Honeywell Beats
Guidance And Delivers 8% Reported Sales Growth And 29% Operating
Cash Flow Growth; Raises High End Of 2018 Earnings
Guidance(1) By 10 Cents
- Reported Earnings per Share of $1.68; EPS(2) of $2.12 (Excl. Separation Costs and Other Items),
Up 18%
- Organic Sales Up 6% Driven by Widespread Growth Across the
Business
- Free Cash Flow (Excl. Separation Cost Impacts) Up 42%,
Conversion(3) 108%
- Also Raising Full-Year Sales, Segment Margin, and Free Cash
Flow(4) Guidance
MORRIS PLAINS, N.J.,
July 20, 2018 /PRNewswire/
-- Honeywell (NYSE: HON) today announced financial
results for the second quarter of 2018 and raised its full-year
sales, segment margin, earnings per share1, and free
cash flow4 guidance.
"Honeywell delivered another outstanding quarter with continued
top-line growth, strong margin expansion, and double-digit earnings
per share and free cash flow growth. Organic sales grew 6 percent,
driven by continued strength in Aerospace; demand for Intelligrated
warehouse automation solutions; and growth in residential thermal
solutions, thermostats and ADI global distribution in our Homes
business. We also saw continued robust short-cycle demand for our
process automation solutions. The increased volumes, combined with
our operational excellence initiatives, drove 60 basis points of
segment margin expansion, above the high end of the guidance we
provided in April. Our operational performance resulted in earnings
per share2 (excluding separation costs and other items)
of $2.12, up 18 percent, exceeding
the high end of our guidance range," said Darius Adamczyk, Chairman and Chief Executive
Officer of Honeywell. "We generated approximately $1.7 billion of free cash flow (excluding
separation costs) in the quarter, up 42 percent, with
conversion3 of 108 percent, and we continued to put our
strong balance sheet to work by repurchasing about $800 million in Honeywell shares in the second
quarter. In the first half of the year, we repurchased
approximately $1.7 billion in
Honeywell shares.
"Given our strong second-quarter performance and confident
outlook, we are raising our 2018 guidance. For the full year, we
now expect organic sales growth to be 5 to 6 percent, segment
margin expansion to be 40 to 60 basis points, earnings per
share1 to be $8.05 to
$8.15, and free cash flow4
to be $5.6 to $6.2 billion," Adamczyk said.
"Our software and Connected offerings continue to gain traction.
Across our segments, Connected software sales have grown
double-digits year-to-date. The portfolio transformation activities
we announced last year are nearly complete, with the spin of our
Transportation Systems business, Garrett, expected to be complete
by the end of the third quarter, and the spin of our Homes business
on track for completion by the end of the year. Our long-cycle
orders and backlog grew 11 and 14 percent respectively, which
positions us well for the rest of 2018 and into 2019. We are
committed to delivering outstanding returns for our shareowners
over the long term," Adamczyk concluded.
A summary of the Company's full-year guidance changes can be
found in Table 1.
Honeywell will discuss the results during an investor conference
call today starting at 9:30 a.m. Eastern
Daylight Time.
Second Quarter Performance
Honeywell sales for the second quarter were up 8 percent on
a reported basis and up 6 percent on an organic basis. The
difference between reported and organic sales relates to the impact
of foreign currency translation. The second-quarter financial
results can be found in Tables 2 and 3.
Aerospace sales for the second quarter were up 8 percent
on an organic basis driven by growth in business aviation OE,
demand in the commercial aftermarket, strength in U.S. and
international defense, and demand for light vehicle gas and
commercial vehicle turbochargers in Transportation Systems. Segment
margin expanded 30 basis points to 22.6 percent, primarily driven
by volume, commercial excellence, and lower customer incentives,
partially offset by higher volumes of lower-margin OE
shipments.
Home and Building Technologies sales for the second
quarter were up 3 percent on an organic basis driven by continued
strength in residential thermal products and thermostats,
commercial fire and software, as well as global growth in the ADI
distribution business. Segment margin expanded 60 basis points to
16.8 percent, primarily driven by commercial excellence, the
benefits from previously funded and executed restructuring, and
higher sales volumes.
Performance Materials and Technologies sales for the
second quarter were up 3 percent on an organic basis driven by
strong backlog conversion and short-cycle demand in Process
Solutions, catalyst and engineering growth in UOP, and continued
demand for Solstice® low global warming materials.
Segment margin expanded 50 basis points to 22.1 percent, primarily
driven by commercial excellence, benefits from previously funded
and executed restructuring, and higher volumes, partially offset by
inflation.
Safety and Productivity Solutions sales for the second
quarter were up 11 percent on an organic basis driven by continued
double-digit sales growth in Intelligrated, strong demand for new
Mobility products, and higher volumes in Sensing and IoT. Segment
margin expanded 150 basis points to 16.5 percent, primarily driven
by higher sales volumes and commercial excellence.
To participate on the conference call, please dial (866)
548-4713 (domestic) or (323) 794-2093 (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 second quarter 2018 earnings call or provide the
conference code HON2Q18. The live webcast of the investor call as
well as related presentation materials will be available through
the "Investor Relations" section of the company's Website
(www.honeywell.com/investor). Investors can hear a replay of the
conference call from 1:30 p.m. EDT,
July 20, until 1:30 p.m. EDT, July
27, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 5576508.
TABLE 1: FULL-YEAR 2018
GUIDANCE5
|
Previous Guidance |
Current Guidance |
Sales |
$42.7B - $43.5B |
$43.1B - $43.6B |
Organic Growth |
3% - 5% |
5% - 6% |
Segment Margin |
19.3% - 19.6% |
19.4% - 19.6% |
Expansion |
Up 30 - 60 bps |
Up 40 - 60 bps |
Earnings Per Share |
$7.85 - $8.05 |
$8.05 - $8.15 |
Earnings Growth |
10% - 13% |
13% - 15% |
Free Cash Flow |
$5.3B - $5.9B |
$5.6B - $6.2B |
Growth |
7% - 20% |
13% - 26% |
TABLE 2: SUMMARY OF FINANCIAL RESULTS
– TOTAL HONEYWELL
|
2Q 2017 |
2Q 2018 |
Change |
Sales |
10,078 |
10,919 |
8% |
Organic |
|
|
6% |
Segment Margin |
19.0% |
19.6% |
60 bps |
Operating Income Margin |
15.9% |
16.3% |
40 bps |
Earnings Per Share |
|
|
|
Reported |
$1.80 |
$1.68 |
(7%) |
Excluding Separation Costs of $346M and $12M
Adjustment to the 4Q17 U.S. Tax Legislation Charge |
$1.80 |
$2.12 |
18% |
Cash Flow from Operations |
1,447 |
1,861 |
29% |
Free Cash Flow (Excluding Separation Cost
Impacts of $67M) |
1,214 |
1,729 |
42% |
|
|
|
|
TABLE 3: SUMMARY OF FINANCIAL RESULTS
– SEGMENTS
|
|
|
|
|
|
|
|
AEROSPACE |
2Q 2017 |
2Q 2018 |
Change |
Sales |
3,674 |
4,058 |
10% |
Organic |
|
|
8% |
Segment Profit |
819 |
918 |
12% |
Segment Margin |
22.3% |
22.6% |
30 bps |
|
|
|
|
|
|
|
|
HOME AND BUILDING TECHNOLOGIES |
|
|
|
|
|
|
|
Sales |
2,414 |
2,546 |
5% |
Organic |
|
|
3% |
Segment Profit |
391 |
427 |
9% |
Segment Margin |
16.2% |
16.8% |
60 bps |
|
|
|
|
|
|
|
|
PERFORMANCE MATERIALS AND TECHNOLOGIES |
|
|
|
Sales |
2,561 |
2,698 |
5% |
Organic |
|
|
3% |
Segment Profit |
553 |
597 |
8% |
Segment Margin |
21.6% |
22.1% |
50 bps |
|
|
|
|
|
|
|
|
|
|
|
|
SAFETY AND PRODUCTIVITY SOLUTIONS |
|
|
|
Sales |
1,429 |
1,617 |
13% |
Organic |
|
|
11% |
Segment Profit |
214 |
267 |
25% |
Segment Margin |
15.0% |
16.5% |
150 bps |
|
|
|
|
|
|
|
|
Honeywell (http://www.honeywell.com/) is a Fortune 100
software-industrial company that delivers industry specific
solutions that include aerospace and automotive products and
services; control technologies for buildings, homes, and industry;
and performance materials globally. Our technologies help
everything from aircraft, cars, homes and buildings, manufacturing
plants, supply chains, and workers become more connected to make
our world smarter, safer, and more sustainable. For more news
and information on Honeywell, please visit
www.honeywell.com/newsroom.
This release contains certain statements that may be deemed
"forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934. All statements, other than
statements of historical fact, that address activities, events or
developments that we or our management intends, expects, projects,
believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are based upon certain
assumptions and assessments made by our management in light of
their experience and their perception of historical trends, current
economic and industry conditions, expected future developments and
other factors they believe to be appropriate. The forward-looking
statements included in this release are also subject to a number of
material risks and uncertainties, including but not limited to
economic, competitive, governmental, and technological factors
affecting our operations, markets, products, services and prices,
as well as the ability to effect the separations. Such
forward-looking statements are not guarantees of future
performance, and actual results, developments and business
decisions may differ from those envisaged by such forward-looking
statements, including with respect to any changes in or abandonment
of the proposed separations. We identify the principal risks and
uncertainties that affect our performance in our Form 10-K and
other filings with the Securities and Exchange Commission.
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, acquisitions and divestitures for the first
12 months following transaction date, and impacts from adoption of
the new accounting guidance on revenue from contracts with
customers that arise solely due to non-comparable accounting
treatment of contracts existing in the prior period; 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 the Homes and
Transportation Systems businesses, if and as noted in the release;
free cash flow conversion, which we define as free cash flow
divided by net income attributable to Honeywell, excluding pension
mark-to-market expenses, separation costs related to the spin-offs,
the 4Q17 U.S. tax legislation charge, and adjustments to such
charge, if and as noted in the release; and earnings per share,
which we adjust to exclude pension mark-to-market expenses, as well
as for other components, such as separation costs related to the
spin-offs, the 4Q17 U.S. tax legislation charge, and adjustments to
such charge, if and as noted in the release. Other than references
to reported earnings per share, all references to earnings per
share in this release are so adjusted. The respective tax rates
applied when adjusting earnings per share for these items are
identified in the release or in the reconciliations presented in
the Appendix. Management believes that, when considered together
with reported amounts, these measures are useful to investors and
management in understanding our ongoing operations and in the
analysis of ongoing operating trends. These metrics should be
considered in addition to, and not as replacements for, the most
comparable GAAP measure. Refer to the Appendix attached to this
release for reconciliations of non-GAAP financial measures to the
most directly comparable GAAP measures.
____________________
1 EPS guidance excludes pension mark-to-market,
separation costs related to the spin-offs of the Homes and
Transportation Systems businesses, and adjustments to the 4Q17 U.S.
tax legislation charge. We do not publish forward-looking EPS
guidance on a GAAP basis as management cannot reliably predict or
estimate, without unreasonable effort, pension mark-to-market
expense as it is dependent on macroeconomic factors, such as
changing interest rates and the return generated on invested
pension plan assets, separation costs given the inherent
uncertainty of any such estimates, and any adjustments to the 4Q17
U.S. tax legislation charge as the amounts are provisional and
subject to change.
2 EPS excludes separation costs related to the spin-offs
and adjustments to the 4Q17 U.S. tax legislation charge.
3 Free cash flow conversion excludes impacts from
separation costs related to the spin-offs and adjustments to the
4Q17 U.S. tax legislation charge.
4 Free cash flow guidance excludes impacts from
separation costs related to the spin-offs.
5 Guidance for EPS and EPS V% excludes pension
mark-to-market, separation costs related to the spin-offs of the
Homes and Transportation Systems businesses, the 4Q17 U.S. tax
legislation charge and adjustments to such charge; guidance for
free cash flow and free cash flow V% excludes impacts from
separation costs related to the spin-offs.
Contacts: |
|
|
|
Media |
Investor Relations |
Scott Sayres |
Mark Macaluso |
(480) 257-8921 |
(973) 455-2222 |
scott.sayres@honeywell.com |
mark.macaluso@honeywell.com |
Honeywell International
Inc. |
Consolidated Statement
of Operations (Unaudited) |
(Dollars in millions,
except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months
Ended |
|
|
June 30, |
|
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Product sales |
$
8,703 |
|
$ 8,079 |
|
$ 16,937 |
|
$ 15,619 |
Service sales |
2,216 |
|
1,999 |
|
4,374 |
|
3,951 |
Net sales |
10,919 |
|
10,078 |
|
21,311 |
|
19,570 |
|
|
|
|
|
|
|
|
|
Costs, expenses and other |
|
|
|
|
|
|
|
Cost of products
sold (A) |
6,202 |
|
5,807 |
|
12,107 |
|
11,188 |
Cost of services
sold (A) |
1,411 |
|
1,217 |
|
2,699 |
|
2,365 |
|
|
7,613 |
|
7,024 |
|
14,806 |
|
13,553 |
Selling, general
and administrative expenses (A) |
1,528 |
|
1,456 |
|
3,003 |
|
2,878 |
Other (income)
expense |
(316) |
|
(259) |
|
(584) |
|
(517) |
Interest and other
financial charges |
95 |
|
79 |
|
178 |
|
154 |
|
|
8,920 |
|
8,300 |
|
17,403 |
|
16,068 |
|
|
|
|
|
|
|
|
|
Income before taxes |
1,999 |
|
1,778 |
|
3,908 |
|
3,502 |
Tax expense |
719 |
|
378 |
|
1,177 |
|
770 |
|
|
|
|
|
|
|
|
|
Net income |
1,280 |
|
1,400 |
|
2,731 |
|
2,732 |
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the
noncontrolling interest |
13 |
|
8 |
|
26 |
|
14 |
|
|
|
|
|
|
|
|
|
Net income attributable to
Honeywell |
$
1,267 |
|
$ 1,392 |
|
$ 2,705 |
|
$ 2,718 |
|
|
|
|
|
|
|
|
|
Earnings per share of common stock -
basic |
$
1.70 |
|
$ 1.82 |
|
$
3.62 |
|
$
3.56 |
|
|
|
|
|
|
|
|
|
Earnings per share of common stock -
assuming dilution |
$
1.68 |
|
$ 1.80 |
|
$
3.57 |
|
$
3.51 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - basic |
745.5 |
|
764.2 |
|
748.0 |
|
763.6 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - assuming dilution |
755.0 |
|
774.0 |
|
758.0 |
|
774.0 |
|
|
|
|
|
|
|
|
|
(A) Cost of products and services sold
and selling, general and administrative expenses include amounts
for repositioning and other charges, the service cost component of
pension and other postretirement (income) expense, and stock
compensation expense. |
Honeywell International
Inc. |
Segment Data
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
Net Sales |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Aerospace |
$
4,058 |
|
$
3,674 |
|
$
8,035 |
|
$
7,220 |
|
|
|
|
|
|
|
|
Home and Building Technologies |
2,546 |
|
2,414 |
|
4,979 |
|
4,683 |
|
|
|
|
|
|
|
|
Performance Materials and Technologies |
2,698 |
|
2,561 |
|
5,232 |
|
4,914 |
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
1,617 |
|
1,429 |
|
3,065 |
|
2,753 |
|
|
|
|
|
|
|
|
Total |
$ 10,919 |
|
$ 10,078 |
|
$ 21,311 |
|
$ 19,570 |
|
|
|
|
|
|
|
|
Reconciliation of
Segment Profit to Income Before Taxes |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
Segment Profit |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Aerospace |
$
918 |
|
$
819 |
|
$
1,811 |
|
$
1,615 |
|
|
|
|
|
|
|
|
Home and Building Technologies |
427 |
|
391 |
|
843 |
|
768 |
|
|
|
|
|
|
|
|
Performance Materials and Technologies |
597 |
|
553 |
|
1,116 |
|
1,036 |
|
|
|
|
|
|
|
|
Safety and Productivity Solutions |
267 |
|
214 |
|
498 |
|
408 |
|
|
|
|
|
|
|
|
Corporate |
(64) |
|
(67) |
|
(128) |
|
(128) |
|
|
|
|
|
|
|
|
Total segment profit |
2,145 |
|
1,910 |
|
4,140 |
|
3,699 |
|
|
|
|
|
|
|
|
Interest and other financial charges |
(95) |
|
(79) |
|
(178) |
|
(154) |
Stock compensation expense (A) |
(38) |
|
(44) |
|
(90) |
|
(94) |
Pension ongoing income (B) |
250 |
|
184 |
|
498 |
|
363 |
Other postretirement income (B) |
6 |
|
6 |
|
12 |
|
10 |
Repositioning and other charges (C,D) |
(265) |
|
(224) |
|
(458) |
|
(353) |
Other (E) |
(4) |
|
25 |
|
(16) |
|
31 |
|
|
|
|
|
|
|
|
Income before taxes |
$
1,999 |
|
$
1,778 |
|
$
3,908 |
|
$
3,502 |
|
|
|
|
|
|
|
|
(A) |
Amounts included in Selling, general and
administrative expenses. |
(B) |
Amounts included in Cost of products and services
sold and Selling, general and administrative expenses (service
costs) and Other income/expense (non-service cost components). |
(C) |
Amounts included in Cost of products and services
sold, Selling, general and administrative expenses, and Other
income/expense. |
(D) |
Includes repositioning, asbestos, and
environmental expenses. |
(E) |
Amounts include the other components of Other
income/expense not included within other categories in this
reconciliation. Equity income (loss) of affiliated companies is
included in segment profit. |
Honeywell International
Inc. |
Consolidated Balance
Sheet (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
|
$
8,082 |
|
$
7,059 |
Short-term
investments |
|
1,768 |
|
3,758 |
Accounts receivable
- net |
|
8,600 |
|
8,866 |
Inventories |
|
4,792 |
|
4,613 |
Other current
assets |
|
1,537 |
|
1,706 |
|
Total current assets |
|
24,779 |
|
26,002 |
|
|
|
|
|
|
Investments and long-term
receivables |
|
897 |
|
667 |
Property, plant and equipment -
net |
|
5,968 |
|
5,926 |
Goodwill |
|
18,137 |
|
18,277 |
Other intangible assets - net |
|
4,261 |
|
4,496 |
Insurance recoveries for asbestos
related liabilities |
|
409 |
|
411 |
Deferred income taxes |
|
355 |
|
236 |
Other assets |
|
5,054 |
|
3,372 |
|
|
|
|
|
|
|
Total assets |
|
$ 59,860 |
|
$ 59,387 |
|
|
|
|
|
|
LIABILITIES AND SHAREOWNERS'
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts
payable |
|
$
6,808 |
|
$
6,584 |
Commercial paper
and other short-term borrowings |
|
4,447 |
|
3,958 |
Current maturities
of long-term debt |
|
133 |
|
1,351 |
Accrued
liabilities |
|
6,630 |
|
6,968 |
|
Total current
liabilities |
|
18,018 |
|
18,861 |
|
|
|
|
|
|
Long-term debt |
|
12,504 |
|
12,573 |
Deferred income taxes |
|
2,751 |
|
2,894 |
Postretirement benefit obligations
other than pensions |
|
497 |
|
512 |
Asbestos related liabilities |
|
1,178 |
|
1,173 |
Other liabilities |
|
7,134 |
|
5,930 |
Redeemable noncontrolling
interest |
|
5 |
|
5 |
Shareowners' equity |
|
17,773 |
|
17,439 |
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interest and shareowners' equity |
|
$ 59,860 |
|
$ 59,387 |
Honeywell International
Inc. |
Consolidated
Statement of Cash Flows (Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ 1,280 |
|
$ 1,400 |
|
$ 2,731 |
|
$ 2,732 |
Less: Net income attributable
to the noncontrolling interest |
|
13 |
|
8 |
|
26 |
|
14 |
Net income attributable to
Honeywell |
|
1,267 |
|
1,392 |
|
2,705 |
|
2,718 |
Adjustments to reconcile net
income attributable to Honeywell to net |
|
|
|
|
|
|
|
|
cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
193 |
|
184 |
|
372 |
|
354 |
Amortization |
|
95 |
|
92 |
|
204 |
|
193 |
Repositioning and other charges |
|
265 |
|
224 |
|
458 |
|
353 |
Net
payments for repositioning and other charges |
|
(187) |
|
(127) |
|
(328) |
|
(264) |
Pension
and other postretirement income |
|
(256) |
|
(190) |
|
(510) |
|
(373) |
Pension
and other postretirement benefit payments |
|
(8) |
|
(23) |
|
(44) |
|
(47) |
Stock
compensation expense |
|
38 |
|
44 |
|
90 |
|
94 |
Deferred income taxes |
|
68 |
|
(50) |
|
114 |
|
(92) |
Other |
|
76 |
|
(22) |
|
78 |
|
(8) |
Accounts receivable |
|
158 |
|
(299) |
|
97 |
|
(276) |
Inventories |
|
(26) |
|
(12) |
|
(189) |
|
(298) |
Other
current assets |
|
217 |
|
22 |
|
174 |
|
(3) |
Accounts payable |
|
167 |
|
199 |
|
224 |
|
314 |
Accrued liabilities |
|
(206) |
|
13 |
|
(448) |
|
(278) |
Net cash provided by operating activities |
|
1,861 |
|
1,447 |
|
2,997 |
|
2,387 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Expenditures for property,
plant and equipment |
|
(199) |
|
(233) |
|
(339) |
|
(401) |
Proceeds from disposals of
property, plant and equipment |
|
1 |
|
1 |
|
3 |
|
25 |
Increase in investments |
|
(1,204) |
|
(1,073) |
|
(1,787) |
|
(2,329) |
Decrease in investments |
|
1,670 |
|
1,016 |
|
3,508 |
|
1,841 |
Cash paid for acquisitions, net
of cash acquired |
|
- |
|
(15) |
|
- |
|
(15) |
Other |
|
343 |
|
(84) |
|
220 |
|
(113) |
Net cash provided by (used for) investing
activities |
|
611 |
|
(388) |
|
1,605 |
|
(992) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of
commercial paper and other short-term borrowings |
|
6,073 |
|
2,568 |
|
12,749 |
|
5,036 |
Payments of commercial paper
and other short-term borrowings |
|
(6,823) |
|
(2,368) |
|
(12,152) |
|
(4,835) |
Proceeds from issuance of
common stock |
|
67 |
|
155 |
|
127 |
|
376 |
Proceeds from issuance of
long-term debt |
|
2 |
|
5 |
|
5 |
|
16 |
Payments of long-term debt |
|
(31) |
|
(25) |
|
(1,277) |
|
(30) |
Repurchases of common
stock |
|
(764) |
|
(682) |
|
(1,704) |
|
(992) |
Cash dividends paid |
|
(560) |
|
(546) |
|
(1,116) |
|
(1,049) |
Other |
|
(2) |
|
(72) |
|
(118) |
|
(105) |
Net cash used for by financing activities |
|
(2,038) |
|
(965) |
|
(3,486) |
|
(1,583) |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash
and cash equivalents |
|
(249) |
|
73 |
|
(93) |
|
222 |
Net increase in cash and cash equivalents |
|
185 |
|
167 |
|
1,023 |
|
34 |
Cash and cash equivalents at beginning of
period |
|
7,897 |
|
7,710 |
|
7,059 |
|
7,843 |
Cash and cash equivalents at end of period |
|
$ 8,082 |
|
$ 7,877 |
|
$ 8,082 |
|
$ 7,877 |
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 |
|
Six Months
Ended |
|
|
June 30, |
|
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ 2,145 |
|
$ 1,910 |
|
$
4,140 |
|
$
3,699 |
|
|
|
|
|
|
|
|
|
Stock compensation expense (A) |
|
(38) |
|
(44) |
|
(90) |
|
(94) |
Repositioning and other (B,C) |
|
(278) |
|
(209) |
|
(441) |
|
(344) |
Pension and other postretirement service costs
(C) |
|
(51) |
|
(59) |
|
(107) |
|
(122) |
Operating Income |
|
$ 1,778 |
|
$ 1,598 |
|
$
3,502 |
|
$
3,139 |
|
|
|
|
|
|
|
|
|
Segment Profit |
|
$ 2,145 |
|
$ 1,910 |
|
$
4,140 |
|
$
3,699 |
÷ Net Sales |
|
$ 10,919 |
|
$ 10,078 |
|
$ 21,311 |
|
$ 19,570 |
Segment Profit Margin % |
|
19.6% |
|
19.0% |
|
19.4% |
|
18.9% |
|
|
|
|
|
|
|
|
|
Operating Income |
|
$ 1,778 |
|
$ 1,598 |
|
$
3,502 |
|
$
3,139 |
÷ Net Sales |
|
$ 10,919 |
|
$ 10,078 |
|
$ 21,311 |
|
$ 19,570 |
Operating Income Margin % |
|
16.3% |
|
15.9% |
|
16.4% |
|
16.0% |
|
|
|
|
|
|
|
|
|
(A) Included in Selling, general and
administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and
equity income adjustment.
(C) Included in Cost of products and services sold, Selling,
general and administrative expenses and Other income/expense. |
|
We define segment profit as operating
income, excluding stock compensation expense, pension and other
postretirement service costs, and repositioning and other
charges. We believe these measures are useful to investors
and management in understanding our ongoing operations and in
analysis of ongoing operating trends. |
|
|
|
|
|
|
|
|
|
A quantitative reconciliation of
segment profit, on an overall Honeywell basis, to operating income
has not been provided for all forward-looking measures of segment
profit and segment margin included herewithin. Management
cannot reliably predict or estimate, without unreasonable effort,
the impact and timing on future operating results arising from
items excluded from segment profit. The information that is
unavailable to provide a quantitative reconciliation could have a
significant impact on our reported financial results. To the
extent quantitative information becomes available without
unreasonable effort in the future, and closer to the period to
which the forward-looking measures pertain, a reconciliation of
segment profit to operating income will be included within future
filings. |
Honeywell International
Inc. |
Reconciliation of
Organic Sales % Change (Unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
June 30, 2018 |
Honeywell |
|
|
Reported sales % change |
|
8% |
Less: Foreign currency translation |
|
2% |
Less: Acquisitions, divestitures and other,
net |
|
- |
Organic sales % change |
|
6% |
|
|
|
Aerospace |
|
|
Reported sales % change |
|
10% |
Less: Foreign currency translation |
|
1% |
Less: Acquisitions, divestitures and other,
net |
|
1% |
Organic sales % change |
|
8% |
|
|
|
Home and Building Technologies |
|
|
Reported sales % change |
|
5% |
Less: Foreign currency translation |
|
2% |
Less: Acquisitions, divestitures and other,
net |
|
- |
Organic sales % change |
|
3% |
|
|
|
Performance Materials and Technologies |
|
|
Reported sales % change |
|
5% |
Less: Foreign currency translation |
|
2% |
Less: Acquisitions, divestitures and other,
net |
|
- |
Organic sales % change |
|
3% |
|
|
|
Safety and Productivity Solutions |
|
|
Reported sales % change |
|
13% |
Less: Foreign currency translation |
|
2% |
Less: Acquisitions, divestitures and other,
net |
|
- |
Organic sales % change |
|
11% |
|
|
|
We define organic sales percent as the
year-over-year change in reported sales relative to the comparable
period, excluding the impact on sales from foreign currency
translation, acquisitions, net of divestitures, and non-comparable
impacts from adoption of the new revenue recognition
standard. We believe this measure is useful to investors and
management in understanding our ongoing operations and in analysis
of ongoing operating trends. |
|
|
|
|
|
|
A quantitative reconciliation of
reported sales percent change to organic sales percent change has
not been provided for forward-looking measures of organic sales
percent change because management cannot reliably predict or
estimate, without unreasonable effort, the fluctuations in global
currency markets that impact foreign currency translation, nor is
it reasonable for management to predict the timing, occurrence and
impact of acquisition and divestiture transactions, all of which
could significantly impact our reported sales percent change. |
Honeywell International
Inc. |
Reconciliation of Cash
Provided by Operating Activities to Free Cash Flow, Excluding
Separation Cost Payments and Calculation of Free Cash Flow
Conversion, Excluding Separation Costs and Adjustments to 4Q17 U.S.
Tax Legislation Charge
(Unaudited) |
(Dollars in
millions) |
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
June 30, 2018 |
|
June 30, 2017 |
|
|
|
|
Cash provided by operating activities |
$
1,861 |
|
$
1,447 |
Expenditures for property, plant and
equipment |
(199) |
|
(233) |
Free cash flow |
1,662 |
|
1,214 |
Separation cost payments |
67 |
|
- |
Free cash flow, excluding separation cost
payments |
$
1,729 |
|
$
1,214 |
|
|
|
|
Net income attributable to Honeywell |
$
1,267 |
|
$
1,392 |
Separation costs, net of tax |
346 |
|
- |
Adjustments to 4Q17 U.S tax legislation
charge |
(12) |
|
- |
|
Net income attributable to Honeywell, excluding
separation costs and adjustments to 4Q17 U.S. tax legislation
charge |
$
1,601 |
|
$
1,392 |
|
|
|
|
Cash provided by operating activities |
$
1,861 |
|
$
1,447 |
÷ Net income attributable to Honeywell |
$
1,267 |
|
$
1,392 |
Operating cash flow conversion |
147% |
|
104% |
|
|
|
|
Free cash flow, excluding separation cost
payments |
$
1,729 |
|
$
1,214 |
|
|
|
|
÷ Net income attributable to Honeywell, excluding
separation costs and adjustments to 4Q17 U.S. tax legislation
charge |
$
1,601 |
|
$
1,392 |
Free cash flow conversion %, excluding separation
costs and adjustments to 4Q17 U.S tax legislation charge |
108% |
|
87% |
|
|
|
|
|
|
|
|
We define free cash flow as cash
provided by operating activities less cash expenditures for
property, plant and equipment. |
|
|
|
|
We believe that this metric is useful
to investors and management as a measure of cash generated by
business operations that will be used to repay scheduled debt
maturities and can be used to invest in future growth through new
business development activities or acquisitions, pay dividends,
repurchase stock or repay debt obligations prior to their
maturities. This metric can also be used to evaluate our ability to
generate cash flow from business operations and the impact that
this cash flow has on our liquidity. |
Honeywell International
Inc. |
Reconciliation of
Earnings per Share to Earnings per Share, Excluding Separation
Costs and Adjustments to 4Q17 U.S. Tax Legislation Charge
(Unaudited) |
|
|
Three Months Ended |
|
June 30, |
|
2018 |
|
2017 |
|
|
|
|
Earnings per share of common stock - assuming
dilution (1) |
$
1.68 |
|
$
1.80 |
Separation costs (2) |
0.46 |
|
- |
Adjustments to 4Q17 U.S. tax legislation
charge |
(0.02) |
|
- |
Earnings per share of common stock - assuming
dilution, excluding separation costs and adjustments to 4Q17 U.S.
tax legislation charge |
$
2.12 |
|
$
1.80 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) For the three months ended June
30, 2018 and 2017, utilizes weighted average shares of
approximately 755 million and 774 million. |
|
|
|
|
(2) Separation costs of $354 million
($346 million net of tax) includes $291 million of tax costs we
incurred in the restructuring of the ownership of various legal
entities in anticipation of the spin-off transactions ("frictional
tax costs") and $63 million ($55 million net of tax)of other
separation costs. |
|
|
|
|
We believe earnings per share,
excluding separation costs and adjustments to 4Q17 U.S. tax
legislation charge is a measure that is useful to investors and
management in understanding our ongoing operations and in analysis
of ongoing operating trends. |
Honeywell International
Inc. |
Reconciliation of
Earnings per Share to Earnings per Share at 24% Effective Tax Rate,
Excluding Separation Costs and Adjustments to 4Q17 U.S. Tax
Legislation Charge (Unaudited) |
|
|
Three Months Ended |
|
June 30, 2018 |
Earnings per share of common stock - assuming
dilution (1) |
$
1.68 |
Separation costs (2) |
0.46 |
Adjustments to 4Q17 U.S. tax legislation
charge |
(0.02) |
Earnings per share of common stock - assuming
dilution, excluding separation costs and adjustments to 4Q17 U.S.
tax legislation charge |
2.12 |
Income tax impact at 24% effective tax rate
(3) |
(0.06) |
Earnings per share of common stock - assuming
dilution at 24% effective tax rate, excluding separation costs and
adjustments to 4Q17 U.S. tax legislation charge |
$
2.06 |
|
|
|
|
|
|
(1) Utilizes weighted average shares
of approximately 755 million. |
|
|
(2) Separation costs of $354 million
($346 million net of tax) includes $291 million of frictional tax
costs and $63 million ($55 million net of tax)of other separation
costs. |
|
|
(3) Income tax impact at 24% effective
tax rate, approximately $47 million, is provided to align our
effective tax rate with previously issued guidance. |
|
|
We believe earnings per share at 24%
effective tax rate excluding separation costs and adjustments to
4Q17 U.S. tax legislation charge is a measure that is useful to
investors and management in understanding our ongoing operations
and in analysis of ongoing operating trends. |
Honeywell International
Inc. |
Reconciliation of
Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income Margins (Unaudited) |
(Dollars in
millions) |
|
|
|
Twelve Months Ended
December 31, 2017 |
|
|
Segment Profit |
$
7,690 |
|
|
Stock compensation expense (A) |
(176) |
Repositioning and other (B,C) |
(1,010) |
Pension and other postretirement service costs
(C) |
(247) |
Operating Income |
$
6,257 |
|
|
Segment Profit |
$
7,690 |
÷ Net Sales |
$
40,534 |
Segment Profit Margin % |
19.0% |
|
|
Operating Income |
$
6,257 |
÷ Net Sales |
$
40,534 |
Operating Income Margin % |
15.4% |
|
|
(A) Included in Selling, general and
administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and
equity income adjustment.
(C) Included in Cost of products and services sold 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, particularly pension
mark-to-market expense as it is dependent on macroeconomic factors,
such as interest rates and the return generated on invested pension
plan assets. The information that is unavailable to provide a
quantitative reconciliation could have a significant impact on our
reported financial results. To the extent quantitative
information becomes available without unreasonable effort in the
future, and closer to the period to which the forward-looking
measures pertain, a reconciliation of segment profit to operating
income will be included within future filings. |
Honeywell International
Inc. |
Reconciliation of
Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Expense, Separation Costs and Adjustments to 4Q17
U.S. Tax Legislation Charge (Unaudited) |
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2017 (1) |
|
2018 |
|
|
|
|
Earnings per share of common stock - assuming
dilution (EPS) |
$
2.14 |
|
TBD |
Pension mark-to-market expense |
0.09 |
|
TBD |
Separation costs |
0.02 |
|
TBD |
Adjustments to 4Q17 U.S. tax legislation
charge |
4.86 |
|
TBD |
|
EPS, excluding pension mark-to-market expense,
separation costs, and adjustments to 4Q17 U.S. tax legislation
charge |
$
7.11 |
|
$8.05 - $8.15 |
|
|
|
|
|
|
|
|
(1) Utilizes weighted average shares
of approximately 772.1 million for full year. Pension
mark-to-market expense uses a blended tax rate of 23%. |
|
|
|
|
We believe earnings per share,
excluding pension mark-to-market expense, separation costs and
adjustments to 4Q17 U.S. tax legislation charge is a measure that
is useful to investors and management in understanding our ongoing
operations and in analysis of ongoing operating trends. For
forward looking information, management cannot reliably predict or
estimate, without unreasonable effort, the pension mark-to-market
expense as it is dependent on macroeconomic factors, such as
interest rates and the return generated on invested pension plan
assets, the separation costs given the inherent uncertainty in the
estimates, and any adjustments to the 4Q17 U.S. tax legislation
charge as the amounts are provisional. We therefore do not
include an estimate for the pension mark-to-market expense,
separation costs, or adjustments to 4Q17 U.S. tax legislation
charge in this reconciliation. Based on economic and industry
conditions, future developments and other relevant factors, these
assumptions are subject to change. |
Honeywell International
Inc.
Reconciliation of Cash Provided by Operating Activities to Free
Cash Flow, Excluding Separation Cost Payments (Unaudited) |
|
|
|
|
Twelve Months Ended |
Twelve Months Ended |
|
December 31, 2017 ($M) |
December 31, 2018 ($B) |
|
|
|
Cash provided by operating activities |
$
5,966 |
TBD |
Expenditures for property, plant and
equipment |
(1,031) |
~(0.9) |
Free cash flow |
4,935 |
TBD |
Separation cost payments |
- |
TBD |
Free cash flow, excluding separation cost
payments |
$
4,935 |
~$5.6 - $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, management cannot reliably predict or estimate,
without unreasonable effort, the separation cost payments given the
inherent uncertainty of the estimates. We therefore do not
include an estimate for the separation cost payments in this
reconciliation. |