United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March
31, 2015
OR
o TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-8974
Honeywell
International Inc. |
(Exact
name of registrant as specified in its charter) |
|
Delaware |
|
22-2640650 |
|
(State
or other jurisdiction of |
|
(I.R.S.
Employer |
|
incorporation
or organization) |
|
Identification
No.) |
|
|
|
|
|
101 Columbia Road
Morris Township, New Jersey |
|
07962 |
|
(Address
of principal executive offices) |
|
(Zip Code) |
|
(973)
455-2000 |
|
|
(Registrant’s
telephone number, including area code) |
|
|
|
|
|
Not
Applicable |
|
|
(Former
name, former address and former fiscal year, |
|
|
if changed
since last report) |
|
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of
“accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer o
Non-Accelerated filer o Smaller reporting company o
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes o
No x
There were 781,707,489 shares of Common Stock outstanding at
March 31, 2015.
Honeywell International Inc.
Index
Cautionary Statement about Forward-Looking
Statements
This report contains “forward-looking
statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those
that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates
will or may occur in the future. They are based on management’s assumptions and assessments in the light of past experience
and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees
of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking
statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both
the near- and long-term. These forward-looking statements should be considered in the light of the information included in this
report and our other filings with the Securities and Exchange Commission, including, without limitation, the Risk Factors, as
well as the description of trends and other factors in Management’s Discussion and Analysis of Financial Condition and Results
of Operations, set forth in our Form 10-K for the year ended December 31, 2014.
PART I. FINANCIAL INFORMATION
The financial statements and related footnotes as of March 31,
2015 should be read in conjunction with the financial statements for the year ended December 31, 2014 contained in our 2014 Annual
Report on Form 10-K.
ITEM 1. FINANCIAL STATEMENTS
Honeywell International Inc.
Consolidated Statement of Operations
(Unaudited)
| |
Three Months Ended | |
| |
March
31, | |
| |
2015 | | |
2014 | |
| |
(Dollars in millions, except per
share amounts) | |
Product
sales | |
$ | 7,364 | | |
$ | 7,845 | |
Service
sales | |
| 1,849 | | |
| 1,834 | |
Net
sales | |
| 9,213 | | |
| 9,679 | |
| |
| | | |
| | |
Costs, expenses
and other | |
| | | |
| | |
Cost of products
sold | |
| 5,213 | | |
| 5,779 | |
Cost
of services sold | |
| 1,149 | | |
| 1,188 | |
| |
| 6,362 | | |
| 6,967 | |
Selling, general
and administrative expenses | |
| 1,230 | | |
| 1,339 | |
Other (income)
expense | |
| (20 | ) | |
| (117 | ) |
Interest
and other financial charges | |
| 77 | | |
| 79 | |
| |
| 7,649 | | |
| 8,268 | |
Income before
taxes | |
| 1,564 | | |
| 1,411 | |
Tax
expense | |
| 418 | | |
| 375 | |
Net income | |
| 1,146 | | |
| 1,036 | |
| |
| | | |
| | |
Less:
Net income attributable to the noncontrolling interest | |
| 30 | | |
| 19 | |
| |
| | | |
| | |
Net
income attributable to Honeywell | |
$ | 1,116 | | |
$ | 1,017 | |
| |
| | | |
| | |
Earnings
per share of common stock - basic: | |
$ | 1.42 | | |
$ | 1.30 | |
Earnings
per share of common stock - assuming dilution: | |
$ | 1.41 | | |
$ | 1.28 | |
Cash dividends
per share of common stock | |
$ | 0.5175 | | |
$ | 0.4500 | |
The Notes to Financial Statements are an
integral part of this statement.
Honeywell International Inc.
Consolidated Statement of Comprehensive
Income
(Unaudited)
| |
Three Months Ended | |
| |
March
31, | |
| |
2015 | | |
2014 | |
| |
(Dollars in millions) | |
Net income | |
$ | 1,146 | | |
$ | 1,036 | |
Other comprehensive loss, net of tax | |
| | | |
| | |
Foreign exchange translation adjustment | |
| (721 | ) | |
| (5 | ) |
| |
| | | |
| | |
Actuarial (losses) gains recognized | |
| (2 | ) | |
| 4 | |
Prior service costs recognized | |
| 5 | | |
| — | |
Pension and other postretirement benefits adjustments | |
| 3 | | |
| 4 | |
| |
| | | |
| | |
Unrealized losses | |
| — | | |
| (11 | ) |
Less: Reclassification adjustment
for gains included in net income | |
| — | | |
| 71 | |
Changes in fair value of available for sale investments | |
| — | | |
| (82 | ) |
| |
| | | |
| | |
Effective portion of cash flow hedges recognized in other
comprehensive income | |
| 105 | | |
| 9 | |
Less: Reclassification adjustment
for gains (losses) included in net income | |
| 27 | | |
| (4 | ) |
Changes in fair value of effective
cash flow hedges | |
| 78 | | |
| 13 | |
Other comprehensive loss, net of
tax | |
| (640 | ) | |
| (70 | ) |
| |
| | | |
| | |
Comprehensive income | |
| 506 | | |
| 966 | |
Less: Comprehensive income attributable
to the noncontrolling interest | |
| 30 | | |
| 19 | |
Comprehensive income attributable
to Honeywell | |
$ | 476 | | |
$ | 947 | |
The Notes to Financial Statements are an
integral part of this statement.
Honeywell International Inc.
Consolidated Balance Sheet
(Unaudited)
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(Dollars in millions) | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash
and cash equivalents | |
$ | 6,575 | | |
$ | 6,959 | |
Accounts,
notes and other receivables | |
| 8,158 | | |
| 7,960 | |
Inventories | |
| 4,507 | | |
| 4,405 | |
Deferred
income taxes | |
| 656 | | |
| 722 | |
Investments
and other current assets | |
| 2,376 | | |
| 2,145 | |
Total
current assets | |
| 22,272 | | |
| 22,191 | |
| |
| | | |
| | |
Investments
and long-term receivables | |
| 464 | | |
| 465 | |
Property,
plant and equipment - net | |
| 5,300 | | |
| 5,383 | |
Goodwill | |
| 12,685 | | |
| 12,788 | |
Other intangible
assets - net | |
| 2,190 | | |
| 2,208 | |
Insurance
recoveries for asbestos related liabilities | |
| 445 | | |
| 454 | |
Deferred income
taxes | |
| 329 | | |
| 404 | |
Other assets | |
| 1,672 | | |
| 1,558 | |
Total
assets | |
$ | 45,357 | | |
$ | 45,451 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts
payable | |
$ | 5,263 | | |
$ | 5,365 | |
Short-term borrowings | |
| 47 | | |
| 51 | |
Commercial
paper | |
| 2,695 | | |
| 1,647 | |
Current
maturities of long-term debt | |
| 1,304 | | |
| 939 | |
Accrued
liabilities | |
| 6,123 | | |
| 6,771 | |
Total
current liabilities | |
| 15,432 | | |
| 14,773 | |
| |
| | | |
| | |
Long-term debt | |
| 5,661 | | |
| 6,046 | |
Deferred income
taxes | |
| 210 | | |
| 236 | |
Postretirement
benefit obligations other than pensions | |
| 911 | | |
| 911 | |
Asbestos related
liabilities | |
| 1,197 | | |
| 1,200 | |
Other liabilities | |
| 4,027 | | |
| 4,282 | |
| |
| | | |
| | |
Redeemable
noncontrolling interest | |
| 242 | | |
| 219 | |
| |
| | | |
| | |
SHAREOWNERS’
EQUITY | |
| | | |
| | |
Capital -
common stock issued | |
| 958 | | |
| 958 | |
- additional
paid-in capital | |
| 5,153 | | |
| 5,038 | |
Common stock
held in treasury, at cost | |
| (10,281 | ) | |
| (9,995 | ) |
Accumulated
other comprehensive loss | |
| (2,099 | ) | |
| (1,459 | ) |
Retained earnings | |
| 23,811 | | |
| 23,115 | |
Total
Honeywell shareowners’ equity | |
| 17,542 | | |
| 17,657 | |
Noncontrolling
interest | |
| 135 | | |
| 127 | |
Total
shareowners’ equity | |
| 17,677 | | |
| 17,784 | |
Total
liabilities, redeemable noncontrolling interest and shareowners’ equity | |
$ | 45,357 | | |
$ | 45,451 | |
The Notes to Financial Statements are an
integral part of this statement.
Honeywell International Inc.
Consolidated Statement of Cash Flows
(Unaudited)
| |
Three Months Ended | |
| |
March 31, | |
| |
2015 | | |
2014 | |
| |
(Dollars in millions) | |
Cash flows from operating activities: | |
| | | |
| | |
Net income | |
$ | 1,146 | | |
$ | 1,036 | |
Less: Net income attributable to the noncontrolling interest | |
| 30 | | |
| 19 | |
Net income attributable to Honeywell | |
| 1,116 | | |
| 1,017 | |
Adjustments to reconcile net income
attributable to Honeywell to net cash provided by operating activities: | |
| | | |
| | |
Depreciation | |
| 163 | | |
| 168 | |
Amortization | |
| 53 | | |
| 70 | |
Gain on sale of available for sale investments | |
| — | | |
| (105 | ) |
Repositioning and other charges | |
| 131 | | |
| 214 | |
Net payments for repositioning and other charges | |
| (100 | ) | |
| (125 | ) |
Pension and other postretirement income | |
| (91 | ) | |
| (49 | ) |
Pension and other postretirement benefit payments | |
| (9 | ) | |
| (36 | ) |
Stock compensation expense | |
| 52 | | |
| 52 | |
Deferred income taxes | |
| 93 | | |
| 2 | |
Excess tax benefits from share based payment arrangements | |
| (47 | ) | |
| (30 | ) |
Other | |
| (102 | ) | |
| (24 | ) |
Changes in assets and liabilities, net
of the effects of acquisitions and divestitures: | |
| | | |
| | |
Accounts, notes and other receivables | |
| (170 | ) | |
| (154 | ) |
Inventories | |
| (86 | ) | |
| (115 | ) |
Other current assets | |
| 58 | | |
| 236 | |
Accounts payable | |
| (112 | ) | |
| (41 | ) |
Accrued liabilities | |
| (528 | ) | |
| (392 | ) |
Net cash provided by operating activities | |
| 421 | | |
| 688 | |
Cash flows from investing activities: | |
| | | |
| | |
Expenditures for property, plant and equipment | |
| (165 | ) | |
| (192 | ) |
Proceeds from disposals of property, plant and equipment | |
| 1 | | |
| 7 | |
Increase in investments | |
| (1,501 | ) | |
| (631 | ) |
Decrease in investments | |
| 1,106 | | |
| 410 | |
Cash paid for acquisitions, net of cash acquired | |
| (185 | ) | |
| — | |
Proceeds from sales of businesses, net of fees paid | |
| 2 | | |
| — | |
Other | |
| (178 | ) | |
| 61 | |
Net cash used for investing activities | |
| (920 | ) | |
| (345 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Net increase in commercial paper | |
| 1,048 | | |
| 1,100 | |
Net increase (decrease) in short-term borrowings | |
| 4 | | |
| (10 | ) |
Proceeds from issuance of common stock | |
| 78 | | |
| 92 | |
Proceeds from issuance of long-term debt | |
| 3 | | |
| 25 | |
Payments of long-term debt | |
| (35 | ) | |
| (602 | ) |
Excess tax benefits from share based payment arrangements | |
| 47 | | |
| 30 | |
Repurchases of common stock | |
| (363 | ) | |
| (320 | ) |
Cash dividends paid | |
| (415 | ) | |
| (363 | ) |
Net cash provided by (used for) financing activities | |
| 367 | | |
| (48 | ) |
| |
| | | |
| | |
Effect of foreign exchange rate changes on cash and cash
equivalents | |
| (252 | ) | |
| (45 | ) |
Net (decrease) increase in cash and cash equivalents | |
| (384 | ) | |
| 250 | |
Cash and cash equivalents at beginning of period | |
| 6,959 | | |
| 6,422 | |
Cash and cash equivalents at end of period | |
$ | 6,575 | | |
| 6,672 | |
The Notes to Financial Statements are an
integral part of this statement.
Honeywell International Inc.
Notes to
Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
Note 1. Basis of Presentation
In the opinion of management,
the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of Honeywell International Inc. and its consolidated subsidiaries (Honeywell
or the Company) at March 31, 2015 and the results of operations and cash flows for the three months ended March 31, 2015 and 2014.
The results of operations for the three months ended March 31, 2015 should not necessarily be taken as indicative of the results
of operations that may be expected for the entire year.
We report our quarterly
financial information using a calendar convention; that is, the first, second and third quarters are consistently reported as
ending on March 31, June 30 and September 30. It has been our practice to establish actual quarterly closing dates using a predetermined
fiscal calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive
effects of quarterly closing on our business processes. The effects of this practice are generally not significant to reported
results for any quarter and only exist within a reporting year. If differences in actual closing dates are material to year-over-year
comparisons of quarterly or year-to-date results, we provide appropriate disclosures. Our actual closing dates for the three months
ended March 31, 2015 and 2014 were March 28, 2015 and March 29, 2014.
Certain prior year amounts
have been reclassified to conform to current year presentation.
Note 2. Recent Accounting Pronouncements
The Company considers
the applicability and impact of all accounting standard updates (ASUs). ASUs not listed below were assessed and determined to
be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.
In May 2014, the Financial
Accounting Standards Board (FASB) issued guidance on revenue from contracts with customers that will supersede most current revenue
recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue
to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for
those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized.
Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction
price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances.
The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows
arising from an entity’s contracts with customers. The guidance is effective for the interim and annual periods beginning
on or after December 15, 2016 (early adoption is not permitted). The guidance permits the use of either a retrospective or cumulative
effect transition method. We have not yet selected a transition method and are currently evaluating the impact of the amended
guidance on our consolidated financial position, results of operations and related disclosures.
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
Note 3. Repositioning and Other Charges
A summary of repositioning and other charges
follows:
| |
Three
Months Ended March 31, | |
| |
2015 | | |
2014 | |
Severance | |
$ | 37 | | |
$ | 71 | |
Asset impairments | |
| 8 | | |
| 9 | |
Exit costs | |
| 1 | | |
| 8 | |
Adjustments | |
| (7 | ) | |
| (6 | ) |
Total
net repositioning charge | |
| 39 | | |
| 82 | |
| |
| | | |
| | |
Asbestos related litigation charges,
net of insurance | |
| 46 | | |
| 48 | |
Probable and
reasonably estimable environmental liabilities | |
| 46 | | |
| 82 | |
Other | |
| — | | |
| 2 | |
| |
| | | |
| | |
Total
net repositioning and other charges | |
$ | 131 | | |
$ | 214 | |
The following table summarizes the pretax
distribution of total net repositioning and other charges by income statement classification:
| |
Three
Months Ended March 31, | |
| |
2015 | | |
2014 | |
Cost
of products and services sold | |
$ | 122 | | |
$ | 191 | |
Selling,
general and administrative expenses | |
| 9 | | |
| 23 | |
| |
$ | 131 | | |
$ | 214 | |
The following table summarizes the pretax
impact of total net repositioning and other charges by segment:
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | |
Aerospace | |
$ | 48 | | |
$ | 76 | |
Automation and
Control Solutions | |
| 24 | | |
| 46 | |
Performance
Materials and Technologies | |
| 7 | | |
| 14 | |
Corporate | |
| 52 | | |
| 78 | |
| |
$ | 131 | | |
$ | 214 | |
In the quarter ended
March 31, 2015, we recognized repositioning charges totaling $46 million including severance costs of $37 million related to workforce
reductions of 3,040 manufacturing and administrative positions across our segments. The workforce reductions were primarily related
to cost savings actions taken in connection with our productivity and ongoing functional transformation initiatives and outsourcing
of certain component manufacturing in our Automation and Control Solutions (ACS) segment.
In the quarter ended
March 31, 2014, we recognized repositioning charges totaling $88 million including severance costs of $71 million related to workforce
reductions of 1,520 manufacturing and administrative positions across our segments. The workforce reductions were primarily related
to cost savings actions taken in
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
connection with our productivity and ongoing functional transformation initiatives, factory transitions
in ACS to more cost-effective locations, site consolidations and organizational realignments of businesses in ACS.
The following table
summarizes the status of our total repositioning reserves:
| |
Severance
Costs | | |
Asset
Impairments | | |
Exit
Costs | | |
Total | |
December 31, 2014 | |
$ | 285 | | |
$ | — | | |
$ | 30 | | |
$ | 315 | |
Charges | |
| 37 | | |
| 8 | | |
| 1 | | |
| 46 | |
Usage - cash | |
| (24 | ) | |
| — | | |
| (3 | ) | |
| (27 | ) |
Usage - noncash | |
| — | | |
| (8 | ) | |
| — | | |
| (8 | ) |
Foreign currency translation | |
| (9 | ) | |
| — | | |
| (2 | ) | |
| (11 | ) |
Adjustments | |
| (3 | ) | |
| — | | |
| (4 | ) | |
| (7 | ) |
March 31, 2015 | |
$ | 286 | | |
$ | — | | |
$ | 22 | | |
$ | 308 | |
Certain
repositioning projects in our segments in 2015 and 2014 included exit or disposal activities, the costs related to which will
be recognized in future periods when the actual liability is incurred. Such exit and disposal costs were not significant.
Note 4. Earnings Per Share
| |
Three
Months Ended
March 31, | |
Basic | |
2015 | | |
2014 | |
Net income attributable to Honeywell | |
$ | 1,116 | | |
$ | 1,017 | |
| |
| | | |
| | |
Weighted average shares outstanding | |
| 783.8 | | |
| 784.9 | |
| |
| | | |
| | |
Earnings per share of common stock | |
$ | 1.42 | | |
$ | 1.30 | |
| |
| | | |
| | |
| |
Three
Months Ended March 31, | |
Assuming
Dilution | |
2015 | | |
2014 | |
Net income attributable to Honeywell | |
$ | 1,116 | | |
$ | 1,017 | |
| |
| | | |
| | |
Average Shares | |
| | | |
| | |
Weighted average shares outstanding | |
| 783.8 | | |
| 784.9 | |
Dilutive securities issuable - stock
plans | |
| 10.2 | | |
| 11.5 | |
Total weighted average shares outstanding | |
| 794.0 | | |
| 796.4 | |
| |
| | | |
| | |
Earnings per share of common stock | |
$ | 1.41 | | |
$ | 1.28 | |
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. For the three months ended March 31, 2015 and 2014, the weighted average number
of stock options excluded from the computations was 7.8 million and 2.0 million, respectively. These stock options were outstanding
at the end of each of the respective periods.
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
Note 5. Accounts, Notes and Other Receivables
| |
March 31,
2015 | | |
December 31,
2014 | |
| |
| | | |
| | |
Trade | |
$ | 7,868 | | |
$ | 7,788 | |
Other | |
| 557 | | |
| 445 | |
| |
| 8,425 | | |
| 8,233 | |
Less: Allowance for doubtful accounts | |
| (267 | ) | |
| (273 | ) |
| |
$ | 8,158 | | |
$ | 7,960 | |
Trade receivables
include $1,730 and $1,636 million of unbilled balances under long-term contracts as of March 31, 2015 and December 31, 2014.
Note 6. Inventories
| |
March 31,
2015 | | |
December 31,
2014 | |
| |
| | | |
| | |
Raw materials | |
$ | 1,088 | | |
$ | 1,124 | |
Work in process | |
| 828 | | |
| 815 | |
Finished products | |
| 2,708 | | |
| 2,634 | |
| |
| 4,624 | | |
| 4,573 | |
Reduction to LIFO cost basis | |
| (117 | ) | |
| (168 | ) |
| |
$ | 4,507 | | |
$ | 4,405 | |
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
Note 7. Long-term Debt
| |
March
31, 2015 | | |
December
31, 2014 | |
| |
| | | |
| | |
Floating rate notes due 2015 | |
$ | 700 | | |
$ | 700 | |
5.40% notes due 2016 | |
| 400 | | |
| 400 | |
5.30% notes due 2017 | |
| 400 | | |
| 400 | |
5.30% notes due 2018 | |
| 900 | | |
| 900 | |
5.00% notes due 2019 | |
| 900 | | |
| 900 | |
4.25% notes due 2021 | |
| 800 | | |
| 800 | |
3.35% notes due 2023 | |
| 300 | | |
| 300 | |
5.70% notes due 2036 | |
| 550 | | |
| 550 | |
5.70% notes due 2037 | |
| 600 | | |
| 600 | |
5.375% notes due 2041 | |
| 600 | | |
| 600 | |
Industrial development bond obligations, floating rate maturing at various dates through 2037 | |
| 30 | | |
| 30 | |
6.625% debentures due 2028 | |
| 216 | | |
| 216 | |
9.065% debentures due 2033 | |
| 51 | | |
| 51 | |
Other (including capitalized leases), 0.6%-9.5% maturing at various dates through 2023 | |
| 518 | | |
| 538 | |
| |
| 6,965 | | |
| 6,985 | |
Less: current portion | |
| (1,304 | ) | |
| (939 | ) |
| |
$ | 5,661 | | |
$ | 6,046 | |
Note 8. Financial Instruments and Fair Value Measures
Our credit, market, foreign currency and
interest rate risk management policies are described in Note 14, Financial Instruments and Fair Value Measures, of Notes to Financial
Statements in our 2014 Annual Report on Form 10-K.
Financial and nonfinancial
assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The
following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring
basis:
| |
March
31, 2015 | | |
December
31, 2014 | |
Assets: | |
| | | |
| | |
Foreign currency exchange contracts | |
$ | 135 | | |
$ | 20 | |
Available for sale investments | |
| 1,767 | | |
| 1,479 | |
Interest rate swap agreements | |
| 108 | | |
| 93 | |
| |
| | | |
| | |
Liabilities: | |
| | | |
| | |
Foreign currency exchange contracts | |
$ | 29 | | |
$ | 10 | |
The foreign currency
exchange contracts and interest rate swap agreements are valued using broker quotations or market transactions in either the listed
or over-the-counter markets. These derivative instruments are classified within level 2 of the fair value hierarchy. The Company
holds investments in certificates of deposits, time deposits and commercial paper that are designated as available for sale and
are valued using market transactions in over-the-counter markets. These investments are classified within level 2 of the fair
value hierarchy.
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
The carrying value of
cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper and short-term borrowings contained
in the Consolidated Balance Sheet approximates fair value. The following table sets forth the Company’s financial assets
and liabilities that were not carried at fair value:
| |
March 31, 2015 | | |
December 31, 2014 | |
| |
Carrying | | |
Fair | | |
Carrying | | |
Fair | |
| |
Value | | |
Value | | |
Value | | |
Value | |
Assets | |
| | | |
| | | |
| | | |
| | |
Long-term receivables | |
$ | 297 | | |
$ | 292 | | |
$ | 297 | | |
$ | 293 | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Long-term debt and related current maturities | |
$ | 6,965 | | |
$ | 7,813 | | |
$ | 6,985 | | |
$ | 7,817 | |
The Company
determined the fair value of the long-term receivables by discounting based upon the terms of the receivable and counterparty details
including credit quality. These receivables are classified within level 2 of the fair value hierarchy. The Company determined the
fair value of the long-term debt and related current maturities utilizing transactions in the listed markets for identical or similar
liabilities. The long-term debt and related current maturities are also classified within level 2 of the fair value hierarchy.
We enter into
transactions designed to provide for netting of offsetting obligations in the event of the insolvency or default of a counterparty.
However, we have not elected to offset multiple contracts with a single counterparty, therefore the fair value of the derivative
instruments in a loss position is not offset against the fair value of derivative instruments in a gain position.
Interest rate
swap agreements are designated as hedge relationships with gains or losses on the derivative recognized in Interest and other financial
charges offsetting the gains and losses on the underlying debt being hedged. For the three months ended March 31, 2015 and 2014,
we recognized $15 million and $13 million of gains in earnings on interest rate swap agreements. Gains and losses are fully offset
by losses and gains on the underlying debt being hedged.
We also economically
hedge our exposure to changes in foreign exchange rates principally with forward contracts. These contracts are marked-to-market
with the resulting gains and losses recognized in earnings offsetting the gains and losses on the non-functional currency denominated
monetary assets and liabilities being hedged. We recognized $162 million of expense and $57 million of income in Other (Income)
Expense for the three months ended March 31, 2015 and 2014.
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
Note 9. Accumulated Other Comprehensive Income (Loss)
Changes in Accumulated Other Comprehensive Income by Component
| |
| | |
| | |
Changes in | | |
Changes in | | |
| | |
| |
Foreign | | |
Pension | | |
Fair Value | | |
Fair Value | | |
| | |
| |
Exchange | | |
and Other | | |
of Available | | |
of Effective | | |
| | |
| |
Translation | | |
Postretirement | | |
for Sale | | |
Cash Flow | | |
| | |
| |
Adjustment | | |
Adjustments | | |
Investments | | |
Hedges | | |
Total | |
Balance at December 31, 2014 | |
$ | (740 | ) | |
$ | (728 | ) | |
$ | — | | |
$ | 9 | | |
$ | (1,459 | ) |
Other comprehensive income (loss) before reclassifications | |
| (721 | ) | |
| — | | |
| — | | |
| 105 | | |
| (616 | ) |
Amounts reclassified from accumulated other comprehensive income | |
| — | | |
| 3 | | |
| — | | |
| (27 | ) | |
| (24 | ) |
Net current period other comprehensive income (loss) | |
| (721 | ) | |
| 3 | | |
| — | | |
| 78 | | |
| (640 | ) |
Balance at March 31, 2015 | |
$ | (1,461 | ) | |
$ | (725 | ) | |
$ | — | | |
$ | 87 | | |
$ | (2,099 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | |
| | | |
Changes in | | |
Changes in | | |
| | |
| |
Foreign | | |
Pension | | |
Fair Value | | |
Fair Value | | |
| | |
| |
Exchange | | |
and Other | | |
of Available | | |
of Effective | | |
| | |
| |
Translation | | |
Postretirement | | |
for Sale | | |
Cash Flow | | |
| | |
| |
Adjustment | | |
Adjustments | | |
Investments | | |
Hedges | | |
Total | |
Balance at December 31, 2013 | |
$ | 304 | | |
$ | 355 | | |
$ | 170 | | |
$ | (11 | ) | |
$ | 818 | |
Other comprehensive income (loss) before reclassifications | |
| (5 | ) | |
| — | | |
| (11 | ) | |
| 9 | | |
| (7 | ) |
Amounts reclassified from accumulated other comprehensive income | |
| — | | |
| 4 | | |
| (71 | ) | |
| 4 | | |
| (63 | ) |
Net current period other comprehensive income (loss) | |
| (5 | ) | |
| 4 | | |
| (82 | ) | |
| 13 | | |
| (70 | ) |
Balance at March 31, 2014 | |
$ | 299 | | |
$ | 359 | | |
$ | 88 | | |
$ | 2 | | |
$ | 748 | |
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
Note 10. Segment Financial Data
Honeywell’s
senior management evaluates segment performance based on segment profit. Segment profit is measured as business unit income (loss)
before taxes excluding general corporate unallocated expense, other income (expense), interest and other financial charges, pension
and other postretirement income (expense), stock compensation expense, repositioning and other charges and accounting changes.
| |
Three Months Ended | |
| |
March 31, | |
| |
2015 | | |
2014 | |
Net Sales | |
| | | |
| | |
Aerospace | |
| | | |
| | |
Products | |
$ | 2,463 | | |
$ | 2,692 | |
Services | |
| 1,144 | | |
| 1,159 | |
Total | |
| 3,607 | | |
| 3,851 | |
Automation and Control Solutions | |
| | | |
| | |
Products | |
| 2,979 | | |
| 3,075 | |
Services | |
| 285 | | |
| 287 | |
Total | |
| 3,264 | | |
| 3,362 | |
Performance Materials and Technologies | |
| | | |
| | |
Products | |
| 1,922 | | |
| 2,078 | |
Services | |
| 420 | | |
| 388 | |
Total | |
| 2,342 | | |
| 2,466 | |
| |
$ | 9,213 | | |
$ | 9,679 | |
| |
| | | |
| | |
Segment Profit | |
| | | |
| | |
Aerospace | |
$ | 752 | | |
$ | 703 | |
Automation and Control Solutions | |
| 516 | | |
| 471 | |
Performance Materials and Technologies | |
| 503 | | |
| 473 | |
Corporate | |
| (50 | ) | |
| (51 | ) |
Total segment profit | |
| 1,721 | | |
| 1,596 | |
| |
| | | |
| | |
Other income (expense)(a) | |
| 12 | | |
| 111 | |
Interest and other financial charges | |
| (77 | ) | |
| (79 | ) |
Stock compensation expense(b) | |
| (52 | ) | |
| (52 | ) |
Pension ongoing income(b) | |
| 100 | | |
| 61 | |
Other postretirement expense(b) | |
| (9 | ) | |
| (12 | ) |
Repositioning and other charges (b) | |
| (131 | ) | |
| (214 | ) |
Income before taxes | |
$ | 1,564 | | |
$ | 1,411 | |
(a) | Equity income (loss) of affiliated companies is included in segment profit. |
| |
(b) | Amounts included in cost of products and services sold and selling, general and administrative
expenses. |
Note 11. Pension Benefits
Net periodic pension
benefit costs for our significant defined benefit plans include the following components:
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
| |
Three Months Ended | |
| |
U.S. Plans | | |
Non-U.S. Plans | |
| |
March 31, | | |
March 31, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Service cost | |
$ | 57 | | |
$ | 60 | | |
$ | 13 | | |
$ | 14 | |
Interest cost | |
| 178 | | |
| 193 | | |
| 44 | | |
| 58 | |
Expected return on plan assets | |
| (320 | ) | |
| (314 | ) | |
| (90 | ) | |
| (89 | ) |
Amortization of prior service cost | |
| 6 | | |
| 6 | | |
| — | | |
| — | |
| |
$ | (79 | ) | |
$ | (55 | ) | |
$ | (33 | ) | |
$ | (17 | ) |
In the first quarter
of 2015, Honeywell contributed $109 million of marketable securities and $4 million of cash to our non-U.S. pension plans.
Note 12. Commitments and Contingencies
Environmental Matters
Our environmental matters are described in
Note 19, Commitments and Contingencies, of Notes to Financial Statements in our 2014 Annual Report on Form 10-K.
The following table summarizes information
concerning our recorded liabilities for environmental costs:
December 31, 2014 | |
$ | 591 | |
|
|
|
|
Accruals for environmental matters deemed probable and reasonably estimable | |
| 46 | |
|
|
|
|
Environmental liability payments | |
| (35 | ) |
|
|
|
|
March 31, 2015 | |
$ | 602 | |
|
|
|
|
Environmental liabilities are included in the following balance
sheet accounts:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Accrued liabilities | |
$ | 278 | | |
$ | 278 | |
Other liabilities | |
| 324 | | |
| 313 | |
| |
$ | 602 | | |
$ | 591 | |
Onondaga Lake,
Syracuse, NY—We are implementing a combined dredging/capping remedy of Onondaga Lake pursuant to a consent decree
approved by the United States District Court for the Northern District of New York in January 2007. We have accrued for our estimated
cost of remediating Onondaga Lake based on currently available information and analysis performed by our engineering consultants.
Honeywell is also conducting remedial investigations and activities at other sites in Syracuse. We have recorded reserves for these
investigations and activities where appropriate, consistent with our accounting policy.
Honeywell has entered
into a cooperative agreement with potential natural resource trustees to assess alleged natural resource damages relating to this
site. It is not possible to predict the outcome or duration of this assessment, or the amounts of, or responsibility for, any damages.
Asbestos Matters
Honeywell is a defendant
in asbestos related personal injury actions related to two predecessor companies:
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
| 1. | North
American Refractories Company (NARCO), which was sold in 1986, produced refractory products
(bricks and cement used in high temperature applications). Claimants consist largely
of individuals who allege exposure to NARCO asbestos-containing refractory products in
an occupational setting. |
| 2. | Bendix
Friction Materials (Bendix), which was sold in 2014, manufactured automotive brake parts
that contained chrysotile asbestos in an encapsulated form. Claimants consist largely
of individuals who allege exposure to asbestos from brakes from either performing or
being in the vicinity of individuals who performed brake replacements. |
The following tables
summarize information concerning NARCO and Bendix asbestos related balances:
Asbestos Related
Liabilities
|
| |
Bendix | | |
NARCO | | |
Total | |
|
December 31, 2014 | |
$ | 623 | | |
$ | 929 | | |
$ | 1,552 | |
|
Accrual for update to estimated liability | |
| 48 | | |
| 1 | | |
| 49 | |
|
Asbestos related liability payments | |
| (49 | ) | |
| (3 | ) | |
| (52 | ) |
|
March 31, 2015 | |
$ | 622 | | |
$ | 927 | | |
$ | 1,549 | |
Insurance Recoveries for Asbestos Related Liabilities
|
| |
Bendix | | |
NARCO | | |
Total | |
|
December 31, 2014 | |
$ | 135 | | |
$ | 350 | | |
$ | 485 | |
|
Probable insurance recoveries related to estimated liability | |
| 5 | | |
| — | | |
| 5 | |
|
Insurance receivables settlements | |
| 1 | | |
| — | | |
| 1 | |
|
Insurance receipts for asbestos related liabilities | |
| (7 | ) | |
| (7 | ) | |
| (14 | ) |
|
March 31, 2015 | |
$ | 134 | | |
$ | 343 | | |
$ | 477 | |
NARCO and Bendix asbestos related balances are included in the
following balance sheet accounts:
|
| |
| | | |
| | |
|
| |
March 31, | | |
December 31, | |
|
| |
2015 | | |
2014 | |
|
Other current assets | |
$ | 32 | | |
$ | 31 | |
|
Insurance recoveries for asbestos related liabilities | |
| 445 | | |
| 454 | |
|
| |
$ | 477 | | |
$ | 485 | |
|
| |
| | | |
| | |
|
Accrued liabilities | |
$ | 352 | | |
$ | 352 | |
|
Asbestos related liabilities | |
| 1,197 | | |
| 1,200 | |
|
| |
$ | 1,549 | | |
$ | 1,552 | |
NARCO Products
–In connection with NARCO’s emergence from bankruptcy on April 30, 2013, a federally authorized 524(g) trust
(NARCO Trust) was established for the evaluation and resolution of all existing and future NARCO asbestos claims. Both Honeywell
and NARCO are protected by a permanent channeling injunction barring all present and future individual actions in state or federal
courts and requiring all asbestos related claims based on exposure to NARCO products to be made against the NARCO Trust. The NARCO
Trust reviews submitted claims and determines award amounts in accordance with established Trust Distribution Procedures approved
by the Bankruptcy Court which set forth the criteria claimants must meet to qualify for compensation including, among other things,
exposure and medical criteria that determine the award amount. In addition, Honeywell provided, and continues to provide, input
to the design of control procedures for processing NARCO claims, and has on-going audit rights to review and monitor the claims
processors’ adherence to the established requirements of the Trust Distribution Procedures.
Honeywell is obligated
to fund NARCO asbestos claims submitted to the NARCO Trust which qualify for payment under the Trust Distribution Procedures (Annual
Contribution Claims), subject to annual caps of $140
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
million in the years 2015 through 2018
and $145 million for each year thereafter. However, the initial $100 million of claims processed through the NARCO Trust (the
Initial Claims Amount) will not count against the annual cap and any unused portion of the Initial Claims Amount will roll over
to subsequent years until fully utilized. As of March 31, 2015, Honeywell has not made any payments to the NARCO Trust for Annual
Contribution Claims.
Honeywell is also responsible
for payments due to claimants pursuant to settlement agreements reached during the pendency of the NARCO bankruptcy proceedings
that provide for the right to submit claims to the NARCO Trust subject to qualification under the terms of the settlement agreements
and Trust Distribution Procedures criteria (Pre-established Unliquidated Claims), which amounts are expected to be paid during
the initial years of trust operations. Such payments are not subject to the annual cap described above.
Our consolidated financial
statements reflect an estimated liability for Pre-established Unliquidated Claims ($147 million), unsettled claims pending as
of the time NARCO filed for bankruptcy protection ($37 million) and for the estimated value of future NARCO asbestos claims expected
to be asserted against the NARCO Trust through 2018 ($743 million). In the absence of actual trust experience on which to base
the estimate, Honeywell projected the probable value of asbestos related future liabilities, including trust claim handling costs,
based on a commonly accepted methodology used by numerous bankruptcy courts addressing 524(g) trusts. Some critical assumptions
underlying this methodology include claims filing rates, disease criteria and payment values contained in the Trust Distribution
Procedures, estimated approval rates of claims submitted to the NARCO Trust and epidemiological studies estimating disease instances.
This projection resulted in a range of estimated liability of $743 million to $961 million. We believe that no amount within this
range is a better estimate than any other amount and accordingly, we have recorded the minimum amount in the range. In light of
the uncertainties inherent in making long-term projections and in connection with the recent implementation of the Trust Distribution
Procedures by the NARCO Trust, as well as the stay of all NARCO asbestos claims which remained in place throughout NARCO’s
Chapter 11 case, we do not believe that we have a reasonable basis for estimating NARCO asbestos claims beyond 2018.
Our insurance receivable
corresponding to the estimated liability for pending and future 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 analyses to estimate the
probable amount of insurance that is recoverable for asbestos claims. While the substantial majority of our insurance carriers
are solvent, some of our individual carriers are insolvent, which has been considered in our analysis of probable recoveries.
We made judgments concerning insurance coverage that we believe are reasonable and consistent with our historical dealings and
our knowledge of any pertinent solvency issues surrounding insurers.
Projecting future events
is subject to many uncertainties that could cause the NARCO-related asbestos liabilities or assets to be higher or lower than
those projected and recorded. Given the uncertainties, we review our estimates periodically, and update them based on our experience
and other relevant factors. Similarly, we will reevaluate our projections concerning our probable insurance recoveries in 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:
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
| |
Three Months Ended |
|
Years Ended | |
| |
March 31, | | |
December 31, | |
Claims Activity | |
2015 | | |
2014 | | |
2013 | |
Claims Unresolved at the beginning of period | |
| 9,267 | | |
| 12,302 | | |
| 23,141 | |
Claims Filed | |
| 707 | | |
| 3,694 | | |
| 4,527 | |
Claims Resolved (a) | |
| (781 | ) | |
| (6,729 | ) | |
| (15,366 | ) |
Claims Unresolved at the end of period | |
| 9,193 | | |
| 9,267 | | |
| 12,302 | |
| |
| | | |
| | | |
| | |
(a) Claims resolved in 2014 include 2,110 cancer claims which
were determined to have no value. Also, claims resolved in 2014 and 2013 included significantly aged (i.e., pending for more than
six years) claims totaling 1,266 and 12,250, respectively, of which 82% and 92%, respectively, were non-malignant.
Disease Distribution of Unresolved Claims | |
| March 31, | | |
December 31, | |
| |
2015 | | |
2014 | | |
2013 | |
Mesothelioma and Other Cancer Claims | |
| 3,773 | | |
| 3,933 | | |
| 5,810 | |
Nonmalignant Claims | |
| 5,420 | | |
| 5,334 | | |
| 6,492 | |
Total Claims | |
| 9,193 | | |
| 9,267 | | |
| 12,302 | |
Honeywell has experienced average resolution values per claim
excluding legal costs as follows:
| |
Years Ended December 31, | | |
| | |
| |
2014 | | |
2013 | | |
2012 | | |
2011 | | |
2010 | |
| |
(in whole dollars) | |
Malignant claims | |
$ | 53,500 | | |
$ | 51,000 | | |
$ | 49,000 | | |
$ | 48,000 | | |
$ | 54,000 | |
Nonmalignant claims | |
$ | 120 | | |
$ | 850 | | |
$ | 1,400 | | |
$ | 1,000 | | |
$ | 1,300 | |
It is not possible to
predict whether resolution values for Bendix-related asbestos claims will increase, decrease or stabilize in the future.
Our consolidated financial
statements reflect an estimated liability for resolution of pending (claims actually filed as of the financial statement date)
and future Bendix-related asbestos claims. We have valued Bendix pending and future claims using average resolution values for
the previous five years. We update the resolution values used to estimate the cost of Bendix pending and future claims during
the fourth quarter each year.
The liability for future
claims represents the estimated value of future asbestos related bodily injury claims expected to be asserted against Bendix over
the next five years. Such estimated cost of future Bendix-related asbestos claims is based on historic claims filing experience
and dismissal rates, disease classifications, and resolution values in the tort system for the previous five years. In light of
the uncertainties inherent in making long-term projections, as well as certain factors unique to friction product asbestos claims,
we do not believe that we have a reasonable basis for estimating asbestos claims beyond the next five years. The methodology used
to estimate the liability for future claims is similar to that used to estimate the liability for future NARCO-related asbestos
claims.
Our insurance receivable
corresponding to the liability for settlement of pending and future Bendix asbestos claims reflects coverage which 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. Based on our ongoing analysis of the probable insurance recovery, insurance receivables are recorded in
the financial statements simultaneous with the recording of the estimated liability for the underlying asbestos claims. This determination
is based on our analysis of the underlying insurance policies, our historical experience with our insurers, our ongoing review
of the solvency of our insurers, judicial determinations relevant to our insurance programs, and our consideration of the impacts
of any settlements reached with our insurers.
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
Honeywell believes it
has sufficient insurance coverage and reserves to cover all pending Bendix-related asbestos claims and Bendix-related asbestos
claims estimated to be filed within the next five years. Although it is impossible to predict the outcome of either pending or
future Bendix-related asbestos claims, we do not believe that such claims would have a material adverse effect on our consolidated
financial position in light of our insurance coverage and our prior experience in resolving such claims. If the rate and types
of claims filed, the average resolution value of such claims and the period of time over which claim settlements are paid (collectively,
the Variable Claims Factors) do not substantially change, Honeywell would not expect future Bendix-related asbestos claims to
have a material adverse effect on our results of operations or operating cash flows in any fiscal year. No assurances can be given,
however, that the Variable Claims Factors will not change.
Other Matters
Honeywell v. United
Auto Workers (UAW) et. al—In July 2011, Honeywell filed an action in federal court (District of New Jersey) against
the UAW and all former employees who retired under a series of Master Collective Bargaining Agreements (MCBAs) between Honeywell
and the UAW seeking a declaratory judgment that certain express limitations on its obligation to contribute toward the healthcare
coverage of such retirees (the CAPS) set forth in the MCBAs may be implemented, effective January 1, 2012. The UAW and certain
retiree defendants filed a mirror suit in the Eastern District of Michigan alleging that the MCBAs do not provide for CAPS on
the Company’s liability for healthcare coverage. The New Jersey action was dismissed and Honeywell subsequently answered
the UAW’s complaint in Michigan and asserted counterclaims for fraudulent inducement, negligent misrepresentation and breach
of implied warranty. The UAW filed a motion to dismiss these counterclaims. The court dismissed Honeywell’s fraudulent inducement
and negligent misrepresentation claims, but let stand the claim for breach of implied warranty. In the second quarter of 2014,
the parties agreed to stay the proceedings with respect to those retirees who retired before the initial inclusions of the CAPS
in the 2003 MCBA until the Supreme Court decided the M&G Polymers USA, LLC v. Tackett case. In a ruling on January
26, 2015, the Supreme Court held that retiree health insurance benefits provided in collective bargaining agreements do not carry
an inference that they are vested or guaranteed to continue for life and that the “vesting” issue must be decided
pursuant to ordinary principles of contract law. Based on this ruling, Honeywell is confident that the CAPS will be upheld and
that its liability for healthcare coverage premiums with respect to the putative class will be limited as negotiated and expressly
set forth in the applicable MCBAs. In the event of an adverse ruling, however, Honeywell’s other postretirement benefits
for pre-2003 retirees would increase by approximately $180 million, reflecting the estimated value of these CAPS.
In December 2013, the
UAW and certain of the plaintiffs filed a motion for partial summary judgment with respect to those retirees who retired after
the initial inclusion of the CAPS in the 2003 MCBA. The UAW sought a ruling that the 2003 MCBA did not limit Honeywell’s
obligation to contribute to healthcare coverage for the post-2003 retirees. That motion remains pending. Honeywell is confident
that the Court will find that the 2003 MCBA does, in fact, limit Honeywell’s retiree healthcare obligation for post-2003
retirees. In the event of an adverse ruling, however, Honeywell’s other postretirement benefits for post-2003 retirees would
increase by approximately $120 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 the F-35 fighter jet. The Company is cooperating fully
with the investigation. While we believe that Honeywell has complied with all relevant U.S. laws and regulations regarding the
manufacture of these sensors, it is not possible to predict the outcome of the investigation or what action, if any, may result
from it.
Given the uncertainty
inherent in litigation and investigations (including the specific matters referenced above), we do not believe it is possible
to develop estimates of reasonably possible loss in excess of current accruals for these matters (other than as specifically set
forth above). Considering our past experience and existing accruals, we do not expect the outcome of these matters, either individually
or in the aggregate, to have a material adverse effect on our consolidated financial position. Because most contingencies are
resolved over long periods of time, potential liabilities are subject to change due to new developments, changes in settlement
strategy or the impact of evidentiary requirements, which could cause us to pay damage awards or settlements (or become subject
to equitable remedies) that could have a material adverse effect on our results of operations or operating cash flows in the periods
recognized or paid.
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
(Dollars in millions, except per share amounts) |
The following MD&A
is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and
its consolidated subsidiaries (Honeywell or the Company) for the three months ended March 31, 2015. The financial information
as of March 31, 2015 should be read in conjunction with the financial statements for the year ended December 31, 2014 contained
in our 2014 Annual Report on Form 10-K.
A. | Results
of Operations – three months ended March 31, 2015 compared with the three months
ended March 31, 2014 |
Net Sales
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | |
Net sales | |
$ | 9,213 | | |
$ | 9,679 | |
% change compared with prior period | |
| (5 | )% | |
| | |
The change in net sales compared to the prior year period is
attributable to the following:
| |
|
Three Months | |
|
|
|
|
Volume | |
| 2 | % |
|
|
|
|
Price | |
| (1 | )% |
|
|
|
|
Foreign Exchange | |
| (4 | )% |
|
|
|
|
Acquisitions/Divestitures | |
| (2 | )% |
|
|
|
|
| |
| (5 | )% |
|
|
|
|
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
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | |
Cost of products and services sold | |
$ | 6,362 | | |
$ | 6,967 | |
% change compared with prior period | |
| (9 | )% | |
| | |
Gross margin percentage | |
| 30.9 | % | |
| 28.0 | % |
Cost of products and
services sold decreased principally due to a decrease in direct and indirect material costs of approximately $360 million (driven
primarily by the favorable impact of foreign exchange and productivity), a decrease in labor costs of approximately $125 million
and lower repositioning and other charges of approximately $70 million.
Gross margin percentage
increased primarily due to higher segment gross margin in all business segments (approximately 2.0 percentage point impact collectively)
and lower repositioning and other charges (approximately 0.7 percentage point impact).
Selling, General and Administrative
Expenses
| |
Three Months Ended
March 31, | |
| |
2015 | | |
2014 | |
Selling, general and administrative expenses | |
$ | 1,230 | | |
$ | 1,339 | |
Percent of sales | |
| 13.4 | % | |
| 13.8 | % |
Selling, general and
administrative expenses decreased as a percentage of sales primarily driven by the favorable impact from foreign exchange, a decrease
in labor costs (driven primarily by productivity, partially offset by merit increases and investments for growth), decreased indirect
costs and lower repositioning and other charges.
Tax Expense
| |
Three Months Ended
March 31, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
Tax expense | |
$ | 418 | | |
$ | 375 | |
Effective tax rate | |
| 26.7 | % | |
| 26.6 | % |
The effective tax rates
for the three months ended in 2015 and 2014 were lower than the U.S. federal statutory rate of 35% due, in part, to non-U.S. earnings
taxed at lower rates and benefits from manufacturing incentives.
Net Income Attributable to Honeywell
| |
Three
Months Ended
March 31, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
Net income attributable to Honeywell | |
$ | 1,116 | | |
$ | 1,017 | |
| |
| | | |
| | |
Earnings per share of common stock – assuming dilution | |
$ | 1.41 | | |
$ | 1.28 | |
Earnings per share of
common stock – assuming dilution increased primarily due to increased segment profit in each business segment and lower
repositioning and other charges, partially offset by lower other income (principally due to the absence of a realized gain related
to the prior year sale of marketable equity securities) and increased tax expense.
Review of Business Segments
| |
Three Months Ended March 31, | | |
% | |
| |
2015 | | |
2014 | | |
Change | |
| |
| | | |
| | | |
| | |
Aerospace Sales | |
| | | |
| | | |
| | |
Commercial Original Equipment | |
$ | 683 | | |
$ | 684 | | |
| — | |
Commercial Aftermarket | |
| 1,082 | | |
| 1,082 | | |
| — | |
Defense and Space | |
| 1,075 | | |
| 1,092 | | |
| (2 | )% |
Transportation Systems | |
| 767 | | |
| 993 | | |
| (23 | )% |
Total Aerospace Sales | |
| 3,607 | | |
| 3,851 | | |
| | |
| |
| | | |
| | | |
| | |
Automation and Control Solutions Sales | |
| | | |
| | | |
| | |
Energy Safety & Security | |
| 2,234 | | |
| 2,301 | | |
| (3 | )% |
Building Solutions & Distribution | |
| 1,030 | | |
| 1,061 | | |
| (3 | )% |
Total Automation and Control Solution Sales | |
| 3,264 | | |
| 3,362 | | |
| | |
| |
| | | |
| | | |
| | |
Performance Materials and Technologies | |
| | | |
| | | |
| | |
UOP | |
| 914 | | |
| 846 | | |
| 8 | % |
Process Solutions | |
| 632 | | |
| 712 | | |
| (11 | )% |
Advanced Materials | |
| 796 | | |
| 908 | | |
| (12 | )% |
Total Performance Materials and Technologies Sales | |
| 2,342 | | |
| 2,466 | | |
| | |
Net Sales | |
$ | 9,213 | | |
$ | 9,679 | | |
| | |
Aerospace
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | | |
%
Change | |
| |
| | | |
| | | |
| | |
Net sales | |
$ | 3,607 | | |
$ | 3,851 | | |
| (6 | )% |
Cost of products and service sold | |
| 2,619 | | |
| 2,903 | | |
| | |
Selling, general and administrative expenses | |
| 161 | | |
| 176 | | |
| | |
Other | |
| 75 | | |
| 69 | | |
| | |
Segment profit | |
$ | 752 | | |
$ | 703 | | |
| 7 | % |
| |
2015 vs. 2014 | |
|
|
|
|
| |
Three Months Ended
March 31, | |
|
|
|
|
Factors Contributing
to Year-Over-Year Change | |
Sales | | |
Segment
Profit | |
|
|
|
|
| |
| | | |
| | |
|
|
|
|
Organic growth/ Operational segment profit | |
| 1 | % | |
| 11 | % |
|
|
|
|
Foreign exchange | |
| (3 | )% | |
| (4 | )% |
|
|
|
|
Acquisitions and divestitures, net | |
| (4 | )% | |
| — | |
|
|
|
|
Total % Change | |
| (6 | )% | |
| 7 | % |
|
|
|
|
Aerospace sales decreased
primarily due to the Friction Materials divestiture and unfavorable impact from foreign exchange, partially offset by an increase
in organic sales.
| | Commercial
Original Equipment sales were flat (increased 1% organic) driven primarily by higher
air transport volumes, consistent with the OE Manufacturers’ (OEM) higher production
rates and higher business and general aviation engine shipments, offset by timing delays
on certain business jet aircraft platforms. |
| | |
| | Commercial
Aftermarket sales were flat (increased 1% organic) driven primarily by higher repair
and overhaul activities, offset by lower sales of spare parts. |
| | |
| | Defense
and Space sales decreased by 2% (decreased 1% organic) primarily due to lower U.S. government
deliveries, partially offset by growth in international programs. |
| | |
| | Transportation
Systems sales decreased by 23% (increased 5% organic) primarily due to the Friction Materials
divestiture and unfavorable impact from foreign exchange, partially offset by continued
growth from new platform launches and higher global gas turbo penetration. |
Aerospace segment profit
increased primarily due to an increase in operational segment profit, partially offset by the unfavorable impact from foreign
exchange. The increase in operational segment profit is driven primarily by productivity, net of inflation, and favorable pricing.
Cost of products and services sold totaled $2.6 billion, a decrease of $284 million, primarily due to the factors discussed above
(excluding price).
Automation and Control Solutions
| |
Three Months Ended
March 31, | |
| |
2015 | | |
2014 | | |
% Change | |
Net sales | |
$ | 3,264 | | |
$ | 3,362 | | |
| (3 | )% |
Cost of products and services sold | |
| 2,089 | | |
| 2,188 | | |
| | |
Selling, general and administrative expenses | |
| 587 | | |
| 637 | | |
| | |
Other | |
| 72 | | |
| 66 | | |
| | |
Segment profit | |
$ | 516 | | |
$ | 471 | | |
| 10 | % |
| |
2015 vs. 2014 | |
|
|
|
|
| |
Three Months Ended March 31, | |
|
|
|
|
Factors Contributing
to Year-Over-Year Change | |
Sales | | |
Segment
Profit | |
|
|
|
|
Organic growth/ Operational segment profit | |
| 3 | % | |
| 15 | % |
|
|
|
|
Foreign exchange | |
| (6 | )% | |
| (5 | )% |
|
|
|
|
Total % Change | |
| (3 | %) | |
| 10 | % |
|
|
|
|
Automation and Control
Solutions (ACS) sales decreased primarily due to the unfavorable impact of foreign exchange partially offset by organic sales
growth.
| | Sales
in Energy, Safety & Security decreased by 3% (increased 3% organic) principally due
to the unfavorable impact of foreign exchange. Organic sales growth was primarily due
to increases in sales volumes, most significantly in Scanning and Mobility driven by
recent contract wins. |
| | |
| | Sales
in Building Solutions & Distribution decreased by 3% (increased 3% organic) principally
due to the unfavorable impact of foreign exchange partially offset by increased sales
volumes in Americas Distribution. |
ACS segment profit increased
due to an increase in operational segment profit partially offset by the unfavorable impact of foreign exchange. The increase
in operational segment profit is primarily due to the positive impact of productivity, net of inflation and higher organic sales
volumes partially offset by continued investments for growth. Cost of products and services sold decreased by $99 million primarily
due to the favorable impact of foreign exchange and productivity partially offset by higher organic sales volume and inflation.
Performance Materials and Technologies
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | | |
Change | |
Net sales | |
$ | 2,342 | | |
$ | 2,466 | | |
| (5 | )% |
Cost of products and services sold | |
| 1,582 | | |
| 1,706 | | |
| | |
Selling, general and administrative expenses | |
| 222 | | |
| 254 | | |
| | |
Other | |
| 35 | | |
| 33 | | |
| | |
Segment profit | |
$ | 503 | | |
$ | 473 | | |
| 6 | % |
| |
2015 vs. 2014 | |
|
|
|
|
| |
Three Months Ended
March 31, | |
|
|
|
|
Factors
Contributing to Year-Over-Year Change | |
Sales | | |
Segment
Profit | |
|
|
|
|
Organic growth/ Operational segment profit | |
| (1 | )% | |
| 10 | % |
|
|
|
|
Foreign exchange | |
| (4 | )% | |
| (4 | )% |
|
|
|
|
Total % Change | |
| (5 | )% | |
| 6 | % |
|
|
|
|
Performance Materials
and Technologies sales decreased due to the unfavorable impact of foreign exchange and decreased organic sales growth.
| | UOP
sales increased 8% (increased 9% organic) driven primarily by higher gas processing and
equipment revenues partially offset by lower engineering revenues due to order delays. |
| | |
| | Sales
in Process Solutions decreased 11% (decreased 3% organic) principally due to the unfavorable
impact of foreign exchange and lower volumes due to order delays partially offset by
volume growth in advanced solutions software and services. |
| | |
| | Advanced
Materials sales decreased 12% (decreased 9% organic) primarily driven by unfavorable
pricing and unplanned plant outages in Resins and Chemicals partially offset by increased
volume in Fluorine Products and Specialty Products. We anticipate unfavorable pricing
to continue in 2015 primarily in Resins and Chemicals where sales fluctuate with the
market price of certain raw materials, which are correlated to the price of oil. |
PMT segment profit increased
due to an increase in operational segment profit partially offset by the unfavorable impact of foreign exchange. The increase
in operational segment profit is primarily due to price and productivity net of inflation and higher UOP sales volume partially
offset by continued investments for growth. Cost of products and services sold decreased $124 million primarily due to the favorable
impacts of inflation and foreign exchange partially offset by higher UOP sales volume and continued investments for growth.
Repositioning Charges
Our repositioning actions
are expected to generate incremental pretax savings of $100 million to $125 million in 2015 compared with 2014 principally from
planned workforce reductions. Cash spending related to our repositioning actions was $27 million in the three months ended March
31, 2015 and was funded through operating cash flows. In 2015, we expect cash spending for repositioning actions to be approximately
$150 million and to be funded through operating cash flows.
B. Liquidity and Capital
Resources
Cash Flow Summary
Our cash flows from
operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows are summarized as follows:
| |
Three Months Ended | |
| |
March 31, | |
| |
2015 | | |
2014 | |
Cash provided by (used for): | |
| | | |
| | |
Operating activities | |
$ | 421 | | |
$ | 688 | |
Investing activities | |
| (920 | ) | |
| (345 | ) |
Financing activities | |
| 367 | | |
| (48 | ) |
Effect of exchange rate changes on cash | |
| (252 | ) | |
| (45 | ) |
Net (decrease) increase in cash and cash equivalents | |
$ | (384 | ) | |
$ | 250 | |
Cash provided by operating
activities decreased by $267 million primarily due to (i) a $151 million Aerospace OEM incentive payment (ii) increased cash tax
payments of $93 million (iii) a $78 million decrease in customer advances, and (iv) a $58 million unfavorable impact from working
capital, partially offset by increased net income of $110 million.
Cash used for investing
activities increased by $575 million primarily due to an increase of approximately $239 million in settlement payments of foreign
currency exchange contracts used as economic hedges on certain non-functional currency denominated monetary assets and liabilities,
an increase in cash paid for acquisitions of $185 million and a net $174 million increase in investments (primarily short-term
marketable securities).
Cash provided by financing
activities increased by $415 million primarily due to an increase in the net proceeds from debt issuances of $507 million partially
offset by an increase in net repurchases of common stock of $57 million and an increase in cash dividends paid of $52 million.
Liquidity
The Company continues
to manage its businesses to maximize operating cash flows as the primary source of liquidity. In addition to our available cash
and operating cash flows, additional sources of liquidity include committed credit lines, short-term debt from the commercial paper
market, long-term borrowings, as well as access to the public debt and equity markets. We continue to balance our cash and financing
uses through investment in our existing core businesses, debt reduction, acquisition activity, share repurchases and dividends.
We continuously assess
the relative strength of each business in our portfolio as to strategic fit, market position, profit and cash flow contribution
in order to upgrade our combined portfolio and identify business units that will most benefit from increased investment. We identify
acquisition candidates that will further our strategic plan and strengthen our existing core businesses. We also identify business
units that do not fit into our long-term strategic plan based on their market position, relative profitability or growth potential.
These businesses are considered for potential divestiture, restructuring or other repositioning actions subject to regulatory constraints.
In 2015, we are not required
to make contributions to our U.S. pension plans. We plan to make contributions of cash and/or marketable securities of approximately
$140 million ($109 million of marketable securities were contributed in January 2015) to our non-U.S. plans to satisfy regulatory
funding standards. The timing and amount of contributions to both our U.S. and non-U.S. plans may be impacted by a number of factors,
including the funded status of the plans.
During the first quarter
of 2015, the Company repurchased $363 million of outstanding shares. Under the Company’s previously reported $5 billion
share repurchase program, $3.7 billion remained available as of March 31, 2015 for additional share repurchases. Honeywell presently
expects to repurchase outstanding shares from time to time to offset the dilutive impact of employee stock based compensation
plans, including future option exercises, restricted unit vesting and matching contributions under our savings plans. In addition,
the Company may repurchase additional shares if and when its net cash (cash and cash equivalents plus short-term available
for sale investments
less commercial paper, current maturities of long-term debt and long-term debt) exceeds $1 to $2 billion. The amount and timing
of future repurchases may vary depending on market conditions and the level of operating, financing and other investing activities.
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Cash and cash equivalents | |
$ | 6,575 | | |
$ | 6,959 | |
Short-term available for sale investments | |
| 1,750 | | |
| 1,463 | |
Cash | |
| 8,325 | | |
| 8,422 | |
| |
| | | |
| | |
Commercial paper | |
| 2,695 | | |
| 1,647 | |
Current maturities of long-term debt | |
| 1,304 | | |
| 939 | |
Long-term debt | |
| 5,661 | | |
| 6,046 | |
Debt | |
| 9,660 | | |
| 8,632 | |
| |
| | | |
| | |
Net cash | |
$ | (1,335 | ) | |
$ | (210 | ) |
C. Other Matters
Litigation
We are subject to a
number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business.
See Note 12, Commitments and Contingencies, of Notes to Financial Statements for further discussion of environmental, asbestos
and other litigation matters.
Critical Accounting Policies
The financial information
as of March 31, 2015 should be read in conjunction with the financial statements for the year ended December 31, 2014 contained
in our 2014 Annual Report on Form 10-K.
For a discussion of
the Company’s critical accounting policies, see Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations in our 2014 Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Note 2, Recent Accounting
Pronouncements, of Notes to Financial Statements for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market
Risks
See our 2014 Annual
Report on Form 10-K (Item 7A). As of March 31, 2015, there has been no material change in this information.
Item 4. Controls and Procedures
Honeywell
management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act
of 1934, as amended (Exchange Act)) as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that such
disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to
ensure information required to be disclosed in the reports that Honeywell files or submits under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms,
and that it is accumulated and communicated to our management, including our CEO, our CFO, and our Controller, as appropriate,
to allow timely decisions regarding required disclosure. There have been no changes that have materially affected, or are reasonably
likely to materially affect, Honeywell’s internal control over financial reporting that have occurred during the period
covered by this Quarterly Report on Form 10-Q.
Part II. Other Information
Item 1. Legal Proceedings
General Legal Matters
We are subject to a
number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business.
See a discussion of environmental, asbestos and other litigation matters in Note 12, Commitments and Contingencies, of Notes to
Financial Statements.
Environmental Matters Involving Potential
Monetary Sanctions in Excess of $100,000
The Virginia Department of Environmental Quality
(“DEQ”) has alleged that Honeywell’s facility in Hopewell, Virginia failed to comply with certain conditions
of its wastewater discharge permit at various times between August 2013 and March 2015. Honeywell has met with the DEQ about this
matter and negotiations to resolve it are ongoing. We do not believe that it will have a material adverse effect on our consolidated
financial position, results of operations or cash flows.
Item 2. Changes in Securities and Use of Proceeds
Honeywell purchased 3,500,000
shares of its common stock, par value $1 per share, in the quarter ending March 31, 2015. The following table summarizes Honeywell’s
purchase of its common stock for the quarter ended March 31, 2015:
Issuer Purchases of Equity Securities |
|
| (a) | | |
| (b) | | |
(c ) | |
(d) |
|
| | | |
| | | |
Total Number | |
Approximate Dollar |
|
| | | |
| | | |
of Shares | |
Value of Shares that |
|
| Total | | |
| | | |
Purchased as | |
May Yet be Purchased |
|
| Number
of | | |
| Average | | |
Part of Publicly | |
Under Plans or |
|
| Shares | | |
| Price
Paid | | |
Announced Plans | |
Programs |
Period |
| Purchased | | |
| per
Share | | |
or Programs | |
(Dollars in millions) |
|
| | | |
| | | |
| |
|
February 2015 |
| 1,575,000 | | |
| $102.72 | | |
1,575,000 | |
$3,914 |
March 2015 |
| 1,925,000 | | |
| $104.46 | | |
1,925,000 | |
$3,713 |
Item 6. EXHIBITS
(a) Exhibits.
See the Exhibit Index on page 29 of this Quarterly Report on Form 10-Q.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
| | |
Honeywell International Inc. |
| | |
|
Date: April 17, 2015 | | 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) |
EXHIBIT INDEX
Exhibit
No. |
|
Description |
11 |
|
Computation of Per Share Earnings (1) |
|
|
|
12 |
|
Computation of Ratio of Earnings to Fixed Charges (filed herewith) |
|
|
|
31.1 |
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
|
|
|
31.2 |
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
|
|
|
32.1 |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
|
|
|
32.2 |
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
|
|
|
101.INS |
|
XBRL Instance Document (filed herewith) |
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema (filed herewith) |
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase (filed herewith) |
|
|
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase (filed herewith) |
|
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase (filed herewith) |
|
|
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase (filed herewith) |
(1) | Data required is provided in Note 4, Earnings Per Share, of Notes to Financial Statements. |
EXHIBIT 12
HONEYWELL INTERNATIONAL INC.
STATEMENT RE: COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
March 31, 2015
(Dollars in millions)
Determination of Earnings: | |
|
Income
before taxes | |
$ | 1,564 | |
Add (Deduct): | |
| | |
Amortization
of capitalized interest | |
| 5 | |
Fixed charges | |
| 89 | |
Equity income,
net of distributions | |
| (8 | ) |
Total
earnings, as defined | |
$ | 1,650 | |
| |
| | |
Fixed
Charges: | |
| | |
Rents(a) | |
$ | 12 | |
Interest and
other financial charges | |
| 77 | |
| |
| 89 | |
Capitalized
interest | |
| 5 | |
Total
fixed charges | |
$ | 94 | |
| |
| | |
Ratio
of Earnings to Fixed Charges | |
| 17.55 | |
| |
| | |
(a) Denotes
the equivalent of an appropriate portion of rentals representative of the interest factor on all rentals other than for capitalized
leases. | |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, David M. Cote, Chief Executive Officer, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Honeywell International Inc.; |
| |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| |
3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| | |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| | |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| | |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
Date: April 17, 2015 |
|
By: |
/s/ David M. Cote |
|
|
|
David M. Cote |
|
|
|
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas A. Szlosek, Chief Financial Officer, certify
that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Honeywell
International Inc.; |
| |
2. | Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
| |
3. | Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in
this report; |
| |
4. | The registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
| | |
| b) | designed such internal control over
financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
| | |
| c) | evaluated the effectiveness of the
registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and |
| | |
| d) | disclosed in this report any change
in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and |
| | |
| b) | any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date: April 17, 2015 |
|
By: |
/s/ Thomas A. Szlosek |
|
|
|
Thomas A. Szlosek |
|
|
|
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
of Honeywell International Inc. (the Company) on Form 10-Q for the period ending March 31, 2015 as filed with the Securities and
Exchange Commission on the date hereof (the Report), I, David M. Cote, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
Date: April 17, 2015 |
|
By: |
/s/ David M. Cote |
|
|
|
David M. Cote |
|
|
|
Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
of Honeywell International Inc. (the Company) on Form 10-Q for the period ending March 31, 2015 as filed with the Securities and
Exchange Commission on the date hereof (the Report), I, Thomas A. Szlosek, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
Date:
April 17, 2015 |
|
By: |
/s/
Thomas A. Szlosek |
|
|
|
Thomas A. Szlosek |
|
|
|
Chief Financial Officer |
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