Honeywell 2006 Annual Report Download - page 49

Liquidity
Each of our businesses is focused on implementing strategies to improve working capital turnover in 2007 to increase operating
cash flows. Considering the current economic environment in which each of our businesses operate and our business plans and
strategies, including our focus on growth, cost reduction and productivity initiatives, we believe that our cash balances and operating
cash flows will remain our principal source of liquidity. In addition to our available cash and operating cash flows, additional sources
of liquidity include committed credit lines, access to the public debt and equity markets, as well as our ability to sell trade accounts
receivables.
A source of liquidity is our ability to issue short-term debt in the commercial paper market. Commercial paper notes are sold at a
discount and have a maturity of not more than 270 days from date of issuance. Borrowings under the commercial paper program are
available for general corporate purposes as well as for financing potential acquisitions. There was $669 million of commercial paper
outstanding at December 31, 2006.
Our ability to access the commercial paper market, and the related cost of these borrowings, is affected by the strength of our
credit ratings and our $2.5 billion of committed bank revolving credit facilities (Revolving Credit Facilities). Our credit ratings are
periodically reviewed by the major independent debt-rating agencies. In 2006, Standard and Poor's, Fitch's and Moody's Rating
Services affirmed their corporate ratings on our long-term debt of A and A+ and A2 respectively, and short-term debt of A-1, F1 and
P-1 respectively, and maintained Honeywell's ratings outlook as “stable”.
On April 27, 2006 Honeywell entered into a $2.3 billion Five-Year Credit Agreement (“Credit Agreement”) with a syndicate of
banks. Commitments under the Credit Agreement can be increased pursuant to the terms of the Credit Agreement to an aggregated
amount not to exceed $3 billion. This credit facility contains a $500 million sub-limit for the issuance of letters of credit. The $2.3
billion credit agreement is maintained for general corporate purposes, including support for the issuance of commercial paper. We had
no borrowings and have issued $145 million of letters of credit under the credit facility at December 31, 2006. The Credit Agreement
replaces the previous $1 billion five year credit agreement dated as of October 22, 2004, and $1.3 billion five year credit agreement
dated as of November 26, 2003 (the “Prior Agreements”). The Credit Agreement does not restrict Honeywell's ability to pay
dividends, nor does it contain financial covenants.
In September 2006, the Company renewed its 364-day Canadian Dollar (CAD) credit facility for 220 million CAD. This facility
was established for general corporate purposes, including support for the issuance of commercial paper in Canada. There are no
borrowings outstanding under this credit facility at December 31, 2006.
In March 2006, the Company issued $300 million of floating rate (Libor + 6 bps) Senior Notes due 2009, $400 million 5.40%
Senior Notes due 2016 and $550 million 5.70% Senior Notes due 2036 (collectively, the “Notes”). The Notes are senior unsecured
and unsubordinated obligations of Honeywell and rank equally with all of Honeywell's existing and future senior unsecured debt and
senior to all Honeywell's subordinated debt. The offering resulted in gross proceeds of $1,250 million, offset by $11 million in
discount and closing costs relating to the offering. Proceeds from the notes were used to repay commercial paper and debt.
During the first quarter of 2006, the Company made a cash tender offer and repurchased $225 million of its $500 million 5.125%
Notes due November 2006. The costs relating to the early redemption of the Notes were immaterial.
In the fourth quarter of 2006, the Company repaid $360 million (Euro 275 million) of its 5.27% Notes, primarily through issuance
of commercial paper.
We also have a current shelf registration statement filed with the Securities and Exchange Commission which allows us to issue up
to $3 billion in debt securities, common stock and preferred stock that may be offered in one or more offerings on terms to be
determined at the time of the offering. Net proceeds of any offering would be used for general corporate purposes, including
repayment of existing indebtedness, capital expenditures and acquisitions.
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