Honeywell Reports First Quarter 2014 Sales Of $9.7 Billion; EPS Of $1.28 Per
Share
- Organic Sales Growth 1%, Up 3% Excluding Defense & Space
- EPS Up 6% Year-Over-Year Reported, Up 10% Using Normalized Tax Rate
- $0.10 EPS Gain Funding $0.11 EPS Restructuring And Other Actions
- Increasing Proforma EPS Guidance To $5.40 - $5.55, From $5.35 - $5.55
MORRIS TOWNSHIP, N.J., April 17, 2014 -- Honeywell (NYSE: HON)
today announced its results for the first quarter of 2014:
Total Honeywell
($ Millions, except Earnings Per Share) 1Q 2013 1Q 2014 Change
Sales 9,328 9,679 4%
Segment Margin 16.2% 16.5% 30 bps
Operating Income Margin 14.1% 14.2% 10 bps
Earnings Per Share $1.21 $1.28 6%
Earnings Per Share (At 26.5% Tax Rate) $1.16 $1.28 10%
Cash Flow from Operations 341 688 102%
Free Cash Flow * 193 496 157%
* Cash Flow from Operations Less Capital Expenditures
"Honeywell had a good start to the year with strong margin expansion driving
better than expected earnings," said Honeywell Chairman and CEO Dave Cote. "We
saw 3% organic sales growth ex-Defense & Space, with strong execution across
each of the businesses driving earnings above the high-end of our guidance. We
remain cautiously optimistic on the macro environment, even with some nice
momentum exiting the quarter in our short-cycle and long-cycle businesses
driving organic sales growth acceleration as we progress through the year. As a
result of the first quarter performance and overall favorable outlook for our
key end markets, we're raising the low-end of our 2014 Proforma EPS outlook by
$0.05 and our new guidance range is $5.40-$5.55. We are also increasing our
cash flow forecast for the year given the strong first quarter working capital
performance. We remain confident in our outlook and intend to perform better
than our peers driven by our diversity of opportunity, relentless seed planting
in new products and technologies, continued penetration of High Growth Regions
(HGRs), and growing traction on key process initiatives. We've also proactively
redeployed non-operating gains and operational earnings to fund smart new
repositioning projects benefiting 2015 and beyond. Our recently announced
organizational changes demonstrate the strength of our organization, add
further evidence to the effectiveness of the Honeywell operating model, and
reaffirm our belief that the best is yet to come for Honeywell."
The company is updating its full-year 2014 guidance and now expects:
Full-Year Guidance
2014 2014 Change
Prior Guidance Revised Guidance vs. 2013
Sales $40.3 - $40.7B $40.3 - $40.7B 3% - 4%
Segment Margin 16.6% - 16.9% 16.6% - 16.9% 30 - 60 bps(3)
Operating Income Margin(1) 15.2% - 15.5% 15.2% - 15.5% 100 - 130 bps
Earnings Per Share(1) $5.35 - $5.55 $5.40 - $5.55 9% - 12%
Free Cash Flow(2) $3.5 - $3.7B $3.8 - $4.0B ~15%
1. Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment
2. Cash Flow from Operations Less Capital Expenditures; Definition of Free Cash
Flow No Longer Excludes NARCO Trust Establishment Payments, Cash Pension
Contributions, and Cash Taxes Relating to the Sale of Available for Sale
Investments
3. Segment Margin ex-M&A up 50 - 80 bps
In April 2014, Honeywell announced the realignment of our Honeywell Process
Solutions (HPS) business from Automation and Control Solutions (ACS) into
Performance Materials and Technologies (PMT). Effective with the reporting of
second quarter 2014 results, Honeywell will report its financial performance
based on the inclusion of HPS in PMT. During the second quarter of 2014
Honeywell will make available segment results revised for the new reporting
structure to provide financial information on a basis consistent with the new
reporting structure.
First Quarter Segment Performance
Aerospace
($ Millions) 1Q 2013 1Q 2014 % Change
Sales 2,911 2,858 (2%)
Segment Profit 551 549 ~Flat
Segment Margin 18.9% 19.2% 30 bps
* Sales were down (2%) compared with the first quarter of 2013 driven by an
(8%) decline in Defense & Space sales as a result of planned program ramp
downs and delays, as well as lower Government Services, partially offset by
Commercial growth. Commercial OE sales were up 1% in the quarter driven by
continued strong OE build rates and favorable platform mix, partially
offset by lower regional jet sales. Commercial Aftermarket growth of 4% was
driven by a 14% increase in spares sales, partially offset by lower
maintenance activities.
* Segment profit was approximately flat, and segment margins expanded 30 bps
to 19.2%, driven by commercial excellence, productivity net of inflation
and favorable aftermarket mix, partially offset by lower volume.
Automation and Control Solutions
($ Millions) 1Q 2013 1Q 2014 % Change
Sales 3,786 4,074 8%
Segment Profit 523 580 11%
Segment Margin 13.8% 14.2% 40 bps
* Sales were up 8% reported, 2% organic, compared with the first quarter of
2013, primarily driven by the favorable impact of acquisitions, growth in
Energy, Safety, and Security, particularly Environmental and Combustion
Controls (ECC) and Life Safety, with continued strong sales in U.S.
residential end markets, new product introductions, and improving
non-residential activity, partially offset by anticipated program ramp
downs in Scanning & Mobility. ACS also had higher service and software
sales in Process Solutions.
* Segment profit was up 11% and segment margins expanded 40 bps to 14.2%
driven by higher sales volume, commercial excellence and productivity net
of inflation, partially offset by the dilutive impact of acquisitions and
continued investments for growth.
Performance Materials and Technologies
($ Millions) 1Q 2013 1Q 2014 % Change
Sales 1,717 1,754 2%
Segment Profit 374 364 (3%)
Segment Margin 21.8% 20.8% (100) bps
* Sales were up 2% compared with the first quarter of 2013, driven by
increased UOP catalyst and gas processing volume and higher volumes in
Advanced Materials, partially offset by lower equipment, licensing and
service sales, and pricing headwinds in Fluorine Products and Resins &
Chemicals, which are expected to moderate over the remainder of the year.
* Segment profit was down (3%) and segment margins decreased (100) bps to
20.8%, driven by unfavorable petrochemical catalyst shipment mix versus the
prior year, price/raw headwinds in Fluorine Products and Resins &
Chemicals, and continued investments for growth, partially offset by
productivity net of inflation.
Transportation Systems
($ Millions) 1Q 2013 1Q 2014 % Change
Sales 914 993 9%
Segment Profit 111 154 39%
Segment Margin 12.1% 15.5% 340 bps
* Sales were up 9% reported, 7% organic, compared with the first quarter of
2013, driven by continued growth from new platform launches, higher global
turbo gas penetration and light vehicle production, and increased
commercial vehicle demand globally.
* Segment profit was up 39% and segment margins increased 340 bps to 15.5%
primarily driven by strong Turbo productivity and volume leverage, and
operational improvements.
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 first quarter 2014 investor conference call or provide the
conference code HONQ114. 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,
April 17, until 11:59 p.m. EDT, April 24, by dialing (800) 839-1162 (domestic)
or (402) 220-0398 (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.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
March 31,
2014 2013
Product sales $ 7,845 $ 7,474
Service sales 1,834 1,854
Net sales 9,679 9,328
Costs, expenses and other
Cost of products sold (A) 5,779 5,567
Cost of services sold (A) 1,188 1,216
6,967 6,783
Selling, general and administrative expenses (A) 1,339 1,229
Other (income) expense (117) (28)
Interest and other financial charges 79 84
8,268 8,068
Income before taxes 1,411 1,260
Tax expense 375 291
Net income 1,036 969
Less: Net income attributable to the noncontrolling interest 19 3
Net income attributable to Honeywell $ 1,017 $ 966
Earnings per share of common stock - basic $ 1.30 $ 1.23
Earnings per share of common stock - assuming dilution $ 1.28 $ 1.21
Weighted average number of shares outstanding-basic 784.9 785.8
Weighted average number of shares outstanding - assuming dilution 796.4 797.1
(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
March 31,
Net Sales 2014 2013
Aerospace $ 2,858 $ 2,911
Automation and Control Solutions 4,074 3,786
Performance Materials and Technologies 1,754 1,717
Transportation Systems 993 914
Total $ 9,679 $ 9,328
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended
March 31,
Segment Profit 2014 2013
Aerospace $ 549 $ 551
Automation and Control Solutions 580 523
Performance Materials and Technologies 364 374
Transportation Systems 154 111
Corporate (51) (51)
Total segment profit 1,596 1,508
Other income (expense) (A) 111 19
Interest and other financial charges (79) (84)
Stock compensation expense (B) (52) (54)
Pension ongoing income (B) 61 21
Other postretirement expense (B) (12) (22)
Repositioning and other charges (B) (214) (128)
Income before taxes $ 1,411 $ 1,260
(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)
March 31, December 31,
2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 6,672 $ 6,422
Accounts, notes and other receivables 8,081 7,929
Inventories 4,407 4,293
Deferred income taxes 840 849
Investments and other current assets 1,531 1,671
Total current assets 21,531 21,164
Investments and long-term receivables 465 393
Property, plant and equipment - net 5,284 5,278
Goodwill 13,028 13,046
Other intangible assets - net 2,445 2,514
Insurance recoveries for asbestos related liabilities 584 595
Deferred income taxes 217 368
Other assets 2,223 2,077
Total assets $ 45,777 $ 45,435
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 5,133 $ 5,174
Short-term borrowings 88 97
Commercial paper 2,399 1,299
Current maturities of long-term debt 65 632
Accrued liabilities 6,668 6,979
Total current liabilities 14,353 14,181
Long-term debt 6,804 6,801
Deferred income taxes 757 804
Postretirement benefit obligations other than pensions 998 1,019
Asbestos related liabilities 1,156 1,150
Other liabilities 3,490 3,734
Redeemable noncontrolling interest 176 167
Shareowners' equity 18,043 17,579
Total liabilities, redeemable noncontrolling
interest and shareowners' equity $ 45,777 $ 45,435
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2014 2013
Cash flows from operating activities:
Net income $ 1,036 $ 969
Less: Net income attributable to the noncontrolling
interest 19 3
Net income attributable to Honeywell 1,017 966
Adjustments to reconcile net income attributable to
Honeywell to net cash provided by operating activities:
Depreciation and amortization 238 248
Gain on sale of available for sale investments (105) -
Repositioning and other charges 214 128
Net payments for repositioning and other charges (125) (98)
Pension and other postretirement (income) expense (49) 1
Pension and other postretirement benefit payments (36) (171)
Stock compensation expense 52 54
Deferred income taxes 2 27
Excess tax benefits from share based payment
arrangements (30) (24)
Other (24) (33)
Changes in assets and liabilities, net of the effects
of acquisitions and divestitures:
Accounts, notes and other receivables (154) (142)
Inventories (115) (51)
Other current assets 236 18
Accounts payable (41) (295)
Accrued liabilities (392) (287)
Net cash provided by operating activities 688 341
Cash flows from investing activities:
Expenditures for property, plant and equipment (192) (148)
Proceeds from disposals of property, plant and equipment 7 -
Increase in investments (631) (174)
Decrease in investments 410 166
Cash paid for acquisitions, net of cash acquired - (122)
Other 61 (33)
Net cash used for investing activities (345) (311)
Cash flows from financing activities:
Net increase in commercial paper 1,100 800
Net (decrease) increase in short-term borrowings (10) 8
Proceeds from issuance of common stock 92 164
Proceeds from issuance of long-term debt 25 7
Payments of long-term debt (602) (600)
Excess tax benefits from share based payment arrangements 30 24
Repurchases of common stock (320) (139)
Cash dividends paid (363) (322)
Net cash used for financing activities (48) (58)
Effect of foreign exchange rate changes on cash and cash
equivalents (45) (67)
Net increase (decrease) in cash and cash equivalents 250 (95)
Cash and cash equivalents at beginning of period 6,422 4,634
Cash and cash equivalents at end of period $ 6,672 $ 4,539
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities
to Free Cash Flow (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2014 2013
Cash provided by operating activities $ 688 $ 341
Expenditures for property, plant and equipment (192) (148)
Free cash flow $ 496 $ 193
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.
Previously, we defined 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
Reconciliation of Cash Provided by Operating
Activities to Free Cash Flow (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2013
Cash provided by operating activities $ 341
Expenditures for property, plant and equipment (148)
$ 193
Cash pension contributions 134
Free cash flow $ 327
Honeywell International Inc.
Reconciliation of Segment Profit to Operating Income
and Calculation of Segment Profit and Operating Income Margins (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2014 2013
Segment Profit $ 1,596 $ 1,508
Stock compensation expense (A) (52) (54)
Repositioning and other (A, B) (220) (137)
Pension ongoing income (A) 61 21
Other postretirement expense (A) (12) (22)
Operating Income $ 1,373 $ 1,316
Segment Profit $ 1,596 $ 1,508
÷ Sales $ 9,679 $ 9,328
Segment Profit Margin % 16.5% 16.2%
Operating Income $ 1,373 $ 1,316
÷ Sales $ 9,679 $ 9,328
Operating Income Margin % 14.2% 14.1%
(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.
Calculation of EPS at 26.5% Tax Rate (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
March 31,
2014 2013
Income before taxes $ 1,411 $ 1,260
Taxes at 26.5% 374 334
Net income at 26.5% tax rate $ 1,037 $ 926
Less: Net income attributable to the noncontrolling
interest 19 3
Net income attributable to Honeywell at 26.5% tax
rate $ 1,018 $ 923
Weighted average number of shares outstanding -
assuming dilution 796.4 797.1
EPS at 26.5% tax rate $ 1.28 $ 1.16
We believe EPS adjusted to expected full-year tax rate at 26.5% is a measure
that is 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
March 31,
2014
Gain on sale of available for sale investments $ 105
Taxes at 26.5% 28
After tax gain on sale of available for sale investments $ 77
EPS impact of gain on sale of available for sale investments(1) $ 0.10
(1) Utilizes weighted average shares of 796.4 million.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to
Free Cash Flow (Unaudited)
(Dollars in millions)
Twelve Months Ended
December 31,
2013
Cash provided by operating activities $ 4,335
Expenditures for property, plant and equipment (947)
Free cash flow $ 3,388
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.
Previously, we defined 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.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to
Free Cash Flow (Unaudited)
(Dollars in millions)
Twelve Months Ended
December 31,
2013
Cash provided by operating activities $ 4,335
Expenditures for property, plant and equipment (947)
$ 3,388
Cash pension contributions 156
NARCO Trust establishment payments 164
Cash taxes relating to the sale of available for sale
investments 100
Free cash flow $ 3,808
Honeywell International Inc.
Reconciliation of Earnings Per Share to Earnings Per Share,
Excluding Pension Mark-to-Market Adjustment
(Unaudited)
Twelve Months Ended
December 31,
2013
EPS $ 4.92
Pension mark-to-market adjustment 0.05
EPS, excluding pension mark-to-market adjustment $ 4.97
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 - assuming dilution of 797.3
million. Mark-to-market uses a blended tax rate of 25.5%.
Honeywell International Inc.
Defense and Space Sales (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2014 2013
Defense and Space Sales $ 1,092 $ 1,192
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