TIDMHON
Honeywell Beats Guidance And Delivers Outstanding Second-Quarter Results Driven
By Sales And Profit Growth; Raises Midpoint Of Adjusted EPS Guidance By 15
Cents
- Sales Growth and Margin Expansion in All Four Segments; Orders up Over 20%
- Reported Sales up 18%, Organic Sales up 15%
- Operating Margin up 450 Basis Points to 18.1%; Segment Margin up 190 Basis
Points to 20.4%
- Earnings Per Share of $2.04, Adjusted Earnings Per Share¹ of $2.02, up 60%
- Generated $1.3 Billion in Operating Cash Flow with Conversion of 89%, $1.5
Billion of Free Cash Flow with Adjusted Conversion² of 103%
CHARLOTTE, N.C., July 23, 2021 /PRNewswire/ -- Honeywell (NASDAQ: HON) today
announced outstanding results for the second quarter that were driven by sales
and segment margin growth in all four businesses. The company also raised its
full-year sales, segment margin, adjusted earnings per share, and cash flow
guidance.
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"Building on our first-quarter momentum, we executed extremely well in the
second quarter. Our results were driven by top-line growth and margin expansion
in all four segments. Organic sales grew 15%, led by double-digit growth in
Performance Materials and Technologies, Honeywell Building Technologies, and
Safety and Productivity Solutions," said Darius Adamczyk, chairman and chief
executive officer of Honeywell. "Our increased volumes, streamlined cost base,
and relentless focus on execution enabled us to expand segment margin by 190
basis points to 20.4%, exceeding the high end of our guidance by 10 basis
points. As a result, we delivered adjusted earnings per share1 of $2.02, up 60%
year over year and above the high end of our second-quarter guidance range. Our
cash performance in the second quarter was strong, as we generated $1.5 billion
of free cash flow with adjusted conversion2 of 103%, all while repurchasing
$1.0 billion in Honeywell shares."
Adamczyk continued, "Our strong performance in the second quarter took place in
a recovering but challenging global environment. We are especially pleased to
see a turnaround in several of our key end markets that were hardest hit by the
pandemic, with commercial aerospace aftermarket and the UOP business returning
to growth in the quarter. We are well positioned to capitalize on improving
conditions as they unfold around the world and to execute on near-term growth
opportunities across our portfolio, including in the warehouse automation,
productivity, building products, and advanced materials markets."
As a result of the company's second-quarter performance and management's
outlook for the remainder of the year, Honeywell raised its full-year sales,
adjusted earnings per share, and cash flow guidance and raised the midpoint of
its segment margin guidance. Full-year sales are now expected to be in the
range of $34.6 billion to $35.2 billion with organic sales growth in the range
of 4% to 6%. Segment margin is expected to be in the range of 20.8% - 21.1%.
Adjusted earnings per share3 is expected to be $7.95 to $8.10, up 10 cents from
the high end of the prior guidance range. Operating cash flow is now expected
to be in the range of $5.9 billion to $6.2 billion and free cash flow is now
expected to be in the range of $5.3 billion to $5.6 billion. A summary of the
company's full-year guidance changes can be found in Table 1.
Second-Quarter Performance
Honeywell sales for the second quarter were up 18% on a reported basis and up
15% on an organic basis. The second-quarter financial results can be found in
Tables 2 and 3.
Aerospace sales for the second quarter were up 7% on an organic basis driven by
a strong recovery in business and general aviation aftermarket demand as flight
hours returned to 2019 levels, partially offset by lower defense volumes and a
more gradual recovery in commercial original equipment build rates. Air
transport aftermarket returned to growth as increased flight hours drove
aftermarket demand. Segment margin expanded 490 basis points to 25.7%.
Honeywell Building Technologies sales for the second quarter were up 13% on an
organic basis driven by broad-based global strength across the portfolio.
Orders were up over 35% year over year, driven by strong bookings for building
products and solutions. The buildings solutions services backlog was up over
30% year over year driven by strong bookings in North America and Asia. In
addition, demand continued for our portfolio of healthy buildings solutions,
with approximately $150 million of orders in the first half. Segment margin
expanded 120 basis points to 22.4%.
Performance Materials and Technologies sales for the second quarter were up 10%
on an organic basis driven by demand for process solutions products and thermal
solutions, higher equipment volumes, licensing, and petrochemical catalyst
shipments in UOP, and continued strong growth across advanced materials. Orders
were up 20% year over year driven by robust demand for services, thermal
solutions, catalysts, and fluorine products. Segment margin expanded 190 basis
points to 20.8%.
Safety and Productivity Solutions sales for the second quarter were up 35% on
an organic basis driven by another quarter of double-digit growth in the
warehouse and workflow solutions, personal protective equipment, and
productivity solutions and services businesses. In addition, short-cycle demand
accelerated in the gas analysis and advanced sensing businesses, which both
grew by high single-digits sequentially from the first quarter. Orders were up
triple digits year over year in productivity solutions and services, giving us
confidence in continued growth for that business. Segment margin expanded 20
basis points to 14.0%.
Conference Call Details
Honeywell will discuss its second-quarter results and updated full-year
guidance during an investor conference call starting at 8:30 a.m. Eastern
Daylight Time today. 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. EDT start. Please mention to the operator that you are
dialing in for Honeywell's second-quarter 2021 earnings call or provide the
conference code HON2Q21. 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. EDT July 23 until 12:30
p.m. EDT July 30 by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 7208292.
TABLE 1: FULL-YEAR 2021 GUIDANCE5
Previous Guidance Current Guidance
Sales $34.0B - $34.8B $34.6B - $35.2B
Organic Growth 3% - 5% 4% - 6%
Segment Margin 20.7% - 21.1% 20.8% - 21.1%
Expansion Up 30 - 70 bps Up 40 - 70 bps
Adjusted Earnings Per Share3 $7.75 - $8.00 $7.95 - $8.10
Adjusted Earnings Growth4 9% - 13% 12% - 14%
Operating Cash Flow $5.8B - $6.1B $5.9B - $6.2B
Free Cash Flow $5.2B - $5.5B $5.3B - $5.6B
TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS
2Q 2021 2Q 2020 Change
Sales 8,808 7,477 18%
Organic Growth 15%
Segment Margin 20.4% 18.5% 190 bps
Operating Income Margin 18.1% 13.6% 450 bps
Earnings Per Share $2.04 $1.53 33%
Adjusted Earnings Per Share1 $2.02 $1.26 60%
Cash Flow from Operations 1,278 1,480 (14%)
Operating Cash Flow Conversion 89% 137% (48%)
Free Cash Flow 1,468 1,253 17%
Adjusted Free Cash Flow Conversion2 103% 140% (37%)
TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS
AEROSPACE 2Q 2021 2Q 2020 Change
Sales 2,766 2,543 9%
Organic Growth 7%
Segment Profit 710 528 34%
Segment Margin 25.7% 20.8% 490 bps
HONEYWELL BUILDING TECHNOLOGIES
Sales 1,407 1,177 20%
Organic Growth 13%
Segment Profit 315 250 26%
Segment Margin 22.4% 21.2% 120 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES
Sales 2,552 2,218 15%
Organic Growth 10%
Segment Profit 530 419 26%
Segment Margin 20.8% 18.9% 190 bps
SAFETY AND PRODUCTIVITY SOLUTIONS
Sales 2,083 1,539 35%
Organic Growth 35%
Segment Profit 292 213 37%
Segment Margin 14.0% 13.8% 20 bps
1Adjusted EPS and adjusted EPS V% exclude 2Q20 favorable resolution of a
foreign tax matter related to the spin-off transactions, changes in fair value
for Garrett Motion Inc. (Garrett) equity securities, and a non-cash charge
associated with a further reduction in value of reimbursement receivables
following Garrett's emergence from bankruptcy on April 30, 2021
2Adjusted free cash flow conversion is free cash flow (cash flow from
operations less capital expenditures plus cash receipts from Garrett) divided
by adjusted net income attributable to Honeywell. Adjusted net income
attributable to Honeywell excludes changes in fair value for Garrett equity
securities, a non-cash charge associated with a further reduction in value of
reimbursement receivables following Garrett's emergence from bankruptcy on
April 30, 2021, and the 2Q20 favorable resolution of a foreign tax matter
related to the spin-off transactions from net income attributable to Honeywell
3Adjusted EPS guidance excludes the $0.11 impact of the sale of the retail
footwear business, a non-cash charge associated with a further reduction in
value of reimbursement receivables following Garrett's emergence from
bankruptcy on April 30, 2021, and any potential future one-time items that we
cannot reliably predict or estimate such as pension mark-to-market and changes
in fair value for Garrett equity securities
4Adjusted EPS V% guidance excludes the $0.11 impact of the sale of the retail
footwear business, a non-cash charge associated with a further reduction in
value of reimbursement receivables following Garrett's emergence from
bankruptcy on April 30, 2021, 4Q20 pension mark-to-market, 2Q20 favorable
resolution of a foreign tax matter related to the spin-off transactions,
non-cash charges associated with the 2020 reduction in value of reimbursement
receivables due from Garrett, net of proceeds from the settlement of related
hedging transactions, and any potential future one-time items that we cannot
reliably predict or estimate such as pension mark-to-market or changes in fair
value for Garrett equity securities
5As discussed in the notes to the attached reconciliations, we do not provide
guidance for margin or EPS on a GAAP basis
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, technological, and COVID-19 public health
factors affecting our operations, markets, products, services and prices. Such
forward-looking statements are not guarantees of future performance, and actual
results, and other developments, including the potential impact of the COVID-19
pandemic, and business decisions may differ from those envisaged by such
forward-looking statements. Any forward-looking plans described herein are not
final and may be modified or abandoned at any time. 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; 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 the transaction date; free cash flow, which we define as cash flow
from operations less capital expenditures plus cash receipts from Garrett, if
and as noted in the release; adjusted free cash flow conversion, which we
define as free cash flow divided by adjusted net income attributable to
Honeywell; adjusted net income attributable to Honeywell, which we define as
net income attributable to Honeywell which we adjust to exclude changes in fair
value for Garrett equity securities, a non-cash charge associated with a
further reduction in value of reimbursement receivables following Garrett's
emergence from bankruptcy on April 30, 2021, and the 2Q20 favorable resolution
of a foreign tax matter related to the spin-off transactions, if and as noted
in the release; and adjusted earnings per share, which we adjust to exclude
pension mark-to-market, the favorable resolution of a foreign tax matter
related to the spin-off transactions, non-cash charges associated with the
reduction in value of reimbursement receivables due from Garrett, net of
proceeds from settlement of related hedging transactions, the gain on sale of
the retail footwear business, and changes in fair value for Garrett equity
securities, if and as noted in the release. 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.
Certain metrics presented on a non-GAAP basis represent the impact of adjusting
items net of tax. The tax-effect for adjusting items is determined individually
and on a case-by-case basis. 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 Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Product sales $ 6,639 $ 5,743 $ 13,048 $ 12,048
Service sales 2,169 1,734 4,214 3,892
Net sales 8,808 7,477 17,262 15,940
Costs, expenses and other
Cost of products sold(1) 4,734 4,163 9,285 8,537
Cost of services sold(1) 1,269 1,113 2,427 2,273
6,003 5,276 11,712 10,810
Selling, general and administrative 1,207 1,183 2,443 2,421
expenses(1)
Other (income) expense (366) (291) (808) (608)
Interest and other financial charges 83 90 173 163
6,927 6,258 13,520 12,786
Income before taxes 1,881 1,219 3,742 3,154
Tax expense (benefit) 434 120 847 449
Net income 1,447 1,099 2,895 2,705
Less: Net income attributable to the 17 18 38 43
noncontrolling interest
Net income attributable to Honeywell $ 1,430 $ 1,081 $ 2,857 $ 2,662
Earnings per share of common stock - $ 2.06 $ 1.54 $ 4.11 $ 3.77
basic
Earnings per share of common stock - $ 2.04 $ 1.53 $ 4.06 $ 3.74
assuming dilution
Weighted average number of shares 693.8 702.3 695.0 705.9
outstanding - basic
Weighted average number of shares 702.5 708.1 703.5 712.6
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 June Six Months Ended June
30, 30,
Net Sales 2021 2020 2021 2020
Aerospace $ 2,766 $ 2,543 $ 5,398 $ 5,904
Honeywell Building 1,407 1,177 2,765 2,458
Technologies
Performance Materials and 2,552 2,218 4,898 4,615
Technologies
Safety and Productivity 2,083 1,539 4,201 2,963
Solutions
Total $ 8,808 $ 7,477 $ 17,262 $ 15,940
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended June Six Months Ended June
30, 30,
Segment Profit 2021 2020 2021 2020
Aerospace $ 710 $ 528 $ 1,472 $ 1,465
Honeywell Building 315 250 620 512
Technologies
Performance Materials and 530 419 964 931
Technologies
Safety and Productivity 292 213 595 391
Solutions
Corporate (54) (25) (83) (66)
Total segment profit 1,793 1,385 3,568 3,233
Interest and other financial (83) (90) (173) (163)
charges
Stock compensation expense (39) (34) (116) (78)
(1)
Pension ongoing income (2) 272 198 548 396
Other postretirement income 18 14 35 27
(2)
Repositioning and other (101) (280) (242) (342)
charges (3,4)
Other (5) 21 26 122 81
Income before taxes $ 1,881 $ 1,219 $ 3,742 $ 3,154
(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 of affiliated
companies is included in segment profit.
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
June 30, December 31,
2021 2020
ASSETS
Current assets:
Cash and cash equivalents $ 11,427 $ 14,275
Short-term investments 891 945
Accounts receivable - net 6,947 6,827
Inventories 4,723 4,489
Other current assets 1,664 1,639
Total current assets 25,652 28,175
Investments and long-term receivables 1,358 685
Property, plant and equipment - net 5,520 5,570
Goodwill 17,135 16,058
Other intangible assets - net 3,748 3,560
Insurance recoveries for asbestos related 342 366
liabilities
Deferred income taxes 762 760
Other assets 9,428 9,412
Total assets $ 63,945 $ 64,586
LIABILITIES
Current liabilities:
Accounts payable $ 6,139 $ 5,750
Commercial paper and other short-term borrowings 3,573 3,597
Current maturities of long-term debt 1,645 2,445
Accrued liabilities 6,786 7,405
Total current liabilities 18,143 19,197
Long-term debt 16,138 16,342
Deferred income taxes 2,302 2,113
Postretirement benefit obligations other than 225 242
pensions
Asbestos-related liabilities 1,819 1,920
Other liabilities 7,109 6,975
Redeemable noncontrolling interest 7 7
Shareowners' equity 18,202 17,790
Total liabilities, redeemable noncontrolling $ 63,945 $ 64,586
interest and shareowners'
equity
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Cash flows from operating
activities:
Net income $ 1,447 $ 1,099 $ 2,895 $ 2,705
Less: Net income attributable to the 17 18 38 43
noncontrolling interest
Net income attributable to Honeywell 1,430 1,081 2,857 2,662
Adjustments to reconcile net income
attributable to Honeywell to net
cash
provided by operating activities:
Depreciation 164 161 335 314
Amortization 120 89 290 179
Gain on sale of non-strategic - - (90) -
businesses and assets
Repositioning and other charges 101 280 242 342
Net payments for repositioning and (163) (198) (358) (309)
other charges
Pension and other postretirement (290) (211) (583) (423)
income
Pension and other postretirement (13) (9) (27) (23)
benefit payments
Stock compensation expense 39 34 116 78
Deferred income taxes 38 (219) 101 (277)
Other (181) (106) (277) (285)
Changes in assets and liabilities,
net of the effects of acquisitions
and
divestitures:
Accounts receivable (270) 735 (127) 776
Inventories (113) (168) (271) (331)
Other current assets (32) (60) (98) 106
Accounts payable 345 (310) 402 (364)
Accrued liabilities 103 381 (256) (26)
Net cash provided by (used for) 1,278 1,480 2,256 2,419
operating activities
Cash flows from investing
activities:
Expenditures for property, plant and (185) (227) (406) (366)
equipment
Proceeds from disposals of property, - - 14 7
plant and equipment
Increase in investments (661) (1,023) (1,397) (1,671)
Decrease in investments 719 746 1,331 1,589
Receipts from Garrett Motion Inc. 375 - 375 -
Receipts (payments) from settlements (163) (204) (23) 83
of derivative contracts
Cash paid for acquisitions, net of (24) - (1,327) -
cash acquired
Proceeds from sales of businesses, - - 190 -
net of fees paid
Net cash provided by (used for) 61 (708) (1,243) (358)
investing activities
Cash flows from financing
activities:
Proceeds from issuance of commercial 1,090 3,710 2,358 7,165
paper and other short-term
borrowings
Payments of commercial paper and (1,089) (3,721) (2,355) (7,094)
other short-term borrowings
Proceeds from issuance of common 47 31 114 97
stock
Proceeds from issuance of long-term 4 5,974 27 7,101
debt
Payments of long-term debt (18) (93) (835) (1,218)
Repurchases of common stock (1,027) (62) (1,849) (1,985)
Cash dividends paid (664) (650) (1,304) (1,285)
Other (3) (2) (33) (40)
Net cash provided by (used for) (1,660) 5,187 (3,877) 2,741
financing activities
Effect of foreign exchange rate 30 98 16 (91)
changes on cash and cash equivalents
Net increase (decrease) in cash and (291) 6,057 (2,848) 4,711
cash equivalents
Cash and cash equivalents at 11,718 7,721 14,275 9,067
beginning of period
Cash and cash equivalents at end of $ 11,427 $ 13,778 $ 11,427 $ 13,778
period
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Ended
June 30, 2021
Honeywell
Reported sales % change 18%
Less: Foreign currency translation 3%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change 15%
Aerospace
Reported sales % change 9%
Less: Foreign currency translation 1%
Less: Acquisitions, divestitures and other, net 1%
Organic sales % change 7%
Honeywell Building Technologies
Reported sales % change 20%
Less: Foreign currency translation 7%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change 13%
Performance Materials and Technologies
Reported sales % change 15%
Less: Foreign currency translation 4%
Less: Acquisitions, divestitures and other, net 1%
Organic sales % change 10%
Safety and Productivity Solutions
Reported sales % change 35%
Less: Foreign currency translation 3%
Less: Acquisitions, divestitures and other, net (3)%
Organic sales % change 35%
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, for the first 12
months following the transaction date. 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 June Twelve
30, Months
Ended
December
31,
2021 2020 2020
Segment profit $ 1,793 $ 1,385 $ 6,665
Stock compensation expense (1) (39) (34) (168)
Repositioning, Other (2,3) (119) (295) (641)
Pension and other postretirement service (37) (38) (160)
costs (4)
Operating income $ 1,598 $ 1,018 $ 5,696
Segment profit $ 1,793 $ 1,385 $ 6,665
÷ Net sales $ 8,808 $ 7,477 $ 32,637
Segment profit margin % 20.4 % 18.5 % 20.4 %
Operating income $ 1,598 $ 1,018 $ 5,696
÷ Net sales $ 8,808 $ 7,477 $ 32,637
Operating income margin % 18.1 % 13.6 % 17.5 %
(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 (Unaudited)
Three Months Ended Twelve
June 30, Months
Ended
December
31,
2021 2020 2020
Earnings per share of common stock - $ 2.04 $ 1.53 $ 6.72
assuming dilution (1)
Pension mark-to-market expense (2) - - 0.04
Separation related tax adjustment (3) - (0.27) (0.26)
Changes in fair value for Garrett equity (0.03) - -
securities (4)
Garrett-related adjustments (5) 0.01 - 0.60
Adjusted earnings per share of common stock $ 2.02 $ 1.26 $ 7.10
- assuming dilution
(1) For the three months ended June 30, 2021 and 2020, adjusted earnings per
share utilizes weighted average shares of approximately 702.5 million and
708.1 million. For the twelve months ended December 31, 2020, adjusted
earnings per share utilizes weighted average shares of 711.2 million.
(2) Pension mark-to-market expense uses a blended tax rate of 25% for 2020.
(3) For the three months ended June 30, 2020 and twelve months ended December
31, 2020, separation related tax adjustment of $186 million ($186 million
net of tax) includes the favorable resolution of a foreign tax matter
related to the spin-off transactions.
(4) For the three months ended June 30, 2021, the adjustment was $16 million
net of tax due to changes in fair value for Garrett equity securities.
(5) For the three months ended June 30, 2021, the adjustment was $7 million net
of tax due to a non-cash charge associated with a further reduction in
value of reimbursement receivables following Garrett's emergence from
bankruptcy on April 30, 2021. For the twelve months ended December 31,
2020, the adjustment was $427 million net of tax due to the non-cash
charges associated with the reduction in value of reimbursement receivables
due from Garrett, net of proceeds from settlement of related hedging
transactions.
We believe adjusted earnings per share 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 and the changes in fair value for Garrett equity
securities. Pension mark-to-market expense is dependent on macroeconomic
factors, such as interest rates and the return generated on invested pension
plan assets. Based on economic and industry conditions, future developments and
other relevant factors, these assumptions are subject to change. Changes in
fair value for Garrett equity securities cannot be forecasted due to the
inherent nature of changing conditions in the overall market.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow,
Reconciliation of Net Income Attributable
to Honeywell to Adjusted Net Income Attributable to Honeywell, and Calculation
of Adjusted Free Cash Flow
Conversion (Unaudited)
(Dollars in millions)
Three Months Three Months
Ended Ended
June 30, June 30,
2021 2020
Cash provided by operating activities $ 1,278 $ 1,480
Expenditures for property, plant and equipment (185) (227)
Garrett cash receipts 375 -
Free cash flow 1,468 1,253
Net income attributable to Honeywell 1,430 1,081
Separation related tax adjustment - (186)
Changes in fair value for Garrett equity securities (16) -
(1)
Garrett related adjustment (2) 7 -
Adjusted net income attributable to Honeywell $ 1,421 $ 895
Cash provided by operating activities $ 1,278 $ 1,480
÷ Net income (loss) attributable to Honeywell $ 1,430 $ 1,081
Operating cash flow conversion % 89 % 137 %
Free cash flow $ 1,468 $ 1,253
÷ Adjusted net income attributable to Honeywell $ 1,421 $ 895
Adjusted free cash flow conversion % 103 % 140 %
(1) The adjustment due to changes in fair value for Garrett equity securities.
(2) For the three months ended June 30, 2021, the adjustment was $7 million net
of tax due to a non-cash charge associated with a further reduction in
value of reimbursement receivables following Garrett's emergence from
bankruptcy on April 30, 2021.
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus cash receipts from Garrett.
We believe that free cash flow is a non-GAAP metric that is useful to investors
and management as a measure of cash generated by operations that will be used
to repay scheduled debt maturities and can be used to invest in future growth
through new business development activities or acquisitions, pay dividends,
repurchase stock or repay debt obligations prior to their maturities. This
metric can also be used to evaluate our ability to generate cash flow from
operations and the impact that this cash flow has on our liquidity. For forward
looking information, we do not provide cash flow conversion guidance on a GAAP
basis as management cannot reliably predict or estimate, without unreasonable
effort, the pension mark-to-market expense and the changes in fair value for
Garrett equity securities. Pension mark-to-market is dependent on macroeconomic
factors, such as interest rates and the return generated on invested pension
plan assets. Based on economic and industry conditions, future developments and
other relevant factors, these assumptions are subject to change. Changes in
fair value of Garrett equity securities cannot be forecasted due to the
inherent nature of changing conditions in the overall market.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
Twelve Months
Ended
December 31,
2021(E) ($B)
Cash provided by operating activities $5.9 - $6.2
Expenditures for property, plant and equipment (1)
Garrett cash receipts 0.4
Free cash flow $5.3 - $5.6
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus cash receipts from Garrett.
We believe that free cash flow is a non-GAAP metric that is useful to investors
and management as a measure of cash generated by 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
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 or changes in fair value of Garrett
equity securities. Pension mark-to-market is dependent on macroeconomic
factors, such as interest rates and the return generated on invested pension
plan assets. Based on economic and industry conditions, future developments and
other relevant factors, these assumptions are subject to change. Changes in
fair value of Garrett equity securities cannot be forecasted due to the
inherent nature of changing conditions in the overall market.
Honeywell International Inc.
Reconciliation of Expected Earnings per Share to Adjusted Earnings per Share
(Unaudited)
Twelve Months
Ended
December 31,
2021(E)
Earnings per share of common stock - assuming dilution (1) $8.05 - $8.20
Gain on sale of retail footwear business (2) (0.11)
Garrett-related adjustments (3) 0.01
Adjusted earnings per share of common stock - assuming dilution $7.95 - $8.10
(1) For the twelve months ended December 31, 2021, expected earnings per share
utilizes weighted average shares of approximately 703 million.
(2) For the twelve months ended December 31, 2021, the adjustment was $72
million net of tax due to the gain on sale of the retail footwear business.
(3) For the twelve months ended December 31, 2021, adjustment was $7 million
net of tax due to a non-cash charge associated with a further reduction in
value of reimbursement receivables following Garrett's emergence from
bankruptcy on April 30, 2021.
We believe adjusted earnings per share 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 any potential future one-time items, such as
pension mark-to-market or changes in fair value for Garrett equity securities,
without unreasonable effort. Pension mark-to-market expense is dependent on
macroeconomic factors, such as interest rates and the return generated on
invested pension plan assets. Based on economic and industry conditions, future
developments and other relevant factors, these assumptions are subject to
change. Changes in fair value for Garrett equity securities cannot be
forecasted due to the inherent nature of changing conditions in the overall
market.
Contacts:
Media Investor Relations
Nina Krauss Reena Vaidya
(704) 627-6035 (704) 627-6200
nina.krauss@honeywell.com reena.vaidya@honeywell.com
END
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July 23, 2021 06:30 ET (10:30 GMT)
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