10-KPeriod: FY2007

HONEYWELL INTERNATIONAL INC Annual Report, Year Ended Dec 31, 2007

Filed February 15, 2008For Securities:HONHONIV

Summary

Honeywell International Inc.'s 2007 Form 10-K filing reveals a company with robust sales growth and strong performance across its diverse segments. Net sales increased by 10% to $34.6 billion, driven by growth in Aerospace and Automation and Control Solutions (ACS). The company demonstrated improved profitability, with income from continuing operations rising to $2.44 billion, a 17.6% increase year-over-year. This growth was supported by higher gross margins, effective cost management (as SG&A as a percentage of sales decreased), and strategic acquisitions. Financially, Honeywell maintained a strong liquidity position, with significant operating cash flow and a substantial backlog of $12.3 billion. The company continued its commitment to returning value to shareholders through share repurchases, having bought back approximately $3.9 billion in shares during 2007. While facing industry-specific challenges and risks such as raw material price volatility and international operational risks, Honeywell appears well-positioned due to its diversified business model and focus on innovation and cost efficiency.

Financial Highlights

22 data points
Beta

Revenue

$34.59B

24.0% Gross Margin

Net Income

$2.44B

7.1% Net Margin

EPS (Diluted)

$3.16

Cash & Equivalents

$1.83B

Free Cash Flow

$3.14B

Financial Statements
Beta
Revenue$34.59B
Cost of Revenue$26.30B
Gross Profit$8.29B
SG&A Expenses$4.57B
Net Income$2.44B
EPS (Basic)$3.20
EPS (Diluted)$3.16

Key Highlights

  • 1Net sales grew by 10% to $34.6 billion in 2007, driven by strong performance in Aerospace and Automation and Control Solutions (ACS).
  • 2Income from continuing operations increased by 17.6% to $2.44 billion, leading to diluted EPS of $3.16.
  • 3Gross margin improved to 24.0% from 23.2% in the prior year, attributed to higher margins in Specialty Materials and Aerospace, and lower pension expenses.
  • 4Selling, general, and administrative (SG&A) expenses as a percentage of sales decreased slightly to 13.2% from 13.4%, indicating improved cost efficiency.
  • 5The company's total backlog stood at $12.3 billion at year-end 2007, indicating a strong pipeline of future business.
  • 6Honeywell repurchased $3.99 billion of its common stock in 2007 under its authorized share repurchase program, demonstrating a commitment to shareholder returns.
  • 7Significant investments in R&D continued, with R&D expenses totaling $1.46 billion, up 3% from the prior year, supporting innovation across segments.

Frequently Asked Questions

Honeywell's net sales increased by 10% to $34.6 billion in 2007. The primary drivers were the Aerospace segment, which saw a 10% increase in sales driven by higher aircraft production rates and aftermarket services, and the Automation and Control Solutions (ACS) segment, which grew by 13% due to strong demand for security and life safety products, as well as energy retrofit projects.

Honeywell experienced a significant improvement in profitability. Income from continuing operations rose by 17.6% to $2.44 billion, resulting in diluted earnings per share (EPS) of $3.16, up from $2.51 in 2006. This was supported by a 0.8 percentage point increase in gross margin and a slight decrease in SG&A as a percentage of sales.

Honeywell demonstrated strong financial health. Operating cash flow increased by $700 million to $3.91 billion in 2007. The company maintained a substantial backlog of $12.3 billion and ended the year with $1.83 billion in cash and cash equivalents. Long-term debt increased, partly due to acquisitions and financing activities, but was managed with a commitment to returning value to shareholders through share repurchases and dividends.

Honeywell highlighted several risks, including adverse impacts from general industry and economic conditions on customer demand, volatility in raw material prices and supplier performance, dependence on successful new technology development, risks associated with increasing international operations, potential impairment charges for long-lived assets, and changes in U.S. government defense and space funding. Additionally, litigation, environmental liabilities, and employee benefit costs were noted as significant factors.