| N e w s R e l e a s e |
| |
| Contacts: | | |
| Media | | Investor Relations |
| Robert C. Ferris | | Murray Grainger |
| (973) 455-3388 | | (973) 455-2222 |
| rob.ferris@honeywell.com | | murray.grainger@honeywell.com |
HONEYWELL REPORTS SECOND QUARTER SALES UP 8% TO
$8.5 BILLION AND EARNINGS UP 24% TO 78 CENTS PER SHARE
Company Raises 2007 Guidance for Sales, EPS, and Free Cash Flow
MORRIS TOWNSHIP, N.J., July 19, 2007 -- Honeywell (NYSE: HON) today announced second quarter 2007 sales increased 8% to $8.5 billion from $7.9 billion last year. Earnings were up 24% to $0.78 per share, versus $0.63 per share last year. Cash flow from operations was $983 million versus $935 million in the second quarter of 2006 and free cash flow (cash flow from operations less capital expenditures) was $820 million, compared to $786 million last year.
“Honeywell’s second quarter was driven by strong organic sales growth, double-digit earnings growth, and robust free cash flow,” said Honeywell Chairman and CEO Dave Cote. “We continue to benefit from our global footprint, great positions in good industries, and our effective deployment of cash through dividends, acquisitions, and share repurchases.”
Honeywell repurchased more than 40 million shares of stock in the second quarter, reducing the amount remaining under its previously announced authorization to approximately $200 million. The company’s Board of Directors has authorized the repurchase of up to an additional $3 billion of Honeywell common stock. Honeywell expects to repurchase shares to maintain an essentially flat share count through the remainder of 2007.
“We had a great first half of 2007 with sales increasing 10%, EPS up 25%, and free cash flow up 42%. As a result of this performance, our share repurchases and confident outlook for the second half, we are raising full-year sales, EPS, and free cash flow guidance,” concluded Cote.
Honeywell increased its previously stated 2007 sales guidance to $33.9 billion, its earnings per share range to $3.10 - 3.16 and free cash flow range to $2.8 - 3.0 billion (cash flow from operations of $3.6 – 3.8 billion).
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Q2 Results - 2
Second Quarter Segment Highlights
Aerospace
- Sales were up 13%, compared with the second quarter of 2006, driven by 15% growth inCommercial and 9% growth in Defense and Space sales. Commercial sales reflected growthof 18% in original equipment and 12% in aftermarket spares and services.
- Segment margins were 17.3%, compared with 15.4% a year ago, driven by volume growth,price and productivity gains, which more than offset the negative impact from inflation.
- Honeywell announced the acquisition of defense logistics leader Dimensions International.The acquisition expands Honeywell’s ability to support the Department of Defense’s needsfor equipment repair, refurbishment, and reset.
- Defense and Space secured contracts worth more than $14 million with the U.S. Navy for itsMicro Air Vehicle (MAV) and with Sikorsky Aircraft Corporation for synthetic visiontechnology. Total MAV-related contract wins to date top $100 million across all branches ofthe U.S. military. Honeywell’s synthetic vision technology will be included in the BlackHawk helicopter cockpit as part of the Defense Advanced Research Projects Agency(DARPA) Sandblaster program designed to enhance situational awareness for pilots inbrownout conditions.
- Honeywell has been selected by Northwest Airlines to provide comprehensive repair andoverhaul services with an estimated value of $490 million over 20 years for auxiliary powerunits and wheels and brakes.
Automation and Control Solutions
- Sales were up 10%, compared with the second quarter of 2006, driven by 9% growth in theProducts businesses and 11% growth in the Solutions businesses.
- Segment margins were 11.0% compared with 10.4% a year ago, due to volume growth andproductivity savings, which more than offset the negative impact from inflation.
- Honeywell Security Group’s ADI security and low voltage products distribution businesscompleted its acquisition of Burtek Systems Corporation. Burtek is a distributor of lowvoltage products for commercial and residential audio, burglar and fire alarm, CCTV, accesscontrol, and data communications.
- Honeywell Building Solutions won an approximately $33 million energy savingsperformance contract with the City of Quincy, Massachusetts, which will reduce the city’senergy costs and cut greenhouse gas emissions. Building Solutions also announced a $15million contract with the U.S. Coast Guard to cut energy costs and greenhouse gas emissionsat nine locations.
- Honeywell Process Solutions signed a definitive agreement, subject to regulatory review, toacquire Enraf Holding B.V., which offers comprehensive solutions for the control andmanagement of transportation, storage, and blending operations in the oil and gas industry.
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Q2 Results - 3
Transportation Systems
- Sales were up 5%, compared with the second quarter of 2006, driven by increased TurboTechnologies light vehicle sales and the positive impact of foreign exchange, which werepartially offset by an expected decline in Turbo Technologies commercial vehicle sales inNorth America and the impact of lower sales of automotive aftermarket products.
- Segment margins were 12.5% compared with 13.8% a year ago, due to investments in newproducts and inflation, which more than offset pricing actions and productivity savings.
- Turbo Technologies was awarded two passenger vehicle diesel platforms worthapproximately $50 million in estimated annual revenues at full production that will beintroduced in Korea, Europe, and the U.S. These platforms are expected to launch in 2011.
- Consumer Products Group launched several new products, including FRAM Syn-wash, along-lasting, washable air filter, and Autolite Xtreme Sport and Xtreme Lawn, premiumspark plugs for the growing small engine segment.
Specialty Materials
- Sales were down 3% compared with the second quarter of 2006, driven by anticipatedtiming with respect to UOP catalyst sales.
- Segment margins were 14.4% compared with 17.3% a year ago, due primarily to lower UOPvolume, inflation, and a temporary plant outage, which more than offset increased pricing.
- UOP announced that Eni S.p.A., a leading European oil company, will build a productionfacility using UOP/Eni Ecofining™ technology to produce“green” diesel for the Europeanmarket. Green diesel is produced from renewable resources and generates lower emissionsthan either biodiesel or traditional petroleum-based diesel. It can be used as a drop inreplacement fuel in current diesel engines without modifications. As a result of its highcetane levels (a measure of the combustion quality of diesel), it can also be used as ablending agent to improve the performance of other diesel fuels. UOP also announced it isdeveloping technology to convert oils from plants and algae to military jet fuel for use bythe U.S. and NATO as part of a program funded by DARPA.
- Specialty Materials announced a new line of materials for body and vehicle armor calledSpectra Shield II, which has demonstrated up to 20 percent greater ballistic performancethan existing Spectra products.
Honeywell will discuss its results during its investor conference call today starting at 10:00 a.m. EDT. To participate, please dial (706) 643-7681 a few minutes before the 10:00 a.m. start. Please mention to the operator that you are dialing in for Honeywell’s investor conference call. The live webcast of the investor call 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 1:00 p.m. EDT, July 19, until midnight, July 26, by dialing (706) 645-9291. The access code is 4735919.
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Q2 Results - 4
Honeywell International is a $33 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell’s shares are traded on the New York, London and Chicago Stock Exchanges. It is one of the 30 stocks that make up the Dow Jones Industrial Average and is also a component of the Standard & Poor’s 500 Index. For additional information, please visitwww.honeywell.com.
This release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management’s assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. 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.
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Q2 Results - 5Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
| | | | Three Months Ended | | | | Six Months Ended | |
| | | | June 30, | | | | June 30, | |
| | | | 2007 | | | | 2006 | | | | 2007 | | | | 2006 | |
| |
| Product sales | | $ | 6,872 | | | $ | 6,381 | | | $ | 13,322 | | | $ | 12,187 | |
| Service sales | | | 1,666 | | | | 1,517 | | | | 3,257 | | | | 2,952 | |
| Net sales | | | 8,538 | | | | 7,898 | | | | 16,579 | | | | 15,139 | |
| Costs, expenses and other | | | | | | | | | | | | | | | | |
| Cost of products sold (A) | | | 5,318 | | | | 4,931 | | | | 10,328 | | | | 9,497 | |
| Cost of services sold (A) | | | 1,173 | | | | 1,096 | | | | 2,313 | | | | 2,130 | |
| | | | 6,491 | | | | 6,027 | | | | 12,641 | | | | 11,627 | |
| Selling, general and administrative expenses (A) | | | 1,127 | | | | 1,086 | | | | 2,216 | | | | 2,088 | |
| Other (income) expense | | | (20 | ) | | | (17 | ) | | | (31 | ) | | | (42 | ) |
| Interest and other financial charges | | | 110 | | | | 94 | | | | 207 | | | | 183 | |
| | | | 7,708 | | | | 7,190 | | | | 15,033 | | | | 13,856 | |
| Income from continuing operations before taxes | | | 830 | | | | 708 | | | | 1,546 | | | | 1,283 | |
| Tax expense | | | 219 | | | | 187 | | | | 409 | | | | 331 | |
| Income from continuing operations | | | 611 | | | | 521 | | | | 1,137 | | | | 952 | |
| Income from discontinued operations, net of taxes | | | - | | | | - | | | | - | | | | 5 | |
| Net income | | $ | 611 | | | $ | 521 | | | $ | 1,137 | | | $ | 957 | |
| |
| Earnings per share of common stock - basic: | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.79 | | | $ | 0.63 | | | $ | 1.45 | | | $ | 1.15 | |
| Income from discontinued operations | | | - | | | | - | | | | - | | | | 0.01 | |
| Net income | | $ | 0.79 | | | $ | 0.63 | | | $ | 1.45 | | | $ | 1.16 | |
| |
| Earnings per share of common stock - assuming dilution: | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.78 | | | $ | 0.63 | | | $ | 1.44 | | | $ | 1.14 | |
| Income from discontinued operations | | | - | | | | - | | | | - | | | | 0.01 | |
| Net income | | $ | 0.78 | | | $ | 0.63 | | | $ | 1.44 | | | $ | 1.15 | |
| |
| Weighted average number of shares outstanding-basic | | | 768 | | | | 825 | | | | 781 | | | | 827 | |
| |
| Weighted average number of shares outstanding - | | | | | | | | | | | | | | | | |
| assuming dilution | | | 779 | | | | 830 | | | | 790 | | | | 833 | |
(A) Cost of products and services sold and selling, general and administrative expenses include amounts for repositioning and other charges, pension and other post-retirement benefits expense, and stock option expense.
Q2 Results - 6Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
| | | | Three Months Ended | | | | Six Months Ended | |
| | | | June 30, | | | | June 30, | |
| Net Sales | | | 2007 | | | | 2006 | | | | 2007 | | | | 2006 | |
| |
| Aerospace | | $ | 3,027 | | | $ | 2,686 | | | $ | 5,867 | | | $ | 5,315 | |
| | | | | | | | | | | | | | | | | |
| Automation and Control Solutions | | | 3,039 | | | | 2,766 | | | | 5,840 | | | | 5,131 | |
| | | | | | | | | | | | | | | | | |
| Specialty Materials | | | 1,216 | | | | 1,253 | | | | 2,415 | | | | 2,405 | |
| | | | | | | | | | | | | | | | | |
| Transportation Systems | | | 1,256 | | | | 1,193 | | | | 2,457 | | | | 2,288 | |
| | | | | | | | | | | | | | | | | |
| Corporate | | | - | | | | - | | | | - | | | | - | |
| |
| Total | | $ | 8,538 | | | $ | 7,898 | | | $ | 16,579 | | | $ | 15,139 | |
| |
| |
Reconciliation of Segment Profit to Income From Continuing Operations Before Taxes |
| |
| | | | Three Months Ended | | | | Six Months Ended | |
| | | | June 30, | | | | June 30, | |
| Segment Profit | | | 2007 | | | | 2006 | | | | 2007 | | | | 2006 | |
| |
| Aerospace | | $ | 523 | | | $ | 413 | | | $ | 1,023 | | | $ | 853 | |
| | | | | | | | | | | | | | | | | |
| Automation and Control Solutions | | | 333 | | | | 287 | | | | 607 | | | | 508 | |
| | | | | | | | | | | | | | | | | |
| Specialty Materials | | | 175 | | | | 217 | | | | 367 | | | | 379 | |
| | | | | | | | | | | | | | | | | |
| Transportation Systems | | | 157 | | | | 165 | | | | 313 | | | | 307 | |
| | | | | | | | | | | | | | | | | |
| Corporate | | | (54 | ) | | | (48 | ) | | | (97 | ) | | | (93 | ) |
| | | | | | | | | | | | | | | | | |
| Total Segment Profit | | | 1,134 | | | | 1,034 | | | | 2,213 | | | | 1,954 | |
| | | | | | | | | | | | | | | | | |
| Other income (expense) | | | 20 | | | | 17 | | | | 31 | | | | 42 | |
| Interest and other financial charges | | | (110 | ) | | | (94 | ) | | | (207 | ) | | | (183 | ) |
| Stock option expense (A) | | | (17 | ) | | | (16 | ) | | | (41 | ) | | | (41 | ) |
| Pension and other postretirement expense (A) | | | (72 | ) | | | (118 | ) | | | (146 | ) | | | (244 | ) |
| Repositioning and other charges (A) | | | (125 | ) | | | (115 | ) | | | (304 | ) | | | (245 | ) |
| |
| Income from continuing operations before taxes | | $ | 830 | | | $ | 708 | | | $ | 1,546 | | | $ | 1,283 | |
(A) Amounts included in cost of products and services sold and selling, general and administrative expenses.
Q2 Results - 7Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
| | | | June 30, | | | | December 31, | |
| | | | 2007 | | | | 2006 | |
| |
| ASSETS | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 1,633 | | | $ | 1,224 | |
| Accounts, notes and other receivables | | | 6,118 | | | | 5,740 | |
| Inventories | | | 3,807 | | | | 3,588 | |
| Deferred income taxes | | | 1,197 | | | | 1,215 | |
| Other current assets | | | 329 | | | | 470 | |
| Assets held for disposal | | | 25 | | | | 67 | |
| Total current assets | | | 13,109 | | | | 12,304 | |
| |
| Investments and long-term receivables | | | 505 | | | | 382 | |
| Property, plant and equipment - net | | | 4,692 | | | | 4,797 | |
| Goodwill | | | 8,457 | | | | 8,403 | |
| Other intangible assets - net | | | 1,213 | | | | 1,247 | |
| Insurance recoveries for asbestos related liabilities | | | 1,107 | | | | 1,100 | |
| Deferred income taxes | | | 925 | | | | 1,075 | |
| Prepaid pension benefit cost | | | 820 | | | | 695 | |
| Other assets | | | 943 | | | | 938 | |
| Total assets | | $ | 31,771 | | | $ | 30,941 | |
| |
| LIABILITIES AND SHAREOWNERS' EQUITY | �� | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 3,661 | | | $ | 3,518 | |
| Short-term borrowings | | | 62 | | | | 62 | |
| Commercial paper | | | 2,589 | | | | 669 | |
| Current maturities of long-term debt | | | 415 | | | | 423 | |
| Accrued liabilities | | | 5,638 | | | | 5,455 | |
| Liabilities related to assets held for disposal | | | 4 | | | | 8 | |
| Total current liabilities | | | 12,369 | | | | 10,135 | |
| |
| Long-term debt | | | 4,485 | | | | 3,909 | |
| Deferred income taxes | | | 455 | | | | 352 | |
| Postretirement benefit obligations other than pensions | | | 2,075 | | | | 2,090 | |
| Asbestos related liabilities | | | 1,216 | | | | 1,262 | |
| Other liabilities | | | 3,371 | | | | 3,473 | |
| Shareowners' equity | | | 7,800 | | | | 9,720 | |
| Total liabilities and shareowners' equity | | $ | 31,771 | | | $ | 30,941 | |
Q2 Results - 8Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
| | | | Three Months Ended | | | | Six Months Ended | |
| | | | June 30, | | | | June 30, | |
| | | | 2007 | | | | 2006 | | | | 2007 | | | | 2006 | |
| Cash flows from operating activities: | | | | | | | | | | | | | | | | |
| Net income | | $ | 611 | | | $ | 521 | | | $ | 1,137 | | | $ | 957 | |
| Adjustments to reconcile net income to net cash provided | | | | | | | | | | | | | | | | |
| by operating activities: | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 213 | | | | 218 | | | | 413 | | | | 406 | |
| Repositioning and other charges | | | 125 | | | | 115 | | | | 304 | | | | 245 | |
| Net (payments) for repositioning and other charges | | | (41 | ) | | | (161 | ) | | | (173 | ) | | | (154 | ) |
| Pension and other postretirement expense | | | 72 | | | | 118 | | | | 146 | | | | 244 | |
| Pension and other postretirement benefit payments | | | (63 | ) | | | (63 | ) | | | (108 | ) | | | (178 | ) |
| Stock option expense | | | 17 | | | | 16 | | | | 41 | | | | 41 | |
| Deferred income taxes | | | 180 | | | | 70 | | | | 197 | | | | 126 | |
| Excess tax benefits from share based payment arrangements | | | (43 | ) | | | - | | | | (51 | ) | | | - | |
| Other | | | 20 | | | | 52 | | | | 26 | | | | (5 | ) |
| Changes in assets and liabilities, net of the effects of | | | | | | | | | | | | | | | | |
| acquisitions and divestitures: | | | | | | | | | | | | | | | | |
| Accounts, notes and other receivables | | | (216 | ) | | | (96 | ) | | | (352 | ) | | | (243 | ) |
| Inventories | | | (41 | ) | | | (25 | ) | | | (202 | ) | | | (208 | ) |
| Other current assets | | | - | | | | 53 | | | | 36 | | | | 42 | |
| Accounts payable | | | 78 | | | | 68 | | | | 143 | | | | 78 | |
| Accrued liabilities | | | 71 | | | | 49 | | | | 4 | | | | (177 | ) |
| Net cash provided by operating activities | | | 983 | | | | 935 | | | | 1,561 | | | | 1,174 | |
| |
| Cash flows from investing activities: | | | | | | | | | | | | | | | | |
| Expenditures for property, plant and equipment | | | (163 | ) | | | (149 | ) | | | (283 | ) | | | (271 | ) |
| Proceeds from disposals of property, plant and equipment | | | 49 | | | | 7 | | | | 82 | | | | 44 | |
| Cash paid for acquisitions, net of cash acquired | | | (95 | ) | | | (552 | ) | | | (108 | ) | | | (608 | ) |
| Proceeds from sales of businesses, net of fees paid | | | 43 | | | | 101 | | | | 52 | | | | 576 | |
| Net cash (used for) investing activities | | | (166 | ) | | | (593 | ) | | | (257 | ) | | | (259 | ) |
| |
| Cash flows from financing activities: | | | | | | | | | | | | | | | | |
| Net increase/(decrease) in commercial paper | | | 1,585 | | | | 531 | | | | 1,913 | | | | (106 | ) |
| Net (decrease) in short-term borrowings | | | (3 | ) | | | (30 | ) | | | - | | | | (210 | ) |
| Payment of debt assumed with acquisitions | | | - | | | | (137 | ) | | | - | | | | (346 | ) |
| Proceeds from issuance of common stock | | | 305 | | | | 65 | | | | 424 | | | | 239 | |
| Proceeds from issuance of long-term debt | | | - | | | | - | | | | 988 | | | | 1,239 | |
| Payments of long-term debt | | | (9 | ) | | | (116 | ) | | | (407 | ) | | | (353 | ) |
| Excess tax benefits from share based payment arrangements | | | 43 | | | | - | | | | 51 | | | | - | |
| Repurchases of common stock | | | (2,301 | ) | | | (503 | ) | | | (3,487 | ) | | | (828 | ) |
| Cash dividends paid on common stock | | | (193 | ) | | | (187 | ) | | | (392 | ) | | | (376 | ) |
| Net cash (used for) financing activities | | | (573 | ) | | | (377 | ) | | | (910 | ) | | | (741 | ) |
| |
| Effect of foreign exchange rate changes on cash and cash equivalents | | | 11 | | | | 17 | | | | 15 | | | | 16 | |
| |
| Net increase/(decrease) in cash and cash equivalents | | | 255 | | | | (18 | ) | | | 409 | | | | 190 | |
| Cash and cash equivalents at beginning of period | | | 1,378 | | | | 1,442 | | | | 1,224 | | | | 1,234 | |
| Cash and cash equivalents at end of period | | $ | 1,633 | | | $ | 1,424 | | | $ | 1,633 | | | $ | 1,424 | |
Q2 Results - 9Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)
(Dollars in millions)
| | | | Three Months Ended | | | | Six Months Ended | |
| | | | June 30, | | | | June 30, | |
| | | | 2007 | | | | 2006 | | | | 2007 | | | | 2006 | |
| Cash provided by operating activities | | $ | 983 | | | $ | 935 | | | $ | 1,561 | | | $ | 1,174 | |
| |
| Expenditures for property, plant and equipment | | | (163 | ) | | | (149 | ) | | | (283 | ) | | | (271 | ) |
| |
| Free cash flow | | $ | 820 | | | $ | 786 | | | $ | 1,278 | | | $ | 903 | |
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.
