Exhibit 99
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 FIRST-QUARTER EARNINGS PER SHARE 34 CENTS, UP 13% VERSUS PRIOR YEAR
o Revenues climb 14% with increases in all four operating segments
o Earnings increase 13% despite pension/OPEB headwind
o First-quarter operating cash flow of $337 million
o Outlook for continued strong performance for 2004
MORRIS TOWNSHIP, N.J., April 21, 2004 -- Honeywell (NYSE: HON) today
announced first-quarter earnings per share of 34 cents, an increase of 4 cents
or 13% over the prior year. The results are primarily due to increased segment
income, partially offset by higher pension and OPEB expense. Revenues of $6.2
billion were up 14% from the previous year, due to strong volume growth,
favorable foreign currency translation, and additional reporting days in the
first quarter of 2004 compared to 2003. Cash flow from operations was $337
million and free cash flow (cash flow from operations less capital expenditures)
was $202 million.
"We are very encouraged by the results of the first quarter, as strong
revenues and earnings reflect good execution and some improvement in market
conditions," said Honeywell Chairman and Chief Executive Officer Dave Cote. "We
had significant revenue increases in all four operating segments, with overall
organic growth over 5%. Net income grew 16% driven by segment profit growth of
20%, reflecting strong conversion on higher volumes even as we continue to
invest in new products and marketing initiatives. The first quarter represents a
terrific start to the year and gives us confidence in the full year outlook for
the company."
Net income was $295 million for the quarter, including pension/OPEB
after-tax expense of $118 million. Operating cash flow of $337 million was $136
million below the same period last year due to working capital usage supporting
revenue growth. Total debt minus cash and cash equivalents resulted in net debt
of $2.3 billion, or 18% of net capital (shareowners' equity plus net debt),
despite share repurchases of $229 million and dividend payouts of $161 million.
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2-results
"In addition to great operating performance, we continue to do well
with our growth initiatives," Mr. Cote said. "Our Aerospace business received
its third Federal Aviation Administration approval for the Primus Epic'r'
integrated avionics system on the new Embraer 170 regional jet, as well as
certification for its Runway Awareness and Advisory System, a safety system
aimed at reducing aircraft runway accidents. In Automation and Control
Solutions, we introduced the latest version of Experion'TM' Process Knowledge
System software, elevating performance in process industries. Our Turbocharger
business gained further acceptance of its AVNT technology in the North American
light truck segment. In Specialty Materials, we increased production in our new
HFC plants as demand for proprietary HFC products continued to grow as customers
around the world transition from CFCs and HCFCs to our ozone friendly solution."
* * * * *
First-Quarter Segment Highlights
Aerospace
o Revenues were up 12% compared with the first quarter of 2003, as a result
of strong sales in both the Commercial and Defense & Space segments as well
as additional reporting days in the quarter.
o Segment margins were 13.3%, up from 12.5% a year ago, due primarily to
strong revenue growth, partially offset by increased investments and lower
licensing income.
o Honeywell was selected to supply the health management/crew information
system and the navigation system to Boeing's 7E7 Dreamliner. The program
value is estimated to be $1.5 billion over the life of the project.
o Aerospace's Primus Epic'r' integrated avionics system and its fly-by-wire
system received Federal Aviation Administration (FAA) certification on the
Embraer 170 regional jet. The certification is the first for the combined
Honeywell Primus Epic and fly-by-wire systems and the first certification
of Primus Epic on a commercial airliner.
o The company's Runway Awareness and Advisory System (RAAS), a new safety
system aimed at reducing the number of aircraft accidents on airport
runways, received FAA certification.
Automation and Control Solutions
o Revenues were up 13% compared with the first quarter of 2003, due to
favorable foreign currency translation and additional reporting days in the
quarter.
o Segment margins were 10.0%, compared with 11.5% in the first quarter of
2003, driven by additional investment in sales and marketing resources, new
product introductions and ERP.
o ACS' Process Solutions business received contracts in Croatia and Korea to
automate operations to improve production, safety and environmental
performance of power systems. India's largest private-sector steel company
awarded the company a contract to automate its blast furnace operation.
o The latest version of Experion'TM' Process Knowledge System software was
released, enhancing performance in the process industries.
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3-results
Transportation Systems
o Revenues increased 28%, compared with the first quarter of 2003, driven by
continued strong growth in Turbochargers, favorable foreign currency
translation and additional reporting days in the quarter.
o Segment margins were 13.4%, compared with 11.0% a year ago, primarily
reflecting strong volume growth in Turbochargers.
o Turbocharger sales were up 38% and continued to be strong in all regions as
Europe increased 42%, Americas 35% and Asia 21%.
o The Fram'r' Air Hog'TM', a high-performance automotive air filter, was
introduced and generated strong retail interest.
Specialty Materials
o Revenues were up 10%, compared with the first quarter of 2003, due to
strong volume and price, additional reporting days in the quarter and
favorable foreign currency translation, partially offset by the divestiture
of noncore businesses.
o Segment margins were 5.6%, compared with 4.0% in the prior year, due to
pricing gains and volume growth partially offset by increased raw materials
costs.
o The demand for Honeywell's proprietary HFC products for refrigeration and
air conditioning applications, as well as for blowing agents for insulation
applications, continued to grow as customers around the world transition
from ozone-depleting CFCs and HCFCs to ozone friendly HFCs.
o Electronic Materials revenues increased 26%, driven by strong semiconductor
demand.
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 $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.
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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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Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Three Months Ended March 31,
----------------------------
2004 2003
------------ ------------
Net sales $ 6,178 $ 5,399
------------ ------------
Costs, expenses and other
Cost of goods sold 4,930 (A) 4,240
Selling, general and administrative expenses 808 (A) 703
(Gain) on sale of non-strategic businesses (32)(B) -
Equity in (income) loss of affiliated companies (7)(A) 2
Other (income) expense (10) (3)
Interest and other financial charges 84 84
------------ ------------
5,773 5,026
------------ ------------
Income before taxes and cumulative effect of accounting change 405 373
Tax expense 110 99
------------ ------------
Income before cumulative effect of accounting change 295 274
Cumulative effect of accounting change - (20)(C)
------------ ------------
Net income $ 295 $ 254
============ ============
Earnings per share of common stock - basic:
Income before cumulative effect of accounting change $ 0.34 $ 0.32
Cumulative effect of accounting change - (0.02)(C)
------------ ------------
Net income $ 0.34 $ 0.30
============ ============
Earnings per share of common stock - assuming dilution:
Income before cumulative effect of accounting change $ 0.34 $ 0.32
Cumulative effect of accounting change - (0.02)(C)
------------ ------------
Net income $ 0.34 $ 0.30
============ ============
Weighted average number of shares outstanding-basic 861 857
============ ============
Weighted average number of shares outstanding -
assuming dilution 864 858
============ ============
(A) Cost of goods sold, selling, general and administrative expenses and
equity in (income) loss of affiliated companies include provisions of
$52, $2 and $2 million, respectively, for environmental, litigation and
net repositioning charges. Total pretax charges were $56 million
(after-tax $35 million, or $0.04 per share).
(B) Represents the pretax gain on the sale of our VCSEL Optical Products
business (after-tax $14 million, or $0.02 per share).
(C) 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 expense adjustment of $20
million, or $0.02 per share.
We report our quarterly financial information using a calendar
convention; that is, the first, second and third quarters are
consistently reported as ending on March 31, June 30 and September 30,
respectively. It has been our practice to establish actual quarterly
closing dates using a predetermined "fiscal" calendar, which requires
our businesses to close their books on a Saturday in order to minimize
the potentially disruptive effects of quarterly closing on business
processes. The effects of this practice are generally not significant
to reported results for any quarter and only exist within a reporting
year. In the event that differences in actual closing dates are
material to year-over-year comparisons of quarterly results, we will
provide appropriate disclosures. Our actual quarterly closing dates for
the three months ended March 31, 2004 and 2003 were April 3, 2004 and
March 29, 2003, respectively. Our fiscal closing calendar for the years
2000 through 2012 is available on our website at www.honeywell.com
under the heading "Investor Relations".
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Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
Net Sales Three Months Ended March 31,
- --------- --------------------------------
2004 2003
-------------- -------------
Aerospace $ 2,304 $ 2,062
Automation and Control Solutions 1,947 1,717
Specialty Materials 856 777
Transportation Systems 1,071 840
Corporate - 3
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Total $ 6,178 $ 5,399
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Segment Profit Three Months Ended March 31,
- -------------- -------------------------------
2004 2003
--------------- ------------
Aerospace $ 307 $ 257
Automation and Control Solutions 195 197
Specialty Materials 48 31
Transportation Systems 143 92
Corporate (39) (32)
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Total Segment Profit 654 545
Gain on sale of non-strategic businesses 32 -
Equity in income (loss) of affiliated companies 7 (2)
Other income 10 3
Interest and other financial charges (84) (84)
Pension and other postretirement benefits (expense) (A) (160) (89)
Repositioning, environmental and litigation charges (A) (54) -
------------- -----------
Income before taxes and cumulative effect
of accounting change $ 405 $ 373
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(A) Amounts included in cost of goods sold and selling, general and
administrative expenses.
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Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
March 31, December 31,
2004 2003
-------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,200 $ 2,950
Accounts, notes and other receivables 3,888 3,643
Inventories 3,090 3,040
Deferred income taxes 1,386 1,526
Other current assets 479 465
------------- -----------
Total current assets 12,043 11,624
Investments and long-term receivables 412 569
Property, plant and equipment - net 4,248 4,295
Goodwill 5,895 5,789
Other intangible assets - net 1,103 1,098
Insurance recoveries for asbestos related liabilities 1,344 1,317
Deferred income taxes 395 342
Prepaid pension benefit cost 3,107 3,173
Other assets 1,119 1,107
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Total assets $29,666 $29,314
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LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 2,314 $ 2,240
Short-term borrowings 177 152
Commercial paper 365 -
Current maturities of long-term debt 21 47
Accrued liabilities 4,344 4,314
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Total current liabilities 7,221 6,753
Long-term debt 4,954 4,961
Deferred income taxes 294 316
Postretirement benefit obligations other than pensions 1,690 1,683
Asbestos related liabilities 2,246 2,279
Other liabilities 2,504 2,593
Shareowners' equity 10,757 10,729
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Total liabilities and shareowners' equity $29,666 $29,314
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Certain prior year amounts have been reclassified to conform with the
current year presentation.
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Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
--------------------------------
2004 2003
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Cash flows from operating activities:
Net income $ 295 $ 254
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of accounting change - 20
(Gain) on sale of non-strategic businesses (32) -
Repositioning, environmental and litigation charges 56 -
Severance and exit cost payments (50) (50)
Environmental and non-asbestos litigation payments (37) (21)
Asbestos related liability payments (101) (31)
Insurance receipts for asbestos related liabilities 18 2
Depreciation 146 142
Undistributed earnings of equity affiliates (8) 2
Deferred income taxes 29 49
Pension and other postretirement benefits expense 160 89
Other postretirement benefit payments (48) (48)
Other 1 (55)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables (168) (29)
Inventories (46) (90)
Other current assets (14) 42
Accounts payable 75 110
Accrued liabilities 61 87
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Net cash provided by operating activities 337 473
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Cash flows from investing activities:
Expenditures for property, plant and equipment (135) (105)
Decrease in investments 80 -
Cash paid for acquisitions (96) (90)
Proceeds from sales of businesses 71 -
------------- -------------
Net cash (used for) investing activities (80) (195)
------------- -------------
Cash flows from financing activities:
Net increase in commercial paper 365 177
Net increase (decrease) in short-term borrowings 3 (4)
Proceeds from issuance of common stock 26 24
Payments of long-term debt (20) (70)
Repurchases of common stock (229) -
Cash dividends on common stock (161) (161)
------------- -------------
Net cash (used for) financing activities (16) (34)
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Effect of foreign exchange rate changes on cash and cash equivalents 9 25
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Net increase in cash and cash equivalents 250 269
Cash and cash equivalents at beginning of period 2,950 2,021
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Cash and cash equivalents at end of period $3,200 $2,290
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Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
-------------------------
2004 2003
----------- ----------
Cash provided by operating activities $ 337 $ 473
Expenditures for property, plant and equipment (135) (105)
----------- ----------
Free cash flow $ 202 $ 368
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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.