Honeywell Reports Full-Year Sales Up 4% To $39.1 Billion; Proforma Earnings Per
Share Up 11% To $4.97 Per Share; Reported Earnings Per Share Of $4.92
-- 4Q13 - 5% Organic Sales Growth; Proforma EPS $1.24, Up 13%, On Stronger
Operations
-- 4Q13 Reported EPS $1.19, Includes ($0.05) Pension MTM Related To
International Plans
-- $0.16 EPS Gain Funds Proactive Restructuring And Other Actions - Including
Friction Sale
-- Reaffirming 2014 Proforma EPS Guidance Of $5.35 - $5.55, Up 8-12%
MORRIS TOWNSHIP, N.J., Jan. 24, 2014 -- Honeywell (NYSE: HON)
today announced its results for the fourth quarter and full year 2013:
Total Honeywell
($ Millions, except Earnings Per Share) FY 2012 FY 2013 Change
Sales 37,665 39,055 4%
Segment Margin 15.6% 16.3% 70 bps
Operating Income Margin(1) 13.6% 14.2% 60 bps
Earnings Per Share (Reported) $3.69 $4.92 33%
Earnings Per Share (Proforma)(1) $4.48 $4.97 11%
Cash Flow from Operations 3,517 4,335 23%
Free Cash Flow(2) 3,672 3,808 4%
4Q 2012 4Q 2013 Change
Sales 9,581 10,387 8%
Segment Margin 15.6% 16.1% 50 bps
Operating Income Margin(1) 13.9% 13.4% (50) bps
Earnings Per Share (Reported) $0.32 $1.19 272%
Earnings Per Share (Proforma)(1) $1.10 $1.24 13%
Cash Flow from Operations 1,349 1,668 24%
Free Cash Flow(2) 1,311 1,402 7%
(1.) Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment
(2.) Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior
to Any NARCO Trust Establishment Payments, Cash Pension Contributions, and Cash
Taxes Relating to the Sale of Available for Sale Investments
"Honeywell had a very strong fourth quarter, capping off a terrific year across
the board with record sales, margins, and earnings," said Honeywell Chairman
and CEO Dave Cote. "Even in a continued slow-growth environment, our 2013 sales
grew 4% and proforma earnings were up 11%, above our guidance, exiting the year
with better than expected sales in every business. We generated strong margin
expansion driven by excellent execution, with benefits from continued traction
on our key process and productivity initiatives across the portfolio. We
sustained our 'seed planting' investments for the future including innovating
new products and technologies, and expanding geographically. We've also
proactively funded new repositioning projects by smartly redeploying
non-operating gains. Our short-cycle businesses accelerated as we ended the
year and our long-cycle order backlog stood at an impressive $15.5 billion.
While we think it's prudent to remain cautious on the global economy at this
time, we're increasingly confident in our 2014 outlook based on the momentum
from the fourth quarter. And, the benefits from smart gain deployment actions
position the Company for strong earnings growth and outperformance over the
next 5 years."
The company is also reaffirming its full-year 2014 guidance:
Full-Year Guidance
2014 Change
Current Guidance vs. 2013
Sales $40.3 - $40.7B 3% - 4%
Segment Margin 16.6% - 16.9% 30 - 60 bps(3)
Operating Income Margin(1) 15.2% - 15.5% 100 - 130 bps
Earnings Per Share(1) $5.35 - $5.55 8% - 12%
Free Cash Flow(2) $3.8 - $4.0B ~Flat - 5%
(1.) Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment
(2.) Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior
to Any NARCO Trust Establishment Payments, Cash Pension Contributions, and
Cash Taxes Relating to the Sale of Available for Sale Investments
(3.) Segment Margin ex-M&A up 50 - 80 bps
Segment Performance
Aerospace
($ Millions) FY 2012 FY 2013 % Change
Sales 12,040 11,980 ~Flat
Segment Profit 2,279 2,372 4%
Segment Margin 18.9% 19.8% 90 bps
($ Millions) 4Q 2012 4Q 2013 % Change
Sales 3,020 3,099 3%
Segment Profit 601 636 6%
Segment Margin 19.9% 20.5% 60 bps
* Sales were up 3% compared with the fourth quarter of 2012 driven by 3%
Commercial growth and a 2% increase in Defense and Space. Commercial
original equipment (OE) sales were approximately flat driven by continued
strong OE build rates and favorable platform mix offset by higher payments
due to BGA OEM customers. Commercial aftermarket sales were up 5% driven
by higher airline spares and strong BGA RMU (Repairs, Modifications, and
Upgrades) sales. Defense and Space sales increased 2% driven by a royalty
gain and international strength offsetting planned program ramp downs.
* Segment profit was up 6%, and segment margins expanded 60 bps to 20.5%,
primarily due to productivity net of inflation, and commercial excellence,
partially offset by investments for growth. BGA OEM payments were offset by
a royalty gain in Defense and Space.
Automation and Control Solutions
($ Millions) FY 2012 FY 2013 % Change
Sales 15,880 16,556 4%
Segment Profit 2,232 2,437 9%
Segment Margin 14.1% 14.7% 60 bps
($ Millions) 4Q 2012 4Q 2013 % Change
Sales 4,172 4,576 10%
Segment Profit 645 698 8%
Segment Margin 15.5% 15.3% (20) bps
* Sales were up 10% reported, up 4% organic, compared with the fourth quarter
of 2012, primarily driven by the favorable impact of acquisitions, growth
in Energy, Safety, and Security due to strong residential end markets, new
product introductions, and strength in the Americas Distribution business.
* Segment profit was up 8% and segment margins were down (20) bps to 15.3%
driven by the dilutive impact of acquisitions, higher Building Solutions
and Distribution sales, and continued investments for growth partially
offset by volume and productivity net of inflation, including benefits from
prior period repositioning.
Performance Materials and Technologies
($ Millions) FY 2012 FY 2013 % Change
Sales 6,184 6,764 9%
Segment Profit 1,154 1,271 10%
Segment Margin 18.7% 18.8% 10 bps
($ Millions) 4Q 2012 4Q 2013 % Change
Sales 1,545 1,734 12%
Segment Profit 210 272 30%
Segment Margin 13.6% 15.7% 210 bps
* Sales were up 12% reported, 9% organic, compared with the fourth quarter of
2012, driven by the favorable impact of the Thomas Russell acquisition,
increased UOP catalyst and gas processing volume, and improved production
volumes in Advanced Materials.
* Segment profit was up 30% and segment margins expanded 210 bps to 15.7% in
the fourth quarter primarily due to strong volume and productivity,
partially offset by continued investments for growth.
Transportation Systems
($ Millions) FY 2012 FY 2013 % Change
Sales 3,561 3,755 5%
Segment Profit 432 498 15%
Segment Margin 12.1% 13.3% 120 bps
($ Millions) 4Q 2012 4Q 2013 % Change
Sales 844 978 16%
Segment Profit 94 133 41%
Segment Margin 11.1% 13.6% 250 bps
* Sales were up 16% reported, 15% organic, compared with the fourth quarter
of 2012, driven by continued growth from new platform launches, higher
global turbo gas penetration and light vehicle production, and an uptick in
China commercial vehicle demand.
* Segment profit was up 41% in the fourth quarter and segment margins
expanded 250 bps to 13.6% primarily driven by strong Turbo material
productivity and volume leverage, and operational improvements in Friction
Materials.
Honeywell will discuss its results during its investor conference call today
starting at 9:00 a.m. EST. To participate on the conference call, please dial
(800) 862-9098 (domestic) or (785) 424-1051 (international) a few minutes
before the 9:00 a.m. EST start. Please mention to the operator that you are
dialing in for Honeywell's fourth quarter 2013 earnings call or provide the
conference code, HONQ413. You can hear a replay of the conference call from 12:
00 p.m. EST, January 24, until 11:59 p.m. EST, January 31, by dialing (800)
283-4799 (domestic) or (402) 220-0860 (international).
A real-time audio webcast of the presentation can be accessed at
http://www.honeywell.com/investor, where related materials will be posted prior
to the presentation. The presentation materials will be in Adobe Acrobat format.
A replay of the webcast will be available following the presentation at the same
link listed above for 30 days.
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; automotive
products; 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)
(Dollars in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
Product sales $ 8,303 $ 7,628 $ 31,214 $ 29,812
Service sales 2,084 1,953 7,841 7,853
Net sales 10,387 9,581 39,055 37,665
Costs, expenses and other
Cost of products sold (A) 6,278 6,302 23,317 22,929
Cost of services sold (A) 1,334 1,379 5,047 5,362
7,612 7,681 28,364 28,291
Selling, general and administrative expenses (A) 1,438 1,523 5,190 5,218
Other (income) expense (185) (16) (238) (70)
Interest and other financial charges 83 87 327 351
8,948 9,275 33,643 33,790
Income before taxes 1,439 306 5,412 3,875
Tax expense 475 51 1,450 944
Net income 964 255 3,962 2,931
Less: Net income attributable to the noncontrolling interest 17 4 38 5
Net income attributable to Honeywell $ 947 $ 251 $ 3,924 $ 2,926
Earnings per share of common stock - basic $ 1.20 $ 0.32 $ 4.99 $ 3.74
Earnings per share of common stock - assuming dilution $ 1.19 $ 0.32 $ 4.92 $ 3.69
Weighted average number of shares outstanding-basic 785.9 787.2 786.4 782.4
Weighted average number of shares outstanding -
assuming dilution 797.0 796.4 797.3 791.9
(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.
(B) Below is a reconciliation of Earnings per share to Earnings per share,
excluding mark-to-market pension expense. We believe this measure is useful to
investors and management in understanding our ongoing operations and in
analysis of ongoing operating trends.
Three Months Ended Twelve Months Ended
December 31, December 31,
2013(1) 2012(1) 2013(1) 2012(1)
Earnings per share of common stock - assuming dilution $ 1.19 $ 0.32 $ 4.92 $ 3.69
Mark-to-market pension expense 0.05 0.78 0.05 0.79
Earnings per share of common stock - assuming dilution,
excluding mark-to-market pension expense $ 1.24 $ 1.10 $ 4.97 $ 4.48
(1)- EPS utilizes weighted average shares outstanding and the effective tax rate
for the period. Mark-to-market uses a blended tax rate of 25.5% and 35.0% for
2013 and 2012, respectively.
Honeywell International Inc
Segment Data (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
Net Sales 2013 2012 2013 2012
Aerospace $ 3,099 $ 3,020 $ 11,980 $ 12,040
Automation and Control Solutions 4,576 4,172 16,556 15,880
Performance Materials and Technologies 1,734 1,545 6,764 6,184
Transportation Systems 978 844 3,755 3,561
Total $ 10,387 $ 9,581 $ 39,055 $ 37,665
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Twelve Months Ended
December 31, December 31,
Segment Profit 2013 2012 2013 2012
Aerospace $ 636 $ 601 $ 2,372 $ 2,279
Automation and Control Solutions 698 645 2,437 2,232
Performance Materials and Technologies 272 210 1,271 1,154
Transportation Systems 133 94 498 432
Corporate (70) (54) (227) (218)
Total segment profit 1,669 1,496 6,351 5,879
Other income (expense) (A) 180 7 202 25
Interest and other financial charges (83) (87) (327) (351)
Stock compensation expense (B) (41) (39) (170) (170)
Pension ongoing income (expense) (B) 22 (7) 90 (36)
Pension mark-to-market expense (B) (51) (957) (51) (957)
Other postretirement expense (B) (13) (20) (20) (72)
Repositioning and other charges (B) (244) (87) (663) (443)
Income before taxes $ 1,439 $ 306 $ 5,412 $ 3,875
(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)
December 31, December 31,
2013 2012
ASSETS
Current assets:
Cash and cash equivalents $ 6,422 $ 4,634
Accounts, notes and other receivables 7,929 7,429
Inventories 4,293 4,235
Deferred income taxes 849 669
Investments and other current assets 1,671 631
Total current assets 21,164 17,598
Investments and long-term receivables 393 623
Property, plant and equipment - net 5,278 5,001
Goodwill 13,046 12,425
Other intangible assets - net 2,514 2,449
Insurance recoveries for asbestos related liabilities 595 663
Deferred income taxes 368 1,889
Other assets 2,077 1,205
Total assets $ 45,435 $ 41,853
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 5,174 $ 4,736
Short-term borrowings 97 76
Commercial paper 1,299 400
Current maturities of long-term debt 632 625
Accrued liabilities 7,016 7,208
Total current liabilities 14,218 13,045
Long-term debt 6,801 6,395
Deferred income taxes 804 628
Postretirement benefit obligations other than pensions 982 1,365
Asbestos related liabilities 1,150 1,292
Other liabilities 3,734 5,913
Redeemable noncontrolling interest 167 150
Shareowners' equity 17,579 13,065
Total liabilities, redeemable noncontrolling interest and shareowners' equity $ 45,435 $ 41,853
Honeywell International Inc
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
Cash flows from operating activities:
Net income $ 964 $ 255 $ 3,962 $ 2,931
Less: Net income attributable to the noncontrolling interest 17 4 38 5
Net income attributable to Honeywell 947 251 3,924 2,926
Adjustments to reconcile net income attributable to Honeywell to net
cash provided by operating activities:
Depreciation and amortization 249 245 989 926
Loss (Gain) on sale of non-strategic businesses and assets 20 (2) 20 (5)
Gain on sale of available for sale investments (195) - (195) -
Repositioning and other charges 244 87 663 443
Net payments for repositioning and other charges (246) (151) (763) (503)
Pension and other postretirement expense (income) 42 984 (19) 1,065
Pension and other postretirement benefit payments (45) (295) (298) (1,183)
Stock compensation expense 41 39 170 170
Deferred income taxes 5 (235) 262 84
Excess tax benefits from share based payment arrangements (31) (28) (132) (56)
Other 273 69 308 108
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables 17 41 (365) (119)
Inventories 135 78 41 25
Other current assets (393) (1) (421) (78)
Accounts payable 384 207 352 (13)
Accrued liabilities 221 60 (201) (273)
Net cash provided by operating activities 1,668 1,349 4,335 3,517
Cash flows from investing activities:
Expenditures for property, plant and equipment (400) (298) (947) (884)
Proceeds from disposals of property, plant and equipment 8 3 15 5
Increase in investments (517) (220) (1,220) (702)
Decrease in investments 474 272 1,122 559
Cash paid for acquisitions, net of cash acquired (70) (376) (1,133) (438)
Proceeds from sales of businesses, net of fees paid 3 3 3 21
Other 97 53 201 11
Net cash used for investing activities (405) (563) (1,959) (1,428)
Cash flows from financing activities:
Net (decrease) increase in commercial paper (800) (499) 899 (199)
Net increase in short-term borrowings 13 3 31 22
Proceeds from issuance of common stock 85 163 447 342
Proceeds from issuance of long-term debt 1,036 16 1,063 102
Payments of long-term debt (3) (1) (607) (1)
Excess tax benefits from share based payment arrangements 31 28 132 56
Repurchases of common stock (304) (317) (1,073) (317)
Cash dividends paid (358) (331) (1,353) (1,211)
Other - - 28 -
Net cash used for financing activities (300) (938) (433) (1,206)
Effect of foreign exchange rate changes on cash and cash equivalents (40) 26 (155) 53
Net increase (decrease) in cash and cash equivalents 923 (126) 1,788 936
Cash and cash equivalents at beginning of period 5,499 4,760 4,634 3,698
Cash and cash equivalents at end of period $ 6,422 $ 4,634 $ 6,422 $ 4,634
Honeywell International Inc
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
Cash provided by operating activities $ 1,668 $ 1,349 $ 4,335 $ 3,517
Expenditures for property, plant and equipment (400) (298) (947) (884)
$ 1,268 $ 1,051 $ 3,388 $ 2,633
Cash pension contributions 5 260 156 1,039
NARCO Trust establishment payments 29 - 164 -
Cash taxes relating to the sale of available for sale investments 100 - 100 -
Free cash flow $ 1,402 $ 1,311 $ 3,808 $ 3,672
We define free cash flow as cash provided by operating activities, less cash
expenditures for property, plant and equipment, cash pension contributions,
NARCO Trust establishment payments and cash taxes relating to the sale of
available for sale investments.
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 Margins Excluding Pension Mark-to-Market
Adjustment (Unaudited)
(Dollars in millions)
Three Months Ended
December 31,
2013 2012
Segment Profit $ 1,669 $ 1,496
Stock compensation expense (A) (41) (39)
Repositioning and other (A, B) (249) (96)
Pension ongoing income (expense) (A) 22 (7)
Pension mark-to-market adjustment (A) (51) (957)
Other postretirement expense (A) (13) (20)
Operating Income $ 1,337 $ 377
Pension mark-to-market adjustment (A) $ (51) $ (957)
Operating Income excluding pension mark-to-market adjustment $ 1,388 $ 1,334
Segment Profit $ 1,669 $ 1,496
÷ Sales $ 10,387 $ 9,581
Segment Profit Margin % 16.1% 15.6%
Operating Income $ 1,337 $ 377
÷ Sales $ 10,387 $ 9,581
Operating Income Margin % 12.9% 3.9%
Operating Income excluding pension mark-to-market adjustment $ 1,388 $ 1,334
÷ Sales $ 10,387 $ 9,581
Operating Income Margin excluding pension mark-to-market adjustment % 13.4% 13.9%
(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 Calculation of Segment Profit and Operating Income Margins Excluding Pension
Mark-to-Market Adjustment (Unaudited)
(Dollars in millions)
Twelve Months Ended
December 31,
2013
Segment Profit $ 6,351
Stock compensation expense (A) (170)
Repositioning and other (A, B) (699)
Pension ongoing expense (A) 90
Pension mark-to-market adjustment (A) (51)
Other postretirement expense (A) (20)
Operating Income $ 5,501
Pension mark-to-market adjustment (A) $ (51)
Operating Income excluding pension mark-to-market adjustment $ 5,552
Segment Profit $ 6,351
÷ Sales $ 39,055
Segment Profit Margin % 16.3%
Operating Income $ 5,501
÷ Sales $ 39,055
Operating Income Margin % 14.1%
Operating Income excluding pension mark-to-market adjustment $ 5,552
÷ Sales $ 39,055
Operating Income Margin excluding pension mark-to-market adjustment % 14.2%
(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 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 $ 5,879
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
EPS Impact of Gain on Sale of Available for Sale Investments (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
December 31,
2013
Gain on sale of available for sale investments $ 195
Taxes at 34.9% 68
After tax gain on sale of available for sale investments $ 127
EPS impact of gain on sale of available for sale $ 0.16
investments(1)
(1) Utilizes weighted average shares of 797.0 million
SOURCE Honeywell