Honeywell 2007 Annual Report Download - page 33

The increase of $0.67 in earnings (diluted) per share for continuing operations in 2006 compared with 2005
primarily relates to an increase in segment profit in Aerospace and Automation and Control Solutions and income
generated from our acquisition of full ownership of UOP in Specialty Materials, reduced repositioning and
pension costs and a reduction in the number of shares outstanding due to the previously announced stock
repurchase program, offset by the impact of adopting FAS No. 123R ("Share-Based Payment") for stock-based
compensation expense of $77 million in 2006. In addition, in 2005 there was a one-time tax charge of $155
million for the repatriation of foreign earnings under the American Jobs Creation Act of 2004, which decreased
earnings and earnings per share in 2005.
For further discussion of segment results, see "Review of Business Segments".
Income From Discontinued Operations
Income from discontinued operations of $5 million, or $0.01 earnings per share (diluted) in 2006 relates to
the operating results of the Indalex business which was sold in February 2006 to Sun Capital Partners, Inc.
BUSINESS OVERVIEW
This Business Overview provides a summary of Honeywell and its four reportable operating segments
(Aerospace, Automation and Control Solutions, Specialty Materials and Transportation Systems), including their
respective areas of focus for 2008 and the relevant economic and other factors impacting their results, and a
discussion of each segment's results for the three years ended December 31, 2007. Each of these segments is
comprised of various product and service classes that serve multiple end markets. See Note 23 to the financial
statements for further information on our reportable segments and our definition of segment profit.
Economic and Other Factors
In addition to the factors listed below with respect to each of our operating segments, our consolidated
operating results are principally driven by:
• Global economic growth rates (US, Europe and emerging regions);
•
Overall sales mix, in particular the mix of Aerospace original equipment and aftermarket sales and the mix
of Automation and Control Solutions products and services sales;
•
The extent to which cost savings from productivity actions are able to offset or exceed the impact of material
and non-material inflation;
•
The impact of the pension discount rate on pension expense; and
•
The impact of changes in foreign currency exchange rate, particularly the US dollar-Euro exchange rate.
Areas of Focus for 2008
The areas of focus for 2008, which are generally applicable to each of our operating segments, include:
• Driving profitable growth by building innovative products that address customer needs;
•
Achieving sales growth, technological excellence and manufacturing capability through global expansion,
especially focused on emerging regions in China, India and the Middle East;
•
Continuing to grow through disciplined acquisition and rigorous integration processes;
•
Proactively managing raw material cost increases with formula and long term fixed price agreements, price
increases and hedging activities, where feasible;
•
Driving free cash flow through increased net income and effective working capital management enabling
continued investment in our businesses, strategic acquisitions, and enabling us to return value to
shareholders through share repurchases and increased dividend payments;
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