Honeywell 2010 Annual Report Download - page 14

Approximately 3 percent of total 2010 sales of Transportation Systems products were exports of U.S. manufactured products. Foreign manufactured
products accounted for 70 percent of total 2010 sales of Transportation Systems. The principal manufacturing facilities outside the U.S. are in Europe, with
less significant operations in Asia and Latin America.
Financial information including net sales and long-lived assets related to geographic areas is included in Note 24 of Notes to Financial Statements in
"Item 8. Financial Statements and Supplementary Data". Information regarding the economic, political, regulatory and other risks associated with
international operations is included in "Item 1A. Risk Factors."
Raw Materials
The principal raw materials used in our operations are generally readily available. We experienced no significant problems in the purchase of key raw
materials and commodities in 2010. We are not dependent on any one supplier for a material amount of our raw materials, except related to phenol, a raw
material used in our Specialty Materials segment. We purchase phenol under a supply agreement with one supplier.
The costs of certain key raw materials, including natural gas, benzene (the key component in phenol), ethylene, fluorspar and sulfur in our Specialty
Materials business, steel, nickel, other metals and ethylene glycol in our Transportation Systems business, and nickel, titanium and other metals in our
Aerospace business, are expected to remain volatile. In addition, in 2010 certain large long-term fixed supplier price agreements expired, primarily relating to
components used by our Aerospace business, which in the aggregate, subjected us to higher volatility in certain component costs. We will continue to attempt
to offset raw material cost increases with formula or long-term supply agreements, price increases and hedging activities where feasible. We do not presently
anticipate that a shortage of raw materials will cause any material adverse impacts during 2011. See "Item 1A. Risk Factors" for further discussion.
We are highly dependent on our suppliers and subcontractors in order to meet commitments to our customers. In addition, many major components and
product equipment items are procured or subcontracted on a single-source basis with a number of domestic and foreign companies. We maintain a
qualification and performance surveillance process to control risk associated with such reliance on third parties. While we believe that sources of supply for
raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Furthermore,
the inability of these suppliers to meet their quality and/or delivery commitments to us, due to bankruptcy, natural disasters or any other reason, may result in
significant costs and delay, including those in connection with the required recertification of parts from new suppliers with our customers or regulatory
agencies.
Patents, Trademarks, Licenses and Distribution Rights
Our segments are not dependent upon any single patent or related group of patents, or any licenses or distribution rights. We own, or are licensed under,
a large number of patents, patent applications and trademarks acquired over a period of many years, which relate to many of our products or improvements to
those products and which are of importance to our business. From time to time, new patents and trademarks are obtained, and patent and trademark licenses
and rights are acquired from others. We also have distribution rights of varying terms for a number of products and services produced by other companies. In
our judgment, those rights are adequate for the conduct of our business. We believe that, in the aggregate, the rights under our patents, trademarks and
licenses are generally important to our operations, but we do not consider any patent, trademark or related group of patents, or any licensing or distribution
rights related to a specific process or product, to be of material importance in relation to our total business. See "Item 1A. Risk Factors" for further discussion.
We have registered trademarks for a number of our products and services, including Honeywell, Aclar, Ademco, Autolite, Bendix, Enovate, Fire-Lite,
FRAM, Garrett, Hand Held, Holts, Jurid, Metrologic, MK, North, Notifier, Novar, Prestone, Redex, RMG, Simoniz, Spectra, System Sensor and UOP.
Research and Development
Our research activities are directed toward the discovery and development of new products, technologies and processes and the development of new
uses for existing products. The Company's principal research and development activities are in the U.S., Europe, India and China.
Research and development (R&D) expense totaled $1,466, $1,330 and $1,543 million in 2010, 2009 and 2008, respectively. The increase in R&D
expense of 10 percent in 2010 compared to 2009 was mainly due to
11