Exhibit 99
[HONEYWELL LETTERHEAD]
News Release
Contact:
Media Investors
Rich Silverman Dan Gallagher
973-455-4732 973-455-2222
richard.silverman@honeywell.com an.gallagher@honeywell.com
HONEYWELL'S SECOND-QUARTER EARNINGS PER SHARE
37 CENTS; CASH FROM OPERATIONS $553 MILLION
o Revenues of $5.7 billion, up 2% vs. 2002
o Free cash flow of $382 million equals 120% of net income
o More than $1.3 billion in new Aerospace contracts announced at Paris Air Show
o Continued progress on Specialty Materials portfolio
MORRIS TOWNSHIP, N.J., July 17, 2003 -- Honeywell (NYSE: HON) today
announced second-quarter earnings per share of 37 cents, in line with prior
earnings guidance. The results are 19 cents below the same period last year, due
to nine cents worth of higher pension expense, including the effect of dilution
from the prior year's contribution of shares to the company's pension plans;
four cents from lower sales in higher margin businesses; and four cents from
increased product development and other expenses. Revenues of $5.7 billion were
up 2% from the previous year, driven by 4% of foreign currency translation. Free
cash flow of $382 million includes the impact of a $170 million voluntary
pension contribution.
"The results for the second quarter represent solid performance for
Honeywell with good revenues, earnings and cash flow in a difficult economic
environment," said Honeywell Chairman and Chief Executive Officer Dave Cote. "We
continue to be focused on executing key strategies, improving customer service,
reducing cycle times and investing to support our growth initiatives. The
results from the quarter reflect the determination of our management team and
the efforts of Honeywell employees worldwide."
Segment profit margins were 8.8%, compared with 12.2% in the same
period last year. The increase in pension costs accounted for 1.5 percentage
points of the change with the remainder primarily due to declines in commercial
aerospace and increased product development and administrative expenses. Free
cash flow equaled 120% of net income with working capital contributing
approximately $100 million in the quarter after adjusting for the non-cash
impact of foreign currency translation. Cash and cash equivalents reached $2.6
billion, resulting in net debt of $2.8 billion, or 22% of net capital.
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2-results
"The second quarter also featured significant progress in each of our
businesses," Mr. Cote said. "In addition to the $1.3 billion in new contracts
announced at the Paris Air Show, Honeywell's Aerospace business received an
order for Primus Epic integrated cockpits for 85 to 135 new Embraer regional
jets purchased by US Airways. In another highlight, Primus Epic obtained its
first government approval as part of the Bell/Agusta AB139 helicopter's
certification in Italy.
"During the quarter in our Automation and Control Solutions business
(ACS), cumulative orders climbed above $240 million for the Experion PKS'TM'
process control system. Our turbocharger business had its fourth consecutive
quarter of double-digit revenue growth, exhibiting strength in all geographic
regions. And, we took an important step in the reorganization of our Specialty
Materials business by completing transactions with BASF.
"We also named a highly regarded financial professional to be our new
Chief Financial Officer. Dave Anderson's credibility and experience in global
corporate finance will help Honeywell chart its course for the future."
* * * * *
Second-Quarter Segment Highlights
Aerospace
o Revenues were down 2% compared with the second quarter of 2002, primarily
as a result of commercial aerospace.
o Segment margins were 10.4%, down from 16.5%, due to lower sales of
commercial original equipment and higher-margin commercial spare parts, as
well as higher pension costs.
o The company announced more than $1.3 billion in new orders at the Paris Air
Show, including contract wins to supply avionics, auxiliary power units,
and wing anti-ice valves on easyJet's 120 Airbus A319 aircraft; Primus Epic
integrated cockpits for 100 to 200 new Embraer regional aircraft purchased
by JetBlue; avionics for the F-35 Joint Strike Fighter; pneumatics for
General Electric's GP7200 engine for the Airbus A380 as well as engine
accessories and valves for GE engines that power the U.S. Air Force C5
transport; and weather radar for the U.S. Air Force's fleet of C-17
"Globemaster" transport aircraft.
o The Federal Aviation Administration selected the company to provide
development, manufacturing, airport installation, training and support for
the new satellite-based precision approach and landing system known as the
Local Area Augmentation System, a program with a lifetime value that, with
the exercise of contract options, could exceed $350 million.
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3-results
Automation and Control Solutions
o Revenues were up 4% compared with the second quarter of 2002, due mostly to
acquisitions and favorable foreign currency translation.
o Segment margins were 9.6%, compared with 12.5% in the second quarter of
2002, driven by increased pension costs, a decline in higher margin sales
in ACS' service business and increased research and development and other
expenses.
o ACS' service business announced a new contract to supply and install
advanced fire detection and life safety systems at the Dallas/Fort Worth
International Airport - the latest in a series of integrated offerings to
airport authorities worldwide.
o Frost & Sullivan, a global leader in market research, named ACS the 2003
Industrial Controls Solutions Company of the Year, attributing the success
to products such as the Experion PKS'TM' process control system that
automates, controls and monitors manufacturing operations.
Transportation Systems
o Revenues increased 15% year-over-year driven by continued strong growth in
turbochargers and favorable foreign currency translation.
o Turbocharger sales continued to be strong in all regions as Europe
increased 34%, North America increased 30% and Asia increased 17%.
o Segment margins were 12.1%, compared with 12.9% a year ago, primarily
reflecting increased pension costs and new product development and
introduction expenses.
o The company announced a $29.1 million agreement with BorgWarner to extend
the current license agreement on Honeywell's innovative variable geometric
turbocharger technology in order to avoid any disruptions to automotive
customers, bringing the aggregate settlement agreement to $54.1 million.
Specialty Materials
o Revenues were down 5%, compared with the second quarter of 2002, due
largely to the disposition of Advanced Circuits and Pharmaceutical Fine
Chemicals.
o Segment margins of 3.4% were down slightly from the prior year as the
benefits of cost actions and divestitures of non-core businesses partially
offset lower prices and higher pension and raw material costs.
o The group completed two transactions with BASF in which Honeywell sold its
engineering plastics business to BASF in exchange for BASF's nylon fiber
business and $90 million in cash.
o Complementing Honeywell's already strong position in barrier technologies,
the company completed its acquisition of Kolon Industries Inc.'s biaxally
oriented nylon films facility in Dangjin, South Korea.
o Specialty Materials announced an agreement to sell its Metglas Solutions
business to Hitachi Metals, Ltd.
* * * * *
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4-results
During the quarter, Honeywell also recognized an after-tax gain of $15
million on the settlement of a patent-infringement lawsuit, an after-tax gain of
$9 million related to the sale of non-strategic businesses and recorded an
after-tax liability of $21 million primarily related to environmental
litigation. The company also purchased the assets under leases qualifying as
variable interest entities resulting in the assumption of $268 million of debt.
Honeywell will discuss its results during its investor webcast at
8:30am ET today. The webcast and related presentation materials will be
available at www.honeywell.com/investor.
* * * * *
Honeywell is a $22 billion diversified technology and manufacturing
leader, serving customers worldwide with aerospace products and services;
control technologies for buildings, homes and industry; turbochargers;
automotive products; specialty chemicals; fibers; and electronic and advanced
materials. Based in Morris Township, N.J., Honeywell is one of 30 stocks that
make up the Dow Jones Industrial Average and is a component of the Standard &
Poor's 500 Index. Its shares are traded on the New York Stock Exchange under the
symbol HON, as well as on the London, Chicago and Pacific Stock Exchanges. For
more about Honeywell, visit www.honeywell.com.
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This release contains forward-looking statements as defined in Section 21E of
the Securities Exchange Act of 1934, including statements about future business
operations, financial performance and market conditions. Such forward-looking
statements involve risks and uncertainties inherent in business forecasts as
further described in our filings under the Securities Exchange Act.
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# # #
5-results
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Three Months Ended June 30,
---------------------------
2003 2002
------- -------
Net sales $5,749 $5,651
------- -------
Costs, expenses and other
Cost of goods sold 4,514 (A) 4,431 (D)
Selling, general and administrative expenses 762 (A) 660
(Gain) loss on sale of non-strategic businesses (31)(B) 166 (E)
Equity in (income) loss of affiliated companies (6) (3)(D)
Other (income) expense (24)(C) (6)
Interest and other financial charges 87 88
------- -------
5,302 5,336
------- -------
Income before taxes 447 315
Tax expense (benefit) 128 (144)
------- -------
Net income $ 319 $ 459
======= =======
Earnings per share of common stock - basic $ 0.37 $ 0.56
======= =======
Earnings per share of common stock - assuming dilution $ 0.37 $ 0.56
======= =======
Weighted average number of shares outstanding-basic 860 819
======= =======
Weighted average number of shares outstanding -
assuming dilution 861 823
======= =======
(A) Cost of goods sold and selling, general and administrative expenses include
provisions of $29 and $5 million, respectively, for legacy environmental
matters deemed probable and reasonably estimable in the second quarter of
2003 and net repositioning and other charges. Total net pretax charges were
$34 million (after-tax $21 million, or $0.03 per share).
(B) Represents the pretax gain on the sale of our Engineering Plastics business
including the tax benefits associated with prior capital losses (after-tax
$9 million, or $0.01 per share).
(C) Includes a gain of $20 million (after-tax $15 million, or $0.02 per share)
related to the settlement of a patent infringement lawsuit.
(D) Cost of goods sold includes a provision of $127 million for net
repositioning and other charges. Equity in (income) loss of affiliated
companies includes a charge of $10 million for severance actions by an
investee. Total net pretax charges were $137 million (after-tax $93
million, or $0.11 per share).
(E) Represents the pretax loss on the disposition of our Pharmaceutical Fine
Chemicals and Automation and Control's Consumer Products businesses
(after-tax gain $98 million, or $0.12 per share). The after-tax gain is due
to the higher deductible tax basis than book basis in the shares sold.
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6-results
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Six Months Ended June 30,
--------------------------
2003 2002
------- -------
Net sales $11,148 $10,850
------- -------
Costs, expenses and other
Cost of goods sold 8,754 (A) 8,504 (E)
Selling, general and administrative expenses 1,465 (A) 1,277 (E)
(Gain) loss on sale of non-strategic businesses (31)(B) 41 (F)
Business impairment charges - 43 (E)
Equity in (income) loss of affiliated companies (4) (10)(E)
Other (income) expense (27)(C) (22)
Interest and other financial charges 171 175
------- --------
10,328 10,008
------- --------
Income before taxes and cumulative effect of accounting change 820 842
Tax expense 227 7
------- --------
Income before cumulative effect of accounting change 593 835
Cumulative effect of accounting change (20)(D) -
------- --------
Net income $ 573 $ 835
======= ========
Earnings per share of common stock - basic:
Income before cumulative effect of accounting change $ 0.69 $ 1.02
Cumulative effect of accounting change (0.02)(D) -
------- --------
Net income $ 0.67 $ 1.02
======= ========
Earnings per share of common stock - assuming dilution:
Income before cumulative effect of accounting change $ 0.69 $ 1.02
Cumulative effect of accounting change (0.02)(D) -
------- --------
Net income $ 0.67 $ 1.02
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Weighted average number of shares outstanding-basic 858 818
======= ========
Weighted average number of shares outstanding -
assuming dilution 859 822
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(A) Cost of goods sold and selling, general and administrative expenses include
provisions of $29 and $5 million, respectively, for legacy environmental
matters deemed probable and reasonably estimable in the second quarter of
2003 and net repositioning and other charges. Total net pretax charges were
$34 million (after-tax $21 million, or $0.03 per share).
(B) Represents the pretax gain on the sale of our Engineering Plastics business
including the tax benefits associated with prior capital losses (after-tax
$9 million, or $0.01 per share).
(C) Includes a gain of $20 million (after-tax $15 million, or $0.02 per share)
related to the settlement of a patent infringement lawsuit.
(D) Effective January 1, 2003, we adopted Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS No.
143). SFAS No. 143 requires recognition of the fair value of obligations
associated with the retirement of tangible long-lived assets when there is
a legal obligation to incur such costs. This adoption resulted in an
after-tax cumulative effect adjustment of expense of $20 million, or $0.02
per share.
(E) Cost of goods sold and selling, general and administrative expenses include
provisions of $173 and $4 million, respectively, for net repositioning and
other charges. Equity in (income) loss of affiliated companies includes a
charge of $13 million principally for severance actions by an investee.
Including business impairment charges, total net pretax charges were $233
million (after-tax $162 million, or $0.20 per share).
(F) Represents the net pretax loss on the dispositions of our Bendix Commercial
Vehicle Systems, Pharmaceutical Fine Chemicals and Automation and Control's
Consumer Products businesses (after-tax gain $177 million, or $0.22 per
share). The after-tax gain is due to the higher deductible tax basis than
book basis in the shares sold.
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7-results
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
Periods Ended June 30,
--------------------------
Three Months Six Months
Net Sales ------------ ----------
- --------- 2003 2002 2003 2002
-------- -------- --------- ---------
Aerospace $ 2,161 $ 2,204 $ 4,223 $ 4,293
Automation and Control Solutions 1,837 1,758 3,554 3,367
Specialty Materials 823 870 1,600 1,628
Transportation Systems 925 805 1,765 1,531
Corporate 3 14 6 31
-------- -------- --------- ---------
Total $ 5,749 $ 5,651 $ 11,148 $ 10,850
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Periods Ended June 30,
---------------------
Three Months Six Months
Segment Profit ------------ ----------
- -------------- 2003 2002 2003 2002
-------- -------- --------- ---------
Aerospace $ 224 $ 364 $ 442 $ 671
Automation and Control Solutions 177 220 362 427
Specialty Materials 28 34 38 42
Transportation Systems 112 104 187 177
Corporate (34) (35) (66) (71)
-------- -------- --------- ---------
Total Segment Profit 507 687 963 1,246
Gain (loss) on sale of non-strategic businesses 31 (166) 31 (41)
Business impairment charges - - - (43)
Equity in income of affiliated companies 6 3 4 10
Other income 24 6 27 22
Interest and other financial charges (87) (88) (171) (175)
Repositioning and other charges included in cost
of goods sold and selling, general and
administrative expenses (34) (127) (34) (177)
-------- -------- --------- ---------
Income before taxes and cumulative effect
of accounting change $ 447 $ 315 $ 820 $ 842
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8-results
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
June 30, December 31,
2003 2002
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 2,626 $ 2,021
Accounts, notes and other receivables 3,353 3,264
Inventories 3,055 2,953
Deferred income taxes 1,592 1,296
Other current assets 490 661
------- -------
Total current assets 11,116 10,195
Investments and long-term receivables 649 624
Property, plant and equipment - net 4,222 4,055
Goodwill 5,717 5,698
Other intangible assets - net 1,087 1,074
Insurance recoveries for asbestos related liabilities 1,370 1,636
Deferred income taxes 303 533
Prepaid pension benefit cost 2,775 2,675
Other assets 1,294 1,069
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Total assets $28,533 $27,559
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LIABILITIES & SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 2,093 $ 1,912
Short-term borrowings 147 60
Commercial paper 188 201
Current maturities of long-term debt 53 109
Accrued liabilities 4,168 4,292
------- -------
Total current liabilities 6,649 6,574
Long-term debt 5,042 4,719
Deferred income taxes 512 419
Postretirement benefit obligations other than pensions 1,685 1,684
Asbestos related liabilities 2,394 2,700
Other liabilities 2,512 2,538
Shareowners' equity 9,739 8,925
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Total liabilities and shareowners' equity $28,533 $27,559
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9-results
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2003 2002 2003 2002
------- ------- ------- -------
Cash flows from operating activities:
Net income $ 319 $ 459 $ 573 $ 835
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of accounting change - - 31 -
(Gain) loss on sale of non-strategic businesses (31) 166 (31) 41
Repositioning and other charges 34 137 34 190
Business impairment charges - - - 43
Insurance receipts for asbestos related liabilities 475 35 477 55
Asbestos related liability payments (357) (42) (388) (50)
Depreciation 148 164 290 340
Undistributed earnings of equity affiliates (6) (13) (4) (23)
Deferred income taxes 85 (86) 134 35
Pension contributions - U.S. plans (170) - (170) -
Other 90 (115) 65 (251)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables (51) (247) (80) (77)
Inventories (5) 51 (95) 42
Other current assets (24) (32) 18 (26)
Accounts payable 65 40 175 (8)
Accrued liabilities (19) 205 (3) (19)
------- ------- ------- -------
Net cash provided by operating activities 553 722 1,026 1,127
------- ------- ------- -------
Cash flows from investing activities:
Expenditures for property, plant and equipment (171) (152) (276) (299)
Proceeds from disposals of property, plant and equipment - 13 - 21
Cash paid for acquisitions (32) (3) (122) (19)
Proceeds from sales of businesses 90 90 90 186
Decrease in short-term investments - - - 7
------- ------- ------- -------
Net cash (used for) investing activities (113) (52) (308) (104)
------- ------- ------- -------
Cash flows from financing activities:
Net increase (decrease) in commercial paper (190) - (13) 237
Net increase (decrease) in short-term borrowings 82 (11) 78 (62)
Proceeds from issuance of common stock 7 12 31 34
Payments of long-term debt - (182) (70) (382)
Cash dividends on common stock (161) (153) (322) (306)
------- ------- ------- -------
Net cash (used for) financing activities (262) (334) (296) (479)
------- ------- ------- -------
Effect of foreign exchange rate changes on cash and cash equivalents 158 48 183 39
------- ------- ------- -------
Net increase in cash and cash equivalents 336 384 605 583
Cash and cash equivalents at beginning of period 2,290 1,592 2,021 1,393
------- ------- ------- -------
Cash and cash equivalents at end of period $ 2,626 $ 1,976 $ 2,626 $ 1,976
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10-results
Honeywell International Inc.
(Dollars in Millions)
Reconciliation of Cash Provided by Operating Activities
to Free Cash Flow (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2003 2002 2003 2002
----- ----- ------ ------
Cash provided by operating activities $ 553 $ 722 $1,026 $1,127
Expenditures for property, plant and equipment (171) (152) (276) (299)
----- ----- ------ ------
Free cash flow $ 382 $ 570 $ 750 $ 828
===== ===== ====== ======
We define free cash flow as cash provided by operating activities, less cash
expenditures for property, plant and and equipment.
We believe that this metric is useful to investors and management as a measure
of cash generated by business operations that 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. 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.
Reconciliation of Operating Income to Segment Profit (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
2003 2002 2003 2002
------ ------ ------- -------
Net sales $ 5,749 $ 5,651 $11,148 $10,850
Cost of goods sold (4,514) (4,431) (8,754) (8,504)
Selling, general and administrative expenses (762) (660) (1,465) (1,277)
------- ------- ------- ------
Operating income 473 560 929 1,069
Add: Repositioning and other charges included
in cost of goods sold and selling, general
and administrative expenses 34 127 34 177
------- ------- ------- ------
Segment profit $ 507 $ 687 $ 963 $ 1,246
======= ======= ======= =======
We evaluate segment and company performance based on segment profit, which
excludes (gains) losses on sales of non-strategic businesses, equity (income)
loss, other (income) expense, interest and other financial charges and
repositioning, litigation, business impairment and other charges.