10-KPeriod: FY2016

HONEYWELL INTERNATIONAL INC Annual Report, Year Ended Dec 31, 2016

Filed February 10, 2017For Securities:HONHONIV

Summary

Honeywell International Inc. reported solid financial performance for the fiscal year ending December 30, 2016, navigating a challenging macroeconomic environment. Net sales increased by 2% to $39.3 billion, with net income attributable to Honeywell rising 1% to $4.8 billion. Diluted earnings per share (EPS) saw a 3% increase to $6.20. The company successfully executed strategic initiatives including cost reduction, capital deployment, and portfolio optimization through acquisitions and divestitures, notably the sale of Honeywell Technology Solutions Inc. and the spin-off of AdvanSix. Honeywell also realigned its reporting segments and completed leadership transitions in key areas, reinforcing its focus on becoming a software-industrial company. Significant capital was deployed towards acquisitions, dividends, share repurchases, and capital investments in growth-oriented facilities, underscoring a commitment to shareholder value enhancement. Looking ahead, Honeywell is focused on executing its leadership transition, driving profitable organic growth through innovation and high-growth region expansion, and further embedding software capabilities across its product and service offerings. The company also continues to manage its cost structure for margin expansion and maintain disciplined capital deployment, balancing investments in core businesses, strategic acquisitions, share repurchases, and dividends.

Financial Highlights

55 data points
Beta

Revenue

$39.30B

30.9% Gross Margin

Net Income

$4.81B

12.2% Net Margin

EPS (Diluted)

$6.21

Total Assets

$54.57B

Cash & Equivalents

$7.84B

Free Cash Flow

$4.40B

Financial Statements
Beta
Revenue$39.30B
Cost of Revenue$27.68B
Gross Profit$12.15B
R&D Expenses$1.86B
SG&A Expenses$5.57B
Net Income$4.81B
EPS (Basic)$6.30
EPS (Diluted)$6.21
Shares Outstanding (Basic)764.30M
Shares Outstanding (Diluted)775.30M

Key Highlights

  • 1Net sales grew 2% to $39.3 billion, with net income attributable to Honeywell increasing 1% to $4.8 billion.
  • 2Diluted Earnings Per Share (EPS) increased by 3% to $6.20.
  • 3The company deployed over $7.5 billion in capital during 2016, including $2.5 billion in strategic acquisitions, increased dividends by 12%, and repurchased $2.1 billion of its shares.
  • 4Significant portfolio actions were taken, including the divestiture of Honeywell Technology Solutions Inc. and the tax-free spin-off of AdvanSix.
  • 5Honeywell realigned its business segments to Home and Building Technologies and Safety and Productivity Solutions to better reflect its operational structure.
  • 6Research and Development (R&D) spending was maintained at 5% of sales, with a focus on software capabilities and innovation.
  • 7The company continued its debt refinancing efforts, issuing $4 billion in Senior Notes to reduce ongoing annual interest expense.

Frequently Asked Questions

Honeywell's net sales increased by 2% to $39.3 billion in 2016. This growth was driven by a combination of factors, including acquisitions (contributing approximately 5% to sales growth), offset by a decrease in organic sales volumes (approximately 2%) and unfavorable foreign currency translation (approximately 1%). Specific segment performance varied, with Home and Building Technologies showing strong organic growth, while Aerospace and Performance Materials and Technologies experienced declines in certain areas.

Honeywell actively deployed capital in 2016, totaling over $7.5 billion. This included approximately $2.5 billion for strategic acquisitions focused on software and technology, a 12% increase in its annual dividend, and $2.1 billion in share repurchases aimed at offsetting the dilutive impact of employee stock-based compensation. Additionally, over $1 billion was invested in capital expenditures for growth and capacity expansion, such as manufacturing facilities for Solstice products and UOP catalysts.

In July 2016, Honeywell announced a realignment of its reporting segments. The former Automation and Control Solutions segment was divided into two new segments: Home and Building Technologies and Safety and Productivity Solutions. Additionally, the Industrial Combustion/Thermal business was moved from Home and Building Technologies to Performance Materials and Technologies. This restructuring aims to provide a clearer reflection of the company's operational focus and performance across its four primary segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

Honeywell maintained its commitment to innovation by investing 5% of sales in Research and Development (R&D) in 2016. The company is strategically focusing on enhancing its software capabilities, evident in the creation of a new software center in the United States to employ over 730 product software engineers, in addition to its existing 11,000 software engineers. This focus aligns with its strategy to become a software-industrial company, integrating software into its products and services for the connected plane, home, building, and factory.