Exhibit 99
HONEYWELL LOGO
Contact:
Media Investors
Victoria Streitfeld Nicholas Noviello
973-455-5281 973-455-2222
victoria.streitfeld@honeywell.com nicholas.noviello@honeywell.com
HONEYWELL'S THIRD-QUARTER EARNINGS PER SHARE 43 CENTS, UP 8% VERSUS PRIOR
YEAR; CASH FLOW FROM OPERATIONS $645 MILLION
o Sales of $6.4 billion, up 11% vs. 2003 due to strong organic growth
o EPS increases despite $105 million pre-tax pension expense
o Free cash flow $525 million, equals 141% of net income
MORRIS TOWNSHIP, N.J., October 20, 2004 -- Honeywell (NYSE: HON) today
announced third-quarter earnings per share of 43 cents, an increase of 3 cents
or 8% over the prior year. Sales of $6.4 billion were up 11% compared to 2003,
resulting from organic sales growth in all four operating segments. Cash flow
from operations was $645 million and free cash flow (cash flow from operations
less capital expenditures) was $525 million.
"These results reflect another quarter of strong sales and earnings,
due to solid operational execution and continued business improvement," said
Honeywell Chairman and Chief Executive Officer Dave Cote. "Each of our operating
segments experienced increased orders and organic sales growth. Segment profit
increased 20% due to good volume conversion, offset by higher raw material costs
in the non-core businesses of Specialty Materials. We continue to strengthen our
balance sheet and drive free cash flow while at the same time investing in
productivity and growth initiatives across the company."
Net income increased to $372 million for the quarter, including the
impact of $105 million of pre-tax pension expense. Free cash flow of $525
million equals 141% of net income. Also, subsequent to quarter end, Standard and
Poor's Ratings Services affirmed its `A/A-1' corporate credit rating on
Honeywell and revised its outlook to stable from negative.
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2-results
"Growth initiatives in each operating segment are gaining momentum and
driving new business," Mr. Cote said. "During the quarter, Aerospace's Primus
Epic'r' integrated cockpit system was certified on the Gulfstream G450.
Automation and Control Solutions introduced FocusPRO 5000, a digital thermostat,
and experienced double-digit orders growth in both its Building and Process
Solutions businesses. Transportation Systems continued to advance turbo
technology, and introduced next generation VNT'TM' on the new BMW 1 Series
platform at the Paris Motor Show. In Specialty Materials, the Chemicals business
continued to expand its Asian presence by breaking ground on a new refrigerant
manufacturing facility in China."
During the quarter, the company initiated repositioning actions
resulting in a charge of $37 million. Additionally, the company recorded a $64
million charge in connection with environmental and other litigation matters,
which was partially offset by $32 million in gains from legal settlements and
previously divested businesses.
* * * * *
Third-Quarter Segment Highlights
Aerospace
o Sales increased 11% over the third quarter of 2003, led by 17% growth in
Commercial sales. Defense & Space sales grew 3% in the quarter.
o Segment margin increased to 15.4%, compared with 14.6% a year ago, due
primarily to strong commercial aftermarket sales growth, which was driven
by increased global flying hours.
o Primus Epic'r' integrated avionics suite was certified on the Gulfstream
G450, the third Gulfstream certification for Primus Epic'r' and the eighth
Primus Epic'r' certification overall.
o Aircraft Landing Systems was awarded a $60 million contract with Lufthansa
to provide wheel and brake products for its fleet of 30 747-400 aircraft.
o Honeywell was selected by Lockheed Martin as Supply Services Provider for
the F-35 Joint Strike Fighter. The estimated value of the program is up to
$900 million over the life of the F-35.
Automation and Control Solutions
o Sales increased 6% over the third quarter of 2003 (8% excluding the impact
of the Security Monitoring divestiture in the second quarter of this year),
primarily due to organic sales growth driven by new product introductions
and contract and energy retrofit wins in the Building Solutions business.
o Segment margin increased to 11.8%, compared with 11.1% a year ago,
primarily driven by volume growth.
o FocusPRO 5000, a digital thermostat designed to provide ultimate
ease-of-use for contractors and homeowners, was launched, further enhancing
Honeywell's new line of innovative residential thermostats.
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3-results
o Building Solutions won $20 million dollars in orders with the United States
Postal Service to implement Shared Energy Savings Contracts in California,
including chiller replacements and major mechanical upgrades, a
co-generation project and lighting retro-fits in over 70 facilities.
o The company introduced Honeywell I.O.N.'TM' (Integrated Operator Node),
which allows industrial customers who use Honeywell's process control
technology to continue to utilize existing infrastructure while upgrading
to the latest Experion'TM' solution.
Transportation Systems
o Sales increased 19% over the third quarter of 2003, driven by continued
strong growth in the Turbochargers business and favorable foreign exchange.
o Segment margin increased to 13.0%, compared with 12.3% a year ago,
primarily driven by unit volume.
o Turbo Technologies newest version of VNT'TM' technology debuted on the new
BMW 1 Series platform at the Paris Motor Show. This next generation VNT'TM'
furthers Honeywell's technology leadership for turbo diesel passenger cars.
o Consumer Products Group successfully launched Prestone'r' All Makes All
Models Extended Life Antifreeze/Coolant, a new antifreeze that is
compatible with all types of antifreeze/coolant on store shelves, including
conventional silicated, organic acid and hybrid technology coolants.
Specialty Materials
o Sales increased 13% over the third quarter of 2003, driven by a 19%
increase in core businesses.
o Segment margin increased to 4.3%, compared with 2.2% a year ago, driven by
organic growth and offset by higher raw material costs in non-core
businesses.
o Honeywell Chemicals broke ground on a new manufacturing plant in Shanghai,
China, that will serve as its Asian production center for refrigerants.
o Performance Products launched a synthetic, high-performance rope using
Spectra fiber that is specifically designed for deep-water heavy lifting.
This rope offers a significant weight-saving alternative to conventional
steel wire and chain.
Honeywell will discuss its results during its investor webcast at 8:00
a.m. on October 20. 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; and specialty chemicals. 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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# # #
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4-results
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Three Months Ended September 30,
----------------------------------
2004 2003
--------- ---------
Net sales $ 6,395 $ 5,768
--------- ---------
Costs, expenses and other
Cost of goods sold 5,087 (A) 4,509 (D)
Selling, general and administrative expenses 820 (A) 729 (D)
(Gain) loss on sale of non-strategic businesses (5)(B) (9)(E)
Equity in (income) loss of affiliated companies (24) (7)(D)
Other (income) expense (50)(C) 11
Interest and other financial charges 81 82
--------- ---------
5,909 5,315
--------- ---------
Income before taxes 486 453
Tax expense 114 109
--------- ---------
Net income $ 372 $ 344
========= =========
Earnings per share of common stock - basic $ 0.43 $ 0.40
========= =========
Earnings per share of common stock - assuming dilution $ 0.43 $ 0.40
========= =========
Weighted average number of shares outstanding-basic 861 862
========= =========
Weighted average number of shares outstanding -
assuming dilution 864 865
========= =========
(A) Cost of goods sold and selling, general and administrative expenses include
provisions of $100 and $1 million, respectively, for environmental,
litigation and net repositioning charges. Total net pretax charges were
$101 million (after-tax $56 million, or $0.06 per share).
(B) Represents the pretax adjustments related to businesses sold in prior
periods (after-tax $3 million, with no effect on earnings per share).
(C) Includes a gain of $27 million (after-tax $17 million, or $0.02 per share)
related to the settlement of a patent infringement lawsuit.
(D) 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 environmental, 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.
(E) 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).
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5-results
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Nine Months Ended September 30,
------------------------------------
2004 2003
---------- ----------
Net sales $ 18,961 $ 16,916
---------- ----------
Costs, expenses and other
Cost of goods sold 15,245 (A) 13,263 (D)
Selling, general and administrative expenses 2,451 (A) 2,194 (D)
(Gain) loss on sale of non-strategic businesses (270)(B) (40)(E)
Equity in (income) loss of affiliated companies (48)(A) (11)(D)
Other (income) expense (78)(C) (16)(F)
Interest and other financial charges 247 253
---------- ----------
17,547 15,643
---------- ----------
Income before taxes and cumulative effect of accounting change 1,414 1,273
Tax expense 386 336
---------- ----------
Income before cumulative effect of accounting change 1,028 937
Cumulative effect of accounting change - (20)(G)
---------- ----------
Net income $ 1,028 $ 917
========== ==========
Earnings per share of common stock - basic:
Income before cumulative effect of accounting change $ 1.19 $ 1.09
Cumulative effect of accounting change - (0.02)(G)
---------- ----------
Net income $ 1.19 $ 1.07
========== ==========
Earnings per share of common stock - assuming dilution:
Income before cumulative effect of accounting change $ 1.19 $ 1.09
Cumulative effect of accounting change - (0.02)(G)
---------- ----------
Net income $ 1.19 $ 1.07
========== ==========
Weighted average number of shares outstanding-basic 860 860
========== ==========
Weighted average number of shares outstanding -
assuming dilution 864 861
========== ==========
(A) Cost of goods sold, selling, general and administrative expenses and equity
in (income) loss of affiliated companies include provisions of $384, $9 and
$6 million, respectively, for environmental, litigation, business
impairment and net repositioning charges. Total net pretax charges were
$399 million (after-tax $249 million, or $0.29 per share).
(B) Represents the pretax gains on the sales of our VCSEL Optical Products and
Security Monitoring businesses, and adjustments related to businesses sold
in prior periods (after-tax $147 million, or $0.17 per share).
(C) Includes a gain of $27 million (after-tax $17 million, or $0.02 per share)
related to the settlement of a patent infringement lawsuit.
(D) 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 environmental, 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.
(E) Represents the 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.
(F) Includes a gain of $20 million (after-tax $15 million, or $0.02 per share)
related to the settlement of a patent infringement lawsuit.
(G) 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 or
year-to-date results, we will provide appropriate disclosures. Our actual
closing dates for the nine months ended September 30, 2004 and 2003 were
October 2, 2004 and September 27, 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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6-results
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
Net Sales Periods Ended September 30,
- --------- ---------------------------
Three Months Nine Months
------------ -----------
2004 2003 2004 2003
--------- --------- ---------- ---------
Aerospace $ 2,468 $ 2,231 $ 7,225 $ 6,454
Automation and Control Solutions 1,994 1,875 5,909 5,429
Specialty Materials 876 777 2,633 2,377
Transportation Systems 1,057 885 3,193 2,650
Corporate - - 1 6
--------- --------- ---------- ---------
Total $ 6,395 $ 5,768 $ 18,961 $16,916
========= ========= ========== =========
Segment Profit Periods Ended September 30,
- -------------- ---------------------------
Three Months Nine Months
------------ ------------
2004 2003 2004 2003
--------- --------- ---------- ---------
Aerospace $ 379 $ 326 $ 1,053 $ 847
Automation and Control Solutions 235 208 637 592
Specialty Materials 38 17 137 99
Transportation Systems 137 109 430 329
Corporate (40) (33) (117) (99)
--------- --------- ---------- ---------
Total Segment Profit 749 627 2,140 1,768
Gain on sale of non-strategic businesses 5 9 270 40
Equity in income of affiliated companies 24 7 48 11
Other income (expense) 50 (11) 78 16
Interest and other financial charges (81) (82) (247) (253)
Pension and other postretirement benefits (expense) (A) (160) (69) (482) (247)
Repositioning, environmental, litigation and business
impairment charges (A) (101) (28) (393) (62)
--------- --------- ---------- ---------
Income before taxes and cumulative effect
of accounting change $ 486 $ 453 $ 1,414 $ 1,273
========= ========= ========== =========
(A) Amounts included in cost of goods sold and selling, general and
administrative expenses.
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7-results
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
September 30, December 31,
2004 2003
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 3,433 $ 2,950
Accounts, notes and other receivables 4,074 3,643
Inventories 3,074 3,040
Deferred income taxes 1,231 1,526
Other current assets 543 465
--------- ---------
Total current assets 12,355 11,624
Investments and long-term receivables 414 569
Property, plant and equipment - net 4,186 4,295
Goodwill 5,909 5,789
Other intangible assets - net 1,130 1,098
Insurance recoveries for asbestos related liabilities 1,436 1,317
Deferred income taxes 476 342
Prepaid pension benefit cost 3,000 3,173
Other assets 1,082 1,107
--------- ---------
Total assets $29,988 $29,314
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 2,346 $ 2,240
Short-term borrowings 33 152
Commercial paper 20 -
Current maturities of long-term debt 145 47
Accrued liabilities 4,686 4,314
--------- ---------
Total current liabilities 7,230 6,753
Long-term debt 4,839 4,961
Deferred income taxes 358 316
Postretirement benefit obligations other than pensions 1,697 1,683
Asbestos related liabilities 2,067 2,279
Other liabilities 2,592 2,593
Shareowners' equity 11,205 10,729
--------- ---------
Total liabilities and shareowners' equity $29,988 $29,314
========= =========
Certain prior year amounts have been reclassified to conform with the current
year presentation.
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8-results
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2004 2003 2004 2003
-------- -------- -------- --------
Cash flows from operating activities:
Net income $ 372 $ 344 $1,028 $ 917
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of accounting change - - - 20
(Gain) loss on sale of non-strategic businesses (5) (9) (270) (40)
Repositioning, environmental, litigation and business
impairment charges 101 30 399 64
Severance and exit cost payments (41) (54) (123) (147)
Environmental and non-asbestos litigation payments (39) (23) (131) (59)
Asbestos related liability payments (101) (79) (424) (467)
Insurance receipts for asbestos related liabilities 13 - 61 477
Depreciation 140 147 428 437
Undistributed earnings of equity affiliates (24) (7) (53) (11)
Deferred income taxes 70 221 152 355
Pension and other postretirement benefits expense 160 69 482 247
Pension contributions - U.S. Plans (5) - (10) (170)
Other postretirement benefit payments (53) (44) (152) (143)
Other 4 (84) (36) (87)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts, notes and other receivables (75) 8 (318) (72)
Inventories (54) 112 (42) 17
Other current assets 8 (39) 1 (21)
Accounts payable 69 (57) 186 118
Accrued liabilities 105 135 309 261
-------- -------- -------- --------
Net cash provided by operating activities 645 670 1,487 1,696
-------- -------- -------- --------
Cash flows from investing activities:
Expenditures for property, plant and equipment (120) (131) (403) (407)
Proceeds from disposals of property, plant and equipment 10 13 12 13
Decrease in investments - - 80 -
Cash paid for acquisitions (111) (2) (220) (124)
Proceeds from sales of businesses (3) 47 391 137
-------- -------- -------- --------
Net cash (used for) investing activities (224) (73) (140) (381)
-------- -------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in commercial paper (75) (188) 20 (201)
Net increase (decrease) in short-term borrowings (2) 3 (126) 81
Proceeds from issuance of common stock 17 8 62 39
Payments of long-term debt - (11) (23) (81)
Repurchases of common stock (50) - (342) -
Cash dividends on common stock (161) (161) (483) (483)
-------- -------- -------- --------
Net cash (used for) financing activities (271) (349) (892) (645)
-------- -------- -------- --------
Effect of foreign exchange rate changes on cash and cash equivalents 51 (4) 28 179
-------- -------- -------- --------
Net increase in cash and cash equivalents 201 244 483 849
Cash and cash equivalents at beginning of period 3,232 2,626 2,950 2,021
-------- -------- -------- --------
Cash and cash equivalents at end of period $3,433 $2,870 $3,433 $2,870
======== ======== ======== ========
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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,
---------------------- -------------------------
2004 2003 2004 2003
------- ------- --------- ---------
Cash provided by operating activities $ 645 $ 670 $ 1,487 $ 1,696
Expenditures for property, plant and equipment (120) (131) (403) (407)
------- ------- --------- ---------
Free cash flow $ 525 $ 539 $ 1,084 $ 1,289
======= ======= ========= =========
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.