Honeywell 2006 Annual Report Download - page 39

engine utilization, partially offset lower sales of mandated upgrades and retrofits of avionics equipment required in the prior
year to meet certain mandated regulatory standards. In 2005, sales increased by 10 percent due to these mandates, and as a
result of increased engine utilization for corporate aircraft.
• Defense and space sales increased by 3 percent in 2006 primarily due to higher sales of surface systems and sales of spare
parts for helicopters that offset lower volume of space sales due to delays in project funding. In 2005, defense and space sales
increased by 2 percent, primarily driven by platform upgrades for war-related activities, growth in precision munitions and
increased spending on restricted space programs. These factors lower replenishment demand for spare parts from the US
military in both 2005 and 2006.
Aerospace segment profit increased by 13 percent in 2006 compared with 2005 due primarily to sales volume growth, increased
prices and productivity savings (including benefits from prior restructuring actions) that were partially offset by inflation and the
impact of stronger OE sales that typically have lower margins than aftermarket sales. Segment profit increased by 18 percent in 2005
compared to 2004 due primarily to volume growth and the effect of productivity actions, partially offset by an increase in spending for
information technology systems.
2007 Areas of Focus
Aerospace's primary areas of focus for 2007 include:
• Continuing to grow the sales and profitability of the commercial aerospace aftermarket in the highly competitive and cost
focused airline industry;
• Securing Honeywell product content on new aircraft platforms;
• Continuing to design equipment that enhances the safety, performance and durability of aerospace and defense equipment,
while reducing weight and operating costs; and
• Developing differentiated, affordable products and services for the defense and space end-market.
Automation and Control Solutions (ACS)
Overview
ACS provides innovative solutions that make homes, buildings, industrial sites, airport facilities and infrastructure more efficient,
safe and comfortable. Our ACS products and services include controls for heating, cooling, indoor air quality, ventilation,
humidification and home automation; advanced software applications for home/building control and optimization; sensors, switches,
control systems and instruments for measuring pressure, air flow, temperature and electrical current; security, fire and gas detection;
access control; video surveillance; remote patient monitoring systems; installation, maintenance and upgrades of systems that keep
buildings safe, comfortable and productive; and automation and control solutions for industrial plants, including advanced software
and automation systems that integrate, control and monitor complex processes in many types of industrial settings.
Economic and Other Factors
ACS's operating results are principally driven by:
• The growth of global commercial construction (including retrofits and upgrades);
• Demand for residential retrofits and upgrades;
• Industrial production;
• U.S. and European economic conditions;
• The strength of capital spending on process and building automation; and
• Changes to fire, security, health care and safety concerns and regulations.
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