REG-Honeywell Intl: HONEYWELL DELIVERS STRONG FOURTH QUARTER RESULTS
03/02/2022 11:35
HONEYWELL DELIVERS STRONG FOURTH QUARTER RESULTS, FULL YEAR OPERATING CASH
FLOW OF $6.0 BILLION AND FREE CASH FLOW OF $5.7 BILLION, ABOVE HIGH END OF
INITIAL GUIDANCE; ISSUES 2022 GUIDANCE
- Fourth Quarter Sales of $8.7 Billion at Midpoint of Previous Guidance
- Fourth Quarter EPS of $2.05 and Adjusted EPS² of $2.09, Above Midpoint of
Previous Guidance
- Full Year EPS of $7.91 and Adjusted EPS? of $8.06, Above High End of
Initial Guidance
- Deployed $8.5 Billion¹ in Capital to Share Repurchases, Dividends, Capital
Expenditures, and Acquisitions in 2021
- Expect 2022 Sales Growth of 4% - 7% Organically and Segment Margin of 21.1%
- 21.5%, 21.4% - 21.8% Excluding the Impact of Quantinuum
CHARLOTTE, N.C., Feb. 3, 2022 /PRNewswire/ -- Honeywell (NASDAQ: HON) today
announced results for the fourth quarter and full year 2021 that met or
exceeded the company's guidance despite an extremely challenging operating
environment. The company also provided its outlook for 2022.
The company reported a fourth-quarter year-over-year sales decline of 3%, down
2% on an organic basis, due to supply-related constraints, a tough comparison
versus 2020 due to lower COVID mask volumes, and six fewer days in the
quarter. Demand remained strong, with orders up high-single digits. Closing
backlog was $28 billion, up 7% year over year. Fourth-quarter operating
margin declined 130 basis points to 17.5% and segment margin expanded 30 basis
points to 21.4% as a result of the company's commercial excellence efforts.
Honeywell delivered fourth-quarter adjusted earnings per share of $2.09, above
the midpoint of the company's guidance.
For the full year, sales increased by 5%, or 4% on an organic basis, and
operating margin expanded 50 basis points with segment margin expanding 60
basis points. The company reported full-year adjusted earnings per share(5) of
$8.06, above the high end of its initial guidance of $7.60 to $8.00.
"Honeywell had a strong finish to another challenging year. We remained
resilient, focusing on operational excellence to deliver the commitments we
made to our shareowners," said Darius Adamczyk, chairman and chief executive
officer of Honeywell. "Our focus on differentiated solutions drove
double-digit organic sales growth in 2021 in our warehouse and workflow
solutions, productivity solutions and services, business and general aviation,
advanced materials, and recurring connected software businesses. Our
disciplined cost management, swift pricing actions to stay ahead of the
inflation curve, and improved productivity resulted in 60 basis points of
segment margin expansion for the year. As a result, our full-year adjusted
earnings per share(5) increased by 14% year over year. We also were strong
cash generators in 2021, delivering $6.0 billion in operating cash flow with
109% conversion and $5.7 billion of free cash flow(6) with 102% adjusted
conversion and free cash flow margin of 17%."
Adamczyk continued, "Our balance sheet remains strong, and we maintained our
focus on executing our capital deployment strategy, including investing in
high-return capital expenditures, repurchasing $3.4 billion of Honeywell
shares, completing four acquisitions, and increasing the dividend for the
12(th) time in the past 11 years. We deployed capital in excess of our
operating cash flow and will continue to follow this playbook in 2022."
Adamczyk concluded, "I am proud of the way Honeywell continues to respond to
the challenging macroeconomic environment. We quickly took action to mitigate
supply chain challenges and inflation by bringing on alternate suppliers,
redesigning parts and implementing pricing actions. We also remained focused
on growth, investing in new markets and technologies such as our
environmental, social and governance (ESG) enablement solutions and the
creation of Quantinuum, the world's largest, most advanced integrated
standalone quantum computing company. We entered 2022 with positive momentum
and a strong backlog, and I am confident we are well positioned to continue to
perform for our shareowners, our customers, and our employees in the short and
long term."
Honeywell also announced its outlook for 2022. The company expects sales of
$35.4 billion to $36.4 billion, representing year-over-year organic growth of
4% to 7%, or 5% to 8% excluding the impact of COVID-driven mask sales
declines; segment margin expansion of 10 to 50 basis points, including the
(30) basis point impact of its newly combined Quantinuum business; earnings
per share(5) of $8.40 to $8.70, up 4% to 8% adjusted; operating cash flow of
$5.7 billion to $6.1 billion, and free cash flow of $4.7 billion to $5.1
billion. A summary of the company's 2022 guidance can be found in Table 1.
Fourth-Quarter Performance
Honeywell sales for the fourth quarter were down 3% year over year on a
reported basis and down 2% year over year on an organic basis. The
fourth-quarter financial results can be found in Tables 2 and 3.
Aerospace sales for the fourth quarter were down 3% year over year on an
organic basis. Business and general aviation original equipment, business and
general aviation aftermarket, and air transport aftermarket all grew double
digits as build rates and flight hours improved, offset by lower U.S. defense
volumes which were impacted by supply chain constraints and lower demand.
Commercial aviation aftermarket sales were up over 16% year over year,
demonstrating momentum in the aftermarket recovery. Segment margin expanded
140 basis points to 29.0% driven by pricing and productivity, partially offset
by higher cost of materials.
Honeywell Building Technologies sales for the fourth quarter were down 1% on
an organic basis year over year due to lower projects volume and continued
supply chain constraints in the products businesses. Orders were up 4% as a
result of demand for fire products, building management systems, and building
projects. Building solutions backlog grew double digits year over year,
positioning the business for growth in 2022. Segment margin contracted 30
basis points to 21.1% driven by lower volume leverage and cost inflation,
mostly offset by favorable pricing.
Performance Materials and Technologies sales for the fourth quarter were up
2% on an organic basis year over year, driven by petrochemical catalyst and
gas processing shipments in UOP, continued growth in advanced materials, and
demand for thermal solutions within process solutions, partially offset by
delayed projects recovery and softness in smart energy. Orders grew 10% year
over year driven by double-digit growth in both UOP and process solutions
projects, a positive indicator for 2022 and beyond. Segment margin expanded
430 basis points to 23.0% driven by favorable pricing and productivity, net of
inflation.
Safety and Productivity Solutions sales for the fourth quarter were down 6%
on an organic basis year over year, driven by lower personal protective
equipment volume, partially offset by double-digit growth in productivity
solutions and services and advanced sensing technologies. Backlog remained
strong at over $4 billion dollars as declines in COVID-related mask demand
were mostly offset by growth in advanced sensing technologies, productivity
solutions and services, and gas detection. Segment margin contracted 450 basis
points to 10.8% driven by lower volume leverage and Intelligrated project
inefficiencies, partially offset by favorable pricing. These results exclude a
$105 million charge (in Repositioning and Other) for certain long-term
contract labor cost inefficiencies due to severe supply chain disruptions
(attributable to the COVID-19 pandemic) related to the warehouse automation
business. For more detail, please see the footnotes for the reconciliation of
segment profit to operating income below.
Conference Call Details
Honeywell will discuss its fourth-quarter results and updated full-year
guidance during an investor conference call starting at 8:30 a.m. Eastern
Standard Time today. To participate on the conference call, please dial (301)
715-8592 approximately 10 minutes before the 8:30 a.m. EST start. The meeting
ID is 922 0876 1191. The password is 576684. A 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). A replay of the webcast will be available for 30
days following the presentation.
TABLE 1: FULL-YEAR 2022 GUIDANCE
Sales $35.4B - $36.4B
Organic Growth 4% - 7%
Organic Growth Excluding Impact of COVID-Driven Mask Sales Declines 5% - 8%
Segment Margin 21.1% - 21.5%
Expansion Up 10 - 50 bps
Segment Margin Excluding the Impact of Quantinuum 21.4% - 21.8%
Expansion Excluding Impact of Quantinuum Up 40 - 80 bps
Earnings Per Share (3) $8.40 - $8.70
Adjusted Earnings Growth (4) 4% - 8%
Operating Cash Flow $5.7B - $6.1B
Free Cash Flow $4.7B - $5.1B
Excluding Impact of Quantinuum $4.9B - $5.3B
TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS
FY 2021 FY 2020 Change
Sales 34,392 32,637 5%
Organic Growth 4%
Segment Margin 21.0% 20.4% 60 bps
Operating Income Margin 18.0% 17.5% 50 bps
Reported Earnings Per Share $7.91 $6.72 18%
Adjusted Earnings Per Share (5) $8.06 $7.10 14%
Cash Flow from Operations 6,038 6,208 (3)%
Conversion 109% 130% (21)%
Free Cash Flow 5,729 5,302 8%
Adjusted Free Cash Flow Conversion (6) 102% 105% (3)%
4Q 2021 4Q 2020 Change
Sales 8,657 8,900 (3)%
Organic Growth (2)%
Segment Margin 21.4% 21.1% 30 bps
Operating Income Margin 17.5% 18.8% -130 bps
Reported Earnings Per Share $2.05 $1.91 7%
Adjusted Earnings Per Share (2) $2.09 $2.07 1%
Cash Flow from Operations 2,663 2,782 (4)%
Conversion 186% 205% (19)%
Free Cash Flow 2,593 2,491 4%
Adjusted Free Cash Flow Conversion (3) 178% 170% 8%
TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS
AEROSPACE FY 2021 FY 2020 Change
Sales 11,026 11,544 (4)%
Organic Growth (5)%
Segment Profit 3,051 2,904 5%
Segment Margin 27.7% 25.2% 250 bps
4Q 2021 4Q 2020
Sales 2,896 2,978 (3)%
Organic Growth (3)%
Segment Profit 839 822 2%
Segment Margin 29.0% 27.6% 140 bps
HONEYWELL BUILDING TECHNOLOGIES FY 2021 FY 2020 Change
Sales 5,539 5,189 7%
Organic Growth 4%
Segment Profit 1,238 1,099 13%
Segment Margin 22.4% 21.2% 120 bps
4Q 2021 4Q 2020
Sales 1,404 1,426 (2)%
Organic Growth (1)%
Segment Profit 296 305 (3)%
Segment Margin 21.1% 21.4% -30 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES FY 2021 FY 2020 Change
Sales 10,013 9,423 6%
Organic Growth 3%
Segment Profit 2,120 1,851 15%
Segment Margin 21.2% 19.6% 160 bps
4Q 2021 4Q 2020
Sales 2,605 2,556 2%
Organic Growth 2%
Segment Profit 598 478 25%
Segment Margin 23.0% 18.7% 430 bps
SAFETY AND PRODUCTIVITY SOLUTIONS FY 2021 FY 2020 Change
Sales 7,814 6,481 21%
Organic Growth 22%
Segment Profit 1,029 907 13%
Segment Margin 13.2% 14.0% -80 bps
4Q 2021 4Q 2020
Sales 1,752 1,940 (10)%
Organic Growth (6)%
Segment Profit 189 297 (36)%
Segment Margin 10.8% 15.3% -450 bps
(1)Capital deployment includes a $270M investment in Quantinuum that is consolidated in our financial statements
(2)Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, changes in fair value for Garrett equity securities, and the 2020 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett.
(3)Adjusted free cash flow conversion excludes pension mark-to-market, changes in fair value for Garrett equity securities, and the 2020 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett.
(4)Adjusted EPS V% guidance excludes pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, an expense related to UOP matters, gain on the sale of the retail footwear business, a 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and the 2020 non-cash charges associated with the reduction in
value of reimbursement receivables due from Garrett.
(5)Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, an expense related to UOP matters, gain on the sale of the retail footwear business, a 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and the 2020 non-cash charges associated with the reduction
in value of reimbursement receivables due from Garrett.
(6)Adjusted free cash flow conversion excludes pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, an expense related to UOP matters, gain on the sale of the retail footwear business, a 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and the 2020 non-cash charges associated with the
reduction in value of reimbursement receivables due from Garrett, if and as noted in the release.
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.
Honeywell uses our Investor Relations website, www.honeywell.com/investor, as
a means of disclosing information which may be of interest or material to our
investors and for complying with disclosure obligations under Regulation FD.
Accordingly, investors should monitor our Investor Relations website, in
addition to following our press releases, SEC filings, public conference
calls, webcasts, and social media.
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. Forward-looking statements are those that address activities, events
or developments that management intends, expects, projects, believes or
anticipates will or may occur in the future. They are based on management's
assumptions and assessments in light of past experience and trends, current
economic and industry conditions, expected future developments and other
relevant factors. They are not guarantees of future performance, and actual
results, developments and business decisions may differ significantly from
those envisaged by our forward-looking statements. We do not undertake to
update or revise any of our forward-looking statements, except as required by
applicable securities law. Our forward-looking statements are also subject to
risks and uncertainties, including the impact of the COVID-19 pandemic, that
can affect our performance in both the near- and long-term. In addition, no
assurance can be given that any plan, initiative, projection, goal commitment,
expectation, or prospect set forth in this release can or will be achieved.
Any forward-looking plans described herein are not final and may be modified
or abandoned at any time. 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 net sales;
*
Organic sales growth, which we define as net sales growth less the impacts
from foreign currency translation, and acquisitions and divestitures for the
first 12 months following transaction date;
*
Organic sales growth excluding COVID-Driven Masks, which we define as organic
sales excluding any sales attributable to COVID-Driven Masks
*
Free cash flow, which we define as cash flow from operations less capital
expenditures plus cash receipts from Garrett, if and as noted in the release;
*
Free cash flow excluding Quantinuum which we define as free cash flow less
free cash flow attributable to Quantinuum;
*
Adjusted net income attributable to Honeywell, which we define as net income
attributable to Honeywell which we adjust to exclude: pension mark-to-market,
changes in fair value for Garrett equity securities, a non-cash charge
associated with a further reduction in value of reimbursement receivables
following Garrett's emergence from bankruptcy on April 30, 2021, an expense
related to UOP matters, gain on the sale of the retail footwear business, a
2Q20 favorable resolution of a foreign tax matter related to the spin-off
transactions, and the 2020 non-cash charges associated with the reduction in
value of reimbursement receivables due from Garrett, if and as noted in the
release;
*
Adjusted free cash flow conversion, which we define as free cash flow divided
by adjusted net income attributable to Honeywell;
*
Adjusted free cash flow margin, which we define as free cash flow divided by
net sales; and
*
Adjusted earnings per share, which we adjust to exclude pension
mark-to-market, changes in fair value for Garrett equity securities, a
non-cash charge associated with a further reduction in value of reimbursement
receivables following Garrett's emergence from bankruptcy on April 30, 2021,
an expense related to UOP matters, gain on the sale of the retail footwear
business, a 2Q20 favorable resolution of a foreign tax matter related to the
spin-off transactions, and the 2020 non-cash charges associated with the
reduction in value of reimbursement receivables due from Garrett, if and as
noted in the release.
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. Certain metrics presented on a non-GAAP basis
represent the impact of adjusting items net of tax. The tax-effect for
adjusting items is determined individually and on a case-by-case basis. Refer
to the Appendix attached to this release for reconciliations of non-GAAP
financial measures to the most directly comparable GAAP measures.
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2021 2020 2021 2020
Product sales $ 6,362 $ 6,804 $ 25,643 $ 24,737
Service sales 2,295 2,096 8,749 7,900
Net sales 8,657 8,900 34,392 32,637
Costs, expenses and other
Cost of products sold ((1)) 4,596 4,786 18,344 17,638
Cost of services sold ((1)) 1,340 1,190 5,050 4,531
5,936 5,976 23,394 22,169
Selling, general and administrative expenses ((1)) 1,203 1,248 4,798 4,772
Other (income) expense (355) (129) (1,378) (675)
Interest and other financial charges 80 95 343 359
6,864 7,190 27,157 26,625
Income before taxes 1,793 1,710 7,235 6,012
Tax expense 351 331 1,625 1,147
Net income 1,442 1,379 5,610 4,865
Less: Net income attributable to the noncontrolling interest 14 20 68 86
Net income attributable to Honeywell $ 1,428 $ 1,359 $ 5,542 $ 4,779
Earnings per share of common stock - basic $ 2.07 $ 1.94 $ 8.01 $ 6.79
Earnings per share of common stock - assuming dilution $ 2.05 $ 1.91 $ 7.91 $ 6.72
Weighted average number of shares outstanding - basic 688.3 701.8 692.3 704.1
Weighted average number of shares outstanding - assuming dilution 695.8 710.0 700.4 711.2
(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 Twelve Months Ended
December 31, December 31,
Net Sales 2021 2020 2021 2020
Aerospace $ 2,896 $ 2,978 $ 11,026 $ 11,544
Honeywell Building Technologies 1,404 1,426 5,539 5,189
Performance Materials and Technologies 2,605 2,556 10,013 9,423
Safety and Productivity Solutions 1,752 1,940 7,814 6,481
Corporate and all other — — — —
Total $ 8,657 $ 8,900 $ 34,392 $ 32,637
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended Twelve Months Ended
December 31, December 31,
Segment Profit 2021 2020 2021 2020
Aerospace $ 839 $ 822 $ 3,051 $ 2,904
Honeywell Building Technologies 296 305 1,238 1,099
Performance Materials and Technologies 598 478 2,120 1,851
Safety and Productivity Solutions 189 297 1,029 907
Corporate and all other (71) (23) (226) (96)
Total segment profit 1,851 1,879 7,212 6,665
Interest and other financial charges (80) (95) (343) (359)
Stock compensation expense ((1)) (45) (50) (217) (168)
Pension ongoing income ((2)) 273 192 1,083 785
Pension mark-to-market expense (40) (44) (40) (44)
Other postretirement income ((2)) 18 17 71 57
Repositioning and other charges ((3,4)) (230) (89) (569) (575)
Other ((5)) 46 (100) 38 (349)
Income before taxes $ 1,793 $ 1,710 $ 7,235 $ 6,012
(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)
December 31, December 31,
2021 2020
ASSETS
Current assets:
Cash and cash equivalents $ 10,959 $ 14,275
Short-term investments 564 945
Accounts receivable—net 6,830 6,827
Inventories 5,138 4,489
Other current assets 1,881 1,639
Total current assets 25,372 28,175
Investments and long-term receivables 1,222 685
Property, plant and equipment—net 5,562 5,570
Goodwill 17,756 16,058
Other intangible assets—net 3,613 3,560
Insurance recoveries for asbestos related liabilities 322 366
Deferred income taxes 489 760
Other assets 10,134 9,412
Total assets $ 64,470 $ 64,586
LIABILITIES
Current liabilities:
Accounts payable $ 6,484 $ 5,750
Commercial paper and other short-term borrowings 3,542 3,597
Current maturities of long-term debt 1,803 2,445
Accrued liabilities 7,679 7,405
Total current liabilities 19,508 19,197
Long-term debt 14,254 16,342
Deferred income taxes 2,364 2,113
Postretirement benefit obligations other than pensions 208 242
Asbestos related liabilities 1,800 1,920
Other liabilities 7,087 6,975
Redeemable noncontrolling interest 7 7
Shareowners' equity 19,242 17,790
Total liabilities, redeemable noncontrolling interest and shareowners' equity $ 64,470 $ 64,586
Honeywell International Inc.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended December 31, Twelve Months Ended December 31,
2021 2020 2021 2020
Cash flows from operating activities:
Net income $ 1,442 $ 1,379 $ 5,610 $ 4,865
Less: Net income attributable to the noncontrolling interest 14 20 68 86
Net income attributable to Honeywell 1,428 1,359 5,542 4,779
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:
Depreciation 168 164 674 644
Amortization 122 90 549 358
(Gain) loss on sale of non-strategic businesses and assets (7) 3 (102) 3
Repositioning and other charges 231 89 569 575
Net payments for repositioning and other charges (187) (181) (692) (833)
Pension and other postretirement income (252) (165) (1,114) (798)
Pension and other postretirement benefit payments (14) (10) (43) (47)
Stock compensation expense 45 50 217 168
Deferred income taxes (11) 114 178 (175)
Reimbursement receivables charge — 159 — 509
Other 78 31 (28) (338)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable 411 54 (8) 669
Inventories (169) 217 (685) (67)
Other current assets 48 (55) (276) 191
Accounts payable 365 475 744 15
Accrued liabilities 407 388 513 555
Net cash provided by (used for) operating activities 2,663 2,782 6,038 6,208
Cash flows from investing activities:
Expenditures for property, plant and equipment (281) (291) (895) (906)
Proceeds from disposals of property, plant and equipment 9 40 27 57
Increase in investments (384) (865) (2,373) (3,236)
Decrease in investments 619 874 2,525 3,508
Receipts from Garrett Motion Inc. 211 — 586 —
Receipts (payments) from settlements of derivative contracts 104 (74) 192 (149)
Cash paid for acquisitions, net of cash acquired 8 (261) (1,326) (261)
Proceeds from sales of businesses, net of fees paid — — 203 —
Net cash provided by (used for) investing activities 286 (577) (1,061) (987)
Cash flows from financing activities:
Proceeds from issuance of commercial paper and other short-term borrowings 1,554 1,897 5,194 10,474
Payments of commercial paper and other short-term borrowings (1,553) (1,888) (5,190) (10,400)
Proceeds from issuance of common stock 58 230 229 393
Proceeds from issuance of long-term debt 8 20 2,517 10,125
Payments of long-term debt (1,562) (71) (4,917) (4,308)
Repurchases of common stock (881) (1,565) (3,380) (3,714)
Cash dividends paid (676) (671) (2,626) (2,592)
Other (7) (5) (81) (59)
Net cash provided by (used for) financing activities (3,059) (2,053) (8,254) (81)
Effect of foreign exchange rate changes on cash and cash equivalents (18) 87 (39) 68
Net increase (decrease) in cash and cash equivalents (128) 239 (3,316) 5,208
Cash and cash equivalents at beginning of period 11,087 14,036 14,275 9,067
Cash and cash equivalents at end of period $ 10,959 $ 14,275 $ 10,959 $ 14,275
Honeywell International Inc.
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Year Ended
Ended December 31, 2021
December 31,
2021
Honeywell
Reported sales % change (3)% 5%
Less: Foreign currency translation (1)% 1%
Less: Acquisitions, divestitures and other, net —% —%
Organic sales % change (2)% 4%
Aerospace
Reported sales % change (3)% (4)%
Less: Foreign currency translation —% 1%
Less: Acquisitions, divestitures and other, net —% —%
Organic sales % change (3)% (5)%
Honeywell Building Technologies
Reported sales % change (2)% 7%
Less: Foreign currency translation (1)% 3%
Less: Acquisitions, divestitures and other, net —% —%
Organic sales % change (1)% 4%
Performance Materials and Technologies
Reported sales % change 2% 6%
Less: Foreign currency translation (1)% 2%
Less: Acquisitions, divestitures and other, net 1% 1%
Organic sales % change 2% 3%
Safety and Productivity Solutions
Reported sales % change (10)% 21%
Less: Foreign currency translation —% 2%
Less: Acquisitions, divestitures and other, net (4)% (3)%
Organic sales % change (6)% 22%
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, for the first 12
months following the transaction date. We believe this measure is useful to
investors and management in understanding our ongoing operations and in
analysis of ongoing operating trends.
We define Organic sales growth excluding COVID-driven mask sales as Organic
sales growth excluding any sales attributable to COVID-driven mask sales. We
believe Organic sales growth excluding COVID-driven mask sales 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 Twelve Months Ended
December 31, December 31,
2021 2020 2021 2020
Segment profit $ 1,851 $ 1,879 $ 7,212 $ 6,665
Stock compensation expense ((1)) (45) (50) (217) (168)
Repositioning, Other ((2,3)) (245) (111) (636) (641)
Pension and other postretirement service costs ((4)) (43) (42) (159) (160)
Operating income $ 1,518 $ 1,676 $ 6,200 $ 5,696
Segment profit $ 1,851 $ 1,879 $ 7,212 $ 6,665
÷ Net sales $ 8,657 $ 8,900 $ 34,392 $ 32,637
Segment profit margin % 21.4% 21.1% 21.0% 20.4 %
Operating income $ 1,518 $ 1,676 $ 6,200 $ 5,696
÷ Net sales $ 8,657 $ 8,900 $ 34,392 $ 32,637
Operating income margin % 17.5% 18.8% 18.0% 17.5%
(1) Included in Selling, general and administrative expenses.
(2) Includes repositioning, asbestos, environmental expenses, equity income adjustment, and other charges. For the three and twelve months ended December 31, 2021, other charges include $105 million of incremental long-term contract labor cost inefficiencies due to severe supply chain disruptions (attributable to the COVID-19 pandemic) relating to the warehouse automation business within the Safety and Product Solutions segment. These costs include incurred amounts and provisions for anticipated losses recognized during the fourth quarter when total estimated costs at completion for certain of the business' long-term contracts exceeded total estimated revenue. These certain costs represent unproductive labor costs due to unexpected supplier delays and the resulting downstream installation issues,
demobilization and remobilization of contract workers, and resolution of contractor disputes.
(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, on an overall Honeywell
basis, to operating income has not been provided for all forward-looking
measures of segment profit and segment margin included herewithin. Management
cannot reliably predict or estimate, without unreasonable effort, the impact
and timing on future operating results arising from items excluded from
segment profit. The information that is unavailable to provide a quantitative
reconciliation could have a significant impact on our reported financial
results. To the extent quantitative information becomes available without
unreasonable effort in the future, and closer to the period to which the
forward-looking measures pertain, a reconciliation of segment profit to
operating income will be included within future filings.
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 Twelve Months Ended December 31, Twelve
December 31, Months
Ended
December
31,
2021 2020 2021 2020 2022E
Earnings per share of common stock - diluted ((1)) $ 2.05 $ 1.91 $ 7.91 $ 6.72 $8.40 - $8.70
Pension mark-to-market expense ((2)) 0.05 0.05 0.05 0.04 No Forecast
Separation related tax adjustment ((3)) — — — (0.26) —
Changes in fair value for Garrett equity securities ((4)) (0.01) — (0.03) — —
Garrett related adjustments ((5)) — 0.11 0.01 0.60 —
Gain on sale of retail footwear business ((6)) — — (0.11) — —
Expense related to UOP Matters ((7)) — — 0.23 — —
Adjusted earnings per share of common stock - diluted $ 2.09 $ 2.07 $ 8.06 $ 7.10 $8.40 - 8.70
(1) For the three months ended December 31, 2021 and 2020, adjusted earnings per share utilizes weighted average shares of approximately 695.8 million and 710.0 million. For the twelve months ended December 31, 2021 and 2020, adjusted earnings per share utilizes weighted average shares of approximately 700.4 million and 711.2 million. For the twelve months ended December 31, 2022, expected earnings per share utilizes weighted average shares of approximately 693 million.
(2) Pension mark-to-market expense uses a blended tax rate of 25% for 2021 and 2020.
(3) For the twelve months ended December 31, 2020, separation-related tax adjustment of $186 million ($186 million net of tax) includes the favorable resolution of a foreign tax matter related to the spin-off transactions.
(4) For the three and twelve months ended December 31, 2021, the adjustments were $5 million and $19 million net of tax due to changes in fair value for Garrett equity securities.
(5) For the twelve months ended December 31, 2021, the adjustment was $7 million net of tax due to a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021. For the three and twelve months ended December 31, 2020, adjustments were $77 million and $427 million net of tax due to the non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement
of related hedging transactions.
(6) For the twelve months ended December 31, 2021, the adjustment was $76 million net of tax due to the gain on sale of the retail footwear business.
(7) For the twelve months ended December 31, 2021, the adjustment was $160 million with no tax benefit due to an expense related to UOP matters.
We believe adjusted earnings per share is a measure that is useful to
investors and management in understanding our ongoing operations and in
analysis of ongoing operating trends. For forward looking information,
management cannot reliably predict or estimate, without unreasonable effort,
the pension mark-to-market expense as it is dependent on macroeconomic
factors, such as interest rates and the return generated on invested pension
plan assets. We therefore do not include an estimate for the pension
mark-to-market expense. Based on economic and industry conditions, future
developments and other relevant factors, these assumptions are subject to
change.
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 December 31, 2021 Three Months Ended December 31, 2020 Twelve Months Ended December 31, 2021 Twelve Months Ended December 31, 2020
Cash provided by operating activities $ 2,663 $ 2,782 $ 6,038 $ 6,208
Expenditures for property, plant and equipment (281) (291) (895) (906)
Garrett cash receipts 211 — 586 —
Free cash flow 2,593 2,491 5,729 5,302
Net income attributable to Honeywell $ 1,428 $ 1,359 $ 5,542 $ 4,779
Separation related tax adjustment — — — (186)
Pension mark-to-market ((1)) 30 33 30 33
Garrett related adjustment ((2)) — 77 7 427
Changes in fair value of equity related securities (5) — (19) —
Gain on sale of retail footwear business — — (76) —
Expense related to UOP Matters — — 160 —
Adjusted net income attributable to Honeywell $ 1,453 $ 1,469 $ 5,644 $ 5,053
Cash provided by operating activities $ 2,663 $ 2,782 $ 6,038 $ 6,208
÷ Net income (loss) attributable to Honeywell $ 1,428 $ 1,359 $ 5,542 $ 4,779
Operating cash flow conversion 186 % 205% 109 % 130 %
Free cash flow $ 2,593 $ 2,491 $ 5,729 $ 5,302
÷ Adjusted net income attributable to Honeywell $ 1,453 $ 1,469 $ 5,644 $ 5,053
Adjusted free cash flow conversion % 178% 170% 102 % 105 %
(1) Pension mark-to-market expense uses a blended tax rate of 25% for 2021 and 2020.
(2) For the twelve months ended December 31, 2021, the adjustment was $7 million net of tax due to a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021. For the three and twelve months ended December 31, 2020, adjustments were $77 million and $427 million net of tax due to the non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from
settlement of related hedging transactions.
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus cash receipts from
Garrett. We define adjusted free cash flow conversion as free cash flow
divided by adjusted net income attributable to Honeywell.
We believe that free cash flow is a non-GAAP metric that is useful to
investors and management as a measure of cash generated by 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 operations and the impact that this cash flow has on our
liquidity. For forward looking information, we do not provide cash flow
conversion guidance on a GAAP basis as management cannot reliably predict or
estimate, without unreasonable effort, the pension mark-to-market expense and
the changes in fair value for Garrett equity securities. Pension
mark-to-market is dependent on macroeconomic factors, such as interest rates
and the return generated on invested pension plan assets. Based on economic
and industry conditions, future developments and other relevant factors, these
assumptions are subject to change. Changes in fair value for Garrett equity
securities cannot be forecasted due to the inherent nature of changing
conditions in the overall market.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Adjusted Free Cash Flow and Calculation of Free Flow Margin (Unaudited)
(Dollars in millions)
Twelve
Months
Ended
December
31, 2021
Cash provided by operating activities $ 6,038
Expenditures for property, plant and equipment (895)
Garrett cash receipts 586
Free cash flow 5,729
Cash provided by operating activities $ 6,038
÷ Net sales $ 34,392
Operating cash flow margin % 18%
Free cash flow $ 5,729
÷ Net sales $ 34,392
Free cash flow margin % 17%
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus cash receipts from
Garrett. We define free cash flow margin as free cash flow divided by net
sales.
We believe that free cash flow is a non-GAAP metric that is useful to
investors and management as a measure of cash generated by 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 operations and the impact that this cash flow has on our
liquidity.
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow and Free Cash Flow to Free Cash Flow excluding Quantinuum (Unaudited)
(Dollars in billions)
Twelve
Months
Ended
December 31,
2022(E)
Cash provided by operating activities ~$5.7 - $6.1
Expenditures for property, plant and equipment ~(1.2)
Garrett cash receipts 0.2
Free cash flow ~$4.7 - $5.1
Free cash flow attributable to Quantinuum 0.2
Free cash flow excluding Quantinuum ~$4.9 - $5.3
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment plus cash receipts from
Garrett. We define free cash flow excluding Quantinuum as free cash flow
less free cash flow attributable to Quantinuum.
We believe that free cash flow and free cash flow excluding Quantinuum are
non-GAAP metrics that are useful to investors and management as a measure of
cash generated by 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 operations and the impact
that this cash flow has on our liquidity.
Contacts:
Media Investor Relations
Nina Krauss Sean Meakim
(704) 627-6035 (704) 627-6200
nina.krauss@honeywell.com sean.meakim@honeywell.com
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