Honeywell 2011 Annual Report Download - page 30

the absence of an other-than-temporary impairment charge of$62 million in the second quarter of 2009, included within "Other, net", partially offset by the
absence of a $50 million deconsolidation gain related to a subsidiary within our Automation and Control Solutions segment in 2009, included within "Gain on
sale of non-strategic businesses and assets", and $22 million of acquisition related costs in 2010, included within "Other, net".
Interest and Other Financial Charges
2011 2010 2009
Interest and other financial charges $ 376 $ 386 $ 458
% change compared with prior period (3)% (16)%
Interest and other financial charges decreased by 3% percent in 2011 compared with 2010 primarily due to lower borrowing costs, partially offset by
higher debt balances.
Interest and other financial charges decreased by 16% percent in 2010 compared with 2009 due to lower debt balances and lower borrowing costs.
Tax Expense
2011 2010 2009
Tax expense $ 417 $ 765 $ 436
Effective tax rate 18.3% 28.1% 22.2%
The effective tax rate decreased by 9.8 percentage points in 2011 compared with 2010 primarily due to a change in the mix of earnings between U.S.
and foreign related to higher U.S. pension expense (primarily driven by an approixmate 7.6 percentage point impact which resulted from the increase in
pension mark-to-market expense), an increased benefit from manufacturing incentives, an increased benefit from the favorable settlement of tax audits and an
increased benefit from a lower foreign effective tax rate. The foreign effective tax rate was 21.1 percent, a decrease of approximately 4.9 percentage points
which primarily consisted of (i) a 5.1 percent impact from decreased valuation allowances on net operating losses primarily due to an increase in German
earnings available to be offset by net operating loss carry forwards, (ii) a 2.4 percent impact from tax benefits related to foreign exchange and investment
losses, iii) a 1.2 percent impact from an increased benefit in tax credits and lower statutory tax rates, and (iv) a 4.1 percent impact related to an increase in tax
reserves. The effective tax rate was lower than the U.S. statutory rate of 35 percent primarily due to earnings taxed at lower foreign rates.
The effective tax rate increased by 5.9 percentage points in 2010 compared with 2009 primarily due to a change in the mix of earnings related to lower
U.S. pension expense, the impact of an enacted change in the tax treatment of the Medicare Part D program, the absence of manufacturing incentives, a
decreased impact from the settlement of audits and an increase in the foreign effective tax rate. The foreign effective tax rate increased by approximately 7
percentage points which primarily consisted of i) a 6 percentage point impact from the absence of tax benefits related to foreign exchange and investment
losses and ii) a (0.1) percentage points impact from increased valuation allowances on net operating losses. The effective tax rate was lower than the U.S.
statutory rate of 35 percent primarily due to earnings taxed at lower foreign rates.
In 2012, the effective tax rate could change based upon the Company's operating results, mix of earnings and the outcome of tax positions taken
regarding previously filed tax returns currently under audit by various Federal, State and foreign tax authorities, several of which may be finalized in the
foreseeable future. The Company believes that it has adequate reserves for these matters, the outcome of which could materially impact the results of
operations and operating cash flows in the period they are resolved.
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