Honeywell(HON)2023-04-26 16:00Financial Performance - Net sales for Q1 2023 increased to $8,864 million, up 5.8% from $8,376 million in Q1 2022[13] - Net income attributable to Honeywell rose to $1,394 million in Q1 2023, compared to $1,134 million in Q1 2022[13] - Earnings per share (diluted) increased to $2.07 in Q1 2023 from $1.64 in Q1 2022[13] - Comprehensive income attributable to Honeywell was $1,331 million in Q1 2023, compared to $1,242 million in Q1 2022[16] - Net income attributable to Honeywell for Q1 2023 was $1.394 billion, compared to $1.134 billion in Q1 2022, reflecting a 22.9% year-over-year increase[22] - Net sales for Q1 2023 reached $8,864 million, up from $8,376 million in Q1 2022[44] - Net sales for Q1 2023 were $8,864 million, with cost of products sold at $4,068 million and cost of services sold at $1,430 million[89] - Net income attributable to Honeywell increased to $1.394 billion in Q1 2023 from $1.134 billion in Q1 2022, with basic earnings per share rising to $2.09 from $1.66[99] - Net sales increased by 6% in Q1 2023 compared to Q1 2022, driven by a 6% increase in pricing and a 2% increase in volume, partially offset by a 2% unfavorable foreign currency translation impact[158] - Gross margin increased by $0.3 billion, with gross margin percentage rising 160 basis points to 38.0% compared to 36.4% in Q1 2022[163] - Net sales for Q1 2023 were $8,864 million, up from $8,376 million in Q1 2022, with product sales at $6,310 million and service sales at $2,554 million[13] - Net income attributable to Honeywell for Q1 2023 was $1,394 million, compared to $1,134 million in Q1 2022[13] - Earnings per share (basic) for Q1 2023 were $2.09, up from $1.66 in Q1 2022[13] - Total costs, expenses, and other for Q1 2023 were $7,082 million, compared to $6,871 million in Q1 2022[13] Cash Flow and Liquidity - Cash and cash equivalents declined to $6,869 million as of March 31, 2023, from $9,627 million as of December 31, 2022[19] - Net cash used for operating activities in Q1 2023 was $784 million, a significant decline from $36 million provided by operating activities in Q1 2022[22] - Cash and cash equivalents decreased by $2.758 billion in Q1 2023, ending the quarter at $6.869 billion compared to $9.281 billion in Q1 2022[22] - The company repurchased $699 million worth of common stock in Q1 2023, a decrease from $1.018 billion in Q1 2022[22] - Cash dividends per share increased to $1.030 in Q1 2023 from $0.980 in Q1 2022[25] - Cash and cash equivalents decreased to $7.2 billion as of March 31, 2023, from $10.1 billion as of December 31, 2022[197] - Net cash provided by operating activities decreased by $820 million in Q1 2023, primarily due to a $1.38 billion decrease in other operating activities[204] - Cash related to investing activities decreased by $19 million in Q1 2023, driven by a $176 million decrease in cash paid for acquisitions and a $79 million net decrease in investments[205] - Cash related to financing activities decreased by $254 million in Q1 2023, primarily due to a $1.32 billion increase in payments of long-term debt[206] - The company repurchased $699 million of common stock in Q1 2023 and has a remaining authorization of $2.1 billion under its $10 billion share repurchase program[208] - The company made payments of approximately $1.5 billion in early 2023 related to the NARCO Buyout and UOP Matters, with an expected receipt of $295 million related to the HWI Sale[211] Balance Sheet and Debt - Total assets decreased to $59,883 million as of March 31, 2023, from $62,275 million as of December 31, 2022[19] - Total current liabilities decreased to $17,896 million as of March 31, 2023, from $19,938 million as of December 31, 2022[19] - Long-term debt decreased to $14,670 million as of March 31, 2023, from $15,123 million as of December 31, 2022[19] - Total Honeywell shareowners' equity increased to $16,919 million as of March 31, 2023, from $16,697 million as of December 31, 2022[19] - Total shareowners' equity decreased to $17.515 billion in Q1 2023 from $19.051 billion in Q1 2022[25] - The company entered into a $1.5 billion 364-day credit agreement and a $4.0 billion five-year credit agreement in March 2023[77] - As of March 31, 2023, there were no outstanding borrowings under the new credit agreements[78] - The company's total long-term debt decreased to $14.670 billion in Q1 2023 from $15.123 billion in Q4 2022[76] - Total borrowings were $19.2 billion as of March 31, 2023, compared to $19.6 billion as of December 31, 2022[199] Segment Performance - Aerospace segment net sales increased to $3,111 million in Q1 2023, up from $2,749 million in Q1 2022, driven by growth in Commercial Aviation Aftermarket ($1,423 million vs. $1,168 million) and Defense and Space ($1,147 million vs. $1,103 million)[44] - Honeywell Building Technologies net sales rose to $1,487 million in Q1 2023, compared to $1,429 million in Q1 2022, with Products contributing $908 million (up from $879 million) and Building Solutions at $579 million (up from $550 million)[44] - Performance Materials and Technologies net sales grew to $2,749 million in Q1 2023, up from $2,453 million in Q1 2022, led by Process Solutions ($1,288 million vs. $1,152 million) and Advanced Materials ($896 million vs. $821 million)[44] - Safety and Productivity Solutions net sales declined to $1,515 million in Q1 2023 from $1,744 million in Q1 2022, with Warehouse and Workflow Solutions dropping to $464 million from $592 million[44] - Aerospace segment net sales increased by 13% to $3.111 billion, with segment profit rising 10% to $827 million[177] - Honeywell Building Technologies segment net sales increased by 4% to $1.487 billion, with segment profit rising 12% to $375 million[182] - Performance Materials and Technologies segment net sales increased by 12% to $2.749 billion, with segment profit rising 11% to $566 million[187] - Safety and Productivity Solutions segment net sales decreased by 13% to $1.515 billion, but segment profit increased by 3% to $260 million[191] Research and Development - Research and development expenses increased to $357 million in Q1 2023, up 2% from $350 million in Q1 2022[13] - Research and development expenses were reclassified as a separate line item starting January 1, 2023, with no impact on net income or cash flows[32] - Research and development expenses remained flat in Q1 2023 compared to Q1 2022[166] Acquisitions and Divestitures - The company acquired US Digital Designs, Inc. for $186 million in January 2022, allocating $53 million to intangible assets and $129 million to goodwill[41] - Honeywell entered into an agreement to acquire Compressor Controls Corporation for $670 million in April 2023, expected to close in the second half of 2023[40] - Honeywell received initial cash proceeds of $256 million from the HWI Sale, with the fair value of remaining proceeds classified as Level 3[94] - Honeywell received $256 million in initial proceeds from the HWI Sale on March 17, 2023[118] Contract Assets and Liabilities - Contract assets increased by $159 million to $2,453 million as of March 31, 2023, compared to $2,294 million at the beginning of the year[55] - Contract liabilities decreased by $292 million to $4,291 million as of March 31, 2023, from $4,583 million at the start of the year[55] - The company recognized $953 million in revenue in Q1 2023 that was previously included in contract liabilities[55] - Total remaining performance obligations stood at $30,260 million as of March 31, 2023, with Aerospace accounting for $12,592 million and Performance Materials and Technologies at $8,381 million[61] - 61% of performance obligations are expected to be satisfied within one year, while 39% will be satisfied beyond one year[62] Repositioning and Restructuring - Total net repositioning and other charges for Q1 2023 were $141 million, compared to $387 million in Q1 2022[67] - The company recognized repositioning charges of $103 million in Q1 2023, including $67 million in severance costs related to workforce reductions of 1,797 positions[67] - Repositioning charges in Q1 2023 included $12 million in asset impairments and $24 million in exit costs[67] Inventory and Supply Chain - Total inventories increased to $5.776 billion in Q1 2023 from $5.538 billion in Q4 2022[74] - Accounts payable related to supply chain financing programs totaled $1.004 billion as of March 31, 2023, up from $992 million at the end of 2022[34] Tax and Environmental Liabilities - The effective tax rate decreased in 2023 compared to 2022, primarily due to increased benefits from taxes on non-U.S. earnings[73] - Environmental liabilities increased to $673 million in Q1 2023 from $615 million in Q1 2022, with $82 million in new accruals and $24 million in payments[104] - Reimbursements from Resideo for environmental matters totaled $35 million in Q1 2023, with a corresponding receivable of $59 million recorded[108] - Asbestos-related liabilities decreased to $1.276 billion in Q1 2023 from $2.616 billion in Q1 2022, primarily due to the NARCO buyout of $1.325 billion[109] - Insurance recoveries for asbestos-related liabilities decreased to $260 million in Q1 2023 from $265 million in Q1 2022[110] - Honeywell agreed to a one-time payment of $1.325 billion to the Trust as part of the NARCO Buyout agreement[115] Derivatives and Hedging - The company's total derivatives at fair value were $18.340 billion in Q1 2023, compared to $18.727 billion in Q4 2022[84] - The carrying value of debt instruments designated as net investment hedges was $4,816 million as of March 31, 2023, compared to $3,836 million as of December 31, 2022[85] - Long-term debt carrying amount with fair value hedging adjustments was $4,787 million as of March 31, 2023, compared to $4,696 million as of December 31, 2022[86] - Interest rate swap agreements resulted in a $67 million loss on hedged items and a $67 million gain on derivatives designated as hedges for Q1 2023[89] Fair Value Measurements - Total assets accounted for at fair value were $698 million as of March 31, 2023, with Level 1 assets at $86 million, Level 2 at $573 million, and Level 3 at $39 million[91] - Total liabilities accounted for at fair value were $271 million as of March 31, 2023, primarily consisting of Level 2 liabilities[91] - The right to HWI Net Sale Proceeds, classified as Level 3, had a fair value of $39 million as of March 31, 2023, down from $295 million as of December 31, 2022[91][93] Legal and Regulatory Matters - The company is subject to various lawsuits and investigations, some involving substantial amounts, as discussed in Note 14 of the financial statements[214] - Unresolved Bendix-related asbestos claims increased to 5,706 as of March 31, 2023, from 5,608 as of December 31, 2022[121] Credit Ratings and Market Access - The company's credit ratings remain stable with S&P, Fitch, and Moody's maintaining long-term ratings of A, A, and A2, respectively[203] - Operating cash flows are expected to meet future operating cash needs, supported by available cash, committed credit lines, and access to public debt and equity markets[212] Other Financial Metrics - Total shares outstanding decreased to 665.7 million in Q1 2023 from 680.7 million in Q1 2022[100] - Accumulated other comprehensive income (loss) decreased to $(3.538) billion in Q1 2023 from $(3.475) billion in Q1 2022, primarily due to foreign exchange translation adjustments[103] - Selling, general and administrative expenses decreased in Q1 2023 due to prior year charges related to suspending operations in Russia[168] - Long-term receivables had a carrying value of $221 million and a fair value of $177 million as of March 31, 2023[98] - Sales decreased by $229 million in Q1 2023 compared to Q1 2022, driven by lower organic sales in Warehouse and Workflow Solutions ($127 million), Productivity Solutions and Services ($44 million), and Sensing and Safety Technologies ($29 million), along with a $29 million unfavorable foreign currency impact[192]