Honeywell 2003 Annual Report Download - page 356

due to the depressed market conditions in the commercial air transport industry
and our potential exposure to asbestos liabilities. The "negative outlook"
ratings have not impaired, nor do we expect it to impair, our access to the
commercial paper markets.
We may from time to time issue unsecured short-term promissory notes in the
commercial paper market. The commercial paper notes may bear interest or may be
sold at a discount and have a maturity of not more than 364 days from date of
issuance. Borrowings under the commercial paper program are available for
general corporate purposes as well as for financing potential acquisitions.
There was no commercial paper outstanding at year-end 2003.
We maintain $2.3 billion of Revolving Credit Facilities with a group of banks,
arranged by Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.,
comprised of: (a) a $1.3 billion Five-Year Credit Agreement, with a $300 million
letter of credit sub-limit and (b) a $1 billion 364-Day Credit Agreement. The
credit agreements are maintained for general corporate purposes, including
support for the issuance of commercial paper. The Five-Year Credit Agreement was
increased in November 2003 from $1 billion to $1.3 billion with the addition of
a $300 million sub-limit for the potential issuance of letters of credit. See
Note 15 of Notes to Financial Statements for details of long term debt and
description of our Revolving Credit Facilities.
We also have a shelf registration statement filed with the Securities and
Exchange Commission which allows us to issue up to $3 billion in debt
securities, common stock and preferred stock that may be offered in one or more
offerings on terms to be determined at the time of the offering. Net proceeds of
any offering would be used for general corporate purposes, including repayment
of existing indebtedness, capital expenditures and acquisitions.
We also sell interests in designated pools of trade accounts receivables to
third parties. The sold receivables are over-collateralized by $174 million at
December 31, 2003 and we retain a subordinated interest in the pool of
receivables representing that over-collateralization as well as an undivided
interest in the balance of the receivables pools. New receivables are sold under
the agreement as previously sold receivables are collected. The retained
interests in the receivables are shown at the amounts expected to be collected
by us, and such carrying value approximates the fair value of our retained
interests. The sold receivables were $500 million at both December 31, 2003 and
2002.
In addition to our normal operating cash requirements, our principal future cash
requirements will be to fund capital expenditures, debt repayments, employee
benefit obligations, environmental remediation costs, asbestos claims, severance
and exit costs related to repositioning actions, share repurchases and any
strategic acquisitions. Our total capital expenditures in 2004 are currently
projected at approximately $665 million. These expenditures are primarily
intended for maintenance, replacement, production capacity expansion and cost
reduction. There are no significant long-term debt repayments scheduled for
2004. Assuming that actual pension plan returns are consistent with our expected
rate of return of 9 percent in 2004 and beyond and that interest rates remain
constant, we would not be required to make any contributions to our U.S. pension
plans for the foreseeable future. We currently expect to repurchase
approximately 10 million shares on an annual basis under our share repurchase
program initiated in the fourth quarter of 2003. Cash expenditures for severance
and other exit costs necessary to execute the remaining repositioning actions
will approximate $200 million in 2004. We expect our cash expenditures for
asbestos claims in 2004 to be approximately $730 million and insurance
recoveries to be approximately $130 million in 2004. See Asbestos Matters in
Note 21 of Notes to Financial Statements for further discussion.
We continuously assess the relative strength of each business in our portfolio
as to strategic fit, market position, profit and cash flow contribution in order
to upgrade our combined portfolio and identify business units that will most
benefit from increased investment. We identify acquisition candidates that will
further our strategic plan and strengthen our existing core businesses. We also
identify business units that do not fit into our long-term strategic plan based
on their market position, relative profitability or growth potential. These
business units are considered for potential divestiture, restructuring or other
repositioning actions subject to regulatory constraints. In 2003, we realized
$137 million in cash proceeds from sales of non-strategic businesses.
We believe that our operating cash flows will be sufficient to meet our future
cash needs. Our available cash, committed credit lines, access to the public
debt and equity markets using debt and equity securities and commercial paper,
as well as our ability to sell trade accounts receivables, provide additional
sources of short-term and long-term liquidity to fund current operations and
future investment opportunities. Based on our current financial position and
expected economic performance, we do not believe that our liquidity will be
adversely impacted by an inability to access our sources of financing.
Contractual Obligations and Probable Liability Payments