EX-99 2 c75343_ex99.htm

Exhibit 99

 

 

News Release

 

Contacts:

Media

Robert C. Ferris

(973) 455-3388

rob.ferris@honeywell.com

 

Investor Relations

Elena Doom

(973) 455-2222

elena.doom@honeywell.com

 

 

HONEYWELL REPORTS THIRD QUARTER 2013

SALES OF $9.6 BILLION; EPS OF $1.24 PER SHARE

 

·EPS Up 3% Year-Over-Year Reported, Up 10% Using Normalized Tax Rate
·Continued Proactive Funding Of Repositioning To Align With Global Growth Outlook
·Increasing EPS Guidance To $4.90 - $4.95, From $4.85 - $4.95

 

MORRIS TOWNSHIP, N.J., October 18, 2013 -- Honeywell (NYSE: HON) today announced its results for the third quarter of 2013:

 

Total Honeywell      
($ Millions, except Earnings Per Share) 3Q 2012 3Q 2013 Change
Sales         9,342          9,647 3%
       
Segment Margin 15.8% 16.7% 90 bps
Operating Income Margin 13.9% 15.2% 130 bps
       
Earnings Per Share (EPS) $1.20 $1.24 3%
Earnings Per Share (At 26.5% Tax Rate) $1.14 $1.25 10%
       
Cash Flow from Operations 999 1,070 7%
Free Cash Flow * 1,021 937 (8%)
       

* Free Cash Flow (cash flow from operations less capital expenditures) prior to any NARCO Trust establishment payments and cash pension contributions

“Honeywell executed well in the quarter, building on the momentum we’ve seen throughout 2013,” said Honeywell Chairman and CEO Dave Cote.  “We delivered another quarter of double digit EPS growth (when normalized for tax). Despite lower than expected sales in the quarter, primarily related to the delay in closing Intermec and lower Defense & Space sales, strong execution across the portfolio helped drive earnings at the high-end of our guidance range.  Our short-cycle businesses, particularly Energy, Safety and Security, and Turbo Technologies, are benefitting from improving end markets, new product introductions, and geographic expansion, while our long-cycle businesses are maintaining a robust backlog, driven by favorable macro trends and strong win rates.  Productivity was impressive across the portfolio, enabling further segment margin expansion in all four businesses and continued proactive funding of new

 

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Q3’13 Results - 2

 

repositioning projects. As a result of the year-to-date performance, we are raising the low-end of our 2013 EPS outlook by $0.05 to $4.90-4.95, which is the high-end of the initial guidance range we provided almost a year ago.  Looking ahead to 2014, we are planning for a continued slow growth macro environment, but see a path to strong earnings growth driven by our relentless seed planting in new products and technologies, continued penetration of high growth regions, and growing traction on key process initiatives.”

Third quarter 2013 EPS reflect a 27.2% effective tax rate compared to 22.7% last year. Using the 2012 actual / 2013 expected full-year tax rate of 26.5% before any pension mark-to-market adjustment, EPS growth was 10%.

The company is updating its full-year 2013 guidance and now expects:

 

Full-Year Guidance      
  2013 2013 Change
  Prior Guidance Revised Guidance vs. 2012  
Sales  $38.9 - $39.3B  $38.8 - $39.0B 3 - 4%
       
Segment Margin 16.0 - 16.2% 16.2 - 16.3% 60 - 70 bps
Operating Income Margin1 14.5 - 14.7% 14.7 - 14.8% 110 - 120 bps
       
Earnings Per Share1 $4.85 - $4.95 $4.90 - $4.95 9 - 11%
       
Free Cash Flow2  ~$3.7B  ~$3.7B ~ Flat
1.Proforma, V% / BPS exclude any pension mark-to-market adjustment
2.Free Cash Flow (cash flow from operations less capital expenditures) prior to any NARCO Trust establishment payments and cash pension contributions

 

Third Quarter Segment Performance

 

Aerospace      
($ Millions) 3Q 2012 3Q 2013 % Change
Sales          3,043 2,973 (2%)
Segment Profit 582 602 3%
Segment Margin 19.1% 20.2% 110 bps

 

·Sales were down (2%) compared with the third quarter of 2012 driven by an (11%) decline in Defense & Space sales as a result of planned ramp downs and program delays, as well as supply chain constraints, partially offset by Commercial growth.  Commercial OE sales were up 3% in the quarter driven by continued strong OE build rates and favorable platform mix. Commercial Aftermarket growth of 5% was driven by improved flight hour growth and strong RMU (Repairs, Modifications, and Upgrades) sales.
·Segment profit was up 3%, and segment margins expanded 110 bps to 20.2%, driven by commercial growth, including productivity net of inflation and commercial excellence, partially offset by lower Defense & Space volume.

 

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Q3’13 Results - 3

 

Automation and Control Solutions      
($ Millions) 3Q 2012 3Q 2013 % Change
Sales          3,958          4,129 4%
Segment Profit 571 631 11%
Segment Margin 14.4% 15.3% 90 bps

 

·Sales were up 4% reported, 3% organic, compared with the third quarter of 2012, primarily driven by growth in Energy, Safety, and Security due to strong residential end markets, improving commercial retrofit activity, new product introductions, and the favorable impact of acquisitions net of divestitures.
· Segment profit was up 11% and segment margins expanded 90 bps to 15.3% driven by strong sales conversion, commercial excellence, and productivity net of inflation.

 

Performance Materials and Technologies

      
($ Millions) 3Q 2012 3Q 2013 % Change
Sales          1,478 1,629 10%
Segment Profit 275 305 11%
Segment Margin 18.6% 18.7% 10 bps

 

·Sales were up 10% reported, but down (1%) organic, compared with the third quarter of 2012, driven by the favorable impact of the Thomas Russell acquisition, partially offset by challenging global market conditions in Advanced Materials.
·Segment profit was up 11% and segment margins increased 10 bps to 18.7%, driven by the favorable margin impact of higher UOP licensing and productivity partially offset by inflation and continued investments for growth.

 

Transportation Systems      
($ Millions) 3Q 2012 3Q 2013 % Change
Sales             863 916  6%
Segment Profit 104 128 23%
Segment Margin 12.1% 14.0% 190 bps

 

·Sales were up 6% reported, 5% organic, compared with the third quarter of 2012, driven by strong growth from new platform launches and higher turbo gas penetration in all regions, partially offset by slightly lower European light vehicle production and lower off-highway sales in the U.S.
·Segment profit was up 23% and segment margins increased 190 bps to 14.0% primarily driven by strong Turbo material productivity and volume leverage, and operational improvements in Friction Materials, partially offset by unfavorable price.

 

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Q3’13 Results - 4

 

Honeywell will discuss its results during its investor conference call today starting at 9:30 a.m. EDT. To participate, please dial (800) 862-9098 (domestic) or (785) 424-1051 (international) a few minutes before the 9:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell’s third quarter 2013 investor conference call or provide the conference code HONQ313. 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 (http://www.honeywell.com/investor). Investors can access a replay of the conference call from 12:00 p.m. EDT, October 18, until 11:59 p.m. EDT, October 25, by dialing (800) 283-4799 (domestic) or (402) 220-0860 (international).

 

Honeywell (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. Based in Morris Township, N.J., Honeywell’s shares are traded on the New York, London, and Chicago Stock Exchanges. For more news

and information on Honeywell, please visit www.honeywellnow.com.

 

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.

 

 

# # #

 

Q3’13 Results - 5

 

Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2013   2012   2013   2012 
                     
Product sales  $7,693   $7,332   $22,911   $22,184 
Service sales   1,954    2,010    5,757    5,900 
Net sales   9,647    9,342    28,668    28,084 
                     
Costs, expenses and other                    
Cost of products sold (A)   5,722    5,474    17,039    16,627 
Cost of services sold (A)   1,220    1,334    3,713    3,983 
    6,942    6,808    20,752    20,610 
Selling, general and administrative expenses (A)   1,242    1,238    3,752    3,695 
Other (income) expense   (1)   (16)   (53)   (54)
Interest and other financial charges   80    88    244    264 
    8,263    8,118    24,695    24,515 
                     
Income before taxes   1,384    1,224    3,973    3,569 
Tax expense   377    278    975    893 
                     
Net income   1,007    946    2,998    2,676 
                     
Less: Net income attributable to the noncontrolling interest   17    (4)   21    1 
                     
Net income attributable to Honeywell  $990   $950   $2,977   $2,675 
                     
Earnings per share of common stock - basic  $1.26   $1.21   $3.78   $3.43 
                     
Earnings per share of common stock - assuming dilution  $1.24   $1.20   $3.73   $3.38 
                     
Weighted average number of shares outstanding-basic   786.3    783.6    786.6    780.7 
                     
Weighted average number of shares outstanding - assuming dilution   797.1    792.5    797.5    790.4 

 

(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.

 

Q3’13 Results - 6

 

Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
Net Sales  2013   2012   2013   2012 
                     
Aerospace  $2,973   $3,043   $8,881   $9,020 
                     
Automation and Control Solutions   4,129    3,958    11,980    11,708 
                     
Performance Materials and Technologies   1,629    1,478    5,030    4,639 
                     
Transportation Systems   916    863    2,777    2,717 
                     
Total  $9,647   $9,342   $28,668   $28,084 

 

Reconciliation of Segment Profit to Income Before Taxes

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
Segment Profit  2013   2012   2013   2012 
                     
Aerospace   $602   $582   $1,736   $1,678 
                     
Automation and Control Solutions   631    571    1,739    1,587 
                     
Performance Materials and Technologies   305    275    999    944 
                     
Transportation Systems   128    104    365    338 
                     
Corporate   (51)   (57)   (157)   (164)
                     
Total segment profit   1,615    1,475    4,682    4,383 
                     
Other income (expense) (A)   (10)   4    22    18 
Interest and other financial charges   (80)   (88)   (244)   (264)
Stock compensation expense (B)   (38)   (40)   (129)   (131)
Pension ongoing income (expense) (B)   22    (7)   68    (29)
Other postretirement expense (B)   (5)   (20)   (7)   (52)
Repositioning and other charges (B)   (120)   (100)   (419)   (356)
                     
Income before taxes  $1,384   $1,224   $3,973   $3,569 

 

(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.
 

Q3’13 Results - 7

 

Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)

 

 
 		  
 		 September 30,
2013		  
 		  
 		 December 31,
2012		  
 
           
ASSETS          
Current assets:          
Cash and cash equivalents  $5,499   $4,634 
Accounts, notes and other receivables   7,950    7,429 
Inventories   4,455    4,235 
Deferred income taxes   707    669 
Investments and other current assets   693    631 
Total current assets   19,304    17,598 
           
Investments and long-term receivables   830    623 
Property, plant and equipment - net   5,107    5,001 
Goodwill   13,230    12,425 
Other intangible assets - net   2,590    2,449 
Insurance recoveries for asbestos related liabilities   653    663 
Deferred income taxes   1,457    1,889 
Other assets   1,235    1,205 
           
Total assets  $44,406   $41,853 
           
LIABILITIES AND SHAREOWNERS’ EQUITY          
Current liabilities:          
Accounts payable  $4,791   $4,736 
Short-term borrowings   88    76 
Commercial paper   2,099    400 
Current maturities of long-term debt   632    625 
Accrued liabilities   7,053    7,208 
Total current liabilities   14,663    13,045 
           
Long-term debt   5,789    6,395 
Deferred income taxes   719    628 
Postretirement benefit obligations other than pensions   995    1,365 
Asbestos related liabilities   1,089    1,292 
Other liabilities   5,917    5,913 
Redeemable noncontrolling interest   161    150 
Shareowners’ equity   15,073    13,065 
           
Total liabilities, redeemable noncontrolling interest and shareowners’ equity  $44,406   $41,853 
 

Q3’13 Results - 8

 

Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2013   2012   2013   2012 
Cash flows from operating activities:                    
Net income  $1,007   $946   $2,998   $2,676 
Less: Net income attributable to the noncontrolling interest   17    (4)   21    1 
Net income attributable to Honeywell   990    950    2,977    2,675 
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:                    
Depreciation and amortization   245    226    740    681 
Gain on sale of non-strategic businesses and assets   —    (4)   —    (3)
Repositioning and other charges   120    100    419    356 
Net payments for repositioning and other charges   (220)   (126)   (517)   (352)
Pension and other postretirement (income) expense   (17)   27    (61)   81 
Pension and other postretirement benefit payments   (40)   (291)   (253)   (888)
Stock compensation expense   38    40    129    131 
Deferred income taxes   72    130    257    319 
Excess tax benefits from share based payment arrangements   (20)   (12)   (101)   (28)
Other   169    143    35    39 
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:                    
Accounts, notes and other receivables   (187)   (140)   (382)   (160)
Inventories   (58)   25    (94)   (53)
Other current assets   (32)   (62)   (28)   (77)
Accounts payable   (2)   (29)   (32)   (220)
Accrued liabilities   12    22    (422)   (333)
Net cash provided by operating activities   1,070    999    2,667    2,168 
                     
Cash flows from investing activities:                    
Expenditures for property, plant and equipment   (203)   (234)   (547)   (586)
Proceeds from disposals of property, plant and equipment   1    1    7    2 
Increase in investments   (243)   (237)   (703)   (482)
Decrease in investments   272    129    648    287 
Cash paid for acquisitions, net of cash acquired   (603)   2    (1,063)   (62)
Proceeds from sales of businesses, net of fees paid   —    —    —    18 
Other   85    17    104    (42)
Net cash used for investing activities   (691)   (322)   (1,554)   (865)
                     
Cash flows from financing activities:                    
Net increase (decrease) in commercial paper   899    (49)   1,699    300 
Net (decrease) increase in short-term borrowings   (3)   8    18    19 
Proceeds from issuance of common stock   59    63    362    179 
Proceeds from issuance of long-term debt   14    44    27    86 
Payments of long-term debt   (3)   —    (604)   — 
Excess tax benefits from share based payment arrangements   20    12    101    28 
Repurchases of common stock   (167)   —    (769)   — 
Cash dividends paid   (330)   (298)   (995)   (880)
Other   28    —    28    — 
Net cash provided by (used for) financing activities   517    (220)   (133)   (268)
                     
Effect of foreign exchange rate changes on cash and cash equivalents   54    82    (115)   27 
Net increase in cash and cash equivalents   950    539    865    1,062 
Cash and cash equivalents at beginning of period   4,549    4,221    4,634    3,698 
Cash and cash equivalents at end of period  $5,499   $4,760   $5,499   $4,760 
 

Q3’13 Results - 9

 

Honeywell International Inc.

Calculation of EPS at 26.5% Tax Rate (Unaudited)

(Dollars in millions, except per share amounts)

 

   Three Months Ended
September 30,		 
   2013   2012 
         
Income before taxes  $1,384   $1,224 
           
Taxes at 26.5%   367    324 
           
Net income at 26.5% tax rate  $1,017   $900 
           
Less: Net income attributable to the noncontrolling interest   17    (4)
           
Net income attributable to Honeywell at 26.5% tax rate  $1,000   $904 
           
Weighted average number of shares outstanding - assuming dilution   797.1    792.5 
           
EPS at 26.5% tax rate  $1.25   $1.14 

 

We believe EPS adjusted to expected full-year tax rate at 26.5% is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

 

Q3’13 Results - 10

 

Honeywell International Inc.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)

(Dollars in millions)

 

   Three Months Ended
September 30,		 
   2013   2012 
         
Cash provided by operating activities  $1,070   $999 
           
Expenditures for property, plant and equipment   (203)   (234)
           
   $867   $765 
           
Cash pension contributions   8    256 
           
NARCO Trust establishment payments   62    — 
           
Free cash flow  $937   $1,021 

 

We define free cash flow as cash provided by operating activities, less cash expenditures for property, plant and equipment, cash pension contributions and NARCO Trust establishment payments.

 

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.

 

Q3’13 Results - 11

 

Honeywell International Inc. 

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) 

(Dollars in millions)

 

   Twelve Months Ended     
   December 31,     
   2012    2013 Guidance  
           
Cash provided by operating activities  $3.5   ~$4.4 
          
Expenditures for property, plant and equipment   (0.9)  ~(1.0)
   $2.6   ~$3.4 
Cash pension contributions   1.1   ~0.2 
          
NARCO Trust establishment payments   —     ~0.2 
          
Free cash flow  $3.7   ~$3.7 

 

We define free cash flow as cash provided by operating activities, less cash expenditures for property, plant and equipment, cash pension contributions and NARCO Trust establishment payments.

 

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. 

 

Q3’13 Results - 12

 

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, 
   2013   2012 
         
Segment Profit  $1,615   $1,475 
           
Stock compensation expense (A)   (38)   (40)
Repositioning and other (A, B)   (131)   (112)
Pension ongoing income (expense) (A)   22    (7)
Other postretirement expense (A)   (5)   (20)
           
Operating Income  $1,463   $1,296 
           
Segment Profit  $1,615   $1,475 
÷ Sales  $9,647   $9,342 
Segment Profit Margin %   16.7%   15.8%
           
Operating Income  $1,463   $1,296 
÷ Sales  $9,647   $9,342 
Operating Income Margin %   15.2%   13.9%

 

(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. 

 

Q3’13 Results - 13

 

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, 
   2012 
     
Segment Profit  $5,879 
      
Stock compensation expense (A)   (170)
Repositioning and other (A, B)   (488)
Pension ongoing expense (A)   (36)
Pension mark-to-market adjustment (A)   (957)
Other postretirement expense (A)   (72)
      
Operating Income  $4,156 
Pension mark-to-market adjustment (A)  $(957)
Operating Income excluding pension mark-to-market adjustment  $5,113 
      
Segment Profit  $5,879 
÷ Sales  $37,665 
Segment Profit Margin %   15.6%
      
Operating Income  $4,156 
÷ Sales  $37,665 
Operating Income Margin %   11.0%
      
Operating Income excluding pension mark-to-market adjustment  $5,113 
÷ Sales  $37,665 
Operating Income Margin excluding pension mark-to-market adjustment %   13.6%

 

(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. 

 

Q3’13 Results - 14

 

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 billions)

 

    2013 Guidance 
      
Segment Profit   ~$6.3 
      
Stock compensation expense (A)   ~(0.2) 
Repositioning and other (A, B)   ~(0.5) 
Pension ongoing income (A)   ~0.1 
Pension mark-to-market adjustment (A)   TBD 
Other postretirement expense (A)   ~(0.0) 
      
Operating Income   ~$5.7 
Pension mark-to-market adjustment (A)   TBD 
Operating Income excluding pension mark-to-market adjustment   ~$5.7 
      
Segment Profit   ~$6.3 
÷ Sales   $38.8 - 39.0 
Segment Profit Margin %   16.2 - 16.3% 
      
Operating Income   ~$5.7 
÷ Sales   $38.8 - 39.0 
Operating Income Margin %   14.7 - 14.8% 
      
Operating Income excluding pension mark-to-market adjustment   ~$5.7 
÷ Sales   $38.8 - 39.0 
Operating Income Margin excluding pension mark-to-market adjustment %   14.7 - 14.8% 

 

(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. 

 

Q3’13 Results - 15

 

Honeywell International Inc.

Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark-to-Market Adjustment (Unaudited)

 

    Twelve Months Ended
December 31,		  
   2012 
     
EPS  $3.69 
      
Pension mark-to-market adjustment   0.79 
      
EPS, excluding pension mark-to-market adjustment  $4.48 

 

We believe EPS, excluding pension mark-to-market adjustment is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

 

EPS utilizes weighted average shares outstanding - assuming dilution of 791.9 million. Mark-to-market uses a blended tax rate of 35.0%.