TIDMHON
Honeywell Delivers 9% Sales Growth And Expands Operating Margin By 180 Basis
Points
- Earnings Per Share of $1.80, Adjusted Earnings Per Share(1) of $2.02, at High
End of Guidance
- Organic Sales up 8%; Second Straight Quarter of Sales Growth in All Four
Segments
- Operating Margin up 180 Basis Points to 18.6%; Segment Margin up 130 Basis
Points to 21.2%
- Deployed $1.5 Billion in Capital to Share Repurchases, Dividends, Capital
Expenditures, and Acquisitions
- Orders up High Single Digits, up Double Digits Ex-COVID Mask Demand; Backlog
up 7% to $27.5 Billion
CHARLOTTE, N.C., Oct. 22, 2021 /PRNewswire/ -- Honeywell (NASDAQ: HON) today
announced outstanding results for the third quarter that met or exceeded the
company's guidance.
"The third quarter was another strong one for Honeywell, with sales growth in
all four segments, significant margin expansion, and exceptional execution even
as we faced tough challenges in the supply chain environment," said Darius
Adamczyk, chairman and chief executive officer of Honeywell. "Organic sales
grew 8%, led by 38% growth in Aerospace commercial aftermarket, 21% growth in
Safety and Productivity Solutions, and 29% growth in UOP and 14% growth in
advanced materials within Performance Materials and Technologies. Our focus on
operational and commercial excellence enabled us to expand segment margin by
130 basis points to 21.2%, exceeding the high end of our guidance range by 60
basis points. As a result, we delivered adjusted earnings per share1 of $2.02,
up 29% year over year, achieving the high end of our third-quarter guidance
range. Our cash performance was strong, and we remain on track to meet our cash
flow commitments for the year. We continued to execute on our capital
deployment strategy, repurchasing $0.7 billion in shares, announcing our 12th
dividend increase in the past 11 years, and completing the acquisition of
Performix Inc. to expand our portfolio of automation solutions for the life
sciences industry."
Adamczyk continued, "Our disciplined approach to productivity and pricing
helped deliver a strong third quarter despite an uncertain global environment
marked by supply chain constraints, increasing raw material inflation, and
labor market challenges. We continue to focus on mitigating these challenges in
the fourth quarter, while capitalizing on near-term growth opportunities across
our portfolio."
Honeywell updated its full-year guidance to reflect the persistent effects of
the macro-challenged environment as well as the third-quarter results.
Full-year sales are now expected to be in the range of $34.2 billion to $34.6
billion with organic sales growth in the range of 4% to 5% due to supply chain
constraints. Segment margin is expected to be in the range of 20.9% to 21.1%.
Adjusted earnings per share2 is expected to be $8.00 to $8.10. Operating cash
flow is still expected to be in the range of $5.9 billion to $6.2 billion and
free cash flow is still expected to be in the range of $5.3 billion to $5.6
billion. A summary of the company's full-year guidance changes can be found in
Table 1.
Third-Quarter Performance
Honeywell sales for the third quarter were up 9% on a reported basis and up 8%
on an organic basis. The third-quarter financial results can be found in Tables
2 and 3.
Aerospace sales for the third quarter were up 2% on an organic basis driven by
an ongoing recovery in commercial aftermarket demand as flight hours continued
to increase as well as by strong growth in business and general aviation
original equipment, partially offset by lower defense volumes, which were
impacted by supply chain constraints. Commercial aftermarket sales were up 38%
year over year and air transport aftermarket sales were up double digits
sequentially from the second quarter, demonstrating momentum in the aftermarket
recovery. Segment margin expanded 390 basis points to 27.1% driven by
commercial excellence, favorable sales mix, and productivity net of inflation.
Honeywell Building Technologies sales for the third quarter were up 3% on an
organic basis driven by strength across the building products portfolio and
continued growth in building solutions services. Orders were up double digits
year over year, driven by strong demand for building projects and products. The
services backlog was up over 35% driven by strong global bookings, positioning
the business for continued growth. Segment margin expanded 190 basis points to
23.5% driven by commercial excellence and productivity, partially offset by
inflation.
Performance Materials and Technologies sales for the third quarter were up 9%
on an organic basis driven by demand for process solutions services and thermal
solutions, petrochemical catalyst shipments and equipment volumes in UOP, and
continued double-digit growth in advanced materials driven by strong demand
across the portfolio. Robust demand for services, automation projects, gas
processing, and advanced materials drove double-digit orders growth year over
year for the second consecutive quarter. Segment margin expanded 260 basis
points to 22.2% driven by commercial excellence and productivity, partially
offset by inflation.
Safety and Productivity Solutions sales for the third quarter were up 21% on an
organic basis driven by another quarter of double-digit growth in the warehouse
and workflow solutions, productivity solutions and services, and gas analysis
businesses, partially offset by lower personal protective equipment volumes.
Orders were up double digits year over year driven by over 50% orders growth in
warehouse and workflow solutions, productivity solutions and services, and
advanced sensing, which should drive continued growth. Segment margin
contracted 70 basis points to 13.2% driven by unfavorable business mix and
Intelligrated supply chain challenges, partially offset by commercial
excellence.
Conference Call Details
Honeywell will discuss its third-quarter results and updated full-year guidance
during an investor conference call starting at 8:30 a.m. Eastern Daylight Time
today. To participate on the conference call, please dial (301) 715-8592
approximately 10 minutes before the 8:30 a.m. EDT start. The meeting ID is 996
7173 6928. The access code is 528460. A 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). A
replay of the webcast will be available for 30 days following the presentation.
TABLE 1: FULL-YEAR 2021 GUIDANCE5
Previous Guidance Current Guidance
Sales $34.6B - $35.2B $34.2B - $34.6B
Organic Growth 4% - 6% 4% - 5%
Segment Margin 20.8% - 21.1% 20.9% - 21.1%
Expansion Up 40 - 70 bps Up 50 - 70 bps
Adjusted Earnings Per Share2 $7.95 - $8.10 $8.00 - $8.10
Adjusted Earnings Growth3 12% - 14% 13% - 14%
Operating Cash Flow $5.9B - $6.2B $5.9B - $6.2B
Free Cash Flow $5.3B - $5.6B $5.3B - $5.6B
TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS
3Q 2021 3Q 2020 Change
Sales 8,473 7,797 9%
Organic Growth 8%
Segment Margin 21.2% 19.9% 130 bps
Operating Income Margin 18.6% 16.8% 180 bps
Earnings Per Share $1.80 $1.07 68%
Adjusted Earnings Per Share1 $2.02 $1.56 29%
Cash Flow from Operations 1,119 1,007 11%
Operating Cash Flow Conversion 89% 133% (44%)
Free Cash Flow 911 758 20%
Adjusted Free Cash Flow Conversion4 64% 68% (4%)
TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS
AEROSPACE 3Q 2021 3Q 2020 Change
Sales 2,732 2,662 3%
Organic Growth 2%
Segment Profit 740 617 20%
Segment Margin 27.1% 23.2% 390 bps
HONEYWELL BUILDING TECHNOLOGIES
Sales 1,370 1,305 5%
Organic Growth 3%
Segment Profit 322 282 14%
Segment Margin 23.5% 21.6% 190 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES
Sales 2,510 2,252 11%
Organic Growth 9%
Segment Profit 558 442 26%
Segment Margin 22.2% 19.6% 260 bps
SAFETY AND PRODUCTIVITY SOLUTIONS
Sales 1,861 1,578 18%
Organic Growth 21%
Segment Profit 245 219 12%
Segment Margin 13.2% 13.9% -70 bps
1Adjusted EPS and adjusted EPS V% exclude changes in fair value for Garrett
Motion Inc. (Garrett) equity securities, an expense related to UOP
matters, gain on the sale of the retail footwear business, and 3Q20 non-cash
charges associated with the reduction in value of reimbursement
receivables due from Garrett.
2Adjusted EPS guidance excludes an expense related to UOP matters, gain on the
sale of the retail footwear business, non-cash charges
associated with a further reduction in value of reimbursement receivables
following Garrett's emergence from bankruptcy on April 30, 2021, and
any potential future one-time items that we cannot reliably predict or estimate
such as pension
mark-to-market and changes in fair value for Garrett equity securities.
3Adjusted EPS V% guidance excludes an expense related to UOP matters, gain on
the sale of the retail footwear business, non-cash charges
associated with a further reduction in value of reimbursement receivables
following Garrett's emergence from bankruptcy on April 30, 2021, 4Q20
pension mark-to-market, 2Q20 favorable resolution of a foreign tax matter
related to the spin-off transactions, non-cash charges associated with
the 2020 reduction in value of reimbursement receivables due from Garrett, net
of proceeds from the settlement of related hedging transactions,
and any potential future one-time items that we cannot reliably predict or
estimate such as pension mark-to-market or changes in fair value for
Garrett equity securities.
4Adjusted free cash flow conversion is free cash flow (cash flow from
operations less capital expenditures plus cash receipts from Garrett) divided
by adjusted net income attributable to Honeywell. Adjusted net income
attributable to Honeywell excludes 3Q20 non-cash charges associated with
the reduction in value of reimbursement receivables due from Garrett, changes
in fair value for Garrett equity securities, an expense related to
UOP matters, and gain on the sale of the retail footwear business.
5As discussed in the notes to the attached reconciliations, we do not provide
guidance for margin or EPS on a GAAP basis.
Honeywell (http://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.
Honeywell uses our Investor Relations website, www.honeywell.com/investor, as a
means of disclosing information which may be of interest or material to our
investors and for complying with disclosure obligations under Regulation FD.
Accordingly, investors should monitor our Investor Relations website, in
addition to following our press releases, SEC filings, public conference calls,
webcasts, and social media.
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
the transaction date; free cash flow, which we define as cash flow from
operations less capital expenditures plus cash receipts from Garrett, if and as
noted in the release; adjusted free cash flow conversion, which we define as
free cash flow divided by adjusted net income attributable to Honeywell;
adjusted net income attributable to Honeywell, which we define as net income
attributable to Honeywell which we adjust to exclude changes in fair value for
Garrett equity securities, an expense related to UOP matters, gain on the sale
of the retail footwear business, and the 3Q20 non-cash charges associated with
the reduction in value of reimbursement receivables due from Garrett, if and as
noted in the release; and adjusted earnings per share, which we adjust to
exclude pension mark-to-market, changes in fair value for Garrett equity
securities, an expense related to UOP matters, gain on the sale of the retail
footwear business, 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, the favorable resolution of a foreign tax
matter related to the spin-off transactions, and a non-cash charge associated
with a further reduction in value of reimbursement receivables following
Garrett's emergence from bankruptcy on April 30, 2021, 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. Certain metrics presented on a non-GAAP basis
represent the impact of adjusting items net of tax. The tax-effect for
adjusting items is determined individually and on a case-by-case basis. Refer
to the Appendix attached to this release for reconciliations of non-GAAP
financial measures to the most directly comparable GAAP measures.
Contacts:
Media Investor Relations
Nina Krauss Reena Vaidya
(704) 627-6035 (704) 627-6200
nina.krauss@honeywell.com reena.vaidya@honeywell.com
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,
2021 2020 2021 2020
Product sales $ 6,233 $ 5,885 $ 19,281 $ 17,933
Service sales 2,240 1,912 6,454 5,804
Net sales 8,473 7,797 25,735 23,737
Costs, expenses and
other
Cost of products 4,463 4,315 13,748 12,852
sold(1)
Cost of services 1,283 1,068 3,710 3,341
sold(1)
5,746 5,383 17,458 16,193
Selling, general and 1,152 1,103 3,595 3,524
administrative
expenses(1)
Other (income) (215) 62 (1,023) (546)
expense
Interest and other 90 101 263 264
financial charges
6,773 6,649 20,293 19,435
Income before taxes 1,700 1,148 5,442 4,302
Tax expense 427 367 1,274 816
(benefit)
Net income 1,273 781 4,168 3,486
Less: Net income 16 23 54 66
attributable to the
noncontrolling
interest
Net income $ 1,257 $ 758 $ 4,114 $ 3,420
attributable to
Honeywell
Earnings per share $ 1.82 $ 1.08 $ 5.93 $ 4.85
of common stock -
basic
Earnings per share $ 1.80 $ 1.07 $ 5.86 $ 4.81
of common stock -
assuming dilution
Weighted average 690.6 702.6 693.6 704.8
number of shares
outstanding - basic
Weighted average 698.9 709.6 702.0 711.6
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 2021 2020 2021 2020
Aerospace $ 2,732 $ 2,662 $ 8,130 $ 8,566
Honeywell Building Technologies 1,370 1,305 4,135 3,763
Performance Materials and Technologies 2,510 2,252 7,408 6,867
Safety and Productivity Solutions 1,861 1,578 6,062 4,541
Total $ 8,473 $ 7,797 $ 25,735 $ 23,737
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Nine Months Ended
September 30, September 30,
Segment Profit 2021 2020 2021 2020
Aerospace $ 740 $ 617 $ 2,212 $ 2,082
Honeywell 322 282 942 794
Building
Technologies
Performance 558 442 1,522 1,373
Materials and
Technologies
Safety and 245 219 840 610
Productivity
Solutions
Corporate (72) (7) (155) (73)
Total segment 1,793 1,553 5,361 4,786
profit
Interest and (90) (101) (263) (264)
other
financial
charges
Stock (56) (40) (172) (118)
compensation
expense (1)
Pension 261 197 809 593
ongoing income
(2)
Other 18 13 53 40
postretirement
income (2)
Repositioning (96) (144) (338) (486)
and other
charges (3,4)
Other (5) (130) (330) (8) (249)
Income before $ 1,700 $ 1,148 $ 5,442 $ 4,302
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 of affiliated companies is
included in segment profit.
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
September 30, December 31,
2021 2020
ASSETS
Current assets:
Cash and cash equivalents $ 11,087 $ 14,275
Short-term investments 1,049 945
Accounts receivable - net 7,239 6,827
Inventories 4,967 4,489
Other current assets 1,691 1,639
Total current assets 26,033 28,175
Investments and long-term receivables 1,243 685
Property, plant and equipment - net 5,514 5,570
Goodwill 16,963 16,058
Other intangible assets - net 3,637 3,560
Insurance recoveries for asbestos related 330 366
liabilities
Deferred income taxes 760 760
Other assets 9,711 9,412
Total assets $ 64,191 $ 64,586
LIABILITIES
Current liabilities:
Accounts payable $ 6,116 $ 5,750
Commercial paper and other short-term borrowings 3,559 3,597
Current maturities of long-term debt 3,344 2,445
Accrued liabilities 7,188 7,405
Total current liabilities 20,207 19,197
Long-term debt 14,346 16,342
Deferred income taxes 2,372 2,113
Postretirement benefit obligations other than 225 242
pensions
Asbestos-related liabilities 1,765 1,920
Other liabilities 7,155 6,975
Redeemable noncontrolling interest 7 7
Shareowners' equity 18,114 17,790
Total liabilities, redeemable noncontrolling $ 64,191 $ 64,586
interest 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,
2021 2020 2021 2020
Cash flows from operating
activities:
Net income $ 1,273 $ 781 $ 4,168 $ 3,486
Less: Net income attributable to the 16 23 54 66
noncontrolling interest
Net income attributable to Honeywell 1,257 758 4,114 3,420
Adjustments to reconcile net income
attributable to Honeywell to net
cash provided by
operating activities:
Depreciation 171 166 506 480
Amortization 137 89 427 268
Gain on sale of non-strategic (5) - (95) -
businesses and assets
Repositioning and other charges 96 144 338 486
Net payments for repositioning and (147) (343) (505) (652)
other charges
Pension and other postretirement (279) (210) (862) (633)
income
Pension and other postretirement (2) (14) (29) (37)
benefit payments
Stock compensation expense 56 40 172 118
Deferred income taxes 88 (12) 189 (289)
Reimbursement receivables charge - 350 - 350
Other 171 (84) (106) (369)
Changes in assets and liabilities,
net of the effects of acquisitions
and divestitures:
Accounts receivable (292) (161) (419) 615
Inventories (245) 47 (516) (284)
Other current assets (226) 140 (324) 246
Accounts payable (23) (96) 379 (460)
Accrued liabilities 362 193 106 167
Net cash provided by operating 1,119 1,007 3,375 3,426
activities
Cash flows from investing
activities:
Expenditures for property, plant and (208) (249) (614) (615)
equipment
Proceeds from disposals of property, 4 10 18 17
plant and equipment
Increase in investments (592) (700) (1,989) (2,371)
Decrease in investments 575 1,045 1,906 2,634
Receipts from Garrett Motion Inc. - - 375 -
Receipts (payments) from settlements 111 (158) 88 (75)
of derivative contracts
Cash paid for acquisitions, net of (7) - (1,334) -
cash acquired
Proceeds from sales of businesses, 13 - 203 -
net of fees paid
Net cash used for investing (104) (52) (1,347) (410)
activities
Cash flows from financing
activities:
Proceeds from issuance of commercial 1,282 1,412 3,640 8,577
paper and other short-term
borrowings
Payments of commercial paper and (1,282) (1,418) (3,637) (8,512)
other short-term borrowings
Proceeds from issuance of common 57 66 171 163
stock
Proceeds from issuance of long-term 2,482 3,004 2,509 10,105
debt
Payments of long-term debt (2,520) (3,019) (3,355) (4,237)
Repurchases of common stock (650) (164) (2,499) (2,149)
Cash dividends paid (646) (636) (1,950) (1,921)
Other (41) (14) (74) (54)
Net cash provided by (used for) (1,318) (769) (5,195) 1,972
financing activities
Effect of foreign exchange rate (37) 72 (21) (19)
changes on cash and cash equivalents
Net increase (decrease) in cash and (340) 258 (3,188) 4,969
cash equivalents
Cash and cash equivalents at 11,427 13,778 14,275 9,067
beginning of period
Cash and cash equivalents at end of $ 11,087 $ 14,036 $ 11,087 $ 14,036
period
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Ended
September 30, 2021
Honeywell
Reported sales % change 9%
Less: Foreign currency translation 1%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change 8%
Aerospace
Reported sales % change 3%
Less: Foreign currency translation -%
Less: Acquisitions, divestitures and other, net 1%
Organic sales % change 2%
Honeywell Building Technologies
Reported sales % change 5%
Less: Foreign currency translation 2%
Less: Acquisitions, divestitures and other, net -%
Organic sales % change 3%
Performance Materials and Technologies
Reported sales % change 11%
Less: Foreign currency translation 1%
Less: Acquisitions, divestitures and other, net 1%
Organic sales % change 9%
Safety and Productivity Solutions
Reported sales % change 18%
Less: Foreign currency translation 1%
Less: Acquisitions, divestitures and other, net (4)%
Organic sales % change 21%
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, for the first 12
months following the transaction date. 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 Twelve
30, Months
Ended
December 31,
2021 2020 2020
Segment profit $ 1,793 $ 1,553 $ 6,665
Stock compensation expense (1) (56) (40) (168)
Repositioning, Other (2,3) (117) (161) (641)
Pension and other postretirement (45) (41) (160)
service costs (4)
Operating income $ 1,575 $ 1,311 $ 5,696
Segment profit $ 1,793 $ 1,553 $ 6,665
÷ Net sales $ 8,473 $ 7,797 $ 32,637
Segment profit margin % 21.2 % 19.9 % 20.4 %
Operating income $ 1,575 $ 1,311 $ 5,696
÷ Net sales $ 8,473 $ 7,797 $ 32,637
Operating income margin % 18.6 % 16.8 % 17.5 %
(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 (Unaudited)
Three Months Ended Twelve Months
September 30, Ended
December 31,
2021 2020 2020
Earnings per share of $ 1.80 $ 1.07 $ 6.72
common stock - assuming
dilution (1)
Pension mark-to-market - - 0.04
expense (2)
Separation related tax - - (0.26)
adjustment (3)
Changes in fair value - - -
for Garrett equity
securities (4)
Garrett-related - 0.49 0.60
adjustments (5)
Gain on sale of retail (0.01) - -
footwear business (6)
Expense related to UOP 0.23 - -
Matters (7)
Adjusted earnings per $ 2.02 $ 1.56 $ 7.10
share of common stock -
assuming dilution
(1) For the three months ended September 30, 2021 and
2020, adjusted earnings per share utilizes weighted
average shares of approximately 698.9 million and
709.6 million. For the twelve months ended December
31, 2020, adjusted earnings per share utilizes
weighted average shares of 711.2 million.
(2) Pension mark-to-market expense uses a blended tax
rate of 25% for 2020.
(3) For the twelve months ended December 31, 2020,
separation related tax adjustment of $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, 2021, the
adjustment was $2 million net of tax due to changes
in fair value for Garrett equity securities.
(5) For the three months ended September 30, 2020, the
adjustment was $350 million net of tax due to the
non-cash charges associated with the reduction in
value of reimbursement receivables due from Garrett.
For the twelve months ended December 31, 2020, the
adjustment was $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.
(6) For the three months ended September 30, 2021, the
adjustment was $4 million net of tax due to the gain
on sale of the retail footwear business.
(7) For the three months ended September 30, 2021, the
adjustment was $160 million with no tax benefit due
to an expense related to UOP matters.
We continue to cooperate with investigations by the
U.S. Department of Justice (DOJ), the Securities and
Exchange Commission (SEC) and the Brazilian
authorities relating to our use of third parties who
previously worked for our UOP business in Brazil in
relation to Petróleo Brasileiro S.A. (Petrobras) in
connection with a project awarded in 2010. The
investigations focus on compliance with the U.S.
Foreign Corrupt Practices Act and similar Brazilian
laws (the UOP Matters), and involve, among other
things, document production and interviews with
former and current management and employees. The DOJ
and the SEC are also examining a matter involving a
foreign subsidiary's prior contract with Unaoil
S.A.M. in Algeria executed in 2011. We continue to be
engaged in discussions with the authorities with
respect to a potential comprehensive resolution of
these matters.
As the discussions are both ongoing and at different
stages with regards to each respective authority,
there can be no assurance as to whether we will reach
a resolution with such authorities or as to the
potential timing, terms, or collateral consequences
of any such resolution. As a result, we cannot
predict the ultimate outcome of these UOP Matters or
the potential impact on the Company. Based on
available information to date, we estimate that a
potential comprehensive resolution of these UOP
Matters would result in a probable loss of at least
$160 million, and we have recorded a charge in this
amount in our Consolidated Statement of Operations,
and have accrued a corresponding liability on the
Consolidated Balance Sheet.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow,
Reconciliation of Net Income
Attributable to Honeywell to Adjusted Net Income Attributable to Honeywell, and
Calculation of Adjusted Free Cash
Flow Conversion (Unaudited)
(Dollars in millions)
Three Months
Three Months Ended
Ended September 30,
September 30, 2020
2021
Cash provided by operating activities $ 1,119 $ 1,007
Expenditures for property, plant and (208) (249)
equipment
Garrett cash receipts - -
Free cash flow 911 758
Net income attributable to Honeywell 1,257 758
Changes in fair value for Garrett equity 2 -
securities (1)
Garrett related adjustment (2) - 350
Gain on sale of retail footwear business (4) -
(3)
Expense related to UOP Matters (4) 160 -
Adjusted net income attributable to $ 1,415 $ 1,108
Honeywell
Cash provided by operating activities $ 1,119 $ 1,007
÷ Net income (loss) attributable to $ 1,257 $ 758
Honeywell
Operating cash flow conversion % 89 % %
133
Free cash flow $ 911 $ 758
÷ Adjusted net income attributable to $ 1,415 $ 1,108
Honeywell
Adjusted free cash flow conversion % 64 % %
68
(1) The adjustment due to changes in
fair value for Garrett equity
securities.
(2) For the three months ended September
30, 2020, the adjustment was $350
million net of tax due to the
noncash charge associated with the
reduction in value of reimbursement
receivables due from Garrett.
(3) The adjustment due to an after-tax
gain on sale of the retail footwear
business.
(4) The adjustment due to an expense
related to UOP matters.
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus cash receipts from Garrett.
We believe that free cash flow is a non-GAAP metric that is useful to investors
and management as a measure of cash generated by operations that will be used
to repay scheduled debt maturities and can be used to invest in future growth
through new business development activities or acquisitions, pay dividends,
repurchase stock or repay debt obligations prior to their maturities. This
metric can also be used to evaluate our ability to generate cash flow from
operations and the impact that this cash flow has on our liquidity. For forward
looking information, we do not provide cash flow conversion guidance on a GAAP
basis as management cannot reliably predict or estimate, without unreasonable
effort, the pension mark-to-market expense and the changes in fair value for
Garrett equity securities. Pension mark-to-market is dependent on macroeconomic
factors, such as interest rates and the return generated on invested pension
plan assets. Based on economic and industry conditions, future developments and
other relevant factors, these assumptions are subject to change. Changes in
fair value of Garrett equity securities cannot be forecasted due to the
inherent nature of changing conditions in the overall market.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
Twelve Months
Ended
December 31,
2021(E) ($B)
Cash provided by operating activities $5.9 - $6.2
Expenditures for property, plant and equipment (1)
Garrett cash receipts 0.4
Free cash flow $5.3 - $5.6
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus cash receipts from Garrett.
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 or changes in fair value of Garrett
equity securities. Pension mark-to-market is dependent on macroeconomic
factors, such as interest rates and the return generated on invested pension
plan assets. Based on economic and industry conditions, future developments and
other relevant factors, these assumptions are subject to change. Changes in
fair value of Garrett equity securities cannot be forecasted due to the
inherent nature of changing conditions in the overall market.
Honeywell International Inc.
Reconciliation of Expected Earnings per Share to Adjusted Earnings per Share
(Unaudited)
Twelve Months
Ended
December 31,
2021(E)
Earnings per share of common stock - $7.87 - $7.97
assuming dilution (1)
Gain on sale of retail footwear business (2) (0.11)
Garrett-related adjustments (3) 0.01
Expense related to UOP Matters (4) 0.23
Adjusted earnings per share of common stock $8.00 - $8.10
- assuming dilution
(1) For the twelve months ended
December 31, 2021, expected
earnings per share utilizes
weighted average
shares of approximately 701
million.
(2) For the twelve months ended
December 31, 2021, the adjustment
was $76 million net of tax due to
the gain
on sale of the retail footwear
business.
(3) For the twelve months ended
December 31, 2021, adjustment was
$7 million net of tax due to a
non-cash
charge associated with a further
reduction in value of
reimbursement receivables
following Garrett's
emergence from bankruptcy on April
30, 2021.
(4) For the twelve months ended
December 31, 2021, adjustment was
$160 million with no tax benefit
due to an
expense related to UOP matters.
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 any potential future one-time items, such as
pension mark-to-market or changes in fair value for Garrett equity securities,
without unreasonable effort. Pension mark-to-market expense is dependent on
macroeconomic factors, such as interest rates and the return generated on
invested pension plan assets. Based on economic and industry conditions, future
developments and other relevant factors, these assumptions are subject to
change. Changes in fair value for Garrett equity securities cannot be
forecasted due to the inherent nature of changing conditions in the overall
market.
END
(END) Dow Jones Newswires
October 22, 2021 06:30 ET (10:30 GMT)
Honeywell (LSE:HON)
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