HON
$163.64
Honeywell International
$.66
.40%
Earnings Details
2nd Quarter June 2019
Thursday, July 18, 2019 6:30:00 AM
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Summary

Honeywell International Misses

Honeywell International (HON) reported 2nd Quarter June 2019 earnings of $2.10 per share on revenue of $9.2 billion. The consensus earnings estimate was $2.08 per share on revenue of $9.4 billion. The Earnings Whisper number was $2.11 per share. Revenue fell 15.3% compared to the same quarter a year ago.

The company said it now expects 2019 earnings of $7.95 to $8.15 per share on revenue of $36.70 billion to $37.20 billion. The company's previous guidance was earnings of $7.90 to $8.15 per share on revenue of $36.50 billion to $37.20 billion and the current consensus earnings estimate is $8.11 per share on revenue of $37.17 billion for the year ending December 31, 2019.

Honeywell International Inc is a technology & manufacturing company, serving customers with aerospace products & services, control, sensing and security technologies for buildings, homes and industry, turbochargers, automotive products, chemicals.

Results
Reported Earnings
$2.10
Earnings Whisper
$2.11
Consensus Estimate
$2.08
Reported Revenue
$9.24 Bil
Revenue Estimate
$9.36 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Honeywell Delivers Earnings Of $2.10, At High End Of Guidance; Raises Full-Year Sales, Earnings, And Cash Guidance

MORRIS PLAINS, N.J., July 18, 2019 /PRNewswire/ -- Honeywell (NYSE: HON) today announced financial results for the second quarter of 2019 and raised its full-year organic sales, earnings per share, and adjusted free cash flow guidance.

"Honeywell delivered another strong quarter of top-line growth, margin expansion, and adjusted free cash flow. Organic sales grew 5% led by our long-cycle businesses including U.S. and international defense, business and general aviation, and oil and gas. Our long-cycle backlog was up over 10%, which positions us well for the second half of 2019. We also saw robust demand in our short-cycle commercial fire, process automation services and software, and aerospace aftermarket businesses. Segment margin expanded 170 basis points year-over-year, which was 30 basis points above the high end of our guidance. We delivered earnings per share of $2.10, which was up 9%2 adjusted, excluding the impact of the spin-offs, and at the high end of our second-quarter guidance," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "In the quarter, we repurchased approximately $1.9 billion in Honeywell shares and generated $1.5 billion of adjusted free cash flow1, with conversion of 100%. We remain on a path to deliver approximately 100% conversion for the full year."

Adamczyk continued, "We are making significant progress in transforming Honeywell into a premier software-industrial company, with connected software sales continuing to grow at a double-digit rate organically. The Honeywell Connected Enterprise foundation is firmly in place, supported by the launch of Honeywell Forge, a comprehensive IIoT software solution. Our digitization and supply chain transformation initiatives are underway, which will enhance our commercial efforts and drive continued segment margin expansion. We are pleased with our progress to date.

"Given our first-half performance and our confidence in our ability to continue to deliver for our shareowners even in an uncertain environment, we are raising our full-year earnings per share guidance by 5 cents to a new range of $7.95 to $8.15, and raising our organic sales guidance to a new range of 4% to 6%," Adamczyk concluded.

A summary of the company's full-year guidance changes can be found in Table 1.

Second-Quarter Performance

Honeywell sales for the second quarter were down 15% on a reported basis and up 5% on an organic basis. The difference between reported and organic sales primarily relates to the spin-offs of the Transportation Systems business (formerly in Aerospace) and the Homes and ADI Global Distribution business (formerly in Honeywell Building Technologies) as well as the unfavorable impact of foreign currency translation. The second-quarter financial results can be found in Tables 2 and 3.

Aerospace sales for the second quarter were up 11% on an organic basis driven by double-digit growth in business aviation original equipment; continued strength in the U.S. and international Defense and Space business, which grew 20% organically; and commercial aftermarket demand across air transport and business aviation. Segment margin expanded 330 basis points to 25.9%, primarily driven by commercial excellence, higher organic sales volumes, and the favorable impact from the spin-off of the Transportation Systems business in 2018.

Honeywell Building Technologies sales for the second quarter were up 5% on an organic basis driven by ongoing strength in commercial fire products and building management software, and global building solutions projects growth. Segment margin expanded 390 basis points to 20.7% driven by the favorable impact from the spin-off of the Homes and ADI Global Distribution business in 2018.

Performance Materials and Technologies sales for the second quarter were up 4% on an organic basis driven by short-cycle demand in Process Solutions; strong licensing, engineering, and refining catalyst sales growth in UOP; and demand for Solstice® low global warming products in Advanced Materials. Segment margin expanded 140 basis points to 23.5%, primarily driven by productivity net of inflation and commercial excellence.

Safety and Productivity Solutions sales for the second quarter were down 4% on an organic basis driven by lower sales volumes in productivity products due to inventory destocking and fewer large project rollouts, partially offset by demand for gas sensing and detection, and Intelligrated aftermarket and voice solutions growth. Segment margin contracted 420 basis points to 12.3%, primarily driven by lower sales volumes in productivity products and higher sales of lower margin products.

Conference Call Details
Honeywell will discuss its second-quarter results and updated full-year guidance during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. To participate on the conference call, please dial (888) 394-8218 (domestic) or (323) 701-0225 (international) approximately ten minutes before the 8:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's second-quarter 2019 earnings call or provide the conference code HON2Q19. The live webcast of the investor call as well as related presentation materials will be available through the Investor Relations section of the company's website (www.honeywell.com/investor). Investors can hear a replay of the conference call from 12:30 p.m. EDT, July 18, until 12:30 p.m. EDT, July 25, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 3915869.

TABLE 1: FULL-YEAR 2019 GUIDANCE


Previous Guidance

Current Guidance

Sales

$36.5B - $37.2B

$36.7B - $37.2B

Organic Growth

3% - 6%

4% - 6%

Segment Margin

20.7% - 21.0%

20.7% - 21.0%

Expansion

Up 110 - 140 bps

Up 110 - 140 bps

Expansion Ex-Spins3

Up 30 - 60 bps

Up 30 - 60 bps

Earnings Per Share

$7.90 - $8.15

$7.95 - $8.15

Earnings Growth Adjusted Ex-Spins4

7% - 10%

8% - 10%

Operating Cash Flow

$6.0B - $6.5B

$6.2B - $6.5B

Adjusted Free Cash Flow5

$5.5B - $6.0B

$5.7B - $6.0B

Conversion

95% - 100%

98% - 100%

 

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS


2Q 2018

2Q 2019

Change

Sales

10,919

9,243

(15%)

Organic Growth



5%

Segment Margin

19.6%

21.3%

170 bps

Operating Income Margin

16.3%

19.1%

280 bps

Reported Earnings Per Share

$1.68

$2.10

25%

Adjusted Earnings Per Share Ex-Spins6

$1.93

$2.10

9%

Cash Flow from Operations

1,861

1,678

(10%)

Adjusted Free Cash Flow7

1,729

1,535

(11%)

 

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS





AEROSPACE

2Q 2018

2Q 2019

Change

Sales

4,058

3,508

(14%)

Organic Growth



11%

Segment Profit

918

907

(1%)

Segment Margin

22.6%

25.9%

330 bps









HONEYWELL BUILDING TECHNOLOGIES




Sales

2,546

1,450

(43%)

Organic Growth



5%

Segment Profit

427

300

(30%)

Segment Margin

16.8%

20.7%

390 bps









PERFORMANCE MATERIALS AND TECHNOLOGIES




Sales

2,698

2,735

1%

Organic Growth



4%

Segment Profit

597

644

8%

Segment Margin

22.1%

23.5%

140 bps









SAFETY AND PRODUCTIVITY SOLUTIONS




Sales

1,617

1,550

(4%)

Organic Growth



(4%)

Segment Profit

267

191

(28%)

Segment Margin

16.5%

12.3%

(420) bps





 

Honeywell (www.honeywell.com) is a Fortune 100 technology company that delivers industry specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials globally. Our technologies help everything from aircraft, buildings, manufacturing plants, supply chains, and workers become more connected to make our world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.

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. 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.

This release contains financial measures presented on a non-GAAP basis. Honeywell's non-GAAP financial measures used in this release are as follows: segment profit, on an overall Honeywell basis, a measure by which we assess operating performance, which we define as operating income adjusted for certain items as presented in the Appendix; segment margin, on an overall Honeywell basis, which we define as segment profit divided by sales and which we adjust to exclude sales and segment profit contribution from Resideo and Garrett in 2018, if and as noted in the release; organic sales growth, which we define as sales growth less the impacts from foreign currency translation, and acquisitions and divestitures for the first 12 months following transaction date; adjusted free cash flow, which we define as cash flow from operations less capital expenditures and which we adjust to exclude the impact of separation costs related to the spin-offs of Resideo and Garrett, if and as noted in the release; adjusted free cash flow conversion, which we define as adjusted free cash flow divided by net income attributable to Honeywell, excluding separation costs related to the spin-offs, and adjustments to the 4Q17 U.S. tax legislation charge, if and as noted in the release; and adjusted earnings per share, which we adjust to exclude pension mark-to-market expenses, as well as for other components, such as separation costs related to the spin-offs, adjustments to the 4Q17 U.S. tax legislation charge, and after-tax segment profit contribution from Resideo and Garrett in the periods noted in the release, net of spin indemnification impacts assuming both indemnification agreements were effective in such periods, if and as noted in the release. The respective tax rates applied when adjusting earnings per share for these items are identified in the release or in the reconciliations presented in the Appendix. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.

1 Adjusted free cash flow and associated conversion exclude impacts from separation costs related to the spin-offs of $28M.
Adjusted EPS V% ex-spins excludes 2Q18 after-tax separation costs related to the spin-offs of Resideo and Garrett, the 2Q18 after-tax segment profit contribution from Resideo and Garrett, net of the spin indemnification impacts assuming both indemnification agreements were effective in 2Q18, and 2Q18 adjustments to the 4Q17 U.S. tax legislation charge.
Segment margin expansion ex-spins guidance excludes sales and segment profit contribution from Resideo and Garrett in 2018.
4 Adjusted EPS V% ex-spins guidance excludes 2018 pension mark-to-market, 2018 after-tax separation costs related to the spin-offs of Resideo and Garrett, and 2018 adjustments to the 4Q17 U.S. tax legislation charge. Also excludes the 2018 after-tax segment profit contribution from the spin-offs, net of spin indemnification impacts assuming both indemnification agreements were effective for all of 2018, of $0.62.
Adjusted free cash flow guidance and associated conversion excludes estimated payments of ~$0.3B for separation costs incurred in 2018 related to the spin-offs of Resideo and Garrett.
6 Adjusted EPS ex-spins and adjusted EPS V% ex-spins exclude 2Q18 after-tax separation costs related to the spin-offs of Resideo and Garrett of $346M, and the favorable 2Q18 adjustments to the 4Q17 U.S. tax legislation charge of $12M. Also excludes the 2Q18 after-tax segment profit contribution from the spin-offs, net of spin indemnification impacts assuming both indemnification agreements were effective in 2Q18, of $0.19.
7 Adjusted free cash flow and adjusted free cash flow V% exclude impacts from separation costs related to the spin-offs of $28M in 2Q19 and $67M in 2Q18.

Contacts:




Media

Investor Relations

Nina Krauss

Mark Macaluso

(704) 627-6035

(973) 455-2222

nina.krauss@honeywell.com  

mark.macaluso@honeywell.com  

 

Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)



Three Months Ended June 30,


Six Months Ended June 30,


2019


2018


2019


2018

Product sales

$

6,990



$

8,703



$

13,703



$

16,937


Service sales

2,253



2,216



4,424



4,374


Net sales

9,243



10,919



18,127



21,311


Costs, expenses and other








Cost of products sold (1)

4,848



6,202



9,470



12,107


Cost of services sold (1)

1,246



1,412



2,503



2,698



6,094



7,614



11,973



14,805


Selling, general and administrative expenses (1)

1,387



1,528



2,750



3,003


Other (income) expense

(305)



(316)



(590)



(584)


Interest and other financial charges

85



95



170



178



7,261



8,921



14,303



17,402


Income before taxes

1,982



1,998



3,824



3,909


Tax expense

426



718



832



1,177


Net income

1,556



1,280



2,992



2,732


Less: Net income attributable to the noncontrolling interest

15



13



35



26


Net income attributable to Honeywell

$

1,541



$

1,267



$

2,957



$

2,706


Earnings per share of common stock - basic

$

2.13



$

1.70



$

4.07



$

3.62


Earnings per share of common stock - assuming dilution

$

2.10



$

1.68



$

4.02



$

3.57


Weighted average number of shares outstanding - basic

723.2



745.5



726.4



748.0


Weighted average number of shares outstanding -
assuming dilution

733.0



755.0



735.9



758.0



(1)  Cost of products and services sold and selling, general and administrative expenses include amounts for
repositioning and other charges, the service cost component of pension and other postretirement (income)
expense, and stock compensation expense.

 

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






Three Months Ended June 30,


Six Months Ended June 30,

Net Sales

2019


2018


2019


2018

Aerospace

$

3,508



$

4,058



$

6,849



$

8,035


Honeywell Building Technologies

1,450



2,546



2,839



4,979


Performance Materials and Technologies

2,735



2,698



5,307



5,232


Safety and Productivity Solutions

1,550



1,617



3,132



3,065


Total

$

9,243



$

10,919



$

18,127



$

21,311


 

Reconciliation of Segment Profit to Income Before Taxes






Three Months Ended June 30,


Six Months Ended June 30,

Segment Profit

2019


2018


2019


2018

Aerospace

$

907



$

918



$

1,745



$

1,811


Honeywell Building Technologies

300



427



571



843


Performance Materials and Technologies

644



597



1,208



1,116


Safety and Productivity Solutions

191



267



403



498


Corporate

(72)



(64)



(148)



(128)


Total segment profit

1,970



2,145



3,779



4,140


Interest and other financial charges

(85)



(95)



(170)



(178)


Stock compensation expense (1)

(34)



(38)



(75)



(90)


Pension ongoing income (2)

148



250



299



498


Other postretirement income (2)

11



6



23



12


Repositioning and other charges (3,4)

(126)



(266)



(210)



(457)


Other (5)

98



(4)



178



(16)


Income before taxes

$

1,982



$

1,998



$

3,824



$

3,909



(1)   Amounts included in Selling, general and administrative expenses.

(2)   Amounts included in Cost of products and services sold and Selling, general and administrative expenses
(service costs) and Other income/expense (non-service cost components).

(3)   Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and
Other income/expense.

(4)   Includes repositioning, asbestos, and environmental expenses.

(5)   Amounts include the other components of Other income/expense not included within other categories in this
reconciliation. Equity income (loss) of affiliated companies is included in segment profit.

 

Honeywell International Inc.
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)



June 30, 2019


December 31,
2018

ASSETS




Current assets:




Cash and cash equivalents

$

8,225



$

9,287


Short-term investments

1,718



1,623


Accounts receivable - net

7,407



7,508


Inventories

4,600



4,326


Other current assets

1,818



1,618


Total current assets

23,768



24,362


Investments and long-term receivables,

747



742


Property, plant and equipment - net

5,260



5,296


Goodwill

15,573



15,546


Other intangible assets - net

3,933



4,139


Insurance recoveries for asbestos related liabilities

422



437


Deferred income taxes

259



382


Other assets

7,788



6,869


Total assets

$

57,750



$

57,773


LIABILITIES




Current liabilities:




Accounts payable

$

5,602



$

5,607


Commercial paper and other short-term borrowings

3,558



3,586


Current maturities of long-term debt

4,017



2,872


Accrued liabilities

6,717



6,859


Total current liabilities

19,894



18,924


Long-term debt

8,608



9,756


Deferred income taxes

1,722



1,713


Postretirement benefit obligations other than pensions

326



344


Asbestos related liabilities

2,226



2,269


Other liabilities

6,907



6,402


Redeemable noncontrolling interest

7



7


Shareowners' equity

18,060



18,358


Total liabilities, redeemable noncontrolling interest and shareowners' equity

$

57,750



$

57,773


 

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






Three Months Ended
June 30,


Six Months Ended
June 30,


2019


2018


2019


2018

Cash flows from operating activities:








Net income

$

1,556



$

1,280



$

2,992



$

2,732


Less: Net income attributable to the noncontrolling interest

15



13



35



26


Net income attributable to Honeywell

1,541



1,267



2,957



2,706


Adjustments to reconcile net income attributable to Honeywell to net 
    cash provided by operating activities:








Depreciation

172



193



335



372


Amortization

123



95



221



204


Repositioning and other charges

126



266



210



457


Net payments for repositioning and other charges

(51)



(187)



(85)



(328)


Pension and other postretirement income

(159)



(256)



(322)



(510)


Pension and other postretirement benefit payments

(15)



(8)



(45)



(44)


Stock compensation expense

34



38



75



90


Deferred income taxes

(36)



67



44



114


Other

9



76



5



78


Changes in assets and liabilities, net of the effects of acquisitions 
    and divestitures:








Accounts receivable

(100)



158



98



97


Inventories

(52)



(26)



(273)



(189)


Other current assets

(22)



217



(239)



174


Accounts payable

21



167



(8)



224


Accrued liabilities

87



(206)



(161)



(448)


Net cash provided by (used for) operating activities

1,678



1,861



2,812



2,997


Cash flows from investing activities:








Expenditures for property, plant and equipment

(171)



(199)



(312)



(339)


Proceeds from disposals of property, plant and equipment

8



1



10



3


Increase in investments

(1,048)



(1,204)



(2,274)



(1,787)


Decrease in investments

1,367



1,670



2,163



3,508


Other

110



343



70



220


Net cash provided by (used for) investing activities

266



611



(343)



1,605


Cash flows from financing activities:








Proceeds from issuance of commercial paper and other short-term
borrowings

3,796



6,073



7,114



12,749


Payments of commercial paper and other short-term borrowings

(3,796)



(6,823)



(7,115)



(12,152)


Proceeds from issuance of common stock

233



67



378



127


Proceeds from issuance of long-term debt

9



2



29



5


Payments of long-term debt

(71)



(31)



(84)



(1,277)


Repurchases of common stock

(1,900)



(764)



(2,650)



(1,704)


Cash dividends paid

(597)



(560)



(1,203)



(1,116)


Other

(2)



(2)



(32)



(118)


Net cash provided by (used for) financing activities

(2,328)



(2,038)



(3,563)



(3,486)


Effect of foreign exchange rate changes on cash and cash equivalents

(16)



(249)



32



(93)


Net increase (decrease) in cash and cash equivalents

(400)



185



(1,062)



1,023


Cash and cash equivalents at beginning of period

8,625



7,897



9,287



7,059


Cash and cash equivalents at end of period

$

8,225



$

8,082



$

8,225



$

8,082


 

Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)



Three Months
Ended June 30, 2019

Honeywell


Reported sales % change

(15)%

Less: Foreign currency translation

(2)%

Less: Acquisitions, divestitures and other, net

(18)%

Organic sales % change

5%



Aerospace


Reported sales % change

(14)%

Less: Foreign currency translation

—%

Less: Acquisitions, divestitures and other, net

(25)%

Organic sales % change

11%



Honeywell Building Technologies


Reported sales % change

(43)%

Less: Foreign currency translation

(2)%

Less: Acquisitions, divestitures and other, net

(46)%

Organic sales % change

5%



Performance Materials and Technologies


Reported sales % change

1%

Less: Foreign currency translation

(3)%

Less: Acquisitions, divestitures and other, net

—%

Organic sales % change

4%



Safety and Productivity Solutions


Reported sales % change

(4)%

Less: Foreign currency translation

(2)%

Less: Acquisitions, divestitures and other, net

2%

Organic sales % change

(4)%


We define organic sales percent as the year-over-year change in reported sales relative to the comparable period,

excluding the impact on sales from foreign currency translation, and acquisitions, net of divestitures. We believe this

measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing

operating trends.


A quantitative reconciliation of reported sales percent change to organic sales percent change has not been provided

for forward-looking measures of organic sales percent change because management cannot reliably predict or

estimate, without unreasonable effort, the fluctuations in global currency markets that impact foreign currency

translation, nor is it reasonable for management to predict the timing, occurrence and impact of acquisition and

divestiture transactions, all of which could significantly impact our reported sales percent change.

 

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,


2019


2018

Segment profit

$

1,970



$

2,145


Stock compensation expense (1)

(34)



(38)


Repositioning, Other (2,3)

(137)



(279)


Pension and other postretirement service costs (4)

(37)



(51)


Operating income

$

1,762



$

1,777


Segment profit

$

1,970



$

2,145


÷ Net sales

$

9,243



$

10,919


Segment profit margin %

21.3%



19.6%


Operating income

$

1,762



$

1,777


÷ Net sales

$

9,243



$

10,919


Operating income margin %

19.1%



16.3%



(1)   Included in Selling, general and administrative expenses.

(2)   Includes repositioning, asbestos, environmental expenses and equity income adjustment.

(3)   Included in Cost of products and services sold, Selling, general and administrative expenses and Other
income/expense.

(4)   Included in Cost of products and services sold and Selling, general and administrative expenses.


We define segment profit as operating income, excluding stock compensation expense, pension and other
postretirement service costs, and repositioning and other charges. We believe these measures are useful to investors
and management in understanding our ongoing operations and in analysis of ongoing operating trends.

 

Honeywell International Inc.
Reconciliation of Earnings per Share to Adjusted Earnings per Share and Adjusted Earnings per Share Excluding
Spin-off Impact (Unaudited)






Three Months Ended June 30,


Twelve Months
Ended

December 31,


2019


2018


2018

Earnings per share of common stock - assuming dilution (1)

$

2.10



$

1.68



$

8.98


Pension mark-to-market expense





0.04


Separation costs (2)



0.46



0.97


Impacts from U.S. Tax Reform



(0.02)



(1.98)


Adjusted earnings per share of common stock - assuming
dilution

$

2.10



$

2.12



$

8.01


Less: EPS, attributable to spin-offs



0.19



0.62


Adjusted earnings per share of common stock - assuming
dilution, excluding spin-off impact



$

1.93



$

7.39



(1) For the three months ended June 30, 2019 and 2018, adjusted earnings per share utilizes weighted average
shares of approximately 733.0 million and 755.0 million. For the twelve months ended December 31, 2018,
adjusted earnings per share utilizes weighted average shares of approximately 753.0 million.


(2) For the three months ended June 30, 2018, separation costs of $354 million ($346 million net of tax) includes
$291 million of tax costs we incurred in the restructuring of the ownership of various legal entities in anticipation
of the spin-off transactions ("frictional tax costs") and $63 million ($55 million net of tax) of other separation
costs. For the twelve months ended December 31, 2018, separation costs of $732 million including net tax
impacts.


We believe adjusted earnings per share, excluding spin-off impact, is a measure that is useful to investors and
management in understanding our ongoing operations and in analysis of ongoing operating trends.

 

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



Three Months
Ended
June 30, 2019


Three Months
Ended
June 30, 2018

Cash provided by operating activities

$

1,678



$

1,861


Expenditures for property, plant and equipment

(171)



(199)


Free cash flow

1,507



1,662


Separation cost payments

28



67


Adjusted free cash flow

$

1,535



$

1,729


Net income attributable to Honeywell

$

1,541



$

1,267


Separation costs, includes net tax impacts



346


Adjustments to 4Q17 U.S tax legislation charge



(12)


Adjusted net income attributable to Honeywell

$

1,541



$

1,601


Cash provided by operating activities

$

1,678



$

1,861


÷ Net income (loss) attributable to Honeywell

$

1,541



$

1,267


Operating cash flow conversion

109%



147%


Adjusted free cash flow

$

1,535



$

1,729


÷ Adjusted net income attributable to Honeywell

$

1,541



$

1,601


Adjusted free cash flow conversion %

100%



108%



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, 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.

 

Honeywell International Inc.
Reconciliation of Segment Profit to Operating Income and Calculation of Segment Profit and Operating Income
Margins (Unaudited)
(Dollars in millions)



Twelve Months
Ended

December 31,

2018

Segment profit

$

8,190




Stock compensation expense (1)

(175)


Repositioning, Other (2,3)

(1,100)


Pension and other postretirement service costs (4)

(210)




Operating income

$

6,705




Segment profit

$

8,190


÷ Net sales

$

41,802


Segment profit margin %

19.6%




Operating income

$

6,705


÷ Net sales

$

41,802


Operating income margin %

16.0%



(1)   Included in Selling, general and administrative expenses.

(2)   Includes repositioning, asbestos, environmental expenses and equity income adjustment.

(3)   Included in Cost of products and services sold, Selling, general and administrative expenses and Other
income/expense.

(4)   Included in Cost of products and services sold and Selling, general and administrative expenses.


We define segment profit as operating income, excluding stock compensation expense, pension and other
postretirement service costs, and repositioning and other charges. We believe these measures are useful to investors
and management in understanding our ongoing operations and in analysis of ongoing operating trends.


A quantitative reconciliation of segment profit margin, on an overall Honeywell basis, to operating income margin has
not been provided for all forward-looking measures of segment profit margin included herewithin, however, operating
income margin is expected to be up 210 to 240 bps in 2019 full year, with the differences between segment profit
margin and operating income margin driven by expected full year stock compensation expense, repositioning
and other, and pension and other postretirement service costs.

 

Honeywell International Inc.
Calculation of Segment Profit Excluding Spin-off Impact and Segment Margin Excluding Spin-off Impact
(Dollars in millions)



Twelve Months
Ended

December 31,

2018

Segment profit

$

8,190


Spin-off impact (1)

(1,011)


Segment profit excluding spin-off impact

$

7,179




Sales

$

41,802


Spin-off impact (1)

(6,551)


Sale excluding spin-off impact

$

35,251




Segment profit margin % excluding spin-off impact

20.4%



(1)   Amount computed as the portion of Aerospace and Honeywell Building Technologies segment profit and sales
in the applicable prior year period for Transportation Systems and Homes and Global Distribution spin-off
businesses.

 

Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash Flow (Unaudited)



Twelve Months
Ended
December 31,

2019(E) ($B)

Cash provided by operating activities

~$6.2 - $6.5

Expenditures for property, plant and equipment

~(0.8)

Free cash flow

~5.4 - 5.7

Separation cost payments

~0.3

Adjusted free cash flow

~$5.7 - $6.0


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, 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.

 

Cision View original content:http://www.prnewswire.com/news-releases/honeywell-delivers-earnings-of-2-10--at-high-end-of-guidance-raises-full-year-sales-earnings-and-cash-guidance-300887096.html

SOURCE Honeywell