10-QPeriod: Q2 FY2008

HONEYWELL INTERNATIONAL INC Quarterly Report for Q2 Ended Jun 30, 2008

Filed July 18, 2008For Securities:HONHONIV

Summary

Honeywell International Inc. reported strong financial performance for the second quarter and first half of 2008, with net sales increasing by 13% and 12% respectively compared to the prior year. This growth was driven by a combination of price increases, volume growth, favorable foreign exchange rates, and contributions from recent acquisitions. Net income also saw a significant rise, reaching $723 million for the quarter and $1,366 million for the six months. The company also demonstrated effective cost management, with an improved gross margin percentage. Key strategic moves during the period include the acquisition of Norcross Safety Products for approximately $1.2 billion, enhancing its Automation and Control Solutions segment, and the agreement to sell its Consumables Solutions business, expected to generate a significant gain. The company also completed the acquisition of Metrologic Instruments in July. Despite ongoing repositioning charges and environmental/asbestos-related liabilities, Honeywell's liquidity remains strong, supported by operating cash flows and credit facilities. Diluted earnings per share increased substantially, reflecting the positive operational and financial trends.

Financial Highlights

22 data points
Beta

Revenue

$9.67B

24.3% Gross Margin

Net Income

$723.00M

7.5% Net Margin

EPS (Diluted)

$0.96

Cash & Equivalents

$2.20B

Free Cash Flow

$1.42B

Financial Statements
Beta
Revenue$9.67B
Cost of Revenue$7.32B
Gross Profit$2.35B
SG&A Expenses$1.29B
Net Income$723.00M
EPS (Basic)$0.97
EPS (Diluted)$0.96

Key Highlights

  • 1Net sales increased by 13% to $9.67 billion for the quarter and 12% to $18.57 billion for the six months, driven by price, volume, foreign exchange, and acquisitions.
  • 2Net income rose to $723 million ($0.96/share diluted) for the quarter and $1.37 billion ($1.81/share diluted) for the six months, up from $611 million and $1.14 billion respectively in the prior year.
  • 3Gross margin percentage improved to 24.3% for the quarter and 24.6% for the six months, indicating better profitability compared to the prior year.
  • 4The company completed the acquisition of Norcross Safety Products for approximately $1.2 billion, significantly boosting the Automation and Control Solutions segment.
  • 5An agreement was made to sell the Consumables Solutions business for $1.05 billion, which is expected to result in a substantial gain in the third quarter of 2008.
  • 6Cash provided by operating activities increased to $1.76 billion for the six months, demonstrating robust operational cash generation.
  • 7The company repurchased common stock, contributing to a reduction in the number of outstanding shares and supporting earnings per share growth.

Frequently Asked Questions

The increase in net sales was driven by a combination of factors: a 3% price increase, a 3% volume increase, a 3% favorable foreign exchange impact, and a 4% contribution from acquisitions/divestitures for the quarter. Similar trends were observed for the six-month period.

Acquisitions played a significant role, notably the purchase of Norcross Safety Products for $1.2 billion, which strengthened the Automation and Control Solutions segment. Acquisitions contributed 4% to the net sales growth in the quarter and 3% in the six-month period.

Honeywell entered into a definitive agreement to sell its Consumables Solutions business for $1.05 billion, expecting to close in the third quarter of 2008. This sale is anticipated to result in a gain of $600 million to $640 million (pre-tax).

The company issued $1.5 billion in Senior Notes in February 2008 and used the proceeds to repay commercial paper. Long-term debt increased, but the company maintains access to various liquidity sources, including cash flow from operations, committed credit lines, and public markets.

Honeywell continues to address significant environmental liabilities and asbestos-related claims. The company has recorded substantial liabilities for these matters and holds corresponding insurance receivables. While these are managed, they represent a complex and ongoing area of financial statement disclosure.