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Press release from PR Newswire

Honeywell Second Quarter 2012 Sales Up 4% To $9.4 Billion; EPS Up 12% To $1.14 Per Share

Wednesday, July 18, 2012

Honeywell Second Quarter 2012 Sales Up 4% To $9.4 Billion; EPS Up 12% To $1.14 Per Share07:30 EDT Wednesday, July 18, 2012-- 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 - $4.55MORRIS TOWNSHIP, N.J., July 18, 2012 /PRNewswire/ -- Honeywell (NYSE: HON) today announced its results for the second quarter of 2012:Total Honeywell($ Millions, except Earnings Per Share)2Q 20112Q 2012ChangeSales9,0869,4354%Segment Margin14.3%15.8%150 bpsOperating Income Margin12.9%13.6%70 bpsEarnings Per Share from Continuing Operations$1.00$1.1414%Earnings Per Share$1.02$1.1412%Cash Flow from Operations1,138973(14%)Free Cash Flow*9951,0405%* 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 Guidance20122012ChangePrior GuidanceRevised Guidancevs. 2011  Sales $38.0 - 38.6B  $37.8 - 38.4B 3% - 5%Segment Margin15.3 - 15.5%15.4 - 15.6%70 - 90 bpsOperating Income Margin113.2 - 13.5%13.4 - 13.6%140 - 160 bpsEarnings Per Share from Continuing Operations2$4.35 - $4.55$4.40 - $4.5510% - 14%Earnings Per Share1$4.35 - $4.55$4.40 - $4.559% - 12%Free Cash Flow3 ~$3.5B  ~$3.5B ~100% conversion1.  Proforma, V% / BPS Excludes Any Pension Mark to Market Adjustment2.  Proforma (Cont. Operations); Excludes Any Pension Mark to Market Adjustment; V% Also Excludes 3Q11 Repo and Other Actions Funded by Gain on Sale of CPG Business (in Disc. Ops.)3.  Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior to Any NARCO Related Payments and Cash Pension Contributions Second Quarter Segment PerformanceAerospace($ Millions)2Q 20112Q 2012% ChangeSales2,8103,0278%Segment Profit45156225%Segment Margin16.0%18.6%260 bpsSales 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 20112Q 2012% ChangeSales3,8803,9622%Segment Profit4965256%Segment Margin12.8%13.3%50 bpsSales 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 20112Q 2012% ChangeSales1,4061,54610%Segment Profit28135025%Segment Margin20.0%22.6%260 bpsSales 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 20112Q 2012% ChangeSales990900(9%)Segment Profit129114(12%)Segment Margin13.0%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 (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 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) 455-2222rob.ferris@honeywell.com elena.doom@honeywell.com    Honeywell International IncConsolidated Statement of Operations (Unaudited)(In millions, except per share amounts)Three Months Ended Six Months Ended June 30, June 30, 2012201120122011Product sales$7,475$7,146$14,852$13,959Service sales1,9601,9403,8903,799Net sales9,4359,08618,74217,758Costs, expenses and other    Cost of products sold  (A)5,5825,42511,15310,619    Cost of services sold  (A)1,3401,2392,6492,4696,9226,66413,80213,088    Selling, general and administrative expenses (A)1,2261,2482,4572,480    Other (income) expense(23)(22)(38)(51)    Interest and other financial charges87961761958,2127,98616,39715,712Income from continuing operations before taxes1,2231,1002,3452,046Tax expense318304615560Income from continuing operations after taxes9057961,7301,486Income from discontinued operations after taxes-14-32Net income9058101,7301,518Less: Net income attributable to the noncontrolling interest3-53Net income attributable to Honeywell$   902$   810$  1,725$  1,515Amounts attributable to Honeywell:Income from continuing operations less net income attributable to the noncontrolling interest9027961,7251,483Income from discontinued operations-14-32Net income attributable to Honeywell$   902$   810$  1,725$  1,515Earnings per share of common stock - basic:Income from continuing operations1.151.012.211.89Income from discontinued operations-0.02-0.04Net income attributable to Honeywell$  1.15$  1.03$    2.21$    1.93Earnings per share of common stock - assuming dilution:Income from continuing operations1.141.002.191.86Income from discontinued operations-0.02-0.04Net income attributable to Honeywell$  1.14$  1.02$    2.19$    1.90Weighted average number of shares outstanding-basic781.4785.0779.3785.2Weighted average number of shares outstanding -    assuming dilution790.5797.3789.3797.5(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 IncSegment Data (Unaudited) (Dollars in millions)Three Months EndedSix Months EndedJune 30,June 30,Net Sales2012201120122011Aerospace$ 3,027$ 2,810$   5,977$   5,506Automation and Control Solutions3,9623,8807,7507,536Performance Materials and Technologies1,5461,4063,1612,761Transportation Systems9009901,8541,955Corporate----     Total$ 9,435$ 9,086$ 18,742$ 17,758Reconciliation of Segment Profit to Income From Continuing Operations Before TaxesThree Months EndedSix Months EndedJune 30,June 30,Segment Profit2012201120122011Aerospace$    562$    451$   1,096$      918Automation and Control Solutions5254961,016955Performance Materials and Technologies350281669565Transportation Systems114129234247Corporate(58)(56)(107)(124)     Total Segment Profit1,4931,3012,9082,561Other income (A)981428Interest 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)27Repositioning 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 IncConsolidated Balance Sheet (Unaudited)(Dollars in millions)June 30,December 31, 20122011ASSETSCurrent assets:    Cash and cash equivalents$      4,221$      3,698    Accounts, notes and other receivables7,2507,228    Inventories4,3424,264    Deferred income taxes269460    Investments and other current assets562484Total current assets16,64416,134Investments and long-term receivables566494Property, plant and equipment - net4,7354,804Goodwill11,83711,858Other intangible assets - net2,3252,477Insurance recoveries for asbestos related liabilities672709Deferred income taxes2,1642,132Other assets1,2311,200Total assets$    40,174$    39,808LIABILITIES AND SHAREOWNERS' EQUITYCurrent liabilities:    Accounts payable$      4,547$      4,738    Short-term borrowings6560    Commercial paper948599    Current maturities of long-term debt62015    Accrued liabilities6,6326,863Total current liabilities12,81212,275Long-term debt6,3426,881Deferred income taxes681676Postretirement benefit obligations other than pensions1,3651,417Asbestos related liabilities1,5221,499Other liabilities5,3696,158Shareowners' equity12,08310,902Total liabilities and shareowners' equity$    40,174$    39,808    Honeywell International Inc Consolidated Statement of Cash Flows (Unaudited)(Dollars in millions)Three Months EndedSix Months EndedJune 30, June 30, 2012201120122011Cash 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 amortization225236455478        Loss/(gain) on sale of non-strategic businesses and assets1(2)1(46)        Repositioning and other charges13494256227        Net payments for repositioning and other charges(122)(98)(226)(207)        Pension and other postretirement expense18(22)5432        Pension and other postretirement benefit payments(308)(32)(597)(1,082)        Stock compensation expense40429191        Deferred income taxes5790189158        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 receivables20(365)(20)(537)           Inventories30(59)(78)(389)           Other current assets13(9)(15)(23)           Accounts payable12264(191)260           Accrued liabilities52174(355)108Net cash provided by operating activities9731,1381,169695Cash flows from investing activities:    Expenditures for property, plant and equipment(200)(165)(352)(289)    Proceeds from disposals of property, plant and equipment-213    Increase in investments(161)(65)(245)(229)    Decrease in investments66114158176    Cash paid for acquisitions, net of cash acquired(63)(1)(64)(8)    Proceeds from sales of businesses, net of fees paid18(2)18215    Other(81)27(59)58Net cash used for investing activities(421)(90)(543)(74)Cash flows from financing activities:    Net increase in commercial paper-5034951    Net increase/(decrease) in short-term borrowings4711(2)    Proceeds from issuance of common stock2699116200    Proceeds from issuance of long-term debt403421,384    Payments of long-term debt-(2)-(439)    Excess tax benefits from share based payment arrangements4171630    Repurchases of common stock-(504)-(504)    Cash dividends paid(291)(266)(582)(530)Net cash (used for)/provided by financing activities(217)(596)(48)190Effect of foreign exchange rate changes on cash and cash equivalents(102)20(55)87Net increase in cash and cash equivalents233472523898Cash and cash equivalents at beginning of period3,9883,0763,6982,650Cash 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 EndedJune 30,20122011Cash provided by operating activities$      973$   1,138Expenditures for property, plant and equipment(200)(165)Free cash flow $      773$      973Cash pension contributions  26722Free cash flow, prior to cash pension contributions$   1,040$      995We 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 operationsthat will be used to repay scheduled debt maturities and can be used to invest in future growth through new businessdevelopment activities or acquisitions, and to pay dividends, repurchase stock, repay debt obligations prior to theirmaturities, 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 IncReconciliation 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 30,2012201120122011Segment Profit$  1,493$1,301$  2,908$  2,561Stock 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)27Operating Income$  1,287$1,174$  2,483$  2,190Segment Profit$  1,493$1,301$  2,908$  2,561÷ Sales$  9,435$9,086$18,742$17,758Segment Profit Margin %15.8%14.3%15.5%14.4%Operating Income$  1,287$1,174$  2,483$  2,190÷ Sales$  9,435$9,086$18,742$17,758Operating Income Margin %13.6%12.9%13.2%12.3%20112012 GuidanceSegment Profit$  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 - $38,400 Operating Income Margin excluding pension mark to market adjustment %12.0%13.4 - 13.6%(A) Included in cost of products and services sold and selling, general and administrative expenses(B) Includes repositioning, asbestos, environmental expense and equity income adjustment   Honeywell International IncReconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark to Market Adjustmentand Third Quarter 2011 Repositioning and Other Actions Funded by Gain on Sale of CPG Business (CPG Gain)2011EPS - continuing operations assuming dilution$     2.35Pension mark to market adjustment$     1.44EPS - continuing operations assuming dilution, excluding pension mark to market adjustment$     3.79Third quarter 2011 repositioning and other actions funded by CPG Gain$0.22EPS - continuing operations assuming dilution, excluding pension mark to market adjustment  and third quarter 2011 repositioning and other actions funded by CPG Gain$     4.012011EPS - Total Honeywell assuming dilution$     2.61Pension mark to market adjustment$     1.44EPS - Total Honeywell assuming dilution, excluding pension mark to market adjustment$     4.05We believe EPS, excluding pension mark to market adjustment and third quarter 2011 repositioning and other actionsfunded by CPG Gain, is a metric that is useful to investors and management in understanding our ongoing operationsand 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 ablended tax rate of 36.9%. SOURCE Honeywell