Honeywell 2002 Annual Report Download - page 207

of our Bendix Commercial Vehicle Systems (BCVS) business of $125 million. The
divestitures of these businesses reduced net sales and increased segment profit
in 2002 compared with 2001 by approximately $500 and $31 million, respectively.
Aggregate sales proceeds were approximately $435 million consisting of cash and
investment securities. (Gain) on sale of non-strategic businesses of $112
million in 2000 represented the pretax gain on the government-mandated
divestiture of the TCAS product line of Honeywell Inc. (the former Honeywell) in
connection with the merger of AlliedSignal Inc. and the former Honeywell in
December 1999.
Asbestos related litigation charges, net of insurance totaled $1,548, $159 and
$7 million in 2002, 2001 and 2000, respectively, related mainly to costs
associated with asbestos claims of North American Refractories Company (NARCO).
See Asbestos Matters in Note 21 of Notes to Financial Statements for further
discussion.
Business impairment charges of $877, $145 and $410 million in 2002, 2001 and
2000, respectively, related principally to the write-down of property, plant and
equipment in businesses in our Specialty Materials segment and in our Friction
Materials business. See the repositioning, litigation, business impairment and
other charges section of this MD&A for further details.
Equity in (income) loss of affiliated companies was income of $42 million in
2002 and losses of $193 and $89 million in 2001 and 2000, respectively. Equity
in (income) loss of affiliated companies included repositioning and other
charges of $13, $200 and $136 million in 2002, 2001 and 2000, respectively. See
the repositioning, litigation, business impairment and other charges section of
this MD&A for further details. The increase in equity in (income) loss of
affiliated companies of $235 million in 2002 compared with 2001 resulted from a
$187 million decrease in repositioning and other charges. The increase also
resulted from exiting a joint venture in our Aerospace segment ($9 million), an
improvement in earnings from joint ventures in our Specialty Materials and
Automation and Control Solutions segments ($23 million), and accounting for the
first quarter of 2002 operating results of our BCVS business using the equity
method since control of the business was transferred to Knorr-Bremse AG in
January 2002 ($6 million). The decrease in equity in (income) loss of affiliated
companies of $104 million in 2001 compared with 2000 resulted from a $64 million
increase in repositioning and other charges, as well as a gain on the sale of
our interest in an automotive aftermarket joint venture in 2000.
Other (income) expense was income of $4, $17 and $57 million in 2002, 2001 and
2000, respectively. Other (income) expense included other charges of $15 million
in 2002 related to an other than temporary decline in value of cost basis equity
investments, and a $6 million loss in 2001 related to the early redemption of
our $200 million 5 3/4% dealer remarketable securities. Other (income) expense
in 2001 also included a $1 million credit recognized upon the adoption of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended (SFAS No. 133). The decrease in
other (income) expense of $13 million in 2002 compared with 2001 resulted from a
decrease in benefits from foreign exchange hedging ($47 million) and an increase
in other charges ($9 million) largely offset by a partial settlement of a patent
infringement lawsuit with an automotive supplier ($15 million), lower minority
interests ($16 million) and higher interest income ($13 million). The decrease
in other (income) expense of $40 million in 2001 compared with 2000 resulted
primarily from a decrease in benefits from foreign exchange hedging ($21
million) and lower interest income ($18 million), partially offset by lower
minority interests ($10 million).
Interest and other financial charges of $344 million in 2002 decreased by $61
million, or 15 percent compared with 2001. Interest and other financial charges
of $405 million in 2001 decreased by $76 million, or 16 percent compared with
2000. The decrease in interest and other financial charges in 2002 compared with
2001 and 2001 compared with 2000 was due mainly to lower average debt
outstanding and lower average interest rates in both years.
The effective tax (benefit) rate was (76.7), (76.6) and 30.8 percent in 2002,
2001 and 2000, respectively. The effective tax (benefit) rate in 2002 was
substantially higher than the statutory rate of 35 percent principally due to
the higher deductible tax basis than book basis on the dispositions of our
Advanced Circuits, PFC and Consumer Products businesses, tax benefits on export
sales and favorable tax audit settlements. The effective tax (benefit) rate in
2001 was substantially higher than the statutory rate of 35 percent principally
due to tax benefits on export sales, U.S. tax credits and favorable tax audit
settlements. The impact of tax benefits on export sales, U.S. tax credits and
favorable audit settlements had a more favorable impact on our effective tax
(benefit) rates in 2002 and 2001 than in prior years principally due to the
relative amount of these benefits in comparison to the amount of our pretax
losses in 2002 and 2001. See Note 7 of Notes to Financial Statements for further
information.
Net loss was $(220) million, or $(0.27) per share, in 2002, net loss was $(99)
million, or $(0.12) per share, in 2001, and net income was $1,659 million, or
$2.05 per share, in 2000. The net losses in 2002 and 2001 were due to the