by operating activities $329 $337
Expenditures for property, plant and equipment (135) (135)
-------- --------
Free cash flow $194 $202
======== ========
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.
CONTACT: Honeywell International
Media Contacts:
Robert C. Ferris, 973-455-3388
rob.ferris@honeywell.com
or
Investor Relations:
Nicholas Noviello, 973-455-2222
nicholas.noviello@honeywell.com
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