Honeywell 2006 Annual Report Download - page 18

Foreign manufactured products comprised 22 percent of total 2006 sales of Specialty Materials. The principal manufacturing facilities
outside the U.S. are in Europe, with less significant operations in Asia and Canada.
Exports of U.S. manufactured products comprised 1 percent of total 2006 sales of Transportation Systems products. Foreign
manufactured products accounted for 63 percent of total 2006 sales of Transportation Systems. The principal manufacturing facilities
outside the U.S. are in Europe, with less significant operations in Asia, Latin America and Canada.
Financial information including net sales and long-lived assets related to geographic areas is included in Note 24 of Notes to Financial
Statements in “Item 8. Financial Statements and Supplementary Data”. Information regarding the economic, political, regulatory and
other risks associated with international operations is included in “Item 1A. Risk Factors.”
Raw Materials
The principal raw materials used in our operations are generally readily available. We experienced no significant or unusual
problems in the purchase of key raw materials and commodities in 2006. We are not dependent on any one supplier for a material
amount of our raw materials, except related to phenol, a raw material used in our Specialty Materials segment. We purchase phenol
under a supply agreement with one supplier. We have no reason to believe there is any material risk to this supply.
We are highly dependent on our suppliers and subcontractors in order to meet commitments to our customers. In addition, many
major components and product equipment items are procured or subcontracted on a sole-source basis with a number of domestic and
foreign companies. We maintain a qualification and performance surveillance process to control risk associated with such reliance on
third parties. While we believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict
what effects shortages or price increases may have in the future.
The costs of certain key raw materials, including natural gas, benzene (the key component in phenol) and fluorspar in our
Specialty Materials' business, steel and nickel in our Transportation Systems business, and nickel, titanium and other metals in our
Aerospace business, were at historically high levels in 2006 and are expected to remain at high price levels. In addition, in 2006
certain large long-term fixed supplier price agreements expired, primarily relating to components used by our Aerospace business,
which in the aggregate, subjected us to higher volatility in certain component costs. We will continue to attempt to offset raw material
cost increases with formula price agreements, price increases and hedging activities where feasible. We have no reason to believe a
shortage of raw materials will cause any material adverse impact during 2007. See “Item 1A. Risk Factors” for further discussion.
Patents, Trademarks, Licenses and Distribution Rights
Our reportable segments are not dependent upon any single patent or related group of patents, or any licenses or distribution rights.
We own, or are licensed under, a large number of patents, patent applications and trademarks acquired over a period of many years,
which relate to many of our products or improvements to those products and which are of importance to our business. From time to
time, new patents and trademarks are obtained, and patent and trademark licenses and rights are acquired from others. We also have
distribution rights of varying terms for a number of products and services produced by other companies. In our judgment, those rights
are adequate for the conduct of our business. We believe that, in the aggregate, the rights under our patents, trademarks and licenses
are generally important to our operations, but we do not consider any patent, trademark or related group of patents, or any licensing or
distribution rights related to a specific process or product, to be of material importance in relation to our total business. See “Item 1A.
Risk Factors” for further discussion.
We have registered trademarks for a number of our products and services, including Honeywell, UOP, Prestone, FRAM, Autolite,
Bendix, Jurid, Holts, Garrett, Ademco, Fire-Lite, Notifier, System Sensor, MK, Novar, Genetron, Enovate, Spectra, Aclar, Simoniz
and Redex.
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