Honeywell 2005 Annual Report Download - page 95

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
Commodity Price Risk Management—Our exposure to market risk for commodity prices can result in changes in our cost of
production. We mitigate our exposure to commodity price risk through the use of long-term, firm-price contracts with our suppliers
and forward commodity purchase agreements with third parties hedging anticipated purchases of several commodities (principally
natural gas). Forward commodity purchase agreements are marked-to-market, with the resulting gains and losses recognized in
earnings when the hedged transaction is recognized.
Interest Rate Risk Management—We use a combination of financial instruments, including medium-term and short-term
financing, variable-rate commercial paper, and interest rate swaps to manage the interest rate mix of our total debt portfolio and
related overall cost of borrowing. At December 31, 2005 and 2004, interest rate swap agreements designated as fair value hedges
effectively changed $681 and $1,218 million, respectively, of fixed rate debt at an average rate of 6.15 and 6.42 percent, respectively,
to LIBOR based floating rate debt. Our interest rate swaps mature through 2007.
Fair Value of Financial Instruments—The carrying value of cash and cash equivalents, trade accounts and notes receivables,
payables, commercial paper and short-term borrowings contained in the Consolidated Balance Sheet approximates fair value.
Summarized below are the carrying values and fair values of our other financial instruments at December 31, 2005 and 2004. The fair
values are based on the quoted market prices for the issues (if traded), current rates offered to us for debt of the same remaining
maturity and characteristics, or other valuation techniques, as appropriate.
December 31, 2005 December 31, 2004
Carrying
Value Fair Value Carrying Value Fair Value
Assets
Long-term receivables $ 306 $ 285 $ 237 $ 218
Interest rate swap agreements 9 9 39 39
Foreign currency exchange contracts 3 3 22 22
Forward commodity contracts 18 18 10 10
Liabilities
Long-term debt and related current maturities $ (4,077) $ (4,291) $ (5,025) $ (5,411)
Foreign currency exchange contracts (5) (5) (6) (6)
Forward commodity contracts (1) (1) (2) (2)
Note 18—Capital Stock
We are authorized to issue up to 2,000,000,000 shares of common stock, with a par value of one dollar. Common shareowners are
entitled to receive such dividends as may be declared by the Board, are entitled to one vote per share, and are entitled, in the event of
liquidation, to share ratably in all the assets of Honeywell which are available for distribution to the common shareowners. Common
shareowners do not have preemptive or conversion rights. Shares of common stock issued and outstanding or held in the treasury are
not liable to further calls or assessments. There are no restrictions on us relative to dividends or the repurchase or redemption of
common stock.
In November 2005, Honeywell's Board authorized the Company to repurchase up to $3 billion of its common stock. As of
December 31, 2005, approximately $2.6 billion of additional shares may yet be purchased under this program. The amount and timing
of repurchases may vary depending on market conditions and the level of other investing activities.
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