Honeywell 2009 Annual Report Download - page 16

U.S. Government Sales
Sales to the U.S. Government (principally by our Aerospace segment), acting through its various
departments and agencies and through prime contractors, amounted to $4,288, $4,240 and $4,011 million in
2009, 2008 and 2007, respectively, which included sales to the U.S. Department of Defense, as a prime
contractor and subcontractor, of $3,455, $3,412 and $3,192 million in 2009, 2008 and 2007, respectively. U.S.
defense spending increased in 2009 and is also expected to increase in 2010. We do not expect to be
significantly affected by any proposed changes in 2010 federal spending due principally to the varied mix of the
government programs which impact us (OEM production, engineering development programs, aftermarket
spares and repairs and overhaul programs). Our contracts with the U.S. Government are subject to audits,
investigations, and termination by the government. See "Item 1A. Risk Factors."
Backlog
Our total backlog at December 31, 2009 and 2008 was $13,182 and $12,972 million, respectively. We
anticipate that approximately $9,339 million of the 2009 backlog will be filled in 2010. We believe that backlog is
not necessarily a reliable indicator of our future sales because a substantial portion of the orders constituting this
backlog may be canceled at the customer's option.
Competition
We are subject to active competition in substantially all product and service areas. Competition is expected
to continue in all geographic regions. Competitive conditions vary widely among the thousands of products and
services provided by us, and vary by country. Depending on the particular customer or market involved, our
businesses compete on a variety of factors, such as price, quality, reliability, delivery, customer service,
performance, applied technology, product innovation and product recognition. Brand identity, service to
customers and quality are generally important competitive factors for our products and services, and there is
considerable price competition. Other competitive factors for certain products include breadth of product line,
research and development efforts and technical and managerial capability. While our competitive position varies
among our products and services, we believe we are a significant competitor in each of our major product and
service classes. However, a number of our products and services are sold in competition with those of a large
number of other companies, some of which have substantial financial resources and significant technological
capabilities. In addition, some of our products compete with the captive component divisions of original
equipment manufacturers. See Item 1A "Risk Factors" for further discussion.
International Operations
We are engaged in manufacturing, sales, service and research and development mainly in the United States,
Europe, Canada, Asia and Latin America. U.S. exports and foreign manufactured products are significant to our
operations. U.S. exports comprised 12, 10 and 10 percent of our total sales in 2009, 2008 and 2007,
respectively. Foreign manufactured products and services, mainly in Europe, were 39 percent of our total sales in
2009, 2008 and 2007.
Approximately 18 percent of total 2009 sales of Aerospace-related products and services were exports of
U.S. manufactured products and systems and performance of services such as aircraft repair and overhaul.
Exports were principally made to Europe, Canada, Asia and Latin America. Foreign manufactured products and
systems and performance of services comprised approximately 15 percent of total 2009 Aerospace sales. The
principal manufacturing facilities outside the U.S. are in Europe, with less significant operations in Canada,
Mexico and Asia.
Approximately 2 percent of total 2009 sales of Automation and Control Solutions products were exports of
U.S. manufactured products. Foreign manufactured products and performance of services accounted for 57
percent of total 2009 Automation and Control Solutions sales. The principal manufacturing facilities outside the
U.S. are in Europe with less significant operations in Asia and Canada.
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