Honeywell 2002 Annual Report Download - page 242

effective as of December 31, 2002 (see Note 21 for additional details). The
provisions for initial recognition and measurement of the liability are
effective on a prospective basis for guarantees that are issued or modified
after December 31, 2002. We do not expect the adoption of the provisions of FIN
45 will have a material effect on our consolidated results of operations and
financial position.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46), which requires that the primary
beneficiary of a variable interest entity (VIE) consolidate the VIE. We do not
expect the adoption of the provisions of FIN 46 will have a material effect on
our consolidated results of operations and financial position.
NOTE 2. ACQUISITIONS
We acquired businesses for an aggregate cost of $520, $122 and $2,646 million in
2002, 2001 and 2000, respectively. All our acquisitions were accounted for under
the purchase method of accounting, and accordingly, the assets and liabilities
of the acquired businesses were recorded at their estimated fair values at the
dates of acquisition. Significant acquisitions made in these years are discussed
below.
In October 2002 we acquired Invensys Sensor Systems (ISS) for approximately $416
million in cash with $115 million allocated to tangible net assets, $206 million
allocated to goodwill and $95 million allocated to other intangible assets. ISS
is a global supplier of sensors and controls used in the medical, office
automation, aerospace, HVAC, automotive, off-road vehicle and consumer appliance
industries. ISS is part of our Automation and Control Products business in our
Automation and Control Solutions reportable segment and is expected to
strengthen our product offerings in the high-growth medical and
automotive-onboard segments. ISS had sales of approximately $253 million in
2002.
In February 2000 we acquired Pittway Corporation (Pittway) for approximately
$2.2 billion in cash and the assumption of net debt with $652 million allocated
to tangible net assets, $1.5 billion allocated to goodwill and $17 million
allocated to other intangible assets. Pittway is a manufacturer and distributor
of security and fire systems and other low-voltage products for homes and
buildings. Its systems and products are marketed globally under the Ademco,
Notifier, System Sensor, ADI, Northern Computers and other brand names. Pittway
is part of our Security and Fire Solutions business in our Automation and
Control Solutions reportable segment and gives us access to the higher growth
security and fire systems business and allows us to offer integrated solutions
combining climate controls with security and fire systems. Pittway had sales of
approximately $1.6 billion in 1999.
In connection with all acquisitions in 2002, 2001 and 2000, the amounts recorded
for transaction costs and the costs of integrating the acquired businesses into
Honeywell were not material. The results of operations of all acquired
businesses have been included in the consolidated results of Honeywell from
their respective acquisition dates. The pro forma results for 2002, 2001 and
2000, assuming these acquisitions had been made at the beginning of the year,
would not be materially different from reported results.
NOTE 3. REPOSITIONING, LITIGATION, BUSINESS IMPAIRMENT AND OTHER CHARGES
A summary of repositioning, litigation, business impairment and other charges
follows:
2002 2001 2000
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Severance ............................................ $ 270 $ 727 $157
Asset impairments .................................... 121 194 141
Exit costs ........................................... 62 95 40
Reserve adjustments .................................. (76) (119) (46)
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Total net repositioning charge .................... 377 897 292
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Asbestos related litigation charges, net of
insurance ......................................... 1,548 159 7
Litton litigation settlement ......................... -- 440 --
Probable and reasonably estimable legal and
environmental liabilities ......................... 30 249 80
Business impairment charges .......................... 877 145 410
Customer claims and settlements of contract
liabilities ....................................... 152 310 93
Write-offs of receivables, inventories and other
assets ............................................ 60 335 84
Investment impairment charges ........................ 15 112 --
Aerospace jet engine contract cancellation ........... -- 100 --
General Electric merger expenses ..................... -- 42 --
Debt extinguishment loss ............................. -- 6 --
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