TIDMHON
Honeywell Reports First Quarter 2016 Sales Of $9.5 Billion; Earnings Up 9% To
$1.53 Per Share
- Core Organic Sales Growth 1%*; Reported Up 3% Due to Sales From Acquisitions
- Segment Margin Improvement of 20 bps Excluding the Impact of M&A
- Repurchased Over $1 Billion of Shares, Deployed $1 Billion to Acquisitions
- Raising Low-End of 2016 EPS Guidance Range (Ex-Pension MTM) to $6.55 - $6.70,
Up 7% - 10%
MORRIS PLAINS, N.J., April 22, 2016 -- Honeywell (NYSE: HON) today announced
its results for the first quarter of 2016:
Total Honeywell
($ Millions, Except Earnings Per Share) 1Q 2015 1Q 2016 Change
Sales 9,213 9,522 3%
Segment Margin 18.7% 18.1% (60) bps
Operating Income Margin 17.6% 17.8% 20 bps
Earnings Per Share $1.41 $1.53 9%
Cash Flow from Operations 421 257 (39%)
Free Cash Flow (1) 256 63 (75%)
(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 had a strong start to 2016, delivering on our sales and earnings
commitments in the first quarter," said Honeywell Chairman and CEO, Dave Cote.
"Earnings per share increased 9% on continued execution across the portfolio.
Core organic sales were up 1%, above the high-end of our guidance, driven by
acceleration in Commercial Aftermarket and Transportation Systems within
Aerospace, continued growth in our residential, commercial, and China
businesses within ACS, and higher sales in Process Solutions and Fluorine
Products in PMT. We announced and closed three acquisitions within ACS and
acquired the remaining 30% interest in UOP Russell, which further strengthens
our Great Positions in Good Industries. We also opportunistically repurchased
over $1 billion of shares during the quarter, and funded approximately $40
million in new restructuring projects. As a result of the first quarter
performance, we are raising the low-end of our full-year earnings guidance
range to $6.55-$6.70, up 7%-10%, and remain committed to our full-year core
organic sales growth and free cash flow outlook."
"Looking ahead, our message and our planning will not change. 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," concluded
Cote.
The company is updating its full-year 2016 guidance and now expects:
2016 Full-Year Guidance
Prior Guidance Revised Guidance Change vs. 2015
Sales $39.9 - $40.9B $40.3 - $40.9B 4% - 6%
Core Organic Growth 1% -2% 1% -2%
Segment Margin 18.9% - 19.3% 18.9% - 19.3% 10 - 50 bps (2)
Operating Income Margin (Ex-Pension MTM) 18.0% - 18.4% 18.0% - 18.4% 10 - 50 bps (3)
Earnings Per Share (Ex-Pension MTM) $6.45 - $6.70 $6.55 - $6.70 7% - 10%
Free Cash Flow (1) $4.6 - $4.8B $4.6 - $4.8B 5% - 10%
1. Cash Flow from Operations Less Capital Expenditures
2. Segment Margin ex-M&A Up 80 - 110 bps
3. Operating Margin ex-M&A Up 80 - 110 bps
First quarter 2016 results by business segment are provided below.
Segment Performance
Aerospace
($ Millions) 1Q 2015 1Q 2016 % Change
Sales 3,607 3,705 3%
Segment Profit 752 798 6%
Segment Margin 20.8% 21.5% 70 bps
* Sales for the first quarter were up 3% on a reported and core organic
basis. Core organic sales growth was driven by higher repair and overhaul
activities, new platform launches and higher global turbo penetration on
passenger vehicles, and strong shipments to Business and General Aviation
(BGA) and Air Transport and Regional (ATR) OEMs.
* Segment profit was up 6% and segment margin expanded 70 bps to 21.5%,
driven by productivity net of inflation, and commercial excellence,
partially offset by continued investments for growth including higher OEM
incentives, and the dilutive impact of acquisitions. Excluding the impact
of acquisitions, segment margin expanded 90 bps.
Automation and Control Solutions
($ Millions) 1Q 2015 1Q 2016 % Change
Sales 3,264 3,677 13%
Segment Profit 516 530 3%
Segment Margin 15.8% 14.4% (140) bps
* Sales for the first quarter were up 4% on a core organic basis and up 13%
reported primarily driven by sales from the Elster acquisition partially
offset by the unfavorable impact of foreign currency. Energy, Safety &
Security (ESS) sales were flat on a core organic basis (up 16% reported)
driven by continued growth in Security and Fire (HSF) on a global basis and
further penetration of High Growth Regions (HGR), particularly in China,
offset by lower volume in Sensing & Productivity Solutions (S&PS). Building
Solutions & Distribution (BSD) sales increased 11% on a core organic basis
(up 5% reported) driven by continued strength in Americas Distribution and
growth in project installation and services in Building Solutions (HBS).
* Segment profit was up 3% and segment margin contracted (140) bps to 14.4%
driven by the unfavorable impact of acquisitions. Excluding the impact of
acquisitions, segment margin expanded 10 bps driven by productivity, net of
inflation, benefits of previously funded restructuring projects, and
commercial excellence, partially offset by the unfavorable impact of
project installation, services, and distribution sales on margin, and
continued investments for growth.
Performance Materials and Technologies
($ Millions) 1Q 2015 1Q 2016 % Change
Sales 2,342 2,140 (9%)
Segment Profit 503 441 (12%)
Segment Margin 21.5% 20.6% (90) bps
* Sales for the first quarter were down (8%) on a core organic basis and down
(9%) reported driven by the unfavorable impact of foreign currency and
lower raw materials pass-through pricing in Resins & Chemicals, partially
offset by the favorable impact of acquisitions. The decrease in core
organic sales was primarily driven by lower UOP gas processing, catalyst,
and equipment sales as anticipated, partially offset by higher projects and
services sales in HPS and higher volume in Fluorine Products.
* Segment profit was down (12%) and segment margins contracted (90) bps to
20.6%, driven by the unfavorable impact of lower UOP catalyst shipments and
acquisitions, partially offset by the benefits of previously funded
restructuring, commercial excellence, and the impact of raw materials
pass-through pricing in Resins & Chemicals. Excluding the impact of
acquisitions, segment margin contracted (70) bps.
Honeywell will discuss its results during its investor conference call today
starting at 9:30 a.m. EDT. To participate on the conference call, please dial
(877) 879-6207 (domestic) or (719) 325-4942 (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 first quarter 2016 earnings call or provide the
conference code HON1Q16. 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, April
22, until 12:30 p.m. EDT, April 29, by dialing (888) 203-1112 (domestic) or
(719) 457-0820 (international). The access code is 3464694.
Honeywell (http://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.honeywell.com/newsroom.
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
(MORE TO FOLLOW) Dow Jones Newswires
April 22, 2016 06:41 ET (10:41 GMT)
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 Mark Macaluso
(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com mark.macaluso@honeywell.com
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
March 31,
2016 2015
Product sales $ $
7,619 7,364
Service sales 1,903 1,849
Net sales 9,522 9,213
Costs, expenses and other
Cost of products sold (A) 5,349 5,213
Cost of services sold (A) 1,198 1,149
6,547 6,362
Selling, general and administrative expenses (A) 1,280 1,230
Other (income) expense (18) (20)
Interest and other financial charges 85 77
7,894 7,649
Income before taxes 1,628 1,564
Tax expense 432 418
Net income 1,196 1,146
Less: Net income attributable to the noncontrolling 10 30
interest
Net income attributable to Honeywell $ $
1,186 1,116
Earnings per share of common stock - basic $ $
1.54 1.42
Earnings per share of common stock - assuming $ $
dilution 1.53 1.41
Weighted average number of shares outstanding - 767.9 783.8
basic
Weighted average number of shares outstanding - 776.9 794.0
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
March 31,
Net Sales 2016 2015
Aerospace $ 3,705 $ 3,607
Automation and Control 3,677 3,264
Solutions
Performance Materials and 2,140 2,342
Technologies
Total $ 9,522 $ 9,213
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended
March 31,
Segment Profit 2016 2015
Aerospace $ 798 $
752
Automation and Control 530 516
Solutions
Performance Materials and 441 503
Technologies
Corporate (49) (50)
Total segment profit 1,720 1,721
Other income (A) 12 12
Interest and other (85) (77)
financial charges
Stock compensation expense (53) (52)
(B)
Pension ongoing income (B) 150 100
Other postretirement 9 (9)
income (expense) (B)
Repositioning and other (125) (131)
charges (B)
Income before taxes $ 1,628 $ 1,564
(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,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ $
4,473 5,455
Accounts, notes and other receivables 8,397 8,075
Inventories 4,743 4,420
Investments and other current assets 1,919 2,103
Total current assets 19,532 20,053
Investments and long-term receivables 592 517
Property, plant and equipment - net 6,027 5,789
Goodwill 16,708 15,895
Other intangible assets - net 4,706 4,577
Insurance recoveries for asbestos related 431 426
liabilities
Deferred income taxes 318 283
Other assets 2,051 1,776
Total assets $ 50,365 $
49,316
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ $
5,511 5,580
Commercial paper and other short-term 3,631 5,937
borrowings
Current maturities of long-term debt 626 577
Accrued liabilities 5,891 6,277
Total current liabilities 15,659 18,371
Long-term debt 9,700 5,554
Deferred income taxes 626 558
Postretirement benefit obligations other than 506 526
pensions
Asbestos related liabilities 1,252 1,251
Other liabilities 4,247 4,348
Redeemable noncontrolling interest 3 290
Shareowners' equity 18,372 18,418
Total liabilities, redeemable $ 50,365 $
noncontrolling interest and shareowners' 49,316
equity
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2016 2015
Cash flows from operating activities:
Net income $ 1,196 $ 1,146
Less: Net income attributable to the noncontrolling interest 10 30
Net income attributable to Honeywell 1,186 1,116
Adjustments to reconcile net income attributable to Honeywell to net
cash provided by operating activities:
Depreciation 179 163
Amortization 74 53
Repositioning and other charges 125 131
Net payments for repositioning and other charges (134) (100)
Pension and other postretirement income (159) (91)
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Pension and other postretirement benefit payments (38) (9)
Stock compensation expense 53 52
Deferred income taxes 48 93
Excess tax benefits from share based payment arrangements (30) (47)
Other 86 (102)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables (203) (170)
Inventories (241) (86)
Other current assets (59) 58
Accounts payable (113) (112)
Accrued liabilities (517) (528)
Net cash provided by operating activities 257 421
Cash flows from investing activities:
Expenditures for property, plant and equipment (194) (165)
Proceeds from disposals of property, plant and equipment 1 1
Increase in investments (836) (1,501)
Decrease in investments 880 1,106
Cash paid for acquisitions, net of cash acquired (1,056) (185)
Proceeds from sales of businesses, net of fees paid - 2
Other 9 (178)
Net cash used for investing activities (1,196) (920)
Cash flows from financing activities:
Net (decrease) increase in commercial paper and other short-term borrowings (2,450) 1,052
Proceeds from issuance of common stock 105 78
Proceeds from issuance of long-term debt 4,448 3
Payments of long-term debt (419) (35)
Excess tax benefits from share based payment arrangements 30 47
Repurchases of common stock (1,156) (363)
Cash dividends paid (499) (415)
Payments to purchase the noncontrolling interest (238) -
Other 18 -
Net cash (used for) provided by financing activities (161) 367
Effect of foreign exchange rate changes on cash and cash equivalents 118 (252)
Net decrease in cash and cash equivalents (982) (384)
Cash and cash equivalents at beginning of period 5,455 6,959
Cash and cash equivalents at end of period $ 4,473 $ 6,575
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
March 31, December 31,
2016 2015 2015
Cash provided by operating activities $ 257 $ 421 $ 5,454
Expenditures for property, plant and equipment (194) (165)
(1,073)
Free cash flow $ 63 $ 256 $ 4,381
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
March 31,
2016 2015
Segment Profit $ 1,720 $ 1,721
Stock compensation expense (A) (53) (52)
Repositioning and other (A, B) (131) (139)
Pension ongoing income (A) 150 100
Other postretirement income (expense) (A) 9 (9)
Operating Income $ 1,695 $ 1,621
Segment Profit $ 1,720 $ 1,721
÷ Sales $ 9,522 $ 9,213
Segment Profit Margin % 18.1% 18.7%
Segment Profit excluding mergers and $ 1,705
acquisitions
÷ Sales excluding mergers and acquisitions $ 9,043
Segment Profit Margin excluding mergers and 18.9%
acquisitions %
Operating Income $ 1,695 $ 1,621
÷ Sales $ 9,522 $ 9,213
Operating Income Margin % 17.8% 17.6%
(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.
Calculation of Segment Profit Margin Excluding Mergers and Acquisitions
(Unaudited)
(Dollars in millions)
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Three Months Ended
March 31,
2016
Aerospace
Segment Profit excluding mergers and acquisitions $ 801
÷ Sales excluding mergers and acquisitions $ 3,685
Segment Profit Margin excluding mergers and 21.7%
acquisitions %
Automation and Control Solutions
Segment Profit excluding mergers and acquisitions $ 522
÷ Sales excluding mergers and acquisitions $ 3,290
Segment Profit Margin excluding mergers and 15.9%
acquisitions %
Performance Materials and Technologies
Segment Profit excluding mergers and acquisitions $ 431
÷ Sales excluding mergers and acquisitions $ 2,068
Segment Profit Margin excluding mergers and 20.8%
acquisitions %
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 Ended
March 31,
2016
Honeywell
Reported sales growth 3%
Less: Foreign currency translation, acquisitions, divestitures and other 3%
Less: Raw materials pricing in R&C (1%)
Core organic sales growth 1%
Performance Materials and Technologies
Reported sales growth (9%)
Less: Foreign currency translation, acquisitions, divestitures and other 1%
Less: Raw materials pricing in R&C (2%)
Core organic sales growth (8%)
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.
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,
2015
Segment Profit $ 7,256
Stock compensation expense (A) (175)
Repositioning and other (A, B) (576)
Pension ongoing income (A) 430
Pension mark-to-market adjustment (A) (67)
Other postretirement expense (A) (40)
Operating Income $ 6,828
Pension mark-to-market adjustment (A) (67)
Operating Income excluding pension mark-to-market adjustment $ 6,895
Segment Profit $ 7,256
÷ Sales $ 38,581
Segment Profit Margin % 18.8%
Operating Income $ 6,828
÷ Sales $ 38,581
Operating Income Margin % 17.7%
Operating Income excluding pension mark-to-market adjustment $ 6,895
÷ Sales $ 38,581
Operating Income Margin excluding pension mark-to-market adjustment % 17.9%
(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 Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Adjustment
(Unaudited)
Twelve Months Ended
December 31,
2015
EPS $
6.04
Pension mark-to-market adjustment (A) 0.06
EPS, excluding pension mark-to-market adjustment $
6.10
(A) - Utilizes weighted average shares of 789.3 million. Mark-to-market uses
a blended tax rate of 36.1%.
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.
END
(END) Dow Jones Newswires
April 22, 2016 06:41 ET (10:41 GMT)
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