Financial Release
Printer Friendly Version View printer-friendly version
  Back to Index
Honeywell Reports Third Quarter 2012 Sales of $9.3 Billion; EPS Up 9% to $1.20 Per Share

9% EPS Growth Driven By Strong Operational Performance And Sales Conversion
Continued Americas And High Growth Region Expansion, Europe As Expected
Segment Margin Increase Of 110 Bps To 15.8%, Operating Margin Up 360 Bps
Narrowing 2012 Proforma EPS Guidance To $4.45 - $4.50, From $4.40 - $4.55

MORRIS TOWNSHIP, N.J., Oct. 19, 2012 /PRNewswire/ -- Honeywell (NYSE: HON) today announced its results for the third quarter of 2012:

Total Honeywell




($ Millions, except Earnings Per Share)

3Q 2011

3Q 2012

Change

Sales

9,298

9,342

~ flat





Segment Margin

14.7%

15.8%

110  bps

Operating Income Margin

10.3%

13.9%

360 bps





Earnings Per Share from Continuing Operations

$0.87

$1.20

38%

Earnings Per Share

$1.10

$1.20

9%





Cash Flow from Operations

661

999

51%

Free Cash Flow *

922

1,021

11%





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

"Honeywell delivered 2% organic sales growth, strong sales conversion and higher earnings per share in the third quarter," said Honeywell Chairman and CEO Dave Cote.  "Our balanced mix of long- and short-cycle businesses, combined with growth in new products and continued expansion in high growth regions, offset European weakness, lower demand for products in some of our short-cycle businesses in China and the U.S., and foreign exchange headwinds in the quarter.  Further, we maintained strong backlogs with new platform wins across a number of our businesses. We continue to be encouraged by the commercial aerospace outlook, increasing infrastructure spending, and oil and gas investments.  These trends, combined with our great positions in good industries, leverage to other macro-trends like safety and security, energy efficiency, and clean energy generation are expected to drive our continued outperformance. Looking ahead to 2013, we are planning for a continued challenging macro environment, but expect to deliver good growth driven by new products, geographic expansion, and traction on key initiatives. Further, we will remain flexible and adhere to our disciplined focus on cost and productivity."

Third quarter 2012 Earnings Per Share (EPS) reflects a 22.7% effective tax rate compared to 23.2% last year.  Adjusting for a normalized tax rate of 26.5% in 2011 and 2012, EPS growth would be 8%.  The tax rate favorability in the third quarter of this year, representing $0.06 of EPS relative to guidance, is expected to be offset in the fourth quarter, with an estimated full year 2012 effective tax rate of 26.5%.

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

 $37.8 - $38.4B

 $37.5 - $37.7B

~ 3%





Segment Margin

15.4 - 15.6%

15.6 - 15.7%

90 - 100 bps

Operating Income Margin1

13.4 - 13.6%

13.5 - 13.7%

150 - 170 bps





Earnings Per Share from Continuing Operations2

$4.40 - $4.55

$4.45 - $4.50

11% - 12%

Earnings Per Share1

$4.40 - $4.55

$4.45 - $4.50

10% - 11%





Free Cash Flow3

 ~$3.5B

 ~$3.5 - $3.6B

~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

Third Quarter Segment Performance

Aerospace




($ Millions)

3Q 2011

3Q 2012

% Change

Sales

2,922

3,043

4%

Segment Profit

532

582

9%

Segment Margin

18.2%

19.1%

90 bps

  • Sales were up 4% compared with the third quarter of 2011 driven by a 9% increase in our Commercial end markets, partially offset by a (1%) decline in Defense and Space. Commercial original equipment (OE) sales were up 14% driven by increased production rates at our major OE customers. Commercial aftermarket sales were up 6% with growth in both business jet spares and repair and overhaul events.
  • Segment profit was up 9%, and segment margins expanded 90 bps to 19.1%, primarily due to higher commercial volumes and productivity net of inflation and increased investments to support future growth.

Automation and Control Solutions




($ Millions)

3Q 2011

3Q 2012

% Change

Sales

3,948

3,958

~ flat

Segment Profit

544

571

5%

Segment Margin

13.8%

14.4%

60 bps

  • Sales were approximately flat, up 2% on an organic basis, compared with the third quarter of 2011. Volume growth and the favorable impact of acquisitions were offset by foreign exchange headwinds.  Process Solutions and Building Solutions and Distribution grew on an organic basis reflecting increased conversion of sales from backlog and increased sales volume in our Fire and Security Distribution business in the Americas. Energy, Safety, and Security was flat organically due to weak industrial end markets globally. 
  • Segment profit was up 5% and segment margins were up 60 bps to 14.4% driven by commercial excellence and productivity benefits net of inflation.

Performance Materials and Technologies




($ Millions)

3Q 2011

3Q 2012

% Change

Sales

1,468

1,478

1%

Segment Profit

254

275

8%

Segment Margin

17.3%

18.6%

130 bps

  • Sales were up 1%, reported and organic, compared with the third quarter of 2011, resulting from higher licensing and equipment sales in UOP and new products and applications in Specialty Products and Electronic Materials, partially offset by challenging global end market conditions in Fluorine Products and Resins and Chemicals.
  • Segment profit was up 8% and segment margins increased 130 bps to 18.6%, primarily due to higher sales at UOP and productivity net of inflation and continued growth investments, partially offset by challenging global end market conditions in Fluorine Products and Resins and Chemicals. 

Transportation Systems




($ Millions)

3Q 2011

3Q 2012

% Change

Sales

960

863

(10%)

Segment Profit

121

104

(14%)

Segment Margin

12.6%

12.1%

(50) bps

  • Sales were down (10%), down (2%) organic, compared with the third quarter of 2011, as new platform launches and higher turbo gas penetration in the U.S. nearly offset the unfavorable impact of foreign exchange, and lower European light vehicle production volume and aftermarket sales.
  • Segment profit was down (14%) and segment margins decreased (50) bps to 12.1% primarily driven by unfavorable foreign exchange, lower sales, and 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 9:30 a.m. EDT.  To participate, please dial (877) 303-4382 (domestic) or (631) 291-4830 (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 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 12:30 p.m. EDT, October 19, until midnight, October 26, dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).  The access code is 18261327.

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; automotive products; turbochargers; and specialty 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 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


 Nine Months Ended 




September 30,


 September 30, 




2012


2011


2012


2011












Product sales

$     7,332


$   7,308


$  22,184


$  21,267


Service sales

2,010


1,990


5,900


5,789


Net sales

9,342


9,298


28,084


27,056












Costs, expenses and other









    Cost of products sold  (A)

5,474


5,739


16,627


16,358


    Cost of services sold  (A)

1,334


1,294


3,983


3,763




6,808


7,033


20,610


20,121


    Selling, general and administrative expenses (A)

1,238


1,303


3,695


3,783


    Other (income) expense

(16)


(21)


(54)


(72)


    Interest and other financial charges

88


90


264


285




8,118


8,405


24,515


24,117












Income from continuing operations before taxes

1,224


893


3,569


2,939


Tax expense

278


207


893


767












Income from continuing operations after taxes

946


686


2,676


2,172












Income from discontinued operations after taxes

-


177


-


209












Net income

946


863


2,676


2,381












Less: Net (loss) income attributable to the noncontrolling interest

(4)


1


1


4












Net income attributable to Honeywell

$        950


$     862


$    2,675


$    2,377












Amounts attributable to Honeywell:










Income from continuing operations less net income 










attributable to the noncontrolling interest

950


685


2,675


2,168



Income from discontinued operations

-


177


-


209



Net income attributable to Honeywell

$        950


$     862


$    2,675


$    2,377












Earnings per share of common stock - basic:









Income from continuing operations

1.21


0.88


3.43


2.77


Income from discontinued operations

-


0.23


-


0.27


Net income attributable to Honeywell

$       1.21


$    1.11


$      3.43


$      3.04












Earnings per share of common stock - assuming dilution:









Income from continuing operations

1.20


0.87


3.38


2.73


Income from discontinued operations

-


0.23


-


0.26


Net income attributable to Honeywell

$       1.20


$    1.10


$      3.38


$      2.99












Weighted average number of shares outstanding-basic

783.6


778.2


780.7


782.9












Weighted average number of shares outstanding -









    assuming dilution

792.5


786.9


790.4


794.0












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

2012


2011


2012


2011










Aerospace

$         3,043


$         2,922


$         9,020


$         8,428










Automation and Control Solutions

3,958


3,948


11,708


11,484










Performance Materials and Technologies

1,478


1,468


4,639


4,229










Transportation Systems

863


960


2,717


2,915










Corporate

-


-


-


-










     Total

$         9,342


$         9,298


$       28,084


$       27,056



















Reconciliation of Segment Profit to Income From Continuing Operations Before Taxes












Three Months Ended


Nine Months Ended



September 30,


September 30,

Segment Profit

2012


2011


2012


2011










Aerospace

$            582


$            532


$         1,678


$         1,450










Automation and Control Solutions

571


544


1,587


1,499










Performance Materials and Technologies

275


254


944


819










Transportation Systems

104


121


338


368










Corporate

(57)


(84)


(164)


(208)










     Total Segment Profit

1,475


1,367


4,383


3,928










Other income (A)

4


8


18


36

Interest and other financial charges

(88)


(90)


(264)


(285)

Stock compensation expense (B)

(40)


(38)


(131)


(129)

Pension ongoing expense (B)

(7)


(26)


(29)


(83)

Other postretirement income/(expense) (B)

(20)


82


(52)


109

Repositioning and other charges (B)

(100)


(410)


(356)


(637)










Income from continuing operations before taxes

$         1,224


$            893


$         3,569


$         2,939










(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,


2012


2011

ASSETS




Current assets:




    Cash and cash equivalents 

$      4,760


$      3,698

    Accounts, notes and other receivables               

7,388


7,228

    Inventories                        

4,314


4,264

    Deferred income taxes                      

573


460

    Investments and other current assets               

711


484

                Total current assets                 

17,746


16,134



Investments and long-term receivables           

600


494

Property, plant and equipment - net               

4,830


4,804

Goodwill                         

11,916


11,858

Other intangible assets - net                    

2,281


2,477

Insurance recoveries for asbestos related liabilities          

654


709

Deferred income taxes                   

1,766


2,132

Other assets                 

1,281


1,200



                Total assets           

$    41,074


$    39,808





LIABILITIES AND SHAREOWNERS' EQUITY




Current liabilities:




    Accounts payable              

$      4,518


$      4,738

    Short-term borrowings                       

75


60

    Commercial paper                       

899


599

    Current maturities of long-term debt                 

624


15

    Accrued liabilities                     

6,597


6,863

                Total current liabilities            

12,713


12,275



Long-term debt                         

6,391


6,881

Deferred income taxes                       

679


676

Postretirement benefit obligations other than pensions               

1,346


1,417

Asbestos related liabilities                     

1,531


1,499

Other liabilities                   

5,195


6,158

Shareowners' equity             

13,219


10,902



                Total liabilities and shareowners' equity             

$    41,074


$    39,808

     


Honeywell International Inc.

 Consolidated Statement of Cash Flows (Unaudited)

(Dollars in millions)












Three Months Ended


Nine Months Ended



September 30, 


September 30, 



2012


2011


2012


2011

Cash flows from operating activities:









    Net income attributable to Honeywell


$    950


$    862


$  2,675


$ 2,377

    Adjustments to reconcile net income attributable to Honeywell to net









    cash provided  by operating activities:









        Depreciation and amortization


226


226


681


704

        Gain on sale of non-strategic businesses and assets


(4)


(307)


(3)


(353)

        Repositioning and other charges


100


410


356


637

        Net payments for repositioning and other charges


(126)


(128)


(352)


(335)

        Pension and other postretirement expense


27


(56)


81


(24)

        Pension and other postretirement benefit payments


(291)


(486)


(888)


(1,568)

        Stock compensation expense


40


38


131


129

        Deferred income taxes


130


39


319


197

        Excess tax benefits from share based payment arrangements


(12)


(1)


(28)


(31)

        Other


143


(84)


39


56

        Changes in assets and liabilities, net of the effects of









        acquisitions and divestitures:









           Accounts, notes and other receivables


(140)


104


(160)


(433)

           Inventories


25


(51)


(53)


(440)

           Other current assets


(62)


(30)


(77)


(53)

           Accounts payable


(29)


105


(220)


365

           Accrued liabilities


22


20


(333)


128

Net cash provided by operating activities


999


661


2,168


1,356










Cash flows from investing activities:









    Expenditures for property, plant and equipment


(234)


(177)


(586)


(466)

    Proceeds from disposals of property, plant and equipment


1


-


2


3

    Increase in investments


(237)


(93)


(482)


(322)

    Decrease in investments


129


112


287


288

    Cash paid for acquisitions, net of cash acquired


2


(619)


(62)


(627)

    Proceeds from sales of businesses, net of fees paid


-


955


18


1,170

    Other


17


9


(42)


67

Net cash (used for)/provided by investing activities


(322)


187


(865)


113










Cash flows from financing activities:









    Net(decrease)/increase in commercial paper


(49)


350


300


401

    Net increase/(decrease) in short-term borrowings


8


(2)


19


(4)

    Proceeds from issuance of common stock


63


32


179


232

    Proceeds from issuance of long-term debt


44


5


86


1,389

    Payments of long-term debt


-


-


-


(439)

    Excess tax benefits from share based payment arrangements


12


1


28


31

    Repurchases of common stock


-


(505)


-


(1,009)

    Cash dividends paid


(298)


(266)


(880)


(796)

Net cash used for financing activities


(220)


(385)


(268)


(195)










Effect of foreign exchange rate changes on cash and cash equivalents


82


(126)


27


(39)

Net increase in cash and cash equivalents


539


337


1,062


1,235

Cash and cash equivalents at beginning of period


4,221


3,548


3,698


2,650

Cash and cash equivalents at end of period


$ 4,760


$ 3,885


$  4,760


$ 3,885



















 

 

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




 September 30,




2012


2011


2012E







Cash provided by operating activities         

$    999


$    661


~$3,500 - 3,600

Expenditures for property, plant and equipment           

(234)


(177)


~(1,000)

Free cash flow         

$765


$484


~$2,500 - 2,600

Cash pension contributions             

256


438


~1,000

Free cash flow, prior to cash pension contributions     

$ 1,021


$    922


~$3,500 - 3,600







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.

 

In reference to free cash flow conversion on page 2, we define free cash flow conversion as free cash flow prior to any NARCO related payments and cash pension contributions divided by net income attributable to Honeywell excluding pension mark to market adjustment.

 

                                                                                                                                 

 

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


September 30,


2012


2011





Segment Profit        

$1,475


$1,367





Stock compensation expense (A)          

(40)


(38)

Repositioning and other (A, B)         

(112)


(423)

Pension ongoing expense (A)          

(7)


(26)

Other postretirement income/(expense) (A)         

(20)


82





Operating Income               

$1,296


$962





Segment Profit       

$1,475


$1,367

÷ Sales         

$9,342


$9,298

Segment Profit Margin %              

15.8%


14.7%





Operating Income              

$1,296


$962

÷ Sales     

$9,342


$9,298

Operating Income Margin %      

13.9%


10.3%










2011


2012 Guidance

Segment Profit          

$5,357


~$5,800 - $5,900 





Stock compensation expense (A)          

(168)


~(175)

Repositioning and other (A, B)        

(794)


 ~(425) - (450) 

Pension ongoing expense (A)           

(105)


~(50)

Pension mark to market adjustment (A)               

(1,802)


TBD  

Other postretirement income/(expense) (A)           

86


~(75)





Operating Income             

$2,574


~$5,075 - $5,150 

Pension mark to market adjustment (A)        

$(1,802)


TBD

Operating Income excluding pension mark to market adjustment              

$4,376


~$5,075 - $5,150





Segment Profit       

$5,357


~$5,800 - $5,900

÷ Sales     

$36,529


$37,500 - $37,700

Segment Profit Margin %            

14.7%


15.6 - 15.7%





Operating Income           

$2,574


 ~$5,075 - $5,150

÷ Sales         

$36,529


 $37,500 - $37,700

Operating Income Margin %             

7.0%


 13.5 - 13.7% 





Operating Income excluding pension mark to market adjustment                   

$4,376


 ~$5,075 - $5,150

÷ Sales         

$36,529


 $37,500 - $37,700

Operating Income Margin excluding pension mark to market adjustment %             

12.0%


13.5 - 13.7%


(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.

                                                                               

 

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