TIDMHON
Honeywell Announces Planned Portfolio Changes
- Plans to Spin Homes and the ADI Global Distribution Business, a $4.5B
Business, and Transportation Systems, a $3.0B Business, into Two Independent,
Publicly-Traded Companies by End of 2018
- Prospective Honeywell Portfolio Consists of High-Growth Businesses with
Strong Operational and Technology Synergies, Focused on Six Key End Markets
- Independent Investment Decisions Will Position Spins to Thrive in Evolving
End Markets
- Company Previews 3Q17 Results: Sales Up 3% Reported, Up 5% Organic;
Earnings Per Share of $1.75
- New Leader Appointed for Home and Building Technologies Business Group; Smart
Energy Business to Align with Performance Materials and Technologies
MORRIS PLAINS, N.J., Oct. 10, 2017 /PRNewswire/ -- Honeywell (NYSE: HON) today
announced the results of its comprehensive portfolio review, including its
intention to separately spin off its Homes product portfolio and ADI global
distribution business, as well as its Transportation Systems business, into two
stand-alone, publicly-traded companies. The planned separation transactions are
intended to be tax-free spins to Honeywell shareowners for U.S. federal income
tax purposes and are expected to be completed by the end of 2018.
"Today's announcement marks the culmination of a rigorous portfolio review
involving a detailed assessment of every Honeywell business. As part of that
review, we analyzed numerous criteria, including growth outlook, financial
performance, market dynamics, potential for disruption, and, most importantly,
assessment of fit as a Honeywell business," said Honeywell President and CEO
Darius Adamczyk. "The remaining Honeywell portfolio will consist of high-growth
businesses in six attractive industrial end markets, each aligned to global
mega trends including energy efficiency, infrastructure investment,
urbanization and safety. These businesses are best positioned to leverage
Honeywell synergies from our technologies, financial and business models, and
talent. Our simplified portfolio will offer multiple platforms for organic
growth and margin expansion through further deployment of our world-class HOS
Gold operating system and the Honeywell Sentience Platform. Honeywell will also
have multiple levers for continuing to execute an aggressive capital deployment
strategy, including a vigorous and disciplined M&A program.
"The spun businesses will be better positioned to maximize shareowner value
through focused strategic decision making and capital allocation tailored for
their end markets," Adamczyk said.
"At Honeywell, we will continue our track record of execution, delivering
growth, margin expansion, and aggressive capital allocation for our
shareowners."
The new Homes and Global Distribution business will be a leader in the home
heating, ventilation and air conditioning (HVAC) controls and security markets,
and a leading global distributor of security and fire protection products. The
business is expected to have annualized revenue of approximately $4.5 billion,
a high-yield credit rating, approximately 13,000 employees, and financial
responsibility for certain Honeywell legacy liabilities.
The new Transportation Systems business will be a global leader in turbocharger
technologies with best-in-class engineering capabilities for a broad range of
engine types across global automobile, truck and other vehicle markets. The
business is expected to have annualized revenue of approximately $3 billion, a
high-yield credit rating, approximately 6,500 employees and financial
responsibility for Honeywell legacy automotive segment liabilities in an amount
equal to our Bendix legacy asbestos liability.
The planned separations will not require a shareowner vote. Each spin-off will
be subject to finalization of the contours of the spun-off business, assurance
that the separation will be tax-free to Honeywell shareowners for U.S. federal
income tax purposes, finalization of the capital structure of the three
corporations, the effectiveness of appropriate filings with the U.S. Securities
and Exchange Commission, final approval of the Honeywell Board of Directors,
and other customary matters.
Company Previews Anticipated Strong Third-Quarter Results; Raises Low-End of
Full-Year Guidance
Honeywell announced it anticipates strong third-quarter results. Sales are
expected to be $10.1 billion, up 3% reported and up 5% organic, and earnings
per share is expected to be $1.75, up 9% reported and up 16%1 ex-divestitures,
normalized for tax at 26%, driven by strong results at its Aerospace and
Performance Materials and Technologies business groups. The Company also raised
the low-end of its full-year 2017 earnings per share guidance by 5 cents to a
new range of $7.05 - $7.10, excluding any pension mark-to-market adjustment.
The Company will hold its quarterly earnings announcement on Friday, October
20, at 9:30 a.m. EDT.
New Leader Appointed for Home and Building Technologies Business Group
Effective immediately, Gary Michel will serve as president and CEO of
Honeywell's Home and Building Technologies (HBT) strategic business group.
Michel will report to Adamczyk and serve as a company officer. Michel succeeds
Terrence Hahn, who will move to a leadership role reporting to Adamczyk and
will help prepare the Homes and ADI businesses for the spin.
Michel joins Honeywell from Ingersoll-Rand Company, where he has held a series
of large leadership roles over the past 32 years. Most recently, he served as
senior vice president and president, Residential HVAC and Supply, which he
transformed to deliver substantial improvements in revenue and market share,
operating income, commercialization processes, and technology platforms. Michel
has also led Ingersoll-Rand's Club Car; Road Development - Construction
Technologies; and Utility Equipment - Construction Technologies businesses.
Michel has held several other roles, including executive director, Corporate
Development, and general manager, Aftermarket Division, for Europe, the Middle
East and Africa. Michel earned his B.S. in mechanical engineering at Virginia
Tech and his M.B.A. at the University of Phoenix.
"Gary has proven himself to be an innovative and energetic leader with a deep
understanding of his customers and end markets and the ability to translate
this knowledge into technology-differentiated offerings that bring value to
customers," Adamczyk said. "Gary is a welcome addition to our team and will
help Honeywell continue to be a leader in connected technologies, building on
our great positions in growing industries."
Smart Energy Business to Align with Performance Materials and Technologies
In addition, Honeywell's Smart Energy business unit, previously part of HBT,
will immediately be integrated into the Process Solutions unit within Honeywell
Performance Materials and Technologies. Honeywell Smart Energy enables
utilities and distribution companies to deploy advanced capabilities that
transform operations, improve reliability and environmental sustainability, and
better serve customers. Its wide array of meter offerings will complement an
existing meter portfolio within Process Solutions. Honeywell's Process
Solutions unit is a pioneer in process automation control and industrial
cyber-security, and a global leader in optimizing and protecting manufacturing
assets in the refining, pulp and paper, industrial power generation, chemicals
and petrochemicals, biofuels, pharmaceuticals, and metals, minerals and mining
industries.
"Both Smart Energy and Process Solutions have deep expertise in metering, large
project roll-outs and software, and both can leverage the Honeywell Sentience
Platform to utilize vast quantities of user data to generate new products and
services that help customers operate more efficiently," Adamczyk said. "Both
businesses are project-based with opportunities for recurring revenue streams.
We are excited about the combination of these two businesses, which will allow
them to expand their respective capabilities and serve a broader set of
customers."
Investor Conference Call
Honeywell will discuss the transactions during an investor conference call
today starting at 8 a.m. EDT. To participate in today's conference call, please
dial (800) 239-9838 (domestic) or (719) 325-2231 (international) approximately
10 minutes before the 8 a.m. EDT start. Please mention to the operator that you
are dialing in for Honeywell's portfolio review call or provide the conference
code 4605029. 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 p.m. EDT, October 10, until 12
p.m. EDT, October 17, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 4605029.
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, as well as the ability to
effect the separations and meet the related conditions noted above. 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, including with respect to any changes in or
abandonment of the proposed separations. 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. In addition, third-quarter results
contained herein are preliminary and may differ from our actual results that
will be reported in our third-quarter earnings release and Form 10-Q filed on
October 20, 2017.
1 Earnings per share variance excludes 2016 divestitures and approximately $60
million of additional 3Q17 restructuring funding enabled by a lower than
planned effective tax rate, normalized for tax at 26%.
Honeywell International Inc
Reconciliation of Organic Sales % Change (Unaudited)
Preliminary
Three Months Ended
September 30,
2017
Honeywell
Reported sales % change 3%
Less: Foreign currency translation 1%
Less: Acquisitions and divestitures, net (3)%
Organic sales % change 5%
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.
Honeywell International Inc
Calculation of Earnings Per Share at 26% Tax Rate Excluding Additional
Restructuring and 2016
Divestitures (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
September 30,
Preliminary 2016
2017
Income before taxes $ $ 1,632
1,783
Taxes at 26% 464 424
Net income at 26% tax rate $ $ 1,208
1,319
Less: Net income attributable to the noncontrolling 17 8
interest
Net income attributable to Honeywell at 26% tax rate $ $ 1,200
1,302
Weighted average number of shares outstanding - 771.4 774.4
assuming dilution
Earnings per share at 26% tax rate $ $
1.69 1.55
Less: Earnings per share attributable to 2016 - 0.04
divestitures (1)
Less: Earnings per share attributable to additional (0.06) -
restructuring (2)
Earnings per share of common stock - assuming dilution,
at 26% tax rate,
excluding additional restructuring and 2016 $ $
divestitures 1.75 1.51
Earnings per share of common stock - assuming dilution $ $
1.75 1.60
Less: Earnings per share impact of normalizing to 26% 0.06 0.05
tax rate
Less: Earnings per share attributable to 2016 0.04
divestitures (1)
Less: Earnings per share attributable to additional (0.06)
restructuring (2)
Earnings per share of common stock - assuming dilution,
at 26% tax rate,
excluding additional restructuring and 2016 $ $
divestitures 1.75 1.51
(1) Earnings per share attributable to 2016 divestitures utilizes weighted
average shares of 774.4 million and a blended tax rate of 32.9% for the three
months ended September 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 September
30, 2017, the Company funded approximately $100 million of restructuring,
approximately $60 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
26% for the three months ended September 30, 2017.
We believe earnings per share adjusted to normalize for the expected effective
tax rate of 26% 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.
Contacts:
Media Investor Relations
Scott Sayres Mark Macaluso
(480) 257-5921 (973) 455-2222
scott.sayres@honeywell.com mark.macaluso@honeywell.com
END
(END) Dow Jones Newswires
October 10, 2017 07:05 ET (11:05 GMT)
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