Honeywell 2012 Annual Report Download - page 77

approximately $600 million, net of cash acquired. Intermec is a U.S. public company which operates
globally and had reported 2011 revenues of approximately $850 million. The transaction is expected to
close by the end of the second quarter of 2013, pending Intermec shareholder approval and following
customary regulatory reviews. The acquisition is expected to be funded with available cash and the
issuance of commercial paper. Intermec will be integrated into our Automation and Control Solutions
segment.
On October 22, 2012, the Company acquired a 70 percent controlling interest in Thomas Russell
Co., a privately-held leading provider of technology and equipment for natural gas processing and
treating, for approximately $525 million ($368 million, net of cash acquired). Thomas Russell Co.’s
results of operations have been consolidated into the Performance Materials and Technologies
segment, with the noncontrolling interest portion reflected in net income attributable to the
noncontrolling interest in the Consolidated Statement of Operations. During the calendar year 2016,
Honeywell has the right to acquire and the noncontrolling shareholder has the right to sell to Honeywell
the remaining 30 percent interest at a price based on a multiple of Thomas Russell Co.’s average
annual operating income from 2013 to 2015, subject to a predetermined cap and floor. Additionally,
Honeywell has the right to acquire the remaining 30 percent interest for a fixed price equivalent to the
cap at any time on or before December 31, 2015. See Note 21 Redeemable Noncontrolling Interest.
The aggregate value of Thomas Russell Co. was allocated to tangible and identifiable intangible
assets acquired and liabilities assumed based on their consolidated estimated fair values at the
acquisition date. On a preliminary basis, the Company has assigned approximately $215 million to
identifiable intangible assets. The intangible assets are predominantly backlog, technology, and
trademarks. These intangible assets are being amortized over their estimated lives, which range from 2
to 10 years, using both straight-line and accelerated amortization methods. The excess of the
purchase price over the estimated fair values of net assets acquired (approximating $440 million), was
recorded as goodwill. This goodwill arises primarily from the avoidance of the time and costs which
would be required (and the associated risks that would be encountered) to enhance our product
offerings to key target markets and serve as entry into new and profitable businesses within the
Performance Materials and Technologies segment. Our interest in the acquired goodwill is deductible
for tax purposes.
The following amounts represent the preliminary determination of the fair value of the identifiable
assets acquired and liabilities assumed.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 157
Accounts and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (221)
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18)
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (149)
Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 525
The results from the acquisition date through December 31, 2012 are included in the Performance
Materials and Technologies segment and were not material to the consolidated financial statements.
As of December 31, 2012, the purchase accounting for Thomas Russell Co. is subject to final
adjustment primarily for the determination of useful lives of intangible assets, amounts allocated to
intangible assets and goodwill, and tax balances.
In December 2011, the Company acquired King’s Safetywear Limited (KSW), a leading
international provider of branded safety footwear. The aggregate value, net of cash acquired, was
68
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)