TIDMHON
Honeywell Reports Strong Fourth Quarter And 2017 Results, Raises 2018 Guidance
To Reflect Lower Tax Rate
- Exceeded Fourth-Quarter Earnings Per Share Guidance on Stronger Margins
- Fourth-Quarter Reported Sales Up 9%; Organic Sales Up 6%, Driven by Strength
in Aerospace Aftermarket, UOP, Advanced Materials, and Intelligrated
- Segment Margin Expansion Driven by Strong Top-Line Growth, Productivity, and
Repositioning Benefits
- Fourth-Quarter Operating Cash Flow of $2.2B; Free Cash Flow of $1.8B,
Conversion of 123% in the Fourth Quarter and 90% for the Full Year(1)
- Funded More Than $350 Million in Repositioning, Repurchased $2.9B of
Honeywell Shares in 2017
MORRIS PLAINS, N.J., Jan. 26, 2018 -- Honeywell (NYSE: HON) today announced
financial results for the fourth quarter and full year of 2017, and raised its
2018 earnings2 guidance by 20 cents to a new range of $7.75 - $8.00 to reflect
an expected lower tax rate due to the U.S. Tax Cuts and Jobs Act of 2017.
"Honeywell delivered a strong fourth quarter, capping an exceptional year for
the company," said Darius Adamczyk, president and chief executive officer of
Honeywell. "Fourth-quarter sales grew six percent organically, leading to
full-year organic sales growth of four percent, driven by robust growth in
Aerospace aftermarket, UOP, Advanced Materials, and Intelligrated. We leveraged
HOS Gold to drive outstanding growth and expand segment margins by 70 basis
points for the year. Earnings per share3 were $1.85 in the fourth quarter and
$7.11 for the full year, up 10 percent year over year, excluding the
fourth-quarter charge related to U.S. tax reform and other items, as a result
of our strong focus on growth and productivity. Our businesses achieved
exceptional free cash flow, with 123 percent conversion in the fourth quarter
and 90 percent conversion for the full year, exceeding the high end of our
guidance for 2017.
"While delivering outstanding 2017 results, we also made significant
investments in our future, including funding more than $350 million in
restructuring projects," Adamczyk continued. "We generated significant value
for our shareowners in 2017 through a 12 percent increase in our dividend; $2.9
billion in share repurchases, including $1.6 billion in the fourth quarter; and
the closing of three acquisitions. Our financial performance and aggressive
capital deployment led to a total shareowner return of 35 percent, well ahead
of the S&P's total shareowner return of 22 percent and the median return of our
multi-industry peers of 24 percent.
"Honeywell's transformation to a software-industrial leader is well underway,
and in 2018, we expect to complete the spin-offs of our Homes and Global
Distribution business, and our Transportation Systems business, which will
position Honeywell for future growth and margin expansion. After the spins,
these businesses will be better positioned to maximize shareowner value through
focused strategic decision making and capital allocation tailored for their end
markets," Adamczyk said.
"I am confident in Honeywell's future, and our ability to continue to deliver
for our shareowners and our employees. Our strong performance in 2017, together
with the enactment of new U.S. tax legislation, has enabled us to increase our
401(k) match in the U.S. This is a sustained, annual benefit that will provide
a more secure retirement for our employees. We believe that enhancing this
benefit is extremely valuable and important to our employees over the long
term," Adamczyk concluded.
The Company recorded a provisional charge of $3.8 billion in the fourth quarter
to reflect the estimated impacts of the U.S. Tax Cuts and Jobs Act of 2017,
including the U.S. tax on deemed repatriated earnings of non-U.S. subsidiaries,
the writedown of net U.S. deferred tax liabilities at lower enacted corporate
tax rates, and the effects of the implementation of the territorial tax system.
The impacts of the legislation may differ from this estimate, possibly
materially (and the amount of the provisional charge may accordingly be
adjusted over the course of 2018), due to changes in interpretations and
assumptions the Company has made, guidance that may be issued, and actions the
Company may take as a result of the tax legislation. Honeywell has been a
strong supporter of this legislation and is encouraged by the significantly
enhanced capital mobility, lower U.S. corporate income tax rates, and more
appealing investment environment in the U.S., which the legislation enables.
Honeywell updated its 2018 guidance to reflect 2017 results and the anticipated
impact of the U.S. tax reform. The company now expects that its 2018 effective
tax rate will be between 22 percent and 23 percent. Full-year earnings per
share4 are now expected to be between $7.75 and $8.00, up 9 percent to 13
percent. A summary of the guidance changes can be found in the table below.
Honeywell will discuss its results during an investor conference call today
starting at 8 a.m. Eastern Standard Time.
Fourth-Quarter Performance
Honeywell sales for the fourth quarter were up six percent on an organic basis
and up nine percent on a reported basis. The difference between reported and
organic sales relates to the impact of foreign currency translation. The
fourth-quarter financial results can be found in Tables 2 and 3, below.
Aerospace sales for the fourth quarter were up five percent on an organic basis
driven by growth in the commercial aftermarket and U.S. defense, and demand for
light vehicle gas and commercial vehicle turbochargers in Transportation
Systems. Segment margin expanded 270 bps to 22.9 percent, primarily driven by
higher Commercial Aftermarket volumes, productivity net of inflation, lower
year-over-year customer incentives, and commercial excellence.
Home and Building Technologies sales for the fourth quarter were up three
percent on an organic basis driven bycontinued demand in Products for fire and
building offerings in Europe, as well as continued strength in Global
Distribution and robust growth in China. Segment margin contracted 40 bps to
17.6 percent, driven by lower Security volumes and investments for growth,
partially offset by commercial excellence.
Performance Materials and Technologies sales for the fourth quarter were up
nine percent on an organic basis driven by strong growth across all businesses.
UOP grew 12 percent on an organic basis driven by robust gas processing,
catalyst, and equipment growth, and Advanced Materials grew 19 percent on an
organic basis driven by continued demand for Solstice® low-global-warming
products.Short-cycle demand in Process Solutions was strong as well. Segment
margin contracted 180 bps to 21.3 percent, primarily driven by an unplanned
plant outage and a different year-over-year mix impact of catalyst sales
combined with stronger equipment volumes in UOP versus our guidance, partly
offset by productivity net of inflation and commercial excellence.
Safety and Productivity Solutions sales for the fourth quarter were up 12
percent on an organic basis driven by double-digit organic sales growth at
Intelligrated; higher volumes in industrial safety products, sensing controls,
and voice-enabled workflow solutions; and strong Retail demand. Segment margin
expanded 140 bps to 15.7 percent, primarily driven by higher volumes and
productivity net of inflation.
To participate on the conference call, please dial (866) 548-4713 (domestic) or
(323) 794-2093 (international) approximately ten minutes before the 8 a.m. EST
start. Please mention to the operator that you are dialing in for Honeywell's
fourth quarter 2017 earnings call or provide the conference code HON4Q17. 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 p.m. EST, January 26, until 1 p.m. EST, February 2, by
dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access
code is 9224317.
Table 1: FULL-YEAR 2018 GUIDANCE5
Previous Guidance Current Guidance
Sales $41.8B - $42.5B $41.8B - $42.5B
Organic Growth 2% - 4% 2% - 4%
Segment Margin 19.2% - 19.5% 19.3% - 19.6%
Expansion Up 30 - 60 bps Up 30 - 60 bps
Earnings Per Share $7.55 - $7.80 $7.75 - $8.00
Earnings Growth 6% - 10% 9% - 13%
Free Cash Flow6 $5.2B - $5.9B $5.2B - $5.9B
TABLE 2: SUMMARY OF FINANCIAL RESULTS - TOTAL HONEYWELL
(Sales, Cash Flow In $ Millions)
FY 2016 FY 2017 Change
Sales 39,302 40,534 3%
Organic 4%
Segment Margin 18.3% 19.0% 70 bps
Operating Income Margin 17.0% 17.6% 60 bps
Earnings Per Share
Reported $6.20 $2.14 (65%)
Ex-Pension MTM, 2016 Divestitures, Separation Costs, $6.46 $7.11 10%
4Q16 Debt Refinancing and Tax Reform Charge
Cash Flow From Operations 5,498 5,966 9%
Free Cash Flow6 4,403 4,935 12%
4Q 2016 4Q 2017 Change
Sales 9,985 10,843 9%
Organic 6%
Segment Margin 19.0% 19.3% 30 bps
Operating Income Margin 16.2% 15.8% (40) bps
Earnings/Loss Per Share
Reported $1.34 ($3.18) (337%)
Ex-Pension MTM, Separation Costs, $1.74 $1.85 6%
4Q16 Debt Refinancing and Tax Reform Charge
Cash Flow From Operations 2,042 2,172 6%
Free Cash Flow6 1,696 1,754 3%
TABLE 3: SUMMARY OF FINANCIAL RESULTS - SEGMENTS
(Sales, Segment Profit In $ Millions)
AEROSPACE FY 2016 FY 2017 Change
Sales 14,751 14,779 Flat
Organic 2%
Segment Profit 2,991 3,288 10%
Segment Margin 20.3% 22.2% 190 bps
4Q 2016 4Q 2017
Sales 3,666 3,902 6%
Organic 5%
Segment Profit 739 893 21%
Segment Margin 20.2% 22.9% 270 bps
HOME AND BUILDING TECHNOLOGIES FY 2016 FY 2017 Change
Sales 9,490 9,777 3%
Organic 2%
Segment Profit 1,621 1,650 2%
Segment Margin 17.1% 16.9% (20) bps
4Q 2016 4Q 2017
Sales 2,488 2,615 5%
Organic 3%
Segment Profit 449 461 3%
Segment Margin 18.0% 17.6% (40) bps
PERFORMANCE MATERIALS AND TECHNOLOGIES FY 2016 FY 2017 Change
Sales 10,436 10,339 (1)%
Organic 8%
Segment Profit 2,112 2,206 4%
Segment Margin 20.2% 21.3% 110 bps
4Q 2016 4Q 2017
Sales 2,540 2,854 12%
Organic 9%
Segment Profit 587 607 3%
Segment Margin 23.1% 21.3% (180) bps
SAFETY AND PRODUCTIVITY SOLUTIONS FY 2016 FY 2017 Change
Sales 4,625 5,639 22%
Organic 5%
Segment Profit 680 852 25%
Segment Margin 14.7% 15.1% 40 bps
4Q 2016 4Q 2017
Sales 1,291 1,472 14%
Organic 12%
Segment Profit 185 231 25%
Segment Margin 14.3% 15.7% 140 bps
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. 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.
Information regarding the impact of the Tax Cuts and Jobs Act of 2017 ("Tax
Legislation") consists of preliminary estimates which are forward-looking
statements and are subject to change, possibly materially, as the firm
completes its financial statements. Information regarding the impact of Tax
Legislation is based on our current calculations, as well our current
interpretations, assumptions and expectations relating to Tax Legislation,
which are subject to further change.
This release contains financial measures presented on a non-GAAP basis.
Honeywell's non-GAAP financial measures used in this release are as follows:
segment profit, on an overall Honeywell basis, a measure by which we assess
operating performance, which we define as operating income adjusted for certain
items as presented in the Appendix; segment margin, on an overall Honeywell
basis, which we define as segment profit divided by sales; organic sales
growth, which we define as sales growth less the impacts from foreign currency
translation and acquisitions and divestitures for the first 12 months following
transaction date; free cash flow, which we define as cash flow from operations
less capital expenditures and which we adjust to exclude separation costs and
with respect to forward looking measures, adjustments to the provisional charge
related to Tax Legislation, if and as noted in the release; free cash flow
conversion, which we define as free cash flow divided by net income
attributable to Honeywell excluding pension mark-to-market expenses, separation
costs, the provisional charge related to Tax Legislation, and with respect to
forward looking measures, adjustments to such provisional charge; and earnings
per share, which we adjust to exclude pension mark-to-market expenses, as well
as for other components, such as divestitures, debt refinancings, and exclusion
of separation costs, the provisional charge related to Tax Legislation, and
with respect to forward looking measures, adjustments to such provisional
charge, if and as noted in the release. Other than references to reported
earnings per share, all references to earnings per share in this release are so
adjusted. The respective tax rates applied when adjusting earnings per share
for these items are identified in the release or in the reconciliations
presented in the Appendix. Management believes that, when considered together
with reported amounts, these measures are useful to investors and management in
understanding our ongoing operations and in the analysis of ongoing operating
trends. These metrics should be considered in addition to, and not as
replacements for, the most comparable GAAP measure. Refer to the Appendix
attached to this release for reconciliations of non-GAAP financial measures to
the most directly comparable GAAP measures. Forward looking quantitative
reconciliations herein exclude separation costs because management cannot
reliably predict or precisely estimate, without unreasonable effort, those
costs given the preliminary nature of the estimates and exclude any adjustments
to the provisional charge related to Tax Legislation as such charge is
provisional.
1 Free cash flow is cash flow from operations less capital expenditures; free
cash flow conversion is free cash flow divided by net income attributable to
Honeywell excluding pension mark-to-market expenses, separation costs related
to the spin-offs of the Homes and Transportation Systems businesses and the
provisional charge related to the Tax Cuts and Jobs Act of 2017
2 EPS excludes pension mark-to-market, separation costs, and adjustments to the
provisional charge related to the Tax Cuts and Jobs Act of 2017
3 EPS, EPS V% exclude pension mark-to-market, 2016 divestitures, 4Q16 debt
refinancing, separation costs, and the provisional charge related to the Tax
Cuts and Jobs Act of 2017
4 EPS, EPS V% exclude pension mark-to-market, 2016 divestitures, 4Q16 debt
refinancing, separation costs related to the spin-offs of the Homes and
Transportation Systems businesses, the provisional charge related to the Tax
Cuts and Jobs Act of 2017 and adjustments to such charge
5 EPS, EPS V% exclude pension mark-to-market, 2016 divestitures, 4Q16 debt
refinancing, separation costs related to the spin-offs of the Homes and
Transportation Systems businesses, the provisional charge related to the Tax
Cuts and Jobs Act of 2017 and adjustments to such charge; free cash flow, free
cash flow V% exclude separation costs and impacts from the Tax Cuts and Jobs
Act of 2017
6 Cash flow from operations less capital expenditures
Contacts:
Media Investor Relations
Scott Sayres Mark Macaluso
(480) 257-8921 (973) 455-2222
scott.sayres@honeywell.com mark.macaluso@honeywell.com
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Twelve Months
Ended
December 31, December 31,
2017 2016 2017 2016
Product sales $ $ $ $
8,646 7,964 32,317 31,362
Service sales 2,197 2,021 8,217 7,940
Net sales 10,843 9,985 40,534 39,302
Costs, expenses and other
Cost of products sold (A) 6,114 5,625 22,659 22,170
Cost of services sold (A) 1,382 1,254 4,916 4,980
7,496 6,879 27,575 27,150
Selling, general and administrative 1,631 1,493 5,808 5,469
expenses (A)
Other (income) expense 18 95 (67) (102)
Interest and other financial charges 81 86 316 338
9,226 8,553 33,632 32,855
Income before taxes 1,617 1,432 6,902 6,447
Tax expense 4,016 387 5,204 1,601
Net income (loss) (2,399) 1,045 1,698 4,846
Less: Net income attributable to the 12 11 43 37
noncontrolling interest
Net income (loss) attributable to $ $ $ $
Honeywell (2,411) 1,034 1,655 4,809
Earnings (loss) per share of common stock $ $ $ $
- basic (3.18) 1.36 2.17 6.29
Earnings (loss) per share of common stock $ $ $ $
- assuming dilution (3.18) 1.34 2.14 6.20
Weighted average number of shares 758.8 762.4 762.1 764.3
outstanding - basic
Weighted average number of shares 758.8 (B) 772.3 772.1 775.3
outstanding - 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.
(B) Due to a loss for the period, no incremental shares are included because
the effect would be antidilutive.
Below is a reconciliation of earnings per share to earnings per share,
excluding pension mark-to-market expense, debt refinancing expense, separation
costs, impact from the Tax Cuts and Jobs Act of 2017 ("Tax Reform"), and
earnings attributable to 2016 divestitures. We believe this measure is useful
to investors and management in understanding our ongoing operations and in
analysis of ongoing operating trends. For the three months ended December 31,
2017, earnings per share utilizes weighted average number of shares
outstanding, assuming dilution of 769.0 million.
Three Months Ended Twelve Months
Ended
December 31, December 31,
2017 2016 2017 2016
Earnings (loss) per share of common stock $ $ $ $
- assuming dilution (3.18) 1.34 2.14 6.20
Pension mark-to-market expense (1) 0.09 0.28 0.09 0.28
Debt refinancing expense (2) - 0.12 - 0.12
Separation costs 0.02 - 0.02 -
Impacts from Tax Reform 4.88 - 4.86 -
Earnings attributable to 2016 - - - (0.14)
divestitures (3)
Impact of dilution of weighted average 0.04 - - -
number of shares outstanding
Earnings per share of common stock -
assuming dilution, excluding pension
mark-to-market expense, debt refinancing
expense, separation costs, impacts from
Tax Reform, and 2016 divestitures $ $ $ $
1.85 1.74 7.11 6.46
(1) Pension mark-to-market expense uses a blended tax rate of 23% and 21.3%
for 2017 and 2016.
(2) Debt refinancing expense uses a tax rate of 26.5% for 2016.
(3) Earnings attributable to 2016 divestitures use a blended tax rate of 33.9%
for 2016.
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
Net Sales 2017 2016 2017 2016
Aerospace $ 3,902 $ 3,666 $ 14,779 $
14,751
Home and Building 2,615 2,488 9,777 9,490
Technologies
Performance 2,854 2,540 10,339 10,436
Materials and
Technologies
Safety and 1,472 1,291 5,639 4,625
Productivity
Solutions
Total $ 10,843 $ 9,985 $ 40,534 $
39,302
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Twelve Months Ended
December 31, December 31,
Segment Profit 2017 2016 2017 2016
Aerospace $ 893 $ 739 $ 3,288 $
2,991
Home and Building 461 449 1,650 1,621
Technologies
Performance 607 587 2,206 2,112
Materials and
Technologies
Safety and 231 185 852 680
Productivity
Solutions
Corporate (96) (61) (306) (218)
Total segment 2,096 1,899 7,690 7,186
profit
Other income (26) (103) 28 71
(expense) (A)
Interest and other (81) (86) (316) (338)
financial charges
Stock compensation (43) (39) (176) (184)
expense (B)
Pension ongoing 167 154 713 601
income (B)
Pension (87) (273) (87) (273)
mark-to-market
expense (B)
Other 5 8 21 32
postretirement
income (B)
Repositioning and (414) (128) (971) (648)
other charges (B)
Income before $ 1,617 $ 1,432 $ 6,902 $
taxes 6,447
(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)
December December
31, 31,
2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ $
7,059 7,843
Short-term investments 3,758 1,520
Accounts receivable - net 8,866 8,177
Inventories 4,613 4,366
Other current assets 1,706 1,152
Total current assets 26,002 23,058
Investments and long-term receivables 667 587
Property, plant and equipment - net 5,926 5,793
Goodwill 18,277 17,707
Other intangible assets - net 4,496 4,634
Insurance recoveries for asbestos related liabilities 411 417
Deferred income taxes 236 347
Other assets 3,372 1,603
Total assets $ $
59,387 54,146
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ $
6,584 5,690
Commercial paper and other short-term borrowings 3,958 3,366
Current maturities of long-term debt 1,351 227
Accrued liabilities 6,968 7,048
Total current liabilities 18,861 16,331
Long-term debt 12,573 12,182
Deferred income taxes 2,894 486
Postretirement benefit obligations other than pensions 512 473
Asbestos related liabilities 1,173 1,014
Other liabilities 5,930 4,110
Redeemable noncontrolling interest 5 3
Shareowners' equity 17,439 19,547
Total liabilities, redeemable noncontrolling $ $
interest and shareowners' equity 59,387 54,146
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2017 2016 2017 2016
Cash flows from operating activities:
Net income (loss) $ $ $ $
(2,399) 1,045 1,698 4,846
Less: Net income attributable to the 12 11 43 37
noncontrolling interest
Net income (loss) attributable to (2,411) 1,034 1,655 4,809
Honeywell
Adjustments to reconcile net income
(loss) attributable to Honeywell to net
cash provided by operating activities:
Depreciation 183 180 717 726
Amortization 100 77 398 304
(Gain) loss on sale of 7 (2) 7 (178)
non-strategic businesses and assets
Repositioning and other charges 438 128 1,021 695
Net payments for repositioning and (234) (205) (628) (625)
other charges
Pension and other postretirement (85) 111 (647) (360)
(income) expense
Pension and other postretirement (35) (33) (106) (143)
benefit payments
Stock compensation expense 43 39 176 184
Deferred income taxes 2,370 (70) 2,294 76
Other 1,680 227 1,642 194
Changes in assets and liabilities,
net of the effects of
acquisitions and divestitures:
Accounts receivable (274) (55) (682) (547)
Inventories 141 215 (259) (18)
Other current assets (581) (106) (568) (106)
Accounts payable 520 272 924 254
Accrued liabilities 310 230 22 233
Net cash provided by operating activities 2,172 2,042 5,966 5,498
Cash flows from investing activities:
Expenditures for property, plant and (418) (346) (1,031) (1,095)
equipment
Proceeds from disposals of property, 40 17 86 21
plant and equipment
Increase in investments (2,594) (871) (6,743) (3,954)
Decrease in investments 1,621 1,023 4,414 3,681
Cash paid for acquisitions, net of (10) (5) (82) (2,573)
cash acquired
Proceeds from sales of businesses, net - (8) - 296
of fees paid
Other (22) 124 (218) 282
Net cash used for investing activities (1,383) (66) (3,574) (3,342)
Cash flows from financing activities:
Proceeds from issuance of commercial 4,893 2,848 13,701 18,997
paper and other short-term borrowings
Payments of commercial paper and other (4,924) (4,887) (13,532) (21,461)
short-term borrowings
Proceeds from issuance of common stock 57 23 520 409
Proceeds from issuance of long-term 1,199 4,735 1,238 9,245
debt
Payments of long-term debt (223) (2,361) (292) (2,839)
Repurchases of common stock (1,554) (213) (2,889) (2,079)
Cash dividends paid (565) (505) (2,119) (1,915)
Payments to purchase the - - - (238)
noncontrolling interest
AdvanSix pre-separation funding - - - 269
AdvanSix pre-spin borrowing - - - 38
AdvanSix cash at spin-off - - - (38)
Other (12) (2) (143) (42)
Net cash (used for) provided by financing (1,129) (362) (3,516) 346
activities
Effect of foreign exchange rate changes on 10 (202) 340 (114)
cash and cash equivalents
Net (decrease) increase in cash and cash (330) 1,412 (784) 2,388
equivalents
Cash and cash equivalents at beginning of 7,389 6,431 7,843 5,455
period
Cash and cash equivalents at end of period $ $ $ $
7,059 7,843 7,059 7,843
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,
2017 2016 2017 2016
Segment Profit $ $ $ $
2,096 1,899 7,690 7,186
Stock compensation expense (43) (39) (176) (184)
(A)
Repositioning and other (B, (422) (136) (1,010) (679)
C)
Pension ongoing income (A) 167 154 713 601
Pension mark-to-market (87) (273) (87) (273)
expense (A)
Other postretirement income 5 8 21 32
(A)
Operating Income $ $ $ $
1,716 1,613 7,151 6,683
Segment Profit $ $ $ $
2,096 1,899 7,690 7,186
÷ Sales 10,843 9,985 40,534 39,302
Segment Profit Margin % 19.3% 19.0% 19.0% 18.3%
Operating Income $ $ $ $
1,716 1,613 7,151 6,683
÷ Sales 10,843 9,985 40,534 39,302
Operating Income Margin % 15.8% 16.2% 17.6% 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.
(C) Included in cost of products and services sold, selling, general and
administrative expenses, and other income/expense.
We define segment profit as operating income, excluding stock compensation
expense, pension ongoing income or expense, pension mark-to-market expense,
other postretirement income or expense, and repositioning and other charges.
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 all 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 Organic Sales % Change (Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2017 2017
Honeywell
Reported sales % change 9% 3%
Less: Foreign currency translation 3% -
Less: Acquisitions and divestitures, - (1)%
net
Organic sales % change 6% 4%
Aerospace
Reported sales % change 6% -
Less: Foreign currency translation 1% -
Less: Acquisitions and divestitures, - (2)%
net
Organic sales % change 5% 2%
Home and Building Technologies
Reported sales % change 5% 3%
Less: Foreign currency translation 2% -
Less: Acquisitions and divestitures, - 1%
net
Organic sales % change 3% 2%
Performance Materials and
Technologies
Reported sales % change 12% (1)%
Less: Foreign currency translation 3% -
Less: Acquisitions and divestitures, - (9)%
net
Organic sales % change 9% 8%
Safety and Productivity Solutions
Reported sales % change 14% 22%
Less: Foreign currency translation 2% -
Less: Acquisitions and divestitures, - 17%
net
Organic sales % change 12% 5%
We define organic sales percent as the year-over-year change in reported sales
relative to the comparable period, excluding the impact on sales from foreign
currency translation and acquisitions, net of divestitures. We believe this
measure 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.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Ended
December 31,
2017
UOP
Reported sales % change 15%
Less: Foreign currency translation 3%
Less: Acquisitions and divestitures, net -
Organic sales % change 12%
AM
Reported sales % change 22%
Less: Foreign currency translation 3%
Less: Acquisitions and divestitures, net -
Organic sales % change 19%
We define organic sales percent as the year-over-year change in reported sales
relative to the comparable period, excluding the impact on sales from foreign
currency translation and acquisitions, net of divestitures. We believe this
measure is useful to investors and management in understanding our ongoing
operations and in analysis of ongoing operating trends.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow and
Calculation of Free Cash Flow Conversion, Excluding Pension Mark-to-Market
Expense, Separation Costs, and Impacts from Tax Reform (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months
Ended
December 31, December 31,
2017 2017
Cash provided by operating activities $ $
2,172 5,966
Expenditures for property, plant and (418) (1,031)
equipment
Free cash flow $ $
1,754 4,935
$ $
Net income (loss), attributable to (2,411) 1,655
Honeywell
Pension mark-to-market expense, net of 67 67
tax (A)
Impacts from separation costs, net of 14 14
tax
Impacts from Tax Reform 3,754 3,754
Net income, attributable to Honeywell,
excluding pension mark-to-market
expense,
separation costs and Tax Reform $ $
1,424 5,490
Cash provided by operating activities $ $
2,172 5,966
÷ Net income (loss) attributable to $ $
Honeywell (2,411) 1,655
Operating cash flow conversion -90% 360%
Free cash flow $ $
1,754 4,935
÷ Net income attributable to Honeywell,
excluding pension mark-to-market
expense,
separation costs and impacts from Tax $ $
Reform 1,424 5,490
Free cash flow conversion %, excluding
pension mark-to-market expense,
separation costs and impacts from Tax 123% 90%
Reform
(A) Pension mark-to-market expense uses a blended tax rate of 23% and 21.3% for
2017 and 2016.
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 Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2016
Cash provided by operating $ $
activities 2,042 5,498
Expenditures for property, (346) (1,095)
plant and equipment
Free cash flow $ $
1,696 4,403
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 Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Expense, Separation Costs and Impacts from Tax Reform
(Unaudited)
Twelve Twelve
Months Months
Ended Ended
December December
31, 31,
2017 (1) 2018
Earnings per share of common stock - assuming dilution $2.14 TBD
(EPS)
Pension mark-to-market expense 0.09 TBD
Separation costs 0.02 TBD
Impacts from Tax Reform 4.86 TBD
EPS, excluding pension mark-to-market expense, $7.11 $7.75-
separation costs, and impacts from Tax Reform $8.00
(1) Utilizes weighted average shares of approximately 772.1 million for full
year. Pension mark-to-market expense uses a blended tax rate of 23%.
We believe earnings per share, excluding pension mark-to-market expense,
separation costs and impacts from Tax Reform is a measure that is useful to
investors and management in understanding our ongoing operations and in
analysis of ongoing operating trends. For forward looking information,
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, the separation costs given the preliminary nature of the estimates, and
any adjustments to charges from Tax Reform as the charges are provisional. We
therefore do not include an estimate for the pension mark-to-market expense,
separation costs, or adjustments to charges from Tax Reform in this
reconciliation. 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
Excluding Separation Costs and Impacts from Tax Reform (Unaudited)
(Dollars in billions)
Twelve Months Ended
December 31,
2018
Cash provided by operating activities TBD
Separation costs TBD
Impacts from Tax Reform TBD
Expenditures for property, plant and equipment (0.9)
Free cash flow $5.2 - $5.9
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. For forward looking
information, management cannot reliably predict or estimate, without
unreasonable effort, the separation costs given the preliminary nature of the
estimates or the amounts from Tax Reform as the charges are provisional. We
therefore do not include an estimate for the separation costs or impacts from
Tax Reform in this reconciliation.
END
(END) Dow Jones Newswires
January 26, 2018 06:37 ET (11:37 GMT)
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