================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - January 31, 2003
(Date of earliest event reported)
HONEYWELL INTERNATIONAL INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 1-8974 22-2640650
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification
incorporation) Number)
101 COLUMBIA ROAD, P.O. BOX 4000, MORRISTOWN, NEW JERSEY 07962-2497
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 455-2000
================================================================================
ITEM 9. REGULATION FD DISCLOSURE
EARNINGS RELEASE.
On January 31, 2003 Honeywell International Inc. announced 2002 earnings.
..
Honeywell International Inc. issued the following press release on
January 31, 2003:
HONEYWELL'S 2002 ONGOING EARNINGS PER SHARE ARE $2.00; REPORTED LOSS PER SHARE
IS $0.27; REVENUES ARE $22.3 BILLION; FREE CASH FLOW IS A RECORD $2.0 BILLION
2002 FOURTH-QUARTER ONGOING EARNINGS PER SHARE ARE
$0.50;
REPORTED LOSS PER SHARE IS $1.78,
REFLECTING AFTER-TAX CHARGE OF $1.9 BILLION;
REVENUES ARE $5.9 BILLION; FREE CASH FLOW IS $546 MILLION
COMPANY EXPECTS 2003 EARNINGS PER SHARE TO RANGE FROM $1.60 TO $1.70,
INCLUDING YEAR-OVER-YEAR NEGATIVE IMPACT OF $0.36 PER SHARE DUE TO
PENSION EXPENSE; COMPANY SEES CONTINUED STRONG CASH GENERATION IN 2003
MORRIS TOWNSHIP, N.J., January 31, 2003 -- Honeywell (NYSE: HON) today
announced that 2002 ongoing earnings per share were $2.00, in line with the
company's previous guidance. Ongoing earnings per share for 2001 were $2.05.
Reported loss per share in 2002 was $0.27, compared with a reported loss per
share of $0.12 in 2001. Reported results from both years include the effects of
charges and divestitures of non-strategic businesses.
"This past year was a challenging one," said Honeywell Chairman and CEO
Dave Cote. "Despite the difficult economic environment, our aggressive cost
actions and productivity initiatives enabled us to generate record free cash
flow and hold ongoing earnings essentially flat on 6% lower revenues. Further,
we took decisive action throughout the year to ensure a firm foundation for
growth and performance in all of our businesses."
2
2002 Full-Year Highlights
Full-year revenues were $22.3 billion, down 6% from $23.7 billion in
2001 as a result of declines primarily in the company's commercial aerospace
units as well as the divestiture of its Commercial Vehicle Braking Systems
business. Revenues increased in the Defense & Space, Security & Fire Solutions,
Turbochargers and Electronic Materials units. Segment profit margins were 11.3%,
down from 11.6% in 2001.
In 2002, Honeywell generated a record $2.0 billion in free cash flow,
up 40% from $1.4 billion a year ago. The company delivered $1.2 billion in cost
productivity.
2002 Fourth-Quarter Results and Actions
Revenues in the fourth quarter were $5.9 billion, flat versus the same
period in 2001. Ongoing earnings per share were $0.50, compared with of $0.55 in
the fourth quarter of 2001. Segment profit margins were 10.7%, compared with
12.2% in 2001. Fourth-quarter results reflect the increase in research and
development expenditures in the company's Aerospace business as well as the
impact of lower pension income and continued declines in commercial aerospace
original equipment. Free cash flow in the quarter was $546 million, compared
with $626 million in the previous year's quarter.
In the quarter, Honeywell undertook a number of actions to improve its
cost structure and address the economic realities of the marketplace. This
resulted in the company taking an after-tax charge of about $1.9 billion, or
$2.28 per share, to cover costs associated with the potential resolution of
asbestos-related claims; asset write-downs in its Specialty Materials, Friction
Materials and Automation & Control Solutions businesses; and repositioning and
other actions. The charge was net of a gain of $18 million, or $0.02 per share,
on the sale of Honeywell's Advanced Circuits business. The reported per-share
loss for the fourth quarter was $1.78, compared with reported earnings per share
of $0.14 in 2001's fourth quarter.
2003 Outlook
Honeywell expects its 2003 earnings per share to range from $1.60 to
$1.70, reflecting the year-over-year negative impact of $0.36 per share due to
pension expense. The company
3
expects revenues of about $22.2 billion in 2003, flat compared with 2002, and
sees continued strong cash generation and cost productivity.
Honeywell plans to provide more details about 2002 results and
expectations for 2003 at an investor meeting beginning at 10am ET today; a
webcast of the investor meeting, as well as related presentation materials, will
be available at www.honeywell.com/investor.
Honeywell is a diversified technology and manufacturing leader, serving
customers worldwide with aerospace products and services; control technologies
for buildings, homes and industry; turbochargers; automotive products; specialty
chemicals; fibers; and electronic and advanced materials. Based in Morris
Township, N.J., Honeywell is one of 30 stocks that make up the Dow Jones
Industrial Average and is a component of the Standard & Poor's 500 Index. Its
shares are traded on the New York Stock Exchange under the symbol HON, as well
as on the London, Chicago and Pacific Stock Exchanges. For more information
about Honeywell, visit www.honeywell.com.
This release contains forward-looking statements as defined in Section
21E of the Securities Exchange Act of 1934, including statements about future
business operations, financial performance and market conditions. Such
forward-looking statements involve risks and uncertainties inherent in business
forecasts as further described in our filings under the Securities Exchange Act.
4
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Three Months Ended December 31
------------------------------
2002 2001(F)
------------------------------ ----------------------------
Reported Adjusted(C) Reported Adjusted(E)
------------- ------------- ---------- -----------
Net sales $ 5,855 $ 5,855 $ 5,853 $ 5,853
-------- ------- ------- -------
Costs, expenses and other
Cost of goods sold 4,875 (A) 4,487 5,021 (D) 4,481
Selling, general and administrative expenses 782 (A) 741 656 656
Loss on sale of non-strategic businesses 83 (B) - - -
Asbestos related litigation charges, net of insurance 1,548 (A) - - -
Business impairment charges 834 (A) - - -
Equity in (income) loss of affiliated companies (25) (25) (12) (12)
Other (income) expense 22 (A) 7 1 1
Interest and other financial charges 83 83 92 92
-------- ------- ------- -------
8,202 5,293 5,758 5,218
-------- ------- ------- -------
Income (loss) before taxes (2,347) 562 95 635
Tax expense (benefit) (880) 150 (23) 188
-------- ------- ------- -------
Net income (loss) $(1,467) $ 412 $ 118 $ 447
======= ======= ======= =======
Earnings (loss) per share of common stock-basic $ (1.78) $ 0.50 $ 0.14 $ 0.55
======= ======= ======= =======
Earnings (loss) per share of common stock -
assuming dilution $ (1.78)(G) $ 0.50 $ 0.14 $ 0.55
======== ======= ======= =======
Weighted average number of shares outstanding-basic 824 824 815 815
======== ======= ======= =======
Weighted average number of shares outstanding -
assuming dilution 824 (G) 824 818 818
======== ======= ======= =======
(A) Cost of goods sold, selling, general and administrative expenses and
other (income) expense include provisions of $388, $41 and $15 million,
respectively, for net repositioning and other charges. Including the
asbestos litigation and business impairment charges, total net pretax
charges were $2,826 million (after-tax $1,897 million, or $2.30 per
share).
(B) Represents the pretax loss on the sale of our Advanced Circuits
business (after-tax gain $18 million, or $0.02 per share). The
after-tax gain is due to the higher deductible tax basis than book
basis in the shares sold.
(C) Excludes the impact from items in (A) and (B) above.
(D) Cost of goods sold includes a provision of $440 million for the
settlement of patent infringement, antitrust and other claims by Litton
Industries and a $100 million charge for the write-off of investments
related to a regional jet engine contract cancellation. Total pretax
charges were $540 million (after-tax $329 million, or $0.40 per share).
(E) Excludes the impact from items in (D) above.
(F) Cost of goods sold includes amortization of goodwill and
indefinite-lived intangible assets of $51 million (after-tax $49
million, or $0.06 per share). Such amortization is excluded from the
2002 results, in conformity with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No.
142), effective for Honeywell as of January 1, 2002.
(G) Dilutive securities issuable in connection with stock plans have been
excluded from the calculation of reported loss per share because their
effect would reduce the loss per share.
5
Honeywell International Inc.
Consolidated Statement of Operations (Unaudited)
(In millions except per share amounts)
Twelve Months Ended December 31
-------------------------------
2002 2001(F)
------------------------------- -------------------------
Reported Adjusted(C) Reported Adjusted(E)
---------------- ------------ --------- ----------
Net sales $22,274 $22,274 $23,652 $23,652
-------- ------- ------- -------
Costs, expenses and other
Cost of goods sold 17,615 (A) 17,054 20,125 (D) 17,991
Selling, general and administrative expenses 2,757 (A) 2,712 3,064 (D) 2,913
Loss on sale of non-strategic businesses 124 (B) - - -
Asbestos related litigation charges, net of insurance 1,548 (A) - 159 (D) -
Business impairment charges 877 (A) - 145 (D) -
Equity in (income) loss of affiliated companies (42)(A) (55) 193 (D) (7)
Other (income) expense (4)(A) (19) (17)(D) (22)
Interest and other financial charges 344 344 405 405
-------- ------- ------- --------
23,219 20,036 24,074 21,280
-------- ------- ------- --------
Income (loss) before taxes (945) 2,238 (422) 2,372
Tax expense (benefit) (725) 594 (323) 700
-------- ------- ------- --------
Net income (loss) $ (220) $1,644 $ (99) $ 1,672
======== ======= ======= ========
Earnings (loss) per share of common stock-basic $(0.27) $ 2.00 $(0.12) $ 2.06
======== ======= ======= ========
Earnings (loss) per share of common stock -
assuming dilution $(0.27)(G) $ 2.00 $(0.12)(G) $ 2.05
======== ======= ======= ========
Weighted average number of shares outstanding-basic 820 820 812 812
======== ======= ======= ========
Weighted average number of shares outstanding -
assuming dilution 820 (G) 823 812 (G) 817
======== ======= ======= ========
(A) Cost of goods sold, selling, general and administrative expenses,
equity in (income) loss of affiliated companies and other (income)
expense include provisions of $561, $45, $13 and $15 million,
respectively, for net repositioning and other charges. Including the
asbestos litigation and business impairment charges, total net pretax
charges were $3,059 million (after-tax $2,059 million, or $2.51 per
share).
(B) Represents the net pretax loss on the dispositions of our Bendix
Commercial Vehicle Systems, Pharmaceutical Fine Chemicals, Automation
and Control's Consumer Products and Advanced Circuits businesses
(after-tax gain $195 million, or $0.24 per share). The after-tax gain
is due to the higher deductible tax basis than book basis in the shares
sold for the Fine Chemicals, Consumer Products and Advanced Circuits
businesses.
(C) Excludes the impact from items in (A) and (B) above.
(D) Cost of goods sold, selling, general and administrative expenses,
equity in (income) loss of affiliated companies and other (income)
expense include provisions of $2,134, $151, $200 and $5 million,
respectively, for net repositioning and other charges. Including the
asbestos litigation and business impairment charges, total net pretax
charges were $2,794 million (after-tax $1,771 million, or $2.18 per
share).
(E) Excludes the impact from items in (D) above.
(F) Cost of goods sold includes amortization of goodwill and
indefinite-lived intangible assets of $204 million (after-tax $196
million, or $0.24 per share). Such amortization is excluded from the
2002 results, in conformity with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No.
142), effective for Honeywell as of January 1, 2002.
(G) Dilutive securities issuable in connection with stock plans have been
excluded from the calculation of reported loss per share because their
effect would reduce the loss per share.
6
Honeywell International Inc.
Segment Data (Unaudited)
(Dollars in Millions)
Net Sales Periods Ended December 31
--------- -------------------------
Three Months Twelve Months
----------------------------- ---------------------------
2002 2001 2002 2001
------- ------- ------- -------
Aerospace $ 2,356 $ 2,338 $ 8,855 $ 9,653
Automation and Control Solutions 1,884 1,876 6,978 7,185
Specialty Materials 780 750 3,205 3,313
Transportation and Power Systems 835 880 3,184 3,457
Corporate - 9 52 44
------- ------- ------- -------
Total $ 5,855 $ 5,853 $22,274 $23,652
======= ======= ======= =======
Segment Profit Periods Ended December 31
-------------- -------------------------
Three Months Twelve Months
--------------------------- --------------------------
2002 2001(A) 2002 2001(A)
------- ------- ------- -------
Aerospace $ 349 $ 393 $ 1,358 $ 1,741
Automation and Control Solutions 230 253 890 819
Specialty Materials 5 (5) 57 52
Transportation and Power Systems 88 111 357 289
Corporate (45) (36) (154) (153)
------- ------- ------- -------
Total Segment Profit 627 716 2,508 2,748
(Loss) on sale of non-strategic businesses (83) - (124) -
Asbestos related litigation charges, net
of insurance (1,548) - (1,548) (159)
Business impairment charges (834) - (877) (145)
Repositioning and other charges (444) (540) (634) (2,490)
Equity in income (loss) of affiliated companies 25 12 55 7
Other income (expense) (7) (1) 19 22
Interest and other financial charges (83) (92) (344) (405)
------- ------- ------- -------
Income (loss) before taxes $(2,347) $ 95 $ (945) $ (422)
======= ======= ======= =======
(A) Includes pretax amortization of goodwill and indefinite-lived intangible
assets of $51 and $204 million, for three and twelve months of 2001,
respectively (Aerospace-$15 and $60 million, Automation and Control
Solutions-$23 and $92 million, Specialty Materials-$8 and $32 million and
Transportation and Power Systems-$5 and $20 million, respectively). Such
amortization is excluded from the 2002 results, in conformity with SFAS No.
142.
7
Honeywell International Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Dollars in Millions)
Periods Ended December 31
-------------------------
Three Months Twelve Months
------------------------------ ---------------------------
2002 2001 2002 2001
------- ------- ------- -------
Cash provided by operating activities $ 754 $ 639 $2,380 $1,996
Litton settlement payment, net of tax refund
of $58 in 2002 - 220 162 220
Net taxes paid on sales of businesses - 30 - 42
------- ------- ------- -------
Adjusted cash provided by operating activities 754 889 2,542 2,258
Expenditures for property, plant and
equipment (227) (264) (671) (876)
Proceeds from disposals of property, plant and
equipment 19 1 41 46
Decrease in investments - - 91 -
------- ------- ------- -------
Free cash flow $ 546 $ 626 $2,003 $1,428
======= ======= ======= =======
Honeywell management uses the free cash flow metric as a measure of cash
generated by business operations, net of the ongoing investment in property,
plant and equipment, that can be used to invest in future growth through new
business development or acquisitions, pay dividends, repurchase stock or repay
debt obligations.
We define free cash flow as cash provided by operating activities adjusted for
the Litton litigation settlement and net taxes paid on sales of businesses, less
expenditures for property, plant and equipment (PP&E) net of proceeds from
disposals of PP&E, plus or minus dispositions of, or investments in,
available-for-sale investment securities.
8
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: January 31, 2003 HONEYWELL INTERNATIONAL INC.
By: /s/ Thomas F. Larkins
---------------------------------
Thomas F. Larkins
Vice President, Corporate Secretary
and Deputy General Counsel
9