Thread regarding Honeywell International Inc. layoffs

Quarterly transcript from DA

DA

Thank you, and good morning, everyone. Before we turn to slides, I would like to make a few opening remarks. We’re clearly holding this call during unprecedented times. The COVID-19 pandemic has widespread impacts on our communities, from our families, friends and neighbors to our employees, customers and suppliers.

At Honeywell, our number one priority is the health and safety of our employees. We are taking many precautions to preserve their well-being over 100,000 employees around the world, results in very few infections across the company. Each of our employees is demonstrating a strong commitment to our company and to our customers during these challenging times.

I sincerely thank them for their strength, resilience and courage. I would also like to express my gratitude to the men and women on the frontlines of this fight. The healthcare workers are working every day to overcome this global health emergency. They are the heroes and we’re doing everything we can to support them with increased production of personal protective equipment and other critical supplies.

This morning, we’ll discuss six key topics. First, we’ll review our first quarter performance, a quarter during, which we over-delivered on our original EPS and segment margin commitments despite a rapidly deteriorating environment. I am particularly proud of this outcome as, even in a crisis, we demonstrated that our investors can count on our reliable say-do outcome. Second, we will discuss how we are working to keep our employees and the men and women on the frontline safe and healthy.

Third, we’ll discuss our outlook for the second quarter. The next few quarters are likely to be among the most unpredictable quarters we’ve ever experienced and our visibility is limited under the current circumstances. Accordingly, our outlook for the second quarter will have less detail than usual, but we’ll provide a level of detail that is commensurate with our visibility in the current environment. We’re also suspending our full year financial guidance until the economic environment stabilizes and we can once again provide a reliable forecast.

Fourth, we will provide an overview of our strong balance sheet and the liquidity position, which will take years of responsible balance sheet management. Fifth, we will outline decisive and expeditious actions we have already taken to manage through the crisis, protect shareholder value and emerge stronger than ever.

We cannot control the pandemic, but we can control how we’re mitigating risk to our operations and supply chain, engaging with customers, managing costs and preserving liquidity. As you’ll see, we are applying Honeywell’s usual level of discipline and diligence to this unprecedented situation. We’ve already locked in plans, which we are executing so that we are not searching for answers as the crisis continues to unfold. And finally, we’ll provide an overview of some new opportunities that are well aligned to our portfolio.

In some cases, access to customer sites was restricted, impacting our ability to complete deliveries and provide services. COVID-19 and the OPEC-plus dispute also caused demand weakness, particularly in our short cycle businesses and in the Aerospace and Oil and Gas end markets. The combination of these effects resulted in an organic sales decline of 4%. As you have come to expect from Honeywell, we responded quickly to changing conditions by implementing cost control measures, which combined with our productivity rigor and commercial excellence drove 140 basis points of segment margin expansion, 90 basis points above the high end of our first quarter guidance.

We also generated $800 million of free cash flow despite lower cash collections from customers at the end of the quarter due to the challenging macroeconomic conditions. We continue to implement our responsible and balanced capital deployment program during the first quarter. We deployed $2.7 billion of capital across share repurchases, dividends and high return CapEx investments to position our company for the future. This was a challenging first quarter due to the rapid escalation of the COVID-19 pandemic and the OPEC-plus dispute. We’re effectively – but we effectively managed through the challenge to over-deliver on our profit commitments, demonstrating our strong say-do.

Let’s turn to Slide 3 to discuss our response to the pandemic. As the COVID-19 pandemic started to evolve, we reacted quickly to ensure the safety of our employees as well as to aiding the frontline response to the crisis. We implemented several precautionary measures to keep our employees safe, including travel restrictions for all employees and full-time work-from-home for nearly all of our non-manufacturing employees.

At Honeywell locations where work cannot be performed remotely such as manufacturing sites, we implemented measures to protect our employees including restricting visitors, enhancing site cleaning and sanitation regimens, providing hand sanitizers, staggering shifts and lunch breaks and putting safe distance practices in place where possible. Where social distancing isn’t possible, we have also provided employees with masks. We have also implemented mandatory temperature screening at several locations and are putting capabilities in place to expand that practice as needed. We’ll continue to comply with all local and national guidance from governments and health authorities.

In addition, we announced that Honeywell will pay for coronavirus testing and treatment costs that are not covered by employees insurance and will provide a full year of paid sick-time upfront for U.S. non-exempt employees. Finally, we announced a $10 million employee relief fund to help employees in financial distress. We also recognize the urgency to keep medical professionals safe. We have quickly ramped up production of our personal protective equipment to address unprecedented demand.

We recently announced that we’re adding manufacturing capabilities to our existing sites in Smithfield, Rhode Island and Phoenix, Arizona to produce millions of N95 masks to help support the urgent need for critical safety equipment. The additional capacity at these two facilities is expected to create more than 1,000 new jobs and produce more than 20 million N95 disposable masks monthly to support the U.S. government’s efforts to combat the virus. Our Smithfield, Rhode Island facility is already producing N95 masks. We installed a production line in only five weeks, a process that normally takes nine months to complete.

Honeywell is supporting the fight against COVID-19 in other ways as well, including increasing production of our other critical personal protective equipment such as safety eyewear and facials, increasing production of sensors used in ventilators and providing testing services to ventilator manufacturers.

Finally, we recently announced that we will shift manufacturing operations at two chemical manufacturing sites in the U.S. and Germany to produce and donate hand sanitizers to government agencies in response to shortages created by the COVID-19 pandemic. These sites which manufactures a high-purity solutions for laboratory research and testing applications will produce hand sanitizers over the next two months for government agencies to distribute to entities in need. These are certainly challenging times and we’re proud of our role and the many actions we have taken to produce essential personal protective equipment to keep the heroes on the frontlines safe.

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Post ID: @OP+14MH8xvY

5 replies (most recent on top)

Some free cash flow has come from unmentioned RIFs and furloughs in recent years. But we're great...hiding behind masks like usual. You'll only see what we want you to see.

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Post ID: @1ccj+14MH8xvY

You could have just provided the link. SMH

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Post ID: @ahl+14MH8xvY

The Phase 2 stuff is because we don’t think that things like Aerospace are going to return to normal next year.

So when we think about it, in the second quarter, we’re going to have some substantial reductions, probably greater than the flight hour reductions that I mentioned earlier in the discussion. So probably greater than 50% types of aftermarket down in the ATR segment in particular.

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Post ID: @cuq+14MH8xvY

what you’re seeing for us, of course, is that we’ve got 40% roughly of our Aerospace businesses, Defense and Space, and that’s continuing to grow. They grew 7% in the first quarter and we see a nice growth trajectory in Q2 as well. And it really is in the commercial side of the business that we’re going to see a substantial acceleration of that growth rate coming down.

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Post ID: @ipy+14MH8xvY

Let’s move next to our cost control actions. Our focus is on maintaining our employee base while also positioning the company for long term performance post crisis. We have rapidly implemented a series of measures to conserve cash and reduce cost, which will help mitigate the potential need for more drastic actions later and will give us more flexibility to respond to prolonged downturn or sudden disruptions in our end markets.

Our cost reduction efforts will reduce cost by at least $1.1 billion to $1.3 billion in 2020 and will be more heavily weighted in the third and fourth quarters of the year. This includes approximately $200 million of benefits from prior year repositioning. We have eliminated or sharply reduced discretionary expenses, limited hiring and cancelled merit increases on a global basis for all levels of the company.

Additionally, our businesses have, in some locations, initiated a rotating-schedule, reduced work weeks or eliminated work weeks. All executives, up through including senior staff and the Board of Directors have also reduced base pay this year and eliminated or substantially lower incentive payouts in 2020. We are also taking proactive steps to preserve jobs at our manufacturing sites including shortened or stagnant work schedules to match production volumes of demand.

The expeditious completions of Phase 1 cost plan previously described is enabling us to complete a Phase 2 cost action plan, which should be developed within 30 days. We believe that these cost controls will enable Honeywell to respond to deteriorating market and economic condition as the full impact of the COVID-19 pandemic becomes apparent.

Finally, let’s discuss how we’re optimizing working capital to match demand in the current environment. We have a solid governance model around cash management and working capital and we executed a comprehensive risk assessment of customers and suppliers to preserve our strong cash position. We reviewed the policies for the highest risk in top revenue customers to make sure we have the appropriate parameters in place to protect our accounts receivable and we implemented tighter exception criteria and enhance executive leadership team review and approval.

Additionally, we also set up processes to identify and assess high risk suppliers. We trained and mobilized over 600 procurement professionals to contact suppliers and take their financial temperature. Many suppliers have already received essential help to keep their doors open and their products and services flow into Honeywell’s factories. Having agile supply chain processes is more important than ever to manage our expenses and cash investments. Therefore, we condensed our sales, inventory and operations planning process from a traditional monthly cycle to a weekly cycle.

Combining this with sales leading indicators, we’re sensing demand changes and realigning our inventory and production schedules faster than ever. Together, the actions we have implemented across the company have positioned Honeywell to effectively manage through uncertain times and we’re confident of our continued execution resilience.

Let’s turn to Slide 9 to discuss our repositioning plan in more detail. As you would expect from us, we are accelerating plans for permanent cost reductions to ensure our cost base reflects the macro-economic environment, particularly in Aerospace and PMT where we see the end market challenges we have discussed this morning. We have ample capacity for repositioning in the second quarter and we’re planning for a net reposition of $175 million to $275 million. Our actions to shares will provide cost reduction tails into 2021 and are proactively preparing a Phase 2 plan, which will likely deploy as we assess market conditions.

Now looking at Slide 10, let me take a moment to share some of the emerging areas of demand that we are adjusting for our customers. In the healthcare space, we see opportunities across multiple businesses. We’re increasing productions of sensors for medical ventilators in our sensing and IoT business.

Our research chemicals business is supporting scientists around the world in the research, development and production of COVID-19 test kits, therapies and the vaccines by prioritizing and ramping production of high-quality analytical products to meet their application needs. And we are offering expedited support services to our pharmaceutical and biopharmaceutical customers in our Aclar business to help facilitate faster healthcare packaging decisions for COVID-19 oral solid medicine. We have already mentioned that many actions were taken to meet increased demands for personal protective equipment, including masks, eyewear, and face shields.

In both, Building Technologies and Process Solutions, we see strong demand for cyber security and have demands for remote access and monitoring for buildings and plants as people increasingly work from remote locations. Also in HBT, we have a suite of healthy building capabilities ready to deploy for customers, who are focused on the health and well-being of their building’s occupants. In SPS, there is strong demand for warehouse automation and supply chain analytics driven by surging e-commerce.

And finally, in Aerospace, as passengers return to normal flying behaviors, to really increase focus on passenger health and safety, which dovetails nicely with our leadership in the environmental control systems for aircraft. We are also offering creative solutions to airlines and airports to protect passengers and to restore confidence in flying. So although the macro environment is creating challenges, it is also creating new customer needs that we’re well-equipped to address.

With that, let’s wrap up on Slide 11. This quarter represents the first of what will be some challenging times ahead. We exceeded our segment profit, segment margin and earnings commitment with EPS growth of 15%, despite the substantial challenges we faced. We remain cautious as the magnitude and final impact of COVID-19 pandemic and OPEC+ dispute is unknown. As a result, there is significant uncertainty around commercial aerospace, oil and gas and short cycle demand, which we expect will meaningfully impact the second quarter.

However, we have a diversified portfolio and significant balance sheet strength to provide resilience in these uncertain times. We acted quickly and prudently to ensure the health and safety of our employees, continuing to serve our customers and protecting our shareholders in response to COVID-19 pandemic. We took decisive actions to reduce our cost base, optimize working capital and further bolster our strong balance sheet and liquidity.

We continue to actively monitor the COVID-19 impact on our operations and we’re confident in our ability to manage through the market volatility. We’re playing a critical role in keeping medical professionals safe through expanded production of N95 masks other PPE needs, sensors for medical equipment and ventilators and new production of hand sanitizers.

Despite the challenging times, we remain committed to our strategic initiatives in the Honeywell Connected Enterprise, supply chain transformation and Honeywell Digital. And we’ll continue investing in our future through breakthrough initiatives, new product introductions, next-generation innovation across our entire portfolio. I am proud of everyone at Honeywell, who is working hard to adapt and deliver in this challenging environment. I am confident we will emerge from this crisis even stronger than ever.

With that, let’s move to Q&A.

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Post ID: @adh+14MH8xvY

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