Honeywell's 1st-Quarter Sales Up 8% To A Record $6.04 Billion
13 April 2000
Honeywell's 1st-Quarter Sales Up 8% To A Record $6.04 Billion; Earnings Per Share Grow 15% To A Record $0.63
MORRIS TOWNSHIP, N.J.--April 13, 2000--
Free Cash Flow Rises To A Record $265 Million, Up 56%
From $170 Million
Company Well-Positioned To Meet 2000 Growth Commitments And Merger
Savings Target Of $250 Million
Honeywell (NYSE: HON) said today that sales in the first quarter were a record $6.04 billion, up 8% compared to sales in the first quarter of 1999. Excluding the effects of foreign exchange, divestitures and acquisitions, sales were up 4% in the quarter.
First-quarter earnings per share were a record $0.63, a 15% increase over 1999 first-quarter earnings per share of $0.55.
Operating margin expanded to 13.8% from 12.4%. Margins widened due to a 6% productivity improvement, driven by ongoing Six Sigma Plus programs and cost reductions. Free cash flow before dividends grew 56% to a record $265 million.
"Our exciting first-quarter results demonstrate that the merger is behind us and that we have successfully integrated two great companies," said Michael R. Bonsignore, Honeywell Chairman and Chief Executive Officer. "The majority of our businesses experienced solid top-line growth this quarter. And our strong focus on productivity improvements - through Six Sigma Plus, aggressive cost reductions and web-enabled processes - helped expand margins and earnings. Our first-quarter performance supports our confidence that Honeywell is well-poised to meet its earnings and revenue commitments for 2000 and beyond."
Honeywell's sales growth was led by double-digit increases in turbochargers, business and regional aviation products, electronic materials and sensing and control products. Strong performances also were seen in aerospace aftermarket services, home and building control products and fluorines.
"We accelerated our shift to a more services- and solutions-based portfolio and expanded our Six Sigma Plus initiatives both internally and with our customers in the quarter," Bonsignore said. He reaffirmed that the company will meet its $250 million first-year merger savings target, noting that more than 300 newly trained Six Sigma Black Belts are now at work in the former Honeywell businesses driving productivity improvements to generate cost savings. They bring the total number of Black Belts in Honeywell to 3,800.
"We strengthened our industry-leading e-business strategy, as well," Bonsignore added. "E-business is enabling us to re-invent our business model, resulting in greater customer access and a more robust and cost-effective global supply chain.
"We debuted MyAircraft.com, a comprehensive open electronic marketplace for aerospace products and services, with our partners United Technologies and i2 Technologies. We also expanded the functionality and content of our plant-centric e-hub MyPlant.com through strategic alliances with Microsoft and VerticalNet. These two actions significantly extended our ability to offer customers productivity-enhancing, web-enabled solutions.
"We are delighted with the way our employees are working together to make the new Honeywell a customer-focused powerhouse and a formidable leader of the transformation to a web-enabled business model," Bonsignore continued. "This progress fuels our confidence in the exciting growth opportunities before us."
Segment highlights for the first quarter were as follows:
Aerospace Solutions - The aftermarket business continues to lead the segment's performance. Significant aftermarket drivers include strong increases throughout the world in air transport and regional flying hours, as well as rising global demand for the company's commercial and military repair and overhaul services that is outpacing market growth.
The ongoing strength in the aftermarket, bolstered by strong performances in business, regional and general aviation OEM sales, helped to more than offset the effects of reduced shipments to the commercial air transport market. The aftermarket business comprises one-half of Honeywell's $10 billion aerospace segment, the leading global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, business and general aviation, military, space and airport operations.
Operating margins expanded due to higher volume growth, a better mix of higher-margin aftermarket products and services and productivity improvements.
Automation & Control - Strong product sales in the Home & Building Control business helped to drive revenues higher in the segment. The business is successfully implementing a strategy to embed software solutions in its products, providing customers with integrated product/solutions offerings.
The acquisition of Pittway Corporation was completed in the quarter. Pittway, with its leading positions in fire and security systems and distribution, will enable the business to accelerate growth in offering integrated, Internet-driven solutions that increase safety, comfort and convenience for home and building owners.
Advanced optimization software and sensing and control products also contributed to the segment's revenue performance.
Operating margins expanded due to the results of aggressive cost reductions and growth in profitable products and services.
Performance Materials - Revenue increases were driven primarily by growth in fluorines, plastics, specialty waxes and electronic materials.
While higher raw material costs drove operating margins lower versus the first quarter of 1999, the segment is beginning to see margin improvement as a result of stronger pricing, reductions in capacity and aggressive cost reductions.
Power & Transportation Products - Robust year-over-year revenue growth in turbochargers - driven by continued worldwide demand for engine-boosting systems - was partially offset by the impact of a strong U.S. dollar.
Operating margins grew due to turbocharger revenue growth, productivity improvements and ongoing cost reductions in Friction Materials and the Consumer Products Group.
Honeywell is a US$24-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 MyAircraft.com, MyPlant.com and MyFacilities.com. Honeywell employs approximately 120,000 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.
Honeywell International Inc.
Consolidated Statement of Income (Unaudited)
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(In millions except per share amounts)
Three Months
Ended March 31
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2000 1999
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Net sales $ 6,044 $ 5,582
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Costs, expenses and other
Cost of goods sold 4,450 4,192
Selling, general and administrative expenses 758 699
Equity in income of affiliated companies (4) (10)
Other (income) expense (10) (18)
Interest and other financial charges 111 73
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5,305 4,936
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Income before taxes on income 739 646
Taxes on income 233 206
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Net income $ 506 $ 440
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Earnings per share of common stock-basic $ 0.64 $ 0.55
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Earnings per share of common stock -
assuming dilution $ 0.63 $ 0.55
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Weighted average number of shares outstanding -
basic 797 793
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Weighted average number of shares outstanding -
assuming dilution 807 807
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Segment Data
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Net Sales Segment Profit
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2000 1999 2000 1999
------ ------ ------ ------
Aerospace Solutions $2,396 $2,328 $ 493 $ 395
Automation & Control 1,700 1,390 190 120
Performance Materials 1,025 983 95 149
Power & Transportation Products 904 859 88 70
Corporate 19 22 (30) (43)
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Total $6,044 $5,582 $ 836 $ 691
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