Honeywell Reports Third Quarter 2014 Sales Up 5% To $10.1 Billion; EPS Of $1.47 Per Share; Raising 2014 EPS Guidance-- Organic Sales Growth 5%; Strong Execution Across The Portfolio-- EPS Up 19% Reported, Up 14% Using Normalized Tax Rate-- Raising Low-End Proforma EPS Guidance To $5.50 - $5.55, From $5.45 - $5.55MORRIS TOWNSHIP, N.J., Oct. 17, 2014 -- Honeywell (NYSE: HON)today announced its results for the third quarter of 2014:Total Honeywell ($ Millions, except Earnings Per Share) 3Q 2013 3Q 2014 ChangeSales 9,647 10,108 5%Segment Margin 16.7% 17.4% 70 bpsOperating Income Margin 15.2% 16.2% 100 bpsEarnings Per Share $1.24 $1.47 19%Earnings Per Share (At 26.5% Tax Rate) $1.25 $1.43 14%Cash Flow from Operations 1,070 1,233 15%Free Cash Flow * 867 974 12%* Cash Flow from Operations Less Capital Expenditures"Organic sales growth and a double-digit earnings increase highlightedHoneywell's strong third quarter," said Honeywell Chairman and CEO Dave Cote."The continued integration and maturation of the Honeywell Operating Systemthroughout our global portfolio is helping to drive sales, margin, earnings,and cash flow higher, and plenty of runway remains. We are committed to ourongoing seed planting investments to bolster our great positions in goodindustries and continuous process improvements to mitigate ongoing globalmacroeconomic uncertainties. We are raising the low-end of our 2014 proformaEPS outlook by $0.05 to $5.50-5.55 (up 11%-12%), which brings us to thehigh-end of the initial guidance we provided almost a year ago. Looking aheadto 2015, we're once again planning for a slow growth macro environment, butexpect to continue delivering strong earnings growth. We're confident thatHoneywell will continue to outperform now and over the long-term driven by arelentless focus on new products and technologies, continued penetration ofhigh-growth regions, and sustained implementation of our key processinitiatives."The company is updating its full-year 2014 guidance and now expects:2014 Full-Year Guidance Change Prior Guidance Revised Guidance vs. 2013Sales $40.2 - $40.4B $40.3 - $40.4B 3% - 4%Segment Margin 16.8% - 17.0% ~17.0% ~70 bpsOperating Income Margin(1) 15.4% - 15.6% ~15.6% ~140 bpsEarnings Per Share(1) $5.45 - $5.55 $5.50 - $5.55 11% - 12%Free Cash Flow(2) $3.8 - $4.0B ~$3.9B ~15%1. Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment2. Cash Flow from Operations Less Capital ExpendituresThird Quarter Segment PerformanceAerospace ($ Millions) 3Q 2013 3Q 2014 % ChangeSales 3,889 3,895 ~FlatSegment Profit 730 790 8%Segment Margin 18.8% 20.3% 150 bps * Sales for the third quarter were up 3% organically, driven by growth across the portfolio, but were approximately flat on a reported basis due to the Friction Materials divestiture. Commercial OE sales were up 5% reflecting continued strong OE build rates, as well as an increase in Business and General Aviation (BGA) engine shipments. Commercial Aftermarket sales increased 2% driven by strong Air Transport and Regional (ATR) spares growth, partially offset by a decline in RMU (Retrofit, Modifications, and Upgrades) sales in BGA and lower repair and overhaul activities. Defense & Space sales grew 3% as a result of strong international growth and stabilization in U.S. government sales. Transportation Systems sales were down (10%) reported, primarily reflecting the Friction Materials divestiture, and up 4% organically driven by new platform launches, higher turbo gas penetration globally, and increased commercial vehicle demand in Europe, partially offset by moderating EU light vehicle production. * Segment profit was up 8%, and segment margins expanded 150 bps to 20.3%, driven by productivity net of inflation, commercial excellence, and the favorable impact of the Friction Materials divestiture.Automation and Control Solutions ($ Millions) 3Q 2013 3Q 2014 % ChangeSales 3,375 3,671 9%Segment Profit 523 583 11%Segment Margin 15.5% 15.9% 40 bps * Sales were up 9% reported, 4% organically, compared with the third quarter of 2013, primarily driven by the favorable impact of the Intermec acquisition and strong organic growth across Energy, Safety, and Security (ESS), particularly in Scanning & Mobility, Industrial Safety, Security, and Fire. Building Solutions & Distribution (BSD) saw continued strength in the Americas Distribution business. * Segment profit was up 11% and segment margins expanded 40 bps to 15.9% driven by higher volume, commercial excellence, and productivity net of inflation, partially offset by the dilutive impact of the Intermec acquisition.Performance Materials and Technologies ($ Millions) 3Q 2013 3Q 2014 % ChangeSales 2,383 2,542 7%Segment Profit 413 444 8%Segment Margin 17.3% 17.5% 20 bps * Sales were up 7% on both an organic and reported basis compared with the third quarter of 2013, driven by UOP catalyst and gas processing growth, an acceleration of sales growth in Process Solutions, and higher sales across Advanced Materials, particularly Fluorine Products. * Segment profit was up 8% and segment margins increased 20 bps to 17.5%, driven by higher volume and productivity net of inflation, partially offset by price/raws headwinds in Resins & Chemicals and continued investments for growth.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 third quarter 2014 investor conference call or provide theconference code HONQ314. 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,October 17, until 11:59 p.m. EDT, October 24, by dialing (800) 723-5154(domestic) or (402) 220-2661 (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. For more news and information onHoneywell, please visit www.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.Contacts:Media Investor RelationsRobert C. Ferris Elena Doom(973) 455-3388 (973) [email protected] [email protected] 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, 2014 2013 2014 2013Product sales $ 8,090 $ 7,693 $ 24,213 $ 22,911Service sales 2,018 1,954 5,827 5,757Net sales 10,108 9,647 30,040 28,668Costs, expenses and other Cost of products sold (A) 5,860 5,722 17,686 17,039 Cost of services sold (A) 1,268 1,220 3,705 3,713 7,128 6,942 21,391 20,752 Selling, general and administrative expenses (A) 1,344 1,242 4,058 3,752 Other (income) expense (21) (1) (159) (53) Interest and other financial charges 77 80 236 244 8,528 8,263 25,526 24,695Income before taxes 1,580 1,384 4,514 3,973Tax expense 388 377 1,160 975Net income 1,192 1,007 3,354 2,998Less: Net income attributable to the noncontrolling interest 25 17 71 21Net income attributable to Honeywell $ 1,167 $ 990 $ 3,283 $ 2,977Earnings per share of common stock - basic $ 1.49 $ 1.26 $ 4.18 $ 3.78Earnings per share of common stock - assuming dilution $ 1.47 $ 1.24 $ 4.13 $ 3.73Weighted average number of shares outstanding-basic 784.5 786.3 784.6 786.6Weighted average number of shares outstanding - assuming dilution 795.0 797.1 795.6 797.5(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 Nine Months Ended September 30, September 30,Net Sales 2014 2013 2014 2013Aerospace $ 3,895 $ 3,889 $ 11,756 $ 11,658Automation and Control Solutions 3,671 3,375 10,640 9,724Performance Materials and Technologies 2,542 2,383 7,644 7,286 Total $ 10,108 $ 9,647 $ 30,040 $ 28,668 Reconciliation of Segment Profit to Income Before Taxes Three Months Ended Nine Months Ended September 30, September 30,Segment Profit 2014 2013 2014 2013Aerospace $ 790 $ 730 $ 2,252 $ 2,101Automation and Control Solutions 583 523 1,587 1,413Performance Materials and Technologies 444 413 1,392 1,325Corporate (58) (51) (167) (157) Total segment profit 1,759 1,615 5,064 4,682Other income (expense) (A) 11 (10) 132 22Interest and other financial charges (77) (80) (236) (244)Stock compensation expense (B) (41) (38) (143) (129)Pension ongoing income (B) 62 22 187 68Other postretirement expense (B) (12) (5) (37) (7)Repositioning and other charges (B) (122) (120) (453) (419)Income before taxes $ 1,580 $ 1,384 $ 4,514 $ 3,973 (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, 2014 2013ASSETSCurrent assets: Cash and cash equivalents $ 6,428 $ 6,422 Accounts, notes and other receivables 8,315 7,929 Inventories 4,485 4,293 Deferred income taxes 794 849 Investments and other current assets 2,336 1,671 Total current assets 22,358 21,164Investments and long-term receivables 447 393Property, plant and equipment - net 5,189 5,278Goodwill 12,923 13,046Other intangible assets - net 2,288 2,514Insurance recoveries for asbestos related liabilities 466 595Deferred income taxes 195 368Other assets 2,315 2,077 Total assets $ 46,181 $ 45,435LIABILITIES AND SHAREOWNERS' EQUITYCurrent liabilities: Accounts payable $ 5,212 $ 5,174 Short-term borrowings 91 97 Commercial paper 1,849 1,299 Current maturities of long-term debt 189 632 Accrued liabilities 6,606 6,979 Total current liabilities 13,947 14,181Long-term debt 6,760 6,801Deferred income taxes 891 804Postretirement benefit obligations other than pensions 955 1,019Asbestos related liabilities 1,131 1,150Other liabilities 3,230 3,734Redeemable noncontrolling interest 204 167Shareowners' equity 19,063 17,579 Total liabilities, redeemable noncontrolling interest and shareowners' equity $ 46,181 $ 45,435 Honeywell International Inc Consolidated Statement of Cash Flows (Unaudited) (Dollars in millions) Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 2014 2013Cash flows from operating activities: Net income $ 1,192 $ 1,007 $ 3,354 $ 2,998 Less: Net income attributable to the noncontrolling interest 25 17 71 21 Net income attributable to Honeywell 1,167 990 3,283 2,977 Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: Depreciation and amortization 227 245 698 740 Loss on sale of non-strategic businesses and assets 1 - 11 - Gain on sale of available for sale investments - - (105) - Repositioning and other charges 122 120 453 419 Net payments for repositioning and other charges (167) (220) (301) (517) Pension and other postretirement income (50) (17) (150) (61) Pension and other postretirement benefit payments (38) (40) (123) (253) Stock compensation expense 41 38 143 129 Deferred income taxes 187 72 255 257 Excess tax benefits from share (22) (20) (71) (101) based payment arrangements Other (274) 169 (207) 35 Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (104) (187) (529) (382) Inventories (57) (58) (279) (94) Other current assets 49 (32) 181 (28) Accounts payable 54 (2) 154 (32) Accrued liabilities 97 12 (151) (422)Net cash provided by operating activities 1,233 1,070 3,262 2,667Cash flows from investing activities: Expenditures for property, plant and equipment (259) (203) (680) (547) Proceeds from disposals of property, plant and equipment 1 1 12 7 Increase in investments (1,415) (243) (3,139) (703) Decrease in investments 1,181 272 2,124 648 Cash paid for acquisitions, net of cash acquired (2) (603) (4) (1,063) Proceeds from sales of businesses, net of fees paid 156 - 157 - Other (96) 85 (109) 104Net cash used for investing activities (434) (691) (1,639) (1,554)Cash flows from financing activities: Net (decrease) increase in commercial paper (400) 899 550 1,699 Net increase (decrease) in short-term borrowings 1 (3) (5) 18 Proceeds from issuance of common stock 45 59 206 362 Proceeds from issuance of long-term debt 34 14 79 27 Payments of long-term debt (1) (3) (607) (604) Excess tax benefits from share based payment arrangements 22 20 71 101 Repurchases of common stock (138) (167) (689) (769) Cash dividends paid (365) (330) (1,101) (995) Other (7) 28 (7) 28Net cash (used for) provided by financing activities (809) 517 (1,503) (133)Effect of foreign exchange rate changes on cash and cash equivalents (144) 54 (114) (115)Net (decrease) increase in cash and cash equivalents (154) 950 6 865Cash and cash equivalents at beginning of period 6,582 4,549 6,422 4,634Cash and cash equivalents at end of period $ 6,428 $ 5,499 $ 6,428 $ 5,499 Honeywell International Inc Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) (Dollars in millions) Three Months Ended September 30, 2014 2013Cash provided by operating activities $ 1,233 $ 1,070Expenditures for property, plant and (259) (203) equipmentFree cash flow $ 974 $ 867We 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. 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, 2014 2013Segment Profit $ 1,759 $ 1,615Stock compensation expense (A) (41) (38)Repositioning and other (A, B) (132) (131)Pension ongoing income (A) 62 22Other postretirement expense (A) (12) (5)Operating Income $ 1,636 $ 1,463Segment Profit $ 1,759 $ 1,615÷ Sales $ 10,108 $ 9,647Segment Profit Margin % 17.4% 16.7%Operating Income $ 1,636 $ 1,463÷ Sales $ 10,108 $ 9,647Operating Income Margin % 16.2% 15.2%(A) Included in cost of products and services sold and selling, general and administrative expenses(B) Includes repositioning, asbestos, environmental expenses and equity income adjustmentWe 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 September 30, 2014 2013Income before taxes $ 1,580 $ 1,384Taxes at 26.5% 419 367Net income at 26.5% tax rate $ 1,161 $ 1,017Less: Net income attributable to the noncontrolling interest 25 17Net income attributable to Honeywell at 26.5% tax rate $ 1,136 $ 1,000Weighted average number of shares outstanding - assuming dilution 795.0 797.1EPS at 26.5% tax rate $ 1.43 $ 1.25We 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 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 income (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-market adjustment % 14.2%(A) Included in cost of products and services sold and selling, general and administrative expenses(B) Includes repositioning, asbestos, environmental expenses and equity income adjustmentWe 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 billions) 2014 GuidanceSegment Profit $6.8 - 6.9Stock compensation expense (A) ~(0.2)Repositioning and other (A, B) ~(0.6)Pension ongoing income (A) ~0.2Pension mark-to-market adjustment (A) TBDOther postretirement expense (A) ~(0.1)Operating Income $6.2 - 6.3Pension mark-to-market adjustment (A) TBDOperating Income excluding pension mark-to-market adjustment $6.2 - 6.3Segment Profit $6.8 - 6.9÷ Sales $40.3 - 40.4Segment Profit Margin % ~ 17.0%Operating Income $6.2 - 6.3÷ Sales $40.3 - 40.4Operating Income Margin % ~ 15.6%Operating Income excluding pension mark-to-market adjustment $6.2 - 6.3÷ Sales $40.3 - 40.4Operating Income Margin excluding pension mark-to-market adjustment % ~ 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 adjustmentWe believe these measures are useful to investors and management inunderstanding our ongoing operations and in analysis of ongoing operatingtrends. 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 ameasure of cash generated by business operations that will be used to repayscheduled debt maturities and can be used to invest in future growth throughnew business 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. 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%.SOURCE Honeywell