Exhibit 99
[HONEYWELL LETTERHEAD]
NEWS RELEASE
Contact:
Media Investors
Victoria Streitfeld Dan Gallagher
973-455-5281 973-455-2222
victoria.streitfeld@honeywell.com dan.gallagher@honeywell.com
HONEYWELL'S 2003 EARNINGS $1.3 BILLION; CASH FROM OPERATIONS $2.2 BILLION;
FOURTH-QUARTER REVENUE UP 5.7%
o Full-year earnings per share of $1.54
o 2003 revenues of $23.1 billion
o Full-year free cash flow of $1.5 billion, including $670 million pension
contribution
o Fourth-quarter revenues increase in all four operating segments
MORRIS TOWNSHIP, NJ, January 29, 2004 -- Honeywell (NYSE: HON) today
announced full-year earnings per share of $1.54, in line with prior earnings
guidance. The results are $1.81 above the same period last year, due to 2002 net
charges of $2.27 partially offset by higher 2003 pension expense. Revenues of
$23.1 billion were up 3.7% from the previous year, driven primarily by favorable
foreign currency translation. Full-year cash flow from operations reached $2.2
billion, including a contribution of $670 million to the company's pension fund,
and full-year free cash flow (cash flow from operations less capital
expenditures) reached $1.5 billion.
"2003 was a year of significant progress," said Honeywell Chairman and
Chief Executive Dave Cote. "Revenue grew nearly 4% despite difficult market
conditions and we reported earnings of $1.3 billion, in line with our previous
guidance. Free cash flow of $1.5 billion was very strong and included $670
million of contributions to the pension plan, which significantly mitigates
future funding requirements. The balance sheet strengthened, and we finished the
year with $3 billion of cash on hand. We continued our focus on productivity and
also made improvements in cycle time, quality and delivery. We improved our
acquisition process and continued to make progress on the portfolio. Most
importantly, we made progress on our growth initiatives with significant
investments in new products and services that will benefit us in 2004 and
beyond."
Fourth-quarter earnings per share were 47 cents, in line with prior
earnings guidance. The results are $2.25 above the same period last year, due to
2002 net charges of $2.28 partially offset by higher 2003 pension expense.
Fourth quarter results include an after-tax increase of $129 million in
reserves for environmental and litigation matters, substantially offset by a
one-time tax
-MORE-
2-2003 results
benefit of $108 million associated with the termination of plans to sell the
company's Friction Materials business. Revenues of $6.2 billion were up 5.7%
from the previous year, driven primarily by favorable foreign currency
translation and organic growth in the Transportation and Specialty Materials
segments. Cash flow from operations was $503 million, including a contribution
of $500 million in the quarter to the company's pension fund, and free cash flow
reached $255 million.
"We see positive momentum in each of our four business segments as we
begin 2004," Mr. Cote said. "In the fourth quarter, we saw double-digit growth
in Turbochargers and core businesses in Specialty Materials. In our Commercial
Aerospace business we saw signs of recovery as global flying hours showed the
greatest year-over-year quarterly improvement since 2001. The downturn in
Commercial Construction has slowed and our Fire and Security businesses continue
to perform well. We are also encouraged by early indications of economic
recovery and are expecting year-over-year growth in revenues and margins in each
business segment."
* * * * *
Fourth-Quarter Segment Highlights
Aerospace
o Revenues were up 0.1%, compared with the fourth quarter of 2002, as a result
of higher sales in Defense and Space offset by weakness in Commercial
Aerospace.
o Segment margins reached 15.9%, compared with 14.3% a year ago, due to higher
productivity net of inflation and other expenses.
o The Primus Epic'r' cockpit was certified for Dassault's Falcon 900EX EASy
business jet.
o The HTF7000 engine entered service on Bombardier's Super-Midsize Challenger
300 Business Jet.
o Engines, Systems & Services won a $400 million contract to supply its RE220
APU to Sukoi Civil Aircraft for use on its RRJ regional aircraft.
Automation and Control Solutions
o Revenues were up 8.0%, compared with the fourth quarter of 2002, as a result
of acquisitions and favorable foreign currency translation.
o Segment margins were 12.3%, compared with 12.0% in the fourth quarter of
2002, with productivity gains offsetting increased investment.
o Honeywell's "Instant Alert'TM' for Schools," a new automated emergency
notification and communication system for parents and guardians, was
introduced.
o The company continues to grow its position in Commercial Security and
Home Networking by acquiring Silent Witness and the assets of FutureSmart
Systems.
o Asset Locator'TM', the company's new real-time tracking and monitoring
service, was used for the first time for school bus tracking; and has
continued to be installed as a hospital infant security system.
o Process Solutions' orders increased 24% over the same period last year
driven by Experion PKS'TM' wins.
-MORE-
3-2003 results
Specialty Materials
o Revenues were up 1.5%, compared with the fourth quarter of 2002, with 8.2%
organic growth partially offset by the disposition of non-core assets.
o Segment margins were 4.7%, compared with 1.7% in 2002, with higher volume,
price increases and synergies from the nylon transaction offsetting higher
raw material costs.
o The Spectra'r' business saw strong demand from the U.S. military for small
arms
protective insert plates.
o Increasing demand for HFCs, a key component of many non-ozone depleting
refrigerants and foam blowing agents, resulted in a 26% increase in
Fluorocarbon revenue, versus the prior year.
Transportation Systems
o Revenues increased 19.8%, compared with the fourth quarter of 2002, driven
by unit volume and favorable foreign currency translation.
o Segment margins were 13.2%, compared with 11.5% a year ago, driven by unit
volume.
o The Turbocharger business grew 34% primarily due to increased European
diesel penetration and higher AVNT sales for commercial vehicles.
o Consumer Products Group introduced FRAM AirHog, a high performance air
filter that expanded its leading brand into a new market segment.
Segment margins exclude pension and OPEB expense. See attached
financial statement schedules for a complete definition of segment profit.
Honeywell will discuss its results during its investor meeting at 10:30 a.m. EST
today. The webcast and related presentation materials will be available at
www.honeywell.com/investor.
* * * * *
Honeywell is a $23 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.
# # #
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Three Months Ended December 31,
-------------------------------
2003 2002
------- -------
Net sales $ 6,187 $ 5,855
------- -------
Costs, expenses and other
Cost of goods sold 4,972 (A) 4,875 (C)
Selling, general and administrative expenses 756 (A) 782 (C)
Loss on sale of non-strategic businesses 2 (B) 83 (D)
Asbestos related litigation charges, net of insurance - 1,548 (C)
Business impairment charges - 834 (C)
Equity in (income) loss of affiliated companies (27) (25)
Other (income) expense 35 22 (C)
Interest and other financial charges 82 83
------- -------
5,820 8,202
------- -------
Income (loss) before taxes 367 (2,347)
Tax (benefit) (40) (880)
------- -------
Net income (loss) $ 407 $(1,467)
======= =======
Earnings (loss) per share of common stock - basic $ 0.47 $ (1.78)
======= =======
Earnings (loss) per share of common stock - assuming dilution $ 0.47 $ (1.78)(E)
======= =======
Weighted average number of shares outstanding-basic 864 824
======= =======
Weighted average number of shares outstanding -
assuming dilution 866 824 (E)
======= =======
(A) Cost of goods sold and selling, general and administrative expenses
include provisions (credits) of $217 and ($3) million, respectively, for
legacy environmental matters deemed probable and reasonably estimable in
the fourth quarter of 2003 and net repositioning and other charges. Total
pretax charges were $214 million (after-tax $19 million, or $0.02 per
share). The after-tax charge includes a tax benefit associated with the
redesignation of our Friction Materials business from held for sale to
held and used.
(B) Represents adjustments to sales of non-strategic businesses in the third
quarter of 2003 (after-tax loss $2 million, with no effect on earnings per
share).
(C) Cost of goods sold, selling, general and administrative expenses and other
(income) expense include provisions of $388, $41 and $15 million,
respectively, for net repositioning and other charges. Including the
asbestos litigation and business impairment charges, total net pretax
charges were $2,826 million (after-tax $1,897 million, or $2.30 per
share).
(D) Represents the pretax loss on the sale of our Advanced Circuits business
(after-tax gain $18 million, or $0.02 per share). The after-tax gain is
due to the higher deductible tax basis than book basis in the shares sold.
(E) Dilutive securities issuable in connection with stock plans have been
excluded from the calculation of loss per share because their effect would
reduce the loss per share.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Twelve Months Ended December 31,
--------------------------------
2003 2002
-------- --------
Net sales $ 23,103 $ 22,274
-------- --------
Costs, expenses and other
Cost of goods sold 18,235 (A) 17,615 (E)
Selling, general and administrative expenses 2,950 (A) 2,757 (E)
(Gain) loss on sale of non-strategic businesses (38)(B) 124 (F)
Asbestos related litigation charges, net of insurance - 1,548 (E)
Business impairment charges - 877 (E)
Equity in (income) loss of affiliated companies (38)(A) (42)(E)
Other (income) expense 19 (C) (4)(E)
Interest and other financial charges 335 344
-------- --------
21,463 23,219
-------- --------
Income (loss) before taxes and cumulative effect of accounting change 1,640 (945)
Tax expense (benefit) 296 (725)
-------- --------
Income (loss) before cumulative effect of accounting change 1,344 (220)
Cumulative effect of accounting change (20)(D) -
-------- --------
Net income (loss) $ 1,324 $ (220)
======== =========
Earnings (loss) per share of common stock - basic:
Income (loss) before cumulative effect of accounting change $ 1.56 $ (0.27)
Cumulative effect of accounting change (0.02)(D) -
-------- --------
Net income (loss) $ 1.54 $ (0.27)
======== =========
Earnings (loss) per share of common stock - assuming dilution:
Income (loss) before cumulative effect of accounting change $ 1.56 $ (0.27)(G)
Cumulative effect of accounting change (0.02)(D) -
-------- --------
Net income (loss) $ 1.54 $ (0.27)(G)
======== =========
Weighted average number of shares outstanding-basic 861 820
======== =========
Weighted average number of shares outstanding -
assuming dilution 862 820 (G)
======== =========
(A) Cost of goods sold, selling, general and administrative expenses and
equity in (income) loss of affiliated companies include provisions of
$272, $4 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 $278 million (after-tax $41
million, or $0.05 per share). The after-tax charge includes tax benefits
from the redesignation of our Friction Materials business from held for
sale to held and used and 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 $4 million, with no
effect on earnings 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, selling, general and administrative expenses, equity
in (income) loss of affiliated companies and other (income) expense
include provisions of $561, $45, $13 and $15 million, respectively, for
net repositioning and other charges. Including the asbestos litigation and
business impairment charges, total net pretax charges were $3,059 million
(after-tax $2,059 million, or $2.51 per share).
(F) Represents the net pretax loss on the dispositions of our Bendix
Commercial Vehicle Systems, Pharmaceutical Fine Chemicals, Automation and
Control's Consumer Products and Advanced Circuits businesses (after-tax
gain $195 million, or $0.24 per share). The after-tax gain is due to the
higher deductible tax basis than book basis in the shares sold for the
Fine Chemicals, Consumer Products and Advanced Circuits businesses.
(G) Dilutive securities issuable in connection with stock plans have been
excluded from the calculation of loss per share because their effect would
reduce the loss per share.
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
Periods Ended December 31,
--------------------------
Net Sales Three Months Twelve Months
- --------- ------------ -------------
2003 2002 2003 2002
------- ------- ------- -------
Aerospace $ 2,359 $ 2,356 $ 8,813 $ 8,855
Automation and Control Solutions 2,035 1,884 7,464 6,978
Specialty Materials 792 780 3,169 3,205
Transportation Systems 1,000 835 3,650 3,184
Corporate 1 - 7 52
------- ------- ------- -------
Total $ 6,187 $ 5,855 $ 23,103 $ 22,274
======= ======= ========= ========
Periods Ended December 31,
--------------------------
Segment Profit Three Months Twelve Months
- -------------- ------------ -------------
2003 2002 2003 2002
------- ------- ------- -------
Aerospace $ 374 $ 338 $ 1,221 $ 1,308
Automation and Control Solutions 251 226 843 860
Specialty Materials 37 13 136 90
Transportation Systems 132 96 461 393
Corporate (43) (45) (142) (154)
------- ------- ------- ------
Total Segment Profit 751 628 2,519 2,497
Gain (loss) on sale of non-strategic businesses (2) (83) 38 (124)
Asbestos related litigation charges, net
of insurance - (1,548) - (1,548)
Business impairment charges - (834) - (877)
Equity in income of affiliated companies 27 25 38 42
Other income (expense) (35) (22) (19) 4
Interest and other financial charges (82) (83) (335) (344)
Pension and other postretirement benefits (expense)
income (A) (78) (1) (325) 11
Repositioning, environmental and other charges (A) (214) (429) (276) (606)
------- ------- ------- ------
Income (loss) before taxes and cumulative effect
of accounting change $ 367 $ (2,347) $ 1,640 $ (945)
======= ======= ========= =======
(A) Amounts included in cost of goods sold and selling, general and
administrative expenses.
Honeywell's Senior Management evaluates segment performance based on segment
profit. Segment profit is business unit income (loss) before taxes excluding
general corporate unallocated expenses, gains (losses) on sales of non-strategic
businesses, equity income (loss), other income (expense), interest and other
financial charges, pension and other postretirement benefits (expense) income,
and repositioning, environmental, litigation, business impairment and other
charges and the cumulative effect of accounting changes. In the fourth quarter
of 2003, Honeywell changed the definition of segment profit to exclude pension
and other postretirement benefits (expense) income. Pension and other
postretirement benefits (expense) income is significantly impacted by
external factors such as investment returns, interest rates and other actuarial
factors that Honeywell does not consider indicative of the underlying business
segment operating performance under the control of business unit management. All
periods presented have been restated to reflect this change.
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
December 31, December 31,
2003 2002
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 2,950 $ 2,021
Accounts, notes and other receivables 3,643 3,264
Inventories 2,939 2,953
Deferred income taxes 1,526 1,301
Other current assets 465 661
------- -------
Total current assets 11,523 10,200
Investments and long-term receivables 569 624
Property, plant and equipment - net 4,295 4,055
Goodwill 5,789 5,698
Other intangible assets - net 1,098 1,074
Insurance recoveries for asbestos related liabilities 1,317 1,636
Deferred income taxes 342 967
Prepaid pension benefit cost 3,173 2,242
Other assets 1,238 1,069
------- -------
Total assets $29,344 $27,565
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 2,240 $ 1,912
Short-term borrowings 152 60
Commercial paper - 201
Current maturities of long-term debt 47 109
Accrued liabilities 4,344 4,403
------- -------
Total current liabilities 6,783 6,685
Long-term debt 4,961 4,719
Deferred income taxes 316 186
Postretirement benefit obligations other than pensions 1,683 1,684
Asbestos related liabilities 2,279 2,700
Other liabilities 2,593 2,666
Shareowners' equity 10,729 8,925
------- -------
Total liabilities and shareowners' equity $29,344 $27,565
======= =======
Certain prior year amounts, principally related to deferred income taxes
and prepaid pension benefit cost, have been reclassified to conform with the
current year presentation.
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- -------------------
2003 2002 2003 2002
------ ------ ------ ------
Cash flows from operating activities:
Net income (loss) $ 407 $(1,467) $1,324 $ (220)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Cumulative effect of accounting change - - 20 -
(Gain) loss on sale of non-strategic businesses 2 83 (38) 124
Repositioning and other charges 214 444 278 634
Severance and exit cost payments (53) (94) (200) (447)
Environmental and non-asbestos litigation payments (32) (34) (91) (313)
Business impairment charges - 834 - 877
Asbestos related litigation charges, net of insurance - 1,548 - 1,548
Asbestos related liability payments (90) (71) (557) (135)
Insurance receipts for asbestos related liabilities 187 3 664 76
Depreciation 158 161 595 671
Undistributed earnings of equity affiliates (27) (25) (38) (55)
Deferred income taxes (11) (920) 344 (775)
Pension and other postretirement benefits expense (income) 78 1 325 (11)
Pension contributions - U.S. plans (500) (30) (670) (130)
Other postretirement benefit payments (55) (50) (203) (199)
Other 132 32 50 (74)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables (164) 74 (236) 105
Inventories 101 213 118 333
Other current assets 1 45 (20) 51
Accounts payable 122 80 240 63
Accrued liabilities 33 (73) 294 257
------ ------ ------ ------
Net cash provided by operating activities 503 754 2,199 2,380
------ ------ ------ ------
Cash flows from investing activities:
Expenditures for property, plant and equipment (248) (227) (655) (671)
Proceeds from disposals of property, plant and equipment 24 19 37 41
Decrease in investments - - - 91
Cash paid for acquisitions (75) (488) (199) (520)
Proceeds from sales of businesses - - 137 183
Decrease (increase) in short-term investments - (1) - 6
------ ------ ------ ------
Net cash (used for) investing activities (299) (697) (680) (870)
------ ------ ------ ------
Cash flows from financing activities:
Net increase (decrease) in commercial paper - 201 (201) 198
Net increase (decrease) in short-term borrowings - (25) 81 (96)
Proceeds from issuance of common stock 15 4 54 41
Proceeds from issuance of long-term debt - 6 - 6
Payments of long-term debt (66) (46) (147) (428)
Repurchases of common stock (37) - (37) -
Cash dividends on common stock (162) (154) (645) (614)
Other - (39) - (39)
------ ------ ------ ------
Net cash (used for) financing activities (250) (53) (895) (932)
------ ------ ------ ------
Effect of foreign exchange rate changes on cash and cash equivalents 126 15 305 50
------ ------ ------ ------
Net increase in cash and cash equivalents 80 19 929 628
Cash and cash equivalents at beginning of period 2,870 2,002 2,021 1,393
------ ------ ------ ------
Cash and cash equivalents at end of period $2,950 $2,021 $2,950 $2,021
====== ====== ====== ======
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2003 2002 2003 2002
------- ------ ------- -------
Cash provided by operating activities $ 503 $ 754 $2,199 $2,380
Expenditures for property, plant and equipment (248) (227) (655) (671)
------- ------ ------- -------
Free cash flow $ 255 $ 527 $1,544 $1,709
======= ====== ======= =======
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.