Honeywell 2005 Annual Report Download - page 59

certain adverse market conditions occur. Actual results in the future may differ materially from these estimated results due to actual
developments in the global financial markets. The methods used by us to assess and mitigate risk discussed above should not be
considered projections of future events.
OTHER MATTERS
Litigation
See Note 21 of Notes to Financial Statements in “Item 8. Financial Statements and Supplementary Data” for a discussion of
environmental, asbestos and other litigation matters.
Sales to the U.S. Government
Sales to the U.S. Government, acting through its various departments and agencies and through prime contractors, amounted to
$3,719, $3,464 and $3,111 million in 2005, 2004 and 2003, respectively. This included sales to the U.S. Department of Defense
(DoD), as a prime contractor and subcontractor, of $2,939, $2,808 and $2,564 million in 2005, 2004 and 2003, respectively. Sales to
the DoD accounted for 10.6, 11.0 and 11.1 percent of our total sales in 2005, 2004 and 2003, respectively. U.S. defense spending
increased in 2005 and is also expected to increase in 2006.
Backlog
Our total backlog at December 31, 2005 and 2004 was $9,327 and $8,229 million, respectively. We anticipate that approximately
$7,594 million of the 2005 backlog will be filled in 2006. We believe that backlog is not necessarily a reliable indicator of our future
sales because a substantial portion of the orders constituting this backlog may be canceled at the customer's option.
Inflation
Highly competitive market conditions have minimized inflation's impact on the selling prices of our products and the costs of our
purchased materials. Except for the costs of certain raw materials in our Specialty Materials and Transportation Systems reportable
segments (See Review of Business Segments section of this MD&A for further discussion), cost increases for materials and labor have
generally been low, and productivity enhancement programs, including repositioning actions and Six Sigma initiatives, have largely
offset any impact.
Recent Accounting Pronouncements
See Note 1 of Notes to Financial Statements in “Item 8. Financial Statements and Supplementary Data” for a discussion of recent
accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information relating to market risk is included in “Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations” under the caption “Financial Instruments”.
Item 8. Financial Statements and Supplementary Data
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