Filed by General Electric Company
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Honeywell International Inc.
Commission File No.: 333-49710
[General Electric Press Release dated December 11, 2000]
GE on Track to Deliver Record Year; Well Positioned for Uncertain Economy
NEW YORK, Dec. 11 /PRNewswire/ -- GE remains on target to deliver earnings of
about $12.7 billion and earnings per share of $1.27 in 2000, both up about 19%
over 1999 and in-line with analysts' consensus estimates, GE Chairman and CEO
John F. Welch told analysts in a meeting here tonight.
Mr. Welch also said that the company expected to report about $130 billion in
revenues, up 17% from last year, and an operating margin rate of about 18.5%. He
noted that the company was on track to report more than $14 billion of free cash
flow, up more than 20% over 1999, and an increase in return on total capital by
150 basis points to nearly 27%.
"We're on pace to conclude another year of record results," Mr. Welch said.
Final results are expected to be reported in mid-January.
Mr. Welch said that GE is comfortable with analysts' earnings per share
estimates of around $1.50 in 2001, in a reasonable economy and excluding the
impact of the Honeywell acquisition. Mr. Welch also discussed events in the
fourth quarter 2000 that have led to some economic uncertainty. He also noted
that even in a moderate recession GE would expect to grow earnings per share
double-digit, in part due to the strength of its longer-cycle businesses and the
resilience of its business model. "The robustness of the GE model really shines
during slower parts of the business cycle -- our global diversity, service
growth, quality efforts and e-Business transformation have reduced GE's
sensitivity to the business cycle," Mr. Welch said.
Mr. Welch also reviewed the significant opportunities the acquisition of
Honeywell provides GE shareowners and customers. The strong technology base at
Honeywell and its attractive product and service positions are complementary to
four of GE's businesses -- Aircraft Engines, Industrial Systems, Plastics and
Power Systems. As Honeywell announced, its fourth quarter results will fall
below Honeywell analyst expectations. However, it appears from GE's preliminary
integration planning efforts that the long-term opportunities for synergies
between the two companies could be more than 50% higher than earlier
expectations -- approaching $2.5 billion annually when the integration is
complete.
Mr. Welch stated that the companies are in the process of seeking regulatory and
Honeywell shareholder approvals and hope to close the transaction in the first
quarter next year. Following completion of the transaction, GE expects to
recognize a pre-tax charge of about $4 billion for the cost of actions relating
to the transaction and designed to improve the combined performance of the
businesses. Mr. Welch confirmed the transaction should increase GE's ongoing
earnings by at least 10 cents in the first full year of combined operations.
This document includes certain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements are
based on management's current expectations and are subject to uncertainty and
changes in circumstances. Actual results may differ materially from these
expectations due to changes in global economic, business, competitive, market
and regulatory factors, or failure of the Honeywell transaction to be completed
for any reason. More detailed information about those factors is contained in
GE's filings with the Securities and Exchange Commission.
General Electric and Honeywell filed a proxy statement/prospectus and other
relevant documents concerning the proposed merger transaction with the SEC on
December 4, 2000. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND
ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT
INFORMATION ON THE PROPOSED TRANSACTION. You may obtain the documents free of
charge at the website maintained by the SEC at http://www.sec.gov. In addition,
you may obtain documents filed with the SEC by General Electric free of charge
by requesting them in writing from General Electric Company, 3135 Easton
Turnpike, Fairfield, CT 06431 Attention: INVESTOR RELATIONS, or by telephone at
203-373-2211.
* * *
[Slides relating to Honeywell transaction presented by General Electric on
December 11, 2000]
[SLIDE]
Legal Statements
- --------------------------------------------------------------------------------
o This presentation includes certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may differ
materially from these expectations due to changes in global economic,
business, competitive, market and regulatory factors, or failure of the
Honeywell transaction to be completed for any reason. More detailed
information about those factors is contained in GE's filings with the
Securities and Exchange Commission.
o General Electric and Honeywell filed a proxy statement/prospectus and other
relevant documents concerning the proposed merger transaction with the SEC on
December 4, 2000. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS
AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY CONTAIN
IMPORTANT INFORMATION ON THE PROPOSED TRANSACTION. You may obtain the
documents free of charge at the website maintained by the SEC at www.sec.gov.
In addition, you may obtain documents filed with the SEC by General Electric
free of charge by requesting them in writing from General Electric Company,
3135 Easton Turnpike, Fairfield, CT 06431 Attention: INVESTOR RELATIONS, or
by telephone at (203) 373-2211.
[SLIDE]
Honeywell/
Financials
[SLIDE]
Honeywell RCA Comparison
- --------------------------------------------------------------------------------
% of Sales
RCA Honeywell
o Consumer Non-Strategic o Truck Brakes
Electronics o Government Services
o Records o Advanced Circuits, etc.
o Carpets
o Semiconductor
o Home & Building
o Nylon
o Industrial Services
GE Toolkit o Engines & Srvcs.
o APUs Avionics
o Aerospace o Industrial Control
o Sensors
Jewels o Specialty Chemicals
o Flourine Chemicals
o NBC o Turbochargers
% of GE Sales 32% 18%
% Market Value 19 8
% Earnings 14 16
IRR >30 RCA+
- --------------------------------------------------------------------------------
o Honeywell Is Easily Digestible and Modest in Size Relative to GE
o Integration Easier than RCA -- Similar Businesses - Easy Culturally
o Purchase 16% of Earnings for 8% of Value -- Enormous Opportunity
- --------------------------------------------------------------------------------
[SLIDE]
Honeywell
- --------------------------------------------------------------------------------
Aerospace Segment
Sales/OM% Applying GE Initiatives
$10B/~20%
Engines & Systems
o Rationalize Facilities - Common Mfg. & Service
o Engines ($) 1.9B Processes ... Expect $400MM of Benefits
o APUs .8B o Adopt GE Service Growth Culture to Improve $5B
o Accessories 1.3B Service Business
o Heat/Cooling .9B
-----
o 15-20% $5.0B
- -----------------------
Electronic Systems o Low Cost Engineering (3000 Software Engineers)
$3.9B/~20%
- -----------------------
Landing Systems
$.4B/>25%
- -----------------------
Aerospace Services
o Part Distrib. o Rationalize Parts Distribution with GE's Shared
o Gov't. Services Services Operation
$1.1B/~10%
- --------------------------------------------------------------------------------
Great Products ... Lots of Cost out Opportunities ... No Problem Areas
- --------------------------------------------------------------------------------
[SLIDE]
Honeywell
- --------------------------------------------------------------------------------
Automation & Control Segment
Sales/OM% Applying GE Initiatives
$7.4B/10%
Industrial Control o Process Products Complement GE's Factory
$1.6B/~10% Automation Products
- -----------------------
Industrial Sensors $.8B o Enhance Service Offering
/~20%
- -----------------------
o Increase Focus on 100MM Home Installed Base
Home & Building Using Honeywell's Brand
$1.5B/15% o Move Mfg. to Low Cost Countries (GEIS Components
80% Low Cost Countries vs. 4% for Honeywell)
Will Save over $100MM
- -----------------------
Home & Building o Restructure People Intensive Service Business
Services o Platform for Service/Installation of New GE
$1.9B/~10% Critical Power Products
- -----------------------
Security &
Fire Controls o Integrate Old Pittway Acquisitions to Drive Out
$1.7B/<10% Base Costs
- --------------------------------------------------------------------------------
Strong Product/Technology Position Supplemented by GE Operating System
- --------------------------------------------------------------------------------
[SLIDE]
Honeywell
- --------------------------------------------------------------------------------
Performance Materials Segment
Sales/OM% Applying GE Initiatives
$4.0B/<10%
Fluorine/Wafer o Strong Free Standing Businesses
Fab Materials - Invest for Growth
$1.0B/~20% - Overhead Efficiencies
- -----------------------
Chemical Specialties o Integrate with GE Plastics Operation & Global
& Polymer Additives Distribution
$.5B/>20%
- -----------------------
o Migrate Fiber to Resin Production & Utilize GE
Nylon Plastics Global Distribution
$1.2B/~B/E OM o Advanced Technology Products for High Growth
Market
- -----------------------
Advanced Circuits/
Polyester Fibers o Restructure & Apply GE Initiatives
$1.1B/<10%
- -----------------------
Pharma Chemicals,
Industrial Wax, o Restructure & Apply GE Initiatives
Roofing Tar
$.3B/OM Losses
- --------------------------------------------------------------------------------
o Strong Freestanding Materials Businesses
o Integration with GE Plastics a Big Upside
- --------------------------------------------------------------------------------
[SLIDE]
Honeywell
- --------------------------------------------------------------------------------
Power & Transportation Segment
Sales/OM% Applying GE Initiatives
$3.6B/~8%
Turbochargers o Fix Capacity Constraint (Six Sigma) - Enhance
$1.2B/~15% Supplier Base
o Bring GE Service Focus - Parts <10% Sales
- -----------------------
Consumer o Great Brands (FRAM, Prestone, Autolite)
Products - New Products/Licensing
$1.1B/<10% - Lighting Distribution
- -----------------------
Truck
Brakes o Drive Synergies Between Friction & Turbochargers
$.4B/~15%
- -----------------------
Friction
Materials o Restructure and Apply GE Initiatives
$.8B/<5%
- -----------------------
Microturbines
<$.1B/OM Losses o Integrate with Power Systems
- --------------------------------------------------------------------------------
Solid Business with Some Segments to Fix
- --------------------------------------------------------------------------------
[SLIDE]
GE/Honeywell
- --------------------------------------------------------------------------------
Applying GE Initiatives
GE Position Honeywell Base
----------- --------------
Globalization
o Low Cost Country o ~20% Lower Cost o $9B Buy - Opportunities
o Global Intellect o ~7,000 Employees at for both Sourcing and
30-50% Lower Cost Intellect
Services
o P&L Focus o 50% of Revenues o 25-30% of Revenues
o Installed Base o $20B Growing at 17% o Big Installed Base Opportunity
o Data Mining
o Upgrade Packages
Six Sigma
o Leadership o Leadership Competency o Primarily Technical
o Span o Span - Massive Reduction o Opportunity
o Customer Centric o At the Customer o Opportunity
o Productivity o Accelerate Productivity o 1% Productivity = >$200MM
e-Business
o Auctions o ~$14B (30%) in '01 o $195MM (2%) in '00
o SG&A Digitization o 20-30% out on $20B o $3.5B SG&A ++-Opportunity
o Selling over the Web o ~10% of Sales on Web o <1%% on Web
[SLIDE]
GE/Honeywell Synergies Overview
- --------------------------------------------------------------------------------
Automation & Control
Cost Structure
[Pie graph showing Total Cost - $6.8B
Segments counterclockwise ($B): Materials - $2.4; Indirect Cost - $1.1; Hourly
C&B - $0.6; Salaried C&B - $2.0; Depc, Amort, & Assessments - $0.4; Programs
- $0.3]
[Large arrow pointing to right]
[Single column bar chart showing 2000 Est Headcount 50,500
First segment: Hourly - 16,200; Second Segment (2 parts): Salaried - Direct
13,300, Indirect 21,000]
- --------------------------------------------------------------------------------
Synergies
-------------------------------------------------------
Process... Savings Cost Owner
------- ------ -------
Mfg Productivity $91 $148 McKenna
Service Productivity 78 78 Harris
Indirect 129 159 Ryan
Sourcing 141 11 Lauterbach
Volume 62 0 Page
--- ---
$500MM $396MM
-------------------------------------------------------
-------------------------------------------------------
$500MM Savings Identified/$600MM Targeted
-------------------------------------------------------
[SLIDE]
Performance Materials Synergy Roll-up
- --------------------------------------------------------------------------------
Cash Om Impact
Categories Outflow 2001 2002 2003
- ---------- ------- ---- ---- ----
Sourcing
Directs $ 5 $ 11 $ 11 Misc direct savings, no single big hitters
Indirects $ 10 $ 20 $ 20 Driven by MRO, Distribution and Warehousing
Sourcing Headcount $ 2 $ 2 $ 2 $ 2 60% reduction at HQ (20)
---- ---- ---- ----
$ 2 $ 17 $ 32 $ 32
Commercial
Incremental Volume (Wax) $ 2 $ 4 $ 7 GE Spec Chem, Wax polymer add sales synergy
Distribution Savings $ 3 $ 5 $ 11 Polymerland distribution sales synergy
Commercial Headcount $ 6 $ 3 $ 7 $ 7 Resin redundant sales infrastructure
Warehouse Savings $ 2 $ 3 $ 3 Close 5 redundant warehouses
Film Consolidation $ 2 $ 4 $ 7 $ 7 Excess capacity; consolidate film lines
---- ---- ---- ----
$ 8 $ 14 $ 27 $ 35
Carpet Fiber Restructuring
Pellet Capacity $130 Capital to convert to chip
Nylon fiber volume shift to Resin $ 8 $ 15 $ 34 Global Engineering Resin sales synergy
Headcount, Salary $ 15 $ 5 $ 10 $ 20 Carpet mgmt team & support infrastructure
Headcount, Hourly $ 37 $ 12 $ 25 $ 49 Stepped shutdown of fiber spinning capability
---- ---- ---- ----
$182 $ 25 $ 50 $103
Headcount, all other
Other Salaried $ 61 $ 20 $ 41 $ 81 Eliminate mgmt layers, headcount to GEP std.
Other Hourly $ 35 $ 12 $ 23 $ 47 Mfg Productivity, Headcount to GEP std.
PP&C HQ $ 18 $ 29 $ 38 $ 38 PP&C Morristown leadership team
---- ---- ---- ----
Total Headcount $114 $ 61 $102 $166
IT $ 5 $ 7 $ 14 $ 29 ITG savings and program management
---- ---- ---- ----
Total Proposal $310 $125 $225 $365
==== ==== ==== ====
[SLIDE]
Honeywell Synergies Information Technology
- --------------------------------------------------------------------------------
-----------------------------------------------
IT% Revenue
-----------
GE H
-- -
Aerospace 3.0 4.3
Ind Sys 2.2 3.1
Plastics 1.6 2.1
Translates to $300M Synergy on $927M Base
-----------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Honeywell Percent
Spend Price Price Usage Total
Today Reduction Reduction Reduction Reduction Comment
--------- --------- --------- --------- --------- -------
SBU's 290 46 46 Application and HC Redundancy
Consulting 150 32 21% 0 32 GDC Use
Telecom 136 27 20% 10 37 Price and HC Reduction
Regional 113 23 23 Application and HC Redundancy
Data Centers 106 16 15% 29 45 Price and Consolidation
Software 70 27 39% 5 32 Price and Application Redundancy
Corp Apps 56 43 43 HC Redundancy
PC's 29 6 21% 4 10 Price and HC Reduction
Help Desks 20 10 50% 3 13 India and HC Reduction
Messaging 11 4 36% 1 5 Price and HC Reduction
HR Support 10 8 8 Application Redundancy
Intranet Support 4 4 4 Application Redundancy
E-Bus Support 2 2 2 Discontinuation
Total 997 122 178 300
Ex DirectBilled Telecom 927
- --------------------------------------------------------------------------------------------------------------------------
[SLIDE]
Working Capital Synergy - Aircraft Engines
- --------------------------------------------------------------------------------
[Two column bar graph showing:
Left Y-Axis - ($ in Billions), Avg W/C, ($B); Right Y-Axis - T/O
GEAE - Avg W/C $1.1, Turns 10.3; Honeywell-Aerospace Avg W/C $2.0, Turns
5.0]
- --------------------------------------------------------------------------------
o Honeywell @ GEAE Turnover = $1B Opportunity
o Total GE/Honeywell = $3B Opportunity
- --------------------------------------------------------------------------------
[SLIDE]
GE Company
- --------------------------------------------------------------------------------
Synergies Summary
Category
------------------------------------------------
Business Component Sourcing Mfg. Comm'l. G&A Total
- ------------------ -------- ---- ------- --- -----
Aerospace/GEAE $202 $407 $ 71 $420 $1100
HBC & Ind. Control/GEIS 140 169 62 129 500
Perf. Materials/GEP 70 150 35 125 380
Power & Transportation 15 0 10 19 44
---- ---- ---- ---- -----
Industrial 427 726 178 693 2024
Corporate - - - - 450
Total $433 $679 $178 $584 $2474
==== ==== ==== ==== =====
- --------------------------------------------------------------------------------
$2.5B Annual Savings - Up to $4.0B of Pre-Tax Charges
- --------------------------------------------------------------------------------
[SLIDE]
HONEYWELL
- --------------------------------------------------------------------------------
Total Year 2000
Honeywell
Estimate GE View
--------- -------
Sales $25.0 $25.1
EBIT 3.9 3.3
% 15.7% 13.1%
Interest (.5) (.5)
Taxes (1.0) (.8)
Net Income $ 2.4 $ 2.0
- --------------------------------------------------------------------------------
Honeywell Ongoing Operations Using GE Practice @ 2B Net
- --------------------------------------------------------------------------------
[SLIDE]
HONEYWELL
- --------------------------------------------------------------------------------
Alternate Scenarios
o Base Business: No Growth/with Synergies
- First Full Year Accretion 11 cents
- Year 2 14 cents
- Year 3 17 cents
- GE/Honeywell Growth Rate +1 % (18%->19%)
o Base Business: 10% Growth/with Synergies
- First Full Year Accretion 12 cents
- Year 2 15 cents
- Year 3 19 cents
- GE/Honeywell Growth Rate +2 % (18%->20%)
- --------------------------------------------------------------------------------
o Complementary Business + GE Initiatives = Upside Growth Opportunity
o Accretion in '01 Dependent on Timing - First Full Year Double Digit
- --------------------------------------------------------------------------------
[SLIDE]
Summary
- --------------------------------------------------------------------------------
New Digitized GE with Integrated Initiatives ...
o Increase Earnings Double Digit Under any Foreseeable Scenario
o Increases Base GE Growth Rate from 15% to 18+% in Reasonable Economy
o Honeywell Adds Double-Digit EPS in First Full Year and Increases GE
Growth Rate 1-2 Points
- --------------------------------------------------------------------------------