TIDMHON
Honeywell Reports Second Quarter 2015 Sales Of $9.8 Billion; EPS Of $1.51 Per
Share; Raising 2015 EPS Guidance
- EPS Up 9% Reported, Up 10% Normalized at 26.5% Tax Rate
- Core Organic Sales Growth 3%* Driven By Commercial Aero, ESS and Advanced
Materials
- Reported Sales Decline 5% Due to Foreign Currency and FM Divestiture
- Segment Margin Improvement of 170 bps to 18.4%
- Raising 2015 EPS Guidance Range to $6.05 - $6.15, Up 9%-11%
MORRIS TOWNSHIP, N.J., July 17, 2015 -- Honeywell (NYSE: HON) today announced
its results for the second quarter of 2015:
Total Honeywell
($ Millions, except Earnings Per Share) 2Q 2014 2Q 2015 Change
Sales 10,253 9,775 (5%)
Segment Margin 16.7% 18.4% 170 bps
Operating Income Margin 15.4% 17.6% 220 bps
Earnings Per Share $1.38 $1.51 9%
Earnings Per Share (At 26.5% Tax Rate) $1.37 $1.51 10%
Cash Flow from Operations 1,341 1,408 5%
Free Cash Flow (1) 1,112 1,165 5%
(1) Cash Flow from Operations Less Capital Expenditures
"Honeywell had a terrific second quarter capping off a strong first half of
2015," said Honeywell Chairman and CEO Dave Cote. "We delivered 3% core organic
sales growth and had another quarter of double-digit earnings growth when
normalized for tax. We saw growth acceleration in both the short- and
long-cycle businesses within Aerospace, continued growth in our commercial and
industrial businesses within ACS, and higher volume across our Advanced
Materials portfolio, particularly in Fluorine Products. We saw margin expansion
in each segment, with a significant portion from gross margin, as our new
products, process focus, disciplined cost management, and restructuring
continue to distinguish Honeywell's performance. We remain committed to seed
planting and process improvements throughout our portfolio. Once again we
proactively funded repositioning actions that will improve our cost position
and drive the efficiencies necessary for winning in a slow growth global
economy. Our great first half performance gives us confidence to again raise
the low end of our full-year EPS guidance range by $0.05 to $6.05-$6.15, and we
remain committed to our full-year core organic sales growth and free cash flow
estimates. We believe that our balanced portfolio of short- and long-cycle
businesses, penetration in High Growth Regions, and the deployment of our key
process initiatives will continue to drive results this year and over the long
term."
The company is updating its full-year 2015 guidance and now expects:
2015 Full-Year Guidance
Change
Prior Revised vs. 2014
Guidance Guidance
Sales $39.0 - $39.0 - (2%) - (3%)
$39.6B $39.6B
Core Organic Growth 3% 3%
Segment Margin 18.3% - 18.6% 18.4% - 18.6% 180 - 200 bps
(2)
Operating Income Margin (Ex-Pension 17.4% - 17.7% 17.5% - 17.7% 240 - 260 bps
MTM) (3)
Earnings Per Share (Ex-Pension MTM) $6.00 - $6.15 $6.05 - $6.15 9% - 11%
Free Cash Flow (1) $4.2 - $4.3B $4.2 - $4.3B 8% - 10%
1. Cash Flow from Operations Less Capital Expenditures
2. Segment Margin ex-4Q14 $184M OEM Incentives Up 140 - 160 bps
3. Operating Margin ex-4Q14 $184M OEM Incentives Up 200 - 220 bps
Second Quarter Segment Performance
Aerospace
($ Millions) 2Q 2014 2Q 2015 % Change
Sales 4,010 3,827 (5%)
Segment Profit 759 777 2%
Segment Margin 18.9% 20.3% 140 bps
* Sales for the second quarter were up 3% on a core organic basis, and were
down 5% reported driven by the Friction Materials divestiture and the
unfavorable impact of foreign currency in Transportation Systems.
Commercial OE sales were up 6% on a reported and core organic basis driven
by strong Business and General Aviation (BGA) engine shipments. Commercial
Aftermarket sales were up 3% on a core organic basis (2% reported) driven
by continued growth in repair and overhaul activities and Air Transport and
Regional (ATR) spares growth, partially offset by a decline in RMU
(Retrofit, Modifications, and Upgrades) sales in BGA. Defense & Space sales
increased 1% on a core organic basis (flat reported) driven by strong
international growth, partially offset by lower sales to the U.S.
government. Transportation Systems sales were up 5% on a core organic basis
driven by new platform launches and higher gas turbo penetration globally.
TS sales were down 25% reported due to the Friction Materials divestiture
and the unfavorable impact of foreign currency.
* Segment profit was up 2% and segment margins expanded 140 bps to 20.3%,
driven by commercial excellence, the favorable impact of the Friction
Materials divestiture, foreign currency hedges, and productivity net of
inflation, partially offset by the margin impact of higher OE shipments.
Automation and Control Solutions
($ Millions) 2Q 2014 2Q 2015 % Change
Sales 3,607 3,553 (1%)
Segment Profit 533 567 6%
Segment Margin 14.8% 16.0% 120 bps
* Sales for the second quarter were up 4% on a core organic basis and down 1%
reported driven by the unfavorable impact of foreign currency. Energy,
Safety, and Security (ESS) sales increased 5% on a core organic basis (flat
reported) driven primarily by continued growth in Scanning & Mobility,
Security, and Fire Safety. Building Solutions & Distribution (BSD) sales
increased 3% on a core organic basis (down 4% reported) driven by continued
strength in Americas Distribution.
* Segment profit was up 6% and segment margins expanded 120 bps to 16.0%
driven by productivity net of inflation and higher volume, partially offset
by continued investments for growth.
Performance Materials and Technologies
($ Millions) 2Q 2014 2Q 2015 % Change
Sales 2,636 2,395 (9%)
Segment Profit 475 509 7%
Segment Margin 18.0% 21.3% 330 bps
* Sales were down 1% on a core organic basis and down 9% reported driven by
the unfavorable impact of foreign currency and raw materials pricing in
Resins & Chemicals. The decrease in core organic sales was primarily driven
by lower volume in UOP and HPS associated with delays in customer projects
and lower UOP catalyst shipments, partially offset by higher volume across
Advanced Materials, particularly in Fluorine Products.
* Segment profit was up 7% and segment margins increased 330 bps to 21.3%,
driven by productivity net of inflation, commercial excellence, and the
impact of raw materials pricing in Resins & Chemicals.
Honeywell will discuss its results during its investor conference call today
starting at 9:30 a.m. EDT. To participate, please dial (888) 298-3451
(domestic) or (719) 457-2605 (international) approximately ten minutes before
the 9:30 a.m. EDT start. Please mention to the operator that you are dialing in
for Honeywell's second quarter 2015 earnings call or provide the conference
code HON2Q15. 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 (www.honeywell.com/investor). Investors can
hear a replay of the conference call from 12:30 p.m. EDT, July 17, until 12:30
p.m. EDT, July 24, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 8213026.
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.
*Throughout this press release, core organic sales growth refers to reported
sales growth less the impacts from foreign currency movement, M&A and raw
materials pricing in the Resins & Chemicals business of PMT. The raw materials
pricing impact is excluded in instances where raw materials costs are passed
through to customers, which drives fluctuations in selling prices not
necessarily tied to volume growth. A reconciliation of core organic sales
growth to reported sales growth is provided in the attached financial tables.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Product sales $ $ $ $
7,798 8,278 15,162 16,123
Service sales 1,977 1,975 3,826 3,809
Net sales 9,775 10,253 18,988 19,932
Costs, expenses and other
Cost of products sold (A) 5,541 6,047 10,754 11,826
Cost of services sold (A) 1,273 1,249 2,422 2,437
6,814 7,296 13,176 14,263
Selling, general and 1,242 1,375 2,472 2,714
administrative expenses (A)
Other (income) expense (20) (21) (40) (138)
Interest and other 77 80 154 159
financial charges
8,113 8,730 15,762 16,998
Income before taxes 1,662 1,523 3,226 2,934
Tax expense 440 397 858 772
Net income 1,222 1,126 2,368 2,162
Less: Net income attributable 28 27 58 46
to the noncontrolling interest
Net income attributable to $ $ $ $
Honeywell 1,194 1,099 2,310 2,116
Earnings per share of common $ $ $ $
stock - basic 1.52 1.40 2.95 2.70
Earnings per share of common $ $ $ $
stock - assuming dilution 1.51 1.38 2.91 2.66
Weighted average number of 783.3 784.5 783.5 784.7
shares outstanding - basic
Weighted average number of 792.9 795.4 793.4 795.9
shares outstanding - assuming
dilution
(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 2015 2014 2015 2014
Aerospace $ $ $ $
3,827 4,010 7,434 7,861
Automation and Control 3,553 3,607 6,817 6,969
Solutions
Performance Materials and 2,395 2,636 4,737 5,102
Technologies
Total $ $ $ $
9,775 10,253 18,988 19,932
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Six Months Ended
June 30, June 30,
Segment Profit 2015 2014 2015 2014
Aerospace $ $ $ $
777 759 1,529 1,462
Automation and Control 567 533 1,083 1,004
Solutions
Performance Materials and 509 475 1,012 948
Technologies
Corporate (50) (58) (100) (109)
Total segment profit 1,803 1,709 3,524 3,305
Other income (A) 12 10 24 121
Interest and other (77) (80) (154) (159)
financial charges
Stock compensation (39) (50) (91) (102)
expense (B)
Pension ongoing income 103 64 203 125
(B)
Other postretirement (11) (13) (20) (25)
expense (B)
Repositioning and other (129) (117) (260) (331)
charges (B)
Income before taxes $ $ $ $
1,662 1,523 3,226 2,934
(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,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ $
5,954 6,959
Accounts, notes and other receivables 8,237 7,960
Inventories 4,447 4,405
Deferred income taxes 659 722
Investments and other current assets 3,883 2,145
Total current assets 23,180 22,191
Investments and long-term receivables 491 465
Property, plant and equipment - net 5,381 5,383
Goodwill 12,763 12,788
Other intangible assets - net 2,141 2,208
Insurance recoveries for asbestos related liabilities 433 454
Deferred income taxes 365 404
Other assets 1,658 1,558
Total assets $ $
46,412 45,451
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ $
5,352 5,365
Short-term borrowings 25 51
Commercial paper 2,795 1,647
Current maturities of long-term debt 1,337 939
Accrued liabilities 6,065 6,771
Total current liabilities 15,574 14,773
Long-term debt 5,562 6,046
Deferred income taxes 300 236
Postretirement benefit obligations other than pensions 921 911
Asbestos related liabilities 1,198 1,200
Other liabilities 4,001 4,282
Redeemable noncontrolling interest 259 219
Shareowners' equity 18,597 17,784
Total liabilities, redeemable noncontrolling $ $
interest and shareowners' equity 46,412 45,451
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Six Months Ended
Ended
June 30, June 30,
2015 2014 2015 2014
Cash flows from operating activities:
Net income $ $ $ $ 2,162
1,222 1,126 2,368
Less: Net income attributable to the 28 27 58 46
noncontrolling interest
Net income attributable to Honeywell 1,194 1,099 2,310 2,116
Adjustments to reconcile net income
attributable to Honeywell to net
cash provided by operating activities:
Depreciation 172 165 335 333
Amortization 54 68 107 138
Loss on sale of non-strategic - 10 - 10
businesses and assets
Gain on sale of available for sale - - - (105)
investments
Repositioning and other charges 129 117 260 331
Net payments for repositioning and (115) (9) (215) (134)
other charges
Pension and other postretirement (92) (51) (183) (100)
income
Pension and other postretirement (39) (49) (48) (85)
benefit payments
Stock compensation expense 39 50 91 102
Deferred income taxes 33 66 126 68
Excess tax benefits from share based (9) (19) (56) (49)
payment arrangements
Other 205 91 103 67
Changes in assets and liabilities,
net of the effects of
acquisitions and divestitures:
Accounts, notes and other (80) (271) (250) (425)
receivables
Inventories 61 (107) (25) (222)
Other current assets (96) (104) (38) 132
Accounts payable 88 141 (24) 100
Accrued liabilities (136) 144 (664) (248)
Net cash provided by operating activities 1,408 1,341 1,829 2,029
Cash flows from investing activities:
Expenditures for property, plant and (243) (229) (408) (421)
equipment
Proceeds from disposals of property, 2 4 3 11
plant and equipment
Increase in investments (2,365) (1,093) (3,866) (1,724)
Decrease in investments 953 533 2,059 943
Cash paid for acquisitions, net of cash - (2) (185) (2)
acquired
Proceeds from sales of businesses, net - 1 2 1
of fees paid
Other 28 (74) (150) (13)
Net cash used for investing activities (1,625) (860) (2,545) (1,205)
Cash flows from financing activities:
Net increase (decrease) in commercial 100 (150) 1,148 950
paper
Net (decrease) increase in short-term (23) 4 (19) (6)
borrowings
Proceeds from issuance of common stock 47 69 125 161
Proceeds from issuance of long-term debt 11 20 14 45
Payments of long-term debt (22) (4) (57) (606)
Excess tax benefits from share based 9 19 56 49
payment arrangements
Repurchases of common stock (123) (231) (486) (551)
Cash dividends paid (436) (373) (851) (736)
Net cash used for financing activities (437) (646) (70) (694)
Effect of foreign exchange rate changes on 33 75 (219) 30
cash and cash equivalents
Net (decrease) increase in cash and cash (621) (90) (1,005) 160
equivalents
Cash and cash equivalents at beginning of 6,575 6,672 6,959 6,422
period
Cash and cash equivalents at end of period $ $ $ $ 6,582
5,954 6,582 5,954
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended
June 30,
2015 2014
Cash provided by operating activities $ 1,408 $ 1,341
Expenditures for property, plant and equipment (243) (229)
Free cash flow $ 1,165 $ 1,112
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 Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Segment Profit $ $ $ $
1,803 1,709 3,524 3,305
Stock compensation expense (39) (50) (91) (102)
(A)
Repositioning and other (A, (137) (128) (276) (348)
B)
Pension ongoing income (A) 103 64 203 125
Other postretirement (11) (13) (20) (25)
expense (A)
Operating Income $ $ $ $
1,719 1,582 3,340 2,955
Segment Profit $ $ $ $
1,803 1,709 3,524 3,305
÷ Sales $ $ $ $
9,775 10,253 18,988 19,932
Segment Profit Margin % 18.4% 16.7% 18.6% 16.6%
Operating Income $ $ $ $
1,719 1,582 3,340 2,955
÷ Sales $ $ $ $
9,775 10,253 18,988 19,932
Operating Income Margin % 17.6% 15.4% 17.6% 14.8%
(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,
2014
Segment Profit $ 6,696
Stock compensation expense (A) (187)
Repositioning and other (A, B) (634)
Pension ongoing income (A) 254
Pension mark-to-market adjustment (A) (249)
Other postretirement expense (A) (49)
Operating Income $ 5,831
Pension mark-to-market adjustment (A) (249)
Operating Income excluding pension mark-to-market adjustment $ 6,080
Segment Profit $ 6,696
÷ Sales $ 40,306
Segment Profit Margin % 16.6%
Operating Income $ 5,831
÷ Sales $ 40,306
Operating Income Margin % 14.5%
Operating Income excluding pension mark-to-market adjustment $ 6,080
÷ Sales $ 40,306
Operating Income Margin excluding pension mark-to-market 15.1%
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.
Calculation of EPS at 26.5% Tax Rate (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
June 30,
2015 2014
Income before taxes $ $
1,662 1,523
Taxes at 26.5% 440 404
Net income at 26.5% tax rate 1,222 1,119
Less: Net income attributable to the noncontrolling 28 27
interest
Net income attributable to Honeywell at 26.5% tax $ $
rate 1,194 1,092
Weighted average number of shares outstanding - 792.9 795.4
assuming dilution
EPS at 26.5% tax rate $ $
1.51 1.37
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 Core Organic Sales Growth (Unaudited)
Three Months Ended
June 30,
2015
Honeywell
Reported sales growth (5%)
Foreign currency, acquisitions, divestitures and other 7%
Raw Materials Pricing in R&C 1%
Core organic sales growth 3%
PMT
Reported sales growth (9%)
Foreign currency, acquisitions, divestitures and other 4%
Raw Materials Pricing in R&C 4%
Core organic sales growth (1%)
Throughout this press release, core organic sales growth refers to reported
sales growth less the impacts from foreign currency movement, M&A and raw
materials pricing in the Resins & Chemicals business of PMT. The raw materials
pricing impact is excluded in instances where raw materials costs are passed
through to customers, which drives fluctuations in selling prices not
necessarily tied to volume growth.
We believe core organic sales growth 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 Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Twelve Months Ended
December 31,
2014
Cash provided by operating activities $ 5,024
Expenditures for property, plant and equipment (1,094)
Free cash flow $ 3,930
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,
2014
EPS $
5.33
Pension mark-to-market adjustment 0.23
EPS, excluding pension mark-to-market $
adjustment 5.56
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 795.2
million. Pension mark-to-market adjustment uses a blended tax rate of 28.1%.
Contacts:
Media Investor Relations
Robert C. Ferris Mark Macaluso
(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com mark.macaluso@honeywell.com
END
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