Honeywell 2012 Annual Report Download - page 18

sales of Transportation Systems. The principal manufacturing facilities outside the U.S. are in Europe,
with less significant operations in Asia and Australia.
The Company and its subsidiaries have a current policy not to conduct business with Iran.
Pursuant to Section 13(r) of the Securities Exchange Act of 1934, we note the following. In 2009,
Honeywell acquired RMG Group (“RMG”), a German company that had a pre-existing contract with an
Iranian entity for the supply and installation of compressed natural gas refueling stations in Iran. The
RMG contract was entered into and performed by a foreign entity and did not involve the development
of natural gas resources or pipelines, and we believe that it was not prohibited by or sanctionable
under applicable laws. In July 2011, RMG assigned performance under the contract to an unaffiliated
Italian company. During the first quarter of 2012, the unaffiliated Italian company performed some
services under the contract. However, since the Iranian customer failed to make required payments,
the unaffiliated Italian company has performed no work under the assigned contract since the first
quarter of 2012. The Company does not intend to perform any further services under this contract, in
accordance with Company policy and applicable laws. No gross revenues or net profits have been
received by the Company under this contract from Iran in 2012. Additionally, a non-U.S. affiliate of
Honeywell received $1,120,000 (representing net profit of $400,000 recognized in a prior period) during
2012 for services performed and / or goods delivered in or prior to the first quarter of 2011 in
connection with automation engineering services contracts entered into in 2009 involving Iran. These
contracts were also entered into and performed by non-US entities, and we believe that the contracts
and their performance were not prohibited by or sanctionable under laws applicable at the time.
Honeywell’s Italian affiliate transferred its remaining obligations to an unaffiliated company based in
Dubai in the fourth quarter of 2010. Honeywell has not performed any services or provided any
materials under these contracts after the first quarter of 2011, and it does not intend to provide any
further services or materials under these contracts, in accordance with Company policy and applicable
laws. OFAC issued a General License in 31 CFR § 560.555 valid from October 9, 2012 to March 8,
2013, which permits transactions ordinarily incident to the wind-down of operations involving Iran by
foreign subsidiaries of U.S. companies. Honeywell’s non-U.S. affiliate in Italy received payments of
$187,000 (out of a total of $1,120,000 received in 2012) during the validity period of the General
License. To Honeywell’s knowledge, neither it nor any of its affiliates engaged in any other activity
during 2012 required to be disclosed under the Securities Exchange Act of 1934.
Financial information including net sales and long-lived assets related to geographic areas is
included in Note 25 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. Although we
occasionally experience disruption in raw materials supply, we experienced no significant problems in
the purchase of key raw materials and commodities in 2012. We are not dependent on any one
supplier for a material amount of our raw materials, except related to R240 (a key component in foam
blowing agents), a raw material used in our Performance Materials and Technologies segment.
The costs of certain key raw materials, including cumene, fluorspar, perchloroethylene, R240,
natural gas, sulfur and ethylene in our Performance Materials and Technologies business, nickel, steel
and other metals in our Transportation Systems business, and nickel, titanium and other metals in our
Aerospace business, are expected to continue to fluctuate. 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 2013. See “Item 1A. Risk Factors” for further discussion.
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
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