10-QPeriod: Q2 FY2018

HONEYWELL INTERNATIONAL INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 20, 2018For Securities:HONHONIV

Summary

Honeywell International Inc. reported a solid second quarter and first half of 2018, demonstrating growth across its key business segments. For the three months ended June 30, 2018, net sales increased by 8% to $10.9 billion, while for the six months ended June 30, 2018, net sales grew by 9% to $21.3 billion, driven by organic growth, favorable foreign currency translation, and the impact of a new revenue recognition standard. Net income attributable to Honeywell for the quarter was $1.267 billion, or $1.68 per diluted share, a decrease from the prior year primarily due to higher tax costs related to business restructuring and separation costs. However, segment profit showed robust growth, particularly in Aerospace and Safety and Productivity Solutions. The company also provided an update on its strategic initiatives, including the ongoing repositioning and cost-saving actions. Repositioning and other charges totaled $458 million for the six-month period. Honeywell's balance sheet remained strong, with a healthy cash flow from operations of $2.997 billion for the first half of the year, enabling continued share repurchases and dividend payments. Management highlighted the successful adoption of new accounting standards for revenue recognition and pension costs, with minimal disruption.

Financial Highlights

53 data points
Beta

Revenue

$10.92B

30.3% Gross Margin

Net Income

$1.27B

11.6% Net Margin

EPS (Diluted)

$1.68

Total Assets

$59.86B

Cash & Equivalents

$8.08B

Free Cash Flow

$1.66B

Financial Statements
Beta
Revenue$10.92B
Cost of Revenue$7.61B
Gross Profit$3.31B
SG&A Expenses$1.53B
Net Income$1.27B
EPS (Basic)$1.70
EPS (Diluted)$1.68
Shares Outstanding (Basic)745.50M
Shares Outstanding (Diluted)755.00M

Key Highlights

  • 1Net sales increased by 8% to $10.9 billion for the three months ended June 30, 2018, and by 9% to $21.3 billion for the six months ended June 30, 2018, driven by organic growth, foreign currency translation, and new revenue recognition standards.
  • 2Net income attributable to Honeywell decreased to $1.267 billion ($1.68/share) in Q2 2018 from $1.392 billion ($1.80/share) in Q2 2017, primarily due to increased tax costs related to business restructuring and separation costs.
  • 3Segment profit showed strong performance, with Aerospace up 12% and Safety and Productivity Solutions up 25% year-over-year in the quarter.
  • 4The company reported $2.997 billion in cash from operating activities for the first half of 2018, a significant increase from $2.387 billion in the prior year period.
  • 5Honeywell continued its share repurchase program, buying back $1.704 billion in the first half of 2018, with $6.0 billion remaining under its approved program.
  • 6New revenue recognition guidance was adopted effective January 1, 2018, with a net decrease to opening retained earnings of $75 million.
  • 7The effective tax rate for the quarter and six months was higher than the statutory rate, impacted by $291 million in tax costs for restructuring the transportation systems business prior to its spin-off.

Frequently Asked Questions

Sales growth was primarily driven by organic growth across segments, a favorable impact from foreign currency translation, and the implementation of the new revenue recognition accounting standard. Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions all saw increases in net sales compared to the prior year.

The decrease in net income was mainly due to significant tax costs associated with the internal restructuring of the transportation systems business in advance of its anticipated spin-off, amounting to $291 million. Additionally, there were increased separation costs related to the spin-offs of the Homes and Global Distribution business and Transportation Systems business, and higher repositioning and other charges.

Cash provided by operating activities increased by $610 million to $2.997 billion for the six months ended June 30, 2018, compared to $2.387 billion in the same period of 2017. This improvement was largely due to a favorable impact from working capital changes and decreased cash tax payments.

Honeywell repurchased $1.704 billion of its common stock in the first half of 2018. As of June 30, 2018, $6.0 billion remained available under its previously approved $8 billion share repurchase program. The company intends to continue repurchasing shares to offset dilution from employee stock-based compensation and potentially reduce the overall share count.