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Honeywell misses 1Q mark
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April 20, 2001: 12:00 a.m. ET
Diversified manufacturer to cut 6,500 jobs as sales, earnings fall
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NEW YORK (CNNfn) - Honeywell International Inc. posted a drop in first-quarter earnings Friday that was much sharper than Wall Street had expected and said it will cut 6,500 jobs, or 5 percent of its staff worldwide.
The diversified manufacturer, which has agreed to be acquired by General Electric Co. (GE: down $0.73 to $47.78, Research, Estimates), earned $415 million, or 51 cents a share, excluding special charges. Analysts surveyed by earnings tracker First Call had forecast earnings per share of 58 cents. The company earned $506 million, or 63 cents a share, in the year-earlier period.
Sales slipped to $5.9 billion from $6 billion in the quarter.
A Honeywell (HON: down $0.73 to $46.87, Research, Estimates) spokesman said the company expects the job cuts to take place by the end of the second quarter. The cuts resulted in a $595 million pre-tax charge that reduced first quarter net income to $41 million, or 5 cents a share.
"Because of concerns over economic softness, we moved even more aggressively in the first quarter to reduce further our cost structure," CEO Michael Bonsignore said. "We are optimistic that we will see the benefits of these actions in the second half of this year and much more so in 2002."
The company had warned on fourth-quarter results but had not alerted investors about problems with first-quarter sales or income. It blamed weaker economic conditions, coupled with higher prices for energy and raw materials, for the earnings disappointment.
Regulators eye GE deal closely
Honeywell also has come under scrutiny by American and European regulators regarding is planned takeover by GE which, if completed, is expected to solve many of the company's problems.
The two companies got an encouraging word from European regulators Tuesday when European Competition Commissioner Mario Monti expressed optimism that his agency's concerns can be resolved by a July 12 deadline.
Bonsignore said Friday he remains confident the deal will pass muster.
"We are pleased with the progress of our pending merger with GE," Bonsignore said. "We remain confident that we will obtain regulatory clearances from the Department of Justice and the European Commission. We are also confident that our merger integration planning efforts will pay off quickly for shareowners once the transaction closes.
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I thought the number would not be this weak.
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Nicholas Heymann
analyst
Prudential Securities |
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The company, a component of the Dow Jones industrial average, had lower profits across all its product lines. Profits slipped 1 percent in its automation and control segment, and 8.5 percent in its aerospace operations, its largest revenue and profit producer. Performance materials profits plunged 60 percent in the quarter, and power and transportation profits were off 43 percent.
"I thought the number would not be this weak," Prudential Securities analyst Nicholas Heymann said, referring to Honeywell's earnings per share."
"I thought you'd end up with a bottom line better and a top line weaker. But there were two factors here – the economic impact of the slowing economy along with higher raw material costs, and the in-limbo status of a company that was still in the process of completing an integration of itself with another partner, AlliedSignal," Heymann said. "And now it's in the process of assimilating with GE."
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Honeywell was acquired by AlliedSignal, with its heavy concentration of aerospace operations, in a December 1999 deal worth $14 billion. Its combination with conglomerate GE, first announced last fall, has been on hold this year after European regulators started an in-depth probe into concerns voiced by competitors.
Decisions related to the combination with GE hurt Honeywell's fourth-quarter results as well, as the company opted to hold on to under performing business units it had previously planned to sell off.
In the first quarter, those operations continued to affect Honeywell's consolidated results. Those units included Friction Materials, Automotive Consumer Products and U.S. Security Monitoring. 
-- from staff and wire reports
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