Honeywell 2013 Annual Report Download

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ANNU A L REPOR T
2013

Table of contents

  • Page 1
    2 0 1 3 A N N U A L R E P O R T

  • Page 2
    ...planting...products, technologies, restructuring, geographies, services, processes, new capacity...to ensure that growth continues far into the future. Five-Year Plan The year 2014 is the last in the five-year plan (2010-2014) Honeywell introduced in March 2010. Despite economic and foreign exchange...

  • Page 3
    ... our key process drivers the Honeywell Operating System (HOS), Velocity Product Developmentâ„¢ (VPDâ„¢), and Functional Transformation (FT). Improving those processes constantly allows our 131,000+ employees to be more efficient and effective every day. We can make all kinds of great business and...

  • Page 4
    ...-to-market adjustment ** Free cash flow (cash flow from operations less capital expenditures) and free cash flow conversion prior to any cash pension contributions, NARCO Trust establishment payments and cash taxes relating to the sale of available for sale investments. 2008 free cash flow excludes...

  • Page 5
    ...a good job for customers in quality, delivery, new products, and project delivery then there won't be any success for our employees or our investors. Our customers' success is our success. It's exciting to be at Honeywell. We look forward to sharing our new five-year plan with you at Investor Day on...

  • Page 6
    ... a blended tax rate of 25.5%. 2) Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market Adjustment and Calculation of Segment Profit and Operating Income Margin Excluding Pension Mark-to-Market Adjustment ($M) 2009 2012 2013 Segment Profit...Stock Based Compensation...

  • Page 7
    ... for Property, Plant and Equipment . (629) $1,624 Cash Pension Contributions ...74 Free Cash Flow...$1,698 Net Income Attributable to Honeywell ...$1,442 Pension Mark-to-Market Adjustment, 58 Net of Tax (a)...Net Income Attributable to Honeywell Excluding Pension Mark-to-Market Adjustment. $1,500...

  • Page 8
    ..., Plant and Equipment ...Cash Pension Contributions ...Cash Taxes Relating to the Sale of the Consumable Solutions Business ...Free Cash Flow...Net Income Attributable to Honeywell ...Pension Mark-to-Market Adjustment, Net of Tax (a) ...Net Income Attributable to Honeywell Excluding Pension Mark...

  • Page 9
    ... 2009 2010 2011 2012 Cash Provided by Operating Activities...Expenditures for Property, Plant and Equipment ...Cash Pension Contributions ...Free Cash Flow ...Net Income Attributable to Honeywell ...Pension Mark-to-Market Adjustment, Net of Tax (a) ...Net Income Attributable to Honeywell Excluding...

  • Page 10
    ... for Property, Plant and Equipment ...Cash Pension Contributions ...NARCO Trust Establishment Payments ...Cash Taxes Relating to the Sale of Available for Sale Investments ...Free Cash Flow...Net Income Attributable to Honeywell ...Pension Mark-to-Market Adjustment, Net of Tax (a) ...Net Income...

  • Page 11
    ... New Jersey (Address of principal executive offices) Registrant's telephone number, including area code (973) 455-2000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, par value $1 per share* 91⁄2% Debentures due June 1, 2016 22-2640650 (I.R.S. Employer...

  • Page 12
    ... Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...6. Selected Financial Data ...7. Management's Discussion and Analysis of Financial Condition and Results of Operations ...7A. Quantitative and Qualitative Disclosures About Market Risk...8. Financial Statements...

  • Page 13
    ... and Controller) and employees. Major Businesses We globally manage our business operations through four businesses that are reported as operating segments: Aerospace, Automation and Control Solutions, Performance Materials and Technologies, and Transportation Systems. Financial information related...

  • Page 14
    ... auxiliary power units Jet fuel starters Secondary power systems Ground power units Repair, overhaul and spare parts Environmental control systems Major Products/Services Air management systems: Air conditioning Bleed air Cabin pressure control Air purification and treatment Gas Processing Heat...

  • Page 15
    ... Collins Thales Trimble/Terra United Technologies Universal Avionics Universal Weather Radios, radar, navigation communication, datalink safety systems Major Customers/Uses Commercial, business and general aviation aircraft Government aviation Military aircraft Key Competitors BAE Boeing/Jeppesen...

  • Page 16
    ... facilities. Environmental and combustion controls; sensing controls Major Products/Services Heating, ventilating and air conditioning controls and components for homes and buildings Major Customers/Uses Original equipment manufacturers (OEMs) Distributors Contractors Key Competitors Amphenol Bosch...

  • Page 17
    ... home solutions Access controls and closed circuit television Home health monitoring and nurse contractor, retail and utility call systems Gas and radiation detection products and systems Emergency lighting Distribution Personal protection equipment Major Customers/Uses OEMs Retailers Distributors...

  • Page 18
    ... guidance systems Major Customers/Uses Building managers and owners Contractors, architects and developers Consulting engineers Security directors Plant managers Utilities Large global corporations Public school systems Universities Local governments Public housing agencies Airports Key Competitors...

  • Page 19
    ... air conditioning Polyurethane foam Precision cleaning Optical Appliances Hospitals Medical equipment Manufacturers Key Competitors Asahi Arkema Daikin Dupont Mexichem Fluor Sinochem Solvay 3M Nuclear services Major Products/Services UF6 conversion services Major Customers/Uses Nuclear fuel...

  • Page 20
    ...Customers/Uses Coatings and inks PVC pipe, siding & profiles Plastics Reflective coatings Safety & security applications Key Competitors BASF Clariant Westlake Semiconductor materials and services Major Products/Services Interconnect-dielectrics Interconnect-metals Semiconductor packaging materials...

  • Page 21
    ... Technology licensing of Process, catalysts, absorbents, Refining equipment and services for producing renewable-based fuels and chemicals Gas processing and hydrogen Major Products/Services Design, engineer, manufacture and install natural gas processing hydrogen separation plants Major Customers...

  • Page 22
    ... of the government programs which impact us (OEM production, engineering development programs, aftermarket spares and repairs and overhaul programs), increases in direct foreign defense and space market sales, as well as our diversified commercial businesses. 10 Major Customers/Uses Automotive and...

  • Page 23
    ... Automation and Control Solutions sales. The principal manufacturing facilities outside the U.S. are in Europe and Asia, with less significant operations in Canada and Australia. Approximately 30 percent of total 2013 sales of Performance Materials and Technologies products and services were exports...

  • Page 24
    ...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...

  • Page 25
    ... likely to have a material effect in the foreseeable future on the Company's business or markets that it serves, nor on its results of operations, capital expenditures or financial position. We will continue to monitor emerging developments in this area. Further information, including the current...

  • Page 26
    ... and semiconductor plants, our customers' availability of capital for refinery construction and expansion, and raw material demand and supply volatility. Transportation Systems' operating results, which generated 10 percent of our consolidated revenues in 2013, are impacted by global production and...

  • Page 27
    ... Systems (nickel, steel and other metals) and Aerospace (nickel, titanium and other metals) segments. Our inability to offset material price inflation through increased prices to customers, formula or long-term fixed price contracts with suppliers, productivity actions or through commodity...

  • Page 28
    ... can range from uncoordinated individual attempts to gain unauthorized access to information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company and/or its third party service providers. While we have experienced, and expect to...

  • Page 29
    ...in exchange rates of emerging market currencies present uncertainties that complicate planning and could unexpectedly impact our profitability, presenting increased counterparty risk with respect to the financial institutions with whom we do business. While we employ comprehensive controls regarding...

  • Page 30
    ... impact our credit rating and access to the public debt and equity markets. A change in the level of U.S. Government defense and space funding or the mix of programs to which such funding is allocated could adversely impact Aerospace's defense and space sales and results of operations. Sales of our...

  • Page 31
    ... Systems segment. Honeywell sells products that address safety and environmental regulation and a substantial portion of our portfolio is dedicated to energy efficient products and services. Legislation or regulations regarding areas such as labor and employment, employee benefit plans, tax, health...

  • Page 32
    ... business, including matters relating to commercial transactions, government contracts, product liability (including asbestos), prior acquisitions and divestitures, employment, employee benefits plans, intellectual property, antitrust, import and export matters and environmental, health and safety...

  • Page 33
    ... used to calculate retiree health benefit expenses, may adversely affect our financial position and results of operations. Risks related to our defined benefit pension plans may adversely impact our results of operations and cash flow. Significant changes in actual investment return on pension...

  • Page 34
    ..., AZ Tucson, AZ Torrance, CA Clearwater, FL Olathe, KS Minneapolis, MN (partially leased) Plymouth, MN Rocky Mount, NC Albuquerque, NM (partially leased) Urbana, OH Greer, SC Automation and Control Solutions San Diego, CA (leased) Northford, CT Freeport, IL St. Charles, IL (leased) Golden Valley, MN...

  • Page 35
    ... and Chief Executive Officer Transportation Systems since May 2013. Vice President and General Manager of Fluorine Products from March 2007 to May 2013. President and Chief Executive Officer Performance Materials and Technologies since March 2008. President of Environmental and Combustion Controls...

  • Page 36
    ... investing activities. The following table summarizes Honeywell's purchase of its common stock, par value $1 per share, for the three months ended December 31, 2013: Issuer Purchases of Equity Securities (a) (b) (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs...

  • Page 37
    ...$100 had been invested in Honeywell stock and each index on December 31, 2008 and that all dividends were reinvested. COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN 350 300 D O L L A R S 250 200 150 100 50 0 2008 2009 Dec 2008 100 100 100 2010 Dec 2009 123.82 126.46 115.95 2011 Dec 2010 172.74...

  • Page 38
    ... of this Annual Report titled Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 6. Selected Financial Data Years Ended December 31, 2013 2012 2011 2010 2009 (Dollars in millions, except per share amounts) Results of Operations Net sales ...Amounts...

  • Page 39
    ..., marketing and sales-to increase the probability that in commercializing new technologies Honeywell delivers the right products at the right price. • Functional Transformation ("FT"): Functional Transformation is HOS for our administrative functions-Finance, Legal, HR, IT and Purchasing...

  • Page 40
    ... 2011 Volume ...Price...Acquisitions/Divestitures ...Foreign Exchange ... 1% 1% 2% - 4% 2% 1% 2% (2)% 3% A discussion of net sales by segment can be found in the Review of Business Segments section of this MD&A. Cost of Products and Services Sold 2013 2012 2011 Cost of products and services sold...

  • Page 41
    ... in costs resulting from acquisitions, investment for growth and merit increases (net of other employee related costs). Other (Income) Expense 2013 2012 2011 Equity (income) loss of affiliated companies ...Gain on sale of available for sale investments ...Loss (gain) on sale of non-strategic...

  • Page 42
    ... pending divestiture of the Friction Materials business within our Transportation Systems segment. See Note 2, Acquisitions and Divestitures for further details. Other income decreased by $14 million in 2012 compared to 2011 due primarily to a $50 million pre-tax gain related to the divestiture of...

  • Page 43
    ...Business Segments." BUSINESS OVERVIEW This Business Overview provides a summary of Honeywell and its four reportable operating segments (Aerospace, Automation and Control Solutions, Performance Materials and Technologies and Transportation Systems), including their respective areas of focus for 2014...

  • Page 44
    ... productivity and enhance the flexibility of the business as it works to proactively respond to changes in end market demand; • Proactively managing raw material costs through formula and long-term supply agreements and hedging activities, where feasible and prudent; • Driving strong cash flow...

  • Page 45
    ... Technologies Product ...Service ...Total...Transportation Systems Product ...Service ...Total...Corporate Product ...Service ...Total...Segment Profit Aerospace...Automation and Control Solutions ...Performance Materials and Technologies ...Transportation Systems ...Corporate ... 2013 2012 2011...

  • Page 46
    ...services, logistics services, advanced systems and instruments, aircraft wheels and brakes and repair and overhaul services. Aerospace sells its products to original equipment (OE) manufacturers in the air transport, regional, business and general aviation aircraft segments, and provides spare parts...

  • Page 47
    ...: % of Aerospace Sales Customer End-Markets 2013 2012 2011 % Increase (Decrease) in Sales 2012 2013 Versus Versus 2011 2012 Commercial original equipment Air transport and regional ...Business and general aviation ...Commercial original equipment ...Commercial aftermarket Air transport and regional...

  • Page 48
    ...pre-production costs associated with new aircraft platforms (OEM Payments). Details regarding the changes in sales by customer end-markets are as follows: Commercial original equipment (OE) sales increased by 19 percent (12 percent organic) in 2012 compared to 2011. • Air transport and regional OE...

  • Page 49
    ..., lighting and home automation; advanced software applications for home/building control and optimization; sensors, switches, control systems and instruments for measuring pressure, air flow, temperature and electrical current; security, fire and gas detection; personal protection equipment; access...

  • Page 50
    ...; and • Changes to energy, fire, security, health care, safety and environmental concerns and regulations. Automation and Control Solutions 2013 2012 Change 2011 Change Net sales...Cost of products and services sold ...Selling, general and administrative expenses ...Other ...Segment profit... $16...

  • Page 51
    ... unfavorable impact of foreign exchange. • Sales in our Energy, Safety & Security businesses increased by 2 percent (1 percent organic) in 2012 principally due to (i) the positive impact of acquisitions (most significantly EMS Technologies, Inc. and King's Safetywear Limited), net of divestitures...

  • Page 52
    ... and refrigeration, additives and enhanced nylon resin. Performance Materials and Technologies 2013 2012 Change 2011 Change Net sales ...Cost of products and services sold ...Selling, general and administrative expenses ...Other ...Segment profit ... $6,764 4,933 485 75 $1,271 $6,184 4,525 433...

  • Page 53
    ... Chemicals sales, primarily due to the phenol plant acquisition; offset by lower sales in Fluorine Products primarily due to unfavorable pricing reflecting more challenging global end market conditions and the unfavorable impact of foreign exchange. PMT segment profit increased by 11 percent in 2012...

  • Page 54
    ... new vehicle purchases; and • Impact of factors such as consumer confidence on automotive aftermarket demand. Transportation systems 2013 2012 Change 2011 Change Net sales ...Cost of products and services sold ...Selling, general and administrative expenses ...Other ...Segment profit ... $3,755...

  • Page 55
    ... pricing. Cost of products and services sold totaled $3.0 billion in 2013, an increase of $127 million which is primarily a result of increased volume, partially offset by increased productivity. In January 2014, the Company entered into a definitive agreement to sell its Friction Materials business...

  • Page 56
    ...- $254 Performance Materials and Technologies Net repositioning charge ...Transportation Systems Net repositioning charge ...Asbestos related litigation charges, net of insurance . Corporate Net repositioning charge ...Asbestos related litigation charges, net of insurance . Probable and reasonably...

  • Page 57
    ... and access to the public debt and equity markets, as well as the ability to sell trade accounts receivables. We continue to balance our cash and financing uses through investment in our existing core businesses, acquisition activity, share repurchases and dividends. Cash Flow Summary Our cash flows...

  • Page 58
    ... short-term debt in the commercial paper market. Commercial paper notes are sold at a discount and have a maturity of not more than 365 days from date of issuance. Borrowings under the commercial paper program are available for general corporate purposes as well as for financing acquisitions. There...

  • Page 59
    ...in 2014 related to the NARCO Trust. In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, dividends, strategic acquisitions, share repurchases, employee benefit obligations, environmental remediation costs, asbestos claims...

  • Page 60
    ... on market conditions and the level of operating, financing and other investing activities. • Dividends-we increased our dividend rate by 10 percent to $.45 per share of common stock effective with the fourth quarter 2013 dividend. The Company intends to continue to pay quarterly dividends in 2014...

  • Page 61
    ... to the Financial Statements for additional information. (5) These amounts represent our insurance recoveries that are deemed probable for asbestos related liabilities as of December 31, 2013. The timing of insurance recoveries are impacted by the terms of insurance settlement agreements, as well...

  • Page 62
    ... actions related to pension funding obligations. Payments due under our OPEB plans are not required to be funded in advance, but are paid as medical costs are incurred by covered retiree populations, and are principally dependent upon the future cost of retiree medical benefits under our plans. We...

  • Page 63
    ... Leu. Our exposure to market risk from changes in interest rates relates primarily to our net debt and pension obligations. As described in Note 14 Long-term Debt and Credit Agreements and Note 16 Financial Instruments and Fair Value Measures of Notes to the Financial Statements, we issue both fixed...

  • Page 64
    ..., 2013 Interest Rate Sensitive Instruments Long-term debt (including current maturities) ...Interest rate swap agreements ...Foreign Exchange Rate Sensitive Instruments Foreign currency exchange contracts(3)...Commodity Price Sensitive Instruments Forward commodity contracts(4) ...December 31, 2012...

  • Page 65
    ...our global business operations or those of previously owned entities, including matters relating to commercial transactions, government contracts, product liability (including asbestos), prior acquisitions and divestitures, employee benefit plans, intellectual property, and environmental, health and...

  • Page 66
    ... of management's judgments applied in the recognition and measurement of insurance recoveries for asbestos related liabilities. Defined Benefit Pension Plans-We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering the majority of our employees and retirees...

  • Page 67
    ... events and circumstances beyond the control of the Company such as changes in interest rates and the performance of the financial markets. In 2013, 2012 and 2011, we were not required to make contributions to satisfy minimum statutory funding requirements in our U.S. pension plans and did not make...

  • Page 68
    ... assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. To address this uncertainty we perform sensitivity analysis on key estimates and assumptions. We completed our annual impairment test...

  • Page 69
    ... on Long-Term Contracts-In 2013, we recognized approximately 16 percent of our total net sales using the percentage-of-completion method for long-term contracts in our Automation and Control Solutions, Aerospace and Performance Materials and Technologies segments. These long-term contracts are...

  • Page 70
    ... See Note 1 to the financial statements for a discussion of recent accounting pronouncements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Information relating to market risk is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of...

  • Page 71
    ..., 2013 2012 2011 (Dollars in millions, except per share amounts) Product sales ...Service sales ...Net sales ...Costs, expenses and other Cost of products sold ...Cost of services sold ...Selling, general and administrative expenses ...Other (income) expense ...Interest and other financial charges...

  • Page 72
    HONEYWELL INTERNATIONAL INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Years Ended December 31, 2013 2012 2011 (Dollars in millions) Net income ...Other comprehensive income (loss), net of tax Foreign exchange translation adjustment ...Actuarial gains (losses)...Prior service credit ...Prior ...

  • Page 73
    ... ...Inventories ...Deferred income taxes...Investments and other current assets...Total current assets ...Investments and long-term receivables ...Property, plant and equipment-net ...Goodwill ...Other intangible assets-net ...Insurance recoveries for asbestos related liabilities ...Deferred income...

  • Page 74
    ... of common stock ...Proceeds from issuance of long-term debt ...Payments of long-term debt...Excess tax benefits from share based payment arrangements ...Repurchases of common stock...Cash dividends paid ...Other ...Net cash used for financing activities ...Effect of foreign exchange rate changes on...

  • Page 75
    ...December 31, 2013 2012 2011 Shares $ Shares $ Shares $ (in millions) Common stock, par value ...Additional paid-in capital Beginning balance ...Issued for employee savings and option plans...Stock-based compensation expense ...Other owner changes ...Ending balance...Treasury stock Beginning balance...

  • Page 76
    .... All intercompany transactions and balances are eliminated in consolidation. The Consumer Products Group (CPG) automotive aftermarket business had historically been part of the Transportation Systems reportable segment. In accordance with generally accepted accounting principles, CPG is presented...

  • Page 77
    ..., are recognized over the contractual period or as services are rendered. Sales under longterm contracts in the Aerospace, Automation and Control Solutions and Performance Materials and Technologies segments are recorded on a percentage-of-completion method measured on the cost-tocost basis for...

  • Page 78
    ... their selection of our aircraft equipment, predominately wheel and braking system hardware, avionics, and auxiliary power units, for installation on commercial aircraft. These incentives consist of free or deeply discounted products, credits for future purchases of product and upfront cash payments...

  • Page 79
    ... subsidiaries are included in earnings. Derivative Financial Instruments-As a result of our global operating and financing activities, we are exposed to market risks from changes in interest and foreign currency exchange rates and commodity prices, which may adversely affect our operating results...

  • Page 80
    ... earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Use of Estimates-The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make...

  • Page 81
    ... for the interim and annual periods beginning on or after December 15, 2011 (early adoption was prohibited), resulted in a common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and International Financial Reporting Standards. The...

  • Page 82
    ... and outstanding shares of Intermec, a leading provider of mobile computing, RFID and bar code, label and receipt printers for use in warehousing, supply chain, field service and manufacturing environments. Intermec was a U.S. public company that operated globally and had reported 2012 revenues of...

  • Page 83
    ... for tax purposes. The results of Intermec and RAE from the acquisition dates through December 31, 2013 are included in our Automation and Control Solutions segment. The results were not material to the consolidated financial statements. As of December 31, 2013, the purchase accounting for Intermec...

  • Page 84
    ... 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. In December 2011, the Company acquired King's Safetywear Limited (KSW) a leading international provider of branded safety...

  • Page 85
    ... Materials, which has been part of the Transportation Systems segment, is consistent with the Company's strategic focus on its portfolio of differentiated global technologies. In July 2011, the Company sold its Consumer Products Group business (CPG) to Rank Group Limited. The sale was completed...

  • Page 86
    ...statement classification: Years Ended December 31, 2013 2012 2011 Cost of products and services sold ...Selling, general and administrative... 31, 2013 2012 2011 Aerospace ...Automation and Control Solutions ...Performance Materials and Technologies ...Transportation Systems ...Corporate... $ 45...

  • Page 87
    ... our Automation and Control Solutions, Aerospace and Performance Materials and Technologies segments were returned to income in 2012 due primarily to fewer employee severance actions caused by higher attrition than originally planned associated with prior severance programs and changes in the scope...

  • Page 88
    .... The exit and disposal costs related to the repositioning actions in 2013 and 2012 which we were not able to recognize at the time the actions were initiated were not significant. 2011 Repositioning Actions Aerospace Automation and Control Solutions Transportation Systems Total Expected exit and...

  • Page 89
    ... of realized gain related to the sale of marketable equity securities. These securities (B/E Aerospace common stock), designated as available for sale, were obtained in conjunction with the sale of the Consumables Solutions business in July 2008. See Note 16, Financial Instruments and Fair Value...

  • Page 90
    ...(1) Net of changes in valuation allowance The effective tax rate increased by 2.4 percentage points in 2013 compared to 2012. The year over year increase was primarily attributable to lower mark-to-market pension expense in the U.S. Other factors causing an increase in the effective tax rate include...

  • Page 91
    ... financial reporting purposes. The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows: Deferred tax assets: Pension...Postretirement benefits other than pensions ...Asbestos and environmental ...Employee compensation...

  • Page 92
    ... at December 31, 2013 with various expiration dates through 2032. All of these carryforwards were generated by subsidiaries prior to their acquisition. The use of pre-acquisition tax credit carryforwards are subject to limitations imposed by Section 382 of the Internal Revenue Code. We do not...

  • Page 93
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) Generally, our uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. The following table summarizes these open tax ...

  • Page 94
    ... income attributable to Honeywell ... The diluted earnings per share calculations exclude the effect of stock options when the options' assumed proceeds exceed the average market price of the common shares during the period. In 2013, 2012, and 2011 the weighted number of stock options excluded from...

  • Page 95
    ... and the related allowances for credit losses. December 31, 2013 Aerospace ...Automation and Control Solutions ...Performance Materials and Technologies ...Transportation Systems ...Corporate ... $ 14 132 23 15 71 $255 Allowance for credit losses for the above detailed long-term trade, financing...

  • Page 96
    ...for the years ended December 31, 2013 and 2012 by segment is as follows: December 31, 2012 Currency Translation Adjustment December 31, 2013 Acquisitions Aerospace...Automation and Control Solutions ...Performance Materials and Technologies ...Transportation Systems ... $ 2,075 8,343 1,810 197 $12...

  • Page 97
    ... per share amounts) Note 13. Accrued Liabilities December 31, 2013 2012 Compensation, benefit and other employee related ...Customer advances and deferred income ...Asbestos related liabilities ...Repositioning ...Product warranties and performance guarantees ...Environmental costs ...Income taxes...

  • Page 98
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) Note 14. Long-term Debt and Credit Agreements December 31, 2013 2012 4.25% notes due 2013 ...3.875% notes due 2014 ...Floating rate notes due 2015 ...5.40% notes due 2016 ...5.30% notes due ...

  • Page 99
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) letters of credit. The Credit Agreement is maintained for general corporate purposes and amends and restates the previous $3 billion five year credit agreement dated April 2, 2012 ...

  • Page 100
    ... 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...

  • Page 101
    ... Management-Our exposure to market risk for commodity prices can result in changes in our cost of production. We primarily mitigate our exposure to commodity price risk through the use of long-term, fixed-price contracts with our suppliers and formula price agreements with suppliers and customers...

  • Page 102
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) December 31, 2013 2012 Assets: Foreign currency exchange contracts ...Available for sale investments...Interest rate swap agreements ...Forward commodity contracts ...Liabilities: ...

  • Page 103
    ...: Years Ended December 31, 2013 2012 Designated Cash Flow Hedge Income Statement Location Foreign currency exchange contracts ... Forward commodity contracts ... Product sales...Cost of products sold ...Sales & general administrative ...Cost of products sold ... $ (7) (4) (11) $ (1) $ (7) 23 (12...

  • Page 104
    ..., except per share amounts) Ineffective portions of commodity derivative instruments designated in cash flow hedge relationships were insignificant in the years ended December 31, 2013 and 2012 and are classified within cost of products sold. Foreign currency exchange contracts in cash flow hedge...

  • Page 105
    ...Pretax Tax After Tax Year Ended December 31, 2013 Foreign exchange translation adjustment...Pensions and other postretirement benefit adjustments ...Changes in fair value of available for sale investments ...Changes in fair value of effective cash flow hedges ...Year Ended December 31, 2012 Foreign...

  • Page 106
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) Components of Accumulated Other Comprehensive Income (Loss) December 31, 2013 2012 Cumulative foreign exchange translation adjustment...Pensions and other postretirement benefit ...

  • Page 107
    ... stock to key employees. Under the terms of the 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the Plan) there were 25,913,501 shares of Honeywell common stock available for future grants at December 31, 2013. Additionally, under the 2006 Stock Plan for Non-Employee...

  • Page 108
    ...NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) The following table summarizes information about stock option activity for the three years ended December 31, 2013: Number of Options Weighted Average Exercise Price Outstanding at December 31, 2010...Granted...

  • Page 109
    ... the fifth anniversary of continuous Board service. In 2011, each non-employee director received an annual grant to purchase 5,000 shares of common stock at the fair market value on the date of grant. In 2012, the annual equity grant changed from a fixed number of shares to a target value of $75,000...

  • Page 110
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) 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. Noncontrolling interests with redemption ...

  • Page 111
    ... financial position. New Jersey Chrome Sites-The excavation and offsite disposal of approximately one million tons of chromium residue present at a predecessor Honeywell site located in Jersey City, New Jersey, known as Study Area 7, was completed in January 2010. We are also implementing related...

  • Page 112
    .... NARCO produced refractory products (bricks and cement used in high temperature applications). We sold the NARCO business in 1986 and agreed to indemnify NARCO with respect to personal injury claims for products that had been discontinued prior to the sale (as defined in the sale agreement). NARCO...

  • Page 113
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) Insurance Recoveries for Asbestos Related Liabilities Year Ended December 31, 2013 Bendix NARCO Total Year Ended December 31, 2012 Bendix NARCO Total Year Ended December 31, 2011 ...

  • Page 114
    ...NARCO asbestos claims reflects coverage which reimburses Honeywell for portions of NARCO-related indemnity and defense costs and is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. We conduct...

  • Page 115
    ... light of any changes to the projected liability or other developments that may impact insurance recoveries. Friction Products-The following tables present information regarding Bendix related asbestos claims activity: Years Ended December 31, 2013 2012 Claims Activity Claims Claims Claims Claims...

  • Page 116
    ... substantial amounts claimed) arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and environmental, health and safety matters...

  • Page 117
    ...would increase by approximately $180 million, reflecting the estimated value of these CAPS. Joint Strike Fighter Investigation-In 2013 the Company received subpoenas from the Department of Justice requesting information relating primarily to parts manufactured in the United Kingdom and China used in...

  • Page 118
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) The following table summarizes information concerning our recorded obligations for product warranties and product performance guarantees: Years Ended December 31, 2013 2012 2011 ...

  • Page 119
    ... limits our exposure to the impact of future health care cost increases. The retiree medical and life insurance plans are not funded. Claims and expenses are paid from our operating cash flow. In 2013, Honeywell amended its U.S. retiree medical plans to no longer offer certain retirees Company group...

  • Page 120
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) Pension Benefits U.S. Plans Non-U.S. Plans 2013 2012 2013 2012 Change in benefit obligation: Benefit obligation at beginning of year...Service cost ...Interest cost ...Plan ...

  • Page 121
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) Other Postretirement Benefits 2013 2012 Change in benefit obligation: Benefit obligation at beginning of year...Service cost ...Interest cost ...Plan amendments ...Actuarial (gains...

  • Page 122
    ..., 2012, and 2011 include the following components: Pension Benefits Net Periodic Benefit Cost 2013 U.S. Plans 2012 2011 Non-U.S. Plans 2013 2012 2011 Service cost ...Interest cost ...Expected return on plan assets...Amortization of transition obligation ...Amortization of prior service cost (credit...

  • Page 123
    ... benefit plans are presented in the following table. U.S. Plans 2012 Pension Benefits Non-U.S. Plans 2011 2013 2012 2011 2013 Actuarial assumptions used to determine benefit obligations as of December 31: Discount rate ...Expected annual rate of compensation increase ...Actuarial assumptions used...

  • Page 124
    ...Honeywell Corporate Investments group providing standard funding and investment guidance. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. While our non-U.S. investment policies are different...

  • Page 125
    ... 31, 2012 Level 1 Level 2 Level 3 Common stock/preferred stock: Honeywell common stock ...U.S. large cap stocks...U.S. mid cap stocks ...U.S. small cap stocks ...International stocks ...Real estate investment trusts ...Fixed income investments: Short term investments ...Government securities...

  • Page 126
    ... NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) Non-U.S. Plans December 31, 2013 Level 1 Level 2 Total Level 3 Common stock/preferred stock: U.S. companies ...Non-U.S. companies ...Fixed income investments: Short-term investments ...Government securities...

  • Page 127
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) The following tables summarize changes in the fair value of Level 3 assets for the years ended December 31, 2013 and 2012: U.S. Plans Private Funds Direct Private Investments Hedge...

  • Page 128
    ... expected future service, as appropriate, are expected to be paid as follows: U.S. Plans Non-U.S. Plans 2014...2015...2016...2017...2018...2019-2023 ...Other Postretirement Benefits $1,068 1,111 1,106 1,105 1,118 5,675 $ 202 208 213 219 226 1,228 December 31, 2013 2012 Assumed health care cost...

  • Page 129
    ... million in 2013, 2012, and 2011, respectively. Note 24. Segment Financial Data We globally manage our business operations through four reportable operating segments serving customers worldwide with aerospace products and services, control, sensing and security technologies for buildings, homes and...

  • Page 130
    ... 31, 2013 2012 2011 Net Sales Aerospace Product ...Service ...Total ...Automation and Control Solutions Product ...Service ...Total ...Performance Materials and Technologies Product ...Service ...Total ...Transportation Systems Product ...Service ...Total ...Corporate Product ...Service ...Total...

  • Page 131
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) December 31, 2012 2013 2011 Total Assets Aerospace ...Automation and Control Solutions ...Performance Materials and Technologies ...Transportation Systems ...Corporate... $ 9,160...

  • Page 132
    ... for asbestos related liabilities ...Asbestos related liability payments...Interest paid, net of amounts capitalized ...Income taxes paid, net of refunds ...Non-cash investing and financing activities: Common stock contributed to savings plans...Note 27. Unaudited Quarterly Financial Information Mar...

  • Page 133
    ... regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements...

  • Page 134
    ... because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of Honeywell's internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria...

  • Page 135
    ... are "independent" as that term is defined in applicable SEC Rules and NYSE listing standards. Honeywell's Code of Business Conduct is available, free of charge, on our website under the heading "Investor Relations" (see "Corporate Governance"), or by writing to Honeywell, 101 Columbia Road, Morris...

  • Page 136
    ... countries. A sub-plan of the Honeywell Global Stock Plan, the UK Sharebuilder Plan, allows an eligible UK employee to contribute a specified percentage of their taxable earnings that is then invested in shares. The Company matches those shares and dividends paid are used to purchase additional 124

  • Page 137
    ... under Honeywell's U.S. tax-qualified savings plan if the Internal Revenue Code limitations on compensation and contributions did not apply. The Company matching contribution is credited to participants' accounts in the form of notional shares of Common Stock. The notional shares are distributed...

  • Page 138
    .... All notional investments in shares of Common Stock are converted to cash when payments are made under the directors' plan. The amount of securities available for future issuance under the Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of Honeywell International Inc. and...

  • Page 139
    .... HONEYWELL INTERNATIONAL INC. Date: February 14, 2014 By: /s/ Adam M. Matteo Adam M. Matteo Vice President and Controller (on behalf of the Registrant and as the Registrant's Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has...

  • Page 140
    ... Item 601(b) of Regulation S-K, Honeywell agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request. 2003 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (incorporated by reference to Honeywell's Proxy Statement, dated March 17, 2003...

  • Page 141
    ... by Exhibit 10.14 to Honeywell's Form 10-K for the year ended December 31, 2008 Honeywell International Inc. Severance Plan for Corporate Staff Employees (Involuntary Termination Following a Change in Control), as amended and restated (filed herewith) Employment Agreement dated as of February 18...

  • Page 142
    ...to Exhibit 10.4 to Honeywell's Form 10-Q for the quarter ended March 31, 2012) 2007 Honeywell Global Employee Stock Plan (incorporated by reference to Honeywell's Proxy Statement, dated March 12, 2007, filed pursuant to Rule 14a6 of the Securities Exchange Act of 1934) Letter Agreement dated July 20...

  • Page 143
    ... S.A., Honeywell International Inc. and Honeywell Holding France SAS (incorporated by reference to Exhibit 10.1 to Honeywell's Form 10-Q for the quarter ended June 30, 2010) Stock and Asset Purchase Agreement dated January 27, 2011 by and among Honeywell International Inc., Rank Group Limited and...

  • Page 144
    HONEYWELL INTERNATIONAL INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Three Years Ended December 31, 2013 (Dollars in millions) Allowance for Doubtful Accounts: Balance December 31, 2010 ...Provision charged to income ...Deductions from reserves...Acquisitions ...Balance December 31, 2011 ......

  • Page 145
    ... and Control Solutions TERRENCE A. HAHN Corporate Vice President Chief Strategy and Marketing Officer RICHARD W. GRABER Senior Vice President Global Government Relations ADAM M. MATTEO Honeywell's Dividend Reinvestment and Share Purchase Plan provides for automatic reinvestment of common stock...

  • Page 146
    Aerospace • Automation and Control Solutions • Performance Materials and Technologies • Transportation Systems Honeywell International Inc. 101 Columbia Road P.O. Box 2245 Morristown, NJ 07962-2245 USA For more information about Honeywell, visit www.honeywell.com.