TIDMHON
Honeywell Overdelivers On Sales, Announces Four Acquisitions In The Fourth
Quarter; Issues 2021 Guidance
- Reported Fourth Quarter Earnings Per Share of $1.91 and Adjusted EPS¹ of
$2.07, Above High End of Guidance
- Delivered Fourth Quarter Operating Cash Flow of $2.8 Billion, Conversion of
205%, and Free Cash Flow of $2.5 Billion, Adjusted Conversion² of 170%
- Completed Three M&A Deals Aligned to Key Growth Vectors and Announced
Agreement to Acquire Sparta Systems for $1.3 Billion
- Expect 2021 Earnings Per Share of $7.60 - $8.00, Up 13% - 19%, 7% - 13%
Adjusted³
CHARLOTTE, N.C., Jan. 29, 2021 /PRNewswire/ -- Honeywell (NYSE: HON) today
announced results for the fourth quarter and full year 2020 that exceeded
investor expectations, as well as its outlook for 2021.
The company reported a fourth-quarter year-over-year sales decline of 6%, down
7% on an organic basis, and a full-year sales decline of 11% on a reported and
organic basis. For the full year, operating margin contracted 120 basis points
and segment margin contracted 70 basis points, with earnings per share of $6.72
and adjusted earnings per share4 of $7.10, above the high end of our guidance.
"We finished a challenging 2020 with another quarter of sequential improvements
in sales growth, margin expansion, and adjusted earnings per share," said
Darius Adamczyk, chairman and chief executive officer of Honeywell. "Our focus
on delivering differentiated solutions drove double-digit organic sales growth
in our defense and space, warehouse automation, personal protective equipment,
and recurring connected software businesses for the second consecutive quarter.
We continued to prudently reduce costs in the quarter, bringing our full-year
total fixed cost savings to $1.5 billion. Our fourth quarter adjusted earnings
per share was $2.07, flat year-over-year on an adjusted basis1 and above the
high end of our guidance. We also continued our focus on generating cash and
achieved 170% adjusted free cash flow conversion2 in the quarter. For the year,
we generated $6.2 billion in operating cash flow with 130% conversion and $5.3
billion in free cash flow with 105% adjusted free cash flow conversion5.
"Honeywell's strong balance sheet put us in a good position to weather the
challenges of 2020 while investing for future growth. We invested in
high-return capital expenditures, repurchased $3.7 billion of Honeywell shares,
completed three acquisitions, made six new investments within Honeywell
Ventures, and announced our 11th consecutive dividend increase. Even with this
level of cash deployment, we ended 2020 with $15.2 billion of cash and
short-term investments on hand," Adamczyk said.
The company also announced its outlook for 2021. Honeywell expects sales of
$33.4 billion to $34.4 billion, representing year-over-year organic growth of
1% to 4%; segment margin expansion of 30 to 70 basis points; earnings per share
of $7.60 to $8.00, up 7% to 13% adjusted3; operating cash flow of $5.7 billion
to $6.1 billion, and free cash flow6 of $5.1 billion to $5.5 billion. A summary
of the company's 2021 guidance can be found in Table 1.
Adamczyk concluded, "I am very proud of the way Honeywell responded to the
crisis in 2020. We quickly focused on liquidity, cost management, and
execution, while rapidly innovating and ramping up production of a wide array
of offerings to help the world recover, including critical personal protective
equipment. We also remained focused on growth and investing in new markets and
technologies. We entered 2021 with positive momentum following two quarters of
sequential improvement. I am confident we are well-positioned for the economic
recovery and will continue to perform for our shareowners, our customers, and
our employees in the short and long term."
Fourth-Quarter Performance
Honeywell sales for the fourth quarter were down 6% on a reported basis and
down 7% on an organic basis. The fourth-quarter financial results can be found
in Tables 2 and 3.
Aerospace sales for the fourth quarter were down 19% 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 expanded 150
basis points to 27.6% driven by productivity actions and commercial excellence.
Honeywell Building Technologies sales for the fourth quarter were down 4% on an
organic basis driven by timing of Building Solutions projects and lower demand
for security products and building management systems, partially offset by
growth in commercial fire. Building Solutions orders were up double digits
year-over-year, driven by large project bookings in the Americas and Europe.
Segment margin expanded 110 basis points to 21.4%. Margin performance was
driven by commercial excellence and productivity actions.
Performance Materials and Technologies sales for the fourth quarter were down
12% on an organic basis driven by continued delays in Process Solutions
automation projects as well as volume declines in smart energy and thermal
solutions, and lower gas processing projects, catalyst shipments, licensing,
and engineering due to softness in the oil and gas sector in UOP, partially
offset by return to growth in Advanced Materials driven by demand for fluorine
products. Segment margin contracted 380 basis points to 18.7% driven by the
impact of lower sales volumes and mix, partially offset by productivity
actions.
Safety and Productivity Solutions sales for the fourth quarter were up 27% on
an organic basis driven by double-digit Intelligrated and personal protective
equipment growth as well as strength in productivity solutions and services.
Orders were up double digits year-over-year for the fifth straight quarter,
driven by strong personal protective equipment and productivity solutions and
services orders growth. Backlog remained at a record high. Segment margin
expanded 260 basis points to 15.3% driven by productivity actions and higher
volumes.
Conference Call Details
Honeywell will discuss its fourth-quarter and full-year results as well as its
2021 outlook during an investor conference call starting at 8:30 a.m. Eastern
Standard 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. EST start. Please mention to the operator that you are
dialing in for Honeywell's fourth quarter 2020 earnings and 2021 outlook call
or provide the conference code HON2021. 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. EST
January 29 until 12:30 p.m. EST February 5 by dialing (888) 203-1112 (domestic)
or (719) 457-0820 (international). The access code is 1005277.
TABLE 1: FULL-YEAR 2021 GUIDANCE
Sales $33.4B - $34.4B
Organic Growth 1% - 4%
Segment Margin 20.7% - 21.1%
Expansion Up 30 - 70 bps
Earnings Per Share $7.60 - $8.00
Adjusted Earnings Growth3 7% - 13%
Operating Cash Flow $5.7B - $6.1B
Free Cash Flow6 $5.1B - $5.5B
TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS
FY 2020 FY 2019 Change
Sales 32,637 36,709 (11)%
Organic Growth (11)%
Segment Margin 20.4% 21.1% -70 bps
Operating Income Margin 17.5% 18.7% -120 bps
Reported Earnings Per Share $6.72 $8.41 (20)%
Adjusted Earnings Per Share4 $7.10 $8.16 (13)%
Cash Flow from Operations 6,208 6,897 (10)%
Conversion 130% 112% 18%
Adjusted Free Cash Flow7 5,302 6,271 (15)%
Adjusted Free Cash Flow Conversion5 105% 105% -%
4Q 2020 4Q 2019 Change
Sales 8,900 9,496 (6)%
Organic Growth (7)%
Segment Margin 21.1% 21.4% -30 bps
Operating Income Margin 18.8% 17.8% 100 bps
Reported Earnings Per Share $1.91 $2.16 (12)%
Adjusted Earnings Per Share1 $2.07 $2.06 -%
Cash Flow from Operations 2,782 2,614 6%
Conversion 205% 167% 38%
Adjusted Free Cash Flow7 2,491 2,292 9%
Adjusted Free Cash Flow Conversion2 170% 154% 16%
TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS
AEROSPACE FY 2020 FY 2019 Change
Sales 11,544 14,054 (18)%
Organic Growth (18)%
Segment Profit 2,904 3,607 (19)%
Segment Margin 25.2% 25.7% -50 bps
4Q 2020 4Q 2019
Sales 2,978 3,661 (19)%
Organic Growth (19)%
Segment Profit 822 954 (14)%
Segment Margin 27.6% 26.1% 150 bps
HONEYWELL BUILDING TECHNOLOGIES FY 2020 FY 2019 Change
Sales 5,189 5,717 (9)%
Organic Growth (9)%
Segment Profit 1,099 1,165 (6)%
Segment Margin 21.2% 20.4% 80 bps
4Q 2020 4Q 2019
Sales 1,426 1,463 (3)%
Organic Growth (4)%
Segment Profit 305 297 3%
Segment Margin 21.4% 20.3% 110 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES FY 2020 FY 2019 Change
Sales 9,423 10,834 (13)%
Organic Growth (13)%
Segment Profit 1,851 2,433 (24)%
Segment Margin 19.6% 22.5% -290 bps
4Q 2020 4Q 2019
Sales 2,556 2,857 (11)%
Organic Growth (12)%
Segment Profit 478 643 (26)%
Segment Margin 18.7% 22.5% -380 bps
SAFETY AND PRODUCTIVITY SOLUTIONS FY 2020 FY 2019 Change
Sales 6,481 6,104 6%
Organic Growth 6%
Segment Profit 907 790 15%
Segment Margin 14.0% 12.9% 110 bps
4Q 2020 4Q 2019
Sales 1,940 1,515 28%
Organic Growth 27%
Segment Profit 297 192 55%
Segment Margin 15.3% 12.7% 260 bps
1Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, non-cash
charges associated with the reduction in value of reimbursement receivables due
from Garrett Motion Inc. (Garrett), net of proceeds from settlement of related
hedging transaction, and 2019 adjustments to the charges taken in connection
with the 4Q17 U.S. tax legislation charge.
2Adjusted free cash flow conversion excludes impacts from 2019 separation cost
payments related to the spin-offs, pension mark-to-market, non-cash charges
associated with the reduction in value of reimbursement receivables due from
Garrett, net of proceeds from settlement of related hedging transaction, and
2019 adjustments to the charges taken in connection with the 4Q17 U.S. tax
legislation charge, if applicable.
3Adjusted EPS V% guidance excludes pension mark-to-market, non-cash charges
associated with the reduction in value of reimbursement receivables due from
Garrett, net of proceeds from settlement of related hedging transaction, and
2Q20 favorable resolution of a foreign tax matter related to the spin-off
transactions.
4Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, non-cash
charges associated with the reduction in value of reimbursement receivables due
from Garrett, net of proceeds from settlement of related hedging transaction,
2Q20 favorable resolution of a foreign tax matter related to the spin-off
transactions, and 2019 adjustments to the charges taken in connection with the
4Q17 U.S. tax legislation charge.
5Adjusted free cash flow conversion excludes impacts from 2019 separation cost
payments related to the spin-offs, pension mark-to-market, non-cash charges
associated with the reduction in value of reimbursement receivables due from
Garrett, net of proceeds from settlement of related hedging transaction, 2Q20
favorable resolution of a foreign tax matter related to the spin-off
transactions, and 2019 adjustments to the charges taken in connection with the
4Q17 U.S. tax legislation charge, if applicable.
6Free cash flow guidance assumes proposed reorganization plan contemplated in
the plan support agreement signed by Garrett is confirmed; should such plan be
confirmed free cash flow definition would be revised to include cash payment
from Garrett to Honeywell under such proposed reorganization plan. See appendix
for details.
7Adjusted free cash flow excludes impacts from 2019 separation cost payments
related to the spin-offs.
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 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. 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 and should the proposed reorganization
plan contemplated in the plan support agreement signed by Garrett be confirmed,
free cash flow definition would be revised to include cash payment from Garrett
to Honeywell under such proposed reorganization plan; 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 pension mark-to-market, adjustments
to the charges taken in connection with the 4Q17 U.S. tax legislation charge,
non-cash charges associated with the reduction in value of reimbursement
receivables due from Garrett, net of proceeds from settlement of related
hedging transaction, and 2Q20 favorable resolution of a foreign tax matter
related to the spin-off transactions, 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, non-cash charges associated with the reduction in value of
reimbursement receivables due from Garrett, net of proceeds from settlement of
related hedging transaction, and 2Q20 favorable resolution of a foreign tax
matter related to the spin-off transactions, if and as noted in the release.
The respective tax rates applied when adjusting earnings per share for these
items are identified in the release or in the reconciliations presented in the
Appendix. Management believes that, when considered together with reported
amounts, these measures are useful to investors and management in understanding
our ongoing operations and in the analysis of ongoing operating trends. These
metrics should be considered in addition to, and not as replacements for, the
most comparable GAAP measure. Refer to the Appendix attached to this release
for reconciliations of non-GAAP financial measures to the most directly
comparable GAAP measures.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2020 2019 2020 2019
Product sales $ 6,804 $ 7,133 $ 24,737 $ 27,629
Service sales 2,096 2,363 7,900 9,080
Net sales 8,900 9,496 32,637 36,709
Costs, expenses and other
Cost of products sold (1) 4,786 5,025 17,638 19,269
Cost of services sold (1) 1,190 1,303 4,531 5,070
5,976 6,328 22,169 24,339
Selling, general and administrative expenses (1) 1,248 1,473 4,772 5,519
Other (income) expense (129) (164) (675) (1,065)
Interest and other financial charges 95 91 359 357
7,190 7,728 26,625 29,150
Income before taxes 1,710 1,768 6,012 7,559
Tax expense 331 178 1,147 1,329
Net income 1,379 1,590 4,865 6,230
Less: Net income attributable to the noncontrolling 20 28 86 87
interest
Net income attributable to Honeywell $ 1,359 $ 1,562 $ 4,779 $ 6,143
Earnings per share of common stock - basic $ 1.94 $ 2.19 $ 6.79 $ 8.52
Earnings per share of common stock - assuming dilution $ 1.91 $ 2.16 $ 6.72 $ 8.41
Weighted average number of shares outstanding - basic 701.8 713.5 704.1 721.0
Weighted average number of shares outstanding - 710.0 722.6 711.2 730.3
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 Twelve Months Ended
December 31, December 31,
Net Sales 2020 2019 2020 2019
Aerospace $ 2,978 $ 3,661 $ 11,544 $ 14,054
Honeywell Building 1,426 1,463 5,189 5,717
Technologies
Performance 2,556 2,857 9,423 10,834
Materials and
Technologies
Safety and 1,940 1,515 6,481 6,104
Productivity
Solutions
Total $ 8,900 $ 9,496 $ 32,637 $ 36,709
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Twelve Months Ended
December 31, December 31,
Segment Profit 2020 2019 2020
2019
Aerospace $ 822 $ 954 $ 2,904 $ 3,607
Honeywell Building 305 297 1,099 1,165
Technologies
Performance 478 643 1,851 2,433
Materials and
Technologies
Safety and 297 192 907 790
Productivity
Solutions
Corporate (23) (54) (96) (256)
Total segment 1,879 2,032 6,665 7,739
profit
Interest and other (95) (91) (359) (357)
financial charges
Stock compensation (50) (41) (168) (153)
expense (1)
Pension ongoing 192 143 785 592
income (2)
Pension (44) (123) (44) (123)
mark-to-market
expense
Other 17 12 57 47
postretirement
income (2)
Repositioning and (89) (240) (575) (546)
other charges (3,4)
Other (5) (100) 76 (349) 360
Income before taxes $ 1,710 $ 1,768 $ 6,012 $ 7,559
(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)
December December
31, 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 14,275 $ 9,067
Short-term investments 945 1,349
Accounts receivable-net 6,827 7,493
Inventories 4,489 4,421
Other current assets 1,639 1,973
Total current assets 28,175 24,303
Investments and long-term receivables 685 588
Property, plant and equipment-net 5,570 5,325
Goodwill 16,058 15,563
Other intangible assets-net 3,560 3,734
Insurance recoveries for asbestos related liabilities 366 392
Deferred income taxes 760 86
Other assets 9,412 8,688
Total assets $ 64,586 $ 58,679
LIABILITIES
Current liabilities:
Accounts payable $ 5,750 $ 5,730
Commercial paper and other short-term borrowings 3,597 3,516
Current maturities of long-term debt 2,445 1,376
Accrued liabilities 7,405 7,476
Total current liabilities 19,197 18,098
Long-term debt 16,342 11,110
Deferred income taxes 2,113 1,670
Postretirement benefit obligations other than pensions 242 326
Asbestos related liabilities 1,920 1,996
Other liabilities 6,975 6,766
Redeemable noncontrolling interest 7 7
Shareowners' equity 17,790 18,706
Total liabilities, redeemable noncontrolling interest and $ 64,586 $ 58,679
shareowners' equity
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
2020 2019 2019
2020
Cash flows from operating
activities:
Net income $ 1,379 $ 1,590 $ 4,865 $ 6,230
Less: Net income attributable to 20 28 86 87
the noncontrolling interest
Net income attributable to 1,359 1,562 4,779 6,143
Honeywell
Adjustments to reconcile net
income attributable to Honeywell
to net cash provided by
operating activities:
Depreciation 164 173 644 673
Amortization 90 96 358 415
Repositioning and other charges 89 240 575 546
Net payments for repositioning (181) (219) (833) (376)
and other charges
Pension and other postretirement (165) (32) (798) (516)
income
Pension and other postretirement (10) (28) (47) (78)
benefit payments
Stock compensation expense 50 41 168 153
Deferred income taxes 114 477 (175) 179
Reimbursement receivables charge 159 - 509 -
Other 34 (384) (335) (286)
Changes in assets and
liabilities, net of the effects
of acquisitions and divestitures:
Accounts receivable 54 89 669 11
Inventories 217 176 (67) (100)
Other current assets (55) (362) 191 (430)
Accounts payable 475 207 15 118
Accrued liabilities 388 578 555 445
Net cash provided by (used for) 2,782 2,614 6,208 6,897
operating activities
Cash flows from investing
activities:
Expenditures for property, plant (291) (335) (906) (839)
and equipment
Proceeds from disposals of 40 2 57 43
property, plant and equipment
Increase in investments (865) (1,035) (3,236) (4,253)
Decrease in investments 874 1,146 3,508 4,464
Receipts (payments) from (74) (143) (149) 102
settlements of derivative
contracts
Cash paid for acquisitions, net (261) (46) (261) (50)
of cash acquired
Net cash provided by (used for) (577) (411) (987) (533)
investing activities
Cash flows from financing
activities:
Proceeds from issuance of 1,897 3,907 10,474 14,199
commercial paper and other
short-term borrowings
Payments of commercial paper and (1,888) (3,906) (10,400) (14,199)
other short-term borrowings
Proceeds from issuance of common 230 73 393 498
stock
Proceeds from issuance of 20 1 10,125 2,726
long-term debt
Payments of long-term debt (71) (2,783) (4,308) (2,903)
Repurchases of common stock (1,565) (750) (3,714) (4,400)
Cash dividends paid (671) (644) (2,592) (2,442)
Other (5) (7) (59) (79)
Net cash provided by (used for) (2,053) (4,109) (81) (6,600)
financing activities
Effect of foreign exchange rate 87 65 68 16
changes on cash and cash
equivalents
Net increase (decrease) in cash 239 (1,841) 5,208 (220)
and cash equivalents
Cash and cash equivalents at 14,036 10,908 9,067 9,287
beginning of period
Cash and cash equivalents at end $ 14,275 $ 9,067 $ 14,275 $ 9,067
of period
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2020 2020
Honeywell
Reported sales % change (6)% (11)%
Less: Foreign currency translation 1% -%
Less: Acquisitions, divestitures and other, net -% -%
Organic sales % change (7)% (11)%
Aerospace
Reported sales % change (19)% (18)%
Less: Foreign currency translation -% -%
Less: Acquisitions, divestitures and other, net -% -%
Organic sales % change (19)% (18)%
Honeywell Building Technologies
Reported sales % change (3)% (9)%
Less: Foreign currency translation 1% -%
Less: Acquisitions, divestitures and other, net -% -%
Organic sales % change (4)% (9)%
Performance Materials and Technologies
Reported sales % change (11)% (13)%
Less: Foreign currency translation 1% -%
Less: Acquisitions, divestitures and other, net -% -%
Organic sales % change (12)% (13)%
Safety and Productivity Solutions
Reported sales % change 28% 6%
Less: Foreign currency translation 1% -%
Less: Acquisitions, divestitures and other, net -% -%
Organic sales % change 27% 6%
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 Three Months Twelve Months Ended
December 31, Ended December 31,
September 30,
2020 2019 2020
2020 2019
Segment profit $ 1,879 $ 2,032 $ 1,553 $ 6,665 $ 7,739
Stock compensation expense (1) (50) (41) (40) (168) (153)
Repositioning, Other (2,3) (111) (259) (161) (641) (598)
Pension and other postretirement service costs (42) (37) (41) (160) (137)
(4)
Operating income $ 1,676 $ 1,695 $ 1,311 $ 5,696 $ 6,851
Segment profit $ 1,879 $ 2,032 $ 1,553 $ 6,665 $ 7,739
÷ Net sales $ 8,900 $ 9,496 $ 7,797 $ 32,637 $ 36,709
Segment profit margin % 21.1 % 21.4 % 19.9 % 20.4 % 21.1 %
Operating income $ 1,676 $ 1,695 $ 1,311 $ 5,696 $ 6,851
÷ Net sales $ 8,900 $ 9,496 $ 7,797 $ 32,637 $ 36,709
Operating income margin % 18.8 % 17.8 % 16.8 % 17.5 % 18.7 %
(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. The information that is unavailable to provide a quantitative
reconciliation could have a significant impact on our reported financial
results. To the extent quantitative information becomes available without
unreasonable effort in the future, and closer to the period to which the
forward-looking measures pertain, a reconciliation of segment profit to
operating income will be included within future filings.
Honeywell International Inc.
Reconciliation of Earnings per Share to Adjusted Earnings per Share and
Adjusted Earnings per Share Excluding
Spin-off Impact (Unaudited)
Three Months Ended Three Months Twelve Months Ended
December 31, Ended December 31,
September
2020 2019 30, 2020 2020 2019
Earnings per $ 1.91 $ 2.16 $ 1.07 $ 6.72 $ 8.41
share of
common stock -
assuming
dilution (1)
Pension 0.05 0.13 - 0.04 0.13
mark-to-market
expense (2)
Separation - - - (0.26) -
related tax
adjustment (3)
Impacts from - (0.23) - - (0.38)
U.S. Tax
Reform
Garrett 0.11 - 0.49 0.60 -
related
adjustment (4)
(5)
Adjusted $ 2.07 $ 2.06 $ 1.56 $ 7.10 $ 8.16
earnings per
share of
common stock
- assuming
dilution
(1) For the three months ended December 31, 2020 and 2019, adjusted earnings per
share utilizes weighted average shares of approximately 710.0 million and 722.6
million. For the twelve months ended December 31, 2020 and 2019, adjusted
earnings per share utilizes weighted average shares of approximately 711.2
million and 730.3 million. For the three months ended September 30, 2020,
adjusted earnings per share utilizes weighted average shares of approximately
709.6 million.
(2) Pension mark-to-market expense uses a blended tax rate of 25% and 24% for 2020
and 2019.
(3) 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.
(4) For the three months ended September 30, 2020, the adjustment was $350 million
net of tax due to the non-cash charge associated with the reduction in value of
reimbursement receivables due from Garrett.
(5) For the three and twelve months ended December 31, 2020, adjustments were $77
million and $427 million net of tax due to the non-cash charges associated with
the reduction in value of reimbursement receivables due from Garrett, net of
proceeds from settlement of related hedging transactions.
We believe adjusted earnings per share, excluding spin-off impact, 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.
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 Three Three Twelve Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
December December September December December
31, 31, 30, 31, 31,
2020 2019 2020 2020 2019
Cash provided by operating $ 2,782 $ 2,614 $ 1,007 $ 6,208 $ 6,897
activities
Expenditures for property, (291) (335) (249) (906) (839)
plant and equipment
Free cash flow 2,491 2,279 758 5,302 6,058
Separation cost payments - 13 - - 213
Adjusted free cash flow $ 2,491 $ 2,292 $ 758 $ 5,302 $ 6,271
Net income attributable to $ 1,359 $ 1,562 $ 758 $ 4,779 $ 6,143
Honeywell
Separation related tax - - - (186) -
adjustment
Impacts from U.S. Tax - (167) - - (281)
Reform
Pension mark-to-market 33 94 - 33 94
Garrett related adjustment 77 - 350 427 -
(1)(2)
Adjusted net income $ 1,469 $ 1,489 $ 1,108 $ 5,053 $ 5,956
attributable to Honeywell
Cash provided by operating $ 2,782 $ 2,614 $ 1,007 $ 6,208 $ 6,897
activities
÷ Net income (loss) $ 1,359 $ 1,562 $ 758 $ 4,779 $ 6,143
attributable to Honeywell
Operating cash flow 205 % 167 % 133 % 130 % 112 %
conversion
Adjusted free cash flow $ 2,491 $ 2,292 $ 758 $ 5,302 $ 6,271
÷ Adjusted net income $ 1,469 $ 1,489 $ 1,108 $ 5,053 $ 5,956
attributable to Honeywell
Adjusted free cash flow 170 % 154 % 68 % 105 % 105 %
conversion %
(1) For the three months ended September 30, 2020, the adjustment was $350
million net of tax due to the non-cash charge associated with the reduction in
value of reimbursement receivables due from Garrett.
(2) For the three and twelve months ended December 31, 2020, adjustments were
$77 million and $427 million net of tax due to the non-cash charges associated
with the reduction in value of reimbursement receivables due from Garrett, net
of proceeds from settlement of related hedging transactions.
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment.
We believe that this metric is useful to investors and management as a measure
of cash generated by business operations that will be used to repay scheduled
debt maturities and can be used to invest in future growth through new business
development activities or acquisitions, pay dividends, repurchase stock or
repay debt obligations prior to their maturities. This metric can also be used
to evaluate our ability to generate cash flow from business operations and the
impact that this cash flow has on our liquidity.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash
Flow (Unaudited)
Twelve Months
Ended
December 31,
2021(E) ($B)
Cash provided by operating activities $5.7 - $6.1
Expenditures for property, plant and equipment (1)
Garrett cash receipts 0.4
Free cash flow $5.1 - $5.5
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus Garrett cash receipts.
We believe that free cash flow is a non-GAAP metric that is useful to investors
and management as a measure of cash generated by 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
operations and the impact that this cash flow has on our liquidity. For forward
looking information, we do not provide cash flow conversion guidance on a GAAP
basis as 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.
Should the proposed reorganization plan contemplated in the Plan Support
Agreement signed by Centerbridge, Oaktree, Honeywell, Garrett and certain other
parties thereto (the "Reorganization Plan") be confirmed by the bankruptcy
court, we will revise our definition of free cash flow to include cash payments
from Garrett to Honeywell. We believe this revised definition will be useful
to investors and management because, under the IRA and TMA, cash reimbursements
from Garret were classified as cash flow from operations, which offset cash
payments made by the Company for asbestos and tax related matters. Should the
Reorganization Plan be confirmed, the IRA and TMA will terminate, and instead
of reimbursements classified as cash flow from operations, Honeywell will
receive the cash payment stream contemplated under the Reorganization Plan.
However, because the underlying reason for a cash payment stream from Garrett
will not have changed, we believe that continuing to include cash payments from
Garrett in free cash flow is useful to investors and management for
comparability to prior periods.
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
January 29, 2021 06:58 ET (11:58 GMT)
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