01—Abstract
Summary
Summary of the 10-K filed March 2, 1995. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K for fiscal 1994 was filed on March 2, 1995, by AlliedSignal Inc. (Commission file 1-8974).
The filing does not match the requested ticker: it is AlliedSignal's report, not Honeywell International's. AlliedSignal later merged with Honeywell in 1999 and adopted the Honeywell name and HON ticker, so this document predates that combination. The company reported record results in 1994.
Net sales rose 8% to $12,817 milliona, and income from operations rose 21% to $1,152 million, with the operating margin improving from 7.9% to 9.0%. Net income was $759 million, or $2.68 per share, compared with $411 million ($1.45 per share) in 1993. The 1993 figure included a $245 million after-tax accounting charge, so 1993 income before that charge was $656 million ($2.31 per share).
Management attributed the improvement to productivity programs, business consolidations, and volume gains in the Automotive and Engineered Materials segments. The company operates three segments: Aerospace ($4,623 millionb in sales, $260 million in net income), Automotive ($4,922 million, $223 million), and Engineered Materials ($3,272 million, $331 million). Aerospace backlog was $4,730 million at year-end, and management expects the commercial aviation downturn to bottom in 1995.
Growth initiatives included the $375 millionc purchase of Textron's Lycoming Turbine Engine Division, the acquisition of General Safety's seat belt business, and the purchase of a Ford spark plug plant. The board raised the quarterly dividend 16% to $0.195 per share, effective in the first quarter of 1995. Balance sheet and cash flow were solid.
Operating cash flow was $1,043 milliond, capital expenditures were $639 million (projected at about $700 million for 1995), and total debt fell $273 million to $1,687 million. The long-term debt to capital ratio improved to 30.4% from 37.9%. Shareowners' equity rose to $2,982 million, and the company had 283.1 million shares outstanding.
Risks include declining U.S. defense spending, commercial aerospace cyclicality, and environmental liabilities, which were recorded at $494 million. Management does not expect environmental matters to have a material adverse effect on financial position. The Goodrich patent suit was ruled in the company's favor at the district court level and is on appeal.
02—Key points
Key Highlights
- Record 1994 net sales of $12,817 million, up 8% from $11,827 million in 1993, driven by Automotive and Engineered Materials volume gains and acquisitions
- Income from operations rose 21% to $1,152 million, with operating margin expanding from 7.9% to 9.0% on productivity and consolidation actions
- Net income of $759 million ($2.68 per share) versus $411 million in 1993, which included a $245 million accounting charge; 1993 income before that charge was $656 million ($2.31 per share)
- Three segments: Aerospace ($4.6B sales), Automotive ($4.9B), and Engineered Materials ($3.3B); Automotive and Engineered Materials each posted 17% or higher sales growth
- Debt reduction: total debt fell $273 million to $1,687 million, and long-term debt to capital dropped to 30.4% from 37.9%; operating cash flow was $1,043 million
- Quarterly dividend raised 16% to $0.195 per share, effective Q1 1995; aerospace backlog of $4,730 million with about $2,681 million expected to convert in 1995
03—Questions
Frequently Asked Questions
Is this filing from Honeywell International (HON), and what company is it actually?
No. The document is the 1994 Form 10-K of AlliedSignal Inc. (Morristown, NJ). AlliedSignal merged with Honeywell in 1999 and took the Honeywell name and HON ticker, so the request's label refers to the same lineage but this filing is from the pre-merger AlliedSignal.
Why did net income appear to rise so sharply in 1994?
Part of the increase reflects a comparison against 1993, which included a one-time $245 million after-tax charge for adopting FASB No. 112 on postemployment benefits. Excluding that charge, 1993 income was $656 million, so 1994 income of $759 million still represents a gain of about 16%. Operating income rose 21%, driven by productivity programs, business consolidations, and higher volumes.
What are the main risks to future earnings?
The main risks cited are continued decline in U.S. defense spending, which affects Aerospace (the DOD accounted for 28% of Aerospace sales), cyclical weakness in commercial aviation (management expects a bottom in 1995), and environmental liabilities. Environmental reserves were $494 million at year-end, and remedial spending is expected to rise to about $85 million in 1995. Management does not expect a material adverse effect on financial position. Automotive also depends heavily on Ford, which accounted for $782 million of 1994 sales.
How strong is the balance sheet and what is the capital allocation picture?
The balance sheet improved in 1994. Total assets were $11,321 million, shareowners' equity was $2,982 million, and the current ratio was 1.4x. Operating cash flow of $1,043 million funded $639 million of capital expenditures (about $700 million projected for 1995) and $531 million of acquisitions, and repaid debt. The company repurchased 2.9 million shares for $103 million and had authority to repurchase up to 13.6 million additional shares.
What growth drivers did management highlight for 1995 and beyond?
Management pointed to the Boeing 737-700 program, where AlliedSignal was named sole APU supplier with a potential of about $2 billion, and to Lycoming Engine, expected to generate about $450 million in 1995 sales. In Automotive, growth was expected from turbocharger capacity expansion, air bag and ABS demand, and acquisitions such as Budd's Wheel and Brake Division. Engineered Materials pointed to CFC substitutes and globalization efforts, including a new Geismar, Louisiana facility.
04—Continue