Q1 2020 Earnings Call
Good day, ladies and gentlemen.
First quarter earnings conference call.
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Hi.
Please go ahead.
Thank you so that'll be good morning, and welcome to Honeywell first quarter 2020, <unk> earnings Conference call.
On the call with me today, our chairman and CEO dairy Saddam truck and senior Vice President and Chief Financial Officer, Greg Lewis also joining us today senior Vice President and Chief supply chain Officer, Thorsten pills, what's your to participate in two and a related to our supply chain.
Colin webcast, including any non-GAAP reconciliations are available on our website at www Dot Honeywell dot com forward slash industry.
No doubt element to this presentation contains forward looking statements that are based on all that's real the world ends up our businesses as you see them today.
Those elements can change based on many factors, including changing economic and business conditions, and we ask that you interpret them not like.
Unless otherwise noted the plants described herein are not final and may be modified or even abandoned at any time no final decision will be taken with respect to such plans without prior saw destruction of any applicable requirements with respect to informing consulting or negotiating with the poor.
These or their representatives.
We identified the principal risks and uncertainties that may affect our performance in our annual report on form 10-K, and other absent some filings.
This morning, we will review our financial results for the first quarter of 2020 and share our views on the second quarter of 20 Twond.
As always we'll leave time for your questions at the end [laughter].
I'll turn the call over to chairman and CEO Garrett adoption.
Thank you Mark and good morning, everyone before we turn to slide so I would like to make a few opening remarks.
Really holding this called an unprecedented times to cope with 19 endemic has widespread impacts on our communities my family friends and neighbors store employees customers and suppliers at Honeywell. Our number one priority is to help them say do you have our employees with taking many precautions to preserve the while being over 200000.
In employees around the world results very few infections across the company each of our employees is demonstrating a strong commitment to our comfortably do our customers. During these challenging cards I sincerely thank them for their strength resilience encouraged but also like to express my gratitude to men and women on the front lines of the spot.
Healthcare workers are working everyday to overcome this global health emergency.
They are the heroes and we're doing everything we can't support them increased production or personal protective equipment.
Other critical supplies.
This morning, we'll discuss six key topics first well your first quarter performance quarter during which we over delivered on our original yes and segment margin commitments. Despite a rapidly deteriorating barb.
I'm, particularly proud of the south covered you didn't quite since we demonstrate our investors can count on a reliable say do outcome second we'll discuss how we're working to keep our employees in the men and women on that front line safe and healthy 30 will discuss our outlook for the second quarter. The next few quarters are likely could be amongst the most I'm pretty.
Four quarters group ever experienced in our visibility is limited under the current circumstances accordingly, our outlook for the second quarter, we'll have less detailed unusual 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 could once again provide a reliable forecast.
Fourth we will provide an overview, our strong balance sheet liquidity position, which looks like years ago responsible balance sheet management.
We will outline decisive expeditious actions already taken to manage through the crisis protect shareholder value emerged stronger than ever.
I cannot think control the pandemic, but we can't control how were mitigating restore operations and supply chain engaging with customers managing cost and preserving liquidity is you'll see we are applying honeywell's usual level disciplined and diligence and unprecedent situation.
Already locked in plans, which are which we are executing so you're not searching for answers as the crisis continues to unfold.
Finally, we'll provide an overview of some new opportunities that are well aligned to our portfolio, let's begin on slide two.
Deliberate essence segment margin expansion above the high end of our original guidance in a rapidly deteriorating Spartan earnings per share for the first quarter was $2.21 up 15% year over year and segment margin expanded 140 basis points to 21.8% global spread cobot 19.
The first quarter credit operational constraints for Honeywell, our suppliers and our customers in some cases access to customer sites was restricted impacting our go to a complete deliveries and provide services.
Good night team and opened plus dispute also caused demand weakness, particularly our short cycle businesses in the aerospace oil and gas in markets. The combination of factors resulted in the organic sales declined 4%.
As you have come to expect from Honeywell responded quickly to changing conditions by implementing a cost control measures, which combined with our productivity you 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 the challenging macroeconomic conditions, we continue to implement a responsible and balanced capital deployment program. During the first quarter, we deployed $2.7 billion of capital across your purchases dividends and high return capex investments to position.
Our company for the future.
He was a challenging first quarter due to the rapid escalation of the cobot 19 pandemic.
Plus dispute where effectively but we effectively managed to the challenged over delivered our profits commitments demonstrating our strong say do.
Let's turn to slide three to discuss our response to the pandemic.
As the cold at 19 pandemic started to ball, we acted quickly to ensure the safety of our employees as well as to aid in the frontline response to the crisis.
Implemented several precautionary measures to keep on please save the goes and travel restrictions for all employees in full time work from home go nearly all of our nonmanufacturing employees.
At Honeywell locations will work cannot be perform remotely such as manufacturing sites, we implemented measures to protect our employees, including restricting visitors enhancing say cleaning and sanitation regiments, providing hand, sanitizers staggering shifts and lunch breaks and putting safe distance practices in place where possible we're social distance.
Isn't possible we have also provided employees of math.
We have also implemented mandatory temperature scrutiny at several locations and are putting capabilities in place to expand that practices need. It will continue to comply with all local and national guidance from governments and health authorities.
In addition, we announced that hung will pay for corner buyers testing in treatment costs that are not covered by employees insurance and will provide full year old paid sick time upfront for U.S. not exempt employees. Finally, we announced a $10 million for you really want to help employees in financial distress. We also recognize too early.
Since you keep medical professionals safe with quickly ramped up production personal protective equipment to address unprecedented demand, we recently announced we're adding manufacturing capabilities to our existing sites and Smithfield, Rhode Island in Phoenix, Arizona produce millions and 95 mass to help support urgent need for critical.
The additional capacity used to facilities is expected to create more than 1000, new jobs in produced more than 20 million in 95 disposable masks monthly to support the U.S. government efforts to combat the buyers.
Our Smithfield, Rhode Island facilities already producing in 90 partner, we installed a production line. The only five weeks a process that normally takes nine months to complete.
Honeywell supporting to fight against called the 19, other ways as well, including increasing production of our other critical personal protective equipment, such as safety eyewear and they shields, increasing production of sensors used in doubt layers and providing testing services to ventilator manufacturers. Finally recently announced it will shift manufacturing operation.
Is it two chemical manufacturing sites in the U.S. and Germany to produce and donate hand sanitizer to government agencies in response to shortages created by the cold with 19 pandemic.
These sites, which manufacture a high purity solutions for laboratory research and testing applications, we produce handstands value reserves over the next few months for government agencies to distribute to enter the didn't need.
These are certainly challenging times through a proud of our role and the many actions we've taken to produce essential personal protective equipment to keep the heroes under current law I'd say.
Now, let me turn it over to Greg at Slide four to discuss our first quarter results more detail.
Well as to provide our views on the second quarter and the balance sheet.
Thank you dairy and good morning, everyone.
The first quarter organic sales declined by 4% as the effects of the pandemic spread across the globe, creating supply chain challenges and restricting access to customer sites, which constrained our ability to deliver particularly in the last two to three weeks of the month.
Aerospace sales were up 1% on organic basis as demand for key U.S. Department of defense programs and guidance and navigation systems and defense and space was partially offset by the steep reduction the flight hours and a slowdown in air transport OE build rates, primarily from our previously communicated lowered 737, Max deliveries to Boeing and.
Commercial aerospace.
Safety and productivity solution sales were down 9% organically increased demand for respiratory personal protective equipment was more than offset by weakness in the short cycle part of the portfolio and calibrated sales were down about 12% due the timing of several major systems projects as expected as a reminder, intelligrated organic growth in the first quarter of last.
Year was approximately 50% up due to strong major systems backlog conversion aftermarket services and increased demand for voice solution, which created a very tough comps this quarter intelligrated backlog remains robust approximately a 40% year over year and as we discussed at our last call. We expect growth to Reaccelerate in the second call.
Order.
[noise] Honeywell building technology sales were down 6% on an organic basis, primarily driven by softness and building solutions projects and lower short cycle volumes and security and building management products.
Finally performance materials and technologies down 5% was negatively affected by the sharp decline in oil prices stemming from the OPEC plugs dispute and the coated 19 related disruptions with H.P.S. down, 6% and you'll you'll pay down 2%.
Continue to legal HFC imports into Europe, and lower automotive refrigerant volumes in advanced materials also contributed to the sale decline.
Despite these challenges our productivity rigor combined with commercial excellence and Swift cost actions drove segment margin expansion of 140 basis points well above our original guidance of 20 to 50 basis points.
We delivered earnings per share of $2.21 up 15% and well above the high end of our original guidance range of two or two to two seven.
Segment profit expansion drove four cents of earnings growth, while lower adjusted effective tax rate, primarily due to new India tax legislation drove 13 cents EPS improvement compared to last year, even without the favorable tax impact the first quarter EPS was one cents above the high end of our guidance and up 8% year over year.
We generated $800 million, a free cash flow down 31% year over year, primarily driven by lower sales and slower collections, particularly in late March.
We continue to execute our capital deployment plans in the first quarter, we deployed over $600 million to dividends and $1.9 billion of share repurchases substantially completing our full year 2020 share repurchase commitment.
We also invested over $100 million on capital expenditures in the quarter, including investments that will enable us to produce millions more and 95 masks to help the Florida buyers relief effort.
Overall this was a very challenging quarter, but we continued to execute and achieve our overdelivered on our segment profit margin expansion and EPS commitments.
Now, let's turn to slide five to discuss our operations.
Our portfolio is highly aligned to guidelines for a central and critical businesses around the world. Our teams have been working tirelessly to ensure that we are able to provide equipment and services to our customers in critical end markets globally in compliance with government safety regulations.
The spread of Cobot 19 has created operational challenges for Honeywell, our suppliers and our customers as governments and companies implement measures to slow to spread of the pandemic I keep employee save these challenges include a temporary site closures staffing shortages and ability to access customer sites for service and project Engineers and.
Nation and logistics disruptions.
The operational constraints change daily However, we've implemented rigorous business continuity processes to ensure they are proactively address and minimize to the extent possible.
So operational disruptions at cost headwinds, our until our integrated supply chain teams efforts under Thorsten leadership.
Have been able to keep us running.
After the outbreak in China, we set up a taxable operations center in January to monitor and manage global supply risk and establishes processes to identify and assist suppliers and financial distress. We continue to monitor all suppliers to ensure they remain operational and we provide support to help them reopened when they experienced temporary closures.
Today, well over 90% of our suppliers our operational.
Our logistics team has been proactively securing transportation and freight modes to ensure transportation availability amid supply and demand in balances.
As it stands today over 90% of our sites our operational globally approximately 15% of our sites are currently experiencing staffing constraints in select regions around the world, including sites in Mexico, Europe, and Asia, Pac where government mandated up to 25% to 75% reductions and staffing.
We're pleased with our progress in responding to these operational constraints and mitigating those impacts we experienced new headwinds everyday but we continue to monitor our supply chain worked closely with our suppliers and respond swiftly when new challenges arise.
Because of these actions are global operations are running with limited, but and unpredictable disruptions or interruptions and these are some of the dynamics that are contributing to our challenge on predictability of our short term financial outlook.
Now, let's turn to slide six and will discuss our segment outlook for the second quarter.
As various said previously the next few quarters are likely to be among the most unpredictable we have ever experienced and our visibility has limits under the current circumstances accordingly were suspending providing full financial guidance until the economic environment stabilizes and we can once again, good reliable and comprehensive forecasts. We believe it is important that.
Provide a level of precision, but its commensurate with our ability to forecast in the current environment and therefore, you will see a different set of inputs versus our normal guidance.
Starting with aerospace, we expect more than a 50% decrease in global Air transport flight hours and more than a 40% decrease and global business aviation flight hours in the second quarter based on industry sources, which will significantly impact our commercial aftermarket businesses.
In addition, our commercial original equipment business will be impacted by the ongoing 737 mass production delay OEM furloughs, and temporary shutdowns and lowered business jet demand due to the economic slowdown.
However, government defense budgets remain intact, and we expect continued growth in defense and space build this will be more than offset by the broader end market challenges and significant demand reduction in the commercial aerospace segment. As a result, we expect aerospace sales to be down more than 25% compared to the second quarter of 2019.
Moving to PMT, the dramatic volatility and declining oil prices related to the Opex plus dispute coupled with the cobot 19 related supply chain disruptions has created a challenging environment.
We are encouraged by the Okay, plus production could agreement and we hope for even broader action. However, we need to see a sustained increase in demand to see a more meaningful impact in the marketplace.
As we extended the past oil price volatility and sustained pressure on prices often leads to project delays and customer Capex and Opex budget cuts, which is what we're seeing today.
We expect a steep decline in refining production in the second quarter and continued weakness in gas processing the reduction of customer Capex and opex budgets will create headwinds for our products businesses and process solutions and you'll be with declines in field services equipment and catalyst shipments.
Additionally, we anticipate new projects will push to the right putting pressure on your p. licensing and engineering volumes in the near term.
As we've discussed in the last two earnings calls, we enter 2020 with a healthy backlog of global Mega projects in process solutions, and we do expect to burn those down over the next few quarters. Although we have not received any long cycle cancellations, we are expecting to orders declined significantly in the second quarter.
With advanced materials automotive plant closures will drive lower refrigerant volumes and a projected slow down and global construction will further pressure sales, however, and specialty products. We are encouraged by strong demand for healthcare packaging armor and research chemical products altogether, we expect PMT sales to be down more than 15%.
Compared to the second quarter of 2019.
And HDTV see the impact of Cobot 19, pandemic as potentially shorter term in nature and the current environment non residential projects in multiple verticals have paused and customers are deferring nonessential spending impacting the timing of long cycle building solutions projects and delaying purchases of security building management and fire products lower.
We are building occupancy and temporary disruption to site access are driving delayed timing of certain building solutions services.
However, we believe these are largely short term timing effects and we continue to see the underlying demand, particularly in fire and security products and our services where orders grew in the first quarter. So building technologies may begin to stabilize as businesses begin to reopen.
We expect HVP sales to be down more than 10% compared to the second quarter 2019.
Finally in Sps the surgeon E Commerce as government, an x. social distancing requirements has created more demand for our warehouse automation business and supports continued conversion of our robust intelligrated backlog and the second quarter, we will see growth in the major systems projects that we booked last year, our intelligrated backlog remains strong.
Up approximately 40% year over year, and we expect this business performed well for the remainder of the year.
However, the macro conditions are resulting in headwinds in our short cycle, Sps businesses, including productivity products guest sensing in retail.
Weakness in aerospace heavy equipment in automotive end markets is also resulting in headwind in the sensing and ASCII business, which will partially be offset by increased demand for sensors in medical ventilators and respiratory equipment.
Finally, we are of course seeing record level demand for respiratory masks and other personal protective equipment and we expect that demand to continue for the foreseeable future mass production at our Smithfield, Rhode Island facility has already online and our Phoenix facility is expected to come online in the second quarter.
P.P.E. orders were up triple digits in the first quarter with strength in respiratory head I piece clubs and clothing categories. Our personal protective equipment backlog is now up triple digits.
In the second in the second quarter. However, we expect the macro and short cycle headwinds to more than offset the growth and PBB and Intelligrated, we expect Sps sales to be down more than 5% compared to the second quarter of 2019.
So while our diverse portfolio is resilient the combined impact to the coated 19 pandemic and the OPEC plus dispute are meaningful across the global economy.
While we have a rigorous MLS in place to manage our operational risks the continuity of our operations as well as those of our customers and suppliers continues to change daily.
As the impacts of the health prices continue to unfold and evolve as a result, we expect a very challenging second quarter with sales expected to be down more than 15% for the company versus the prior year.
Now, let's move onto slide seven and discuss our balance sheet as liquidity.
Our strong balance sheet provides a stable foundation as well as opportunity for our company during challenging times such as these we have maintained a premium credit rating for over 25 years, which has been a long term competitive advantages for us, especially during difficult times like the downturn in 2008, and nine and again today. It reflects many years of responsible cap.
No management, good stewardship of our pension plan and an emphasis on prudent leverage and significant liquidity.
We exit 2019 in an incredibly strong position and we took additional actions during the first quarter to further bolster our financial flexibility as at the caution and he is unpredictable times.
As discussed in our outlook call. We further de risk our pension plan by increasing the planned asset allocation to 60% fixed income in the first quarter, which has proved to be prudent as our pension plan remain overfunded at the ended the quarter and requires no additional funding even with the tremendous volatility in the capital markets.
We also refinanced a billion dollar euros of February maturities with the Euro bond offering maturing in 2024 and 2032.
We have no remaining bond maturities coming due in 2020, and only 800 million bonds odd million dollars, a bond maturities coming due within the next year.
Most recently, we announced the $6 billion two year delayed draw term loan agreement, which combined with our pre existing five and a half billion dollars of undrawn revolving credit facilities brings our total undrawn sources of liquidity to 11, and a half billion dollars.
As of the ended the first quarter, we had $8.8 billion with cash and short term investments on the balance sheet and a net debt to EBITDA ratio well below one.
Altogether, we have over $20 billion of cash short term investments and undrawn sources of liquidity readily available compared to only $800 million of long term debt maturities and $3 billion to $5 billion of commercial paper coming due within the next year.
And as you can see on the slide our balance sheet and liquidity profile is significantly stronger than it was heading into 2008 2009 downturn. When we were more levered had less than $6 billion of liquidity Undrawn and our pension was severely under funded.
We will focus on preservation of liquidity during the second quarter and expect to enter the third quarter with significant capital deployment options should we have greater clarity on economic conditions.
With that I'd like to turn the call back over to areas.
Thank you, Greg, let's turn to slide eight as the Cobot 19 pandemic started to spread it immediately acted to maintain to continue our operations and keep serving our customers. These actions. In addition to hundreds diversified portfolio strong balance sheet from history of discipline and resilience uncertain times demonstrate our though the men's towards different.
We have already discuss our efforts within the supply chain and balance sheet. This morning. So let me walk you through that are two other key priorities starting with sales generation the rapidly redeployed around 1000 of ourselves to a larger her as were seeing market demand, particularly run our health care ecommerce supply chain remote factory operations.
Cyber security and PBM you offerings, we modified the sales incentive plans for 6500 sellers, ensuring our sales teams have the proper motivation to find the areas of growth in our target markets also to ensure our sales managers and sellers have the skills, they need and best practices for virtually connect with our customers develop playbooks containing.
Sales best practices and lessons learned from our China team, who are the first to implement a virtual selling techniques.
[noise], while not easy our sellers have embraced the challenge and opportunity of maintaining a high level of communication for our customers one of our HBP employees, even turn to ruminant. Its houses are like demo center for customers and used it to launch a product of 40 of our top European partners the video.
We're also in the process of launching ecommerce websites to enable our transactional customers to receive product information in place orders quickly and efficiently. For example, our research chemicals business launched a new website through enables our customers performing important lab work associated with public 19 pandemic to quickly and easily French or laboratory.
Supplies.
Our sales and demand generation actions are being reinforced by rigorous weekly review process led by me personally together with Jeff Kimball, our Chief commercial officer demand generation remains a priority even these difficult conditions, let's move extra cost control actions. Our focus is on maintaining our employee base, while also positioning the company.
For long term performance post crisis rapidly implement a series of measures to conserve cash and reduce costs, which will help mitigate the potential for more drastic actions later it will give us more flexibility the response to prolong downturn, where sudden disruptions in our end markets.
Cost reduction efforts will reduce costs by at least 1.1 billion to $1.3 billion in 2020 and will more heavily weighted in the third and fourth quarters of the year. This includes approximately $200 million of benefits from prior year reposition.
Weve eliminated or sharply reduced discretionary expenses limited hiring and canceled merit increases on a global basis for all levels of the company. Additionally, our businesses had some locations in issue that rotating scheduled reduced work weeks or eliminate or work weeks all executives appfluent polluting senior staff and the board of.
Directors have also reduced based paid this year and eliminate or substantially lower incentive payouts and 20 point.
We're also taking proactive steps to preserve jobs or manufacturing sites, including shortly or staggering work schedules to match production volumes of demand.
The expeditious completions are phase one cost plan previously described is enabling us to compete a phase two 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 to a coated 19 pandemic becomes apparent.
Finally, let's discuss how we're optimizing working capital domestic demand in the current environment with a solid governance model around cash management and working capital we executed a comprehensive brick risk assessment customers and suppliers to preserve our strong cash position.
Reviewed the policies for the highest risk and top revenue customers to make sure we have the appropriate parameters in place to protect our accounts receivable and we implement tighter exception proteinuria enhance executive leadership team review and approval. Additionally, we also set up processes to identify and that sort of high risk suppliers.
We train and mobilize over 600 procurement professionals, the context suppliers and take your financial temperature. Many suppliers have already received essential help to keep their doors open from the products and services flowing to honeywell's factories.
Having NGL supply chain process is more important than ever to means our expenses in cash investments. Therefore, weve condense, our sales inventory and operations planning process from a traditional monthly cycle to a weekly cycle. Combining this with sales leading indicators were sensing dimensions and realigning our inventory the.
And schedules faster than ever.
Together the actions, we have implemented across the company or physician Honeywell effectively managed to uncertain times. We're confident our continued execution resilience, let's turn to slide nine to discuss our repositioning plan in more detail.
[noise] you would expect from US we are accelerating plans for prudent cost reductions to ensure our cost base reflects the macro economic environment, particularly aerospace in PMT Lucy end market challenges, we have discussed this morning.
We have ample capacity to reposition the second quarter replacement for net reposition of $175 million to $275 million I reactions to shows will provide cost reduction pales into 2021 and are proactively preparing a phase two 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 and the health care space, we see opportunities across multiple businesses were increasing productions of sensors for medical ventilators, and ARSESP sensing and Io tea business, our research chemicals business is supporting scientist.
Around the World The research development and production of Coca 19 test kits therapies in the vaccines, but prioritizing and ramping production of high quality analytical products that meet their applications and we're offering expedited support services store pharmaceutical biopharmaceutical customers are exlar business to help.
Real estate faster healthcare packaging decisions for coated 19 oral solid medicine.
Already mentioned that many extra we're taking to meet increased demands for personal protective equipment, including Max eyewear and fish oils.
In both.
Building technologies and process solutions, we see strong demand for cyber security and advanced remote access and monitoring for buildings and plants as people inclusive look from remote locations.
Most of them HPQ, we have a suite of healthy building capabilities are ready to deploy for customers or focused on the health well being of their buildings occupancy and Sps the strong demand for warehouse automation and supply chain analytics, driven by surging ecommerce and finally in aerospace is passengers return to.
Well flying behaviors, we increased focus on passenger health and safety, which dovetails nicely our leadership in environmental control systems for aircraft.
We're also offering creative solutions to airlines airports to protect passengers and to restore confidence in Florida.
So all those macro environment is creating challenges. It is also creating new customer needs that were well equipped with equipped to address with that let's wrap up on slide 11.
This quarter represents the first we will be some challenging times ahead.
We exceeded our segment profit segment margin and earnings commitment.
EPS growth of 15% despite the substantial challenges we faced remain cautious because the magnitude and final impact or covenant that 19 pandemic and Opex plus dispute is unknown as a result was significant uncertainty around commercial aerospace oil and gas in short cycle demand, which we expect will meaningfully.
At the second quarter. However, you have a diversified portfolio and significant balance sheet strength to provide resilience in these uncertain times reacted quickly and prudently to ensure the health and safety of or employees continuing to serve our customers and protecting our shareholders response to cope with 19 pandemic we took just.
They sort of actions to reduce our cost base optimize working capital from further bolster our strong balance sheet liquidity.
Continue actively monitor to cope with 90 impact on our operations. We're confident in car builds you manage through the market volatility.
We're playing a critical role and keeping medical professional safe through expanded production of 95 masks. Other PT mean sensor for medical equipment, ventilators and new production of hand sanitizer.
Despite the challenges challenging times, we remain committed their strategic initiatives in the Honeywell connected enterprise supply chain transformation and Honeywell digital.
We continue investing in our future breakthrough initiatives, new product introductions next generation innovation across our entire portfolio I am proud of everyone. At Honeywell was working hard to adapt and deliver this challenging environment I am confident we will emerge from this crisis, even stronger than ever that mark let.
Moved acuity.
Thank you Drs Darice, Greg and Thorsten are now available to answer your questions Savannah. Please open the line fit.
At this time.
On your touched.
If any.
Sorry.
Yes.
Your question.
Our first question.
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Please go ahead.
Hi, guys good morning.
When do you want it.
So just on kind of the second quarter color I appreciate that.
You guys.
Gross margin of around you know kind of mid thirtys or whatever it is should we expect because of the significant.
Drop off here that and little bit more of a back half waiting on these tommy's cost saves.
You deck romantic kind of a little bit more than that on a headline kind of segment profit basis in into Q, just trying to kind of get an idea of the of the Russell.
Leveraging your kind of expecting in the business is there anything in the mix you know that wouldn't move that around just just curious on that front.
And then it would you expect it that is kind of the low point of the year given that you know this they should kind of all this economic stuff should begin to kind of feel a bit and then the cost saves come in.
Yes, Steve a couple of that I mean.
In terms of Q2, Yeah, I mean, I think we expect a worse.
Well metals for the year in Q2, I mean, obviously, we're in middle of some cost actions, we're doing that.
We expect Q2 to be the most that process from a GDP perspective or sort of underlying assumptions here nice it I emphasized the word assumptions.
That GDP Q2 will be the worst improved in Q3 and improved in Q4. So obviously our margins will kind of follow that trend Q2 will be the bottom we expect some level of improvement in Q3 and further in Q4, that's sort of the overall trends, we can't give a level of precision on those because obviously some of the cost actions timing of that.
That's still a little bit I'm, not totally within our control and.
What we're we're taking aggressive actions not just with the phase one that was discussed or we're also looking in phase two which is going to be deployed.
Well finalized into plausible mimic 60 days for sure.
Got it so so I guess.
You're you're not really kind of commenting on something you could hold around that maybe a little bit higher than that gross margin rate just kind of help for enough for that freight train that for us.
Well I mean, clearly our Q2 Deco metals will be worse, I mean that that's you know and then they'll start improving for that I don't know that I can give you any more procedures than that I mean, that's okay, otherwise and since we provided guidance.
Right.
And then just on the buyback.
Hi, guys.
Talked about kind of completing your 2020 program, but obviously your balance sheet is in good shape I mean, I don't know where you bought back the stock this quarter.
But are you do you have kind of capacity in are you willing that as you get better visibility on the second half that you could be opportunistic.
In the event.
Things pull back again.
Yeah, I mean, obviously we have.
The liquidity and cash is not a concern for us I mean, given our position balance sheet. The term loan telecom so I mean, we.
We have a lot of optionality to second half I mean, I wouldn't expect much in the second quarter. I mean, I think this is the time to kind of assess the situation and see what's happening see what's going on in the medical are leading us to markets are turning around so I wouldn't expect much here in the Q2 timeframe, but [noise].
We have a lot of reps optionality in the second half that potentially I'll get back in the market.
But we'll see I think that.
We're going to kind of hold a cap on to break here in Q2, you see what happens.
Implement our both our growth plans and I emphasized and I think with or some opportunities even this crisis.
Obviously also execute.
Cost plans as well because that's what.
That's what we have to do in this environment is Youre reality and then we'll we look at capital allocation as it relates to buybacks and so long as we move into Q3 and beyond.
Got it will start one way to go about this for the year are the cost saves enough to kind of hold the decremental would in and around your gross margin.
Is that kind of what these what kind of cost saves are going to do.
Yeah, I think it's too early to tell Steve because we still haven't fully quantified the phase two impact and we don't want we don't know what the revenue.
Reductions going to be yeah, frankly, the so so the problem would give me a numbers here is that we're operating with two or three different variables, all of which which could move dramatically.
Yeah sure you know many get down to a gas and you know as Honeywell, We don't guess I mean, when we say something we do it which was evidenced by our Q1 delivery or segment profit.
[laughter] appreciate it I had to try thanks a lot.
Yeah. Thanks.
Our next question.
Right.
What.
Hi, guys warrants that werent et cetera.
Everybody surviving okay.
I hear your voice or even in that area.
Yeah, right everybody Anwar.
Hi, Good I guess, just a little bit a follow up on the balance sheet question from.
Steve I mean, you're in a great position then.
Baxter is one element, but M&A as and others is.
Is there a and that that pipeline you can continue to work as it just to impossible to even think about doing deals right now or.
Yeah, that's something maybe current for later in the or just some thoughts on that.
Well I mean as you can imagine that a lot of the M&A activity is kind of a little bit of on pause you know I think you know as being a body or that's probably the thing yeah, because I don't want it necessarily be buying off for 2019 comps I don't forget that makes a lot of phones.
But given our balance sheet, which is in great position.
Yeah, I think that this is an area, which could be an opportunity to second half or I think the valuation should and will change and that's pretty obvious but whatever you have a sudden change in economic conditions like we do now what's really slipped I mean literally flip from the beginning of March the into March were sitting a dramatic.
Position it takes a little bit of time reality for sellers just thinking in terms of with the valuation should be I mean, everybody still wants to value their business, all but 2019 figures and that's just isn't realistic anymore kind of have to look forward rather look backward.
Yeah, I couldn't agree more.
Just a point of clarification here you know.
You've got this 1.1 to 1.3 billion dollar cost out and it looks like it's more of kind of a shorter term stuff and then you have this.
This 375 to 500 million repositioning.
Charges should we think about that was just kind of.
Short short time, and then the repositioning is the structural stop is there any way to reconcile as part of that.
That's a 1.1 to 1.3.
Yeah, Let me give you a little color on that which is dumped into red is mostly short term think about that at one one to one 330% to 40% of it is roughly short term.
But the rest of it is permanent so that's it's not it's not all just short term stuff and I think you should think of up to phase two actions.
Not all per minute, but the majority permanent.
Super helpful. Okay. Good luck guys. Thank you.
Thank you.
Our next question will come from Andrew.
I got good morning.
Good morning, Andrew.
Just a just a question on aerospace.
25% decline in second quarter, I think quite a bit better than a lot of the peers.
That have got more more than just Andrew more than 25%. It's not just me nessler, yeah, it's not a 25, it's more of that.
More than 25%, so I'm just trying to figure out saying your peer set sort of been guide anymore.
Third is 40 to 50 is.
So just any color between the pieces within aerospace.
Tapping into the second quarter and I know you have provided some and also how does it work out sequentially through the here in second quarter, the bottom or is it going to get worse.
So you know what you're seeing for US of course is that we've got a 40% roughly of our aerospace businesses defense and space and that's continuing to grow it grew 7% in the first quarter and and we see a nice growth trajectory in Q2 as well and it really is in the commercial in the commercial side of the business that we're going to see.
See.
A substantial acceleration of Oh that have that growth rate coming down so and again relative to the back half of the year as Gary is described we expect the second quarter to be the worst is going to get but to be honest, we don't really know and that's again part of the reason why we're not giving you a full year guidance, we're telling you.
The best we can see here out in the in the very short term 90 days and all of the aspects of what happens with the health crisis when people go back and fly again.
That is not something that is very clear to anyone including us.
Yeah, and faster I bet, I mean, all off our free cash flow.
Hey, you.
You know any big one time items, a the cap cash flow down year over year and ability to release working capital down. The line. Thank you very much if any it was mostly it was mostly receivables our collections were down year on year again, as particularly as you got down to the last few weeks of March they slowed dramatically.
You can imagine there was some places where people weren't there to actually be able to execute payments.
You know and other customers are beginning to get a little bit skittish with with their payments as well. So that's really the major story for the quarter and we absolutely are going to do all the things Dairies described on working capital, including Readjusting, our supply plans to these new realities from.
From the standpoint of our inventory plan and that's going on as we speak.
Thank you.
Thanks Sandra.
Next we'll hear from Julian Mitchell.
Hi, good morning, maybe.
Maybe just the first good morning, maybe just the first question around the ESP segment. So I think it's the one segments, where it looks like youre guiding for a narrow a decline perhaps in the second quarter year on year. This is what was seen in the first quarter.
Just wanted to check that's correct and then within that.
Understood the integrated suite in fact, I go through the minus the cost year over year in Q2, maybe help us understand your assumptions about the rest of S.P.S. incentives of safety and the rest of productivity solutions I'm aware of what you're seeing already April does tally up with that.
Down over 5% would guide.
Yeah, I mean, you know in STS I mean, you think things should think about a couple of businesses.
You know accelerating for the couple of next couple of quarters, one being Intelligrated I mean, we near our backlog there's tremendous.
And continues to grow so so that's a.
We expect to see growth in calibrated, obviously that demand on E. Commerce is going to become more acute not less acute and we have in orders positions and our backlog and even our front log that looks extraordinarily appealing. So so that's a business.
Obviously, we are captured a tremendous amount of business NPP any that's a and at that business is going to accelerate more or less every single month as we move forward through the year. So we expect to see growth.
And then.
Modest to the modest decline than some of the other businesses you know, although sensing and Aiotv will see growth in some of that health care oriented sensors or other segments and its exposed to like aerospace better obviously going to be decline so that's going to be.
Our productivity products business.
It kind of low single digit kind of decline this kind of what we're expecting some of those segments are gonna do pretty well transportation logistics and health care retail is not so that's kind of how we see that one so overall I mean, we do expect S.P.S. for the year.
To be are healthier strongest SPG and I think it's you know we could even see growth in the SPG even this year.
Very helpful. Thank you and my second question, maybe just a broader one I'm not so much Q2, but a broader one around the PMT segment that segment managed to ride the 15 16 energy downturn remarkably well.
I just wondered if you sold more pressure maybe in this downturn this is that well.
Because of the aspects around the gasoline consumption being down in different markets.
Maybe low pressure as wedding process solutions because of extra admitted downstream capex cuts.
And how much of the fixed cost out like you something from Thorsten based on that.
Kevin can help PMT offset this disappear revenue neutral.
Yeah, well, what's it you know t. and he is going to be challenge for the segments that are oil and gas oriented and obviously, we have exposure and will fuel p. and hps.
You know I remember the 15 16, because I ran that business at that time wasn't that much fun.
But you know I do worry about a couple of factors here. The first one is there's just no demand I mean, if you think about you know what comes out to refineries jet fuels. That's gasoline so on the world needs to go back to work and start functioning again because.
No one is flying very few countries in the world our reopening so there's very little gasoline and fuel consumption.
Price of oil is highly depressed if you look at if I remember correctly, the lowest price of oil that I got I seem to recall back into 15 16 timeframe was about 27 28 Bucks a barrel were substantially south of that so it's going to be a challenging time for PMT and we're going to be taking some wordy art.
Taking a look if you take even more cost reductions to along with the demand and you know you even heard some recent announcements as early as today are out with Exxon and Chevron further coming back haptics. So you know we have two we have to adjust to the reality of today.
The focus on a lot of our services on a lot of our digital business.
To drive growth and this segments that are still going because we do participate in the pharma segment, we have some play in food and beverage pharmaceuticals, and so on so it's not all doom and gloom, we clearly it's going to be a challenge time for PMT for a portion of that business smoking type business and we have to a line.
Reality and adjust our cost base.
To what we anticipate will be.
Great. Thank you.
Thank you.
Next we'll hear from Jefferies.
Thanks.
Hey, good morning, everyone. Just a couple of quick ones from me if I could.
First just back on the on the cost reduction actions.
The 375 to 500 million.
Structuring asking the same figure that you use back in January.
Now we're looking at this additional 1.1 to 1.3 billion of cost of which 60% to 70% is structural so it would seem to me that that does require a heavier lift from actual restructuring spend so could you just kind of line that up for me and then provide.
Little bit more color on what the phase two might actually be.
Sure. So just a couple of things number one the you know the 1.1 to 1.3 about 200 million of that as is carryover restructuring from the prior year. So it's not a 100% incremental and you're right I mean, we guided a pretty sizable repositioning capacity as we always do because we're always building pipeline.
Around repositioning that's been one of the things that continue to feed our productivity delivery over many many years and so what you're seeing here as we just accelerated a substantial amount of that into the.
The first the first quarter ended the second quarter mainly to drive.
Direct and indirect cost reductions to combat. This situation. So that capacity has always been there to deal with the pipeline as it gets created on we've we've just now deployed it or about to deploy it into some very specific things around direct and indirect cost reductions.
In the near term.
And then maybe just one other thing to add to that as you know a portion of that cost saving is also in indirect costs. So as we think about 2021, obviously as you reduce your indirect cost that doesn't require much if any restructuring.
So we don't anticipate going back to 2019 indirect spending levels and 2021 and that that's probably not realistic. So part of that savings that will see is going to lives grew in 2021.
It's going to be someplace between what we're going to come back in 2020 and.
What it was in 2019, so part of that is going to be material.
And when you think about this phase two is this thing.
You had.
Really already on the show Thorsten was working on.
So just to.
A significant acceleration or you.
But what kind of a new blogger reevaluation of just your cost structure and the current situation.
No I mean, you know look we want it to do a back all the way in the March timeframe is react quickly and decisively because the world really change the month of March So our phase one plan with things that we could do a very quickly very decisively some moving.
Some restructuring.
You know some of the reduced work weeks down today reductions due to all those kinds of things the phase two stuff is.
Because we don't think that things like aerospace are going to return to normal next year <unk>. So I don't know fix a two year window three year window, you've heard others are pine on that but I don't think that that's a short term so particularly in aerospace in PMT, we're going to have to align our cost base to their react.
So what we're likely to experience in 2021, and hopefully not beyond but maybe beyond so it's a phase two is out say a further realization of what the markets might look like in the future in our realignment cost base more of a permanent realignment to adjust to.
Did that reality.
That's just the mother really quick follow up just on Aero you gave us the flight hour numbers I mean, typically we think as some kind of multiplier to that.
Can you maybe give us a little color I can just what the last six weeks it looked like and aftermarket I would assume it's tracking down more than those flight hours declines, but hard to tell obviously from my seat.
Yeah, I would say.
Jeff from a from an aftermarket perspective.
Definitely accelerated and a in the first and I would say the last six weeks for sure I mean at the end of March in particular.
You know started to see some pretty substantial slowdown so when we think about it in the second quarter.
We're going to have we're going to have some substantial reductions.
Probably greater than the flight hour reductions that that I mentioned earlier in the discussions so you know probably greater than 50%.
Types of of aftermarket down and and engage CR segment in particular.
Right after the color plus the luck.
Next we'll hear from.
[noise] claims good morning can look when they're ready for that the should the Carla.
I think this is a question Greg, but but this is that the strategic as well, but you know obviously you've got to.
And of course, it's too early to stress testing those airline.
Commercial aero customers are fine or et cetera, So how do you thinking about.
I could go see credit risk and also as pricing are you seeing.
You can say concessions on pricing a little quest for pricing concessions.
Hi deal with that thanks.
Yeah, Yeah. So I can tell you that we are an active dialogue with our customer base in particularly in those two segments. As you mentioned because they are they are hurdle. So so their customers are coming back to us and and talking with us about ways in which we can work together to ensure that they're able to navigate through this environment.
And so were you know we're going through what you would expect a disciplined company do we're doing.
Not only direct dialogue with some of those larger customers, but we're also doing a substantially deeper credit risk assessment on our whole portfolio.
And you know in cases, where we need to do things like.
Pay before shipments or require cash before orders are taken were doing it on but we got to you know that's a that's a nuanced.
Strategy, because you've got to be.
Consider if that consideration about the strategic customers that you're dealing with so.
That's a it's an ongoing activity I will tell you that it's got the senior most leadership attention. These are not decisions that are being taken down and low levels of the organization each of the SPG, President and CFO shows and dairy some myself or having direct dialogue on some of these larger a.
In particular, so it's going to be a challenge theres no doubt about it I don't think we've seen.
The impact in the markets yet of of what could happen from.
Solvency risk standpoint, and I think that's that's yet to play out but were you know we're taking appropriate actions as you would expect us to go do to manage through that.
Oh, sorry, and then the following for that.
Hello can get pulled that any guidance, but some of the find on free cash flow and obviously the biggest them clinically tested with anything that's anything it's like some of the that you're putting on with capital that's new initiatives to maybe dry free cash flow conversion highest over the coming this year.
Yeah, I mean did that the two biggest areas, we're focusing on as you can imagine as inventory and receivables. So we've got full court press on with our receivables teams in the and the Sbgs as I mentioned to make sure that our collections activities a robust.
And then thorsten and his team as dairies highlighted have instituted a weekly executive sign up all the way to the Honeywell level and.
That's going to be a big focus for us and I'll, let maybe thorsten say few words about what we're doing it yeah, I mean to them main focus areas to make sure that we follow demand very very closely and be very reactive and fast and all actions I think that's the that's the main change that via the instituted over the last couple of weeks.
One other thing Nigel though I will tell you, though that we are not planning on cutting growth capex.
We're in a strong cash position.
Those projects are.
High return projects I'm, not I'm not planning on sacrificing the future just to cut back on the Capex thing.
I, that's probably something that we're going to continue upon.
Okay. That's okay. Good luck.
Thank you. Thank you.
Next we'll hear from.
<unk>.
<unk>.
Right. Thank you good morning, everyone.
What did you know when it.
I appreciate hearing all the specifics on the honeywell's cold that responses.
Maybe just to pick up right, where you left off Gary. So if you could you said you wouldn't be cut growth capex, but will there be any cuts to capex on the Nate maybe maintenance Capex and could you size is that for us. Please.
Yeah, I mean, there might be because obviously, we're not operating our ER to silver use as much as we go through some of them are operating it reduce work hours. So obviously to align with some of the volumes that were seeing obviously, the maintenance bikes as somebody a bit smaller somewhat there might be some.
Trends around some of the maintenance budgets just be that's totally aligned to production but.
So they'll probably some modest reductions in capex, but.
We are not planning on reducing investments and future growth for the future Npis project and the idea 95 masks is a good example, I mean, you can imagine we're putting capital to work right now.
To go do that so so so again, absolutely going back and scrubbing, our capital plan and making the appropriate adjustments, but to their says point demand growth.
Is going to continue to be funded.
That's real helpful. And then just last one for me if we could talk a bit about potential secular changes it might be a bit too early but there's been lots of discussion about re shoring and specifically shortening supply chains and some other sensitivities there you've obviously responded with the increase.
And on the five mass.
But since we have thorsten here. If we can you hear about how Honeywell is responding do you think re shoring of supply chains are is something that will be a meaningful driver and how is unlocking position. Thanks.
Yeah, I think it is a little bit too early to tell at this juncture. So what will do but you know you have to remember that our strategy always has been is kind of a regional for regional or local for local production change I mean, if anything I like to accelerate that I'd like to be is really local for local I mean were mostly there and I think thats still very much to write strategy.
You got to public producing their countries in which you operate in leveraging those supply chains and operate locally so I'm not sure. That's a dramatic change from where we have been if anything it's probably an acceleration of.
The strategy that we already have.
Great. Thank you and best of luck to everyone.
Thank you.
Next we'll hear from Peter.
Yeah. Thanks, Thanks, Good morning parents, Greg Mark.
Dairy and thank you for everything you're doing that regarding all the math.
The stuff that's a great I've, just maybe a bit a question on on aerospace just to circle back or more of a higher higher level question, but just you know you we installed base of equipment. Given aftermarket is so important always been kind of representative of kind of the global fleet in terms of installed base, how you're thinking about like after market.
On this and you think there's going to be some structural impediment because of the heavy retirements, probably an unfair question, but just trying to get Michelle.
Yeah, well I think you know a lot of that depends upon how quickly we think the air traffic will return and you know theres a little bit of a trade off world Airlines want to dispose with cash to acquire new aircraft or they want to operate the current fleet to maintain cash flexibility and retain those cash so.
And then also the timing matters too. So you know is that something we're thinking a lot sure absolutely.
Exactly though there's kind of two different theories one three years.
You retire more aircraft in bringing new ones, okay, because of the efficiencies and so on that makes sense.
But in other areas are paid may not want to necessarily as an airline pipe part with a lot of cash it further spend and right now when you're in cash distrust state. So, we'll see which way. It goes I think the most important thing to remember and.
We're spending all our time and energy is providing solutions for airlines, even airports in terms of how we can regain passenger confidence to fly again.
When people start says you are sitting at home and will probably start opening up the economies. The single most important thing that can happen for this industry is people gaining a confidence to fly again and that's that's really what we're spending their time.
Appreciate the detail thanks again.
Thank you.
Next we'll hear from Josh.
Hi, good morning, though.
Hey, just learning first question.
Yes can you hear me.
Yes.
Can you hear me.
All right yes.
Correct and impact on a customer shutdowns and kind of is an ability to do service or get on site. What some folks I appreciate that we're still kinda operating in some of these lease bands, but relative to that down yeah greater than 15% how much of that is just kind of an inability to.
To get the worked on whether it's in a building refinery on et cetera.
Yes, Jeff it's actually it's really hard to parse it and be able to save for sure. I mean, we think we probably lost two to three points of growth in the in the first quarter due to some of these issues and and to be honest, it's not like I know, what they're going to be.
Until people movement.
Becomes freer, we're going to struggle with ER with service and project execution in the solutions businesses, while while social distancing norms become clear in the factories, you know thats going to have an influence over capacity and attendance and so on but it's.
It's near impossible for us to put a number on that which is.
Partly why we shared the.
Greater than you know down greater than this type of a number as opposed to some level precision because it's changing almost daily and it's different in every region of the country, it's going to be different in certain states and then you've got us on so I wish I could provide you something more precise but but frankly, that's part of the reason why are.
Level of visibility.
Precluding us from giving more.
Precise guidance.
Understood and then just a follow up on just price question on the aftermarket versus flight hours.
If I think about past downturns in air traffic.
He cannibalization risk that that comes out the other side in kind of delays that recovery in your business relative to flight hours or do you tend to move in lock step.
In both directions, I know you know everyone's product portfolio kind of lends itself to different.
Different exposures on that.
Well I think there's just a lead lag effect right I mean, I think there is clearly a correlation on the aftermarket to the flight hours flown both on the BG and air transport side, there's probably a little bit of a delay in terms of a recurrence and growth in flight hours and that being exhibited in the aftermarket consumption, but other than that I think that.
Relations generally there and as you see flight hours return or whether its.
In the business segment or Air Transport, you should start to see aftermarket return probably some lighting products. Yeah. I think as you described earlier derisked the bigger vary but will be the new plain old plane situation that people are buying lots of new planes, that's going to have a different effect. If there you know.
Running the older equipment and not taking new deliveries, that's kinda, that's going into effect that as well so.
These are yeah. These are some of the variables that we'll have to see how they play out here over the coming quarters.
Okay, that's what they tell so that's.
So that I will take one more question. Please.
Well take our final question I'm, Joe Ritchie.
Yes.
You know checked Joe.
Let's move onto the next I'm pleased to that.
And then we will hear from.
Hi.
With Jefferies. Please go ahead.
Hi, good morning, everyone and thanks for the time various on H.P.T., a large portion is exposed to commercial construction. What are you hearing from your customers in terms of severance persist products. How are they do wrong. How do you think about a recovery I think you noted you think a short term demand issue do you think we see any sort of structural change for commercial demand.
No I mean I'd to answer your second question for so I don't see any structural change for commercial demand I mean.
I actually think there's an opportunity of our HBT business, because what CEO of any commercial good building isn't going to want to provide a safer cleaner environment for that for his or her employees.
So I think that that you know in terms of overall commercial construction I don't seem structural change you know short term as all of it tougher to predict Theres you as you can you imagine throughout the world you have different rules and regulations. Some some regions. Some state some countries are allowing construction to keep going and others have put more restriction.
And this novel, Oregon, Most a world kind of comes back we're going to have a little bit better visibility and actually access both to service. Some of these buildings as well as to probably products and solutions. So that's a bit of a mixed story, but it's more or less relying too.
The world kind of returning to some level normalcy and ER.
And if it really varies throughout the world in terms of them. Some places construction is moving others saw its in a false state.
And then on I guess my second question, maybe can you talk about what set up a couple of you're starting to see eight on Asia and China by segment, how quickly or some of these business that's coming back.
Yeah, I you know I think it's a little bit of a mixed story, maybe I'll use China. As an example surged you can imagine in China January therapy were extraordinary slow that the business was there wasn't really much of anything happening modules better much we saw a bounce back which was which was encouraging but it was then.
No not horrible about soft I mean think about negative single digit kinda business. So I.
I think the assumption that China is back to normal at least.
Based only on April data point may not be.
I may not be correct. You know aviation is just starting to pick up in China and this is a little bit of what I talked about before which is.
We have to get the passenger comfortable to fly again, because just because you lift some restrictions that doesn't mean that people are going to jump on airplanes. The second day. After that so there's got to be real level focus and effort to make sure. The you know they come back and that's that's what we're working with a lot of our airport in airline customers on some of the solutions.
There's some really good ideas to help them they do that.
Okay, great. Thanks for the color.
Right.
And that concludes today's question and answer session. At this time I'd like to turn the conference back to Mr. Gary.
Yes.
I want to thank our shareholders for their continued support of Honeywell.
These are challenging and that's uncertain times for all and remain focused on continuing to perform for our share owners are customers and employees, while we cannot predict how the cobot 19 pandemic will ultimately impact our business in the global economy, we are well positioned to weather the storm of a balanced portfolio track record of execution and strong balance sheet.
We've managed through uncertain times before we'll do so again, the 2020 will be challenging I continue to be excited about the future for Honeywell, our operational rigor will serve us well given the near term economic outlook. Thank you all for listening to stay safe and healthy.
Thank you.
Today's teleconference. Please disconnect your lines at this time.
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