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
2017 |
|
2016 |
|
|
|
|
|
|
|
Income before taxes |
|
$ 1,783 |
|
$ 1,632 |
|
|
|
|
|
|
|
Taxes at 26% |
|
464 |
|
424 |
|
|
|
|
|
|
|
Net income at 26% tax rate |
|
$ 1,319 |
|
$ 1,208 |
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
|
17 |
|
8 |
|
|
|
|
|
|
|
Net income attributable to Honeywell at 26% tax
rate |
|
$ 1,302 |
|
$ 1,200 |
|
|
|
|
|
|
|
Weighted average number of shares outstanding -
assuming dilution |
|
771.4 |
|
774.4 |
|
|
|
|
|
|
|
Earnings per share at 26% tax rate |
|
$
1.69 |
|
$ 1.55 |
|
Less: Earnings per share attributable to 2016
divestitures (1) |
|
- |
|
0.04 |
|
Less: Earnings per share attributable to
additional restructuring (2) |
|
(0.06) |
|
- |
|
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% tax rate |
|
0.06 |
|
0.05 |
|
Less: Earnings per share attributable to 2016
divestitures (1) |
|
|
|
0.04 |
|
Less: Earnings per share attributable to
additional restructuring (2) |
|
(0.06) |
|
|
|
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 |