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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Honeywell International Incorporated | LSE:HON | London | Ordinary Share | COM STK USD1 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 159.07 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMHON
Honeywell Beats Guidance And Delivers 8% Reported Sales Growth And 29%
Operating Cash Flow Growth; Raises High End Of 2018 Earnings Guidance(1) By 10
Cents
- Reported Earnings per Share of $1.68; EPS(2) of $2.12 (Excl. Separation Costs
and Other Items), Up 18%
- Organic Sales Up 6% Driven by Widespread Growth Across the Business
- Free Cash Flow (Excl. Separation Cost Impacts) Up 42%, Conversion(3) 108%
- Also Raising Full-Year Sales, Segment Margin, and Free Cash Flow(4) Guidance
MORRIS PLAINS, N.J., July 20, 2018 /PRNewswire/ -- Honeywell (NYSE: HON) today
announced financial results for the second quarter of 2018 and raised its
full-year sales, segment margin, earnings per share1, and free cash flow4
guidance.
"Honeywell delivered another outstanding quarter with continued top-line
growth, strong margin expansion, and double-digit earnings per share and free
cash flow growth. Organic sales grew 6 percent, driven by continued strength in
Aerospace; demand for Intelligrated warehouse automation solutions; and growth
in residential thermal solutions, thermostats and ADI global distribution in
our Homes business. We also saw continued robust short-cycle demand for our
process automation solutions. The increased volumes, combined with our
operational excellence initiatives, drove 60 basis points of segment margin
expansion, above the high end of the guidance we provided in April. Our
operational performance resulted in earnings per share2 (excluding separation
costs and other items) of $2.12, up 18 percent, exceeding the high end of our
guidance range," said Darius Adamczyk, Chairman and Chief Executive Officer of
Honeywell. "We generated approximately $1.7 billion of free cash flow
(excluding separation costs) in the quarter, up 42 percent, with conversion3 of
108 percent, and we continued to put our strong balance sheet to work by
repurchasing about $800 million in Honeywell shares in the second quarter. In
the first half of the year, we repurchased approximately $1.7 billion in
Honeywell shares.
"Given our strong second-quarter performance and confident outlook, we are
raising our 2018 guidance. For the full year, we now expect organic sales
growth to be 5 to 6 percent, segment margin expansion to be 40 to 60 basis
points, earnings per share1 to be $8.05 to $8.15, and free cash flow4 to be
$5.6 to $6.2 billion," Adamczyk said.
"Our software and Connected offerings continue to gain traction. Across our
segments, Connected software sales have grown double-digits year-to-date. The
portfolio transformation activities we announced last year are nearly complete,
with the spin of our Transportation Systems business, Garrett, expected to be
complete by the end of the third quarter, and the spin of our Homes business on
track for completion by the end of the year. Our long-cycle orders and backlog
grew 11 and 14 percent respectively, which positions us well for the rest of
2018 and into 2019. We are committed to delivering outstanding returns for our
shareowners over the long term," Adamczyk concluded.
A summary of the Company's full-year guidance changes can be found in Table 1.
Honeywell will discuss the results during an investor conference call today
starting at 9:30 a.m. Eastern Daylight Time.
Second Quarter Performance
Honeywell sales for the second quarter were up 8 percent on a reported basis
and up 6 percent on an organic basis. The difference between reported and
organic sales relates to the impact of foreign currency translation. The
second-quarter financial results can be found in Tables 2 and 3.
Aerospace sales for the second quarter were up 8 percent on an organic basis
driven by growth in business aviation OE, demand in the commercial aftermarket,
strength in U.S. and international defense, and demand for light vehicle gas
and commercial vehicle turbochargers in Transportation Systems. Segment margin
expanded 30 basis points to 22.6 percent, primarily driven by volume,
commercial excellence, and lower customer incentives, partially offset by
higher volumes of lower-margin OE shipments.
Home and Building Technologies sales for the second quarter were up 3 percent
on an organic basis driven by continued strength in residential thermal
products and thermostats, commercial fire and software, as well as global
growth in the ADI distribution business. Segment margin expanded 60 basis
points to 16.8 percent, primarily driven by commercial excellence, the benefits
from previously funded and executed restructuring, and higher sales volumes.
Performance Materials and Technologies sales for the second quarter were up 3
percent on an organic basis driven by strong backlog conversion and short-cycle
demand in Process Solutions, catalyst and engineering growth in UOP, and
continued demand for Solstice® low global warming materials. Segment margin
expanded 50 basis points to 22.1 percent, primarily driven by commercial
excellence, benefits from previously funded and executed restructuring, and
higher volumes, partially offset by inflation.
Safety and Productivity Solutions sales for the second quarter were up 11
percent on an organic basis driven by continued double-digit sales growth in
Intelligrated, strong demand for new Mobility products, and higher volumes in
Sensing and IoT. Segment margin expanded 150 basis points to 16.5 percent,
primarily driven by higher sales volumes and commercial excellence.
To participate on the conference call, please dial (866) 548-4713 (domestic) or
(323) 794-2093 (international) approximately ten minutes before the 9:30 a.m.
EDT start. Please mention to the operator that you are dialing in for
Honeywell's second quarter 2018 earnings call or provide the conference code
HON2Q18. 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 1:30 p.m. EDT, July 20, until 1:30 p.m. EDT, July 27,
by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The
access code is 5576508.
TABLE 1: FULL-YEAR 2018 GUIDANCE5
Previous Guidance Current Guidance
Sales $42.7B - $43.5B $43.1B - $43.6B
Organic Growth 3% - 5% 5% - 6%
Segment Margin 19.3% - 19.6% 19.4% - 19.6%
Expansion Up 30 - 60 bps Up 40 - 60 bps
Earnings Per Share $7.85 - $8.05 $8.05 - $8.15
Earnings Growth 10% - 13% 13% - 15%
Free Cash Flow $5.3B - $5.9B $5.6B - $6.2B
Growth 7% - 20% 13% - 26%
TABLE 2: SUMMARY OF FINANCIAL RESULTS - TOTAL HONEYWELL
2Q 2Q Change
2017 2018
Sales 10,078 10,919 8%
Organic 6%
Segment Margin 19.0% 19.6% 60 bps
Operating Income Margin 15.9% 16.3% 40 bps
Earnings Per Share
Reported $1.80 $1.68 (7%)
Excluding Separation Costs of $346M and $12M Adjustment to $1.80 $2.12 18%
the 4Q17 U.S. Tax Legislation Charge
Cash Flow from Operations 1,447 1,861 29%
Free Cash Flow (Excluding Separation Cost Impacts of $67M) 1,214 1,729 42%
TABLE 3: SUMMARY OF FINANCIAL RESULTS - SEGMENTS
AEROSPACE 2Q 2017 2Q 2018 Change
Sales 3,674 4,058 10%
Organic 8%
Segment Profit 819 918 12%
Segment Margin 22.3% 22.6% 30 bps
HOME AND BUILDING TECHNOLOGIES
Sales 2,414 2,546 5%
Organic 3%
Segment Profit 391 427 9%
Segment Margin 16.2% 16.8% 60 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES
Sales 2,561 2,698 5%
Organic 3%
Segment Profit 553 597 8%
Segment Margin 21.6% 22.1% 50 bps
SAFETY AND PRODUCTIVITY SOLUTIONS
Sales 1,429 1,617 13%
Organic 11%
Segment Profit 214 267 25%
Segment Margin 15.0% 16.5% 150 bps
Honeywell (http://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. 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.
This release contains financial measures presented on a non-GAAP basis.
Honeywell's non-GAAP financial measures used in this release are as follows:
segment profit, on an overall Honeywell basis, a measure by which we assess
operating performance, which we define as operating income adjusted for certain
items as presented in the Appendix; segment margin, on an overall Honeywell
basis, which we define as segment profit divided by sales; organic sales
growth, which we define as sales growth less the impacts from foreign currency
translation, acquisitions and divestitures for the first 12 months following
transaction date, and impacts from adoption of the new accounting guidance on
revenue from contracts with customers that arise solely due to non-comparable
accounting treatment of contracts existing in the prior period; free cash flow,
which we define as cash flow from operations less capital expenditures and
which we adjust to exclude the impact of separation costs related to the
spin-offs of the Homes and Transportation Systems businesses, if and as noted
in the release; free cash flow conversion, which we define as free cash flow
divided by net income attributable to Honeywell, excluding pension
mark-to-market expenses, separation costs related to the spin-offs, the 4Q17
U.S. tax legislation charge, and adjustments to such charge, if and as noted in
the release; and earnings per share, which we adjust to exclude pension
mark-to-market expenses, as well as for other components, such as separation
costs related to the spin-offs, the 4Q17 U.S. tax legislation charge, and
adjustments to such charge, if and as noted in the release. Other than
references to reported earnings per share, all references to earnings per share
in this release are so adjusted. The respective tax rates applied when
adjusting earnings per share for these items are identified in the release or
in the reconciliations presented in the Appendix. Management believes that,
when considered together with reported amounts, these measures are useful to
investors and management in understanding our ongoing operations and in the
analysis of ongoing operating trends. These metrics should be considered in
addition to, and not as replacements for, the most comparable GAAP measure.
Refer to the Appendix attached to this release for reconciliations of non-GAAP
financial measures to the most directly comparable GAAP measures.
____________________
1 EPS guidance excludes pension mark-to-market, separation costs related to the
spin-offs of the Homes and Transportation Systems businesses, and adjustments
to the 4Q17 U.S. tax legislation charge. We do not publish forward-looking EPS
guidance on a GAAP basis as management cannot reliably predict or estimate,
without unreasonable effort, pension mark-to-market expense as it is dependent
on macroeconomic factors, such as changing interest rates and the return
generated on invested pension plan assets, separation costs given the inherent
uncertainty of any such estimates, and any adjustments to the 4Q17 U.S. tax
legislation charge as the amounts are provisional and subject to change.
2 EPS excludes separation costs related to the spin-offs and adjustments to the
4Q17 U.S. tax legislation charge.
3 Free cash flow conversion excludes impacts from separation costs related to
the spin-offs and adjustments to the 4Q17 U.S. tax legislation charge.
4 Free cash flow guidance excludes impacts from separation costs related to the
spin-offs.
5 Guidance for EPS and EPS V% excludes pension mark-to-market, separation costs
related to the spin-offs of the Homes and Transportation Systems businesses,
the 4Q17 U.S. tax legislation charge and adjustments to such charge; guidance
for free cash flow and free cash flow V% excludes impacts from separation costs
related to the spin-offs.
Contacts:
Media Investor Relations
Scott Sayres Mark Macaluso
(480) 257-8921 (973) 455-2222
scott.sayres@honeywell.com mark.macaluso@honeywell.com
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Product sales $ 8,703 $ $ 16,937 $ 15,619
8,079
Service sales 2,216 1,999 4,374 3,951
Net sales 10,919 10,078 21,311 19,570
Costs, expenses and other
Cost of products 6,202 5,807 12,107 11,188
sold (A)
Cost of services 1,411 1,217 2,699 2,365
sold (A)
7,613 7,024 14,806 13,553
Selling, general and 1,528 1,456 3,003 2,878
administrative expenses
(A)
Other (income) (316) (259) (584) (517)
expense
Interest and other 95 79 178 154
financial charges
8,920 8,300 17,403 16,068
Income before taxes 1,999 1,778 3,908 3,502
Tax expense 719 378 1,177 770
Net income 1,280 1,400 2,731 2,732
Less: Net income 13 8 26 14
attributable to the
noncontrolling interest
Net income attributable $ 1,267 $ $ 2,705 $ 2,718
to Honeywell 1,392
Earnings per share of $ 1.70 $ $ 3.62 $ 3.56
common stock - basic 1.82
Earnings per share of $ 1.68 $ $ 3.57 $ 3.51
common stock - assuming 1.80
dilution
Weighted average number 745.5 764.2 748.0 763.6
of shares outstanding -
basic
Weighted average number 755.0 774.0 758.0 774.0
of shares outstanding -
assuming dilution
(A) Cost of products and services sold and selling, general and administrative
expenses include amounts for repositioning and other charges, the service cost
component of pension and other postretirement (income) 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 2018 2017 2018 2017
Aerospace $ $ $ $
4,058 3,674 8,035 7,220
Home and Building 2,546 2,414 4,979 4,683
Technologies
Performance Materials and 2,698 2,561 5,232 4,914
Technologies
Safety and Productivity 1,617 1,429 3,065 2,753
Solutions
Total $ $ $ $
10,919 10,078 21,311 19,570
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Six Months Ended
June 30, June 30,
Segment Profit 2018 2017 2018 2017
Aerospace $ $ $ $
918 819 1,811 1,615
Home and Building 427 391 843 768
Technologies
Performance Materials and 597 553 1,116 1,036
Technologies
Safety and Productivity 267 214 498 408
Solutions
Corporate (64) (67) (128) (128)
Total segment profit 2,145 1,910 4,140 3,699
Interest and other financial (95) (79) (178) (154)
charges
Stock compensation expense (38) (44) (90) (94)
(A)
Pension ongoing income (B) 250 184 498 363
Other postretirement income 6 6 12 10
(B)
Repositioning and other (265) (224) (458) (353)
charges (C,D)
Other (E) (4) 25 (16) 31
Income before taxes $ $ $ $
1,999 1,778 3,908 3,502
(A) Amounts included in Selling, general and administrative expenses.
(B) Amounts included in Cost of products and services sold and Selling, general
and administrative expenses (service costs) and Other income/expense
(non-service cost components).
(C) Amounts included in Cost of products and services sold, Selling, general
and administrative expenses, and Other income/expense.
(D) Includes repositioning, asbestos, and environmental expenses.
(E) Amounts include the other components of Other income/expense not included
within other categories in this reconciliation. Equity income (loss) of
affiliated companies is included in segment profit.
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
June 30, December
31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ $
8,082 7,059
Short-term investments 1,768 3,758
Accounts receivable - net 8,600 8,866
Inventories 4,792 4,613
Other current assets 1,537 1,706
Total current assets 24,779 26,002
Investments and long-term receivables 897 667
Property, plant and equipment - net 5,968 5,926
Goodwill 18,137 18,277
Other intangible assets - net 4,261 4,496
Insurance recoveries for asbestos related liabilities 409 411
Deferred income taxes 355 236
Other assets 5,054 3,372
Total assets $ $
59,860 59,387
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ $
6,808 6,584
Commercial paper and other short-term borrowings 4,447 3,958
Current maturities of long-term debt 133 1,351
Accrued liabilities 6,630 6,968
Total current liabilities 18,018 18,861
Long-term debt 12,504 12,573
Deferred income taxes 2,751 2,894
Postretirement benefit obligations other than pensions 497 512
Asbestos related liabilities 1,178 1,173
Other liabilities 7,134 5,930
Redeemable noncontrolling interest 5 5
Shareowners' equity 17,773 17,439
Total liabilities, redeemable noncontrolling $ $
interest and shareowners' equity 59,860 59,387
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Six Months Ended
Ended
June 30, June 30,
2018 2017 2018 2017
Cash flows from operating activities:
Net income $ $ $ $
1,280 1,400 2,731 2,732
Less: Net income attributable to the 13 8 26 14
noncontrolling interest
Net income attributable to Honeywell 1,267 1,392 2,705 2,718
Adjustments to reconcile net income
attributable to Honeywell to net
cash provided by operating activities:
Depreciation 193 184 372 354
Amortization 95 92 204 193
Repositioning and other charges 265 224 458 353
Net payments for repositioning and (187) (127) (328) (264)
other charges
Pension and other postretirement (256) (190) (510) (373)
income
Pension and other postretirement (8) (23) (44) (47)
benefit payments
Stock compensation expense 38 44 90 94
Deferred income taxes 68 (50) 114 (92)
Other 76 (22) 78 (8)
Accounts receivable 158 (299) 97 (276)
Inventories (26) (12) (189) (298)
Other current assets 217 22 174 (3)
Accounts payable 167 199 224 314
Accrued liabilities (206) 13 (448) (278)
Net cash provided by operating activities 1,861 1,447 2,997 2,387
Cash flows from investing activities:
Expenditures for property, plant and (199) (233) (339) (401)
equipment
Proceeds from disposals of property, 1 1 3 25
plant and equipment
Increase in investments (1,204) (1,073) (1,787) (2,329)
Decrease in investments 1,670 1,016 3,508 1,841
Cash paid for acquisitions, net of cash - (15) - (15)
acquired
Other 343 (84) 220 (113)
Net cash provided by (used for) investing 611 (388) 1,605 (992)
activities
Cash flows from financing activities:
Proceeds from issuance of commercial 6,073 2,568 12,749 5,036
paper and other short-term borrowings
Payments of commercial paper and other (6,823) (2,368) (12,152) (4,835)
short-term borrowings
Proceeds from issuance of common stock 67 155 127 376
Proceeds from issuance of long-term 2 5 5 16
debt
Payments of long-term debt (31) (25) (1,277) (30)
Repurchases of common stock (764) (682) (1,704) (992)
Cash dividends paid (560) (546) (1,116) (1,049)
Other (2) (72) (118) (105)
Net cash used for by financing activities (2,038) (965) (3,486) (1,583)
Effect of foreign exchange rate changes on (249) 73 (93) 222
cash and cash equivalents
Net increase in cash and cash equivalents 185 167 1,023 34
Cash and cash equivalents at beginning of 7,897 7,710 7,059 7,843
period
Cash and cash equivalents at end of period $ $ $ $
8,082 7,877 8,082 7,877
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 Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Segment Profit $ $ $ $
2,145 1,910 4,140 3,699
Stock compensation expense (A) (38) (44) (90) (94)
Repositioning and other (B,C) (278) (209) (441) (344)
Pension and other postretirement (51) (59) (107) (122)
service costs (C)
Operating Income $ $ $ $
1,778 1,598 3,502 3,139
Segment Profit $ $ $ $
2,145 1,910 4,140 3,699
÷ Net Sales $ $ $ $
10,919 10,078 21,311 19,570
Segment Profit Margin % 19.6% 19.0% 19.4% 18.9%
Operating Income $ $ $ $
1,778 1,598 3,502 3,139
÷ Net Sales $ $ $ $
10,919 10,078 21,311 19,570
Operating Income Margin % 16.3% 15.9% 16.4% 16.0%
(A) Included in Selling, general and administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity income
adjustment.
(C) Included in Cost of products and services sold, Selling, general and
administrative expenses and Other income/expense.
We define segment profit as operating income, excluding stock compensation
expense, pension and other postretirement service costs, and repositioning and
other charges. We believe these measures are useful to investors and
management in understanding our ongoing operations and in analysis of ongoing
operating trends.
A quantitative reconciliation of segment profit, on an overall Honeywell basis,
to operating income has not been provided for all forward-looking measures of
segment profit and segment margin included herewithin. Management cannot
reliably predict or estimate, without unreasonable effort, the impact and
timing on future operating results arising from items excluded from segment
profit. The information that is unavailable to provide a quantitative
reconciliation could have a significant impact on our reported financial
results. To the extent quantitative information becomes available without
unreasonable effort in the future, and closer to the period to which the
forward-looking measures pertain, a reconciliation of segment profit to
operating income will be included within future filings.
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Ended
June 30, 2018
Honeywell
Reported sales % change 8%
Less: Foreign currency translation 2%
Less: Acquisitions, divestitures and other, net -
Organic sales % change 6%
Aerospace
Reported sales % change 10%
Less: Foreign currency translation 1%
Less: Acquisitions, divestitures and other, net 1%
Organic sales % change 8%
Home and Building Technologies
Reported sales % change 5%
Less: Foreign currency translation 2%
Less: Acquisitions, divestitures and other, net -
Organic sales % change 3%
Performance Materials and Technologies
Reported sales % change 5%
Less: Foreign currency translation 2%
Less: Acquisitions, divestitures and other, net -
Organic sales % change 3%
Safety and Productivity Solutions
Reported sales % change 13%
Less: Foreign currency translation 2%
Less: Acquisitions, divestitures and other, net -
Organic sales % change 11%
We define organic sales percent as the year-over-year change in reported sales
relative to the comparable period, excluding the impact on sales from foreign
currency translation, acquisitions, net of divestitures, and non-comparable
impacts from adoption of the new revenue recognition standard. We believe this
measure is useful to investors and management in understanding our ongoing
operations and in analysis of ongoing operating trends.
A quantitative reconciliation of reported sales percent change to organic sales
percent change has not been provided for forward-looking measures of organic
sales percent change because management cannot reliably predict or estimate,
without unreasonable effort, the fluctuations in global currency markets that
impact foreign currency translation, nor is it reasonable for management to
predict the timing, occurrence and impact of acquisition and divestiture
transactions, all of which could significantly impact our reported sales
percent change.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow,
Excluding Separation Cost Payments and Calculation of Free Cash Flow
Conversion, Excluding Separation Costs and Adjustments to 4Q17 U.S. Tax
Legislation Charge
(Unaudited)
(Dollars in millions)
Three Months Three Months
Ended Ended
June 30, 2018 June 30, 2017
Cash provided by operating activities $ $
1,861 1,447
Expenditures for property, plant and equipment (199) (233)
Free cash flow 1,662 1,214
Separation cost payments 67 -
Free cash flow, excluding separation cost $ $
payments
1,729 1,214
Net income attributable to Honeywell $ $
1,267 1,392
Separation costs, net of tax 346 -
Adjustments to 4Q17 U.S tax legislation charge (12) -
Net income attributable to Honeywell, excluding $ $
separation costs and adjustments to 4Q17 U.S.
tax legislation charge 1,601 1,392
Cash provided by operating activities $ $
1,861 1,447
÷ Net income attributable to Honeywell $ $
1,267 1,392
Operating cash flow conversion 147% 104%
Free cash flow, excluding separation cost $ $
payments
1,729 1,214
÷ Net income attributable to Honeywell, $ $
excluding separation costs and adjustments to
4Q17 U.S. tax legislation charge 1,601 1,392
Free cash flow conversion %, excluding 108% 87%
separation costs and adjustments to 4Q17 U.S
tax legislation charge
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, 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
Separation Costs and Adjustments to 4Q17 U.S. Tax Legislation Charge
(Unaudited)
Three Months Ended
June 30,
2018 2017
Earnings per share of common stock - assuming dilution $ $
(1)
1.68 1.80
Separation costs (2) 0.46 -
Adjustments to 4Q17 U.S. tax legislation charge (0.02) -
Earnings per share of common stock - assuming dilution, $ $
excluding separation costs and adjustments to 4Q17 U.S.
tax legislation charge 2.12 1.80
(1) For the three months ended June 30, 2018 and 2017, utilizes weighted
average shares of approximately 755 million and 774 million.
(2) Separation costs of $354 million ($346 million net of tax) includes $291
million of tax costs we incurred in the restructuring of the ownership of
various legal entities in anticipation of the spin-off transactions
("frictional tax costs") and $63 million ($55 million net of tax)of other
separation costs.
We believe earnings per share, excluding separation costs and adjustments to
4Q17 U.S. tax legislation charge 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 Earnings per Share to Earnings per Share at 24% Effective Tax
Rate, Excluding Separation Costs and Adjustments to 4Q17 U.S. Tax Legislation
Charge (Unaudited)
Three
Months
Ended
June 30,
2018
Earnings per share of common stock - assuming dilution (1) $
1.68
Separation costs (2) 0.46
Adjustments to 4Q17 U.S. tax legislation charge (0.02)
Earnings per share of common stock - assuming dilution, excluding 2.12
separation costs and adjustments to 4Q17 U.S. tax legislation
charge
Income tax impact at 24% effective tax rate (3) (0.06)
Earnings per share of common stock - assuming dilution at 24% $
effective tax rate, excluding separation costs and adjustments to 2.06
4Q17 U.S. tax legislation charge
(1) Utilizes weighted average shares of approximately 755 million.
(2) Separation costs of $354 million ($346 million net of tax) includes $291
million of frictional tax costs and $63 million ($55 million net of tax)of
other separation costs.
(3) Income tax impact at 24% effective tax rate, approximately $47 million, is
provided to align our effective tax rate with previously issued guidance.
We believe earnings per share at 24% effective tax rate excluding separation
costs and adjustments to 4Q17 U.S. tax legislation charge 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 and Calculation of Segment
Profit and Operating Income Margins (Unaudited)
(Dollars in millions)
Twelve Months Ended
December 31, 2017
Segment Profit $
7,690
Stock compensation expense (A) (176)
Repositioning and other (B,C) (1,010)
Pension and other postretirement service costs (247)
(C)
Operating Income $
6,257
Segment Profit $
7,690
÷ Net Sales $
40,534
Segment Profit Margin % 19.0%
Operating Income $
6,257
÷ Net Sales $
40,534
Operating Income Margin % 15.4%
(A) Included in Selling, general and administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity income
adjustment.
(C) Included in Cost of products and services sold and Selling, general and
administrative expenses.
We define segment profit as operating income, excluding stock compensation
expense, pension and other postretirement service costs, and repositioning and
other charges. We believe these measures are useful to investors and
management in understanding our ongoing operations and in analysis of ongoing
operating trends.
A quantitative reconciliation of segment profit, on an overall Honeywell basis,
to operating income has not been provided for all forward-looking measures of
segment profit and segment margin included herewithin. Management cannot
reliably predict or estimate, without unreasonable effort, the impact and
timing on future operating results arising from items excluded from segment
profit, particularly pension mark-to-market expense as it is dependent on
macroeconomic factors, such as interest rates and the return generated on
invested pension plan assets. The information that is unavailable to provide a
quantitative reconciliation could have a significant impact on our reported
financial results. To the extent quantitative information becomes available
without unreasonable effort in the future, and closer to the period to which
the forward-looking measures pertain, a reconciliation of segment profit to
operating income will be included within future filings.
Honeywell International Inc.
Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Expense, Separation Costs and Adjustments to 4Q17 U.S. Tax
Legislation Charge (Unaudited)
Twelve Months Twelve
Ended Months
Ended
December 31, December
31,
2017 (1) 2018
Earnings per share of common stock - assuming $ TBD
dilution (EPS)
2.14
Pension mark-to-market expense 0.09 TBD
Separation costs 0.02 TBD
Adjustments to 4Q17 U.S. tax legislation charge 4.86 TBD
EPS, excluding pension mark-to-market expense, $ $8.05 -
separation costs, and adjustments to 4Q17 U.S. tax $8.15
legislation charge 7.11
(1) Utilizes weighted average shares of approximately 772.1 million for full
year. Pension mark-to-market expense uses a blended tax rate of 23%.
We believe earnings per share, excluding pension mark-to-market expense,
separation costs and adjustments to 4Q17 U.S. tax legislation charge is a
measure that is useful to investors and management in understanding our ongoing
operations and in analysis of ongoing operating trends. For forward looking
information, management cannot reliably predict or estimate, without
unreasonable effort, the pension mark-to-market expense as it is dependent on
macroeconomic factors, such as interest rates and the return generated on
invested pension plan assets, the separation costs given the inherent
uncertainty in the estimates, and any adjustments to the 4Q17 U.S. tax
legislation charge as the amounts are provisional. We therefore do not include
an estimate for the pension mark-to-market expense, separation costs, or
adjustments to 4Q17 U.S. tax legislation charge in this reconciliation. Based
on economic and industry conditions, future developments and other relevant
factors, these assumptions are subject to change.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow,
Excluding Separation Cost Payments (Unaudited)
Twelve Months Ended Twelve Months
Ended
December 31, 2017 ($M) December 31,
2018 ($B)
Cash provided by operating $ TBD
activities 5,966
Expenditures for property, plant and (1,031) (0.9)
equipment
Free cash flow 4,935 TBD
Separation cost payments - TBD
Free cash flow, excluding separation $ $5.6 - $6.2
cost payments 4,935
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, 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. For forward looking
information, management cannot reliably predict or estimate, without
unreasonable effort, the separation cost payments given the inherent
uncertainty of the estimates. We therefore do not include an estimate for the
separation cost payments in this reconciliation.
END
(END) Dow Jones Newswires
July 20, 2018 06:30 ET (10:30 GMT)
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