TIDMHON
Honeywell Expands Operating Margin 220 Basis Points, Segment Margin 130 Basis
Points And Generates Over $2 Billion Of Cash During The Quarter; Expects 2020
Earnings Per Share Of $8.60 - $9.00
- Fourth Quarter Reported Sales Down 2% Due to Impact of 2018 Spin-Off, Organic
Sales Up 2%
- Fourth Quarter Reported Earnings Per Share of $2.16; Adjusted EPS of $2.06,
Up 11% Ex-Spins(1)
- Full Year Operating Cash Flow of $6.9 Billion; Adjusted Free Cash Flow(2) of
$6.3 Billion, Conversion 105%
- Expect 2020 Earnings Per Share of $8.60 - $9.00, Up 5% - 10% Adjusted(3)
CHARLOTTE, North Carolina, Jan. 31, 2020 -- Honeywell (NYSE: HON) today
announced financial results for the fourth quarter and full year 2019, as well
as its outlook for 2020.
"We finished 2019 with a strong fourth quarter. Organic sales were up 2% for
the quarter and up 5% for the full year, driven by continued strength across
Aerospace, growth in Process Solutions, and demand for commercial fire,
security and building management products. We also had strong bookings in
Intelligrated again, up over 100% in the fourth quarter. Our growth and
productivity rigor, in addition to the impact of the 2018 spin-offs, drove 130
basis points of segment margin expansion in the quarter, and 150 basis points
for the full year. This resulted in adjusted earnings per share of $2.06 for
the quarter, up 11%1, and $8.16 for the year, up 10%4, excluding the impact of
the spin-offs," said Darius Adamczyk, chairman and chief executive officer of
Honeywell. "We have continued to meet or exceed our guidance and the long-term
targets we set forth in 2017, while further strengthening our balance sheet. We
generated $6.3 billion of adjusted free cash flow for the year and achieved
105% conversion2. We continue to effectively deploy capital, and in 2019, we
repurchased $4.4 billion of Honeywell shares, completed the acquisitions of
TruTrak Flight Systems and Rebellion Photonics, made over 10 strategic
investments within Honeywell Ventures, and announced our tenth consecutive
double-digit dividend increase."
The company also announced its outlook for 2020. Honeywell expects sales of
$36.7 billion to $37.8 billion, representing year-over-year organic growth of
0% to 3%; segment margin expansion of 20 to 50 basis points; earnings per share
of $8.60 to $9.00, up 5% to 10% adjusted3; operating cash flow of $6.6 billion
to $7.1 billion, and free cash flow of $5.7 billion to $6.2 billion. A summary
of the company's 2020 guidance can be found in Table 1.
Adamczyk concluded, "2019 was another exciting year for Honeywell, as we
continued to build our Honeywell Connected Enterprise business, resulting in
double-digit connected software growth, made significant progress within our
Honeywell Digital and Integrated Supply Chain transformation initiatives, and
launched a brand campaign that highlights some of Honeywell's most exciting
innovations. We delivered strong results, and entered 2020 with positive
momentum, including a healthy long-cycle backlog that was up 10%
year-over-year. I am confident that we will be able to continue to perform for
our shareowners, our customers, and our employees in 2020."
Fourth-Quarter Performance
Honeywell sales for the fourth quarter were down 2% on a reported basis and up
2% on an organic basis. The difference between reported and organic sales
primarily relates to the spin-off of the former Homes and ADI Global
Distribution business (formerly in Honeywell Building Technologies). The
fourth-quarter financial results can be found in Tables 2 and 3.
Aerospace sales for the fourth quarter were up 7% on an organic basis driven by
continued strength in the Defense and Space business, growth in the air
transport commercial aftermarket, and original equipment demand in business
aviation. Segment margin expanded 270 basis points to 26.1%, primarily driven
by commercial excellence and aftermarket volumes.
Honeywell Building Technologies sales for the fourth quarter were up 3% on an
organic basis driven by continued demand in commercial fire and building
management products, as well as security growth across the Americas and
Europe. Segment margin expanded 170 basis points to 20.3%, primarily driven by
the favorable impact following the spin-off of the former Homes and ADI Global
Distribution business.
Performance Materials and Technologies sales for the fourth quarter were up 3%
on an organic basis driven by continued strength in Process Solutions,
particularly in projects, services, and smart energy, and strength in equipment
and petrochemical catalysts in UOP. This was partially offset by declines in
Advanced Materials, which was impacted by continued illegal imports of
hydrofluorocarbons (HFCs) into Europe and demand softness in specialty
products. Segment margin contracted 80 basis points to 22.5%, primarily driven
by unfavorable mix, partially offset by productivity, net of inflation.
Safety and Productivity Solutions sales for the fourth quarter were down 11% on
an organic basis driven by the impact of major systems project timing in
Intelligrated, lower sales volumes in productivity products, and lower demand
for personal protective equipment in the Safety business, which more than
offset continued demand for gas sensing products. Intelligrated orders were
robust for the second consecutive quarter, up over 100% year-over-year in the
fourth quarter, resulting in a backlog increase of over 30% exiting the year.
Segment margin contracted 330 basis points to 12.7%, primarily driven by lower
sales volumes in productivity products and mix of sales.
Conference Call Details
Honeywell will discuss its fourth quarter and full-year results as well as its
2020 outlook during an investor conference call today starting at 8:30 a.m.
Eastern Standard Time. To participate on the conference call, please dial (866)
548-4713 (domestic) or (323) 794-2093 (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 2019 earnings and 2020 outlook call
or provide the conference code HON2020. 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 approximately 12:30
p.m. EST, January 31, until 12:30 p.m. EST, February 7, by dialing (888)
203-1112 (domestic) or (719) 457-0820 (international). The access code is
7318539.
TABLE 1: FULL-YEAR 2020 GUIDANCE
Sales $36.7B - $37.8B
Organic Growth 0% - 3%
Segment Margin 21.3% - 21.6%
Expansion Up 20 - 50 bps
Earnings Per Share $8.60 - $9.00
Adjusted Earnings Growth3 5% - 10%
Operating Cash Flow $6.6B - $7.1B
Free Cash Flow $5.7B - $6.2B
TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS
FY 2018 FY 2019 Change
Sales 41,802 36,709 (12)%
Organic Growth 5%
Segment Margin 19.6% 21.1% 150 bps
Operating Income Margin 16.0% 18.7% 270 bps
Reported Earnings Per Share $8.98 $8.41 (6)%
Adjusted Earnings Per Share Ex-Spins4 $7.39 $8.16 10%
Cash Flow from Operations 6,434 6,897 7%
Conversion 95% 112% 17%
Adjusted Free Cash Flow2 6,030 6,271 4%
Adjusted Free Cash Flow Conversion2 100% 105% 5%
Adjusted Free Cash Flow Conversion, Ex-Pension2 115% 114% (1)%
4Q 2018 4Q 2019 Change
Sales 9,729 9,496 (2)%
Organic Growth 2%
Segment Margin 20.1% 21.4% 130 bps
Operating Income Margin 15.6% 17.8% 220 bps
Reported Earnings Per Share $2.31 $2.16 (6)%
Adjusted Earnings Per Share Ex-Spins1 $1.86 $2.06 11%
Cash Flow from Operations 1,559 2,614 68%
Conversion 91% 167% 76%
Adjusted Free Cash Flow2 1,486 2,292 54%
Adjusted Free Cash Flow Conversion2 105% 154% 49%
Adjusted Free Cash Flow Conversion, Ex-Pension2 121% 166% 45%
TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS
AEROSPACE FY 2018 FY 2019 Change
Sales 15,493 14,054 (9)%
Organic Growth 9%
Segment Profit 3,503 3,607 3%
Segment Margin 22.6% 25.7% 310 bps
4Q 2018 4Q 2019
Sales 3,428 3,661 7%
Organic Growth 7%
Segment Profit 801 954 19%
Segment Margin 23.4% 26.1% 270 bps
HONEYWELL BUILDING TECHNOLOGIES FY 2018 FY 2019 Change
Sales 9,298 5,717 (39)%
Organic Growth 5%
Segment Profit 1,608 1,165 (28)%
Segment Margin 17.3% 20.4% 310 bps
4Q 2018 4Q 2019
Sales 1,802 1,463 (19)%
Organic Growth 3%
Segment Profit 335 297 (11)%
Segment Margin 18.6% 20.3% 170 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES FY 2018 FY 2019 Change
Sales 10,674 10,834 1%
Organic Growth 4%
Segment Profit 2,328 2,433 5%
Segment Margin 21.8% 22.5% 70 bps
4Q 2018 4Q 2019
Sales 2,802 2,857 2%
Organic Growth 3%
Segment Profit 652 643 (1)%
Segment Margin 23.3% 22.5% (80) bps
SAFETY AND PRODUCTIVITY SOLUTIONS FY 2018 FY 2019 Change
Sales 6,337 6,104 (4)%
Organic Growth (4)%
Segment Profit 1,032 790 (23)%
Segment Margin 16.3% 12.9% (340) bps
4Q 2018 4Q 2019
Sales 1,697 1,515 (11)%
Organic Growth (11)%
Segment Profit 272 192 (29)%
Segment Margin 16.0% 12.7% (330) bps
1Adjusted EPS and adjusted EPS V% ex-spins excludes pension mark-to-market,
4Q18 after-tax separation costs related to the spin-offs, the 4Q18 after-tax
segment profit contribution from the spin-off of Resideo, net of spin
reimbursement impacts assuming the indemnification and reimbursement agreement
was effective in 4Q18, and 4Q18 adjustments to the charges taken in connection
with the 4Q17 U.S. tax legislation charge.
2Adjusted free cash flow excludes impacts from separation costs related to the
spin-offs. Adjusted free cash flow conversion also excludes pension
mark-to-market and adjustments to the charges taken in connection with the 4Q17
U.S. tax legislation charge. Adjusted free cash flow conversion, ex-pension
also excludes pension ongoing income.
3Adjusted EPS V% guidance excludes pension mark-to-market and adjustments to
the charges taken in connection with the 4Q17 U.S. tax legislation charge in
2019.
4Adjusted EPS and adjusted EPS V% ex-spins excludes pension mark-to-market,
2018 after-tax separation costs related to the spin-offs of Resideo and
Garrett, the 2018 after-tax segment profit contribution from the spin-offs, net
of spin reimbursement impacts assuming both indemnification and reimbursement
agreements were effective in 2018, and adjustments to the charges taken in
connection with the 4Q17 U.S. tax legislation charge.
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 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, and
acquisitions and divestitures for the first 12 months following transaction
date; 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, separation costs related to the spin-offs,
and adjustments to the 4Q17 U.S. tax legislation charge, if and as noted in the
release; adjusted free cash flow conversion, ex-pension, which we define as
adjusted free cash flow conversion, excluding pension ongoing income, 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, adjustments to the 4Q17 U.S. tax
legislation charge, and after-tax segment profit contribution from Resideo and
Garrett in the periods noted in the release, net of spin reimbursement impacts
assuming both indemnification and reimbursement 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.
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,
2019 2018 2019 2018
Product sales $ 7,133 $ 7,434 $ 27,629 $ 32,848
Service sales 2,363 2,295 9,080 8,954
Net sales 9,496 9,729 36,709 41,802
Costs, expenses
and other
Cost of products 5,025 5,400 19,269 23,634
sold (1)
Cost of services 1,303 1,285 5,070 5,412
sold (1)
6,328 6,685 24,339 29,046
Selling, general 1,473 1,524 5,519 6,051
and
administrative
expenses (1)
Other (income) (164) (290) (1,065) (1,149)
expense
Interest and 91 90 357 367
other financial
charges
7,728 8,009 29,150 34,315
Income before 1,768 1,720 7,559 7,487
taxes
Tax expense 178 (20) 1,329 659
Net income 1,590 1,740 6,230 6,828
Less: Net income 28 19 87 63
attributable to
the
noncontrolling
interest
Net income $ 1,562 $ 1,721 $ 6,143 $ 6,765
attributable to
Honeywell
Earnings per $ 2.19 $ 2.34 $ 8.52 $ 9.10
share of common
stock - basic
Earnings per $ 2.16 $ 2.31 $ 8.41 $ 8.98
share of common
stock - assuming
dilution
Weighted average 713.5 734.0 721.0 743.0
number of shares
outstanding -
basic
Weighted average 722.6 743.9 730.3 753.0
number of shares
outstanding -
assuming dilution
(1) 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.
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
Net Sales 2019 2018 2019 2018
Aerospace $ 3,661 $ 3,428 $ 14,054 $ 15,493
Honeywell 1,463 1,802 5,717 9,298
Building
Technologies
Performance 2,857 2,802 10,834 10,674
Materials and
Technologies
Safety and 1,515 1,697 6,104 6,337
Productivity
Solutions
Total $ 9,496 $ 9,729 $ 36,709 $ 41,802
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Twelve Months Ended
December 31, December 31,
Segment Profit 2019 2018 2019 2018
Aerospace $ 954 $ 801 $ 3,607 $ 3,503
Honeywell 297 335 1,165 1,608
Building
Technologies
Performance 643 652 2,433 2,328
Materials and
Technologies
Safety and 192 272 790 1,032
Productivity
Solutions
Corporate (54) (100) (256) (281)
Total segment 2,032 1,960 7,739 8,190
profit
Interest and (91) (90) (357) (367)
other
financial
charges
Stock (41) (44) (153) (175)
compensation
expense (1)
Pension 143 247 592 992
ongoing income
(2)
Pension (123) (37) (123) (37)
mark-to-market
expense
Other 12 8 47 32
postretirement
income (2)
Repositioning (240) (335) (546) (1,091)
and other
charges (3,4)
Other (5) 76 11 360 (57)
Income before $ 1,768 $ 1,720 $ 7,559 $ 7,487
taxes
(1) Amounts included in Selling, general and administrative
expenses.
(2) 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).
(3) Amounts included in Cost of products and services sold,
Selling, general and administrative expenses, and Other income/
expense.
(4) Includes repositioning, asbestos, and environmental expenses.
(5) 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 December
31, 31,
2019 2018
ASSETS
Current assets:
Cash and cash equivalents $ 9,067 $ 9,287
Short-term investments 1,349 1,623
Accounts receivable-net 7,493 7,508
Inventories 4,421 4,326
Other current assets 1,973 1,618
Total current assets 24,303 24,362
Investments and long-term receivables 588 742
Property, plant and equipment-net 5,325 5,296
Goodwill 15,563 15,546
Other intangible assets-net 3,734 4,139
Insurance recoveries for asbestos related liabilities 392 437
Deferred income taxes 86 382
Other assets 8,688 6,869
Total assets $ 58,679 $ 57,773
LIABILITIES
Current liabilities:
Accounts payable $ 5,730 $ 5,607
Commercial paper and other short-term borrowings 3,516 3,586
Current maturities of long-term debt 1,376 2,872
Accrued liabilities 7,476 6,859
Total current liabilities 18,098 18,924
Long-term debt 11,110 9,756
Deferred income taxes 1,670 1,713
Postretirement benefit obligations other than pensions 326 344
Asbestos related liabilities 1,996 2,269
Other liabilities 6,766 6,402
Redeemable noncontrolling interest 7 7
Shareowners' equity 18,706 18,358
Total liabilities, redeemable noncontrolling interest and $ 58,679 $ 57,773
shareowners' equity
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
2019 2018 2019 2018
Cash flows from operating activities:
Net income $ 1,590 $ 1,740 $ 6,230 $ 6,828
Less: Net income attributable to the 28 19 87 63
noncontrolling interest
Net income attributable to Honeywell 1,562 1,721 6,143 6,765
Adjustments to reconcile net income
attributable to Honeywell to net cash
provided by
operating activities:
Depreciation 173 163 673 721
Amortization 96 91 415 395
(Gain) loss on sale of non-strategic 1 - 1 -
businesses and assets
Repositioning and other charges 240 335 546 1,091
Net payments for repositioning and (219) (133) (376) (652)
other charges
Pension and other postretirement income (32) (218) (516) (987)
Pension and other postretirement (28) (13) (78) (80)
benefit payments
Stock compensation expense 41 44 153 175
Deferred income taxes 477 (104) 179 (586)
Other (385) (531) (287) (694)
Changes in assets and liabilities, net
of the effects of acquisitions and
divestitures:
Accounts receivable 89 (367) 11 (236)
Inventories 176 (44) (100) (503)
Other current assets (362) (138) (430) 218
Accounts payable 207 267 118 733
Accrued liabilities 578 486 445 74
Net cash provided by (used for) 2,614 1,559 6,897 6,434
operating activities
Cash flows from investing activities:
Expenditures for property, plant and (335) (306) (839) (828)
equipment
Proceeds from disposals of property, 2 11 43 15
plant and equipment
Increase in investments (1,035) (1,177) (4,253) (4,059)
Decrease in investments 1,146 1,398 4,464 6,032
Cash paid for acquisitions, net of cash (46) (484) (50) (535)
acquired
Other (143) 152 102 402
Net cash provided by (used for) (411) (406) (533) 1,027
investing activities
Cash flows from financing activities:
Proceeds from issuance of commercial 3,907 4,591 14,199 23,891
paper and other short-term borrowings
Payments of commercial paper and other (3,906) (4,942) (14,199) (24,095)
short-term borrowings
Proceeds from issuance of common stock 73 25 498 267
Proceeds from issuance of long-term 1 1 2,726 27
debt
Payments of long-term debt (2,783) (27) (2,903) (1,330)
Repurchases of common stock (750) (1,692) (4,400) (4,000)
Cash dividends paid (644) (603) (2,442) (2,272)
Pre-separation funding - 1,197 - 2,801
Spin-off cash - (179) - (179)
Other (7) (1) (79) (142)
Net cash provided by (used for) (4,109) (1,630) (6,600) (5,032)
financing activities
Effect of foreign exchange rate changes 65 (39) 16 (201)
on cash and cash equivalents
Net increase (decrease) in cash and (1,841) (516) (220) 2,228
cash equivalents
Cash and cash equivalents at beginning 10,908 9,803 9,287 7,059
of period
Cash and cash equivalents at end of $ 9,067 $ 9,287 $ 9,067 $ 9,287
period
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2019 2019
Honeywell
Reported sales % change (2)% (12)%
Less: Foreign currency translation -% (1)%
Less: Acquisitions, divestitures and other, net (4)% (16)%
Organic sales % change 2% 5%
Aerospace
Reported sales % change 7% (9)%
Less: Foreign currency translation -% -%
Less: Acquisitions, divestitures and other, net -% (18)%
Organic sales % change 7% 9%
Honeywell Building Technologies
Reported sales % change (19)% (39)%
Less: Foreign currency translation (1)% (2)%
Less: Acquisitions, divestitures and other, net (21)% (42)%
Organic sales % change 3% 5%
Performance Materials and Technologies
Reported sales % change 2% 1%
Less: Foreign currency translation (1)% (3)%
Less: Acquisitions, divestitures and other, net -% -%
Organic sales % change 3% 4%
Safety and Productivity Solutions
Reported sales % change (11)% (4)%
Less: Foreign currency translation (1)% (2)%
Less: Acquisitions, divestitures and other, net 1% 2%
Organic sales % change (11)% (4)%
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 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,
2019 2018 2019 2018
Segment profit $ 2,032 $ 1,960 $ 7,739 $ 8,190
Stock compensation expense (41) (44) (153) (175)
(1)
Repositioning, Other (2,3) (259) (347) (598) (1,100)
Pension and other (37) (49) (137) (210)
postretirement service costs
(4)
Operating income $ 1,695 $ 1,520 $ 6,851 $ 6,705
Segment profit $ 2,032 $ 1,960 $ 7,739 $ 8,190
÷ Net sales $ 9,496 $ 9,729 $ 36,709 $ 41,802
Segment profit margin % 21.4 % 20.1 % 21.1 % 19.6 %
Operating income $ 1,695 $ 1,520 $ 6,851 $ 6,705
÷ Net sales $ 9,496 $ 9,729 $ 36,709 $ 41,802
Operating income margin % 17.8 % 15.6 % 18.7 % 16.0 %
(1) Included in Selling, general and administrative
expenses.
(2) Includes repositioning, asbestos, environmental
expenses and equity income adjustment.
(3) Included in Cost of products and services sold,
Selling, general and administrative expenses and
Other income/expense.
(4) 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 Earnings per Share to Adjusted Earnings per Share and
Adjusted Earnings per Share Excluding Spin-off Impact (Unaudited)
Three Months Twelve Months Ended
Ended December 31,
December 31,
2019 2018 2019 2018
Earnings per share of common $ 2.16 $ 2.31 $ 8.41 $ 8.98
stock - assuming dilution (1)
Pension mark-to-market expense 0.13 0.04 0.13 0.04
(2)
Separation costs (3) - 0.14 - 0.97
Impacts from U.S. Tax Reform (0.23) (0.58) (0.38) (1.98)
Adjusted earnings per share of $ 2.06 $ 1.91 $ 8.16 $ 8.01
common stock - assuming
dilution
Less: EPS, attributable to 0.05 - 0.62
spin-offs
Adjusted earnings per share of $ 1.86 $ 8.16 $ 7.39
common stock - assuming
dilution, excluding spin-off
impact
(1) For the three months ended December 31, 2019
and 2018, adjusted earnings per share utilizes
weighted average shares of approximately 722.6
million and 743.9 million. For the twelve
months ended December 31, 2019 and 2018,
adjusted earnings per share utilizes weighted
average shares of approximately 730.3 million
and 753.0 million.
(2) Pension mark-to-market expense uses a blended
tax rate of 24% for 2019 and 2018.
(3) For the three months ended December 31, 2018,
separation costs of $104 million. For the
twelve months ended December 31, 2018,
separation costs of $732 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. 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. We therefore do not include an estimate for the
pension mark-to-market expense. 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 Adjusted Free Cash
Flow and Calculation of Adjusted Free Cash Flow Conversion (Unaudited)
(Dollars in millions)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 2019 31, 2018 31, 2019 31, 2018
Cash provided by operating activities $ 2,614 $ 1,559 $ 6,897 $ 6,434
Expenditures for property, plant and (335) (306) (839) (828)
equipment
Free cash flow 2,279 1,253 6,058 5,606
Separation cost payments 13 233 213 424
Adjusted free cash flow $ 2,292 $ 1,486 $ 6,271 $ 6,030
Net income attributable to Honeywell $ 1,562 $ 1,721 $ 6,143 $ 6,765
Separation costs, includes net tax - 104 - 732
impacts
Impacts from U.S. Tax Reform (167) (435) (281) (1,494)
Pension mark-to-market 94 28 94 28
Adjusted net income attributable to $ 1,489 $ 1,418 $ 5,956 $ 6,031
Honeywell
Cash provided by operating activities $ 2,614 $ 1,559 $ 6,897 $ 6,434
÷ Net income (loss) attributable to $ 1,562 $ 1,721 $ 6,143 $ 6,765
Honeywell
Operating cash flow conversion 167 % 91 % 112 % 95 %
Adjusted free cash flow $ 2,292 $ 1,486 $ 6,271 $ 6,030
÷ Adjusted net income attributable to $ 1,489 $ 1,418 $ 5,956 $ 6,031
Honeywell
Adjusted free cash flow conversion % 154 % 105 % 105 % 100 %
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)
Twelve Months Twelve Months
Ended Ended
December 31, December 31,
2019 2020(E) ($B)
Cash provided by operating activities 6,897 $6.6 - $7.1
Expenditures for property, plant and equipment (839) (0.9)
Free cash flow 6,058 5.7 - 6.2
Separation cost payments 213 -
Adjusted free cash flow 6,271 $5.7 - $6.2
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, we do not provide cash flow conversion guidance on a GAAP basis as
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.
Honeywell International Inc.
Calculation of Adjusted Free Cash Flow Conversion Excluding Pension Ongoing
Income Impact (Unaudited)
(Dollars in millions)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 2019 31, 2018 31, 2019 31, 2018
Adjusted net income $ 1,489 $ 1,418 $ 5,956 $ 6,031
attributable to Honeywell
Pension ongoing income(1) (111) (192) (459) (770)
Adjusted net income $ 1,378 $ 1,226 $ 5,497 $ 5,261
attributable to Honeywell,
excluding
pension ongoing income
Adjusted free cash flow $ 2,292 $ 1,486 $ 6,271 $ 6,030
÷ Adjusted net income $ 1,378 $ 1,226 $ 5,497 $ 5,261
attributable to Honeywell,
excluding
pension ongoing income
Adjusted free cash flow 166 % 121 % 114 % 115 %
conversion %, excluding
pension
ongoing income
(1) Pension ongoing income uses a blended tax rate of 22.5% and
22.4% for 2019 and 2018.
Contacts:
Media Investor Relations
Nina Krauss Mark Bendza
(704) 627-6035 (704) 627-6200
nina.krauss@honeywell.com mark.bendza@honeywell.com
END
(END) Dow Jones Newswires
January 31, 2020 06:30 ET (11:30 GMT)
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