|
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 September 30, 2011
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 |
|
07962 |
|
|
|
(Address of principal executive offices) |
|
(Zip Code) |
|
(973) 455-2000 |
|
(Registrants 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 773,497,365 shares of Common Stock outstanding at September 30, 2011.
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 managements 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 Managements Discussion and Analysis of Financial Condition and Results of Operations, set forth in our Form 10-K for the year ended December 31, 2010. |
2
The financial information as of September 30, 2011 should be read in conjunction with the financial statements for the year ended December 31, 2010 contained in our Form 10-K filed on February 11, 2011.
|
|
FINANCIAL STATEMENTS |
|
Honeywell International Inc. |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per share amounts) |
|
||||||||||
|
|||||||||||||
Product sales |
|
$ |
7,308 |
|
$ |
6,329 |
|
$ |
21,267 |
|
$ |
18,320 |
|
Service sales |
|
|
1,990 |
|
|
1,810 |
|
|
5,789 |
|
|
5,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
9,298 |
|
|
8,139 |
|
|
27,056 |
|
|
23,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs, expenses and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
|
5,739 |
|
|
4,959 |
|
|
16,358 |
|
|
14,238 |
|
Cost of services sold |
|
|
1,294 |
|
|
1,211 |
|
|
3,763 |
|
|
3,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,033 |
|
|
6,170 |
|
|
20,121 |
|
|
17,804 |
|
Selling, general and administrative expenses |
|
|
1,303 |
|
|
1,129 |
|
|
3,783 |
|
|
3,329 |
|
Other (income) expense |
|
|
(21 |
) |
|
(78 |
) |
|
(72 |
) |
|
(89 |
) |
Interest and other financial charges |
|
|
90 |
|
|
96 |
|
|
285 |
|
|
294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,405 |
|
|
7,317 |
|
|
24,117 |
|
|
21,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before taxes |
|
|
893 |
|
|
822 |
|
|
2,939 |
|
|
2,263 |
|
Tax expense |
|
|
207 |
|
|
245 |
|
|
767 |
|
|
650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations after taxes |
|
|
686 |
|
|
577 |
|
|
2,172 |
|
|
1,613 |
|
|
|||||||||||||
Net income from discontinued operations after taxes |
|
|
177 |
|
|
19 |
|
|
209 |
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
863 |
|
|
596 |
|
|
2,381 |
|
|
1,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the noncontrolling interest |
|
|
1 |
|
|
(2 |
) |
|
4 |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
862 |
|
$ |
598 |
|
$ |
2,377 |
|
$ |
1,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Honeywell: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations less net income attributable to the noncontrolling interest |
|
|
685 |
|
|
579 |
|
|
2,168 |
|
|
1,600 |
|
Income from discontinued operations |
|
|
177 |
|
|
19 |
|
|
209 |
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
862 |
|
$ |
598 |
|
$ |
2,377 |
|
$ |
1,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock - basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
0.88 |
|
|
0.75 |
|
|
2.77 |
|
|
2.08 |
|
Income from discontinuing operations |
|
|
0.23 |
|
|
0.02 |
|
|
0.27 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
1.11 |
|
$ |
0.77 |
|
$ |
3.04 |
|
$ |
2.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock - assuming dilution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
0.87 |
|
|
0.74 |
|
|
2.73 |
|
|
2.06 |
|
Income from discontinuing operations |
|
|
0.23 |
|
|
0.02 |
|
|
0.26 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
1.10 |
|
$ |
0.76 |
|
$ |
2.99 |
|
$ |
2.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share of common stock |
|
$ |
0.3325 |
|
$ |
0.3025 |
|
$ |
0.9975 |
|
$ |
0.9075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Notes to Financial Statements are an integral part of this statement.
3
|
Honeywell International Inc. |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,885 |
|
$ |
2,650 |
|
|
Accounts, notes and other receivables |
|
|
7,316 |
|
|
6,841 |
|
|
Inventories |
|
|
4,369 |
|
|
3,822 |
|
|
Deferred income taxes |
|
|
867 |
|
|
877 |
|
|
Investments and other current assets |
|
|
607 |
|
|
455 |
|
|
Assets held for sale |
|
|
|
|
|
841 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
17,044 |
|
|
15,486 |
|
|
|
|
|
|
|
|
|
|
|
Investments and long-term receivables |
|
|
465 |
|
|
616 |
|
|
Property, plant and equipment - net |
|
|
4,725 |
|
|
4,724 |
|
|
Goodwill |
|
|
11,645 |
|
|
11,275 |
|
|
Other intangible assets - net |
|
|
2,376 |
|
|
2,537 |
|
|
Insurance recoveries for asbestos related liabilities |
|
|
748 |
|
|
825 |
|
|
Deferred income taxes |
|
|
1,056 |
|
|
1,221 |
|
|
Other assets |
|
|
1,386 |
|
|
1,150 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
39,445 |
|
$ |
37,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
4,570 |
|
$ |
4,199 |
|
|
Short-term borrowings |
|
|
60 |
|
|
67 |
|
|
Commercial paper |
|
|
700 |
|
|
299 |
|
|
Current maturities of long-term debt |
|
|
515 |
|
|
523 |
|
|
Accrued liabilities |
|
|
7,014 |
|
|
6,446 |
|
|
Liabilities related to assets held for sale |
|
|
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
12,859 |
|
|
11,724 |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
6,880 |
|
|
5,755 |
|
|
Deferred income taxes |
|
|
505 |
|
|
636 |
|
|
Postretirement benefit obligations other than pensions |
|
|
1,386 |
|
|
1,477 |
|
|
Asbestos related liabilities |
|
|
1,574 |
|
|
1,557 |
|
|
Other liabilities |
|
|
4,474 |
|
|
5,898 |
|
|
|
|
|
|
|
|
|
|
|
SHAREOWNERS EQUITY |
|
|
|
|
|
|
|
|
Capital |
- common stock issued |
|
|
958 |
|
|
958 |
|
|
- additional paid-in capital |
|
|
4,113 |
|
|
3,977 |
|
Common stock held in treasury, at cost |
|
|
(8,973 |
) |
|
(8,299 |
) |
|
Accumulated other comprehensive income (loss) |
|
|
(1,122 |
) |
|
(1,067 |
) |
|
Retained earnings |
|
|
16,686 |
|
|
15,097 |
|
|
|
|
|
|
|
|
|
|
|
Total Honeywell shareowners equity |
|
|
11,662 |
|
|
10,666 |
|
|
Noncontrolling interest |
|
|
105 |
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
Total shareowners equity |
|
|
11,767 |
|
|
10,787 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareowners equity |
|
$ |
39,445 |
|
$ |
37,834 |
|
|
|
|
|
|
|
|
|
|
The Notes to Financial Statements are an integral part of this statement.
4
|
Honeywell International Inc. |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
||||
|
|
|
|
||||
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
|
|
(Dollars in millions) |
|
||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
2,377 |
|
$ |
1,653 |
|
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
704 |
|
|
716 |
|
Gain on sale of non-strategic businesses and assets |
|
|
(353 |
) |
|
|
|
Repositioning and other charges |
|
|
637 |
|
|
482 |
|
Net payments for repositioning and other charges |
|
|
(335 |
) |
|
(229 |
) |
Pension and other postretirement expense |
|
|
(24 |
) |
|
161 |
|
Pension and other postretirement benefit payments |
|
|
(1,495 |
) |
|
(136 |
) |
Stock compensation expense |
|
|
129 |
|
|
123 |
|
Deferred income taxes |
|
|
197 |
|
|
688 |
|
Excess tax benefits from share based payment arrangements |
|
|
(31 |
) |
|
(5 |
) |
Other |
|
|
(17 |
) |
|
(97 |
) |
Changes in assets and liabilities, net of the effects of acquisitions and divestitures: |
|
|
|
|
|
|
|
Accounts, notes and other receivables |
|
|
(433 |
) |
|
(569 |
) |
Inventories |
|
|
(440 |
) |
|
(356 |
) |
Other current assets |
|
|
(53 |
) |
|
(46 |
) |
Accounts payable |
|
|
365 |
|
|
329 |
|
Accrued liabilities |
|
|
128 |
|
|
444 |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
1,356 |
|
|
3,158 |
|
|
|
|
|
|
|
|
|
|
|||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
Expenditures for property, plant and equipment |
|
|
(466 |
) |
|
(351 |
) |
Proceeds from disposals of property, plant and equipment |
|
|
3 |
|
|
8 |
|
Increase in investments |
|
|
(322 |
) |
|
(435 |
) |
Decrease in investments |
|
|
288 |
|
|
94 |
|
Cash paid for acquisitions, net of cash acquired |
|
|
(627 |
) |
|
(1,318 |
) |
Proceeds from sales of businesses, net of fees paid |
|
|
1,170 |
|
|
|
|
Other |
|
|
67 |
|
|
22 |
|
|
|
|
|
|
|
|
|
Net cash provided by/(used for) investing activities |
|
|
113 |
|
|
(1,980 |
) |
|
|
|
|
|
|
|
|
|
|||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
Net increase in commercial paper |
|
|
401 |
|
|
599 |
|
Net (decrease)/increase in short-term borrowings |
|
|
(4 |
) |
|
18 |
|
Payment of debt assumed with acquisitions |
|
|
|
|
|
(326 |
) |
Proceeds from issuance of common stock |
|
|
232 |
|
|
111 |
|
Proceeds from issuance of long-term debt |
|
|
1,389 |
|
|
|
|
Payments of long-term debt |
|
|
(439 |
) |
|
(1,004 |
) |
Excess tax benefits from share based payment arrangements |
|
|
31 |
|
|
5 |
|
Repurchases of common stock |
|
|
(1,009 |
) |
|
|
|
Cash dividends paid |
|
|
(796 |
) |
|
(704 |
) |
|
|
|
|
|
|
|
|
Net cash used for financing activities |
|
|
(195 |
) |
|
(1,301 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
|
(39 |
) |
|
(38 |
) |
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
|
1,235 |
|
|
(161 |
) |
Cash and cash equivalents at beginning of period |
|
|
2,650 |
|
|
2,801 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
3,885 |
|
$ |
2,640 |
|
|
|
|
|
|
|
|
|
The Notes to Financial Statements are an integral part of this statement.
5
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 at September 30, 2011 and the results of operations for the three and nine months ended September 30, 2011 and 2010 and cash flows for the nine months ended September 30, 2011 and 2010. The results of operations for the three and nine months ended September 30, 2011 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year. We have evaluated subsequent events through the date of issuance of our consolidated financial statements.
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, respectively. 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. In the event that 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 and nine months ended September 30, 2011 and 2010 were October 1, 2011 and October 2, 2010, respectively.
The financial information as of September 30, 2011 should be read in conjunction with the financial statements for the year ended December 31, 2010 contained in our Form 10-K filed on February 11, 2011.
Certain prior year amounts have been reclassified to conform to current year presentation.
The Company has reported its Consumer Products Group business (CPG) as a discontinued operation as of June 30, 2011. Accordingly, the results of operations for all periods presented have been reclassified to reflect the business as a discontinued operation and the assets and liabilities of the business have been reclassified as held for sale as of December 31, 2010. The net income attributable to the non-controlling interest for the discontinued operations is insignificant.
Note 2. Recent Accounting Pronouncements
Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASUs) to the FASBs Accounting Standards Codification.
The Company considers the applicability and impact of all recent 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 and results of operations.
In May 2011, the FASB issued amendments to disclosure requirements for common fair value measurement. These amendments, effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change some fair value measurement principles and disclosure requirements. The implementation of this amended accounting guidance is not expected to have a material impact on our consolidated financial position and results of operations.
In June 2011, the FASB issued amendments to disclosure requirements for presentation of comprehensive income. This guidance, effective retrospectively for the interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous
6
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share
amounts)
statement of comprehensive income or in two separate but consecutive statements. The implementation of this amended accounting guidance is not expected to have a material impact on our consolidated financial position and results of operations.
In September 2011, the FASB issued amendments to the goodwill impairment guidance which provides an option for companies to use a qualitative approach to test goodwill for impairment if certain conditions are met. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (early adoption is permitted). The implementation of amended accounting guidance is not expected to have a material impact on our consolidated financial position and results of operations.
Note 3. Acquisitions and Divestitures
AcquisitionsIn August 2011, the Company acquired 100 percent of the issued and outstanding shares of EMS Technologies, Inc. (EMS), a leading provider of connectivity solutions for mobile networking, rugged mobile computers and satellite communications. EMS is a US public company which operates globally and had reported 2010 revenues of approximately $355 million.
The aggregate value, net of cash acquired, was approximately $513 million and was allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. On a preliminary basis, the Company has assigned approximately $134 million to identifiable intangible assets, of which approximately $93 million and approximately $41 million were recorded within the Aerospace and Automation and Control segments respectively, predominantly customer relationships, existing technology and trademarks. These intangible assets are being amortized over their estimated lives, using straight-line and accelerated amortization methods. The excess of the purchase price over the estimated fair values of net assets acquired (approximating $240 million), was recorded as goodwill. This goodwill arises primarily from the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our product offerings to key target markets and serve as entry into new and profitable segments, and the expected cost synergies that will be realized through the consolidation of the acquired business into our Aerospace and Automation and Control Solutions segments. These cost synergies are expected to be realized principally in the areas of selling, general and administrative expenses, material sourcing and manufacturing. This goodwill is non-deductible for tax purposes.
The results from the acquisition date through September 30, 2011 are included in the Aerospace and Automation and Control Solutions segments and were not material to the consolidated financial statements. As of September 30, 2011, the purchase accounting for EMS is subject to final adjustment primarily for the valuation of inventory and property, plant and equipment, useful lives of intangible assets, amounts allocated to intangible assets and goodwill, and for certain pre-acquisition contingencies.
DivestituresIn July 2011, the Company sold its Consumer Products Group business (CPG) to Rank Group Limited. The sale was completed for approximately $955 million in cash proceeds, resulting in a pre-tax gain of approximately $301 million and approximately $178 million net of tax. The gain was recorded in net income from discontinued operations after taxes in the Companys Consolidated Statement of Operations for the quarter ended September 30, 2011. The net income attributable to the non-controlling interest for the discontinued operations is insignificant. The sale of CPG, which had been part of the Transportation Systems segment, is consistent with the Companys strategic focus on its portfolio of differentiated global technologies.
The key components of income from discontinued operations related to CPG were as follows:
7
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
60 |
|
$ |
253 |
|
$ |
530 |
|
$ |
728 |
|
Costs, expenses and other |
|
|
51 |
|
|
199 |
|
|
421 |
|
|
572 |
|
Selling, general and administrative expense |
|
|
14 |
|
|
23 |
|
|
63 |
|
|
71 |
|
Other (income) expense |
|
|
(3 |
) |
|
2 |
|
|
(2 |
) |
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
|
(2 |
) |
|
29 |
|
|
48 |
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on disposal of discontinued operations |
|
|
301 |
|
|
|
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations before taxes |
|
|
299 |
|
|
29 |
|
|
349 |
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
|
122 |
|
|
10 |
|
|
140 |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations after taxes |
|
$ |
177 |
|
$ |
19 |
|
$ |
209 |
|
$ |
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of assets and liabilities classified as discontinued operations and included in other current assets and other current liabilities related to the CPG business consisted of the following:
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
Accounts, notes and other receivables |
|
$ |
227 |
|
Inventories |
|
|
136 |
|
Property, plant and equipment - net |
|
|
116 |
|
Goodwill and other intangibles - net |
|
|
359 |
|
Other |
|
|
3 |
|
|
|
|
|
|
Total assets |
|
$ |
841 |
|
|
|
|
|
|
Accounts payable |
|
$ |
145 |
|
Accrued and other liabilities |
|
|
45 |
|
|
|
|
|
|
Total liabilities |
|
$ |
190 |
|
|
|
|
|
|
8
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Note 4. Repositioning and Other Charges
A summary of repositioning and other charges follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Severance |
|
$ |
194 |
|
$ |
64 |
|
$ |
237 |
|
$ |
121 |
|
Asset impairments |
|
|
76 |
|
|
12 |
|
|
86 |
|
|
21 |
|
Exit costs |
|
|
35 |
|
|
5 |
|
|
47 |
|
|
9 |
|
Adjustments |
|
|
(7 |
) |
|
(9 |
) |
|
(21 |
) |
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net repositioning charge |
|
|
298 |
|
|
72 |
|
|
349 |
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asbestos related litigation charges, net of insurance |
|
|
38 |
|
|
48 |
|
|
116 |
|
|
135 |
|
Probable and reasonably estimable environmental liabilities |
|
|
76 |
|
|
68 |
|
|
177 |
|
|
169 |
|
Other |
|
|
(2 |
) |
|
24 |
|
|
(5 |
) |
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net repositioning and other charges |
|
$ |
410 |
|
$ |
212 |
|
$ |
637 |
|
$ |
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the pretax classification of total net repositioning and other charges by income statement caption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Cost of products and services sold |
|
$ |
343 |
|
$ |
185 |
|
$ |
545 |
|
$ |
445 |
|
Selling, general and administrative expenses |
|
|
67 |
|
|
27 |
|
|
92 |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
410 |
|
$ |
212 |
|
$ |
637 |
|
$ |
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the pretax impact of total net repositioning and other charges by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Aerospace |
|
$ |
38 |
|
$ |
27 |
|
$ |
32 |
|
$ |
33 |
|
Automation and Control Solutions |
|
|
137 |
|
|
34 |
|
|
182 |
|
|
63 |
|
Specialty Materials |
|
|
28 |
|
|
14 |
|
|
41 |
|
|
25 |
|
Transportation Systems |
|
|
120 |
|
|
44 |
|
|
196 |
|
|
149 |
|
Corporate |
|
|
87 |
|
|
93 |
|
|
186 |
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
410 |
|
$ |
212 |
|
$ |
637 |
|
$ |
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the quarter ended September 30, 2011, we recognized repositioning charges totaling $305 million including severance costs of $194 million related to workforce reductions of 2,097 manufacturing and administrative positions across all of our segments. The workforce reductions were primarily related to the planned shutdown of a manufacturing facility in our Transportation Systems segment, factory consolidations and/or rationalizations and an organizational realignment of a business in our Automation and Control Solutions segment, factory transitions in connection with acquisition-related synergies in our Automation and Control Solutions and Aerospace segments, the consolidation of non-U.S. repair facilities in our Aerospace segment, the exit of a product line in our Specialty Materials segment, and cost savings actions taken in connection with our ongoing functional transformation and productivity initiatives. The repositioning charges included asset impairments of $76 million principally related to the write-off of certain intangible assets in our Automation and
9
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Control Solutions segment due to a change in branding strategy and manufacturing plant and equipment associated with the planned shutdown of a manufacturing facility and exit of a product line as discussed above. The repositioning charges also included exit costs of $35 million principally for costs to terminate a contract in connection with the exit from a product line in our Aerospace segment and closure obligations associated with the planned shutdown of a manufacturing facility and exit of a product line as discussed above.
In the quarter ended September 30, 2010, we recognized repositioning charges totaling $81 million including severance costs of $64 million related to workforce reductions of 1,188 manufacturing and administrative positions in our Automation and Control Solutions, Aerospace and Specialty Materials segments. The workforce reductions were related to achieving acquisition-related synergies in our Automation and Control Solutions segment, factory transitions in our Automation and Control Solutions and Specialty Materials segments to more cost-effective locations, the exit and/or rationalization of certain product lines in our Specialty Materials segment, and the wind-down of certain programs in the Defense and Space business of our Aerospace segment. The repositioning charges also included asset impairments of $12 million principally related to manufacturing plant and equipment associated with the exit and/or rationalization of certain product lines in our Specialty Materials segment.
In the nine months ended September 30, 2011, we recognized repositioning charges totaling $370 million including severance costs of $237 million related to workforce reductions of 3,043 manufacturing and administrative positions across all of our segments. The workforce reductions were primarily related to the planned shutdown of a manufacturing facility in our Transportation Systems segment, cost savings actions taken in connection with our ongoing functional transformation and productivity initiatives, factory transitions in connection with acquisition-related synergies in our Automation and Control Solutions and Aerospace segments, the exit from and/or rationalization of certain product lines and markets in our Specialty Materials and Automation and Control Solutions segments, the consolidation of repair facilities in our Aerospace segment, and factory consolidations and/or rationalizations and organizational realignments of businesses in our Automation and Control Solutions segment. The repositioning charges included asset impairments of $86 million principally related to the write-off of certain intangible assets in our Automation and Control Solutions segment due to a change in branding strategy and manufacturing plant and equipment associated with the planned shutdown of a manufacturing facility and the exit of a product line and a factory transition as discussed above. The repositioning charges also included exit costs of $47 million principally for costs to terminate contracts related to the exit of a market and product line and a factory transition and closure obligations associated with the planned shutdown of a manufacturing facility and exit of a product line as discussed above. Also, $21 million of previously established accruals, primarily for severance at our Aerospace and Automation and Control Solutions segments, were returned to income in the first nine months of 2011 due principally to fewer employee separations than originally planned associated with prior severance programs.
In the nine months ended September 30, 2010, we recognized repositioning charges totaling $151 million including severance costs of $121 million related to workforce reductions of 2,155 manufacturing and administrative positions across all of our segments. The workforce reductions were primarily related to the planned shutdown of certain manufacturing facilities in our Automation and Control Solutions and Transportation Systems segments, cost savings actions taken in connection with our ongoing functional transformation and productivity initiatives, factory transitions in our Aerospace, Automation and Control Solutions and Specialty Materials segments to more cost-effective locations, achieving acquisition-related synergies in our Automation and Control Solutions segment, and the exit and/or rationalization of certain product lines in our Specialty Materials segment. The repositioning charges also included asset impairments of $21 million principally related to manufacturing plant and equipment associated with the exit and/or rationalization of certain product lines and in facilities scheduled to close. Also, $17 million of previously established accruals, primarily for severance at our Automation and Control Solutions, Transportation Systems and Aerospace segments, were returned to income in the first nine months of 2010 due primarily to fewer employee separations than originally planned associated with prior severance programs.
10
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
The following table summarizes the status of our total repositioning reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance |
|
Asset |
|
Exit |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
$ |
276 |
|
$ |
|
|
$ |
34 |
|
$ |
310 |
|
Charges |
|
|
237 |
|
|
86 |
|
|
47 |
|
|
370 |
|
Usage - cash |
|
|
(95 |
) |
|
|
|
|
(17 |
) |
|
(112 |
) |
Usage - noncash |
|
|
|
|
|
(86 |
) |
|
|
|
|
(86 |
) |
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
(21 |
) |
|
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
$ |
397 |
|
$ |
|
|
$ |
64 |
|
$ |
461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain repositioning projects in our Aerospace, Automation and Control Solutions and Transportation Systems segments included exit or disposal activities, the costs related to which will be recognized in future periods when the actual liability is incurred. The nature of these exit or disposal costs includes asset set-up and moving, product recertification and requalification, and employee retention, training and travel. The following tables summarize by segment, expected, incurred and remaining exit and disposal costs related to 2011 and 2010 repositioning actions which we were not able to recognize at the time the actions were initiated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Repositioning Actions |
|
Aerospace |
|
Automation and |
|
Transportation |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Expected exit and disposal costs |
|
$ |
15 |
|
$ |
15 |
|
$ |
7 |
|
$ |
37 |
|
Costs incurred during: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year-to-date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining exit and disposal costs |
|
$ |
15 |
|
$ |
15 |
|
$ |
7 |
|
$ |
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Repositioning Actions |
|
Aerospace |
|
Automation and |
|
Transportation |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Expected exit and disposal costs |
|
$ |
11 |
|
$ |
10 |
|
$ |
2 |
|
$ |
23 |
|
Costs incurred during: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year-to-date |
|
|
(1 |
) |
|
(3 |
) |
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining exit and disposal costs |
|
$ |
10 |
|
$ |
7 |
|
$ |
2 |
|
$ |
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the quarter ended September 30, 2011, we recognized a charge of $76 million for environmental liabilities deemed probable and reasonably estimable in the quarter. We also recognized a charge of $38 million primarily representing an update to our estimated liability for the resolution of Bendix related asbestos claims as of September 30, 2011, net of probable insurance recoveries. Environmental and Asbestos matters are discussed in detail in Note 15, Commitments and Contingencies.
In the quarter ended September 30, 2010, we recognized a charge of $68 million for environmental liabilities deemed probable and reasonably estimable in the quarter. We also recognized a charge of $48 million primarily representing an update to our estimated liability for the resolution of Bendix related asbestos claims as of September 30, 2010, net of probable insurance recoveries. We also recognized other charges of $24 million in connection with the evaluation of potential resolution of certain legal matters.
In the nine months ended September 30, 2011, we recognized a charge of $177 million for environmental liabilities deemed probable and reasonably estimable in the period. We also recognized a charge of $116 million
11
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
primarily representing an update to our estimated liability for the resolution of Bendix related asbestos claims as of September 30, 2011, net of probable insurance recoveries.
In the nine months ended September 30, 2010, we recognized a charge of $169 million for environmental liabilities deemed probable and reasonably estimable in the period. We also recognized a charge of $135 million primarily representing an update to our estimated liability for the resolution of Bendix related asbestos claims as of September 30, 2010, net of probable insurance recoveries. We also recognized other charges of $42 million in connection with the evaluation of potential resolution of certain legal matters.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 5. Other (income) expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity (income)/loss of affiliated companies |
|
$ |
(13 |
) |
$ |
(3 |
) |
$ |
(36 |
) |
$ |
(16 |
) |
Gain on sale of non-strategic businesses and assets |
|
|
(6 |
) |
|
|
|
|
(52 |
) |
|
|
|
Interest income |
|
|
(15 |
) |
|
(14 |
) |
|
(42 |
) |
|
(30 |
) |
Foreign exchange |
|
|
5 |
|
|
(3 |
) |
|
23 |
|
|
5 |
|
Other, net |
|
|
8 |
|
|
(58 |
) |
|
35 |
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(21 |
) |
$ |
(78 |
) |
$ |
(72 |
) |
$ |
(89 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of non-strategic businesses and assets for the nine months ended September 30, 2011 includes a $41 million pre-tax gain, $25 million net of tax, related to the divestiture of the automotive on-board sensor products business within our Automation and Control Solutions segment.
Other, net in the nine months ended September 30, 2011 includes a loss of $29 million resulting from early redemption of debt in the first quarter of 2011. See Note 10 Long-term Debt and Credit Agreements for further details.
Other, net in the three and nine months ended September 30, 2010 includes a $62 million pre-tax gain, $39 million net of tax, related to the consolidation of a joint venture within our Specialty Materials segment. The Company obtained control and the ability to direct those activities most significant to the joint ventures economic performance in last years third quarter, resulting in consolidation.
Note 6. Earnings Per Share
The details of the earnings per share calculations for the three and nine months ended September 30, 2011 and 2010 are as follows:
12
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
Basic |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations less net income attributable to the noncontrolling interest |
|
$ |
685 |
|
$ |
579 |
|
$ |
2,168 |
|
$ |
1,600 |
|
Income from discontinued operations |
|
|
177 |
|
|
19 |
|
|
209 |
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
|
862 |
|
|
598 |
|
|
2,377 |
|
|
1,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
778.2 |
|
|
776.5 |
|
|
782.9 |
|
|
770.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
0.88 |
|
|
0.75 |
|
|
2.77 |
|
|
2.08 |
|
Income from discontinued operations |
|
|
0.23 |
|
|
0.02 |
|
|
0.27 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
1.11 |
|
$ |
0.77 |
|
$ |
3.04 |
|
$ |
2.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
Assuming Dilution |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations less net income attributable to the noncontrolling interest |
|
$ |
685 |
|
$ |
579 |
|
$ |
2,168 |
|
$ |
1,600 |
|
Income from discontinued operations |
|
|
177 |
|
|
19 |
|
|
209 |
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
|
862 |
|
|
598 |
|
|
2,377 |
|
|
1,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
778.2 |
|
|
776.5 |
|
|
782.9 |
|
|
770.6 |
|
Dilutive securities issuable - stock plans |
|
|
8.7 |
|
|
6.3 |
|
|
11.1 |
|
|
6.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average shares outstanding |
|
|
786.9 |
|
|
782.8 |
|
|
794.0 |
|
|
777.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
0.87 |
|
|
0.74 |
|
|
2.73 |
|
|
2.06 |
|
Income from discontinued operations |
|
|
0.23 |
|
|
0.02 |
|
|
0.26 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
1.10 |
|
$ |
0.76 |
|
$ |
2.99 |
|
$ |
2.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and nine months ended September 30, 2011, the weighted average number of stock options excluded from the computations were 11.6 and 8.9 million, respectively. For the three and nine months ended September 30, 2010, the weighted average number of stock options excluded from the computations were 21.7 and 18.3 million, respectively. These stock options were outstanding at the end of each of the respective periods.
13
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Note 7. Accounts, Notes and Other Receivables
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
Trade |
|
$ |
7,101 |
|
$ |
6,471 |
|
Other |
|
|
455 |
|
|
647 |
|
|
|
|
|
|
|
|
|
|
|
|
7,556 |
|
|
7,118 |
|
Less - Allowance for doubtful accounts |
|
|
(240 |
) |
|
(277 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
7,316 |
|
$ |
6,841 |
|
|
|
|
|
|
|
|
|
Trade Receivables includes $1,495, and $1,307 million of unbilled balances under long-term contracts as of September 30, 2011 and December 31, 2010, respectively. These amounts are billed in accordance with the terms of customer contracts to which they relate.
Note 8. Inventories
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
Raw materials |
|
$ |
1,311 |
|
$ |
1,139 |
|
Work in process |
|
|
918 |
|
|
792 |
|
Finished products |
|
|
2,306 |
|
|
2,045 |
|
|
|
|
|
|
|
|
|
|
|
|
4,535 |
|
|
3,976 |
|
Reduction to LIFO cost basis |
|
|
(166 |
) |
|
(154 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
4,369 |
|
$ |
3,822 |
|
|
|
|
|
|
|
|
|
Note 9. Goodwill and Other Intangible Assets - Net
The change in the carrying amount of goodwill for the nine months ended September 30, 2011 by segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
Acquisitions |
|
Divestitures |
|
Currency |
|
September 30, |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Aerospace |
|
$ |
1,883 |
|
$ |
153 |
|
$ |
|
|
$ |
2 |
|
$ |
2,038 |
|
Automation and Control Solutions |
|
|
7,907 |
|
|
144 |
|
|
(12 |
) |
|
60 |
|
|
8,099 |
|
Specialty Materials |
|
|
1,291 |
|
|
16 |
|
|
|
|
|
4 |
|
|
1,311 |
|
Transportation Systems |
|
|
194 |
|
|
|
|
|
|
|
|
3 |
|
|
197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,275 |
|
$ |
313 |
|
$ |
(12 |
) |
$ |
69 |
|
$ |
11,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
December 31, 2010 |
|
||||||||||||||
|
|
|
|
|
|
||||||||||||||
|
|
Gross |
|
|
|
Net |
|
Gross |
|
|
|
Net |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Determinable life intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and technology |
|
$ |
1,176 |
|
$ |
(748 |
) |
$ |
428 |
|
$ |
1,101 |
|
$ |
(676 |
) |
$ |
425 |
|
Customer relationships |
|
|
1,651 |
|
|
(473 |
) |
|
1,178 |
|
|
1,688 |
|
|
(399 |
) |
|
1,289 |
|
Trademarks |
|
|
156 |
|
|
(91 |
) |
|
65 |
|
|
186 |
|
|
(84 |
) |
|
102 |
|
Other |
|
|
207 |
|
|
(140 |
) |
|
67 |
|
|
512 |
|
|
(404 |
) |
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,190 |
|
|
(1,452 |
) |
|
1,738 |
|
|
3,487 |
|
|
(1,563 |
) |
|
1,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite life intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
|
638 |
|
|
|
|
|
638 |
|
|
613 |
|
|
|
|
|
613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,828 |
|
$ |
(1,452 |
) |
$ |
2,376 |
|
$ |
4,100 |
|
$ |
(1,563 |
) |
$ |
2,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to intangible assets for the nine months ended September 30, 2011 and 2010 was $184 and $183 million, respectively.
We completed our annual impairment testing of goodwill and indefinite-lived intangibles as of March 31, 2011 and determined that there was no impairment as of that date.
Note 10. Long-term Debt and Credit Agreements
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
6.125% notes due 2011 |
|
$ |
500 |
|
$ |
500 |
|
5.625% notes due 2012 |
|
|
|
|
|
400 |
|
4.25% notes due 2013 |
|
|
600 |
|
|
600 |
|
3.875% notes due 2014 |
|
|
600 |
|
|
600 |
|
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 |
|
|
|
|
5.375% notes due 2041 |
|
|
600 |
|
|
|
|
Industrial development bond obligations, floating rate maturing at various dates through 2037 |
|
|
37 |
|
|
46 |
|
6.625% debentures due 2028 |
|
|
216 |
|
|
216 |
|
9.065% debentures due 2033 |
|
|
51 |
|
|
51 |
|
5.70% notes due 2036 |
|
|
550 |
|
|
550 |
|
5.70% notes due 2037 |
|
|
600 |
|
|
600 |
|
Other (including capitalized leases), 0.6%-9.5% maturing at various dates through 2023 |
|
|
241 |
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
|
7,395 |
|
|
6,278 |
|
|
|
|
|
|
|
|
|
Less current portion |
|
|
(515 |
) |
|
(523 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
6,880 |
|
$ |
5,755 |
|
|
|
|
|
|
|
|
|
15
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
|
|
The schedule of principal payments on long term debt is as follows: |
||||
|
||||
|
|
September 30, 2011 |
|
|
|
|
|
|
|
2011 |
|
$ |
514 |
|
2012 |
|
|
17 |
|
2013 |
|
|
618 |
|
2014 |
|
|
607 |
|
2015 |
|
|
1 |
|
Thereafter |
|
|
5,638 |
|
|
|
|
|
|
|
|
|
7,395 |
|
Less-current portion |
|
|
(515 |
) |
|
|
|
|
|
|
|
$ |
6,880 |
|
|
|
|
|
|
In February 2011, the Company issued $800 million 4.25 percent Senior Notes due 2021 and $600 million 5.375 percent Senior Notes due 2041 (collectively, the Notes). The Notes are senior unsecured and unsubordinated obligations of Honeywell and rank equally with all of Honeywells existing and future senior unsecured debt and senior to all of Honeywells subordinated debt. The offering resulted in gross proceeds of $1,400 million, offset by $19 million in discount and closing costs related to the offering.
In the first quarter of 2011, the Company repurchased the entire outstanding principal amount of its $400 million 5.625 percent Notes due 2012 via a cash tender offer and a subsequent optional redemption. The cost relating to the early redemption of the Notes, including the make-whole premium, was $29 million.
In March 2011, the Company entered into a $2,800 million Five Year Credit Agreement (Credit Agreement) with a syndicate of banks. Commitments under the Credit Agreement can be increased pursuant to the terms of the Credit Agreement to an aggregate amount not to exceed $3,500 million. The Credit Agreement is maintained for general corporate purposes, including support for the issuance of commercial paper, and replaces the previous $2,800 million five year credit agreement dated May 14, 2007 (Prior Agreement). There have been no borrowings under the Credit Agreement or the Prior Agreement. The Credit Agreement does not restrict the Companys ability to pay dividends, nor does it contain financial covenants.
As a source of liquidity, we may periodically sell interests in designated pools of trade accounts receivables to third parties. As of September 30, 2011 and December 31, 2010 none of the receivables in the designated pools had been sold to third parties. When we sell receivables, they are over-collateralized and we retain a subordinated interest in the pool of receivables representing that over-collateralization as well as an undivided interest in the balance of the receivables pools. The terms of the trade accounts receivable program permit the repurchase of receivables from the third parties at our discretion, providing us with an additional source of revolving credit. As a result, program receivables remain on the Companys balance sheet with a corresponding amount recorded as either Short-term borrowings or Long-term debt.
Note 11. Financial Instruments and Fair Value Measures
Credit and Market RiskFinancial instruments, including derivatives, expose us to counterparty credit risk for nonperformance and to market risk related to changes in interest and currency exchange rates and commodity prices. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. Our counterparties in derivative transactions are substantial investment and commercial banks with significant experience using such derivative instruments. We monitor the impact of market risk on the fair value and cash flows of our derivative and other financial instruments considering reasonably possible changes in interest rates, currency exchange rates and commodity prices and restrict the use of derivative financial instruments to hedging activities.
We continually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single customer or a small group of customers.
16
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Foreign Currency Risk ManagementWe conduct our business on a multinational basis in a wide variety of foreign currencies. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. Our objective is to preserve the economic value of non-functional currency denominated cash flows. We attempt to hedge transaction exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign currency exchange forward and option contracts with third parties.
We hedge monetary assets and liabilities denominated in non-functional currencies. Prior to conversion into U.S. dollars, these assets and liabilities are remeasured at spot exchange rates in effect on the balance sheet date. The effects of changes in spot rates are recognized in earnings and included in Other (Income) Expense. We partially hedge forecasted sales and purchases, which predominantly occur in the next twelve months and are denominated in non-functional currencies, with currency forward contracts. Changes in the forecasted non-functional currency cash flows due to movements in exchange rates are substantially offset by changes in the fair value of the currency forward contracts designated as hedges. Market value gains and losses on these contracts are recognized in earnings when the hedged transaction is recognized. Open foreign currency exchange forward contracts mature predominantly in the next twelve months. At September 30, 2011 and December 31, 2010, we had contracts with notional amounts of $4,631 million and $5,733 million respectively, to exchange foreign currencies, principally the U.S. dollar, Euro, British pound, Canadian dollar, Hong Kong dollar, Mexican peso, Swiss franc, Czech koruna, Chinese renminbi, Indian rupee, Singapore dollar, Swedish krona, Korean won and Thai baht.
Commodity Price Risk ManagementOur 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. We also enter into forward commodity contracts with third parties designated as hedges of anticipated purchases of several commodities. Forward commodity contracts are marked-to-market, with the resulting gains and losses recognized in earnings when the hedged transaction is recognized. At September 30, 2011 and December 31, 2010, we had contracts with notional amounts of $45 million and $23 million, respectively, related to forward commodity agreements, principally base metals and natural gas.
Interest Rate Risk Management We use a combination of financial instruments, including long-term, medium-term and short-term financing, variable-rate commercial paper, and interest rate swaps to manage the interest rate mix of our total debt portfolio and related overall cost of borrowing. At September 30, 2011 and December 31, 2010, interest rate swap agreements designated as fair value hedges effectively changed $1,400 and $600 million, respectively, of fixed rate debt at an average rate of 4.09 and 3.88 percent, respectively, to LIBOR based floating rate debt. Our interest rate swaps mature at various dates through 2021.
Fair Value of Financial Instruments The FASBs accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASBs guidance classifies the inputs used to measure fair value into the following hierarchy:
|
|
|
|
Level 1 |
Unadjusted quoted prices in active markets for identical assets or liabilities |
|
|
|
|
Level 2 |
Unadjusted quoted prices in active markets for similar assets or liabilities, or |
|
|
|
|
|
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or |
|
|
|
|
|
Inputs other than quoted prices that are observable for the asset or liability |
|
|
|
|
Level 3 |
Unobservable inputs for the asset or liability |
17
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
The Company endeavors to utilize the best available information in measuring fair value. Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has determined that our available for sale investments in marketable equity securities are level 1 and our remaining financial assets and liabilities are level 2 in the fair value hierarchy. The following table sets forth the Companys financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
Assets: |
|
|
|
|
|
|
|
Foreign currency exchange contracts |
|
$ |
16 |
|
$ |
16 |
|
Available for sale investments |
|
|
332 |
|
|
322 |
|
Interest rate swap agreements |
|
|
135 |
|
|
22 |
|
Forward commodity contracts |
|
|
1 |
|
|
2 |
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Foreign currency exchange contracts |
|
$ |
40 |
|
$ |
14 |
|
Forward commodity contracts |
|
|
3 |
|
|
2 |
|
The foreign currency exchange contracts, interest rate swap agreements, and forward commodity contracts are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2. The Company also holds investments in commercial paper, certificates of deposits, and time deposits that are designated as available for sale and are valued using market transactions in over-the-counter markets. As such, these investments are classified within level 2.
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 Companys financial assets and liabilities that were not carried at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
December 31, 2010 |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term receivables |
|
$ |
127 |
|
$ |
127 |
|
$ |
203 |
|
$ |
199 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and related current maturities |
|
$ |
7,395 |
|
$ |
8,395 |
|
$ |
6,278 |
|
$ |
6,835 |
|
In the three and nine months ended September 30, 2011, the Company had nonfinancial assets, specifically property, plant and equipment, with a net book value of $128 million and $143 million, respectively, which were accounted for at fair value on a nonrecurring basis. These assets were tested for impairment and based on the fair value of these assets the Company recognized losses of $74 million and $85 million, respectively, in the three and nine months ended September 30, 2011. The Company has determined that the fair value measurements of these nonfinancial assets are level 3 in the fair value hierarchy. In the three and nine months ended September 30, 2010, the Company had nonfinancial assets, specifically property, plant and equipment, software and intangible assets, with a net book value of $13 million and $31 million, respectively, that were accounted for at fair value on a nonrecurring basis. Based on the fair value of these assets the Company recognized losses of $12 million and $29 million, respectively, in the three and nine months ended September 30, 2010.
The derivatives utilized for risk management purposes as detailed above are included on the Consolidated Balance Sheet and impacted the Statement of Operations as follows:
18
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Fair value of derivatives classified as assets consist of the following:
|
|
|
|
|
|
|
|
|
|
Designated as a Hedge |
|
Balance Sheet Classification |
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
|
|
||
Foreign currency exchange contracts |
|
Accounts, notes, and other receivables |
|
$ |
15 |
|
$ |
10 |
|
Interest rate swap agreements |
|
Other assets |
|
|
135 |
|
|
22 |
|
Commodity contracts |
|
Accounts, notes, and other receivables |
|
|
1 |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Not Designated as a Hedge |
|
Balance Sheet Classification |
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
|
|
||
Foreign currency exchange contracts |
|
Accounts, notes, and other receivables |
|
$ |
1 |
|
$ |
6 |
|
|
|
|
|
|
|
|
|
|
|
Fair value of derivatives classified as liabilities consist of the following: |
|||||||||
|
|
|
|
|
|
|
|
|
|
Designated as a Hedge |
|
Balance Sheet Classification |
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
|
|
||
Foreign currency exchange contracts |
|
Accrued liabilities |
|
$ |
36 |
|
$ |
9 |
|
Commodity contracts |
|
Accrued liabilities |
|
|
3 |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Not Designated as a Hedge |
|
Balance Sheet Classification |
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
|
|
||
Foreign currency exchange contracts |
|
Accrued liabilities |
|
$ |
4 |
|
$ |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in OCI (effective portions) consist of the following: |
|||||||||||||
|
|||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
Designated Cash Flow Hedge |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency exchange contracts |
|
$ |
(30 |
) |
$ |
8 |
|
$ |
(14 |
) |
$ |
16 |
|
Commodity contracts |
|
|
(3 |
) |
|
(3 |
) |
|
(1 |
) |
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) reclassified from AOCI to income consist of the following: |
|||||||||||||||
|
|||||||||||||||
Designated |
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
Cash Flow Hedge |
|
Income Statement Location |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Foreign currency exchange contracts |
|
Product sales |
|
$ |
10 |
|
$ |
(7 |
) |
$ |
26 |
|
$ |
(13 |
) |
|
Cost of products sold |
|
|
(8 |
) |
|
11 |
|
|
(24 |
) |
|
20 |
|
|
|
Selling & general administrative |
|
|
(2 |
) |
|
1 |
|
|
4 |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
Cost of products sold |
|
$ |
1 |
|
$ |
(1 |
) |
$ |
1 |
|
$ |
(4 |
) |
19
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Ineffective portions of commodity derivative instruments designated in cash flow hedge relationships were insignificant in the three and nine months ended September 30, 2011 and 2010 and are classified within cost of products sold. Foreign currency exchange contracts in cash flow hedge relationships qualify as critical matched terms hedge relationships and as a result have no ineffectiveness.
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. Gains on interest rate swap agreements recognized in earnings were $80 and $113 million in the three and nine months ended September 30, 2011. Gains on interest rate swap agreements recognized in earnings were $10 million and $30 million in both the three and nine months ended September 30, 2010. These gains were fully offset by losses 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. For the three and nine months ended September 30, 2011, we recognized $4 million of expense and $34 million of income, respectively, in Other (Income) Expense. For the three and nine months ended September 30, 2010, we recognized $18 million of income and $2 million of expense, respectively, in Other (Income) Expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12. Comprehensive Income/(Loss) |
|
|
|
||||||||||
|
|
|
|
||||||||||
Comprehensive income/(loss) consists of the following: |
|
|
|
||||||||||
|
|
|
|
|
|
||||||||
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
||||||||||
Net income |
|
$ |
863 |
|
$ |
596 |
|
$ |
2,381 |
|
$ |
1,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation adjustments |
|
|
(440 |
) |
|
599 |
|
|
67 |
|
|
(106 |
) |
Pension and postretirement benefit adjustments |
|
|
(77 |
) |
|
32 |
|
|
(70 |
) |
|
(96 |
) |
Change in fair value of effective cash flow hedges |
|
|
(33 |
) |
|
|
|
|
(24 |
) |
|
1 |
|
Change in unrealized gains on available for sale investments(a) |
|
|
(36 |
) |
|
19 |
|
|
(28 |
) |
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277 |
|
|
1,246 |
|
|
2,326 |
|
|
1,512 |
|
Less: Comprehensive Income/(Loss) attributable to noncontrolling interest(b) |
|
|
|
|
|
(1 |
) |
|
3 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income/(Loss) attributable to Honeywell |
|
$ |
277 |
|
$ |
1,247 |
|
$ |
2,323 |
|
$ |
1,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Includes reclassification adjustment for losses included in net income.
(b) Comprehensive Income/(Loss) attributable to noncontrolling interest consisted predominately of net income.
20
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
Changes in Noncontrolling Interest for the nine months ended September 30 consist of the following: |
|||||||
|
|
|
|
|
|
|
|
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Balance beginning of period |
|
|
121 |
|
|
110 |
|
Comprehensive Income/(Loss) attributable to noncontrolling interest |
|
|
3 |
|
|
15 |
|
Acquisitions |
|
|
|
|
|
18 |
|
Dividends paid |
|
|
(14 |
) |
|
(7 |
) |
Other owner changes |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
Balance end of period, September 30 |
|
|
105 |
|
|
136 |
|
|
|
|
|
|
|
|
|
In the nine months ended September 30, 2011 there was a $2 million decrease to Honeywell additional paid in capital for purchases of existing noncontrolling interests.
In the nine months ended September 30, 2010 there were no increases or decreases to Honeywell additional paid in capital for purchases and sales of existing noncontrolling interests.
21
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Note 13. Segment Financial Data
Honeywells 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 benefits (expense), stock compensation expense, repositioning and other charges and accounting changes.
The Consumer Products Group business had historically been part of the Transportation Systems reportable segment. In accordance with the presentation of CPG as discontinued operations, results for current periods presented as well as all future periods include Turbo Technologies and Friction Materials only. See Note 3 Acquisitions and Divestitures for further details.
22
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
1,660 |
|
$ |
1,460 |
|
$ |
4,685 |
|
$ |
4,241 |
|
Services |
|
|
1,262 |
|
|
1,244 |
|
|
3,743 |
|
|
3,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,922 |
|
|
2,704 |
|
|
8,428 |
|
|
7,857 |
|
Automation and Control Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
3,388 |
|
|
2,972 |
|
|
9,855 |
|
|
8,366 |
|
Services |
|
|
560 |
|
|
502 |
|
|
1,629 |
|
|
1,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,948 |
|
|
3,474 |
|
|
11,484 |
|
|
9,835 |
|
Specialty Materials |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
1,300 |
|
|
1,111 |
|
|
3,812 |
|
|
3,377 |
|
Services |
|
|
168 |
|
|
64 |
|
|
417 |
|
|
196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,468 |
|
|
1,175 |
|
|
4,229 |
|
|
3,573 |
|
Transportation Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
960 |
|
|
786 |
|
|
2,915 |
|
|
2,336 |
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
960 |
|
|
786 |
|
|
2,915 |
|
|
2,336 |
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,298 |
|
$ |
8,139 |
|
$ |
27,056 |
|
$ |
23,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace |
|
$ |
532 |
|
$ |
458 |
|
$ |
1,450 |
|
$ |
1,314 |
|
Automation and Control Solutions |
|
|
544 |
|
|
471 |
|
|
1,499 |
|
|
1,258 |
|
Specialty Materials |
|
|
254 |
|
|
194 |
|
|
819 |
|
|
578 |
|
Transportation Systems |
|
|
121 |
|
|
92 |
|
|
368 |
|
|
250 |
|
Corporate |
|
|
(84 |
) |
|
(56 |
) |
|
(208 |
) |
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Profit |
|
|
1,367 |
|
|
1,159 |
|
|
3,928 |
|
|
3,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/ (expense)(a) |
|
|
8 |
|
|
75 |
|
|
36 |
|
|
73 |
|
Interest and other financial charges |
|
|
(90 |
) |
|
(96 |
) |
|
(285 |
) |
|
(294 |
) |
Stock compensation expense(b) |
|
|
(38 |
) |
|
(36 |
) |
|
(129 |
) |
|
(122 |
) |
Pension expense(b) |
|
|
(26 |
) |
|
(50 |
) |
|
(83 |
) |
|
(146 |
) |
Other postretirement income/(expense)(b) |
|
|
82 |
|
|
(18 |
) |
|
109 |
|
|
(12 |
) |
Repositioning and other charges (b) |
|
|
(410 |
) |
|
(212 |
) |
|
(637 |
) |
|
(480 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
$ |
893 |
|
$ |
822 |
|
$ |
2,939 |
|
$ |
2,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
23
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Note 14. Pension and Other Postretirement Benefits
Net periodic pension and other postretirement benefits costs for our significant defined benefit plans include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
|
||||||||||
|
|||||||||||||
|
|
U.S. Plans |
|
||||||||||
|
|
|
|
||||||||||
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
58 |
|
$ |
55 |
|
$ |
174 |
|
$ |
166 |
|
Interest cost |
|
|
190 |
|
|
192 |
|
|
571 |
|
|
576 |
|
Expected return on plan assets |
|
|
(253 |
) |
|
(225 |
) |
|
(760 |
) |
|
(676 |
) |
Amortization of prior service cost |
|
|
8 |
|
|
8 |
|
|
25 |
|
|
24 |
|
Settlements and curtailments |
|
|
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3 |
|
$ |
30 |
|
$ |
34 |
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans |
|
||||||||||
|
|
|
|
||||||||||
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Service cost |
|
$ |
14 |
|
$ |
12 |
|
$ |
44 |
|
$ |
38 |
|
Interest cost |
|
|
60 |
|
|
56 |
|
|
180 |
|
|
169 |
|
Expected return on plan assets |
|
|
(72 |
) |
|
(59 |
) |
|
(215 |
) |
|
(177 |
) |
Amortization of transition obligation |
|
|
|
|
|
|
|
|
1 |
|
|
|
|
Amortization of prior service (credit) |
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
Settlements and curtailments |
|
|
1 |
|
|
|
|
|
2 |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3 |
|
$ |
9 |
|
$ |
11 |
|
$ |
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Service cost |
|
$ |
|
|
$ |
1 |
|
$ |
1 |
|
$ |
2 |
|
Interest cost |
|
|
17 |
|
|
19 |
|
|
52 |
|
|
62 |
|
Amortization of prior service (credit) |
|
|
(3 |
) |
|
(13 |
) |
|
(25 |
) |
|
(31 |
) |
Recognition of actuarial losses |
|
|
10 |
|
|
9 |
|
|
28 |
|
|
23 |
|
Settlements and curtailments |
|
|
(106 |
) |
|
|
|
|
(167 |
) |
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(82 |
) |
$ |
16 |
|
$ |
(111 |
) |
$ |
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In January and September 2011, Honeywell made voluntary cash contributions of $1 billion and $400 million, respectively, to our U.S. pension plans to improve the funded status of the plans. Given lower than expected year to date asset returns and current discount rates, the Company is considering an additional $250 million cash contribution to our pension plans in the fourth quarter of 2011 and additional voluntary contributions in 2012. The timing and amount of contributions may be impacted by a number of factors, including changes in the rate of return on plan assets and discount rates.
24
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
If required, a mark to market adjustment will be recorded in the fourth quarter of 2011 in accordance with our pension accounting method as described in Note 1 to our financial statements for the year ended December 31, 2010 contained in our Form 10-K filed on February 11, 2011.
In the nine months ended September 30, 2011, in connection with new collective bargaining agreements reached with several of its union groups, Honeywell amended its U.S. retiree medical plans eliminating the subsidy for those union employees. These plan amendments resulted in curtailment gains of $61 and $106 million in the second quarter and third quarter of 2011, respectively, which was included as part of net periodic postretirement benefit cost. The curtailment gains represent the recognition of previously unrecognized prior service credits attributable to the future years of service of the union groups for which future accrual of benefits has been eliminated.
Note 15. Commitments and Contingencies
Environmental Matters
We are subject to various federal, state, local and foreign government requirements relating to the protection of the environment. We believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and personal injury and that our handling, manufacture, use and disposal of hazardous substances are in accordance with environmental and safety laws and regulations. However, mainly because of past operations and operations of predecessor companies, we, like other companies engaged in similar businesses, have incurred remedial response and voluntary cleanup costs for site contamination and are a party to lawsuits and claims associated with environmental and safety matters, including past production of products containing hazardous substances. Additional lawsuits, claims and costs involving environmental matters are likely to continue to arise in the future.
With respect to environmental matters involving site contamination, we continually conduct studies, individually or jointly with other potentially responsible parties, to determine the feasibility of various remedial techniques. It is our policy to record appropriate liabilities for environmental matters when remedial efforts or damage claim payments are probable and the costs can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted future costs required to complete the remedial work. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical, regulatory or legal information becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially responsible parties, technology and information related to individual sites, we do not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of our recorded liabilities. We expect to fund expenditures for these matters from operating cash flow. The timing of cash expenditures depends on a number of factors, including the timing of remedial investigations and feasibility studies, the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties.
The following table summarizes information concerning our recorded liabilities for environmental costs:
|
|
|
|
|
December 31, 2010 |
|
$ |
753 |
|
Accruals for environmental matters deemed probable and reasonably estimable |
|
|
177 |
|
Environmental liability payments |
|
|
(156 |
) |
Other |
|
|
3 |
|
|
|
|
|
|
September 30, 2011 |
|
$ |
777 |
|
|
|
|
|
|
25
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Environmental liabilities are included in the following balance sheet accounts:
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
Accrued liabilities |
|
$ |
306 |
|
$ |
328 |
|
Other liabilities |
|
|
471 |
|
|
425 |
|
|
|
|
|
|
|
|
|
|
|
$ |
777 |
|
$ |
753 |
|
|
|
|
|
|
|
|
|
Although we do not currently possess sufficient information to reasonably estimate the amounts of liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined, they could be material to our consolidated results of operations or operating cash flows in the periods recognized or paid. However, considering our past experience and existing reserves, we do not expect that these environmental matters will have a material adverse effect on our consolidated financial position.
New Jersey Chrome SitesThe 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 have also received approval of the United States District Court for the District of New Jersey for the implementation of related groundwater and sediment remedial actions, and are seeking the appropriate permits from state and federal agencies. Provisions have been made in our financial statements for the estimated cost of these remedies.
The above-referenced site is the most significant of the 21 sites located in Hudson County, New Jersey that are the subject of an Administrative Consent Order (ACO) entered into with the New Jersey Department of Environmental Protection (NJDEP) in 1993 (the Honeywell ACO Sites). Remedial investigations and activities consistent with the ACO have also been conducted and are underway at the other Honeywell ACO Sites. We have recorded reserves for the Honeywell ACO Sites where appropriate under the accounting policy described above.
We have entered into court-approved settlements of litigation filed in federal court against Honeywell and other landowners seeking the cleanup of chrome residue at groups of properties known as Study Areas 5, 6 South and 6 North of the Honeywell ACO Sites. The required remedial actions are consistent with our recorded reserves.
On May 3, 2005, NJDEP filed a lawsuit in New Jersey Superior Court against Honeywell and two other companies seeking declaratory and injunctive relief, unspecified damages, and the reimbursement of unspecified total costs relating to sites in New Jersey allegedly contaminated with chrome ore processing residue. The claims against Honeywell relate to the activities of a predecessor company which ceased its New Jersey manufacturing operations in the mid-1950s. In September 2011, the court approved a settlement of the claims. Under the settlement, Honeywell paid $5 million of NJDEPs past costs, and accepted sole responsibility to remediate 24 of the 53 Publicly Funded Sites (i.e., those sites for which none of the three companies had previously accepted remediation responsibility). Honeywell will also bear 50 percent of the costs at another 10 Publicly Funded Sites. We have recorded reserves for the Publicly Funded Sites where appropriate under the accounting policy described above.
Dundalk Marine Terminal, Baltimore, MDChrome residue from legacy chrome plant operations in Baltimore was deposited as fill at the Dundalk Marine Terminal (DMT), which is owned and operated by the Maryland Port Administration (MPA). Honeywell and the MPA have been sharing costs to investigate and mitigate related environmental issues, and have entered into a cost sharing agreement under which Honeywell will bear 77 percent of the costs of developing and implementing permanent remedies for the DMT facility. In January 2011, the MPA and Honeywell submitted to the Maryland Department of the Environment (MDE) a Corrective Measures Alternatives Analysis (CMAA) of certain potential remedies for DMT to assist MDE in selection of a final remedy, which has not yet occurred. Provision has been made in our financial statements for the CMAA consistent with the accounting policy described above. We have negotiated a Consent Decree with the MPA and MDE with respect to the investigation and remediation of the DMT facility. The Consent Decree is being challenged in federal court by BUILD, a Baltimore community group, together with a local church and two
26
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
individuals (collectively BUILD). In October 2007, the Court dismissed with prejudice BUILDs state law claims and dismissed without prejudice BUILDs RCRA claims regarding neighborhoods near the DMT facility. In August 2008, the Court held a hearing on the Companys motion to dismiss BUILDs remaining claims on the grounds that MDE is diligently prosecuting the investigation and remediation of the DMT. We are awaiting the Courts decision. We do not believe that this matter will have a material adverse impact on our consolidated financial position or operating cash flows. Given the scope and complexity of this project, it is possible that the cost of remediation, when determinable, could have a material adverse impact on our results of operations in the periods recognized.
Onondaga Lake, Syracuse, NYWe 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 under the accounting policy described above.
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
Like many other industrial companies, Honeywell is a defendant in personal injury actions related to asbestos. We did not mine or produce asbestos, nor did we make or sell insulation products or other construction materials that have been identified as the primary cause of asbestos related disease in the vast majority of claimants. Products containing asbestos previously manufactured by Honeywell or by previously owned subsidiaries primarily fall into two general categories: refractory products and friction products.
Refractory ProductsHoneywell owned North American Refractories Company (NARCO) from 1979 to 1986. NARCO produced refractory products (high temperature bricks and cement) that were sold largely to the steel industry in the East and Midwest. Less than 2 percent of NARCOS products contained asbestos.
When we sold the NARCO business in 1986, we 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 retained all liability for all other claims. On January 4, 2002, NARCO filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
As a result of the NARCO bankruptcy filing, all of the claims pending against NARCO are automatically stayed pending the reorganization of NARCO. In addition, the bankruptcy court enjoined both the filing and prosecution of NARCO-related asbestos claims against Honeywell. The stay has remained in effect continuously since January 4, 2002. In connection with NARCOs bankruptcy filing, we paid NARCOs parent company $40 million and agreed to provide NARCO with up to $20 million in financing. We also agreed to pay $20 million to NARCOs parent company upon the filing of a plan of reorganization for NARCO acceptable to Honeywell (which amount was paid in December 2005 following the filing of NARCOs Third Amended Plan of Reorganization), and to pay NARCOs parent company $40 million, and to forgive any outstanding NARCO indebtedness to Honeywell, upon the effective date of the plan of reorganization.
We believe that, as part of the NARCO plan of reorganization, a trust will be established for the benefit of all asbestos claimants, current and future, pursuant to Trust Distribution Procedures negotiated with the NARCO Asbestos Claimants Committee and the Court-appointed legal representative for future asbestos claimants. If the trust is put in place and approved by the Court as fair and equitable, Honeywell as well as NARCO will be entitled to 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 federally-supervised trust. Honeywell reached agreement with the representative for future NARCO claimants and the Asbestos Claimants Committee to cap its annual contributions to the trust with respect to future claims at a level that would not have a material impact on Honeywells operating cash flows.
In November 2007, the Bankruptcy Court entered an amended order confirming the NARCO Plan without
27
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
modification and approving the 524(g) trust and channeling injunction in favor of NARCO and Honeywell. In December 2007, certain insurers filed an appeal of the Bankruptcy Court Order in the United States District Court for the Western District of Pennsylvania. The District Court affirmed the Bankruptcy Court Order in July 2008. In August 2008, insurers filed a notice of appeal to the Third Circuit Court of Appeals. Oral argument took place on May 21, 2009 and the matter was submitted for decision. In connection with the settlement of an insurance coverage litigation matter, the insurer appellants withdrew their appeal regarding the NARCO Plan. On August 3, 2010 the Third Circuit Court of Appeals entered an order formally dismissing the NARCO appeal. Although the result in the affiliates case will not have a direct substantive impact on the NARCO case, the NARCO Plan of Reorganization cannot become effective until resolution of an appeal of the Chapter 11 proceedings of NARCO affiliates. The Third Circuit reheard the affiliates appeal en banc on October 13, 2010 and, on May 4, 2011, reversed the Bankruptcy Courts confirmation order and remanded for further proceedings. The affiliates case has been returned to the Bankruptcy Court where the parties are working to resolve their disputes. The affiliates also filed a petition for certiorari to the U.S. Supreme Court. It is not possible to predict the timing or outcome of discussions between the parties, or the Bankruptcy Court or Supreme Court proceedings, in the affiliates case. We expect that the stay enjoining litigation against NARCO and Honeywell will remain in effect until the effective date of the NARCO Plan of Reorganization.
Our consolidated financial statements reflect an estimated liability for settlement of pending and future NARCO-related asbestos claims of $1,124 million and $1,125 million as of September 30, 2011 and December 31, 2010, respectively. The estimated liability for pending claims is based on terms and conditions, including evidentiary requirements, in definitive agreements with approximately 260,000 current claimants, and an estimate of the unsettled claims pending as of the time NARCO filed for bankruptcy protection. Substantially all settlement payments with respect to current claims have been made. Approximately $100 million of payments due pursuant to these settlements is due only upon establishment of the NARCO trust.
The estimated liability for future claims represents the estimated value of future asbestos related bodily injury claims expected to be asserted against NARCO through 2018 and the aforementioned obligations to NARCOs parent. In light of the uncertainties inherent in making long-term projections we do not believe that we have a reasonable basis for estimating asbestos claims beyond 2018. The estimate is based upon the disease criteria and payment values contained in the NARCO Trust Distribution Procedures negotiated with the NARCO Asbestos Claimants Committee and the NARCO future claimants representative. Honeywell projected the probable number and value, including trust claim handling costs, of asbestos related future liabilities based upon experience of asbestos claims filing rates in the tort system and in certain operating asbestos trusts, and the claims experience in those forums. The valuation methodology also includes an analysis of the population likely to have been exposed to asbestos containing products, epidemiological studies to estimate the number of people likely to develop asbestos related diseases, NARCO claims filing history, the pending inventory of NARCO asbestos related claims and payment rates expected to be established by the NARCO trust. This methodology used to estimate the liability for future claims has been commonly accepted by numerous courts and resulted in a range of estimated liability for future claims of $743 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.
As of September 30, 2011 and December 31, 2010, our consolidated financial statements reflect an insurance receivable corresponding to the liability for settlement of pending and future NARCO-related asbestos claims of $685 and $718 million, respectively. This coverage reimburses Honeywell for portions of the costs incurred to settle NARCO related claims and court judgments as well as 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. At September 30, 2011, a significant portion of this coverage is with insurance companies with whom we have agreements to pay full policy limits based on corresponding Honeywell claims costs. We conduct analyses to determine the amount of insurance that we estimate is probable of recovery in relation to payment of current and estimated future 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 with our insurers, our knowledge of any pertinent solvency issues surrounding insurers and various judicial determinations relevant to our insurance programs.
In the second quarter of 2006, Travelers Casualty and Insurance Company (Travelers) filed a declaratory judgment action in the Supreme Court of New York, County of New York against Honeywell and other insurance carriers that provide coverage for NARCO asbestos claims, seeking a declaration regarding coverage
28
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
obligations for NARCO-related asbestos claims under high excess insurance coverage issued by Travelers and the other insurance carriers. The other insurance carriers asserted cross claims against Honeywell seeking declarations regarding their coverage obligations for NARCO-related asbestos claims under high excess insurance coverage issued by them. Since then, the Company has entered into settlement agreements resolving all asbestos coverage issues with certain of these insurance carriers. Approximately $65 million of remaining unsettled coverage is included in our NARCO-related insurance receivable at September 30, 2011. Honeywell believes it is entitled to the coverage at issue and expects to prevail in this matter. In the third quarter of 2007, Honeywell prevailed on a critical choice of law issue concerning the appropriate method of allocating NARCO-related asbestos liabilities to triggered policies. The plaintiffs appealed and the trial courts ruling was upheld by the intermediate appellate court in the second quarter of 2009. Plaintiffs further appeal to the New York Court of Appeals, the highest court in New York, was denied in October 2009. A related New Jersey action brought by Honeywell has been dismissed, but all coverage claims against plaintiffs have been preserved in the New York action. Based upon (i) our understanding of relevant facts and applicable law, (ii) the terms of insurance policies at issue, (iii) our experience on matters of this nature, and (iv) the advice of counsel, we believe that the amount due from the remaining insurance carriers is probable of recovery. While Honeywell expects to prevail in this matter, an adverse outcome could have a material impact on our results of operations in the period recognized but would not be material to our consolidated financial position or operating cash flows.
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. There is no assurance that the plan of reorganization will become final, that insurance recoveries will be timely or whether there will be any NARCO related asbestos claims beyond 2018. Given the inherent uncertainty in predicting future events, 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 ProductsHoneywells Bendix friction materials (Bendix) business manufactured automotive brake parts that contained chrysotile asbestos in an encapsulated form. Existing and potential 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 present information regarding Bendix related asbestos claims activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended |
|
Year Ended |
|
|||||
Claims Activity |
|
2011 |
|
2010 |
|
2009 |
|
|||
|
|
|
|
|
|
|
|
|||
Claims Unresolved at the beginning of period |
|
|
22,480 |
|
|
19,940 |
|
|
51,951 |
|
Claims Filed during the period (a) |
|
|
2,719 |
|
|
4,302 |
|
|
2,697 |
|
Claims Resolved during the period(b) |
|
|
(2,399 |
) |
|
(1,762 |
) |
|
(34,708 |
) |
|
|
|
|
|
|
|
|
|
|
|
Claims Unresolved at the end of period |
|
|
22,800 |
|
|
22,480 |
|
|
19,940 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) The number of claims filed in 2010 includes approximately 1,541 non-malignant claims (with an accrued liability of approximately $575 thousand in the aggregate), a majority of which had previously been dismissed in Mississippi and re-filed in Arkansas.
(b) The number of claims resolved in 2010 includes approximately 1,300 claims previously classified as inactive (95% non-malignant and accrued liability of approximately $2.0 million) which were activated during 2010. The claims portfolio was reduced in 2009 due to settlements, dismissals and the elimination of significantly aged (i.e., pending for more than six years), inactive (including claims for which the required medical and exposure showings have not been made) and duplicate claims.
29
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|||||
Disease Distribution of Unresolved Claims |
|
2011 |
|
2010 |
|
2009 |
|
|||
|
|
|
|
|
|
|
|
|||
Mesothelioma and Other Cancer Claims |
|
|
4,919 |
|
|
4,856 |
|
|
4,727 |
|
Other Claims |
|
|
17,881 |
|
|
17,624 |
|
|
15,213 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Claims |
|
|
22,800 |
|
|
22,480 |
|
|
19,940 |
|
|
|
|
|
|
|
|
|
|
|
|
Honeywell has experienced average resolution values per claim excluding legal costs as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
(in whole dollars) |
|
|||||||||||||
Malignant claims |
|
$ |
54,000 |
|
$ |
50,000 |
|
$ |
65,000 |
|
$ |
33,000 |
|
$ |
33,000 |
|
Nonmalignant claims |
|
$ |
1,300 |
|
$ |
200 |
|
$ |
1,500 |
|
$ |
500 |
|
$ |
250 |
|
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 and future Bendix related asbestos claims of $613 and $594 million at September 30, 2011 and December 31, 2010, respectively. Our liability for the estimated cost of future Bendix related asbestos claims is based on historic claims filing experience, disease classifications, expected resolution values, and historic dismissal rates. We have valued Bendix pending and future claims using average resolution values for the previous five years. Changes in the tort system, which began in 2006, refocused asbestos litigation on mesothelioma cases, making the five year period 2006 through 2010 representative for forecasting purposes. We update the expected resolution values used to estimate the cost of pending and future Bendix claims during the fourth quarter each year.
The estimated 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. 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 estimate is based upon Bendix historical experience in the tort system for the five years ended December 31, 2010 with respect to claims filing and resolution values. The methodology used to estimate the liability for future claims has been commonly accepted by numerous courts. It is similar to that used to estimate the future NARCO related asbestos claims liability.
As of September 30, 2011 and December 31, 2010, our consolidated financial statements reflect an insurance receivable corresponding to the liability for settlement of pending and future Bendix related asbestos claims of $160 and $157 million, respectively. This coverage 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, our interpretation of judicial determinations relevant to our insurance programs, and our consideration of the impacts of any settlements reached with our insurers. Insurance receivables are also recorded when structured insurance settlements provide for future fixed payment streams that are not contingent upon future claims or other events. Such amounts are recorded at the net present value of the fixed payment stream.
On a cumulative historical basis, Honeywell has recorded insurance receivables equal to approximately 40 percent of the value of the underlying asbestos claims recorded. However, because there are gaps in our coverage due to insurance company insolvencies, certain uninsured periods, and insurance settlements, this rate is expected to decline for any future Bendix related asbestos liabilities that may be recorded. Future recoverability
30
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
rates may also be impacted by numerous other factors, such as future insurance settlements, insolvencies and judicial determinations relevant to our coverage program, which are difficult to predict. Assuming continued defense and indemnity spending at current levels, we estimate that the cumulative recoverability rate could decline over the next five years to approximately 35 percent.
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.
Refractory and Friction Products The following tables summarize information concerning NARCO and Bendix asbestos related balances:
|
|
|
|
|
|
|
|
|
|
|
Asbestos Related Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Bendix |
|
NARCO |
|
Total |
|
|||
|
|
|
|
|
|
|
|
|||
December 31, 2010 |
|
$ |
594 |
|
$ |
1,125 |
|
$ |
1,719 |
|
Accrual for update to estimated liability |
|
|
137 |
|
|
2 |
|
|
139 |
|
Asbestos related liability payments |
|
|
(118 |
) |
|
(3 |
) |
|
(121 |
) |
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
$ |
613 |
|
$ |
1,124 |
|
$ |
1,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Recoveries for Asbestos Related Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Bendix |
|
NARCO |
|
Total |
|
|||
|
|
|
|
|
|
|
|
|||
December 31, 2010 |
|
$ |
157 |
|
$ |
718 |
|
$ |
875 |
|
Probable insurance recoveries related to estimated liability |
|
|
18 |
|
|
|
|
|
18 |
|
Insurance receivable settlement |
|
|
6 |
|
|
|
|
|
6 |
|
Insurance receipts for asbestos related liabilities |
|
|
(21 |
) |
|
(33 |
) |
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
$ |
160 |
|
$ |
685 |
|
$ |
845 |
|
|
|
|
|
|
|
|
|
|
|
|
31
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
NARCO and Bendix asbestos related balances are included in the following balance sheet accounts:
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
Other current assets |
|
$ |
97 |
|
$ |
50 |
|
Insurance recoveries for asbestos related liabilities |
|
|
748 |
|
|
825 |
|
|
|
|
|
|
|
|
|
|
|
$ |
845 |
|
$ |
875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
$ |
163 |
|
$ |
162 |
|
Asbestos related liabilities |
|
|
1,574 |
|
|
1,557 |
|
|
|
|
|
|
|
|
|
|
|
$ |
1,737 |
|
$ |
1,719 |
|
|
|
|
|
|
|
|
|
Other Matters
We are subject to a number of other lawsuits, investigations and disputes (some of which involve 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. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Included in these other matters are the following:
Allen, et al. v. Honeywell Retirement Earnings PlanPursuant to a settlement approved by the U.S. District Court for the District of Arizona in February 2008, 18 of 21 claims alleged by plaintiffs in this class action lawsuit were dismissed with prejudice in exchange for approximately $35 million (paid from the Companys pension plan) and the maximum aggregate liability for the remaining three claims (alleging that Honeywell impermissibly reduced the pension benefits of certain employees of a predecessor entity when the plan was amended in 1983 and failed to calculate benefits in accordance with the terms of the plan) was capped at $500 million. In October 2009, the Court granted summary judgment in favor of the Honeywell Retirement Earnings Plan with respect to the claim regarding the calculation of benefits. In May 2011, the parties engaged in mediation and reached an agreement in principle to settle the three remaining claims for $23.8 million (also to be paid from the Companys pension plan). Settlement documents have been submitted to the court for classwide approval and we anticipate a fairness hearing on the settlement in the fourth quarter of 2011 or the first quarter of 2012. Upon court approval of the settlement, all claims in this matter will be fully resolved.
Quick LubeOn March 31, 2008, S&E Quick Lube, a filter distributor, filed suit in U.S. District Court for the District of Connecticut alleging that twelve filter manufacturers, including Honeywell, engaged in a conspiracy to fix prices, rig bids and allocate U.S. customers for aftermarket automotive filters. This suit is a purported class action on behalf of direct purchasers of filters from the defendants. Parallel purported class actions, including on behalf of indirect purchasers of filters, have been filed by other plaintiffs in a variety of jurisdictions in the United States and Canada. The U.S cases have been consolidated into a single multi-district litigation in the Northern District of Illinois. In April 2011, the multi-district litigation was stayed pending an investigation by the U.S. Attorney for the Eastern District of Pennsylvania relating to plaintiffs principal witness for possible violations of federal law. In June 2011, plaintiffs principal witness pled guilty to a felony count of having made false statements to federal investigators. We believe the claims against Honeywell are without merit and we will vigorously defend against the claims raised in these actions. As previously reported, the Antitrust Division of the Department of Justice notified Honeywell in January 2010 that it had officially closed its investigation into possible collusion in the replacement auto filters industry.
32
Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)
Solvay v. Honeywell On September 29, 2011, a jury in the District of Delaware returned a unanimous verdict in favor of Honeywell in this patent infringement suit, finding plaintiff Solvays asserted patent claim invalid on three grounds and awarding no damages. Solvay had claimed that Honeywells manufacture and sale of HFC-245fa infringed its patent and sought damages of $61 million. Honeywell expects Solvay to make a motion requesting the District Court to overturn the jurys verdict and, in the event that motion is denied, appeal the judgment to the Federal Circuit. Honeywell will continue its vigorous defense and expects to prevail on Solvays motion and any appeal.
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. 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.
33
Report of Independent Registered Public Accounting Firm
To the Board
of Directors and Shareowners
of Honeywell International Inc.:
We have reviewed the accompanying consolidated balance sheet of Honeywell International Inc. and its subsidiaries as of September 30, 2011 and the related consolidated statement of operations for the three-month and nine-month periods ended September 30, 2011 and 2010 and the consolidated statement of cash flows for the nine-month periods ended September 30, 2011 and 2010. These interim financial statements are the responsibility of the Companys management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2010, and the related consolidated statements of operations, of shareowners equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 11, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2010, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.
|
|
/s/ PricewaterhouseCoopers LLP |
|
Florham Park, New Jersey |
|
October 21, 2011 |
|
|
|
|
|
The Report of Independent Registered Public Accounting Firm included above is not a report or part of a Registration Statement prepared or certified by an independent accountant within the meanings of Sections 7 and 11 of the Securities Act of 1933, and the accountants Section 11 liability does not extend to such report.
34
|
|
MANAGEMENTS 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. (Honeywell) for the three and nine months ended September 30, 2011. The financial information as of September 30, 2011 should be read in conjunction with the financial statements for the year ended December 31, 2010 contained in our Form 10-K filed on February 11, 2011.
The Consumer Products Group business had historically been part of the Transportation Systems reportable segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of our Consumer Products Group business are presented as discontinued operations and, as such, have been excluded from continuing operations and from segment results for all periods presented. See Note 3 Acquisitions and Divestitures for further details.
|
|
A. |
Results of Operations three and nine months ended September 30, 2011 compared with the three and nine months ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
9,298 |
|
$ |
8,139 |
|
$ |
27,056 |
|
$ |
23,601 |
|
% change compared with prior period |
|
|
14 |
% |
|
|
|
|
15 |
% |
|
|
|
The change in net sales compared to the prior year period is attributable to the following:
|
|
|
|
|
|
|
|
Three Months |
|
Year to Date |
|
|
|
|
|
|
|
Volume |
|
5 |
% |
6 |
% |
Price |
|
3 |
% |
3 |
% |
Acquisitions/Divestitures |
|
3 |
% |
4 |
% |
Foreign Exchange |
|
3 |
% |
2 |
% |
|
|
|
|
|
|
|
|
14 |
% |
15 |
% |
|
|
|
|
|
|
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 |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Cost of products and services sold |
|
$ |
7,033 |
|
$ |
6,170 |
|
$ |
20,121 |
|
$ |
17,804 |
|
% change compared with prior period |
|
|
14 |
% |
|
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin percentage |
|
|
24.4 |
% |
|
24.2 |
% |
|
25.6 |
% |
|
24.6 |
% |
Cost of products and services sold increased by $863 million or 14 percent in the quarter ended September 30, 2011 compared with the quarter ended September 30, 2010 principally due to an estimated increase in direct material costs, labor costs, and indirect costs of approximately $650 million, $120 million, and $70 million, respectively, driven substantially by a 14 percent increase in sales as a result of the factors (excluding price) discussed above and in the Review of Business Segments section of this MD&A, and an increase of approximately $160 million of repositioning and other charges, partially offset by approximately $110 million decrease in pension and other postretirement expense.
35
Cost of products and services sold increased by $2,317 million or 13 percent in the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010 principally due to an estimated increase in direct material costs, labor costs, and indirect costs of approximately $1.6 billion, $450 million, and $280 million, respectively, driven substantially by a 15 percent increase in sales as a result of the factors (excluding price) discussed above and in the Review of Business Segments section of this MD&A, and an increase of approximately $100 million of repositioning and other charges, partially offset by approximately $170 million decrease in pension and other postretirement expense.
Gross margin percentage increased by 0.2 percentage points in the quarter ended September 30, 2011 compared with the quarter ended September 30, 2010 primarily due to higher segment gross margin driven by our Aerospace, Specialty Materials, and Automation & Control segments (approximately 0.6 percentage point impact collectively) and lower other postretirement and pension expense (approximately 1.4 percentage point impact), partially offset by higher repositioning and other charges (approximately 1.9 percentage point impact).
Gross margin percentage increased by 1.0 percentage points in the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010 primarily due to higher segment gross margin driven by all the business segments (approximately 0.6 percentage point impact collectively) and lower postretirement and pension expense (approximately 0.6 percentage point impact), partially offset by higher repositioning and other charges (approximately 0.4 percentage point impact).
For further discussion of segment results see Review of Business Segments.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expense |
|
$ |
1,303 |
|
$ |
1,129 |
|
$ |
3,783 |
|
$ |
3,329 |
|
Percent of sales |
|
|
14.0 |
% |
|
13.9 |
% |
|
14.0 |
% |
|
14.1 |
% |
Selling, general and administrative expenses (SG&A) increased as a percentage of sales by 0.1 percent in the quarter ended September 30, 2011 compared to the quarter ended September 30, 2010 driven by an estimated $130 million increase in labor costs resulting from acquisitions, repositioning actions, investment for growth and merit increase, partially offset by the impact of higher sales volumes as a result of the factors discussed in the Review of Business Segments section of this MD&A.
SG&A decreased as a percentage of sales by 0.1 percent in the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010 driven by the impact of higher sales volumes as a result of the factors discussed in the Review of Business Segments section of this MD&A, partially offset by an estimated $420 million increase in labor costs resulting from acquisitions, investment for growth, merit increase and repositioning actions.
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Equity (income)/loss of affiliated companies |
|
$ |
(13 |
) |
$ |
(3 |
) |
$ |
(36 |
) |
$ |
(16 |
) |
Gain on sale of non-strategic businesses and assets |
|
|
(6 |
) |
|
|
|
|
(52 |
) |
|
|
|
Interest income |
|
|
(15 |
) |
|
(14 |
) |
|
(42 |
) |
|
(30 |
) |
Foreign exchange |
|
|
5 |
|
|
(3 |
) |
|
23 |
|
|
5 |
|
Other, net |
|
|
8 |
|
|
(58 |
) |
|
35 |
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(21 |
) |
$ |
(78 |
) |
$ |
(72 |
) |
$ |
(89 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Other income of $21 million decreased by $57 million for the three months ended September 30, 2011 compared with the three months ended September 30, 2010. The decrease is due primarily to a $62 million pre-tax gain related to the consolidation of a joint venture within our Specialty Materials segment in the third quarter of 2010 (see Note 5 of Notes to Financial Statements).
Other income of $72 million decreased by $17 million for the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010. The decrease is due primarily to a $41 million pre-tax gain related to the divestiture of the automotive on-board sensor products business within our Automation and Control Solutions segment, partially offset by a $62 million pre-tax gain related to the consolidation of a joint venture within our Specialty Materials segment in the third quarter of 2010 (see Note 5 of Notes to Financial Statements).
Interest and Other Financial Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Interest and other financial charges |
|
$ |
90 |
|
$ |
96 |
|
$ |
285 |
|
$ |
294 |
|
% change compared with prior period |
|
|
(6 |
)% |
|
|
|
|
(3 |
)% |
|
|
|
Interest and other financial charges decreased by $6 million in the quarter ended September 30, 2011 compared with the quarter ended September 30, 2010 and by $9 million in the nine months ended 2011, compared with the nine months ended September 30, 2010 primarily due to lower borrowing costs, partially offset by higher debt balances.
Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Tax expense |
|
$ |
207 |
|
$ |
245 |
|
$ |
767 |
|
$ |
650 |
|
Effective tax rate |
|
|
23.2 |
% |
|
29.8 |
% |
|
26.1 |
% |
|
28.7 |
% |
The effective tax rate decreased by 6.6 percent in the quarter ended September 30, 2011 compared with the quarter ended September 30, 2010 due primarily to decreased tax expense related to the favorable outcome of tax audits, as well as the tax impact of the consolidation of a joint venture within our Specialty Materials segment in 2010 (see Note 5 of Notes to Financial Statements). In conjunction with settlement of the tax audits, the tax contingency reserves were adjusted accordingly. Additionally, during the quarter ended September 30, 2011, the Company adjusted its tax contingency reserve related to certain foreign operations by reclassifying an unrealized future tax benefit to an unrecognized tax position. This balance sheet reclassification had no impact on tax expense for the three and nine months ended September 30, 2011.
The effective tax rate decreased by 2.6 percent in the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010 due primarily to decreased tax expense related to the favorable outcome of tax audits and the 2010 tax impact from enacted change in the tax treatment of the Medicare Part D program.
The effective tax rate for the periods ending in 2011 was lower than the statutory rate of 35 percent due, in part, to foreign earnings taxed at lower tax rates and benefits from U.S. manufacturing incentives and U.S. tax credits.
The effective tax rate for the periods ending in 2010 was lower than the statutory rate of 35 percent due, in part, to foreign earnings taxed at lower tax rates and benefits from U.S. manufacturing incentives.
37
Net Income Attributable to Honeywell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Amounts attributable to Honeywell |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
685 |
|
|
579 |
|
|
2,168 |
|
|
1,600 |
|
Income from discontinued operations |
|
|
177 |
|
|
19 |
|
|
209 |
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Honeywell |
|
$ |
862 |
|
$ |
598 |
|
$ |
2,377 |
|
$ |
1,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock assuming dilution |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.87 |
|
$ |
0.74 |
|
$ |
2.73 |
|
$ |
2.06 |
|
Income from discontinued operations |
|
|
0.23 |
|
|
0.02 |
|
|
0.26 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
1.10 |
|
|
0.76 |
|
|
2.99 |
|
|
2.13 |
|
Earnings per share of common stock assuming dilution increased by $0.34 per share in the quarter ended September 30, 2011 compared with the quarter ended September 30, 2010 primarily due to increased segment profit in each of our Business Segments, gain on disposal of discontinued operations, lower other postretirement and pension expense and lower tax expense, partially offset by increased repositioning and other charges and lower other income / (expense).
Earnings per share of common stock assuming dilution increased by $0.86 per share in the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010, primarily due to increased segment profit in each of our Business Segments, lower other postretirement and pension expense and gain on disposal of discontinued operations, partially offset by increased repositioning and other charges, higher tax expense, increase in the number of shares outstanding and lower other income / (expense).
38
Review of Business Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
1,660 |
|
$ |
1,460 |
|
$ |
4,685 |
|
$ |
4,241 |
|
Services |
|
|
1,262 |
|
|
1,244 |
|
|
3,743 |
|
|
3,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,922 |
|
|
2,704 |
|
|
8,428 |
|
|
7,857 |
|
Automation and Control Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
3,388 |
|
|
2,972 |
|
|
9,855 |
|
|
8,366 |
|
Services |
|
|
560 |
|
|
502 |
|
|
1,629 |
|
|
1,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,948 |
|
|
3,474 |
|
|
11,484 |
|
|
9,835 |
|
Specialty Materials |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
1,300 |
|
|
1,111 |
|
|
3,812 |
|
|
3,377 |
|
Services |
|
|
168 |
|
|
64 |
|
|
417 |
|
|
196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,468 |
|
|
1,175 |
|
|
4,229 |
|
|
3,573 |
|
Transportation Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
960 |
|
|
786 |
|
|
2,915 |
|
|
2,336 |
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
960 |
|
|
786 |
|
|
2,915 |
|
|
2,336 |
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,298 |
|
$ |
8,139 |
|
$ |
27,056 |
|
$ |
23,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace |
|
$ |
532 |
|
$ |
458 |
|
$ |
1,450 |
|
$ |
1,314 |
|
Automation and Control Solutions |
|
|
544 |
|
|
471 |
|
|
1,499 |
|
|
1,258 |
|
Specialty Materials |
|
|
254 |
|
|
194 |
|
|
819 |
|
|
578 |
|
Transportation Systems |
|
|
121 |
|
|
92 |
|
|
368 |
|
|
250 |
|
Corporate |
|
|
(84 |
) |
|
(56 |
) |
|
(208 |
) |
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Profit |
|
|
1,367 |
|
|
1,159 |
|
|
3,928 |
|
|
3,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/ (expense)(a) |
|
|
8 |
|
|
75 |
|
|
36 |
|
|
73 |
|
Interest and other financial charges |
|
|
(90 |
) |
|
(96 |
) |
|
(285 |
) |
|
(294 |
) |
Stock compensation expense(b) |
|
|
(38 |
) |
|
(36 |
) |
|
(129 |
) |
|
(122 |
) |
Pension expense(b) |
|
|
(26 |
) |
|
(50 |
) |
|
(83 |
) |
|
(146 |
) |
Other postretirement income/(expense)(b) |
|
|
82 |
|
|
(18 |
) |
|
109 |
|
|
(12 |
) |
Repositioning and other charges (b) |
|
|
(410 |
) |
|
(212 |
) |
|
(637 |
) |
|
(480 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
$ |
893 |
|
$ |
822 |
|
$ |
2,939 |
|
$ |
2,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
% |
|
Nine Months Ended |
|
% |
|
||||||||||
|
|
|
|
|
|||||||||||||||
|
|
2011 |
|
2010 (a) |
2011 |
|
2010 (a) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Aerospace Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air transport and regional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original equipment |
|
$ |
361 |
|
$ |
332 |
|
|
9 |
% |
$ |
1,093 |
|
$ |
1,016 |
|
|
8 |
% |
Aftermarket |
|
|
721 |
|
|
634 |
|
|
14 |
% |
|
2,073 |
|
|
1,809 |
|
|
15 |
% |
Business and general aviation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original equipment |
|
|
213 |
|
|
126 |
|
|
69 |
% |
|
496 |
|
|
374 |
|
|
33 |
% |
Aftermarket |
|
|
314 |
|
|
251 |
|
|
25 |
% |
|
879 |
|
|
709 |
|
|
24 |
% |
Defense and Space Sales |
|
|
1,313 |
|
|
1,361 |
|
|
(4 |
)% |
|
3,887 |
|
|
3,949 |
|
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aerospace Sales |
|
|
2,922 |
|
|
2,704 |
|
|
|
|
|
8,428 |
|
|
7,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automation and Control Solutions Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
2,475 |
|
|
2,153 |
|
|
15 |
% |
|
7,273 |
|
|
6,086 |
|
|
20 |
% |
Solutions |
|
|
1,473 |
|
|
1,321 |
|
|
12 |
% |
|
4,211 |
|
|
3,749 |
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Automation and Control Solutions Sales |
|
|
3,948 |
|
|
3,474 |
|
|
|
|
|
11,484 |
|
|
9,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty Materials Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UOP |
|
|
506 |
|
|
372 |
|
|
36 |
% |
|
1,380 |
|
|
1,150 |
|
|
20 |
% |
Advanced Materials |
|
|
962 |
|
|
803 |
|
|
20 |
% |
|
2,849 |
|
|
2,423 |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Specialty Materials Sales |
|
|
1,468 |
|
|
1,175 |
|
|
|
|
|
4,229 |
|
|
3,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Systems Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turbo Technologies |
|
|
960 |
|
|
786 |
|
|
22 |
% |
|
2,915 |
|
|
2,336 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Transportation Systems Sales |
|
|
960 |
|
|
786 |
|
|
|
|
|
2,915 |
|
|
2,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
9,298 |
|
$ |
8,139 |
|
|
|
|
$ |
27,056 |
|
$ |
23,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) - Certain prior year amounts have been reclassified to conform to the current year presentation.
Aerospace
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||||
|
|
|
|
|
|
||||||||||||||
|
|
2011 |
|
2010 |
|
% |
|
2011 |
|
2010 |
|
% |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net sales |
|
$ |
2,922 |
|
$ |
2,704 |
|
|
8 |
% |
$ |
8,428 |
|
$ |
7,857 |
|
|
7 |
% |
Cost of products and services sold |
|
|
2,192 |
|
|
2,058 |
|
|
|
|
|
6,396 |
|
|
5,991 |
|
|
|
|
Selling, general and administrative expenses |
|
|
149 |
|
|
138 |
|
|
|
|
|
431 |
|
|
403 |
|
|
|
|
Other |
|
|
49 |
|
|
50 |
|
|
|
|
|
151 |
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
532 |
|
$ |
458 |
|
|
16 |
% |
$ |
1,450 |
|
$ |
1,314 |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 vs. 2010 |
|
||||||||||
|
|
|
|
||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
Factors Contributing to Year-Over-Year Change |
|
Sales |
|
Segment |
|
Sales |
|
Segment |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Organic growth/ Operational segment profit |
|
|
6 |
% |
|
11 |
% |
|
7 |
% |
|
11 |
% |
Acquisitions and divestitures, net |
|
|
1 |
% |
|
1 |
% |
|
|
|
|
|
|
Other |
|
|
1 |
% |
|
4 |
% |
|
|
|
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total % Change |
|
|
8 |
% |
|
16 |
% |
|
7 |
% |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace sales by major customer end-markets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||||
|
|
|
|
|
|
||||||||||||||
|
|
% of Aerospace |
|
% |
|
% of Aerospace |
|
% |
|
||||||||||
|
|
|
|
|
|
||||||||||||||
Customer End-Markets |
|
2011 |
|
2010 |
|
|
2011 |
|
2010 |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air transport and regional Original equipment |
|
|
12 |
% |
|
12 |
% |
|
9 |
% |
|
13 |
% |
|
13 |
% |
|
8 |
% |
Aftermarket |
|
|
25 |
% |
|
24 |
% |
|
14 |
% |
|
25 |
% |
|
23 |
% |
|
15 |
% |
Business and general aviation Original equipment |
|
|
7 |
% |
|
5 |
% |
|
69 |
% |
|
6 |
% |
|
5 |
% |
|
33 |
% |
Aftermarket |
|
|
11 |
% |
|
9 |
% |
|
25 |
% |
|
10 |
% |
|
9 |
% |
|
24 |
% |
Defense and Space |
|
|
45 |
% |
|
50 |
% |
|
(4 |
)% |
|
46 |
% |
|
50 |
% |
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
100 |
% |
|
8 |
% |
|
100 |
% |
|
100 |
% |
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace sales increased by 8 percent in the quarter ended September 30, 2011, compared with the quarter ended September 30, 2010 due to a 6 percent increase in organic growth due to increased commercial sales volume, partially offset by a decline in defense and space revenues, a 1 percent growth from the EMS acquisition, and a 1 percent increase in revenue due to lower original equipment manufacturers (OEM) payments in the quarter ended September 30, 2011.
Aerospace sales increased by 7 percent in the nine months ended September 30, 2011, compared with the quarter ended September 30, 2010 due to a 7 percent increase in organic growth primarily due to increased commercial sales volume.
Details regarding the changes in sales by customer end-markets are as follows:
|
|
|
|
|
Air transport and regional original equipment (OE) sales increased 9 percent for the quarter ended September 30, 2011, driven by higher sales to our OE customers, consistent with higher production rates and platform mix. Air transport and regional original equipment (OE) sales increased 8 percent for the nine months ended September 30, 2011, driven by higher sales to our OE customers, consistent with higher production rates, platform mix and a higher win rate on selectables (components selected by purchasers of new aircraft). |
|
|
|
|
|
Air transport and regional aftermarket sales increased for both three and nine months ended September 30, 2011 by 14 and 15 percent, respectively, primarily due to increased sales of spare parts and higher maintenance activity driven by the impact of increased flying hours of approximately 5 percent for both the three and nine months ended September 30, 2011. |
|
|
|
|
|
Business and general aviation OE sales increased by 69 percent in the quarter ended September 30, 2011, due to strong demand in the business jet end market for the aircraft platforms on which we have high |
41
|
|
|
|
|
product content, a decrease in OEM payments, and growth resulting from the EMS acquisition. Business and general aviation OE sales increased by 33 percent in the nine months ended September 30, 2011, due to a rebound from near trough levels in 2010 and strong demand in the business jet end market, favorable platform mix and growth from acquisitions, partially offset by OEM payments made in the second quarter. |
|
|
|
|
|
Business and general aviation aftermarket sales increased by 25 percent and 24 percent in the quarter ended and nine months ended September 30, 2011, respectively, primarily due to increased sales of spare parts and revenue associated with maintenance service agreements. |
|
|
|
|
|
Defense and space sales decreased by 4 percent and 2 percent in the quarter and nine months ended September 30, 2011 primarily due to anticipated program ramp downs, partially offset by higher international aftermarket sales, increased unmanned aerial vehicle (UAV) shipments and the EMS acquisition. |
Aerospace segment profit increased by 16 percent in the quarter ended September 30, 2011 compared with quarter ended September 30, 2010 due to an 11 percent increase in operational segment profit driven by increased sales volumes, a 4 percent favorable impact from the decrease in OEM payments in the quarter and 1 percent favorable impact from the EMS acquisition. The increase in operational segment profit is comprised of the positive impact from higher commercial aftermarket demand, favorable aftermarket mix, price and productivity, net of inflation partially offset by research, development and engineering (RD&E) investments. Cost of goods sold totaled $2 billion for the quarter ended September 30, 2011, an increase of approximately $134 million which is primarily a result of the factors discussed above.
Aerospace segment profit increased by 10 percent for the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010 due to an increase in operational segment profit of approximately 11 percent primarily due to higher sales volume, partially offset by an unfavorable impact of 1 percent resulting from increased OEM payments made in 2011. The increase in operational segment profit is comprised of the positive impact from higher commercial aftermarket demand, favorable aftermarket mix, and price and productivity, net of inflation, partially offset by RD&E investments. Cost of goods sold totaled $6.4 billion for the nine months ended September 30, 2011, an increase of approximately $405 million which is primarily a result of the factors discussed above.
Automation and Control Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||||
|
|
|
|
|
|
||||||||||||||
|
|
2011 |
|
2010 |
|
% |
|
2011 |
|
2010 |
|
% |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net sales |
|
$ |
3,948 |
|
$ |
3,474 |
|
|
14 |
% |
$ |
11,484 |
|
$ |
9,835 |
|
|
17 |
% |
Cost of products and services sold |
|
|
2,659 |
|
|
2,351 |
|
|
|
|
|
7,729 |
|
|
6,640 |
|
|
|
|
Selling, general and administrative expenses |
|
|
700 |
|
|
609 |
|
|
|
|
|
2,111 |
|
|
1,804 |
|
|
|
|
Other |
|
|
45 |
|
|
43 |
|
|
|
|
|
145 |
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
544 |
|
$ |
471 |
|
|
15 |
% |
$ |
1,499 |
|
$ |
1,258 |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 vs. 2010 |
|
||||||||||
|
|
|
|
||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
|
|
|
||||||||
Factors Contributing to Year-Over-Year Change |
|
Sales |
|
Segment |
|
Sales |
|
Segment |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Organic growth/ Operational segment profit |
|
|
4 |
% |
|
6 |
% |
|
6 |
% |
|
7 |
% |
Foreign exchange |
|
|
4 |
% |
|
4 |
% |
|
4 |
% |
|
5 |
% |
Acquisitions and divestitures, net |
|
|
6 |
% |
|
5 |
% |
|
7 |
% |
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total % Change |
|
|
14 |
% |
|
15 |
% |
|
17 |
% |
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automation and Control Solutions (ACS) sales increased by 14 percent in the quarter ended September 30, 2011 compared with the quarter ended September 30, 2010, primarily due to a 6 percent growth from acquisitions, net of divestitures, 4 percent increase in organic revenue driven by increased sales volume and 4 percent favorable impact of foreign exchange.
ACS sales increased by 17 percent in the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010, primarily due to a 7 percent growth from acquisitions, net of divestitures, 6 percent increase in organic revenue driven by increased sales volume, and a 4 percent favorable impact of foreign exchange.
|
|
|
|
|
Sales in our Products businesses increased by 15 percent in the quarter ended September 30, 2011 and 20 percent in the nine months ended September 30, 2011, principally due to (i) the positive impact of acquisitions (most significantly Sperian and EMS), net of divestitures (ii) higher sales volume due to general industrial recovery and new product introductions and (iii) the favorable impact of foreign exchange. |
|
|
|
|
|
Sales in our Solutions businesses increased by 12 percent in the quarter and nine months ended September 30, 2011 primarily driven by volume growth in our Process Solutions business reflecting conversion to sales from backlog, the favorable impact of foreign exchange, and the impact of acquisitions. Orders increased in the three and nine months ended September 30, 2011 compared to the corresponding period in 2010, and backlog increased as of September 30, 2011, primarily driven by positive impact of foreign exchange, continued favorable macro trends in energy efficiency, oil and gas infrastructure projects, and growth in emerging regions. |
ACS segment profit increased by 15 percent in the quarter ended September 30, 2011 compared with the quarter ended September 30, 2010 due to a 6 percent increase in operational segment profit, 5 percent increase from acquisitions, net of divestitures and 4 percent positive impact of foreign exchange. The increase in operational segment profit is comprised of an approximate 3 percent positive impact from price and productivity, net of inflation and investment for growth and 3 percent positive impact from higher sales volume. Cost of goods sold totaled $2.7 billion for the quarter ended September 30, 2011, an increase of $308 million which is primarily due to acquisitions, net of divestitures, foreign exchange, higher sales volumes and inflation, partially offset by positive impact from productivity.
ACS segment profit increased by 19 percent in the nine months ended September 30, 2011 compared with the nine months ended September 30, 2010 primarily due to a 7 percent increase in operational segment profit, 7 percent increase from acquisitions, net of divestitures and 5 percent positive impact of foreign exchange. The increase in operational segment profit is comprised of an approximate 6 percent positive impact from higher sales volume and 1 percent positive impact from price and productivity, net of inflation and investment for growth. Cost of goods sold totaled $7.7 billion for the nine months ended September 30, 2011, an increase of $1.1 billion which is primarily due to acquisitions, net of divestitures, higher sales volumes, foreign exchange and inflation, partially offset by positive impact from productivity.
43
Specialty Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||||
|
|
|
|
|
|
||||||||||||||
|
|
2011 |
|
2010 |
|
Change |
|
2011 |
|
2010 |
|
Change |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net sales |
|
$ |
1,468 |
|
$ |
1,175 |
|
|
25 |
% |
$ |
4,229 |
|
$ |
3,573 |
|
|
18 |
% |
Cost of products and services sold |
|
|
1,100 |
|
|
886 |
|
|
|
|
|
3,074 |
|
|
2,681 |
|
|
|
|
Selling, general and administrative expenses |
|
|
103 |
|
|
75 |
|
|
|
|
|
301 |
|
|
256 |
|
|
|
|
Other |
|
|
11 |
|
|
20 |
|
|
|
|
|
35 |
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
254 |
|
$ |
194 |
|
|
31 |
% |
$ |
819 |
|
$ |
578 |
|
|
42 |
% |