Honeywell Reports Strong Finish To 2016

MORRIS PLAINS, N.J., January 27, 2017 -- Honeywell (NYSE: HON) today announced results for the fourth quarter and full-year of 2016, and reaffirmed 2017 earnings guidance.

“We finished 2016 with a strong fourth quarter, achieving 14% earnings growth (excluding divestitures and charges for pension mark-to-market and debt refinancing), 90 basis points of segment margin expansion excluding M&A, and free cash flow conversion of 126%,” said Honeywell Chairman and CEO Dave Cote. “For the full year, we delivered earnings growth of 8% (excluding charges for pension mark-to-market and debt refinancing) and drove strong operational segment margin expansion while making significant investments for the future, including over $250 million in incremental Aerospace OEM incentives (the equivalent of four percentage points of EPS). We funded high-return capital projects through more than $1 billion in capital expenditures, marking the third consecutive year of reinvesting at over 150% of depreciation, and we continued to upgrade our growth profile through acquisitions totaling more than $2.5 billion and divestitures with aggregate annual revenues in excess of $1 billion. To better drive top-line growth and improve our overall decision-making speed, we realigned our business segments and funded more than $250 million in internal restructuring projects. In addition, our debt refinancing will reduce our expected 2017 interest expense by about 8% despite increasing total borrowings by $4 billion, and we returned nearly $4.5 billion to our shareowners through dividends and share repurchases.”

¹ Cash Flow From Operations Less Capital Expenditures; Free Cash Flow Conversion = Free Cash Flow / Net Income, Excluding Pension Mark-To-Market Adjustment And Debt Refinancing Charges

Cote concluded, “We delivered outstanding returns again in 2016 with a total shareowner return of 15%, which exceeded the S&P’s total shareowner return by 300 basis points. More importantly, we set the stage for a successful 2017. I am confident in our ability to continue to outperform under Darius Adamczyk. It has been an honor to lead Honeywell for the past 15 years, and I know that our best days are ahead of us.”

Darius Adamczyk, President and Chief Operating Officer said, “Our business will benefit in the future from the investments we made in 2016. All of these actions, combined with our focus on enhancing organic growth, and the power of our connected businesses, make us optimistic about 2017 and beyond. We are reaffirming our 2017 earnings guidance today. As I discussed on our December outlook call, Honeywell will continue our focus on driving organic growth and margin expansion through new software opportunities, breakthrough initiatives, and an improved customer experience. We look forward to discussing this more at our annual investor conference on March 1 in New York City.”

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

Fourth Quarter Performance

Honeywell sales for the fourth quarter were flat on a reported basis and down 1% on a core organic basis. The difference between reported and core organic sales is due to the impact of acquisitions, primarily Elster and Intelligrated, partially offset by the spin-off of Resins and Chemicals in Performance Materials and Technologies and the divestiture of the Aerospace government services business. The fourth-quarter and full-year 2016 financial results can be found in Tables 1 and 2 below.

Aerospace sales for the fourth quarter were down 5% on a core organic basis. The decrease was primarily driven by lower volumes in Business and General Aviation, higher OEM incentives, program completions in U.S. Space and International Defense, and continued weakness in the commercial helicopter business, as expected. This was partially offset by global gas turbo penetration in passenger vehicles in Transportation Systems. Segment margin declined 130 bps to 20.2%, due to higher OEM incentives, product mix, and lower volumes, partially offset by productivity net of inflation and commercial excellence. Excluding the impact of acquisitions and higher OEM incentives, segment margin contracted by 10 basis points.

Home and Building Technologies sales for the fourth quarter were up 2% on a core organic basis driven by continued strength in our Building Solutions and Distribution businesses, double-digit growth in China and India, and new product introductions in Environmental and Energy Solutions. Segment margin declined 30 bps to 16.8%, primarily driven by acquisition amortization and integration costs. Excluding the impact of acquisitions, segment margin expanded 60 basis points driven by benefits from previously-funded restructuring and commercial excellence, partially offset by the unfavorable impact of higher Distribution sales and growth investments.

Performance Materials and Technologies sales for the fourth quarter were up 5% on a core organic basis driven by strong catalyst, licensing, and equipment growth in UOP and a continued ramp in Solstice® sales in Advanced Materials. Segment margin expanded 520 bps to 25.4%, driven by productivity net of inflation, the favorable impact from the spin-off of AdvanSix, higher catalyst volumes, and commercial excellence. Excluding the impact of acquisitions, segment margin expanded by 560 bps.

Safety and Productivity Solutions sales for the fourth quarter were down 6% on a core organic basis as a result of lower volumes in the Productivity and Safety businesses and supply chain delays. Segment margin contracted 100 bps to 14.3%, primarily driven by acquisition amortization and integration costs. Excluding the impact of acquisitions, segment margin expanded by 100 bps driven by restructuring benefits and commercial excellence, partially offset by lower volumes across the portfolio. 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. EST start. Please mention to the operator that you are dialing in for Honeywell’s fourth quarter 2016 earnings call or provide the conference code HON4Q16. 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/us/en/investor). Investors can hear a replay of the conference call from 12:30 p.m. EST, January 27, until 12:30 p.m. EST, February 3, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 2675177.

² Cash Flow From Operations Less Capital Expenditures

TABLE 2: SUMMARY OF FINANCIAL RESULTS – SEGMENTS

³ Excludes ~$48M Increase In Aero OEM Incentives YoY

Throughout this press release, core organic sales growth refers to reported sales growth less the impacts from foreign currency translation, M&A and raw materials pass-through pricing in the former Resins & Chemicals business previously part of Performance Materials and Technologies. The raw materials pricing impact is excluded in instances where raw materials costs are passed through to customers, which drives fluctuations in selling prices not tied to volume growth. A reconciliation of core organic sales growth to reported sales growth is provided in the attached financial tables.

4Q 2016 Press Release Financials.pdf