10-QPeriod: Q3 FY2013

HONEYWELL INTERNATIONAL INC Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 18, 2013For Securities:HONHONIV

Summary

Honeywell International Inc. (HON) reported its third-quarter and year-to-date results for the period ending September 30, 2013. The company demonstrated a solid increase in net sales, rising by 3% for the quarter and 2% year-to-date compared to the prior year. This growth was driven by a combination of price increases and contributions from recent acquisitions, notably RAE Systems and Intermec, which were integrated into the Automation and Control Solutions segment. Net income attributable to Honeywell also saw a healthy increase, with diluted earnings per share (EPS) rising to $1.24 for the quarter and $3.73 year-to-date, up from $1.20 and $3.38 respectively in the prior year. The company's performance was supported by strong results across most segments, particularly Automation and Control Solutions and Performance Materials and Technologies, both of which experienced significant profit growth. While the Aerospace segment saw a slight dip in sales due to defense sector slowdowns, its segment profit still managed to grow. The Transportation Systems segment also showed robust growth in both sales and profit. Honeywell's financial health remains strong, supported by increased operating cash flows and strategic capital allocation, including significant investments in acquisitions and ongoing share repurchases.

Financial Statements
Beta

Key Highlights

  • 1Net sales increased by 3% to $9.6 billion for the third quarter and 2% to $28.7 billion for the first nine months of 2013 compared to the prior year.
  • 2Diluted earnings per share (EPS) increased to $1.24 in the third quarter and $3.73 year-to-date, up from $1.20 and $3.38 respectively in the comparable periods of 2012.
  • 3The company completed two significant acquisitions: RAE Systems for $338 million and Intermec for $607 million, both integrated into the Automation and Control Solutions segment.
  • 4Segment profit showed strong growth, particularly in Automation and Control Solutions (up 11% in Q3) and Performance Materials and Technologies (up 11% in Q3).
  • 5Operating cash flow increased significantly to $2.67 billion for the nine months ended September 30, 2013, up from $2.17 billion in the prior year, largely due to reduced pension contributions.
  • 6The company repurchased approximately $167 million of its stock in the third quarter, with $829 million remaining under its share repurchase program.
  • 7The NARCO Plan of Reorganization became fully effective in April 2013, establishing a trust for the evaluation and resolution of asbestos claims, with Honeywell obligated to fund claims subject to annual caps.

Frequently Asked Questions

Sales growth was driven by a combination of price increases (1% in Q3) and contributions from recent acquisitions (2% in Q3), notably RAE Systems and Intermec. Organic growth was also a factor in several segments like Automation and Control Solutions and Transportation Systems.

These acquisitions contributed positively to sales and segment profit, particularly within the Automation and Control Solutions segment. The combined value of these acquisitions was over $900 million, with significant goodwill and identifiable intangible assets recorded.

While Aerospace sales decreased by 2% primarily due to reduced volumes in the defense and space business, segment profit still grew by 3%. This resilience was due to increased commercial original equipment volumes, favorable pricing, and operational efficiencies, indicating a robust underlying performance despite market headwinds in defense.

The effectiveness of the NARCO Plan of Reorganization and the establishment of the NARCO Trust provide a structured framework for resolving past asbestos claims related to NARCO products. While Honeywell has funding obligations related to this trust, it offers a more predictable way to manage these liabilities, which were previously subject to ongoing litigation and bankruptcy proceedings.