Honeywell's 1st-Quarter Ongoing Earnings Per Share Are $0.51; First-Quarter Sales Are $5.9 Billion;
MORRIS TOWNSHIP, N.J.--April 20, 2001--Rise In Aerospace Original Equipment Activity And Significant Industrial Control ManageAbility(TM) Contract Wins Highlight Quarter
Company Aggressively Reducing Costs To Position For Future Growth,
Incurs First-Quarter Charge Of $595 Million
Honeywell said today its first-quarter ongoing earnings per share (EPS) were $0.51, excluding $595 million (after-tax $374 million) in repositioning and other charges. Reported first-quarter EPS was $0.05.
Honeywell Chairman and CEO Michael R. Bonsignore said the company's first-quarter financial results "reflect continued weakness in some end-markets and our ongoing efforts to reduce our cost structure and increase the growth potential of core businesses as we prepare to close our pending merger with General Electric [NYSE: GE]."
"Honeywell has not been immune to the current economic downturn," Bonsignore added. "Some of our businesses are more sensitive to end-market cycles, while others are thriving. Most importantly for us, our core business portfolio has remained resilient despite the difficult operating environment."
Honeywell's first-quarter EPS was substantially affected by a challenging economic environment and continued high energy and raw material costs. Other factors included income declines in units the company had planned to divest but retained due to pooling of interest restrictions (Friction Materials, Automotive Consumer Products and U.S. Security Monitoring). First-quarter EPS also was negatively affected by the discontinuation of strategic portfolio and licensing activities.
Sales in the first quarter were flat before currency translation at $5.9 billion. Sales growth was seen in Turbochargers, Fire & Security, Aerospace Avionics, Advanced Circuits and Sensing & Control products. Short-to-medium-term weaknesses in some end-markets led to lower sales in Commercial Vehicle Braking Systems, Electronic Materials, Friction Materials, Automotive Consumer Products and Industrial Automation & Control.
The company saw a nearly across-the-board increase in commercial aerospace original equipment sales in the first quarter. It also saw strong order growth in its Industrial Control business, with several significant ManageAbility(TM) contract wins awarded by key customers, including Alcoa ($300 million), Conoco ($18 million) and Chevron Phillips Chemical Company ($14 million).
First-quarter operating margin was 11.7%, compared to 13.8% in the first quarter of the prior year. Margins continue to be affected negatively by high energy and raw material costs (primarily natural gas). Free cash flow was $111 million compared to $265 million in the first quarter of 2000, reflecting higher working capital, lower profitability and capital outlays for a Fluorine Products expansion project.
Bonsignore explained that the first-quarter charge of $595 million is primarily related to company-wide cost-reduction activities. "Because of concerns over economic softness, we moved even more aggressively in the first quarter to reduce further our cost structure," Bonsignore said. "We are optimistic that we will see the benefits of these actions in the second half of this year and much more so in 2002."
The company's first-quarter cost-reduction activities are expected to result in a total census reduction of approximately 6,500 employees, or approximately 5% of the workforce. The company said the reductions reflect cost-actions being implemented by business units across the company to address end-market softness.
"We are pleased with the progress of our pending merger with GE," Bonsignore said. "We remain confident that we will obtain regulatory clearances from the Department of Justice and the European Commission. We are also confident that our merger integration planning efforts will pay off quickly for shareowners once the transaction closes."
First-Quarter Segment Highlights
Aerospace Solutions - The segment's sales were up 3%, excluding divestitures. The segment saw higher commercial original equipment sales in most areas and strong sales in Avionics and the aftermarket. Operating margins were slightly lower due to higher sales of lower-margin original equipment products and new product investments.
Automation & Control - The segment's sales were up 3%, driven by growth in Fire & Security and Sensing & Control products. Sales growth was partially offset by lower sales in Industrial Automation & Control due to a shift to longer lead-time order activity in the petrochemical industry. Operating margins were roughly flat compared to the prior year period.
Performance Materials - The segment's sales were down 11%, driven by divestitures and weakness in the semiconductor and automotive end-markets. Sales growth was seen in Advanced Circuits due to growth in broadband and telecom devices and applications. Operating margins were sharply lower due to high energy and raw material costs (primarily natural gas).
Power & Transportation - The segment's sales were down 5% driven primarily by foreign currency translation. Strong sales growth continued in Turbochargers (up 20%) due to ongoing demand in the European diesel-powered passenger car industry. Sales growth was offset by sharply lower sales in Commercial Vehicle Braking Systems due to a continuing decline in North American truck builds. The segment's operating margins were lower due to lower volumes in Automotive Consumer Products, Commercial Vehicle Braking Systems and Friction Materials, driven by weakness in automotive end-markets.
Honeywell is a US$25-billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; power generation systems; specialty chemicals; fibers; plastics; and electronic and advanced materials. The company is a leading provider of software and solutions and Internet e-hubs including MyPlant.com and MyFacilities.com, and it is a founding member of Cordiem, LLC, an aerospace industry business-to-business Internet exchange and applications service provider. Honeywell employs approximately 125,000 people in 95 countries and is traded on the New York Stock Exchange under the symbol HON, as well as on the London, Chicago and Pacific 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. Additional information on the company is available on the Internet at www.honeywell.com.
This release contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, including statements about future business operations, financial performance and market conditions. Such forward-looking statements involve risks and uncertainties inherent in business forecasts as further described in our filings under the Securities Exchange Act.
Honeywell International Inc.
Consolidated Statement of Income (Unaudited)
(In millions except per share amounts)
Three Months Ended March 31
2001 2000
--------------------------- ----------
Reported Adjusted (B) Reported
----------- ----------- ----------
Net sales $ 5,944 $ 5,944 $ 6,044
----------- ----------- ----------
Costs, expenses and other
Cost of goods sold 4,973 (A) 4,499 4,450
Selling, general and
administrative expenses 768 (A) 747 758
Equity in (income) loss
of affiliated companies 103 (A) 8 (4)
Other (income) expense (4)(A) (9) (10)
Interest and other
financial charges 111 111 111
----------- ----------- ----------
5,951 5,356 5,305
----------- ----------- ----------
Income before taxes
on income (7) 588 739
Taxes on income (48) 173 233
----------- ----------- ----------
Net income $ 41 $ 415 $ 506
=========== =========== ==========
Earnings per share of
common stock-basic $0.05 $0.51 $0.64
=========== =========== ==========
Earnings per share of
common stock - assuming
dilution $0.05 $0.51 $0.63
=========== =========== ==========
Weighted average number
of shares
outstanding-basic 809 809 797
=========== =========== ==========
Weighted average number
of shares outstanding -
assuming dilution 815 815 807
=========== =========== ==========
(A) Cost of goods sold and selling, general and administrative
expenses include a provision of $474 and $21 million,
respectively, for severance, asset impairments and other
charges. Equity in (income) loss of affiliated companies
includes a provision of $95 million for the impairment of an
investee, a contract loss and severance charges. Other
(income) expense includes a net provision of $5 million,
consisting of $6 million for a charge related to the early
extinguishment of debt and a $1 million benefit recognized
upon the adoption of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as amended (SFAS No. 133), effective for
Honeywell as of January 1, 2001. Total net pretax charges,
including the impact of adopting SFAS No. 133, were $595
million (after-tax $374 million, or $0.46 per share).
(B) Excludes the impact from items in (A) above.
Honeywell International Inc.
Segment Data
(Dollars in millions)
Net Sales Three Months Ended March 31
2001 2000
-------------- --------------
Aerospace Solutions $ 2,411 $ 2,396
Automation & Control 1,748 1,700
Performance Materials 913 1,025
Power & Transportation Products 860 904
Corporate 12 19
-------------- --------------
Total $ 5,944 $ 6,044
============== ==============
Segment Profit Three Months Ended March 31
2001 2000
-------------- --------------
Aerospace Solutions $ 451 $ 493
Automation & Control 188 190
Performance Materials 38 95
Power & Transportation Products 50 88
Corporate (29) (30)
-------------- --------------
Total Segment Profit 698 836
Equity in income (loss) of
affiliated companies (8) 4
Other income 9 10
Interest and other
financial charges (111) (111)
Repositioning and other charges (595) -
-------------- --------------
Income before taxes on income $ (7) $ 739
============== ==============