Honeywell Reports Second Quarter 2014 Sales Up 6% To $10.3 Billion; EPS Of $1.38 Per Share; Raising 2014 EPS Guidance-- Organic Sales Growth 3%; Strong Execution Across The Portfolio-- EPS Up 8% Reported, Up 12% Using Normalized Tax Rate-- Raising Low-End Proforma EPS Guidance To $5.45 - $5.55, From $5.40 - $5.55MORRIS TOWNSHIP, N.J., July 18, 2014 -- Honeywell (NYSE: HON)today announced its results for the second quarter of 2014:Total Honeywell($ Millions, except Earnings Per Share) 2Q 2013 2Q 2014 ChangeSales 9,693 10,253 6%Segment Margin 16.1% 16.7% 60 bpsOperating Income Margin 14.3% 15.4% 110 bpsEarnings Per Share $1.28 $1.38 8%Earnings Per Share (At 26.5% Tax Rate) $1.22 $1.37 12%Cash Flow from Operations 1,256 1,341 7%Free Cash Flow * 1,060 1,112 5%* Cash Flow from Operations Less Capital Expenditures"Honeywell had another terrific quarter and a very good first half of 2014,"said Honeywell Chairman and CEO Dave Cote. "Strong execution across ourbusinesses and continued momentum across the portfolio helped us to deliverstronger than expected earnings. We saw 6% sales growth and margin expansion inevery business as our key growth and productivity initiatives continue to makea difference. Our short-cycle businesses, particularly Energy, Safety andSecurity, and Turbo Technologies, are benefiting from improving end markets,new product introductions, and geographic expansion, while our long-cyclebusinesses are growing robust backlogs supported by favorable macro trends andstrong win rates. Our recently announced closing of the sale of FrictionMaterials was a significant step in our effort to align the Honeywell portfolioaround Great Positions in Good Industries. We believe that our portfolio iswell positioned for continued growth. As a result of our first halfperformance, we are raising the low end of our 2014 proforma EPS guidance by$0.05 with the expectation of improved organic growth and continued marginexpansion in the second half of the year."The company is updating its full-year 2014 guidance and now expects:Full-Year Guidance 2014 2014 Change Prior Guidance Revised Guidance(3) vs. 2013Sales $40.3 - $40.7B $40.2 - $40.4B 3% - 4%Segment Margin 16.6% - 16.9% 16.8% - 17.0% 50 - 70 bpsOperating Income Margin(1) 15.2% - 15.5% 15.4% - 15.6% 120 - 140 bpsEarnings Per Share(1) $5.40 - $5.55 $5.45 - $5.55 10% - 12%Free Cash Flow(2) $3.8 - $4.0B $3.8 - $4.0B ~15%1. Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment2. Cash Flow from Operations Less Capital Expenditures3. Reflects Absence Of (~$300M) Friction Materials Sales in 2H 2014On July 14, Honeywell announced that it will realign its Transportation Systemsbusiness segment with its Aerospace business segment to better take advantageof the engineering and technology similarities and the shared business modelsbetween these two business segments. Under the realigned segment reportingstructure, the Company will have three business segments: Aerospace, Automationand Control Solutions, and Performance Materials and Technologies. Thisrealignment has no impact on the Company's historical consolidated financialposition, results of operations or cash flows. Effective with the reporting ofthird quarter 2014 results, the Company will report its financial performancebased on the inclusion of Transportation Systems in Aerospace. To providehistorical information on a basis consistent with its new reporting structure,the Company will make available during the third quarter of 2014 certainhistorical segment results recast to conform to the new reporting structure.The recasted financial information will not represent a restatement ofpreviously issued financial statements.Second Quarter Segment PerformanceAerospace($ Millions) 2Q 2013 2Q 2014 % ChangeSales 2,997 2,991 ~FlatSegment Profit 583 592 2%Segment Margin 19.5% 19.8% 30 bps * Sales were approximately flat compared with the second quarter of 2013 driven by 1% Commercial sales growth, offset by a (1%) decline in Defense & Space. Commercial OE sales were approximately flat in the quarter reflecting continued growth in OE build rates, offset by higher BGA OEM payments and engine shipment timing. Commercial Aftermarket growth of 1% was driven by an increase in spares sales, partially offset by fewer maintenance events. Defense & Space sales declined (1%) as a result of lower sales to the U.S. government, partially offset by strong international growth. * Segment profit was up 2%, and segment margins expanded 30 bps to 19.8%, driven by commercial excellence and productivity net of inflation, partially offset by BGA OEM payments, higher OE mix, and continued investments for growth.Automation and Control Solutions($ Millions) 2Q 2013 2Q 2014 % ChangeSales 3,270 3,607 10%Segment Profit 467 533 14%Segment Margin 14.3% 14.8% 50 bps * Sales were up 10% reported, 3% organic, compared with the second quarter of 2013, primarily driven by the favorable impact of acquisitions net of divestitures and growth in Energy, Safety, and Security, particularly Environmental and Combustion Controls and Honeywell Scanning & Mobility. ACS benefitted from strength in U.S. residential end markets and new product introductions, as well as continued growth in fire, gas, and the Americas Distribution business. * Segment profit was up 14% and segment margins expanded 50 bps to 14.8% driven by commercial excellence, productivity net of inflation, and higher volume, partially offset by the dilutive impact of acquisitions and continued investments for growth.Performance Materials and Technologies($ Millions) 2Q 2013 2Q 2014 % ChangeSales 2,479 2,636 6%Segment Profit 438 475 8%Segment Margin 17.7% 18.0% 30 bps * Sales were up 6% compared with the second quarter of 2013, driven by UOP catalyst and gas processing growth and higher sales in Advanced Materials, particularly Fluorine Products. * Segment profit was up 8% and segment margins increased 30 bps to 18.0%, driven by productivity net of inflation and higher volume, partially offset by price/raw headwinds in Resins & Chemicals, unfavorable UOP catalyst shipment mix versus the prior year, and continued investments for growth.Transportation Systems($ Millions) 2Q 2013 2Q 2014 % ChangeSales 947 1,019 8%Segment Profit 126 167 33%Segment Margin 13.3% 16.4% 310 bps * Sales were up 8% reported, 4% organic, compared with the second quarter of 2013, driven by continued growth from new platform launches, higher global automotive production, and increased commercial vehicle demand in Europe. * Segment profit was up 33% and segment margins increased 310 bps to 16.4% 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 second quarter 2014 investor conference call or provide theconference code HONQ214. 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,July 18, until 11:59 p.m. EDT, July 25, by dialing (800) 757-4768 (domestic) or(402) 220-7227 (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.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 Six Months Ended June 30, June 30, 2014 2013 2014 2013Product sales $ 8,278 $ 7,744 $ 16,123 $ 15,218Service sales 1,975 1,949 3,809 3,803Net sales 10,253 9,693 19,932 19,021Costs, expenses and other Cost of products sold (A) 6,047 5,750 11,826 11,317 Cost of services sold (A) 1,249 1,277 2,437 2,493 7,296 7,027 14,263 13,810 Selling, general and administrative expenses (A) 1,375 1,281 2,714 2,510 Other (income) expense (21) (24) (138) (52) Interest and other financial charges 80 80 159 164 8,730 8,364 16,998 16,432Income before taxes 1,523 1,329 2,934 2,589Tax expense 397 307 772 598Net income 1,126 1,022 2,162 1,991Less: Net income attributable to the noncontrolling interest 27 1 46 4Net income attributable to Honeywell $ 1,099 $ 1,021 $ 2,116 $ 1,987Earnings per share of common stock - basic $ 1.40 $ 1.30 $ 2.70 $ 2.53Earnings per share of common stock - assuming dilution $ 1.38 $ 1.28 $ 2.66 $ 2.49Weighted average number of shares outstanding-basic 784.5 787.6 784.7 786.7Weighted average number of shares outstanding - assuming dilution 795.4 798.1 795.9 797.6(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 Six Months Ended June 30, June 30,Net Sales 2014 2013 2014 2013Aerospace $ 2,991 $ 2,997 $ 5,849 $ 5,908Automation and Control Solutions 3,607 3,270 6,969 6,349Performance Materials and Technologies 2,636 2,479 5,102 4,903Transportation Systems 1,019 947 2,012 1,861 Total $ 10,253 $ 9,693 $ 19,932 $ 19,021Reconciliation of Segment Profit to Income Before Taxes Three Months Ended Six Months Ended June 30, June 30,Segment Profit 2014 2013 2014 2013Aerospace $ 592 $ 583 $ 1,141 $ 1,134Automation and Control Solutions 533 467 1,004 890Performance Materials and Technologies 475 438 948 912Transportation Systems 167 126 321 237Corporate (58) (55) (109) (106) Total segment profit 1,709 1,559 3,305 3,067Other income (expense) (A) 10 13 121 32Interest and other financial charges (80) (80) (159) (164)Stock compensation expense (B) (50) (37) (102) (91)Pension ongoing income (B) 64 25 125 46Other postretirement income (expense) (B) (13) 20 (25) (2)Repositioning and other charges (B) (117) (171) (331) (299)Income before taxes $ 1,523 $ 1,329 $ 2,934 $ 2,589(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) June 30, December 31, 2014 2013ASSETSCurrent assets: Cash and cash equivalents $ 6,582 $ 6,422 Accounts, notes and other receivables 8,350 7,929 Inventories 4,511 4,293 Deferred income taxes 803 849 Investments and other current assets 2,207 1,671 Total current assets 22,453 21,164Investments and long-term receivables 488 393Property, plant and equipment - net 5,316 5,278Goodwill 13,049 13,046Other intangible assets - net 2,378 2,514Insurance recoveries for asbestos related liabilities 432 595Deferred income taxes 176 368Other assets 2,304 2,077 Total assets $ 46,596 $ 45,435LIABILITIES AND SHAREOWNERS' EQUITYCurrent liabilities: Accounts payable $ 5,276 $ 5,174 Short-term borrowings 96 97 Commercial paper 2,249 1,299 Current maturities of long-term debt 60 632 Accrued liabilities 6,643 6,979 Total current liabilities 14,324 14,181Long-term debt 6,839 6,801Deferred income taxes 795 804Postretirement benefit obligations other than pensions 978 1,019Asbestos related liabilities 1,146 1,150Other liabilities 3,508 3,734Redeemable noncontrolling interest 189 167Shareowners' equity 18,817 17,579 Total liabilities, redeemable noncontrolling interest and shareowners' equity $ 46,596 $ 45,435 Honeywell International Inc Consolidated Statement of Cash Flows (Unaudited) (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013Cash flows from operating activities: Net income $ 1,126 $ 1,022 $ 2,162 $ 1,991 Less: Net income attributable to the noncontrolling interest 27 1 46 4 Net income attributable to Honeywell 1,099 1,021 2,116 1,987 Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: Depreciation and amortization 233 247 471 495 Loss on sale of non-strategic businesses and assets 10 - 10 - Gain on sale of available for sale investments - - (105) - Repositioning and other charges 117 171 331 299 Net payments for repositioning and other charges (9) (199) (134) (297) Pension and other postretirement income (51) (45) (100) (44) Pension and other postretirement benefit payments (49) (42) (85) (213) Stock compensation expense 50 37 102 91 Deferred income taxes 66 158 68 185 Excess tax benefits from share based payment arrangements (19) (57) (49) (81) Other 91 (101) 67 (134) Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (271) (53) (425) (195) Inventories (107) 15 (222) (36) Other current assets (104) (14) 132 4 Accounts payable 141 265 100 (30) Accrued liabilities 144 (147) (248) (434)Net cash provided by operating activities 1,341 1,256 2,029 1,597Cash flows from investing activities: Expenditures for property, plant and equipment (229) (196) (421) (344) Proceeds from disposals of property, plant and equipment 4 6 11 6 Increase in investments (1,093) (286) (1,724) (460) Decrease in investments 533 210 943 376 Cash paid for acquisitions, net of cash acquired (2) (338) (2) (460) Proceeds from sales of businesses, net of fees paid 1 - 1 - Other (74) 52 (13) 19Net cash used for investing activities (860) (552) (1,205) (863)Cash flows from financing activities: Net (decrease) increase in commercial paper (150) - 950 800 Net increase (decrease) in short-term borrowings 4 13 (6) 21 Proceeds from issuance of common stock 69 139 161 303 Proceeds from issuance of long-term debt 20 6 45 13 Payments of long-term debt (4) (1) (606) (601) Excess tax benefits from share based payment arrangements 19 57 49 81 Repurchases of common stock (231) (463) (551) (602) Cash dividends paid (373) (343) (736) (665)Net cash used for financing activities (646) (592) (694) (650)Effect of foreign exchange rate changes on cash and cash equivalents 75 (102) 30 (169)Net (decrease) increase in cash and cash equivalents (90) 10 160 (85)Cash and cash equivalents at beginning of period 6,672 4,539 6,422 4,634Cash and cash equivalents at end of period $ 6,582 $ 4,549 $ 6,582 $ 4,549 Honeywell International Inc Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) (Dollars in millions) Three Months Ended June 30, 2014 2013Cash provided by operating activities $ 1,341 $ 1,256Expenditures for property, plant and equipment (229) (196)Free cash flow $ 1,112 $ 1,060We 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. 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 June 30, 2014 2013Segment Profit $ 1,709 $ 1,559Stock compensation expense (A) (50) (37)Repositioning and other (A, B) (128) (182)Pension ongoing income (A) 64 25Other postretirement income (expense) (A) (13) 20Operating Income $ 1,582 $ 1,385Segment Profit $ 1,709 $ 1,559÷ Sales $ 10,253 $ 9,693Segment Profit Margin % 16.7% 16.1%Operating Income $ 1,582 $ 1,385÷ Sales $ 10,253 $ 9,693Operating Income Margin % 15.4% 14.3%(A) Included in cost of products and services sold and selling, general and administrative expenses.(B) Includes repositioning, asbestos, environmental expenses and equity income adjustment.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 June 30, 2014 2013Income before taxes $ 1,523 $ 1,329Taxes at 26.5% 404 352Net income at 26.5% tax rate $ 1,119 $ 977Less: Net income attributable to the noncontrolling interest 27 1Net income attributable to Honeywell at 26.5% tax rate $ 1,092 $ 976Weighted average number of shares outstanding - assuming dilution 795.4 798.1EPS at 26.5% tax rate $ 1.37 $ 1.22We believe EPS adjusted to expected full-year tax rate at 26.5% is ameasure that is useful to investors and management in understanding ourongoing operations 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 adjustment.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 billions) 2014 GuidanceSegment Profit $6.7 - 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 $6.1 - 6.3Pension mark-to-market adjustment (A) TBDOperating Income excluding pension mark-to-market adjustment $6.1 - 6.3Segment Profit $6.7 - 6.9÷ Sales $40.2 - 40.4Segment Profit Margin % 16.8% - 17.0%Operating Income $6.1 - 6.3÷ Sales $40.2 - 40.4Operating Income Margin % 15.4% - 15.6%Operating Income excluding pension mark-to-market adjustment $6.1 - 6.3÷ Sales $40.2 - 40.4Operating Income Margin excluding pension mark-to-market adjustment % 15.4% - 15.6%(A) Included in cost of products and services sold and selling, general and administrative expenses.(B) Includes repositioning, asbestos, environmental expenses and equity income adjustment.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 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) $ 3,388We 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 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. 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