10-QPeriod: Q3 FY2008

HONEYWELL INTERNATIONAL INC Quarterly Report for Q3 Ended Sep 30, 2008

Filed October 17, 2008For Securities:HONHONIV

Summary

Honeywell International Inc. reported solid financial results for the third quarter and the first nine months of 2008, demonstrating resilience amidst a challenging economic environment. Net sales increased by 6% in Q3 and 10% year-to-date, driven by a combination of price increases, volume growth, favorable foreign exchange, and strategic acquisitions. The company successfully completed the acquisitions of Safety Products Holding, Inc. (Norcross) and Metrologic Instruments, Inc., integrating them into its Automation and Control Solutions segment, while also divesting its Consumables Solutions business for a significant gain. Profitability saw a notable boost from a $623 million pre-tax gain on the sale of the Consumables Solutions business, contributing to a 16% increase in diluted earnings per share for the quarter and a 24% increase year-to-date. Despite increased repositioning and other charges, particularly for environmental liabilities and workforce reductions, Honeywell maintained strong operating cash flow, supported by effective cost management and strategic capital allocation, including share repurchases and dividend payments. The company's diverse business segments showed varied performance, with Automation and Control Solutions and Specialty Materials demonstrating robust growth, while Aerospace and Transportation Systems navigated mixed market conditions.

Financial Highlights

22 data points
Beta

Revenue

$9.28B

19.4% Gross Margin

Net Income

$719.00M

7.8% Net Margin

EPS (Diluted)

$0.97

Cash & Equivalents

$2.29B

Free Cash Flow

$556.00M

Financial Statements
Beta
Revenue$9.28B
Cost of Revenue$7.48B
Gross Profit$1.80B
SG&A Expenses$1.31B
Net Income$719.00M
EPS (Basic)$0.98
EPS (Diluted)$0.97

Key Highlights

  • 1Net sales increased by 6% in Q3 2008 to $9.28 billion and by 10% year-to-date to $27.84 billion, driven by price, volume, foreign exchange, and acquisitions.
  • 2Net income for Q3 2008 was $719 million, up from $618 million in Q3 2007. Diluted EPS increased to $0.97 from $0.81.
  • 3The company recorded a significant pre-tax gain of $623 million from the sale of its Consumables Solutions business in July 2008.
  • 4Acquisitions of Safety Products Holding, Inc. (Norcross) for $1.2 billion and Metrologic Instruments, Inc. for $715 million were completed and integrated.
  • 5Repositioning and other charges increased substantially, driven by workforce reductions and environmental liabilities, impacting gross margin percentage.
  • 6Operating cash flow remained strong, totaling $2.53 billion for the first nine months of 2008, despite increased capital expenditures for acquisitions.
  • 7The company repurchased $1.46 billion of its common stock in the first nine months of 2008, contributing to a reduction in outstanding shares.

Frequently Asked Questions

In the third quarter of 2008, Honeywell reported a net sales increase of 6% to $9.28 billion, driven by price, volume, foreign exchange, and acquisitions. Net income rose to $719 million, and diluted earnings per share increased to $0.97. This performance was significantly boosted by a $623 million pre-tax gain from the sale of its Consumables Solutions business.

Honeywell made strategic moves by acquiring Safety Products Holding, Inc. (Norcross) for approximately $1.2 billion and Metrologic Instruments, Inc. for $715 million, both of which were integrated into the Automation and Control Solutions segment. Additionally, the company divested its Consumables Solutions business to B/E Aerospace for $1.05 billion, realizing a substantial gain.

While sales increased, the gross margin percentage decreased due to higher repositioning charges, including workforce reductions and environmental liabilities, as well as lower margins in certain segments. Selling, general, and administrative expenses as a percentage of sales also increased, primarily due to acquisition-related costs and repositioning charges. The company continued to benefit from lower pension expense.

Honeywell generated strong operating cash flow of $2.53 billion for the first nine months of 2008, an increase from the prior year. This strong cash flow supported significant investments in acquisitions, capital expenditures for property, plant, and equipment, and substantial share repurchases. The company also maintains access to committed credit lines and commercial paper markets, ensuring robust liquidity.