TIDMHON
Honeywell Reports Third Quarter 2016 Sales Of $9.8 Billion, Up 2%; Earnings Per
Share Of $1.60
=- 3Q16 Reported EPS of $1.60, or $1.67 Excluding $0.07 Deployed to
Restructuring
=- 4Q16 EPS Guidance of $1.74-$1.78 (Ex-Pension MTM)(1), Up 10%-13%
=- Full-Year EPS Guidance of $6.60-$6.64 (Ex-Pension MTM)(1), Up 8%-9%
MORRIS PLAINS, N.J., Oct. 21, 2016 -- Honeywell (NYSE: HON) today announced its
results for the third quarter of 2016:
Total Honeywell
($ Millions, Except Earnings Per Share) 3Q 2015 3Q 2016 Change
Sales 9,611 9,804 2%
Segment Margin 19.3% 17.5% (180) bps
Operating Income Margin 18.3% 15.6% (270) bps
Earnings Per Share $1.60 $1.60 Flat
Earnings Per Share (Excluding $0.07 Deployed to Restructuring) $1.67 4%
Cash Flow from Operations 1,693 1,554 (8%)
Free Cash Flow2 1,416 1,280 (10%)
__________________________
1 Excludes Impact From Contemplated Q4 Debt Refinancing
2 Cash Flow from Operations Less Capital Expenditures
Throughout this press release, core organic sales growth refers to reported
sales growth less the impacts from foreign currency translation, M&A and raw
materials pass-through pricing in the Resins & Chemicals business of PMT. The
raw materials pricing impact is excluded in instances where raw materials costs
are passed through to customers, which drives fluctuations in selling prices
not tied to volume growth. A reconciliation of core organic sales growth to
reported sales growth is provided in the attached financial tables.
"The third-quarter results came in as we outlined on our October 7 conference
call. We are well-positioned for double-digit earnings growth in the fourth
quarter, leading to 8%-9% earnings growth in 2016," said Honeywell Chairman and
CEO Dave Cote. "It was a quarter of important changes in many areas. We split
the former Automation and Control Solutions business into two new reporting
segments; closed the acquisition of Intelligrated and sold Honeywell Technology
Solutions, Inc.; and spun off our Resins and Chemicals business as a
freestanding publicly-traded company named AdvanSix Inc. (NYSE: ASIX). We also
funded approximately $250 million in restructuring and other actions from a
$0.07 increase in first- and second-quarter EPS caused by an accounting
standard adoption, and the $0.14 gain related to the sale of our government
services business. These actions will drive more than $175 million of benefits
in 2017 alone. We also intend in the fourth quarter to refinance outstanding
debt maturing in 2017-2019, which will lower interest expense by approximately
$60 million annually beginning in 2017."
"Combined with our ongoing productivity initiatives driven by the Honeywell
Operating System, and the strength of our underlying portfolio, the actions we
announced this quarter position Honeywell for future outperformance," continued
Cote. "Moving ahead, we are targeting low single-digit core organic sales
growth, continued segment margin improvement, and a double-digit increase in
EPS in 2017. Darius Adamczyk, Chief Operating Officer, and Tom Szlosek, Chief
Financial Officer, will provide more details about 2017 during our annual
outlook call in December."
"We are committed to creating sustainable long-term shareowner value,"
concluded Cote. "We remain focused on disciplined capital deployment,
aggressive organic sales growth, seed planting for new products and
technologies, penetrating High Growth Regions, and executing on our key process
initiatives. 2017 will be an inflection year for several core business units:
growing demand for our UOP catalysts and modular equipment, JetwaveT and other
products and services tied to connected aircraft, further turbo penetration,
and strong sales growth from Solstice® (HFOs), our line of low-global-warming
refrigerants and blowing agents. Revenue and earnings from the nearly $8
billion in M&A investments during the past two years should also be a
significant contributor to 2017 performance. We are confident in our position
and expect to continue to outperform."
The Company's current 2016 full-year guidance, which reflects our October 6,
2016 announcement, is as follows:
2016 Full-Year Guidance
Current Guidance Change vs. 2015
Sales $39.4 - $39.6 2% - 3%
Core Organic Growth (1%)-(2%)
Segment Margin 18.1% (70) bps3
Operating Income Margin (Ex-Pension MTM) 17.6% (30) bps4
Earnings Per Share (Ex-Pension MTM)5 $6.60 - $6.64 8% - 9%
Free Cash Flow6 $4.2 - $4.3B (2%) - (5%)
__________________________
3 Segment Margin ex-M&A Down (10) bps
4 Operating Margin ex-M&A Up 30 bps
5Excludes Impact From Contemplated Q4 Debt Refinancing
6 Cash Flow From Operations Less Capital Expenditures
Segment Performance
Aerospace
($ Millions) 3Q 2015 3Q 2016 % Change
Sales 3,820 3,601 (6%)
Segment Profit 833 663 (20%)
Segment Margin 21.8% 18.4% (340) bps
* Sales for the third quarter were down (6%) on a reported and core organic
basis. The decrease was primarily driven by the unfavorable impact of
third-quarter OEM incentives, lower volumes in Business and General
Aviation, program completions in the U.S. Space and international Defense
businesses, and continued weakness in the commercial helicopter business.
This was partially offset by increased Air Transport OE deliveries and
repair and overhaul activities, and new turbo platform launches on
passenger vehicles in Transportation Systems.
* Segment profit was down (20%) and segment margin declined (340) bps to
18.4%, due to higher Aerospace OEM incentives and lower volumes in Business
Jet and Defense, partially offset by productivity net of inflation and
commercial excellence.
Home and Building Technologies
($ Millions) 3Q 2015 3Q 2016 % Change
Sales 2,313 2,701 17%
Segment Profit 408 441 8%
Segment Margin 17.6% 16.3% (130) bps7
__________________________
7 Segment Profit Down (20) bps Ex-M&A
* Sales for the third quarter were up 17% reported and up 5% on a core
organic basis. The increase was primarily driven by continued strength in
our Distribution and Building Solutions businesses, and Products growth in
Environmental & Energy Solutions and in China. The difference between
reported and core organic sales was due to the favorable impact from
acquisitions, primarily Elster.
* Segment profit was up 8% and segment margin declined (130) bps to 16.3%,
driven by acquisition amortization and integration costs, continued growth
investments in salespeople and research and development, and the
unfavorable mix impact of increased sales in Building Solutions and
Distribution, partially offset by benefits from previously-funded
restructuring, higher sales volumes, and commercial excellence.
Performance Materials and Technologies
($ Millions) 3Q 2015 3Q 2016 % Change
Sales 2,279 2,329 2%
Segment Profit 474 503 6%
Segment Margin 20.8% 21.6% 80 bps
* Sales for the third quarter were up 2% reported. Core organic sales were
down (3%) primarily driven by declines in UOP gas processing, licensing,
and engineering, partially offset by strong catalyst shipments and
conversion of global mega projects in Process Solutions. The difference
between reported and core organic sales was due to the favorable impact
from acquisitions, partially offset by the unfavorable impact of foreign
currency and market pricing headwinds in Resins & Chemicals.
* Segment profit was up 6% and segment margins expanded 80 bps to 21.6%,
driven by productivity net of inflation, higher catalyst volumes, and
acquisition integration excellence, partially offset by continued
investments for growth.
Safety and Productivity Solutions
($ Millions) 3Q 2015 3Q 2016 % Change
Sales 1,199 1,173 (2%)
Segment Profit 193 172 (11%)
Segment Margin 16.1% 14.7% (140) bps
* Sales for the third quarter were down (2%) reported. Core organic sales
were down (8%) in the quarter as a result of lower volume in Productivity
Solutions associated with the USPS contract (which was completed in the
third quarter of 2015), continued channel headwinds, and lower volumes in
our Safety business. The difference between reported and core organic sales
was due to the favorable impact from acquisitions, primarily Intelligrated.
* Segment profit was down (11%) and segment margin contracted (140) bps to
14.7%, primarily driven by lower volumes and acquisition amortization and
integration costs, partially offset by restructuring benefits and
commercial excellence.
Honeywell will discuss its results during its investor conference call today
starting at 9:30 a.m. EDT. To participate on the conference call, please dial
(877) 795-3635 (domestic) or (719) 325-4816 (international) approximately ten
minutes before the 9:30 a.m. EDT start. Please mention to the operator that you
are dialing in for Honeywell's third quarter 2016 earnings call or provide the
conference code HON3Q16. 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, October
21, until 12:30 p.m. EDT, October 28, by dialing (888) 203-1112 (domestic) or
(719) 457-0820 (international). The access code is 7056857.
Honeywell (http://www.honeywell.com/) is a Fortune 100 diversified technology
and manufacturing leader, serving customers worldwide with aerospace products
and services; control technologies for buildings, homes, and industry;
turbochargers; and performance materials. 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.
Contacts:
Media Investor Relations
Robert C. Ferris Mark Macaluso
(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com mark.macaluso@honeywell.com
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Product sales $ 7,744 $ 7,573 $ 23,398 $ 22,735
Service sales 2,060 2,038 5,919 5,864
Net sales 9,804 9,611 29,317 28,599
Costs, expenses and other
Cost of products sold (A) 5,594 5,372 16,545 16,126
Cost of services sold (A) 1,309 1,282 3,726 3,704
6,903 6,654 20,271 19,830
Selling, general and administrative expenses (A) 1,367 1,202 3,976 3,674
Other (income) expense (180) (24) (197) (64)
Interest and other financial charges 82 72 252 226
8,172 7,904 24,302 23,666
Income before taxes 1,632 1,707 5,015 4,933
Tax expense 384 431 1,214 1,289
Net income 1,248 1,276 3,801 3,644
Less: Net income attributable to the noncontrolling interest 8 12 26 70
Net income attributable to Honeywell $ 1,240 $ 1,264 $ 3,775 $ 3,574
Earnings per share of common stock - basic $ 1.62 $ 1.62 $ 4.93 $ 4.57
Earnings per share of common stock - assuming dilution $ 1.60 $ 1.60 $ 4.86 $ 4.51
Weighted average number of shares outstanding - basic 763.7 780.4 765.0 782.5
Weighted average number of shares outstanding - assuming dilution 774.4 789.5 776.3 792.1
(A) Cost of products and services sold and selling, general and administrative
expenses include amounts for repositioning and other charges, pension and other
postretirement (income) expense, and stock compensation expense
Honeywell International Inc
Segment Data (Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
Net Sales 2016 2015 2016 2015
Aerospace $ 3,601 $ 3,820 $ 11,085 $ 11,254
Home and Building Technologies 2,701 2,313 7,854 6,686
Performance Materials and Technologies 2,329 2,279 7,044 7,137
Safety and Productivity Solutions 1,173 1,199 3,334 3,522
Corporate - - - -
Total $ 9,804 $ 9,611 $ 29,317 $ 28,599
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Nine Months Ended
September 30, September 30,
Segment Profit 2016 2015 2016 2015
Aerospace $ 663 $ 833 $ 2,252 $ 2,362
Home and Building Technologies 441 408 1,213 1,088
Performance Materials and Technologies 503 474 1,484 1,517
Safety and Productivity Solutions 172 193 495 565
Corporate (59) (56) (157) (156)
Total segment profit 1,720 1,852 5,287 5,376
Other income (expense) (A) 169 15 174 39
Interest and other financial charges (82) (72) (252) (226)
Stock compensation expense (B) (49) (41) (145) (132)
Pension ongoing income (B) 146 96 447 299
Other postretirement income (expense) (B) 7 (10) 24 (30)
Repositioning and other charges (B) (279) (133) (520) (393)
Income before taxes $ 1,632 $ 1,707 $ 5,015 $ 4,933
(A) Equity income (loss) of affiliated companies is included in segment
profit
(B) Amounts included in cost of products and services sold and selling,
general and administrative expenses
Honeywell International Inc
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
September 30, December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ 6,431 $ 5,455
Accounts, notes and other receivables 8,627 8,075
Inventories 4,587 4,420
Investments and other current assets 2,189 2,103
Total current assets 21,834 20,053
Investments and long-term receivables 639 517
Property, plant and equipment - net 5,725 5,789
Goodwill 17,846 15,895
Other intangible assets - net 4,847 4,577
Insurance recoveries for asbestos related liabilities 433 426
Deferred income taxes 335 283
Other assets 1,897 1,776
Total assets $ 53,556 $ 49,316
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 5,418 $ 5,580
Commercial paper and other short-term borrowings 5,601 5,937
Current maturities of long-term debt 649 577
Accrued liabilities 6,545 6,277
Total current liabilities 18,213 18,371
Long-term debt 9,608 5,554
Deferred income taxes 701 558
Postretirement benefit obligations other than pensions 477 526
Asbestos related liabilities 1,278 1,251
Other liabilities 3,905 4,348
Redeemable noncontrolling interest 3 290
Shareowners' equity 19,371 18,418
Total liabilities, redeemable noncontrolling interest and shareowners' equity $ 53,556 $ 49,316
Honeywell International Inc
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Cash flows from operating activities:
Net income $ 1,248 $ 1,276 $ 3,801 $ 3,644
Less: Net income attributable to the noncontrolling interest 8 12 26 70
Net income attributable to Honeywell 1,240 1,264 3,775 3,574
Adjustments to reconcile net income attributable to Honeywell to net
cash provided by operating activities:
Depreciation 182 168 546 503
Amortization 78 51 227 158
Gain on sale of non-strategic businesses and assets (176) (1) (176) (1)
Repositioning and other charges 302 133 567 393
Net payments for repositioning and other charges (154) (114) (420) (329)
Pension and other postretirement income (153) (86) (471) (269)
Pension and other postretirement benefit payments (29) (36) (110) (84)
Stock compensation expense 49 41 145 132
Deferred income taxes (36) 158 146 284
Excess tax benefits from share based payment arrangements - (13) - (69)
Other (8) 14 (33) 151
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables (57) 302 (570) 52
Inventories (21) 5 (233) (20)
Other current assets 60 (73) 78 (111)
Accounts payable (18) 11 (18) (13)
Accrued liabilities 295 (131) 3 (795)
Net cash provided by operating activities 1,554 1,693 3,456 3,556
Cash flows from investing activities:
Expenditures for property, plant and equipment (274) (277) (749) (685)
Proceeds from disposals of property, plant and equipment 3 - 4 3
Increase in investments (1,262) (1,835) (3,083) (5,701)
Decrease in investments 873 1,991 2,658 4,050
Cash paid for acquisitions, net of cash acquired (1,484) - (2,568) (185)
Proceeds from sales of businesses, net of fees paid 304 1 304 3
Other 106 81 158 (69)
Net cash used for investing activities (1,734) (39) (3,276) (2,584)
Cash flows from financing activities:
Net increase (decrease) in commercial paper and other short-term borrowings 1,799 882 (425) 2,011
Proceeds from issuance of common stock 143 25 386 150
Proceeds from issuance of long-term debt 37 34 4,510 48
Payments of long-term debt (8) (91) (478) (148)
Excess tax benefits from share based payment arrangements - 13 - 69
Repurchases of common stock (233) (1,235) (1,866) (1,721)
Cash dividends paid (453) (410) (1,410) (1,261)
Payments to purchase the noncontrolling interest - - (238) -
AdvanSix pre-separation funding 269 - 269 -
AdvanSix pre-spin borrowing 38 - 38 -
AdvanSix cash at spin-off (38) - (38) -
Other (25) (27) (40) (61)
Net cash provided by (used for) financing activities 1,529 (809) 708 (913)
Effect of foreign exchange rate changes on cash and cash equivalents 37 (236) 88 (455)
Net increase (decrease) in cash and cash equivalents 1,386 609 976 (396)
Cash and cash equivalents at beginning of period 5,045 5,954 5,455 6,959
Cash and cash equivalents at end of period $ 6,431 $ 6,563 $ 6,431 $ 6,563
Honeywell International Inc
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
September 30, December 31,
2016 2015 2015
Cash provided by operating activities $ 1,554 $ 1,693 $ 5,519
Expenditures for property, plant and equipment (274) (277) (1,073)
Free cash flow $ 1,280 $ 1,416 $ 4,446
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, and to 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 Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income Margins (Unaudited)
(Dollars in millions)
Three Months Ended
September 30,
2016 2015
Segment Profit $ 1,720 $ 1,852
Stock compensation expense (A) (49) (41)
Repositioning and other (A, B) (290) (142)
Pension ongoing income (A) 146 96
Other postretirement income (expense) (A) 7 (10)
Operating Income $ 1,534 $ 1,755
Segment Profit $ 1,720 $ 1,852
÷ Sales $ 9,804 $ 9,611
Segment Profit Margin % 17.5% 19.3%
Operating Income $ 1,534 $ 1,755
÷ Sales $ 9,804 $ 9,611
Operating Income Margin % 15.6% 18.3%
(A) Included in cost of products and services sold and selling, general and
administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity income
adjustment.
We believe these measures are useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc
Reconciliation of Segment Profit to Operating Income Excluding Pension
Mark-to-Market Adjustment and
Calculation of Segment Profit and Operating Income Margins Excluding Pension
Mark-to-Market Adjustment (Unaudited)
(Dollars in millions)
Twelve Months Ended
December 31,
2015
Segment Profit $ 7,256
Stock compensation expense (A) (175)
Repositioning and other (A, B) (576)
Pension ongoing income (A) 430
Pension mark-to-market adjustment (A) (67)
Other postretirement expense (A) (40)
Operating Income $ 6,828
Pension mark-to-market adjustment (A) (67)
Operating Income excluding pension mark-to-market adjustment $ 6,895
Segment Profit $ 7,256
÷ Sales $ 38,581
Segment Profit Margin % 18.8%
Operating Income $ 6,828
÷ Sales $ 38,581
Operating Income Margin % 17.7%
Operating Income excluding pension mark-to-market adjustment $ 6,895
÷ Sales $ 38,581
Operating Income Margin excluding pension mark-to-market adjustment % 17.9%
(A) Included in cost of products and services sold and selling, general and
administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity income
adjustment.
We believe these measures are useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc
Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Adjustment and Debt Refinancing Expenses (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2015 (1) 2015 (2)
Earnings per share of common stock - assuming dilution $ 1.53 $ 6.04
Pension mark-to-market adjustment 0.05 0.06
Debt refinancing expenses - -
Earnings per share of common stock - assuming dilution,
excluding pension mark-to-market and debt refinancing expenses $ 1.58 $ 6.10
(1) Utilizes weighted average shares of 780.8 million. Mark-to-market uses a
blended tax rate of 36.1%
(2) Utilizes weighted average shares of 789.3 million. Mark-to-market uses a
blended tax rate of 36.1%
We believe earnings per share, excluding pension mark-to-market and debt
refinancing expenses, is a measure that is useful to investors and management
in understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc
Calculation of SBG Segment Profit Margin Excluding Mergers and Acquisitions
(Unaudited)
(Dollars in millions)
Three Months Ended
September 30,
2016
Aerospace
Segment Profit excluding mergers and acquisitions $ 658
÷ Sales excluding mergers and acquisitions $ 3,559
Segment Profit Margin excluding mergers and acquisitions % 18.5%
Home and Building Technologies
Segment Profit excluding mergers and acquisitions $ 416
÷ Sales excluding mergers and acquisitions $ 2,384
Segment Profit Margin excluding mergers and acquisitions % 17.4%
Performance Materials and Technologies
Segment Profit excluding mergers and acquisitions $ 473
÷ Sales excluding mergers and acquisitions $ 2,195
Segment Profit Margin excluding mergers and acquisitions % 21.5%
Safety and Productivity Solutions
Segment Profit excluding mergers and acquisitions $ 166
÷ Sales excluding mergers and acquisitions $ 1,092
Segment Profit Margin excluding mergers and acquisitions % 15.2%
We believe these measures are useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc
Reconciliation of Core Organic Sales Growth (Unaudited)
Three Months Ended
September 30,
2016
Honeywell
Reported sales growth 2%
Less: Foreign currency translation, acquisitions, divestitures and other 5%
Less: Raw materials pricing in R&C -
Core organic sales growth (3%)
PMT
Reported sales growth 2%
Less: Foreign currency translation, acquisitions, divestitures and other 5%
Less: Raw materials pricing in R&C -
Core organic sales growth (3%)
Throughout this press release, core organic sales growth refers to reported
sales growth less the impacts from foreign currency translation, M&A and raw
materials pass-through pricing in the Resins & Chemicals business of PMT. The
raw materials pricing impact is excluded in instances where raw materials costs
are passed through to customers, which drives fluctuations in selling prices
not tied to volume growth.
We believe core organic sales growth is a measure that is useful to investors
and management in understanding our ongoing operations and in analysis of
ongoing operating trends.
END
(END) Dow Jones Newswires
October 21, 2016 06:53 ET (10:53 GMT)
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