Honeywell Delivers Earnings Per Share of $1.75 and Sales of $10.1 Billion
MORRIS PLAINS, N.J., Oct. 20, 2017 /PRNewswire/ -- Honeywell (NYSE: HON) today announced financial results for the third quarter of 2017.
"Honeywell delivered another quarter of high-quality financial results, with organic growth of five percent, segment margin expansion of 120 basis points, and earnings per share of $1.75, up 16 percent(2) year-over-year," said Darius Adamczyk, President and Chief Executive Officer of Honeywell. "This was a standout quarter for us when it comes to organic growth. Our Aerospace aftermarket business grew more than seven percent, our warehouse automation business continued to grow at a double-digit pace, and there was broad strength across Performance Materials and Technologies, led by 25 percent organic sales growth in UOP. We also saw good momentum in orders and backlog, with double-digit backlog growth in UOP, Intelligrated, Defense, and Honeywell Building Solutions, positioning us for future growth.
"The investments we have made in people, capital expenditures, research and development, and M&A are delivering outstanding growth for our shareowners," Adamczyk said. "Also, we continue to improve the cost structure of our businesses through ongoing restructuring actions, and in the third quarter, we dedicated approximately $120 million to new projects.
"Last week, we announced our intention to spin our Homes and Global Distribution business and our Transportation Systems business into two independent public companies by the end of next year. The spun businesses will benefit from being able to make independent investment decisions that will better position them for growth and value creation for decades to come. After completion of the spins, Honeywell will have a more focused and growth-oriented portfolio that benefits from cross-Honeywell synergies. These actions will position the company to deliver sustained financial outperformance," Adamczyk continued. "Honeywell is well positioned in both the short and long term, and we anticipate a strong finish to 2017."
Honeywell also reaffirmed its full-year earnings-per-share guidance of $7.05 to $7.10, up nine to 10 percent year-over-year, excluding divestitures, any pension mark-to-market adjustments, and 2016 debt refinancing charges. Earlier this month, the company raised the low end of the range by five cents.
Honeywell will discuss the results during its investor conference call today starting at 9:30 a.m. Eastern Daylight Time.
Third Quarter Performance
Honeywell sales for the third quarter were up five percent on an organic basis and up three percent on a reported basis. The difference between reported and organic sales relates to the 2016 spin-off of the former Resins and Chemicals business in Performance Materials and Technologies and the 2016 divestiture of the Aerospace government services business, partially offset by the acquisition of Intelligrated in Safety and Productivity Solutions and the impact of foreign currency translation. The third-quarter financial results can be found in Tables 1 and 2, below.
Aerospace sales for the third quarter were up four percent on an organic basis driven by growth in Commercial Aftermarket and lower year-over-year customer incentives, strength in U.S. defense, and continued recovery in commercial vehicles in Transportation Systems. Segment margin expanded 290 bps to 21.3 percent, primarily driven by the lower customer incentives, productivity net of inflation, and the favorable impact of the 2016 divestiture of the government services.
Home and Building Technologies sales for the third quarter were up two percent on an organic basis driven by Smart Energy program roll-outs, air and water product sales in China, and continued growth in the Distribution business. Segment margin expanded 10 bps to 16.4 percent, driven by restructuring benefits, productivity net of inflation, and commercial excellence, partially offset by the unfavorable impact of higher sales from lower margin products and investments for growth, including research and development.
Performance Materials and Technologies sales for the third quarter were up 10 percent on an organic basis driven by strong growth in every business, including 25 percent growth in UOP driven by robust catalyst, licensing, equipment, and gas processing volumes; continued demand for Solstice(®) low-global-warming products in Advanced Materials; and short-cycle demand within Honeywell Process Solutions. Segment margin expanded 170 bps to 23.3 percent, primarily driven by commercial excellence, productivity net of inflation, and the favorable impact from the spin-off of the former Resins and Chemicals business.
Safety and Productivity Solutions sales for the third quarter were up 3 percent on an organic basis driven by increased demand for industrial safety products, voice-enabled workflow solutions and Movilizer software, and double-digit organic sales growth at Intelligrated, a leading provider of warehouse automation solutions, which Honeywell acquired in 2016. Segment margin expanded 40 bps to 15.1 percent, primarily driven by productivity net of inflation, partially offset by acquisition amortization and integration costs. Excluding the impact of acquisitions, segment margin expanded 190 bps.
To participate on the conference call, please dial (866) 548-4713 (domestic) or (719) 457-1036 (international) approximately ten minutes before the 9:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's third quarter 2017 earnings call or provide the conference code HON3Q17. 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 1:30 p.m. EDT, October 20, until 1:30 p.m. EDT, October 27, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 1952662.
TABLE 1: SUMMARY OF FINANCIAL RESULTS - TOTAL HONEYWELL
3Q 2016 3Q 2017 Change
------- ------- ------
Sales 9,804 10,121 3%
Organic 5%
Segment Margin 17.5% 18.7% 120 bps
Operating Income Margin 15.6% 17.8% 220 bps
Earnings Per Share
Reported $1.60 $1.75 9%
Ex-Divestitures & Additional 3Q17 Restructuring, Normalized for Tax $1.51 $1.75 16%
Cash Flow From Operations 1,554 1,407 (9%)
Free Cash Flow(3) 1,280 1,195 (7%)
TABLE 2: SUMMARY OF FINANCIAL RESULTS - SEGMENTS
AEROSPACE 3Q 2016 3Q 2017 Change
------- ------- ------
Sales 3,601 3,657 2%
Organic 4%
Segment Profit 663 780 18%
Segment Margin 18.4% 21.3% 290 bps
HOME AND BUILDING TECHNOLOGIES
Sales 2,701 2,790 3%
Organic 2%
Segment Profit 441 458 4%
Segment Margin 16.3% 16.4% 10 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES
Sales 2,329 2,260 (3%)
Organic 10%
Segment Profit 503 526 5%
Segment Margin 21.6% 23.3% 170 bps
SAFETY AND PRODUCTIVITY SOLUTIONS
Sales 1,173 1,414 21%
Organic 3%
Segment Profit 172 213 24%
Segment Margin 14.7% 15.1% 40 bps
Ex-M&A 190 bps
Honeywell (www.honeywell.com) is a Fortune 100 software-industrial company that delivers industry specific solutions that include aerospace and automotive products and services; control technologies for buildings, homes, and industry; and performance materials globally. Our technologies help everything from aircraft, cars, homes and 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, and technological factors affecting our operations, markets, products, services and prices, as well as the ability to effect the separations. 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, including with respect to any changes in or abandonment of the proposed separations. 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.
(1) Cash Flow From Operations Less Capital Expenditures
(2) Earnings per share variance excludes 2016 divestitures and additional 3Q17 restructuring funding enabled by a lower than planned effective tax rate, normalized for tax at 26 percent
(3) Cash Flow From Operations Less Capital Expenditures
Contacts:
Media Investor Relations
Scott Sayres Mark Macaluso
(480) 257-5921 (973) 455-2222
scott.sayres@honeywell.com mark.macaluso@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,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Product sales $8,052 $7,744 $23,671 $23,398
Service sales 2,069 2,060 6,020 5,919
----- ----- ----- -----
Net sales 10,121 9,804 29,691 29,317
------ ----- ------ ------
Costs, expenses and other
Cost of products sold (A) 5,648 5,594 16,545 16,545
Cost of services sold (A) 1,225 1,309 3,534 3,726
----- ----- ----- -----
6,873 6,903 20,079 20,271
Selling, general and administrative expenses (A) 1,447 1,367 4,177 3,976
Other (income) expense (63) (180) (85) (197)
Interest and other financial charges 81 82 235 252
--- --- --- ---
8,338 8,172 24,406 24,302
----- ----- ------ ------
Income before taxes 1,783 1,632 5,285 5,015
Tax expense 418 384 1,188 1,214
--- --- ----- -----
Net income 1,365 1,248 4,097 3,801
Less: Net income attributable to the noncontrolling interest 17 8 31 26
--- --- --- ---
Net income attributable to Honeywell $1,348 $1,240 $4,066 $3,775
====== ====== ====== ======
Earnings per share of common stock - basic $1.77 $1.62 $5.33 $4.93
===== ===== ===== =====
Earnings per share of common stock - assuming dilution $1.75 $1.60 $5.26 $4.86
===== ===== ===== =====
Weighted average number of shares outstanding - basic 762.2 763.7 763.1 765.0
===== ===== ===== =====
Weighted average number of shares outstanding - assuming dilution 771.4 774.4 773.1 776.3
===== ===== ===== =====
(A) Cost of products and services sold and selling, general and administrative expenses include amounts for repositioning and other charges, 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 2017 2016 2017 2016
--------- ---- ---- ---- ----
Aerospace $3,657 $3,601 $10,877 $11,085
Home and Building Technologies 2,790 2,701 8,079 7,854
Performance Materials and Technologies 2,260 2,329 6,568 7,044
Safety and Productivity Solutions 1,414 1,173 4,167 3,334
Total $10,121 $9,804 $29,691 $29,317
======= ====== ======= =======
Reconciliation of Segment Profit to Income Before Taxes
-------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
Segment Profit 2017 2016 2017 2016
-------------- ---- ---- ---- ----
Aerospace $780 $663 $2,395 $2,252
Home and Building Technologies 458 441 1,267 1,213
Performance Materials and Technologies 526 503 1,521 1,484
Safety and Productivity Solutions 213 172 621 495
Corporate (82) (59) (210) (157)
--- --- ---- ----
Total segment profit 1,895 1,720 5,594 5,287
Other income (expense) (A) 49 169 54 174
Interest and other financial charges (81) (82) (235) (252)
Stock compensation expense (B) (39) (49) (133) (145)
Pension ongoing income (expense) (B) 183 146 546 447
Other postretirement income (expense) (B) 6 7 16 24
Repositioning and other charges (B) (230) (279) (557) (520)
---- ---- ---- ----
Income before taxes $1,783 $1,632 $5,285 $5,015
====== ====== ====== ======
(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)
September 30, December 31,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $7,389 $7,843
Short-term investments 2,781 1,520
Accounts receivable - net 8,587 8,177
Inventories 4,751 4,366
Other current assets 1,136 1,152
Total current assets 24,644 23,058
Investments and long-term receivables 643 587
Property, plant and equipment - net 5,757 5,793
Goodwill 18,268 17,707
Other intangible assets - net 4,587 4,634
Insurance recoveries for asbestos related liabilities 411 417
Deferred income taxes 264 347
Other assets 2,194 1,603
----- -----
Total assets $56,768 $54,146
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $6,061 $5,690
Commercial paper and other short-term borrowings 3,932 3,366
Current maturities of long-term debt 1,398 227
Accrued liabilities 6,834 7,048
Total current liabilities 18,225 16,331
Long-term debt 11,453 12,182
Deferred income taxes 300 486
Postretirement benefit obligations other than pensions 530 473
Asbestos related liabilities 1,004 1,014
Other liabilities 4,025 4,110
Redeemable noncontrolling interest 3 3
Shareowners' equity 21,228 19,547
------ ------
Total liabilities, redeemable noncontrolling interest and shareowners' equity $56,768 $54,146
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
-----------------------------------------------
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Cash flows from operating activities:
Net income $1,365 $1,248 $4,097 $3,801
Less: Net income attributable to the noncontrolling interest 17 8 31 26
--- --- --- ---
Net income attributable to Honeywell 1,348 1,240 4,066 3,775
Adjustments to reconcile net income attributable to Honeywell to net
cash provided by operating activities:
Depreciation 180 182 534 546
Amortization 105 78 298 227
(Gain) loss on sale of non-strategic businesses and assets - (176) - (176)
Repositioning and other charges 230 302 583 567
Net payments for repositioning and other charges (130) (154) (394) (420)
Pension and other postretirement income (189) (153) (562) (471)
Pension and other postretirement benefit payments (24) (29) (71) (110)
Stock compensation expense 39 49 133 145
Deferred income taxes 16 (36) (76) 146
Other (30) (8) (38) (33)
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts receivable (132) (135) (408) (492)
Inventories (102) (21) (400) (233)
Other current assets 16 138 13 -
Accounts payable 90 (18) 404 (18)
Accrued liabilities (10) 295 (288) 3
Net cash provided by operating activities 1,407 1,554 3,794 3,456
----- ----- ----- -----
Cash flows from investing activities:
Expenditures for property, plant and equipment (212) (274) (613) (749)
Proceeds from disposals of property, plant and equipment 21 3 46 4
Increase in investments (1,820) (1,262) (4,149) (3,083)
Decrease in investments 952 873 2,793 2,658
Cash paid for acquisitions, net of cash acquired (57) (1,484) (72) (2,568)
Proceeds from sales of businesses, net of fees paid - 304 - 304
Other (83) 106 (196) 158
Net cash used for investing activities (1,199) (1,734) (2,191) (3,276)
------ ------ ------ ------
Cash flows from financing activities:
Proceeds from issuance of commercial paper and other short-term borrowings 3,772 5,455 8,808 16,149
Payments of commercial paper and other short-term borrowings (3,773) (3,656) (8,608) (16,574)
Proceeds from issuance of common stock 87 143 463 386
Proceeds from issuance of long-term debt 23 37 39 4,510
Payments of long-term debt (39) (8) (69) (478)
Repurchases of common stock (343) (233) (1,335) (1,866)
Cash dividends paid (505) (453) (1,554) (1,410)
Payments to purchase the noncontrolling interest - - - (238)
AdvanSix pre-separation funding - 269 - 269
AdvanSix pre-spin borrowing - 38 - 38
AdvanSix cash at spin-off - (38) - (38)
Other (26) (25) (131) (40)
Net cash (used for) provided by financing activities (804) 1,529 (2,387) 708
---- ----- ------ ---
Effect of foreign exchange rate changes on cash and cash equivalents 108 37 330 88
--- --- --- ---
Net (decrease) increase in cash and cash equivalents (488) 1,386 (454) 976
Cash and cash equivalents at beginning of period 7,877 5,045 7,843 5,455
Cash and cash equivalents at end of period $7,389 $6,431 $7,389 $6,431
====== ====== ====== ======
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)
------------------------------------------------------------------------------------
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Cash provided by operating activities $1,407 $1,554 $3,794 $3,456
Expenditures for property, plant and equipment (212) (274) (613) (749)
---- ---- ---- ----
Free cash flow $1,195 $1,280 $3,181 $2,707
====== ====== ====== ======
We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment.
We believe that this metric is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business
development activities or acquisitions, pay dividends, repurchase stock or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from business operations and the impact that
this cash flow has on our liquidity.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow and Calculation of Free Cash Flow Conversion
----------------------------------------------------------------------------------------------------------------------
(Dollars in millions)
Three Months Ended
September 30,
-------------
2017
----
Cash provided by operating activities $1,407
Expenditures for property, plant and equipment (212)
----
Free cash flow $1,195
======
Cash provided by operating activities $1,407
÷ Net income attributable to Honeywell $1,348
------
Operating cash flow conversion 104%
===
Free cash flow $1,195
÷ Net income attributable to Honeywell $1,348
Free cash flow conversion % 89%
===
We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment.
We define free cash flow conversion as free cash flow divided by net income attributable to Honeywell.
We believe that this metric is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business
development activities or acquisitions, pay dividends, repurchase stock or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from business operations and the impact
that this cash flow has on our liquidity.
Honeywell International Inc.
Reconciliation of Segment Profit to Operating Income and Calculation of Segment Profit and
Operating Income Margins (Unaudited)
------------------------------------------------------------------------------------------
(Dollars in millions)
Three Months Ended
September 30,
-------------
2017 2016
---- ----
Segment Profit $1,895 $1,720
Stock compensation expense (A) (39) (49)
Repositioning and other (B, C) (244) (290)
Pension ongoing income (A) 183 146
Other postretirement income (A) 6 7
--- ---
Operating Income $1,801 $1,534
Segment Profit $1,895 $1,720
÷ Sales 10,121 9,804
------ -----
Segment Profit Margin % 18.7% 17.5%
==== ====
Operating Income $1,801 $1,534
÷ Sales 10,121 9,804
------ -----
Operating Income Margin % 17.8% 15.6%
==== ====
(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.
(C) Included in cost of products and services sold, selling, general and administrative expenses,
and other income/expense.
We believe these measures are useful to investors and management in understanding our ongoing
operations and in analysis of ongoing operating trends.
Honeywell International Inc.
Calculation of Segment Profit Margin Excluding Mergers and
Acqusitions (Unaudited)
----------------------------------------------------------
(Dollars in millions)
Three Months Ended
September 30,
2017
----
Safety and Productivity
Solutions
Segment Profit excluding
mergers and acquisitions $202
÷ Sales excluding mergers
and acquisitions $1,219
Segment Profit Margin
excluding mergers and
acquisitions % 16.6%
====
We believe these measures are useful to investors and management
in understanding our ongoing operations and in analysis of
ongoing operating trends.
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
---------------------------------------------------
Three Months Ended
September 30,
2017
----
Honeywell
Reported sales % change 3%
Less: Foreign currency translation 1%
Less: Acquisitions and divestitures,
net (3)%
Organic sales % change 5%
===
Aerospace
Reported sales % change 2%
Less: Foreign currency translation 1%
Less: Acquisitions and divestitures,
net (3)%
Organic sales % change 4%
===
Home and Building Technologies
Reported sales % change 3%
Less: Foreign currency translation 1%
Less: Acquisitions and divestitures,
net -
Organic sales % change 2%
===
Performance Materials and
Technologies
Reported sales % change (3)%
Less: Foreign currency translation 1%
Less: Acquisitions and divestitures,
net (14)%
Organic sales % change 10%
===
Safety and Productivity Solutions
Reported sales % change 21%
Less: Foreign currency translation 1%
Less: Acquisitions and divestitures,
net 17%
Organic sales % change 3%
===
We believe organic sales growth is a measure that is useful to
investors and management in understanding our ongoing operations
and in analysis of ongoing operating trends.
Honeywell International Inc.
Calculation of Earnings Per Share at 26% Tax Rate Excluding 3Q17 Additional Restructuring and 2016 Divestitures (Unaudited)
--------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)
Three Months Ended
September 30,
-------------
2017 2016
---- ----
Income before taxes $1,783 $1,632
Taxes at 26% 464 424
--- ---
Net income at 26% tax rate $1,319 $1,208
Less: Net income attributable to the noncontrolling interest 17 8
--- ---
Net income attributable to Honeywell at 26% tax rate $1,302 $1,200
====== ======
Weighted average number of shares outstanding - assuming dilution 771.4 774.4
===== =====
Earnings per share at 26% tax rate $1.69 $1.55
Less: Earnings per share impact attributable to 2016 divestitures (1) - 0.04
Less: Earnings per share attributable to additional restructuring (2) (0.06) -
Earnings per share of common stock - assuming dilution, at 26% tax rate,
excluding additional restructuring and 2016 divestitures $1.75 $1.51
===== =====
Earnings per share of common stock - assuming dilution $1.75 $1.60
Less: Earnings per share impact of normalizing to 26% tax rate 0.06 0.05
Less: Earnings per share impact attributable to 2016 divestitures (1) - 0.04
Less: Earnings per share attributable to additional restructuring (2) (0.06)
Earnings per share of common stock - assuming dilution, at 26% tax rate,
excluding additional restructuring and 2016 divestitures $1.75 $1.51
===== =====
(1) Earnings per share attributable to 2016 divestitures utilizes weighted average shares of 774.4 million and a
blended tax rate of 32.9% for the three months ended September 30, 2016.
(2) The Company has and continues to have an ongoing level of restructuring activities, for which there is a
planned amount of restructuring-related charges. For the three months ended September 30, 2017, the Company
funded approximately $60 million of additional restructuring enabled by a lower than expected effective tax rate for
the period. We believe that the exclusion of this additional restructuring provides a more comparable measure of
year-on-year results. Earnings per share attributable to additional restructuring uses a tax rate of 26% for three
months ended September 30, 2017.
We believe earnings per share adjusted to normalize for the expected effective tax rate of 26% for the most
recently completed fiscal quarter (as presented in prior guidance for such quarter) and to exclude the 2016
divestitures is a measure that is useful to investors and management in understanding our ongoing operations and
in analysis of ongoing operating trends.
Honeywell International Inc.
Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark-to-Market Expense, Debt Refinancing Expense and
Earnings Attributable to 2016 Divestitures (Unaudited)
-----------------------------------------------------
Twelve Months Ended
December 31,
------------
2017E (1) 2016 (2)
-------- -------
Earnings per share of common stock - assuming dilution (EPS) TBD $6.20
Pension mark-to-market expense TBD 0.28
Debt refinancing expense - 0.12
EPS, excluding pension mark-to-market expense and debt refinancing expense $7.05 - $7.10 6.60
Earnings attributable to 2016 divestitures - (0.14)
EPS, excluding pension mark-to-market expense, debt refinancing expense and
earnings attributable to 2016 divestitures $7.05 - $7.10 $6.46
============= =====
(1) Utilizes weighted average shares of approximately 772 million and an expected effective tax rate of approximately 22%.
(2) Utilizes weighted average shares of 775.3 million. Pension mark-to-market expense uses a blended tax rate of 21.3%. Debt refinancing
expense uses a tax rate of 26.5%. Earnings attributable to 2016 divestitures use a blended tax rate of 33.9%.
We believe EPS, excluding pension mark-to-market expense, debt refinancing expense and earnings attributable to 2016 divestitures is a
measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
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 in this reconciliation. Management is not currently forecasting an impact to earnings per
hare arising from a debt refinancing or divestiture transaction. Based on economic and industry conditions, future developments and other
relevant factors, these assumptions are subject to change.
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SOURCE Honeywell
