Honeywell Reports Third Quarter Sales of $7.7 Billion and Earnings of $0.80 Per Share

MORRIS TOWNSHIP, N.J., Oct. 23 /PRNewswire-FirstCall/ -- Honeywell (NYSE: HON) today announced third quarter 2009 sales of $7.7 billion, in line with expectations, versus $9.3 billion in the third quarter last year. Earnings were $0.80 per share compared to $0.97 per share in the third quarter of 2008. Third quarter 2009 EPS included the positive impact of lower than expected tax expense in the quarter of approximately $0.04, which the company expects to be offset on a full-year basis by a higher income tax rate in the fourth quarter of 2009. Cash flow from operations was $1,148 million versus $769 million last year, and free cash flow (cash flow from operations less capital expenditures) was $1,022 million versus $556 million in the third quarter of 2008.

"Honeywell is positioning its businesses for long-term growth by continuing to invest in new products and services, geographic expansion, and key process initiatives," said Honeywell Chairman and Chief Executive Officer Dave Cote. "We executed well in the third quarter with sales on track and better than expected earnings and free cash flow performance. We're particularly pleased with our free cash flow performance year-to-date, which reflects our strong operating disciplines and working capital controls. These results reflect the impact of the growth investments and productivity actions we have taken in the midst of tough market conditions."

"Our employees have responded remarkably in support of both our growth initiatives and productivity actions," continued Cote. "Their contributions have enabled us to meet our performance objectives despite ongoing volume headwinds. By preserving our industrial base and continuing to build a robust pipeline of differentiated technologies and new products for the global marketplace, we're confident Honeywell will emerge from this period a much stronger company, ready to grow and build on our great positions in good industries."

Honeywell forecasts 2009 sales of approximately $31 billion, earnings per share of $2.85 and free cash flow of $3 billion.

Segment Highlights

Aerospace

  • Sales were down 16% compared with the third quarter of 2008, resulting from lower volumes in Commercial Aerospace, partially offset by higher sales of original equipment for military platforms, logistics services and advanced aircraft modifications, and upgrades.
  • Segment profit was down 12%, primarily due to volume declines, however segment margin increased 80 bps to 17.4% driven by cost savings initiatives and benefits from prior repositioning actions.
  • Honeywell SmartPath(TM) Precision Landing System received FAA System Design Approval, making it the first ground-based augmentation system (GBAS) to receive this distinction. SmartPath provides differential Global Positioning System (GPS) corrections to replace or supplement older landing system technology such as Instrument Landing System (ILS), enabling more precision, more flight path flexibility, and more airport throughput.
  • Honeywell signed a $77 million contract with AWAS, one of the world's leading aircraft leasing companies, to provide safety and navigational avionics and its fuel-efficient Auxiliary Power Unit (APU). The advanced avionics include IntuVue(TM), Honeywell's 3-D weather radar that allows pilots to better see and avoid weather, wind shear and turbulence, ensuring a safer and more comfortable ride for passengers, as well as cost savings for the airlines.
  • Honeywell won a $185 million contract with the United Kingdom's Ministry of Defense to provide T55-L-714A engines and spares to retrofit their fleet of Chinook helicopters. The T55-L-714A engine increases power by 17%, increases maintenance intervals and reduces fuel consumption by nearly 5%.

Automation and Control Solutions

  • Sales were down 14%, compared with the third quarter of 2008, resulting from slower economic growth and the unfavorable impact of foreign exchange, partially offset by continued growth in emerging regions, new product introductions, and the net favorable impact from acquisitions and divestitures.
  • Segment profit was flat due to lower sales, while segment margin increased 180 bps to 13.5% driven by cost savings initiatives and benefits from prior repositioning actions.
  • Building Solutions completed one of the largest solar projects for the Army at Fort Dix, N.J., part of an energy savings performance contract (ESPC) valued at $17.6 million. The ESPC will decrease energy consumption at the post by almost 10% annually.
  • Building Solutions signed a $33.6 million, 20-year energy efficiency and facility renewal program with the Minneapolis Public Housing Authority (MPHA). The program will help MPHA improve its infrastructure and reduce energy consumption, saving more than $3.7 million in utility costs per year. The program, which will impact more than 40 high-rise buildings and 700 single-family residences across the city, is one of the largest projects of its kind.
  • Process Solutions was selected to automate Flambeau River Biofuels, the largest green diesel plant in the United States. Honeywell will provide the Park Falls, Wisconsin plant with a fully-integrated system to help produce 18 million gallons of green diesel annually from wood waste and forest residue.
  • Honeywell Life Safety received a $3.5 million order from Y-12 National Security Complex in Oak Ridge, Tennessee, a U.S. Department of Energy facility, for respiratory protection products.

Transportation Systems

  • Sales were down 24% compared with the third quarter of 2008 due to lower volumes primarily driven by lower sales to global automotive OE customers and the negative impact of foreign exchange, partially offset by new platform launches with automotive OE customers and share gains in the automotive aftermarket retail channel.
  • Segment profit was down 39% and segment margin decreased 170 bps to 7.1% due to lower sales volumes partially offset by cost savings initiatives and benefits from prior restructuring actions.
  • Turbo Technologies was awarded contracts estimated at more than $370 million in revenue over the life of these programs. The contracts, which include critical platform wins with key customers in Europe, Asia, and the U.S. on both gasoline and diesel passenger and commercial vehicle applications, are expected to begin in 2011. Independent analysts expect turbo penetration to grow from 24% of all light vehicles today to around 70% by 2020, and predict rapid turbo adoption in the U.S. reaching close to 25% of the total light vehicle sales in the next five years.
  • Honeywell launched its gasoline turbocharging technology on BMW's new ActiveHybrid engine intended for its 7-series and X6 vehicles. This 4.4L, V8 engine combines a hybrid transmission with an advanced gasoline turbocharged engine to deliver 407 hp and provide best-in-class fuel consumption and emissions in this vehicle category.

Specialty Materials

  • Sales were down 23% compared with the third quarter of 2008, resulting from lower volumes and the unfavorable impact of pass through raw material price declines at our Resins and Chemicals business, partially offset by higher petrochemical catalyst sales and traction on green initiatives at UOP.
  • Segment profit was down 2%, primarily due to volume declines, however segment margin increased 330 bps to 15.2% due to the positive impact of lower material costs and cost savings initiatives.
  • UOP announced that its green jet fuel process technology will be used to produce nearly 600,000 gallons of green jet fuel, made from sustainable, non-food feedstocks including animal fats, algae, and camelina, for the U.S. Navy and Air Force. This is part of a joint program for the U.S. Defense Energy Support Center for alternative fuels testing and certification.
  • Electronic Materials announced the launch of SOLARC, a new anti-reflective coating that improves the efficiency and power output of photovoltaic panels. This new product uses materials originally developed for semiconductor manufacturing to improve the light transmittance through the glass that covers photovoltaic panels.

Honeywell will discuss its results during its investor conference call today starting at 8:00 a.m. EDT. To participate, please dial (719) 457-2683 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 webcast starting at 11:00 a.m. EDT, October 23, until midnight EDT, October 30, by dialing (719) 457-0820. The access code is 4845565.

Honeywell (www.honeywell.com) is a Fortune 100 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 more news and information on Honeywell, please visit www.honeywellnow.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                  Elena Doom
    (973) 455-3388                    (973) 455-2222
    rob.ferris@honeywell.com          elena.doom@honeywell.com

                  Consolidated Statement of Operations (Unaudited)
                  ------------------------------------------------
                       (In millions except per share amounts)

                             Three Months Ended   Nine Months Ended
                                September 30,        September 30,
                                2009    2008        2009    2008
                                ----    ----        ----    ----

    Product sales             $5,947  $7,375     $17,569 $22,363
    Service sales              1,753   1,900       5,267   5,481
                               -----   -----       -----   -----
    Net sales                  7,700   9,275      22,836  27,844
                               -----   -----      ------  ------

    Costs, expenses and other
        Cost of products
         sold (A)              4,657   6,153      13,781  17,749
        Cost of services
         sold (A)              1,140   1,323       3,454   3,722
                               -----   -----       -----   -----
                               5,797   7,476      17,235  21,471
        Selling, general
         and administrative
         expenses (A)          1,034   1,309       3,270   3,854
        Other (income)
         expense                 (39)   (660)         14    (730)
        Interest and other
         financial
         charges                 110     112         350     342
                                 ---     ---         ---     ---
                               6,902   8,237      20,869  24,937
                               -----   -----      ------  ------

    Income before taxes          798   1,038       1,967   2,907
    Tax expense                  179     315         489     808
                                 ---     ---         ---     ---

    Net income                   619     723       1,478   2,099

    Less: Net income
     attributable to the
     noncontrolling interest      11       4          23      14
                                  --       -          --      --

    Net income attributable
     to Honeywell               $608    $719      $1,455  $2,085
                                ====    ====      ======  ======

    Earnings per share of
     common stock - basic      $0.80   $0.98       $1.94   $2.82
                               =====   =====       =====   =====

    Earnings per share
     of common stock -
     assuming dilution         $0.80   $0.97       $1.94   $2.79
                               =====   =====       =====   =====

    Weighted average
     number of shares
     outstanding - basic         761     731         749     739
                                 ===     ===         ===     ===

    Weighted average number of
     shares outstanding -
     assuming dilution           764     738         751     748
                                 ===     ===         ===     ===


    (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.



                            Segment Data (Unaudited)
                            ------------------------
                             (Dollars in millions)

                         Three Months Ended     Nine Months Ended
                            September 30,          September 30,
    Net Sales             2009       2008        2009       2008
    ---------             ----       ----        ----       ----

    Aerospace           $2,622     $3,110      $8,100     $9,421

    Automation and
     Control Solutions   3,188      3,688       9,202     10,484

    Specialty Materials  1,015      1,321       3,117      4,180

    Transportation
     Systems               875      1,156       2,417      3,759

    Corporate                -          -           -          -
                          ----       ----        ----       ----

         Total          $7,700     $9,275     $22,836    $27,844
                        ======     ======     =======    =======



             Reconciliation of Segment Profit to Income Before Taxes
             -------------------------------------------------------

                         Three Months Ended     Nine Months Ended
                            September 30,          September 30,
                            -------------          -------------
    Segment Profit        2009       2008        2009       2008
    --------------        ----       ----        ----       ----

    Aerospace             $455       $516      $1,397     $1,681

    Automation and
     Control Solutions     431        430       1,088      1,148

    Specialty Materials    155        158         430        609

    Transportation
     Systems                62        102          84        400

    Corporate              (43)       (48)       (133)      (153)
                           ---        ---        ----       ----

         Total Segment
          Profit         1,060      1,158       2,866      3,685

    Other income/
     (expense) (A)          31        633         (37)       681
    Interest and
     other financial
     charges              (110)      (112)       (350)      (342)
    Stock compensation
     expense (B)           (18)       (31)        (95)      (107)
    Pension and other
     postretirement
     expense (B)           (51)       (36)        (48)       (89)
    Repositioning and
     other charges (B)    (114)      (574)       (369)      (921)
                          ----       ----        ----       ----

         Income before
          taxes           $798     $1,038      $1,967     $2,907
                          ====     ======      ======     ======


    (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,
                                                      2009          2008
                                                      ----          ----

    ASSETS
    Current assets:
        Cash and cash equivalents                   $2,604        $2,065
        Accounts, notes and other receivables        6,464         6,129
        Inventories                                  3,576         3,848
        Deferred income taxes                          900           922
        Other current assets                           342           299
                                                       ---           ---
      Total current assets                          13,886        13,263

    Investments and long-term receivables              471           670
    Property, plant and equipment - net              4,828         4,934
    Goodwill                                        10,520        10,185
    Other intangible assets - net                    2,265         2,267
    Insurance recoveries for asbestos related
     liabilities                                     1,045         1,029
    Deferred income taxes                            1,698         2,135
    Other assets                                     1,060         1,007
                                                     -----         -----

      Total assets                                 $35,773       $35,490
                                                   =======       =======

    LIABILITIES AND SHAREOWNERS' EQUITY
    Current liabilities:
        Accounts payable                            $3,201        $3,773
        Short-term borrowings                          253            56
        Commercial paper                               696         1,431
        Current maturities of long-term debt         1,019         1,023
        Accrued liabilities                          5,865         6,006
                                                     -----         -----
      Total current liabilities                     11,034        12,289

    Long-term debt                                   6,256         5,865
    Deferred income taxes                              730           698
    Postretirement benefit obligations other than
     pensions                                        1,554         1,799
    Asbestos related liabilities                     1,559         1,538
    Other liabilities                                5,045         6,032
    Shareowners' equity                              9,595         7,269
                                                     -----         -----

      Total liabilities and shareowners' equity    $35,773       $35,490
                                                   =======       =======



                             Honeywell International Inc.
                  Consolidated Statement of Cash Flows (Unaudited)
                  -------------------------------------------------
                               (Dollars in millions)


                                 Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                    -------------         -------------
                                  2009        2008      2009        2008
                                  ----        ----      ----        ----
    Cash flows from operating
     activities:
        Net income attributable
         to Honeywell             $608        $719    $1,455      $2,085
        Adjustments to reconcile
          net income to net cash
          provided by operating
          activities:
            Depreciation and
             amortization          242         247       711         693
            Gain on sale of non-
             strategic businesses
             and assets            (15)       (623)      (15)       (635)
            Repositioning and
             other charges         114         574       369         921
            Net payments for
             repositioning and
             other charges        (153)        (97)     (447)       (237)
            Pension and other
             postretirement
             expense                51          36        48          89
            Pension and other
             postretirement benefit
             payments              (48)        (50)     (144)       (153)
            Stock compensation
             expense                18          31        95         107
            Deferred income taxes   87           5       432         248
            Excess tax benefits
             from share based
             payment arrangements    -          (2)        -         (21)
            Other                  (12)        (61)      274          28
            Changes in assets and
             liabilities, net of
             the effects of
             acquisitions and
             divestitures:
               Accounts, notes
                and other
                receivables       (140)        155       202        (465)
               Inventories          96         (49)      350        (393)
               Other current
                assets             (57)         16       (49)         (4)
               Accounts payable     36         (76)     (605)        210
               Accrued
                liabilities        321         (56)      (61)         59
                                   ---         ---       ---          --
    Net cash provided by
     operating activities        1,148         769     2,615       2,532
                                 -----         ---     -----       -----

    Cash flows from investing
     activities:
        Expenditures for
         property, plant and
         equipment                (126)       (213)     (352)       (552)
        Proceeds from disposals
         of property, plant and
         equipment                   4           2        21          52
        Decrease in investments      -           -         1          14
        Increase in investments      -          (4)        -          (4)
        Cash paid for
         acquisitions, net of
         cash acquired            (440)       (800)     (468)     (2,108)
        Proceeds from sales of
         businesses, net of
         fees paid                   1         921         1         921
        Other                       (5)          -       (53)          7
                                    --          --       ---           -
    Net cash used for
     investing activities         (566)        (94)     (850)     (1,670)
                                  ----         ---      ----      ------

    Cash flows from financing
     activities:
        Net increase/(decrease)
         in commercial paper       298         689      (735)        459
        Net (decrease)/ increase
         in short-term
         borrowings               (120)          1      (313)         22
        Proceeds from issuance
         of common stock            11          16        20         142
        Proceeds from issuance
         of long-term debt           -           -     1,488       1,487
        Payments of long-term
         debt                     (611)          -    (1,104)       (425)
        Excess tax benefits
         from share based
         payment arrangements        -           2         -          21
        Repurchases of common
         stock                       -      (1,018)        -      (1,459)
        Cash dividends paid on
         common stock             (232)       (201)     (684)       (610)
                                  ----        ----      ----        ----
    Net cash used for
     financing activities         (654)       (511)   (1,328)       (363)
                                  ----        ----    ------        ----

    Effect of foreign
     exchange rate changes
     on cash and cash
     equivalents                    70         (76)      102         (36)
                                    --         ---       ---         ---

    Net (decrease)/increase
     in cash and cash equivalents   (2)         88       539         463
    Cash and cash equivalents
     at beginning of period      2,606       2,204     2,065       1,829
                                 -----       -----     -----       -----
    Cash and cash equivalents
     at end of period           $2,604      $2,292    $2,604      $2,292
                                ======      ======    ======      ======



                         Honeywell International Inc.
     Reconciliation of Cash Provided by Operating Activities to Free Cash
                                Flow (Unaudited)
     --------------------------------------------------------------------
                             (Dollars in millions)

                                         Three Months Ended  Nine Months Ended
                                            September 30,      September 30,
                                            -------------      -------------
                                           2009       2008    2009       2008
                                           ----       ----    ----       ----

    Cash provided by operating
     activities                          $1,148       $769  $2,615     $2,532

    Expenditures for property, plant
     and equipment                         (126)      (213)   (352)      (552)
                                           ----       ----    ----       ----

      Free cash flow                     $1,022       $556  $2,263     $1,980
                                         ======       ====  ======     ======


    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, and to 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.

SOURCE Honeywell

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