TIDMHON
Honeywell Reports Second Quarter 2013 Sales Of $9.7 Billion; EPS Up 12% To
$1.28 Per Share
=- Strong Productivity Driving EPS Growth Of 12%, Up 8% Using Expected
Full-Year Tax Rate
=- Continued Proactive Funding Of Repositioning To Align With Global Growth
Outlook
=- Increasing Proforma EPS Guidance To $4.85 - $4.95, From $4.80 - $4.95
MORRIS TOWNSHIP, N.J., July 19, 2013 -- Honeywell (NYSE: HON)
today announced its results for the second quarter of 2013:
Total Honeywell
($ Millions, except Earnings Per Share) 2Q 2012 2Q 2013 Change
Sales 9,435 9,693 3%
Segment Margin 15.8% 16.1% 30 bps
Operating Income Margin 13.6% 14.3% 70 bps
Earnings Per Share $1.14 $1.28 12%
Cash Flow from Operations 973 1,256 29%
Free Cash Flow * 1,040 1,142 10%
* Free Cash Flow (cash flow from operations less capital expenditures) prior to
any NARCO Trust establishment payments and cash pension contributions
"Honeywell had another good quarter and a strong first half of 2013," said
Honeywell Chairman and CEO Dave Cote. "Despite operating in a slow growth macro
environment, we saw good organic growth in ACS's Energy, Safety and Security
business and in Turbo Technologies, both of which continue to outgrow the key
end markets in which they compete. Our long-cycle businesses, including
Commercial Aerospace, Process Solutions, and UOP, also continue to perform
well, benefitting from favorable macro-trends, winning new contracts, and
maintaining a strong backlog, which currently stands at $15.5B. We remain
focused on seed planting, funding cost savings initiatives across the
portfolio, and remaining flexible given the continued uncertain global economic
outlook. And, as a result of our first half performance, we are raising the
low-end of our 2013 guidance by $0.05 with the expectation of modestly improved
organic growth and continued margin expansion in the second half outlook."
Second quarter 2013 earnings per share (EPS) reflect a 23.1% effective tax rate
compared to 26.0% last year. Using the 2012 actual / 2013 expected full-year
tax rate of 26.5% before any pension mark-to-market adjustment, EPS growth
would have been 8%.
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 $38.8 - $39.3B $38.9 - $39.3B 3 - 4%
Segment Margin 15.9 - 16.2% 16.0 - 16.2% 40 - 60 bps
Operating Income Margin(1) 14.3 - 14.6% 14.5 - 14.7% 90 - 110 bps
Earnings Per Share(1) $4.80 - $4.95 $4.85 - $4.95 8 - 11%
Free Cash Flow(2) $3.7B $3.7B Flat
1. Proforma, V% / BPS exclude any pension mark-to-market adjustment
2. Free Cash Flow (cash flow from operations less capital expenditures) prior
to any NARCO Trust establishment payments and cash pension contributions
Second Quarter Segment Performance
Aerospace
($ Millions) 2Q 2012 2Q 2013 % Change
Sales 3,027 2,997 (1%)
Segment Profit 562 583 4%
Segment Margin 18.6% 19.5% 90 bps
* Sales were down (1%) compared with the second quarter of 2012 driven by an
(8%) decline in Defense & Space sales as a result of planned ramp downs and
program delays, largely offset by Commercial growth. Commercial OE sales
were up 8% in the quarter driven by continued strong OE build rates and
favorable platform mix. Commercial Aftermarket growth of 3% was driven by
improved flight hour growth and spares sales, partially offset by lower
maintenance events.
* Segment profit was up 4%, and segment margins expanded 90 bps to 19.5%,
driven by commercial excellence and productivity net of inflation,
partially offset by lower Defense & Space sales.
Automation and Control Solutions
($ Millions) 2Q 2012 2Q 2013 % Change
Sales 3,962 4,065 3%
Segment Profit 525 585 11%
Segment Margin 13.3% 14.4% 110 bps
* Sales were up 3% on both a reported and organic basis compared with the
second quarter of 2012. All three businesses experienced growth driven by
new product introductions, stronger services and software uptake, and
improved residential end market conditions, partially offset by
non-residential end markets, which remain suppressed.
* Segment profit was up 11% and segment margins were up 110 bps to 14.4%
driven by commercial excellence and productivity net of inflation.
Performance Materials and Technologies
($ Millions) 2Q 2012 2Q 2013 % Change
Sales 1,546 1,684 9%
Segment Profit 350 320 (9%)
Segment Margin 22.6% 19.0% (360) bps
* Sales were up 9% reported, approximately flat organically, compared with
the second quarter of 2012, driven by higher UOP petrochemical catalyst
shipments and equipment sales, and the favorable impact of the Thomas
Russell acquisition, partially offset by lower production volume in
Advanced Materials and the unfavorable impact of unseasonably cool weather
on Fluorine Products refrigerant volume.
* Segment profit was down (9%) and segment margins decreased (360) bps to
19.0%, primarily driven by the impact of lower UOP licensing sales compared
to prior year, lower Advanced Materials volumes, investments for growth,
inflation, and the dilutive impact of the Thomas Russell acquisition.
Transportation Systems
($ Millions) 2Q 2012 2Q 2013 % Change
Sales 900 947 5%
Segment Profit 114 126 11%
Segment Margin 12.7% 13.3% 60 bps
* Sales were up 5% on both a reported and organic basis, compared with the
second quarter of 2012, driven by higher turbo gas penetration in all
regions, strong growth from new platform launches, and improving China
commercial vehicle sales, partially offset by the impact of an
approximately (1%) decline in European light vehicle production volumes.
* Segment profit was up 11% and segment margins increased 60 bps to 13.3%
primarily driven by strong productivity and volume leverage, partially
offset by unfavorable price, and ongoing projects to drive operational
improvement in the Friction Materials business.
Honeywell will discuss its results during its investor conference call today
starting 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 for
Honeywell's second quarter 2013 investor conference call or provide the
conference code HONQ213. The live webcast of the investor call as well as
related presentation materials 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 12:00 p.m. EDT,
July 19, until 11:59 p.m. EDT, July 26, by dialing (800) 723-0498 (domestic) or
(402) 220-2652 (international).
Honeywell (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;
turbochargers; and performance 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
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. We identify the principal risks and uncertainties
that affect our performance in our Form 10-K and other filings with the
Securities and Exchange Commission.
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 Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Product sales $ 7,744 $ 7,475 $ 15,218 $ 14,852
Service sales 1,949 1,960 3,803 3,890
Net sales 9,693 9,435 19,021 18,742
Costs, expenses and other
Cost of products sold (A) 5,750 5,582 11,317 11,153
Cost of services sold (A) 1,277 1,340 2,493 2,649
7,027 6,922 13,810 13,802
Selling, general and administrative expenses (A) 1,281 1,226 2,510 2,457
Other (income) expense (24) (23) (52) (38)
Interest and other financial charges 80 87 164 176
8,364 8,212 16,432 16,397
Income before taxes 1,329 1,223 2,589 2,345
Tax expense 307 318 598 615
Net income 1,022 905 1,991 1,730
Less: Net income attributable to the
noncontrolling interest 1 3 4 5
Net income attributable to Honeywell $ 1,021 $ 902 $ 1,987 $ 1,725
Earnings per share of common stock - basic $ 1.30 $ 1.15 $ 2.53 $ 2.21
Earnings per share of common stock - assuming
dilution $ 1.28 $ 1.14 $ 2.49 $ 2.19
Weighted average number of shares outstanding-basic 787.6 781.4 786.7 779.3
Weighted average number of shares outstanding -
assuming dilution 798.1 790.5 797.6 789.3
(A) Cost of products and services sold and selling, general and administrative
expenses include amounts for repositioning and other charges, pension and other
postretirement (income) 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 2013 2012 2013 2012
Aerospace $ 2,997 $ 3,027 $ 5,908 $ 5,977
Automation and
Control 4,065 3,962 7,851 7,750
Solutions
Performance
Materials and 1,684 1,546 3,401 3,161
Technologies
Transportation 947 900 1,861 1,854
Systems
Total $ 9,693 $ 9,435 $ 19,021 $ 18,742
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Six Months Ended
June 30, June 30,
Segment Profit 2013 2012 2013 2012
Aerospace $ 583 $ 562 $ 1,134 $ 1,096
Automation and
Control
Solutions 585 525 1,108 1,016
Performance
Materials and
Technologies 320 350 694 669
Transportation
Systems 126 114 237 234
Corporate (55) (58) (106) (107)
Total
segment profit 1,559 1,493 3,067 2,908
Other income
(expense) (A) 13 9 32 14
Interest and
other
financial
charges (80) (87) (164) (176)
Stock
compensation
expense (B) (37) (40) (91) (91)
Pension
ongoing income
(expense) (B) 25 (9) 46 (22)
Other
postretirement
income
(expense) (B) 20 (9) (2) (32)
Repositioning
and other
charges (B) (171) (134) (299) (256)
Income before
taxes $ 1,329 $ 1,223 $ 2,589 $ 2,345
(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,
2013 2012
ASSETS
Current assets:
Cash and cash equivalents $ 4,549 $ 4,634
Accounts, notes and other receivables 7,655 7,429
Inventories 4,295 4,235
Deferred income taxes 670 669
Investments and other current assets 680 631
Total current assets 17,849 17,598
Investments and long-term receivables 756 623
Property, plant and equipment - net 4,997 5,001
Goodwill 12,640 12,425
Other intangible assets - net 2,393 2,449
Insurance recoveries for asbestos related liabilities 658 663
Deferred income taxes 1,701 1,889
Other assets 1,172 1,205
Total assets $ 42,166 $ 41,853
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 4,718 $ 4,736
Short-term borrowings 91 76
Commercial paper 1,200 400
Current maturities of long-term debt 632 625
Accrued liabilities 6,839 7,208
Total current liabilities 13,480 13,045
Long-term debt 5,779 6,395
Deferred income taxes 643 628
Postretirement benefit obligations other than pensions 1,317 1,365
Asbestos related liabilities 1,154 1,292
Other liabilities 5,781 5,913
Redeemable noncontrolling interest 154 150
Shareowners' equity 13,858 13,065
Total liabilities, redeemable noncontrolling
interest and shareowners' equity $ 42,166 $ 41,853
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Cash flows from operating activities:
Net income attributable to Honeywell $ 1,021 $ 902 $ 1,987 $ 1,725
Adjustments to reconcile net income attributable to Honeywell
to net cash provided by operating activities:
Depreciation and amortization 247 225 495 455
Loss on sale of non-strategic businesses and assets - 1 - 1
Repositioning and other charges 171 134 299 256
Net payments for repositioning and other charges (199) (122) (297) (226)
Pension and other postretirement (income) expense (45) 18 (44) 54
Pension and other postretirement benefit payments (42) (308) (213) (597)
Stock compensation expense 37 40 91 91
Deferred income taxes 158 57 185 189
Excess tax benefits from share based payment arrangements (57) (4) (81) (16)
Other (101) (97) (134) (104)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables (53) 20 (195) (20)
Inventories 15 30 (36) (78)
Other current assets (14) 13 4 (15)
Accounts payable 265 12 (30) (191)
Accrued liabilities (147) 52 (434) (355)
Net cash provided by operating activities 1,256 973 1,597 1,169
Cash flows from investing activities:
Expenditures for property, plant and equipment (196) (200) (344) (352)
Proceeds from disposals of property, plant and equipment 6 - 6 1
Increase in investments (286) (161) (460) (245)
Decrease in investments 210 66 376 158
Cash paid for acquisitions, net of cash acquired (338) (63) (460) (64)
Proceeds from sales of businesses, net of fees paid - 18 - 18
Other 52 (81) 19 (59)
Net cash used for investing activities (552) (421) (863) (543)
Cash flows from financing activities:
Net increase in commercial paper - - 800 349
Net increase in short-term borrowings 13 4 21 11
Proceeds from issuance of common stock 139 26 303 116
Proceeds from issuance of long-term debt 6 40 13 42
Payments of long-term debt (1) - (601) -
Excess tax benefits from share based payment arrangements 57 4 81 16
Repurchases of common stock (463) - (602) -
Cash dividends paid (343) (291) (665) (582)
Net cash used for financing activities (592) (217) (650) (48)
Effect of foreign exchange rate changes on cash
and cash equivalents (102) (102) (169) (55)
Net increase (decrease) in cash and cash equivalents 10 233 (85) 523
Cash and cash equivalents at beginning of period 4,539 3,988 4,634 3,698
Cash and cash equivalents at end of period $ 4,549 $ 4,221 $ 4,549 $ 4,221
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended
June 30,
2013 2012
Cash provided by operating activities $1,256 $973
Expenditures for property, plant and equipment (196) (200)
$1,060 $773
Cash pension contributions 9 267
NARCO Trust establishment payments 73 -
Free cash flow $1,142 $1,040
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 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.
Honeywell International Inc.
Reconciliation of Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income
(Dollars in millions)
Three Months Ended
June 30,
2013 2012
Segment Profit $ 1,559 $ 1,493
Stock compensation expense (A) (37) (40)
Repositioning and other (A, B) (182) (148)
Pension ongoing income (expense) (A) 25 (9)
Other postretirement income (expense) (A) 20 (9)
Operating Income $ 1,385 $ 1,287
Segment Profit $ 1,559 $ 1,493
÷ Sales $ 9,693 $ 9,435
Segment Profit Margin % 16.1% 15.8%
Operating Income $ 1,385 $ 1,287
÷ Sales $ 9,693 $ 9,435
Operating Income Margin % 14.3% 13.6%
(A) Included in cost of products and services sold and selling, general and
administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity income
adjustment.
We believe these measures are useful to investors and management in
understanding our ongoing 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
Segment Profit and Operating Income Margins Excluding Pension
Mark-to-Market Adjustment (Unaudited)
(Dollars in millions)
Twelve Months Ended
December 31,
2012
Segment Profit $ 5,879
Stock 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 $ 4,156
Pension 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
and administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity
income adjustment.
We believe these measures are useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc.
Reconciliation of Segment Profit to Operating Income Excluding Pension
Mark-to-Market Adjustment
Segment Profit and Operating Income Margins Excluding Pension Mark-to-Market
Adjustment
(Dollars in billions)
2013 Guidance
Segment Profit $6.2 - 6.4
Stock compensation expense (A) (0.2)
Repositioning and other (A, B) (0.5)
Pension ongoing income (A) 0.1
Pension mark-to-market adjustment (A) TBD
Other postretirement expense (A) (0.0)
Operating Income $5.6 - 5.8
Pension mark-to-market adjustment (A) TBD
Operating Income excluding pension mark-to-market adjustment $5.6 - 5.8
Segment Profit $6.2 - 6.4
÷ Sales $38.9 - 39.3
Segment Profit Margin % 16.0 - 16.2%
Operating Income $5.6 - 5.8
÷ Sales $38.9 - 39.3
Operating Income Margin % 14.5 - 14.7%
Operating Income excluding pension mark-to-market adjustment $5.6 - 5.8
÷ Sales $38.9 - 39.3
Operating Income Margin excluding pension mark-to-market 14.5 - 14.7%
adjustment %
(A) Included in cost of products and services sold and selling, general and
administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity
income adjustment.
We believe these measures are useful to investors and
management in understanding our ongoing operations and in
analysis of ongoing operating trends.
Honeywell International Inc.
Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Adjustment
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 investors and management in understanding our ongoing
operations and in analysis of ongoing operating trends.
EPS utilizes weighted average shares outstanding of 791.9 million.
Mark-to-market uses a blended tax rate of 35.0%.
SOURCE Honeywell
END
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