Honeywell Reports
Strong Finish to 2018; Expects 2019 Earnings Per Share of
$7.80 - $8.10
- Continued Strength in Fourth
Quarter led by Commercial Aerospace, Defense, and Warehouse
Automation
- Fourth Quarter Reported Sales Down
10% Due to Impact of Spin-Offs, Organic Sales up 6%
- Fourth Quarter Reported Earnings
Per Share of $2.31; Adjusted EPS(1)
of $1.91, up 12% Ex-Spins(1)
- Full Year Operating Cash Flow up
8%, Conversion 95%; Adj. Free Cash Flow(2) up 22%, Conversion
100%
- Expect Strong Sales, Margin and Cash Flow Growth in 2019
Following Portfolio Transformation
MORRIS PLAINS, N.J.,
Feb. 1, 2019 /PRNewswire/ --
Honeywell (NYSE: HON) today announced financial results for
the fourth quarter and full year 2018 and also announced its
outlook for 2019.
"Honeywell delivered a strong fourth quarter to finish out what
was an incredible year for our customers, our employees, and our
shareowners. Organic sales were up 6 percent in the fourth quarter
and full year, primarily driven by continued strength in our
long-cycle businesses in commercial aerospace, U.S. defense, and
warehouse automation. Our long-cycle orders and backlog were up
over 15 percent for the year, which positions us well for 2019 and
beyond. Our focus on generating profitable growth combined with
productivity rigor drove 80 basis points of segment margin
expansion this quarter, and 60 basis points for the full year,
exceeding the long-term targets we set forth in 2017. This momentum
resulted in adjusted earnings per share1 of $1.91, up 12 percent1 year-over-year,
excluding the impact of the spin-offs completed in 2018. For the
full year, we exceeded the high end of our original adjusted
earnings per share and adjusted free cash flow guidance even after
dilution from the spin-offs, while at the same time returning value
to shareowners in the form of the spin dividends." said
Darius Adamczyk, Chairman and Chief
Executive Officer of Honeywell. "We generated over $6 billion of cash for the year and reached 100
percent conversion2, a milestone for the company and
proof that our initiatives are working. We expect to remain at
similar levels for cash conversion in 2019, principally driven by
continued working capital improvements."
Adamczyk continued, "We have good momentum exiting 2018 after an
exciting year. We continue to transform the portfolio, as we
demonstrated with the successful spin-offs of our Homes and
Transportation Systems businesses. We now have a simpler, more
focused portfolio spread across six attractive end markets with
approximately 60 percent of the portfolio growing sales at or above
5 percent organically for the full year. We effectively deployed
capital to dividends, capital expenditures, acquisitions, and
repurchases of Honeywell shares. Our dividend increase in September
marked the ninth consecutive double-digit increase since 2010."
The company also announced its outlook for 2019. Honeywell
expects sales of $36.0 billion to
$36.9 billion, representing organic
sales growth of 2 to 5 percent; segment margin expansion of 110 to
140 basis points, or 30 to 60 basis points excluding the favorable
impact of the 2018 spin-offs3; earnings per share of
$7.80 to $8.10; operating cash flow of $5.9 billion to $6.5
billion and adjusted free cash flow4 of
$5.4 billion to $6.0 billion, representing conversion of
approximately 100 percent. A summary of the company's 2019 guidance
can be found in Table 1.
"We have an established software business and strategy in our
connected enterprises which continues to grow at double-digit rates
as our shift to a software-industrial company continues. We
continue to make improvements in our supply chain and working
capital to drive better sales, margin and free cash flow; and we
have begun the digitization of Honeywell processes to improve
organizational efficiency and enable enhanced analytics to drive
better decision making. It's an exciting time to be part of
Honeywell, and we look forward to continuing our track record of
matching our say with our do in 2019," Adamczyk
concluded.
Fourth-Quarter Performance
Honeywell sales for the fourth quarter were down 10 percent
on a reported basis and up 6 percent on an organic basis. The
difference between reported and organic sales primarily relates to
the spin-offs of the former Transportation Systems business
(formerly in Aerospace) and the former Homes and ADI Global
Distribution business (formerly in Honeywell Building
Technologies), partially offset by the favorable impact of foreign
currency translation. Fourth-quarter reported earnings per share
was $2.31, which includes a
$435 million favorable adjustment to
the fourth quarter 2017 charge related to U.S. tax legislation,
$104 million of separation costs
(including net tax impacts) associated with the spin-offs, and a
$28 million pension mark-to-market
expense. The fourth-quarter financial results can be found in
Tables 2 and 3.
Aerospace sales for the fourth quarter were up 10 percent
on an organic basis driven by continued double-digit organic growth
in the U.S. and international defense business and business
aviation OE, and demand in the air transport and business aviation
aftermarket. Segment margin expanded 50 basis points to 23.4
percent, primarily driven by commercial excellence, lower customer
incentives, and the favorable impact from the spin-off of the
former Transportation Systems business, partially offset by higher
volumes of lower-margin OE shipments.
Honeywell Building Technologies sales for the fourth
quarter were up 1 percent on an organic basis driven by continued
demand for commercial fire products, strength in the former Homes
and ADI Global Distribution business (now Resideo) prior to its
spin-off effective October 29, offset
by declines in the China air and
water products business and Building Management Systems. Sales in
Building Solutions were flat on an organic basis, with growth in
projects offset by declines in the energy vertical. Segment
margin expanded 100 basis points to 18.6 percent, primarily driven
by commercial excellence, the favorable impact following the
spin-off of the former Homes and ADI Global Distribution business,
and benefits from repositioning.
Performance Materials and Technologies sales for the
fourth quarter were flat on an organic basis. The result was driven
by strong licensing, engineering and catalyst demand in UOP,
short-cycle maintenance and migration services demand in Process
Solutions, and growth in Solstice® low global warming
products, largely offset by volume declines for specialty products
in Advanced Materials. Segment margin expanded 200 basis points to
23.3 percent, primarily driven by the favorable impact of higher
catalyst shipments in UOP, commercial excellence, and benefits from
repositioning.
Safety and Productivity Solutions sales for the
fourth quarter were up 15 percent on an organic basis driven by
continued double-digit sales growth in the Intelligrated warehouse
automation business, robust volumes across sensing and IoT, and
demand for new mobility launches in productivity products. Segment
margin expanded 30 basis points to 16.0 percent, primarily driven
by commercial excellence, productivity and higher sales
volumes.
Conference Call Details
Honeywell will discuss the 2018 results and 2019 outlook during an
investor conference call today starting at 8:30 a.m. Eastern Standard Time. To participate
on the conference call, please dial (800) 289-0438 (domestic) or
(323) 794-2423 (international) approximately ten minutes before the
8:30 a.m. EST start. Please
mention to the operator that you are dialing in for Honeywell's
fourth quarter 2018 earnings and 2019 outlook call or provide the
conference code HON2019. The live webcast of the investor call as
well as related presentation materials will be available through
the Investor Relations section of the company's website
(www.honeywell.com/investor). Investors can hear a replay of the
conference call from 12:30 p.m. EST,
February 1, until 12:30 p.m. EST, February
8, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 4116151.
TABLE 1: FULL-YEAR 2019 GUIDANCE
Sales |
$36.0B - $36.9B |
Organic Growth |
2% - 5% |
Segment Margin |
20.7% - 21.0% |
Expansion |
Up 110 - 140 bps |
Expansion Ex-Spins5 |
Up 30 - 60 bps |
Earnings Per Share |
$7.80 - $8.10 |
Earnings Growth Ex-Spins6 |
6% - 10% |
Operating Cash Flow |
$5.9B - $6.5B |
Adjusted Free Cash Flow7 |
$5.4B - $6.0B |
Conversion |
95% - 100% |
TABLE 2: SUMMARY OF HONEYWELL
FINANCIAL RESULTS
|
FY 2017 |
FY 2018 |
Change |
Sales |
40,534 |
41,802 |
3% |
Organic Growth |
|
|
6% |
Segment Margin |
19.0% |
19.6% |
60 bps |
Operating Income Margin |
15.6% |
16.0% |
40 bps |
Reported Earnings Per Share |
$2.00 |
$8.98 |
349% |
Adjusted Earnings Per Share8 |
$7.15 |
$8.01 |
12% |
Cash Flow from Operations |
5,966 |
6,434 |
8% |
Adjusted Free Cash Flow9 |
4,935 |
6,030 |
22% |
|
|
|
|
|
4Q 2017 |
4Q 2018 |
Change |
Sales |
10,843 |
9,729 |
(10%) |
Organic Growth |
|
|
6% |
Segment Margin |
19.3% |
20.1% |
80 bps |
Operating Income Margin |
14.9% |
15.6% |
70 bps |
Reported Earnings Per Share |
($3.32) |
$2.31 |
170% |
Adjusted Earnings Per Share8 |
$1.89 |
$1.91 |
1% |
Cash Flow from Operations |
2,172 |
1,559 |
(28%) |
Adjusted Free Cash Flow9 |
1,754 |
1,486 |
(15%) |
TABLE 3: SUMMARY OF SEGMENT FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
AEROSPACE |
FY 2017 |
FY 2018 |
Change |
Sales |
14,779 |
15,493 |
5% |
Organic Growth |
|
|
9% |
Segment Profit |
3,288 |
3,503 |
7% |
Segment Margin |
22.2% |
22.6% |
40 bps |
|
|
|
|
|
4Q 2017 |
4Q 2018 |
|
Sales |
3,902 |
3,428 |
(12%) |
Organic Growth |
|
|
10% |
Segment Profit |
893 |
801 |
(10%) |
Segment Margin |
22.9% |
23.4% |
50 bps |
|
|
|
|
|
|
|
|
HONEYWELL BUILDING TECHNOLOGIES |
FY 2017 |
FY 2018 |
Change |
Sales |
9,777 |
9,298 |
(5%) |
Organic Growth |
|
|
3% |
Segment Profit |
1,650 |
1,608 |
(3%) |
Segment Margin |
16.9% |
17.3% |
40 bps |
|
|
|
|
|
4Q 2017 |
4Q 2018 |
|
Sales |
2,615 |
1,802 |
(31%) |
Organic Growth |
|
|
1% |
Segment Profit |
461 |
335 |
(27%) |
Segment Margin |
17.6% |
18.6% |
100 bps |
|
|
|
|
|
|
|
|
PERFORMANCE MATERIALS AND TECHNOLOGIES |
FY 2017 |
FY 2018 |
Change |
Sales |
10,339 |
10,674 |
3% |
Organic Growth |
|
|
2% |
Segment Profit |
2,206 |
2,328 |
6% |
Segment Margin |
21.3% |
21.8% |
50 bps |
|
|
|
|
|
4Q 2017 |
4Q 2018 |
|
Sales |
2,854 |
2,802 |
(2%) |
Organic Growth |
|
|
~Flat |
Segment Profit |
607 |
652 |
7% |
Segment Margin |
21.3% |
23.3% |
200 bps |
|
|
|
|
|
|
|
|
SAFETY AND PRODUCTIVITY SOLUTIONS |
FY 2017 |
FY 2018 |
Change |
Sales |
5,639 |
6,337 |
12% |
Organic Growth |
|
|
11% |
Segment Profit |
852 |
1,032 |
21% |
Segment Margin |
15.1% |
16.3% |
120 bps |
|
|
|
|
|
4Q 2017 |
4Q 2018 |
|
Sales |
1,472 |
1,697 |
15% |
Organic Growth |
|
|
15% |
Segment Profit |
231 |
272 |
18% |
Segment Margin |
15.7% |
16.0% |
30 bps |
|
|
|
|
Honeywell (www.honeywell.com) is a Fortune 100 technology
company that delivers industry specific solutions that include
aerospace products and services; control technologies for buildings
and industry; and performance materials globally. Our technologies
help everything from aircraft, 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.
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 and which we adjust to
exclude sales and segment profit contribution from Resideo and
Garrett in 2018, if and as noted in the release; organic sales
growth, which we define as sales growth less the impacts from
foreign currency translation, acquisitions and divestitures for the
first 12 months following transaction date, and impacts from
adoption of the new accounting guidance on revenue from contracts
with customers that arise solely due to non-comparable accounting
treatment of contracts existing in the prior period; adjusted free
cash flow, which we define as cash flow from operations less
capital expenditures and which we adjust to exclude the impact of
separation costs related to the spin-offs of Resideo and Garrett,
if and as noted in the release; adjusted free cash flow conversion,
which we define as adjusted free cash flow divided by net income
attributable to Honeywell, excluding pension mark-to-market
expenses, separation costs related to the spin-offs, and
adjustments to the 4Q17 U.S. tax legislation charge, if and as
noted in the release; and adjusted earnings per share, which we
adjust to exclude pension mark-to-market expenses, as well as for
other components, such as separation costs related to the
spin-offs, the 4Q17 U.S. tax legislation charge, adjustments to
such charge, and after-tax segment profit contribution from Resideo
and Garrett in the periods noted in the release, net of spin
indemnification impacts assuming both indemnification agreements
were effective in such periods, if and as noted in the release. 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.
Contacts: |
|
|
|
Media |
Investor Relations |
Scott Sayres |
Mark Macaluso |
(480) 257-8921 |
(973) 455-2222 |
scott.sayres@honeywell.com |
mark.macaluso@honeywell.com |
1 Adjusted EPS and Adjusted EPS V% exclude pension
mark-to-market, after-tax separation costs related to the spin-offs
of Resideo and Garrett, the 4Q17 U.S. tax legislation charge and
2018 adjustments to such charge; adjusted EPS V% ex-spins also
excludes after-tax segment profit from Garrett in 4Q17 and
after-tax segment profit from Resideo in the months of November and
December 2017, net of the spin
indemnification impacts assuming both indemnification agreements
were effective during these periods.
2 Adjusted free cash flow, associated conversion and
adjusted free cash flow V% exclude impacts from separation costs
related to the spin-offs. Associated conversion also excludes
pension mark-to-market and 2018 adjustments to the 4Q17 U.S. tax
legislation charge.
3 Segment margin expansion ex-spins guidance excludes
sales and segment profit contribution from Resideo and Garrett in
2018.
4 Adjusted free cash flow guidance and associated
conversion excludes estimated payments of ~$0.3B for separation costs incurred in 2018
related to the spin-offs of Resideo and Garrett.
5 Segment margin expansion ex-spins guidance excludes
sales and segment profit contribution from Resideo and Garrett in
2018.
6 EPS growth ex-spins guidance excludes pension
mark-to-market in 2018, after-tax separation costs related to the
spin-offs of Resideo and Garrett. Also excludes the after-tax
segment profit contribution from the spin-offs in 2018, net of spin
indemnification impacts assuming both indemnification agreements
were effective for all of 2018, of $0.62.
7 Adjusted free cash flow guidance and associated
conversion excludes estimated payments of ~$0.3B for separation costs incurred in 2018
related to the spin-offs of Resideo and Garrett.
8 Adjusted EPS and adjusted EPS V% exclude pension
mark-to-market, the 4Q17 U.S. tax legislation charge, the favorable
adjustment to such charge of $1.5B in
FY18 and $435M in 4Q18, and after-tax
separation costs related to the spin-offs of Resideo and Garrett of
$732M in FY18 and $104M in 4Q18.
9 Adjusted free cash flow and adjusted free cash flow V%
exclude impacts from separation costs related to the spin-offs of
$424M in FY18 and $233M in 4Q18.
|
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, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Product sales |
$
7,434 |
|
$ 8,646 |
|
$ 32,848 |
|
$ 32,317 |
Service sales |
2,295 |
|
2,197 |
|
8,954 |
|
8,217 |
Net sales |
9,729 |
|
10,843 |
|
41,802 |
|
40,534 |
|
|
|
|
|
|
|
|
|
Costs, expenses and other |
|
|
|
|
|
|
|
Cost of products
sold (A) |
5,400 |
|
6,194 |
|
23,634 |
|
23,176 |
Cost of services
sold (A) |
1,285 |
|
1,346 |
|
5,412 |
|
4,968 |
|
|
6,685 |
|
7,540 |
|
29,046 |
|
28,144 |
Selling, general
and administrative expenses (A) |
1,524 |
|
1,684 |
|
6,051 |
|
6,087 |
Other (income)
expense |
(290) |
|
(129) |
|
(1,149) |
|
(963) |
Interest and other
financial charges |
90 |
|
81 |
|
367 |
|
316 |
|
|
8,009 |
|
9,176 |
|
34,315 |
|
33,584 |
|
|
|
|
|
|
|
|
|
Income before taxes |
1,720 |
|
1,667 |
|
7,487 |
|
6,950 |
Tax expense (benefit) |
(20) |
|
4,174 |
|
659 |
|
5,362 |
|
|
|
|
|
|
|
|
|
Net income (loss) |
1,740 |
|
(2,507) |
|
6,828 |
|
1,588 |
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
19 |
|
12 |
|
63 |
|
43 |
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to
Honeywell |
$
1,721 |
|
$ (2,519) |
|
$ 6,765 |
|
$ 1,545 |
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common
stock - basic |
$
2.34 |
|
$ (3.32) |
|
$
9.10 |
|
$
2.03 |
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common
stock - assuming dilution |
$
2.31 |
|
$ (3.32) |
|
$
8.98 |
|
$
2.00 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - basic |
734.0 |
|
758.8 |
|
743.0 |
|
762.1 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - assuming dilution |
743.9 |
|
758.8 |
(B) |
753.0 |
|
772.1 |
|
|
|
|
|
|
|
|
|
(A) Cost of products and services sold
and selling, general and administrative expenses include amounts
for repositioning and other charges, the service cost component of
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, separation costs, and impact from the Tax Cuts and Jobs
Act of 2017 ("U.S. Tax Reform"). 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, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common stock -
assuming dilution |
$
2.31 |
|
$ (3.32) |
|
$
8.98 |
|
$
2.00 |
|
Pension mark-to-market expense (1) |
0.04 |
|
0.09 |
|
0.04 |
|
0.09 |
|
Separation costs |
0.14 |
|
0.02 |
|
0.97 |
|
0.02 |
|
Impacts from U.S. Tax Reform |
(0.58) |
|
5.06 |
|
(1.98) |
|
5.04 |
|
Impact of dilution of weighted average number of
shares outstanding |
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock - assuming
dilution, excluding pension |
|
|
|
|
|
|
|
|
mark-to-market expense, separation costs, and
impacts from Tax Reform |
$
1.91 |
|
$ 1.89 |
|
$
8.01 |
|
$
7.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Pension mark-to-market expense
uses a blended tax rate of 24% for 2018 and 23% for 2017. |
Honeywell International
Inc |
Segment Data
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
Net Sales |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
3,428 |
|
$
3,902 |
|
$ 15,493 |
|
$ 14,779 |
|
|
|
|
|
|
|
|
|
Honeywell Building Technologies |
1,802 |
|
2,615 |
|
9,298 |
|
9,777 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
2,802 |
|
2,854 |
|
10,674 |
|
10,339 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
1,697 |
|
1,472 |
|
6,337 |
|
5,639 |
|
|
|
|
|
|
|
|
|
Total |
$
9,729 |
|
$ 10,843 |
|
$ 41,802 |
|
$ 40,534 |
|
|
|
|
|
|
|
|
|
Reconciliation of
Segment Profit to Income Before Taxes |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
Segment Profit |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Aerospace |
$
801 |
|
$
893 |
|
$
3,503 |
|
$
3,288 |
|
|
|
|
|
|
|
|
|
Honeywell Building Technologies |
335 |
|
461 |
|
1,608 |
|
1,650 |
|
|
|
|
|
|
|
|
|
Performance Materials and
Technologies |
652 |
|
607 |
|
2,328 |
|
2,206 |
|
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
272 |
|
231 |
|
1,032 |
|
852 |
|
|
|
|
|
|
|
|
|
Corporate |
(100) |
|
(96) |
|
(281) |
|
(306) |
|
|
|
|
|
|
|
|
|
Total segment
profit |
1,960 |
|
2,096 |
|
8,190 |
|
7,690 |
|
|
|
|
|
|
|
|
|
Interest and other financial
charges |
(90) |
|
(81) |
|
(367) |
|
(316) |
Stock compensation expense (A) |
(44) |
|
(43) |
|
(175) |
|
(176) |
Pension ongoing income (B) |
247 |
|
167 |
|
992 |
|
713 |
Pension mark-to-market expense
(B) |
(37) |
|
(87) |
|
(37) |
|
(87) |
Other postretirement income (B) |
8 |
|
5 |
|
32 |
|
21 |
Repositioning and other charges
(C,D) |
(335) |
|
(387) |
|
(1,091) |
|
(973) |
Other (E) |
11 |
|
(3) |
|
(57) |
|
78 |
|
|
|
|
|
|
|
|
|
Income before taxes |
$
1,720 |
|
$
1,667 |
|
$
7,487 |
|
$
6,950 |
|
|
|
|
|
|
|
|
|
(A) |
Amounts included in Selling, general and
administrative expenses. |
|
|
|
|
(B) |
Amounts included in Cost of products
and services sold and Selling, general and administrative expenses
(service costs) and Other income/expense (non-service cost
components). |
(C) |
Amounts included in Cost of products
and services sold, Selling, general and administrative expenses,
and Other income/expense. |
(D) |
Includes repositioning, asbestos, and
environmental expenses. |
(E) |
Amounts include the other components
of Other income/expense not included within other categories in
this reconciliation. Equity income (loss) of affiliated companies
is included in segment profit. |
Honeywell International
Inc |
Consolidated Balance
Sheet (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
|
$
9,287 |
|
$
7,059 |
Short-term
investments |
|
1,623 |
|
3,758 |
Accounts receivable
- net |
|
7,508 |
|
8,866 |
Inventories |
|
4,326 |
|
4,613 |
Other current
assets |
|
1,618 |
|
1,706 |
|
Total current assets |
|
24,362 |
|
26,002 |
|
|
|
|
|
|
Investments and long-term
receivables |
|
742 |
|
667 |
Property, plant and equipment -
net |
|
5,296 |
|
5,926 |
Goodwill |
|
15,546 |
|
18,277 |
Other intangible assets - net |
|
4,139 |
|
4,496 |
Insurance recoveries for asbestos
related liabilities |
|
437 |
|
479 |
Deferred income taxes |
|
382 |
|
251 |
Other assets |
|
6,869 |
|
3,372 |
|
|
|
|
|
|
|
Total assets |
|
$
57,773 |
|
$
59,470 |
|
|
|
|
|
|
LIABILITIES AND SHAREOWNERS'
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts
payable |
|
$
5,607 |
|
$
6,584 |
Commercial paper
and other short-term borrowings |
|
3,586 |
|
3,958 |
Current maturities
of long-term debt |
|
2,872 |
|
1,351 |
Accrued
liabilities |
|
6,859 |
|
6,968 |
|
Total current liabilities |
|
18,924 |
|
18,861 |
|
|
|
|
|
|
Long-term debt |
|
9,756 |
|
12,573 |
Deferred income taxes |
|
1,713 |
|
2,664 |
Postretirement benefit obligations
other than pensions |
|
344 |
|
512 |
Asbestos related liabilities |
|
2,269 |
|
2,260 |
Other liabilities |
|
6,402 |
|
5,930 |
Redeemable noncontrolling
interest |
|
7 |
|
5 |
Shareowners' equity |
|
18,358 |
|
16,665 |
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling
interest and shareowners' equity |
|
$
57,773 |
|
$
59,470 |
Honeywell International
Inc |
Consolidated
Statement of Cash Flows (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months
Ended |
|
|
December 31, |
|
December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ 1,740 |
|
$ (2,507) |
|
$ 6,828 |
|
$ 1,588 |
Less: Net income attributable
to the noncontrolling interest |
|
19 |
|
12 |
|
63 |
|
43 |
Net income (loss) attributable
to Honeywell |
|
1,721 |
|
(2,519) |
|
6,765 |
|
1,545 |
Adjustments to reconcile net
income attributable to Honeywell to net |
|
|
|
|
|
|
|
|
cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
163 |
|
183 |
|
721 |
|
717 |
Amortization |
|
91 |
|
100 |
|
395 |
|
398 |
(Gain)
loss on sale of non-strategic businesses and assets |
|
- |
|
7 |
|
- |
|
7 |
Repositioning and other charges |
|
335 |
|
387 |
|
1,091 |
|
973 |
Net
payments for repositioning and other charges |
|
(133) |
|
(234) |
|
(652) |
|
(628) |
Pension
and other postretirement income |
|
(218) |
|
(85) |
|
(987) |
|
(647) |
Pension
and other postretirement benefit payments |
|
(13) |
|
(35) |
|
(80) |
|
(106) |
Stock
compensation expense |
|
44 |
|
43 |
|
175 |
|
176 |
Deferred income taxes |
|
(104) |
|
2,529 |
|
(586) |
|
2,452 |
Other |
|
(531) |
|
1,680 |
|
(694) |
|
1,642 |
Changes
in assets and liabilities, net of the effects of |
|
|
|
|
|
|
|
|
acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(367) |
|
(274) |
|
(236) |
|
(682) |
Inventories |
|
(44) |
|
141 |
|
(503) |
|
(259) |
Other
current assets |
|
(138) |
|
(581) |
|
218 |
|
(568) |
Accounts payable |
|
267 |
|
520 |
|
733 |
|
924 |
Accrued liabilities |
|
486 |
|
310 |
|
74 |
|
22 |
Net cash provided by operating activities |
|
1,559 |
|
2,172 |
|
6,434 |
|
5,966 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Expenditures for property,
plant and equipment |
|
(306) |
|
(418) |
|
(828) |
|
(1,031) |
Proceeds from disposals of
property, plant and equipment |
|
11 |
|
40 |
|
15 |
|
86 |
Increase in investments |
|
(1,177) |
|
(2,594) |
|
(4,059) |
|
(6,743) |
Decrease in investments |
|
1,398 |
|
1,621 |
|
6,032 |
|
4,414 |
Cash paid for acquisitions, net
of cash acquired |
|
(484) |
|
(10) |
|
(535) |
|
(82) |
Other |
|
152 |
|
(22) |
|
402 |
|
(218) |
Net cash provided by (used for) investing
activities |
|
(406) |
|
(1,383) |
|
1,027 |
|
(3,574) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of
commercial paper and other short-term borrowings |
|
4,591 |
|
4,893 |
|
23,891 |
|
13,701 |
Payments of commercial paper
and other short-term borrowings |
|
(4,942) |
|
(4,924) |
|
(24,095) |
|
(13,532) |
Proceeds from issuance of
common stock |
|
25 |
|
57 |
|
267 |
|
520 |
Proceeds from issuance of
long-term debt |
|
1 |
|
1,199 |
|
27 |
|
1,238 |
Payments of long-term debt |
|
(27) |
|
(223) |
|
(1,330) |
|
(292) |
Repurchases of common
stock |
|
(1,692) |
|
(1,554) |
|
(4,000) |
|
(2,889) |
Cash dividends paid |
|
(603) |
|
(565) |
|
(2,272) |
|
(2,119) |
Pre-separation funding |
|
1,197 |
|
- |
|
2,801 |
|
- |
Spin-off cash |
|
(179) |
|
- |
|
(179) |
|
- |
Other |
|
(1) |
|
(12) |
|
(142) |
|
(143) |
Net cash provided by (used for) by financing
activities |
|
(1,630) |
|
(1,129) |
|
(5,032) |
|
(3,516) |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash
and cash equivalents |
|
(39) |
|
10 |
|
(201) |
|
340 |
Net increase (decrease) in cash and cash
equivalents |
|
(516) |
|
(330) |
|
2,228 |
|
(784) |
Cash and cash equivalents at beginning of
period |
|
9,803 |
|
7,389 |
|
7,059 |
|
7,843 |
Cash and cash equivalents at end of period |
|
$ 9,287 |
|
$ 7,059 |
|
$ 9,287 |
|
$ 7,059 |
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, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ 1,960 |
|
$ 2,096 |
|
$
8,190 |
|
$
7,690 |
|
|
|
|
|
|
|
|
|
Stock compensation expense (A) |
|
(44) |
|
(43) |
|
(175) |
|
(176) |
Repositioning, Other (B,C) |
|
(347) |
|
(371) |
|
(1,100) |
|
(962) |
Pension and other postretirement service costs
(D) |
|
(49) |
|
(63) |
|
(210) |
|
(249) |
Operating income |
|
$ 1,520 |
|
$ 1,619 |
|
$
6,705 |
|
$
6,303 |
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ 1,960 |
|
$ 2,096 |
|
$
8,190 |
|
$
7,690 |
÷ Net sales |
|
$ 9,729 |
|
$ 10,843 |
|
$ 41,802 |
|
$ 40,534 |
Segment profit margin % |
|
20.1% |
|
19.3% |
|
19.6% |
|
19.0% |
|
|
|
|
|
|
|
|
|
Operating income |
|
$ 1,520 |
|
$ 1,619 |
|
$
6,705 |
|
$
6,303 |
÷ Net sales |
|
$ 9,729 |
|
$ 10,843 |
|
$ 41,802 |
|
$ 40,534 |
Operating income margin % |
|
15.6% |
|
14.9% |
|
16.0% |
|
15.6% |
|
|
|
|
|
|
|
|
|
(A) Included in 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.
(D) Included in Cost of products and services sold and Selling,
general and administrative expenses. |
|
We define segment profit as operating
income, excluding stock compensation expense, pension and other
postretirement service costs, 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. 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 Ended |
|
Twelve Months Ended |
|
|
|
December 31, 2018 |
|
December 31, 2018 |
|
Honeywell |
|
|
|
|
|
Reported sales % change |
|
(10)% |
|
3% |
|
Less: Foreign currency translation |
|
(1)% |
|
1% |
|
Less: Acquisitions, divestitures and other,
net |
|
(15)% |
|
(4)% |
|
Organic sales % change |
|
6% |
|
6% |
|
|
|
|
|
|
|
Aerospace |
|
|
|
|
|
Reported sales % change |
|
(12)% |
|
5% |
|
Less: Foreign currency translation |
|
(1)% |
|
1% |
|
Less: Acquisitions, divestitures and other,
net |
|
(21)% |
|
(5)% |
|
Organic sales % change |
|
10% |
|
9% |
|
|
|
|
|
|
|
Honeywell Building Technologies |
|
|
|
|
|
Reported sales % change |
|
(31)% |
|
(5)% |
|
Less: Foreign currency translation |
|
(2)% |
|
1% |
|
Less: Acquisitions, divestitures and other,
net |
|
(30)% |
|
(9)% |
|
Organic sales % change |
|
1% |
|
3% |
|
|
|
|
|
|
|
Performance Materials and Technologies |
|
|
|
|
|
Reported sales % change |
|
(2)% |
|
3% |
|
Less: Foreign currency translation |
|
(2)% |
|
1% |
|
Less: Acquisitions, divestitures and other,
net |
|
- |
|
- |
|
Organic sales % change |
|
- |
|
2% |
|
|
|
|
|
|
|
Safety and Productivity Solutions |
|
|
|
|
|
Reported sales % change |
|
15% |
|
12% |
|
Less: Foreign currency translation |
|
(1)% |
|
1% |
|
Less: Acquisitions, divestitures and other,
net |
|
1% |
|
- |
|
Organic sales % change |
|
15% |
|
11% |
|
|
|
|
|
|
|
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, acquisitions, net of divestitures, and non-comparable
impacts from adoption of the new revenue recognition
standard. 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 Cash
Provided by Operating Activities to Adjusted Free Cash Flow and
Calculation of Adjusted Free Cash Flow
Conversion (Unaudited) |
|
(Dollars in
millions) |
|
|
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
|
December 31, 2018 |
|
December 31, 2017 |
|
|
|
|
|
|
Cash provided by operating activities |
$
6,434 |
|
$
5,966 |
|
Expenditures for property, plant and
equipment |
(828) |
|
(1,031) |
|
Free cash flow |
5,606 |
|
4,935 |
|
Separation cost payments |
424 |
|
- |
|
Adjusted free cash flow |
$
6,030 |
|
$
4,935 |
|
|
|
|
|
|
Net income attributable to Honeywell |
$
6,765 |
|
$
1,545 |
|
Separation costs, includes net tax impacts |
732 |
|
14 |
|
U.S. Tax Reform |
(1,494) |
|
3,891 |
|
Pension mark-to-market |
28 |
|
67 |
|
Adjusted net income attributable to Honeywell |
$
6,031 |
|
$
5,517 |
|
|
|
|
|
|
Cash provided by operating activities |
$
6,434 |
|
$
5,966 |
|
÷ Net income (loss) attributable to Honeywell |
$
6,765 |
|
$
1,545 |
|
Operating cash flow conversion |
95% |
|
386% |
|
|
|
|
|
|
Adjusted free cash flow |
$
6,030 |
|
$
4,935 |
|
÷ Adjusted net income attributable to
Honeywell |
$
6,031 |
|
$
5,517 |
|
Adjusted free cash flow conversion % |
100% |
|
89% |
|
|
|
|
|
|
|
|
|
|
|
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 Adjusted Free Cash Flow
(Unaudited) |
|
(Dollars in
millions) |
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
December 31, 2018 |
|
December 31, 2017 |
|
|
|
|
|
|
Cash provided by operating activities |
$
1,559 |
|
$
2,172 |
|
Expenditures for property, plant and
equipment |
(306) |
|
(418) |
|
Free cash flow |
1,253 |
|
1,754 |
|
Separation cost payments |
233 |
|
- |
|
Adjusted free cash flow |
$
1,486 |
|
$
1,754 |
|
|
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 (loss) per Share to Adjusted Earnings per Share, Excluding
Spin-off Impact (Unaudited) |
|
|
|
Three Months Ended |
|
|
December 31, |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
Earnings (loss) per share of common stock -
assuming dilution (1) |
$
2.31 |
|
$
(3.32) |
|
Pension mark-to-market expense |
0.04 |
|
0.09 |
|
Separation costs (2) |
0.14 |
|
0.02 |
|
Impacts from U.S. Tax Reform |
(0.58) |
|
5.06 |
|
Impacts of dilution of weighted average number of
shares outstanding |
|
|
0.04 |
|
Adjusted earnings per share of common stock -
assuming dilution |
$
1.91 |
|
$
1.89 |
|
Less: EPS, attributable to spin-offs |
|
|
$
0.19 |
|
Adjusted earnings per share of common stock -
assuming dilution, excluding spin-off impact |
|
|
1.70 |
|
|
|
|
|
|
(1) For the three months ended
December 31, 2018 and 2017, adjusted earnings per share utilizes
weighted average shares of approximately 743.9 million and 769
million. |
|
|
|
|
|
(2) For the three months ended
December 31, 2018 and 2017, separation costs of $104 million and
$14 million including net tax impacts. |
|
|
|
|
|
We believe adjusted earnings per
share, excluding spin-off impact, is a measure that is useful to
investors and management in understanding our ongoing operations
and in analysis of ongoing operating trends. |
|
Honeywell International
Inc |
Reconciliation of Cash
Provided by Operating Activities to Adjusted Free Cash Flow
(Unaudited) |
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
December 31, 2018 ($M) |
|
December 31, 2019 ($B) |
|
|
|
|
Cash provided by operating activities |
$
6,434 |
|
~$5.9 - $6.5 |
Expenditures for property, plant and
equipment |
(828) |
|
~(0.8) |
Free cash flow |
5,606 |
|
~5.1 - 5.7 |
Separation cost payments |
424 |
|
~0.3 |
Adjusted free cash flow |
$
6,030 |
|
~$5.4 - $6.0 |
|
|
|
|
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. |