Workflow
Honeywell(HON) - 2023 Q1 - Quarterly Report
HONHoneywell(HON)2023-04-26 16:00
Transcript
Slide

Financial Performance - Net sales for Q1 2023 increased to 8,864million,up5.88,864 million, up 5.8% from 8,376 million in Q1 2022[13] - Net income attributable to Honeywell rose to 1,394millioninQ12023,comparedto1,394 million in Q1 2023, compared to 1,134 million in Q1 2022[13] - Earnings per share (diluted) increased to 2.07inQ12023from2.07 in Q1 2023 from 1.64 in Q1 2022[13] - Comprehensive income attributable to Honeywell was 1,331millioninQ12023,comparedto1,331 million in Q1 2023, compared to 1,242 million in Q1 2022[16] - Net income attributable to Honeywell for Q1 2023 was 1.394billion,comparedto1.394 billion, compared to 1.134 billion in Q1 2022, reflecting a 22.9% year-over-year increase[22] - Net sales for Q1 2023 reached 8,864million,upfrom8,864 million, up from 8,376 million in Q1 2022[44] - Net sales for Q1 2023 were 8,864million,withcostofproductssoldat8,864 million, with cost of products sold at 4,068 million and cost of services sold at 1,430million[89]−NetincomeattributabletoHoneywellincreasedto1,430 million[89] - Net income attributable to Honeywell increased to 1.394 billion in Q1 2023 from 1.134billioninQ12022,withbasicearningspersharerisingto1.134 billion in Q1 2022, with basic earnings per share rising to 2.09 from 1.66[99]−Netsalesincreasedby61.66[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 8,864million,upfrom8,864 million, up from 8,376 million in Q1 2022, with product sales at 6,310millionandservicesalesat6,310 million and service sales at 2,554 million[13] - Net income attributable to Honeywell for Q1 2023 was 1,394million,comparedto1,394 million, compared to 1,134 million in Q1 2022[13] - Earnings per share (basic) for Q1 2023 were 2.09,upfrom2.09, up from 1.66 in Q1 2022[13] - Total costs, expenses, and other for Q1 2023 were 7,082million,comparedto7,082 million, compared to 6,871 million in Q1 2022[13] Cash Flow and Liquidity - Cash and cash equivalents declined to 6,869millionasofMarch31,2023,from6,869 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 784million,asignificantdeclinefrom784 million, a significant decline from 36 million provided by operating activities in Q1 2022[22] - Cash and cash equivalents decreased by 2.758billioninQ12023,endingthequarterat2.758 billion in Q1 2023, ending the quarter at 6.869 billion compared to 9.281billioninQ12022[22]−Thecompanyrepurchased9.281 billion in Q1 2022[22] - The company repurchased 699 million worth of common stock in Q1 2023, a decrease from 1.018billioninQ12022[22]−Cashdividendspershareincreasedto1.018 billion in Q1 2022[22] - Cash dividends per share increased to 1.030 in Q1 2023 from 0.980inQ12022[25]−Cashandcashequivalentsdecreasedto0.980 in Q1 2022[25] - Cash and cash equivalents decreased to 7.2 billion as of March 31, 2023, from 10.1billionasofDecember31,2022[197]−Netcashprovidedbyoperatingactivitiesdecreasedby10.1 billion as of December 31, 2022[197] - Net cash provided by operating activities decreased by 820 million in Q1 2023, primarily due to a 1.38billiondecreaseinotheroperatingactivities[204]−Cashrelatedtoinvestingactivitiesdecreasedby1.38 billion decrease in other operating activities[204] - Cash related to investing activities decreased by 19 million in Q1 2023, driven by a 176milliondecreaseincashpaidforacquisitionsanda176 million decrease in cash paid for acquisitions and a 79 million net decrease in investments[205] - Cash related to financing activities decreased by 254millioninQ12023,primarilyduetoa254 million in Q1 2023, primarily due to a 1.32 billion increase in payments of long-term debt[206] - The company repurchased 699millionofcommonstockinQ12023andhasaremainingauthorizationof699 million of common stock in Q1 2023 and has a remaining authorization of 2.1 billion under its 10billionsharerepurchaseprogram[208]−Thecompanymadepaymentsofapproximately10 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 295millionrelatedtotheHWISale[211]BalanceSheetandDebt−Totalassetsdecreasedto295 million related to the HWI Sale[211] Balance Sheet and Debt - Total assets decreased to 59,883 million as of March 31, 2023, from 62,275millionasofDecember31,2022[19]−Totalcurrentliabilitiesdecreasedto62,275 million as of December 31, 2022[19] - Total current liabilities decreased to 17,896 million as of March 31, 2023, from 19,938millionasofDecember31,2022[19]−Long−termdebtdecreasedto19,938 million as of December 31, 2022[19] - Long-term debt decreased to 14,670 million as of March 31, 2023, from 15,123millionasofDecember31,2022[19]−TotalHoneywellshareowners′equityincreasedto15,123 million as of December 31, 2022[19] - Total Honeywell shareowners' equity increased to 16,919 million as of March 31, 2023, from 16,697millionasofDecember31,2022[19]−Totalshareowners′equitydecreasedto16,697 million as of December 31, 2022[19] - Total shareowners' equity decreased to 17.515 billion in Q1 2023 from 19.051billioninQ12022[25]−Thecompanyenteredintoa19.051 billion in Q1 2022[25] - The company entered into a 1.5 billion 364-day credit agreement and a 4.0billionfive−yearcreditagreementinMarch2023[77]−AsofMarch31,2023,therewerenooutstandingborrowingsunderthenewcreditagreements[78]−Thecompany′stotallong−termdebtdecreasedto4.0 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 15.123billioninQ42022[76]−Totalborrowingswere15.123 billion in Q4 2022[76] - Total borrowings were 19.2 billion as of March 31, 2023, compared to 19.6billionasofDecember31,2022[199]SegmentPerformance−Aerospacesegmentnetsalesincreasedto19.6 billion as of December 31, 2022[199] Segment Performance - Aerospace segment net sales increased to 3,111 million in Q1 2023, up from 2,749millioninQ12022,drivenbygrowthinCommercialAviationAftermarket(2,749 million in Q1 2022, driven by growth in Commercial Aviation Aftermarket (1,423 million vs. 1,168million)andDefenseandSpace(1,168 million) and Defense and Space (1,147 million vs. 1,103million)[44]−HoneywellBuildingTechnologiesnetsalesroseto1,103 million)[44] - Honeywell Building Technologies net sales rose to 1,487 million in Q1 2023, compared to 1,429millioninQ12022,withProductscontributing1,429 million in Q1 2022, with Products contributing 908 million (up from 879million)andBuildingSolutionsat879 million) and Building Solutions at 579 million (up from 550million)[44]−PerformanceMaterialsandTechnologiesnetsalesgrewto550 million)[44] - Performance Materials and Technologies net sales grew to 2,749 million in Q1 2023, up from 2,453millioninQ12022,ledbyProcessSolutions(2,453 million in Q1 2022, led by Process Solutions (1,288 million vs. 1,152million)andAdvancedMaterials(1,152 million) and Advanced Materials (896 million vs. 821million)[44]−SafetyandProductivitySolutionsnetsalesdeclinedto821 million)[44] - Safety and Productivity Solutions net sales declined to 1,515 million in Q1 2023 from 1,744millioninQ12022,withWarehouseandWorkflowSolutionsdroppingto1,744 million in Q1 2022, with Warehouse and Workflow Solutions dropping to 464 million from 592million[44]−Aerospacesegmentnetsalesincreasedby13592 million[44] - Aerospace segment net sales increased by 13% to 3.111 billion, with segment profit rising 10% to 827million[177]−HoneywellBuildingTechnologiessegmentnetsalesincreasedby4827 million[177] - Honeywell Building Technologies segment net sales increased by 4% to 1.487 billion, with segment profit rising 12% to 375million[182]−PerformanceMaterialsandTechnologiessegmentnetsalesincreasedby12375 million[182] - Performance Materials and Technologies segment net sales increased by 12% to 2.749 billion, with segment profit rising 11% to 566million[187]−SafetyandProductivitySolutionssegmentnetsalesdecreasedby13566 million[187] - Safety and Productivity Solutions segment net sales decreased by 13% to 1.515 billion, but segment profit increased by 3% to 260million[191]ResearchandDevelopment−Researchanddevelopmentexpensesincreasedto260 million[191] Research and Development - Research and development expenses increased to 357 million in Q1 2023, up 2% from 350millioninQ12022[13]−ResearchanddevelopmentexpenseswerereclassifiedasaseparatelineitemstartingJanuary1,2023,withnoimpactonnetincomeorcashflows[32]−ResearchanddevelopmentexpensesremainedflatinQ12023comparedtoQ12022[166]AcquisitionsandDivestitures−ThecompanyacquiredUSDigitalDesigns,Inc.for350 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 53milliontointangibleassetsand53 million to intangible assets and 129 million to goodwill[41] - Honeywell entered into an agreement to acquire Compressor Controls Corporation for 670millioninApril2023,expectedtocloseinthesecondhalfof2023[40]−Honeywellreceivedinitialcashproceedsof670 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 256millionininitialproceedsfromtheHWISaleonMarch17,2023[118]ContractAssetsandLiabilities−Contractassetsincreasedby256 million in initial proceeds from the HWI Sale on March 17, 2023[118] Contract Assets and Liabilities - Contract assets increased by 159 million to 2,453millionasofMarch31,2023,comparedto2,453 million as of March 31, 2023, compared to 2,294 million at the beginning of the year[55] - Contract liabilities decreased by 292millionto292 million to 4,291 million as of March 31, 2023, from 4,583millionatthestartoftheyear[55]−Thecompanyrecognized4,583 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 30,260millionasofMarch31,2023,withAerospaceaccountingfor30,260 million as of March 31, 2023, with Aerospace accounting for 12,592 million and Performance Materials and Technologies at 8,381million[61]−618,381 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 387millioninQ12022[67]−Thecompanyrecognizedrepositioningchargesof387 million in Q1 2022[67] - The company recognized repositioning charges of 103 million in Q1 2023, including 67millioninseverancecostsrelatedtoworkforcereductionsof1,797positions[67]−RepositioningchargesinQ12023included67 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 24millioninexitcosts[67]InventoryandSupplyChain−Totalinventoriesincreasedto24 million in exit costs[67] Inventory and Supply Chain - Total inventories increased to 5.776 billion in Q1 2023 from 5.538billioninQ42022[74]−Accountspayablerelatedtosupplychainfinancingprogramstotaled5.538 billion in Q4 2022[74] - Accounts payable related to supply chain financing programs totaled 1.004 billion as of March 31, 2023, up from 992millionattheendof2022[34]TaxandEnvironmentalLiabilities−Theeffectivetaxratedecreasedin2023comparedto2022,primarilyduetoincreasedbenefitsfromtaxesonnon−U.S.earnings[73]−Environmentalliabilitiesincreasedto992 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 615millioninQ12022,with615 million in Q1 2022, with 82 million in new accruals and 24millioninpayments[104]−ReimbursementsfromResideoforenvironmentalmatterstotaled24 million in payments[104] - Reimbursements from Resideo for environmental matters totaled 35 million in Q1 2023, with a corresponding receivable of 59millionrecorded[108]−Asbestos−relatedliabilitiesdecreasedto59 million recorded[108] - Asbestos-related liabilities decreased to 1.276 billion in Q1 2023 from 2.616billioninQ12022,primarilyduetotheNARCObuyoutof2.616 billion in Q1 2022, primarily due to the NARCO buyout of 1.325 billion[109] - Insurance recoveries for asbestos-related liabilities decreased to 260millioninQ12023from260 million in Q1 2023 from 265 million in Q1 2022[110] - Honeywell agreed to a one-time payment of 1.325billiontotheTrustaspartoftheNARCOBuyoutagreement[115]DerivativesandHedging−Thecompany′stotalderivativesatfairvaluewere1.325 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 18.727billioninQ42022[84]−Thecarryingvalueofdebtinstrumentsdesignatedasnetinvestmenthedgeswas18.727 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 3,836millionasofDecember31,2022[85]−Long−termdebtcarryingamountwithfairvaluehedgingadjustmentswas3,836 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 4,696millionasofDecember31,2022[86]−Interestrateswapagreementsresultedina4,696 million as of December 31, 2022[86] - Interest rate swap agreements resulted in a 67 million loss on hedged items and a 67milliongainonderivativesdesignatedashedgesforQ12023[89]FairValueMeasurements−Totalassetsaccountedforatfairvaluewere67 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 86million,Level2at86 million, Level 2 at 573 million, and Level 3 at 39million[91]−Totalliabilitiesaccountedforatfairvaluewere39 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 39millionasofMarch31,2023,downfrom39 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)billioninQ12023from(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 221millionandafairvalueof221 million and a fair value of 177 million as of March 31, 2023[98] - Sales decreased by 229millioninQ12023comparedtoQ12022,drivenbylowerorganicsalesinWarehouseandWorkflowSolutions(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 (44million),andSensingandSafetyTechnologies(44 million), and Sensing and Safety Technologies (29 million), along with a $29 million unfavorable foreign currency impact[192]