Honeywell Beats Guidance And Delivers Outstanding Second-Quarter Results Driven By Sales And Profit Growth; Raises Midpoint Of Adjusted EPS Guidance By 15 Cents

CHARLOTTE, N.C., July 23, 2021 /PRNewswire/ -- Honeywell (NASDAQ: HON) today announced outstanding results for the second quarter that were driven by sales and segment margin growth in all four businesses. The company also raised its full-year sales, segment margin, adjusted earnings per share, and cash flow guidance.

(PRNewsfoto/Honeywell)

"Building on our first-quarter momentum, we executed extremely well in the second quarter. Our results were driven by top-line growth and margin expansion in all four segments. Organic sales grew 15%, led by double-digit growth in Performance Materials and Technologies, Honeywell Building Technologies, and Safety and Productivity Solutions," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "Our increased volumes, streamlined cost base, and relentless focus on execution enabled us to expand segment margin by 190 basis points to 20.4%, exceeding the high end of our guidance by 10 basis points. As a result, we delivered adjusted earnings per share1 of $2.02, up 60% year over year and above the high end of our second-quarter guidance range. Our cash performance in the second quarter was strong, as we generated $1.5 billion of free cash flow with adjusted conversion2 of 103%, all while repurchasing $1.0 billion in Honeywell shares."

Adamczyk continued, "Our strong performance in the second quarter took place in a recovering but challenging global environment. We are especially pleased to see a turnaround in several of our key end markets that were hardest hit by the pandemic, with commercial aerospace aftermarket and the UOP business returning to growth in the quarter. We are well positioned to capitalize on improving conditions as they unfold around the world and to execute on near-term growth opportunities across our portfolio, including in the warehouse automation, productivity, building products, and advanced materials markets."

As a result of the company's second-quarter performance and management's outlook for the remainder of the year, Honeywell raised its full-year sales, adjusted earnings per share, and cash flow guidance and raised the midpoint of its segment margin guidance. Full-year sales are now expected to be in the range of $34.6 billion to $35.2 billion with organic sales growth in the range of 4% to 6%. Segment margin is expected to be in the range of 20.8% - 21.1%. Adjusted earnings per share3 is expected to be $7.95 to $8.10, up 10 cents from the high end of the prior guidance range. Operating cash flow is now expected to be in the range of $5.9 billion to $6.2 billion and free cash flow is now expected to be in the range of $5.3 billion to $5.6 billion. A summary of the company's full-year guidance changes can be found in Table 1.

Second-Quarter Performance
Honeywell sales for the second quarter were up 18% on a reported basis and up 15% on an organic basis. The second-quarter financial results can be found in Tables 2 and 3.

Aerospace sales for the second quarter were up 7% on an organic basis driven by a strong recovery in business and general aviation aftermarket demand as flight hours returned to 2019 levels, partially offset by lower defense volumes and a more gradual recovery in commercial original equipment build rates. Air transport aftermarket returned to growth as increased flight hours drove aftermarket demand. Segment margin expanded 490 basis points to 25.7%.

Honeywell Building Technologies sales for the second quarter were up 13% on an organic basis driven by broad-based global strength across the portfolio. Orders were up over 35% year over year, driven by strong bookings for building products and solutions. The buildings solutions services backlog was up over 30% year over year driven by strong bookings in North America and Asia. In addition, demand continued for our portfolio of healthy buildings solutions, with approximately $150 million of orders in the first half. Segment margin expanded 120 basis points to 22.4%.

Performance Materials and Technologies sales for the second quarter were up 10% on an organic basis driven by demand for process solutions products and thermal solutions, higher equipment volumes, licensing, and petrochemical catalyst shipments in UOP, and continued strong growth across advanced materials. Orders were up 20% year over year driven by robust demand for services, thermal solutions, catalysts, and fluorine products. Segment margin expanded 190 basis points to 20.8%.

Safety and Productivity Solutions sales for the second quarter were up 35% on an organic basis driven by another quarter of double-digit growth in the warehouse and workflow solutions, personal protective equipment, and productivity solutions and services businesses. In addition, short-cycle demand accelerated in the gas analysis and advanced sensing businesses, which both grew by high single-digits sequentially from the first quarter. Orders were up triple digits year over year in productivity solutions and services, giving us confidence in continued growth for that business. Segment margin expanded 20 basis points to 14.0%.

Conference Call Details
Honeywell will discuss its second-quarter results and updated full-year guidance during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. To participate on the conference call, please dial (866) 548-4713 (domestic) or (323) 794-2093 (international) approximately ten minutes before the 8:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's second-quarter 2021 earnings call or provide the conference code HON2Q21. The live webcast of the investor call as well as related presentation materials will be available through the Investor Relations section of the company's website (www.honeywell.com/investor). Investors can hear a replay of the conference call from 12:30 p.m. EDT July 23 until 12:30 p.m. EDT July 30 by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 7208292.

TABLE 1: FULL-YEAR 2021 GUIDANCE5


Previous Guidance

Current Guidance

Sales

$34.0B - $34.8B

$34.6B - $35.2B

Organic Growth

3% - 5%

4% - 6%

Segment Margin

20.7% - 21.1%

20.8% - 21.1%

Expansion

Up 30 - 70 bps

Up 40 - 70 bps

Adjusted Earnings Per Share3

$7.75 - $8.00

$7.95 - $8.10

    Adjusted Earnings Growth4

9% - 13%

12% - 14%

Operating Cash Flow

$5.8B - $6.1B

$5.9B - $6.2B

Free Cash Flow

$5.2B - $5.5B

$5.3B - $5.6B

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS



2Q 2021


2Q 2020


Change

Sales


8,808


7,477


18%

Organic Growth






15%

Segment Margin


20.4%


18.5%


190 bps

Operating Income Margin


18.1%


13.6%


450 bps

Earnings Per Share


$2.04


$1.53


33%

Adjusted Earnings Per Share1


$2.02


$1.26


60%

Cash Flow from Operations


1,278


1,480


(14%)

Operating Cash Flow Conversion


89%


137%


(48%)

Free Cash Flow


1,468


1,253


17%

Adjusted Free Cash Flow Conversion2


103%


140%


(37%)

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

AEROSPACE


2Q 2021


2Q 2020


Change

Sales


2,766


2,543


9%

Organic Growth






7%

Segment Profit


710


528


34%

Segment Margin


25.7%


20.8%


490 bps

HONEYWELL BUILDING TECHNOLOGIES







Sales


1,407


1,177


20%

Organic Growth






13%

Segment Profit


315


250


26%

Segment Margin


22.4%


21.2%


120 bps

PERFORMANCE MATERIALS AND TECHNOLOGIES







Sales


2,552


2,218


15%

Organic Growth






10%

Segment Profit


530


419


26%

Segment Margin


20.8%


18.9%


190 bps

SAFETY AND PRODUCTIVITY SOLUTIONS







Sales


2,083


1,539


35%

Organic Growth






35%

Segment Profit


292


213


37%

Segment Margin


14.0%


13.8%


20 bps

1Adjusted EPS and adjusted EPS V% exclude 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, changes in fair value for Garrett Motion Inc. (Garrett) equity securities, and a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021

2Adjusted free cash flow conversion is free cash flow (cash flow from operations less capital expenditures plus cash receipts from Garrett) divided by adjusted net income attributable to Honeywell. Adjusted net income attributable to Honeywell excludes changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, and the 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions from net income attributable to Honeywell

3Adjusted EPS guidance excludes the $0.11 impact of the sale of the retail footwear business, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, and any potential future one-time items that we cannot reliably predict or estimate such as pension mark-to-market and changes in fair value for Garrett equity securities

4Adjusted EPS V% guidance excludes the $0.11 impact of the sale of the retail footwear business, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, 4Q20 pension mark-to-market, 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, non-cash charges associated with the 2020 reduction in value of reimbursement receivables due from Garrett, net of proceeds from the settlement of related hedging transactions, and any potential future one-time items that we cannot reliably predict or estimate such as pension mark-to-market or changes in fair value for Garrett equity securities

5As discussed in the notes to the attached reconciliations, we do not provide guidance for margin or EPS on a GAAP basis

Honeywell (www.honeywell.com) is a Fortune 100 technology company that delivers industry specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials globally. Our technologies help everything from aircraft, buildings, manufacturing plants, supply chains, and workers become more connected to make our world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.

This release contains certain statements that may be deemed "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current economic and industry conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, technological, and COVID-19 public health factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, and other developments, including the potential impact of the COVID-19 pandemic, and business decisions may differ from those envisaged by such forward-looking statements. Any forward-looking plans described herein are not final and may be modified or abandoned at any time. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

This release contains financial measures presented on a non-GAAP basis. Honeywell's non-GAAP financial measures used in this release are as follows: segment profit, on an overall Honeywell basis, a measure by which we assess operating performance, which we define as operating income adjusted for certain items as presented in the Appendix; segment margin, on an overall Honeywell basis, which we define as segment profit divided by sales; organic sales growth, which we define as sales growth less the impacts from foreign currency translation, and acquisitions and divestitures for the first 12 months following the transaction date; free cash flow, which we define as cash flow from operations less capital expenditures plus cash receipts from Garrett, if and as noted in the release; adjusted free cash flow conversion, which we define as free cash flow divided by adjusted net income attributable to Honeywell; adjusted net income attributable to Honeywell, which we define as net income attributable to Honeywell which we adjust to exclude changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, and the 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, if and as noted in the release; and adjusted earnings per share, which we adjust to exclude pension mark-to-market, the favorable resolution of a foreign tax matter related to the spin-off transactions, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transactions, the gain on sale of the retail footwear business, and changes in fair value for Garrett equity securities, if and as noted in the release. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain metrics presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.   

 

Honeywell International Inc.

Consolidated Statement of Operations (Unaudited)

(Dollars in millions, except per share amounts)



Three Months Ended June 30,


Six Months Ended June 30,


2021


2020


2021


2020

Product sales

$

6,639



$

5,743



$

13,048



$

12,048


Service sales

2,169



1,734



4,214



3,892


Net sales

8,808



7,477



17,262



15,940


Costs, expenses and other








Cost of products sold(1)

4,734



4,163



9,285



8,537


Cost of services sold(1)

1,269



1,113



2,427



2,273



6,003



5,276



11,712



10,810


Selling, general and administrative expenses(1)

1,207



1,183



2,443



2,421


Other (income) expense

(366)



(291)



(808)



(608)


Interest and other financial charges

83



90



173



163



6,927



6,258



13,520



12,786


Income before taxes

1,881



1,219



3,742



3,154


Tax expense (benefit)

434



120



847



449


Net income

1,447



1,099



2,895



2,705


Less: Net income attributable to the noncontrolling interest

17



18



38



43


Net income attributable to Honeywell

$

1,430



$

1,081



$

2,857



$

2,662


Earnings per share of common stock - basic

$

2.06



$

1.54



$

4.11



$

3.77


Earnings per share of common stock - assuming dilution

$

2.04



$

1.53



$

4.06



$

3.74


Weighted average number of shares outstanding - basic

693.8



702.3



695.0



705.9


Weighted average number of shares outstanding - assuming dilution

702.5



708.1



703.5



712.6




(1)

Cost of products and services sold and Selling, general and administrative expenses include amounts for repositioning and other charges, the service cost component of pension and other postretirement (income) expense, and stock compensation expense.


 

Honeywell International Inc.

Segment Data (Unaudited)

(Dollars in millions)



Three Months Ended June 30,


Six Months Ended June 30,

Net Sales

2021


2020


2021


2020

Aerospace

$

2,766



$

2,543



$

5,398



$

5,904


Honeywell Building Technologies

1,407



1,177



2,765



2,458


Performance Materials and Technologies

2,552



2,218



4,898



4,615


Safety and Productivity Solutions

2,083



1,539



4,201



2,963


Total

$

8,808



$

7,477



$

17,262



$

15,940


 

Reconciliation of Segment Profit to Income Before Taxes



Three Months Ended June 30,


Six Months Ended June 30,

Segment Profit

2021


2020


2021


2020

Aerospace

$

710



$

528



$

1,472



$

1,465


Honeywell Building Technologies

315



250



620



512


Performance Materials and Technologies

530



419



964



931


Safety and Productivity Solutions

292



213



595



391


Corporate

(54)



(25)



(83)



(66)


Total segment profit

1,793



1,385



3,568



3,233


Interest and other financial charges

(83)



(90)



(173)



(163)


Stock compensation expense (1)

(39)



(34)



(116)



(78)


Pension ongoing income (2)

272



198



548



396


Other postretirement income (2)

18



14



35



27


Repositioning and other charges (3,4)

(101)



(280)



(242)



(342)


Other (5)

21



26



122



81


Income before taxes

$

1,881



$

1,219



$

3,742



$

3,154




(1)

Amounts included in Selling, general and administrative expenses.

(2)

Amounts included in Cost of products and services sold and Selling, general and administrative expenses (service costs) and Other income (expense) (non-service cost components).

(3)

Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and Other (income) expense.

(4)

Includes repositioning, asbestos, and environmental expenses.

(5)

Amounts include the other components of Other (income) expense not included within other categories in this reconciliation. Equity income of affiliated companies is included in segment profit.

 

Honeywell International Inc.

Consolidated Balance Sheet (Unaudited)

(Dollars in millions)



June 30, 2021


December 31, 2020

ASSETS




Current assets:




Cash and cash equivalents

$

11,427



$

14,275


Short-term investments

891



945


Accounts receivable - net

6,947



6,827


Inventories

4,723



4,489


Other current assets

1,664



1,639


Total current assets

25,652



28,175


Investments and long-term receivables

1,358



685


Property, plant and equipment - net

5,520



5,570


Goodwill

17,135



16,058


Other intangible assets - net

3,748



3,560


Insurance recoveries for asbestos related liabilities

342



366


Deferred income taxes

762



760


Other assets

9,428



9,412


Total assets

$

63,945



$

64,586


LIABILITIES




Current liabilities:




Accounts payable

$

6,139



$

5,750


Commercial paper and other short-term borrowings

3,573



3,597


Current maturities of long-term debt

1,645



2,445


Accrued liabilities

6,786



7,405


Total current liabilities

18,143



19,197


Long-term debt

16,138



16,342


Deferred income taxes

2,302



2,113


Postretirement benefit obligations other than pensions

225



242


Asbestos-related liabilities

1,819



1,920


Other liabilities

7,109



6,975


Redeemable noncontrolling interest

7



7


Shareowners' equity

18,202



17,790


Total liabilities, redeemable noncontrolling interest and shareowners'
equity

$

63,945



$

64,586


 

Honeywell International Inc.

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in millions)



Three Months Ended
June 30,


Six Months Ended
June 30,


2021


2020


2021


2020

Cash flows from operating activities:








Net income

$

1,447



$

1,099



$

2,895



$

2,705


Less: Net income attributable to the noncontrolling interest

17



18



38



43


Net income attributable to Honeywell

1,430



1,081



2,857



2,662


Adjustments to reconcile net income attributable to Honeywell to net cash
provided by operating activities:








Depreciation

164



161



335



314


Amortization

120



89



290



179


Gain on sale of non-strategic businesses and assets





(90)




Repositioning and other charges

101



280



242



342


Net payments for repositioning and other charges

(163)



(198)



(358)



(309)


Pension and other postretirement income

(290)



(211)



(583)



(423)


Pension and other postretirement benefit payments

(13)



(9)



(27)



(23)


Stock compensation expense

39



34



116



78


Deferred income taxes

38



(219)



101



(277)


Other

(181)



(106)



(277)



(285)


Changes in assets and liabilities, net of the effects of acquisitions and
divestitures:








Accounts receivable

(270)



735



(127)



776


Inventories

(113)



(168)



(271)



(331)


Other current assets

(32)



(60)



(98)



106


Accounts payable

345



(310)



402



(364)


Accrued liabilities

103



381



(256)



(26)


Net cash provided by (used for) operating activities

1,278



1,480



2,256



2,419


Cash flows from investing activities:








Expenditures for property, plant and equipment

(185)



(227)



(406)



(366)


Proceeds from disposals of property, plant and equipment





14



7


Increase in investments

(661)



(1,023)



(1,397)



(1,671)


Decrease in investments

719



746



1,331



1,589


Receipts from Garrett Motion Inc.

375





375




Receipts (payments) from settlements of derivative contracts

(163)



(204)



(23)



83


Cash paid for acquisitions, net of cash acquired

(24)





(1,327)




Proceeds from sales of businesses, net of fees paid





190




Net cash provided by (used for) investing activities

61



(708)



(1,243)



(358)


Cash flows from financing activities:








Proceeds from issuance of commercial paper and other short-term borrowings

1,090



3,710



2,358



7,165


Payments of commercial paper and other short-term borrowings

(1,089)



(3,721)



(2,355)



(7,094)


Proceeds from issuance of common stock

47



31



114



97


Proceeds from issuance of long-term debt

4



5,974



27



7,101


Payments of long-term debt

(18)



(93)



(835)



(1,218)


Repurchases of common stock

(1,027)



(62)



(1,849)



(1,985)


Cash dividends paid

(664)



(650)



(1,304)



(1,285)


Other

(3)



(2)



(33)



(40)


Net cash provided by (used for) financing activities

(1,660)



5,187



(3,877)



2,741


Effect of foreign exchange rate changes on cash and cash equivalents

30



98



16



(91)


Net increase (decrease) in cash and cash equivalents

(291)



6,057



(2,848)



4,711


Cash and cash equivalents at beginning of period

11,718



7,721



14,275



9,067


Cash and cash equivalents at end of period

$

11,427



$

13,778



$

11,427



$

13,778


 

Honeywell International Inc.

Reconciliation of Organic Sales % Change (Unaudited)



Three Months Ended
June 30, 2021

Honeywell


Reported sales % change

18%

Less: Foreign currency translation

3%

Less: Acquisitions, divestitures and other, net

—%

Organic sales % change

15%



Aerospace


Reported sales % change

9%

Less: Foreign currency translation

1%

Less: Acquisitions, divestitures and other, net

1%

Organic sales % change

7%



Honeywell Building Technologies


Reported sales % change

20%

Less: Foreign currency translation

7%

Less: Acquisitions, divestitures and other, net

—%

Organic sales % change

13%



Performance Materials and Technologies


Reported sales % change

15%

Less: Foreign currency translation

4%

Less: Acquisitions, divestitures and other, net

1%

Organic sales % change

10%



Safety and Productivity Solutions


Reported sales % change

35%

Less: Foreign currency translation

3%

Less: Acquisitions, divestitures and other, net

(3)%

Organic sales % change

35%

We define organic sales percent as the year over year change in reported sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of reported sales percent change to organic sales percent change has not been provided for forward-looking measures of organic sales percent change because management cannot reliably predict or estimate, without unreasonable effort, the fluctuations in global currency markets that impact foreign currency translation, nor is it reasonable for management to predict the timing, occurrence and impact of acquisition and divestiture transactions, all of which could significantly impact our reported sales percent change.

Honeywell International Inc.

Reconciliation of Segment Profit to Operating Income and Calculation of Segment Profit and Operating Income
Margins (Unaudited)

(Dollars in millions)



Three Months Ended June 30,


Twelve Months
Ended

December 31,


2021


2020


2020

Segment profit

$

1,793



$

1,385



$

6,665


Stock compensation expense (1)

(39)



(34)



(168)


Repositioning, Other (2,3)

(119)



(295)



(641)


Pension and other postretirement service costs (4)

(37)



(38)



(160)


Operating income

$

1,598



$

1,018



$

5,696


Segment profit

$

1,793



$

1,385



$

6,665


÷ Net sales

$

8,808



$

7,477



$

32,637


Segment profit margin %

20.4

%


18.5

%


20.4

%

Operating income

$

1,598



$

1,018



$

5,696


÷ Net sales

$

8,808



$

7,477



$

32,637


Operating income margin %

18.1

%


13.6

%


17.5

%



(1)

Included in Selling, general and administrative expenses.

(2)

Includes repositioning, asbestos, environmental expenses, and equity income adjustment.

(3)

Included in Cost of products and services sold, Selling, general and administrative expenses and Other (income) expense.

(4)

Included in Cost of products and services sold and Selling, general and administrative expenses.

We define segment profit as operating income, excluding stock compensation expense, pension and other postretirement service costs, and repositioning and other charges. We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of segment profit, on an overall Honeywell basis, to operating income has not been provided for all forward-looking measures of segment profit and segment margin included herewithin. Management cannot reliably predict or estimate, without unreasonable effort, the impact and timing on future operating results arising from items excluded from segment profit. The information that is unavailable to provide a quantitative reconciliation could have a significant impact on our reported financial results. To the extent quantitative information becomes available without unreasonable effort in the future, and closer to the period to which the forward-looking measures pertain, a reconciliation of segment profit to operating income will be included within future filings.

Honeywell International Inc.

Reconciliation of Earnings per Share to Adjusted Earnings per Share (Unaudited)



Three Months Ended June 30,


Twelve Months
Ended

December 31,


2021


2020


2020

Earnings per share of common stock - assuming dilution (1)

$

2.04



$

1.53



$

6.72


Pension mark-to-market expense (2)





0.04


Separation related tax adjustment (3)



(0.27)



(0.26)


Changes in fair value for Garrett equity securities (4)

(0.03)






Garrett-related adjustments (5)

0.01





0.60


Adjusted earnings per share of common stock - assuming dilution

$

2.02



$

1.26



$

7.10




(1)

For the three months ended June 30, 2021 and 2020, adjusted earnings per share utilizes weighted average shares of approximately 702.5 million and 708.1 million. For the twelve months ended December 31, 2020, adjusted earnings per share utilizes weighted average shares of 711.2 million.

(2)

Pension mark-to-market expense uses a blended tax rate of 25% for 2020.

(3)

For the three months ended June 30, 2020 and twelve months ended December 31, 2020, separation related tax adjustment of $186 million ($186 million net of tax) includes the favorable resolution of a foreign tax matter related to the spin-off transactions.

(4)

For the three months ended June 30, 2021, the adjustment was $16 million net of tax due to changes in fair value for Garrett equity securities.

(5)

For the three months ended June 30, 2021, the adjustment was $7 million net of tax due to a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021. For the twelve months ended December 31, 2020, the adjustment was $427 million net of tax due to the non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transactions.

We believe adjusted earnings per share is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. For forward looking information, management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense and the changes in fair value for Garrett equity securities. Pension mark-to-market expense is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. Based on economic and industry conditions, future developments and other relevant factors, these assumptions are subject to change. Changes in fair value for Garrett equity securities cannot be forecasted due to the inherent nature of changing conditions in the overall market. 

Honeywell International Inc.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow, Reconciliation of Net Income Attributable
to Honeywell to Adjusted Net Income Attributable to Honeywell
, and Calculation of Adjusted Free Cash Flow
Conversion (Unaudited)

(Dollars in millions)



Three Months
Ended

June 30, 2021


Three Months
Ended

June 30, 2020

Cash provided by operating activities

$

1,278



$

1,480


Expenditures for property, plant and equipment

(185)



(227)


Garrett cash receipts

375




Free cash flow

1,468



1,253


Net income attributable to Honeywell

1,430



1,081


Separation related tax adjustment



(186)


Changes in fair value for Garrett equity securities (1)

(16)




Garrett related adjustment (2)

7




Adjusted net income attributable to Honeywell

$

1,421



$

895


Cash provided by operating activities

$

1,278



$

1,480


÷ Net income (loss) attributable to Honeywell

$

1,430



$

1,081


Operating cash flow conversion %

89

%


137

%

Free cash flow

$

1,468



$

1,253


÷ Adjusted net income attributable to Honeywell

$

1,421



$

895


Adjusted free cash flow conversion %

103

%


140

%



(1)

The adjustment due to changes in fair value for Garrett equity securities.

(2)

For the three months ended June 30, 2021, the adjustment was $7 million net of tax due to a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021.

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment plus cash receipts from Garrett.

We believe that free cash flow is a non-GAAP metric that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity. For forward looking information, we do not provide cash flow conversion guidance on a GAAP basis as management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense and the changes in fair value for Garrett equity securities. Pension mark-to-market is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. Based on economic and industry conditions, future developments and other relevant factors, these assumptions are subject to change. Changes in fair value of Garrett equity securities cannot be forecasted due to the inherent nature of changing conditions in the overall market.

Honeywell International Inc.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)



Twelve Months
Ended
December 31,
2021(E) ($B)

Cash provided by operating activities

~$5.9 - $6.2

Expenditures for property, plant and equipment

~(1)

Garrett cash receipts

0.4

Free cash flow

~$5.3 - $5.6

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment plus cash receipts from Garrett.

We believe that free cash flow is a non-GAAP metric that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity. For forward looking information, we do not provide cash flow conversion guidance on a GAAP basis as management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense or changes in fair value of Garrett equity securities. Pension mark-to-market is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. Based on economic and industry conditions, future developments and other relevant factors, these assumptions are subject to change. Changes in fair value of Garrett equity securities cannot be forecasted due to the inherent nature of changing conditions in the overall market.

Honeywell International Inc.

Reconciliation of Expected Earnings per Share to Adjusted Earnings per Share (Unaudited)




Twelve Months
Ended

December 31,

2021(E)



Earnings per share of common stock - assuming dilution (1)


$8.05 - $8.20

Gain on sale of retail footwear business (2)


(0.11)

Garrett-related adjustments (3)


0.01

Adjusted earnings per share of common stock - assuming dilution


$7.95 - $8.10



(1)

For the twelve months ended December 31, 2021, expected earnings per share utilizes weighted average shares of approximately 703 million.

(2)

For the twelve months ended December 31, 2021, the adjustment was $72 million net of tax due to the gain on sale of the retail footwear business.

(3)

For the twelve months ended December 31, 2021, adjustment was $7 million net of tax due to a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021.

We believe adjusted earnings per share is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. For forward looking information, management cannot reliably predict or estimate any potential future one-time items, such as pension mark-to-market or changes in fair value for Garrett equity securities, without unreasonable effort. Pension mark-to-market expense is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. Based on economic and industry conditions, future developments and other relevant factors, these assumptions are subject to change. Changes in fair value for Garrett equity securities cannot be forecasted due to the inherent nature of changing conditions in the overall market.

Contacts:




Media

Investor Relations

Nina Krauss

Reena Vaidya

(704) 627-6035

(704) 627-6200

nina.krauss@honeywell.com

reena.vaidya@honeywell.com

 

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SOURCE Honeywell

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