Honeywell Reports Full Year Sales Up 3% to $37.7 Billion; Proforma Earnings Per Share Up 11% to $4.48 Per Share; Reported Earnings Per Share of $3.69 - 2012 Earnings Growth Driven By Strong Operational Performance

- Record Segment Margin Of 15.6%, Up 90 bps YoY; Operating Margin 13.6% Up 160 bps YoY

- Pension Mark-to-Market Adjustment As Expected - ($0.79) Per Share

- Reaffirming 2013 Proforma EPS Guidance Of $4.75-4.95, Up Another 6-11% Over 2012

MORRIS TOWNSHIP, N.J., Jan. 25, 2013 /PRNewswire/ -- Honeywell (NYSE: HON) today announced its results for the fourth quarter and full year 2012:

Total Honeywell




($ Millions, except Earnings Per Share)

FY 2011

FY 2012

Change

Sales

36,529

37,665

3%





Segment Margin

14.7%

15.6%

90 bps

Operating Income Margin1

12.0%

13.6%

160 bps





Earnings Per Share (Reported)

$2.61

$3.69

41%

Earnings Per Share (Proforma) 1

$4.05

$4.48

11%





Cash Flow from Operations

2,833

3,517

24%

Free Cash Flow2

3,780

3,672

(3%)






4Q 2011

4Q 2012

Change

Sales

9,473

9,581

1%





Segment Margin

15.1%

15.6%

50 bps

Operating Income Margin1

12.9%

13.9%

100 bps





Earnings Per Share (Reported)

($0.40)

$0.32

N/A

Earnings Per Share (Proforma) 1

$1.05

$1.10

5%





Cash Flow from Operations

1,477

1,349

(9%)

Free Cash Flow2

1,417

1,311

(7%)





1. Proforma, V%/bps Exclude Any Pension Mark-to-Market Adjustment

2. Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior to Cash Pension Contributions

"Honeywell had another year of terrific performance in 2012," said Honeywell Chairman and CEO Dave Cote. "In a weak global economy, we grew sales 3% and earnings by 11%, while expanding margins to record levels and continuing to generate strong cash flow. We outperformed while also continuing to invest in seed planting initiatives like new products and services, global growth, cost competitiveness, and strengthening our key processes -- Honeywell Operating System, Velocity Product Development™, and Functional Transformation. Our balanced mix of long- and short-cycle businesses and expansion in high growth regions has offset lower demand in some of our short-cycle businesses, European weakness, and foreign exchange headwinds. We've also maintained a strong long-cycle backlog, now a record $15.8 billion, with new platform wins across many of our businesses last year. These positive trends, combined with our great positions in good industries, conservative planning, and the continued evolution of our internal processes will help Honeywell drive sales, margin growth, cash generation, and EPS outperformance in 2013 and over the long-term."

The company is also reaffirming its full-year 2013 sales and EPS guidance:

Full Year Guidance






2013

Change



Current Guidance

vs. 2012

Sales


$39.0 - $39.5B

4 - 5%





Segment Margin


15.8 - 16.1%

20 - 50 bps

Operating Income Margin1


14.2 - 14.5%

60 - 90 bps





Earnings Per Share1


$4.75 - $4.95

6 - 11%





Free Cash Flow2


~$3.7B

~Flat

1. Proforma, V% / bps Exclude Any Pension Mark-to-Market Adjustment

2. Free Cash Flow (Cash Flow from Operations Less Capital Expenditures) Prior to Any NARCO Related Payments and Cash Pension Contributions

Segment Performance

Aerospace




($ Millions)

FY 2011

FY 2012

% Change

Sales

11,475

12,040

5%

Segment Profit

2,023

2,279

13%

Segment Margin

17.6%

18.9%

130 bps






4Q 2011

4Q 2012

% Change

Sales

3,047

3,020

(1%)

Segment Profit

573

601

5%

Segment Margin

18.8%

19.9%

110 bps

  • Sales were down (1%) compared with the fourth quarter of 2011 driven by a (6%) decline in Defense and Space, partially offset by a 3% increase in our commercial end markets. Commercial original equipment (OE) sales were up 5% driven by increased production rates at our major OE customers. Commercial aftermarket sales were up 3% driven by higher maintenance activity.
  • Segment profit was up 5%, and segment margins expanded 110 bps to 19.9%, primarily due to commercial excellence, productivity net of inflation, and lower BGA OE payments, partially offset by investments for growth.

Automation and Control Solutions




($ Millions)

FY 2011

FY 2012

% Change

Sales

15,535

15,880

2%

Segment Profit

2,083

2,232

7%

Segment Margin

13.4%

14.1%

70 bps





($ Millions)

4Q 2011

4Q 2012

% Change

Sales

4,051

4,172

3%

Segment Profit

584

645

10%

Segment Margin

14.4%

15.5%

110 bps

  • Sales were up 3% compared with the fourth quarter of 2011 as volume growth and the favorable impact of acquisitions, net of divestitures was partially offset by foreign exchange headwinds. Energy, Safety, and Security was up 4% organically due to acceleration of growth in Environmental and Combustion Controls and continued growth in Scanning & Mobility and Security. Process Solutions and Building Solutions and Distribution grew at a slower rate, reflecting a more challenging capital investment environment.
  • Segment profit was up 10% and segment margins were up 110 bps to 15.5% driven by commercial excellence and strong productivity net of inflation and other investments for growth, including the favorable impact of previously completed restructuring actions.

Performance Materials and Technologies




($ Millions)

FY 2011

FY 2012

% Change

Sales

5,659

6,184

9%

Segment Profit

1,042

1,154

11%

Segment Margin

18.4%

18.7%

30 bps





($ Millions)

4Q 2011

4Q 2012

% Change

Sales

1,430

1,545

8%

Segment Profit

223

210

(6%)

Segment Margin

15.6%

13.6%

(200 bps)

  • Sales were up 8% reported, 2% organic, compared with the fourth quarter of 2011, resulting from the Thomas Russell acquisition in UOP, partially offset by lower volume of petrochemical and refining catalysts. Advanced Materials sales were up 5% driven by new products and applications, partially offset by challenging end market conditions.
  • Segment profit declined (6%) and segment margins contracted (200 bps) to 13.6% in the fourth quarter primarily due to lower catalyst sales in UOP, unfavorable price/raws spread in Resins and Chemicals and challenging end market conditions, partially offset by productivity net of labor inflation and investments for growth.

Transportation Systems




($ Millions)

FY 2011

FY 2012

% Change

Sales

3,859

3,561

(8%)

Segment Profit

485

432

(11%)

Segment Margin

12.6%

12.1%

(50 bps)





($ Millions)

4Q 2011

4Q 2012

% Change

Sales

944

844

(11%)

Segment Profit

117

94

(20%)

Segment Margin

12.4%

11.1%

(130 bps)

  • Sales were down (11%), down (8%) organic, compared with the fourth quarter of 2011, driven by lower European light vehicle production and aftermarket sales, partially offset by new platform launches and higher gas turbo penetration, primarily in the U.S. and China.
  • Segment profit was down (20%) in the fourth quarter and segment margins decreased (130 bps) to 11.1% primarily driven by lower sales volumes and price, unfavorable foreign exchange, and ongoing projects to drive operational improvement in the Friction Materials business, partially offset by productivity benefits.

Honeywell will discuss its results during its investor conference call today starting at 9:00 a.m. EST. To participate on the conference call, please dial (800) 862-9098 (domestic) or (785) 424-1051 (international) a few minutes before the 9:00 a.m. EST start. Please mention to the operator that you are dialing in for Honeywell's fourth quarter 2012 earnings call or provide the conference code, HONQ412. You can hear a replay of the conference call from 12:00 p.m. EST, January 25, until 11:59 p.m. EST, February 1, by dialing (800) 374-1216 (domestic) or (402) 220-0681 (international).

A real-time audio webcast of the presentation can be accessed at http://www.honeywell.com/investor, where related materials will be posted prior to the presentation. The presentation materials will be in Adobe Acrobat format. A replay of the webcast will be available following the presentation at the same link listed above for 30 days.

Honeywell (www.honeywell.com) is a Fortune 100 diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes, and industry; automotive products; turbochargers; and performance materials. Based in Morris Township, N.J., Honeywell's shares are traded on the New York, London, and Chicago Stock Exchanges. For more news and information on Honeywell, please visit www.honeywellnow.com.

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, and technological factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements.

Contacts:


Media

Investor Relations

Robert C. Ferris

Elena Doom

(973) 455-3388

(973) 455-2222

rob.ferris@honeywell.com

elena.doom@honeywell.com










Honeywell International Inc

Consolidated Statement of Operations (Unaudited)

(In millions, except per share amounts)












Three Months Ended


Twelve Months Ended



December 31,


December 31,



2012


2011


2012


2011










Product sales

$ 7,628


$ 7,478


$ 29,812


$ 28,745

Service sales

1,953


1,995


7,853


7,784

Net sales

9,581


9,473


37,665


36,529










Costs, expenses and other








      Cost of products sold (A)

6,302


6,862


22,929


23,220

      Cost of services sold (A)

1,379


1,573


5,362


5,336



7,681


8,435


28,291


28,556

      Selling, general and administrative expenses (A)

1,523


1,616


5,218


5,399

      Other (income) expense

(16)


(12)


(70)


(84)

      Interest and other financial charges

87


91


351


376



9,275


10,130


33,790


34,247










Income (loss) from continuing operations before taxes

306


(657)


3,875


2,282

Tax expense (benefit)

51


(350)


944


417










Income (loss) from continuing operations after taxes

255


(307)


2,931


1,865










Income from discontinued operations after taxes

-


-


-


209










Net income (loss)

255


(307)


2,931


2,074










Less: Net income attributable to the noncontrolling interest

4


3


5


7










Net income (loss) attributable to Honeywell

$ 251


$ (310)


$ 2,926


$ 2,067










Amounts attributable to Honeywell:









Income (loss) from continuing operations less net income









attributable to the noncontrolling interest

251


(310)


2,926


1,858


Income from discontinued operations

-


-


-


209


Net income (loss) attributable to Honeywell

$ 251


$ (310)


$ 2,926


$ 2,067










Earnings per share of common stock - basic:








  Income (loss) from continuing operations

0.32


(0.40)


3.74


2.38

  Income from discontinued operations

-


-


-


0.27

  Net income (loss) attributable to Honeywell

$ 0.32


$ (0.40)


$ 3.74


$ 2.65










Earnings per share of common stock - assuming dilution:








  Income (loss) from continuing operations

0.32


(0.40)


3.69


2.35

  Income from discontinued operations

-


-


-


0.26

  Net income (loss) attributable to Honeywell

$ 0.32


$ (0.40)


$ 3.69


$ 2.61










Weighted average number of shares outstanding-basic

787.2


774.7


782.4


780.8










Weighted average number of shares outstanding -  








    assuming dilution

796.4


784.3


791.9


791.6










(A) Cost of products and services sold and selling, general and administrative expenses include amounts for repositioning and other charges, pension and other postretirement expense, and stock compensation expense.

(B) Below is a reconciliation of Earnings per share to Earnings per share, excluding mark-to-market pension expense. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.








Three Months Ended


Twelve Months Ended



December 31,


December 31,



20121


20111


20121


20111











Earnings per share of common stock - assuming dilution

$ 0.32


$ (0.40)


$ 3.69


$ 2.61


Mark-to-market pension expense

0.78


1.45


0.79


1.44











Earnings per share of common stock - assuming dilution,









excluding mark-to-market pension expense

$ 1.10


$ 1.05


$ 4.48


$ 4.05











1- EPS utilizes weighted average shares outstanding and the effective tax rate for the period. Mark-to-market uses a blended tax rate of 35.0% and 36.9% for 2012 and 2011, respectively

 

Honeywell International Inc

Segment Data (Unaudited) 

(Dollars in millions)












Three Months Ended


Twelve Months Ended



December 31,


December 31,

Net Sales


2012


2011


2012


2011










Aerospace

$   3,020


$   3,047


$   12,040


$    11,475










Automation and Control Solutions

4,172


4,051


15,880


15,535










Performance Materials and Technologies

1,545


1,430


6,184


5,659










Transportation Systems

844


944


3,561


3,859










Corporate

-


1


-


1










     Total

$   9,581


$   9,473


$   37,665


$   36,529



















Reconciliation of Segment Profit to Income From Continuing Operations Before Taxes












Three Months Ended


Twelve Months Ended



December 31,


December 31,

Segment Profit


2012


2011


2012


2011










Aerospace

$      601


$      573


$     2,279


$     2,023










Automation and Control Solutions

645


584


2,232


2,083










Performance Materials and Technologies

210


223


1,154


1,042










Transportation Systems

94


117


432


485










Corporate

(54)


(68)


(218)


(276)










     Total Segment Profit

1,496


1,429


5,879


5,357










Other income (expense) (A)

7


(3)


25


33

Interest and other financial charges

(87)


(91)


(351)


(376)

Stock compensation expense (B)

(39)


(39)


(170)


(168)

Pension ongoing expense (B)

(7)


(22)


(36)


(105)

Pension mark-to-market expense (B)

(957)


(1,802)


(957)


(1,802)

Other postretirement income/(expense) (B)

(20)


(23)


(72)


86

Repositioning and other charges (B)

(87)


(106)


(443)


(743)










Income (loss) from continuing operations before taxes

$      306


$     (657)


$     3,875


$    2,282



















    (A) Equity income/(loss) of affiliated companies is included in Segment Profit.










    (B) Amounts included in cost of products and services sold and selling, general and administrative expenses.

Honeywell International Inc

Consolidated Balance Sheet (Unaudited)

(Dollars in millions)











December 31,

December 31, 




2012



2011










ASSETS








Current assets:







    Cash and cash equivalents


$         4,634



$           3,698


    Accounts, notes and other receivables


7,429



7,228


    Inventories


4,235



4,264


    Deferred income taxes


669



460


    Investments and other current assets


631



484



Total current assets


17,598



16,134










Investments and long-term receivables


623



494


Property, plant and equipment - net


5,001



4,804


Goodwill


12,425



11,858


Other intangible assets - net


2,449



2,477


Insurance recoveries for asbestos related liabilities


663



709


Deferred income taxes


1,889



2,132


Other assets


1,205



1,200











Total assets


$       41,853



$         39,808










LIABILITIES AND SHAREOWNERS' EQUITY







Current liabilities:







    Accounts payable


$         4,736



$           4,738


    Short-term borrowings


76



60


    Commercial paper


400



599


    Current maturities of long-term debt


625



15


    Accrued liabilities


7,208



6,863



Total current liabilities


13,045



12,275










Long-term debt


6,395



6,881


Deferred income taxes


628



676


Postretirement benefit obligations other than pensions


1,365



1,417


Asbestos related liabilities


1,292



1,499


Other liabilities


5,913



6,158


Redeemable noncontrolling interest


150



-


Shareowners' equity


13,065



10,902











Total liabilities, redeemable noncontrolling interest and shareowners' equity


$       41,853



$         39,808










Honeywell International Inc

 Consolidated Statement of Cash Flows (Unaudited)

(Dollars in millions)












Three Months Ended


Twelve Months Ended



December 31,


December 31,



2012


2011


2012


2011

Cash flows from operating activities:









    Net income (loss) attributable to Honeywell


$    251


$   (310)


$ 2,926


$ 2,067

    Adjustments to reconcile net income (loss) attributable to Honeywell to net








    cash provided  by operating activities:









        Depreciation and amortization


245


253


926


957

        Gain on sale of non-strategic businesses and assets


(2)


(9)


(5)


(362)

        Repositioning and other charges


87


106


443


743

        Net payments for repositioning and other charges


(151)


(133)


(503)


(468)

        Pension and other postretirement expense


984


1,847


1,065


1,823

        Pension and other postretirement benefit payments


(295)


(315)


(1,183)


(1,883)

        Stock compensation expense


39


39


170


168

        Deferred income taxes


(235)


(528)


84


(331)

        Excess tax benefits from share based payment arrangements


(28)


(11)


(56)


(42)

        Other


69


233


108


289

        Changes in assets and liabilities, net of the effects of









        acquisitions and divestitures:









           Accounts, notes and other receivables


41


117


(119)


(316)

           Inventories


78


130


25


(310)

           Other current assets


(1)


78


(78)


25

           Accounts payable


207


162


(13)


527

           Accrued liabilities


60


(182)


(273)


(54)

Net cash provided by operating activities


1,349


1,477


3,517


2,833










Cash flows from investing activities:









    Expenditures for property, plant and equipment


(298)


(332)


(884)


(798)

    Proceeds from disposals of property, plant and equipment


3


3


5


6

    Increase in investments


(220)


(58)


(702)


(380)

    Decrease in investments


272


66


559


354

    Cash paid for acquisitions, net of cash acquired


(376)


(346)


(438)


(973)

    Proceeds from sales of businesses, net of fees paid


3


(14)


21


1,156

    Other


53


(43)


11


24

Net cash used for investing activities


(563)


(724)


(1,428)


(611)










Cash flows from financing activities:









    Net (decrease)/increase in commercial paper


(499)


(101)


(199)


300

    Net increase/(decrease) in short-term borrowings


3


2


22


(2)

    Payment of debt assumed with acquisitions


-


(33)


-


(33)

    Proceeds from issuance of common stock


163


72


342


304

    Proceeds from issuance of long-term debt


16


1


102


1,390

    Payments of long-term debt


(1)


(500)


(1)


(939)

    Excess tax benefits from share based payment arrangements


28


11


56


42

    Repurchases of common stock


(317)


(76)


(317)


(1,085)

    Cash dividends paid


(331)


(295)


(1,211)


(1,091)

Net cash used for financing activities


(938)


(919)


(1,206)


(1,114)










Effect of foreign exchange rate changes on cash and cash equivalents


26


(21)


53


(60)

Net (decrease)/increase in cash and cash equivalents


(126)


(187)


936


1,048

Cash and cash equivalents at beginning of period


4,760


3,885


3,698


2,650

Cash and cash equivalents at end of period


$ 4,634


$ 3,698


$ 4,634


$ 3,698










Honeywell International Inc

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow, Prior to Cash Pension Contributions (Unaudited)

(Dollars in millions)






























Three Months Ended


 Twelve Months Ended 



December 31,


December 31,



2012


2011


2012


2011










Cash provided by operating activities


$     1,349


$  1,477


$      3,517


$    2,833










Expenditures for property, plant and equipment 


(298)


(332)


(884)


(798)










Free cash flow


$     1,051


$  1,145


$      2,633


$    2,035










Cash pension contributions


260


272


1,039


1,745










Free cash flow, prior to cash pension contributions


$     1,311


$  1,417


$      3,672


$    3,780



















We define free cash flow as cash provided by operating activities, less cash expenditures for property, plant and equipment.










We believe that this metric is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, and to pay dividends, repurchase stock, repay debt obligations prior to their maturities, or make cash pension contributions. This metric can also be used to evaluate our ability to generate cash flow from business operations and the impact that this cash flow has on our liquidity.


Honeywell International Inc.


Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market Adjustment and Calculation of Segment Profit and Operating Income Margin Excluding Pension Mark-to-Market Adjustment (Unaudited)

(Dollars in millions)




































Three Months Ended


 Twelve Months Ended 





December 31,


December 31,





2012


2011


2012


2011














Segment Profit


$      1,496


$    1,429


$     5,879


$   5,357














Stock compensation expense (A)


(39)


(39)


(170)


(168)



Repositioning and other (A, B)


(96)


(121)


(488)


(794)



Pension ongoing expense (A)


(7)


(22)


(36)


(105)



Pension mark-to-market adjustment (A)


(957)


(1,802)


(957)


(1,802)



Other postretirement income/(expense) (A)


(20)


(23)


(72)


86














Operating Income (Loss)


$         377


$      (578)


$     4,156


$   2,574



Pension mark-to-market adjustment (A)


$       (957)


$   (1,802)


$      (957)


$  (1,802)



Operating Income excluding pension mark-to-market adjustment


$      1,334


$    1,224


$     5,113


$   4,376














Segment Profit


$      1,496


$    1,429


$     5,879


$   5,357



÷ Sales


$      9,581


$    9,473


$   37,665


$ 36,529



Segment Profit Margin %


15.6%


15.1%


15.6%


14.7%














Operating Income (Loss)


$         377


$     (578)


$     4,156


$   2,574



÷ Sales


$      9,581


$    9,473


$   37,665


$ 36,529



Operating Income (Loss) Margin %


3.9%


(6.1%)


11.0%


7.0%














Operating Income excluding pension mark-to-market adjustment


$      1,334


$    1,224


$     5,113


$   4,376



÷ Sales


$      9,581


$    9,473


$   37,665


$ 36,529



Operating Income Margin excluding pension mark-to-market adjustment %


13.9%


12.9%


13.6%


12.0%














(A) Included in cost of products and services sold and selling, general and administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity income adjustment.


















We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. 





 

SOURCE Honeywell



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