Honeywell Reports Third Quarter 2014 Sales Up 5% To $10.1 Billion; EPS Of $1.47
Per Share; Raising 2014 EPS Guidance
-- Organic Sales Growth 5%; Strong Execution Across The Portfolio
-- EPS Up 19% Reported, Up 14% Using Normalized Tax Rate
-- Raising Low-End Proforma EPS Guidance To $5.50 - $5.55, From $5.45 - $5.55
MORRIS TOWNSHIP, N.J., Oct. 17, 2014 -- Honeywell (NYSE: HON)
today announced its results for the third quarter of 2014:
Total Honeywell
($ Millions, except Earnings Per Share) 3Q 2013 3Q 2014 Change
Sales 9,647 10,108 5%
Segment Margin 16.7% 17.4% 70 bps
Operating Income Margin 15.2% 16.2% 100 bps
Earnings Per Share $1.24 $1.47 19%
Earnings Per Share (At 26.5% Tax Rate) $1.25 $1.43 14%
Cash Flow from Operations 1,070 1,233 15%
Free Cash Flow * 867 974 12%
* Cash Flow from Operations Less Capital Expenditures
"Organic sales growth and a double-digit earnings increase highlighted
Honeywell's strong third quarter," said Honeywell Chairman and CEO Dave Cote.
"The continued integration and maturation of the Honeywell Operating System
throughout our global portfolio is helping to drive sales, margin, earnings,
and cash flow higher, and plenty of runway remains. We are committed to our
ongoing seed planting investments to bolster our great positions in good
industries and continuous process improvements to mitigate ongoing global
macroeconomic uncertainties. We are raising the low-end of our 2014 proforma
EPS outlook by $0.05 to $5.50-5.55 (up 11%-12%), which brings us to the
high-end of the initial guidance we provided almost a year ago. Looking ahead
to 2015, we're once again planning for a slow growth macro environment, but
expect to continue delivering strong earnings growth. We're confident that
Honeywell will continue to outperform now and over the long-term driven by a
relentless focus on new products and technologies, continued penetration of
high-growth regions, and sustained implementation of our key process
initiatives."
The company is updating its full-year 2014 guidance and now expects:
2014 Full-Year Guidance
Change
Prior Guidance Revised Guidance vs. 2013
Sales $40.2 - $40.4B $40.3 - $40.4B 3% - 4%
Segment Margin 16.8% - 17.0% ~17.0% ~70 bps
Operating Income Margin(1) 15.4% - 15.6% ~15.6% ~140 bps
Earnings Per Share(1) $5.45 - $5.55 $5.50 - $5.55 11% - 12%
Free Cash Flow(2) $3.8 - $4.0B ~$3.9B ~15%
1. Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment
2. Cash Flow from Operations Less Capital Expenditures
Third Quarter Segment Performance
Aerospace
($ Millions) 3Q 2013 3Q 2014 % Change
Sales 3,889 3,895 ~Flat
Segment Profit 730 790 8%
Segment Margin 18.8% 20.3% 150 bps
* Sales for the third quarter were up 3% organically, driven by growth across
the portfolio, but were approximately flat on a reported basis due to the
Friction Materials divestiture. Commercial OE sales were up 5% reflecting
continued strong OE build rates, as well as an increase in Business and
General Aviation (BGA) engine shipments. Commercial Aftermarket sales
increased 2% driven by strong Air Transport and Regional (ATR) spares
growth, partially offset by a decline in RMU (Retrofit, Modifications, and
Upgrades) sales in BGA and lower repair and overhaul activities. Defense &
Space sales grew 3% as a result of strong international growth and
stabilization in U.S. government sales. Transportation Systems sales were
down (10%) reported, primarily reflecting the Friction Materials
divestiture, and up 4% organically driven by new platform launches, higher
turbo gas penetration globally, and increased commercial vehicle demand in
Europe, partially offset by moderating EU light vehicle production.
* Segment profit was up 8%, and segment margins expanded 150 bps to 20.3%,
driven by productivity net of inflation, commercial excellence, and the
favorable impact of the Friction Materials divestiture.
Automation and Control Solutions
($ Millions) 3Q 2013 3Q 2014 % Change
Sales 3,375 3,671 9%
Segment Profit 523 583 11%
Segment Margin 15.5% 15.9% 40 bps
* Sales were up 9% reported, 4% organically, compared with the third quarter
of 2013, primarily driven by the favorable impact of the Intermec
acquisition and strong organic growth across Energy, Safety, and Security
(ESS), particularly in Scanning & Mobility, Industrial Safety, Security,
and Fire. Building Solutions & Distribution (BSD) saw continued strength in
the Americas Distribution business.
* Segment profit was up 11% and segment margins expanded 40 bps to 15.9%
driven by higher volume, commercial excellence, and productivity net of
inflation, partially offset by the dilutive impact of the Intermec
acquisition.
Performance Materials and Technologies
($ Millions) 3Q 2013 3Q 2014 % Change
Sales 2,383 2,542 7%
Segment Profit 413 444 8%
Segment Margin 17.3% 17.5% 20 bps
* Sales were up 7% on both an organic and reported basis compared with the
third quarter of 2013, driven by UOP catalyst and gas processing growth, an
acceleration of sales growth in Process Solutions, and higher sales across
Advanced Materials, particularly Fluorine Products.
* Segment profit was up 8% and segment margins increased 20 bps to 17.5%,
driven by higher volume and productivity net of inflation, partially offset
by price/raws headwinds in Resins & Chemicals and continued investments for
growth.
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 third quarter 2014 investor conference call or provide the
conference code HONQ314. 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,
October 17, until 11:59 p.m. EDT, October 24, by dialing (800) 723-5154
(domestic) or (402) 220-2661 (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. 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 Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Product sales $ 8,090 $ 7,693 $ 24,213 $ 22,911
Service sales 2,018 1,954 5,827 5,757
Net sales 10,108 9,647 30,040 28,668
Costs, expenses and other
Cost of products sold (A) 5,860 5,722 17,686 17,039
Cost of services sold (A) 1,268 1,220 3,705 3,713
7,128 6,942 21,391 20,752
Selling, general and
administrative
expenses (A) 1,344 1,242 4,058 3,752
Other (income) expense (21) (1) (159) (53)
Interest and other
financial charges 77 80 236 244
8,528 8,263 25,526 24,695
Income before taxes 1,580 1,384 4,514 3,973
Tax expense 388 377 1,160 975
Net income 1,192 1,007 3,354 2,998
Less: Net income attributable
to the noncontrolling interest 25 17 71 21
Net income attributable to
Honeywell $ 1,167 $ 990 $ 3,283 $ 2,977
Earnings per share of common
stock - basic $ 1.49 $ 1.26 $ 4.18 $ 3.78
Earnings per share of common
stock - assuming dilution $ 1.47 $ 1.24 $ 4.13 $ 3.73
Weighted average number of
shares outstanding-basic 784.5 786.3 784.6 786.6
Weighted average number of
shares outstanding - assuming
dilution 795.0 797.1 795.6 797.5
(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 Nine Months Ended
September 30, September 30,
Net Sales 2014 2013 2014 2013
Aerospace $ 3,895 $ 3,889 $ 11,756 $ 11,658
Automation and
Control
Solutions 3,671 3,375 10,640 9,724
Performance
Materials and
Technologies 2,542 2,383 7,644 7,286
Total $ 10,108 $ 9,647 $ 30,040 $ 28,668
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Nine Months Ended
September 30, September 30,
Segment Profit 2014 2013 2014 2013
Aerospace $ 790 $ 730 $ 2,252 $ 2,101
Automation and
Control
Solutions 583 523 1,587 1,413
Performance
Materials and
Technologies 444 413 1,392 1,325
Corporate (58) (51) (167) (157)
Total segment
profit 1,759 1,615 5,064 4,682
Other income
(expense) (A) 11 (10) 132 22
Interest and
other
financial
charges (77) (80) (236) (244)
Stock
compensation
expense (B) (41) (38) (143) (129)
Pension ongoing
income (B) 62 22 187 68
Other postretirement
expense (B) (12) (5) (37) (7)
Repositioning
and other
charges (B) (122) (120) (453) (419)
Income before taxes $ 1,580 $ 1,384 $ 4,514 $ 3,973
(A) Equity income (loss) of affiliated companies is included in segment profit
(B) Amounts included in cost of products and services sold and selling,
general and administrative expenses
Honeywell International Inc
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
September 30, December 31,
2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 6,428 $ 6,422
Accounts, notes and other receivables 8,315 7,929
Inventories 4,485 4,293
Deferred income taxes 794 849
Investments and other current assets 2,336 1,671
Total current assets 22,358 21,164
Investments and long-term receivables 447 393
Property, plant and equipment - net 5,189 5,278
Goodwill 12,923 13,046
Other intangible assets - net 2,288 2,514
Insurance recoveries for asbestos related
liabilities 466 595
Deferred income taxes 195 368
Other assets 2,315 2,077
Total assets $ 46,181 $ 45,435
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 5,212 $ 5,174
Short-term borrowings 91 97
Commercial paper 1,849 1,299
Current maturities of long-term debt 189 632
Accrued liabilities 6,606 6,979
Total current liabilities 13,947 14,181
Long-term debt 6,760 6,801
Deferred income taxes 891 804
Postretirement benefit obligations other than
pensions 955 1,019
Asbestos related liabilities 1,131 1,150
Other liabilities 3,230 3,734
Redeemable noncontrolling interest 204 167
Shareowners' equity 19,063 17,579
Total liabilities, redeemable
noncontrolling interest and
shareowners' equity $ 46,181 $ 45,435
Honeywell International Inc
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Cash flows from operating activities:
Net income $ 1,192 $ 1,007 $ 3,354 $ 2,998
Less: Net income attributable to
the noncontrolling interest 25 17 71 21
Net income attributable to
Honeywell 1,167 990 3,283 2,977
Adjustments to reconcile net
income attributable to Honeywell
to net cash provided by operating
activities:
Depreciation and amortization 227 245 698 740
Loss on sale of non-strategic
businesses and assets 1 - 11 -
Gain on sale of available for
sale investments - - (105) -
Repositioning and other
charges 122 120 453 419
Net payments for repositioning
and other charges (167) (220) (301) (517)
Pension and other
postretirement income (50) (17) (150) (61)
Pension and other
postretirement benefit
payments (38) (40) (123) (253)
Stock compensation expense 41 38 143 129
Deferred income taxes 187 72 255 257
Excess tax benefits from share (22) (20) (71) (101)
based payment arrangements
Other (274) 169 (207) 35
Changes in assets and
liabilities, net of the
effects of acquisitions
and divestitures:
Accounts, notes and other
receivables (104) (187) (529) (382)
Inventories (57) (58) (279) (94)
Other current assets 49 (32) 181 (28)
Accounts payable 54 (2) 154 (32)
Accrued liabilities 97 12 (151) (422)
Net cash provided by operating
activities 1,233 1,070 3,262 2,667
Cash flows from investing activities:
Expenditures for property, plant
and equipment (259) (203) (680) (547)
Proceeds from disposals of
property, plant and equipment 1 1 12 7
Increase in investments (1,415) (243) (3,139) (703)
Decrease in investments 1,181 272 2,124 648
Cash paid for acquisitions, net of
cash acquired (2) (603) (4) (1,063)
Proceeds from sales of businesses,
net of fees paid 156 - 157 -
Other (96) 85 (109) 104
Net cash used for investing activities (434) (691) (1,639) (1,554)
Cash flows from financing activities:
Net (decrease) increase in
commercial paper (400) 899 550 1,699
Net increase (decrease) in
short-term borrowings 1 (3) (5) 18
Proceeds from issuance of common
stock 45 59 206 362
Proceeds from issuance of
long-term debt 34 14 79 27
Payments of long-term debt (1) (3) (607) (604)
Excess tax benefits from share
based payment arrangements 22 20 71 101
Repurchases of common stock (138) (167) (689) (769)
Cash dividends paid (365) (330) (1,101) (995)
Other (7) 28 (7) 28
Net cash (used for) provided by
financing activities (809) 517 (1,503) (133)
Effect of foreign exchange rate
changes on cash and cash equivalents (144) 54 (114) (115)
Net (decrease) increase in cash and
cash equivalents (154) 950 6 865
Cash and cash equivalents at beginning
of period 6,582 4,549 6,422 4,634
Cash and cash equivalents at end of
period $ 6,428 $ 5,499 $ 6,428 $ 5,499
Honeywell International Inc
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended
September 30,
2014 2013
Cash provided by operating activities $ 1,233 $ 1,070
Expenditures for property, plant and (259) (203)
equipment
Free cash flow $ 974 $ 867
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.
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
September 30,
2014 2013
Segment Profit $ 1,759 $ 1,615
Stock compensation expense (A) (41) (38)
Repositioning and other (A, B) (132) (131)
Pension ongoing income (A) 62 22
Other postretirement expense (A) (12) (5)
Operating Income $ 1,636 $ 1,463
Segment Profit $ 1,759 $ 1,615
÷ Sales $ 10,108 $ 9,647
Segment Profit Margin % 17.4% 16.7%
Operating Income $ 1,636 $ 1,463
÷ Sales $ 10,108 $ 9,647
Operating Income Margin % 16.2% 15.2%
(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
September 30,
2014 2013
Income before taxes $ 1,580 $ 1,384
Taxes at 26.5% 419 367
Net income at 26.5% tax rate $ 1,161 $ 1,017
Less: Net income attributable to the noncontrolling
interest 25 17
Net income attributable to Honeywell at 26.5% tax
rate $ 1,136 $ 1,000
Weighted average number of shares outstanding -
assuming dilution 795.0 797.1
EPS at 26.5% tax rate $ 1.43 $ 1.25
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
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 income (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 billions)
2014 Guidance
Segment Profit $6.8 - 6.9
Stock compensation expense (A) ~(0.2)
Repositioning and other (A, B) ~(0.6)
Pension ongoing income (A) ~0.2
Pension mark-to-market adjustment (A) TBD
Other postretirement expense (A) ~(0.1)
Operating Income $6.2 - 6.3
Pension mark-to-market adjustment (A) TBD
Operating Income excluding pension mark-to-market adjustment $6.2 - 6.3
Segment Profit $6.8 - 6.9
÷ Sales $40.3 - 40.4
Segment Profit Margin % ~ 17.0%
Operating Income $6.2 - 6.3
÷ Sales $40.3 - 40.4
Operating Income Margin % ~ 15.6%
Operating Income excluding pension mark-to-market adjustment $6.2 - 6.3
÷ Sales $40.3 - 40.4
Operating Income Margin excluding pension mark-to-market
adjustment % ~ 15.6%
(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 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.
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%.
SOURCE Honeywell