Honeywell 2006 Annual Report Download - page 94

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
Note 15—Lease Commitments
Future minimum lease payments under operating leases having initial or remaining noncancellable lease terms in excess of one
year are as follows:
At December 31,
2006
2007 $ 304
2008 222
2009 155
2010 100
2011 74
Thereafter 223
$ 1,078
We have entered into agreements to lease land, equipment and buildings. Principally all our operating leases have initial terms of
up to 25 years, and some contain renewal options subject to customary conditions. At any time during the terms of some of our leases,
we may at our option purchase the leased assets for amounts that approximate fair value. We do not expect that any of our
commitments under the lease agreements will have a material adverse effect on our consolidated results of operations, financial
position or liquidity.
Rent expense was $341, $326 and $321 million in 2006, 2005 and 2004, respectively.
Note 16—Financial Instruments
Credit and Market Risk—Financial instruments, including derivatives, expose us to counterparty credit risk for nonperformance
and to market risk related to changes in interest or currency exchange rates. We manage our exposure to counterparty credit risk
through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk.
Our counterparties in derivative transactions are substantial investment and commercial banks with significant experience using such
derivative instruments. We monitor the impact of market risk on the fair value and cash flows of our derivative and other financial
instruments considering reasonably possible changes in interest and currency exchange rates and restrict the use of derivative financial
instruments to hedging activities.
We continually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business.
While concentrations of credit risk associated with our trade accounts and notes receivable are considered minimal due to our diverse
customer base, a significant portion of our customers are in the commercial air transport industry (aircraft manufacturers and airlines)
accounting for approximately 21 percent of our consolidated sales in 2006. The terms and conditions of our credit sales are designed
to mitigate or eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single
customer or a small group of customers.
Foreign Currency Risk Management—We conduct our business on a multinational basis in a wide variety of foreign currencies.
Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between
subsidiaries, foreign currency denominated monetary assets and liabilities and anticipated transactions arising from international trade.
Our objective is to preserve the economic value of non-functional currency denominated cash flows. We attempt to have all
transaction exposures hedged with natural offsets to the fullest extent possible and, once these opportunities have been exhausted,
through foreign currency forward and option agreements with third parties. Our principal currency exposures relate to the U.S. dollar,
Euro,
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