Honeywell to Take Massive Writeoff, Report Loss for ’86
Honeywell’s massive restructuring, which includes shedding its computer operations, will cost it dearly this year. The Minneapolis-based company said Wednesday that it will take a $575-million hit against fourth-quarter earnings and report its first-ever year-end loss, amounting to about $380 million.
However, said Edson W. Spencer, Honeywell’s chairman and chief executive, the company expects to be back in the black next year and to improve profits thereafter. Spencer estimated that the company’s 1987 earnings will be $5 a share.
“We are at the end of a major strategic refocusing of our businesses,” he said. “The benefits of this effort . . . will significantly enhance growth and profitability for Honeywell in the years ahead.”
No Estimate on Quarterly Loss
The company did not disclose estimates of its fourth-quarter loss.
For 1986, the company expects its revenue from continuing operations to total $5.5 billion. That excludes its information systems unit, which in 1985 contributed sales of $1.95 billion.
Earlier this month, Honeywell said it was selling 57.5% of the computer-making division to French-based Bull and Japanese electronics giant NEC. The $500 million it will receive from that sale will go toward its pending $1.02-billion purchase of Sperry Aerospace Group from Unisys.
Of the $575 million in fourth-quarter charges, $400 million is related to the sale of the information systems division. In part, Honeywell discounted the selling price $250 million below the unit’s estimated net book value.
The remaining $175 million in charges against fourth-quarter earnings is attributed to its other restructuring costs. In September, the company said it would eliminate 4,000 jobs by the end of the year (including about 800 in the computer division), consolidate some operations and terminate several ventures. Additionally, it announced a $132-million securities repurchase program.
The restructuring was designed to concentrate Honeywell’s efforts in its aerospace, defense electronics and automation controls businesses. Spencer said that strategy means that “Honeywell moves into 1987 a stronger, leaner competitor.”
But he also acknowledged that next year’s profit improvements would stem primarily from cost-savings associated with the restructuring and that the company must improve profit margins and cash flow.
The company predicted that its 1987 revenue would be $6.5 billion, including more than $700 million from Sperry Aerospace. That means it expects only a modest $300 million, or 5%, growth in revenue from other continuing operations.
