Honeywell Reports Third-Quarter EPS Of $1.07, Adjusted EPS Of $1.56; Generates Sequential Sales And Segment Profit Growth In All Segments
CHARLOTTE, N.C., Oct. 30, 2020 /PRNewswire/ -- 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 share(2) 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 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 share(1) of $7.00 to $7.05, down 14%. A summary of the company's 2020 guidance can be found in Table 1.
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
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 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 GUIDANCE(3)
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 Share(1)
$1.97 - $2.02
$7.00 - $7.05
Adjusted Earnings Growth(1)
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 Share(2) $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%)
---
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
---
(1)Adjusted 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
(2)Adjusted 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
(3)As 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 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.
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,
---
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 International Inc.
Segment Data (Unaudited)
(Dollars in millions)
---
Three Months Ended Nine Months Ended
September 30, 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 Nine Months Ended
September 30, 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 International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
---
September 30, December 31,
2020 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 International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
---
Three Months Ended Nine Months Ended
September 30, 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 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 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 International Inc.
Reconciliation of Earnings per Share to Adjusted Earnings per Share (Unaudited)
---
Three Months Ended September 30, Three Months Three Months Twelve Months
Ended June 30, Ended Ended
2020 December 31, December 31,
2019 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.
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 Three Months
Ended Ended
September 30, September 30,
2020 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 International Inc.
Reconciliation of Segment Profit to Operating Income and Calculation of Segment Profit and Operating Income
Margins (Unaudited)
(Dollars in millions)
---
Three Months Twelve Months Three Months
Ended Ended Ended June 30,
December 31, December 31, 2020
2019 2019
---
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.
Honeywell International Inc.
Reconciliation of Expected Earnings per Share to Adjusted Earnings per Share (Unaudited)
---
Three Months Twelve Months
Ended Ended
December 31, December 31,
2020 (E) 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.
Contacts:
Media
Investor Relations
Nina Krauss
Mark Bendza
(704) 627-6035
(704) 627-6200
nina.krauss@honeywell.com
mark.bendza@honeywell.com
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SOURCE Honeywell
