10-QPeriod: Q1 FY2020

HONEYWELL INTERNATIONAL INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 1, 2020For Securities:HONHONIV

Summary

Honeywell International Inc. reported net sales of $8.46 billion for the first quarter of 2020, a decrease of 5% compared to the prior year, largely due to volume declines influenced by the initial impacts of the COVID-19 pandemic and unfavorable foreign currency translation. Despite the sales dip, the company demonstrated resilience with a 12% increase in segment profit for the Aerospace segment. Diluted Earnings Per Share (EPS) rose to $2.21 from $1.92 in the prior year, driven by lower tax expenses, higher segment profit, and a reduced share count. The company highlighted its proactive management of the evolving COVID-19 situation, focusing on employee safety, increasing production of essential Personal Protective Equipment (PPE), and implementing cost-saving measures. Honeywell also took steps to bolster its financial flexibility by entering into a $6.0 billion Delayed Draw Term Loan Agreement and a $1.5 billion 364-Day Credit Agreement. While the overall sales were down, the company's diversified business segments and strategic financial management position it to navigate the challenging economic environment.

Financial Highlights

54 data points
Beta

Revenue

$8.46B

34.6% Gross Margin

Net Income

$1.58B

18.7% Net Margin

EPS (Diluted)

$2.21

Total Assets

$57.42B

Cash & Equivalents

$7.72B

Free Cash Flow

$800.00M

Financial Statements
Beta
Revenue$8.46B
Cost of Revenue$5.53B
Gross Profit$2.93B
SG&A Expenses$1.24B
Net Income$1.58B
EPS (Basic)$2.23
EPS (Diluted)$2.21
Shares Outstanding (Basic)709.60M
Shares Outstanding (Diluted)717.00M

Key Highlights

  • 1Net sales for Q1 2020 were $8.46 billion, down 5% year-over-year, reflecting initial impacts of the COVID-19 pandemic and foreign currency headwinds.
  • 2Diluted EPS increased to $2.21 from $1.92, benefiting from lower tax expenses, improved segment profit, and a reduced share count.
  • 3Aerospace segment showed strength with a 1% sales increase and a significant 12% rise in segment profit.
  • 4The company is increasing production of essential PPE, including N95 masks, to support global health and safety efforts.
  • 5Honeywell enhanced its liquidity position by entering into a $6.0 billion Delayed Draw Term Loan Agreement and a $1.5 billion 364-Day Credit Agreement.
  • 6Repositioning actions resulted in $66 million of severance costs for workforce reductions, impacting manufacturing and administrative positions across segments.
  • 7Cash provided by operating activities decreased by $195 million, primarily due to working capital changes and repositioning payments, though offset by lower cash tax payments.

Frequently Asked Questions

The COVID-19 pandemic had an impact on Honeywell's Q1 2020 results, primarily contributing to a 5% decrease in net sales year-over-year due to lower sales volumes in certain products across its businesses, notably in the Commercial Aviation Original Equipment, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions segments. The company also highlighted the pandemic's potential adverse effects on customers and suppliers in volatile markets such as airline and oil & gas.

Honeywell maintained a solid financial position. Despite a decrease in operating cash flow, the company actively managed its liquidity by entering into a $6.0 billion Delayed Draw Term Loan Agreement and a $1.5 billion 364-Day Credit Agreement to maximize financial flexibility and bolster resilience. As of March 31, 2020, the company held $8.8 billion in cash and cash equivalents and short-term investments, and had $3.5 billion in commercial paper outstanding. The company stated that its operating cash flows, cash balances, and credit lines are expected to be sufficient to meet future obligations.

Performance varied across segments. The Aerospace segment showed resilience with a 1% increase in net sales and a significant 12% increase in segment profit. Honeywell Building Technologies saw an 8% decrease in sales, Performance Materials and Technologies reported a 7% sales decrease, and Safety and Productivity Solutions experienced a 10% sales decrease. These declines were attributed to lower volumes, foreign currency translation, and in some cases, unfavorable pricing, although some segments saw increased demand for specific products like worker safety equipment due to COVID-19.

Honeywell is prioritizing employee health and safety by implementing precautions at its sites and enabling remote work where possible. To manage costs, the company is reducing discretionary expenses, limiting hiring, and considering workforce reductions. It is also investing in increased production of essential PPE, such as N95 masks, to support public health needs.