Honeywell 2012 Annual Report Download - page 94

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Note 15—Lease Commitments
Future minimum lease payments under operating leases having initial or remaining noncancellable
lease terms in excess of one year are as follows:
At December 31,
2012
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 305
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
$1,288
We have entered into agreements to lease land, equipment and buildings. Principally all our
operating leases have initial terms of up to 25 years, and some contain renewal options subject to
customary conditions. At any time during the terms of some of our leases, we may at our option
purchase the leased assets for amounts that approximate fair value. We do not expect that any of our
commitments under the lease agreements will have a material adverse effect on our consolidated
results of operations, financial position or liquidity.
Rent expense was $390, $386 and $369 million in 2012, 2011 and 2010, respectively.
Note 16—Financial Instruments and Fair Value Measures
Credit and Market Risk—Financial instruments, including derivatives, expose us to counterparty
credit risk for nonperformance and to market risk related to changes in interest and currency exchange
rates and commodity prices. We manage our exposure to counterparty credit risk through specific
minimum credit standards, diversification of counterparties, and procedures to monitor concentrations
of credit risk. Our counterparties in derivative transactions are substantial investment and commercial
banks with significant experience using such derivative instruments. We monitor the impact of market
risk on the fair value and cash flows of our derivative and other financial instruments considering
reasonably possible changes in interest rates, currency exchange rates and commodity prices and
restrict the use of derivative financial instruments to hedging activities.
We continually monitor the creditworthiness of our customers to which we grant credit terms in the
normal course of business. The terms and conditions of our credit sales are designed to mitigate or
eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent
on a single customer or a small group of customers.
Foreign Currency Risk Management—We conduct our business on a multinational basis in a
wide variety of foreign currencies. Our exposure to market risk for changes in foreign currency
exchange rates arises from international financing activities between subsidiaries, foreign currency
denominated monetary assets and liabilities and transactions arising from international trade. Our
objective is to preserve the economic value of non-functional currency denominated cash flows. We
attempt to hedge transaction exposures with natural offsets to the fullest extent possible and, once
these opportunities have been exhausted, through foreign currency exchange forward and option
contracts with third parties.
We hedge monetary assets and liabilities denominated in non-functional currencies. Prior to
conversion into U.S. dollars, these assets and liabilities are remeasured at spot exchange rates in
effect on the balance sheet date. The effects of changes in spot rates are recognized in earnings and
included in Other (Income) Expense. We partially hedge forecasted sales and purchases, which
predominantly occur in the next twelve months and are denominated in non-functional currencies, with
85
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)