TIDMHON
Honeywell Reports Third-Quarter EPS Of $1.07, Adjusted EPS Of $1.56; Generates
Sequential Sales And Segment Profit Growth In All Segments
- Reported Double-Digit Growth in Defense and Space, Warehouse Automation,
Personal Protective Equipment, and Recurring Software Sales
- Generated 320 Basis Points of Sequential Operating Margin Improvement
- Delivered Over $450 Million of Cost Savings; Funded $124 Million of
Repositioning to Drive Further Savings
- Reinstates Financial Guidance; Expects Fourth Quarter EPS of $1.97 to $2.02
and Full-Year EPS of $6.78 to $6.83, Full-Year Adjusted EPS¹ of $7.00 to $7.05
CHARLOTTE, North Carolina, Oct. 30, 2020 /PRNewswire/ -- Honeywell (NYSE: HON)
today announced results for the third quarter of 2020, which improved
sequentially versus the second quarter of 2020.
The company reported a third-quarter year-over-year sales decline of 14%
reported and organic, operating margin contraction of 250 basis points, and
segment margin contraction of 130 basis points, with adjusted earnings per
share2 of $1.56.
"I am pleased with the quarter-over-quarter improvements in sales growth,
margin expansion and adjusted earnings per share that we delivered in the third
quarter," said Darius Adamczyk, chairman and chief executive officer of
Honeywell. "We continued to focus on driving sales growth in areas that have
not been as impacted by the current downturn, including defense and space,
warehouse automation and personal protective equipment, all of which grew by
double-digits organically year-over-year. Recurring software sales also grew
double-digits organically, continuing our transformation to a premier
software-industrial company.
"We also focused on aggressively managing cost, and delivered over $450 million
in savings in the quarter, bringing our year-to-date total to $1.1 billion. We
now expect to generate $1.5 billion to $1.6 billion of cost savings during
2020, up from our previous estimate of $1.4 billion to $1.6 billion," Adamczyk
continued. "Honeywell's balance sheet remains strong, with $15 billion of cash
and short-term investments on hand, and we further enhanced our financial
flexibility this quarter by issuing $3 billion of bonds at attractive rates and
repaying in full the $3 billion term loan borrowed earlier this year. Capital
deployment remains a focus for us. In the third quarter, we resumed
opportunistic share repurchases and announced the 11th consecutive increase to
our dividend. We also recently announced two acquisitions that will provide
emerging technologies in our Aerospace business. I am confident we are
well-positioned for the economic recovery."
Adamczyk concluded, "Last month we celebrated two significant milestones:
Honeywell's 100th anniversary on the New York Stock Exchange and our return to
the Dow Jones Industrial Average. Honeywell is a company that has weathered the
toughest of times and emerged from them stronger than before. This crisis is no
exception. We have moved very quickly to introduce new offerings to help people
get back to the workplace, back to play, back to travel, and back to life, and
I am pleased with the strong demand we are seeing for these solutions. We
remain focused on cost management and execution, while also investing in new
markets and new technologies that will shape the next 100 years for our
customers, shareowners and employees."
Honeywell expects fourth quarter sales of $8.2 billion to $8.5 billion,
representing a year-over-year organic sales decline of 11% to 14%; segment
margin of 21.1% to 21.3%, down 10 to 30 basis points; and earnings per share of
$1.97 to $2.02, down 2% to 4% adjusted. Full-year sales are expected to be in
the range of $31.9 billion to $32.2 billion, representing a year-over-year
organic sales decline of 12% to 13%; segment margin of 20.4% to 20.5%, down 60
to 70 basis points; and adjusted earnings per share1 of $7.00 to $7.05, down
14%. A summary of the company's 2020 guidance can be found in Table 1.
Adjusted EPS in the headline excludes the impact of a non-cash $350M pre-tax
and after-tax charge associated with the reduction in carrying value to present
value of reimbursement receivables due from Garrett in relation to Garrett's
September 20, 2020 Chapter 11 bankruptcy filing
Third-Quarter Performance
Honeywell sales for the third quarter were down 14% on a reported and organic
basis. The third-quarter financial results can be found in Tables 2 and 3.
Aerospace sales for the third quarter were down 25% on an organic basis driven
by lower commercial aftermarket demand due to the ongoing impact of reduced
flight hours and lower volumes in commercial original equipment, partially
offset by double-digit growth in Defense and Space. Segment margin contracted
240 basis points to 23.2% driven by lower volumes and sales mix.
Honeywell Building Technologies sales for the third quarter were down 8% on an
organic basis driven by lower demand for building products and delays in
Building Solutions projects, partially offset by growth in the services
verticals. Segment margin expanded 60 basis points to 21.6%. Margin performance
was driven by commercial excellence and productivity actions.
Performance Materials and Technologies sales for the third quarter were down
16% on an organic basis driven by delays in Process Solutions services and
automation projects as well as volume declines in smart energy; lower gas
processing projects, catalyst shipments, licensing, and engineering due to
softness in the oil and gas sector in UOP; and lower fluorine products volumes
in Advanced Materials, partially offset by packaging and composites growth.
Segment margin contracted 220 basis points to 19.6% driven by the impact of
lower sales volumes, partially offset by productivity actions.
Safety and Productivity Solutions sales for the third quarter were up 8% on an
organic basis driven by double-digit Intelligrated and personal protective
equipment growth as well as a return to growth in productivity solutions and
services, partially offset by lower gas sensing volumes. Orders were up
double-digits year-over-year for the fourth straight quarter, driven by
approximately 150% personal protective equipment orders growth, and backlog
remained at a record high. Segment margin expanded 50 basis points to 13.9%
driven by productivity actions and commercial excellence.
Conference Call Details
Honeywell will discuss its third-quarter results and fourth-quarter outlook
during an investor conference call starting at 8:30 a.m. Eastern Daylight Time
today. To participate on the conference call, please dial (866) 548-4713
(domestic) or (323) 794-2093 (international) approximately ten minutes before
the 8:30 a.m. EDT start. Please mention to the operator that you are dialing in
for Honeywell's third-quarter 2020 earnings call or provide the conference code
HON3Q20. The live webcast of the investor call as well as related presentation
materials will be available through the Investor Relations section of the
company's website (www.honeywell.com/investor). Investors can hear a replay of
the conference call from 12:30 p.m. EDT, October 30, until 12:30 p.m. EST,
November 6, by dialing (888) 203-1112 (domestic) or (719) 457-0820
(international). The access code is 1772801.
TABLE 1: 4Q AND FULL-YEAR 2020 GUIDANCE3
4Q Guidance FY Guidance
Sales $8.2B - $8.5B $31.9B - $32.2B
Organic Growth Down (14%) - (11%) Down (13%) - (12%)
Segment Margin 21.1% - 21.3% 20.4% - 20.5%
Expansion Down (30) - (10) bps Down (70) - (60) bps
Earnings Per Share $1.97 - $2.02 $6.78 - $6.83
Adjusted Earnings Per Share1 $1.97 - $2.02 $7.00 - $7.05
Adjusted Earnings Growth1 Down (4%) - (2%) Down (14%)
TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS
3Q 2020 3Q 2019 Change
Sales 7,797 9,086 (14%)
Organic Growth (14%)
Segment Margin 19.9% 21.2% -130 bps
Operating Income Margin 16.8% 19.3% -250 bps
Earnings Per Share $1.07 $2.23 (52%)
Adjusted Earnings Per Share2 $1.56 $2.08 (25%)
Cash Flow from Operations 1,007 1,471 (32%)
Operating Cash Flow Conversion 133% 91% 42%
Free Cash Flow 758 1,279 (41%)
Adjusted Free Cash Flow4 758 1,286 (41%)
Adjusted Free Cash Flow Conversion5 68% 85% (17%)
TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS
AEROSPACE 3Q 2020 3Q 2019 Change
Sales 2,662 3,544 (25%)
Organic Growth (25%)
Segment Profit 617 908 (32%)
Segment Margin 23.2% 25.6% -240 bps
HONEYWELL BUILDING TECHNOLOGIES
Sales 1,305 1,415 (8%)
Organic Growth (8%)
Segment Profit 282 297 (5%)
Segment Margin 21.6% 21.0% 60 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES
Sales 2,252 2,670 (16%)
Organic Growth (16%)
Segment Profit 442 582 (24%)
Segment Margin 19.6% 21.8% -220 bps
SAFETY AND PRODUCTIVITY SOLUTIONS
Sales 1,578 1,457 8%
Organic Growth 8%
Segment Profit 219 195 12%
Segment Margin 13.9% 13.4% 50 bps
1Adjusted EPS and adjusted EPS V% guidance exclude 4Q19 pension mark-to-market,
adjustments to the charges taken in connection with the 4Q17 U.S. tax
legislation charge, 2Q20 favorable resolution of a foreign tax matter related
to the spin-off transactions, and the impact of a non-cash $350M pre-tax and
after-tax charge associated with the reduction in carrying value to present
value of reimbursement receivables due from Garrett in relation to Garrett's
September 20, 2020 Chapter 11 bankruptcy filing
2Adjusted EPS and adjusted EPS V% exclude adjustments to the charges taken in
connection with the 4Q17 U.S. tax legislation charge and the impact of a
non-cash $350M pre-tax and after-tax charge associated with the reduction in
carrying value to present value of reimbursement receivables due from Garrett
in relation to Garrett's September 20, 2020 Chapter 11 bankruptcy filing
3As discussed in the notes to the attached reconciliations, we do not provide
guidance for margin or EPS on a GAAP basis
4Adjusted free cash flow and adjusted free cash flow V% exclude impacts from
separation costs related to the spin-offs of $7M in 3Q19
5Adjusted free cash flow conversion excludes impacts from separation costs
related to the spin-offs of $7M in 3Q19, adjustments to the charges taken in
connected with the 4Q17 U.S. tax legislation charge, and the impact of a
non-cash $350M pre-tax and after-tax charge associated with the reduction in
carrying value to present value of reimbursement receivables due from Garrett
in relation to Garrett's September 20, 2020 Chapter 11 bankruptcy filing
Honeywell (www.honeywell.com) is a Fortune 100 technology company that delivers
industry specific solutions that include aerospace products and services;
control technologies for buildings and industry; and performance materials
globally. Our technologies help everything from aircraft, 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, technological, and COVID-19 public health
factors affecting our operations, markets, products, services and prices. Such
forward-looking statements are not guarantees of future performance, and actual
results, and other developments, including the potential impact of the COVID-19
pandemic, and business decisions may differ from those envisaged by such
forward-looking statements. Any forward-looking plans described herein are not
final and may be modified or abandoned at any time.
No final decision will be taken with respect to such plans or proposals without
prior satisfaction of any applicable requirements with respect to informing,
consulting or negotiating with employees or their representatives. 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, and acquisitions and divestitures for the first 12 months
following transaction date; free cash flow, which we define as cash flow from
operations less capital expenditures; adjusted 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 Resideo and
Garrett, if and as noted in the release; adjusted free cash flow conversion,
which we define as adjusted free cash flow divided by net income attributable
to Honeywell, excluding separation costs related to the spin-offs and the
impact of a non-cash $350M pre-tax and after-tax charge associated with the
reduction in carrying value to present value of reimbursement receivables due
from Garrett in relation to Garrett's September 20, 2020 Chapter 11 bankruptcy
filing, if and as noted in the release; and adjusted earnings per share, which
we adjust to exclude pension mark-to-market, adjustments to the charges taken
in connection with the 4Q17 U.S. tax legislation charge, the favorable
resolution of a foreign tax matter related to the spin-off transactions, and
the impact of a non-cash $350M pre-tax and after-tax charge associated with the
reduction in carrying value to present value of reimbursement receivables due
from Garrett in relation to Garrett's September 20, 2020 Chapter 11 bankruptcy
filing, if and as noted in the release. 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.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Product sales $ 5,885 $ 6,793 $ 17,933 $ 20,496
Service sales 1,912 2,293 5,804 6,717
Net sales 7,797 9,086 23,737 27,213
Costs, expenses
and other
Cost of products 4,315 4,775 12,852 14,244
sold (1)
Cost of services 1,068 1,263 3,341 3,767
sold (1)
5,383 6,038 16,193 18,011
Selling, general 1,103 1,296 3,524 4,046
and administrative
expenses (1)
Other (income) 62 (311) (546) (901)
expense
Interest and other 101 96 264 266
financial charges
6,649 7,119 19,435 21,422
Income before 1,148 1,967 4,302 5,791
taxes
Tax expense 367 319 816 1,151
(benefit)
Net income 781 1,648 3,486 4,640
Less: Net income 23 24 66 59
attributable to
the noncontrolling
interest
Net income $ 758 $ 1,624 $ 3,420 $ 4,581
attributable to
Honeywell
Earnings per share $ 1.08 $ 2.26 $ 4.85 $ 6.33
of common stock -
basic
Earnings per share $ 1.07 $ 2.23 $ 4.81 $ 6.25
of common stock -
assuming dilution
Weighted average 702.6 717.6 704.8 723.5
number of shares
outstanding -
basic
Weighted average 709.6 726.7 711.6 732.8
number of shares
outstanding -
assuming dilution
(1) 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 Nine Months Ended
September 30, September 30,
Net Sales 2020 2019 2020 2019
Aerospace $ 2,662 $ 3,544 $ 8,566 $ 10,393
Honeywell 1,305 1,415 3,763 4,254
Building
Technologies
Performance 2,252 2,670 6,867 7,977
Materials and
Technologies
Safety and 1,578 1,457 4,541 4,589
Productivity
Solutions
Total $ 7,797 $ 9,086 $ 23,737 $ 27,213
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Nine Months Ended
September 30, September 30,
Segment Profit 2020 2019 2020 2019
Aerospace $ 617 $ 908 $ 2,082 $ 2,653
Honeywell 282 297 794 868
Building
Technologies
Performance 442 582 1,373 1,790
Materials and
Technologies
Safety and 219 195 610 598
Productivity
Solutions
Corporate (7) (54) (73) (202)
Total segment 1,553 1,928 4,786 5,707
profit
Interest and (101) (96) (264) (266)
other
financial
charges
Stock (40) (37) (118) (112)
compensation
expense (1)
Pension 197 150 593 449
ongoing income
(2)
Other 13 12 40 35
postretirement
income (2)
Repositioning (144) (96) (486) (306)
and other
charges (3,4)
Other (5) (330) 106 (249) 284
Income before $ 1,148 $ 1,967 $ 4,302 $ 5,791
taxes
(1) Amounts included in Selling, general and administrative
expenses.
(2) 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).
(3) Amounts included in Cost of products and services sold,
Selling, general and administrative expenses, and Other income/
expense.
(4) Includes repositioning, asbestos, and environmental expenses.
(5) 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)
September December
30, 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 14,036 $ 9,067
Short-term investments 972 1,349
Accounts receivable - net 6,878 7,493
Inventories 4,705 4,421
Other current assets 1,609 1,973
Total current assets 28,200 24,303
Investments and long-term receivables 673 588
Property, plant and equipment - net 5,419 5,325
Goodwill 15,666 15,563
Other intangible assets - net 3,494 3,734
Insurance recoveries for asbestos related liabilities 374 392
Deferred income taxes 154 86
Other assets 9,479 8,688
Total assets $ 63,459 $ 58,679
LIABILITIES
Current liabilities:
Accounts payable $ 5,270 $ 5,730
Commercial paper and other short-term borrowings 3,550 3,516
Current maturities of long-term debt 985 1,376
Accrued liabilities 7,379 7,476
Total current liabilities 17,184 18,098
Long-term debt 17,687 11,110
Deferred income taxes 1,474 1,670
Postretirement benefit obligations other than pensions 309 326
Asbestos related liabilities 1,845 1,996
Other liabilities 6,640 6,766
Redeemable noncontrolling interest 7 7
Shareowners' equity 18,313 18,706
Total liabilities, redeemable noncontrolling interest $ 63,459 $ 58,679
and shareowners' equity
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Cash flows from operating
activities:
Net income $ 781 $ 1,648 $ 3,486 $ 4,640
Less: Net income attributable to the 23 24 66 59
noncontrolling interest
Net income attributable to Honeywell 758 1,624 3,420 4,581
Adjustments to reconcile net income
attributable to Honeywell to net
cash provided by operating
activities:
Depreciation 166 165 480 500
Amortization 89 98 268 319
Repositioning and other charges 144 96 486 306
Net payments for repositioning and (343) (72) (652) (157)
other charges
Pension and other postretirement (210) (162) (633) (484)
income
Pension and other postretirement (14) (5) (37) (50)
benefit payments
Stock compensation expense 40 37 118 112
Deferred income taxes (12) (342) (289) (298)
Reimbursement receivables charge 350 - 350 -
Other (84) 93 (369) 98
Changes in assets and liabilities,
net of the effects of acquisitions
and divestitures:
Accounts receivable (161) (176) 615 (78)
Inventories 47 (3) (284) (276)
Other current assets 140 171 246 (68)
Accounts payable (96) (81) (460) (89)
Accrued liabilities 193 28 167 (133)
Net cash provided by (used for) 1,007 1,471 3,426 4,283
operating activities
Cash flows from investing
activities:
Expenditures for property, plant and (249) (192) (615) (504)
equipment
Proceeds from disposals of property, 10 31 17 41
plant and equipment
Increase in investments (700) (944) (2,371) (3,218)
Decrease in investments 1,045 1,155 2,634 3,318
Receipts (payments) from settlements (158) 175 (75) 245
of derivative contracts
Other - (4) - (4)
Net cash provided by (used for) (52) 221 (410) (122)
investing activities
Cash flows from financing
activities:
Proceeds from issuance of commercial 1,412 3,178 8,577 10,292
paper and other short-term
borrowings
Payments of commercial paper and (1,418) (3,178) (8,512) (10,293)
other short-term borrowings
Proceeds from issuance of common 66 47 163 425
stock
Proceeds from issuance of long-term 3,004 2,696 10,105 2,725
debt
Payments of long-term debt (3,019) (36) (4,237) (120)
Repurchases of common stock (164) (1,000) (2,149) (3,650)
Cash dividends paid (636) (595) (1,921) (1,798)
Other (14) (40) (54) (72)
Net cash provided by (used for) (769) 1,072 1,972 (2,491)
financing activities
Effect of foreign exchange rate 72 (81) (19) (49)
changes on cash and cash equivalents
Net increase (decrease) in cash and 258 2,683 4,969 1,621
cash equivalents
Cash and cash equivalents at 13,778 8,225 9,067 9,287
beginning of period
Cash and cash equivalents at end of $ 14,036 $ 10,908 $ 14,036 $ 10,908
period
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Ended
September 30, 2020
Honeywell
Reported sales % change (14)%
Less: Foreign currency translation -%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change (14)%
Aerospace
Reported sales % change (25)%
Less: Foreign currency translation -%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change (25)%
Honeywell Building Technologies
Reported sales % change (8)%
Less: Foreign currency translation -%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change (8)%
Performance Materials and Technologies
Reported sales % change (16)%
Less: Foreign currency translation -%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change (16)%
Safety and Productivity Solutions
Reported sales % change 8%
Less: Foreign currency translation -%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change 8%
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 and acquisitions, net of divestitures. 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 Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income
Margins (Unaudited)
(Dollars in millions)
Three Months Ended September 30,
2020 2019
Segment profit $ 1,553 $ 1,928
Stock compensation expense (1) (40) (37)
Repositioning, Other (2,3) (161) (109)
Pension and other postretirement (41) (30)
service costs (4)
Operating income $ 1,311 $ 1,752
Segment profit $ 1,553 $ 1,928
÷ Net sales $ 7,797 $ 9,086
Segment profit margin % 19.9 % 21.2 %
Operating income $ 1,311 $ 1,752
÷ Net sales $ 7,797 $ 9,086
Operating income margin % 16.8 % 19.3 %
(1) Included in Selling, general and
administrative expenses.
(2) Includes repositioning, asbestos,
environmental expenses and equity income
adjustment.
(3) Included in Cost of products and services
sold, Selling, general and administrative
expenses and Other income/expense.
(4) 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.
Honeywell International Inc.
Reconciliation of Earnings per Share to Adjusted Earnings per Share (Unaudited)
Three Months Ended Three Three Twelve
September 30, Months Months Months
Ended June Ended Ended
30, December December
2020 31, 31,
2019 2019
2020 2019
Earnings per share $ 1.07 $ 2.23 $ 1.53 $ 2.16 $ 8.41
of common stock -
assuming dilution
(1)
Pension - - - 0.13 0.13
mark-to-market
expense (2)
Separation-related - - (0.27) - -
tax adjustment (3)
Impacts from U.S. - (0.15) - (0.23) (0.38)
Tax Reform
Reimbursement $ 0.49 - - - -
receivable charge
(4)
Adjusted earnings $ 1.56 $ 2.08 $ 1.26 $ 2.06 $ 8.16
per share of
common stock -
assuming dilution
(1) For the three months ended September 30, 2020 and 2019,
adjusted earnings per share utilizes weighted average shares
of approximately 709.6 million and 726.7 million. For the
three months ended June 30, 2020, adjusted earnings per share
utilizes weighted average shares of approximately 708.1
million. For the three and twelve months ended December 31,
2019 adjusted earnings per share utilizes weighted average
shares of approximately 722.6 million and 730.3.
(2) Pension mark-to-market expense uses a blended tax rate of 24%
for 2019.
(3) For the three months ended June 30, 2020, separation-related
tax adjustment of $186 million ($186 million net of tax)
includes the favorable resolution of a foreign tax matter
related to the spin-off transactions.
(4) The impact due to a non-cash $350M pre-tax and after-tax
charge associated with the reduction in carrying value to
present value of reimbursement receivables due from Garrett
in relation to Garrett's September 20, 2020 Chapter 11
bankruptcy filing.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash
Flow and Calculation of Adjusted
Free Cash Flow Conversion (Unaudited)
(Dollars in millions)
Three Months Three Months
Ended Ended
September 30, September 30,
2020 2019
Cash provided by operating $ 1,007 $ 1,471
activities
Expenditures for property, plant and (249) (192)
equipment
Free cash flow 758 1,279
Separation cost payments - 7
Adjusted free cash flow $ 758 $ 1,286
Net income attributable to Honeywell 758 1,624
Impacts from U.S. Tax Reform - (114)
Reimbursement receivable charge (1) 350 -
Adjusted net income attributable to $ 1,108 $ 1,510
Honeywell
Cash provided by operating $ 1,007 $ 1,471
activities
÷ Net income (loss) attributable to $ 758 $ 1,624
Honeywell
Operating cash flow conversion 133 % 91 %
Adjusted free cash flow $ 758 $ 1,286
÷ Adjusted net income attributable $ 1,108 $ 1,510
to Honeywell
Adjusted free cash flow conversion % 68 % 85 %
(1) A non-cash $350M pre-tax and after-tax
charge associated with the reduction in
carrying value to present value of
reimbursement receivables due from Garrett
in relation to Garrett's September 20,
2020 Chapter 11 bankruptcy filing.
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 Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income
Margins (Unaudited)
(Dollars in millions)
Three Twelve Three Months
Months Months Ended June
Ended Ended 30,
December December 31, 2020
31, 2019
2019
Segment profit $ 2,032 $ 7,739 $ 1,385
Stock compensation expense (1) (41) (153) (34)
Repositioning, Other (2,3) (259) (598) (295)
Pension and other postretirement (37) (137) (38)
service costs (4)
Operating income $ 1,695 $ 6,851 $ 1,018
Segment profit $ 2,032 $ 7,739 $ 1,385
÷ Net sales $ 9,496 $ 36,709 $ 7,477
Segment profit margin % 21.4 % 21.1 % 18.5 %
Operating income $ 1,695 $ 6,851 $ 1,018
÷ Net sales $ 9,496 $ 36,709 $ 7,477
Operating income margin % 17.8 % 18.7 % 13.6 %
(1) Included in Selling, general and
administrative expenses.
(2) Includes repositioning, asbestos,
environmental expenses and equity income
adjustment.
(3) Included in Cost of products and services
sold, Selling, general and administrative
expenses and Other income/expense.
(4) 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 Expected Earnings per Share to Adjusted Earnings per Share
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2020 (E) 2020 (E)
Earnings per share $1.97 - $2.02 $6.78 - $6.83
of common stock -
assuming dilution
(1)
Pension - -
mark-to-market
expense
Separation-related - (0.27)
tax adjustment (2)
Reimbursement - 0.49
receivable charge
(3)
Adjusted earnings $1.97 - $2.02 $7.00 - $7.05
per share of common
stock - assuming
dilution
(1) For the three and twelve months ended December 31, 2020,
expected adjusted earnings per share utilizes weighted
average shares of approximately 710 million and 711
million.
(2) For the twelve months ended December 31, 2020,
separation-related tax adjustment of $186 million ($186
million net of tax) includes the favorable resolution of
a foreign tax matter related to the spin-off
transactions.
(3) The impact due to a non-cash $350M pre-tax and after-tax
charge associated with the reduction in carrying value to
present value of reimbursement receivables due from
Garrett in relation to Garrett's September 20, 2020
Chapter 11 bankruptcy filing.
We believe adjusted earnings per share, 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. We therefore do not include an estimate for the pension mark-to-market
expense. Based on economic and industry conditions, future developments and
other relevant factors, these assumptions are subject to change.
Contacts:
Media Investor Relations
Nina Krauss Mark Bendza
(704) 627-6035 (704) 627-6200
nina.krauss@honeywell.com mark.bendza@honeywell.com
END
(END) Dow Jones Newswires
October 30, 2020 06:30 ET (10:30 GMT)
Honeywell (LSE:HON)
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Honeywell (LSE:HON)
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