TIDMHON
Honeywell's Third Quarter Sales Up 9% to $8.4 Billion and
Reported Earnings Per Share $0.64
- 9% Organic Growth Reflects Continued Strong Order Rates
- Strong Revenue Conversion More Than Offsets Labor Cost Headwinds
- 2010 Sales and EPS Expected Above High-End of Previous Guidance
- Company Forecasts Record Free Cash Flow of $3.5 Billion in 2010
MORRIS TOWNSHIP, N.J., Oct. 22 -- Honeywell (NYSE: HON) today announced
third quarter 2010 sales were up 9% to $8.4 billion versus $7.7 billion in
the third quarter of 2009. Earnings, excluding non-cash pension expense, were
$0.82 per share compared to $0.83 per share in the prior year. On a reported
basis, earnings per share were $0.64 in the third quarter of 2010 versus
$0.80 in the third quarter last year. Cash flow from operations was $1.3
billion and free cash flow (cash flow from operations less capital
expenditures) was $1.2 billion in the third quarter, compared to cash flow
from operations of $1.1 billion and free cash flow of $1.0 billion in the
third quarter last year. On a year-to-date basis, cash flow from operations
was $3.2 billion versus $2.6 billion in 2009, and free cash flow was $2.8
billion compared to $2.3 billion.
"This was another terrific quarter for Honeywell," said Honeywell
Chairman and CEO Dave Cote. "We had continued growth across the portfolio
with our short cycle businesses, such as turbochargers and general industrial
products, extending their strong upward trends. We're also now seeing an
uptick in the commercial aerospace aftermarket. The longer cycle Solutions
businesses and UOP demonstrated good growth in the quarter as well. We had
exceptional cash flow, driven by high quality earnings and very strong
working capital performance, and we now expect record free cash flow for the
year. We closed on the Sperian Protection acquisition, extending our position
in the growing Personal Protection Equipment space. We remain very confident
this will be another stand-out acquisition for Honeywell, demonstrating our
disciplined acquisition process."
"We're in the early stages of planning for 2011 and we believe we are
well positioned for growth given our focus on new products and services,
geographic expansion, and the improvement we're seeing in many of our major
end markets," concluded Cote. "We'll continue to plan conservatively,
emphasizing achievable top-line growth combined with the favorable impact of
our key process initiatives, continued R&D investment, and new technologies.
We expect to continue to see benefits of focused seed planting initiatives
and global growth next year. As always, we will provide full context and
guidance for 2011 in our December Outlook Call."
Honeywell now forecasts 2010 sales of approximately $33 billion and
earnings of approximately $2.52 per share on a reported basis ($3.26,
excluding non-cash pension expense), both now above the high-end of the
previous guidance range. The company also forecasts 2010 free cash flow,
above the high-end of its prior guidance, of approximately $3.5 billion,
which includes a planned fourth quarter $600 million cash pension
contribution (cash flow from operations of approximately $4.1 billion).
Segment Highlights
Aerospace
- Sales were up 3% compared with the third quarter of 2009, primarily due
to higher commercial OEM and aftermarket volumes, partially offset by
amounts recognized for payments to Business and General Aviation (BGA)
OEM customers to offset pre-production costs.
- Segment profit was up 1%, however segment margins decreased 40 bps to
17.0%. The segment margin decline was primarily due to BGA OEM payments
mentioned above and the absence of prior year labor cost actions,
partially offset by increased volume and benefits from prior period
repositioning actions.
- Brazil's air traffic control commission, the Comissao de Implantacao do
Sistema de Controle do Espaco Aero (CISCEA), has selected Honeywell to
deliver and install Smart Path(TM) (Ground-Based Augmentation System ?
GBAS) at Galeao-Antonio Carlos Jobim International Airport in Rio de
Janeiro. The Smart Path system is the first and only GBAS to receive
the Federal Aviation Administration's System Design Approval.
- Honeywell was awarded a Federal Aviation Administration (FAA) research
program to evaluate and develop a NextGen Air Traffic Management
technology that will allow aircraft to utilize 4-Dimensional Flight
Trajectory-Based Operations, incorporating precise timing and accurate
data position to improve air traffic operations. 4-D Trajectory allows
aircraft to automatically fly faster or slower to avoid airport
congestion, smoothing traffic flow and improving capacity and on-time
arrivals.
- Honeywell was chosen by easyJet Airline Company Ltd. to provide our
fuel-efficient 131-9A auxiliary power unit (APU) and extended
maintenance service for their Airbus A320 aircraft in a 10-year, $51
million contract. Honeywell's 131-9A APU is the most commonly used APU
for single-aisle commercial transport and generates greater fuel
efficiency on each aircraft on which it is utilized.
Automation and Control Solutions
- Sales were up 9% compared with the third quarter of 2009, primarily due
to growth in all regions, execution of energy efficiency-related
projects, general industrial recovery, and new product introductions.
- Segment profit was up 9% and segment margins increased 10 bps to 13.6%
driven by higher volumes, cost savings initiatives, and benefits from
prior repositioning actions, partially offset by the absence of prior
year labor cost actions and acquisition costs.
- Honeywell Process Solutions (HPS) has entered phase two of its
Integrated Main Automation Contractor consulting project with Abu Dhabi
Gas Development Company Ltd. for its Shah Gas Development Project,
valued at an additional $78 million. HPS is leveraging its full
technology portfolio to help the site operate safely, reliably, and
efficiently. The Shah Gas Development Project is one of the largest and
most complex projects in the industry and is expected to process 1
billion cubic feet of gas per day at full production capacity in 2014.
- Honeywell Building Solutions teamed with Washington Gas to win a task
order by the U.S. General Services Administration (GSA) to design and
construct a new 12,000 square foot underground electrical vault and an
electrical distribution system for a new U.S. Department of Homeland
Security (DHS) headquarters at the St. Elizabeths Campus in Washington
D.C. The value of work to be performed by Honeywell as a part of this
award is $30 million.
- Honeywell closed two acquisitions in the quarter: Sperian Protection, a
leader in personal protection equipment (PPE) design and manufacturing;
and, E-Mon the market leader in electric sub-metering, an important
component in commercial energy efficiency programs and the Smart Grid.
Transportation Systems
- Sales were up 19% compared with the third quarter of 2009, primarily
due to higher Turbo volumes globally, robust new platform launches and
higher European diesel penetration.
- Segment profit was up $60 million and segment margins increased 460 bps
to 11.7%, driven by higher volumes, increased productivity, and
benefits from prior repositioning actions, partially offset by material
inflation and the absence of prior year labor cost actions.
- Honeywell announced that it expects the global turbo industry to double
in the next five years, from 17 million new turbo vehicles in 2009 to 35
million in 2015. In the U.S., turbocharged vehicles are expected to
grow from nearly one million (5%) vehicles sold today to more than four
million (more than 20%) in five years. In China, turbocharging is
anticipated to grow from approximately 10% today to 20% by 2015.
- Honeywell Turbo Technologies announced the launch of three advanced
turbocharger technologies at the 2010 Paris Motor Show. Designed to
increase both performance and fuel-efficiency, while lowering emissions
on premium engines, the new turbo innovations will be featured on the
2011 Mercedes S350 BlueTec diesel engine, Range Rover's V8 4.4L engine,
and the Mercedes S500 BlueEFFICIENCY V8 gas engine. Each vehicle
delivers at least 10% improvements in both horsepower and fuel economy
over its previous models.
Specialty Materials
- Sales were up 16% compared with the third quarter of 2009, resulting
from higher volumes due to improved global markets and commercial
excellence, which resulted in higher sales to Asia in our Resins and
Chemicals business, new applications and penetration of specialty
additives and films, refrigerants and industrial process aids globally,
and higher gas processing equipment and new petrochemical catalyst
sales at UOP.
- Segment profit was up 25% and segment margins increased 130 bps to
16.5%, due to higher sales volumes, commercial excellence, and cost
productivity, partially offset by material inflation and the absence of
prior year labor cost actions.
- Honeywell's UOP was selected by Korea's HC Petrochem Co., Ltd. to
provide technology for an expansion of a petrochemicals plant in Daesan,
South Korea. HC Petrochem will use the UOP Parex(TM) process and the UOP
Isomar(TM) process to help triple production of high-purity
para-xylene, a key ingredient in the production of purified
terephthalic acid (PTA). PTA is used to make polyester for fabric and
polyethylene terephthalate (PET) chips for carbonated soft drink and
water bottles. Honeywell's UOP technology was also selected by Rentech,
Inc.'s Rialto Renewable Energy Center for the conversion of biomass to
transportation fuels. The new facility will use UOP hydroprocessing
technology to convert hydrocarbons into clean-fuel products. The
renewable energy center will convert biomass, such as yard and tree
trimmings, into renewable, ultra-clean diesel fuel and renewable
electricity.
- Honeywell announced the launch of new materials for photovoltaic cells,
expanding its line of PowerShield(R) backing systems, which protect
photovoltaic modules under the most severe conditions. It also
announced a new line of electronic materials designed to enable
manufacturers of crystalline silicon photovoltaic cells to boost their
power output through use of advanced, high-efficiency cell designs.
Honeywell will discuss its results during its investor conference call
today starting at 8:00 a.m. EDT. To participate, please dial +1-719-325-2382 a
few minutes before the 8:00 a.m. EDT 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
conference call from 11:00 a.m. EDT, October 22, until midnight, October 29,
by dialing +1-719-457-0820. The access code is 6363040.
Honeywell International (http://www.honeywell.com) is a Fortune 100
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. For more news and
information on Honeywell, please visit http://www.honeywellnow.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
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 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.
Consolidated Statement of Operations (Unaudited)
------------------------------------------------
(In millions except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
2010 2009 2010 2009
---- ---- ---- ----
Product sales $6,582 $5,947 $19,048 $17,569
Service sales 1,810 1,753 5,281 5,267
----- ----- ----- -----
Net sales 8,392 7,700 24,329 22,836
----- ----- ------ ------
Costs, expenses and other
Cost of products sold (A) 5,255 4,657 15,102 13,781
Cost of services sold (A) 1,235 1,140 3,638 3,454
----- ----- ----- -----
6,490 5,797 18,740 17,235
Selling, general and
administrative expenses (A) 1,177 1,034 3,475 3,270
Other (income) expense (75) (39) (86) 14
Interest and other financial
charges 95 110 294 350
--- --- --- ---
7,687 6,902 22,423 20,869
----- ----- ------ ------
Income before taxes 705 798 1,906 1,967
Tax expense 208 179 540 489
--- --- --- ---
Net income 497 619 1,366 1,478
Less: Net income attributable
to the noncontrolling
interest (2) 11 13 23
--- --- --- ---
Net income attributable to
Honeywell $499 $608 $1,353 $1,455
==== ==== ====== ======
Earnings per share of common
stock -basic $0.64 $0.80 $1.76 $1.94
===== ===== ===== =====
Earnings per share of common
stock -assuming dilution $0.64 $0.80 $1.74 $1.94
===== ===== ===== =====
Weighted average number of
shares outstanding -basic 776.5 760.8 770.6 748.7
===== ===== ===== =====
Weighted average number of
shares outstanding -
assuming dilution 782.8 764.0 777.3 751.1
===== ===== ===== =====
(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.
Segment Data (Unaudited)
------------------------
(Dollars in millions)
Three Months Nine Months
Ended Ended
September 30, September 30,
Net Sales 2010 2009 2010 2009
--------- ---- ---- ---- ----
Aerospace $2,704 $2,622 $7,857 $8,100
Automation and Control
Solutions 3,474 3,188 9,835 9,202
Specialty Materials 1,175 1,015 3,573 3,117
Transportation Systems 1,039 875 3,064 2,417
Corporate - - - -
--- --- --- ---
Total $8,392 $7,700 $24,329 $22,836
====== ====== ======= =======
Reconciliation of Segment Profit to Income Before Taxes
-------------------------------------------------------
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
Segment Profit 2010 2009 2010 2009
-------------- ---- ---- ---- ----
Aerospace $458 $455 $1,314 $1,397
Automation and Control
Solutions 471 431 1,258 1,088
Specialty Materials 194 155 578 430
Transportation Systems 122 62 333 84
Corporate (53) (43) (148) (133)
--- --- ---- ----
Total Segment Profit 1,192 1,060 3,335 2,866
Other income/ (expense) (A) 72 31 70 (37)
Interest and other financial
charges (95) (110) (294) (350)
Stock compensation expense
(B) (37) (18) (123) (95)
Pension expense (B) (197) (30) (588) (86)
Other postretirement income/
(expense) (B) (18) (21) (12) 38
Repositioning and other
charges (B) (212) (114) (482) (369)
---- ---- ---- ----
Income before taxes $705 $798 $1,906 $1,967
==== ==== ====== ======
(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 December
30, 31,
2010 2009
---- ----
ASSETS
Current assets:
Cash and cash equivalents $2,640 $2,801
Accounts, notes and other receivables 6,916 6,274
Inventories 4,027 3,446
Deferred income taxes 987 1,034
Investments and other current assets 593 381
--- ---
Total current assets 15,163 13,936
Investments and long-term receivables 601 579
Property, plant and equipment - net 4,738 4,847
Goodwill 11,529 10,494
Other intangible assets - net 2,711 2,174
Insurance recoveries for asbestos
related liabilities 830 941
Deferred income taxes 1,411 2,017
Other assets 1,136 1,016
----- -----
Total assets $38,119 $36,004
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $4,059 $3,633
Short-term borrowings 65 45
Commercial paper 897 298
Current maturities of long-term debt 23 1,018
Accrued liabilities 6,502 6,153
----- -----
Total current liabilities 11,546 11,147
Long-term debt 6,265 6,246
Deferred income taxes 745 542
Postretirement benefit obligations
other than pensions 1,494 1,594
Asbestos related liabilities 1,343 1,040
Other liabilities 6,260 6,481
Shareowners' equity 10,466 8,954
------ -----
Total liabilities and
shareowners' equity $38,119 $36,004
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
------------------------------------------------
(Dollars in millions)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Cash flows from
operating
activities:
Net income
attributable to
Honeywell $499 $608 $1,353 $1,455
Adjustments to
reconcile net income
attributable to
Honeywell to net - - - -
cash provided by
operating
activities: - - - -
Depreciation and
amortization 242 242 716 711
Gain on sale of non-
strategic businesses
and assets - (15) - (15)
Repositioning and
other charges 212 114 482 369
Net payments for
repositioning and
other charges (8) (153) (229) (447)
Pension and other
postretirement
expense 215 51 600 48
Pension and other
postretirement
benefit payments (47) (48) (136) (144)
Stock compensation
expense 37 18 123 95
Deferred income taxes 154 87 549 432
Excess tax benefits
from share based
payment arrangements (1) - (5) -
Other 97 (12) (97) 274
Changes in assets and
liabilities, net of
the effects of - - - -
acquisitions and
divestitures: - - - -
Accounts, notes and
other receivables (402) (140) (591) 202
Inventories (227) 96 (377) 350
Other current assets (20) (57) (3) (49)
Accounts payable 238 36 354 (605)
Accrued liabilities 336 321 419 (61)
Net cash provided by
operating activities 1,325 1,148 3,158 2,615
----- ----- ----- -----
Cash flows from
investing
activities:
Expenditures for
property, plant and
equipment (166) (126) (351) (352)
Proceeds from
disposals of
property, plant and
equipment 6 4 8 21
Increase in
investments (124) - (435) -
Decrease in
investments 84 - 94 1
Cash paid for
acquisitions, net of
cash acquired (322) (440) (1,318) (468)
Proceeds from sales
of businesses, net
of fees paid - 1 - 1
Other 34 (5) 22 (53)
Net cash used for
investing activities (488) (566) (1,980) (850)
---- ---- ------ ----
Cash flows from
financing
activities:
Net
(decrease)/increase
in commercial paper (251) 298 599 (735)
Net increase/
(decrease) in short-
term borrowings 6 (120) 18 (313)
Payment of debt
assumed with
acquisitions (326) - (326) -
Proceeds from
issuance of common
stock 56 11 111 20
Proceeds from
issuance of long-
term debt - - - 1,488
Payments of long-
term debt (3) (611) (1,004) (1,104)
Excess tax benefits
from share based
payment arrangements 1 - 5 -
Cash dividends paid (240) (232) (704) (684)
Net cash used for
financing activities (757) (654) (1,301) (1,328)
---- ---- ------ ------
Effect of foreign
exchange rate
changes on cash and
cash equivalents 109 70 (38) 102
Net increase/
(decrease) in cash
and cash equivalents 189 (2) (161) 539
Cash and cash
equivalents at
beginning of period 2,451 2,606 2,801 2,065
Cash and cash
equivalents at end
of period $2,640 $2,604 $2,640 $2,604
====== ====== ====== ======
Honeywell International Inc.
----------------------------
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
-------------------------------------------------------------------------
(Dollars in millions)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Cash provided by operating
activities $1,325 $1,148 $3,158 $2,615
Expenditures for property, plant
and equipment (166) (126) (351) (352)
---- ---- ---- ----
Free cash flow $1,159 $1,022 $2,807 $2,263
====== ====== ====== ======
2010
Guidance
--------
Cash provided by operating
activities $4,100
Expenditures for property, plant
and equipment $600
------
Free cash flow $3,500
========
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.
Reconciliation of Earnings per share to Earnings per share, excluding
pension expense (Unaudited)
---------------------------------------------------------------------
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2010 (1) 2009 (1) 2010 (1) 2009 (1)
------- ------- ------- -------
Earnings per share of
common stock -assuming
dilution $0.64 $0.80 $1.74 $1.94
Pension expense 0.18 0.03 0.54 0.09
---- ---- ---- ------
Earnings per share of
common stock -assuming
dilution, excluding
pension expense $0.82 $0.83 $2.28 $2.02
===== ===== ===== =====
2010
Guidance(2)
-----------
Earnings per share of common stock
-assuming dilution $2.52
Pension expense $0.74
-------
Earnings per share of common stock
-assuming dilution, excluding
pension expense $3.26
=======
(1)-Utilizes weighted average shares outstanding and the effective
tax rate for the period.
(2)-Assumes weighted average shares outstanding of 780 million and a
26.5% effective tax rate for 2010 guidance.
We believe that earnings per share of common stock ?assuming dilution,
excluding pension expense is useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Contacts:
Media Investor Relations
Robert C. Ferris Elena Doom
+1-973-455-3388 +1-973-455-2222
rob.ferris@honeywell.com elena.doom@honeywell.com
SOURCE Honeywell
CONTACT: Media, Robert C. Ferris, +1-973-455-3388,
rob.ferris@honeywell.com or Investor Relations, Elena Doom, +1-973-455-2222,
elena.doom@honeywell.com
END
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