Honeywell 2005 Annual Report Download - page 46

Repositioning and Other Charges
A summary of repositioning and other charges follows:
2005 2004 2003
(Dollars in millions)
Severance $ 248 $ 85 $ 69
Asset impairments 5 21 6
Exit costs 14 10 7
Reserve adjustments (25) (28) (69)
Total net repositioning charge 242 88 13
Asbestos related litigation charges, net of insurance 10 76 —
Probable and reasonably estimable environmental liabilities 186 536 235
Business impairment charges 23 42 —
Arbitration award related to phenol supply agreement (67) — —
Other 18 33 30
Total net repositioning and other charges $ 412 $ 775 $ 278
The following table summarizes the pretax distribution of total net repositioning and other charges by income statement
classification:
2005 2004 2003
(Dollars in millions)
Cost of products and services sold $ 324 $ 621 $ 272
Selling, general and administrative expenses 43 25 4
Asbestos related litigation charges, net of insurance 10 76 —
Business impairment charges 23 42 —
Equity in (income) loss of affiliated companies 2 6 2
Other (income) expense 10 5 —
$ 412 $ 775 $ 278
In 2005, we recognized repositioning charges totaling $267 million primarily for severance costs related to workforce reductions
of 5,269 manufacturing and administrative positions across all of our reportable segments including the implementation of a new
organizational structure in our Aerospace reportable segment which reorganized our Aerospace businesses to better align with
customer segments. The implementation of the new Aerospace organizational structure was substantially completed in the third
quarter of 2005. Also, $25 million of previously established accruals, primarily for severance at our Corporate, Specialty Materials
and Automation and Control Solutions reportable segments were returned to income in 2005. The reversal of severance liabilities
relates to changes in the scope of previously announced severance programs, excise taxes relating to executive severance amounts
previously paid which were determined to no longer be payable, and severance amounts previously paid to an outside service provider
as part of an outsourcing arrangement which were refunded to Honeywell.
In 2004, we recognized repositioning charges totaling $116 million primarily for severance costs related to workforce reductions
of 2,272 manufacturing and administrative positions across all of our reportable segments. Also, $28 million of previously established
accruals, primarily for severance, were returned to income in 2004, due to fewer employee separations than originally planned
associated with certain prior repositioning actions, resulting in reduced severance liabilities principally in our Automation and Control
Solutions reportable segment.
In 2003, we recognized repositioning charges totaling $82 million primarily for severance costs related to workforce reductions of
1,501 manufacturing and administrative positions across all of our reportable segments. Also, $69 million of previously established
accruals, primarily for severance, were returned to income in 2003, due to fewer employee separations than originally planned
associated with certain prior repositioning actions, resulting in reduced severance liabilities in our Automation and Control Solutions,
Aerospace and Specialty Materials reportable segments.
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