Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HONEYWELL INTERNATIONAL INC | hon-20201030.htm |
Exhibit 99
| Contacts: | |||||
| Media | Investor Relations | ||||
| Nina Krauss | Mark Bendza | ||||
| (704) 627-6035 | (704) 627-6200 | ||||
| nina.krauss@honeywell.com | mark.bendza@honeywell.com | ||||
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, N.C., October 30, 2020 -- 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
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 - MORE -
Honeywell Q3’20 Results - 2
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.
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
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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%) | |||||||||||||||||
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Honeywell Q3’20 Results - 4
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
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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.
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Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended 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 sold (1) | 4,315 | 4,775 | 12,852 | 14,244 | |||||||||||||||||||
| Cost of services sold (1) | 1,068 | 1,263 | 3,341 | 3,767 | |||||||||||||||||||
| 5,383 | 6,038 | 16,193 | 18,011 | ||||||||||||||||||||
| Selling, general and administrative expenses (1) | 1,103 | 1,296 | 3,524 | 4,046 | |||||||||||||||||||
| Other (income) expense | 62 | (311) | (546) | (901) | |||||||||||||||||||
| Interest and other financial charges | 101 | 96 | 264 | 266 | |||||||||||||||||||
| 6,649 | 7,119 | 19,435 | 21,422 | ||||||||||||||||||||
| Income before taxes | 1,148 | 1,967 | 4,302 | 5,791 | |||||||||||||||||||
| Tax expense (benefit) | 367 | 319 | 816 | 1,151 | |||||||||||||||||||
| Net income | 781 | 1,648 | 3,486 | 4,640 | |||||||||||||||||||
| Less: Net income attributable to the noncontrolling interest | 23 | 24 | 66 | 59 | |||||||||||||||||||
| Net income attributable to Honeywell | $ | 758 | $ | 1,624 | $ | 3,420 | $ | 4,581 | |||||||||||||||
| Earnings per share of common stock - basic | $ | 1.08 | $ | 2.26 | $ | 4.85 | $ | 6.33 | |||||||||||||||
| Earnings per share of common stock - assuming dilution | $ | 1.07 | $ | 2.23 | $ | 4.81 | $ | 6.25 | |||||||||||||||
| Weighted average number of shares outstanding - basic | 702.6 | 717.6 | 704.8 | 723.5 | |||||||||||||||||||
| Weighted average number of shares outstanding - assuming dilution | 709.6 | 726.7 | 711.6 | 732.8 | |||||||||||||||||||
(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 Q3’20 Results - 7
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in millions)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Net Sales | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Aerospace | $ | 2,662 | $ | 3,544 | $ | 8,566 | $ | 10,393 | |||||||||||||||
| Honeywell Building Technologies | 1,305 | 1,415 | 3,763 | 4,254 | |||||||||||||||||||
| Performance Materials and Technologies | 2,252 | 2,670 | 6,867 | 7,977 | |||||||||||||||||||
| Safety and Productivity Solutions | 1,578 | 1,457 | 4,541 | 4,589 | |||||||||||||||||||
| Total | $ | 7,797 | $ | 9,086 | $ | 23,737 | $ | 27,213 | |||||||||||||||
Reconciliation of Segment Profit to Income Before Taxes
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Segment Profit | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Aerospace | $ | 617 | $ | 908 | $ | 2,082 | $ | 2,653 | |||||||||||||||
| Honeywell Building Technologies | 282 | 297 | 794 | 868 | |||||||||||||||||||
| Performance Materials and Technologies | 442 | 582 | 1,373 | 1,790 | |||||||||||||||||||
| Safety and Productivity Solutions | 219 | 195 | 610 | 598 | |||||||||||||||||||
| Corporate | (7) | (54) | (73) | (202) | |||||||||||||||||||
| Total segment profit | 1,553 | 1,928 | 4,786 | 5,707 | |||||||||||||||||||
| Interest and other financial charges | (101) | (96) | (264) | (266) | |||||||||||||||||||
| Stock compensation expense (1) | (40) | (37) | (118) | (112) | |||||||||||||||||||
| Pension ongoing income (2) | 197 | 150 | 593 | 449 | |||||||||||||||||||
| Other postretirement income (2) | 13 | 12 | 40 | 35 | |||||||||||||||||||
| Repositioning and other charges (3,4) | (144) | (96) | (486) | (306) | |||||||||||||||||||
| Other (5) | (330) | 106 | (249) | 284 | |||||||||||||||||||
| Income before taxes | $ | 1,148 | $ | 1,967 | $ | 4,302 | $ | 5,791 | |||||||||||||||
(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 Q3’20 Results - 8
Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
| September 30, 2020 | December 31, 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 and shareowners’ equity | $ | 63,459 | $ | 58,679 | |||||||
Honeywell Q3’20 Results - 9
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
| Three Months Ended September 30, | Nine Months Ended 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 noncontrolling interest | 23 | 24 | 66 | 59 | |||||||||||||||||||
| 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 other charges | (343) | (72) | (652) | (157) | |||||||||||||||||||
| Pension and other postretirement income | (210) | (162) | (633) | (484) | |||||||||||||||||||
| Pension and other postretirement benefit payments | (14) | (5) | (37) | (50) | |||||||||||||||||||
| 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) operating activities | 1,007 | 1,471 | 3,426 | 4,283 | |||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||
| Expenditures for property, plant and equipment | (249) | (192) | (615) | (504) | |||||||||||||||||||
| Proceeds from disposals of property, plant and equipment | 10 | 31 | 17 | 41 | |||||||||||||||||||
| Increase in investments | (700) | (944) | (2,371) | (3,218) | |||||||||||||||||||
| Decrease in investments | 1,045 | 1,155 | 2,634 | 3,318 | |||||||||||||||||||
| Receipts (payments) from settlements of derivative contracts | (158) | 175 | (75) | 245 | |||||||||||||||||||
| Other | — | (4) | — | (4) | |||||||||||||||||||
| Net cash provided by (used for) investing activities | (52) | 221 | (410) | (122) | |||||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||
| Proceeds from issuance of commercial paper and other short-term borrowings | 1,412 | 3,178 | 8,577 | 10,292 | |||||||||||||||||||
| Payments of commercial paper and other short-term borrowings | (1,418) | (3,178) | (8,512) | (10,293) | |||||||||||||||||||
| Proceeds from issuance of common stock | 66 | 47 | 163 | 425 | |||||||||||||||||||
| Proceeds from issuance of long-term debt | 3,004 | 2,696 | 10,105 | 2,725 | |||||||||||||||||||
| 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) financing activities | (769) | 1,072 | 1,972 | (2,491) | |||||||||||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | 72 | (81) | (19) | (49) | |||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 258 | 2,683 | 4,969 | 1,621 | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 13,778 | 8,225 | 9,067 | 9,287 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 14,036 | $ | 10,908 | $ | 14,036 | $ | 10,908 | |||||||||||||||
Honeywell Q3’20 Results - 10
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 Q3’20 Results - 11
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 service costs (4) | (41) | (30) | |||||||||
| 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 Q3’20 Results - 12
Honeywell International Inc.
Reconciliation of Earnings per Share to Adjusted Earnings per Share (Unaudited)
| Three Months Ended September 30, | Three Months Ended June 30, 2020 | Three Months Ended December 31, 2019 | Twelve Months Ended December 31, 2019 | ||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Earnings per share of common stock - assuming dilution (1) | $ | 1.07 | $ | 2.23 | $ | 1.53 | $ | 2.16 | $ | 8.41 | |||||||||||||||||||
| Pension mark-to-market expense (2) | — | — | — | 0.13 | 0.13 | ||||||||||||||||||||||||
| Separation-related tax adjustment (3) | — | — | (0.27) | — | — | ||||||||||||||||||||||||
| Impacts from U.S. Tax Reform | — | (0.15) | — | (0.23) | (0.38) | ||||||||||||||||||||||||
| Reimbursement receivable charge (4) | $ | 0.49 | — | — | — | — | |||||||||||||||||||||||
| Adjusted earnings per share of common stock - assuming dilution | $ | 1.56 | $ | 2.08 | $ | 1.26 | $ | 2.06 | $ | 8.16 | |||||||||||||||||||
(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.
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Honeywell Q3’20 Results - 13
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 Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||||
| Cash provided by operating activities | $ | 1,007 | $ | 1,471 | |||||||
| Expenditures for property, plant and equipment | (249) | (192) | |||||||||
| 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 Honeywell | $ | 1,108 | $ | 1,510 | |||||||
| Cash provided by operating activities | $ | 1,007 | $ | 1,471 | |||||||
| ÷ Net income (loss) attributable to Honeywell | $ | 758 | $ | 1,624 | |||||||
| Operating cash flow conversion | 133 | % | 91 | % | |||||||
| Adjusted free cash flow | $ | 758 | $ | 1,286 | |||||||
| ÷ Adjusted net income attributable to Honeywell | $ | 1,108 | $ | 1,510 | |||||||
| 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 Q3’20 Results - 14
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 December 31, 2019 | Twelve Months Ended December 31, 2019 | Three Months Ended June 30, 2020 | |||||||||||||||
| 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 service costs (4) | (37) | (137) | (38) | ||||||||||||||
| 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.
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Honeywell Q3’20 Results - 15
Honeywell International Inc.
Reconciliation of Expected Earnings per Share to Adjusted Earnings per Share (Unaudited)
| Three Months Ended December 31, 2020 (E) | Twelve Months Ended December 31, 2020 (E) | |||||||||||||
| Earnings per share of common stock - assuming dilution (1) | $1.97 - $2.02 | $6.78 - $6.83 | ||||||||||||
| Pension mark-to-market expense | — | — | ||||||||||||
| Separation-related tax adjustment (2) | — | (0.27) | ||||||||||||
| Reimbursement receivable charge (3) | — | 0.49 | ||||||||||||
| Adjusted earnings per share of common stock - assuming dilution | $1.97 - $2.02 | $7.00 - $7.05 | ||||||||||||
(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.
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