TIDMHON
Honeywell Reports Full-Year 2015 Sales Of $38.6 Billion; Earnings Up 10% To
$6.10
- 4Q15 EPS (Ex-Pension MTM) of $1.58, Up 10%; Core Organic Sales Flat*
- 4Q15 Segment Margin Improvement of 290 bps to 18.8%, Up 140 bps Ex-4Q14 $184M
OEM Incentives
- Completed Acquisition of Elster on December 29, 2015, Integration Underway
- Reaffirming 2016 EPS Guidance (Ex-Pension MTM) of $6.45-$6.70, Up 6-10%
MORRIS PLAINS, N.J., Jan. 29, 2016 -- Honeywell (NYSE: HON) today announced
results for the fourth quarter and full-year of 2015:
Total Honeywell
($ Millions, except Earnings Per Share) FY 2014 FY 2015 Change
Sales 40,306 38,581 (4%)
Segment Margin 16.6% 18.8% 220 bps
Operating Income Margin (Ex-Pension MTM) 15.1% 17.9% 280 bps
Earnings Per Share (Reported) $5.33 $6.04 13%
Earnings Per Share (Ex-Pension MTM) $5.56 $6.10 10%
Cash Flow from Operations 5,024 5,454 9%
Free Cash Flow (1) 3,930 4,381 11%
4Q 2014 4Q 2015 Change
Sales 10,266 9,982 (3%)
Segment Margin 15.9% 18.8% 290 bps
Operating Income Margin (Ex-Pension MTM) 14.5% 18.0% 350 bps
Earnings Per Share (Reported) $1.20 $1.53 28%
Earnings Per Share (Ex-Pension MTM) $1.43 $1.58 10%
Cash Flow from Operations 1,762 1,959 11%
Free Cash Flow (1) 1,348 1,571 17%
(1) Cash Flow from Operations Less Capital Expenditures
*Throughout this press release, core organic sales growth refers to reported
sales growth less the impacts from foreign currency translation, M&A and raw
materials pass-through 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 tied to volume growth. A reconciliation of core organic sales
growth to reported sales growth is provided in the attached financial tables.
"Honeywell delivered a strong fourth quarter, capping off another year of
robust margin expansion, earnings growth, and cash flow," said Honeywell
Chairman and CEO Dave Cote. "We grew earnings 10% in a tough environment,
representing our sixth consecutive year of double-digit earnings growth.
Segment margins grew by 220 basis points driven by strong execution across the
portfolio and our key process initiatives, including HOS Gold. Free Cash Flow
for the full year increased 11% to $4.4 billion, which exceeded the high-end of
our guidance range and included over 125% conversion in the fourth quarter. We
committed to more than $6 billion in acquisitions in 2015 to bolster our Great
Positions in Good Industries, reinvested $1.1 billion in our businesses through
high-return capital expenditure projects, and returned more than $3.5 billion
to our shareowners, including a 15% increase in our dividend. We also funded
more than $160 million in new restructuring projects, including $60 million in
the fourth quarter, which will put us in an even stronger position for the
future."
"We are planning conservatively in 2016 as we are expecting another year of
slow global economic growth," continued Cote. "But, we remain confident in
Honeywell's ability to outperform. We will support growth where there are
opportunities to drive outperformance, be cautious in our sales planning, plan
costs and spending conservatively, and continue to support the seed planting
for new products, services, geographies, and process improvements that allow us
to perform well now and in the future. We expect continued margin expansion and
earnings outperformance in 2016 and over the long term, supported by our
balanced portfolio, HOS Gold breakthrough goals, further penetration of High
Growth Regions, and funded restructuring projects."
The company also reaffirms its full-year 2016 guidance.
2016 Full-Year Guidance
2016 Change
Current Guidance vs. 2015
Sales $39.9B - $40.9B 3% - 6%
Core Organic Growth 1% - 2%
Segment Margin 18.9% - 19.3% 10 - 50 bps (2)
Operating Income Margin (Ex-Pension MTM) 18.0% - 18.4% 10 - 50 bps (3)
Earnings Per Share (Ex-Pension MTM) $6.45 - $6.70 6% - 10%
Free Cash Flow (1) $4.6 - $4.8B 5% - 10%
1. Cash Flow from Operations Less Capital Expenditures
2. Segment Margin Ex-M&A Up 80 - 110 bps
3. Operating Margin Ex-M&A Up 80 - 110 bps
Full-year and fourth quarter 2015 results by business segment are provided
below.
Segment Performance
Aerospace
($ Millions) FY 2014 FY 2015 % Change
Sales 15,598 15,237 (2%)
Segment Profit 2,915 3,218 10%
Segment Margin 18.7% 21.1% 240 bps
($ Millions) 4Q 2014 4Q 2015 % Change
Sales 3,842 3,983 4%
Segment Profit 663 856 29%
Segment Margin 17.3% 21.5% 420 bps
* Sales for the fourth quarter were up 2% on a core organic basis, and were
up 4% reported driven by the $184 million OEM incentives incurred in the
fourth quarter of 2014 partially offset by the unfavorable impact of
foreign currency. Commercial OE sales were up 9% on a core organic basis
(45% reported) driven by strong Business and General Aviation (BGA) engine
shipments and higher shipments to large Air Transport and Regional (ATR)
OEMs. Commercial Aftermarket sales were up 3% on a core organic basis (2%
reported) driven by continued growth in repair and overhaul activities.
Defense & Space sales decreased (1%) on a core organic basis (down 3%
reported) driven by lower sales to the U.S. government and a difficult
prior year comparison in the international business. Transportation
Systems sales were up 1% on a core organic basis driven by new platform
launches and higher diesel and gas turbo penetration on passenger vehicles,
partially offset by lower commercial vehicle production. TS sales were
down (10%) reported due to the unfavorable impact of foreign currency.
* Segment profit for the fourth quarter was up 29% and segment margins
expanded 420 bps to 21.5%, driven by the fourth quarter 2014 OEM
incentives, productivity net of inflation, and commercial excellence,
partially offset by the margin impact of higher OE shipments and continued
investments for growth. Excluding the fourth quarter 2014 OEM incentives,
segment profit was up 1%, and segment margins expanded 50 basis points.
Automation and Control Solutions
($ Millions) FY 2014 FY 2015 % Change
Sales 14,487 14,109 (3%)
Segment Profit 2,200 2,313 5%
Segment Margin 15.2% 16.4% 120 bps
($ Millions) 4Q 2014 4Q 2015 % Change
Sales 3,847 3,721 (3%)
Segment Profit 613 616 Flat
Segment Margin 15.9% 16.6% 70 bps
* Sales for the fourth quarter were flat on a core organic basis and down
(3%) reported driven by the unfavorable impact of foreign currency.
Energy, Safety & Security (ESS) sales decreased (1%) on a core organic
basis (down 3% reported) driven primarily by a difficult prior year
comparison in Sensing & Productivity Solutions (S&PS), partially offset by
continued growth in Security and Fire (HSF) on a global basis. Building
Solutions & Distribution (BSD) sales increased 3% on a core organic basis
(down 3% reported) driven by continued strength in Americas Distribution
partially offset by slowing Building Solutions backlog conversion.
* Segment profit for the fourth quarter was flat and segment margins expanded
70 bps to 16.6% driven by productivity net of inflation, benefits of
previously funded restructuring projects, and commercial excellence,
partially offset by continued investments for growth.
Performance Materials and Technologies
($ Millions) FY 2014 FY 2015 % Change
Sales 10,221 9,235 (10%)
Segment Profit 1,817 1,935 6%
Segment Margin 17.8% 21.0% 320 bps
($ Millions) 4Q 2014 4Q 2015 % Change
Sales 2,577 2,278 (12%)
Segment Profit 425 462 9%
Segment Margin 16.5% 20.3% 380 bps
* Sales for the fourth quarter were down (4%) on a core organic basis and
down (12%) reported driven by the unfavorable impact of foreign currency
and lower raw materials pass-through pricing in Resins & Chemicals. The
decrease in core organic sales was primarily driven by lower UOP gas
processing, equipment and licensing sales, HPS field products weakness, and
lower volume in Resins & Chemicals, partially offset by higher UOP catalyst
shipments and higher volume in Fluorine Products.
* Segment profit for the fourth quarter was up 9% and segment margins
increased 380 bps to 20.3%, driven by productivity net of inflation,
commercial excellence, and the favorable impact of raw materials
pass-through pricing in Resins & Chemicals (pricing model protects profit
dollars).
Honeywell will discuss its results during its investor conference call today
starting at 9:30 a.m. EST. To participate on the conference call, please dial
(877) 780-3381 (domestic) or (719) 325-2336 (international) approximately ten
minutes before the 9:30 a.m. EST start. Please mention to the operator that you
are dialing in for Honeywell's fourth quarter 2015 earnings call. The live
January 29, 2016 06:38 ET (11:38 GMT)
Accounts, notes and other receivables 8,075 7,960
Inventories 4,420 4,405
Deferred income taxes - 722
Investments and other current assets 2,103 2,145
Total current assets 20,053 22,191
Investments and long-term receivables 517 465
Property, plant and equipment - net 5,789 5,383
Goodwill 15,895 12,788
Other intangible assets - net 4,577 2,208
Insurance recoveries for asbestos related 426 454
liabilities
Deferred income taxes 283 404
Other assets 1,776 1,558
Total assets $ $
49,316 45,451
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ $
5,580 5,365
Commercial paper and other short-term 5,937 1,698
borrowings
Current maturities of long-term debt 577 939
Accrued liabilities 6,277 6,771
Total current liabilities 18,371 14,773
Long-term debt 5,554 6,046
Deferred income taxes 558 236
Postretirement benefit obligations other than 526 911
pensions
Asbestos related liabilities 1,251 1,200
Other liabilities 4,348 4,282
Redeemable noncontrolling interest 290 219
Shareowners' equity 18,418 17,784
Total liabilities, redeemable noncontrolling $ $
interest and shareowners' equity 49,316 45,451
Honeywell International Inc
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months
Ended
December 31, December 31,
2015 2014 2015 2014
Cash flows from operating activities:
Net income $ 1,203 $ 975 $ 4,847 $ 4,329
Less: Net income attributable to 9 19 79 90
the noncontrolling interest
Net income attributable to 1,194 956 4,768 4,239
Honeywell
Adjustments to reconcile net
income attributable to Honeywell to
net
cash provided by operating
activities:
Depreciation 169 168 672 667
Amortization 53 58 211 257
Loss on sale of non-strategic 2 - 1 11
businesses and assets
Gain on sale of available for - (116) - (221)
sale investments
Repositioning and other 153 145 546 598
charges
Net payments for repositioning (208) (229) (537) (530)
and other charges
Pension and other (54) 194 (323) 44
postretirement (income) expense
Pension and other (38) (44) (122) (167)
postretirement benefit payments
Stock compensation expense 43 44 175 187
Deferred income taxes 31 (123) 315 132
Excess tax benefits from share (12) (31) (81) (102)
based payment arrangements
Other (98) (120) (8) (327)
Changes in assets and
liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other 159 357 211 (172)
receivables
Inventories 250 79 230 (200)
Other current assets 191 (61) 80 120
Accounts payable (4) 153 (17) 307
Accrued liabilities 128 332 (667) 181
Net cash provided by operating 1,959 1,762 5,454 5,024
activities
Cash flows from investing activities:
Expenditures for property, plant (388) (414) (1,073) (1,094)
and equipment
Proceeds from disposals of 12 6 15 18
property, plant and equipment
Increase in investments (1,013) (935) (6,714) (4,074)
Decrease in investments 2,537 1,164 6,587 3,288
Cash paid for acquisitions, net of (5,043) - (5,228) (4)
cash acquired
Proceeds from sales of businesses, (2) 3 1 160
net of fees paid
Other (33) (61) (102) (170)
Net cash used for investing activities (3,930) (237) (6,514) (1,876)
Cash flows from financing activities:
Net increase (decrease) in 2,254 (236) 4,265 309
commercial paper and other short-term
borrowings
Proceeds from issuance of common 36 59 186 265
stock
Proceeds from issuance of 12 18 60 97
long-term debt
Payments of long-term debt (732) (2) (880) (609)
Excess tax benefits from share 12 31 81 102
based payment arrangements
Repurchases of common stock (163) (235) (1,884) (924)
Cash dividends paid (465) (409) (1,726) (1,510)
Other - 5 - (2)
Net cash provided by (used for) 954 (769) 102 (2,272)
financing activities
Effect of foreign exchange rate (91) (225) (546) (339)
changes on cash and cash equivalents
Net (decrease) increase in cash and (1,108) 531 (1,504) 537
cash equivalents
Cash and cash equivalents at beginning 6,563 6,428 6,959 6,422
of period
Cash and cash equivalents at end of $ 5,455 $ 6,959 $ 5,455 $ 6,959
period
Honeywell International Inc
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow and
Calculation of Free Cash Flow Conversion (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
2015 2014 2015 2014
Cash provided $ 1,959 $ 1,762 $ 5,454 $ 5,024
by operating
activities
Expenditures (388) (414) (1,073) (1,094)
for property,
plant and
equipment
Free cash flow $ 1,571 $ 1,348 $ 4,381 $ 3,930
Net income, $ 1,194 $ $ 4,768 $ 4,239
attributable to 956
Honeywell
Pension 43 179 43 179
mark-to-market
adjustment, net
of tax (A)
Net income, $ 1,237 $ 1,135 $ 4,811 $ 4,418
attributable to
Honeywell,
excluding
pension
mark-to-market
adjustment
Cash provided $ 1,959 $ 1,762 $ 5,454 $ 5,024
by operating
activities
÷ Net income, $ 1,194 $ $ 4,768 $ 4,239
attributable to 956
Honeywell
Operating cash 164% 184% 114% 119%
flow conversion
Free cash flow $ 1,571 $ 1,348 $ 4,381 $ 3,930
÷ Net income, $ 1,237 $ 1,135 $ 4,811 $ 4,418
attributable to
Honeywell,
excluding
pension
mark-to-market
adjustment
Free cash flow 127% 119% 91% 89%
conversion
(A) Mark-to-market uses a blended tax rate of 36.1% and 28.1% for 2015 and
2014.
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment.
We define free cash flow conversion as free cash flow divided by net income,
attributable to Honeywell, excluding pension mark-to-market adjustment.
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
January 29, 2016 06:38 ET (11:38 GMT)
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 Twelve Months Ended
December 31, December 31,
2015 2014 2015 2014
Segment Profit $ 1,880 $ 1,632 $ 7,256 $ 6,696
Stock compensation (43) (44) (175) (187)
expense (A)
Repositioning and (158) (154) (576) (634)
other (A, B)
Pension ongoing 131 67 430 254
income (A)
Pension (67) (249) (67) (249)
mark-to-market
adjustment (A)
Other (10) (12) (40) (49)
postretirement
expense (A)
Operating Income $ 1,733 $ 1,240 $ 6,828 $ 5,831
Pension (67) (249) (67) (249)
mark-to-market
adjustment (A)
Operating Income $ 1,800 $ 1,489 $ 6,895 $ 6,080
excluding pension
mark-to-market
adjustment
Segment Profit $ 1,880 $ 1,632 $ 7,256 $ 6,696
÷ Sales $ 9,982 $ 10,266 $ 38,581 $ 40,306
Segment Profit 18.8% 15.9% 18.8% 16.6%
Margin %
Operating Income $ 1,733 $ 1,240 $ 6,828 $ 5,831
÷ Sales $ 9,982 $ 10,266 $ 38,581 $ 40,306
Operating Income 17.4% 12.1% 17.7% 14.5%
Margin %
Operating Income $ 1,800 $ 1,489 $ 6,895 $ 6,080
excluding pension
mark-to-market
adjustment
÷ Sales $ 9,982 $ 10,266 $ 38,581 $ 40,306
Operating Income 18.0% 14.5% 17.9% 15.1%
Margin excluding
pension
mark-to-market
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 Core Organic Sales Growth (Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2015 2015
Honeywell
Reported sales growth (3%) (4%)
Foreign currency translation, acquisitions, 2% 4%
divestitures and other
Raw materials pricing in R&C 1% 1%
Core organic sales growth 0% 1%
PMT
Reported sales growth (12%) (10%)
Foreign currency translation, acquisitions, 4% 4%
divestitures and other
Raw materials pricing in R&C 4% 5%
Core organic sales growth (4%) (1%)
Throughout this press release, core organic sales growth refers to reported
sales growth less the impacts from foreign currency translation, M&A and raw
materials pass-through 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 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.
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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