TIDMHON
Honeywell Reports Second Quarter Sales Up 15% to $9.1 Billion
and Earnings Per Share Up 40% to $1.02
- Sales Including $234 Million of Discontinued Operations -
$9.3 Billion, High End of Previous Range
- CPG Moved to Discontinued Operations - Divestiture Expected
to Close in Q3
- 8% Organic Growth Driven by New Products, Emerging Region
Growth, and Strong End Markets
- Confident in 2011 Outlook - Raising EPS Guidance to
$3.85-4.00, Up 28-33% vs. 2010 Proforma EPS
MORRIS TOWNSHIP, N.J., July 22, 2011 -- Honeywell (NYSE: HON) today
announced second quarter 2011 sales of $9.1 billion, up 15% versus $7.9
billion in the second quarter of 2010, excluding $234 million from its
discontinued Consumer Products Group (CPG) operations in 2011 and $235
million in 2010. Earnings per share were up 40% in the second quarter to
$1.02 versus $0.73 in the second quarter last year, which reflects income
from discontinued operations of $0.02 in both the second quarter of 2011 and
2010. Cash flow from operations was $1,138 million and free cash flow (cash
flow from operations less capital expenditures) was $973 million, compared
to $1,090 million and $975 million, respectively, in the second quarter last
year. Honeywell has received all necessary regulatory approvals for the
previously announced sale of CPG, which is expected to close in the third
quarter. The table below shows a reconciliation of continuing and
discontinued operations.
Continuing Discontinued Total
Operations Operations - CPG Honeywell
2Q11 V% 2Q11 V% 2Q11 V%
Sales $ 9,086 15% $ 234 -1% $ 9,320 14%
EPS $ 1.00 41% $ 0.02 0% $ 1.02 40%
Note: Dollars in millions, except per share amounts; Discontinued
operations presentation has no effect on cash flow
"Honeywell's strong second quarter performance reflects terrific
execution and continued momentum in our key end markets, contributing to our
upside performance in the first half of 2011," said Honeywell Chairman and
CEO Dave Cote. "The sales growth we're seeing reflects our extensive
innovation pipeline and increasing presence in high growth regions. We had
particularly robust growth in the Aerospace commercial aftermarket, and our
short-cycle businesses such as Advanced Materials, ACS Products, and Turbo
Technologies continued to perform well."
"We expect good organic growth to continue in the second half of 2011,"
continued Cote. "Favorable global macro trends like safety, security,
energy, and globalization combined with our continued investments in new
technologies, high growth regions, and our process initiatives will enable
the company to continue to grow and outperform now and over the long-term."
Honeywell now expects 2011 sales of $36.1-36.7 billion, an increase of
12-14% over 2010, which excludes CPG sales now reported in discontinued
operations in both periods; and earnings in the range of $3.85-4.00 per
share (including discontinued operations) versus a previous estimate of
$3.80-3.95 per share, an increase of 28-33% over 2010 proforma EPS of $3.00
(in each case, this excludes any mark-to-market pension adjustments). 2010
reported earnings were $2.59 per share. The company also reaffirmed that it
expects free cash flow of $3.5-3.7 billion, excluding any U.S. pension
contributions in 2011 (cash flow from operations of $3.3-3.5 billion
including $1 billion of pension contributions made to date).
Recent Highlights
Aerospace
- Sales were up 6% compared with the second quarter of 2010,
primarily due to strong increases in the Commercial Aftermarket and
marginally higher Defense and Space sales, slightly offset by amounts
recognized for payments to Business and General Aviation (BGA) OE
customers for pre-production costs.
- Segment profit was up 2% and segment margins were down 70 bps to
16.0%, primarily due to the BGA OE payments discussed above, which
unfavorably impacted margins by 110 basis points year-over-year, and
higher R&D investments, partially offset by volume, favorable mix, and
productivity net of inflation.
- Honeywell won a contract valued at more than $70 million to
provide Auxiliary Power Units (APUs) for Hainan Airlines' fleet of A320
aircraft. The APUs will be delivered over three years, beginning in
2012. As part of the agreement, Honeywell will also provide repair and
overhaul services of APUs on other existing aircraft.
- Honeywell and Safran announced the development of green electric
taxi capabilities for new and existing commercial jets. Honeywell's APUs
and Safran's electric motors will be used in the development of this new
hybrid system. Honeywell's APU generator will power electrical motors in
the aircraft's wheels without using main engines during aircraft ground
operations, saving the airlines millions in fuel costs and slashing
carbon and other emissions created during runway taxi operations.
- Honeywell Technology Solutions, Inc. (HTSI) won a five-year, $38
million contract with the Federal Aviation Administration (FAA) to
maintain security systems at more than 1,000 locations in the agency's
Air Traffic Organization (ATO) Air Traffic Systems Branch. HTSI will
provide corrective maintenance for security systems at FAA locations
across the country, including air traffic control facilities and
national airspace navigation, surveillance, and communication sites. The
corrective maintenance contract includes security equipment such as
video surveillance, physical access control equipment, intrusion
detection, and barrier arms.
Automation and Control Solutions
- Sales were up 20%, compared with the second quarter of 2010,
with 8% growth from acquisitions, net of divestitures, 6% organic growth
due to the general industrial recovery, new product introductions,
emerging region strength, and favorable macro trends such as energy
demand and energy efficiency, and the 6% impact from favorable foreign
exchange.
- Segment profit was up 24% and segment margins increased 40 bps
to 12.8% driven by higher volumes and project sales, partially offset by
material inflation and investment for growth across the portfolio.
- Building Solutions completed the first phase of energy-efficient
building upgrades at the University of Wisconsin-Milwaukee (UWM), which
will save the school an estimated $620,000 in annual energy costs. The
work is part of a three-phase, $21.7 million energy conservation and
infrastructure renewal program that will improve comfort and efficiency
in university facilities while cutting utility costs and greenhouse gas
emissions.
- Process Solutions was selected as the engineering, procurement,
and construction contractor by North Refineries Company (NRC) of Iraq to
upgrade the automation systems at its refinery in Baiji, Iraq. The $9.6
million project will upgrade NRC's existing control system with
Honeywell's Experion(R) Process Knowledge System(R) and Safety Manager
to improve operational efficiency, reliability, and safety at the
refinery.
- Security launched Total Connect(TM) 2.0, a new technology
platform for its popular Total Connect service that allows home and
business owners to remotely manage their security systems and view live
video via personal computers, smart phones, tablets, and other
web-enabled devices. Later this year, Honeywell will introduce Tuxedo
Touch(TM), a new line of color graphic touchscreen keypads that will
further strengthen the company's Connected Home offering. These new
touchscreens will extend the capabilities of Honeywell's
industry-leading VISTA(R) security systems through new home automation
and energy management capabilities, enabling the control of devices such
as thermostats, electronic locks, lighting modules, and window shades.
Transportation Systems
- Sales were up 26% compared with the second quarter of 2010,
due to foreign exchange, higher passenger and commercial vehicle Turbo
volumes globally, new platform launches, and higher European diesel
penetration.
- Segment profit was up 45% and segment margins increased 160 bps
to 13.0%, primarily driven by higher volumes and increased productivity,
offset by material inflation.
- Honeywell Turbo Technologies was awarded new platform wins with
customers including Caterpillar, Ford, General Motors, Honda, Mazda,
Tata, Toyota, and Volkswagen, estimated at approximately $600 million in
revenue throughout the life of the programs. The platforms span the
European, Asian, and U.S. markets for both gasoline and diesel passenger
and commercial vehicle applications and are expected to launch beginning
in 2012. Year-to-date platform wins are estimated at approximately $1
billion in revenue throughout the life of the programs.
- Honeywell Turbo Technologies announced the launch of several
turbocharger technologies at the 2011 Shanghai Auto Show that were
developed in China specifically for the Chinese market. The new
Honeywell turbo innovations supported both gasoline and diesel
applications and were featured on the Chinese-made Chery 2.0L G5 and
JAC's 2.0L Refine and 1.9L Rein models. China is the world's fastest
growing market for turbochargers with anticipated growth of more than
20% in 2011 versus 2010.
Specialty Materials
- Sales were up 12% compared with the second quarter of 2010,
resulting from improved global end markets, commercial excellence, and
new product applications in the Advanced Materials business, coupled
with strong UOP growth.
- Segment profit was up 31% and segment margins increased 300 bps
to 20.0% due to higher sales and licensing revenues, commercial
excellence, and cost productivity, partially offset by raw material
inflation.
- Honeywell embarked on a new "world first" in alternative energy
use as its Honeywell Green Jet Fuel(TM) powered a Gulfstream jet across
the Atlantic using a 50/50 blend of petroleum-based jet fuel and
camelina-derived green jet fuel and landing in Paris, France. The fuel
meets all specifications for flight without any modifications to the
aircraft or engine. Honeywell's historic transatlantic green jet fuel
flight closely followed the route taken by Charles Lindbergh in his
famous first flight across the Atlantic to Le Bourget Field in Paris.
Honeywell Green Jet Fuel was also used in a Boeing 747-8 freighter
flight across the Atlantic. ASTM International, a key global standards
body, has recently given provisional approval for the use of green jet
fuel in commercial flights, and full approval is expected this month.
- UOP announced that China's Wison (Nanjing) Clean Energy Company
Ltd. has selected its technology to convert methanol into building
blocks for chemical products at a coal chemical complex in China. The
project will be the first commercial-scale installation of UOP's
advanced methanol-to-olefins (MTO) solution, which allows petrochemical
producers to use methanol from natural gas or coal, instead of
petroleum, to produce high yields of high-value plastics and
petrochemicals. This solution, allows producers in countries with
limited supplies of crude oil, but plentiful quantities of coal or
natural gas, to produce high-value petrochemicals.
- Fluorine Products announced that it has tripled production
capacity at its Buffalo Research Lab in Buffalo, N.Y. for its
low-global-warming-potential product HFO-1234ze to meet the growing
global need for the material. The product is used in multiple foam and
aerosol applications. It was achieved through equipment upgrades and
overall productivity improvements during the last 18 months.
Acquisitions
- Honeywell signed a definitive agreement to acquire EMS
Technologies, Inc., a leading provider of connectivity solutions for
mobile networking, rugged mobile computers, and satellite
communications. The acquisition will enhance Honeywell's existing
capabilities in rugged mobile computing technologies within its
Automation and Control Solutions (ACS) business and satellite
communications within its Aerospace business. EMS's $181 million Global
Resource Management (GRM) division provides highly ruggedized mobile
computing products and services for use in transportation, logistics,
and workforce management settings as well as secure satellite-based
asset tracking and messaging technology for search and rescue,
warehousing, and field force automation environments. Through its $174
million Aviation division, EMS provides terminals, antennas, in-cabin
network devices, rugged data storage, and surveillance applications
predominantly for use on aircraft. Honeywell expects the tender offer
for EMS's outstanding shares to be completed in the third quarter.
Honeywell will discuss its results during its investor conference call
today starting at 9:30 a.m. EDT. To participate, please dial (631) 291-4830
a few minutes before the 9:30 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 12:30 p.m. EDT, July 22, until midnight, July 29, by
dialing (706) 645-9291. The access code is 68707283.
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.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
------------------------------------------------
(In millions except per share amounts)
Three Months
Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
---- ---- ---- ----
Product sales $7,146 $6,184 $13,959 $11,991
Service sales 1,940 1,742 3,799 3,471
----- ----- ----- -----
Net sales 9,086 7,926 17,758 15,462
----- ----- ------ ------
Costs, expenses and
other
Cost of products sold
(A) 5,425 4,783 10,619 9,279
Cost of services sold
(A) 1,239 1,184 2,469 2,355
----- ----- ----- -----
6,664 5,967 13,088 11,634
Selling, general and
administrative
expenses (A) 1,248 1,110 2,480 2,200
Other (income) expense (22) (9) (51) (11)
Interest and other
financial charges 96 91 195 198
--- --- --- ---
7,986 7,159 15,712 14,021
----- ----- ------ ------
Income from continuing
operations before
taxes 1,100 767 2,046 1,441
Tax expense 304 209 560 405
--- --- --- ---
Income from continuing
operations after taxes 796 558 1,486 1,036
Income from
discontinued
operations after taxes 14 16 32 34
--- --- --- ---
Net income 810 574 1,518 1,070
Less: Net income
attributable to the
noncontrolling
interest - 8 3 15
--- --- --- ---
Net income attributable
to Honeywell $810 $566 $1,515 $1,055
==== ==== ====== ======
Amounts attributable to
Honeywell:
Income from continuing
operations less net
income attributable
to the noncontrolling
interest 796 550 1,483 1,021
Income from
discontinued
operations 14 16 32 34
Net income attributable
to Honeywell $810 $566 $1,515 $1,055
==== ==== ====== ======
Earnings per share of
common stock -basic:
Income from continuing
operations 1.01 0.72 1.89 1.33
Income from
discontinued
operations 0.02 0.02 0.04 0.04
Net Income $1.03 $0.74 $1.93 $1.37
===== ===== ===== =====
Earnings per share of
common stock -
assuming dilution:
Income from continuing
operations 1.00 0.71 1.86 1.32
Income from
discontinued
operations 0.02 0.02 0.04 0.04
Net Income $1.02 $0.73 $1.90 $1.36
===== ===== ===== =====
Weighted average number
of shares outstanding-
basic 785.0 769.6 785.2 767.7
===== ===== ===== =====
Weighted average number
of shares outstanding
-
assuming dilution 797.3 777.3 797.5 774.5
===== ===== ===== =====
(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.
Discontinued Operations Reconciliation (Unaudited)
--------------------------------------------------
2Q
2Q11(1) V% YTD(1) V% 2011E(2) V%
------- --- ------ --- ------- ---
Sales -Continuing
Operations $9,086 $17,758 $36.1 - 36.7
Sales - CPG 234 470 0.6
--- --- -----
Sales - Total Honeywell $9,320 14% $18,228 14% $36.7-37.3 10%-12%
EPS -Continuing
Operations -assuming
dilution 1.00 1.86 3.62-3.77
EPS -CPG -assuming
dilution 0.02 0.04 0.23
---- ---- ------
EPS - Total Honeywell $1.02 40% $1.90 40% $3.85-4.00 28%-33%
(1) Dollars in millions, except per share amount
(2) Dollars in billions, except per share amount
Honeywell International Inc.
Segment Data (Unaudited)
------------------------
(Dollars in millions)
Three Months
Ended Six Months Ended
June 30, June 30,
Net Sales 2011 2010 2011 2010
=-------- ---- ---- ---- ----
Aerospace $2,810 $2,647 $5,506 $5,153
Automation
and
Control
Solutions 3,880 3,237 7,536 6,361
Specialty
Materials 1,406 1,259 2,761 2,398
Transportation
Systems 990 783 1,955 1,550
Corporate - - - -
--- --- --- ---
Total $9,086 $7,926 $17,758 $15,462
====== ====== ======= =======
Reconciliation of Segment Profit to Income From Continuing Operations
Before Taxes
---------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
Segment Profit 2011 2010 2011 2010
=------------- ---- ---- ---- ----
Aerospace $451 $443 $918 $856
Automation and
Control Solutions 496 401 955 787
Specialty Materials 281 214 565 384
Transportation
Systems 129 89 247 158
Corporate (56) (68) (124) (100)
--- --- ---- ----
Total Segment Profit 1,301 1,079 2,561 2,085
Other income/
(expense) (A) 8 - 28 (2)
Interest and other
financial charges (96) (91) (195) (198)
Stock compensation
expense (B) (42) (36) (91) (86)
Pension expense
ongoing (B) (22) (46) (57) (96)
Other postretirement
income/(expense)
(B) 45 (12) 27 6
Repositioning and
other charges (B) (94) (127) (227) (268)
--- ---- ---- ----
Income from
continuing
operations before
taxes $1,100 $767 $2,046 $1,441
====== ==== ====== ======
(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 December
30, 31,
2011 2010
---- ----
ASSETS
Current assets:
Cash and cash equivalents $3,548 $2,650
Accounts, notes and other receivables 7,344 6,841
Inventories 4,197 3,822
Deferred income taxes 926 877
Investments and other current assets 545 455
Assets held for sale 826 841
--- ---
Total current assets 17,386 15,486
Investments and long-term receivables 516 616
Property, plant and equipment - net 4,718 4,724
Goodwill 11,492 11,275
Other intangible assets - net 2,347 2,537
Insurance recoveries for asbestos related
liabilities 802 825
Deferred income taxes 1,115 1,221
Other assets 1,274 1,150
----- -----
Total assets $39,650 $37,834
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $4,442 $4,199
Short-term borrowings 68 67
Commercial paper 350 299
Current maturities of long-term debt 514 523
Accrued liabilities 6,555 6,446
Liabilities related to assets held for sale 182 190
--- ---
Total current liabilities 12,111 11,724
Long-term debt 6,790 5,755
Deferred income taxes 661 636
Postretirement benefit obligations other
than pensions 1,411 1,477
Asbestos related liabilities 1,565 1,557
Other liabilities 4,928 5,898
Shareowners' equity 12,184 10,787
------ ------
Total liabilities and shareowners' equity $39,650 $37,834
======= =======
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
------------------------------------------------
(Dollars in millions)
Three
Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2011 2010 2011 2010
---- ---- ---- ----
Cash flows from
operating
activities:
Net income
attributable to
Honeywell $810 $566 $1,515 $1,055
Adjustments to
reconcile net income
attributable to
Honeywell to net
cash provided by
operating
activities:
Depreciation and
amortization 236 241 478 474
Gain on sale of non-
strategic businesses
and assets (2) - (46) -
Repositioning and
other charges 94 128 227 270
Net payments for
repositioning and
other charges (98) (102) (207) (221)
Pension and other
postretirement
expense (22) 59 32 92
Pension and other
postretirement
benefit payments (10) (53) (1,047) (89)
Stock compensation
expense 42 36 91 86
Deferred income taxes 90 415 158 487
Excess tax benefits
from share based
payment arrangements (17) (2) (30) (4)
Other 10 (98) 105 (194)
Changes in assets and
liabilities, net of
the effects of
acquisitions and
divestitures:
Accounts, notes and
other receivables (365) (271) (537) (188)
Inventories (59) (6) (389) (131)
Other current assets (9) 15 (23) (3)
Accounts payable 264 180 260 97
Accrued liabilities 174 (18) 108 102
Net cash provided by
operating activities 1,138 1,090 695 1,833
----- ----- --- -----
Cash flows from
investing
activities:
Expenditures for
property, plant and
equipment (165) (115) (289) (185)
Proceeds from
disposals of
property, plant and
equipment 2 1 3 2
Increase in
investments (65) (15) (229) (311)
Decrease in
investments 114 10 176 10
Cash paid for
acquisitions, net of
cash acquired (1) (996) (8) (996)
Proceeds from sales
of businesses, net
of fees paid (2) - 215 -
Other 27 4 58 (12)
Net cash used for
investing activities (90) (1,111) (74) (1,492)
--- ------ --- ------
Cash flows from
financing
activities:
Net increase/
(decrease) in
commercial paper 50 (100) 51 850
Net increase/
(decrease) in short-
term borrowings 7 13 (2) 12
Proceeds from
issuance of common
stock 99 23 200 55
Proceeds from
issuance of long-
term debt 3 - 1,384 -
Payments of long-
term debt (2) - (439) (1,001)
Excess tax benefits
from share based
payment arrangements 17 2 30 4
Repurchases of common
stock (504) - (504) -
Cash dividends paid (266) (233) (530) (464)
Net cash (used
for)/provided by
financing activities (596) (295) 190 (544)
---- ---- --- ----
Effect of foreign
exchange rate
changes on cash and
cash equivalents 20 (84) 87 (147)
--- --- --- ----
Net increase in cash
and cash equivalents 472 (400) 898 (350)
Cash and cash
equivalents at
beginning of period 3,076 2,851 2,650 2,801
Cash and cash
equivalents at end
of period 3,548 2,451 3,548 2,451
===== ===== ===== =====
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
-------------------------------------------------------------------------
(Dollars in millions)
Three Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2011
2011 2010 2011 2010 Guidance
---- ---- ---- ---- ---------
Cash provided
by operating
activities $1,138 $1,090 $695 $1,833 $3,300-3,500
Expenditures
for property,
plant and
equipment (165) (115) (289) (185) (800)
---- ---- ---- ---- -------
Free cash flow $973 $975 $406 $1,648 $2,500-2,700
U.S. Pension
Cash
Contributions
(1) - - 1,000 - 1,000
--- --- ----- --- ------
Free cash flow,
excluding U.S.
pension cash
contributions $973 $975 $1,406 $1,648 $3,500-3,700
==== ==== ====== ====== ============
(1) Represents cash contributions to date.
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.
Contacts:
Media Investor Relations
Robert C. Ferris Elena Doom
(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com elena.doom@honeywell.com
SOURCE Honeywell
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