Honeywell Delivers
$1.80 Earnings Per Share; Sales of
$10.1 Billion Exceeds Guidance
- Reported Sales Up 1%, Organic Sales Up Over 3% Driven By
Performance In Aerospace Aftermarket, Advanced Materials, And Home
And Building Products
- Invested More Than $115
Million In Restructuring Projects To Drive Growth And
Productivity
- Year-To-Date Operating Cash Flow Up 25% And Free Cash Flow
Up 39%
- Raising Full-Year Sales Guidance; Raising Low-End Of 2017
EPS Guidance By 10 Cents To
$7.00 - $7.10
MORRIS PLAINS, N.J.,
July 21, 2017 -- Honeywell
(NYSE: HON) today announced financial results for the second
quarter of 2017 and updated its full-year 2017 sales and earnings
guidance.
"Honeywell's strong performance continued through the second
quarter, with over 3% organic sales growth that exceeded the high
end of our guidance range, and 50 basis points of segment margin
expansion, resulting in second-quarter earnings per share of
$1.80," said Darius Adamczyk, President and Chief Executive
Officer of Honeywell. "Earnings came in at the high end of our
guidance range, up 10%? year-over-year. We
continued our investments to enhance future profitable growth
through new product introductions, additions to the sales
organization, and more than $115
million of restructuring funding in the quarter, made
possible by a lower-than-planned tax rate. Quarterly free cash flow
of $1.2 billion was impacted by the
timing of cash tax payments, and our first-half performance
remained strong with nearly 40% growth in free cash flow
year-over-year."
"Previous investments in production capacity are driving
top-line growth. For example, our newly completed facilities within
Performance Materials and Technologies are contributing to
double-digit growth for our Solstice® line of
low-global-warming products and strong orders, sales, and backlog
growth in UOP," continued Adamczyk. "We are also pleased with the
continued strength in Aerospace Commercial Aftermarket and in
Safety and Productivity Solutions, where we continue to see strong
demand for safety products and voice-enabled workflow
solutions."
"We expect continued momentum in organic sales growth throughout
2017, supported by strong order rates and a growing backlog across
many of our businesses," said Adamczyk. "Our focus on delivering
organic growth while maintaining productivity rigor and
aggressively deploying capital, combined with our efforts to evolve
as a world-class software-industrial company, is delivering results
for our shareowners."
"We are increasing our full-year reported and organic sales
guidance and raising the low end of our full-year earnings guidance
by 10 cents. We now anticipate 2017
earnings per share to be between $7.00 and
$7.10, up 8%-10%, excluding divestitures, any pension
mark-to-market adjustments, and 2016 debt refinancing charges. We
also now expect full-year sales to be between $39.3 billion and $40.0 billion, up 2%-4%
organic," Adamczyk concluded.
Honeywell will discuss the results during its investor
conference call today starting at 9:30 a.m.
Eastern Daylight Time.
Second Quarter Performance
Honeywell sales for the second quarter were up over 3% on
an organic basis and up 1% on a reported basis. The difference
between reported and organic sales is the impact of foreign
currency translation, the 2016 spin-off of the former Resins and
Chemicals business in Performance Materials and Technologies, and
the 2016 divestiture of the Aerospace government services business,
partially offset by the Intelligrated acquisition in Safety and
Productivity Solutions. The second-quarter financial results can be
found in Tables 1 and 2, and updated full-year guidance can be
found in Table 3, below.
Aerospace sales for the second quarter were up 2% on an
organic basis driven by strength in Commercial Aftermarket, growth
in U.S. defense, and a continuing recovery in commercial vehicles
in Transportation Systems. Segment margin expanded 140 bps to
22.3%, primarily driven by higher volumes, productivity net of
inflation, and the favorable impact of the 2016 divestiture of the
government services business.
Home and Building Technologies sales for the second
quarter were up 4% on an organic basis driven by Smart Energy
program roll-outs, air and water product sales in China, and continued growth in the
Distribution business. Segment margin was unchanged at 15.4%,
driven by restructuring benefits and productivity net of inflation,
offset by the unfavorable impact of higher sales from lower margin
products and investments for growth.
Performance Materials and Technologies sales for the
second quarter were up 6% on an organic basis driven by continued
strength in Solstice® sales in Advanced Materials and
double-digit growth in modular gas processing in UOP. Segment
margin expanded 200 bps to 23.4%, primarily driven by productivity
net of inflation, the favorable impact from the spin-off of the
former Resins and Chemicals business, and commercial
excellence.
Safety and Productivity Solutions sales for the second
quarter were up 1% on an organic basis as a result of higher
volumes in industrial safety products, sensing controls, and
voice-enabled workflow solutions. Segment margin contracted 70 bps
to 15.0%, primarily driven by acquisition amortization and
integration costs, and investments for growth. Excluding the impact
of acquisitions, segment margin expanded 90 bps driven primarily by
restructuring benefits and productivity net of inflation.
To participate in today's conference call, please dial (800)
263-0877 (domestic) or (719) 457-1036 (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 2017 earnings call or provide the
conference code HON2Q17. 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 1:30 p.m. EDT,
July 21, until 1:30 p.m. EDT, July
28, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 8469822.
TABLE 1: SUMMARY OF FINANCIAL RESULTS
– TOTAL HONEYWELL
|
2Q 2016 |
2Q 2017 |
Change |
Sales |
9,991 |
10,078 |
1% |
Organic |
|
|
3% |
Segment Margin |
18.5% |
19.0% |
50 bps |
Operating Income Margin |
18.4% |
18.3% |
(10) bps |
Earnings Per Share |
|
|
|
Reported |
$1.70 |
$1.80 |
6% |
Ex-Divestitures & Additional 2Q17
Restructuring, Normalized for Tax |
$1.64 |
$1.80 |
10% |
Cash Flow From Operations? |
1,583 |
1,447 |
(9%) |
Free Cash
Flow?,? |
1,302 |
1,214 |
(7%) |
|
|
|
|
TABLE 2: SUMMARY OF FINANCIAL RESULTS
– SEGMENTS
|
|
|
|
|
|
|
|
AEROSPACE |
2Q 2016 |
2Q 2017 |
Change |
Sales |
3,779 |
3,674 |
(3%) |
Organic |
|
|
2% |
Segment Profit |
791 |
819 |
4% |
Segment Margin |
20.9% |
22.3% |
140 bps |
|
|
|
|
|
|
|
|
HOME AND BUILDING TECHNOLOGIES |
|
|
|
|
|
|
|
Sales |
2,676 |
2,736 |
2% |
Organic |
|
|
4% |
Segment Profit |
412 |
420 |
2% |
Segment Margin |
15.4% |
15.4% |
Flat |
|
|
|
|
|
|
|
|
PERFORMANCE MATERIALS AND TECHNOLOGIES |
|
|
|
Sales |
2,434 |
2,239 |
(8%) |
Organic |
|
|
6% |
Segment Profit |
520 |
524 |
1% |
Segment Margin |
21.4% |
23.4% |
200 bps |
|
|
|
|
|
|
|
|
|
|
|
|
SAFETY AND PRODUCTIVITY SOLUTIONS |
|
|
|
Sales |
1,102 |
1,429 |
30% |
Organic |
|
|
1% |
Segment Profit |
173 |
214 |
24% |
Segment Margin |
15.7% |
15.0% |
(70) bps |
Ex-M&A |
|
|
90 bps |
|
|
|
|
|
|
|
|
TABLE 3: 2017 FULL-YEAR GUIDANCE
|
Previous Guidance |
Current Guidance |
Change vs. 2016 |
Sales |
$38.6 - $39.5 |
$39.3 - $40.0 |
Flat – 2% |
Organic |
|
|
2% - 4% |
Segment Margin |
19.0% - 19.4% |
19.0% - 19.4% |
70 - 110 bps |
Earnings Per Share
(Ex-Divestitures, 2016 Debt Refinancing, And Pension MTM) |
$6.90 - $7.10 |
$7.00 - $7.10 |
8% - 10% |
Free Cash Flow? |
$4.6B - $4.7B |
$4.6B - $4.7B |
5% - 7% |
Honeywell (www.honeywell.com) is a Fortune 100
software-industrial company that delivers industry specific
solutions that include aerospace and automotive products and
services; control technologies for buildings, homes, and industry;
and performance materials globally. Our technologies help
everything from aircraft, cars, homes and buildings, manufacturing
plants, supply chains, and workers become more connected to make
our world smarter, safer, and more sustainable. 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 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.
?Earnings per share variance excludes 2016
divestitures and $90 million
additional 2Q17 restructuring funding enabled by a lower than
planned effective tax rate, normalized for tax at 25%
?Includes $0.2B Impact Of
Cash Tax Payment Timing
?Cash Flow From Operations Less Capital Expenditures
?Cash Flow From Operations Less Capital Expenditures
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 |
|
Six Months
Ended |
|
|
June 30, |
|
June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Product sales |
$
8,079 |
|
$ 8,035 |
|
$ 15,619 |
|
$ 15,654 |
Service sales |
1,999 |
|
1,956 |
|
3,951 |
|
3,859 |
Net sales |
10,078 |
|
9,991 |
|
19,570 |
|
19,513 |
|
|
|
|
|
|
|
|
|
Costs, expenses and other |
|
|
|
|
|
|
|
Cost of products
sold (A) |
5,660 |
|
5,602 |
|
10,897 |
|
10,951 |
Cost of services
sold (A) |
1,190 |
|
1,219 |
|
2,309 |
|
2,417 |
|
|
6,850 |
|
6,821 |
|
13,206 |
|
13,368 |
Selling, general
and administrative expenses (A) |
1,381 |
|
1,329 |
|
2,730 |
|
2,609 |
Other (income)
expense |
(10) |
|
1 |
|
(22) |
|
(17) |
Interest and other
financial charges |
79 |
|
85 |
|
154 |
|
170 |
|
|
8,300 |
|
8,236 |
|
16,068 |
|
16,130 |
|
|
|
|
|
|
|
|
|
Income before taxes |
1,778 |
|
1,755 |
|
3,502 |
|
3,383 |
Tax expense |
378 |
|
428 |
|
770 |
|
830 |
|
|
|
|
|
|
|
|
|
Net income |
1,400 |
|
1,327 |
|
2,732 |
|
2,553 |
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
8 |
|
8 |
|
14 |
|
18 |
|
|
|
|
|
|
|
|
|
Net income attributable to
Honeywell |
$
1,392 |
|
$ 1,319 |
|
$ 2,718 |
|
$ 2,535 |
|
|
|
|
|
|
|
|
|
Earnings per share of common stock -
basic |
$
1.82 |
|
$ 1.73 |
|
$
3.56 |
|
$
3.31 |
|
|
|
|
|
|
|
|
|
Earnings per share of common stock -
assuming dilution |
$
1.80 |
|
$ 1.70 |
|
$
3.51 |
|
$
3.26 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - basic |
764.2 |
|
763.3 |
|
763.6 |
|
765.5 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - assuming dilution |
774.0 |
|
774.9 |
|
774.0 |
|
777.2 |
|
|
|
|
|
|
|
|
|
(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 |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
3,674 |
|
$
3,779 |
|
$
7,220 |
|
$
7,484 |
|
|
|
|
|
|
|
|
|
Home and Building Technologies |
2,736 |
|
2,676 |
|
5,289 |
|
5,153 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
2,239 |
|
2,434 |
|
4,308 |
|
4,715 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
1,429 |
|
1,102 |
|
2,753 |
|
2,161 |
|
|
|
|
|
|
|
|
|
Total |
$ 10,078 |
|
$
9,991 |
|
$ 19,570 |
|
$ 19,513 |
|
|
|
|
|
|
|
|
|
Reconciliation of
Segment Profit to Income Before Taxes |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
Segment Profit |
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
819 |
|
$
791 |
|
$
1,615 |
|
$
1,589 |
|
|
|
|
|
|
|
|
|
Home and Building Technologies |
420 |
|
412 |
|
809 |
|
772 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
524 |
|
520 |
|
995 |
|
981 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
214 |
|
173 |
|
408 |
|
323 |
|
|
|
|
|
|
|
|
|
Corporate |
(67) |
|
(49) |
|
(128) |
|
(98) |
|
|
|
|
|
|
|
|
|
Total segment
profit |
1,910 |
|
1,847 |
|
3,699 |
|
3,567 |
|
|
|
|
|
|
|
|
|
Other income (expense) (A) |
(1) |
|
(7) |
|
5 |
|
5 |
Interest and other financial
charges |
(79) |
|
(85) |
|
(154) |
|
(170) |
Stock compensation expense (B) |
(44) |
|
(43) |
|
(94) |
|
(96) |
Pension ongoing income (B) |
184 |
|
151 |
|
363 |
|
301 |
Other postretirement income (B) |
6 |
|
8 |
|
10 |
|
17 |
Repositioning and other charges
(B) |
(198) |
|
(116) |
|
(327) |
|
(241) |
|
|
|
|
|
|
|
|
|
Income before taxes |
$
1,778 |
|
$
1,755 |
|
$
3,502 |
|
$
3,383 |
|
|
|
|
|
|
|
|
|
(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, |
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
|
$
7,877 |
|
$
7,843 |
Short-term
investments |
|
1,944 |
|
1,520 |
Accounts receivable
- net |
|
8,442 |
|
8,177 |
Inventories |
|
4,651 |
|
4,366 |
Other current
assets |
|
1,150 |
|
1,152 |
|
Total current assets |
|
24,064 |
|
23,058 |
|
|
|
|
|
|
Investments and long-term
receivables |
|
570 |
|
587 |
Property, plant and equipment -
net |
|
5,718 |
|
5,793 |
Goodwill |
|
18,038 |
|
17,707 |
Other intangible assets - net |
|
4,566 |
|
4,634 |
Insurance recoveries for asbestos
related liabilities |
|
401 |
|
417 |
Deferred income taxes |
|
357 |
|
347 |
Other assets |
|
1,954 |
|
1,603 |
|
|
|
|
|
|
|
Total assets |
|
$ 55,668 |
|
$ 54,146 |
|
|
|
|
|
|
LIABILITIES AND SHAREOWNERS'
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts
payable |
|
$
5,971 |
|
$
5,690 |
Commercial paper
and other short-term borrowings |
|
3,803 |
|
3,366 |
Current maturities
of long-term debt |
|
1,378 |
|
227 |
Accrued
liabilities |
|
6,829 |
|
7,048 |
|
Total current
liabilities |
|
17,981 |
|
16,331 |
|
|
|
|
|
|
Long-term debt |
|
11,329 |
|
12,182 |
Deferred income taxes |
|
329 |
|
486 |
Postretirement benefit obligations
other than pensions |
|
537 |
|
473 |
Asbestos related liabilities |
|
998 |
|
1,014 |
Other liabilities |
|
3,941 |
|
4,110 |
Redeemable noncontrolling
interest |
|
3 |
|
3 |
Shareowners' equity |
|
20,550 |
|
19,547 |
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interest and shareowners' equity |
|
$ 55,668 |
|
$ 54,146 |
Honeywell International
Inc |
Consolidated
Statement of Cash Flows (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ 1,400 |
|
$ 1,327 |
|
$ 2,732 |
|
$ 2,553 |
Less: Net income attributable
to the noncontrolling interest |
|
8 |
|
8 |
|
14 |
|
18 |
Net income attributable to
Honeywell |
|
1,392 |
|
1,319 |
|
2,718 |
|
2,535 |
Adjustments to reconcile net
income attributable to Honeywell to net |
|
|
|
|
|
|
|
|
cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
184 |
|
185 |
|
354 |
|
364 |
Amortization |
|
92 |
|
75 |
|
193 |
|
149 |
Repositioning and other charges |
|
224 |
|
140 |
|
353 |
|
265 |
Net
payments for repositioning and other charges |
|
(127) |
|
(132) |
|
(264) |
|
(266) |
Pension
and other postretirement income |
|
(190) |
|
(159) |
|
(373) |
|
(318) |
Pension
and other postretirement benefit payments |
|
(23) |
|
(43) |
|
(47) |
|
(81) |
Stock
compensation expense |
|
44 |
|
43 |
|
94 |
|
96 |
Deferred income taxes |
|
(50) |
|
134 |
|
(92) |
|
182 |
Other |
|
(22) |
|
(113) |
|
(8) |
|
(25) |
Changes
in assets and liabilities, net of the effects of |
|
|
|
|
|
|
|
|
acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(299) |
|
(149) |
|
(276) |
|
(357) |
Inventories |
|
(12) |
|
29 |
|
(298) |
|
(212) |
Other
current assets |
|
22 |
|
(84) |
|
(3) |
|
(138) |
Accounts payable |
|
199 |
|
113 |
|
314 |
|
- |
Accrued liabilities |
|
13 |
|
225 |
|
(278) |
|
(292) |
Net cash provided by operating activities |
|
1,447 |
|
1,583 |
|
2,387 |
|
1,902 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Expenditures for property,
plant and equipment |
|
(233) |
|
(281) |
|
(401) |
|
(475) |
Proceeds from disposals of
property, plant and equipment |
|
1 |
|
- |
|
25 |
|
1 |
Increase in investments |
|
(1,073) |
|
(985) |
|
(2,329) |
|
(1,821) |
Decrease in investments |
|
1,016 |
|
905 |
|
1,841 |
|
1,785 |
Cash paid for acquisitions, net
of cash acquired |
|
(15) |
|
(28) |
|
(15) |
|
(1,084) |
Other |
|
(84) |
|
43 |
|
(113) |
|
52 |
Net cash used for investing activities |
|
(388) |
|
(346) |
|
(992) |
|
(1,542) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of
commercial paper and other short-term borrowings |
|
2,568 |
|
4,394 |
|
5,036 |
|
10,694 |
Payments of commercial paper
and other short-term borrowings |
|
(2,368) |
|
(4,168) |
|
(4,835) |
|
(12,918) |
Proceeds from issuance of
common stock |
|
155 |
|
138 |
|
376 |
|
243 |
Proceeds from issuance of
long-term debt |
|
5 |
|
25 |
|
16 |
|
4,473 |
Payments of long-term debt |
|
(25) |
|
(51) |
|
(30) |
|
(470) |
Repurchases of common
stock |
|
(682) |
|
(477) |
|
(992) |
|
(1,633) |
Cash dividends paid |
|
(546) |
|
(458) |
|
(1,049) |
|
(957) |
Payments to purchase the
noncontrolling interest |
|
- |
|
- |
|
- |
|
(238) |
Other |
|
(72) |
|
(1) |
|
(105) |
|
(15) |
Net cash used for financing activities |
|
(965) |
|
(598) |
|
(1,583) |
|
(821) |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash
and cash equivalents |
|
73 |
|
(67) |
|
222 |
|
51 |
Net decrease in cash and cash equivalents |
|
167 |
|
572 |
|
34 |
|
(410) |
Cash and cash equivalents at beginning of
period |
|
7,710 |
|
4,473 |
|
7,843 |
|
5,455 |
Cash and cash equivalents at end of period |
|
$ 7,877 |
|
$ 5,045 |
|
$ 7,877 |
|
$ 5,045 |
Honeywell International
Inc |
Reconciliation of Cash
Provided by Operating Activities to Free Cash Flow
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months
Ended |
|
|
June 30, |
|
June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities |
$
1,447 |
|
$
1,583 |
|
$
2,387 |
|
$
1,902 |
|
Expenditures for property, plant and
equipment |
(233) |
|
(281) |
|
(401) |
|
(475) |
|
Free cash flow |
$
1,214 |
|
$
1,302 |
|
$
1,986 |
|
$
1,427 |
|
|
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, 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, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ 1,910 |
|
$ 1,847 |
|
$
3,699 |
|
$
3,567 |
|
|
|
|
|
|
|
|
|
Stock compensation expense (A) |
|
(44) |
|
(43) |
|
(94) |
|
(96) |
Repositioning and other (A, B) |
|
(209) |
|
(122) |
|
(344) |
|
(253) |
Pension ongoing income (A) |
|
184 |
|
151 |
|
363 |
|
301 |
Other postretirement income (A) |
|
6 |
|
8 |
|
10 |
|
17 |
Operating Income |
|
$ 1,847 |
|
$ 1,841 |
|
$
3,634 |
|
$
3,536 |
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ 1,910 |
|
$ 1,847 |
|
$
3,699 |
|
$
3,567 |
÷ Sales |
|
10,078 |
|
9,991 |
|
19,570 |
|
19,513 |
Segment Profit Margin % |
|
19.0% |
|
18.5% |
|
18.9% |
|
18.3% |
|
|
|
|
|
|
|
|
|
Operating Income |
|
$ 1,847 |
|
$ 1,841 |
|
$
3,634 |
|
$
3,536 |
÷ Sales |
|
10,078 |
|
9,991 |
|
19,570 |
|
19,513 |
Operating Income Margin % |
|
18.3% |
|
18.4% |
|
18.6% |
|
18.1% |
|
(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 |
Calculation of Segment
Profit Margin Excluding Mergers and Acqusitions (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2017 |
|
Safety and Productivity Solutions |
|
|
|
Segment Profit excluding mergers and
acquisitions |
|
$
182 |
|
÷ Sales excluding mergers and acquisitions |
|
$
1,096 |
|
Segment Profit Margin excluding mergers and
acquisitions % |
|
16.6% |
|
|
|
|
|
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
Organic Sales % Change (Unaudited) |
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2017 |
|
Honeywell |
|
|
|
Reported sales % change |
|
1% |
|
Less: Foreign currency translation |
|
(1)% |
|
Less: Acquisitions and divestitures, net |
|
(1)% |
|
Organic sales % change |
|
3% |
|
|
|
|
|
Aerospace |
|
|
|
Reported sales % change |
|
(3)% |
|
Less: Foreign currency translation |
|
(1)% |
|
Less: Acquisitions and divestitures, net |
|
(4)% |
|
Organic sales % change |
|
2% |
|
|
|
|
|
Home and Building Technologies |
|
|
|
Reported sales % change |
|
2% |
|
Less: Foreign currency translation |
|
(2)% |
|
Less: Acquisitions and divestitures, net |
|
- |
|
Organic sales % change |
|
4% |
|
|
|
|
|
Performance Materials and Technologies |
|
|
|
Reported sales % change |
|
(8)% |
|
Less: Foreign currency translation |
|
(1)% |
|
Less: Acquisitions and divestitures, net |
|
(13)% |
|
Organic sales % change |
|
6% |
|
|
|
|
|
Safety and Productivity Solutions |
|
|
|
Reported sales % change |
|
30% |
|
Less: Foreign currency translation |
|
(1)% |
|
Less: Acquisitions and divestitures, net |
|
30% |
|
Organic sales % change |
|
1% |
|
|
|
|
|
We believe 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. |
|
|
|
|
|
A quantitative reconciliation of
reported sales percent change to organic sales percent change has
not been provided for forward-looking measures of organic sales
percent
change because management cannot reliably predict or estimate,
without unreasonable effort, the fluctuations in global currency
markets that impact foreign currency translation,
nor is it reasonable for management to predict the timing,
occurrence and impact of acquisition and divestiture transactions,
all of which could significantly impact our reported sales percent
change. |
|
Honeywell International
Inc |
Calculation of Earnings
Per Share at 25% Tax Rate Excluding Additional Restructuring and
2016 Divestitures (Unaudited) |
(Dollars in millions,
except per share amounts) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
Income before taxes |
|
$ 1,778 |
|
$ 1,755 |
|
|
|
|
|
|
|
Taxes at 25% |
|
445 |
|
439 |
|
|
|
|
|
|
|
Net income at 25% tax rate |
|
$ 1,333 |
|
$ 1,316 |
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
|
8 |
|
8 |
|
|
|
|
|
|
|
Net income attributable to Honeywell at 25% tax
rate |
|
$ 1,325 |
|
$ 1,308 |
|
|
|
|
|
|
|
Weighted average number of shares outstanding -
assuming dilution |
|
774.0 |
|
774.9 |
|
|
|
|
|
|
|
Earnings per share at 25% tax rate |
|
$ 1.71 |
|
$ 1.69 |
|
Less: Earnings per share attributable to 2016
divestitures (1) |
|
- |
|
0.05 |
|
Less: Earnings per share attributable to
additional restructuring (2) |
|
(0.09) |
|
- |
|
Earnings per share of common stock - assuming
dilution, at 25% tax rate, |
|
|
|
|
|
excluding additional restructuring and 2016
divestitures |
|
$ 1.80 |
|
$ 1.64 |
|
|
|
|
|
|
|
Earnings per share of common stock - assuming
dilution |
|
$ 1.80 |
|
$ 1.70 |
|
Less: Earnings per share impact of normalizing to
25% tax rate |
|
0.09 |
|
0.01 |
|
Less: Earnings per share attributable to 2016
divestitures (1) |
|
- |
|
0.05 |
|
Less: Earnings per share attributable to
additional restructuring (2) |
|
(0.09) |
|
- |
|
Earnings per share of common stock - assuming
dilution, at 25% tax rate, |
|
|
|
|
|
excluding additional restructuring and 2016
divestitures |
|
$ 1.80 |
|
$ 1.64 |
|
|
(1) Earnings per share attributable to
2016 divestitures uses a blended tax rate of 32.3% for three months
ended June 30, 2016. |
(2) The Company has and continues to
have an ongoing level of restructuring activities, for which there
is a planned amount of restructuring-related charges.
Additional restructuring represents only amounts that are
incremental to those planned restructuring amounts. For the
three months ended June 30, 2017, the
Company funded $117 million of restructuring, $90 million of which
was incremental to the planned amount. This additional
restructuring was enabled by a lower
than expected effective tax rate for the period. We believe
that the exclusion of this additional restructuring provides a more
comparable measure of year-on-year
results. Earnings per share attributable to additional
restructuring uses a tax rate of 25% for three months ended June
30, 2017. |
|
We believe earnings per share adjusted
to normalize for the expected effective tax rate of 25% for the
most recently completed fiscal quarter (as presented in prior
guidance for such quarter) and to exclude the 2016 divestitures 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 and Calculation of Segment
Profit |
and Operating Income
Margins (Unaudited) |
(Dollars in
millions) |
|
|
|
Twelve Months Ended |
|
December 31, |
|
2016 |
|
|
Segment Profit |
$ 7,186 |
|
|
Stock compensation expense (A) |
(184) |
Repositioning and other (A, B) |
(679) |
Pension ongoing income (A) |
601 |
Pension mark-to-market expense (A) |
(273) |
Other postretirement expense (A) |
32 |
Operating Income |
$ 6,683 |
|
|
Segment Profit |
$ 7,186 |
÷ Sales |
$ 39,302 |
Segment Profit Margin % |
18.3% |
|
|
Operating Income |
$ 6,683 |
÷ Sales |
$ 39,302 |
Operating Income Margin % |
17.0% |
|
(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. |
|
A quantitative reconciliation of
segment profit, on an overall Honeywell basis, to operating income
has not been provided for forward-looking measures of
segment profit and segment margin included herewithin.
Management cannot reliably predict or estimate, without
unreasonable effort, the impact and timing
on future operating results arising from items excluded from
segment profit, particularly pension mark-to-market expense as it
is dependent on macroeconomic factors,
such as interest rates and the return generated on invested pension
plan assets. The information that is unavailable to provide a
quantitative reconciliation could have a
significant impact on our reported financial results. To the
extent quantitative information becomes available without
unreasonable effort in the future, and closer to the
period to which the forward-looking measures pertain, a
reconciliation of segment profit to operating income will be
included within future filings. |
Honeywell International
Inc |
Reconciliation of
Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Expense, Debt Refinancing
Expense and Earnings Attributable to 2016 Divestitures
(Unaudited) |
|
|
|
|
|
|
|
|
|
Twelve Months
Ended |
|
|
|
December 31, |
|
|
|
|
2017E (1) |
|
2016 (2) |
|
|
|
|
|
|
|
|
Earnings per share of common stock - assuming
dilution (EPS) |
|
|
TBD |
|
$
6.20 |
|
|
|
|
|
|
|
|
Pension mark-to-market expense |
|
|
TBD |
|
0.28 |
|
Debt refinancing expense |
|
|
- |
|
0.12 |
|
|
|
|
|
|
|
|
EPS, excluding pension mark-to-market expense and
debt refinancing expense |
|
|
$7.00 - $7.10 |
|
6.60 |
|
|
|
|
|
|
|
|
Earnings attributable to 2016 divestitures |
|
|
- |
|
(0.14) |
|
|
|
|
|
|
|
|
EPS, excluding pension mark-to-market expense,
debt refinancing expense and |
|
|
|
|
|
|
earnings attributable to 2016 divestitures |
|
|
$7.00 - $7.10 |
|
$
6.46 |
|
|
(1) Utilizes weighted average shares
of approximately 774 million and an expected effective tax rate of
24%. |
(2) Utilizes weighted average shares
of 775.3 million. Pension mark-to-market expense uses a
blended tax rate of 21.3%. Debt refinancing expense uses a
tax rate of 26.5%.
Earnings attributable to 2016 divestitures use a blended tax rate
of 33.9%. |
|
We believe EPS, excluding pension
mark-to-market expense, debt refinancing expense and earnings
attributable to 2016 divestitures is a measure that is useful to
investors and
management in understanding our ongoing operations and in analysis
of ongoing operating trends. Management cannot reliably
predict or estimate, without unreasonable effort, the
pension mark-to-market expense as it is dependent on macroeconomic
factors, such as interest rates and the return generated on
invested pension plan assets. We therefore do
not include an estimate for the pension mark-to-market expense in
this reconciliation. Management is not currently forecasting
an impact to earnings per share arising from a debt
refinancing or divestiture transaction. Based on economic and
industry conditions, future developments and other relevant
factors, these assumptions are subject to change. |
Honeywell International
Inc |
Reconciliation of Cash
Provided by Operating Activities to Free Cash Flow
(Unaudited) |
(Dollars in
billions) |
|
|
|
|
|
|
|
Twelve Months
Ended |
|
|
December 31, |
|
|
2017E |
|
2016 |
|
|
|
|
|
Cash provided by operating activities |
|
$5.7 - $5.8 |
|
$5.5 |
Expenditures for property, plant and
equipment |
|
~(1.1) |
|
(1.1) |
Free cash flow |
|
$4.6 - $4.7 |
|
$4.4 |
|
|
|
|
|
We define free cash flow as cash
provided by operating activities less cash expenditures for
property, plant and equipment. |
|
We believe 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, 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. |