Financial Release
Printer Friendly Version View printer-friendly version
  Back to Index
Honeywell Second Quarter 2012 Sales Up 4% To $9.4 Billion; EPS Up 12% To $1.14 Per Share

  • 14% Earnings Growth From Continuing Operations Driven By Strong Sales Conversion
  • Continued Robust Americas And Emerging Region Performance, Europe As Expected
  • Strong Margin Expansion - Segment Margin Up 150 bps, Operating Income Margin Up 70 bps
  • Raising 2012 Proforma EPS Guidance to $4.40 - $4.55, Up From $4.35 - $4.55

MORRIS TOWNSHIP, N.J., July 18, 2012 /PRNewswire/ -- Honeywell (NYSE: HON) today announced its results for the second quarter of 2012:

Total Honeywell




($ Millions, except Earnings Per Share)

2Q 2011

2Q 2012

Change

Sales

9,086

9,435

4%





Segment Margin

14.3%

15.8%

150 bps

Operating Income Margin

12.9%

13.6%

70 bps





Earnings Per Share from Continuing Operations

$1.00

$1.14

14%

Earnings Per Share

$1.02

$1.14

12%





Cash Flow from Operations

1,138

973

(14%)

Free Cash Flow*

995

1,040

5%





* Free Cash Flow (cash flow from operations less capital expenditures) prior to cash pension contributions

"Honeywell had another terrific quarter, capping off a very strong first half of 2012," said Honeywell Chairman and CEO Dave Cote.  "Despite a more challenging macro environment, particularly in Europe, Honeywell delivered strong sales conversion and double-digit earnings growth in the second quarter and executed well against our growth and productivity playbook.  Our short cycle businesses, such as ESS and Advanced Materials, were strong in the U.S., and our long cycle businesses continued to grow globally, benefitting from favorable macro trends and strong backlog. As such, we're raising the low end of our 2012 guidance by $0.05, with the expectation of continued margin expansion in the second half driving our strong full-year outlook.  Given the increasingly uncertain global economic environment, we'll remain flexible, but also continue to invest in sustainable growth through seed planting in new products and technologies, geographic expansion, and our key process initiatives, all supporting our Great Positions in Good Industries throughout the world."

The company is updating its full-year 2012 sales and EPS guidance and now expects:

Full-Year Guidance





2012

2012

Change


Prior Guidance

Revised Guidance

vs. 2011 

Sales

 $38.0 - 38.6B

 $37.8 - 38.4B

3% - 5%





Segment Margin

15.3 - 15.5%

15.4 - 15.6%

70 - 90 bps

Operating Income Margin1

13.2 - 13.5%

13.4 - 13.6%

140 - 160 bps





Earnings Per Share from Continuing Operations2

$4.35 - $4.55

$4.40 - $4.55

10% - 14%

Earnings Per Share1

$4.35 - $4.55

$4.40 - $4.55

9% - 12%





Free Cash Flow3

 ~$3.5B

 ~$3.5B

~100% conversion





1.  Proforma, V% / BPS Excludes Any Pension Mark to Market Adjustment

2.  Proforma (Cont. Operations); Excludes Any Pension Mark to Market Adjustment; V% Also Excludes 3Q11 Repo and Other Actions Funded by Gain on Sale of CPG Business (in Disc. Ops.)

3.  Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior to Any NARCO Related Payments and Cash Pension Contributions

 

Second Quarter Segment Performance








Aerospace




($ Millions)

2Q 2011

2Q 2012

% Change

Sales

2,810

3,027

8%

Segment Profit

451

562

25%

Segment Margin

16.0%

18.6%

260 bps

  • Sales were up 8% compared with the second quarter of 2011.  Organic growth was 7%, or 4% organic excluding the absence of prior year payments to Business and General Aviation customers to offset preproduction costs (OE payments). Aerospace growth was driven by an 18% increase in our Commercial end markets, partially offset by lower Defense and Space revenue.  Commercial original equipment (OE) sales were up 38%, or 16% excluding the impact of the EMS acquisition and lower OE payments year over year.  Commercial aftermarket sales were up 9% with growth in both spares and repair and overhaul sales.
  • Segment profit was up 25%, and segment margins expanded 260 bps to 18.6%, primarily due to the absence of prior year OE payments, higher commercial volumes, commercial excellence and productivity net of inflation, partially offset by higher investments in research and development to support future growth.

Automation and Control Solutions




($ Millions)

2Q 2011

2Q 2012

% Change

Sales

3,880

3,962

2%

Segment Profit

496

525

6%

Segment Margin

12.8%

13.3%

50 bps

  • Sales were up 2%, 4% organic, compared with the second quarter of 2011 driven by volume growth and the favorable impact of acquisitions, partially offset by foreign exchange headwinds.  Process Solutions, Building Solutions and Distribution, and Energy, Safety and Security all grew on an organic basis.  The ACS long cycle businesses saw continued good global growth, while the short cycle businesses had good growth in the Americas, partially offset by continued declines in Europe. ACS continues to benefit from new product introductions, geographic expansion, and favorable macro trends such as safety, security, and energy efficiency. 
  • Segment profit was up 6% and segment margins were up 50 bps to 13.3% driven by higher productivity benefits net of inflation.

 

Performance Materials and Technologies




($ Millions)

2Q 2011

2Q 2012

% Change

Sales

1,406

1,546

10%

Segment Profit

281

350

25%

Segment Margin

20.0%

22.6%

260 bps

  • Sales were up 10%, 4% organic, compared with the second quarter of 2011, resulting from strong UOP licensing, equipment, and service sales, the phenol plant acquisition, and strong volumes in Resins & Chemicals (R&C), offsetting decreased UOP catalyst sales primarily due to timing of deliveries, and the impact of more challenging global end market conditions for Fluorine Products.
  • Segment profit was up 25% and segment margins increased 260 bps to 22.6%, a record for PMT, primarily due to higher UOP licensing and service revenues, R&C volumes, and productivity, partially offset by more challenging end market conditions. 

 

Transportation Systems                 




($ Millions)

2Q 2011

2Q 2012

% Change

Sales

990

900

(9%)

Segment Profit

129

114

(12%)

Segment Margin

13.0%

12.7%

(30) bps

 

  • Sales were down (9%), (1%) organic, compared with the second quarter of 2011, due to the unfavorable impact of foreign exchange and significantly lower European light vehicle production volume and aftermarket sales, partially offset by new platform launches, including higher turbo gas penetration in North America.
  • Segment profit was down (12%) and segment margins decreased (30) bps to 12.7% primarily driven by inflation and the impact of ongoing projects to drive operational improvement in the Friction Materials business, partially offset by productivity benefits.

Honeywell will discuss its results during its investor conference call today starting at 9:00 a.m. EDT.  To participate, please dial (631) 291-4830 a few minutes before the 9:00 a.m. EDT start.  Please mention to the operator that you are dialing in for Honeywell's investor conference call.  The live webcast of the investor call 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, July 18, until midnight, July 25, by dialing (404) 537-3406.  The access code is 77820901.

Honeywell (http://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; automotive products; turbochargers; and performance materials. Based in Morris Township, N.J., Honeywell's shares are traded on the New York, London, and Chicago Stock Exchanges.  For more news and information on Honeywell, please visit http://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.

 

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)

(In millions, except per share amounts)












Three Months Ended


 Six Months Ended 



June 30,


 June 30, 



2012


2011


2012


2011










Product sales

$7,475


$7,146


$14,852


$13,959

Service sales

1,960


1,940


3,890


3,799

Net sales

9,435


9,086


18,742


17,758










Costs, expenses and other








    Cost of products sold  (A)

5,582


5,425


11,153


10,619

    Cost of services sold  (A)

1,340


1,239


2,649


2,469



6,922


6,664


13,802


13,088

    Selling, general and administrative expenses (A)

1,226


1,248


2,457


2,480

    Other (income) expense

(23)


(22)


(38)


(51)

    Interest and other financial charges

87


96


176


195



8,212


7,986


16,397


15,712










Income from continuing operations before taxes

1,223


1,100


2,345


2,046

Tax expense

318


304


615


560










Income from continuing operations after taxes

905


796


1,730


1,486










Income from discontinued operations after taxes

-


14


-


32










Net income

905


810


1,730


1,518










Less: Net income attributable to the noncontrolling interest

3


-


5


3










Net income attributable to Honeywell

$   902


$   810


$  1,725


$  1,515










Amounts attributable to Honeywell:









Income from continuing operations less net income 









attributable to the noncontrolling interest

902


796


1,725


1,483


Income from discontinued operations

-


14


-


32


Net income attributable to Honeywell

$   902


$   810


$  1,725


$  1,515










Earnings per share of common stock - basic:








Income from continuing operations

1.15


1.01


2.21


1.89

Income from discontinued operations

-


0.02


-


0.04

Net income attributable to Honeywell

$  1.15


$  1.03


$    2.21


$    1.93










Earnings per share of common stock - assuming dilution:








Income from continuing operations

1.14


1.00


2.19


1.86

Income from discontinued operations

-


0.02


-


0.04

Net income attributable to Honeywell

$  1.14


$  1.02


$    2.19


$    1.90










Weighted average number of shares outstanding-basic

781.4


785.0


779.3


785.2










Weighted average number of shares outstanding -








    assuming dilution


790.5


797.3


789.3


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 post-retirement expense, and stock compensation expense 


  










Honeywell International Inc

Segment Data (Unaudited) 

(Dollars in millions)












Three Months Ended


Six Months Ended



June 30,


June 30,

Net Sales


2012


2011


2012


2011










Aerospace

$ 3,027


$ 2,810


$   5,977


$   5,506










Automation and Control Solutions

3,962


3,880


7,750


7,536










Performance Materials and Technologies

1,546


1,406


3,161


2,761










Transportation Systems

900


990


1,854


1,955










Corporate

-


-


-


-










     Total

$ 9,435


$ 9,086


$ 18,742


$ 17,758



















Reconciliation of Segment Profit to Income From Continuing Operations Before Taxes












Three Months Ended


Six Months Ended



June 30,


June 30,

Segment Profit


2012


2011


2012


2011










Aerospace

$    562


$    451


$   1,096


$      918










Automation and Control Solutions

525


496


1,016


955










Performance Materials and Technologies

350


281


669


565










Transportation Systems

114


129


234


247










Corporate

(58)


(56)


(107)


(124)










     Total Segment Profit

1,493


1,301


2,908


2,561










Other income (A)

9


8


14


28

Interest and other financial charges

(87)


(96)


(176)


(195)

Stock compensation expense (B)

(40)


(42)


(91)


(91)

Pension ongoing expense (B)

(9)


(22)


(22)


(57)

Other postretirement income/(expense) (B)

(9)


45


(32)


27

Repositioning and other charges (B)

(134)


(94)


(256)


(227)










Income from continuing operations before taxes

$ 1,223


$ 1,100


$   2,345


$   2,046



















(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)











June 30,

December 31, 




2012



2011










ASSETS








Current assets:







    Cash and cash equivalents


$      4,221



$      3,698


    Accounts, notes and other receivables


7,250



7,228


    Inventories


4,342



4,264


    Deferred income taxes


269



460


    Investments and other current assets


562



484



Total current assets


16,644



16,134










Investments and long-term receivables


566



494


Property, plant and equipment - net


4,735



4,804


Goodwill


11,837



11,858


Other intangible assets - net


2,325



2,477


Insurance recoveries for asbestos related liabilities


672



709


Deferred income taxes


2,164



2,132


Other assets


1,231



1,200











Total assets


$    40,174



$    39,808










LIABILITIES AND SHAREOWNERS' EQUITY







Current liabilities:







    Accounts payable


$      4,547



$      4,738


    Short-term borrowings


65



60


    Commercial paper


948



599


    Current maturities of long-term debt


620



15


    Accrued liabilities


6,632



6,863



Total current liabilities


12,812



12,275










Long-term debt


6,342



6,881


Deferred income taxes


681



676


Postretirement benefit obligations other than pensions


1,365



1,417


Asbestos related liabilities


1,522



1,499


Other liabilities


5,369



6,158


Shareowners' equity


12,083



10,902











Total liabilities and shareowners' equity


$    40,174



$    39,808



 

  









Honeywell International Inc

 Consolidated Statement of Cash Flows (Unaudited)

(Dollars in millions)










Three Months Ended


Six Months Ended


June 30, 


June 30, 


2012


2011


2012


2011

Cash flows from operating activities:








    Net income attributable to Honeywell

$    902


$    810


$ 1,725


$ 1,515

    Adjustments to reconcile net income attributable to Honeywell to net








    cash provided  by operating activities:








        Depreciation and amortization

225


236


455


478

        Loss/(gain) on sale of non-strategic businesses and assets

1


(2)


1


(46)

        Repositioning and other charges

134


94


256


227

        Net payments for repositioning and other charges

(122)


(98)


(226)


(207)

        Pension and other postretirement expense

18


(22)


54


32

        Pension and other postretirement benefit payments

(308)


(32)


(597)


(1,082)

        Stock compensation expense

40


42


91


91

        Deferred income taxes

57


90


189


158

        Excess tax benefits from share based payment arrangements

(4)


(17)


(16)


(30)

        Other

(97)


32


(104)


140

        Changes in assets and liabilities, net of the effects of








        acquisitions and divestitures:








           Accounts, notes and other receivables

20


(365)


(20)


(537)

           Inventories

30


(59)


(78)


(389)

           Other current assets

13


(9)


(15)


(23)

           Accounts payable

12


264


(191)


260

           Accrued liabilities

52


174


(355)


108

Net cash provided by operating activities

973


1,138


1,169


695









Cash flows from investing activities:








    Expenditures for property, plant and equipment

(200)


(165)


(352)


(289)

    Proceeds from disposals of property, plant and equipment

-


2


1


3

    Increase in investments

(161)


(65)


(245)


(229)

    Decrease in investments

66


114


158


176

    Cash paid for acquisitions, net of cash acquired

(63)


(1)


(64)


(8)

    Proceeds from sales of businesses, net of fees paid

18


(2)


18


215

    Other

(81)


27


(59)


58

Net cash used for investing activities

(421)


(90)


(543)


(74)









Cash flows from financing activities:








    Net increase in commercial paper

-


50


349


51

    Net increase/(decrease) in short-term borrowings

4


7


11


(2)

    Proceeds from issuance of common stock

26


99


116


200

    Proceeds from issuance of long-term debt

40


3


42


1,384

    Payments of long-term debt

-


(2)


-


(439)

    Excess tax benefits from share based payment arrangements

4


17


16


30

    Repurchases of common stock

-


(504)


-


(504)

    Cash dividends paid

(291)


(266)


(582)


(530)

Net cash (used for)/provided by financing activities

(217)


(596)


(48)


190









Effect of foreign exchange rate changes on cash and cash equivalents

(102)


20


(55)


87

Net increase in cash and cash equivalents

233


472


523


898

Cash and cash equivalents at beginning of period

3,988


3,076


3,698


2,650

Cash and cash equivalents at end of period

$ 4,221


$ 3,548


$ 4,221


$ 3,548










  

Honeywell International Inc.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow, Prior to Cash Pension Contributions (Unaudited)

(Dollars in millions)














Three Months Ended


June 30,


2012


2011





Cash provided by operating activities

$      973


$   1,138





Expenditures for property, plant and equipment

(200)


(165)





Free cash flow

 

$      773


$      973





Cash pension contributions

 

267


22





Free cash flow, prior to cash pension contributions

$   1,040


$      995









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, repay debt obligations prior to their

maturities, or make cash pension contributions. 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 Excluding Pension Mark to Market Adjustment and Calculation of Segment Profit and Operating Income Margin Excluding Pension Mark to Market Adjustment (Unaudited)

(Dollars in millions)






























Three Months Ended


 Six Months Ended 



June 30,


June 30,



2012


2011


2012


2011










Segment Profit


$  1,493


$1,301


$  2,908


$  2,561










Stock compensation expense (A)


(40)


(42)


(91)


(91)

Repositioning and other (A,B)


(148)


(108)


(280)


(250)

Pension ongoing expense (A)


(9)


(22)


(22)


(57)

Other postretirement income/(expense) (A)


(9)


45


(32)


27










Operating Income


$  1,287


$1,174


$  2,483


$  2,190










Segment Profit


$  1,493


$1,301


$  2,908


$  2,561

÷ Sales


$  9,435


$9,086


$18,742


$17,758

Segment Profit Margin %


15.8%


14.3%


15.5%


14.4%










Operating Income


$  1,287


$1,174


$  2,483


$  2,190

÷ Sales


$  9,435


$9,086


$18,742


$17,758

Operating Income Margin %


13.6%


12.9%


13.2%


12.3%





















2011


2012 Guidance










Segment Profit


$  5,357


  ~$5,800 - $6,000 










Stock compensation expense (A)


(168)


 ~(200) 



Repositioning and other (A,B)


(794)


 ~(400) 



Pension ongoing expense (A)


(105)


 ~(100) 



Pension mark to market adjustment (A)


(1,802)


 TBD 



Other postretirement income/(expense) (A)


86


 ~(100) 










Operating Income


$  2,574


 ~$5,000 - $5,200 



Pension mark to market adjustment (A)


$ (1,802)


 TBD 



Operating Income excluding pension mark to market adjustment


$  4,376


 ~$5,000 - $5,200 










Segment Profit


$  5,357


  ~$5,800 - $6,000 



÷ Sales


$36,529


 $37,800 - $38,400 



Segment Profit Margin %


14.7%


15.4 - 15.6%










Operating Income


$  2,574


 ~$5,000 - $5,200 



÷ Sales


$36,529


 $37,800 - $38,400 



Operating Income Margin %


7.0%


13.4 - 13.6%












Operating Income excluding pension mark to market adjustment


$  4,376


 ~$5,000 - $5,200 



÷ Sales


$36,529


 $37,800 - $38,400 



Operating Income Margin excluding pension mark to market adjustment %


12.0%


13.4 - 13.6%






























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

  


Honeywell International Inc

Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark to Market Adjustment
and Third Quarter 2011 Repositioning and Other Actions Funded by Gain on Sale of CPG Business (CPG Gain)





2011



EPS - continuing operations assuming dilution

$     2.35



Pension mark to market adjustment

$     1.44



EPS - continuing operations assuming dilution, excluding pension mark to market adjustment

$     3.79



Third quarter 2011 repositioning and other actions funded by CPG Gain

$0.22



EPS - continuing operations assuming dilution, excluding pension mark to market adjustment

  and third quarter 2011 repositioning and other actions funded by CPG Gain



$     4.01






2011



EPS - Total Honeywell assuming dilution

$     2.61



Pension mark to market adjustment

$     1.44



EPS - Total Honeywell assuming dilution, excluding pension mark to market adjustment

$     4.05



We believe EPS, excluding pension mark to market adjustment and third quarter 2011 repositioning and other actions

funded by CPG Gain, is a metric 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 of 791.6 million and the effective tax rate for the period. Mark to market uses a

blended tax rate of 36.9%.


 

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