N e w s R e l e a s e
| Contacts: | |
| Media | Investor Relations |
| Robert C. Ferris | Elena Doom |
| (973)455-3388 | (973)455-2222 |
| rob.ferris@honeywell.com | elena.doom@honeywell.com |
HONEYWELL REPORTS FIRST QUARTER SALES UP 3% TO
$7.8 BILLION; EARNINGS PER SHARE OF $0.50
• EPS of $0.68 Excluding Non-Cash Pension Expense, Up 21% Versus Prior Year
• Organic Sales Growth Resumes in Several Short-Cycle Businesses
• Strong Operating Leverage, Margin Improvement In 3 of 4 Businesses
• Raising Full-Year EPS and Cash Flow Guidance
MORRIS TOWNSHIP, N.J., April 23, 2010 -- Honeywell (NYSE: HON) today announced first quarter 2010 sales were up 3% to $7.8 billion versus $7.6 billion in 2009 and earnings were $0.50 per share versus $0.54 per share in the prior year. Excluding non-cash pension expense, earnings were up 21% to $0.68 per share compared to $0.56 per share in the prior year. Cash flow from operations was $743 million versus $341 million in the first quarter of 2009 and free cash flow (cash flow from operations less capital expenditures) was up 190% to $673 million compared to $232 million last year.
“Honeywell’s first quarter performance reflects better than expected improvements in many of our end markets, coupled with strong commercial execution and disciplined cost controls,” said Honeywell Chairman and Chief Executive Officer Dave Cote. “Key short cycle businesses, such as turbochargers and general industrial products, saw good organic growth in the quarter reflecting improved market conditions. We’re building a strong backlog of orders and are encouraged by continued penetration of our new products and important contracts won during the quarter. We also continue to benefit from effective execution of our big process initiatives - Honeywell Operating System, Velocity Product Development™, and Functional Transformation - contributing to strong operating leverage and margin expansion.” “While the timing and shape of the recovery is uncertain and we remain conservative in our planning assumptions, the outlook for Honeywell is bright,” continued Cote. “Our great positions in good industries; links to favorable global macro trends, such as safety, security, and energy efficiency; growth in emerging regions; and strong pipeline of new products and technologies are reflected in our raised outlook for the year and should drive attractive growth over the long-term.” Honeywell now expects 2010 sales of $31.5 -32.3 billion and earnings in the range of $2.30 -2.45 per share versus a previous estimate of $2.20 -2.40 per share. The company also now expects free cash flow of $2.8 -3.1 billion (cash flow from operations of $3.5 -3.8 billion) versus a previous estimate of $2.4 -2.7 billion.
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Q1’10 Results - 2
First Quarter Segment Highlights
Aerospace
Sales were down 9% compared with the first quarter of 2009, primarily due to lower originalequipment sales to regional and business aviation customers and lower airline aftermarketsales, partially offset by growth in defense sales and logistics services.
Segment profit was down 15% and segment margin decreased 120 bps to 16.5%, primarily dueto volume declines, partially offset by cost savings initiatives and benefits from priorrepositioning actions.
Honeywell announced more than $190 million in contracts at the Singapore Air Show foravionics, maintenance, and auxiliary power unit selections with Asia Pacific regional airlines,including China Eastern, Air China, Qantas, and Vietnam Airlines.
Honeywell won a $51 million, five-year contract with the Naval Air Warfare Center AircraftDivision to provide engineering and integrated logistics support. The company will providedesign, development, integration, testing, evaluation, maintenance, and logistics support for theLight Airborne Multi-Purpose System (LAMPS), the shipboard element of a two-way digitaldata link between a U.S. Navy ship and a SH-60 helicopter.
Honeywell was selected by Commercial Aircraft Corporation of China, Ltd.(COMAC) to supply our 131-9 Auxiliary Power Unit (APU) and associated equipment for theC919 single-aisle commercial airliner valued at $7.3 billion over the life of the contract. TheHoneywell 131-9 APU has more than 51 million hours in commercial service on narrow-bodyaircraft like the Boeing 737 and the Airbus A320. The 131-9 APU delivers industry-leadingreliability with more than 10,000 hours between unscheduled maintenance, which lowers thecost of operations and features the lowest fuel burn and ramp noise available in its class.
Automation and Control Solutions
Sales were up 4%, compared with the first quarter of 2009, primarily due to the positive impactof foreign exchange, continued growth in emerging regions, new product introductions, andgeneral industrial recovery, partially offset by softness in commercial and residential endmarkets in developed regions.
Segment profit was up 24% and segment margin increased 200 bps to 12.4% driven by costsavings initiatives and benefits from prior repositioning actions, partially offset by inflation.
Automation and Control Solutions introduced approximately 115 new products in the firstquarter, including the Dolphin® 9700, a rugged digital assistant, equipped with multi-functionaldata collection and communications; the Honeywell ZephyrTM, the industry’s most accurateairflow sensor for medical and industrial applications; and the Silent Knight IntelliKnight 5600, a 25-point control panel that provides customers with a more cost-effective, intelligent firealarm solution with pinpoint identification of a fire source.
Building Solutions won a General Services Administration (GSA) Region 7 Energy SavingsPerformance Contract (ESPC) worth $10 million. The GSA sites are primarily border stations,federal office buildings, and courthouses. The project includes both solar and wind powerinstallations, with building automation (lighting, water, and mechanical retrofits) being installedat 22 sites.
Process Solutions signed a five-year agreement to be a Main Automation Contractor (MAC) forRoyal Dutch Shell PLC to design automation and safety systems. In addition, the businessannounced that its Experion® Process Knowledge System (PKS®) will control operations andhelp drive a 50% increase in production capacity for Thailand’s first supercritical power plantoperated by GHECO-One Ltd; a significant $5 million commitment from a Korean shipbuilderfor instrumentation on 100 vessels; and RMG secured a $5 million contract from a Chinese gaspipeline distribution company to provide regulators for gas pressure reduction stations.
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Q1’10 Results - 3
Transportation Systems
Sales were up 33% compared with the first quarter of 2009, due to higher volumes ofturbochargers, friction materials, and consumer products globally and the favorable impact offoreign exchange.
Segment profit was up approximately $100 million and segment margin increased 1,000 bps to9.6% driven by higher volumes, increased productivity, and benefits from prior restructuringactions.
Honeywell Turbo Technologies was awarded new platform wins with customers includingVolkswagen, Peugeot, and General Motors estimated at more than $1 billion in revenue over thelife of the programs. The platforms span the European, Asian, and American markets for bothpassenger and commercial vehicle applications and are expected to launch beginning in 2012.
Honeywell launched its latest Euro5 VNT™ (Variable Nozzle Turbine) turbo on the world’s most fuel-efficient five-seater passenger car – the Volkswagen Polo BlueMotion 1.2L diesel. The Polo will deliver 15% better fuel economy and 15% less emissions than its predecessor model.
Specialty Materials
Sales were up 8% compared with the first quarter of 2009, resulting from higher sales in ourResins and Chemicals, Electronic Materials, and Fluorine Products businesses due to improvedglobal markets and the favorable impact of pass-through raw material price increases, partiallyoffset by lower catalyst sales and project timing in our UOP business.
Segment profit was up 36% and segment margin increased 300 bps to 14.9% due to highersales, commercial and plant effectiveness, and cost savings initiatives.
Honeywell Green Jet Fuel™, produced using Honeywell UOP’s renewable jet fuel processtechnology, powered a U.S. Navy F/A-18 Super Hornet (the “Green Hornet”) in the firstsupersonic flight as part of the Navy’s efforts to certify the use of alternative fuels in militaryaircraft. The fuel was produced under a project for U.S. Defense Energy Support Center(DESC). Honeywell’s UOP is producing approximately 600,000 gallons of fuel for use by theNavy and U.S. Air Force from sustainable, non-food feedstocks, including animal fats, algae,and camelina. Honeywell Green Jet Fuel has already been successfully tested on commercialaircraft in demonstration flights by Air New Zealand, Continental Airlines, Japan Airlines,and KLM. Results from those demonstration flights showed Honeywell Green Jet Fuel in a50/50 blend with petroleum jet fuel performed as well, if not better, than traditional petroleum-derived jet fuel.
Honeywell Fluorine Products announced the launch of the Honeywell Enovate™ PROContractor Program designed to help contractors expand their business offerings in the area ofair sealing and weatherization for home and buildings. The program features new Honeywellproducts, including energy-efficient foam insulation and sealants, as well as professionaldevelopment training.
Honeywell will discuss its results during its investor conference call today starting at 8:00 a.m. EDT. To participate, please dial (719) 785-1755 a few minutes before the 8:00 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 investor call starting at 11:00 a.m. EDT, April 23, until midnight, April 30, by dialing (719) 457-0820. The access code is 4643398.
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Q1’10 Results - 4
Honeywell International (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; 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. For more news and information on Honeywell, please visitwww.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.
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Q1'10 - Results - 5
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
| Product sales | $ | 6,047 | $ | 5,818 | ||||
| Service sales | 1,729 | 1,752 | ||||||
| Net sales | 7,776 | 7,570 | ||||||
| Costs, expenses and other | ||||||||
| Cost of products sold (A) | 4,787 | 4,608 | ||||||
| Cost of services sold (A) | 1,195 | 1,148 | ||||||
| 5,982 | 5,756 | |||||||
| Selling, general and administrative expenses (A) | 1,136 | 1,152 | ||||||
| Other (income) expense | (2 | ) | 2 | |||||
| Interest and other financial charges | 107 | 117 | ||||||
| 7,223 | 7,027 | |||||||
| Income before taxes | 553 | 543 | ||||||
| Tax expense | 160 | 144 | ||||||
| Net income | 393 | 399 | ||||||
| Less: Net income attributable to the noncontrolling interest | 7 | 2 | ||||||
| Net income attributable to Honeywell | $ | 386 | $ | 397 | ||||
| Earnings per share of common stock - basic | $ | 0.50 | $ | 0.54 | ||||
| Earnings per share of common stock - assuming dilution | $ | 0.50 | $ | 0.54 | ||||
| Weighted average number of shares outstanding-basic | 766 | 738 | ||||||
| Weighted average number of shares outstanding - | ||||||||
| assuming dilution | 772 | 739 | ||||||
(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 expense, and stock compensation expense.
Q1'10 - Results - 6
Segment Data (Unaudited)
(Dollars in millions)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Net Sales | 2010 | 2009 | ||||||
| Aerospace | $ | 2,506 | $ | 2,759 | ||||
| Automation and Control Solutions | 3,124 | 3,001 | ||||||
| Specialty Materials | 1,139 | 1,054 | ||||||
| Transportation Systems | 1,007 | 756 | ||||||
| Corporate | - | - | ||||||
| Total | $ | 7,776 | $ | 7,570 | ||||
| Reconciliation of Segment Profit to Income Before Taxes | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Segment Profit | 2010 | 2009 | ||||||
| Aerospace | $ | 413 | $ | 488 | ||||
| Automation and Control Solutions | 386 | 311 | ||||||
| Specialty Materials | 170 | 125 | ||||||
| Transportation Systems | 96 | (3 | ) | |||||
| Corporate | (29 | ) | (45 | ) | ||||
| Total Segment Profit | 1,036 | 876 | ||||||
| Other income/ (expense) (A) | (2 | ) | (8 | ) | ||||
| Interest and other financial charges | (107 | ) | (117 | ) | ||||
| Stock compensation expense (B) | (50 | ) | (42 | ) | ||||
| Pension expense (B) | (200 | ) | (26 | ) | ||||
| Other postretirement income/ (expense) (B) | 18 | (29 | ) | |||||
| Repositioning and other charges (B) | (142 | ) | (111 | ) | ||||
| Income before taxes | $ | 553 | $ | 543 | ||||
| (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. |
Q1'10 - Results - 7
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
| March 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,851 | $ | 2,801 | ||||
| Accounts, notes and other receivables | 6,184 | 6,274 | ||||||
| Inventories | 3,568 | 3,446 | ||||||
| Deferred income taxes | 1,024 | 1,034 | ||||||
| Investments and other current assets | 706 | 381 | ||||||
| Total current assets | 14,333 | 13,936 | ||||||
| Investments and long-term receivables | 586 | 579 | ||||||
| Property, plant and equipment - net | 4,697 | 4,847 | ||||||
| Goodwill | 10,362 | 10,494 | ||||||
| Other intangible assets - net | 2,114 | 2,174 | ||||||
| Insurance recoveries for asbestos related liabilities | 936 | 941 | ||||||
| Deferred income taxes | 1,973 | 2,017 | ||||||
| Other assets | 1,025 | 1,016 | ||||||
| Total assets | $ | 36,026 | $ | 36,004 | ||||
| LIABILITIES AND SHAREOWNERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,553 | $ | 3,633 | ||||
| Short-term borrowings | 44 | 45 | ||||||
| Commercial paper | 1,248 | 298 | ||||||
| Current maturities of long-term debt | 23 | 1,018 | ||||||
| Accrued liabilities | 6,233 | 6,153 | ||||||
| Total current liabilities | 11,101 | 11,147 | ||||||
| Long-term debt | 6,246 | 6,246 | ||||||
| Deferred income taxes | 570 | 542 | ||||||
| Postretirement benefit obligations other than pensions | 1,547 | 1,594 | ||||||
| Asbestos related liabilities | 1,049 | 1,040 | ||||||
| Other liabilities | 6,409 | 6,481 | ||||||
| Shareowners' equity | 9,104 | 8,954 | ||||||
| Total liabilities and shareowners' equity | $ | 36,026 | $ | 36,004 | ||||
Q1'10 - Results - 8
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income attributable to Honeywell | $ | 386 | $ | 397 | ||||
| Adjustments to reconcile net income attributable to Honeywell to net | ||||||||
| cash provided by operating activities: | ||||||||
| Depreciation and amortization | 233 | 234 | ||||||
| Repositioning and other charges | 142 | 111 | ||||||
| Net payments for repositioning and other charges | (119 | ) | (148 | ) | ||||
| Pension and other postretirement expense | 182 | 55 | ||||||
| Pension and other postretirement benefit payments | (36 | ) | (47 | ) | ||||
| Stock compensation expense | 50 | 42 | ||||||
| Deferred income taxes | 26 | 272 | ||||||
| Excess tax benefits from share based payment arrangements | (2 | ) | - | |||||
| Other | (96 | ) | (142 | ) | ||||
| Changes in assets and liabilities, net of the effects of | ||||||||
| acquisitions and divestitures: | ||||||||
| Accounts, notes and other receivables | 90 | 461 | ||||||
| Inventories | (122 | ) | 49 | |||||
| Other current assets | (28 | ) | (31 | ) | ||||
| Accounts payable | (80 | ) | (629 | ) | ||||
| Accrued liabilities | 117 | (283 | ) | |||||
| Net cash provided by operating activities | 743 | 341 | ||||||
| Cash flows from investing activities: | ||||||||
| Expenditures for property, plant and equipment | (70 | ) | (109 | ) | ||||
| Proceeds from disposals of property, plant and equipment | 1 | 8 | ||||||
| Increase in investments | (296 | ) | - | |||||
| Decrease in investments | - | 1 | ||||||
| Cash paid for acquisitions, net of cash acquired | - | (20 | ) | |||||
| Other | (16 | ) | (6 | ) | ||||
| Net cash used for investing activities | (381 | ) | (126 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net increase/(decrease) in commercial paper | 950 | (931 | ) | |||||
| Net (decrease)/increase in short-term borrowings | (1 | ) | 6 | |||||
| Proceeds from issuance of common stock | 32 | 4 | ||||||
| Proceeds from issuance of long-term debt | - | 1,488 | ||||||
| Payments of long-term debt | (1,001 | ) | (493 | ) | ||||
| Excess tax benefits from share based payment arrangements | 2 | - | ||||||
| Cash dividends paid | (231 | ) | (224 | ) | ||||
| Net cash used for financing activities | (249 | ) | (150 | ) | ||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (63 | ) | (78 | ) | ||||
| Net increase/(decrease) in cash and cash equivalents | 50 | (13 | ) | |||||
| Cash and cash equivalents at beginning of period | 2,801 | 2,065 | ||||||
| Cash and cash equivalents at end of period | $ | 2,851 | $ | 2,052 | ||||
Q1'10 - Results - 9
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow and Calculation of Free Cash Flow Conversion (Unaudited)
(Dollars in millions)
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2010 | 2009 | 2010 Guidance | ||||||||
| Cash provided by operating activities | $ | 743 | $ | 341 | ~$3,500 - $3,800 | |||||
| Expenditures for property, plant and equipment | (70 | ) | (109 | ) | ~ $700 | |||||
| Free cash flow | $ | 673 | $ | 232 | $2,800 - $3,100 | |||||
We define free cash flow as cash provided by operating activities, less cash expenditures for property, plant and equipment.
Reconciliation of Earnings per share to Earnings per share, excluding pension expense (Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 20101 | 20091 | 2010 EPS Guidance2 | ||||||
| Earnings per share of common stock - assuming dilution | $ | 0.50 | $ | 0.54 | ~$2.30 - $2.45 | |||
| Pension expense | 0.18 | ~0.03 | ~ $0.77 | |||||
| Earnings per share of common stock - assuming dilution, excluding pension expense | $ | 0.68 | $ | 0.56 | ~$3.07 - $3.22 | |||
1- Utilizes weighted average shares outstanding and the effective tax rate for the period.
2- Assumes weighted average shares outstanding of 780 million and a 26.5% effective tax rate for 2010 guidance.
We believe that earnings per share of common stock - assuming dilution, excluding pension expense is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.