Honeywell Reports Second Quarter Sales Up 8% to $8.5 Billion and Earnings Up 24% to 78 Cents Per Share

MORRIS TOWNSHIP, N.J., July 19 /PRNewswire-FirstCall/ -- Honeywell (NYSE:HON) today announced second quarter 2007 sales increased 8% to $8.5 billion from $7.9 billion last year. Earnings were up 24% to $0.78 per share, versus $0.63 per share last year. Cash flow from operations was $983 million versus $935 million in the second quarter of 2006 and free cash flow (cash flow from operations less capital expenditures) was $820 million, compared to $786 million last year.

"Honeywell's second quarter was driven by strong organic sales growth, double-digit earnings growth, and robust free cash flow," said Honeywell Chairman and CEO Dave Cote. "We continue to benefit from our global footprint, great positions in good industries, and our effective deployment of cash through dividends, acquisitions, and share repurchases."

Honeywell repurchased more than 40 million shares of stock in the second quarter, reducing the amount remaining under its previously announced authorization to approximately $200 million. The company's Board of Directors has authorized the repurchase of up to an additional $3 billion of Honeywell common stock. Honeywell expects to repurchase shares to maintain an essentially flat share count through the remainder of 2007.

"We had a great first half of 2007 with sales increasing 10%, EPS up 25%, and free cash flow up 42%. As a result of this performance, our share repurchases, and confident outlook for the second half, we are raising full-year sales, EPS, and free cash flow guidance," concluded Cote.

Honeywell increased its previously stated 2007 sales guidance to $33.9 billion, its earnings per share range to $3.10 - 3.16 and free cash flow range to $2.8 - 3.0 billion (cash flow from operations of $3.6 - 3.8 billion).

    Second Quarter Segment Highlights

    Aerospace
    ---------
    -- Sales were up 13%, compared with the second quarter of 2006, driven by
       15% growth in Commercial and 9% growth in Defense and Space sales.
       Commercial sales reflected growth of 18% in original equipment and 12%
       in aftermarket spares and services.
    -- Segment margins were 17.3%, compared with 15.4% a year ago, driven by
       volume growth, price and productivity gains, which more than offset the
       negative impact from inflation.
    -- Honeywell announced the acquisition of defense logistics leader
       Dimensions International. The acquisition expands Honeywell's ability
       to support the Department of Defense's needs for equipment repair,
       refurbishment, and reset.
    -- Defense and Space secured contracts worth more than $14 million with
       the U.S. Navy for its Micro Air Vehicle (MAV) and with Sikorsky
       Aircraft Corporation for synthetic vision technology. Total MAV-related
       contract wins to date top $100 million across all branches of the U.S.
       military.  Honeywell's synthetic vision technology will be included in
       the Black Hawk helicopter cockpit as part of the Defense Advanced
       Research Projects Agency (DARPA) Sandblaster program designed to
       enhance situational awareness for pilots in brownout conditions.
    -- Honeywell has been selected by Northwest Airlines to provide
       comprehensive repair and overhaul services with an estimated value of
       $490 million over 20 years for auxiliary power units and wheels and
       brakes.

    Automation and Control Solutions
    --------------------------------
    -- Sales were up 10%, compared with the second quarter of 2006, driven by
       9% growth in the Products businesses and 11% growth in the Solutions
       businesses.
    -- Segment margins were 11.0% compared with 10.4% a year ago, due to
       volume growth and productivity savings, which more than offset the
       negative impact from inflation.
    -- Honeywell Security Group's ADI security and low voltage products
       distribution business completed its acquisition of Burtek Systems
       Corporation. Burtek is a distributor of low voltage products for
       commercial and residential audio, burglar and fire alarm, CCTV, access
       control, and data communications.
    -- Honeywell Building Solutions won an approximately $33 million energy
       savings performance contract with the City of Quincy, Massachusetts,
       which will reduce the city's energy costs and cut greenhouse gas
       emissions.  Building Solutions also announced a $15 million contract
       with the U.S. Coast Guard to cut energy costs and greenhouse gas
       emissions at nine locations.
    -- Honeywell Process Solutions signed a definitive agreement, subject to
       regulatory review, to acquire Enraf Holding B.V., which offers
       comprehensive solutions for the control and management of
       transportation, storage, and blending operations in the oil and gas
       industry.

    Transportation Systems
    ----------------------
    -- Sales were up 5%, compared with the second quarter of 2006, driven by
       increased Turbo Technologies light vehicle sales and the positive
       impact of foreign exchange, which were partially offset by an expected
       decline in Turbo Technologies commercial vehicle sales in North America
       and the impact of lower sales of automotive aftermarket products.
    -- Segment margins were 12.5% compared with 13.8% a year ago, due to
       investments in new products and inflation, which more than offset
       pricing actions and productivity savings.
    -- Turbo Technologies was awarded two passenger vehicle diesel platforms
       worth approximately $50 million in estimated annual revenues at full
       production that will be introduced in Korea, Europe, and the U.S.
       These platforms are expected to launch in 2011.
    -- Consumer Products Group launched several new products, including FRAM
       Syn-wash, a long-lasting, washable air filter, and Autolite Xtreme
       Sport and Xtreme Lawn, premium spark plugs for the growing small engine
       segment.

    Specialty Materials
    -------------------
    -- Sales were down 3% compared with the second quarter of 2006, driven by
       anticipated timing with respect to UOP catalyst sales.
    -- Segment margins were 14.4% compared with 17.3% a year ago, due
       primarily to lower UOP volume, inflation, and a temporary plant outage,
       which more than offset increased pricing.
    -- UOP announced that Eni S.p.A., a leading European oil company, will
       build a production facility using UOP/Eni Ecofining(TM) technology to
       produce "green" diesel for the European market.  Green diesel is
       produced from renewable resources and generates lower emissions than
       either biodiesel or traditional petroleum-based diesel.  It can be used
       as a drop in replacement fuel in current diesel engines without
       modifications.  As a result of its high cetane levels (a measure of the
       combustion quality of diesel), it can also be used as a blending agent
       to improve the performance of other diesel fuels.  UOP also announced
       it is developing technology to convert oils from plants and algae to
       military jet fuel for use by the U.S. and NATO as part of a program
       funded by DARPA.
    -- Specialty Materials announced a new line of materials for body and
       vehicle armor called Spectra Shield(R) II, which has demonstrated up to
       20% greater ballistic performance than existing Spectra products.

Honeywell will discuss its results during its investor conference call today starting at 10:00 a.m. EDT. To participate, please dial (706) 643-7681 a few minutes before the 10:00 a.m. start. Please mention to the operator that you are dialing in for Honeywell's investor conference call. The live webcast of the investor call will be available through the "Investor Relations" section of the company's Website (http://www.honeywell.com/investor). Investors can access a replay of the conference call from 1:00 p.m. EDT, July 19, until midnight, July 26, by dialing (706) 645-9291. The access code is 4735919.

Honeywell International is a $33 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell's shares are traded on the New York, London and Chicago Stock Exchanges. It is one of the 30 stocks that make up the Dow Jones Industrial Average and is also a component of the Standard & Poor's 500 Index. For additional information, please visit www.honeywell.com.

This release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management's assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

    Contacts:
    Media                           Investor Relations
    Robert C. Ferris                Murray Grainger
    (973) 455-3388                  (973) 455-2222
    rob.ferris@honeywell.com        murray.grainger@honeywell.com



                         Honeywell International Inc.
               Consolidated Statement of Operations (Unaudited)
              -------------------------------------------------
                    (In millions except per share amounts)

                                           Three Months      Six Months
                                              Ended            Ended
                                             June 30,         June 30,
                                          --------------------------------
                                           2007    2006    2007     2006
                                          ------  ------   ------   ------
    Product sales                         $6,872  $6,381  $13,322  $12,187
    Service sales                          1,666   1,517    3,257    2,952
                                          ------  ------   ------   ------
    Net sales                              8,538   7,898   16,579   15,139
                                          ------  ------   ------   ------

    Costs, expenses and other
    Cost of products sold (A)              5,318   4,931   10,328    9,497
    Cost of services sold (A)              1,173   1,096    2,313    2,130
                                          ------  ------   ------   ------
                                           6,491   6,027   12,641   11,627
    Selling, general and
     administrative expenses (A)           1,127   1,086    2,216    2,088
    Other (income) expense                   (20)    (17)     (31)     (42)
    Interest and other financial
     charges                                 110      94      207      183
                                          ------  ------   ------   ------
                                           7,708   7,190   15,033   13,856
                                          ------  ------   ------   ------

    Income from continuing
     operations before taxes                 830     708    1,546    1,283
    Tax expense                              219     187      409      331
                                          ------  ------   ------   ------
    Income from continuing
     operations                              611     521    1,137      952
    Income from discontinued
     operations, net of taxes                  -       -        -        5
                                          ------  ------   ------   ------
    Net income                              $611    $521   $1,137     $957
                                          ======  ======   ======   ======

    Earnings per share of common
     stock - basic:
      Income from continuing
       operations                          $0.79   $0.63    $1.45    $1.15
      Income from discontinued
       operations                              -       -        -     0.01
                                          ------  ------   ------   ------
      Net income                           $0.79   $0.63    $1.45    $1.16
                                          ======  ======   ======   ======

    Earnings per share of common
     stock - assuming dilution:
      Income from continuing
       operations                          $0.78   $0.63    $1.44    $1.14
      Income from discontinued
       operations                              -       -        -     0.01
                                          ------  ------   ------   ------

      Net income                           $0.78   $0.63    $1.44    $1.15
                                          ======  ======   ======   ======

    Weighted average number of
     shares outstanding-basic                768     825      781      827
                                          ======  ======   ======   ======

    Weighted average number of
     shares outstanding -
     assuming dilution                       779     830      790      833
                                          ======  ======   ======   ======

    (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 benefits expense, and stock
        option expense.



                         Honeywell International Inc.
                           Segment Data (Unaudited)
                          -------------------------
                            (Dollars in millions)

                                           Three Months      Six Months
                                              Ended            Ended
                                             June 30,         June 30,
                                           -------------------------------
    Net Sales                              2007    2006     2007     2006
                                          ------  ------   ------   ------

    Aerospace                             $3,027  $2,686   $5,867   $5,315

    Automation and Control Solutions       3,039   2,766    5,840    5,131

    Specialty Materials                    1,216   1,253    2,415    2,405

    Transportation Systems                 1,256   1,193    2,457    2,288

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

      Total                               $8,538  $7,898  $16,579  $15,139
                                          ======  ======   ======   ======



          Reconciliation of Segment Profit to Income From Continuing
                           Operations Before Taxes

                                           Three Months     Six Months
                                              Ended            Ended
                                             June 30,         June 30,
                                           -------------------------------
    Segment Profit                         2007    2006     2007     2006
                                          ------  ------   ------   ------

    Aerospace                               $523    $413   $1,023     $853

    Automation and Control Solutions         333     287      607      508

    Specialty Materials                      175     217      367      379

    Transportation Systems                   157     165      313      307

    Corporate                                (54)    (48)     (97)     (93)
                                          ------  ------   ------   ------

      Total Segment Profit                 1,134   1,034    2,213    1,954

    Other income (expense)                    20      17       31       42
    Interest and other financial
     charges                                (110)    (94)    (207)    (183)
    Stock option expense (A)                 (17)    (16)     (41)     (41)
    Pension and other postretirement
     expense (A)                             (72)   (118)    (146)    (244)
    Repositioning and other charges (A)     (125)   (115)    (304)    (245)
                                          ------  ------   ------   ------

      Income from continuing
       operations before taxes              $830    $708   $1,546   $1,283
                                          ======  ======   ======   ======

    (A) 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,
                                           2007                       2006
                                         ---------                 ----------
    ASSETS
    Current assets:
      Cash and cash equivalents           $1,633                      $1,224
      Accounts, notes and other
       receivables                         6,118                       5,740
      Inventories                          3,807                       3,588
      Deferred income taxes                1,197                       1,215
      Other current assets                   329                         470
      Assets held for disposal                25                          67
                                         ---------                 ----------
          Total current assets            13,109                      12,304

    Investments and long-term
     receivables                             505                         382
    Property, plant and equipment - net    4,692                       4,797
    Goodwill                               8,457                       8,403
    Other intangible assets - net          1,213                       1,247
    Insurance recoveries for asbestos
     related liabilities                   1,107                       1,100
    Deferred income taxes                    925                       1,075
    Prepaid pension benefit cost             820                         695
    Other assets                             943                         938
                                         ---------                 ----------
          Total assets                   $31,771                     $30,941
                                         =========                 ==========

    LIABILITIES AND SHAREOWNERS' EQUITY
    Current liabilities:
      Accounts payable                    $3,661                      $3,518
      Short-term borrowings                   62                          62
      Commercial paper                     2,589                         669
      Current maturities of long-
       term debt                             415                         423
      Accrued liabilities                  5,638                       5,455
      Liabilities related to assets
       held for disposal                       4                           8
                                         ---------                 ----------
          Total current liabilities       12,369                      10,135

    Long-term debt                         4,485                       3,909
    Deferred income taxes                    455                         352
    Postretirement benefit obligations
     other than pensions                   2,075                       2,090
    Asbestos related liabilities           1,216                       1,262
    Other liabilities                      3,371                       3,473
    Shareowners' equity                    7,800                       9,720
                                         ---------                 ----------
          Total liabilities and
           shareowners' equity           $31,771                     $30,941
                                         =========                 ==========



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

                                           Three Months       Six Months
                                              Ended              Ended
                                              June 30,          June 30,
                                            --------------------------------
                                             2007     2006     2007     2006
                                            ------  ------   ------   ------
    Cash flows from operating activities:
      Net income                             $611     $521   $1,137     $957
      Adjustments to reconcile net
       income to net cash provided
       by operating activities:
        Depreciation and amortization         213      218      413      406
        Repositioning and other charges       125      115      304      245
        Net (payments) for repositioning
         and other charges                    (41)    (161)    (173)    (154)
        Pension and other
         postretirement expense                72      118      146      244
        Pension and other postretirement
         benefit payments                     (63)     (63)    (108)    (178)
        Stock option expense                   17       16       41       41
        Deferred income taxes                 180       70      197      126
        Excess tax benefits from
         share based payment arrangements     (43)       -      (51)       -
        Other                                  20       52       26       (5)
        Changes in assets and
         liabilities, net of the
         effects of acquisitions and
         divestitures:
          Accounts, notes and
           other receivables                 (216)     (96)    (352)    (243)
          Inventories                         (41)     (25)    (202)    (208)
          Other current assets                  -       53       36       42
          Accounts payable                     78       68      143       78
          Accrued liabilities                  71       49        4     (177)
                                            ------  ------   ------   ------
    Net cash provided by operating
     activities                               983      935    1,561    1,174
                                            ------  ------   ------   ------

    Cash flows from investing activities:
      Expenditures for property,
       plant and equipment                   (163)    (149)    (283)    (271)
      Proceeds from disposals of
       property, plant and equipment           49        7       82       44
      Cash paid for acquisitions,
       net of cash acquired                   (95)    (552)    (108)    (608)
      Proceeds from sales of
       businesses, net of fees paid            43      101       52      576
                                            ------  ------   ------   ------
    Net cash (used for) investing
     activities                              (166)    (593)    (257)    (259)
                                            ------  ------   ------   ------
    Cash flows from financing activities:
      Net increase/(decrease) in
       commercial paper                     1,585      531    1,913     (106)
      Net (decrease) in short-term
       borrowings                              (3)     (30)       -     (210)
      Payment of debt assumed with
       acquisitions                             -     (137)       -     (346)
      Proceeds from issuance of
       common stock                           305       65      424      239
      Proceeds from issuance of
       long-term debt                           -        -      988    1,239
      Payments of long-term debt               (9)    (116)    (407)    (353)
      Excess tax benefits from share
       based payment arrangements              43        -       51        -
      Repurchases of common stock          (2,301)    (503)  (3,487)    (828)
      Cash dividends paid on common
       stock                                 (193)    (187)    (392)    (376)
                                            ------  ------   ------   ------
    Net cash (used for) financing
     activities                              (573)    (377)    (910)    (741)
                                            ------  ------   ------   ------

    Effect of foreign exchange rate
     changes on cash and cash equivalents      11       17       15       16
                                            ------  ------   ------   ------

    Net increase/(decrease) in cash
     and cash equivalents                     255      (18)     409      190
    Cash and cash equivalents at
     beginning of period                    1,378    1,442    1,224    1,234
                                            ------  ------   ------   ------
    Cash and cash equivalents at end
     of period                             $1,633   $1,424   $1,633   $1,424
                                            ======  ======   ======   ======



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

                                            Three Months       Six Months
                                               Ended             Ended
                                              June 30,          June 30,
                                           -------------------------------
                                             2007    2006     2007     2006
                                            ------  ------   ------   ------
    Cash provided by operating
     activities                              $983    $935    $1,561   $1,174

    Expenditures for property, plant
     and equipment                           (163)   (149)     (283)    (271)
                                            ------  ------   ------   ------
    Free cash flow                           $820    $786    $1,278     $903
                                            ======  ======   ======   ======

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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