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Press release from PR Newswire

Honeywell Reports Third Quarter 2012 Sales of $9.3 Billion; EPS Up 9% to $1.20 Per Share

Friday, October 19, 2012

Honeywell Reports Third Quarter 2012 Sales of $9.3 Billion; EPS Up 9% to $1.20 Per Share06:30 EDT Friday, October 19, 2012- 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 - $4.55MORRIS TOWNSHIP, N.J., Oct. 19, 2012 /PRNewswire/ -- Honeywell (NYSE: HON) today announced its results for the third quarter of 2012:Total Honeywell($ Millions, except Earnings Per Share)3Q 20113Q 2012ChangeSales9,2989,342~ flatSegment Margin14.7%15.8%110  bpsOperating Income Margin10.3%13.9%360 bpsEarnings Per Share from Continuing Operations$0.87$1.2038%Earnings Per Share$1.10$1.209%Cash Flow from Operations66199951%Free Cash Flow *9221,02111%* 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 Guidance20122012ChangePrior GuidanceRevised Guidancevs. 2011  Sales $37.8 - $38.4B  $37.5 - $37.7B ~ 3%Segment Margin15.4 - 15.6%15.6 - 15.7%90 - 100 bpsOperating Income Margin113.4 - 13.6%13.5 - 13.7%150 - 170 bpsEarnings Per Share from Continuing Operations2$4.40 - $4.55$4.45 - $4.5011% - 12%Earnings Per Share1$4.40 - $4.55$4.45 - $4.5010% - 11%Free Cash Flow3 ~$3.5B  ~$3.5 - $3.6B ~100% Conversion1. Proforma, V% / BPS Excludes Any Pension Mark to Market Adjustment 2. Proforma (Cont. Operations); Excludes Any Pension Mark to Market Adjustment; V% Also Excludes 3Q11 Repo and Other Actions Funded by Gain on Sale of CPG Business (in Disc. Ops) 3. Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior to Any NARCO Related Payments and Cash Pension ContributionsThird Quarter Segment Performance Aerospace($ Millions)3Q 20113Q 2012% ChangeSales2,9223,0434%Segment Profit5325829%Segment Margin18.2%19.1%90 bpsSales 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 20113Q 2012% ChangeSales3,9483,958~ flatSegment Profit5445715%Segment Margin13.8%14.4%60 bpsSales 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 20113Q 2012% ChangeSales1,4681,4781%Segment Profit2542758%Segment Margin17.3%18.6%130 bpsSales 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 20113Q 2012% ChangeSales960863(10%)Segment Profit121104(14%)Segment Margin12.6%12.1%(50) bpsSales 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 (  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 ( 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 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)  Honeywell International Inc.Consolidated Statement of Operations (Unaudited)(In millions, except per share amounts)Three Months Ended Nine Months Ended September 30, September 30, 2012201120122011Product sales$     7,332$   7,308$  22,184$  21,267Service sales2,0101,9905,9005,789Net sales9,3429,29828,08427,056Costs, expenses and other    Cost of products sold  (A)5,4745,73916,62716,358    Cost of services sold  (A)1,3341,2943,9833,7636,8087,03320,61020,121    Selling, general and administrative expenses (A)1,2381,3033,6953,783    Other (income) expense(16)(21)(54)(72)    Interest and other financial charges88902642858,1188,40524,51524,117Income from continuing operations before taxes1,2248933,5692,939Tax expense278207893767Income from continuing operations after taxes9466862,6762,172Income from discontinued operations after taxes-177-209Net income9468632,6762,381Less: Net (loss) income attributable to the noncontrolling interest(4)114Net income attributable to Honeywell$        950$     862$    2,675$    2,377Amounts attributable to Honeywell:Income from continuing operations less net income attributable to the noncontrolling interest9506852,6752,168Income from discontinued operations-177-209Net income attributable to Honeywell$        950$     862$    2,675$    2,377Earnings per share of common stock - basic:Income from continuing operations1.210.883.432.77Income from discontinued operations-0.23-0.27Net income attributable to Honeywell$       1.21$    1.11$      3.43$      3.04Earnings per share of common stock - assuming dilution:Income from continuing operations1.200.873.382.73Income from discontinued operations-0.23-0.26Net income attributable to Honeywell$       1.20$    1.10$      3.38$      2.99Weighted average number of shares outstanding-basic783.6778.2780.7782.9Weighted average number of shares outstanding -    assuming dilution792.5786.9790.4794.0(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 EndedNine Months EndedSeptember 30,September 30,Net Sales2012201120122011Aerospace$         3,043$         2,922$         9,020$         8,428Automation and Control Solutions3,9583,94811,70811,484Performance Materials and Technologies1,4781,4684,6394,229Transportation Systems8639602,7172,915Corporate----     Total$         9,342$         9,298$       28,084$       27,056Reconciliation of Segment Profit to Income From Continuing Operations Before TaxesThree Months EndedNine Months EndedSeptember 30,September 30,Segment Profit2012201120122011Aerospace$            582$            532$         1,678$         1,450Automation and Control Solutions5715441,5871,499Performance Materials and Technologies275254944819Transportation Systems104121338368Corporate(57)(84)(164)(208)     Total Segment Profit1,4751,3674,3833,928Other income (A)481836Interest 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)109Repositioning 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, 20122011ASSETS Current assets:     Cash and cash equivalents $      4,760$      3,698    Accounts, notes and other receivables               7,3887,228    Inventories                        4,3144,264    Deferred income taxes                      573460    Investments and other current assets               711484                Total current assets                 17,74616,134Investments and long-term receivables           600494Property, plant and equipment - net               4,8304,804Goodwill                         11,91611,858Other intangible assets - net                    2,2812,477Insurance recoveries for asbestos related liabilities          654709Deferred income taxes                   1,7662,132Other assets                 1,2811,200                Total assets           $    41,074$    39,808LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities:     Accounts payable              $      4,518$      4,738    Short-term borrowings                       7560    Commercial paper                       899599    Current maturities of long-term debt                 62415    Accrued liabilities                     6,5976,863                Total current liabilities            12,71312,275Long-term debt                         6,3916,881Deferred income taxes                       679676Postretirement benefit obligations other than pensions               1,3461,417Asbestos related liabilities                     1,5311,499Other liabilities                   5,1956,158Shareowners' equity             13,21910,902                Total liabilities and shareowners' equity             $    41,074$    39,808     Honeywell International Inc. Consolidated Statement of Cash Flows (Unaudited)(Dollars in millions)Three Months EndedNine Months EndedSeptember 30, September 30, 2012201120122011Cash 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 amortization226226681704        Gain on sale of non-strategic businesses and assets(4)(307)(3)(353)        Repositioning and other charges100410356637        Net payments for repositioning and other charges(126)(128)(352)(335)        Pension and other postretirement expense27(56)81(24)        Pension and other postretirement benefit payments(291)(486)(888)(1,568)        Stock compensation expense4038131129        Deferred income taxes13039319197        Excess tax benefits from share based payment arrangements(12)(1)(28)(31)        Other143(84)3956        Changes in assets and liabilities, net of the effects of        acquisitions and divestitures:           Accounts, notes and other receivables(140)104(160)(433)           Inventories25(51)(53)(440)           Other current assets(62)(30)(77)(53)           Accounts payable(29)105(220)365           Accrued liabilities2220(333)128Net cash provided by operating activities9996612,1681,356Cash flows from investing activities:    Expenditures for property, plant and equipment(234)(177)(586)(466)    Proceeds from disposals of property, plant and equipment1-23    Increase in investments(237)(93)(482)(322)    Decrease in investments129112287288    Cash paid for acquisitions, net of cash acquired2(619)(62)(627)    Proceeds from sales of businesses, net of fees paid-955181,170    Other179(42)67Net cash (used for)/provided by investing activities(322)187(865)113Cash flows from financing activities:    Net(decrease)/increase in commercial paper(49)350300401    Net increase/(decrease) in short-term borrowings8(2)19(4)    Proceeds from issuance of common stock6332179232    Proceeds from issuance of long-term debt445861,389    Payments of long-term debt---(439)    Excess tax benefits from share based payment arrangements1212831    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 equivalents82(126)27(39)Net increase in cash and cash equivalents5393371,0621,235Cash and cash equivalents at beginning of period4,2213,5483,6982,650Cash 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, 201220112012ECash 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             256438~1,000 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 SegmentProfit and Operating Income Margin Excluding Pension Mark to Market Adjustment (Unaudited) (Dollars in millions)  Three Months Ended September 30, 20122011Segment Profit        $1,475$1,367Stock compensation expense (A)          (40)(38)Repositioning and other (A, B)         (112)(423)Pension ongoing expense (A)          (7)(26)Other postretirement income/(expense) (A)         (20)82Operating Income               $1,296$962Segment Profit       $1,475$1,367÷ Sales         $9,342$9,298Segment Profit Margin %              15.8%14.7%Operating Income              $1,296$962÷ Sales     $9,342$9,298Operating Income Margin %      13.9%10.3%20112012 GuidanceSegment 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)TBDOperating Income excluding pension mark to market adjustment              $4,376~$5,075 - $5,150Segment Profit       $5,357~$5,800 - $5,900÷ Sales     $36,529$37,500 - $37,700Segment Profit Margin %            14.7%15.6 - 15.7%Operating Income           $2,574 ~$5,075 - $5,150÷ Sales         $36,529 $37,500 - $37,700Operating 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 - $37,700Operating 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 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 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