Honeywell Intl Honeywell Announces Planned Portfolio Changes

 
TIDMHON 
 
Honeywell Announces Planned Portfolio Changes 
 
- Plans to Spin Homes and the ADI Global Distribution Business, a $4.5B 
Business, and Transportation Systems, a $3.0B Business, into Two Independent, 
Publicly-Traded Companies by End of 2018 
 
- Prospective Honeywell Portfolio Consists of High-Growth Businesses with 
Strong Operational and Technology Synergies, Focused on Six Key End Markets 
 
- Independent Investment Decisions Will Position Spins to Thrive in Evolving 
End Markets 
 
- Company Previews 3Q17 Results: Sales Up 3% Reported, Up 5% Organic; 
Earnings Per Share of $1.75 
 
- New Leader Appointed for Home and Building Technologies Business Group; Smart 
Energy Business to Align with Performance Materials and Technologies 
 
MORRIS PLAINS, N.J., Oct. 10, 2017 /PRNewswire/ -- Honeywell (NYSE: HON) today 
announced the results of its comprehensive portfolio review, including its 
intention to separately spin off its Homes product portfolio and ADI global 
distribution business, as well as its Transportation Systems business, into two 
stand-alone, publicly-traded companies. The planned separation transactions are 
intended to be tax-free spins to Honeywell shareowners for U.S. federal income 
tax purposes and are expected to be completed by the end of 2018. 
 
"Today's announcement marks the culmination of a rigorous portfolio review 
involving a detailed assessment of every Honeywell business. As part of that 
review, we analyzed numerous criteria, including growth outlook, financial 
performance, market dynamics, potential for disruption, and, most importantly, 
assessment of fit as a Honeywell business," said Honeywell President and CEO 
Darius Adamczyk. "The remaining Honeywell portfolio will consist of high-growth 
businesses in six attractive industrial end markets, each aligned to global 
mega trends including energy efficiency, infrastructure investment, 
urbanization and safety. These businesses are best positioned to leverage 
Honeywell synergies from our technologies, financial and business models, and 
talent. Our simplified portfolio will offer multiple platforms for organic 
growth and margin expansion through further deployment of our world-class HOS 
Gold operating system and the Honeywell Sentience Platform. Honeywell will also 
have multiple levers for continuing to execute an aggressive capital deployment 
strategy, including a vigorous and disciplined M&A program. 
 
"The spun businesses will be better positioned to maximize shareowner value 
through focused strategic decision making and capital allocation tailored for 
their end markets," Adamczyk said. 
 
"At Honeywell, we will continue our track record of execution, delivering 
growth, margin expansion, and aggressive capital allocation for our 
shareowners." 
 
The new Homes and Global Distribution business will be a leader in the home 
heating, ventilation and air conditioning (HVAC) controls and security markets, 
and a leading global distributor of security and fire protection products. The 
business is expected to have annualized revenue of approximately $4.5 billion, 
a high-yield credit rating, approximately 13,000 employees, and financial 
responsibility for certain Honeywell legacy liabilities. 
 
The new Transportation Systems business will be a global leader in turbocharger 
technologies with best-in-class engineering capabilities for a broad range of 
engine types across global automobile, truck and other vehicle markets. The 
business is expected to have annualized revenue of approximately $3 billion, a 
high-yield credit rating, approximately 6,500 employees and financial 
responsibility for Honeywell legacy automotive segment liabilities in an amount 
equal to our Bendix legacy asbestos liability. 
 
The planned separations will not require a shareowner vote. Each spin-off will 
be subject to finalization of the contours of the spun-off business, assurance 
that the separation will be tax-free to Honeywell shareowners for U.S. federal 
income tax purposes, finalization of the capital structure of the three 
corporations, the effectiveness of appropriate filings with the U.S. Securities 
and Exchange Commission, final approval of the Honeywell Board of Directors, 
and other customary matters. 
 
Company Previews Anticipated Strong Third-Quarter Results; Raises Low-End of 
Full-Year Guidance 
Honeywell announced it anticipates strong third-quarter results. Sales are 
expected to be $10.1 billion, up 3% reported and up 5% organic, and earnings 
per share is expected to be $1.75, up 9% reported and up 16%1 ex-divestitures, 
normalized for tax at 26%, driven by strong results at its Aerospace and 
Performance Materials and Technologies business groups. The Company also raised 
the low-end of its full-year 2017 earnings per share guidance by 5 cents to a 
new range of $7.05 - $7.10, excluding any pension mark-to-market adjustment. 
The Company will hold its quarterly earnings announcement on Friday, October 
20, at 9:30 a.m. EDT. 
 
New Leader Appointed for Home and Building Technologies Business Group 
Effective immediately, Gary Michel will serve as president and CEO of 
Honeywell's Home and Building Technologies (HBT) strategic business group. 
Michel will report to Adamczyk and serve as a company officer. Michel succeeds 
Terrence Hahn, who will move to a leadership role reporting to Adamczyk and 
will help prepare the Homes and ADI businesses for the spin. 
 
Michel joins Honeywell from Ingersoll-Rand Company, where he has held a series 
of large leadership roles over the past 32 years. Most recently, he served as 
senior vice president and president, Residential HVAC and Supply, which he 
transformed to deliver substantial improvements in revenue and market share, 
operating income, commercialization processes, and technology platforms. Michel 
has also led Ingersoll-Rand's Club Car; Road Development - Construction 
Technologies; and Utility Equipment - Construction Technologies businesses. 
Michel has held several other roles, including executive director, Corporate 
Development, and general manager, Aftermarket Division, for Europe, the Middle 
East and Africa. Michel earned his B.S. in mechanical engineering at Virginia 
Tech and his M.B.A. at the University of Phoenix. 
 
"Gary has proven himself to be an innovative and energetic leader with a deep 
understanding of his customers and end markets and the ability to translate 
this knowledge into technology-differentiated offerings that bring value to 
customers," Adamczyk said. "Gary is a welcome addition to our team and will 
help Honeywell continue to be a leader in connected technologies, building on 
our great positions in growing industries." 
 
Smart Energy Business to Align with Performance Materials and Technologies 
In addition, Honeywell's Smart Energy business unit, previously part of HBT, 
will immediately be integrated into the Process Solutions unit within Honeywell 
Performance Materials and Technologies. Honeywell Smart Energy enables 
utilities and distribution companies to deploy advanced capabilities that 
transform operations, improve reliability and environmental sustainability, and 
better serve customers. Its wide array of meter offerings will complement an 
existing meter portfolio within Process Solutions. Honeywell's Process 
Solutions unit is a pioneer in process automation control and industrial 
cyber-security, and a global leader in optimizing and protecting manufacturing 
assets in the refining, pulp and paper, industrial power generation, chemicals 
and petrochemicals, biofuels, pharmaceuticals, and metals, minerals and mining 
industries. 
 
"Both Smart Energy and Process Solutions have deep expertise in metering, large 
project roll-outs and software, and both can leverage the Honeywell Sentience 
Platform to utilize vast quantities of user data to generate new products and 
services that help customers operate more efficiently," Adamczyk said. "Both 
businesses are project-based with opportunities for recurring revenue streams. 
We are excited about the combination of these two businesses, which will allow 
them to expand their respective capabilities and serve a broader set of 
customers." 
 
Investor Conference Call 
Honeywell will discuss the transactions during an investor conference call 
today starting at 8 a.m. EDT. To participate in today's conference call, please 
dial [phone] (domestic) or [phone] (international) approximately 
10 minutes before the 8 a.m. EDT start. Please mention to the operator that you 
are dialing in for Honeywell's portfolio review call or provide the conference 
code 4605029. 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 (www.honeywell.com/investor). Investors can 
hear a replay of the conference call from 12 p.m. EDT, October 10, until 12 
p.m. EDT, October 17, by dialing [phone] (domestic) or [phone] 
(international). The access code is 4605029. 
 
Honeywell (www.honeywell.com) is a Fortune 100 software-industrial company that 
delivers industry specific solutions that include aerospace and automotive 
products and services; control technologies for buildings, homes, and industry; 
and performance materials globally. Our technologies help everything from 
aircraft, cars, homes and buildings, manufacturing plants, supply chains, and 
workers become more connected to make our world smarter, safer, and more 
sustainable.  For more news and information on Honeywell, please visit 
www.honeywell.com/newsroom. 
 
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, as well as the ability to 
effect the separations and meet the related conditions noted above. 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, including with respect to any changes in or 
abandonment of the proposed separations. 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. In addition, third-quarter results 
contained herein are preliminary and may differ from our actual results that 
will be reported in our third-quarter earnings release and Form 10-Q filed on 
October 20, 2017. 
 
1 Earnings per share variance excludes 2016 divestitures and approximately $60 
million of additional 3Q17 restructuring funding enabled by a lower than 
planned effective tax rate, normalized for tax at 26%. 
 
                          Honeywell International Inc 
 
             Reconciliation of Organic Sales % Change (Unaudited) 
 
                                                            Preliminary 
 
                                                         Three Months Ended 
 
                                                           September 30, 
 
                                                                2017 
 
Honeywell 
 
Reported sales % change                                          3% 
 
Less: Foreign currency translation                               1% 
 
Less: Acquisitions and divestitures, net                        (3)% 
 
Organic sales % change                                           5% 
 
We believe organic sales growth 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 
 
    Calculation of Earnings Per Share at 26% Tax Rate Excluding Additional 
                            Restructuring and 2016 
                           Divestitures (Unaudited) 
 
                (Dollars in millions, except per share amounts) 
 
                                                          Three Months Ended 
 
                                                             September 30, 
 
                                                         Preliminary      2016 
                                                            2017 
 
Income before taxes                                            $      $  1,632 
                                                               1,783 
 
Taxes at 26%                                                     464       424 
 
Net income at 26% tax rate                                     $      $  1,208 
                                                               1,319 
 
Less: Net income attributable to the noncontrolling               17         8 
interest 
 
Net income attributable to Honeywell at 26% tax rate           $      $  1,200 
                                                               1,302 
 
Weighted average number of shares outstanding -                771.4     774.4 
assuming dilution 
 
Earnings per share at 26% tax rate                           $             $ 
                                                                1.69      1.55 
 
Less: Earnings per share attributable to 2016                      -      0.04 
divestitures (1) 
 
Less: Earnings per share attributable to additional           (0.06)         - 
restructuring (2) 
 
Earnings per share of common stock - assuming dilution, 
at 26% tax rate, 
 
excluding additional restructuring and 2016                  $           $ 
divestitures                                                    1.75      1.51 
 
Earnings per share of common stock - assuming dilution       $           $ 
                                                                1.75      1.60 
 
Less: Earnings per share impact of normalizing to 26%           0.06      0.05 
tax rate 
 
Less: Earnings per share attributable to 2016                             0.04 
divestitures (1) 
 
Less: Earnings per share attributable to additional           (0.06) 
restructuring (2) 
 
Earnings per share of common stock - assuming dilution, 
at 26% tax rate, 
 
excluding additional restructuring and 2016                  $           $ 
divestitures                                                    1.75      1.51 
 
(1) Earnings per share attributable to 2016 divestitures utilizes weighted 
average shares of 774.4 million and a blended tax rate of 32.9% for the three 
months ended September 30, 2016. 
 
(2) The Company has and continues to have an ongoing level of restructuring 
activities, for which there is a planned amount of restructuring-related 
charges. Additional restructuring represents only amounts that are incremental 
to those planned restructuring amounts. For the three months ended September 
30, 2017, the Company funded approximately $100 million of restructuring, 
approximately $60 million of which was incremental to the planned amount. This 
additional restructuring was enabled by a lower than expected effective tax 
rate for the period. We believe that the exclusion of this additional 
restructuring provides a more comparable measure of year-on-year results. 
Earnings per share attributable to additional restructuring uses a tax rate of 
26% for the three months ended September 30, 2017. 
 
We believe earnings per share adjusted to normalize for the expected effective 
tax rate of 26% for the most recently completed fiscal quarter (as presented 
in prior guidance for such quarter) and to exclude the 2016 divestitures is a 
measure that is useful to investors and management in understanding our 
ongoing operations and in analysis of ongoing operating trends. 
 
 
 
Contacts: 
 
Media                                          Investor Relations 
 
Scott Sayres                                   Mark Macaluso 
 
[phone]                                 [phone] 
 
[e-mail]                     [e-mail] 
 
 
 
END 
 

(END) Dow Jones Newswires

October 10, 2017 07:05 ET (11:05 GMT)