Honeywell Reports 2010 Full-Year Sales Up 8% to $33.4 Billion; Proforma Earnings Per Share Up 12% to $3.00, Reported Earnings Per Share Up 26% to $2.59

MORRIS TOWNSHIP, N.J., Jan. 28, 2011 /PRNewswire/ -- Honeywell (NYSE: HON) today announced full-year 2010 sales increased 8% to $33.4 billion vs. $30.9 billion in 2009.  Earnings per share (proforma) were up 12% to $3.00 versus $2.69 in the prior year, excluding the unfavorable impact of the pension mark-to-market adjustment. Reported earnings per share for 2010 were $2.59 versus $2.05 in the prior year.  Free cash flow (cash flow from operations less capital expenditures) was a record $3.6 billion (cash flow from operations of $4.2 billion).  

Fourth quarter sales increased 12% to $9.0 billion versus $8.1 billion in 2009.  Earnings per share (proforma) were $0.87 versus $0.83 in the prior year fourth quarter, excluding the unfavorable impact of the pension mark-to-market adjustment ($0.40 per share in 2010 and $0.63 per share in 2009). Reported earnings in the fourth quarter were $0.47 per share versus $0.20 in the prior year. Free cash flow was $0.7 billion (cash flow from operations was $1.0 billion), including a $600 million cash contribution to U.S. pension in the fourth quarter.  

The company separately announced the sale of its Consumer Products Group (CPG) business to Rank Group, a private investment company, in a cash transaction valued at approximately $950 million.  Currently reported within Honeywell’s Transportation Systems segment, CPG had 2010 sales of approximately $1 billion. The company’s 2011 EPS guidance excludes the anticipated book gain on the sale of CPG, which it expects to utilize for repositioning and other actions. The benefits of these actions, together with the deployment of divestiture proceeds, are expected to more than offset lost CPG earnings beyond 2011. Upon regulatory approval, the company expects to account for CPG as Discontinued Operations.

“We are pleased to announce the sale of CPG - while CPG is a good business, it doesn’t fit with our portfolio of differentiated, global technologies,” said Honeywell Chairman and Chief Executive Officer Dave Cote. “We’re also very pleased with our strong fourth quarter results, capping a terrific year for Honeywell. The year saw progressively improved market conditions, with great execution across our businesses resulting in robust sales growth and record segment margins and cash flow. Our seed planting investments contributed meaningfully to our growth and productivity in 2010, with significant global customer wins, a robust new product pipeline, and traction on our key process initiatives. Our orders are trending higher across our businesses, and with the continued improvement we’re seeing in the global economy, we’re confident in our outlook for higher revenues, and 20% plus earnings growth in 2011.”

Honeywell raised its 2011 earnings guidance to $3.60-3.80 per share, up from $3.50-3.70 per share, excluding any mark-to-market pension adjustment. The company also reaffirmed its previously-stated 2011 sales guidance of $35.0-36.0 billion (excluding the impact of the anticipated Discontinued Operations accounting treatment of CPG) and free cash flow guidance of $3.5-3.7 billion, before any U.S. pension contributions (cash flow from operations of $3.3-3.5 billion, including $1 billion pension contribution).

Fourth Quarter Segment Highlights

Aerospace

• Sales were up 6% compared with the fourth quarter of 2009 due to higher Commercial OEM and aftermarket volumes, as well as higher military and government services sales, partially offset by pre-production payments made to Business and General Aviation (BGA) OEM customers.
• Segment profit was up 5%, and segment margin in the quarter decreased 20 bps to 18.4%. The segment margin decline was primarily due to the absence in 2010 of prior year labor cost actions and BGA OEM payments mentioned above, partially offset by increased volume and benefits from prior period repositioning actions. Full-year 2010 segment margin was 17.2%, down 40 bps compared to 2009.
• Honeywell won a $100 million retrofit package to provide avionics and fuel-efficient 131-9A auxiliary power units (APU) to Vietnam Airlines for its fleet of 36 new and 22 existing Airbus A321 aircraft.
• Honeywell was awarded a one-year contract extension valued at $34 million with the U.S. Navy for Performance-Based Logistics (PBL) supply support for APUs. A model program of public-private partnership, the program has experienced high performance in fleet support with APU availability exceeding 95%, up from a pre-program average of 65%.
• Honeywell is developing evolutionary safety technology that blends its proven SmartView™ Synthetic Vision System (SVS) with Enhanced Vision Sensors (EVS) that use infrared technology to give flight crews improved situational awareness when flying in weather or at night.  The new technology will allow flight crews to land in low visibility conditions that may currently require aircraft to re-attempt a landing or divert to a different airport until the weather improves, delaying airline operations, driving up fuel costs, and increasing CO2 emissions.  SVS/EVS has been featured in more than 90 media stories over the past month.
• Customers continue to select Honeywell over a field of avionics competitors, citing the company’s technology and product differentiation as the key deciding factor.  In 2010, Honeywell won 50% of the business avionics contracts for which it presented bids.  These wins encompassed both new and derivative high value commercial aircraft platforms, making Honeywell the clear share winner.

Automation and Control Solutions

• Sales were up 15% compared with the fourth quarter of 2009, with organic growth in all regions and businesses due to general industrial recovery and new product introductions, execution of energy efficiency-related and industrial infrastructure projects, and the favorable impact from net acquisitions and divestitures.
• Segment profit was up 2%, and segment margin in the quarter decreased 160 bps to 13.1%. The segment margin decline was primarily due to the absence in 2010 of prior year labor cost actions, the dilutive impact of M&A, and reinvestment for growth across the portfolio, partially offset by higher volumes and project sales. Full-year 2010 segment margin was 12.9%, up 30 bps compared to 2009.
• Honeywell Automation and Control Solutions introduced over 400 new products in 2010, including ImpactXtreme, a wireless gas detector; Honeywell Total Connect Video Services, which enables video viewing via Smartphones including iPhone™, Android, and BlackBerry®;  Xenon 1900, Honeywell’s industry leading, area-imaging barcode scanning technology; the Universal Remote Input/Output (I/O) Module for Honeywell Safety Manager, allowing process manufacturers to integrate more safety devices and simplify installation; and TruStability® Pressure Sensor, the industry’s most accurate sensor for medical and industrial applications.
• Honeywell Building Solutions signed an approximate $200 million contract with the U.S. General Services Administration (GSA) to support the continued development of on-site utilities and energy infrastructure at the Food and Drug Administration (FDA) headquarters - the White Oak Federal Research Center in Silver Spring, Md. The main component of the project is the construction of a central utility plant that will meet the heating, cooling, and energy requirements of a 1.2 million square-foot expansion that’s currently underway. This is the fifth energy conservation contract for Honeywell at the White Oak campus.
• Honeywell Building Solutions was awarded a 10-year, $18 million Energy Savings Performance Contract to provide a variety of infrastructure improvements including an Enterprise Building Integrator (EBI), Energy Manager, and Windows on the World (WOW) System at The Minillas Government Complex, Puerto Rico’s largest government center and headquarters of the Puerto Rican Building Authority. The project also includes a 17 kW solar system, four wind turbines, and lighting and water retrofits in the three main buildings of the complex.
• Honeywell Process Solutions (HPS) saw orders up 20% in 2010 and backlog up 26% and continues to win exciting new infrastructure projects globally. HPS was recently awarded a project with Shah Gas valued at $158 million by leveraging its full technology portfolio to help the customer operate safely, reliably, and efficiently.  The business was also awarded a new contract by Wintershall Netherlands B.V. for the implementation and delivery of Experion® PKS for a new offshore gas production facility.

Transportation Systems

• Sales were up 18% compared with the fourth quarter of 2009, primarily due to higher Turbo volumes globally, robust new platform launches, higher European diesel penetration, and higher sales of branded car care products.
• Segment profit was up 94% and segment margin in the quarter increased 480 bps to 12.2%, driven by higher volumes, increased productivity, and benefits from prior repositioning actions, partially offset by material inflation and the absence in 2010 of prior year labor cost actions. Full-year 2010 segment margin was 11.2%, up an impressive 660 bps compared to the trough in 2009.
• Honeywell launched its modern gas turbocharger on the newly introduced Chevrolet Cruze engine.  The new Chevrolet Cruze Eco will feature a turbocharged 1.4-liter gasoline engine with best-in-class 42 mpg highway rating from the U.S. EPA, outpacing several hybrids on the market in fuel efficiency and performance.
• In 2010, Honeywell Turbo Technologies was awarded new gasoline and diesel platform wins with customers estimated at more than $3 billion in revenue over the life of the programs. The platforms span the U.S., European, Asian, and South American markets for both passenger and commercial vehicle applications and are expected to begin launching in 2012.  

Specialty Materials

• Sales were up 12% compared with the fourth quarter of 2009, resulting from higher volumes due to improved global markets, commercial excellence, and new product applications in the Advanced Materials business, coupled with higher gas processing equipment sales at UOP.
• Segment profit was down 2%, and segment margin in the quarter decreased 220 bps to 14.8% due to the absence in 2010 of prior year labor cost actions, material inflation, and unfavorable mix, partially offset by higher sales volumes, commercial excellence, and cost productivity. Full-year 2010 segment margin was 15.8%, up 120 bps compared to 2009.
• Honeywell’s UOP announced that it was selected by Petroleo Brasileiro S.A. (Petrobras) to provide process technologies for two new diesel refineries in Brazil.  When complete the new facilities will have the combined capacity to process 900,000 barrels of oil per day, which is equivalent to 40 percent of the petroleum processed by the company today.  In addition to process engineering design for its hydrocracking and hydrotreating technologies used at the site, UOP will also serve as the Front-End Engineering Design (FEED) contractor, providing refinery-wide design for both facilities and adding to UOP’s global project capabilities.  
• Honeywell announced that its high-strength Spectra® fiber is serving as a key component of industrial slings that are lifting the tower sections of the reconstructed San Francisco-Oakland Bay Bridge. The fiber is used as a reinforcement material in the Holloway Houston HHIPER LIFT™ slings used to raise multiple sections weighing up to 2.6 million pounds for the construction of the new earthquake-resistant, self-anchored suspension span of the bridge.

Honeywell will discuss its results during its investor conference call today starting at 8:00 a.m. EST.  To participate, please dial (719) 325-4865 a few minutes before the 8:00 a.m. start.  Please mention to the operator that you are dialing in for Honeywell's investor conference call.  The live webcast of the investor call will be available through the “Investor Relations” section of the company's Website (http://www.honeywell.com/investor).  Investors can access a replay of the conference call from 11:00 a.m. EST, January 28, until midnight, February 4, by dialing (719) 457-0820.  The access code is 2983708.

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 specialty 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.

SOURCE Honeywell