Honeywell 2004 Annual Report Download - page 72

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
change. This accounting change did not have a material impact on results of operations for 2004 and 2003. Pro forma effects for 2002
assuming adoption of SFAS No. 143 as of January 1, 2002, were not material to net income or per share amounts.
Note 2—Acquisitions
We acquired businesses for an aggregate cost of $396, $199 and $520 million in 2004, 2003 and 2002, respectively. All of 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 May 2003, Honeywell sold its Engineering Plastics business to BASF in exchange for BASF's nylon fiber business and $90
million in cash. BASF's nylon fiber business became part of Specialty Materials' nylon business. Since the cash consideration received
from BASF was in excess of 25 percent of the fair value of this exchange, this transaction was viewed as “monetary” in accordance
with Issue 8(a) of EITF 01-2, “Interpretations of APB Opinion No. 29”. Accordingly, the pre-tax gain on the sale of our Engineering
Plastics business of $38 million was based on the fair value of the consideration received from BASF less the sum of the net book
value of our Engineering Plastics business and related transaction costs. We recorded the assets and liabilities acquired in the BASF
business at fair market value based on a valuation performed by an independent appraisal firm at the acquistion date which
corresponded to the value agreed upon in the asset purchase agreement for this transaction. Specialty Materials' Engineering Plastics
business and BASF's nylon fiber business both had annual sales of approximately $400 million.
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 with determinable lives.
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. ISS had sales of approximately $253 million in 2002.
In connection with all acquisitions in 2004, 2003 and 2002, 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 2004, 2003 and 2002,
assuming these acquisitions had been made at the beginning of the year, would not be materially different from reported results.
On December 13, 2004, we announced that we had reached agreement with the board of directors of Novar plc (Novar) on the
terms of recommended Offers for the entire issued and ordinary preference share capital of Novar. The aggregate value of the Offers is
$2.4 billion (fully diluted for the exercise of all outstanding options), including the assumption of approximately $580 million of
outstanding debt, net of cash. The Novar board has unanimously recommended the Offers. We expect to complete the transaction in
the first quarter of 2005 and to fund the acquisition with existing cash resources.
Novar is a UK listed holding company which operates globally in the electrical, electronic and control products, the aluminum
extrusion and the security printing businesses and had reported 2003 revenues of $2.7 billion. We do not intend to hold the aluminum
extrusion and security printing businesses in the long-term and expect to pursue strategic alternatives for these units as soon as
practical.
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