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Honeywell Delivers $1.80 Earnings Per Share; Sales of $10.1 Billion Exceeds Guidance

MORRIS PLAINS, N.J., July 21, 2017 /PRNewswire/ -- Honeywell (NYSE: HON) today announced financial results for the second quarter of 2017 and updated its full-year 2017 sales and earnings guidance.

"Honeywell's strong performance continued through the second quarter, with over 3% organic sales growth that exceeded the high end of our guidance range, and 50 basis points of segment margin expansion, resulting in second-quarter earnings per share of $1.80," said Darius Adamczyk, President and Chief Executive Officer of Honeywell. "Earnings came in at the high end of our guidance range, up 10%1 year-over-year. We continued our investments to enhance future profitable growth through new product introductions, additions to the sales organization, and more than $115 million of restructuring funding in the quarter, made possible by a lower-than-planned tax rate. Quarterly free cash flow of $1.2 billion was impacted by the timing of cash tax payments, and our first-half performance remained strong with nearly 40% growth in free cash flow year-over-year."

"Previous investments in production capacity are driving top-line growth. For example, our newly completed facilities within Performance Materials and Technologies are contributing to double-digit growth for our Solstice® line of low-global-warming products and strong orders, sales, and backlog growth in UOP," continued Adamczyk. "We are also pleased with the continued strength in Aerospace Commercial Aftermarket and in Safety and Productivity Solutions, where we continue to see strong demand for safety products and voice-enabled workflow solutions."

"We expect continued momentum in organic sales growth throughout 2017, supported by strong order rates and a growing backlog across many of our businesses," said Adamczyk. "Our focus on delivering organic growth while maintaining productivity rigor and aggressively deploying capital, combined with our efforts to evolve as a world-class software-industrial company, is delivering results for our shareowners."

"We are increasing our full-year reported and organic sales guidance and raising the low end of our full-year earnings guidance by 10 cents. We now anticipate 2017 earnings per share to be between $7.00 and $7.10, up 8%-10%, excluding divestitures, any pension mark-to-market adjustments, and 2016 debt refinancing charges. We also now expect full-year sales to be between $39.3 billion and $40.0 billion, up 2%-4% organic," Adamczyk concluded.

Honeywell will discuss the results during its investor conference call today starting at 9:30 a.m. Eastern Daylight Time.

Second Quarter Performance

Honeywell sales for the second quarter were up over 3% on an organic basis and up 1% on a reported basis. The difference between reported and organic sales is the impact of foreign currency translation, the 2016 spin-off of the former Resins and Chemicals business in Performance Materials and Technologies, and the 2016 divestiture of the Aerospace government services business, partially offset by the Intelligrated acquisition in Safety and Productivity Solutions. The second-quarter financial results can be found in Tables 1 and 2, and updated full-year guidance can be found in Table 3, below.

Aerospace sales for the second quarter were up 2% on an organic basis driven by strength in Commercial Aftermarket, growth in U.S. defense, and a continuing recovery in commercial vehicles in Transportation Systems. Segment margin expanded 140 bps to 22.3%, primarily driven by higher volumes, productivity net of inflation, and the favorable impact of the 2016 divestiture of the government services business.

Home and Building Technologies sales for the second quarter were up 4% on an organic basis driven by Smart Energy program roll-outs, air and water product sales in China, and continued growth in the Distribution business. Segment margin was unchanged at 15.4%, driven by restructuring benefits and productivity net of inflation, offset by the unfavorable impact of higher sales from lower margin products and investments for growth.

Performance Materials and Technologies sales for the second quarter were up 6% on an organic basis driven by continued strength in Solstice® sales in Advanced Materials and double-digit growth in modular gas processing in UOP. Segment margin expanded 200 bps to 23.4%, primarily driven by productivity net of inflation, the favorable impact from the spin-off of the former Resins and Chemicals business, and commercial excellence.

Safety and Productivity Solutions sales for the second quarter were up 1% on an organic basis as a result of higher volumes in industrial safety products, sensing controls, and voice-enabled workflow solutions. Segment margin contracted 70 bps to 15.0%, primarily driven by acquisition amortization and integration costs, and investments for growth. Excluding the impact of acquisitions, segment margin expanded 90 bps driven primarily by restructuring benefits and productivity net of inflation.

To participate in today's conference call, please dial (800) 263-0877 (domestic) or (719) 457-1036 (international) approximately ten minutes before the 9:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's second quarter 2017 earnings call or provide the conference code HON2Q17. 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 1:30 p.m. EDT, July 21, until 1:30 p.m. EDT, July 28, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 8469822.

TABLE 1: SUMMARY OF FINANCIAL RESULTS &endash; TOTAL HONEYWELL

2Q 2016

2Q 2017

Change

Sales

9,991

10,078

1%

Organic

3%

Segment Margin

18.5%

19.0%

50 bps

Operating Income Margin

18.4%

18.3%

(10) bps

Earnings Per Share

Reported

$1.70

$1.80

6%

Ex-Divestitures & Additional 2Q17 Restructuring, Normalized for Tax

$1.64

$1.80

10%

Cash Flow From Operations2

1,583

1,447

(9%)

Free Cash Flow2,3

1,302

1,214

(7%)

TABLE 2: SUMMARY OF FINANCIAL RESULTS &endash; SEGMENTS

AEROSPACE

2Q 2016

2Q 2017

Change

Sales

3,779

3,674

(3%)

Organic

2%

Segment Profit

791

819

4%

Segment Margin

20.9%

22.3%

140 bps

HOME AND BUILDING TECHNOLOGIES

Sales

2,676

2,736

2%

Organic

4%

Segment Profit

412

420

2%

Segment Margin

15.4%

15.4%

Flat

PERFORMANCE MATERIALS AND TECHNOLOGIES

Sales

2,434

2,239

(8%)

Organic

6%

Segment Profit

520

524

1%

Segment Margin

21.4%

23.4%

200 bps

SAFETY AND PRODUCTIVITY SOLUTIONS

Sales

1,102

1,429

30%

Organic

1%

Segment Profit

173

214

24%

Segment Margin

15.7%

15.0%

(70) bps

Ex-M&A

90 bps

TABLE 3: 2017 FULL-YEAR GUIDANCE

Previous Guidance

Current Guidance

Change vs. 2016

Sales

$38.6 - $39.5

$39.3 - $40.0

Flat &endash; 2%

Organic

2% - 4%

Segment Margin

19.0% - 19.4%

19.0% - 19.4%

70 - 110 bps

Earnings Per Share (Ex-Divestitures, 2016 Debt Refinancing, And Pension MTM)

$6.90 - $7.10

$7.00 - $7.10

8% - 10%

Free Cash Flow4

$4.6B - $4.7B

$4.6B - $4.7B

5% - 7%

Honeywell (www.honeywell.com) is a Fortune 100 software-industrial company that delivers industry specific solutions that include aerospace and automotive products and services; control technologies for buildings, homes, and industry; and performance materials globally. Our technologies help everything from aircraft, cars, homes and 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.

1Earnings per share variance excludes 2016 divestitures and $90 million additional 2Q17 rest

2
$0.2B
3
4

Contacts:

Media

Investor Relations

Robert C. Ferris

Mark Macaluso

(973) 455-3388

(973) 455-2222

rob.ferris@honeywell.com

mark.macaluso@honeywell.com

Honeywell International Inc

Consolidated Statement of Operations (Unaudited)

(Dollars in millions, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

Product sales

$ 8,079

$ 8,035

$ 15,619

$ 15,654

Service sales

1,999

1,956

3,951

3,859

Net sales

10,078

9,991

19,570

19,513

Costs, expenses and other

Cost of products sold (A)

5,660

5,602

10,897

10,951

Cost of services sold (A)

1,190

1,219

2,309

2,417

6,850

6,821

13,206

13,368

Selling, general and administrative expenses (A)

1,381

1,329

2,730

2,609

Other (income) expense

(10)

1

(22)

(17)

Interest and other financial charges

79

85

154

170

8,300

8,236

16,068

16,130

Income before taxes

1,778

1,755

3,502

3,383

Tax expense

378

428

770

830

Net income

1,400

1,327

2,732

2,553

Less: Net income attributable to the noncontrolling interest

8

8

14

18

Net income attributable to Honeywell

$ 1,392

$ 1,319

$ 2,718

$ 2,535

Earnings per share of common stock - basic

$ 1.82

$ 1.73

$ 3.56

$ 3.31

Earnings per share of common stock - assuming dilution

$ 1.80

$ 1.70

$ 3.51

$ 3.26

Weighted average number of shares outstanding - basic

764.2

763.3

763.6

765.5

Weighted average number of shares outstanding - assuming dilution

774.0

774.9

774.0

777.2

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

Honeywell International Inc

Segment Data (Unaudited)

(Dollars in millions)

Three Months Ended

Six Months Ended

June 30,

June 30,

Net Sales

2017

2016

2017

2016

Aerospace

$ 3,674

$ 3,779

$ 7,220

$ 7,484

Home and Building Technologies

2,736

2,676

5,289

5,153

Performance Materials and Technologies

2,239

2,434

4,308

4,715

Safety and Productivity Solutions

1,429

1,102

2,753

2,161

Total

$ 10,078

$ 9,991

$ 19,570

$ 19,513

Reconciliation of Segment Profit to Income Before Taxes

Three Months Ended

Six Months Ended

June 30,

June 30,

Segment Profit

2017

2016

2017

2016

Aerospace

$ 819

$ 791

$ 1,615

$ 1,589

Home and Building Technologies

420

412

809

772

Performance Materials and Technologies

524

520

995

981

Safety and Productivity Solutions

214

173

408

323

Corporate

(67)

(49)

(128)

(98)

Total segment profit

1,910

1,847

3,699

3,567

Other income (expense) (A)

(1)

(7)

5

5

Interest and other financial charges

(79)

(85)

(154)

(170)

Stock compensation expense (B)

(44)

(43)

(94)

(96)

Pension ongoing income (B)

184

151

363

301

Other postretirement income (B)

6

8

10

17

Repositioning and other charges (B)

(198)

(116)

(327)

(241)

Income before taxes

$ 1,778

$ 1,755

$ 3,502

$ 3,383

(A) Equity income (loss) of affiliated companies is included in segment profit.

(B) Amounts included in cost of products and services sold and selling, general and administrative expenses.

Honeywell International Inc

Consolidated Balance Sheet (Unaudited)

(Dollars in millions)

June 30,

December 31,

2017

2016

ASSETS

Current assets:

Cash and cash equivalents

$ 7,877

$ 7,843

Short-term investments

1,944

1,520

Accounts receivable - net

8,442

8,177

Inventories

4,651

4,366

Other current assets

1,150

1,152

Total current assets

24,064

23,058

Investments and long-term receivables

570

587

Property, plant and equipment - net

5,718

5,793

Goodwill

18,038

17,707

Other intangible assets - net

4,566

4,634

Insurance recoveries for asbestos related liabilities

401

417

Deferred income taxes

357

347

Other assets

1,954

1,603

Total assets

$ 55,668

$ 54,146

LIABILITIES AND SHAREOWNERS' EQUITY

Current liabilities:

Accounts payable

$ 5,971

$ 5,690

Commercial paper and other short-term borrowings

3,803

3,366

Current maturities of long-term debt

1,378

227

Accrued liabilities

6,829

7,048

Total current liabilities

17,981

16,331

Long-term debt

11,329

12,182

Deferred income taxes

329

486

Postretirement benefit obligations other than pensions

537

473

Asbestos related liabilities

998

1,014

Other liabilities

3,941

4,110

Redeemable noncontrolling interest

3

3

Shareowners' equity

20,550

19,547

Total liabilities, redeemable noncontrolling interest and shareowners' equity

$ 55,668

$ 54,146

Honeywell International Inc

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in millions)

Three Months Ended

Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

Cash flows from operating activities:

$ 1,400

$ 1,327

$ 2,732

$ 2,553

Less: Net income attributable to the noncontrolling interest

8

8

14

18

Net income attributable to Honeywell

1,392

1,319

2,718

2,535

Adjustments to reconcile net income attributable to Honeywell to net

cash provided by operating activities:

Depreciation

184

185

354

364

Amortization

92

75

193

149

Repositioning and other charges

224

140

353

265

Net payments for repositioning and other charges

(127)

(132)

(264)

(266)

Pension and other postretirement income

(190)

(159)

(373)

(318)

Pension and other postretirement benefit payments

(23)

(43)

(47)

(81)

Stock compensation expense

44

43

94

96

Deferred income taxes

(50)

134

(92)

182

Other

(22)

(113)

(8)

(25)

Changes in assets and liabilities, net of the effects of

acquisitions and divestitures:

Accounts receivable

(299)

(149)

(276)

(357)

Inventories

(12)

29

(298)

(212)

Other current assets

22

(84)

(3)

(138)

Accounts payable

199

113

314

-

Accrued liabilities

13

225

(278)

(292)

Net cash provided by operating activities

1,447

1,583

2,387

1,902

Cash flows from investing activities:

Expenditures for property, plant and equipment

(233)

(281)

(401)

(475)

Proceeds from disposals of property, plant and equipment

1

-

25

1

Increase in investments

(1,073)

(985)

(2,329)

(1,821)

Decrease in investments

1,016

905

1,841

1,785

Cash paid for acquisitions, net of cash acquired

(15)

(28)

(15)

(1,084)

Other

(84)

43

(113)

52

Net cash used for investing activities

(388)

(346)

(992)

(1,542)

Cash flows from financing activities:

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

2,568

4,394

5,036

10,694

Payments of commercial paper and other short-term borrowings

(2,368)

(4,168)

(4,835)

(12,918)

Proceeds from issuance of common stock

155

138

376

243

Proceeds from issuance of long-term debt

5

25

16

4,473

Payments of long-term debt

(25)

(51)

(30)

(470)

Repurchases of common stock

(682)

(477)

(992)

(1,633)

Cash dividends paid

(546)

(458)

(1,049)

(957)

Payments to purchase the noncontrolling interest

-

-

-

(238)

Other

(72)

(1)

(105)

(15)

Net cash used for financing activities

(965)

(598)

(1,583)

(821)

Effect of foreign exchange rate changes on cash and cash equivalents

73

(67)

222

51

Net decrease in cash and cash equivalents

167

572

34

(410)

Cash and cash equivalents at beginning of period

7,710

4,473

7,843

5,455

Cash and cash equivalents at end of period

$ 7,877

$ 5,045

$ 7,877

$ 5,045

Honeywell International Inc<

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)

(Dollars in millions)

Three Months Ended

Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

Cash provided by operating activities

$ 1,447

$ 1,583

$ 2,387

$ 1,902

Expenditures for property, plant and equipment

(233)

(281)

(401)

(475)

Free cash flow

$ 1,214

$ 1,302

$ 1,986

$ 1,427

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)

Three Months Ended

Six Months Ended

June 30,

June 30,

2017

2016

2017

2016

Segment Profit

$ 1,910

$ 1,847

$ 3,699

$ 3,567

Stock compensation expense (A)

(44)

(43)

(94)

(96)

Repositioning and other (A, B)

(209)

(122)

(344)

(253)

Pension ongoing income (A)

184

151

363

301

Other postretirement income (A)

6

8

10

17

Operating Income

$ 1,847

$ 1,841

$ 3,634

$ 3,536

Segment Profit

$ 1,910

$ 1,847

$ 3,699

$ 3,567

√∑ Sales

10,078

9,991

19,570

19,513

Segment Profit Margin %

19.0%

18.5%

18.9%

18.3%

Operating Income

$ 1,847

$ 1,841

$ 3,634

$ 3,536

√∑ Sales

10,078

9,991

19,570

19,513

Operating Income Margin %

18.3%

18.4%

18.6%

18.1%

(A) Included in cost of products and services sold and selling, general and administrative expenses.

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

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

Calculation of Segment Profit Margin Excluding Mergers and Acqusitions (Unaudited)

(Dollars in millions)

Three Months Ended

June 30,

2017

Safety and Productivity Solutions

Segment Profit excluding mergers and acquisitions

$ 182

√∑ Sales excluding mergers and acquisitions

$ 1,096

Segment Profit Margin excluding mergers and acquisitions %

16.6%

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 Organic Sales % Change (Unaudited)

Three Months Ended

June 30,

2017

Honeywell

Reported sales % change

1%

Less: Foreign currency translation

(1)%

Less: Acquisitions and divestitures, net

(1)%

Organic sales % change

3%

Aerospace

Reported sales % change

(3)%

Less: Foreign currency translation

(1)%

Less: Acquisitions and divestitures, net

(4)%

Organic sales % change

2%

Home and Building Technologies

Reported sales % change

2%

Less: Foreign currency translation

(2)%

Less: Acquisitions and divestitures, net

-

Organic sales % change

4%

Performance Materials and Technologies

Reported sales % change

(8)%

Less: Foreign currency translation

(1)%

Less: Acquisitions and divestitures, net

(13)%

Organic sales % change

6%

Safety and Productivity Solutions

Reported sales % change

30%

Less: Foreign currency translation

(1)%

Less: Acquisitions and divestitures, net

30%

Organic sales % change

1%

We believe organic sales growth is a measure that 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

Calculation of Earnings Per Share at 25% Tax Rate Excluding Additional Restructuring and 2016 Divestitures (Unaudited)

(Dollars in millions, except per share amounts)

Three Months Ended

June 30,

2017

2016

Income before taxes

$ 1,778

$ 1,755

Taxes at 25%

445

439

Net income at 25% tax rate

$ 1,333

$ 1,316

Less: Net income attributable to the noncontrolling interest

8

8

Net income attributable to Honeywell at 25% tax rate

$ 1,325

$ 1,308

Weighted average number of shares outstanding - assuming dilution

774.0

774.9

Earnings per share at 25% tax rate

$ 1.71

$ 1.69

Less: Earnings per share attributable to 2016 divestitures (1)

-

0.05

Less: Earnings per share attributable to additional restructuring (2)

(0.09)

-

Earnings per share of common stock - assuming dilution, at 25% tax rate,

excluding additional restructuring and 2016 divestitures

$ 1.80

$ 1.64

Earnings per share of common stock - assuming dilution

$ 1.80

$ 1.70

Less: Earnings per share impact of normalizing to 25% tax rate

0.09

0.01

Less: Earnings per share attributable to 2016 divestitures (1)

-

0.05

Less: Earnings per share attributable to additional restructuring (2)

(0.09)

-

Earnings per share of common stock - assuming dilution, at 25% tax rate,

excluding additional restructuring and 2016 divestitures

$ 1.80

$ 1.64

(1) Earnings per share attributable to 2016 divestitures uses a blended tax rate of 32.3% for three months ended June 30, 2016.

(2) The Company has and continues to have an ongoing level of restructuring activities, for which there is a planned amount of restructuring-related charges. Additional restructuring represents only amounts that are incremental to those planned restructuring amounts. For the three months ended June 30, 2017, the Company funded $117 million of restructuring, $90 million of which was incremental to the planned amount. This additional restructuring was enabled by a lower than expected effective tax rate for the period. We believe that the exclusion of this additional restructuring provides a more comparable measure of year-on-year results. Earnings per share attributable to additional restructuring uses a tax rate of 25% for three months ended June 30, 2017.

We believe earnings per share adjusted to normalize for the expected effective tax rate of 25% for the most recently completed fiscal quarter (as presented in prior guidance for such quarter) and to exclude the 2016 divestitures 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 Segment Profit to Operating Income and Calculation of Segment Profit

and Operating Income Margins (Unaudited)

(Dollars in millions)

Twelve Months Ended

December 31,

2016

Segment Profit

$ 7,186

Stock compensation expense (A)

(184)

Repositioning and other (A, B)

(679)

Pension ongoing income (A)

601

Pension mark-to-market expense (A)

(273)

Other postretirement expense (A)

32

Operating Income

$ 6,683

Segment Profit

$ 7,186

√∑ Sales

$ 39,302

Segment Profit Margin %

18.3%

Operating Income

$ 6,683

√∑ Sales

$ 39,302

Operating Income Margin %

17.0%

(A) Included in cost of products and services sold and selling, general and administrative expenses.

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

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 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, particularly 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. 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 Earnings Per Share, Excluding Pension Mark-to-Market Expense, Debt Refinancing Expense and Earnings Attributable to 2016 Divestitures (Unaudited)

Twelve Months Ended

December 31,

2017E (1)

2016 (2)

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

TBD

$ 6.20

Pension mark-to-market expense

TBD

0.28

Debt refinancing expense

-

0.12

EPS, excluding pension mark-to-market expense and debt refinancing expense

$7.00 - $7.10

6.60

Earnings attributable to 2016 divestitures

-

(0.14)

EPS, excluding pension mark-to-market expense, debt refinancing expense and

earnings attributable to 2016 divestitures

$7.00 - $7.10

$ 6.46

(1) Utilizes weighted average shares of approximately 774 million and an expected effective tax rate of 24%.

(2) Utilizes weighted average shares of 775.3 million. Pension mark-to-market expense uses a blended tax rate of 21.3%. Debt refinancing expense uses a tax rate of 26.5%. Earnings attributable to 2016 divestitures use a blended tax rate of 33.9%.

We believe EPS, excluding pension mark-to-market expense, debt refinancing expense and earnings attributable to 2016 divestitures is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. 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 in this reconciliation. Management is not currently forecasting an impact to earnings per share arising from a debt refinancing or divestiture transaction. 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 Free Cash Flow (Unaudited)

(Dollars in billions)

Twelve Months Ended

December 31,

2017E

2016

Cash provided by operating activities

$5.7 - $5.8

$5.5

Expenditures for property, plant and equipment

~(1.1)

(1.1)

Free cash flow

$4.6 - $4.7

$4.4

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment.

We believe 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.

SOURCE Honeywell