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Honeywell Reports First Quarter Sales Up 11% to $8.9 Billion; Earnings Up 30% to $0.85 Per Share-- Organic Revenue Growth Across All Regions-- Cash from Operations and Free Cash Flow Up 25%-- Continued Aggressive Repositioning to Benefit Future Periods-- Major Contract Wins with Embraer, Gulfstream, and Airbus-- Full-Year Earnings per Share Guidance Moved to High End of Previous Range
MORRIS TOWNSHIP, N.J., April 18 /PRNewswire-FirstCall/ -- Honeywell NYSE: HON today announced first quarter 2008 sales increased 11% to $8.9 billion from $8.0 billion in 2007. Earnings were up 30% to $0.85 per share, versus $0.66 per share in the prior year. Cash flow from operations was $721 million versus $578 million in the first quarter of 2007 and free cash flow (cash flow from operations less capital expenditures) was $571 million, compared to $458 million last year, in each case an increase of 25%. "We continue to outperform with double-digit sales, EPS, and free cash flow increases in the quarter," said Honeywell Chairman and CEO Dave Cote. "Our global reach and diversified portfolio of businesses helped to drive organic sales growth across all regions. We also continue to win major multi-year contracts that support the favorable long-term outlook for our businesses." "We remain confident in Honeywell's outlook despite tougher global economic conditions," added Cote. "We continue to invest in innovation and acquisitions while executing on productivity initiatives such as Honeywell Operating System, Velocity Product Development, and Functional Transformation. Our cash deployment strategy and focus on organic sales growth and productivity are delivering strong returns to our shareowners." Honeywell is increasing its previously stated 2008 sales guidance by $700 million to $36.8 - 37.4 billion and is moving its earnings per share guidance to $3.70 - 3.80, the high end of its previously stated range.
First Quarter Segment Highlights
Aerospace
-- Sales were up 7%, compared with the first quarter of 2007, driven by 8%
growth in Commercial and 5% growth in Defense and Space sales.
Commercial sales reflected growth of 8% in original equipment and 8% in
aftermarket spares and services. Defense and Space sales included the
positive impact of the Dimensions International acquisition.
-- Segment profit grew 13%, while segment margin increased by 100 bps to
18.6%, due primarily to increased prices, productivity, and sales
volume growth, partially offset by inflation.
-- Honeywell has been chosen to supply the latest generation of its
HTF7000 turbofan propulsion system family for Embraer's new MSJ and MLJ
business aircraft in a contract valued at more than $23 billion
(including aftermarket) over the life of the contract. The HTF7500-E
engine will feature new technology to achieve reduced emissions and
improved fuel efficiency.
-- Honeywell was selected to supply avionics and mechanical systems for
the new Gulfstream G650 aircraft worth an estimated $3 billion. The
contract includes the first business jet application of Honeywell's
Next Generation Flight Management System, previously announced for the
Boeing 747-8, as well as its RDR4000 turbulence certified weather radar
that is in service on the Airbus A380 and Air Force C-17 aircraft.
-- Honeywell secured a $1.5 billion contract (including aftermarket) to
provide the Flight Management System and the Aircraft Environment
Surveillance System for Airbus' new long-range, extra wide-body A350XWB
aircraft. In September 2007, Honeywell was selected by Airbus to
provide advanced Air Management Systems and auxiliary power unit
technologies for the Airbus A350XWB in a contract valued at $16 billion
(including aftermarket) over the life of the contract.
Automation and Control Solutions
-- Sales were up 14%, compared with the first quarter of 2007, due to
acquisitions, the favorable impact of foreign exchange and organic
growth. Sales were up 14% in the Products businesses and up 14% in the
Solutions businesses.
-- Segment profit grew 20%, while segment margin increased by 50 bps to
10.3%, driven by productivity savings and the favorable impact of
foreign exchange, partially offset by inflation and the impact of
acquisitions.
-- Life Safety announced an agreement to acquire Norcross Safety Products,
a leading manufacturer in the large and growing personal protection
equipment market for fire, utility, and general industrial
applications, for approximately $1.2 billion.
-- Building Solutions was awarded four renewable energy solar panel
projects in California and Oregon. The projects are expected to
produce more than 2.4 million kilowatt-hours of electricity annually,
which can power up to 225 homes per year. The business will also
partner with Baltimore Gas & Electric on a demand response program
giving the utility greater control of peak consumption using
Honeywell's new UtilityPRO(TM) thermostat.
-- Process Solutions will provide its Experion(R) Process Knowledge System
for a new liquefied natural gas (LNG) project in Western Australia. The
integrated control system will streamline production, improve
operational efficiency and safety, and provide data from subsystems
throughout the facility to aid operator decision making.
Transportation Systems
-- Sales were up 6%, compared with the first quarter of 2007, driven by
the favorable impact of foreign exchange and increased sales in our
Turbo Technologies business.
-- Segment profit decreased 4%, while segment margin decreased by 130 bps
to 11.7%, resulting from CPG volume declines, the impact of commodity
inflation, and investments in product development to support future
Turbo platforms.
-- Turbo Technologies was awarded three contracts estimated at more than
$183 million in revenue over the life of the programs. These include
new technology solutions for passenger vehicle diesel engines and will
be produced in Japan and Europe for export to European and U.S. markets
beginning in 2009.
-- Honeywell's turbochargers were featured on 28 new vehicles - with
engines ranging from 1.1 to 4.4 liters - at the 78th International
Motor Show of Geneva in March. The company introduced its latest
gasoline turbo technology on the new BMW X6.
Specialty Materials
-- Sales were up 18% compared with the first quarter of 2007, driven by
growth in all businesses, particularly UOP, Resins and Chemicals, and
Fluorine Products.
-- Segment profit grew 38%, while segment margin increased by 280 bps to
18.8%, driven by pricing and productivity gains, which more than offset
inflation.
-- UOP plans to establish a natural gas processing design center in Kuala
Lumpur, Malaysia, to better support the growing Southeast Asia market.
The new design center will focus initially on executing projects
involving UOP's Separex(TM) membrane systems, which are used to remove
impurities from natural gas streams.
-- Honeywell Performance Products will expand production of Aclar(R) film
to meet growing demand for the clear, moisture-barrier material, which
is used extensively in pharmaceutical packaging. An upgrade of existing
production capabilities, combined with overall productivity
improvements, is expected to boost Aclar production by up to 23% by the
end of 2008.
Honeywell will discuss its results during its investor conference call today starting at 8:00 a.m. EDT. To participate, please dial (706) 643-7681 a few minutes before the 8:00 a.m. 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 investor call starting at 11:00 a.m. EDT, April 18, until 11 p.m., April 25, by dialing (706) 645-9291. The access code is 39285103. Honeywell International is a $36 billion 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 additional information, please visit www.honeywell.com. This release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management's assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. 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.
Contacts:
Media Investor Relations
Robert C. Ferris Murray Grainger
(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com murray.grainger@honeywell.com
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Three Months Ended March 31,
----------------------------
2008 2007
--------- ----------
Product sales $7,156 $6,450
Service sales 1,739 1,591
--------- ----------
Net sales 8,895 8,041
--------- ----------
Costs, expenses and other
Cost of products sold (A) 5,507 5,010
Cost of services sold (A) 1,165 1,140
--------- ----------
6,672 6,150
Selling, general and administrative
expenses (A) 1,255 1,089
Other (income) expense (22) (11)
Interest and other financial charges 115 97
--------- ----------
8,020 7,325
--------- ----------
Income before taxes 875 716
Tax expense 232 190
--------- ----------
Net income $643 $526
========= ==========
Earnings per share of common
stock - basic $0.87 $0.66
========= ==========
Earnings per share of common
stock - assuming dilution $0.85 $0.66
========= ==========
Weighted average number of
shares outstanding-basic 743 795
========= ==========
Weighted average number of shares
outstanding - assuming dilution 753 802
========= ==========
(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 Inc.
Segment Data (Unaudited)
(Dollars in millions)
Net Sales Three Months Ended March 31,
----------------------------
2008 2007
--------- ----------
Aerospace $3,030 $2,840
Automation and Control Solutions 3,180 2,801
Specialty Materials 1,409 1,199
Transportation Systems 1,276 1,201
Corporate - -
--------- ----------
Total $8,895 $8,041
========= ==========
Reconciliation of Segment Profit to Income Before Taxes
Segment Profit Three Months Ended March 31,
----------------------------
2008 2007
--------- ----------
Aerospace $563 $500
Automation and Control Solutions 328 274
Specialty Materials 265 192
Transportation Systems 149 156
Corporate (56) (43)
--------- ----------
Total Segment Profit 1,249 1,079
Other income/ (expense) (A) 6 11
Interest and other financial charges (115) (97)
Stock compensation expense (B), (C) (41) (24)
Pension and other postretirement expense (B) (27) (74)
Repositioning and other charges (B) (197) (179)
--------- ----------
Income before taxes $875 $716
========= ==========
(A) Equity income/(loss) of affiliated companies is included in Segment
Profit, on a prospective basis, commencing January 1, 2008. Other
income/(expense) as presented above includes equity income/(loss) of
affiliated companies of ($2) million for the three months ended March
31, 2007.
(B) Amounts included in cost of products and services sold and selling,
general and administrative expenses.
(C) Costs associated with restricted stock units ("RSU") are excluded from
Segment Profit, on a prospective basis, commencing January 1, 2008.
Stock compensation expense, including RSU expense, totaled $39 million
for the three months ended March 31, 2007. Stock option expense is
included for all periods presented.
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
March 31, December 31,
2008 2007
--------- ----------
ASSETS
Current assets:
Cash and cash equivalents $2,234 $1,829
Accounts, notes and other receivables 6,604 6,387
Inventories 4,149 3,861
Deferred income taxes 1,338 1,241
Other current assets 418 367
--------- ----------
Total current assets 14,743 13,685
Investments and long-term receivables 522 500
Property, plant and equipment - net 5,012 4,985
Goodwill 9,251 9,175
Other intangible assets - net 1,492 1,498
Insurance recoveries for asbestos
related liabilities 1,007 1,086
Deferred income taxes 676 637
Prepaid pension benefit cost 1,268 1,256
Other assets 973 983
--------- ----------
Total assets $34,944 $33,805
========= ==========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $4,097 $3,962
Short-term borrowings 62 64
Commercial paper 896 1,756
Current maturities of long-term debt 518 418
Accrued liabilities 5,759 5,741
--------- ----------
Total current liabilities 11,332 11,941
Long-term debt 6,576 5,419
Deferred income taxes 952 734
Postretirement benefit obligations
other than pensions 2,012 2,025
Asbestos related liabilities 1,419 1,405
Other liabilities 3,017 3,059
Shareowners' equity 9,636 9,222
--------- ----------
Total liabilities and
shareowners' equity $34,944 $33,805
========= ==========
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
---------------------------
2008 2007
--------- ----------
Cash flows from operating activities:
Net income $643 $526
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 217 200
Repositioning and other charges 197 179
Net payments for repositioning
and other charges (21) (132)
Pension and other
postretirement expense 27 74
Pension and other postretirement
benefit payments (61) (45)
Stock compensation expense 41 24
Deferred income taxes 108 17
Excess tax benefits from share
based payment arrangements (7) (8)
Other 45 6
Changes in assets and liabilities,
net of the effects of acquisitions
and divestitures:
Accounts, notes and
other receivables (224) (136)
Inventories (289) (161)
Other current assets (35) 36
Accounts payable 135 65
Accrued liabilities (55) (67)
--------- ----------
Net cash provided by operating activities 721 578
--------- ----------
Cash flows from investing activities:
Expenditures for property,
plant and equipment (150) (120)
Proceeds from disposals of
property, plant and equipment 12 33
Decrease in investments 6 -
Cash paid for acquisitions,
net of cash acquired (55) (13)
Proceeds from sales of
businesses, net of fees paid - 9
Other (2) -
--------- ----------
Net cash used for investing activities (189) (91)
--------- ----------
Cash flows from financing activities:
Net (decrease)/increase in
commercial paper (860) 328
Net (decrease)/increase in
short-term borrowings (3) 3
Proceeds from issuance of
common stock 51 119
Proceeds from issuance of
long-term debt 1,487 988
Payments of long-term debt (225) (398)
Excess tax benefits from share
based payment arrangements 7 8
Repurchases of common stock (441) (1,186)
Cash dividends paid on common stock (204) (199)
--------- ----------
Net cash used for financing activities (188) (337)
--------- ----------
Effect of foreign exchange rate
changes on cash and cash equivalents 61 4
--------- ----------
Net increase in cash and cash equivalents 405 154
Cash and cash equivalents at
beginning of period 1,829 1,224
--------- ----------
Cash and cash equivalents at end
of period $2,234 $1,378
========= ==========
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
--------------------------
2008 2007
--------- ---------
Cash provided by operating activities $721 $578
Expenditures for property, plant and
equipment (150) (120)
--------- ---------
Free cash flow $571 $458
========= =========
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, 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.
Website: http://www.honeywell.com/Website: http://www.honeywell.com/investor/ |
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