Company Delivers Fourth Quarter EPS Growth of 7% Despite Tough Economic Environment
MORRIS TOWNSHIP, N.J., Jan. 30 /PRNewswire-FirstCall/ -- Honeywell today announced full-year 2008 sales increased 6% to $36.6 billion from $34.6 billion in 2007. Earnings per share were up 19% to $3.76 versus $3.16 in the prior year. Cash flow from operations was $3.8 billion and free cash flow (cash flow from operations less capital expenditures), excluding cash taxes relating to the sale of the Consumables Solutions (CS) business, was $3.1 billion. Free cash flow conversion (free cash flow divided by net income) was 110% of net income for the full-year, excluding the CS taxes.
Fourth quarter sales were $8.7 billion versus $9.3 billion in 2007. Earnings per share were $0.97 versus $0.91 in the prior year fourth quarter. Cash flow from operations was $1.3 billion and excluding CS taxes, free cash flow was $1.1 billion. Fourth quarter free cash flow conversion was 155% of net income, excluding the CS taxes.
"Having great positions in good industries combined with strong execution drove Honeywell's performance and growth in a tough 2008 economic environment," said Honeywell Chairman and Chief Executive Officer Dave Cote. "Our key initiatives, including the Honeywell Operating System, Velocity Product Development and Functional Transformation, are working, and we're a much stronger company today because of their ongoing global implementation. In 2008, we were awarded large multi-year contracts and continued to be a strong cash generator. We also made acquisitions to bolster our portfolio, completed meaningful share repurchases, and increased the dividend rate."
"2009 will be a more challenging year," concluded Cote. "However, the actions we've taken over the past several years will benefit us in this economic downturn and have made Honeywell a more efficient, innovative, and productive company. We are well positioned and confident in our ability to outperform in 2009 and over the long-term."
Honeywell also reaffirmed its previously stated 2009 earnings per share guidance of $3.20-3.55.
Fourth Quarter Segment Highlights
Aerospace
-- Sales declined 1%, compared with the fourth quarter of 2007, as a result
of a net decrease from acquisitions and divestitures (primarily the sale
of the Consumables Solutions business), partially offset by strong sales
to Business and General Aviation Original Equipment customers. Sales,
excluding the impact of acquisitions and divestitures, were up 2%.
-- Segment profit grew 1%, while segment margin increased by 40 bps to
19.2%, driven by sales mix, partially offset by inflation.
-- Honeywell was selected to provide main engine propulsion, Auxiliary
Power Unit, environmental system and cabin pressurization equipment and
aircraft lighting for the new Gulfstream G250 business aircraft in an
agreement valued at more than $4 billion over the life of the program
(including aftermarket).
-- Honeywell received a $65 million production contract for its Micro Air
Vehicle, known as the T-Hawk(TM), from the U.S. military. Deliveries of
90 systems will begin in the second quarter of 2009 and conclude in
December 2009. The autonomous vehicle, weighing 17 pounds and measuring
14 inches in diameter, can fly to inspect hazardous areas for threats
without exposing warfighters to enemy fire.
-- Honeywell was awarded a $52 million contract to deliver F124-GA-200
engines to Alenia Aermacchi, a Finmeccanica Company, for the production
of the Advanced Jet Trainer M-346. The design and durability of this
engine delivers unrivaled performance over other aircraft engines,
enabling it to maintain specified thrust levels for a longer period of
time.
Automation and Control Solutions
-- Sales were up 3%, compared with the fourth quarter of 2007, with net
growth from acquisitions and divestitures, offset by the unfavorable
impact of foreign exchange.
-- Segment profit grew 12%, while segment margin increased by 110 bps to
13.4%, driven by increased productivity, partially offset by inflation.
-- Building Solutions was awarded an Indefinite Delivery Indefinite
Quantity Energy Savings Performance Contract (ESPC) by the U.S.
Department of Energy, which allows Honeywell to implement up to $5
billion of energy efficiency, renewable energy and water conservation
projects at federally owned buildings and facilities globally over the
next 10 years.
-- Process Solutions announced an $11 million contract to provide process
control hardware and software to Nuon's Magnum plant, a 1,300 megawatt
combined-cycle power station under construction in Eemshaven,
Netherlands. The Magnum plant will use Honeywell's Experion(R) Process
Knowledge System to monitor and control the state-of-the-art power
station and Honeywell's Safety Manager system to establish safety
practices such as process and emergency shutdowns, equipment protection,
and fire and gas monitoring.
-- Honeywell signed Public-Private Partnership (P3) contracts for 18 new
schools in Alberta, Canada and a new hospital in Woodstock, Ontario. The
projects include the design and installation of building automation,
security, and life safety systems and management of the performance and
maintenance of the facilities over the course of the 30-year contracts.
Transportation Systems
-- Sales declined 35% compared with the fourth quarter of 2007, due to
lower volumes and the unfavorable impact of foreign exchange.
-- Segment profit was down 96% primarily due to volume declines and
inflation.
-- Turbo Technologies was awarded contracts expected to total more than $90
million over the life of the programs. The programs awarded were for
both passenger and commercial vehicle platforms using Honeywell's
performance-enhancing, emission-compliant technologies including the
latest Variable Nozzle Turbine (VNT) technology. The applications range
from 1.7L passenger vehicle engines to large 7L commercial vehicle
engines on models in Europe and Japan.
Specialty Materials
-- Sales declined 12% compared with the fourth quarter of 2007, due to
lower volumes and the unfavorable impact of foreign exchange.
-- Segment profit was down 16% due to volume declines and inflation.
-- UOP's process technology helped develop second-generation biofuels used
by Air New Zealand, Japan Airlines and Continental Airlines, which each
successfully completed demonstration flights using this new alternative
fuel.
-- Advanced Fibers and Composites announced that its high-strength Spectra
fiber is now being used in industrial slings for offshore oil and gas
exploration and has also expanded its line of Spectra Shield II
ballistic material for body and vehicle armor.
Honeywell will discuss its results during its investor conference call today starting at 8:00 a.m. EST. To participate, please dial (719) 325-4755 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 30, until midnight, February 6, by dialing (719) 457-0820. The access code is 3381490.
Honeywell International is a $37 billion 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 additional information, please visit www.honeywell.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 Murray Grainger
(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com murray.grainger@honeywell.com
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
------------------------------------------------
(In millions except per share amounts)
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Product sales $6,849 $7,475 $29,212 $27,805
Service sales 1,863 1,800 7,344 6,784
----- ----- ----- -----
Net sales 8,712 9,275 36,556 34,589
----- ----- ------ ------
Costs, expenses and other
Cost of products sold (A) 5,294 5,851 23,043 21,629
Cost of services sold (A) 1,229 1,162 4,951 4,671
----- ----- ----- -----
6,523 7,013 27,994 26,300
Selling, general and administrative
expenses (A) 1,179 1,205 5,033 4,565
Other (income) expense (12) (6) (728) (53)
Interest and other financial charges 114 125 456 456
--- --- --- ---
7,804 8,337 32,755 31,268
----- ----- ------ ------
Income before taxes 908 938 3,801 3,321
Tax expense 201 249 1,009 877
--- --- ----- ---
Net income $707 $689 $2,792 $2,444
==== ==== ====== ======
Earnings per share of common stock -
basic $0.97 $0.92$3.79 $3.20
===== ===== ===== =====
Earnings per share of common stock -
assuming dilution $0.97 $0.91 $3.76 $3.16
===== ===== ===== =====
Weighted average number of shares
outstanding - basic 729 747 737 765
=== === === ===
Weighted average number of shares
outstanding - assuming dilution 730 758 744 774
=== === === ===
(A) Cost of products and services sold and selling, general and
administrative expenses include amounts for repositioning and other
charges, pension and other post-retirement expense, and stock
compensation expense.
Honeywell International Inc.
Segment Data (Unaudited)
-------------------------
(Dollars in millions)
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------ ------------
Net Sales 2008 2007 2008 2007
--------- ---- ---- ---- ----
Aerospace $3,229 $3,267 $12,650 $12,236
Automation and Control Solutions 3,534 3,442 14,018 12,478
Specialty Materials 1,086 1,240 5,266 4,866
Transportation Systems 863 1,326 4,622 5,009
Corporate - - - -
--- --- --- ---
Total $8,712 $9,275 $36,556 $34,589
====== ====== ======= =======
Reconciliation of Segment Profit to Income Before Taxes
-------------------------------------------------------
Three Months Twelve MonthsEnded Ended
December 31, December 31,
------------ ------------
Segment Profit 2008 2007 2008 2007
-------------- ---- ---- ---- ----
Aerospace $619 $614 $2,300 $2,197
Automation and Control Solutions 474 425 1,622 1,405
Specialty Materials 112 134 721 658
Transportation Systems 6 146 406 583
Corporate (51) (45) (204) (189)
--- --- ---- ----
Total Segment Profit 1,160 1,274 4,845 4,654
Other income/ (expense) (A) (2) 6 665 53
Interest and other financial charges (114) (125) (456) (456)
Stock compensation expense (B), (C) (21) (11) (128) (65)
Pension and other postretirement
expense (B) (24) (71) (113) (322)
Repositioning and other charges (B) (91) (135) (1,012) (543)
--- ---- ------ ----
Income before taxes $908 $938 $3,801 $3,321
==== ==== ====== ======
(A) Equity income/(loss) of affiliated companies is included in Segment
Profit, on a prospective basis, commencing January 1, 2008. Other
income/(expense) as presented above includes equity income/(loss) of
affiliated companies of $3 and $10 million for the three and twelve
months ended December 31, 2007, respectively.
(B) Amounts included in cost of products and services sold and selling,
general and administrative expenses.
(C) Costs associated with restricted stock units ("RSU") are excluded from
Segment Profit, on a prospective basis, commencing January 1, 2008.
Stock compensation expense, including RSU expense, totaled $17 and
$112 million for the three and twelve months ended December 31, 2007,
respectively. Stock option expense is included for all periods
presented.Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
--------------------------------------
(Dollars in millions)
December 31, December 31,
2008 2007
---- ----
ASSETS
Current assets:
Cash and cash equivalents $2,065 $1,829
Accounts, notes and other receivables 6,129 6,387
Inventories 3,848 3,861
Deferred income taxes 922 1,241
Other current assets 299 367
--- ---
Total current assets 13,263 13,685
Investments and long-term receivables 670 500
Property, plant and equipment - net 4,934 4,985
Goodwill 10,185 9,175
Other intangible assets - net 2,267 1,498
Insurance recoveries for asbestos related
liabilities 1,029 1,086
Deferred income taxes 2,135 637
Prepaid pension benefit cost 62 1,256
Other assets 945 983
--- ---
Total assets $35,490 $33,805
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $3,773 $3,962
Short-term borrowings 56 64
Commercial paper 1,431 1,756
Current maturities of long-term debt 1,023 418
Accrued liabilities 6,006 5,741
----- -----
Total current liabilities12,289 11,941
Long-term debt 5,865 5,419
Deferred income taxes 698 734
Postretirement benefit obligations other than
pensions 1,799 2,025
Asbestos related liabilities 1,538 1,405
Other liabilities 6,114 3,059
Shareowners' equity 7,187 9,222
----- -----
Total liabilities and shareowners' equity $35,490 $33,805
======= =======
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
-------------------------------------------------
(Dollars in millions)
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Cash flows from operating activities:
Net income $707 $689 $2,792 $2,444
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 210 217 903 837
Gain on sale of non-strategic
businesses and assets - 2 (635) (19)
Repositioning and other
charges 92 135 1,013 543
Net payments for repositioning
and other charges (209) (149) (446) (504)
Pension and other
postretirement expense 24 71 113 322
Pension and other
postretirement benefit
payments (61) (134) (214) (300)
Stock compensation expense 21 11 128 65
Deferred income taxes (133) 163 115 332Excess tax benefits from
share based payment
arrangements - (18) (21) (86)
Other 53 5 81 180
Changes in assets and
liabilities, net of the
effects of acquisitions and
divestitures:
Accounts, notes and other
receivables 857 136 392 (467)
Inventories 232 107 (161) (183)
Other current assets 29 (19) 25 17
Accounts payable (362) 124 (152) 397
Accrued liabilities (201) 100 (142) 333
---- --- ---- ---
Net cash provided by operating
activities 1,259 1,440 3,791 3,911
----- ----- ----- -----
Cash flows from investing activities:
Expenditures for property, plant
and equipment (332) (310) (884) (767)
Proceeds from disposals of
property, plant and equipment 1 11 53 98
Increase in investments (2) - (6) (20)
Decrease in investments 4 6 18 6
Cash paid for acquisitions,
net of cash acquired (73) (584) (2,181) (1,150)
Proceeds from sales of
businesses, net of fees
paid (12) - 909 51
Other 61 - 68 -
-- -- -- --
Net cash used for investing
activities (353) (877) (2,023) (1,782)
---- ---- ------ ------
Cash flows from financing activities:
Net (decrease) increase in
commercial paper (784) (221) (325) 1,078
Net decrease in short-term
borrowings (23) (7) (1) (3)
Payment of debt assumed with
acquisitions - - - (40)
Proceeds from issuance of
common stock 486 146 603
Proceeds from issuance of long-
term debt - - 1,487 1,885
Payments of long-term debt (3) (15) (428) (430)
Excess tax benefits from
share based payment
arrangements - 18 21 86
Repurchases of common stock - (203) (1,459) (3,986)
Cash dividends paid on
common stock (201) (187) (811) (767)
---- ---- ---- ----
Net cash used for financing
activities (1,007) (529) (1,370) (1,574)
------ ---- ------ ------
Effect of foreign exchange rate
changes on cash and cash equivalents (126) 8 (162) 50
---- - ---- --
Net (decrease) increase in cash and
cash equivalents (227) 42 236 605
Cash and cash equivalents at
beginning of period 2,292 1,787 1,829 1,224
----- ----- ----- -----
Cash and cash equivalents at end
of period $2,065 $1,829 $2,065 $1,829
====== ====== ====== ======
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to
----------------------------------------------------------
Free Cash Flow (Unaudited)
--------------------------
(Dollars in millions)
Three Months Twelve Months
Ended EndedDecember 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Cash provided by operating activities $1,259 $1,440 $3,791 $3,911
Expenditures for
property, plant and
equipment (332) (310) (884) (767)
---- ---- ---- ----
Free cash flow 927 1,130 2,907 3,144
--- ----- ----- -----
Cash taxes relating to the sale of
the Consumables Solutions business 166 - 166 -
--- - --- -
Free cash flow excluding cash
taxes relating to the sale
of the Consumables Solutions
business $1,093 $1,130 $3,073 $3,144
====== ====== ====== ======
We define free cash flow as cash provided by operating activities, less
cash expenditures for property, plant and equipment.
We believe that free cash flow and free cash flow, less cash taxes
related to the sale of the Consumables Solutions business, are useful to
investors and management as measures 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, or
repay debt obligations prior to their maturities. These metrics 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