Financial Release
Printer Friendly Version View printer-friendly version
  Back to Index
Honeywell Reports Third Quarter 2014 Sales Up 5% To $10.1 Billion; EPS Of $1.47 Per Share; Raising 2014 EPS Guidance
-- Organic Sales Growth 5%; Strong Execution Across The Portfolio
-- EPS Up 19% Reported, Up 14% Using Normalized Tax Rate
-- Raising Low-End Proforma EPS Guidance To $5.50 - $5.55, From $5.45 - $5.55

MORRIS TOWNSHIP, N.J., Oct. 17, 2014 /PRNewswire/ -- Honeywell (NYSE: HON) today announced its results for the third quarter of 2014:

Total Honeywell




($ Millions, except Earnings Per Share)

3Q 2013

3Q 2014

Change

Sales

9,647

10,108

5%





Segment Margin

16.7%

17.4%

70 bps

Operating Income Margin

15.2%

16.2%

100 bps





Earnings Per Share

$1.24

$1.47

19%

Earnings Per Share (At 26.5% Tax Rate)

$1.25

$1.43

14%





Cash Flow from Operations

1,070

1,233

15%

Free Cash Flow *

867

974

12%





* Cash Flow from Operations Less Capital Expenditures

"Organic sales growth and a double-digit earnings increase highlighted Honeywell's strong third quarter," said Honeywell Chairman and CEO Dave Cote.  "The continued integration and maturation of the Honeywell Operating System throughout our global portfolio is helping to drive sales, margin, earnings, and cash flow higher, and plenty of runway remains.  We are committed to our ongoing seed planting investments to bolster our great positions in good industries and continuous process improvements to mitigate ongoing global macroeconomic uncertainties.  We are raising the low-end of our 2014 proforma EPS outlook by $0.05 to $5.50-5.55 (up 11%-12%), which brings us to the high-end of the initial guidance we provided almost a year ago.  Looking ahead to 2015, we're once again planning for a slow growth macro environment, but expect to continue delivering strong earnings growth.  We're confident that Honeywell will continue to outperform now and over the long-term driven by a relentless focus on new products and technologies, continued penetration of high-growth regions, and sustained implementation of our key process initiatives."

The company is updating its full-year 2014 guidance and now expects:

2014 Full-Year Guidance






Change


Prior Guidance

Revised Guidance

vs. 2013 

Sales

 $40.2 - $40.4B

 $40.3 - $40.4B

3% - 4%





Segment Margin

16.8% - 17.0%

~17.0%

~70 bps

Operating Income Margin1

15.4% - 15.6%

~15.6%

~140 bps





Earnings Per Share1

$5.45 - $5.55

$5.50 - $5.55

11% - 12%





Free Cash Flow2

 $3.8 - $4.0B

 ~$3.9B

~15%








1.

   Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment

2.

   Cash Flow from Operations Less Capital Expenditures

Third Quarter Segment Performance

Aerospace




($ Millions)

3Q 2013

3Q 2014

% Change

Sales

3,889

3,895

~Flat

Segment Profit

730

790

8%

Segment Margin

18.8%

20.3%

150 bps

  • Sales for the third quarter were up 3% organically, driven by growth across the portfolio, but were approximately flat on a reported basis due to the Friction Materials divestiture.  Commercial OE sales were up 5% reflecting continued strong OE build rates, as well as an increase in Business and General Aviation (BGA) engine shipments.  Commercial Aftermarket sales increased 2% driven by strong Air Transport and Regional (ATR) spares growth, partially offset by a decline in RMU (Retrofit, Modifications, and Upgrades) sales in BGA and lower repair and overhaul activities.  Defense & Space sales grew 3% as a result of strong international growth and stabilization in U.S. government sales.  Transportation Systems sales were down (10%) reported, primarily reflecting the Friction Materials divestiture, and up 4% organically driven by new platform launches, higher turbo gas penetration globally, and increased commercial vehicle demand in Europe, partially offset by moderating EU light vehicle production.
  • Segment profit was up 8%, and segment margins expanded 150 bps to 20.3%, driven by productivity net of inflation, commercial excellence, and the favorable impact of the Friction Materials divestiture.

Automation and Control Solutions




($ Millions)

3Q 2013

3Q 2014

% Change

Sales

3,375

3,671

9%

Segment Profit

523

583

11%

Segment Margin

15.5%

15.9%

40 bps

  • Sales were up 9% reported, 4% organically, compared with the third quarter of 2013, primarily driven by the favorable impact of the Intermec acquisition and strong organic growth across Energy, Safety, and Security (ESS), particularly in Scanning & Mobility, Industrial Safety, Security, and Fire. Building Solutions & Distribution (BSD) saw continued strength in the Americas Distribution business.
  • Segment profit was up 11% and segment margins expanded 40 bps to 15.9% driven by higher volume, commercial excellence, and productivity net of inflation, partially offset by the dilutive impact of the Intermec acquisition.

Performance Materials and Technologies




($ Millions)

3Q 2013

3Q 2014

% Change

Sales

2,383

2,542

7%

Segment Profit

413

444

8%

Segment Margin

17.3%

17.5%

20 bps

  • Sales were up 7% on both an organic and reported basis compared with the third quarter of 2013, driven by UOP catalyst and gas processing growth, an acceleration of sales growth in Process Solutions, and higher sales across Advanced Materials, particularly Fluorine Products.
  • Segment profit was up 8% and segment margins increased 20 bps to 17.5%, driven by higher volume and productivity net of inflation, partially offset by price/raws headwinds in Resins & Chemicals and continued investments for growth.

Honeywell will discuss its results during its investor conference call today starting at 9:30 a.m. EDT.  To participate, please dial (800) 862-9098 (domestic) or (785) 424-1051 (international) a few minutes before the 9:30 a.m. EDT start.  Please mention to the operator that you are dialing in for Honeywell's third quarter 2014 investor conference call or provide the conference code HONQ314.  The live webcast of the investor call as well as related presentation materials will be available through the "Investor Relations" section of the company's Website (http://www.honeywell.com/investor).  Investors can access a replay of the conference call from 12:00 p.m. EDT, October 17, until 11:59 p.m. EDT, October 24, by dialing (800) 723-5154 (domestic) or (402) 220-2661 (international).

Honeywell (www.honeywell.com) is a Fortune 100 diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes, and industry; turbochargers; and performance materials.  For more news and information on Honeywell, please visit www.honeywellnow.com.

This release contains certain statements that may be deemed "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current economic and industry conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

Contacts:


Media

Investor Relations

Robert C. Ferris

Elena Doom

(973) 455-3388

(973) 455-2222

rob.ferris@honeywell.com

elena.doom@honeywell.com

 

Honeywell International Inc

Consolidated Statement of Operations (Unaudited)

(Dollars in millions, except per share amounts)












Three Months Ended


 Nine Months Ended 



September 30,


September 30,



2014


2013


2014


2013










Product sales

$         8,090


$      7,693


$      24,213


$      22,911

Service sales

2,018


1,954


5,827


5,757

Net sales

10,108


9,647


30,040


28,668










Costs, expenses and other








    Cost of products sold  (A)

5,860


5,722


17,686


17,039

    Cost of services sold  (A)

1,268


1,220


3,705


3,713



7,128


6,942


21,391


20,752

    Selling, general and administrative expenses (A)

1,344


1,242


4,058


3,752

    Other (income) expense

(21)


(1)


(159)


(53)

    Interest and other financial charges

77


80


236


244



8,528


8,263


25,526


24,695










Income before taxes

1,580


1,384


4,514


3,973

Tax expense

388


377


1,160


975










Net income

1,192


1,007


3,354


2,998










Less: Net income attributable to the noncontrolling interest

25


17


71


21










Net income attributable to Honeywell

$         1,167


$         990


$        3,283


$        2,977










Earnings per share of common stock - basic

$           1.49


$        1.26


$          4.18


$          3.78










Earnings per share of common stock - assuming dilution

$           1.47


$        1.24


$          4.13


$          3.73










Weighted average number of shares outstanding-basic

784.5


786.3


784.6


786.6










Weighted average number of shares outstanding - assuming dilution

795.0


797.1


795.6


797.5



















(A) Cost of products and services sold and selling, general and administrative expenses include amounts for repositioning and other charges, pension and other postretirement (income) expense, and stock compensation expense. 

 

 


Honeywell International Inc

Segment Data (Unaudited) 

(Dollars in millions)












Three Months Ended


Nine Months Ended



September 30,


September 30,

Net Sales

2014


2013


2014


2013










Aerospace

$         3,895


$         3,889


$       11,756


$       11,658










Automation and Control Solutions

3,671


3,375


10,640


9,724










Performance Materials and Technologies

2,542


2,383


7,644


7,286










     Total

$       10,108


$         9,647


$       30,040


$       28,668



















Reconciliation of Segment Profit to Income Before Taxes












Three Months Ended


Nine Months Ended



September 30,


September 30,

Segment Profit

2014


2013


2014


2013










Aerospace

$            790


$            730


$         2,252


$         2,101










Automation and Control Solutions

583


523


1,587


1,413










Performance Materials and Technologies

444


413


1,392


1,325










Corporate

(58)


(51)


(167)


(157)










     Total segment profit

1,759


1,615


5,064


4,682










Other income (expense) (A)

11


(10)


132


22

Interest and other financial charges

(77)


(80)


(236)


(244)

Stock compensation expense (B)

(41)


(38)


(143)


(129)

Pension ongoing income (B)

62


22


187


68

Other postretirement expense (B)

(12)


(5)


(37)


(7)

Repositioning and other charges (B)

(122)


(120)


(453)


(419)










Income before taxes

$         1,580


$         1,384


$         4,514


$         3,973





















(A)

Equity income (loss) of affiliated companies is included in segment profit












(B)

Amounts included in cost of products and services sold and selling, general and administrative expenses

 

 

Honeywell International Inc

Consolidated Balance Sheet (Unaudited)

(Dollars in millions)








September 30,


December 31,



2014


2013






ASSETS





Current assets:




    Cash and cash equivalents

$      6,428


$      6,422

    Accounts, notes and other receivables

8,315


7,929

    Inventories

4,485


4,293

    Deferred income taxes

794


849

    Investments and other current assets

2,336


1,671


Total current assets

22,358


21,164






Investments and long-term receivables

447


393

Property, plant and equipment - net

5,189


5,278

Goodwill

12,923


13,046

Other intangible assets - net

2,288


2,514

Insurance recoveries for asbestos related liabilities

466


595

Deferred income taxes

195


368

Other assets

2,315


2,077







Total assets

$    46,181


$    45,435






LIABILITIES AND SHAREOWNERS' EQUITY




Current liabilities:




    Accounts payable

$      5,212


$      5,174

    Short-term borrowings

91


97

    Commercial paper

1,849


1,299

    Current maturities of long-term debt

189


632

    Accrued liabilities

6,606


6,979


Total current liabilities

13,947


14,181






Long-term debt

6,760


6,801

Deferred income taxes

891


804

Postretirement benefit obligations other than pensions

955


1,019

Asbestos related liabilities

1,131


1,150

Other liabilities

3,230


3,734

Redeemable noncontrolling interest

204


167

Shareowners' equity

19,063


17,579







Total liabilities, redeemable noncontrolling interest and shareowners' equity

$    46,181


$    45,435

 

 

Honeywell International Inc

 Consolidated Statement of Cash Flows (Unaudited)

(Dollars in millions)










Three Months Ended


Nine Months Ended


September 30, 


September 30, 


2014


2013


2014


2013

Cash flows from operating activities:








    Net income

$   1,192


$   1,007


$  3,354


$ 2,998

    Less: Net income attributable to the noncontrolling interest

25


17


71


21

    Net income attributable to Honeywell

1,167


990


3,283


2,977

    Adjustments to reconcile net income attributable to Honeywell to net








    cash provided by operating activities:








        Depreciation and amortization

227


245


698


740

        Loss on sale of non-strategic businesses and assets

1


-


11


-

        Gain on sale of available for sale investments

-


-


(105)


-

        Repositioning and other charges

122


120


453


419

        Net payments for repositioning and other charges

(167)


(220)


(301)


(517)

        Pension and other postretirement income

(50)


(17)


(150)


(61)

        Pension and other postretirement benefit payments

(38)


(40)


(123)


(253)

        Stock compensation expense

41


38


143


129

        Deferred income taxes

187


72


255


257

        Excess tax benefits from share based payment arrangements

(22)


(20)


(71)


(101)

        Other

(274)


169


(207)


35

        Changes in assets and liabilities, net of the effects of








        acquisitions and divestitures:








           Accounts, notes and other receivables

(104)


(187)


(529)


(382)

           Inventories

(57)


(58)


(279)


(94)

           Other current assets

49


(32)


181


(28)

           Accounts payable

54


(2)


154


(32)

           Accrued liabilities

97


12


(151)


(422)

Net cash provided by operating activities

1,233


1,070


3,262


2,667









Cash flows from investing activities:








    Expenditures for property, plant and equipment

(259)


(203)


(680)


(547)

    Proceeds from disposals of property, plant and equipment

1


1


12


7

    Increase in investments

(1,415)


(243)


(3,139)


(703)

    Decrease in investments

1,181


272


2,124


648

    Cash paid for acquisitions, net of cash acquired

(2)


(603)


(4)


(1,063)

    Proceeds from sales of businesses, net of fees paid

156


-


157


-

    Other

(96)


85


(109)


104

Net cash used for investing activities

(434)


(691)


(1,639)


(1,554)









Cash flows from financing activities:








    Net (decrease) increase in commercial paper

(400)


899


550


1,699

    Net increase (decrease) in short-term borrowings

1


(3)


(5)


18

    Proceeds from issuance of common stock

45


59


206


362

    Proceeds from issuance of long-term debt

34


14


79


27

    Payments of long-term debt

(1)


(3)


(607)


(604)

    Excess tax benefits from share based payment arrangements

22


20


71


101

    Repurchases of common stock

(138)


(167)


(689)


(769)

    Cash dividends paid

(365)


(330)


(1,101)


(995)

    Other

(7)


28


(7)


28

Net cash (used for) provided by financing activities

(809)


517


(1,503)


(133)









Effect of foreign exchange rate changes on cash and cash equivalents

(144)


54


(114)


(115)

Net (decrease) increase in cash and cash equivalents

(154)


950


6


865

Cash and cash equivalents at beginning of period

6,582


4,549


6,422


4,634

Cash and cash equivalents at end of period

$   6,428


$   5,499


$  6,428


$ 5,499

 

 


Honeywell International Inc

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)

(Dollars in millions)










Three Months Ended


September 30,


2014


2013





Cash provided by operating activities

$         1,233


$         1,070

Expenditures for property, plant and equipment 

(259)


(203)





Free cash flow

$            974


$            867









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. 

 

 

Honeywell International Inc

Reconciliation of Segment Profit to Operating Income and Calculation of Segment Profit and Operating Income Margins (Unaudited)

(Dollars in millions)










Three Months Ended


September 30,


2014


2013





Segment Profit

$         1,759


$        1,615





Stock compensation expense (A)

(41)


(38)

Repositioning and other (A, B)

(132)


(131)

Pension ongoing income (A)

62


22

Other postretirement expense (A)

(12)


(5)





Operating Income

$         1,636


$        1,463





Segment Profit

$         1,759


$        1,615

÷ Sales

$       10,108


$        9,647

Segment Profit Margin %

17.4%


16.7%





Operating Income

$         1,636


$        1,463

÷ Sales

$       10,108


$        9,647

Operating Income Margin %

16.2%


15.2%





(A) Included in cost of products and services sold and selling, general and administrative expenses
(B) Includes repositioning, asbestos, environmental expenses and equity income adjustment





We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. 

 

 

Honeywell International Inc

Calculation of EPS at 26.5% Tax Rate (Unaudited)

(Dollars in millions, except per share amounts)














Three Months Ended


September 30,


2014


2013





Income before taxes

$       1,580


$       1,384





Taxes at 26.5%

419


367





Net income at 26.5% tax rate

$       1,161


$       1,017





Less: Net income attributable to the noncontrolling interest

25


17





Net income attributable to Honeywell at 26.5% tax rate

$       1,136


$       1,000





Weighted average number of shares outstanding - assuming dilution

795.0


797.1





EPS at 26.5% tax rate

$         1.43


$         1.25





We believe EPS adjusted to expected full-year tax rate at 26.5% is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. 

 

 

Honeywell International Inc

Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market Adjustment and

Calculation of Segment Profit and Operating Income Margins Excluding Pension Mark-to-Market Adjustment (Unaudited)

(Dollars in millions)








Twelve Months Ended




December 31,




2013









Segment Profit


$     6,351










Stock compensation expense (A)


(170)




Repositioning and other (A, B)


(699)




Pension ongoing income (A)


90




Pension mark-to-market adjustment (A)


(51)




Other postretirement expense (A)


(20)










Operating Income


$     5,501




Pension mark-to-market adjustment (A)


(51)




Operating Income excluding pension mark-to-market adjustment


$     5,552










Segment Profit


$     6,351




÷ Sales


$   39,055




Segment Profit Margin %


16.3%










Operating Income


$    5,501




÷ Sales


$  39,055




Operating Income Margin %


14.1%










Operating Income excluding pension mark-to-market adjustment


$    5,552




÷ Sales


$  39,055




Operating Income Margin excluding pension mark-to-market adjustment %


14.2%





(A) Included in cost of products and services sold and selling, general and administrative expenses

(B) Includes repositioning, asbestos, environmental expenses and equity income adjustment


We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

 

 

Honeywell International Inc

Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market Adjustment and

Calculation of Segment Profit and Operating Income Margins Excluding Pension Mark-to-Market Adjustment (Unaudited)

(Dollars in billions)








2014 Guidance



Segment Profit

$6.8 - 6.9



Stock compensation expense (A)

~(0.2)

Repositioning and other (A, B)

~(0.6)

Pension ongoing income (A)

~0.2

Pension mark-to-market adjustment (A)

TBD

Other postretirement expense (A)

~(0.1)



Operating Income

$6.2 - 6.3

Pension mark-to-market adjustment (A)

TBD

Operating Income excluding pension mark-to-market adjustment

$6.2 - 6.3



Segment Profit

 $6.8 - 6.9 

÷ Sales

 $40.3 - 40.4 

Segment Profit Margin %

~ 17.0%



Operating Income

 $6.2 - 6.3 

÷ Sales

 $40.3 - 40.4 

Operating Income Margin %

~ 15.6%



Operating Income excluding pension mark-to-market adjustment

 $6.2 - 6.3 

÷ Sales

 $40.3 - 40.4 

Operating Income Margin excluding pension mark-to-market adjustment %

~ 15.6%



(A) Included in cost of products and services sold and selling, general and administrative expenses
(B) Includes repositioning, asbestos, environmental expenses and equity income adjustment




We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. 

 

 


Honeywell International Inc

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)

(Dollars in millions)





















Twelve Months Ended




December 31, 




2013








Cash provided by operating activities



$      4,335









Expenditures for property, plant and equipment



(947)









Free cash flow



$      3,388















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. 

 

 

Honeywell International Inc

Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark-to-Market Adjustment (Unaudited)




Twelve Months Ended



December 31, 



2013






EPS


$          4.92







Pension mark-to-market adjustment


0.05







EPS, excluding pension mark-to-market adjustment


$          4.97







We believe EPS, excluding pension mark-to-market adjustment is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. 






EPS utilizes weighted average shares outstanding - assuming dilution of 797.3 million. Mark-to-market uses a blended tax rate of 25.5%.

 

SOURCE Honeywell

Honeywell Now

Keeping you up-to-date with the latest news and information on Honeywell

Keeping you up-to-date
with the latest news and information on Honeywell