Honeywell Reports First Quarter 2014 Sales Of $9.7 Billion; EPS Of $1.28 Per Share- Organic Sales Growth 1%, Up 3% Excluding Defense & Space- EPS Up 6% Year-Over-Year Reported, Up 10% Using Normalized Tax Rate- $0.10 EPS Gain Funding $0.11 EPS Restructuring And Other Actions- Increasing Proforma EPS Guidance To $5.40 - $5.55, From $5.35 - $5.55MORRIS TOWNSHIP, N.J., April 17, 2014 -- Honeywell (NYSE: HON)today announced its results for the first quarter of 2014:Total Honeywell($ Millions, except Earnings Per Share) 1Q 2013 1Q 2014 ChangeSales 9,328 9,679 4%Segment Margin 16.2% 16.5% 30 bpsOperating Income Margin 14.1% 14.2% 10 bpsEarnings Per Share $1.21 $1.28 6%Earnings Per Share (At 26.5% Tax Rate) $1.16 $1.28 10%Cash Flow from Operations 341 688 102%Free Cash Flow * 193 496 157%* Cash Flow from Operations Less Capital Expenditures"Honeywell had a good start to the year with strong margin expansion drivingbetter than expected earnings," said Honeywell Chairman and CEO Dave Cote. "Wesaw 3% organic sales growth ex-Defense & Space, with strong execution acrosseach of the businesses driving earnings above the high-end of our guidance. Weremain cautiously optimistic on the macro environment, even with some nicemomentum exiting the quarter in our short-cycle and long-cycle businessesdriving organic sales growth acceleration as we progress through the year. As aresult of the first quarter performance and overall favorable outlook for ourkey end markets, we're raising the low-end of our 2014 Proforma EPS outlook by$0.05 and our new guidance range is $5.40-$5.55. We are also increasing ourcash flow forecast for the year given the strong first quarter working capitalperformance. We remain confident in our outlook and intend to perform betterthan our peers driven by our diversity of opportunity, relentless seed plantingin new products and technologies, continued penetration of High Growth Regions(HGRs), and growing traction on key process initiatives. We've also proactivelyredeployed non-operating gains and operational earnings to fund smart newrepositioning projects benefiting 2015 and beyond. Our recently announcedorganizational changes demonstrate the strength of our organization, addfurther evidence to the effectiveness of the Honeywell operating model, andreaffirm our belief that the best is yet to come for Honeywell."The company is updating its full-year 2014 guidance and now expects:Full-Year Guidance 2014 2014 Change Prior Guidance Revised Guidance vs. 2013Sales $40.3 - $40.7B $40.3 - $40.7B 3% - 4%Segment Margin 16.6% - 16.9% 16.6% - 16.9% 30 - 60 bps(3)Operating Income Margin(1) 15.2% - 15.5% 15.2% - 15.5% 100 - 130 bpsEarnings Per Share(1) $5.35 - $5.55 $5.40 - $5.55 9% - 12%Free Cash Flow(2) $3.5 - $3.7B $3.8 - $4.0B ~15%1. Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment2. Cash Flow from Operations Less Capital Expenditures; Definition of Free Cash Flow No Longer Excludes NARCO Trust Establishment Payments, Cash Pension Contributions, and Cash Taxes Relating to the Sale of Available for Sale Investments3. Segment Margin ex-M&A up 50 - 80 bpsIn April 2014, Honeywell announced the realignment of our Honeywell ProcessSolutions (HPS) business from Automation and Control Solutions (ACS) intoPerformance Materials and Technologies (PMT). Effective with the reporting ofsecond quarter 2014 results, Honeywell will report its financial performancebased on the inclusion of HPS in PMT. During the second quarter of 2014Honeywell will make available segment results revised for the new reportingstructure to provide financial information on a basis consistent with the newreporting structure.First Quarter Segment PerformanceAerospace ($ Millions) 1Q 2013 1Q 2014 % ChangeSales 2,911 2,858 (2%)Segment Profit 551 549 ~FlatSegment Margin 18.9% 19.2% 30 bps * Sales were down (2%) compared with the first quarter of 2013 driven by an (8%) decline in Defense & Space sales as a result of planned program ramp downs and delays, as well as lower Government Services, partially offset by Commercial growth. Commercial OE sales were up 1% in the quarter driven by continued strong OE build rates and favorable platform mix, partially offset by lower regional jet sales. Commercial Aftermarket growth of 4% was driven by a 14% increase in spares sales, partially offset by lower maintenance activities. * Segment profit was approximately flat, and segment margins expanded 30 bps to 19.2%, driven by commercial excellence, productivity net of inflation and favorable aftermarket mix, partially offset by lower volume.Automation and Control Solutions ($ Millions) 1Q 2013 1Q 2014 % ChangeSales 3,786 4,074 8%Segment Profit 523 580 11%Segment Margin 13.8% 14.2% 40 bps * Sales were up 8% reported, 2% organic, compared with the first quarter of 2013, primarily driven by the favorable impact of acquisitions, growth in Energy, Safety, and Security, particularly Environmental and Combustion Controls (ECC) and Life Safety, with continued strong sales in U.S. residential end markets, new product introductions, and improving non-residential activity, partially offset by anticipated program ramp downs in Scanning & Mobility. ACS also had higher service and software sales in Process Solutions. * Segment profit was up 11% and segment margins expanded 40 bps to 14.2% driven by higher sales volume, commercial excellence and productivity net of inflation, partially offset by the dilutive impact of acquisitions and continued investments for growth.Performance Materials and Technologies ($ Millions) 1Q 2013 1Q 2014 % ChangeSales 1,717 1,754 2%Segment Profit 374 364 (3%)Segment Margin 21.8% 20.8% (100) bps * Sales were up 2% compared with the first quarter of 2013, driven by increased UOP catalyst and gas processing volume and higher volumes in Advanced Materials, partially offset by lower equipment, licensing and service sales, and pricing headwinds in Fluorine Products and Resins & Chemicals, which are expected to moderate over the remainder of the year. * Segment profit was down (3%) and segment margins decreased (100) bps to 20.8%, driven by unfavorable petrochemical catalyst shipment mix versus the prior year, price/raw headwinds in Fluorine Products and Resins & Chemicals, and continued investments for growth, partially offset by productivity net of inflation.Transportation Systems ($ Millions) 1Q 2013 1Q 2014 % ChangeSales 914 993 9%Segment Profit 111 154 39%Segment Margin 12.1% 15.5% 340 bps * Sales were up 9% reported, 7% organic, compared with the first quarter of 2013, driven by continued growth from new platform launches, higher global turbo gas penetration and light vehicle production, and increased commercial vehicle demand globally. * Segment profit was up 39% and segment margins increased 340 bps to 15.5% primarily driven by strong Turbo productivity and volume leverage, and operational improvements.Honeywell will discuss its results during its investor conference call todaystarting at 9:30 a.m. EDT. To participate, please dial (800) 862-9098(domestic) or (785) 424-1051 (international) a few minutes before the 9:30 a.m.EDT start. Please mention to the operator that you are dialing in forHoneywell's first quarter 2014 investor conference call or provide theconference code HONQ114. The live webcast of the investor call as well asrelated presentation materials will be available through the "InvestorRelations" section of the company's Website (http://www.honeywell.com/investor). Investors can access a replay of the conference call from 12:00 p.m. EDT,April 17, until 11:59 p.m. EDT, April 24, by dialing (800) 839-1162 (domestic)or (402) 220-0398 (international).Honeywell (www.honeywell.com) is a Fortune 100 diversified technology andmanufacturing leader, serving customers worldwide with aerospace products andservices; control technologies for buildings, homes, and industry;turbochargers; and performance materials. Based in Morris Township, N.J.,Honeywell's shares are traded on the New York, London, and Chicago StockExchanges. For more news and information on Honeywell, please visitwww.honeywellnow.com.This release contains certain statements that may be deemed "forward-lookingstatements" within the meaning of Section 21E of the Securities Exchange Act of1934. All statements, other than statements of historical fact, that addressactivities, events or developments that we or our management intends, expects,projects, believes or anticipates will or may occur in the future areforward-looking statements. Such statements are based upon certain assumptionsand assessments made by our management in light of their experience and theirperception 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 anumber of material risks and uncertainties, including but not limited toeconomic, competitive, governmental, and technological factors affecting ouroperations, markets, products, services and prices. Such forward-lookingstatements are not guarantees of future performance, and actual results,developments and business decisions may differ from those envisaged by suchforward-looking statements. We identify the principal risks and uncertaintiesthat affect our performance in our Form 10-K and other filings with theSecurities and Exchange Commission. Honeywell International Inc. Consolidated Statement of Operations (Unaudited) (Dollars in millions, except per share amounts) Three Months Ended March 31, 2014 2013Product sales $ 7,845 $ 7,474Service sales 1,834 1,854Net sales 9,679 9,328Costs, expenses and other Cost of products sold (A) 5,779 5,567 Cost of services sold (A) 1,188 1,216 6,967 6,783 Selling, general and administrative expenses (A) 1,339 1,229 Other (income) expense (117) (28) Interest and other financial charges 79 84 8,268 8,068Income before taxes 1,411 1,260Tax expense 375 291Net income 1,036 969Less: Net income attributable to the noncontrolling interest 19 3Net income attributable to Honeywell $ 1,017 $ 966Earnings per share of common stock - basic $ 1.30 $ 1.23Earnings per share of common stock - assuming dilution $ 1.28 $ 1.21Weighted average number of shares outstanding-basic 784.9 785.8Weighted average number of shares outstanding - assuming dilution 796.4 797.1(A) Cost of products and services sold and selling, general and administrativeexpenses include amounts for repositioning and other charges, pension and otherpostretirement (income) expense, and stock compensation expense. Honeywell International Inc. Segment Data (Unaudited) (Dollars in millions) Three Months Ended March 31,Net Sales 2014 2013Aerospace $ 2,858 $ 2,911Automation and Control Solutions 4,074 3,786Performance Materials and Technologies 1,754 1,717Transportation Systems 993 914 Total $ 9,679 $ 9,328 Reconciliation of Segment Profit to Income Before Taxes Three Months Ended March 31,Segment Profit 2014 2013Aerospace $ 549 $ 551Automation and Control Solutions 580 523Performance Materials and Technologies 364 374Transportation Systems 154 111Corporate (51) (51) Total segment profit 1,596 1,508Other income (expense) (A) 111 19Interest and other financial charges (79) (84)Stock compensation expense (B) (52) (54)Pension ongoing income (B) 61 21Other postretirement expense (B) (12) (22)Repositioning and other charges (B) (214) (128)Income before taxes $ 1,411 $ 1,260(A) Equity income (loss) of affiliated companies is included in segmentprofit.(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) March 31, December 31, 2014 2013ASSETSCurrent assets: Cash and cash equivalents $ 6,672 $ 6,422 Accounts, notes and other receivables 8,081 7,929 Inventories 4,407 4,293 Deferred income taxes 840 849 Investments and other current assets 1,531 1,671 Total current assets 21,531 21,164Investments and long-term receivables 465 393Property, plant and equipment - net 5,284 5,278Goodwill 13,028 13,046Other intangible assets - net 2,445 2,514Insurance recoveries for asbestos related liabilities 584 595Deferred income taxes 217 368Other assets 2,223 2,077 Total assets $ 45,777 $ 45,435LIABILITIES AND SHAREOWNERS' EQUITYCurrent liabilities: Accounts payable $ 5,133 $ 5,174 Short-term borrowings 88 97 Commercial paper 2,399 1,299 Current maturities of long-term debt 65 632 Accrued liabilities 6,668 6,979 Total current liabilities 14,353 14,181Long-term debt 6,804 6,801Deferred income taxes 757 804Postretirement benefit obligations other than pensions 998 1,019Asbestos related liabilities 1,156 1,150Other liabilities 3,490 3,734Redeemable noncontrolling interest 176 167Shareowners' equity 18,043 17,579 Total liabilities, redeemable noncontrolling interest and shareowners' equity $ 45,777 $ 45,435 Honeywell International Inc. Consolidated Statement of Cash Flows (Unaudited) (Dollars in millions) Three Months Ended March 31, 2014 2013Cash flows from operating activities: Net income $ 1,036 $ 969 Less: Net income attributable to the noncontrolling interest 19 3 Net income attributable to Honeywell 1,017 966 Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: Depreciation and amortization 238 248 Gain on sale of available for sale investments (105) - Repositioning and other charges 214 128 Net payments for repositioning and other charges (125) (98) Pension and other postretirement (income) expense (49) 1 Pension and other postretirement benefit payments (36) (171) Stock compensation expense 52 54 Deferred income taxes 2 27 Excess tax benefits from share based payment arrangements (30) (24) Other (24) (33) Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (154) (142) Inventories (115) (51) Other current assets 236 18 Accounts payable (41) (295) Accrued liabilities (392) (287)Net cash provided by operating activities 688 341Cash flows from investing activities: Expenditures for property, plant and equipment (192) (148) Proceeds from disposals of property, plant and equipment 7 - Increase in investments (631) (174) Decrease in investments 410 166 Cash paid for acquisitions, net of cash acquired - (122) Other 61 (33)Net cash used for investing activities (345) (311)Cash flows from financing activities: Net increase in commercial paper 1,100 800 Net (decrease) increase in short-term borrowings (10) 8 Proceeds from issuance of common stock 92 164 Proceeds from issuance of long-term debt 25 7 Payments of long-term debt (602) (600) Excess tax benefits from share based payment arrangements 30 24 Repurchases of common stock (320) (139) Cash dividends paid (363) (322)Net cash used for financing activities (48) (58)Effect of foreign exchange rate changes on cash and cash equivalents (45) (67)Net increase (decrease) in cash and cash equivalents 250 (95)Cash and cash equivalents at beginning of period 6,422 4,634Cash and cash equivalents at end of period $ 6,672 $ 4,539 Honeywell International Inc. Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) (Dollars in millions) Three Months Ended March 31, 2014 2013Cash provided by operating activities $ 688 $ 341Expenditures for property, plant and equipment (192) (148)Free cash flow $ 496 $ 193We define free cash flow as cash provided by operating activities less cashexpenditures for property, plant and equipment.We believe that this metric is useful to investors and management as a measureof cash generated by business operations that will be used to repay scheduleddebt maturities and can be used to invest in future growth through new businessdevelopment activities or acquisitions, and to pay dividends, repurchase stock,or repay debt obligations prior to their maturities. This metric can also beused to evaluate our ability to generate cash flow from business operations andthe impact that this cash flow has on our liquidity.Previously, we defined free cash flow as cash provided by operating activities,less cash expenditures for property, plant and equipment, cash pensioncontributions, NARCO Trust establishment payments and cash taxes relating tothe sale of available for sale investments Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) (Dollars in millions) Three Months Ended March 31, 2013Cash provided by operating activities $ 341Expenditures for property, plant and equipment (148) $ 193Cash pension contributions 134Free cash flow $ 327 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 March 31, 2014 2013Segment Profit $ 1,596 $ 1,508Stock compensation expense (A) (52) (54)Repositioning and other (A, B) (220) (137)Pension ongoing income (A) 61 21Other postretirement expense (A) (12) (22)Operating Income $ 1,373 $ 1,316Segment Profit $ 1,596 $ 1,508÷ Sales $ 9,679 $ 9,328Segment Profit Margin % 16.5% 16.2%Operating Income $ 1,373 $ 1,316÷ Sales $ 9,679 $ 9,328Operating Income Margin % 14.2% 14.1%(A) Included in cost of products and services sold and selling, general andadministrative expenses.(B) Includes repositioning, asbestos, environmental expenses and equity incomeadjustment.We believe these measures are useful to investors and management inunderstanding our ongoing operations and in analysis of ongoing operatingtrends. Honeywell International Inc. Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market Adjustment and Calculation of Segment Profit and Operating Income Margins Excluding Pension Mark-to-Market Adjustment (Unaudited) (Dollars in millions) Twelve Months Ended December 31, 2013Segment Profit $ 6,351Stock compensation expense (A) (170)Repositioning and other (A, B) (699)Pension ongoing expense (A) 90Pension mark-to-market adjustment (A) (51)Other postretirement expense (A) (20)Operating Income $ 5,501Pension mark-to-market adjustment (A) $ (51)Operating Income excluding pension mark-to-market adjustment $ 5,552Segment Profit $ 6,351÷ Sales $ 39,055Segment Profit Margin % 16.3%Operating Income $ 5,501÷ Sales $ 39,055Operating Income Margin % 14.1%Operating Income excluding pension mark-to-market adjustment $ 5,552÷ Sales $ 39,055Operating Income Margin excluding pension mark-to-marketadjustment % 14.2%(A) Included in cost of products and services sold and selling, general andadministrative expenses.(B) Includes repositioning, asbestos, environmental expenses and equity incomeadjustment.We believe these measures are useful to investors and management inunderstanding our ongoing operations and in analysis of ongoing operatingtrends. Honeywell International Inc. Calculation of EPS at 26.5% Tax Rate (Unaudited) (Dollars in millions, except per share amounts) Three Months Ended March 31, 2014 2013Income before taxes $ 1,411 $ 1,260Taxes at 26.5% 374 334Net income at 26.5% tax rate $ 1,037 $ 926Less: Net income attributable to the noncontrolling interest 19 3Net income attributable to Honeywell at 26.5% tax rate $ 1,018 $ 923Weighted average number of shares outstanding - assuming dilution 796.4 797.1EPS at 26.5% tax rate $ 1.28 $ 1.16We believe EPS adjusted to expected full-year tax rate at 26.5% is a measurethat is useful to investors and management in understanding our ongoingoperations and in analysis of ongoing operating trends. Honeywell International Inc. EPS Impact of Gain on Sale of Available for Sale Investments (Unaudited) (Dollars in millions, except per share amounts) Three Months Ended March 31, 2014Gain on sale of available for sale investments $ 105Taxes at 26.5% 28After tax gain on sale of available for sale investments $ 77EPS impact of gain on sale of available for sale investments(1) $ 0.10(1) Utilizes weighted average shares of 796.4 million. Honeywell International Inc. Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) (Dollars in millions) Twelve Months Ended December 31, 2013Cash provided by operating activities $ 4,335Expenditures for property, plant and equipment (947)Free cash flow $ 3,388We define free cash flow as cash provided by operating activities less cashexpenditures for property, plant and equipment.We believe that this metric is useful to investors and management as a measureof cash generated by business operations that will be used to repay scheduleddebt maturities and can be used to invest in future growth through newbusiness development activities or acquisitions, and to pay dividends,repurchase stock, or repay debt obligations prior to their maturities. Thismetric can also be used to evaluate our ability to generate cash flow frombusiness operations and the impact that this cash flow has on our liquidity.Previously, we defined free cash flow as cash provided by operatingactivities, less cash expenditures for property, plant and equipment, cashpension contributions, NARCO Trust establishment payments and cash taxesrelating to the sale of available for sale investments. Honeywell International Inc. Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) (Dollars in millions) Twelve Months Ended December 31, 2013Cash provided by operating activities $ 4,335Expenditures for property, plant and equipment (947) $ 3,388Cash pension contributions 156NARCO Trust establishment payments 164Cash taxes relating to the sale of available for sale investments 100Free cash flow $ 3,808 Honeywell International Inc. Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark-to-Market Adjustment (Unaudited) Twelve Months Ended December 31, 2013EPS $ 4.92Pension mark-to-market adjustment 0.05EPS, excluding pension mark-to-market adjustment $ 4.97We believe EPS, excluding pension mark-to-market adjustment is a measure thatis useful to investors and management in understanding our ongoing operationsand in analysis of ongoing operating trends.EPS utilizes weighted average shares outstanding - assuming dilution of 797.3million. Mark-to-market uses a blended tax rate of 25.5%. Honeywell International Inc. Defense and Space Sales (Unaudited) (Dollars in millions) Three Months Ended March 31, 2014 2013Defense and Space Sales $ 1,092 $ 1,192Contacts:Media Investor RelationsRobert C. Ferris Elena Doom(973) 455-3388 (973) [email protected] [email protected]
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