Honeywell 2002 Annual Report Download - page 246

Automation and Control Solutions communication business. We also recognized
impairment charges of $92 million related principally to the write-down of
property, plant and equipment of our Friction Materials business, which is
classified as assets held for disposal in Other Current Assets (a plan of
disposal of Friction Materials was adopted in 2001; in January 2003, we entered
into a letter of intent to sell this business to Federal-Mogul Corp. -- See Note
21). In 2002, we recognized asbestos related litigation charges of $1,548
million principally related to costs associated with the potential resolution of
asbestos claims of North American Refractories Company (see Note 21). In 2002,
we also recognized other charges consisting of customer claims and settlements
of contract liabilities of $152 million and write-offs of receivables,
inventories and other assets of $60 million. These other charges related mainly
to our Advanced Circuits business, bankruptcy of a customer in our Aerospace
reportable segment, and customer claims in our Aerospace and Automation and
Control Solutions reportable segments. Additionally, we recognized other charges
consisting of probable and reasonably estimable environmental liabilities of $30
million and write-offs related to an other than temporary decline in the value
of certain equity cost investments of $15 million.
In 2001, we recognized other charges consisting of a settlement of the Litton
Systems, Inc. litigation for $440 million, probable and reasonably estimable
legal and environmental liabilities of $249 million (see Note 21), asbestos
related litigation charges of $159 million (see Note 21), customer claims and
settlements of contract liabilities of $310 million and write-offs of
receivables, inventories, and other assets of $335 million. Our Friction
Materials business was designated as held for disposal, and we recognized an
impairment charge of $145 million related to the write-down of property, plant
and equipment, goodwill and other identifiable intangible assets to their fair
value less costs to sell. We recognized charges of $112 million related to an
other than temporary decline in the value of an equity investment and an equity
investee's loss contract and a $100 million charge for write-off of investments,
including inventory, related to a regional jet engine contract cancellation. We
also recognized $42 million of transaction expenses related to the proposed
merger with General Electric and redeemed our $200 million 5 3/4% dealer
remarketable securities due 2011, resulting in a loss of $6 million.
In 2000, we identified certain business units and manufacturing facilities as
non-core to our business strategy. As a result of this assessment, we
implemented cost reduction initiatives and conducted discussions with potential
acquirers of these businesses and assets. As part of this process, we evaluated
the businesses and assets for possible impairment. As a result of our analysis,
we recognized impairment charges in 2000 of $245 and $165 million principally
related to the write-down of property, plant and equipment, goodwill and other
identifiable intangible assets of our Friction Materials business and a chemical
manufacturing facility, respectively. We recognized other charges consisting of
probable and reasonably estimable environmental liabilities of $80 million,
asbestos related litigation charges of $7 million, customer claims and
settlements of contract liabilities of $93 million and write-offs of
receivables, inventories and other assets of $84 million.
NOTE 4. GAIN (LOSS) ON SALE OF NON-STRATEGIC BUSINESSES
In 2002, we sold the following businesses:
Pretax After-tax
gain (loss) gain (loss)
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Automation and Control Solutions --
Consumer Products ............................... $(131) $(10)
Specialty Materials -- Advanced Circuits ........... (83) 18
Specialty Materials -- Pharmaceutical Fine
Chemicals (PFC) ................................. (35) 108
Transportation and Power Systems -- Bendix
Commercial Vehicle Systems (BCVS) ............... 125 79
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$(124) $195
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We realized proceeds of approximately $435 million in cash and investment
securities on the sale of these businesses in 2002. Our Advanced Circuits and
PFC businesses had a higher deductible tax basis than book basis which resulted
in an after-tax gain. The divestitures of these businesses reduced net sales and
increased segment profit in 2002 compared with 2001 by approximately $500 and
$31 million, respectively.
In 2000, as a result of a government mandate in connection with the merger of
AlliedSignal and the former Honeywell, we sold the TCAS product line of the
former Honeywell. We received approximately $215 million in cash resulting in a
pretax gain of $112 million. The TCAS product line had annual sales of
approximately $100 million.
NOTE 5. OTHER (INCOME) EXPENSE