[HONEYWELL LOGO]
News Release Exhibit 99
Contact:
Media Investors
Michael Holland Dan Gallagher
973-455-2728 973-455-2222
michael.holland@honeywell.com dan.gallagher@honeywell.com
HONEYWELL'S THIRD-QUARTER EARNINGS PER SHARE
40 CENTS; CASH FROM OPERATIONS $670 MILLION
o Revenues of $5.8 billion, up 3.6% vs. 2002
o Record third-quarter free cash flow of $539 million
o Revenues increase in three of Honeywell's four operating segments
o Defense & Space and Turbochargers deliver double-digit revenue growth
MORRIS TOWNSHIP, N.J., October 16, 2003 -- Honeywell (NYSE: HON) today
announced third-quarter earnings per share of 40 cents, in line with prior
earnings guidance. The results are 10 cents below the same period last year,
primarily due to higher pension expense, including the effect of dilution from
the prior year's contribution of shares to the company's pension plans. Revenues
of $5.8 billion were up 3.6% from the previous year, driven primarily by
favorable foreign currency translation. Year-to-date cash flow from operations
reached $1.7 billion and year-to-date free cash flow (cash flow from operations
less capital expenditures) reached $1.3 billion.
"We delivered another solid quarter, with revenues and earnings on
target and record free cash flow, despite difficult market conditions," said
Honeywell Chairman and Chief Executive Officer Dave Cote. "We had revenue
increases in three of our four operating segments, and our Defense & Space and
Turbochargers businesses, which represent about a quarter of our portfolio,
posted double-digit revenue growth. These results demonstrate that our
management teams and employees around the globe are focused on creating a
stronger, more growth-focused Honeywell."
Net income was $344 million for the quarter. Free cash flow of $539
million was positively impacted by inventory reductions, lower capital
expenditures relative to depreciation expense and favorable cash tax payments.
Total debt minus cash and cash equivalents resulted in net debt of $2.3 billion,
or 19% of net capital, versus 22% at the end of the second quarter. Net capital
is defined as shareowners' equity plus net debt.
-MORE-
2-results
"We continue to demonstrate technological leadership across the
portfolio," Mr. Cote said. "Our Aerospace business was selected to develop
integrated software for the U.S. Army's Future Combat System program, and
received its first Federal Aviation Administration approval for the Primus
Epic[SYMBOL] integrated cockpit. In Automation and Control Solutions (ACS),
Experion PKS'TM' process control system was recognized by START magazine and
Microsoft with a Vision Award for innovation. Our Turbocharger business
delivered another quarter of impressive growth in all geographic regions and
successfully completed development of its third-generation Variable Nozzle
Turbocharger.
"We also continued steady progress on rationalizing the Specialty
Materials portfolio by completing the sale of two non-core businesses."
* * * * *
Third-Quarter Segment Highlights
Aerospace
o Revenues were up 1.1% compared with the third quarter of 2002, as a result
of strong sales in Defense & Space, which offset declines in Commercial
Aerospace.
o Segment margins were 13.6%, down from 15.3% a year ago, due primarily to
higher pension costs and commercial aftermarket sales mix.
o The company was selected by Boeing Co. and Science Applications
International Corp. to develop integrated software for the U.S. Army's
Future Combat System program. Estimated value of the contracts could be more
than $200 million during the program development phase.
o Aerospace's Primus Epic[SYMBOL] integrated avionics system received its
first Federal Aviation Administration approval for Gulfstream's G550
ultra-long-range business jet.
Automation and Control Solutions
o Revenues were up 8.6% compared with the third quarter of 2002, due to
acquisitions and favorable foreign currency translation.
o Segment margins were 10.9%, compared with 13.5% in the third quarter of
2002, driven by pricing, higher pension costs, Building Solutions' sales
mix and increased research and development and other expenses.
o ACS' Process Solutions business received a 2003 Technology & Business Award
from START Magazine and Microsoft for Experion PKS[SYMBOL], the company's
process control system.
o The Honeywell Round[SYMBOL] thermostat celebrated its 50th anniversary
during the third quarter. The Round[SYMBOL], part of a Smithsonian
Institution collection of pioneering designs, has sold 85 million units
since 1953.
-MORE-
3-results
Specialty Materials
o Revenues were down 2.5%, compared with the third quarter of 2002, due to the
disposition of Advanced Circuits and Metglas, partially offset by favorable
foreign currency translation.
o Segment margins were (1.0%), compared with 1.3% in the prior year, due to
higher pension costs, plant disruptions and raw materials, partially offset
by divestitures and cost actions.
o Specialty Materials completed the sale of its Metglas business to Hitachi
Metals, Ltd and its European textile operations to Glaeser Textile.
Transportation Systems
o Revenues increased 8.2%, compared with the third quarter of 2002, driven by
continued strong growth in turbochargers and favorable foreign currency
translation.
o Turbocharger sales were up 16% and continued to be strong in all regions as
Europe increased 17%, Americas 12% and Asia 7%.
o Segment margins were 10.3%, compared with 11.2% a year ago, primarily
reflecting higher pension costs and lower volume and unfavorable mix in
Friction Materials, partially offset by margin expansion in Turbochargers.
o Our Turbocharger business successfully completed development of its
third-generation Variable Nozzle Turbocharger to maintain its leadership in
the diesel car segment. Also, the Shanghai manufacturing facility produced
its one-millionth turbocharger during the quarter.
Honeywell will discuss its results during its investor webcast at 8:30
am 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
# # #
4-results
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Three Months Ended September 30,
2003 2002
-------- --------
Net sales $ 5,768 $ 5,569
-------- --------
Costs, expenses and other
Cost of goods sold 4,509 (A) 4,236
Selling, general and administrative expenses 729 (A) 698
(Gain) loss on sale of non-strategic businesses (9)(B) -
Equity in (income) loss of affiliated companies (7)(A) (7)
Other (income) expense 11 (4)
Interest and other financial charges 82 86
-------- --------
5,315 5,009
-------- --------
Income before taxes 453 560
Tax expense 109 148
-------- --------
Net income $ 344 $ 412
======== ========
Earnings per share of common stock - basic $ 0.40 $ 0.50
======== ========
Earnings per share of common stock - assuming dilution $ 0.40 $ 0.50
======== ========
Weighted average number of shares outstanding-basic 862 821
======== ========
Weighted average number of shares outstanding -
assuming dilution 865 823
======== ========
(A) Cost of goods sold, selling, general and administrative expenses and equity
in (income) loss of affiliated companies include provisions of $26, $2 and
$2 million, respectively, for legacy environmental matters deemed probable
and reasonably estimable in the third quarter of 2003 and net repositioning
and other charges. Total net pretax charges were $30 million (after-tax $1
million, with no effect on earnings per share). The after-tax charge
includes a tax benefit from a tax settlement related to a prior year asset
impairment.
(B) Represents the net pretax gain on the sale of several non-strategic
businesses (after-tax loss $3 million, with no effect on earnings per
share).
-MORE-
5-results
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Nine Months Ended September 30,
2003 2002
-------- --------
Net sales $ 16,916 $ 16,419
-------- --------
Costs, expenses and other
Cost of goods sold 13,263 (A) 12,740 (E)
Selling, general and administrative expenses 2,194 (A) 1,975 (E)
(Gain) loss on sale of non-strategic businesses (40)(B) 41 (F)
Business impairment charges - 43 (E)
Equity in (income) loss of affiliated companies (11)(A) (17)(E)
Other (income) expense (16)(C) (26)
Interest and other financial charges 253 261
-------- --------
15,643 15,017
-------- --------
Income before taxes and cumulative effect of accounting change 1,273 1,402
Tax expense 336 155
-------- --------
Income before cumulative effect of accounting change 937 1,247
Cumulative effect of accounting change (20)(D) -
-------- --------
Net income $ 917 $ 1,247
======== ========
Earnings per share of common stock - basic:
Income before cumulative effect of accounting change $ 1.09 $ 1.52
Cumulative effect of accounting change (0.02)(D) -
-------- --------
Net income $ 1.07 $ 1.52
======== ========
Earnings per share of common stock - assuming dilution:
Income before cumulative effect of accounting change $ 1.09 $ 1.52
Cumulative effect of accounting change (0.02)(D) -
-------- --------
Net income $ 1.07 $ 1.52
======== ========
Weighted average number of shares outstanding-basic 860 819
======== ========
Weighted average number of shares outstanding -
assuming dilution 861 822
======== ========
(A) Cost of goods sold, selling, general and administrative expenses and equity
in (income) loss of affiliated companies include provisions of $55, $7 and
$2 million, respectively, for legacy environmental matters deemed probable
and reasonably estimable in 2003 and net repositioning and other charges.
Total net pretax charges were $64 million (after-tax $22 million, or $0.03
per share). The after-tax charge includes a tax benefit from a tax
settlement related to a prior year asset impairment.
(B) Represents the net pretax gain on the sale of our Engineering Plastics and
several other non-strategic businesses (after-tax $6 million, or $0.01 per
share). The after-tax gain includes tax benefits associated with prior
capital losses.
(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.
-MORE-
6-results
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
Periods Ended September 30,
-----------------------------------------
Net Sales Three Months Nine Months
2003 2002 2003 2002
------- ------- ------- -------
Aerospace $ 2,231 $ 2,206 $ 6,454 $ 6,499
Automation and Control Solutions 1,875 1,727 5,429 5,094
Specialty Materials 777 797 2,377 2,425
Transportation Systems 885 818 2,650 2,349
Corporate - 21 6 52
------- ------- ------- -------
Total $ 5,768 $ 5,569 $16,916 $16,419
======= ======= ======= =======
Periods Ended September 30,
-----------------------------------------
Three Months Nine Months
2003 2002 2003 2002
------- ------- ------- -------
Aerospace $ 303 $ 338 $ 745 $ 1,009
Automation and Control Solutions 205 233 567 660
Specialty Materials (8) 10 30 52
Transportation Systems 91 92 278 269
Corporate (33) (38) (99) (109)
------- ------- ------- -------
Total Segment Profit 558 635 1,521 1,881
Gain (loss) on sale of non-strategic businesses 9 - 40 (41)
Business impairment charges - - - (43)
Equity in income of affiliated companies 7 7 11 17
Other income (expense) (11) 4 16 26
Interest and other financial charges (82) (86) (253) (261)
Repositioning, environmental and other charges
included in cost of goods sold and selling,
general and administrative expenses (28) - (62) (177)
------- ------- ------- -------
Income before taxes and cumulative effect
of accounting change $ 453 $ 560 $ 1,273 $ 1,402
======= ======= ======= =======
-MORE-
7-results
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
September 30, December 31,
2003 2002
------------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,870 $ 2,021
Accounts, notes and other receivables 3,354 3,264
Inventories 2,930 2,953
Deferred income taxes 1,424 1,296
Other current assets 645 661
------- -------
Total current assets 11,223 10,195
Investments and long-term receivables 643 624
Property, plant and equipment - net 4,168 4,055
Goodwill 5,712 5,698
Other intangible assets - net 1,101 1,074
Insurance recoveries for asbestos related liabilities 1,253 1,636
Deferred income taxes 321 533
Prepaid pension benefit cost 2,767 2,675
Other assets 1,197 1,069
------- -------
Total assets $28,385 $27,559
======= =======
LIABILITIES & SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 2,032 $ 1,912
Short-term borrowings 149 60
Commercial paper - 201
Current maturities of long-term debt 52 109
Accrued liabilities 4,361 4,292
------- -------
Total current liabilities 6,594 6,574
Long-term debt 5,006 4,719
Deferred income taxes 510 419
Postretirement benefit obligations other than pensions 1,684 1,684
Asbestos related liabilities 2,217 2,700
Other liabilities 2,490 2,538
Shareowners' equity 9,884 8,925
------- -------
Total liabilities and shareowners' equity $28,385 $27,559
======= =======
-MORE-
8-results
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------- ------- ------- -------
Cash flows from operating activities:
Net income $ 344 $ 412 $ 917 $ 1,247
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 (9) - (40) 41
Repositioning and other charges 30 - 64 190
Litton settlement payment, net of tax refund - (162) - (162)
Business impairment charges - - - 43
Insurance receipts for asbestos related liabilities - 18 477 73
Asbestos related liability payments (79) (14) (467) (64)
Depreciation 147 170 437 510
Undistributed earnings of equity affiliates (7) (7) (11) (30)
Deferred income taxes 145 96 279 131
Pension contributions - U.S. plans - (100) (170) (100)
Other 17 (60) 82 (311)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables 8 108 (72) 31
Inventories 112 78 17 120
Other current assets (39) 32 (21) 6
Accounts payable (57) (9) 118 (17)
Accrued liabilities 58 (63) 55 (82)
------- ------- ------- -------
Net cash provided by operating activities 670 499 1,696 1,626
------- ------- ------- -------
Cash flows from investing activities:
Expenditures for property, plant and equipment (131) (145) (407) (444)
Proceeds from disposals of property, plant and equipment 13 1 13 22
Decrease in investments - 91 - 91
Cash paid for acquisitions (2) (13) (124) (32)
Proceeds from sales of businesses 47 (3) 137 183
Decrease in short-term investments - - - 7
------- ------- ------- -------
Net cash (used for) investing activities (73) (69) (381) (173)
------- ------- ------- -------
Cash flows from financing activities:
Net (decrease) in commercial paper (188) (240) (201) (3)
Net increase (decrease) in short-term borrowings 3 (9) 81 (71)
Proceeds from issuance of common stock 8 3 39 37
Payments of long-term debt (11) - (81) (382)
Cash dividends on common stock (161) (154) (483) (460)
------- ------- ------- -------
Net cash (used for) financing activities (349) (400) (645) (879)
------- ------- ------- -------
Effect of foreign exchange rate changes on cash and cash
equivalents (4) (4) 179 35
------- ------- ------- -------
Net increase in cash and cash equivalents 244 26 849 609
Cash and cash equivalents at beginning of period 2,626 1,976 2,021 1,393
------- ------- ------- -------
Cash and cash equivalents at end of period $ 2,870 $ 2,002 $ 2,870 $ 2,002
======= ======= ======= =======
-MORE-
9-results
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------- ------- ------- -------
Cash provided by operating activities $ 670 $ 499 $ 1,696 $ 1,626
Expenditures for property, plant and equipment (131) (145) (407) (444)
------- ------- ------- -------
Free cash flow $ 539 $ 354 $ 1,289 $ 1,182
======= ======= ======= =======
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.