0000773840 hon:ServicesMember hon:SafetyAndProductivitySolutionsMember 2019-01-01 2019-12-31



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

x

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, 2016

2019

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 number1-8974

Honeywell International Inc.

(Exact name of registrant as specified in its charter)

Delaware
Delaware 22-2640650
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
incorporation or organization)
Identification No.)
   
115 Tabor Road
Morris Plains, New Jersey300 South Tryon Street		 28202
Charlotte,07950NC
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (973) 455-2000

(704) 627-6200

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange
Title of Each Class  Trading SymbolsName of each exchange on Which Registeredwhich registered
Common Stock, par value $1 per share*
Floating Rate Senior Notes due 2018
HONNew York Stock Exchange
0.650% Senior Notes due 2020
HON 20New York Stock Exchange
1.300% Senior Notes due 2023
HON 23ANew York Stock Exchange
2.250% Senior Notes due 2028 HON 28ANew York Stock Exchange
New York
* The common stock is also listed on the London Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock ExchangeExchange.

* The common stock is also listed on the London Stock Exchange.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesx☒ Noo

☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yeso☐ Nox

☒

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. Yesx☒Noo

☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, 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). Yesx☒ Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x

☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filerxAccelerated fileroNon-accelerated fileroSmaller reporting companyo

Large accelerated filer ☒      Accelerated filer ☐      Non-accelerated filer ☐      Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso☐ Nox

☒

The aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $88.6$125.6 billion at June 30, 2016.

2019.

There were 761,194,241712,599,803 shares of Common Stock outstanding at January 27, 2017.

25, 2020.

Documents Incorporated by Reference

Part III: Proxy Statement for Annual Meeting of Shareowners to be held April 24, 2017.

27, 2020.
 




TABLE OF CONTENTS

  Item   Page
       
Part I      
  1. Business 3
    Executive Officers of the Registrant 7
  1A. Risk Factors 8
  1B. Unresolved Staff Comments 12
  2. Properties 12
  3. Legal Proceedings 12
  4. Mine Safety Disclosures 12
Part II.      
  5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 13
  6. Selected Financial Data 15
  7. Management’s Discussion and Analysis of Financial Condition andResults of Operations 16
  7A. Quantitative and Qualitative Disclosures About Market Risks 33
  8. Financial Statements and Supplementary Data 34
  9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 86
  9A. Controls and Procedures 86
  9B. Other Information 86
Part III.      
  10. Directors and Executive Officers of the Registrant 88
  11. Executive Compensation 88
  12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 88
  13. Certain Relationships and Related Transactions 90
  14. Principal Accounting Fees and Services 90
       
Part IV. 15. Exhibits and Financial Statement Schedules 91
Signatures 92

  Item   Page
Part I 1
 
Business
 
1
   
 
Information About our Executive Officers
 
5
  1A.
 
Risk Factors
 
5
  1B.
 
Unresolved Staff Comments
 
13
  2
 
Properties
 
13
  3
 
Legal Proceedings
 
13
  4
 
Mine Safety Disclosures
 
13
Part II. 5
 
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
14
  6
 
Selected Financial Data
 
16
  7
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
17
  7A.
 
Quantitative and Qualitative Disclosures About Market Risks
 
32
  8
 
Financial Statements and Supplementary Data
 
33
  9
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
96
  9A.
 
Controls and Procedures
 
96
  9B.
 
Other Information
 
96
Part III. 10
 
Directors and Executive Officers of the Registrant
 
97
  11
 
Executive Compensation
 
97
  12
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
97
  13
 
Certain Relationships and Related Transactions
 
99
  14
 
Principal Accounting Fees and Services
 
99
Part IV. 15
 
Exhibits and Financial Statement Schedules
 
100
  16
 
Form 10-K Summary
 
100
Signatures
 
106




PART I.

Item 1.Business

Item 1. Business
Honeywell International Inc. (Honeywell(“Honeywell” or the Company)“the Company”) invents and commercializes technologies that address some of the world’s most critical challenges around energy, safety, security, air travel, productivity and global urbanization. As a diversified technology and manufacturing company, we are uniquely positioned to blend physical products with software to serve customers worldwide with aerospace products and services, turbochargers, energy efficient products and solutions for homes, businesses, and transportation, specialty chemicals, electronic and advanced materials, process technology for refining and petrochemicals, and productivity, sensing, safety and security technologies for buildings homes and industries. Our products and solutions enable a safer, more comfortable and more productive world, enhancing the quality of life of people around the globe. Honeywell was incorporated in Delaware in 1985.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, are available free of charge on our website (www.honeywell.com) under the heading Investor RelationsInvestors (see SEC Filings and Reports) immediately after they are filed with, or furnished to, the Securities and Exchange Commission (SEC). In addition, in this Annual Report on Form 10-K, the Company incorporates by reference certain information from parts of its Proxy Statement for the 20172020 Annual Meeting of Stockholders, which we expect to file with the SEC on or about March 9, 2017,12, 2020, and which will also be available free of charge on our website.

Major Businesses

We globally manage our business operations through four operating segments: Aerospace, Home andHoneywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. Financial information related to our operating segments is included in Note 2122 Segment Financial Data of Notes to Consolidated Financial Statements.

The major products/services, including Honeywell Forge solutions supported by Honeywell Connected Enterprise ("HCE"), customers/uses and key competitors of each of our operating segments are:

Aerospace

Aerospace is a leading global supplier of products, software and services for aircraft and vehiclesaircrafts that it sells to original equipment manufacturers (OEMs)(OEM) and other customers in a variety of end markets:markets including: air transport, regional, business and general aviation aircraft, airlines, aircraft operators and defense and space contractors and automotive and truck manufacturers. Aerospace is a leading provider of aircraft engines, integrated avionics, systems and service solutions, and related products and services for aircraft manufacturers,andturbochargers to improve the performance and efficiency of passenger cars and commercial vehicles. Aerospace also provides spare parts, repair, overhaul and maintenance services (principally to aircraft operators) for the aftermarket.contractors. Aerospace products and services include auxiliary power units, propulsion engines, environmental control systems, integrated avionics, wireless connectivity services, electric power systems, engine controls, flight safety, communications, navigation hardware, data and software applications, radar and surveillance systems, aircraft lighting, management and technical services, advanced systems and instruments, satellite and space components, aircraft wheels and brakes, repair and overhaul services turbochargers and thermal systems.

Home Aerospace also provides spare parts, repair, overhaul and maintenance services (principally to aircraft operators) for the aftermarket. Honeywell Forge solutions are designed to identify and resolve problems faster, making fleet management and flight operations more efficient.

Honeywell Building Technologies

Home and

Honeywell Building Technologies is a leading global provider of products, software, solutions and technologies that help owners of homes stay connected and in control of their comfort, security and energy use; enable commercial building owners and occupants to ensure their facilities are safe, energy efficient, sustainable and productive; and help electricity, gas and water providers supply customers and communities more efficiently. Home andproductive. Honeywell Building Technologies products and services include controls and displays for heating, cooling, indoor air quality, ventilation, humidification, combustion, lighting and home automation; advanced software applications for home/building control and optimization; sensors, switches, control systems and instruments for measuring pressure, air flow, temperature and electrical current; products, services and solutions for measurement, regulation, control and metering of gases and electricity; metering and communications systems for water utilities and industries;energy management; access control; video surveillance; fire products; remote patient monitoring systems; and installation, maintenance and upgrades of systems that keepsystems. Honeywell Forge solutions are designed to digitally manage buildings safe, comfortableto use space intelligently, cut operating expenses and productive.

3
reduce maintenance.


Performance Materials and Technologies

Performance Materials and Technologies is a global leader in developing and manufacturing advancedhigh-quality performance chemicals and materials, process technologies and automation solutions, including Honeywell Forge connected solutions. The segment comprises Process Solutions, UOP and Advanced Materials. Process Solutions provides automation control, instrumentation, advanced software and related services for the oil and gas, refining, pulp and paper, industrial power generation, chemicals and petrochemicals, biofuels, life sciences, and metals, minerals and mining industries. Through its smart energy products, Process Solutions enables utilities and distribution companies to deploy advanced capabilities to improve operations, reliability and environmental sustainability. UOP provides process technology, products, including catalysts and adsorbents, equipment, and consulting services that enable customers to efficiently produce gasoline, diesel, jet fuel, petrochemicals and renewable fuels for the petroleum refining, gas processing, petrochemical, and other industries. Process Solutions is a pioneer in automation control, instrumentation, advanced software and related services for the oil and gas, refining, pulp and paper, industrial power generation, chemicals and petrochemicals, biofuels, life sciences, and metals, minerals and mining industries. Advanced Materials manufactures a wide variety of high-performance products, including fluorocarbons, hydrofluoroolefins, specialty films, waxes, additives, advanced fibers, customized research chemicalsmaterials used to manufacture end products such as bullet-resistant armor, nylon, computer chips and intermediates,pharmaceutical packaging, and electronicprovides reduced and low global-warming-potential (GWP) materials based on hydrofluoro-olefin technology. In the industrial environment, Honeywell Forge solutions enable integration and chemicals.

connectivity to provide a holistic view of operations and turn data into clear actions to maximize productivity and efficiency. Honeywell Forge's cybersecurity capabilities help identify risks and act on cyber-related incidents, together enabling improved operations and protecting processes, people and assets.

Safety and Productivity Solutions

Safety and Productivity Solutions is a leading global provider of products software and connected solutions to customers around the globesoftware that improve productivity, workplace safety and asset performance.performance to customers around the globe. Safety products include personal protection equipment, apparel, gear, and footwear designed for work, play and outdoor activities.activities; gas detection technology; and cloud-based notification and emergency messaging. Productivity Solutions products and services include gas detection technology; mobile devices and software for computing, data collection and thermal printing; supply chain and warehouse automation equipment, software and solutions; custom-engineered sensors, switches and controls for sensing and productivity solutions; and software-based data and asset management productivity solutions.

Honeywell Forge solutions digitally automate processes to improve efficiency while reducing downtime and safety costs.

Competition

We are subject to competition in substantially all product and service areas. Some of our key competitors are:

·Aerospace: Borg-Warner (automotive), Garmin, General Electric, Rockwell Collins, Thales and United Technologies

·Home and Building Technologies: Emerson Electric, Itron, Johnson Controls, Schneider and Siemens

·Performance Materials and Technologies: Albemarle, BASF, Dow, Dupont, Emerson and Sinopec

·Safety and Productivity Solutions: 3M, Mine Safety Appliances, Kion Group, TE Connectivity and Zebra Technologies

Aerospace: Garmin, Safran, Thales, and United Technologies
Honeywell Building Technologies: Johnson Controls, Schneider Electric, Siemens and United Technologies
Performance Materials and Technologies: Albemarle, BASF, Dupont, Emerson Electric, Schneider Electric, Siemens, Sinopec and Yokogawa
Safety and Productivity Solutions: 3M, Kion Group, Mine Safety Appliances (MSA), TE Connectivity, and Zebra Technologies
Our businesses compete on a variety of factors such as price, quality, reliability, delivery, customer service, performance, applied technology, product innovation and product recognition. Brand identity, service to customers and quality are important competitive factors for our products and services, and there is considerable price competition. Other competitive factors include breadth of product line, research and development efforts and technical and managerial capability. While our competitive position varies among our products and services, we believe we are a significant competitor in each of our major product and service classes. Many of our competitors have substantial financial resources and significant technological capabilities. In addition, some of our products compete with the captive component divisions of OEMs.

Aerospace Sales 

Our Aerospace segment sales were 38%, 39% and 39% of our total sales in 2016, 2015 and 2014. Our sales to commercial aerospace OEMs were 6%, 8% and 6% of our total sales in 2016, 2015 and 2014. In addition, our sales to commercial aftermarket customers of aerospace products and services were 12%, 12% and 11% of our total sales in 2016, 2015 and 2014.

U.S. Government Sales

Sales to the U.S. Government (principally by Aerospace), acting through its various departments and agencies and through prime contractors, amounted to $3,330$4,057 million, $3,743$3,403 million and $3,693$3,203 million in 2016, 20152019, 2018 and 2014,2017, which included sales to the U.S. Department of Defense, as a prime contractor and subcontractor, of $2,647$3,491 million, $2,680$2,832 million and $2,792$2,546 million in 2016, 20152019, 2018 and 2014. U.S. defense

4

spending decreased in 2016 compared to 2015.2017. We do not expect our overall operating results to be significantly affected by any proposed changes in 20172020 federal defense spending due principally to the varied mix of the government programs which impact us (OEMs’ production, engineering development programs, aftermarket spares and repairs and overhaul programs), as well as our diversified commercial businesses.

Backlog

Our total backlog at December 31, 2016 and 2015 was $19,075 million and $18,183 million. We anticipate that approximately $12,022 million of the 2016 backlog will be filled in 2017. We believe that backlog is not necessarily a reliable indicator of our future sales because a substantial portion of the orders constituting this backlog may be canceled at the customer’s option.



International Operations

We are engagedengage in manufacturing, sales, service and research and development (R&D) globally. U.S. exports and non-U.S. manufactured products are significant to our operations. U.S. exports comprised 13%15% of our total sales in 20162019, 13% in 2018 and 14%12% in each of 2015 and 2014.2017. Non-U.S. manufactured products and services, mainly in Europe and Asia, were 43%40% of our total sales in 2016, 39%2019, 43% in 20152018 and 41%44% in 2014.

  Year Ended December 31, 2016
   
Manufactured Products and Systems and
Performance of Services		 Aerospace Home and
Building
Technologies		 Performance
Materials and
Technologies		 Safety and
Productivity
Solutions
  (% of Total Sales) 
U.S. Exports  21%  2%  18%  5%
Non-U.S.  33%  50%  48%  46%

2017.

Manufactured Products and Systems and
Performance of Services
 Year Ended December 31, 2019
Aerospace 
Honeywell
Building
Technologies
 
Performance
Materials and
Technologies
 
Safety and
Productivity
Solutions
  (% of Segment Sales)
U.S. Exports 25% 2% 16% 2%
Non-U.S. manufactured/services 19% 64% 56% 41%
Information related to risks attendant to our foreign operations is included in Item 1A. Risk Factors under the caption “Macroeconomic and Industry Risks.”

Backlog
Our backlog represents the estimated remaining value of work to be performed under firm contracts. Backlog is equal to our remaining performance obligations under the contracts that meet the guidance on revenue from contracts with customers as discussed in Note 7 to the Consolidated Financial Statements. Backlog was $25,612 million and $24,850 million at December 31, 2019 and 2018. We expect to recognize approximately 57% of our remaining performance obligations as revenue in 2020, and the remaining balance thereafter.
Raw Materials

The principal raw materials used in our operations are generally readily available. Although we occasionally experience disruption in raw materials supply, we experienced no significant problems in the purchase of key raw materials or commodities in 2016.2019. We are not dependent on any one supplier for a material amount of our raw materials.

The costs

Prices of certain key raw materials, including R240,copper, fluorspar, copper,tungsten salts, ethylene, aluminum, and perchloroethylenemolybdenum in Performance Materials and Technologies and nickel, steel, titanium and other metals in Aerospace, are expected to continue to fluctuate. We will continue to attempt to offset raw material cost increases with formula or long-term supply agreements, price increases and hedging activities where feasible. We do not presently anticipate that a shortage of raw materials will cause any material adverse impacts during 2017.

2020.

Patents, Trademarks, Licenses and Distribution Rights

Our segments are not dependent upon any single patent or related group of patents, or any licenses or distribution rights. In our judgment, our intellectual property rights are adequate for the conduct of our business. We believe that, in the aggregate, the rights under our patents, trademarks and licenses are generally important to our operations, but we do not consider any individual patent, trademark or any licensing or distribution rights related to a specific process or product to be of material importance in relation to our total business.

Research and Development

The Company’s principal research and development activities are in the U.S., India, Europe and China. Research and development expense totaled $2,143 million, $1,856 million and $1,892 million in 2016, 2015 and 2014. R&D expense was 5% of sales in each of 2016, 2015 and 2014. Customer-sponsored (principally by the U.S. Government) R&D activities amounted to an additional $967 million, $998 million and $1,034 million in 2016, 2015 and 2014.

5


Environment

We are subject to various federal, state, local and foreign government requirements regarding protection of human health and the environment. We believe that, as a general matter, ourOur policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage, and of resulting financial liability, in connection with our business. Some risk of environmental damage is, however, inherent in some of our operations and products, as it is with other companies engaged in similar businesses.

We are and have been engagedengage in the handling, manufacture,manufacturing, use and disposal of many substances classified as hazardous by one or more regulatory agencies. We believe that, as a general matter, ourOur 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 these substances are in accord withmeet or exceed environmental and safety laws and regulations. It is also possible that future knowledge or other developments, such as improved capability to detect substances in the environment or increasingly strict environmental laws and standards and enforcement policies, could bring into question our current or past handling, manufacture, use or disposal of these substances.

Among other environmental requirements, we are subject to the federal Superfund and similar state and foreign laws and regulations, under which we have been designated as a potentially responsible party that may be liable for cleanup costs associated with current and former operating sites and various hazardous waste sites, some of which are on the U.S. Environmental Protection Agency’s National Priority List. AlthoughWhile there is a possibility that a responsible party might have to bear more than its proportional share of the cleanup costs if it isbe unable to obtain appropriate contribution from other responsible parties, we do not anticipate having to bear significantly more than our proportional share in multi-party situations taken as a whole.

We do not believe that Federal, State and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, or any existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material effect in the foreseeable future on the Company’s business or markets that it serves, nor on its results of operations, capital expenditures, earnings, competitive position or financial standing.business. We will continue to monitor emerging developments in this area.

Employees

We have approximately 131,000113,000 employees at December 31, 2016,2019, of whom approximately 45,00044,000 are located in the United States.

6

4


Information About our Executive Officers of the Registrant

The executive officers of Honeywell, listed as follows, are elected annually by the Board of Directors. There are no family relationships among them.

Name, Age,
Date First
Elected an
Executive Officer
 Business Experience
Date First Elected an
Executive OfficerBusiness Experience
David M. Cote, 64
2002
Darius Adamczyk, 54
2017(a)
 Chairman of the Board and Chief Executive Officer since July 2002.
Darius Adamczyk, 51
2014(a)		April 2018. President and Chief Executive Officer from April 2017 to April 2018. Chief Operating Officer sincefrom April 2016.2016 to March 2017. President and Chief Executive Officer Performance Materials and Technologies from April 2014 to April 2016. President of Honeywell Process Solutions from April 2012 to April 2014. President of Honeywell Scanning & Mobility from July 2008 to April 2012.
Que Thanh Dallara, 46
2018
 
Katherine L. Adams, 52
2009		Senior Vice President and General Counsel since April 2009.
Roger Fradin, 63
2004(b)		Vice Chairman since April 2014. President and Chief Executive Officer AutomationConnected Enterprise since October 2018. Vice President and Control SolutionsChief Commercial Officer from January 20042017 to April 2014.October 2018. From 2007 to 2016, Ms. Dallara served in multiple leadership positions at TE Connectivity Ltd., most recently as Senior Vice President, Corporate Strategy and Analytics.
Rajeev Gautam, 64
67
2016
 President and Chief Executive Officer Performance Materials and Technologies since April 2016. President of Honeywell UOP from January 2009 to April 2016.
Mark R. James, 58
2007
 Senior Vice President Human Resources, Security and Communications since November 2007.
Terrence S. Hahn, 50
2013
Vimal Kapur, 54
2018
 President and Chief Executive Officer Home andHoneywell Building Technologies since July 2016.May 2018. President and Chief Executive Officer Transportation Systemsof Honeywell Process Solutions from May 2013 to July 2016. Vice President and General Manager of Fluorine Products from March 20072014 to May 2013.2018.
Mark R. James, 55
2007		Senior Vice President Human Resources, Procurement and Communications since November 2007.
Andreas C. Kramvis, 64
2008(b)		Vice Chairman since April 2014. President and Chief Executive Officer Performance Materials and Technologies from March 2008 to April 2014.
Timothy O. Mahoney, 60
2009		President and Chief Executive Officer Aerospace since September 2009.
Krishna Mikkilineni, 57
2010		Senior Vice President Engineering, Operations and Information Technology since April 2013. Senior Vice President Engineering and Operations from April 2010 to April 2013 and President Honeywell Technology Solutions from January 2009 to April 2013.
Thomas A. Szlosek, 53
2014
Gregory P. Lewis, 52
2018
 Senior Vice President and Chief Financial Officer since April 2014.August 2018. Vice President of Enterprise Information Management from October 2016 to April 2018, prior to being named Vice President, Corporate Finance from April 2013 to April 2014.in May 2018. Chief Financial Officer of Automation and Control Solutions from February 2007April 2013 to April 2013.September 2016.
Anne T. Madden, 55
2017
 Senior Vice President and General Counsel since October 2017. Corporate Secretary from February 2018 to September 2019. Vice President of Corporate Development and Global Head of M&A from January 2002 to October 2017.
Michael R. Madsen, 56
2019
President and Chief Executive Officer Aerospace since October 2019. Vice President, Integrated Supply Chain of Aerospace from May 2015 to October 2019. President, Aerospace Defense and Space from October 2010 to May 2015
John F. Waldron, 41
44
2016
 
President and Chief Executive Officer, Safety and Productivity Solutions since July 2016. President of Sensing and Productivity Solutions from July 2015 to July 2016. President of Scanning and Mobility from April 2012 to July 2015. Vice President and General Manager of Americas Scanning and Mobility from January 2012 to April 2012.

(a)Also a Director.
(b) Retiring from Honeywell on February 15, 2017.
7

Item 1A. Risk Factors

Cautionary Statement About Forward-Looking Statements

We describe many of the trends and other factors that drive our business and future results in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other parts of this report (including this Item 1A). Such discussions contain 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 management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management’s assumptions and assessments in 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 significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties that can affect our performance in both the near-andnear- and long-term. These forward-looking statements should be considered in light of the information included in this Form 10-K, including, in particular, the factors discussed below. These factors may be revised or supplemented in subsequent reports on Forms 10-Q and 8-K.



Risk Factors

Our business, operating results, cash flows and financial condition are subject to the principal risks and uncertainties set forth below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results.

Macroeconomic and Industry Risks

Industry

Each of our businesses is subject to unique industry and economic conditions that may adversely affect the markets and operating conditions of our customers, which in turn can affect demand for our products and services and our results of operations.

·
•
Aerospace—Operating results ofOur Aerospace are directly tied to cyclical industry and economic conditions, as well as changes inbusiness is impacted by customer buying patterns of aftermarket parts, supplier stability, factory transitions and global supply chain capacity constraints. The operatingconstraints that may lead to shortages of crucial components. Operating results of our Commercial Aviation business unit may be adversely affected by downturns in the global demand for air travel which impacts new aircraft production or the delay or cancellation of new aircraft orders, delays in launch schedules for new aircraft, the retirement of aircraft and global flying hours, which impact air transport, regional, business and general aviation aircraft utilization rates. Operating results may be adversely affected by the decrease in air travel demand due to regional restrictions or suspension of service for public health, safety, or environmental events. Operating results could also be impacted by changes in overall trends related to end market demand for the product portfolio.portfolio, as well as, new entrants and non-traditional players entering the market. Operating results in our Defense and Space business unit may be affected by the mix of U.S. and foreign government appropriations for defense and space programs and by compliance risks. Results may also be impacted by the potential introduction of counterfeit parts into our global supply chain.
•
Honeywell Building Technologies—Operating results in our Transportation Systems business unit may be affected by the level of production and demand for automobiles and trucks equipped with turbochargers, regulatory changes regarding automobile and truck emissions and fuel economy, consumer demand and spending for automotive aftermarket products and delays in launch schedules for new automobile and truck platforms.

·Home and Building Technologies—Operatingresults may be adversely impacted by downturns in the level of global residential and commercial construction activity (including retrofits and upgrades), lower capital spending and operating expenditures on building projects, less industrial plant expansion, changes in the competitive landscape including new market entrants and new technologies, and fluctuations in inventory levels in distribution channels.

·
•
Performance Materials and Technologies—Operating results may be adversely impacted by downturns in capacity utilization for chemical, industrial, refining, petrochemical and semiconductor plants, our customers’ availability of capital for refinery construction and expansion, raw material demand and supply volatility, product commoditization, continued illegal imports of hydrofluorocarbons into Europe and our ability to maximize our facilities’ production capacity and minimize downtime. In particular, the volatility in oil and natural gas prices have and will continue to impact our customers’ operating levels and capital spending and thus demand for our products and services.
8
·•
Safety and Productivity Solutions—OperatingresultsOperating results may be adversely impacted by downturns in the level of global capital spending and operating expenditures, including in the oil and gas industry, reduced investments in process automation, safety monitoring, and plant capacity utilization initiatives, fluctuations in retail markets, lower customer demand due to the failure to anticipate and respond to overall trends related to end market demand, changes in the competitive landscape including new market entrants and technology that may lead to product commoditization, and adverse industry economic conditions, all of which could result in lower market share, reduced selling prices and lower margins.

An increasing percentage of our sales and operations is in non-U.S. jurisdictions and is subject to the economic, political, regulatory, foreign exchange and other risks of international operations.

Our international operations, including U.S. exports, represent more than half of the Company’s sales. Risks related to international operations include exchange control regulations, wage and price controls, antitrust regulations, employment regulations, foreign investment laws, import, export and other trade restrictions (such as sanctions and embargoes), differing levels of protection of intellectual property, acts of industrial espionage, violations by our employees of anti-corruption laws (despite our efforts to mitigate these risks), changes in regulations regarding transactions with state-owned enterprises, nationalization of private enterprises, acts of terrorism, and our ability to hire and maintain qualified staff and maintain the safety of our employees in these regions. Instability and uncertainties arising from the global geopolitical environment, including the United Kingdom referendum in favor of exiting the European Union and the evolving U.S.international and domestic political, regulatory and economic landscape, following the 2016 elections,potential for changes in global trade policies including sanctions and trade barriers, trends such as populism, economic nationalism and negative sentiment toward multinational companies, and the cost of compliance with increasingly complex and often conflicting regulations worldwide can impair our flexibility in modifying product, marketing, pricing or other strategies for growing our businesses, as well as our ability to improve productivity and maintain acceptable operating margins.



While there is uncertainty regarding the final outcome and full terms of the United Kingdom’s future relationship with the European Union, it is possible that there will be greater restrictions on imports and exports between the United Kingdom and other countries, including the United States, increased tariffs on U.K. imports and exports, and increased regulatory complexities. The Company has developed plans to mitigate the potential impact of these possible restrictions, but the implications of these uncertainties could affect the Company's business, financial position and results of operations.
Existing free trade laws and regulations provide certain beneficial duties and tariffs for qualifying imports and exports. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products or from where we import products or raw materials, either directly or through our suppliers, could have an impact on our competitive position and financial results.
The United States has commenced certain trade actions, including imposing tariffs on certain goods imported from China and other countries, which has resulted in retaliatory tariffs by China and other countries. Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could increase the cost of our products.
Operating outside of the United States also exposes us to foreign exchange risk, which we monitor and seek to reduce through hedging activities. However, foreign exchange hedging activities bear a financial cost and may not always be available to us or be successful in eliminating such volatility. Finally, we generate significant amounts of cash outside of the United States that is invested with financial and non-financial counterparties. While we employ comprehensive controls regarding global cash management to guard against cash or investment loss and to ensure our ability to fund our operations and commitments, a material disruption to the counterparties with whom we transact business could expose Honeywell to financial loss.

Operating outside the United States also exposes us to additional intellectual property risk. The laws and enforcement practices of certain jurisdictions in which we operate may not protect our intellectual property rights to the same extent as in the U.S. and may impose joint venture, technology transfer, local service or other foreign investment requirements and restrictions that potentially compromise control over our technology and proprietary information. Failure of foreign jurisdictions to protect our intellectual property rights, an inability to effectively enforce such rights in foreign jurisdictions, or the imposition of foreign jurisdiction investment or sourcing restrictions or requirements could result in loss of valuable proprietary information and could impact our competitive position and financial results.
Risks related to our defined benefit pension plans may adversely impact our results of operations and cash flow.

Significant changes in actual investment return on pension assets, discount rates, and other factors could adversely affect our results of operations and require cash pension contributions in future periods. Changes in discount rates and actual asset returns different than our anticipated asset returns can result in significant non-cash actuarial gains or losses which we record in the fourth quarter of each fiscal year, and, if applicable, in any quarter in which an interim re-measurement is triggered. With regard to cash pension contributions, funding requirements for our pension plans are largely dependent upon interest rates, actual investment returns on pension assets and the impact of legislative or regulatory changes related to pension funding obligations.

We may be required to transition from the use of the LIBOR interest rate index in the future.
We have certain contracts indexed to LIBOR to calculate the interest rate. The continued availability of the LIBOR index is not guaranteed after 2021. We cannot predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted. The language in certain of our LIBOR-based contracts identify various events that trigger when a successor rate to the designated rate would be selected. If a trigger is satisfied, such contracts may give the calculation agent discretion over the substitute index or indices for the calculation of interest rates to be selected. The implementation of a substitute index or indices for the calculation of interest rates under our contracts may result in our incurring significant expenses in effecting the transition and may result in disputes or litigation over the appropriateness or comparability to LIBOR of the substitute index or indices, which could have an adverse effect on our results of operations.


Operational Risks

Raw material price fluctuations, the ability of key suppliers to meet quality and delivery requirements, or catastrophic events can increase the cost of our products and services, impact our ability to meet commitments to customers and cause us to incur significant liabilities.

The cost of raw materials is a key element in the cost of our products, particularly in Performance Materials and Technologies (R240,(copper, fluorspar, copper,tungsten salts, ethylene, aluminum, and perchloroethylene)molybdenum) and in Aerospace (nickel, steel, titanium and other metals). Our inability to offset material price inflation through increased prices to customers, formula or long-term fixed price contracts with suppliers, productivity actions or through commodity hedges could adversely affect our results of operations.

Many major components, product equipment items and raw materials, particularly in Aerospace, are procured or subcontracted on a single or sole-source basis. Although we maintain a qualification and performance surveillance process and we believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale

9

production and adjust delivery of long-lead time products during times of volatile demand. Our inability to fill our supply needs would jeopardize our ability to fulfill obligations under commercial and government contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.

We may be unable to successfully execute or effectively integrate acquisitions, and divestitures may not occur as planned.

We regularly review our portfolio of businesses and pursue growth through acquisitions and seek to divest non-core businesses. We may not be able to complete transactions on favorable terms, on a timely basis, or at all, and during integration we may discover cybersecurity and compliance issues.all. In addition, our results of operations and cash flows may be adversely impacted by (i) the failure of acquired businesses to meet or exceed expected returns, including risk of impairment; (ii) the failure to integrate multiple acquired businesses into Honeywell simultaneously and on schedule and/or to achieve expected synergies; (iii) the inability to dispose of non-core assets and businesses on satisfactory terms and conditions; and (iv) the discovery of unanticipated liabilities, labor relations difficulties, cybersecurity concerns, compliance issues or other problems in acquired businesses for which we lack contractual protections, insurance or indemnities, or with regard to divested businesses, claims by purchasers to whom we have provided contractual indemnification.

Our future growth is largely dependent upon our ability to develop new technologies and introduce new products that achieve market acceptance in increasingly competitive markets with acceptable margins.

Our future growth rate depends upon a number of factors, including our ability to (i) identify and evolve with emerging technological and broader industry trends in our target end-markets,end-markets; (ii) develop and maintain competitive products,products; (iii) defend our market share against an ever-expanding number of competitors including many new and non-traditional competitors,competitors; (iv) enhance our products by adding innovative features that differentiate our products from those of our competitors and prevent commoditization of our products,products; (v) develop, manufacture and bring compelling new products to market quickly and cost-effectively,cost-effectively; (vi) monitor disruptive technologies and (vi)business models; (vii) achieve sufficient return on investment for new products introduced based on capital expenditures and research and development spending; (viii) respond to changes in overall trends related to end-market demand; and (ix) attract, develop and retain individuals with the requisite technical expertise and understanding of customers’ needs to develop new technologies and introduce new products.

Competitors may also develop after-market services and parts for our products which attract customers and adversely affect our return on investment for new products. The failure of our technologies or products to gain market acceptance due to more attractive offerings by our competitors or the failure to address any of the above factors could significantly reduce our revenues and adversely affect our competitive standing and prospects.



Failure to increase productivity through sustainable operational improvements, as well as an inability to successfully execute repositioning projects or to effectively manage our workforce, may reduce our profitability or adversely impact our businesses.

Our profitability and margin growth are dependent upon our ability to drive sustainable improvements. In addition, we seek productivity and cost savings benefits through repositioning actions and projects, such as consolidation of manufacturing facilities, transitions to cost-competitive regions and product line rationalizations. Risks associated with these actions include delays in execution, of the planned initiatives, additional unexpected costs, realization of fewer than estimated productivity improvements and adverse effects on employee morale. We may not realize the full operational or financial benefits we expect, the recognition of these benefits may be delayed and these actions may potentially disrupt our operations. In addition, organizational changes, increased attrition, failure to create and implement a succession plan for key Company positions, not retaining key talent, inability to attract new employees with unique skills, labor relations difficulties, or workforce stoppage could have a material adverse effect on our business, reputation, financial position and results of operations.

As a supplier to the U.S. Government, we are subject to unique risks, such as the right of the U.S. Government to terminate contracts for convenience and to conduct audits and investigations of our operations and performance.

U.S. Government contracts are subject to termination by the government, either for the convenience of the government or for our failure to perform consistent with the terms of the applicable contract. Our contracts with the U.S. Government are also subject to government audits that may recommend downward price adjustments and other changes. When appropriate and prudent, we have made adjustments and paid voluntary refunds in the past and may do so in the future.

We are also subject to government investigations of business practices and compliance with government

10

procurement regulations. If, as a result of any such investigation or other government investigations (including investigation of violations of certain environmental, employment or export laws), Honeywell or one of its businesses were found to have violated applicable law, then it could be suspended from bidding on or receiving awards of new government contracts, suspended from contract performance pending the completion of legal proceedings and/or have its export privileges suspended.

Our operations and the prior operations of predecessor companies expose us to the risk of material environmental liabilities.

Mainly because of past operations and operations of predecessor companies, we are subject to potentially material liabilities related to the remediation of environmental hazards and to claims of personal injuries or property damages that may be caused by hazardous substance releases and exposures. We continue to incur remedial response and voluntary clean-up 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. Various federal, state, local and foreign governments regulate the discharge of materials into the environment, or the use of or communications respecting certain materials in our products, and can impose substantial fines and criminal sanctions for violations, and require injunctive relief measures, including installation of costly equipment or operational changes to limit emissions and/or decrease the likelihood of accidental hazardous substance releases.releases, or limiting access of our products to markets, among others. In addition, changes in laws, regulations and enforcement of policies, the discovery of previously unknown contamination or new technology or information related to individual sites, the establishment of stricter state or federal toxicity standards with respect to certain contaminants, or the imposition of new clean-up requirements or remedial techniques could require us to incur additional costs in the future that would have a negative effect on our financial condition or results of operations.



Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.

Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company, its products, its customers and/or its third party service providers, including cloud providers. Our customers, including the U.S. government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our products, and we may incur additional costs to comply with such demands. While we have experienced, and expect to continue to experience, these types of threats and incidents, none of them to date have been material to the Company. We seek to deploy comprehensive measures to deter, prevent, detect, respond to and mitigate these threats, including identity and access controls, data protection, vulnerability assessments, product software designs which we believe are less susceptible to cyber attacks, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems. Despite these efforts, cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. Cybersecurity incidents aimed at the software imbedded in our products could lead to third party claims that our product failures have caused a similar range of damages to our customers, and this risk is enhanced by the increasingly connected nature of our products. The potential consequences of a material cybersecurity incident include financial loss, reputational damage, litigation with third parties, theft of intellectual property, fines levied by the Federal Trade Commission, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect our competitiveness and results of operations.

The development of technology products and services presents security and safety risks.
An increasing number of our products, services and technologies are delivered with Internet of Things (IoT) capabilities and the accompanying interconnected device networks which include sensors, data and advanced computing capabilities. We have developed product software designs which we believe are less susceptible to cyber-attacks, but despite these efforts, if our products and services that include IoT solutions do not work as intended or are compromised, the possible consequences include financial loss, reputational damage, exposure to legal claims or enforcement actions, theft of intellectual property, and diminution in the value of our investment in research, development and engineering, which in turn could adversely affect our competitiveness and results of operations.
Data privacy, data protection, and information security may require significant resources and presents certain risks.
We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary business information, personal data or other information that is subject to privacy and security laws, regulations and/or customer-imposed controls. Despite our efforts to protect such data, we may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, or employee errors that could potentially lead to the compromising of such data, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions. In addition, we operate in an environment in which there are different and potentially conflicting data privacy laws in effect in the various U.S. states and foreign jurisdictions in which we operate and we must understand and comply with each law and standard in each of these jurisdictions while ensuring the data is secure. For example, the State of California recently passed legislation granting residents certain new data privacy rights and regulating the security of IoT devices, effective in January 2020; European laws require us to have an approved legal mechanism to transfer personal data out of Europe; the European Union General Data Protection Regulation, which became enforceable in May 2018, superseded prior European Union data protection legislation and imposes more stringent requirements in how we collect and process personal data and provides for significantly greater penalties for noncompliance; and several other countries have passed laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions. Government enforcement actions can be costly and interrupt the regular operation of our business, and violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements.


A material disruption of our operations, particularly at our manufacturing facilities or within our information technology infrastructure, could adversely affect our business.
Our facilities, supply chains, distribution systems and information technology systems are subject to catastrophic loss due to natural disasters, including hurricanes and floods, power outages, fires, explosions, terrorism, equipment failures, sabotage, cyber incidents, adverse weather conditions, labor disputes, critical supply failure, inaccurate downtime forecast, political disruption, and other reasons, which can result in undesirable consequences, including financial losses and damaged relationships with customers. Public health crises, like a regional or global pandemic, could disrupt our supply chain, distribution channels, production facilities, operations and customer demand, which could negatively impact our operations and adversely affect our business. We employ information technology systems and networks to support the business and rely on them to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Disruptions to our information technology infrastructure from system failures, shutdowns, power outages, telecommunication or utility failures, cybersecurity incidents, and other events, including disruptions at our cloud computing, server, systems and other third party IT service providers, could interfere with our operations, interrupt production and shipments, damage customer and business partner relationships, and negatively impact our reputation.
Concentrations of credit and market risk may adversely affect our results of operations.
We maintain long-term contract relationships with many of our customers, suppliers, and other counterparties. While we monitor the financial health of these counterparties, we are exposed to credit and market risks to the extent that customers, suppliers, and other counterparties are concentrated in similar industries and geographic regions. Changes in economic conditions in these industries or geographic regions could result in the credit deterioration or insolvency of a significant counterparty, which may lead to concerns about the creditworthiness of other counterparties in the same industry or geography, impacting our ability to renew our long-term contract arrangements or collect amounts due under these arrangements.
Legal and Regulatory Risks

Our U.S. and non-U.S. tax liabilities are dependent, in part, upon the distribution of income among various jurisdictions in which we operate.

Our future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, regulations and judicial rulings (or changes in the interpretation thereof), potential taxation of digital services, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures and various other governmental enforcement initiatives. Our tax expense includes estimates of tax reserves and reflects other estimates and assumptions, including assessments

11

of future earnings of the Company which could impact the valuation of our deferred tax assets. Changes in tax laws or regulations, including further regulatory developments arising from U.S. tax reform legislation as well as multi-jurisdictional changes enacted in response to the guidelinesaction items provided by the Organization for Economic Co-operation and Development (OECD) to address base erosion and profit shifting, and potential comprehensive U.S. tax reform which, among other things, might change certain U.S. tax rules impacting the way U.S based multinationals are taxed,, will increase tax uncertainty and may adversely impact our provision for income taxes.



Changes in legislation or government regulations or policies can have a significant impact on our results of operations.

The sales and margins of each of our segments are directly impacted by government regulations including safety, performance and product certification regulations. Within Aerospace, the operating results of Commercial Original Equipment and Commercial Aftermarket may be impacted by, among other things, mandates of the Federal Aviation Administration and other similar international regulatory bodies requiring the installation of equipment on aircraft. Our Defense and Space business unit may be affected by changes in government procurement regulations, while emissions, fuel economyregulations. Within Honeywell Building Technologies and energy efficiency standards for motor vehicles can impact Transportation Systems. Within HomeSafety and Building Technologies,Productivity Solutions, the demand for and cost of providing products, services and solutions can be impacted by fire, security, safety, health care, environmental and energy efficiency standards and regulations. Performance Materials and Technologies’ results of operations can be affectedimpacted by environmental safetystandards, regulations, and energy efficiency standards and regulations.judicial determinations. Growth in all our businesses within emerging markets may be adversely impacted by the inability to acquire and retain qualified employees where local employment law mandates may be restrictive.

Noncompliance with legislation and regulations can result in fines and penalties.

Increased public awareness and concern regarding global climate change may result in more international, regional and/or federal or other stakeholder requirements or expectations that could mandate more restrictive or expansive standards, such as stricter limits on greenhouse gas emissions or more prescriptive reporting of environmental, social, and governance metrics, than the voluntary commitments, that the Company has adopted or require such changes on a more accelerated time frame. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements upon the Company or its products, they could negatively impact the Company’s business, capital expenditures, results of operations, financial condition and competitive position.
We cannot predict with certainty the outcome of litigation matters, government proceedings and other contingencies and uncertainties.

We are subject to a number of 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 (including asbestos), prior acquisitions and divestitures, employment, employee benefits plans, intellectual property, antitrust, accounting, import and export, and environmental, health and safety matters. Our potential liabilities are subject to change over time due to new developments, changes in settlement strategy or the impact of evidentiary requirements, and we may become subject to or be required to pay damage awards or settlements that could have a material adverse effect on our results of operations, cash flows and financial condition. While we maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. The incurrence of significant liabilities for which there is no or insufficient insurance coverage could adversely affect our results of operations, cash flows, liquidity and financial condition.


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Item 1B.Unresolved Staff Comments

Not applicable.

Item 1B. Unresolved Staff Comments
None.
Item 2.Properties

Item 2. Properties
We have approximately 1,346932 locations, of which 305242 are plants.manufacturing sites. Our properties and equipment are in good operating condition and are adequate for our present needs. We do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.

Item 3.Legal Proceedings

Item 3. Legal Proceedings
We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business. See a discussion of environmental, asbestos and other litigation matters in Note 1920 Commitments and Contingencies of Notes to Consolidated Financial Statements.


The following matter is disclosed solely pursuant to the requirement to disclose certain environmental matters involving potential monetary sanctions in excess of $100,000: In January 2020, Honeywell reached agreement with the Texas Commission on Environmental Quality (TCEQ) to settle allegations that its Orange, Texas facility had exceeded certain emissions limits in its air permit. When Honeywell discovered these emissions, it took immediate corrective measures to address the issue, and self-reported the emissions to the TCEQ. Under the terms of the settlement, Honeywell will pay a penalty of $152,415 to resolve the matter.
Item 4.
Item 4. Mine Safety Disclosures

Not applicable.

12
One of our wholly-owned subsidiaries has a placer claim for and operates a chabazite ore surface mine in Arizona. Information concerning mine safety and other regulatory matters associated with this mine is required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K and is included in Exhibit 95 to this annual report.


13


Part II.

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Honeywell’s

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the New York Stock Exchange. Market and dividendExchange under the ticker symbol “HON”. Dividend information for Honeywell’s common stock is included in Note 2425 Unaudited Quarterly Financial Information of Notes to Consolidated Financial Statements.

The number of record holders of our common stock at December 31, 20162019 was 50,891.

43,552.

Information regarding securities authorized for issuance under equity compensation plans is included in Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters under the caption “Equity Compensation Plans.”

Honeywell

We purchased 2,000,0004,325,518 shares of itsour common stock, par value $1 per share, in the quarter ending December 31, 2016. Under2019. On April 29, 2019, the Company’sBoard of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included amounts remaining under, and replaced, the previously reported $5 billionapproved share repurchase program, of which $4.1 billion remained available asprogram. As of December 31, 20162019, $7.0 billion remained available for additional share repurchases. Honeywell presently expectsWe expect to repurchase outstanding shares from time to time to generally offset the dilutive impact of employee stock based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans. Additionally, we seek to reduce share count via share repurchases as and when attractive opportunities arise. The amount and timing of future repurchases may vary depending on market conditions and the level of our operating, financing and other investing activities.

The following table summarizes Honeywell’s purchaseour purchases of itsHoneywell's common stock for the three months ended December 31, 2016:

Issuer Purchases of Equity Securities
Period Total
Number of
Shares
Purchased		 Average
Price Paid
per Share		 Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs		 Approximate Dollar
Value of Shares that
May Yet be Purchased
Under Plans or
Programs
(Dollars in millions)
October 2016 2,000,000  $106.56  2,000,000 $4,077 
13
2019:

Issuer Purchases of Equity Securities
Period 
Total
Number of
Shares
Purchased
 
Average
Price Paid
per Share
 
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans
or Programs
 
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under Plans or
Programs
(Dollars in millions)
October 2019 1,326,831
 $163.68
 1,326,831
 $7,522
November 2019 1,573,877
 $179.03
 1,573,877
 $7,240
December 2019 1,424,810
 $176.15
 1,424,810
 $6,989




Performance Graph

The following graph compares the five-year cumulative total return on our common stock to the total returns on the Standard & Poor’s (S&P) 500 Stock Index and a composite of S&P’s Industrial Conglomerates and Aerospace and Defense indices, on a 65%55%/35%45% weighted basis (the Composite Index). The weighting of the components of the Composite Index are based on our segments’ relative contribution to total segment profit. The selection of the Industrial Conglomerates component of the Composite Index reflects the diverse and distinct range of non-aerospace businesses conducted by Honeywell. The annual changes for the five-year period shown in the graph are based on the assumption that $100 had been invested in Honeywell stock and each index on December 31, 20112014 and that all dividends were reinvested.

  Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016
                         
Honeywell  100   119.85   176.23   196.52   208.00   239.26 
S&P 500 Index®  100   116.00   153.57   174.60   177.01   198.18 
Composite Index  100   117.94   172.09   180.52   203.72   228.82 
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chart-9cfa9e6dd1e05237936.jpg

  Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019
Honeywell
jpga13.jpg
100 105.80 121.65 164.35 150.84 206.19
S&P Index
jpga14.jpg
100 101.38 113.51 138.29 132.23 173.86
Composite Index
jpga15.jpg
100 111.71 126.60 144.27 117.70 150.03

15


HONEYWELL INTERNATIONAL INC.

This selected financial data should be read in conjunction with Honeywell’s Consolidated Financial Statements and related Notes included elsewhere in this Annual Report as well as the section of this Annual Report titled Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 6. Selected Financial Data
 Years Ended December 31,
2019 
2018(1)(2)
 
2017(1)
 2016 2015
 (Dollars in millions, except per share amounts)
Results of Operations       
  
Net sales$36,709
 $41,802
 $40,534
 $39,302
 $38,581
Net income attributable to Honeywell6,143
 6,765
 1,545
 4,812
 4,771
Earnings Per Common Share         
Earnings from continuing operations:         
Basic8.52
 9.10
 2.03
 6.30
 6.12
Assuming dilution8.41
 8.98
 2.00
 6.21
 6.04
Dividends per share3.36
 3.06
 2.74
 2.45
 2.15
Balance Sheet Data         
Property, plant and equipment-net5,325
 5,296
 5,926
 5,793
 5,789
Total assets58,679
 57,773
 59,470
 54,566
 49,711
Short-term debt4,892
 6,458
 5,309
 3,593
 6,514
Long-term debt11,110
 9,756
 12,573
 12,182
 5,554
Total debt16,002
 16,214
 17,882
 15,775
 12,068
Redeemable noncontrolling interest7
 7
 5
 3
 290
Shareowners’ equity18,706
 18,358
 16,665
 18,883
 17,751
Item 6.Selected
(1)2018 and 2017 Net Income attributable to Honeywell and Earnings Per Common Share were impacted by U.S. Tax Reform; see Note 5 Income Taxes of Notes to Consolidated Financial DataStatements for further details.

  Years Ended December 31,
  2016 2015 2014 2013 2012
  (Dollars in millions, except per share amounts)
                     
Results of Operations                    
Net sales $39,302  $38,581  $40,306  $39,055  $37,665 
Net income attributable to Honeywell  4,809   4,768   4,239   3,924   2,926 
                     
Earnings Per Common Share                    
Earnings from continuing operations:                    
 Basic  6.29   6.11   5.40   4.99   3.74 
 Assuming dilution  6.20   6.04   5.33   4.92   3.69 
Dividends per share  2.45   2.15   1.87   1.68   1.53 
                     
Financial Position at Year-End                    
Property, plant and equipment-net  5,793   5,789   5,383   5,278   5,001 
Total assets  54,146   49,316   45,451   45,435   41,853 
Short-term debt  3,593   6,514   2,637   2,028   1,101 
Long-term debt  12,182   5,554   6,046   6,801   6,395 
Total debt  15,775   12,068   8,683   8,829   7,496 
Redeemable noncontrolling interest  3   290   219   167   150 
Shareowners’ equity  19,547   18,418   17,784   17,579   13,065 
15
(2)The results of operations for Transportation Systems business and Homes and Global Distribution business are included in the Consolidated Statement of Operations through the effective dates of the respective spin-offs, which occurred in 2018.

16


Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in millions, except per share amounts)

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell(“Honeywell” or the Company)“the Company”) for the three years ended December 31, 2016.2019. All references to Notes relate to Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

In July 2016,

On October 1, 2018, we completed the Company announcedtax-free spin-off to Honeywell shareowners of our Transportation Systems business, previously part of Aerospace, into a standalone publicly-traded company, Garrett Motion Inc. (“Garrett”).
On October 29, 2018, we completed the realignmenttax-free spin-off to Honeywell shareowners of the our Homes and Global Distribution business, units comprising its Automation and Control Solutions reporting segment by forming two new reportable operating segments:previously part of Home and Building Technologies and Safety and Productivity Solutions. Home and(renamed Honeywell Building Technologies includes Environmental & Energy Solutions, Security and Fire, and Building Solutions and Distribution. Additionally,following the Industrial Combustion/Thermal business, previously part of Environmental & Energy Solutions in Automation and Control Solutions, became part of Performance Materials and Technologies.Safety and Productivity Solutionsincludes Sensing & Productivity Solutions and Industrial Safety, as well asspin-off), into a standalone publicly-traded company, Resideo Technologies, Inc. (“Resideo”).
We removed the Intelligrated business.Under the realigned segment reporting structure, the Company has four reportable operating segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. The Company has reported its financial performance based on this realignment for all periods presented.

These realignments have no impact on the Company’s historical consolidated financial position, results of operations or cash flows. Prior period amounts have been reclassified to conform to current period segment presentation. 

On September 16, 2016, the Company completed the sale of the Aerospace government services business, Honeywell Technology Solutions Inc.The assets and liabilities associated with Honeywell Technology Solutions Inc. have been removedGarrett and Resideo from the Company’sour Consolidated Balance Sheet as of the effective datedates of the sale. Therespective spin-offs. We included the results of operations for Honeywell Technology Solutions are includedGarrett and Resideo in theour Consolidated Statement of Operations through the effective datedates of the sale.

On October 1, 2016,respective spin-offs. Total sales and total cost of products and services sold attributable to these spin-offs, impacting segment profit, were $6.6 billion and $4.8 billion for the Company completedthe tax-free spin-off of its Resins and Chemicals business, part of Performance Materials and Technologies, into a standalone, publicly-traded company (named AdvanSix) to Honeywell shareowners. The assets and liabilities associated with AdvanSix have been removed from the Company’s Consolidated Balance Sheet asyear ended December 31, 2018.

A detailed discussion of the effective date of the spin-off. The results of operations for AdvanSixprior year 2018 to 2017 year-over-year changes are not included herein and can be found in the Consolidated Statement of Operations throughManagement's Discussion and Analysis section in the effective date of2018 Annual Report on Form 10-K filed February 8, 2019.
EXECUTIVE SUMMARY
During 2019, we continued to deliver on our financial commitments and to create long-term shareowner value. Income before taxes grew 1% to $7.6 billion despite the spin-off.

Executive summary

In 2016, Honeywell successfully navigated a challenging macro-economic environment. We grew net sales 2% to $39,302 million, grew earnings per share of common stock – assuming dilution 3% to $6.20 and grew net incomespin-offs. The improvement in year over year Income before taxes was attributable to Honeywell 1%both sales growth as well as operational improvements that increased operating margins. We believe our ability to $4,809 million.drive continuous earnings growth over a long history results from consistently identifying and investing in productivity initiatives. We executed on cost reduction activities, accelerated our capital deployment strategy and improved the growth portfolio through acquisitions and divestitures, including the divestiture of Honeywell Technology Solutions Inc. and the tax-free spin-off of AdvanSix. We also announced the realignment of the business units comprising our Automation and Control Solutions segmentcontinue to two new reportable operating segments, as previously mentioned. The Company also announced a leadership succession plan for our Chief Executive Officer and successfully executed leadership transitions in three of our four reportable operating segments.

We continued our balanced long-term focus on enhancing shareowner value without sacrificing growth investment,commercial excellence and improvements in our manufacturing and operational processes, including maintaining R&D spendingour Integrated Supply Chain and Honeywell Digital transformations, to drive higher sales at 5%better margins.

We are careful not to allow the attainment of sales, new product introductions aligned with global macroeconomic trends in energy, safety, security, productivity and global urbanization, over $300 million of new repositioning investmentsshort-term financial results to improve our operations and increased investment in High Growth Regions. We also continued to enhance our software capabilities throughimperil the creation of long-term, sustainable shareowner value. We are committed to a strategy to become one of the world’s leading software centerindustrial companies. Our technology investments allow us to introduce new technology solutions in the United States to staff more than 730 full-time product software engineers, who arehigh growth businesses in addition to the more than 11,000 software engineers already partbroad-based, attractive industrial end markets. Each of Honeywell.

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these end markets is characterized by favorable global mega-trends including energy efficiency, infrastructure investment, urbanization and safety.

In 20162019 we deployed capital of over $7.5$7.8 billion, including capital expenditures, dividends, share repurchases, mergers and acquisitions, and venture investments.

BUSINESS OBJECTIVES
Our businesses are focused on the following:

·Mergers and Acquisitions—we deployed over $2.5 billion during 2016, acquiring businesses that will be integrated into each of our four operating segments. These acquisitions all share a software and technology focus and increase our existing deep alignment with enduring macro trends such as energy efficiency, clean energy generation, safety, security, productivity and global urbanization.
·Dividend—after a 15% dividend rate increase in 2015, we increased our annual dividend rate by 12% in 2016, as we seek to continue to grow the dividend faster than earnings, marking the 12th dividend increase in the past 11 years.
·Share Repurchases—we continue to opportunistically repurchase our shares with the goal of generally keeping share count flat and seeking to offset the dilutive impact of employee stock based compensation and savings plans. In 2016, we repurchased 19.3 million shares for $2.1 billion.
·Capital Investment in Facilities—we invested over $1 billion in capital expenditures focused on high return investments such asfollowing objectives:
Driving profitable growth through delivering innovative products through research and development and technological excellence, and through continued enhancement of our footprint in high growth regions;
Continuing to execute on our strategy to become the premier software-industrial, including the ongoing expansion of facilities to manufacture our Solstice® low global-warming potential refrigerant products and building new production facilities to make UOP catalyst and absorbent products.

Honeywell also completed refinancingForge connected solutions for aircraft, buildings, cybersecurity, plants, and workers and driving a recurring revenue model across the Company;

Expanding margins by optimizing the Company’s cost structure through Supply Chain and Honeywell Digital transformation initiatives, commercial excellence, repositioning, and other manufacturing and operational process improvements;
Executing disciplined, rigorous M&A and integration processes to deliver growth through acquisitions;
Controlling corporate costs, including costs incurred for asbestos and environmental matters, pension and other post-retirement benefits; and
Increasing availability of long-termcapital through strong cash flow generation and conversion from effective working capital management and proactively managing debt throughto enable the issuance of €4,000 million Senior Notes in FebruaryCompany to smartly deploy capital for strategic acquisitions, dividends, share repurchases and an additional $4,500 million Senior Notes in October. The proceeds from the offerings of Senior Notes were used to repurchase $2,200 million of Senior Notes outstanding, as well as repay outstanding commercial paper. We expect these refinancing activities will reduce our ongoing annual interest expense.

capital expenditures.


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CONSOLIDATED RESULTS OF OPERATIONS

Net Sales

  2016 2015 2014
             
Net sales $39,302  $38,581  $40,306 
% change compared with prior period  2%  (4)%    

 2019 2018 2017
Net sales$36,709
 $41,802
 $40,534
% change compared with prior period(12)% 3%  
Net sales decreased in 2019 compared to 2018 due to the spin-offs. Our 2018 results included $6,550 million of sales related to the Transportation Systems and Homes and Global Distribution businesses. Absent the impact of the spin-offs during 2018, sales grew 4% from $35,252 in 2018 to $36,709 in 2019.
The change in net sales is attributable to the following:

  2016
Versus
2015		 2015
Versus
2014
     
Volume  (2)%  1%
Price  -   (1)%
Acquisitions/Divestitures  5%  (1)%
Foreign Currency Translation  (1)%  (4)%
Other  -   1%
   2%  (4)%

 
2019
Versus
2018
 
2018
Versus
2017
Volume3 % 4 %
Price2 % 2 %
Foreign Currency Translation(1)% 1 %
Acquisitions/Divestitures(16)% (4)%
 (12)% 3 %
A discussion of net sales by segment can be found in the Review of Business Segments section of this MD&A.

Management’s Discussion and Analysis.

The unfavorable impact of foreign currency translation impact in 20162019 compared with 2015 is2018 was principally driven by the weakening of the British Pound, Chinese Renminbi and Canadian Dollar, partially offset by the strengthening of the Japanese Yen against the U.S. Dollar.

The foreign currency translation impact in 2015 compared with 2014 is principally driven by the weakening of the Euro and Canadian Dollar against the U.S. Dollar.

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currencies of the majority of our international markets, primarily the Euro, British Pound and Chinese Renminbi.

Cost of Products and Services Sold

  2016 2015 2014
          
Cost of products and services sold $27,150  $26,747  $28,957 
% change compared with prior period  2%  (8)%    
             
Gross Margin percentage  30.9%  30.7%  28.2%

Cost of products and services sold increased in 2016 compared with 2015 principally due to increased direct material costs of approximately $380 million (driven primarily by acquisitions, net of divestitures, partially offset by the favorable impact of productivity, net of inflation, and foreign currency translation), higher depreciation and amortization attributable to acquisitions of approximately $135 million and increased pension mark-to-market expense allocated to cost of products and services sold of $70 million, partially offset by higher pension and other postretirement benefits income allocated to cost of products and services sold of $200 million.

Gross margin percentage increased in 2016 compared with 2015 principally due to higher gross margin in Performance Materials and Technologies (approximately 0.6 percentage point impact) and higher pension and other postretirement benefits income allocated to cost of products and services sold (approximately 0.5 percentage point impact), partially offset by lower gross margin in Aerospace, Home and Building Solutions and Safety and Productivity Solutions (approximately 0.7 percentage point impact collectively) and increased pension mark-to-market expense allocated to cost of products and services sold (approximately 0.2 percentage point impact).

 2019 2018 2017
Cost of products and services sold$24,339
 $29,046
 $28,144
% change compared with prior period(16)% 3%  
Gross Margin percentage33.7 % 30.5% 30.6%
Cost of products and services sold decreased in 20152019 compared with 2014 principallyto 2018 due to a decrease inlower direct and indirect material costs of approximately $1,460$3,920 million, (drivenlower labor costs of approximately $160 million (both driven by the spin-offs of the Transportation Systems and Homes and Global Distribution businesses), and lower repositioning and other charges of approximately $530 million, largely due to lower asbestos and environmental related charges net of the reimbursements. Absent the impact of these items during 2018, cost of products and services sold increased approximately 3%.
Gross margin percentage increased in 2019 compared with 2018 primarily due to higher gross margin in the segments (approximately 1.4 percentage points), with higher Aerospace, Honeywell Building Technologies and Performance Materials and Technologies gross margins, including the favorable impact following the spin-offs, partially offset by lower Safety and Productivity Solutions gross margin. Additionally, gross margin percentage increased due to the lower costs within cost of products and services sold for repositioning and other charges (approximately 1.5 percentage point impact) and pension service costs (approximately 0.2 percentage point impact).


Selling, General and Administrative Expenses
 2019 2018 2017
Selling, general and administrative expenses$5,519
 $6,051
 $6,087
% of sales15.0% 14.5% 15.0%
Selling, general and administrative expenses decreased in 2019 compared with 2018 primarily due to the impact of the spin-offs. In addition, selling, general and administrative expenses decreased due to productivity and the favorable impact of foreign currency translation, productivity, lower raw materials pass-through pricing and the absence of the Friction Materials business, partially offset by higher sales volume), a decreaselabor inflation.
Other (Income) Expense
 2019 2018 2017
Other (income) expense$(1,065) $(1,149) $(963)
Other (income) expense decreased in labor costs of approximately $450 million and higher pension income allocated to cost of products and services sold of approximately $230 million.

Gross margin percentage increased in 20152019 compared with 2014 principally due to higher gross margin in all of our business segments (approximately 2.0 percentage point impact collectively) and increased pension income allocated to cost of products and services sold (approximately 0.5 percentage point impact).

Selling, General and Administrative Expenses

  2016 2015 2014
Selling, general and administrative expense $5,469  $5,006  $5,518 
             
% of sales  13.9%  13.0%  13.7%

Selling, general and administrative expenses (SG&A) increased in 2016 compared with 20152018 primarily due to increased labor costs (driven primarily by acquisitions, net of divestitures, investment for growth and merit increases), increasedlower pension mark-to-market expense allocated to SG&A and higher repositioning charges,non-service income, partially offset by lower separation costs.

Tax Expense
 2019 2018 2017
Tax expense$1,329
 $659
 $5,362
Effective tax rate17.6% 8.8% 77.2%
The effective tax rate for 2019 was lower than the favorable impactU.S. federal statutory rate of 21% primarily resulting from the impacts of revised guidance related to U.S. Tax Reform and internal restructuring initiatives that resulted in a $281 million reduction of accrued withholding taxes related to unremitted foreign currency translationearnings.
The effective tax rate for 2018 was lower than the U.S. federal statutory rate of 21% primarily attributable to internal restructuring initiatives that resulted in a reduction of accrued withholding taxes of approximately $1.1 billion related to unremitted foreign earnings. In addition, we recorded a tax benefit of approximately $440 million as a reduction to our 2017 provisional estimate of impacts from what is commonly referred to as the U.S. Tax Cuts and increased pension income allocated to SG&A.

SG&A decreased in 2015 compared with 2014 primarily driven by the favorable impact from foreign currency translation, increased pension income allocated to SG&A, decreased indirect costs and benefits from repositioning,Jobs Act (“U.S. Tax Reform”), which was partially offset by increased labor$411 million of tax costs (primarily merit increasesassociated with the internal restructuring of the Homes and investment for growth).

Tax Expense

  2016 2015 2014
          
Tax expense $1,601  $1,739  $1,489 
Effective tax rate  24.8%  26.4%  25.6%
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Global Distribution business and the Transportation Systems business in advance of their spin-offs.

For further discussion of changes in the effective tax rate, see Note 5 Income Taxes in theof Notes to Consolidated Financial Statements.

The effective tax rates for 2016, 2015 and 2014 are lower than the U.S. statutory rate of 35% primarily due to lower tax rates on non-U.S. earnings, the vast majority of which we intend to permanently reinvest outside the United States.

The Company currently expects the effective tax rate for 2017 to be approximately 25%. The effective tax rate can vary from quarter to quarter due to unusual or infrequently occurring items, the resolution of income tax audits, changes in tax laws or other items such as pension mark-to-market adjustments and the tax impact from employee share-based payments.

Net Income Attributable to Honeywell

  2016 2015 2014
          
Net income attributable to Honeywell $4,809  $4,768  $4,239 
             
Earnings per share of common stock – assuming dilution $6.20  $6.04  $5.33 

 2019 2018 2017
Net income attributable to Honeywell$6,143
 $6,765
 $1,545
Earnings per share of common stock–assuming dilution$8.41
 $8.98
 $2.00
Earnings per share of common stock – stock–assuming dilution increaseddecreased in 20162019 compared with 20152018 primarily driven by the absence of profit attributable to the spin-offs, higher income tax expense (attributable to a lower income tax benefit related to U.S. Tax Reform and internal restructuring initiatives when compared to the prior year), partially offset by increased pensionoperational segment profit and lower repositioning and other postretirement income, higher segment profit in Home andcharges.



Review of Business Segments
We globally manage our business operations through four segments: Aerospace, Honeywell Building Technologies, and Performance Materials and Technologies, the gain related to the Honeywell Technology Solutions, Inc. divestiture, a decrease in the weighted average shares outstanding and the tax benefit from adoption of the FASB’s accounting standard related to employee share-based payment accounting, partially offset by lower segment profit in Aerospace and Safety and Productivity Solutions, increased pension mark-to-market expense and higher repositioning and other charges.

Earnings per share of common stock – assuming dilution increased in 2015Solutions.

 Years Ended December 31, % Change
2019
Versus
2018
 
2018
Versus
2017
2019 2018 2017 
Aerospace Sales         
Commercial Aviation Original Equipment$2,997
 $2,833
 $2,475
 6 % 14 %
Commercial Aviation Aftermarket5,731
 5,373
 5,103
 7 % 5 %
Defense and Space5,326
 4,665
 4,053
 14 % 15 %
Transportation Systems—
 2,622
 3,148
 (100)% (17)%
Total Aerospace Sales14,054
 15,493
 14,779
    
Honeywell Building Technologies Sales         
Homes—
 3,928
 4,482
 (100)% (12)%
Buildings5,717
 5,370
 5,295
 6 % 1 %
Total Honeywell Building Technologies Sales5,717
 9,298
 9,777
    
Performance Materials and Technologies Sales         
UOP2,890
 2,845
 2,753
 2 % 3 %
Process Solutions5,146
 4,981
 4,795
 3 % 4 %
Advanced Materials2,798
 2,848
 2,791
 (2)% 2 %
Total Performance Materials and Technologies Sales10,834
 10,674
 10,339
    
Safety and Productivity Solutions Sales         
Safety2,215
 2,278
 2,169
 (3)% 5 %
Productivity Solutions3,889
 4,059
 3,470
 (4)% 17 %
Total Safety and Productivity Solutions Sales6,104
 6,337
 5,639
    
Net Sales$36,709
 $41,802
 $40,534
    


Aerospace
 2019 2018 Change 2017 Change
Net sales$14,054
 $15,493
 (9)% $14,779
 5%
Cost of products and services sold9,398
 10,837
   10,320
  
Selling, general and administrative and other expenses1,049
 1,153
   1,171
  
Segment profit$3,607
 $3,503
 3 % $3,288
 7%
Factors Contributing to Year-Over-Year Change2019 vs. 2018 2018 vs. 2017
Sales 
Segment
Profit
 Sales 
Segment
Profit
Organic9 % 21 % 9 % 9 %
Foreign currency translation— % — % 1 % 1 %
Acquisitions, divestitures and other, net(18)% (18)% (5)% (3)%
Total % Change(9)% 3 % 5 % 7 %
2019 compared with 2014 primarily driven by increased segment profit in each of our business segments and lower pension and other postretirement expense, partially offset by increased tax expense and lower other income (principally2018
Aerospace sales decreased due to the absenceimpact of a realized gainthe spin-off of the Transportation Systems business. Our 2018 results included $2,622 million of sales related to the prior year salespin-off. Absent the impact of marketable equity securities).

BUSINESS OVERVIEW

Our consolidated results are principally impacted by:
·Change in global economic growth rates and industry conditions and demand in our key end markets;
·Ability of recently acquired businesses to integrate and continue to operate and grow in accordance with the assumptions utilized in determining the acquisition purchase price;
·The impact of fluctuations in foreign currency exchange rates (in particular the Euro), relative to the U.S. Dollar;
·The extent to which cost savings from productivity actions are able to offset or exceed the impact of material and non-material inflation; and
·The impact of the pension discount rate and asset returns on pension expense, including mark-to-market adjustments, and funding requirements.
Our 2017 areas of focus which are generally applicable to each of our operating segments include:
·Ensuring the successful completion of the leadership transition, which includes the Chief Executive Officer and leaders for three of our operating segments,  and continuing to execute on the realignment of our Home and Building Technologies and Safety and Productivity Solutions operating segments;
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the spin-off during 2018, sales grew approximately 9% from $12,871 million to $14,054 million due to growth in organic sales.
·Driving profitable organic growth through R&D and technological excellence to deliver innovative products that customers value and expansion and localization of our footprint in high growth regions;
·Executing on our strategy to become a software-industrial company, which for us means products and services that facilitate the connected plane, home, building and factory;
·Executing disciplined, rigorous M&A and integration processes to deliver growth through previously announced acquisitions;
·Expanding margins by maintaining and improving the Company’s cost structure through manufacturing and administrative process improvements, repositioning, and other productivity actions;
·Controlling corporate and other non-operating costs, including costs incurred for asbestos and environmental matters, pension and other post-retirement and income tax expense;
·Increasing availability of capital through strong cash flow conversion from effective working capital management and proactively managing debt levels to enable the Company to smartly deploy capital for strategic acquisitions, dividends, share repurchases and capital expenditures.

Review of Business Segments

           % Change
           2016 2015
  Years Ended December 31,  Versus Versus
  2016 2015 2014 2015 2014
Aerospace Sales                    
Commercial Aviation Original Equipment $2,525  $2,905  $2,607   (13)%  11%
Commercial Aviation Aftermarket  4,796   4,656   4,578   3%  2%
Defense and Space  4,375   4,715   4,754   (7)%  (1)%
Transportation Systems  3,055   2,961   3,659   3%  (19)%
Total Aerospace Sales  14,751   15,237   15,598         
                     
Home and Building Technologies Sales                    
Home and Building Products  5,967   4,711   4,868   27%  (3)%
Home and Building Distribution  4,687   4,450   4,617   5%  (4)%
Total Home and Building Technologies Sales  10,654   9,161   9,485         
                     
Performance Materials and Technologies Sales                    
UOP  2,469   2,976   3,195   (17)%  (7)%
Process Solutions  3,476   2,989   3,378   16%  (12)%
Advanced Materials  3,327   3,510   3,904   (5)%  (10)%
Total Performance Materials and                    
Technologies Sales  9,272   9,475   10,477         
                     
Safety and Productivity Solutions Sales                    
Safety  2,075   2,135   2,339   (3)%  (9)%
Productivity Solutions  2,550   2,573   2,407   (1)%  7%
Total Safety and Productivity Solutions Sales  4,625   4,708   4,746         
Net Sales $39,302  $38,581  $40,306         
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Aerospace

  2016 2015 Change 2014 Change
                
Net sales $14,751  $15,237   (3)% $15,598   (2)%
Cost of products and services sold  10,820   11,068       11,699     
Selling, general and administrative expenses  620   643       712     
Other  320   308       272     
Segment profit $2,991  $3,218   (7)% $2,915   10%

  2016 vs. 2015 2015 vs. 2014
Factors Contributing to Year-Over-Year Change Sales Segment
Profit		 Sales Segment
Profit
             
Organic growth/ Operational segment profit  (3)%  (6)%  2%  8%
Foreign currency translation  -   (1)%  (3)%  (4)%
Acquisitions, divestitures and other, net  -   -   (1)%  6%
Total % Change  (3)%  (7)%  (2)%  10%

2016 compared with 2015

AerospaceCommercial Aviation Original Equipment sales decreasedincreased 6% (increased 6% organic) primarily due to higher incentives toincreased demand from business aviation original equipment manufacturers (OEM Incentives), a decrease in organic(OEM).

Commercial Aviation Aftermarket sales volumes and the Honeywell Technology Solutions Inc. divestiture, which was partially offset by growth from acquisitions.

·Commercial Original Equipment sales decreased by 13% (decreased 12%increased 7% (increased 7% organic) primarily due to higher OEM incentives and decreased demand from business and general aviation original equipment manufacturers (OEMs), partially offset by higher shipments to air transport OEMs. Consistent with broader aerospace industry trends, we expect the continuation of lower business and general aviation OEM sales volumes.
·Commercial Aftermarket sales increased by 3% (increased 3% organic) primarily driven by higher repair and overhaul activities and increased spares shipments.
·Defense and Space sales decreased by 7% (decreased 6% organic) primarily due to declines in U.S. space and international defense programs, lower U.S. government services revenue, largely attributable to the impact of divestitures, and decreased demand from commercial helicopter OEMs, partially offset by sales from acquisitions.
·Transportation Systems sales increased by 3% (increased 4% organic) primarily driven by new platform launches and higher global turbo gas penetration.

Aerospace segment profit decreased primarily due to a 6% decreasegrowth in operational segment profit and a 1% unfavorable impact from foreign currency translation. The decrease in operational segment profit is primarily due to product mix, higher OEM incentives and lower sales volumes, partially offset by productivity and price, net of inflation. Cost of products and services sold decreased primarily driven by productivity, net of inflation, and lower sales volumes, partially offset by acquisitions, net of divestitures.

2015 compared with 2014

Aerospace sales decreased primarily due to the unfavorable impact from foreign currency translation and the Friction Materials divestiture, partially offset by an increase in organic sales, as discussed below, and a decrease in OEM incentives predominantly to air transport and regional aviation OEMs.

·Commercial Original Equipment sales increased by 11% (increased by 5% organic) primarily driven by a decrease in OEM Incentives and higher business and general aviation engine shipments.
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and business aviation.
Defense and Space sales increased 14% (increased 14% organic) primarily driven by growth in U.S. and international defense.
·Commercial Aftermarket sales increased by 2% (increased 2% organic) primarily driven by higher repair and overhaul activities, partially offset by lower retrofits, modifications and upgrades for business and general aviation customers.
·Defense and Space sales decreased by 1% (flat organic) primarily due to lower U.S. government revenue, partially offset by growth in international programs.
·Transportation Systems sales decreased by 19% (increased 3% organic) primarily due to the unfavorable impact from foreign currency translation and the Friction Materials divestiture, partially offset by continued growth from new platform launches and higher global turbo gas penetration.

Aerospace segment profit increased primarily due to an 8% increase in operational segment profitorganic sales volume, price, and a 6% favorable impact of acquisitions, divestitures and other (predominantly the absence of higher prior year OEM Incentives), as discussed above, partially offset by a 4% unfavorable impact of foreign currency translation. The increase in operational segment profit is primarily driven by productivity, net of inflation, and favorable pricing, partially offset by continued investments for growth.the divestiture impacts following the spin-off of the Transportation Systems business. Cost of products and services sold decreased primarily due to the favorable impactspin-off of foreign currency translation, the Friction Materials divestiture,Transportation Systems business and productivity, net of inflation, partially offset by continued investments for growth.

Home andhigher sales volume.




Honeywell Building Technologies

  2016 2015 Change 2014 Change
                
Net sales $10,654  $9,161   16% $9,485   (3)%
Cost of products and services sold  7,079   5,961       6,231     
Selling, general and administrative expenses  1,680   1,488       1,618     
Other  212   200       181     
Segment profit $1,683  $1,512   11% $1,455   4%

  2016 vs. 2015 2015 vs. 2014
Factors Contributing to Year-Over-Year Change Sales Segment
Profit		 Sales Segment
Profit
             
Organic growth/ Operational segment profit  4%  7%  3%  10%
Foreign currency translation  (2)%  (2)%  (6)%  (6)%
Acquisitions and divestitures, net  14%  6%  -   - 
Total % Change  16%  11%  (3)%  4%

2016

 2019 2018 Change 2017 Change
Net sales$5,717
 $9,298
 (39)% $9,777
 (5)%
Cost of products and services sold3,444
 6,066
   6,430
  
Selling, general and administrative and other expenses1,108
 1,624
   1,697
  
Segment profit$1,165
 $1,608
 (28)% $1,650
 (3)%
Factors Contributing to Year-Over-Year Change2019 vs. 2018 2018 vs. 2017
Sales 
Segment
Profit
 Sales 
Segment
Profit
Organic5 % 8 % 3 % 5 %
Foreign currency translation(2)% (2)% 1 % 1 %
Acquisitions, divestitures and other, net(42)% (34)% (9)% (9)%
Total % Change(39)% (28)% (5)% (3)%
2019 compared with 2015

Home and2018

Honeywell Building Technologies sales increased primarilydecreased due to the impact of the spin-off of the Homes and Global Distribution business. Our 2018 results included $3,928 million of sales related to the spin-off. Absent the impact of the spin-off during 2018, sales grew approximately 6% from $5,370 million to $5,717 million.
Sales in Building Technologies increased 6% (increased 5% organic) due to the organic growth from acquisitionsin both Products and organic sales growthBuilding Solutions, partially offset by the unfavorable impact of foreign currency translation.

·Sales in Home and Building Products increased by 27% (increased 2% organic) principally driven by acquisitions. Organic sales growth was primarily attributable to new product introductions in our Environmental and Energy Solutions business and volume growth in our Security and Fire business.

·Sales in Home and Building Distribution increased by 5% (increased 7% organic) principally due to organic sales growth partially offset by the unfavorable impact of foreign currency translation. Organic sales growth was primarily driven by volume in our Distribution and Building Solutions Energy businesses.

Home and

Honeywell Building Technologies segment profit increaseddecreased primarily due to the divestiture impacts following the spin-off of the Homes and Global Distribution business. This was offset by an increase in operational segment profitorganic sales volumes and acquisitionsprice, partially offset by inflation. Cost of products and services sold decreased due to the spin-off, partially offset by higher sales volumes.


Performance Materials and Technologies
 2019 2018 Change 2017 Change
Net sales$10,834
 $10,674
 1% $10,339
 3%
Cost of products and services sold6,989
 6,948
   6,764
  
Selling, general and administrative and other expenses1,412
 1,398
   1,369
  
Segment profit$2,433
 $2,328
 5% $2,206
 6%
Factors Contributing to Year-Over-Year Change2019 vs. 2018 2018 vs. 2017
Sales 
Segment
Profit
 Sales 
Segment
Profit
Organic4 % 6 % 2% 5%
Foreign currency translation(3)% (1)% 1% 1%
Acquisitions, divestitures and other, net—
 —
 —% —%
Total % Change1 % 5 % 3% 6%
2019 compared with 2018
Performance Materials and Technologies sales increased primarily due to organic growth, mainly due to volumes, partially offset by the unfavorable impact of foreign currency translation. The increase
UOP sales increased 2% (increased 3% organic) driven primarily by increases in operational segment profit wascatalyst sales, project volumes, and licensing, partially offset by lower gas processing volumes and the unfavorable impact of foreign currency translation.
Process Solutions sales increased 3% (increased 6% organic) driven primarily driven by productivity net of inflationincreases in maintenance and price. Cost ofmigration services, project volumes, field products, and services increased due to acquisitions and inflationsoftware sales, partially offset by the favorableunfavorable impact of foreign currency translation.

22

2015 compared with 2014

Home and Building TechnologiesAdvanced Materials sales decreased 2% (flat organic) driven primarily due toby the unfavorable impact of foreign currency translation and decreased volumes in specialty products, partially offset by organic sales growth.

·Sales in Homegrowth in fluorine products sales.
Performance Materials and Building Products decreased by 3% (increased 3% organic) principally due to the unfavorable impact of foreign currency translation partially offset by volume growth in our Security and Fire business.

·Sales in Home and Building Distribution decreased by 4% (increased 3% organic) principally due to the unfavorable impact of foreign currency translation. Organic sales growth was primarily due to increased sales volume in Distribution partially offset by softness in the project installation and U.S. energy retrofit businesses.

Home and Building Technologies segment profit increased primarily due to the positive impact of price and productivity, net of inflation, and price, partially offset by continued investment for growth, higher sales volumesof lower margin products and the unfavorable impact of foreign currency translation. Cost of products and services sold decreasedincreased primarily due to higher sales volumes, partially offset by the favorable impact of foreign currency translation and productivity, partially offset by highernet of inflation.



Safety and Productivity Solutions
 2019 2018 Change 2017 Change
Net sales$6,104
 $6,337
 (4)% $5,639
 12%
Cost of products and services sold4,158
 4,205
   3,714
  
Selling, general and administrative and other expenses1,156
 1,100
   1,073
  
Segment profit$790
 $1,032
 (23)% $852
 21%


Factors Contributing to Year-Over-Year Change2019 vs. 2018 2018 vs. 2017
Sales 
Segment
Profit
 Sales 
Segment
Profit
Organic(4)% (23)% 11% 20%
Foreign currency translation(2)% (2)% 1% 1%
Acquisitions, divestitures and other, net2 % 2 % —% —%
Total % Change(4)% (23)% 12% 21%
2019 compared with 2018
Safety and Productivity Solutions sales decreased primarily due to lower organic sales volume.

Performance Materials and Technologies

  2016 2015 Change 2014  Change
                     
Net sales $9,272  $9,475   (2)% $10,477   (10)%
Cost of products and services sold  6,051   6,414       7,385     
Selling, general and administrative expenses  1,026   936       1,082     
Other  145   135       134     
Segment profit $2,050  $1,990   3% $1,876   6%

  2016 vs. 2015 2015 vs. 2014
Factors Contributing to Year-Over-Year Change Sales Segment
Profit		 Sales Segment Profit
                 
Organic growth/ Operational segment profit  (3)%  2%  (6)%  10%
Foreign currency translation  (1)%  (2)%  (4)%  (4)%
Acquisitions and divestitures, net  2%  3%  -   - 
Total % Change  (2)%  3%  (10)%  6%

2016 compared with 2015

Performance Materials and Technologies sales decreased due to a decrease in organic sales volumes and the unfavorable impact of foreign currency translation, partially offset by growth from acquisitions, net of divestitures.

·UOP sales decreased by 17% (decreased 16%acquisitions.
Sales in Safety decreased 3% (decreased 1% organic) driven primarily by lower gas processing revenues due to a significant slowdown in customer projects and decreased catalyst volumes in the first nine months, partially offset by increased catalyst, licensing and equipment sales in the fourth quarter.

·Process Solutions sales increased by 16% (increased 4% organic) driven primarily by increased volumes driven by the Elster acquisition and higher revenues in projects, partially offset by lower field products sales.

·Advanced Materials sales decreased by 5% (increased 3% organic) driven primarily by the impact of the October 1, 2016 spin-off of AdvanSix and lower market pricing, as well as lower raw material pass-through pricing in AdvanSix in the first nine months, partially offset by increased volumes in fluorine and specialty products.
23

Performance Materials and Technologies segment profit increased due to acquisitions, net of divestitures, and an increase in operational segment profit, partially offset by the unfavorable impact of foreign currency translation. The increase in operational segment profit is primarily due to productivity, net of inflation, partially offset bytranslation and lower organic sales volumes and continued investments for growth. Cost of products and services soldin Industrial Safety.

Sales in Productivity Solutions decreased 4% (decreased 6% organic) primarily due to lower organic sales volumes, favorable foreign currency translation, and productivity, net of inflation, partially offset by acquisitions, net of divestitures.

2015 compared with 2014

Performance Materials and Technologies sales decreased due to a decrease in organic sales volumes and the unfavorable impact of foreign currency translation.

·UOP sales decreased by 7% (decreased 6% organic) driven primarily by lower gas processing revenues due to a significant slowdown in customer projects and decreased equipment, engineering and licensing revenues partially offset by increased catalyst revenues.

·Process Solutions sales decreased by 12% (decreased 3% organic) driven primarily by the unfavorable impact of foreign currency translation and lower volumes primarily due to weakness in projects and field products.

·Advanced Materials sales decreased by 10% (decreased 7% organic) primarily driven by lower raw material pass-through pricing and unplanned plant outages in resins and chemicals partially offset by increased volumes in fluorine products.

Performance Materials and Technologies segment profit increased due to an increase in operational segment profit partially offset by the unfavorable impact of foreign currency translation. The increase in operational segment profit is primarily due to price and productivity, net of inflation partially offset by lower organic sales volumes and continued investments for growth. Cost of products and services sold decreased primarily due to the favorable impacts of inflation, foreign currency translation, lower organic sales volumes and productivity, partially offset by continued investments for growth.

Safety and Productivity Solutions

  2016 2015 Change 2014 Change
                     
Net sales $4,625  $4,708   (2)% $4,746   (1)%
Cost of products and services sold  3,001   3,020       3,052     
Selling, general and administrative expenses  841   851       933     
Other  103   91       75     
Segment profit $680  $746   (9)% $686   9%

  2016 vs. 2015 2015 vs. 2014
     
Factors Contributing to Year-Over-Year Change Sales Segment Profit Sales Segment Profit
                 
Organic growth/ Operational segment profit  (7)%  (8)%  2%  11%
Foreign currency translation  (1)%  (2)%  (5)%  (4)%
Acquisitions and divestitures, net  6%  1%  2%  2%
Total % Change  (2)%  (9)%  (1)%  9%

2016 compared with 2015

Safety and Productivity Solutions sales decreased primarily due to decreased sales volumesProducts and the unfavorable impact of foreign currency translation, partially offset by growth from acquisitions.

24
·Sales in Safety decreased by 3% (decreased 2% organic) due to decreased sales volume in the Industrial Safety business, lower distribution in the Retail business, and the unfavorable impact of foreign currency translation.

·Sales in Productivity Solutions decreased by 1% (decreased 11% organic) principally due to declines in the Productivity Products business, partially offset by growth from acquisitions.

Safety and Productivity Solutions segment profit decreased due toas a decreaseresult of lower sales volumes in operational segment profitProductivity Products, higher sales of lower margin products and the unfavorable impact of foreign currency translation, partially offset by growth from acquisitions. The decrease in operational segment profit is due to decreased sales volumes, partially offset by price andhigher productivity, net of inflation, favorable pricing and growth from acquisitions. Cost of products and services decreased primarily due to productivity, net of inflation, decreased sales volumes, and the favorable impact of foreign currency translation partially offset by growth from acquisitions.

2015 compared with 2014

Safety and Productivity Solutions sales decreased primarily due to the unfavorable impact of foreign currency translation partially offset by acquisitions and organic sales growth.

·Sales in Safety decreased by 9% (decreased 3% organic) principally due to decreased sales volumes in Industrial Safety and the unfavorable impact of foreign currency translation, partially offset by increased sales volume in the Retail business.

·Sales in Productivity Solutions increased by 7% (increased 8% organic) principally due to acquisitions and increased sales volumes in the Productivity Products business, partially offset by the unfavorable impact of foreign currency translation.

Safety and Productivity Solutions segment profit increased due to an increase in operational segment profit and acquisitions, partially offset by the unfavorable impact of foreign currency translation. The increase in operational segment profit is due to the positive impact of price and productivity, net of inflation, and higher sales volumes, partially offset by continued investment for growth. Cost of products and services sold decreased primarily due to higher productivity, net of inflation, and the favorable impact of foreign currency translation, partially offset by acquisitions and higher sales volumes.

acquisitions.

Repositioning Charges

See Note 3 Repositioning and Other Charges of Notes to Consolidated Financial Statements for a discussion of our repositioning actions and related charges incurred in 2016, 20152019, 2018 and 2014. These repositioning actions are expected to generate incremental pretax savings of $200 million to $300 million in 2017 compared with 2016 principally from planned workforce reductions.2017. Cash spending related to our repositioning actions was $228$249 million, $118$285 million and $161$177 million in 2016, 20152019, 2018 and 2014,2017, and was funded through operating cash flows. In 2017,2020, we expect cash spending for repositioning actions to be approximately $225$300 million and to be funded through operating cash flows.


24


LIQUIDITY AND CAPITAL RESOURCES

The Company continues

We continue to manage itsour businesses to maximize operating cash flows as the primary source of liquidity. In addition to our available cash and operating cash flows, we maintain additional sources of liquidity, includeincluding committed credit lines, short-term debt from the commercial paper market, long-term borrowings, and access to the public debt and equity markets.markets and the ability to access non-U.S. cash as a result of the U.S. Tax Reform. We continueuse cash generated through operations to balance our cash and financing uses through investmentinvest in our existing core businesses, acquisition activity,acquisitions, share repurchases and dividends.

Cash Flow Summary

Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized as follows:

25
  Years Ended December 31,
  2016 2015 2014
Cash provided by (used for):            
Operating activities $5,498  $5,519  $5,080 
Investing activities  (3,342)  (6,514)  (1,876)
Financing activities  346   37   (2,328)
Effect of exchange rate changes on cash  (114)  (546)  (339)
Net increase (decrease) in cash and cash equivalents $2,388  $(1,504) $537 

2016

 Years Ended December 31,
2019 2018 2017
Cash provided by (used for):     
Operating activities$6,897
 $6,434
 $5,966
Investing activities(533) 1,027
 (3,574)
Financing activities(6,600) (5,032) (3,516)
Effect of exchange rate changes on cash16
 (201) 340
Net (decrease) increase in cash and cash equivalents$(220) $2,228
 $(784)
2019 compared with 2015

2018

Cash provided by operating activities decreasedincreased by $21$463 million primarily due to $276 million decrease in net payments for repositioning and other charges, largely due to asbestos and environmental related reimbursement receipts, and a $35 million favorable impact from working capital (favorable inventory and accounts receivable partially offset by accounts payable).
Cash used by investing activities increased by $1,560 million primarily due to a $958 million unfavorable impact from working capital, partially offset by (i) a $395 million improvement in customer advances and deferred income, (ii) a $171 million increase in net income before the non-cash pension mark-to-market adjustment, (iii) the absence of $151 million in OEM incentive payments and (iv) lower cash tax payments of $50 million.

Cash used for investing activities decreased by $3,172 million primarily due to (i) a decrease in cash paid for acquisitions of $2,655 million, most significantly Elster in 2015, (ii) an increase in proceeds from the sales of businesses of $295 million (most significantly Honeywell Technology Solutions Inc.) and (iii) a $384 million favorable change in settlements of foreign currency exchange contracts used as economic hedges on certain non-functional currency denominated monetary assets and liabilities. The decreases were partially offset by a net $146$1,762 million increase in investments, primarily short-term marketable securities.

Cash provided byused for financing activities increased by $309$1,568 million primarily due to an increase in the prior year pre-spin separation funding of $2,622 million net proceeds from debt issuances of $497 million, partially offset byspin-off cash, an increase in cash dividends paid of $189$170 million including amounts paid to the former UOP Russell LLC noncontrolling shareholder.

2015 compared with 2014

Cash provided by operating activities increased by $439 million primarily due to a $489 million favorable impact from working capital and a $382 million increase in net income before the non-cash pension mark-to-market adjustment, partially offset by (i) a $175 million decrease in customer advances and deferred income, (ii) $151 million in OEM incentives and (iii) increased cash tax payments of $50 million.

Cash used for investing activities increased by $4,638 million primarily due to an increase in cash paid for acquisitions of $5,224 million, most significantly Elster, and a decrease in proceeds of $159 million, primarily from the Friction Materials divestiture, partially offset by a net $659 million decrease in investments, primarily short-term marketable securities.

Cash provided by financing activities increased by $2,365 million primarily due to an increase in the net proceeds from debt issuances of $3,648 million, partially offset by an increase in net repurchases of common stock of $1,039$169 million, and an increasepartially offset by a decrease in cash dividends paidnet debt payments of $216$1,330 million.

Liquidity

Each of our businesses is focused on implementing strategies to increaseincreasing operating cash flows through revenue growth, margin expansion and improved working capital turnover. Considering the current economic environment in which each of the businesses operate and their business plans and strategies, including the focus on growth, cost reduction and productivity initiatives, weWe believe that cash balances and operating cash flow will continue to be our principal source of liquidity. In addition to the available cash and operating cash flows, additional sources of liquidity include committed credit lines, short-term debt from the commercial paper markets, long-term borrowings, and access to the public debt and equity markets. At December 31, 2016, a substantial portionTo date, the Company has not experienced any limitations in our ability to access these sources of the Company’s cash and cash equivalents were held by foreign subsidiaries. If the amounts held outside of the U.S. were to be repatriated, under current law, they would be subject to U.S. federal income taxes, less applicable foreign tax credits. However, our intent is to permanently reinvest the vast majority of these funds outside of the U.S. It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the resulting U.S. income tax liability.

26
liquidity.

We monitor the third-party depository institutions that hold our cash and cash equivalents on a daily basis. Our emphasis is primarily safety of principal and secondarily maximizing yield of those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities.

A source of liquidity is our ability to issue short-term debt inaccess the commercial paper market. Commercial paper notes are sold at a discount or premium and have a maturity of not more than 365 days from date of issuance. Borrowings under the commercial paper program are available for general corporate purposes as well as for financing acquisitions. The weighted average interest rate on short-term borrowings and commercial paper outstanding as of December 31, 20162019 was (0.13%(0.37%) and as of December 31, 20152018 was 0.26%(0.31%).

Our ability to access the commercial paper market, and the related cost of these borrowings, is affected by the strength of our credit rating and market conditions. Our credit ratings are periodically reviewed by the major independent debt-rating agencies. As of December 31, 2016,2019, Standard and Poor’s (S&P), Fitch, and Moody’s have ratings on our long-term debt of A, A and A2 and short-term debt of A-1, F1 and P1. S&P, Fitch and Moody’s have Honeywell’s rating outlook as “stable.” To date, the Company has not experienced any limitations in our ability to access these sources of liquidity.



We also have a current shelf registration statement filed with the Securities and Exchange Commission under which we may issue additional debt securities, common stock and preferred stock that may be offered in one or more offerings on terms to be determined at the time of the offering. Net proceeds of any offering would be used for general corporate purposes, including repayment of existing indebtedness, share repurchases, capital expenditures and acquisitions.

See Note 2Acquisitions2 Acquisitions and Divestitures and Note 12Long-term13 Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements for additional discussion of items impacting our liquidity.

In 2016, the Company2019, we repurchased $2,079$4,400 million of outstanding shares to offset the dilutive impact of employee stock based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans. Inplans, and to reduce share count when attractive opportunities arise. On April 2016,29, 2019, the Board of Directors authorized the repurchase of up to a total of $5$10.0 billion of Honeywell common stock, of which $4.1$7.0 billion remained available as of December 31, 20162019 for additional share repurchases. Honeywell presently expectsThis authorization included amounts remaining under and replaced the previously approved share repurchase program. We expect to repurchase outstanding shares from time to time to generally offset the dilutive impact of employee stock based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans.

We will continue to seek to reduce share count via share repurchases when attractive opportunities arise.

In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, share repurchases, dividends, strategic acquisitions share repurchases, employee benefit obligations, environmental remediation costs, asbestos claims, severance and exit costs related to repositioning actions and debt repayments.

Specifically, we expect our primary cash requirements in 20172020 to be as follows:

§Capital expenditures—we expect to spend approximately $1.1 billion for capital expenditures in 2017 primarily for growth, production and capacity expansion, cost reduction, maintenance, and replacement.

§Share repurchases— under the Company’s share repurchase program, $4.1 billion is available as of December 31, 2016 for additional share repurchases. Honeywell presently expects to repurchase outstanding shares from time to time to generally offset the dilutive impact of employee stock-based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans. The amount and timing of future repurchases may vary depending on market conditions and our level of operating, financing and other investing activities.

§Dividends—we increased our quarterly dividend rate by 12% to $.6650 per share of common stock effective with the fourth quarter 2016 dividend. The Company intends to continue to pay quarterly dividends in 2017.

§Asbestos claims—we expect our cash spending for asbestos claims and our cash receipts for related insurance recoveries to be approximately $546 million and $23 million in 2017.

§Pension contributions—in 2017, we are not required to make contributions to our U.S. pension plans. We plan to make contributions of cash and/or marketable securities of approximately $130 million ($89 million of marketable securities were contributed in January 2017) to our non-U.S. plans to
27
Capital expenditures—we expect to spend approximately $900 million for capital expenditures in 2020 primarily for growth, production and capacity expansion, cost reduction, maintenance, and replacement.

satisfy regulatory funding standards.

Share repurchases—under our share repurchase program, $7.0 billion is available as of December 31, 2019 for additional share repurchases. We expect to repurchase outstanding shares from time to time to offset the dilutive impact of employee stock-based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans. Additionally, we will seek to reduce share count via share repurchases as and when attractive opportunities arise. The amount and timing of future repurchases may vary depending on market conditions and amountour level of contributionsoperating, financing and other investing activities.
Dividends—we increased our quarterly dividend rate by 10% to both our U.S. and non-U.S. plans may be impacted by a number$0.90 per share of factors, includingcommon stock effective with the funded status of the plans.

§Repositioning actions—we expect that cash spending for severance and other exit costs necessary to execute repositioning actions will approximate $225 million in 2017.

§Environmental remediation costs—we expect to spend approximately $250 million in 2017 for remedial response and voluntary clean-up costs.

fourth quarter 2019 dividend. We intend to continue to pay quarterly dividends in 2020.

We continuously assess the relative strength of each business in our portfolio as to strategic fit, market position, profit and cash flow contribution in order to identify target investment and acquisition opportunities in order to upgrade our combined portfolio and identify business units that will most benefit from increased investment.portfolio. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses. We also identify businesses that do not fit into our long-term strategic plan based on their market position, relative profitability or growth potential. These businesses are considered for potential divestiture, restructuring or other repositioning actions subject to regulatory constraints. In 2016 and 2015, we realized $565 million and $1 million in cash proceeds from sales and a spin-off of non-strategic businesses.

Based on past performance and current expectations, we believe that our operating cash flows will be sufficient to meet our future operating cash needs. Our available cash, committed credit lines and access to the public debt and equity markets, provide additional sources of short-term and long-term liquidity to fund current operations, debt maturities, and future investment opportunities.



Contractual Obligations and Probable Liability Payments

Following is a summary of our significant contractual obligations and probable liability payments at December 31, 2016:

     Payments by Period   
  Total(6) 2017 2018-
2019		 2020-
2021		 Thereafter
Long-term debt, including capitalized leases(1) $12,409  $227  $2,672  $3,611  $5,899 
Interest payments on long-term debt, including capitalized leases  3,491   290   568   495   2,138 
Minimum operating lease payments  1,123   289   374   204   256 
Purchase obligations(2)  1,657   778   499   293   87 
Estimated environmental liability payments(3)  511   252   191   62   6 
Asbestos related liability payments(4)  1,560   546   699   295   20 
Asbestos insurance recoveries(5)  (440)  (23)  (110)  (103)  (204)
  $20,311  $2,359  $4,893  $4,857  $8,202 

2019:
 
Total(6)(7)
 Payments by Period Thereafter
2020 2021-
2022		 2023-
2024		 
Long-term debt, including finance leases(1)
$12,486
 $1,376
 $3,617
 $2,513
 $4,980
Interest payments on long-term debt, including finance leases3,100
 327
 577
 434
 1,762
Operating lease liabilities790
 195
 290
 160
 145
Purchase obligations(2)
1,606
 782
 586
 238
 —
Estimated environmental liability payments(3)
709
 222
 257
 177
 53
Asbestos related liability payments(4)
2,357
 361
 612
 438
 946
Asbestos insurance recoveries(5)
(434) (42) (108) (64) (220)
 $20,614
 $3,221
 $5,831
 $3,896
 $7,666

(1)Assumes all long-term debt is outstanding until scheduled maturity.
(2)Purchase obligations are entered into with various vendors in the normal course of business and are consistent with our expected requirements.
(3)The payment amounts in the table only reflect the environmental liabilities which are probable and reasonably estimable as of December 31, 2016.2019.
(4)These amounts are estimates of asbestos related cash payments for NARCO and Bendix based on our asbestos related liabilities which are probable and reasonably estimable as of December 31, 2016.2019. See Asbestos Matters in Note 1920 Commitments and Contingencies of Notes to Consolidated Financial Statements for additional information.
(5)These amounts represent our insurance recoveries that are deemed probable for asbestos related liabilities as of December 31, 2016.2019. See Asbestos Matters in Note 1920 Commitments and Contingencies of Notes to Consolidated Financial Statements for additional information.
(6)The table excludes tax liability payments, including those for unrecognized tax benefits. See Note 5 Income Taxes of Notes to Consolidated Financial Statements for additional information.
(7)The table excludes expected proceeds from the indemnification and reimbursement agreements entered into with Garrett and Resideo. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for additional information.
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Asbestos Matters
Payments, net of insurance recoveries, related to known asbestos matters was $163 million, $216 million and $239 million in 2019, 2018 and 2017 and is estimated to be approximately $320 million in 2020. We expect to pay these asbestos matters from operating cash flows. The timing of these payments depends on several factors, including the timing of litigation and settlements of liability claims.

Reimbursements from Garrett for payments related to asbestos matters, as defined in the indemnification and reimbursement agreement, was $152 million in 2019 and is expected to be approximately $115 million in 2020. We received approximately $36 million in January 2020.
See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of our asbestos matters and the indemnification and reimbursement agreement entered into with Garrett.


Environmental Matters

Accruals for environmental matters deemed probable and reasonably estimable were $195$213 million, $194$395 million and $268$287 million in 2016, 20152019, 2018 and 2014.2017. In addition, in 20162019, 2018 and 20152017 we incurred operating costs for ongoing businesses of approximately $83$99 million, $95 million and $90$82 million relating to compliance with environmental regulations.

Spending

Payments related to known environmental matters was $228$256 million, $273$218 million and $321$212 million in 2016, 20152019, 2018 and 20142017 and is estimated to be approximately $250$220 million in 2017.2020. We expect to fund expenditures forpay these environmental matters from operating cash flow.flows. The timing of cash expendituresthese payments depends on several factors, including the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, execution timeframe of projects, remedial techniques to be utilized and agreement with other parties.

Reimbursements from Resideo for payments related to environmental matters at certain sites, as defined in the indemnification and reimbursement agreement, was $140 million in 2019 and is expected to be $140 million in 2020. We received approximately $35 million in January 2020.
See Note 1920 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of our environmental matters.

matters and the indemnification and reimbursement agreement entered into with Resideo.

Financial Instruments

The following table illustrates the potential change in fair value for interest rate sensitive instruments based on a hypothetical immediate one percentage point increase in interest rates across all maturities and the potential change in fair value for foreign exchange rate sensitive instruments based on a 10% weakening of the U.S. Dollar versus local currency exchange rates across all maturities at December 31, 20162019 and 2015.

  Face or
Notional
Amount		 Carrying
Value(1)		 Fair
Value(1)		 Estimated
Increase
(Decrease)
in Fair
Value(2)
December 31, 2016                
Interest Rate Sensitive Instruments                
Long-term debt (including current maturities) $12,409  $(12,409) $(13,008) $(537)
Interest rate swap agreements  1,850   21   21   (112)
Foreign Exchange Rate Sensitive Instruments                
Foreign currency exchange contracts(3)  9,554   150   150   (195)
                 
December 31, 2015                
Interest Rate Sensitive Instruments                
Long-term debt (including current maturities) $6,131  $(6,131) $(6,721) $(407)
Interest rate swap agreements  1,100   92   92   (59)
Foreign Exchange Rate Sensitive Instruments                
Foreign currency exchange contracts(3)  10,538   11   11   (153)

2018.
 
Face or
Notional
Amount
 
Carrying
Value(1)
 
Fair
Value(1)
 
Estimated
Increase
(Decrease)
in Fair
Value(2)
December 31, 2019       
Interest Rate Sensitive Instruments       
 Long-term debt (including current maturities)$12,486
 $(12,486) $(13,578) $(677)
 Interest rate swap agreements3,950
 25
 25
 (72)
Foreign Exchange Rate Sensitive Instruments       
   Foreign currency exchange contracts(3)
12,746
 270
 270
 (676)
 Cross currency swap agreements1,200
 51
 51
 (115)
December 31, 2018       
Interest Rate Sensitive Instruments       
 Long-term debt (including current maturities)$12,628
 $(12,628) $(13,133) $(654)
 Interest rate swap agreements2,600
 (45) (45) (83)
Foreign Exchange Rate Sensitive Instruments       
   Foreign currency exchange contracts(3)
14,995
 115
 115
 (742)
 Cross currency swap agreements1,200
 32
 32
 (117)

(1)Asset or (liability).
(2)A hypothetical immediate one percentage point decrease in interest rates across all maturities and a potential change in fair value of foreign exchange rate sensitive instruments based on a 10% strengthening of the U.S. dollar versus local currency exchange rates across all maturities will result in a change in fair value approximately equal to the inverse of the amount disclosed in the table.
(3)Changes in the fair value of foreign currency exchange contracts are offset by changes in the fair value, or cash flows, or net investments of underlying hedged foreign currency transactions.transactions or foreign operations.

See Note 1415 Financial Instruments and Fair Value Measures of Notes to Consolidated Financial Statements for further discussion on the agreements.

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CRITICAL ACCOUNTING POLICIES

ESTIMATES

The preparation of our consolidated financial statements in accordance with generally accepted accounting principles is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. Many estimates and assumptions involved in the application of accounting principles have a material impact on reported financial condition and operating performance and on the comparability of such reported information over different reporting periods. Critical accounting estimates or assumptions are those where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the impact of the estimates and assumptions on financial condition or operating performance is material. We consider the accounting policiesestimates and assumptions discussed below to be critical to the understanding of our financial statements. Actual results could differ from our estimates and assumptions, and any such differences could be material to our consolidated financial statements.

Contingent Liabilities—We are subject to a number of lawsuits, investigations and claims (some of which involve substantial dollar amounts) that arise out of the conduct of our global business operations or those of previously owned entities, including matters relating to commercial transactions, government contracts, product liability (including asbestos), prior acquisitions and divestitures, employee benefit plans, intellectual property, legal and environmental, health and safety matters. We continually assess the likelihood of any adverse judgments or outcomes to our contingencies, as well as potential amounts or ranges of probable losses, and recognize a liability, if any, for these contingencies based on a carefulthorough analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Such analysis includes making judgments concerning matters such as the costs associated with environmental matters, the outcome of negotiations, the number and cost of pending and future asbestos claims, and the impact of evidentiary requirements. Because most contingencies are resolved over long periods of time, liabilities may change in the future due to new developments (including new discovery of facts, changes in legislation and outcomes of similar cases through the judicial system), changes in assumptions or changes in our settlement strategy. See Note 1920 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of management’s judgment applied in the recognition and measurement of our environmental and asbestos liabilities which represent our most significant contingencies.

Asbestos Related ContingenciesLiabilities and Insurance Recoveries—Honeywell’s involvement in asbestos related personal injury actions relates to two predecessor companies. Regarding North American Refractories Company (NARCO) asbestos related claims, we accrued for pending claims based on terms and conditions in agreements with NARCO, its former parent company, and certain asbestos claimants, and an estimate of the unsettled claims pending as of the time NARCO filed for bankruptcy protection. We also accrued for the estimated value of future NARCO asbestos related claims expected to be asserted against the NARCO Trust. The estimate of future NARCO claims is based on a commonly accepted methodology used by numerous bankruptcy courts addressing 524(g) trusts and also reflects disputes concerning implementation of the Trust Distribution Procedures by the NARCO Trust, a lack of sufficient trust claims processing experience, as well as the stay of all NARCO asbestos claims which remained in place throughout NARCO’s Chapter 11 case. Some critical assumptions underlying this commonly accepted methodology include claims filing rates, disease criteria and payment values contained in the Trust Distribution Procedures, estimated approval rates of claims submitted to the NARCO Trust and epidemiological studies estimating disease instances. The estimated value of future NARCO claims was originally established at the time of the NARCO Chapter 11 filing reflecting claims expected to be asserted against NARCO over a fifteen year period. This projection resulted in a range of estimated liability of $743 million to $961 million. We believe that no amount within this range is a better estimate than any other amount and accordingly, we have recorded the minimum amount in the range. Regarding Bendix asbestos related claims, we accrued for the estimated value of pending claims using average resolution values for the previous five years. We also accrued for the estimated value of future anticipated claims related to Bendix for the next five years based on historic claims filing experience and dismissal rates, disease classifications, and average resolution values in the tort system for the previous five years. In light of the uncertainties inherent in making long-term projections, as well as certain factors unique to friction product asbestos claims, we do not believe that we have a reasonable basis for estimating asbestos claims beyond the next five years.

In connection with the recognition of liabilities for asbestos related matters, we record asbestos related insurance recoveries that are deemed probable. In assessing the probability of insurance recovery, we make judgments concerning insurance coverage that we believe are reasonable and consistent with our historical dealings and our knowledge of any pertinent solvency issues surrounding insurers. 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. Projecting future events is subject to various uncertainties that could cause the insurance recovery on asbestos related liabilities to be higher or lower than that projected and recorded. Given the inherent uncertainty in making future projections, we reevaluate our projections concerning our probable insurance recoveries in light ofconsidering any changes to the projected liability, our recovery experience or other relevant factors that may impact future insurance recoveries.

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Our involvement in asbestos related personal injury actions relates to two predecessor companies. Regarding North American Refractories Company (“NARCO”) asbestos related claims, we accrue for pending claims based on terms and conditions in agreements with NARCO, its former parent company, and certain asbestos claimants, and an estimate of the unsettled claims pending as of the time NARCO filed for bankruptcy protection. We also accrue for the estimated value of future NARCO asbestos related claims expected to be asserted against the NARCO Trust. The estimate of future NARCO claims was prepared in 2002, in the same year NARCO filed for bankruptcy protection, using NARCO tort system litigation experience based on a commonly accepted methodology used by numerous bankruptcy courts addressing 524(g) trusts. Accordingly, the estimated value of future NARCO asbestos claims was prepared before there was data on claims filings and payment rates in the NARCO Trust under the Trust Distribution Procedures and prepared when the stay of all NARCO asbestos claims was in effect (which remained in effect until NARCO emerged from Bankruptcy protection). Some critical assumptions underlying this commonly accepted methodology included claims filing rates, disease criteria and payment values contained in the Trust Distribution Procedures, estimated approval rates of claims submitted to the NARCO Trust and epidemiological studies estimating disease instances. This estimate resulted in a range of estimated liability of $743 million to $961 million. We believe that no amount within this range is a better estimate than any other amount and accordingly, we have recorded the minimum amount in the range. Given the Trust’s lack of sufficiently reliable claims data since NARCO emerged from bankruptcy protection, it is not yet possible to update our estimated future claim costs based on actual NARCO Trust experience. When sufficiently reliable claims data exists, we will update our estimate of the NARCO Trust Liability and it is possible that a material change may need to be recognized. Regarding Bendix Friction Materials (“Bendix”) asbestos related claims, we accrued for the estimated value of pending claims using average resolution values for the previous



five years. We also accrued for the estimated value of future claims related to Bendix over the full term of epidemiological projections through 2059 based on historic and anticipated claims filing experience and dismissal rates, disease classifications, and average resolution values in the tort system for the previous five years.
See Note 1920 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of management’s judgments applied in the recognition and measurement of our asbestos-related liabilities and related insurance recoveries.

Reimbursement Receivables—In conjunction with the Garrett and Resideo spin-offs, the Company entered into reimbursement agreements under which Honeywell receives cash payments as reimbursement primarily for asbestos related liability payments related to the Bendix business in the U.S. (Garrett) and net spending for environmental matters at certain sites as defined in the agreement (Resideo). Accordingly, the Company has recorded a receivable based on estimates in the underlying reimbursable Honeywell spend, and we monitor the recoverability of such receivable, which is subject to terms of applicable credit agreements and general ability to pay.
See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of the recognition and measurement of our reimbursement receivables.
Defined Benefit Pension Plans—We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans. For financial reporting purposes, net periodic pension (income) expense is calculated annually based upon a number of actuarial assumptions, including a discount rate for plan obligations and an expected long-term rate of return on plan assets. Changes in the discount rate and expected long-term rate of return on plan assets could materially affect the annual pension (income) expense amount. Annual pension (income) expense is comprised of a potential mark-to-market adjustment (MTM Adjustment) and service and interest cost, assumed return on plan assets, and prior service amortization (Pension Ongoing (Income) Expense) and a potential mark-to-market adjustment (MTM Adjustment).

The key assumptions used in developing our 2016, 20152019, 2018 and 20142017 net periodic pension (income) expense for our U.S. plans included the following:

  2016 2015 2014
Discount Rate:            
Projected benefit obligation  4.46%  4.08%  4.89%
Service cost (1)  4.69%  N/A   N/A 
Interest cost (1)  3.59%  N/A   N/A 
Assets:            
Expected rate of return  7.75%  7.75%  7.75%
Actual rate of return  10%  2%  8%
Actual 10 year average annual compounded rate of return  6%  7%  8%

(1) N/A in 2015 and 2014 as the discount rate methodology was changed in fourth quarter of 2015. See Note 20 Pension and Other Postretirement Benefits of Notes to Financial Statements.

 2019 2018 2017
Discount Rate:     
Projected benefit obligation4.35% 3.68 % 4.20%
Service cost4.47% 3.77 % 4.42%
Interest cost3.94% 3.27 % 3.49%
Assets:     
Expected rate of return6.75% 7.75 % 7.75%
Actual rate of return21.2% (1.8)% 20.5%
Actual 10 year average annual compounded rate of return11.1% 11.0 % 7.4%
The MTM Adjustment represents the recognition of net actuarial gains or losses in excess of 10% of the corridor.greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor). Net actuarial gains and losses occur when the actual experience differs from any of the various assumptions used to value our pension plans or when assumptions change. The primary factors contributing to actuarial gains and losses are changes in the discount rate used to value pension obligations as of the measurement date each year and the difference between expected and actual returns on plan assets. The mark-to-market accounting method results in the potential for volatile and difficult to forecast MTM Adjustments. MTM charges were $273$123 million, $67$37 million and $249$87 million in 2016, 20152019, 2018 and 2014.

2017.

We determine the expected long-term rate of return on plan assets utilizing historical plan asset returns over varying long-term periods combined with our expectations of future market conditions and asset mix considerations (see Note 2021 Pension and Other Postretirement Benefits of Notes to Consolidated Financial Statements for details on the actual various asset classes and targeted asset allocation percentages for our pension plans). We plan to continue to use an expected rate of return on plan assets of 7.75%6.15% for 2017 as this is2020 down from 6.75% for 2019 reflecting a long-term rate based on historical plan asset returns over varying long term periods combined with our expectationsdecline in interest rates and additional re-balancing of future market conditions and the asset mix of the plan’s investments.

assets to more fixed income.

The discount rate reflects the market rate on December 31 (measurement date) for high-quality fixed-income investments with maturities corresponding to our benefit obligations and is subject to change each year. The discount rate can be volatile from year to year as it is determined based upon prevailing interest rates as of the measurement date. We used a 4.20%3.22% discount rate to determine benefit obligations as of December 31, 2016,2019, reflecting thea decrease in the market interest rate environment since the prior year-end.



In addition to the potential for MTM Adjustments, changes in our expected rate of return on plan assets and discount rate resulting from economic events also affects future pension ongoing (income) expense. The following table highlights the sensitivity of our U.S. pension obligations and ongoing (income) expense to changes in these assumptions, assuming all other assumptions remain constant. These estimates exclude any potential MTM Adjustment:

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Impact on 2017
Pension
Change in Assumption
Impact on 2020
Pension Ongoing
Expense
 Impact on PBO
0.25 percentage point decrease in discount rateDecrease $20$26 million Increase $500$480 million
0.25 percentage point increase in discount rateIncrease $18$25 million Decrease $460$470 million
0.25 percentage point decrease in expected rate of return on assetsIncrease $40$46 million —
0.25 percentage point increase in expected rate of return on assetsDecrease $40$46 million —

Pension ongoing income for all of our world-wide pension plans is expected to be approximately $715$786 million in 20172020 compared with pension ongoing income of $601$592 million in 2016.2019. The expected increase in pension income is primarily due to higher asset returns in 2016 and lower interest costs due tocost from a declinedecrease in discount rates mainly in our U.S. and UK plans.plans, and higher expected return on plan assets (lower rate of return on a higher asset base). Also, if required, an MTM Adjustment will be recorded in the fourth quarter of 20172020 in accordance with our pension accounting method as previously described. It is difficult to reliably forecast or predict whether there will be a MTM Adjustment in 2017,2020, and if one is required, what the magnitude of such adjustment will be. MTM Adjustments are primarily driven by events and circumstances beyond the control of the Company such as changes in interest rates and the performance of the financial markets.

Long-Lived Assets (including Tangible and

Finite-Lived Intangible Assets)Assets—The determination of useful lives (for depreciation/amortization purposes) and whether or not tangible and intangible assets are impaired involves the use of accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. We evaluate the recoverability of the carrying amount of our long-livedfinite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of a long-livedfinite-lived intangible asset group may not be fully recoverable. The principal factors in considering when to perform an impairment review are as follows:

•Significant under-performance (i.e., declines in sales, earnings or cash flows) of a business or product line in relation to expectations;
•Annual operating plans or five-year strategic plans that indicate an unfavorable trend in operating performance of a business or product line;
•Significant negative industry or economic trends; or
•Significant changes or planned changes in our use of the assets.

Significant under-performance (i.e., declines in sales, earnings or cash flows) of a business or product line in relation to expectations;
Annual operating plans or strategic plan outlook that indicate an unfavorable trend in operating performance of a business or product line;
Significant negative industry or economic trends; or
Significant changes or planned changes in our use of the assets.
Once it is determined that an impairment review is necessary, recoverability of assets is measured by comparing the carrying amount of the asset grouping to the estimated future undiscounted cash flows. If the carrying amount exceeds the estimated future undiscounted cash flows, the asset grouping is considered to be impaired. The impairment is then measured as the difference between the carrying amount of the asset grouping and its fair value. We endeavor to utilize the best information available to measure fair value, which is usually either market prices (if available), level 1 or level 2 of the fair value hierarchy, or an estimate of the future discounted cash flow, level 3 of the fair value hierarchy. The key estimates in our discounted cash flow analysis include assumptions as to expected industry and business growth rates, sales volume, selling prices and costs, cash flows, and the discount rate selected. These estimates are subject to changes in the economic environment, including market interest rates and expected volatility. Management believes the estimates of future cash flows and fair values are reasonable; however, changes in estimates due to variance from assumptions could materially affect the valuations.

Goodwill and Indefinite-Lived Intangible Assets Impairment Testing—Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual, or more frequent if necessary, impairment testing. In testing goodwill and indefinite-lived intangible assets, the fair value is estimated utilizing a discounted cash flow approach utilizing cash flow forecasts, in our five yearincluding strategic and annual operating plans, adjusted for terminal value assumptions. These impairment tests involve the use of accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. To address this uncertainty, we perform sensitivity analysis on key estimates and assumptions.



Income Taxes—On a recurring basis, we assess the need for a valuation allowance against our deferred tax assets by considering all available positive and negative evidence, such as past operating results, projections

32

of future taxable income, enacted tax law changes and the feasibility and impact of tax planning initiatives. Our projections of future taxable income include a number of estimates and assumptions regarding our volume, pricing and costs, as well as the timing and amount of reversals of taxable temporary differences.

We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities including resolution of any related appeals and litigation. We assess our income tax positions based upon our evaluation of the facts, circumstances and information available at the reporting date. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.
For further discussion of additional income tax policies, see Note 1 Summary of Significant Accounting Policies and Note 5 Income Taxes of Notes to Consolidated Financial Statements.
Sales Recognition on Long-Term Contracts—In 2016,We recognize sales for long-term contracts with performance obligations satisfied over time using either an input or output method. We recognize revenue over time as we perform on these contracts based on the continuous transfer of control to the customer. With control transferring over time, revenue is recognized approximately 13%based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost input method of progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs. Under the cost-to-cost method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. Due to the nature of the work required to be performed on many of our total net sales usingperformance obligations, the percentage-of-completion method for long-term contracts. These long-term contracts are measured on the cost-to-cost basis for engineering-type contracts and the units-of-delivery basis for production-type contracts. Accounting for these contracts involves management judgment in estimatingestimation of total contract revenue and cost.cost at completion requires judgment. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, incentive and award provisions associated with technical performance and price adjustment clauses (such as inflation or index-based clauses). Contract costs are incurred over a period of time, which can be several years, and the estimation of these costs requires management judgment. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Revenue and cost estimates are regularly monitored and revised based on changes in circumstances. Impacts from changes in estimates of net sales and cost of sales are recognized on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. Anticipated losses on long-term contracts are recognized when such losses become evident. We maintain financial controls over the customer qualification, contract pricing and estimation processes to reduce the risk of contract losses.

OTHER MATTERS

Litigation

See Note 1920 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of environmental, asbestos and other litigation matters.

Recent Accounting Pronouncements

See Note 1 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risks

Information relating to market risks is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Financial Instruments”.

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32


ITEM

Item 8. Financial Statements and Supplementary Data

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF OPERATIONS

  Years Ended December 31,
  2016 2015 2014
   
  (Dollars in millions, except per share amounts)
             
Product sales $31,362  $30,695  $32,398 
Service sales  7,940   7,886   7,908 
Net sales  39,302   38,581   40,306 
             
Costs, expenses and other            
Cost of products sold  22,170   21,775   23,889 
Cost of services sold  4,980   4,972   5,068 
   27,150   26,747   28,957 
Selling, general and administrative expenses  5,469   5,006   5,518 
Other (income) expense  (102)  (68)  (305)
Interest and other financial charges  338   310   318 
   32,855   31,995   34,488 
             
Income from continuing operations before taxes  6,447   6,586   5,818 
Tax expense  1,601   1,739   1,489 
Net income  4,846   4,847   4,329 
Less: Net income attributable to the noncontrolling interest  37   79   90 
Net income attributable to Honeywell $4,809  $4,768  $4,239 
             
Earnings per share of common stock - basic $6.29  $6.11  $5.40 
             
Earnings per share of common stock - assuming dilution $6.20  $6.04  $5.33 
             
Cash dividends per share of common stock $2.45  $2.15  $1.87 

 Years Ended December 31,
2019 2018 2017
 
(Dollars in millions,
except per share amounts)
Product sales$27,629
 $32,848
 $32,317
Service sales9,080
 8,954
 8,217
Net sales36,709
 41,802
 40,534
Costs, expenses and other     
Cost of products sold19,269
 23,634
 23,176
Cost of services sold5,070
 5,412
 4,968
 24,339
 29,046
 28,144
Selling, general and administrative expenses5,519
 6,051
 6,087
Other (income) expense(1,065) (1,149) (963)
Interest and other financial charges357
 367
 316
 29,150
 34,315
 33,584
Income before taxes7,559
 7,487
 6,950
Tax expense1,329
 659
 5,362
Net income6,230
 6,828
 1,588
Less: Net income attributable to the noncontrolling interest87
 63
 43
Net income attributable to Honeywell$6,143
 $6,765
 $1,545
Earnings per share of common stock—basic$8.52
 $9.10
 $2.03
Earnings per share of common stock—assuming dilution$8.41
 $8.98
 $2.00
The Notes to Consolidated Financial Statements are an integral part of this statement.

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33


HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

  Years Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Net income $4,846  $4,847  $4,329 
             
Other comprehensive income (loss), net of tax            
             
Foreign exchange translation adjustment  (52)  (1,152)  (1,044)
             
Actuarial losses  (443)  (464)  (1,411)
Prior service (cost) credit  (18)  446   73 
Prior service credit recognized during year  (78)  (13)  (2)
Actuarial losses recognized during year  236   72   202 
Transition obligation recognized during year  -   -   1 
Settlements and curtailments  (5)  2   - 
Foreign exchange translation and other  73   41   54 
Pensions and other postretirement benefit adjustments  (235)  84   (1,083)
             
Unrealized gains for the period  -   -   15 
Less: reclassification adjustment for gains included in net income  -   -   185 
Changes in fair value of available for sale investments  -   -   (170)
             
Effective portion of cash flow hedges recognized in other comprehensive income  103   91   20 
Less: reclassification adjustment for (losses) gains included in net income  (5)  99   - 
Changes in fair value of effective cash flow hedges  108   (8)  20 
             
Other comprehensive income (loss), net of tax  (179)  (1,076)  (2,277)
             
Comprehensive income  4,667   3,771   2,052 
Less: Comprehensive income attributable to the noncontrolling interest  29   73   87 
Comprehensive income attributable to Honeywell $4,638  $3,698  $1,965 

 Years Ended December 31,
2019 2018 2017
 (Dollars in millions)
Net income$6,230
 $6,828
 $1,588
Other comprehensive income (loss), net of tax     
Foreign exchange translation adjustment143
 (685) (37)
Actuarial gains (losses) recognized162
 (602) 753
Prior service credit (cost) recognized1
 2
 (59)
Prior service credit recognized during year(79) (74) (70)
Actuarial (gains) losses recognized during year16
 35
 83
Settlements and curtailments—
 2
 19
Foreign exchange translation and other(14) 31
 (49)
Pensions and other postretirement benefit adjustments86
 (606) 677
Cash flow hedges recognized in other comprehensive income103
 89
 (101)
Less: Reclassification adjustment for gains (losses) included in net income92
 4
 60
Changes in fair value of cash flow hedges11
 85
 (161)
Other comprehensive income (loss), net of tax240
 (1,206) 479
Comprehensive income6,470
 5,622
 2,067
Less: Comprehensive income attributable to the noncontrolling interest82
 53
 51
Comprehensive income attributable to Honeywell$6,388
 $5,569
 $2,016
The Notes to Consolidated Financial Statements are an integral part of this statement.

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34


HONEYWELL INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEET

  December 31,
  2016 2015
   
  (Dollars in millions)
ASSETS        
Current assets:        
Cash and cash equivalents $7,843  $5,455 
Accounts, notes and other receivables  8,818   8,075 
Inventories  4,366   4,420 
Investments and other current assets  2,031   2,103 
Total current assets  23,058   20,053 
         
Investments and long-term receivables  587   517 
Property, plant and equipment - net  5,793   5,789 
Goodwill  17,707   15,895 
Other intangible assets - net  4,634   4,577 
Insurance recoveries for asbestos related liabilities  417   426 
Deferred income taxes  347   283 
Other assets  1,603   1,776 
Total assets $54,146  $49,316 
         
LIABILITIES        
Current liabilities:        
Accounts payable $5,690  $5,580 
Commercial paper and other short-term borrowings  3,366   5,937 
Current maturities of long-term debt  227   577 
Accrued liabilities  7,048   6,277 
Total current liabilities  16,331   18,371 
         
Long-term debt  12,182   5,554 
Deferred income taxes  486   558 
Postretirement benefit obligations other than pensions  473   526 
Asbestos related liabilities  1,014   1,251 
Other liabilities  4,110   4,348 
         
Redeemable noncontrolling interest  3   290 
         
SHAREOWNERS’ EQUITY        
Capital - common stock issued  958   958 
 - additional paid-in capital  5,781   5,377 
Common stock held in treasury, at cost  (13,366)  (11,664)
Accumulated other comprehensive income (loss)  (2,714)  (2,535)
Retained earnings  28,710   26,147 
Total Honeywell shareowners’ equity  19,369   18,283 
Noncontrolling interest  178   135 
Total shareowners’ equity  19,547   18,418 
Total liabilities, redeemable noncontrolling interest and shareowners’ equity $54,146  $49,316 

 December 31,
2019 2018
 (Dollars in millions)
ASSETS   
Current assets:   
Cash and cash equivalents$9,067
 $9,287
Short-term investments1,349
 1,623
Accounts receivable—net7,493
 7,508
Inventories4,421
 4,326
Other current assets1,973
 1,618
Total current assets24,303
 24,362
Investments and long-term receivables588
 742
Property, plant and equipment—net5,325
 5,296
Goodwill15,563
 15,546
Other intangible assets—net3,734
 4,139
Insurance recoveries for asbestos related liabilities392
 437
Deferred income taxes86
 382
Other assets8,688
 6,869
Total assets$58,679
 $57,773
LIABILITIES   
Current liabilities:   
Accounts payable$5,730
 $5,607
Commercial paper and other short-term borrowings3,516
 3,586
Current maturities of long-term debt1,376
 2,872
Accrued liabilities7,476
 6,859
Total current liabilities18,098
 18,924
Long-term debt11,110
 9,756
Deferred income taxes1,670
 1,713
Postretirement benefit obligations other than pensions326
 344
Asbestos related liabilities1,996
 2,269
Other liabilities6,766
 6,402
Redeemable noncontrolling interest7
 7
SHAREOWNERS’ EQUITY   
Capital—common stock issued958
 958
—additional paid-in capital6,876
 6,452
Common stock held in treasury, at cost(23,836) (19,771)
Accumulated other comprehensive income (loss)(3,197) (3,437)
Retained earnings37,693
 33,978
Total Honeywell shareowners’ equity18,494
 18,180
Noncontrolling interest212
 178
Total shareowners’ equity18,706
 18,358
Total liabilities, redeemable noncontrolling interest and shareowners’ equity$58,679
 $57,773

The Notes to Consolidated Financial Statements are an integral part of this statement.

36


35


HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

  Years Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Cash flows from operating activities:            
Net income $4,846  $4,847  $4,329 
Less: Net income attributable to the noncontrolling interest  37   79   90 
Net income attributable to Honeywell  4,809   4,768   4,239 
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:            
Depreciation  726   672   667 
Amortization  304   211   257 
(Gain) loss on sale of non-strategic businesses and assets  (178)  1   11 
Gain on sale of available for sale investments  -   -   (221)
Repositioning and other charges  695   546   598 
Net payments for repositioning and other charges  (625)  (537)  (530)
Pension and other postretirement (income) expense  (360)  (323)  44 
Pension and other postretirement benefit payments  (143)  (122)  (167)
Stock compensation expense  184   175   187 
Deferred income taxes  76   315   132 
Excess tax benefits from share based payment arrangements  -   (81)  (102)
Other  194   57   (271)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:            
Accounts, notes and other receivables  (770)  211   (172)
Inventories  (18)  230   (200)
Other current assets  117   80   120 
Accounts payable  254   (17)  307 
Accrued liabilities  233   (667)  181 
Net cash provided by operating activities  5,498   5,519   5,080 
Cash flows from investing activities:            
Expenditures for property, plant and equipment  (1,095)  (1,073)  (1,094)
Proceeds from disposals of property, plant and equipment  21   15   18 
Increase in investments  (3,954)  (6,714)  (4,074)
Decrease in investments  3,681   6,587   3,288 
Cash paid for acquisitions, net of cash acquired  (2,573)  (5,228)  (4)
Proceeds from sales of businesses, net of fees paid  296   1   160 
Other  282   (102)  (170)
Net cash used for investing activities  (3,342)  (6,514)  (1,876)
Cash flows from financing activities:            
Net (decrease) increase in commercial paper and other short term borrowings  (2,464)  4,265   309 
Proceeds from issuance of common stock  409   186   265 
Proceeds from issuance of long-term debt  9,245   60   97 
Payments of long-term debt  (2,839)  (880)  (609)
Excess tax benefits from share based payment arrangements  -   81   102 
Repurchases of common stock  (2,079)  (1,884)  (924)
Cash dividends paid  (1,915)  (1,726)  (1,510)
Payments to purchase the noncontrolling interest  (238)  -   - 
AdvanSix pre-separation funding  269   -   - 
AdvanSix pre-spin borrowing  38   -   - 
AdvanSix cash at spin-off  (38)  -   - 
Other  (42)  (65)  (58)
Net cash provided by (used for) financing activities  346   37   (2,328)
Effect of foreign exchange rate changes on cash and cash equivalents  (114)  (546)  (339)
Net increase (decrease) in cash and cash equivalents  2,388   (1,504)  537 
Cash and cash equivalents at beginning of period  5,455   6,959   6,422 
Cash and cash equivalents at end of period $7,843  $5,455  $6,959 

 Years Ended December 31,
2019 2018 2017
 (Dollars in millions)
Cash flows from operating activities:     
Net income$6,230
 $6,828
 $1,588
Less: Net income attributable to the noncontrolling interest87
 63
 43
Net income attributable to Honeywell6,143
 6,765
 1,545
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:     
Depreciation673
 721
 717
Amortization415
 395
 398
(Gain) loss on sale of non-strategic businesses and assets1
 —
 7
Repositioning and other charges546
 1,091
 973
Net payments for repositioning and other charges(376) (652) (628)
Pension and other postretirement income(516) (987) (647)
Pension and other postretirement benefit payments(78) (80) (106)
Stock compensation expense153
 175
 176
Deferred income taxes179
 (586) 2,452
Other(287) (694) 1,642
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:     
Accounts receivable11
 (236) (682)
Inventories(100) (503) (259)
Other current assets(430) 218
 (568)
Accounts payable118
 733
 924
Accrued liabilities445
 74
 22
Net cash provided by (used for) operating activities6,897
 6,434
 5,966
Cash flows from investing activities:     
Expenditures for property, plant and equipment(839) (828) (1,031)
Proceeds from disposals of property, plant and equipment43
 15
 86
Increase in investments(4,253) (4,059) (6,743)
Decrease in investments4,464
 6,032
 4,414
Cash paid for acquisitions, net of cash acquired(50) (535) (82)
Other102
 402
 (218)
Net cash provided by (used for) investing activities(533) 1,027
 (3,574)
Cash flows from financing activities:     
Proceeds from issuance of commercial paper and other short-term borrowings14,199
 23,891
 13,701
Payments of commercial paper and other short-term borrowings(14,199) (24,095) (13,532)
Proceeds from issuance of common stock498
 267
 520
Proceeds from issuance of long-term debt2,726
 27
 1,238
Payments of long-term debt(2,903) (1,330) (292)
Repurchases of common stock(4,400) (4,000) (2,889)
Cash dividends paid(2,442) (2,272) (2,119)
Pre-separation funding—
 2,801
 —
Spin-off cash—
 (179) —
Other(79) (142) (143)
Net cash provided by (used for) financing activities(6,600) (5,032) (3,516)
Effect of foreign exchange rate changes on cash and cash equivalents16
 (201) 340
Net increase (decrease) in cash and cash equivalents(220) 2,228
 (784)
Cash and cash equivalents at beginning of period9,287
 7,059
 7,843
Cash and cash equivalents at end of period$9,067
 $9,287
 $7,059

The Notes to Consolidated Financial Statements are an integral part of this statement.

37

36


HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY

  Years Ended December 31,
  2016 2015 2014
  Shares $ Shares $ Shares $
  (in millions)
Common stock, par value  957.6   958   957.6   958   957.6   958 
                         
Additional paid-in capital                        
Beginning balance      5,377       5,038       4,682 
Issued for employee savings and option plans      183       164       175 
Stock-based compensation expense      171       175       187 
Other owner changes      50       -       (6)
Ending balance      5,781       5,377       5,038 
                         
Treasury stock                        
Beginning balance  (187.2)  (11,664)  (175.4)  (9,995)  (173.8)  (9,374)
Reacquired stock or repurchases of common stock  (19.3)  (2,079)  (18.8)  (1,884)  (10.0)  (924)
Issued for employee savings and option plans  9.7   377   6.7   215   8.4   303 
Other owner changes  -   -   0.3   -   -   - 
Ending balance  (196.8)  (13,366)  (187.2)  (11,664)  (175.4)  (9,995)
                         
Retained earnings                        
Beginning balance      26,147       23,115       20,383 
Net income attributable to Honeywell      4,809       4,768       4,239 
Dividends on common stock      (1,883)      (1,686)      (1,478)
AdvanSix spin-off      (362)      -       - 
Redemption value adjustment      (1)      (50)      (29)
Ending balance      28,710       26,147       23,115 
                         
Accumulated other comprehensive income (loss)                        
Beginning balance      (2,535)      (1,459)      818 
Foreign exchange translation adjustment      (52)      (1,152)      (1,044)
Pensions and other postretirement benefit adjustments      (235)      84       (1,083)
Changes in fair value of available for sale investments      -       -       (170)
Changes in fair value of effective cash flow hedges      108       (8)      20 
Ending balance      (2,714)      (2,535)      (1,459)
                         
Noncontrolling interest                        
Beginning balance      135       127       112 
Acquisitions      1       3       - 
Interest sold (bought)      -       -       (7)
Net income attributable to noncontrolling interest      37       35       40 
Foreign exchange translation adjustment      (8)      (6)      (3)
Dividends paid      (17)      (26)      (17)
Contributions from noncontrolling interest holders      -       -       5 
Other owner changes      30       2       (3)
Ending balance      178       135       127 
                         
Total shareowners’ equity  760.8   19,547   770.4   18,418   782.2   17,784 

 Years Ended December 31,
2019 2018 2017
Shares $ Shares $ Shares $
 (in millions)
Common stock, par value957.6
 958
 957.6
 958
 957.6
 958
Additional paid-in capital           
Beginning balance  6,452
   6,212
   5,781
Issued for employee savings and option plans  271
   65
   255
Stock-based compensation expense  153
   175
   176
Ending balance  6,876
   6,452
   6,212
Treasury stock           
Beginning balance(228.0) (19,771) (206.7) (15,914) (196.8) (13,366)
Reacquired stock or repurchases of common stock(26.5) (4,400) (26.5) (4,000) (20.5) (2,889)
Issued for employee savings and option plans8.0
 335
 5.2
 143
 10.6
 341
Ending balance(246.5) (23,836) (228.0) (19,771) (206.7) (15,914)
Retained earnings           
Beginning balance  33,978
   27,481
   28,046
Adoption of new accounting standards  —
   264
   —
Net income attributable to Honeywell  6,143
   6,765
   1,545
Dividends on common stock  (2,428)   (2,279)   (2,101)
Spin-offs  —
   1,749
   (9)
Redemption value adjustment  —
   (2)   —
Ending balance  37,693
   33,978
   27,481
Accumulated other comprehensive income (loss)           
Beginning balance  (3,437)   (2,235)   (2,714)
Foreign exchange translation adjustment  143
   (728)   (37)
Pensions and other postretirement benefit adjustments  86
   (559)   677
Changes in fair value of cash flow hedges  11
   85
   (161)
Ending balance  (3,197)   (3,437)   (2,235)
Noncontrolling interest           
Beginning balance  178
   163
   178
Acquisitions, divestitures, and other  (3)   (12)   (11)
Net income attributable to noncontrolling interest  87
   63
   43
Foreign exchange translation adjustment  (5)   (10)   8
Dividends paid  (45)   (26)   (55)
Ending balance  212
   178
   163
Total shareowners’ equity711.1
 18,706
 729.6
 18,358
 750.9
 16,665
Cash dividends per share of common stock  $3.360
   $3.055
   $2.740

The Notes to Consolidated Financial Statements are an integral part of this statement.

38

37
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts)




Note 1. Summary of Significant Accounting Policies

Accounting Principles—The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The following is a description of Honeywell’s significant accounting policies.

Principles of Consolidation—The consolidated financial statements include the accounts of Honeywell International Inc. and all of its subsidiaries and entities in which a controlling interest is maintained. Our consolidation policy requires equity investments that we exercise significant influence over but do not control the investee and are not the primary beneficiary of the investee’s activities to be accounted for using the equity method. Investments through which we are not able to exercise significant influence over the investee and which we do not have readily determinable fair values are accounted for under the cost method. All intercompany transactions and balances are eliminated in consolidation.

Redeemable noncontrolling interest is considered to be temporary equity and is therefore reported outside of permanent equity on the Consolidated Balance Sheet at the greater of the initial carrying amount adjusted for the noncontrolling interest’s share of net income (loss) or its redemption value.

Property, Plant and Equipment—Property, plant and equipment are recorded at cost, including any asset retirement obligations, less accumulated depreciation. For financial reporting, the straight-line method of depreciation is used over the estimated useful lives of 10 to 50 years for buildings and improvements and 2 to 16 years for machinery and equipment. Recognition of the fair value of obligations associated with the retirement of tangible long-lived assets is required when there is a legal obligation to incur such costs. Upon initial recognition of a liability, the cost is capitalized as part of the related long-lived asset and depreciated over the corresponding asset’s useful life.

Goodwill and Indefinite-Lived Intangible Assets—Goodwill and indefinite-lived intangible assets are subject to impairment testing annually as of March 31, and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value. We completed our annual goodwill impairment test as of March 31, 20162019 and determined that there was no impairment as of that date.

Other Intangible Assets with Determinable Lives—Other intangible assets with determinable lives consist of customer lists, technology, patents and trademarks and other intangibles and are amortized over their estimated useful lives, ranging from 2 to 24 years.

Sales Recognition—Product and service sales are recognized when persuasive evidenceor as the Company transfers control of an arrangement exists, product delivery has occurredthe promised products or services have been rendered, pricingto its customers. Revenue is fixedmeasured as the amount of consideration we expect to receive in exchange for transferring goods or determinable, and collection is reasonably assured.providing services. Service sales, principally representing repair, maintenance and engineering activities are recognized over the contractual period or as services are rendered. Sales under long-term contracts with performance obligations satisfied over time are recognized using either an input or output method. We recognize revenue over time as we perform on these contracts because of the continuous transfer of control to the customer. With control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost input method of progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs. Under the cost-to-cost method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. We review our cost estimates on significant contracts on a periodic basis, or when circumstances change and warrant a modification to a previous estimate. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Provisions for anticipated losses on long-term contracts are recorded in full when such losses become evident, to the extent required.
The customer funding for costs incurred for nonrecurring engineering and development activities of our products under agreements with commercial customers is deferred and subsequently recognized as revenue as products are delivered to the customers. Additionally, expenses incurred, up to the customer agreed funded amount, are deferred as an asset and recognized as cost of sales when products are delivered to the customer. The deferred customer funding and costs result in recognition of deferred costs (asset) and deferred revenue (liability) on our Consolidated Balance Sheet. Capitalized contract fulfillment costs were approximately $1 billion as of December 31, 2019 and 2018. The amounts recognized as cost of sales were approximately $0.1 billion for the years ended December 31, 2019 and 2018.  

38
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Revenues for our mechanical service programs are recognized as performance obligations are satisfied over time, with recognition reflecting a series of distinct services using the output method.
The terms of a contract or the historical business practice can give rise to variable consideration due to, but not limited to, cash-based incentives, rebates, performance awards, or credits. We estimate variable consideration at the most likely amount we will receive from customers. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.
For the year ended 2017, prior to the adoption of the revenue recognition standard (see Note 7 Revenue Recognition and Contracts with Customers), product and service sales were recognized when persuasive evidence of an arrangement existed, product delivery had occurred or services had been rendered, pricing was fixed or determinable, and collection was reasonably assured. Service sales, principally representing repair, maintenance and engineering activities were recognized over the contractual period or as services were rendered. Sales under long-term contracts were recorded on a percentage-of-completion method measured on the cost-to-cost basis for engineering-type contracts and the units-of-delivery basis for production-type contracts. Provisions for anticipated losses on long-term contracts arewere recorded in full when such losses becomebecame evident. Revenues from contracts with multiple element arrangements arewere recognized as each element iswas earned based on the relative fair value of each element provided the delivered elements havehad value to customers on a standalone basis. Amounts allocated to each element arewere based on its objectively determined fair value, such as the sales price for the product or service when it iswas sold separately or competitor prices for similar products or services.

Environmental—We accrueThe Company accrues costs related to environmental matters when it is probable that we have incurred a liability related to a contaminated site and the amount can be reasonably estimated. For additional information, see Note 1920 Commitments and Contingencies.

Asbestos Related ContingenciesLiabilities and Insurance Recoveries—We recognizeThe Company recognizes a liability for any asbestos related contingency that is probable of occurrence and reasonably estimable. In connection with the recognition of liabilities for asbestos related matters, we record asbestos related insurance recoveries that are deemed probable. For additional information, see Note 1920 Commitments and Contingencies.

Reimbursement Receivables—In conjunction with the Garrett Motion Inc. (“Garrett”) and Resideo Technologies, Inc. (“Resideo”) spin-offs, the Company entered into reimbursement agreements under which Honeywell receives cash payments as reimbursement primarily for asbestos related liability payments related to the Bendix business in the U.S. (Garrett) and net spending for environmental matters at certain sites as defined in the agreement (Resideo). Accordingly, the Company has recorded a receivable based on estimates in the underlying reimbursable Honeywell spend, and we monitor the recoverability of such receivable, which is subject to terms of applicable credit agreements and general ability to pay. For additional information, see Note 20 Commitments and Contingencies.
Aerospace Sales Incentives—We provideThe Company provides sales incentives to commercial aircraft manufacturers and airlines in connection with their selection of ourits aircraft equipment, predominately wheel and braking system hardware, avionics, and auxiliary power units, for installation on commercial aircraft. These incentives consist of

39

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts) 

free or deeply discounted products, credits for future purchases of product andor upfront cash payments. These costs are generally recognized in the period incurred as cost of products sold or as a reduction to relevant sales, as appropriate.

Research and Development—Research and development costs for company-sponsored research and development projects are expensed as incurred. Such costs are principally included in cost of products and services sold and were $2,143$1,556 million, $1,856$1,809 million and $1,892$1,835 million in 2016, 20152019, 2018 and 2014.

2017. Customer-sponsored research and development activities under contracts with customers are included as a contract cost and included in cost of products and services sold when revenue from such contracts is recognized. Such customer-sponsored research and development activities amounted to an additional $1,079 million, $1,069 million and $876 million in 2019, 2018 and 2017.


39
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Stock-Based Compensation Plans—The principal awards issued under our stock-based compensation plans, which are described in Note 1819 Stock-Based Compensation Plans, are non-qualified stock options and restricted stock units. The cost for such awards is measured at the grant date based on the fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award) and is included in selling, general and administrative expenses. Forfeitures are estimated at the time of grant to recognize expense for those awards that are expected to vest and are based on our historical forfeiture rates.

Pension Benefits—The Company presents net periodic pensions costs by disaggregating the service cost component of net benefit costs and reports those costs in the same line item or items in the Consolidated Statement of Operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other non-service components of net benefit costs are required to be presented separately from the service cost component.
The Company records the service cost component of Pension ongoing (income) expense in Costs of products and services sold and Selling, general and administrative expenses. The remaining components of net benefit costs within Pension ongoing (income) expense, primarily interest costs and assumed return on plan assets, are recorded in Other (income) expense. We recognize net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) annually in the fourth quarter each year (MTM Adjustment), and, if applicable,. The MTM Adjustment is also reported in any quarter in which an interim remeasurement is triggered. The remaining components of pensionOther (income) expense, primarily service and interest costs and assumed return on plan assets, are recognized on a quarterly basis (Pension ongoing (income) expense).

expense.

Foreign Currency Translation—Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. Dollars are translated into U.S. Dollars using year-end exchange rates. Sales, costs and expenses are translated at the average exchange rates in effect during the year. Foreign currency translation gains and losses are included as a component of accumulatedAccumulated other comprehensive income (loss). For subsidiaries operating in highly inflationary environments, inventories and property, plant and equipment, including related expenses, are remeasured at the exchange rate in effect on the date the assets were acquired, while monetary assets and liabilities are remeasured at year-end exchange rates. Remeasurement adjustments for these subsidiaries are included in earnings.

Derivative Financial Instruments— We minimizeThe Company reduces our risks from interest and foreign currency exchange rate fluctuations through our normal operating and financing activities and, when deemed appropriate through the use of derivative financial instruments. Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes and wepurposes. We do not use leveraged derivative financial instruments. Derivative financial instruments that qualify for hedge accounting must be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

All derivatives are recorded on the balance sheet as assets or liabilities and measured at fair value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair values of both the derivatives and the hedged items are recorded in current earnings. For derivatives designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives are recorded in accumulatedAccumulated other comprehensive income (loss) and subsequently recognized in earnings when the hedged items impact earnings. Cash flows of such derivative financial instruments are classified consistent with the underlying hedged item.

We have elected to exclude the time value of the derivatives (i.e., the forward points) from the assessment of hedge effectiveness and recognize the initial value of the excluded component in earnings using the amortization approach. For derivative instruments that are designated and qualify as a net investment hedge, the gain or loss is reported as a component of Other comprehensive income (loss) and recorded in Accumulated other comprehensive income (loss). The gain or loss will be subsequently reclassified into net earnings when the hedged net investment is either sold or substantially liquidated.


40
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Income Taxes—Significant judgment is required in evaluating tax positions. We establish additional reserves for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum recognition threshold. The approach for evaluating certain and uncertain tax positions is defined by the authoritative guidance which determines when a tax position is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, the Company and its subsidiaries are examined by various federal, state and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a change in estimate become known.

40
For discussion of the impacts from what is commonly referred to as the U.S. Tax Cuts and Jobs Act (“U.S Tax Reform”), see Note 5 Income Taxes.

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts) 

Cash and cash equivalents—Cash and cash equivalents include cash on hand and highly liquid investments having an original maturity of three months or less.

Earnings Per Share—Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding.

Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation.

Leases—At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The assessment is based on (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset.

All significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases), and we recognize lease expense for these leases as incurred over the lease term.
ROU assets represent our right to use an underlying asset during the reasonably certain lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in determining the lease liability. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments are incurred. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately.

The Company primarily uses our incremental borrowing rate, which is based on the information available at the lease commencement date, in determining the present value of the lease payments. In determining the borrowing rate, we consider the lease term, secured incremental borrowing rate, and for leases denominated in a currency different than U.S. dollar, the collateralized borrowing rate in the foreign currency using the U.S. dollar and foreign currency swap spread, when available.
Recent Accounting Pronouncements—We considerThe Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated results of operations, financial position and cash flows (consolidated financial statements).

In May 2014,December 2019, the FASB issued guidance on revenue from contracts with customersaccounting standard update to simplify the accounting for income taxes. The standard’s amendments include changes in various subtopics of accounting for income taxes including, but not limited to, accounting for “hybrid” tax regimes, tax basis step-up in goodwill obtained in a transaction that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenuenot a business combination, intraperiod tax allocation exception to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled toincremental approach, ownership changes in exchangeinvestments, interim-period accounting for those goods or services.enacted changes in tax law, and year-to date loss limitation in interim-period tax accounting. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The effective date was deferred for one year to the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted as of the original effective date – interim and annual periods beginning on or after December 15, 2016. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method.

We are still finalizing the analysis to quantify the adoption impact of the provisions of the new standard, but we do not currently expect it to have a material impact on our consolidated financial position or results of operations. Based on the evaluation of our current contracts and revenue streams, most will be recorded consistently under both the current and new standard. The FASB has issued, and may issue in the future, interpretive guidance which may cause our evaluation to change. We believe we are following an appropriate timeline to allow for proper recognition, presentation and disclosure upon adoption effective the beginning of fiscal year 2018.

In February 2016, the FASB issued guidance on accounting for leases which requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases that will be effective for interim and annual periodsfiscal years beginning after December 15, 2018. Early2020 with early adoption is permitted. The guidance requirespermitted, including the use of a modified retrospective approach. We are currently evaluating the impact of the guidance on our consolidated financial position, results of operations, and related notes to financial statements.

In March 2016, the FASB issued amended guidance related to the employee share-based payment accounting. The guidance requires all income tax effect of awards to be recognized in the income statement, which were previously presented as a component of Total shareowners’ equity, on a prospective basis. The guidance also requires presentation of excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. We have elected to early adopt the standard in the quarter ended September 30, 2016, which requires adoption effective as of the beginning of the fiscal year. The adoption resulted in a diluted earnings per share benefit of $0.14 and the recognition of excess tax benefits as a reduction in the provision for income taxes of $127 million for the year ended December 31, 2016. Refer to Note 24 Unaudited Quarterly Financial Information for the earnings per share for the first and second quarters of 2016, recast to reflect the impact from adoption. Cash paid by the Company when directly withholding shares for tax-withholding purposes are classified as a financing activity on a retrospective basis.

41

41
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

The



interim periods within those years. We are currently evaluating impacts of these amendments on our Consolidated financial position, results of operations, cash flows, and related notes to the Financial Statements.
In February 2018, the FASB issued guidance that allows for an accounting policy electionentity to estimateelect to reclassify the number of awards that are expectedincome tax effects on items resulting from what is commonly referred to vest or account for forfeitures when they occur. We electedas the U.S. Tax Cuts and Jobs Act ("U.S. Tax Reform") from accumulated other comprehensive income to maintain the current forfeitures policy and will continue to include an estimate of those forfeitures when recognizing stock compensation expense. Classification of the excess tax benefits in the Consolidated Statement of Cash Flows are presented on a prospective basis as of January 1, 2016.

In August 2016, the FASB issued new guidance intended to reduce diversity in practice in how certain cash receipts and payments are classified in the statement of cash flows, including debt prepayment or extinguishment costs, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, and distributions from certain equity method investees.retained earnings. The guidance is effective for interim and annual periodsfiscal years beginning after December 15, 2017, and2018 with early adoption is permitted. The guidance requires application on a retrospective basis.permitted, including interim periods within those years. The Company is currently evaluatinghas elected to not reclassify the impactstranded income tax effects of this guidance.

U.S. Tax Reform from accumulated other comprehensive income to retained earnings.

In OctoberJune 2016, the FASB issued an accounting standard updatethat requires companies to utilize an impairment model (current expected credit loss, or CECL) for most financial assets measured at amortized cost and certain other financial instruments, which requires an entityinclude, but are not limited to, recognizetrade and other receivables. This accounting standard will replace the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Underincurred loss model under current GAAP recognitionwith a model that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate those losses. Effective January 1, 2020, the income tax consequences for asset transfers other than inventory could not be recognized until the asset was sold to a third party.Company adopted this standard. The guidance is intended to reduce diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires application on a modified retrospective basis. We are currently evaluating the impact of this accounting standard updatedoes not have a material impact on our consolidated financial statements.

Consolidated Financial Statements.

Note 2. Acquisitions and Divestitures

During 2016 and 2015, we2019, there were no significant acquisitions individually or in aggregate.
During 2018, the Company acquired businesses for an aggregate cost (net of cash and debt assumed) of $2,538approximately $535 million, and $5,244 million.

In August 2016,mainly due to the Company acquired Intelligrated,November 2018 acquisition of Transnorm, a leading provider of supply chainglobal leader in high-performance conveyor and warehouse automation technologies, for an aggregate value, net of cash acquired, of $1,488 million. Intelligratedsolutions, including approximately $380 million allocated to goodwill. Transnorm is part of Safety and Productivity Solutions. The preliminary determination of the assets and liabilities acquired with Intelligrated have been included in the Consolidated Balance Sheet as of December 31, 2016, including $1,129 million allocated to goodwill, which is non-deductible for tax purposes.

In April 2016, the Company completed the acquisition of Xtralis International Holdings Limited (Xtralis), a leading global provider of aspiration smoke detection and perimeter security technologies, for an aggregate cost, net of cash acquired and debt assumed, of $515 million. Xtralis is part of Home and Building Technologies.

In February 2016, the Company acquired 100 percent of the issued and outstanding shares of COM DEV International (COM DEV), a leading satellite and space components provider, for an aggregate value, net of cash acquired and debt assumed, of $347 million. COM DEV is part of Aerospace and had reported 2015 fiscal year revenues of $159 million.

In January 2016, the Company acquired the remaining 30 percent noncontrolling interest in UOP Russell LLC, which develops technology and manufactures modular equipment to process natural gas, for $240 million. UOP Russell LLC is part of Performance Materials and Technologies.

In December 2015, the Company completed the acquisition of the Elster Division of Melrose Industries plc (Elster), for an aggregate value, net of cash acquired, of $4,899 million. Elster had 2015 revenues of $1,670 million and has been integrated into Home and Building Technologies and Performance Materials and Technologies. The following table summarizes the final fair value of the acquired Elster assets and liabilities.

42

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts) 

Current assets$519
Intangible assets2,163
Other noncurrent assets193
Current liabilities(566)
Noncurrent liabilities(973)
Net assets acquired1,336
Noncontrolling interest(2)
Goodwill3,565
Purchase Price$4,899

The Elster identifiable intangible assets primarily include customer relationships, trade names and technology that are being amortized over their estimated lives ranging from 1 to 20 years using straight line and accelerated amortization methods. The goodwill is non-deductible for tax purposes.

As of December 31, 2016, the purchase accounting for Intelligrated, Xtralis and COM DEV is subject to final adjustment, primarily for the valuation of amounts allocated to intangible assets and goodwill, determination of useful lives for definite-lived intangible assets, tax balances and for any pre-acquisition contingencies. Goodwill arising from these

During 2017, there were no significant acquisitions is non-deductible for tax purposes. The results of operations from date of acquisition through December 31, 2016 are includedindividually or in the Consolidated Statement of Operations.

aggregate.

On October 1, 2016,2018, the Company completed the tax-free spin-off to Honeywell shareowners of its Resins and ChemicalsTransportation Systems business, part of Performance Materials and Technologies,Aerospace, into a standalone publicly-traded company, (named AdvanSixGarrett Motion Inc. or AdvanSix)(“Garrett”). On October 29, 2018, the Company completed the tax-free spin-off to Honeywell shareowners.shareowners of its Homes and Global Distribution business, part of Home and Building Technologies (renamed Honeywell Building Technologies following the spin-off), into a standalone publicly-traded company, Resideo Technologies, Inc. (“Resideo”). The assets of approximately $5.5 billion, including approximately $2.8 billion of goodwill and net of recorded receivables, and liabilities of approximately $7.2 billion associated with AdvanSixspin-off entities have been removed through Retained Earnings from the Company’s Consolidated Balance Sheet.Sheet as of the effective date of the spin-off. The results of operations for AdvanSixand cash flows are included in the Consolidated Statement of Operations and Consolidated Statement of Cash Flows through the effective date of the spin-off.

The Income before taxes attributable to the spin-off businesses were $0.4 billion and $0.5 billion for 2018 and 2017.

Honeywell shareowners of record as of the close of business on SeptemberOctober 16, 20162018 received one share of AdvanSixResideo common stock for every 256 shares of Honeywell common stock. Immediately prior to the effective date of the spin-off, AdvanSixResideo incurred debt of $1.2 billion to make a cash distribution of $269 million to the Company. At
Honeywell shareowners of record as of the same time, AdvanSix alsoclose of business on September 18, 2018 received one share of Garrett common stock for every 10 shares of Honeywell common stock. Immediately prior to the effective date of the spin-off, Garrett incurred $38 milliondebt of borrowings$1.6 billion to make a cash distribution to the Company.
In 2018 in order to fund its postconnection with the spin-off, working capital.

Thethe Company entered into certain agreements with AdvanSixResideo and Garrett to effectaffect our legal and structural separation, including a transition services agreement with AdvanSixagreements to provide certain administrative and other services for a limited time.

On September 16, 2016,time, and tax matters and indemnification and reimbursement agreements. As of the Company completed the saleend of Honeywell Technology Solutions Inc. for a sale price2019, most of $300 million. The Company recognized a pre-tax gain of $176 million, which was recordedthose agreements are still in Other (income) expense. The Honeywell Technology Solutions Inc. business was part of Aerospace.

43
effect.

42
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



Note 3. Repositioning and Other Charges

A summary of repositioning and other charges follows:

  Years Ended December 31,
  2016 2015 2014
Severance $283  $197  $156 
Asset impairments  43   13   12 
Exit costs  43   6   16 
Reserve adjustments  (109)  (53)  (38)
Total net repositioning charge  260   163   146 
             
Asbestos related litigation charges, net of insurance  222   189   182 
Probable and reasonably estimable environmental liabilities  195   194   268 
Other  18   -   2 
Total net repositioning and other charges $695  $546  $598 

 Years Ended December 31,
2019 2018 2017
Severance$260
 $289
 $305
Asset impairments95
 162
 142
Exit costs83
 79
 60
Reserve adjustments(5) (10) (16)
Total net repositioning charge433
 520
 491
Asbestos related litigation charges, net of insurance and reimbursements42
 163
 159
Probable and reasonably estimable environmental liabilities, net of reimbursements59
 345
 287
Other12
 63
 36
Total net repositioning and other charges$546
 $1,091
 $973

The following table summarizes the pretaxpre-tax distribution of total net repositioning and other charges by income statement classification:

  Years Ended December 31,
  2016 2015 2014
Cost of products and services sold $522  $483  $525 
Selling, general and administrative expenses  126   63   73 
Other (income) expense  47   -   - 
  $695  $546  $598 

 Years Ended December 31,
2019 2018 2017
Cost of products and services sold$276
 $811
 $736
Selling, general and administrative expenses270
 239
 187
Other (income) expense—
 41
 50
 $546
 $1,091
 $973

The following table summarizes the pretaxpre-tax impact of total net repositioning and other charges by segment:

  Years Ended December 31,
  2016 2015 2014
Aerospace $298  $211  $193 
Home and Building Technologies  35   43   52 
Performance Materials and Technologies  94   40   33 
Safety and Productivity Solutions  1   34   28 
Corporate  267   218   292 
  $695  $546  $598 

 Years Ended December 31,
2019 2018 2017
Aerospace$33
 $154
 $248
Honeywell Building Technologies108
 111
 78
Performance Materials and Technologies93
 191
 102
Safety and Productivity Solutions71
 133
 51
Corporate241
 502
 494
 $546
 $1,091
 $973

In 2016, we2019, the Company recognized repositioning charges totaling $369$438 million including severance costs of $283$260 million related to workforce reductions of 6,5855,336 manufacturing and administrative positions across our segments. The workforce reductions related to costs savings actions taken in connection with our productivity and ongoing functional transformation initiatives and to site transitions, mainly in Honeywell Building Technologies, as we transition manufacturing to more cost-effective locations. The repositioning charge included asset impairments of $95 million largely related to a write down in connection with assets held for sale. The repositioning charge included exit costs of $83 million primarily related to current period exit costs incurred for previously approved repositioning projects, termination fees associated with the early cancellation of supply agreements for certain raw materials in Performance Materials and Technologies and Honeywell Building Technologies and for closure obligations associated with site transitions.
In 2018, the Company recognized repositioning charges totaling $530 million including severance costs of $289 million related to workforce reductions of 6,486 manufacturing and administrative positions across our segments. The workforce reductions were primarily related to planned site closures, mainly in Safety and Productivity Solutions, Performance Materials and Technologies and Honeywell Building Technologies, as we transition manufacturing sites to more cost-effective locations. The workforce reductions were also related to our productivity and ongoing functional

43
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


transformation initiatives. The repositioning charge included asset impairments of $162 million mainly related to manufacturing plant and equipment associated with planned site closures. Asset impairments also included the write-down of a legacy property in Corporate in connection with its planned disposition and the write-off of certain capitalized assets in Corporate. The repositioning charge included exit costs of $79 million primarily related to a termination fee associated with the early cancellation of a supply agreement for certain raw materials in Performance Materials and Technologies and for closure obligations associated with planned site closures.
In 2017, the Company recognized repositioning charges totaling $507 million including severance costs of $305 million related to workforce reductions of 7,096 manufacturing and administrative positions across its segments. The workforce reductions were primarily related to cost savings actions taken in connection with our productivity and ongoing functional transformation initiatives; the separation of the former Automationinitiatives and Control Solutions reporting segment into two new reporting segments; factorywith site transitions, in each of our reportable operating segments, to more cost-effective locations; and achieving acquisition-related synergies.locations. The repositioning charge included asset impairments of $43$142 million principally in our Corporate segment related to the write-offwrite-down of legacy properties and certain intangible assetsequipment in connection with their planned disposition and the salewrite-down of a Performance Materialsresearch and Technologies business.development facility in connection with a planned exit from such facility. The repositioning charge included exit costs of $43$60 million principally for expenses related to the spin-off of our AdvanSix business and closure obligations associated with factory transitions. Also, $109 million of previously established accruals, primarily for severance, were returned to income as a result of higher attrition than anticipated in prior severance programs resulting in lower required severance payments, lower than expected severance costs in certain repositioning actions, and changes in scope of previously announced repositioning actions.

44

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

In 2015, we recognized repositioning charges totaling $216 million including severance costs of $197 million related to workforce reductions of 6,405 manufacturing and administrative positions across our segments. The workforce reductions were primarily related to cost savings actions taken in connection with our productivity and ongoing functional transformation initiatives. Also, $53 million of previously established accruals, primarily for severance, were returned to income due principally to higher attrition than anticipated in prior severance programs resulting in lower required severance payments, and changes in scope of previously announced repositioning actions.

In 2014, we recognized repositioning charges totaling $184 million including severance costs of $156 million related to workforce reductions of 2,975 manufacturing and administrative positions across our segments. The workforce reductions were primarily related to cost savings actions taken in connection with our productivity and ongoing functional transformation initiatives; factorysite transitions in Homeeach of our segments and Building Technologies, Safety and Productivity Solutions and Aerospace to more cost-effective locations; and site consolidations and organizational realignments of businessesfor lease exit obligations in Home and Building Technologies, Safety and Productivity Solutions and Performance Materials and Technologies. Also, $38 million of previously established accruals, primarily for severance, were returned to income due principally to the change in scope of a previously announced repositioning action and higher attrition than anticipated in prior severance programs resulting in lower required severance payments.

our Corporate segment.

The following table summarizes the status of ourthe Company's total repositioning reserves:

  Severance Asset Exit  
  Costs Impairments Costs Total
Balance at December 31, 2013 $302  $-  $45  $347 
2014 charges  156   12   16   184 
2014 usage - cash  (135)  -   (26)  (161)
2014 usage - noncash  -   (12)  -   (12)
Adjustments  (33)  -   (5)  (38)
Foreign currency translation  (5)  -   -   (5)
Balance at December 31, 2014  285   -   30   315 
2015 charges  197   13   6   216 
2015 usage - cash  (109)  -   (9)  (118)
2015 usage - noncash  -   (13)  -   (13)
Acquisitions  16   -   -   16 
Adjustments  (49)  -   (4)  (53)
Foreign currency translation  (11)  -   (2)  (13)
Balance at December 31, 2015  329   -   21   350 
2016 charges  283   43   43   369 
2016 usage - cash  (203)  -   (25)  (228)
2016 usage - noncash  (6)  (43)  -   (49)
Adjustments  (106)  -   (3)  (109)
Foreign currency translation  1   -   (3)  (2)
Balance at December 31, 2016 $298  $-  $33  $331 

 
Severance
Costs
 
Asset
Impairments
 
Exit
Costs
 Total
Balance at December 31, 2016$298
 $—
 $33
 $331
Charges305
 142
 60
 507
Usage—cash(163) —
 (14) (177)
Usage—noncash—
 (142) —
 (142)
Adjustments and reclassifications(13) —
 (10) (23)
Foreign currency translation15
 —
 2
 17
Balance at December 31, 2017442
 —
 71
 513
Charges289
 162
 79
 530
Usage—cash(218) —
 (67) (285)
Usage—noncash—
 (163) —
 (163)
Divestitures(11) —
 (3) (14)
Adjustments(8) 1
 (3) (10)
Foreign currency translation(5) —
 —
 (5)
Balance at December 31, 2018489
 —
 77
 566
Charges260
 95
 83
 438
Usage—cash(186) —
 (63) (249)
Usage—noncash—
 (100) —
 (100)
Divestitures—
 —
 —
 —
Adjustments(8) 5
 (2) (5)
Foreign currency translation—
 —
 1
 1
Balance at December 31, 2019$555
 $—
 $96
 $651

Certain repositioning projects in each of our reportable operating segments in 2016, 2015 and 2014 includedwill recognize exit or disposal activities, the costs related to which will be recognized in future periods when the actual liability is incurred. Such exit costs incurred in 2019, 2018 and disposal costs2017 were not significant.

45
In 2018, the other charge of $63 million mainly relates to reserves taken due to the required wind-down of the Company's activities in Iran and the evaluation of potential resolution of a certain legal matter.


44
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



Note 4. Other (Income) Expense

  Years Ended December 31,
  2016 2015 2014
             
Equity (income) loss of affiliated companies $(31) $(30) $(36)
Gain on sale of available for sale investments  -   -   (221)
(Gain) Loss on sale of non-strategic businesses and assets  (178)  1   11 
Interest income  (106)  (104)  (102)
Foreign exchange  12   43   34 
Other, net  201   22   9 
  $(102) $(68) $(305)

Refer

 Years Ended December 31,
2019 2018 2017
Interest income$(255) $(217) $(151)
Pension ongoing income—non-service(606) (1,165) (875)
Other postretirement income—non-service(47) (32) (21)
Equity income of affiliated companies(52) (50) (39)
Loss (gain) on sale of non-strategic business and assets1
 —
 7
Foreign exchange(120) (63) 18
Separation costs—
 321
 16
Other (net)14
 57
 82
 $(1,065) $(1,149) $(963)

Separation costs are associated with the spin-offs of the Company's Homes and Global Distribution business and Transportation Systems business, and are primarily associated with third party services.
For the year ended December 31, 2018 and 2017, Other (net) includes asset impairments in Corporate related to the write-down of a legacy property in connection with its planned disposition. See Note 2 Acquisitions3 Repositioning and Divestitures and Note 12 Long-term Debt and Credit Agreements for further details of transactions recognized in 2016 within Other (income) expense.

Charges.

Note 5. Income Taxes

Income from continuing operations before taxes

  Years Ended December 31,
  2016 2015 2014
U.S. $2,976  $3,361  $3,340 
Non-U.S.  3,471   3,225   2,478 
  $6,447  $6,586  $5,818 

 Years Ended December 31,
2019 2018 2017
U.S.$4,178
 $2,919
 $2,873
Non-U.S.3,381
 4,568
 4,077
 $7,559
 $7,487
 $6,950


Tax expense (benefit)

  Years Ended December 31,
  2016 2015 2014
Tax expense (benefit) consists of            
Current:            
 U.S. Federal $869  $786  $746 
 U.S. State  97   78   39 
 Non-U.S.  559   560   572 
  $1,525  $1,424  $1,357 
Deferred:            
 U.S. Federal $38  $196  $114 
 U.S. State  17   49   63 
 Non-U.S.  21   70   (45)
   76   315   132 
  $1,601  $1,739  $1,489 
46
 Years Ended December 31,
2019 2018 2017
Tax expense (benefit) consists of     
Current:     
U.S. Federal$8
 $(21) $2,061
U.S. State43
 89
 62
Non-U.S.1,099
 1,177
 787
 $1,150
 $1,245
 $2,910
Deferred:     
U.S. Federal$332
 $396
 $190
U.S. State63
 8
 139
Non-U.S.(216) (990) 2,123
 179
 (586) 2,452
 $1,329
 $659
 $5,362




45
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

  Years Ended December 31,
  2016 2015 2014
The U.S. federal statutory income tax rate is reconciled to our effective income tax rate as follows:      
U.S. federal statutory income tax rate  35.0%  35.0%  35.0%
Taxes on non-U.S. earnings below U.S. tax rate(1)  (8.0)  (8.0)  (7.0)
U.S. state income taxes(1)  1.1   1.2   1.2 
Manufacturing incentives  (0.7)  (1.5)  (1.0)
Employee stock ownership plan dividend tax benefit  (0.5)  (0.4)  (0.4)
Tax credits  (0.7)  (1.0)  (1.0)
Reserves for tax contingencies  1.2   0.7   (0.2)
Employee share-based payments  (2.0)  -   - 
All other items—net  (0.6)  0.4   (1.0)
   24.8%  26.4%  25.6%



 Years Ended December 31,
2019 2018 2017
The U.S. federal statutory income tax rate is reconciled to our effective income tax rate as follows:     
U.S. federal statutory income tax rate21.0 % 21.0 % 35.0 %
Taxes on non-U.S. earnings(1)(2)
(0.5) 0.2
 (12.8)
U.S. state income taxes(1)
1.1
 1.6
 1.4
Reserves for tax contingencies2.0
 0.3
 1.6
Employee share-based payments(1.2) (0.7) (2.9)
U.S. Tax Reform(3.6) (5.8) 56.0
Reduction of taxes on unremitted earnings—
 (14.2) —
Separation tax costs—
 5.5
 —
All other items—net(1.2) 0.9
 (1.1)
 17.6 % 8.8 % 77.2 %
(1)Net of changes in valuation allowance

(2)Includes U.S. taxes on non-U.S. earnings

The effective tax rate decreasedincreased by 1.68.8 percentage points in 20162019 compared to 2015.2018. The decreaseincrease was primarily attributable to excessa lower income tax benefitsbenefit resulting from employee share-based payments arising from adoption of the FASB’s amendedrevised guidance related to employee share-based payment accounting, partially offset by increased tax reservesU.S. Tax Reform and internal restructuring initiatives that resulted in various jurisdictions and lower tax benefits from manufacturing incentives.a $281 million reduction of accrued withholding taxes related to unremitted foreign earnings when compared to the prior year. The Company’s non-U.S. effective tax rate was 16.7%26.1%, a decreasean increase of approximately 2.822.0 percentage points compared to 2015.2018. The year-over-year decreaseincrease in the non-U.S. effective tax rate was primarily driven by higher earnings in lower tax rate jurisdictions and a decrease in the tax impact of restructuring and divestitures. The effective tax rate was lower than the U.S. federal statutory rate of 35% primarily due to overall non-U.S. earnings taxed at lower rates.

The effective tax rate increased by 0.8 percentage points in 2015 compared to 2014. The increase was primarily attributable to decreased tax benefits from the resolution of tax audits, partially offset by increased tax benefits from manufacturing incentives, the impact of more income in jurisdictions with lower tax rates and fewer reserves. The Company’s non-U.S. effective tax rate for 2015 was 19.5%, a decrease of approximately 1.8 percentage points compared to 2014. The year-over-year decrease in the non-U.S.foreign effective tax rate was primarily attributable to higher earnings ina lower income tax rate jurisdictions coupled with lower expensebenefit related to reserves in various jurisdictions, partially offset by an increase from the tax impact ofCompany’s internal restructuring and dispositions. initiatives when compared to the prior year.

The effective tax rate decreased by 68.4 percentage points in 2018 compared to 2017. The decrease was lower thanprimarily attributable to internal restructuring initiatives that resulted in a reduction of accrued withholding taxes of approximately $1.1 billion related to unremitted foreign earnings. In addition, we recorded a tax benefit of approximately $440 million as a reduction to our 2017 provisional estimate of impacts from U.S. Tax Reform, which was partially offset by $411 million of tax costs associated with the U.S. federal statutoryinternal restructuring of the Homes and Global Distribution business and Transportation Systems business in advance of their spin-offs. The Company’s non-U.S. effective tax rate was 4.1%, a decrease of 35%approximately 67.3 percentage points compared to 2017. The year over year decrease in the foreign effective tax rate was primarily dueattributable to overall non-U.S.the impact of the Company’s internal restructuring initiatives and the reduction of accrued withholding taxes on unremitted foreign earnings, taxed at lower rates.

partially offset by the spin-off transactions.


46
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Deferred tax assets (liabilities)

The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows:

47
Deferred tax assets:December 31,
2019 2018
Postretirement benefits other than pensions$111
 $120
Asbestos and environmental531
 589
Employee compensation and benefits205
 262
Other accruals and reserves279
 336
Net operating and capital losses652
 688
Tax credit carryforwards246
 154
Gross deferred tax assets2,024
 2,149
Valuation allowance(656) (689)
Total deferred tax assets$1,368
 $1,460
Deferred tax liabilities:   
Pension$(469) $(40)
Property, plant and equipment(469) (422)
Intangibles(1,296) (1,553)
Unremitted earnings of foreign subsidiaries(419) (616)
Other asset basis differences(136) (110)
Other(163) (50)
Total deferred tax liabilities(2,952) (2,791)
Net deferred tax liability$(1,584) $(1,331)

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

  December 31,
Deferred tax assets: 2016 2015
Pension $411  $500 
Postretirement benefits other than pensions  262   292 
Asbestos and environmental  471   473 
Employee compensation and benefits  418   387 
Other accruals and reserves  765   626 
Net operating and capital losses  669   620 
Tax credit carryforwards  206   198 
Gross deferred tax assets  3,202   3,096 
Valuation allowance  (621)  (589)
Total deferred tax assets $2,581  $2,507 
         
Deferred tax liabilities:        
Property, plant and equipment $(560) $(661)
Intangibles  (1,843)  (1,797)
Other asset basis differences  (274)  (293)
Other  (43)  (31)
Total deferred tax liabilities  (2,720)  (2,782)
Net deferred tax liability $(139) $(275)


The change in deferred tax balance was primarily attributable to deferred tax liabilities transferred in connection with the AdvanSix spin-off. OurCompany's gross deferred tax assets include $1,034$767 million related to non-U.S. operations comprised principally of net operating losses, capital loss and tax credit carryforwards (mainly in Canada, France, Germany, Luxembourg and the United Kingdom) and deductible temporary differences. We maintain a valuation allowance of $619$653 million against a portion of the non-U.S. gross deferred tax assets. The change in the valuation allowance resulted in an increasea decrease of $69 million, increase of $114$23 million and decreaseincreases of $10$57 million and $4 million to income tax expense in 2016, 20152019, 2018 and 2014.2017. In the event we determine that we will not be able to realize our net deferred tax assets in the future, we will reduce such amounts through an increase to income tax expense in the period such determination is made. Conversely, if we determine that we will be able to realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded valuation allowance through a reduction to income tax expense in the period that such determination is made.

As of December 31, 2016,2019, the Company recorded a $419 million deferred tax liability on all of our unremitted foreign earnings based on estimated earnings and profits of approximately $16.7 billion as of the balance sheet date.
As of December 31, 2019, the Company's net operating loss, capital loss and tax credit carryforwards were as follows:

Jurisdiction Expiration
Period		 Net Operating
and Capital Loss
Carryforwards		 Tax Credit
Carryforwards
U.S. Federal 2036 $25  $55 
U.S. State 2036  720   26 
Non-U.S. 2035  651   137 
Non-U.S. Indefinite  2,186   - 
    $3,582  $218 

Jurisdiction
Expiration
Period
 
Net Operating
and Capital Loss
Carryforwards
 
Tax Credit
Carryforwards
U.S. Federal2039 $16
 $89
U.S. State2039 389
 20
Non-U.S.2039 277
 142
Non-U.S.Indefinite 2,324
 —
   $3,006
 $251



47
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Many jurisdictions impose limitations on the timing and utilization of net operating loss and tax credit carryforwards. In those instances, whereby there is an expected permanent limitation on the utilization of the net operating loss or tax credit carryforward, the deferred tax asset and amount of the carryforward have been reduced.

U.S. federal income taxes have not been provided on undistributed earnings of the vast majority of our international subsidiaries as it is our intention to reinvest these earnings into the respective subsidiaries. At

48

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

December 31, 2016 Honeywell has not provided for U.S. federal income and non-U.S. withholding taxes on approximately $18.3 billion of such earnings of our non-U.S. operations. It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the resulting U.S. income tax liability.

  2016 2015 2014
Change in unrecognized tax benefits:            
Balance at beginning of year $765  $659  $729 
Gross increases related to current period tax positions  96   56   65 
Gross increases related to prior periods tax positions  88   175   204 
Gross decreases related to prior periods tax positions  (33)  (72)  (277)
Decrease related to resolutions of audits with tax authorities  (3)  (11)  (32)
Expiration of the statute of limitations for the assessment of taxes  (10)  (13)  (10)
Foreign currency translation  (26)  (29)  (20)
Balance at end of year $877  $765  $659 

 2019 2018 2017
Change in unrecognized tax benefits:     
Balance at beginning of year$1,089
 $947
 $877
Gross increases related to current period tax positions51
 370
 94
Gross increases related to prior periods tax positions83
 82
 153
Gross decreases related to prior periods tax positions(34) (201) (91)
Decrease related to resolutions of audits with tax authorities(3) (40) (76)
Expiration of the statute of limitations for the assessment of taxes(13) (50) (54)
Foreign currency translation(9) (19) 44
Balance at end of year$1,164
 $1,089
 $947

As of December 31, 2016, 2015,2019, 2018, and 20142017 there were $877$1,164 million, $765$1,089 million, and $659$947 million of unrecognized tax benefits that if recognized would be recorded as a component of income taxTax expense.

The following table summarizes tax years that remain subject to examination by major tax jurisdictions as of December 31, 2016:

2019:
Jurisdiction
Open Tax Years
Based on Originally Filed Returns
Jurisdiction
Examination in
progress
 
Examination not yet
progress
initiated
U.S. Federal20102015 - 2012, 20142016 2013 - 20162017-2019
U.S. State20082011 - 20142017 2011 - 20162012-2018
Australia2009 - 2015N/A 20162016-2019
Canada(1)
2010 - 20142015-2017 2015 - 20162018-2019
China2003 - 20142009-2018 2015 - 20162019
France2012 - 2014N/A 2005 - 2011, 2015 - 20162017-2019
Germany(1)
2008 - 20122008-2017 2013 - 20162018-2019
India1999 - 20141999-2017 2015 - 20162018-2019
Switzerland(1)Italy2013 - 20142012-2017 2015 - 20162018-2019
Netherlands2016-20172018-2019
Switzerland(1)
2012-20182019
United Kingdom20132013-2017 2014 - 20162018-2019

(1) Includes provincial or similar local jurisdictions, as applicable.


(1)Includes provincial or similar local jurisdictions, as applicable.
Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in our financial statements. In addition, the outcome of these examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in future periods.

Unrecognized tax benefits for examinations in progress were $398$413 million, $349$304 million and $403$487 million, as of December 31, 2016, 2015,2019, 2018, and 2014.2017. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of Tax Expenseexpense in the Consolidated Statement of Operations and totaled $18$73 million, $11$45 million and $24$28 million for the years ended December 31, 2016, 2015,2019, 2018, and 2014.2017. Accrued interest and penalties were $395$487 million, $336$426 million and $325$423 million, as of December 31, 2016, 2015,2019, 2018, and 2014.

49
2017.

48
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



U.S. Tax Reform
During the quarter ending December 31, 2018, the Company completed the accounting for the tax effects of U.S. Tax Reform which amounted to a total tax charge of approximately $3.5 billion, most of whichwas recorded as a provisional estimate at the end of 2017. During 2018, we reduced our provisional estimate by approximately $440 million as a reduction to Tax expense.
Corporate Tax Rate Change—During the years 2018 and 2017, the Company recorded a total tax benefit of approximately $190 million due to the decrease in the corporate statutory tax rate from 35% to 21%. This includes a measurement period adjustment of approximately $90 million recorded during 2018 as a reduction to Tax expense. The change in the provisional estimate primarily relates to information contained in tax returns that were filed during the quarter ending December 31, 2018, some of which require approval from U.S. tax authorities. The tax benefit from the change in tax rates results from the Company’s deferred tax liability position for the excess of its net book value over its tax basis of its U.S. assets and liabilities that will generate future taxable income in excess of book income. This additional taxable income will be subject to tax at a lower corporate tax rate, consequently reducing the Company’s deferred tax liability.
Mandatory Transition Tax—During the years 2018 and 2017, the Company recorded a total tax charge of approximately $1,950 million due to the imposition of the mandatory transition tax (“MTT”) on the deemed repatriation of undistributed foreign earnings. This includes a measurement period adjustment of approximately $50 million recorded during 2018 as an increase to Tax expense. The change in the provisional estimate primarily relates to updated amounts from tax returns that were finalized during 2018, computations based on 2018 testing dates and guidance from the taxing authorities that was received during the year. The Company has elected to pay the MTT liability over a period of eight years.
Undistributed Foreign Earnings—During the years 2018 and 2017, the Company recorded a total tax charge of approximately $1,700 million due to the Company’s intent to no longer permanently reinvest the historical unremitted earnings of its foreign affiliates that existed as of December 31, 2017. This includes a measurement period adjustment of approximately $400 million recorded during 2018 as a reduction to Tax expense. The change in the provisional estimate primarily relates to updated amounts from tax returns that were finalized during 2018, the application of foreign tax credits based on guidance issued during the year and changes to the applicable withholding tax rates in local jurisdictions. The Company also reduced these taxes on unremitted foreign earnings by $281 million and $1.1 billion in 2019 and 2018, respectively, that were recorded as reductions to Tax expense.
Global Intangible Low Taxed Income—U.S. Tax Reform imposes a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. The Company has made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred.

49
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Note 6. Earnings Per Share

The details of the earnings per share calculations for the years ended December 31, 2016, 20152019, 2018 and 20142017 are as follows:

  Years Ended December 31,
Basic 2016 2015 2014
Net income attributable to Honeywell $4,809  $4,768  $4,239 
             
Weighted average shares outstanding  764.3   779.8   784.4 
             
Earnings per share of common stock $6.29  $6.11  $5.40 

  Years Ended December 31,
Assuming Dilution 2016 2015 2014
Net income attributable to Honeywell $4,809  $4,768  $4,239 
             
Average Shares            
Weighted average shares outstanding  764.3   779.8   784.4 
Dilutive securities issuable - stock plans  11.0   9.5   10.8 
Total weighted average diluted shares outstanding  775.3   789.3   795.2 
            
Earnings per share of common stock - assuming dilution $6.20  $6.04  $5.33 

BasicYears Ended December 31,
2019 2018 2017
Net income attributable to Honeywell$6,143
 $6,765
 $1,545
Weighted average shares outstanding721.0
 743.0
 762.1
Earnings per share of common stock$8.52
 $9.10
 $2.03

Assuming DilutionYears Ended December 31,
2019 2018 2017
Net income attributable to Honeywell$6,143
 $6,765
 $1,545
Average Shares     
Weighted average shares outstanding721.0
 743.0
 762.1
Dilutive securities issuable—stock plans9.3
 10.0
 10.0
Total weighted average diluted shares outstanding730.3
 753.0
 772.1
Earnings per share of common stock—assuming dilution$8.41
 $8.98
 $2.00

The diluted earnings per share calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. In 2016, 2015,2019, 2018, and 20142017 the weighted number of stock options excluded from the computations were 7.52.5 million, 7.12.5 million, and 4.72.8 million. These stock options were outstanding at the end of each of the respective periods.


50
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Note 7. Revenue Recognition and Contracts with Customers
The Company has a comprehensive offering of products and services, including software and technologies, that are sold to a variety of customers in multiple end markets. See the following disaggregated revenue table and related discussions by operating segment for details.
 Year Ended December 31,
 2019 2018
Aerospace   
Commercial Aviation Original Equipment$2,997
 $2,833
Commercial Aviation Aftermarket5,731
 5,373
Defense and Space5,326
 4,665
Transportation Systems—
 2,622
 14,054
 15,493
Honeywell Building Technologies   
Homes Products and Software—
 1,732
Distribution (ADI)—
 2,196
Products3,314
 2,953
Building Solutions2,403
 2,417
 5,717
 9,298
Performance Materials and Technologies   
UOP2,890
 2,845
Process Solutions5,146
 4,981
Specialty Products1,062
 1,134
Fluorine Products1,736
 1,714
 10,834
 10,674
Safety and Productivity Solutions   
Safety and Retail2,215
 2,278
Productivity Products1,110
 1,373
Warehouse and Workflow Solutions1,931
 1,829
Sensing & Internet-of-Things (IoT)848
 857
 6,104
 6,337
Net sales$36,709
 $41,802


Aerospace – A global supplier of products, software and services for aircraft. Products include aircraft propulsion engines, auxiliary power units, environmental control systems, integrated avionics, electric power systems, hardware for engine controls, flight safety, communications and navigation, satellite and space components, aircraft wheels and brakes, and thermal systems. Software includes engine controls, flight safety, communications, navigation, radar and surveillance systems, internet connectivity and aircraft instrumentation. Services are provided to customers for the repair, overhaul, retrofit and modification of propulsion engines, auxiliary power units, avionics and mechanical systems and aircraft wheels and brakes. Additionally, Aerospace provides Honeywell Forge for aircraft connected solutions, software and data services designed to improve customers’ efficiency and enable improved operations.
Honeywell Building Technologies – A global provider of products, software, solutions and technologies for buildings. Products include controls and displays for heating, cooling, indoor air quality, ventilation, humidification, combustion, and lighting; sensors, switches, control systems and instruments for measuring pressure, air flow, temperature and electrical current; access control; video surveillance; fire detection; and installation, maintenance and upgrades of systems that keep buildings safe, comfortable and productive. Software includes monitoring and managing heating, cooling, indoor air quality, ventilation, humidification, combustion, and lighting; advanced applications for

51
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


building control and optimization; video surveillance; and remote patient monitoring systems. Installation, maintenance and upgrade services of products used in commercial building applications for heating, cooling, maintaining indoor air quality, ventilation, humidification, combustion, lighting, video surveillance and fire safety. These offerings, including Honeywell Forge for buildings connected solutions, address key energy challenges, keep people and places safe, enhance the building occupant experience, and improve critical infrastructure.
Performance Materials and Technologies – A global provider of products, software, solutions and technologies. Products include catalysts, adsorbents, equipment and high-performance materials, devices for measurement, regulation, control and metering of gases and electricity, and metering and communications systems for water utilities and industries, including Honeywell Forge connected solutions. Honeywell Forge for plant provides seamless integration and connectivity within plants and facilities to provide a holistic view of operations, turning data into clear actions, and Honeywell Forge for cybersecurity helps identify risks and act on cyber-related incidents, together enabling the best operations and protecting process, people and assets. Software is provided to support process technologies supporting automation and to monitor a variety of industrial processes used in industries such as oil and gas, chemicals, petrochemicals, metals, minerals and mining industries. Services are provided for installation and maintenance of products.
Safety and Productivity Solutions – A global provider of products, software and Honeywell Forge for workers connected solutions. Products include personal protection equipment and footwear, gas detection devices, mobile computing, data collection and thermal printing devices, automation equipment for supply chain and warehouse automation and custom-engineered sensors, switches and controls. Software and solutions are provided to customers for supply chain and warehouse automation, to manage data and assets to drive productivity and for computing, data collection and thermal printing.
For a summary by disaggregated product and services sales for each segment, refer to Note 22 Segment Financial Data.
The Company recognizes revenue arising from performance obligations outlined in contracts with its customers that are satisfied at a point in time and over time. The disaggregation of our revenue based off timing of recognition is as follows:
 Year Ended December 31,
 2019 2018
Products, transferred point in time61% 67%
Products, transferred over time14
 12
Net product sales75
 79
Services, transferred point in time9
 7
Services, transferred over time16
 14
Net service sales25
 21
Net sales100% 100%

Contract Balances

Progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded on the Consolidated Balance Sheet in Accounts Notesreceivable - net and Other Receivables

  December 31,
  2016 2015
       
Trade $8,449  $7,901 
Other  674   436 
   9,123   8,337 
Less - Allowance for doubtful accounts  (305)  (262)
  $8,818  $8,075 

assets (unbilled receivables (contract assets) and billed receivables) and Accrued liabilities and Other liabilities (customer advances and deposits (contract liabilities)). Unbilled receivables (contract assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligations to be satisfied over a period of time. Contract liabilities are derecognized when revenue is recorded, either when a milestone is met triggering the contractual right to bill or when the performance obligation is satisfied.


52
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.
The following table summarizes the Company's contract assets and liabilities balances:
 2019 2018
Contract assets—January 1$1,548
 $1,721
Contract assets—December 311,602
 1,548
Change in contract assets—increase (decrease)$54
 $(173)
Contract liabilities—January 1$(3,378) $(2,973)
Contract liabilities—December 31(3,501) (3,378)
Change in contract liabilities—(increase) decrease$(123) $(405)
Net change$(69) $(578)

The net change in 2019 was primarily driven by the receipt of advance payments from customers exceeding recognition of revenue as performance obligations were satisfied prior to billing. The net change in 2018 was primarily driven by the receipt of advance payments from customers exceeding reductions from recognition of revenue as performance obligations were satisfied and related billings. For the year ended December 31, 2019 and 2018, we recognized revenue of $1,543 million and $1,166 million that was previously included in the beginning balance of contract liabilities.

When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications for goods or services and not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When our contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. In situations when our contract includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For any contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation. In such cases, the observable standalone sales are used to determine the stand alone selling price.
Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract.


53
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The following table outlines the Company's remaining performance obligations disaggregated by segment: 
 December 31, 2019
Aerospace$11,315
Honeywell Building Technologies5,515
Performance Materials and Technologies6,527
Safety and Productivity Solutions2,255
 $25,612

Performance obligations recognized as of December 31, 2019 will be satisfied over the course of future periods. Our disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. Performance obligations expected to be satisfied within one year and greater than one year are 57% and 43%.
The timing of satisfaction of the Company's performance obligations does not significantly vary from the typical timing of payment. Typical payment terms of our fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts we may be entitled to receive an advance payment.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed.
Note 8. Accounts Receivable
 December 31,
2019 2018
Trade$7,639
 $7,705
Less—Allowance for doubtful accounts(146) (197)
 $7,493
 $7,508

Trade Receivables includes $1,626$1,586 million and $1,590$1,543 million of unbilled balances under long-term contracts as of December 31, 20162019 and December 31, 2015.2018. These amounts are billed in accordance with the terms of customer contracts to which they relate.

50

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

Note 8.9. Inventories

  December 31,
  2016 2015
Raw materials $1,104  $1,120 
Work in process  775   826 
Finished products  2,552   2,590 
   4,431   4,536 
Reduction to LIFO cost basis  (65)  (116)
  $4,366  $4,420 

 December 31,
2019 2018
Raw materials$1,056
 $1,109
Work in process817
 811
Finished products2,593
 2,445
 4,466
 4,365
Reduction to LIFO cost basis(45) (39)
 $4,421
 $4,326

Inventories valued at LIFO amounted to $296$292 million and $399$294 million at December 31, 20162019 and 2015.2018. Had such LIFO inventories been valued at current costs, theirthe carrying values would have been approximately $65$45 million and $116$39 million higher at December 31, 20162019 and 2015.

2018.


54
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Note 9.10. Property, Plant and Equipment - Equipment—Net

  December 31,
  2016 2015
Land and improvements $363  $367 
Machinery and equipment  9,956   10,505 
Buildings and improvements  3,248   3,188 
Construction in progress  940   848 
   14,507   14,908 
Less—Accumulated depreciation  (8,714)  (9,119)
  $5,793  $5,789 

 December 31,
2019 2018
Land and improvements$251
 $262
Machinery and equipment9,586
 9,435
Buildings and improvements3,152
 3,125
Construction in progress724
 588
 13,713
 13,410
Less—Accumulated depreciation(8,388) (8,114)
 $5,325
 $5,296

Depreciation expense was $726$673 million, $672$721 million and $667$717 million in 2016, 20152019, 2018 and 2014.

2017.

Note 10.11. Goodwill and Other Intangible Assets - Assets—Net

The following table summarizes the change in the carrying amount of goodwill for the years ended December 31, 20162019 and 20152018 by segment is as follows:

  December 31,
2015		 Acquisitions/
Divestitures		 Currency
Translation
Adjustment		 December 31,
2016		 
Aerospace $2,296  $169  $(24) $2,441  
Home and Building Technologies  6,438   820   (156)  7,102  
Performance Materials and Technologies  3,771   (110)  (32)  3,629  
Safety and Productivity Solutions  3,390   1,182   (37)  4,535  
  $15,895  $2,061  $(249) $17,707  
51
segment.
 December 31, 2018 
Acquisitions/
Divestitures
 
Currency
Translation
Adjustment
 December 31, 2019
Aerospace$2,258
 $—
 $8
 $2,266
Honeywell Building Technologies3,238
 (1) (22) 3,215
Performance Materials and Technologies5,147
 —
 (42) 5,105
Safety and Productivity Solutions4,903
 75
 (1) 4,977
 $15,546
 $74
 $(57) $15,563

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)


Other intangible assets are comprised of:

  December 31, 2016 December 31, 2015
  Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount
Determinable life intangibles:                        
Patents and technology $1,841  $(1,141) $700  $1,688  $(1,061) $627 
Customer relationships  3,816   (1,098)  2,718   3,558   (942)  2,616 
Trademarks  284   (156)  128   230   (131)  99 
Other  359   (284)  75   323   (264)  59 
   6,300   (2,679)  3,621   5,799   (2,398)  3,401 
Indefinite life intangibles:                        
Trademarks  1,013   -   1,013   1,176   -   1,176 
  $7,313  $(2,679) $4,634  $6,975  $(2,398) $4,577 

 December 31, 2019 December 31, 2018
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Determinable life intangibles:           
Patents and technology$2,060
 $(1,481) $579
 $1,996
 $(1,332) $664
Customer relationships3,769
 (1,766) 2,003
 3,785
 (1,510) 2,275
Trademarks317
 (228) 89
 326
 (206) 120
Other297
 (262) 35
 349
 (299) 50
 6,443
 (3,737) 2,706
 6,456
 (3,347) 3,109
Indefinite life intangibles:           
Trademarks1,028
 —
 1,028
 1,030
 —
 1,030
 $7,471
 $(3,737) $3,734
 $7,486
 $(3,347) $4,139

Intangible assets amortization expense was $304$415 million, $211$395 million, and $257$398 million in 2016, 2015, 2014.2019, 2018, 2017. Estimated intangible asset amortization expense for each of the next five years approximates $394 million in 2017, $400 million in 2018, $396 million in 2019, $353$355 million in 2020, and $300$317 million in 2021.

2021, $293 million in 2022, $256 million in 2023, and $234 million in 2024.

55
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Note 11.12. Accrued Liabilities

  December 31,
  2016 2015
Customer advances and deferred income $2,151  $1,863 
Compensation, benefit and other employee related  1,489   1,460 
Asbestos related liabilities  546   292 
Repositioning  322   335 
Product warranties and performance guarantees  351   355 
Environmental costs  252   253 
Income taxes  430   201 
Accrued interest  97   97 
Other taxes  290   266 
Insurance  172   205 
Other (primarily operating expenses)  948   950 
  $7,048  $6,277 
52
 December 31,
2019 2018
Customer advances and deferred income$2,490
 $2,403
Compensation, benefit and other employee related1,551
 1,469
Repositioning640
 566
Asbestos related liabilities361
 245
Income taxes253
 166
Other taxes239
 234
Environmental costs222
 175
Product warranties and performance guarantees213
 243
Operating lease liabilities171
 —
Insurance143
 170
Accrued interest91
 94
Other (primarily operating expenses)1,102
 1,094
 $7,476
 $6,859




56
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



Note 12.13. Long-term Debt and Credit Agreements

  December 31,
  2016 2015
5.40% notes due 2016 $-  $400 
5.30% notes due 2017  -   400 
Floating rate Euro notes due 2018  1,054   - 
5.30% notes due 2018  -   900 
5.00% notes due 2019  -   900 
1.40% notes due 2019  1,250   - 
Floating rate notes due 2019  250   - 
0.65% Euro notes due 2020  1,054   - 
4.25% notes due 2021  800   800 
1.85% notes due 2021  1,500   - 
1.30% Euro notes due 2023  1,317   - 
3.35% notes due 2023  300   300 
2.50% notes due 2026  1,500   - 
2.25% Euro notes due 2028  790   - 
5.70% notes due 2036  550   550 
5.70% notes due 2037  600   600 
5.375% notes due 2041  600   600 
Industrial development bond obligations, floating rate maturing at various dates through 2037  30   30 
6.625% debentures due 2028  216   216 
9.065% debentures due 2033  51   51 
Other (including capitalized leases and debt issuance costs),
0.7%-8.2% maturing at various dates through 2023		  547   384 
   12,409   6,131 
Less: current portion  (227)  (577)
  $12,182  $5,554 

 December 31,
2019 2018
1.40% notes due 2019$—
 $1,250
Three year floating rate notes due 2019—
 250
Two year floating rate notes due 2019—
 450
1.80% notes due 2019—
 750
0.65% Euro notes due 20201,123
 1,145
4.25% notes due 2021800
 800
1.85% notes due 20211,500
 1,500
2.15% notes due 2022600
 —
Floating rate notes due 2022600
 —
1.30% Euro notes due 20231,404
 1,432
3.35% notes due 2023300
 300
2.30% notes due 2024750
 —
2.50% notes due 20261,500
 1,500
2.25% Euro notes due 2028842
 859
2.70% notes due 2029750
 —
5.70% notes due 2036441
 441
5.70% notes due 2037462
 462
5.375% notes due 2041417
 417
3.812% notes due 2047445
 445
Industrial development bond obligations, floating rate maturing at various dates through 203722
 22
6.625% debentures due 2028201
 201
9.065% debentures due 203351
 51
Other (including finance leases and debt issuance costs), 6.6% weighted average maturing at various dates through 2025278
 353
 12,486
 12,628
Less: current portion(1,376) (2,872)
 $11,110
 $9,756

The schedule of principal payments on long-term debt is as follows:

  December 31,
2016
2017 $227 
2018  1,122 
2019  1,550 
2020  1,299 
2021  2,312 
Thereafter  5,899 
   12,409 
Less-current portion  (227)
  $12,182 

In February 2016,

 December 31, 2019
2020$1,376
20212,375
20221,242
20231,733
2024780
Thereafter4,980
 12,486
Less-current portion(1,376)
 $11,110


57
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


On August 8, 2019, the Company issued €1,000$600 million 2.15% Senior Notes due 2022, $600 million Floating Rate Senior Notes due 2018, €1,0002022, $750 million 0.65%2.30% Senior Notes due 2020, €1,2502024 and $750 million 1.30%2.70% Senior Notes due 2023 and €750 million 2.25% Senior Notes due 20282029 (collectively the “Euro Notes”"2019 Notes"). The Euro2019 Notes are senior unsecured and unsubordinated obligations of Honeywell and rank equally with all of Honeywell’s existing and future senior unsecured debt and

53

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

senior to all of Honeywell’s subordinated debt. The offering resulted in gross proceeds of $4,438 million, offset by $23 million in discount and closing costs related to the offering.

In October 2016, the Company issued $1,250 million 1.40% Senior Notes due 2019, $250 million Floating Rate Senior Notes due 2019, $1,500 million 1.85% Senior Notes due 2021 and $1,500 million 2.50% Senior Notes due 2026 (collectively, the “Notes”). The Notes are senior unsecured and unsubordinated obligations of Honeywell and rank equally with all of Honeywell’sHoneywell's existing and future senior unsecured debt and senior to all of Honeywell’sHoneywell's subordinated debt. The offering resulted in gross proceeds of $4,500$2,700 million, offset by $27$18 million in discount and closing costs related to the offering.

In

For the fourth quarter of 2016,issuances described above, unless otherwise noted, all debt issuance costs are deferred and recognized as a direct deduction to the related debt liability and are amortized to interest expense over the debt term.
On October 30, 2019, the Company repurchasedpaid its 1.40% notes due 2019, Three year floating rate notes due 2019, Two year floating rate notes due 2019 and 1.80% notes due 2019.
In connection with the entire outstanding principal amountGarrett spin-off, wholly owned subsidiaries of its $400Garrett issued notes and entered new credit facilities, which obligations were retained by Garrett in the spin-off. On September 27, 2018 the Company received net proceeds of $1,604 million 5.30 % Senior Notes due 2017, $900from such borrowings.
In connection with the Resideo spin-off, wholly owned subsidiaries of Resideo issued notes and entered new credit facilities, which obligations were retained by Resideo in the spin-off. On October 25, 2018 the Company received net proceeds of $1,197 million 5.30% Senior Notes due 2018 and $900 million 5.00% Senior Notes due 2019. The cost related to the early redemption, including the “make whole premium”, was $126 million which was recorded in Other (income) expense.

from such borrowings.

On April 29, 2016,26, 2019, the Company entered into Amendment No. 2 (Amendment) to thea $4.0 billion Amended and Restated $4 billionFive Year Credit Agreement dated as of July 10, 2015, as amended by the certain Amendment No. 1 dated as of September 30, 2015 (as so amended, the “Credit(the “5-Year Credit Agreement”), with a syndicate of banks. The 5-Year Credit Agreement is maintained for general corporate purposes. Commitments under the 5-Year Credit Agreement can be increased pursuant to the terms of the 5-Year Credit Agreement to an aggregate amount not to exceed $4.5 billion. The Amendment, among other things, extends5-Year Credit Agreement amends and restates the previously reported $4.0 billion amended and restated five-year credit agreement dated as of April 27, 2018 (the "Prior Agreement"). The 5-Year Credit Agreement’s termination date from July 10, 2020 to July 10, 2021.

Agreement has substantially the same material terms and conditions as the Prior Agreement.

On April 29, 2016,26, 2019, the Company entered into a $1.5 billion 364-Day Credit Agreement (364-Day Credit Agreement) with a syndicate of banks. TheThis 364-Day Credit Agreement is maintained for general corporate purposes.

On April 29, 2016, the Company terminated all commitments under the $3 billion credit agreement dated as of September 30, 2015, among the Company, the lenders party thereto and Citibank, N.A., as administrative agent. A full description of the Credit Agreement and the 364-Day Credit Agreement can be found in the Company’s Current Report on Form 8-K, dated April 29, 2016.

On August 5, 2016, the Company entered into a $1.5 billion 364-Day Credit Agreement (Second 364-Day Credit Agreement) with a syndicate of banks. The Second 364-Day Credit Agreement is maintained for general corporate purposes. A full description of the Second 364-day Credit Agreement can be found in the Company’s Current Report on Form 8-K, dated August 5, 2016.

On December 23, 2016, the Company terminated all commitments under the Second 364-day credit agreement dated as of August 5, 2016, among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

There have been no borrowings under any of the credit agreements previously described.

Note 13. Lease Commitments

Future14. Leases


Adoption

Effective January 1, 2019, the Company adopted the new lease accounting standard using the modified retrospective method of applying the new standard at the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry forward the historical lease classification. Adoption of this standard resulted in the recording of net operating lease right-of-use (ROU) assets and corresponding operating lease liabilities of $0.7 billion. Financial position for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance.
A significant portion of the Company's operating and finance lease portfolio includes corporate offices, research and development facilities, manufacturing sites, information technology (IT) equipment, and automobiles. The majority of our leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more. Operating lease ROU assets are presented within Other assets. The current portion of operating lease liabilities are presented within Accrued liabilities, and the non-current portion of operating lease liabilities are presented within Other liabilities on the Consolidated Balance Sheet. Finance lease assets are included in Property, plant and equipment - net, and the finance lease obligations are included in Current maturities of long-term debt, and in Long-term debt on the Consolidated Balance Sheet.


58
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


A portion of the Company's real estate leases is generally subject to annual changes in the Consumer Price Index (CPI). The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of our automobile leases is considered variable. The variable lease payments for such automobiles leases are based on actual mileage incurred at the stated contractual rate and recognized in the period in which the obligation for those payments was incurred.
 Year Ended December 31, 2019
Operating lease cost$222
Variable lease cost27
Short-term lease cost12
Finance lease cost: 
Amortization of right-of-use assets65
Interest on lease liability30
Total finance lease cost95
Total lease cost$356

Supplemental cash flow information related to leases was as follows:
 Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leases$224
Operating cash flows from finance leases32
Financing cash flows from finance leases61
Right-of-use assets obtained in exchange for lease obligations: 
Operating leases$179
Finance leases34


59
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Supplemental balance sheet information related to leases was as follows:
 December 31, 2019
Operating leases 
Other assets$673
Accrued liabilities171
Other liabilities534
Total operating lease liabilities$705
Finance leases 
Property, plant and equipment$361
Accumulated depreciation(152)
Property, plant and equipment - net$209
Current maturities of long-term debt59
Long-term debt156
Total finance lease liabilities$215
Weighted-average remaining lease term 
Operating leases6 years
Finance leases4 years
Weighted-average discount rate 
Operating leases3.3%
Finance leases16.2%

As of December 31, 2019, maturities of lease liabilities were as follows:
 Operating LeasesFinance Leases
2020$195
$86
2021162
73
2022128
53
202397
41
202463
37
Thereafter145
12
Total lease payments790
302
Less: interest(85)(87)
Total$705
$215

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments underfor operating leases having initial or remaining noncancellable lease terms in excess of one year arewould have been as follows:

54
 At December 31, 2018
2019$210
2020168
2021142
2022109
202380
Thereafter147
 $856



60
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

  At December 31,
2016
2017 $289 
2018  216 
2019  158 
2020  110 
2021  94 
Thereafter  256 
  $1,123 

Rent expense was $387 million, $390 million and $420 million in 2016, 2015 and 2014.



Note 14.15. Financial Instruments and Fair Value Measures

Credit and Market Risk—Risk—Financial instruments, including derivatives, expose usthe Company to counterparty credit risk for nonperformance and to market risk related to changes in interest and currency exchange rates. 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 and currency exchange rates and restrict the use of derivative financial instruments to hedging activities.

We

The Company continually monitormonitors the creditworthiness of ourits customers to which we grantit grants credit terms in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single customer or a small group of customers.

Foreign Currency Risk Management—We conduct ourManagement—The Company conducts 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 primary objective is to preserve the U.S. Dollar value of foreign currency denominated cash flows and earnings. We attempt to hedgemonitor our collective foreign currency exposures with natural offsets to the fullest extent possibleexposure and once these opportunities have been exhausted, throughenter into foreign currency exchange forward and option contracts (foreign currency exchange contracts) with third parties.

We hedgeparties, when necessary, to minimize the impact of changes in foreign currency exchange rates.

The Company has 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 partiallymay purchase or enter into derivative instruments to hedge our foreign currency exposure. We hedge forecasted sales and purchases, which occur in the next twelve months and are denominated in non-functional currencies, with foreign currency exchange 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 thethese foreign currency exchange 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 contracts mature in the next twelve months. AtAs of December 31, 20162019 and 2015,2018, we had contracts with notional amounts of $9,554$12,746 million and $10,538$14,995 million to exchange foreign currencies, principally the U.S. Dollar, Euro, Canadian Dollar, British Pound, Canadian Dollar,Mexican Peso, Chinese Renminbi, Indian Rupee, Mexican Peso, Singapore Dollar, U.A.E. DirhamMalaysian Ringgit, and Swiss Franc.

We have As of December 31, 2019, we estimate that approximately $52 million of net derivative gains related to our cash flow hedges included in Accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months.

The Company has also designated foreign currency debt and certain derivative contracts as hedges against portions of ourits net investment in foreign operations during the year ended December 31, 2016.2019. Gains or losses on the effective portion of the foreign currency debt and derivative contracts designated as a net investment hedge are recorded in the same manner as foreign currency translation adjustments. The Company did not have ineffectiveness related to net investment hedges during the year ended December 31, 2016.

55

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

Interest Rate Risk Management—We useManagement—Financial instruments, including derivatives, expose the Company to market risk related to changes in interest rates. The Company uses 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 December 31, 20162019 and 2015,2018, interest rate swap agreements designated as fair value hedges effectively changed $1,850$3,950 million and $1,100$2,600 million of fixed rate debt at rates of 3.39%2.87% and 4.00%2.93% to LIBOR based floating rate debt. Our interest rate swaps mature at various dates through 2026.

2029.


61
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Fair Value of Financial Instruments—The FASB’s accounting guidance definesfor fair value as the price that would be received to sell an assetmeasurements and disclosures establishes a three-level fair value hierarchy.
Level 1-Inputs are based on quoted prices in active markets for identical assets and liabilities.
Level 2-Inputs are based on observable inputs other than quoted prices in active markets for identical or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

similar assets and liabilities.

Level 3-One or more inputs are unobservable and significant.
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 following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 20162019 and 2015:

  December 31,
  2016 2015
Assets:        
Foreign currency exchange contracts $152  $28 
Available for sale investments  1,670   1,501 
Interest rate swap agreements  69   92 
         
Liabilities:        
Foreign currency exchange contracts $2  $17 
Interest rate swap agreements  48   - 

2018:

 December 31,
2019 2018
Assets:   
Foreign currency exchange contracts$291
 $119
Available for sale investments1,523
 1,784
Interest rate swap agreements38
 20
Cross currency swap agreements51
 32
Liabilities:   
Foreign currency exchange contracts$21
 $4
Interest rate swap agreements13
 65

The foreign currency exchange contracts, and interest rate swap agreements, and cross currency swap agreements 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 published prices based off observable market data. As such, these investments are classified within level 2.

The Company also holds available for sale investments in U.S. government and corporate debt securities valued utilizing published prices based on quoted market pricing, which are classified within level 1.

The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper (of which $3,513 million and $3,583 million was Euro denominated as of December 31, 2019 and 2018) and short-term borrowings contained in the Consolidated Balance Sheet approximates fair value.
The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:

  December 31, 2016 December 31, 2015
  Carrying
Value		 Fair
Value		 Carrying
Value		 Fair
Value
Assets                
Long-term receivables $280  $273  $292  $283 
Liabilities                
Long-term debt and related current maturities $12,409  $13,008  $6,131  $6,721 

 December 31, 2019 December 31, 2018
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
Assets       
Long-term receivables$129
 $127
 $333
 $329
Liabilities       
Long-term debt and related current maturities$12,486
 $13,578
 $12,628
 $13,133

The following table sets forth the amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:
Line in the Consolidated Balance
Sheet of Hedged Item
Carrying Amount of the Hedged Item Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
December 31,
2019		 December 31,
2018		 December 31,
2019		 December 31,
2018
Long-term debt$3,975
 $2,555
 $25
 $(45)


62
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The Company determined the fair value of the long-term receivables by discounting based uponutilizing transactions in the terms of the receivable and counterparty details including credit quality.listed markets for identical or similar assets. As such, the fair value of these receivables is considered level 2. The Company determined the fair value of the long-term debt and related current maturities utilizing transactions in the listed markets for identical or similar liabilities. As such, the fair value of the long-term debt and related current maturities is considered level 2 as well.

2.

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

56

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

being hedged. LossesGains and losses on interest rate swap agreements recognized in earnings were $71$70 million of income, $37 million of expense and $2$29 million of expense in the years ended December 31, 20162019, 2018 and 2015. Gains on interest rate swap agreements recognized in earnings were $38 million in the year ended December 31, 2014.2017. Gains and losses are fully offset by losses and gains on the underlying debt being hedged.

We also

The Company economically hedge ourhedges its exposure to changes in foreign exchange rates principally with forward contracts. These contracts are marked-to-market with the resulting gains and losses recognized in earnings offsetting the gains and losses on the non-functional currency denominated monetary assets and liabilities being hedged. We recognized $232$106 million of income, in other (income) expense in the year ended December 31, 2016. We recognize $86$394 million of income, and $181$207 million of expense in otherOther (income) expense in the years ended December 31, 20152019, 2018 and 2014. See Note 4 Other (Income) Expense for further details2017.
The following tables summarize the location and impact to the Consolidated Statement of Operations related to fair value and cash flow hedging relationships:
 Year Ended December 31, 2019
Revenue 
Cost of
Products
Sold
 SG&A 
Other
(Income)
Expense
 
Interest
and Other
Financial
Charges
 $36,709
 $19,269
 $5,519
 $(1,065) $357
Gain or (loss) on cash flow hedges:         
Foreign Currency Exchange Contracts:         
Amount reclassified from accumulated other comprehensive income into income3
 44
 1
 73
 —
Amount excluded from effectiveness testing recognized in earnings using an amortization approach—
 22
 —
 35
 —
Gain or (loss) on fair value hedges:         
Interest Rate Swap Agreements:         
Hedged Items—
 —
 —
 —
 (70)
Derivatives designated as hedges—
 —
 —
 —
 70
 Year Ended December 31, 2018
Revenue 
Cost of
Products
Sold
 SG&A Other (Income) Expense 
Interest
and Other
Financial
Charges
 $41,802
 $23,634
 $6,051
 $(1,149) $367
Gain or (loss) on cash flow hedges:         
Foreign Currency Exchange Contracts:         
Amount reclassified from accumulated other comprehensive income into income(9) (35) (2) 47
 —
Amount excluded from effectiveness testing recognized in earnings using an amortization approach—
 6
 —
 9
 —
Gain or (loss) on fair value hedges:         
Interest Rate Swap Agreements:         
Hedged Items—
 —
 —
 —
 37
Derivatives designated as hedges—
 —
 —
 —
 (37)

63
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The following table summarizes the amounts of gain or (loss) on net impact of these economic foreign currency hedges.

investment hedges recognized in Accumulated other comprehensive income (loss):
Derivatives Net Investment Hedging RelationshipsYears Ended December 31,
2019 2018
Euro-denominated long-term debt$68
 $177
Euro-denominated commercial paper71
 168
Cross currency swap32
 44
Foreign currency exchange contracts23
 —

Note 15.16. Other Liabilities

  Years Ended
December 31,
  2016 2015
Pension and other employee related $2,084  $2,461 
Income taxes  1,041   1,009 
Environmental  259   265 
Insurance  253   257 
Asset retirement obligations  63   65 
Deferred income  81   99 
Other  329   192 
  $4,110  $4,348 

 December 31,
2019 2018
Income taxes$2,115
 $2,236
Pension and other employee related1,873
 1,795
Deferred income1,310
 1,264
Operating lease liabilities534
 —
Environmental487
 580
Insurance247
 236
Asset retirement obligations61
 74
Product warranties and performance guarantees56
 67
Other83
 150
 $6,766
 $6,402

Note 16.17. Capital Stock

We are

Honeywell is authorized to issue up to 2,000,000,000 shares of common stock, with a par value of $1. Common shareowners are entitled to receive such dividends as may be declared by the Board of Directors, are entitled to one vote per share, and are entitled, in the event of liquidation, to share ratably in all the assets of Honeywell which are available for distribution to the common shareowners. Common shareowners do not have preemptive or conversion rights. Shares of common stock issued and outstanding or held in the treasury are not liable to further calls or assessments. There are no restrictions on us relative to dividends or the repurchase or redemption of common stock.

In

On April 2016,29, 2019, the Board of Directors authorized the repurchase of up to $5a total of $10.0 billion of Honeywell common stock, which included amounts remaining under, and approximately $4.1replaced, the previously approved share repurchase program. Approximately $7.0 billion and $3.7 billion remained available as of December 31, 2016. Under the Company’s previous share repurchase plan announced in December 2013 the Board of Directors authorized the repurchase of up to $5 billion of Honeywell common stock2019, and $2.2 billion remained available as of December 31, 2015.

We purchased2018 for additional share repurchases.

Honeywell repurchased approximately 19.3 million and 18.826.5 million shares of ourits common stock in 2016both 2019 and 2015,2018, for $2,079$4,400 million and $1,884$4,000 million.

We are

Honeywell is authorized to issue up to 40,000,000 shares of preferred stock, without par value, and can determine the number of shares of each series, and the rights, preferences and limitations of each series. At December 31, 2016,2019, there was no preferred stock outstanding.

57

64
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



Note 17.18. Accumulated Other Comprehensive Income (Loss)

The changes in accumulatedAccumulated other comprehensive income (loss) are provided in the tables below. Comprehensive income (loss) attributable to noncontrolling interest consists predominantly of net income.

    Pretax   Tax   After Tax 
 Year Ended December 31, 2016            
  Foreign exchange translation adjustment $(52) $-  $(52)
  Pensions and other postretirement benefit adjustments  (336)  101   (235)
  Changes in fair value of effective cash flow hedges  134   (26)  108 
   $(254) $75  $(179)
 Year Ended December 31, 2015            
  Foreign exchange translation adjustment $(1,152) $-  $(1,152)
  Pensions and other postretirement benefit adjustments  129   (45)  84 
  Changes in fair value of effective cash flow hedges  (11)  3   (8)
   $(1,034) $(42) $(1,076)
 Year Ended December 31, 2014            
  Foreign exchange translation adjustment $(1,044) $-  $(1,044)
  Pensions and other postretirement benefit adjustments  (1,707)  624   (1,083)
  Changes in fair value of available for sale investments  (246)  76   (170)
  Changes in fair value of effective cash flow hedges  24   (4)  20 
   $(2,973) $696  $(2,277)

 Pre-tax Tax After-Tax
Year Ended December 31, 2019     
Foreign exchange translation adjustment$143
 $—
 $143
Pensions and other postretirement benefit adjustments115
 (29) 86
Changes in fair value of designated cash flow hedges20
 (9) 11
 $278
 $(38) $240
Year Ended December 31, 2018     
Foreign exchange translation adjustment$(728) $—
 $(728)
Pensions and other postretirement benefit adjustments(727) 168
 (559)
Changes in fair value of designated cash flow hedges102
 (17) 85
 $(1,353) $151
 $(1,202)
Year Ended December 31, 2017     
Foreign exchange translation adjustment$(37) $—
 $(37)
Pensions and other postretirement benefit adjustments847
 (170) 677
Changes in fair value of designated cash flow hedges(194) 33
 (161)
 $616
 $(137) $479
Components of Accumulated Other Comprehensive Income (Loss)

   December 31, 
   2016 2015  
 Cumulative foreign exchange translation adjustment $(1,944) $(1,892) 
 Pensions and other postretirement benefit adjustments  (879)  (644) 
 Fair value of available for sale investments  -   -  
 Fair value of effective cash flow hedges  109   1  
   $(2,714) $(2,535) 

58

 December 31,
2019 2018
Cumulative foreign exchange translation adjustment$(2,566) $(2,709)
Pensions and other postretirement benefit adjustments(675) (761)
Fair value of designated cash flow hedges44
 33
 $(3,197) $(3,437)

65
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



Changes in Accumulated Other Comprehensive Income (Loss) by Component

   Foreign
Exchange
Translation
Adjustment		   Pension
and Other
Postretirement
Adjustments		   Changes in
Fair Value of
Effective
Cash Flow
Hedges		   Total 
                 
Balance at December 31, 2014 $(740) $(728) $9  $(1,459)
Other comprehensive income  (loss) before reclassifications  (1,152)  23   91   (1,038)
Amounts reclassified from  accumulated other  comprehensive income (loss)  -   61   (99) (38)
Net current period other  comprehensive income (loss)  (1,152)  84   (8) (1,076)
Balance at December 31, 2015 $(1,892) $(644) $1  $(2,535)
Other comprehensive income  (loss) before reclassifications  (52)  (388)  103   (337)
Amounts reclassified from  accumulated other  comprehensive income  -   153   5   158 
Net current period other  comprehensive income (loss)  (52)  (235)  108   (179)
Balance at December 31, 2016 $(1,944) $(879) $109  $(2,714)

 
Foreign
Exchange
Translation
Adjustment
 
Pension
and Other
Postretirement
Adjustments
 
Changes in
Fair Value of
Cash Flow
Hedges
 Total
Balance at December 31, 2017$(1,981) $(202) $(52) $(2,235)
Other comprehensive income (loss) before reclassifications(685) (569) 89
 (1,165)
Amounts reclassified from accumulated other comprehensive income—
 (37) (4) (41)
Spin-off(43) 47
 —
 4
Net current period other comprehensive income (loss)(728) (559) 85
 (1,202)
Balance at December 31, 2018$(2,709) $(761) $33
 $(3,437)
Other comprehensive income (loss) before reclassifications156
 149
 103
 408
Amounts reclassified from accumulated other comprehensive income(13) (63) (92) (168)
Net current period other comprehensive income (loss)143
 86
 11
 240
Balance at December 31, 2019$(2,566) $(675) $44
 $(3,197)

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

  Year Ended December 31, 2016
Affected Line in the Consolidated Statement of Operations		 
    
  Product
Sales		  Cost of
Products
Sold		  Cost of
Services
Sold		  Selling, General
and
Administrative
Expenses		  Total 
Amortization of Pension and  Other Postretirement Items:                      
Actuarial losses recognized $-  $214  $44  $46  $304 
Prior service (credit)  recognized  -   (87)  (18)  (18)  (123)
Settlements and  curtailments  -   (4)  (1)  (1)  (6)
Losses (gains) on cash flow  hedges  3   16   3   (5)  17 
Total before tax $3  $139  $28  $22  $192 
Tax expense (benefit)   (34)
Total reclassifications for the period, net of tax  $158 
59

 Year Ended December 31, 2019
Affected Line in the Consolidated Statement of Operations
Product
Sales
 
Cost of
Products
Sold
 
Cost of
Services
Sold
 
Selling,
General and
Admin.
Expenses
 
Other
(Income)
Expense
 Total
Amortization of Pension and Other Postretirement Items:           
Actuarial losses recognized$—
 $—
 $—
 $—
 $135
 $135
Prior service (credit) recognized—
 —
 —
 —
 (104) (104)
Settlements and curtailments—
 —
 —
 —
 —
 —
Losses (gains) on cash flow hedges(3) (35) (9) (1) (73) (121)
Losses (gains) on net investment hedges—
 —
 —
 —
 (19) (19)
Total before tax$(3) $(35) $(9) $(1) $(61) $(109)
Tax expense (benefit) (59)
Total reclassifications for the period, net of tax $(168)

66
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

  Year Ended December 31, 2015
Affected Line in the Consolidated Statement of Operations		 
    
  Product
Sales		  Cost of
Products
Sold		  Cost of
Services
Sold		  Selling, General
and
Administrative
Expenses		  Total 
Amortization of Pension and  Other Postretirement Items:                    
Actuarial losses recognized $-  $78  $16  $17  $111 
Prior service (credit)  recognized  -   (14)  (3)  (3)  (20)
Settlements and  curtailments  -   2   -   -   2 
Losses (gains) on cash flow  hedges  (17)  (73)  (17)  (2)  (109)
Total before tax $(17) $(7) $(4) $12  $(16)
Tax expense (benefit) (22)
Total reclassifications for the period, net of tax$(38)


 Year Ended December 31, 2018
Affected Line in the Consolidated Statement of Operations
Product
Sales
 
Cost of
Products
Sold
 
Cost of
Services
Sold
 
Selling,
General and
Admin.
Expenses
 
Other
(Income)
Expense
 Total
Amortization of Pension and Other Postretirement Items:           
Actuarial losses recognized$—
 $—
 $—
 $—
 $45
 $45
Prior service (credit) recognized—
 —
 —
 —
 (99) (99)
Settlements and curtailments—
 —
 —
 —
 2
 2
Losses (gains) on cash flow hedges10
 30
 6
 2
 (47) 1
Total before tax$10
 $30
 $6
 $2
 $(99) $(51)
Tax expense (benefit) 10
Total reclassifications for the period, net of tax $(41)

Note 18.19. Stock-Based Compensation Plans

The 2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (2016 Plan) and 2016 Stock Plan for Non-Employee Directors of Honeywell International Inc. (2016 Directors Plan) were both approved by the shareowners at the Annual Meeting of Shareowners effective on April 25, 2016. Following approval of both plans, we have not and will not grant any new awards under any previously existing stock-based compensation plans. At December 31, 2016,2019, there were 46,365,609,37,364,854, and 960,609866,273 shares of Honeywell common stock available for future grants under terms of the 2016 Plan and 2016 Directors Plan, respectively.

Stock Options—The exercise price, term and other conditions applicable to each option granted under ourthe Company's stock plans are generally determined by the Management Development and Compensation Committee of the Board. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of our stock on that date. The fair value is recognized as an expense over the employee’s requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on our common stock and historical volatility of our common stock. We used a Monte Carlo simulation model to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.

Compensation cost on a pre-tax basis related

The following table summarizes the impact to the Consolidated Statement of Operations from stock options recognizedoptions:
 Years Ended December 31,
2019 2018 2017
Compensation expense$47
 $64
 $79
Future income tax benefit recognized10
 13
 17


67
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in selling, general and administrative expenses in 2016, 2015 and 2014 was $87 million, $78 million and $85 million. The associated future income tax benefit recognized in 2016, 2015 and 2014 was $29 million, $26 million and $31 million.

millions, except per share amounts)



The following table sets forth fair value per share information, including related weighted-average assumptions, used to determine compensation cost:

cost.
 Years Ended December 31,
2019 2018 2017
Weighted average fair value per share of options granted during the year(1)
$21.57
 $23.63
 $16.68
Assumptions:     
Expected annual dividend yield2.65% 2.49% 2.81%
Expected volatility18.40% 18.93% 18.96%
Risk-free rate of return2.46% 2.71% 2.02%
Expected option term (years)4.87
 4.95
 5.04
60
(1)Estimated on date of grant using Black-Scholes option-pricing model.

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

   Years Ended December 31, 
   2016  2015  2014 
 Weighted average fair value per share of options granted during the year(1) $15.59  $17.21  $16.35 
 Assumptions:            
  Expected annual dividend yield  2.92%  1.98%  2.05%
  Expected volatility  23.07%  21.55%  23.06%
  Risk-free rate of return  1.29%  1.61%  1.48%
  Expected option term (years)  4.97   4.96   4.99 

  (1) Estimated on date of grant using Black-Scholes option-pricing model.

The following table summarizes information about stock option activity for the three years ended December 31, 2016:

      Weighted
      Average
   Number of Exercise
   Options Price
 Outstanding at December 31, 2013  30,663,837  $53.27 
  Granted  5,823,706   93.95 
  Exercised  (5,697,263)  47.47 
  Lapsed or canceled  (1,294,668)  67.70 
 Outstanding at December 31, 2014  29,495,612   61.80 
  Granted  5,967,256   103.87 
  Exercised  (4,190,298)  53.40 
  Lapsed or canceled  (703,132)  84.31 
 Outstanding at December 31, 2015  30,569,438   70.76 
  Granted  6,281,053   103.51 
  Exercised  (7,075,852)  57.41 
  Lapsed or canceled  (1,107,339)  96.81 
 Outstanding at December 31, 2016  28,667,300  $79.57 
 Vested and expected to vest at December 31, 2016(1)  27,067,969  $78.14 
 Exercisable at December 31, 2016  15,536,961  $63.39 

(1) Represents the sum of vested options of 15.5 million and expected to vest options of 11.6 million. Expected to vest options are derived by applying the pre-vesting forfeiture rate assumption to total outstanding unvested options of 13.4 million.

2019:

 
Number of
Options
 
Weighted
Average
Exercise
Price
Outstanding at December 31, 201628,667,300
 $79.57
Granted5,098,569
 125.16
Exercised(8,840,019) 62.34
Lapsed or canceled(1,516,557) 109.04
Outstanding at December 31, 201723,409,293
 94.16
Spin related adjustment(1)
989,158
  
Granted3,303,722
 148.48
Exercised(3,399,375) 78.29
Lapsed or canceled(1,824,217) 123.01
Outstanding at December 31, 201822,478,581
 97.83
Granted3,136,058
 155.43
Exercised(5,897,060) 84.31
Lapsed or canceled(986,017) 136.15
Outstanding at December 31, 201918,731,562
 $109.87
Vested and expected to vest at December 31, 2019(2)
17,636,444
 $107.39
Exercisable at December 31, 201911,620,992
 $92.19
(1)Additional options granted to offset the dilutive impact of the spin-offs on outstanding options.
(2)Represents the sum of vested options of 11.6 million and expected to vest options of 6.0 million. Expected to vest options are derived by applying the pre-vesting forfeiture rate assumption to total outstanding unvested options of 7.1 million.

68
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The following table summarizes information about stock options outstanding and exercisable at December 31, 2016:

2019:
Range of Exercise PricesOptions Outstanding Options Exercisable
Number
Outstanding
 
Weighted
Average Life(1)
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
 
Number
Exercisable
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
$27.00–$64.991,621,042
 1.87 $55.38
 $197
 1,621,042
 $55.38
 $197
$65.00–$89.993,388,800
 3.74 79.79
 329
 3,388,800
 79.79
 329
$90.00–$99.995,266,409
 5.70 98.80
 412
 4,461,659
 98.81
 349
$100.00–$134.993,344,472
 7.11 119.07
 194
 1,636,518
 118.65
 95
$135.00–$180.995,110,839
 8.76 152.49
 125
 512,973
 148.52
 15
 18,731,562
 6.10 $109.87
 $1,257
 11,620,992
 $92.19
 $985
61
(1)Average remaining contractual life in years.

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

   Options Outstanding Options Exercisable
             Weighted           Weighted     
         Weighted   Average   Aggregate       Average   Aggregate 
 Range of   Number   Average   Exercise   Intrinsic   Number   Exercise   Intrinsic 
 Exercise prices   Outstanding   Life(1)   Price   Value   Exercisable   Price   Value 
 $28.19-$49.99   3,235,333   2.72  $35.33  $260   3,235,333  $35.33  $260 
 $50.00-$64.99   6,627,010   4.16   58.12   383   6,627,010   58.12   383 
 $65.00-$75.00   3,565,255   6.16   69.54   165   2,420,333   69.55   112 
 $90.00-$99.99   4,244,518   7.16   93.42   95   1,927,354   93.42   43 
 $100.00-$116.28   10,995,184   8.70   103.42   137   1,326,931   103.27   17 
     28,667,300   6.43   79.57  $1,040   15,536,961   63.39  $815 

(1) Average remaining contractual life in years.

ThereThere were 17,202,377,14,073,120 and 16,019,74212,288,854 options exercisable at weighted average exercise prices of $55.11$83.42 and $49.40$78.35 at December 31, 20152018 and 2014.

2017.

The following table summarizes the financial statement impact from stock options exercised:

  Years Ended December 31,
Options Exercised 2016 2015 2014
Intrinsic value(1) $395  $210  $272 
Tax benefit realized  137   73   96 

(1) Represents the amount by which the stock price exceeded the exercise price of the options on the date of exercise.

Options ExercisedYears Ended December 31,
2019 2018 2017
Intrinsic value(1)
$483
 $238
 $620
Tax benefit realized117
 47
 221
(1)Represents the amount by which the stock price exceeded the exercise price of the options on the date of exercise.
At December 31, 20162019 there was $126$88 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 2.292.47 years. The total fair value of options vested during 2016, 20152019, 2018 and 20142017 was $76$61 million, $73 million and $72$87 million.

Restricted Stock Units—Restricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain key employees and directors as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to sevensix years and are payable in Honeywell common stock upon vesting.


69
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The following table summarizes information about RSU activity for the three years ended December 31, 2016:

2019:
 
Number of
Restricted
Stock Units
 
Weighted
Average
Grant Date
Fair Value
Per Share
Non-vested at December 31, 20164,467,343
 $94.17
Granted1,274,791
 129.71
Vested(1,289,892) 81.37
Forfeited(505,415) 103.06
Non-vested at December 31, 20173,946,827
 108.60
Spin related adjustment(1)
154,346
  
Granted1,360,338
 153.46
Vested(988,787) 91.68
Forfeited(814,851) 117.40
Non-vested at December 31, 20183,657,873
 125.35
Granted1,200,202
 162.43
Vested(1,160,333) 104.32
Forfeited(457,677) 134.50
Non-vested at December 31, 20193,240,065
 $143.07
62
(1)Additional RSU grants to offset the dilutive impact of the spin-offs on non-vested RSUs.

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

   Number of
Restricted
Stock Units		 Weighted
Average
Grant Date
Fair Value
Per Share
Non-vested at December 31, 2013   6,692,220  $60.04 
 Granted   1,455,209   94.88 
 Vested   (1,787,894)  53.63 
 Forfeited   (460,341)  63.54 
Non-vested at December 31, 2014   5,899,194   70.32 
 Granted   1,190,406   103.04 
 Vested   (1,681,342)  56.38 
 Forfeited   (426,670)  77.73 
Non-vested at December 31, 2015   4,981,588   82.18 
 Granted   1,364,469   110.49 
 Vested   (1,486,173)  68.58 
 Forfeited   (392,541)  88.88 
Non-vested at December 31, 2016   4,467,343  $94.17 

As of December 31, 2016,2019, there was approximately $193$217 million of total unrecognized compensation cost related to non-vested RSUs granted under our stock plans which is expected to be recognized over a weighted-average period of 3.572.86 years.

The following table summarizes information about income statementthe impact to the Consolidated Statement of Operations from RSUs for the three years ended December 31, 2016:

  Years Ended December 31,
  2016 2015 2014
Compensation expense $97  $97  $102 
Future income tax benefit recognized  30   29   37 
RSUs:
 Years Ended December 31,
2019 2018 2017
Compensation expense$106
 $111
 $97
Future income tax benefit recognized21
 21
 19

Note 19.20. Commitments and Contingencies


Environmental Matters

We are

The Company is 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, wethe Company continually conductconducts 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

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HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


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

63

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

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 ourthe Company's recorded liabilities for environmental costs:

  Years Ended December 31,
  2016 2015 2014
Beginning of year $518  $591  $643 
Accruals for environmental matters deemed probable and reasonably estimable  195   194   268 
Environmental liability payments  (228)  (273)  (321)
Other  26   6   1 
End of year $511  $518  $591 

 Years Ended December 31,
2019 2018 2017
Beginning of year$755
 $595
 $511
Accruals for environmental matters deemed probable and reasonably estimable213
 395
 287
Environmental liability payments(256) (218) (212)
Other(3) (17) 9
End of year$709
 $755
 $595

Environmental liabilities are included in the following balance sheet accounts:

  December 31,
   2016  2015
Accrued liabilities $252  $253 
Other liabilities  259   265 
  $511  $518 

We do

 December 31,
2019 2018
Accrued liabilities$222
 $175
Other liabilities487
 580
 $709
 $755

The Company does not currently possess sufficient information to reasonably estimate the amounts of environmental 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 although they could be material to our consolidated results of operations and operating cash flows in the periods recognized or paid. However, considering our past experience and existing reserves, we do not expect that environmental matters will have a material adverse effect on our consolidated financial position.

Onondaga Lake, Syracuse, NY—

In 2016, we largely completedconjunction with the Resideo spin-off, the Company entered into an indemnification and reimbursement agreement with a dredging/capping remedy of Onondaga LakeResideo subsidiary, pursuant to which Resideo’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to 90 percent of Honeywell’s annual net spending for environmental matters at certain sites as defined in the agreement. The amount payable to Honeywell in any given year is subject to a consent decree approvedcap of $140 million, and the obligation will continue until the earlier of December 31, 2043, or December 31 of the third consecutive year during which the annual payment obligation has been less than $25 million. Reimbursements associated with this agreement were $140 million and $25 million in 2019 and 2018, respectively and offset operating cash outflows incurred by the United States District CourtCompany. As the Company records the accruals for environmental matters deemed probable and reasonably estimable related to the Northern District of New York in January 2007. Some additional long-term monitoring and maintenance activities will continue, as requiredsites covered by the consent decree. indemnification and reimbursement agreement, a corresponding receivable from Resideo for 90 percent of that accrual is also recorded. This receivable amount recorded in 2019 and 2018, subsequent to the spin-off, was $109 million and $50 million. As of December 31, 2019, Other Current Assets and Other Assets includes $140 million and $445 million representing the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement. As of December 31, 2018, Other Current Assets and Other Assets includes $140 million and $476 million representing the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement.

Asbestos Matters
Honeywell is also conducting remedial investigations and activities at other sites in Syracuse. We have recorded reserves for these investigations and activities where appropriate, consistent with 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

Honeywell is a defendantnamed in asbestos related personal injury actionsclaims related to two predecessor companies:

·North American Refractories Company (NARCO), which was sold in 1986, produced refractory products (bricks and cement used in high temperature applications). Claimants consist largely of individuals who allege exposure to NARCO asbestos-containing refractory products in an occupational setting.

·Bendix Friction Materials (Bendix) business, which was sold in 2014, manufactured automotive brake parts that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements.
64
North American Refractories Company (“NARCO”), which was sold in 1986, and Bendix Friction Materials (“Bendix”) business, which was sold in 2014.

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



The following tables summarize information concerning NARCO and Bendix asbestos related balances:

Asbestos Related Liabilities

  Year Ended December 31, Year Ended December 31, Year Ended December 31,
  2016 2015 2014
  Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total
Beginning of year $622  $921  $1,543  $623  $929  $1,552  $656  $955  $1,611 
Accrual for update to estimated liability  203   9   212   180   8   188   195   4   199 
Change in estimated cost of future claims  13   -   13   11   -   11   (1)  -   (1)
Update of expected resolution values for pending claims  4   -   4   1   -   1   2   -   2 
Asbestos related liability payments  (201)  (11)  (212)  (193)  (16)  (209)  (229)  (30)  (259)
End of year $641  $919  $1,560  $622  $921  $1,543  $623  $929  $1,552 

 Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
 Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total
Beginning of year$1,623
 $891
 $2,514
 $1,703
 $907
 $2,610
 $1,789
 $919
 $2,708
Accrual for update to estimated liability78
 22
 100
 197
 32
 229
 199
 31
 230
Change in estimated cost of future claims(22) —
 (22) (72) —
 (72) (65) —
 (65)
Update of expected resolution values for pending claims(4) —
 (4) 1
 —
 1
 3
 —
 3
Asbestos related liability payments(176) (55) (231) (206) (48) (254) (223) (43) (266)
End of year$1,499
 $858
 $2,357
 $1,623
 $891
 $2,514
 $1,703
 $907
 $2,610

Insurance Recoveries for Asbestos Related Liabilities

  Year Ended December 31, Year Ended December 31, Year Ended December 31,
  2016 2015 2014
  Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total
Beginning of year $124  $325  $449  $135  $350  $485  $141  $531  $672 
Probable insurance recoveries related to estimated liability  26   -   26   21   -   21   24   -   24 
Insurance receipts for asbestos related liabilities  (37)  (6)  (43)  (33)  (30)  (63)  (24)  (187)  (211)
Insurance receivables settlements and write offs  7   -   7   1   6   7   (6)  7   1 
Other  1   -   1   -   (1)  (1)  -   (1)  (1)
End of year $121  $319  $440  $124  $325  $449  $135  $350  $485 

 Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
 Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total
Beginning of year$170
 $307
 $477
 $191
 $312
 $503
 $201
 $319
 $520
Probable insurance recoveries related to estimated liability3
 —
 3
 11
 —
 11
 10
 —
 10
Insurance receipts for asbestos related liabilities(39) (29) (68) (33) (5) (38) (20) (7) (27)
Insurance receivables settlements and write offs19
 3
 22
 1
 —
 1
 —
 —
 —
Other—
 —
 —
 —
 —
 —
 —
 —
 —
End of year$153
 $281
 $434
 $170
 $307
 $477
 $191
 $312
 $503

NARCO and Bendix asbestos related balances are included in the following balance sheet accounts:

  December 31,
  2016 2015
       
Other current assets $23  $23 
Insurance recoveries for asbestos related liabilities  417   426 
  $440  $449 
         
Accrued liabilities $546  $292 
Asbestos related liabilities  1,014   1,251 
  $1,560  $1,543 

 December 31,
2019 2018
Other current assets$42
 $40
Insurance recoveries for asbestos related liabilities392
 437
 $434
 $477
Accrued liabilities$361
 $245
Asbestos related liabilities1,996
 2,269
 $2,357
 $2,514

NARCO Products –In connection—Honeywell’s predecessor, Allied Corporation owned NARCO from 1979 to 1986. When the NARCO business was sold, Honeywell’s predecessor entered into a cross-indemnity agreement with NARCO’s emergenceNARCO which included an obligation to indemnify the purchaser for asbestos claims. Such claims arise primarily from alleged occupational exposure to asbestos-containing refractory brick and mortar for high-temperature applications. NARCO ceased manufacturing these products in 1980, and the first asbestos claims were filed in the tort system against NARCO in 1983. Claims filings and related costs increased dramatically in the late 1990s through 2001, which led to NARCO filing for bankruptcy in January 2002. Once NARCO filed for bankruptcy, all then current and future NARCO asbestos claims were stayed against both NARCO and Honeywell pending the reorganization of NARCO.

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HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Following the bankruptcy filing, in December 2002 Honeywell recorded a total NARCO asbestos liability of $3.2 billion, which was comprised of three components: (i) the estimated liability to settle pre-bankruptcy petition NARCO claims and certain post-petition settlements ($2.2 billion, referred to as “Pre-bankruptcy NARCO Liability”), (ii) the estimated liability related to then unasserted NARCO claims for the period 2004 through 2018 ($950 million, referred to as “NARCO Trust Liability”), and (iii) other NARCO bankruptcy-related obligations totaling $73 million.
When the NARCO Trust Liability of $950 million was established in 2002, the methodology for estimating the potential liability was based primarily on: (a) epidemiological projections of the future incidence of disease for the period 2004 through 2018, a fifteen-year period; (b) historical claims rates in the tort system for the five-year period prior to the bankruptcy filing date; and (c) anticipated NARCO Trust payment values set forth in the then current draft of the NARCO Trust Distribution Procedures. The methodology required estimating, by disease, three critical inputs: (i) likely number of claims to be asserted against the NARCO Trust in the future, (ii) percentage of those claims likely to receive payment, and (iii) payment values. The Company utilized outside asbestos liability valuation specialists to support our preparation of the NARCO Trust Liability estimate, which was based on a commonly accepted methodology used by numerous bankruptcy courts addressing 524(g) trusts.
In 2002, when the Company first established its initial liability, NARCO asbestos claims resolution shifted from the tort system to an anticipated NARCO Trust framework, where claims would be processed in accordance with established NARCO Trust Distribution Procedures, including strict medical and exposure criteria for a plaintiff to receive compensation. We believed at the time that the NARCO Trust’s claims filing and resolution experience after the NARCO Trust became operational would be significantly different from pre-bankruptcy tort system experience in light of these more rigorous claims processing requirements in the NARCO Trust Distribution Procedures and Honeywell’s active oversight of claims processing and approval. Given these anticipated differences, we believed that a 15-year time period was the appropriate horizon for establishing a probable and reasonably estimable liability for then unasserted NARCO claims as it represented our best estimate of the time period it would take for the NARCO Trust to be approved by the Bankruptcy Court, become fully operational and generate sufficiently reliable claims data (i.e., a data set which is statistically representative) to enable us to update our NARCO Trust Liability.
The NARCO Trust Distribution Procedures were finalized in 2006, and the Company updated its NARCO Trust Liability to reflect the final terms and payment values. The original 15-year period (from 2004 through 2018) for unasserted claims did not change as asbestos claims filings continued to be stayed against both Honeywell and NARCO. The 2006 update resulted in a range of the estimated liability for unasserted claims of $743 million to $961 million, and we believed that no amount within this range was a better estimate than any other amount. In accordance with ASC 450–Contingencies (“ASC 450”), we recorded the low end of the range of $743 million (the “2006 NARCO Trust Liability Estimate”) which resulted in a reduction of $207 million in our NARCO Trust Liability.
NARCO emerged from bankruptcy on April 30, 2013, at which time a federally authorized 524(g) trust (NARCO Trust) was established for the evaluation and resolution of all existing

65

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

and future NARCO asbestos claims. Both Honeywell and NARCO are protected by a permanent channeling injunction barring all present and future individual actions in state or federal courts and requiring all asbestos related claims based on exposure to NARCO asbestos-containing products to be made against the NARCO Trust.

The NARCO Trust reviews submitted claimsAgreement and determines award amounts in accordance with establishedthe NARCO Trust Distribution Procedures approved byare the Bankruptcy Court which setprincipal documents setting forth the criteria claimants must meet to qualify for compensation including, among other things, exposure and medical criteria that determine the award amount. In addition, Honeywell provided, and continues to provide, input to the design of control procedures for processing NARCO claims, and has on-going audit rights to review and monitor the claims processors’ adherence to the established requirementsstructure of the Trust Distribution Procedures.

NARCO Trust. These documents establish Honeywell’s evergreen funding obligations. Honeywell is obligated to fund NARCO asbestos claims submitted to the NARCO Trust which qualify for payment under the Trust Distribution Procedures (Annual Contribution Claims), subject to an annual capscap of $140 million in the years 2017 and 2018 and $145 million for each year thereafter.million. However, the initial $100 million of claims processed through the NARCO Trust (the Initial Claims Amount) will not count against the annual cap and any unused portion of the Initial Claims Amount will roll over to subsequent years until fully utilized. These documents also establish the material operating rules for the NARCO Trust, including Honeywell audit rights and the criteria claimants must meet to have a valid claim paid. These claims payment criteria include providing the NARCO Trust with adequate medical evidence of the claimant’s asbestos-related condition and credible evidence of exposure to a specific NARCO asbestos-containing product. Further, the NARCO Trust is eligible to receive cash dividends from Harbison-Walker International Inc (“HWI”), the reorganized and renamed entity that emerged, fully operational, from the NARCO bankruptcy. The NARCO Trust is required to use any funding received from HWI to pay Annual Contribution Claims until those funds are exhausted. It is only at this point that Honeywell’s funding obligation to the Trust is triggered. Thus, there is an unrelated primary source for funding that affects Honeywell’s funding of the NARCO Trust Liability.


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HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Once operational, the NARCO Trust began to receive, process and pay claims that had been previously stayed pending the Trust becoming operational. As the NARCO Trust began to pay claims in 2014, we began to assert our on-going audit rights to review and monitor the claims processor’s adherence to the established requirements of the NARCO Trust Distribution Procedures. While doing so, we identified several issues with the way the Trust was implementing the NARCO Trust Distribution Procedures. In 2015, Honeywell filed suit against the NARCO Trust in Bankruptcy Court alleging breach of certain provisions of the NARCO Trust Agreement and NARCO Trust Distribution Procedures. The parties agreed to dismiss the proceeding without prejudice pursuant to an 18 month18-month Standstill Agreement, that expireswhich expired in October 2017. ClaimsNotwithstanding its expiration, claims processing will continue duringcontinues, and Honeywell continues to negotiate and attempt to resolve remaining disputed issues (that is, instances where Honeywell believes the NARCO Trust is not processing claims in accordance with established NARCO Trust Distribution Procedures). Honeywell reserves the right to seek judicial intervention should negotiations fail.
After the NARCO Trust became effective in 2013, the $743 million NARCO Trust Liability was then comprised of:
(i) liability for unasserted claims; and
(ii) liability for claims asserted after the NARCO Trust became operational but not yet paid.
Although the Company knows the number of claims filed with the NARCO Trust each year, it is not able to determine at this period subjecttime the portion of the NARCO Trust Liability which represents asserted versus unasserted claims due to a defined dispute resolution process. Asthe lack of December 31, 2016, sufficiently reliable claims data because of the claims processing issues described previously.
Honeywell has notcontinues to maintain the 2006 NARCO Trust Liability (the $743 million accrual less payments made any payments to the NARCO Trust for Annual Contribution Claims), as there has not been sufficiently reliable claims data history to enable the Company to update that liability.
As of December 31, 2019, all cash dividends paid to the NARCO Trust by HWI has been used to pay Annual Contribution Claims.

In the fourth quarter of 2019, Honeywell is also responsiblefunded $29 million to the NARCO Trust for payments duethe payment of Annual Contribution Claims.

As of December 31, 2019, the Company's total NARCO asbestos liability of $858 million reflects Pre-bankruptcy NARCO liability of $144 million and NARCO Trust Liability of $714 million (the $743 million accrual for NARCO Trust Liability was reduced by the $29 million payment to claimantsthe NARCO Trust in the fourth quarter of 2019 for Annual Contribution Claims). Through December 31, 2019, Pre-bankruptcy NARCO Liability has been reduced by approximately $2 billion since first established in 2002, largely related to settlement payments. The remaining Pre-bankruptcy NARCO liability principally represents estimated amounts owed pursuant to settlement agreements reached during the pendency of the NARCO bankruptcy proceedings that provide for the right to submit claims to the NARCO Trust subject to qualification under the terms of the settlement agreements and Trust Distribution Procedures criteria (Pre-established Unliquidated Claims), which amounts are estimated at $150 millionProcedures. The other NARCO bankruptcy obligations were paid in 2013 and are expectedno further liability is recorded.
Honeywell continues to be paid duringevaluate the initial years of trust operations ($5 million of which has been paid since the effective dateappropriateness of the 2006 NARCO Trust). Such payments are not subject to the annual cap described above.

Our consolidated financial statements reflect an estimated liability for pre-established unliquidated claims ($145 million), unsettled claims pending as of the time NARCO filed for bankruptcy protection ($31 million) and for the estimated value of future NARCO asbestos claims expected to be asserted againstTrust Liability Estimate. Despite becoming effective in 2013, the NARCO Trust ($743 million). The estimate of future NARCO claims is based on a commonly accepted methodology used by numerous bankruptcy courts addressing 524(g) trusts and also reflects disputes concerning implementationhas experienced delays in becoming fully operational. Violations of the Trust Distribution Procedures byand the resulting disputes and challenges, a standstill pending dispute resolution, and limited claims payments, have all contributed to the lack of sufficient normalized data based on actual claims processing experience in the Trust since it became operational. As a result, we have not been able to further update the NARCO Trust a lack of sufficient trust claims processing experience, as well as the stay of all NARCO asbestos claims which remained in place throughout NARCO’s Chapter 11 case. Some critical assumptions underlying this commonly accepted methodology include claims filing rates, disease criteria and payment values contained in the Trust Distribution Procedures, estimated approval rates of claims submittedLiability aside from deducting payments to the NARCO Trust for Annual Contribution Claims. The 2006 million NARCO Trust Liability Estimate continues to be appropriate because of the unresolved pending claims in the Trust, some portion of which will result in payouts in the future, and epidemiological studies estimating disease instances. The estimated value of futurebecause new claims continue to be filed with the NARCO Trust. When sufficiently reliable claims was originally established at the timedata exists, we will update our estimate of the NARCO Chapter 11 filing reflecting claims expectedTrust Liability and it is possible that a material change may need to be asserted against NARCO over a fifteen year period. This projection resulted in a rangerecognized.

The Company's insurance receivable of estimated liability$281 million as of $743 million to $961 million. We believe that no amount within this range is a better estimate than any other amount and accordingly, we have recorded the minimum amount in the range.

Our insurance receivableDecember 31, 2019, corresponding to the estimated liability for pendingasserted and futureunasserted NARCO asbestos claims, reflects coverage which reimburses Honeywell for portions of NARCO-related indemnity and defense costs and is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. We conduct analyses to estimate the probable amount of insurance that is recoverable for asbestos claims. While the substantial majority of our insurance carriers are solvent, some of our individual carriers are insolvent, which has been considered in our analysis of probable recoveries. We made judgments concerning insurance coverage that we believe are reasonable and consistent with our historical dealings and our knowledge of any pertinent solvency issues surrounding insurers.

Projecting future events is subject to many uncertainties that could cause the NARCO-related asbestos liabilities or assets to be higher or lower than those projected and recorded. Given the uncertainties, we review our estimates periodically, and update them based on our experience and other relevant factors. Similarly, we will reevaluate our projections concerning our probable insurance recoveries in light of any changes to the projected liability or other developments that may impact insurance recoveries.

66

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



Bendix Products—Bendix manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements. The following tables present information regarding Bendixrelated asbestos claims activity:

  Years Ended
December 31,
Claims Activity 2016 2015
       
Claims Unresolved at the beginning of year  7,779   9,267 
Claims Filed  2,830   2,862 
Claims Resolved  (2,885)  (4,350)
Claims Unresolved at the end of year  7,724   7,779 

   December 31,
 Disease Distribution of Unresolved Claims 2016 2015
        
 Mesothelioma and Other Cancer Claims  3,490   3,772 
 Nonmalignant Claims  4,234   4,007 
 Total Claims  7,724   7,779 

activity:

Claims ActivityYears Ended December 31,
2019 2018
Claims Unresolved at the beginning of year6,209
 6,280
Claims Filed2,659
 2,430
Claims Resolved(2,388) (2,501)
Claims Unresolved at the end of year6,480
 6,209

Disease Distribution of Unresolved ClaimsDecember 31,
2019 2018
Mesothelioma and Other Cancer Claims3,399
 2,949
Nonmalignant Claims3,081
 3,260
Total Claims6,480
 6,209

Honeywell has experienced average resolution values per claim excluding legal costs as follows:

  Years Ended December 31,
  2016 2015 2014 2013 2012
                
  (in whole dollars) 
Malignant claims $44,000  $44,000  $53,500  $51,000  $49,000 
Nonmalignant claims $4,485  $100  $120  $850  $1,400 

 Years Ended December 31,
2019 2018 2017 2016 2015
 (in whole dollars)
Malignant claims$50,200
 $55,300
 $56,000
 $44,000
 $44,000
Nonmalignant claims$3,900
 $4,700
 $2,800
 $4,485
 $100

It is not possible to predict whether resolution values for Bendix-related asbestos claims will increase, decrease or stabilize in the future.

Our

The Company's consolidated financial statements reflect an estimated liability for resolution of pendingasserted (claims actually filed as of the financial statement date) and futureunasserted Bendix-related asbestos claims.claims and excludes the Company’s legal fees to defend such asbestos claims which will continue to be expensed by the Company as they are incurred. We have valued Bendix pendingasserted and futureunasserted claims using average resolution values for the previous five years. We update the resolution values used to estimate the cost of Bendix pendingasserted and futureunasserted claims during the fourth quarter each year.

The

Honeywell reflects the inclusion of all years of epidemiological disease projection through 2059 when estimating the liability for future claims represents the estimated value of futureunasserted Bendix-related asbestos related bodily injury claims expected to be asserted against Bendix over the next five years.claims. Such estimated cost of futureliability for unasserted Bendix-related asbestos claims is based on historic and anticipated claims filing experience and dismissal rates, disease classifications, and resolution values in the tort system for the previous five years. In light of the uncertainties inherent in making long-term projections, as well as certain factors unique to friction product asbestos claims, we do not believe that we have a reasonable basis for estimating asbestos claims beyond the next five years. The methodology used to estimate the liability for future claims is similar to that used to estimate the liability for future NARCO-related asbestos claims.

Our insurance receivable corresponding to the liability for settlement of pendingasserted and futureunasserted Bendix asbestos claims reflects coverage which is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Based on our ongoing analysis of the probable insurance recovery, insurance receivables are recorded in the financial statements simultaneous with the recording of the estimated liability for the underlying asbestos claims. This determination is based on our analysis of the underlying insurance policies, our historical experience with our insurers, our ongoing review of the solvency of our insurers, judicial determinations relevant to our insurance programs, and our consideration of the impacts of any settlements reached with our insurers.

67
In conjunction with the Garrett spin-off, the Company entered into an indemnification and reimbursement agreement with a Garrett subsidiary, pursuant to which Garrett’s subsidiary will have an obligation to make cash payments to Honeywell in amounts equal to (i) 90% of Honeywell’s asbestos-related liability payments primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments, in each case related to legacy elements of the Garrett business, including the legal costs of defending and resolving such liabilities, less (ii) 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities. The amount payable to Honeywell


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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

Honeywell believes it



in respect of such liabilities arising in any given year will be subject to a cap of approximately Euro 150 million (equivalent to $175 million at the time the indemnification and reimbursement agreement was entered into). The obligation will continue until the earlier of December 31, 2048, or December 31 of the third consecutive year during which the annual obligation has sufficient insurance coveragebeen less than the Euro equivalent, at the fixed exchange rate at time of the indemnification and reservesreimbursement agreement was entered into, of $25 million. Reimbursements associated with this agreement were $152 million and $42 million in 2019 and 2018, respectively, and offset operating cash outflows incurred by the Company. As the Company records the accruals for matters covered by the agreement, a corresponding receivable from Garrett is recorded for 90 percent of that accrual as determined by the terms of the agreement. This receivable amount recorded in 2019 was $16 million. In 2018, subsequent to cover all pendingthe spin-off, the Company recorded a reversal to the receivable for $17 million in the fourth quarter of 2018. As of December 31, 2019, Other Current Assets and Other Assets includes $115 million and $947 million representing the short-term and long-term portion of the receivable amount due from Garrett under the indemnification and reimbursement agreement. As of December 31, 2018, Other Current Assets and Other Assets includes $171 million and $1,058 million representing the short-term and long-term portion of the receivable amount due from Garrett under the indemnification and reimbursement agreement.
On December 2, 2019, Garrett Motion Inc. and Garrett ASASCO Inc. filed a Summons with Notice and commenced a lawsuit in the Commercial Division of the Supreme Court of the State of New York, County of New York seeking to invalidate the indemnification and reimbursement agreement between Garrett and Honeywell. Garrett seeks damages and a declaratory judgment based on various claims set forth in the Summons with Notice. On January 15, 2020, Garrett filed its complaint in the action, which asserted the same claims. We strongly believe that Garrett's allegations have no merit, nor are they material to Honeywell. We believe we have fully complied with our obligations under the Agreement and that the Agreement is enforceable.
On September 13, 2018, following completion of the Securities and Exchange Commission (SEC) Division of Corporation Finance’s review of our prior accounting for liabilities for unasserted Bendix-related asbestos claims, the SEC Division of Enforcement advised that it had opened an investigation related to this matter. On August 28, 2019, the SEC informed the Company that it had concluded its investigation and Bendix-relatedthat it does not intend to recommend any enforcement action against Honeywell.
On October 31, 2018, David Kanefsky, a Honeywell shareholder, filed a putative class action complaint in the U.S. District Court for the District of New Jersey alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5 related to the prior accounting for Bendix asbestos claims. On May 15, 2019, Wayne County Employees’ Retirement System, another Honeywell shareholder, filed a putative class action asserting the same claims relating to substantially the same alleged conduct in the same jurisdiction. On December 16, 2019, the court denied Wayne County Employees' Retirement System's motion to be appointed as substitute lead plaintiff in the Kanefsky action. On December 30, 2019, the lead plaintiff filed an amended complaint in the Kanefsky action. We believe the claims related to the prior accounting for Bendix 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.

no merit.

Other Matters

We are

The Company is 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:

Honeywell v. United Auto Workers (UAW) et. al—In JulySeptember 2011, Honeywell filed an action in federal court (District of New Jersey) against the UAW and all former employees who retired undercertain Honeywell retirees (Plaintiffs) filed a suit in the Eastern District of Michigan (the District Court) alleging that a series of Master Collective Bargaining Agreements (MCBAs) between Honeywell and the UAW seeking a declaratory judgmentprovided the retirees with rights to lifetime, vested healthcare benefits that certaincould never be changed or reduced. Plaintiffs alleged that Honeywell had violated those vested rights by implementing express limitations (CAPS) on its obligation to contributethe amount Honeywell contributed toward the healthcare coverage of such retirees (the CAPS) set forth infor the MCBAs may be implemented, effective January 1, 2012. The UAW and certain retiree defendants filed a mirror suit in the Eastern District of Michigan alleging that the MCBAs do not provide for CAPS on the Company’s liability for healthcare coverage. The New Jersey action was dismissed andretirees. Honeywell subsequently answered the UAW’s complaint in Michigan and asserted counterclaims, for fraudulent inducement, negligent misrepresentation and breach of implied warranty. The UAW filed a motion to dismiss these counterclaims. The court dismissed Honeywell’s fraudulent inducement and negligent misrepresentation claims, but let stand the claimincluding for breach of implied warranty. In the second quarter of
Between 2014 the parties agreed to stay the proceedings with respect to those retirees who retired before the initial inclusions ofand 2015, Honeywell began enforcing the CAPS in the 2003 MCBA until the Supreme Court decided theM&G Polymers USA, LLC v. Tackettcase.against former employees. In a ruling on January 26, 2015, the Supreme Court held that retiree health insurance benefits provided in collective bargaining agreements do not carry an inference that they are vested or guaranteed to continue for life and that the “vesting” issue must be decided pursuant to ordinary principles of contract law. The stay of the proceedings has been lifted and the case is again proceeding. Based on the Supreme Court’s ruling, Honeywell is confident that the CAPS will be upheld and that its liability for healthcare coverage premiums with respect to the putative class will be limited as negotiated and expressly set forth in the applicable MCBAs. In the event of an adverse ruling, however, Honeywell’s other postretirement benefits for pre-2003 retirees would increase by approximately $129 million, reflecting the estimated value of these CAPS.

In December 2013,response, the UAW and certain of the plaintiffsPlaintiffs filed a motion for partial summary judgment with respect to those retirees who retired after the initial inclusion of the CAPS in the 2003 MCBA. The UAW soughtseeking a ruling that the 2003 MCBA didMCBAs do not limit Honeywell’s obligation to contribute to healthcare coverage for the post-2003those retirees. That motion remains pending. Honeywell is confident that the Court will find that the 2003 MCBA does, in fact, limit Honeywell’s retiree healthcare obligation for post-2003 retirees. In the event of an adverse ruling, however, Honeywell’s other postretirement benefits for post-2003 retirees would increase by approximately $95 million, reflecting the estimated value of these CAPS.

Joint Strike Fighter Investigation - In 2013 the Company received subpoenas from the Department of Justice requesting information relating primarily to parts manufactured in the United Kingdom and China used in the F-35 fighter jet. The Company is cooperating fully with the investigation. While we believe that Honeywell has complied with all relevant U.S. laws and regulations regarding the manufacture of these sensors, it is not possible

68

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



On March 29, 2018, the District Court issued its opinion resolving all pending summary judgment motions, except for Honeywell’s counterclaim for breach of implied warranty, which has since been dismissed without prejudice.
In the opinion, the District Court held that the MCBAs do not promise retirees vested, lifetime benefits that survive expiration of the MCBAs. Based on this ruling, Honeywell terminated the retirees healthcare coverage benefits altogether as of July 31, 2018. In response, the UAW filed a motion to enjoin Honeywell from completely terminating coverage as of July 31, 2018, arguing that the CAPS themselves are vested and that Honeywell must continue to provide retiree medical benefits at the capped level. On July 28, 2018, the District Court denied the UAW’s motion and entered a final judgment consistent with its March 2018 ruling. The UAW has appealed this decision to the Sixth Circuit Court of Appeals. Honeywell believes the District Court’s ruling will be upheld.
In the March 2018 opinion, the District Court also held that Honeywell is obligated under the MCBAs to pay the “full premium” for retiree healthcare rather than the capped amount. Based on this ruling, Honeywell would be required to pay monetary damages to retirees for any past years in which Honeywell paid less than the “full premium” of their healthcare coverage. Such damages would be limited, depending on the retiree group, to a two to three-year period ending when the 2017 MCBA expired, and Honeywell would have no ongoing obligation to continue funding healthcare coverage for subsequent periods. Honeywell has appealed the District Court’s ruling on this “full premium” damages issue, and believes that the Sixth Circuit Court of Appeals will reverse the District Court on that issue. In the event the Sixth Circuit were to sustain the District Court’s ruling on this issue, Honeywell would be liable for damages of at least $12 million.
Petrobras and Unaoil—We are cooperating with certain investigations by the U.S. Department of Justice (DOJ), the SEC and Brazilian authorities relating to our use of third parties who previously worked for our UOP business in Brazil in relation to Petróleo Brasileiro S.A. (Petrobras). The investigations are focused on compliance with the U.S. Foreign Corrupt Practices Act and similar Brazilian laws, and involve, among other things, document production and interviews with former and current management and employees. The DOJ and the SEC are also examining a matter involving a foreign subsidiary’s prior engagement of Unaoil S.A.M. in Algeria. We are cooperating with the authorities in each of the above matters. While we cannot predict the outcome of these matters, based on the investigationfacts currently known to us, we do not anticipate that these matters will have a material adverse effect on our financial condition, results of operations, or whatcash flows.
In re Resideo Technologies, Inc. Securities Litigation—On January 7, 2020, The Gabelli Asset Fund and certain related parties filed a putative class action if any, may resultcomplaint against Resideo and Honeywell in the U.S. District Court for the District of Minnesota alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5 related to Resideo's spinoff from it.

Honeywell in October 2018.  On January 27, 2020, this putative class action was consolidated with certain previously-filed actions asserting claims relating to substantially the same matters into a single class action under the title In re Resideo Technologies, Inc. Securities Litigation.  We believe the allegations against Honeywell regarding the Resideo spinoff have no merit.

Given the uncertainty inherent in litigation and investigations (including the specific matters referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters (other than as specifically set forth above). Considering our past experience and existing accruals, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our consolidated financial position. Because most contingencies are resolved over long periods of time, potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause us to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on our results of operations or operating cash flows in the periods recognized or paid.


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HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Warranties and Guarantees

In the normal course of business, we issuethe Company issues product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. The following table summarizes information concerning our recorded obligations for product warranties and product performance guarantees.

  Years Ended December 31,
  2016 2015 2014
Beginning of year $416  $403  $405 
Accruals for warranties/guarantees issued during the year  326   206   225 
Adjustment of pre-existing warranties/guarantees  (40)  13   (34)
Settlement of warranty/guarantee claims  (215)  (206)  (193)
End of year $487  $416  $403 

 Years Ended December 31,
2019 2018 2017
Beginning of year$310
 $408
 $487
Accruals for warranties/guarantees issued during the year173
 208
 215
Adjustment of pre-existing warranties/guarantees(34) (78) (27)
Settlement of warranty/guarantee claims(180) (228) (267)
End of year$269
 $310
 $408
Product warranties and product performance guarantees are included in the following balance sheet accounts:

  December 31,
  2016 2015
Accrued liabilities $351  $355 
Other liabilities  136   61 
  $487  $416 
 December 31,
2019 2018
Accrued liabilities$213
 $243
Other liabilities56
 67
 $269
 $310

Note 20.21. Pension and Other Postretirement Benefits

We sponsor

The Company sponsors a number of both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering the majority of our employees and retirees.plans. Pension benefits for many of our U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. All non-union hourly and salaried employees joining Honeywell for the first time after December 31, 2012, are not eligible to participate in Honeywell’s U.S. defined benefit pension plans. We also sponsor defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally the UK, Netherlands, Germany, and Canada. Other pension plans outside of the U.S. are not material to the Company either individually or in the aggregate.

We

The Company also sponsorsponsors postretirement benefit plans that provide health care benefits and life insurance coverage mainly to U.S. eligible retirees. None of Honeywell’s U.S. employees are eligible for a retiree medical subsidy from the Company. In addition, more than 80%the vast majority of Honeywell’s U.S. retirees either have no Company subsidy or have a fixed-dollar subsidy amount. This significantly limits our exposure to the impact of future health care cost increases. The retiree medical and life insurance plans are not funded. Claims and expenses are paid from our operating cash flow.

69

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



The following tables summarize the balance sheet impact, including the benefit obligations, assets and funded status associated with ourthe Company's significant pension and other postretirement benefit plans.

  Pension Benefits
  U.S. Plans Non-U.S. Plans
  2016 2015 2016  2015
Change in benefit obligation:                
Benefit obligation at beginning of year $17,298  $18,035  $6,338  $5,761 
Service cost  191   223   47   51 
Interest cost  600   696   179   177 
Plan amendments  -   (429)  -   - 
Actuarial (gains) losses  448   (269)  1,125   (178)
Acquisitions  -   61   6   1,137 
Benefits paid  (1,135)  (1,027)  (243)  (199)
Settlements and curtailments  -   -   (50)  (11)
Foreign currency translation  -   -   (930)  (417)
Other  12   8   11   17 
Benefit obligation at end of year  17,414   17,298   6,483   6,338 
Change in plan assets:                
Fair value of plan assets at beginning of year  16,349   17,066   6,117   5,333 
Actual return on plan assets  1,554   233   1,006   154 
Company contributions  36   34   186   147 
Acquisitions  -   43   -   1,036 
Benefits paid  (1,135)  (1,027)  (243)  (199)
Foreign currency translation  -   -   (957)  (361)
Other  10   -   11   7 
Fair value of plan assets at end of year  16,814   16,349   6,120   6,117 
Funded status of plans $(600) $(949) $(363) $(221)
Amounts recognized in Consolidated Balance Sheet consist of:                
Prepaid pension benefit cost(1) $-  $-  $380  $427 
Accrued pension liabilities - current(2)  (106)  (51)  (11)  (7)
Accrued pension liabilities - noncurrent(3)  (494)  (898)  (732)  (641)
Net amount recognized $(600) $(949) $(363) $(221)

 Pension Benefits
U.S. Plans Non-U.S. Plans
2019 2018 2019 2018
Change in benefit obligation:       
Benefit obligation at beginning of year$16,141
 $18,151
 $6,182
 $7,019
Service cost82
 140
 22
 26
Interest cost613
 573
 142
 143
Plan amendments—
 —
 —
 30
Actuarial (gains) losses2,064
 (1,111) 708
 (356)
Benefits paid(1,111) (1,137) (269) (264)
Settlements and curtailments(507) —
 —
 (9)
Foreign currency translation—
 —
 107
 (342)
Other1
 (475) 5
 (65)
Benefit obligation at end of year17,283
 16,141
 6,897
 6,182
Change in plan assets:       
Fair value of plan assets at beginning of year17,109
 18,985
 6,481
 7,151
Actual return on plan assets3,458
 (303) 863
 (173)
Company contributions45
 34
 62
 137
Benefits paid(1,111) (1,137) (269) (264)
Settlements and curtailments(507) —
 —
 —
Foreign currency translation—
 —
 165
 (378)
Other1
 (470) 5
 8
Fair value of plan assets at end of year18,995
 17,109
 7,307
 6,481
Funded status of plans$1,712
 $968
 $410
 $299
Amounts recognized in Consolidated Balance Sheet consist of:       
Prepaid pension benefit cost(1)
$2,069
 $1,295
 $1,196
 $1,094
Accrued pension liabilities—current(2)
(32) (27) (13) (12)
Accrued pension liabilities—noncurrent(3)
(325) (300) (773) (783)
Net amount recognized$1,712
 $968
 $410
 $299
(1)Included in Other assets on Consolidated Balance Sheet
(2)Included in Accrued liabilities on Consolidated Balance Sheet
(3)Included in Other liabilities - noncurrent on Consolidated Balance Sheet
70

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

  Other Postretirement Benefits
  2016 2015
Change in benefit obligation:        
Benefit obligation at beginning of year $569  $973 
Service cost  -   - 
Interest cost  20   33 
Plan amendments(1)  27   (290)
Actuarial (gains) losses  (31)  (55)
Benefits paid  (93)  (92)
Benefit obligation at end of year  492   569 
Change in plan assets:        
Fair value of plan assets at beginning of year  -   - 
Actual return on plan assets  -   - 
Company contributions  -   - 
Benefits paid  -   - 
Fair value of plan assets at end of year  -   - 
Funded status of plans $(492) $(569)
         
Amounts recognized in Consolidated Balance Sheet consist of:        
Accrued liabilities $(62) $(85)
Postretirement benefit obligations other than pensions(2)  (430)  (484)
Net amount recognized $(492) $(569)



 
Other
Postretirement
Benefits
2019 2018
Change in benefit obligation:   
Benefit obligation at beginning of year$364
 $530
Service cost—
 —
Interest cost14
 15
Plan amendments(2) (34)
Actuarial (gains) losses(16) (110)
Benefits paid(35) (37)
Benefit obligation at end of year325
 364
Change in plan assets:   
Fair value of plan assets at beginning of year—
 —
Actual return on plan assets—
 —
Company contributions—
 —
Benefits paid—
 —
Fair value of plan assets at end of year—
 —
Funded status of plans$(325) $(364)
Amounts recognized in Consolidated Balance Sheet consist of:   
Accrued liabilities$(40) $(62)
Postretirement benefit obligations other than pensions(1)
(285) (302)
Net amount recognized$(325) $(364)
(1) In 2015, elimination of retiree medical insurance coverage for certain retirees. Amount recognized as part of net postretirement benefit cost over the expected future lifetime of the remaining participants in the plan.
(2) (1)Excludes non-U.S. plans of $43$41 million and $42 million in 20162019 and 2015.2018.

Amounts recognized in accumulatedAccumulated other comprehensive (income) loss associated with ourthe Company's significant pension and other postretirement benefit plans at December 31, 20162019 and 20152018 are as follows:

  Pension Benefits
  U.S. Plans Non-U.S. Plans
  2016 2015 2016 2015
Prior service (credit) $(312) $(355) $(11) $(22)
Net actuarial loss  1,099   1,005   582   464 
Net amount recognized $787  $650  $571  $442 

   Other Postretirement Benefits
  2016 2015
Prior service (credit) $(393) $(496)
Net actuarial loss  136   189 
Net amount recognized $(257) $(307)

 Pension Benefits
U.S. Plans Non-U.S. Plans
2019 2018 2019 2018
Prior service (credit) cost$(176) $(218) $21
 $20
Net actuarial loss544
 860
 701
 600
Net amount recognized$368
 $642
 $722
 $620
 
Other
Postretirement
Benefits
2019 2018
Prior service (credit)$(166) $(226)
Net actuarial (gain) loss(20) (4)
Net amount recognized$(186) $(230)


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HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The components of net periodic benefit (income) cost and other amounts recognized in otherOther comprehensive (income) loss for ourthe Company's significant pension and other postretirement benefit plans include the following components:

71

Net Periodic Benefit CostPension Benefits
U.S. Plans Non-U.S. Plans
2019 2018 2017 2019 2018 2017
Service cost$82
 $140
 $172
 $22
 $26
 $40
Interest cost613
 573
 586
 142
 143
 147
Expected return on plan assets(1,117) (1,426) (1,262) (331) (443) (411)
Amortization of prior service (credit) cost(42) (43) (43) —
 (1) (1)
Recognition of actuarial losses35
 —
 41
 88
 37
 46
Settlements and curtailments4
 —
 18
 —
 (3) —
Net periodic benefit (income) cost$(425) $(756) $(488) $(79) $(241) $(179)
Other Changes in Plan Assets and
Benefits Obligations Recognized in Other Comprehensive (Income) Loss
U.S. Plans Non-U.S. Plans
2019 2018 2017 2019 2018 2017
Actuarial (gains) losses$(277) $619
 $(792) $176
 $250
 $(153)
Prior service cost (credit)—
 —
 —
 —
 30
 (1)
Prior service credit recognized during year42
 43
 43
 —
 4
 1
Actuarial losses recognized during year(39) —
 (59) (88) (37) (46)
Foreign currency translation—
 —
 —
 14
 (34) 43
Total recognized in other comprehensive (income) loss$(274) $662
 $(808) $102
 $213
 $(156)
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss$(699) $(94) $(1,296) $23
 $(28) $(335)


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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

  Pension Benefits
  U.S. Plans Non-U.S. Plans
Net Periodic Benefit Cost  2016  2015  2014  2016  2015  2014
Service cost $191  $223  $241  $47  $51  $56 
Interest cost  600   696   771   179   177   231 
Expected return on plan assets  (1,226)  (1,278)  (1,257)  (377)  (358)  (354)
Amortization of transition obligation  -   -   -   -   1   2 
Amortization of prior service (credit) cost  (43)  13   23   (3)  (3)  (2)
Recognition of actuarial losses  27   52   26   246   15   223 
Settlements and curtailments  -   8   -   (7)  2   - 
Net periodic benefit (income) cost $(451) $(286) $(196) $85  $(115) $156 

Other Changes in Plan Assets and
Benefits Obligations Recognized in		 U.S. Plans Non-U.S. Plans
Other Comprehensive (Income) Loss 2016 2015 2014 2016 2015 2014
Actuarial losses $121  $775  $1,686  $447  $27  $333 
Prior service (credit)  -   (429)  -   -   -   (17)
Transition obligation recognized during year  -   -   -   -   (1)  (2)
Prior service (cost) credit recognized during year  43   (13)  (23)  10   3   2 
Actuarial losses recognized during year  (27)  (52)  (26)  (246)  (17)  (223)
Foreign currency translation  -   -   -   (83)  (37)  (50)
Total recognized in other comprehensive (income) loss $137  $281  $1,637  $128  $(25) $43 
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss $(314) $(5) $1,441  $213  $(140) $199 



The estimated prior service (credit) for pension benefits that will be amortized from accumulatedAccumulated other comprehensive (income) loss into net periodic benefit (income) cost in 20172020 are expected to be ($43)$(42) million and ($1)$0 million for U.S. and non-U.S. pension plans.

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HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

  Other Postretirement Benefits
  Years Ended December 31,
Net Periodic Benefit Cost  2016  2015  2014
Service cost $-  $-  $- 
Interest cost  20   33   42 
Amortization of prior service (credit)  (76)  (30)  (20)
Recognition of actuarial losses  22   34   24 
Net periodic benefit (income) cost $(34) $37  $46 

  Years Ended December 31,
Other Changes in Plan Assets and Benefits Obligations 2016 2015 2014
Recognized in Other Comprehensive (Income) Loss            
Actuarial (gains) losses $(31) $(55) $46 
Prior service cost (credit)  27   (290)  (87)
Prior service credit recognized during year  76   30   20 
Actuarial losses recognized during year  (22)  (34)  (24)
Total recognized in other comprehensive (income) loss $50  $(349) $(45)
Total recognized in net periodic benefit cost and other comprehensive (income) loss $16  $(312) $1 

Net Periodic Benefit CostOther Postretirement Benefits
Years Ended December 31,
2019 2018 2017
Service cost$—
 $—
 $—
Interest cost14
 15
 19
Amortization of prior service (credit)(62) (52) (58)
Recognition of actuarial losses—
 3
 13
Net periodic benefit (income) cost$(48) $(34) $(26)
Other Changes in Plan Assets and Benefits Obligations
Recognized in Other Comprehensive (Income) Loss
Years Ended December 31,
2019 2018 2017
Actuarial (gains) losses$(16) $(110) $(14)
Prior service cost (credit)(2) (34) 91
Prior service credit recognized during year62
 52
 58
Actuarial losses recognized during year—
 (3) (13)
Total recognized in other comprehensive (income) loss$44
 $(95) $122
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss$(4) $(129) $96

The estimated net loss(gain) and prior service (credit) for other postretirement benefits that will be amortized from accumulatedAccumulated other comprehensive (income) loss into net periodic benefit (income) cost in 20172020 are expected tobe $14 million$0 and ($70) million.

$(63) million.


82
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Major actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for our significant benefit plans are presented in the following table as weighted averages.

  Pension Benefits
  U.S. Plans  Non-U.S. Plans
  2016  2015  2014  2016  2015  2014 
Actuarial assumptions used to determine benefit obligations as of December 31:                        
Discount rate  4.20%  4.46%  4.08%  2.51%  3.49%  3.26%
Expected annual rate of compensation increase  4.50%  4.48%  4.50%  2.17%  2.11%  2.53%
                        
Actuarial assumptions used to determine net periodic benefit (income) cost for years ended December 31:                        
Discount rate - benefit obligation  4.46%  4.08%  4.89%  3.49%  3.26%  4.29%
Discount rate - service cost  4.69%  N/A   N/A   2.92%  N/A   N/A 
Discount rate - interest cost  3.59%  N/A   N/A   3.07%  N/A   N/A 
Expected rate of return on plan assets  7.75%  7.75%  7.75%  6.65%  6.94%  6.96%
Expected annual rate of compensation increase  4.48%  4.50%  4.50%  2.11%  2.53%  2.81%
 Pension Benefits
U.S. Plans Non-U.S. Plans
2019 2018 2017 2019 2018 2017
Actuarial assumptions used to determine benefit obligations as of December 31:           
Discount rate3.22% 4.35% 3.68% 1.81% 2.63% 2.36%
Expected annual rate of compensation increase3.25% 3.25% 4.50% 2.47% 2.46% 0.73%
Actuarial assumptions used to determine net periodic benefit (income) cost for years ended December 31:           
Discount rate—benefit obligation4.35% 3.68% 4.20% 2.63% 2.36% 2.51%
Discount rate—service cost4.47% 3.77% 4.42% 2.26% 2.20% 2.14%
Discount rate—interest cost3.94% 3.27% 3.49% 2.34% 2.08% 2.19%
Expected rate of return on plan assets6.75% 7.75% 7.75% 5.14% 6.23% 6.43%
Expected annual rate of compensation increase3.25% 4.50% 4.50% 2.46% 2.49% 2.17%
 
Other
Postretirement
Benefits
2019 2018 2017
Actuarial assumptions used to determine benefit obligations as of December 31:     
Discount rate3.03% 4.07% 3.39%
Actuarial assumptions used to determine net periodic benefit cost for years ended December 31:     
Discount rate(1)
4.07% 3.39% 3.60%
73
(1)Discount rate was 3.65% for 1/1/2017 through 2/28/2017. Rate was changed to 3.60% for the remainder of 2017 due to a Plan remeasurement as of 3/1/2017.

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

  Other Postretirement Benefits
  2016   2015   2014 
Actuarial assumptions used to determine benefit obligations as of December 31:             
Discount rate  3.65% 3.80% 3.45%
              
Actuarial assumptions used to determine net periodic benefit cost for years ended December 31:             
Discount rate  3.80% 3.45% 4.05%

The discount rate for ourthe Company's U.S. pension and other postretirement benefits plans reflects the current rate at which the associated liabilities could be settled at the measurement date of December 31. To determine discount rates for our U.S. pension and other postretirement benefit plans, we use a modeling process that involves matching the expected cash outflows of our benefit plans to a yield curve constructed from a portfolio of high quality, fixed-income debt instruments. We use the single weighted-average yield of this hypothetical portfolio as a discount rate benchmark. The discount rate used to determineWe utilize a full yield curve approach in the other postretirement benefit obligation is lower principally due to a shorter expected durationestimation of other postretirement plan obligations as compared to pension plan obligations.

During the fourth quarter of 2015 we changed the methodology used to estimate the service and interest cost components of net periodic pension benefit (income) cost for our significant pension plans. Previously, we estimated such cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the pension benefit obligation. The new methodology utilizes a full yield curveThis approach in the estimation of these cost components by applyingapplies the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows and provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. The change did not affect the measurement of our pension obligation and was applied prospectively as a change in estimate. For our U.S. pension plans, the single weighted average spot rates used to determine service and interest costs for 20172020 are 4.42%3.33% and 3.49%2.76%.

Our The discount rate used to determine the other postretirement benefit obligation is lower principally due to a shorter expected duration of other postretirement plan obligations as compared to pension plan obligations.


83
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The Company plans to use an expected rate of return on U.S. plan assets of 7.75%6.15% for 2020 down from 6.75% for 2019 reflecting a decline in interest rates and additional re-balancing of assets to more fixed income. Our asset return assumption is a long-term rate based on historical plan asset returns over varying long-term periods combined with current market conditions and broad asset mix considerations.considerations with a focus on long-term trends rather than short-term market conditions. We review the expected rate of return on an annual basis and revise it as appropriate.

For non-U.S. benefit plans actuarial assumptions reflect economic and market factors relevant to each country.

Pension Benefits

Included in

The following amounts relate to the aggregate data in the tables above are the amounts applicable to ourCompany's significant pension plans with accumulated benefit obligations exceeding the fair value of plan assets. Amounts related to such plans were as follows:

  December 31, 
  U.S. Plans  Non-U.S. Plans 
  2016  2015  2016  2015 
Projected benefit obligation $17,414  $17,298  $2,294  $1,624 
Accumulated benefit obligation $17,263  $16,899  $2,220  $1,574 
Fair value of plan assets $16,814  $16,349  $1,552  $976 

Accumulatedassets:

 December 31,
U.S. Plans Non-U.S. Plans
2019 2018 2019 2018
Projected benefit obligation$357
 $327
 $1,018
 $1,668
Accumulated benefit obligation$347
 $321
 $973
 $1,604
Fair value of plan assets$—
 $—
 $233
 $873

The accumulated benefit obligation for ourthe Company's U.S. defined benefit pension plans were $17.3was $17.2 billion and $16.9$16.1 billion and for our Non-U.S. defined benefit pension plans were $6.4was $6.8 billion and $6.2$6.1 billion at December 31, 20162019 and 2015.

Our2018.

The Company's asset investment strategy for our U.S. pension plans focuses on maintaining a diversified portfolio using various asset classes in order to achieve our long-term investment objectives on a risk adjusted basis. Our

74

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

actual invested positions in various securities change over time based on short and longer-term investment opportunities. To achieveDuring 2019, we continued to employ a de-risking strategy which increases the matching characteristics of our objectives, we have establishedassets relative to our obligation. Our long-term target allocations are as follows: 60%55%-70% equity securities, 10%-20% fixed income securities and cash, 25%-40% equity securities, 5%-15%-10% real estate investments, and 10%-20% other types of investments. Equity securities include publicly-traded stock of companies located both inside and outside the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. Treasuries. Real estate investments include direct investments in commercial properties and investments in real estate funds. Other types of investments include investments in private equity and hedge funds that follow several different strategies. We review our assets on a regular basis to ensure that we are within the targeted asset allocation ranges and, if necessary, asset balances are adjusted back within target allocations.

Our

The Company's non-U.S. pension assets are typically managed by decentralized fiduciary committees with the Honeywell Corporate Investments group providing funding and investment guidance. Our non-U.S. investment policies are different for each country as local regulations, funding requirements, and financial and tax considerations are part of the funding and investment allocation process in each country.

In accordance with ASU 2015-07, “Fair Value Measurement (Topic 820)”, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the following tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets.


84
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


The fair values of both ourthe Company's U.S. and non-U.S. pension plans assets by asset category are as follows:

  U.S. Plans
  December 31, 2016
  Total Level 1 Level 2  Level 3 
Equities:              
Honeywell common stock $2,140  $2,140  $-  $- 
U.S. equities  3,583   3,583   -   - 
Non-U.S. equities  2,069   2,037   32   - 
Real estate investment trusts  203   203   -   - 
Fixed income:                
Short term investments  1,306   1,306   -   - 
Government securities  305   -   305   - 
Corporate bonds  4,366   -   4,366   - 
Mortgage/Asset-backed securities  617   -   617   - 
Insurance contracts  7   -   7   - 
Direct investments:                
Direct private investments  609   -   -   609 
Real estate properties  664   -   -   664 
Total  15,869  $9,269  $5,327  $1,273 
Investments measured at NAV:                
Private funds  815             
Real estate funds  110             
Hedge funds  20             
Total assets at fair value $16,814             

75

 U.S. Plans
December 31, 2019
Total Level 1 Level 2 Level 3
Equities:       
Honeywell common stock$2,857
 $2,857
 $—
 $—
U.S. equities1,227
 1,227
 —
 —
Non-U.S. equities—
 —
 —
 —
Real estate investment trusts—
 —
 —
 —
Fixed income:       
Short term investments1,395
 1,395
 —
 —
Government securities1,146
 —
 1,146
 —
Corporate bonds8,603
 —
 8,603
 —
Mortgage/Asset-backed securities1,023
 —
 1,023
 —
Insurance contracts8
 —
 8
 —
Direct investments:       
Direct private investments950
 —
 —
 950
Real estate properties619
 —
 —
 619
Total$17,828
 $5,479
 $10,780
 $1,569
Investments measured at NAV:       
Private funds1,019
      
Real estate funds42
      
Hedge funds—
      
Commingled Funds106
      
Total assets at fair value$18,995
      

85
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

  U.S. Plans
  December 31, 2015
  Total Level 1 Level 2 Level 3
Equities:            
Honeywell common stock $1,916  $1,916  $-  $- 
U.S. equities  4,572   4,572   -   - 
Non-U.S. equities  2,099   1,943   156   - 
Real estate investment trusts  209   209   -   - 
Fixed income:                
Short term investments  1,332   1,332   -   - 
Government securities  425   -   425   - 
Corporate bonds  3,003   -   3,003   - 
Mortgage/Asset-backed securities  561   -   561   - 
Insurance contracts  7   -   7   - 
Direct investments:                
Direct private investments  535   -   -   535 
Real estate properties  626   -   -   626 
Total  15,285  $9,972  $4,152  $1,161 
Investments measured at NAV:                
Private funds  889             
Real estate funds  156             
Hedge funds  19             
Total assets at fair value $16,349             

  Non-U.S. Plans
   December 31, 2016
   Total Level 1 Level 2 Level 3
Equities:                
U.S. equities $650  $525  $125  $- 
Non-U.S. equities  2,153   219   1,934   - 
Fixed income:                
Short-term investments  146   146   -   - 
Government securities  1,530   -   1,530   - 
Corporate bonds  1,220   -   1,220   - 
Mortgage/Asset-backed securities  18   -   18   - 
Insurance contracts  152   -   152   - 
Investments in private funds:                
Private funds  42   -   19   23 
Real estate funds  124   -   -   124 
Total  6,035  $890  $4,998  $147 
Investments measured at NAV:                
Private funds  33             
Real estate funds  52             
Total assets at fair value $6,120             

76

  Non-U.S. Plans
   December 31, 2015
  Total Level 1 Level 2 Level 3
Equities:                
U.S. equities $569  $479  $90  $- 
Non-U.S. equities  2,200   228   1,972   - 
Fixed income:                
Short-term investments  108   105   3   - 
Government securities  1,621   -   1,621   - 
Corporate bonds  1,073   -   1,073   - 
Mortgage/Asset-backed securities  94   -   94   - 
Insurance contracts  170   -   170   - 
Investments in private funds:                
Private funds  10   -   -   10 
Real estate funds  152   -   -   152 
Total  5,997  $812  $5,023  $162 
Investments measured at NAV:                
Private funds  51             
Real estate funds  69             
Total assets at fair value $6,117             
77

 U.S. Plans
December 31, 2018
Total Level 1 Level 2 Level 3
Equities:       
Honeywell common stock$2,438
 $2,438
 $—
 $—
U.S. equities1,365
 1,365
 —
 —
Non-U.S. equities753
 753
 —
 —
Real estate investment trusts244
 244
 —
 —
Fixed income:       
Short term investments877
 877
 —
 —
Government securities993
 —
 993
 —
Corporate bonds6,824
 —
 6,824
 —
Mortgage/Asset-backed securities1,032
 —
 1,032
 —
Insurance contracts8
 —
 8
 —
Direct investments:       
Direct private investments829
 —
 —
 829
Real estate properties657
 —
 —
 657
Total$16,020
 $5,677
 $8,857
 $1,486
Investments measured at NAV:       
Private funds931
      
Real estate funds56
      
Hedge funds1
      
Commingled funds101
      
Total assets at fair value$17,109
      
 Non-U.S. Plans
December 31, 2019
Total Level 1 Level 2 Level 3
Equities:       
U.S. equities$149
 $—
 $149
 $—
Non-U.S. equities1,384
 54
 1,330
 —
Fixed income:       
Short-term investments522
 522
 —
 —
Government securities3,006
 —
 3,006
 —
Corporate bonds1,746
 —
 1,746
 —
Mortgage/Asset-backed securities84
 —
 84
 —
Insurance contracts120
 —
 120
 —
Investments in private funds:       
Private funds69
 —
 35
 34
Real estate funds150
 —
 —
 150
Total$7,230
 $576
 $6,470
 $184
Investments measured at NAV:       
Private funds21
      
Real estate funds56
      
Total assets at fair value$7,307
      

86
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



 Non-U.S. Plans
December 31, 2018
Total Level 1 Level 2 Level 3
Equities:       
U.S. equities$429
 $297
 $132
 $—
Non-U.S. equities1,356
 44
 1,312
 —
Fixed income:       
Short-term investments189
 189
 —
 —
Government securities2,572
 —
 2,572
 —
Corporate bonds1,468
 —
 1,468
 —
Mortgage/Asset-backed securities60
 —
 60
 —
Insurance contracts137
 —
 137
 —
Investments in private funds:       
Private funds46
 —
 12
 34
Real estate funds144
 —
 —
 144
Total$6,401
 $530
 $5,693
 $178
Investments measured at NAV:       
Private funds26
      
Real estate funds54
      
Total assets at fair value$6,481
      

The following table summarizes changes in the fair value of Level 3 assets for both U.S. and Non-U.S. plans:

  U.S. Plans Non-U.S. Plans
  Direct      
  Private Real Estate Private Real Estate
  Investments Properties Funds Funds
Balance at December 31, 2014 $301  $600  $4  $100 
Actual return on plan assets:                
Relating to assets still held at year-end  47   16   -   5 
Relating to assets sold during the year  21   14   -   - 
Purchases  242   16   10   51 
Sales and settlements  (76)  (20)  (4)  (4)
                 
Balance at December 31, 2015  535   626   10   152 
Actual return on plan assets:                
Relating to assets still held at year-end  (42)  11   1   (22)
Relating to assets sold during the year  28   7   -   (1)
Purchases  141   48   12   - 
Sales and settlements  (53)  (28)  -   (5)
Balance at December 31, 2016 $609  $664  $23  $124 

 U.S. Plans Non-U.S. Plans
Direct
Private
Investments
 
Real Estate
Properties
 
Private
Funds
 
Real Estate
Funds
Balance at December 31, 2017$752
 $597
 $31
 $149
Actual return on plan assets:       
Relating to assets still held at year-end36
 33
 1
 (4)
Relating to assets sold during the year65
 2
 —
 —
Purchases95
 47
 2
 —
Sales and settlements(119) (22) —
 (1)
Balance at December 31, 2018$829
 $657
 $34
 $144
Actual return on plan assets:       
Relating to assets still held at year-end15
 40
 —
 7
Relating to assets sold during the year89
 (23) —
 1
Purchases216
 48
 —
 —
Sales and settlements(199) (103) —
 (2)
Balance at December 31, 2019$950
 $619
 $34
 $150

The Company enters into futures contracts to gain exposure to certain markets. Sufficient cash or cash equivalents are held by our pension plans to cover the notional value of the futures contracts. At December 31, 20162019 and 2015,2018, our U.S. plans had contracts with notional amounts of $3,775$4,463 million and $2,613$2,808 million. At December 31, 20162019 and 2015,2018, our non-U.S. plans had contracts with notional amounts of $55$479 million and $54$111 million. In both our U.S. and non-U.S. pension plans, the notional derivative exposure is primarily related to outstanding equity and fixed income futures contracts.

Common stocks, preferred stocks, real estate investment trusts, and short-term investments are valued at the closing price reported in the active market in which the individual securities are traded. Corporate bonds, mortgages, asset-backed securities, and government securities are valued either by using pricing models, bids provided by brokers

87
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


or dealers, quoted prices of securities with similar characteristics or discounted cash flows and as such include adjustments for certain risks that may not be observable such as credit and liquidity risks. Certain securities are held in collective trust funds which are valued using net asset values provided by the administrators of the funds. Investments in private equity, debt, real estate and hedge funds and direct private investments are valued at estimated fair value based on quarterly financial information received from the investment advisor and/or general partner. Investments in real estate properties are valued on a quarterly basis using the income approach. Valuation estimates are periodically supplemented by third party appraisals.

Our general

The Company's funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In 2016, 20152019, 2018, and 2014,2017, we were not required to make contributions to our U.S. pension plans and no contributions were made. We are not required to make any contributions to our U.S. pension plans in 2017.2020. In 2016,2019, contributions of $149$43 million were made to our non-U.S. pension plans to satisfy regulatory funding requirements. In 2017,2020, we expect to make contributions of cash and/or marketable securities of approximately $130$112 million to our non-U.S. pension plans to satisfy regulatory funding standards. Contributions for both our U.S. and non-U.S. pension plans do not reflect benefits paid directly from Company assets.

Benefit payments, including amounts to be paid from Company assets, and reflecting expected future service, as appropriate, are expected to be paid as follows:

78
 U.S. Plans Non-U.S. Plans
2020$1,159
 $282
20211,151
 288
20221,145
 296
20231,138
 303
20241,128
 311
2025-20295,353
 1,690

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

  U.S. Plans Non-U.S. Plans
2017 $1,217  $223 
2018  1,136   225 
2019  1,147   231 
2020  1,158   238 
2021  1,167   244 
2022-2026  5,838   1,323 


Other Postretirement Benefits

  December 31, 
  2016  2015 
Assumed health care cost trend rate:        
Health care cost trend rate assumed for next year  6.50%  7.00%
Rate that the cost trend rate gradually declines to  5.00%  5.00%
Year that the rate reaches the rate it is assumed to remain at  2023   2023 

 December 31,
2019 2018
Assumed health care cost trend rate:   
Health care cost trend rate assumed for next year7.00% 7.00%
Rate that the cost trend rate gradually declines to5.00% 5.00%
Year that the rate reaches the rate it is assumed to remain at2029
 2029

The assumed health care cost trend rate has a significant effect on the amounts reported. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:

  1 percentage point
  Increase Decrease
Effect on total of service and interest cost components $1  $(1)
Effect on postretirement benefit obligation $25  $(18)
         
Benefit payments reflecting expected future service, as appropriate, are expected to be paid as follows: 

  Without Impact of Net of
  Medicare Subsidy Medicare Subsidy
2017 $67  $62 
2018  62   57 
2019  57   53 
2020  52   48 
2021  48   44 
2022-2026  156   141 
 1 percentage point
Increase Decrease
Effect on total of service and interest cost components$1
 $(1)
Effect on postretirement benefit obligation$14
 $(12)

Benefit payments reflecting expected future service, as appropriate, are expected to be paid as follows:
 
Without Impact of
Medicare Subsidy
 
Net of
Medicare Subsidy
2020$46
 $41
202142
 38
202239
 35
202336
 32
202422
 20
2025-202995
 84


88
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Note 21.22. Segment Financial Data

We

Honeywell globally manage ourmanages its business operations through four4 reportable operating segments. Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance.

Honeywell’s senior management evaluates segment performance based on segment profit. SegmentEach segment’s profit is measured as business unitsegment income (loss) before taxes excluding general corporate unallocated expense, other income (expense), interest and other financial charges, stock compensation expense, pension and other postretirement benefitsincome (expense), stock compensation expense and repositioning and other charges.

In July 2016, the Company announced the realignment of the business units comprising its Automationcharges, and Control Solutions reporting segment by forming two new reportable operating segments: Home and Building Technologies and Safety and Productivity Solutions. Home and Building Technologies includes Environmental & Energy Solutions, Security and Fire, and Building Solutions and Distribution. Additionally, the Industrial Combustion/Thermal business, previously part of Environmental & Energy Solutions in Automation and Control Solutions, became part of Performance Materials and Technologies.Safety and Productivity Solutionsincludes

79
other items within Other (income) expense. 

 Years Ended December 31,
2019 2018 2017
Net Sales     
Aerospace     
Product$8,766
 $10,415
 $10,067
Service5,288
 5,078
 4,712
Total14,054
 15,493
 14,779
Honeywell Building Technologies     
Product4,395
 7,868
 8,396
Service1,322
 1,430
 1,381
Total5,717
 9,298
 9,777
Performance Materials and Technologies     
Product8,732
 8,589
 8,521
Service2,102
 2,085
 1,818
Total10,834
 10,674
 10,339
Safety and Productivity Solutions     
Product5,736
 5,976
 5,333
Service368
 361
 306
Total6,104
 6,337
 5,639
 $36,709
 $41,802
 $40,534
Depreciation and amortization     
Aerospace$234
 $281
 $279
Honeywell Building Technologies63
 112
 118
Performance Materials and Technologies493
 452
 441
Safety and Productivity Solutions222
 216
 219
Corporate76
 55
 58
 $1,088
 $1,116
 $1,115
Segment Profit     
Aerospace$3,607
 $3,503
 $3,288
Honeywell Building Technologies1,165
 1,608
 1,650
Performance Materials and Technologies2,433
 2,328
 2,206
Safety and Productivity Solutions790
 1,032
 852
Corporate(256) (281) (306)
 $7,739
 $8,190
 $7,690

89
HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)

Sensing & Productivity Solutions and Industrial Safety, as well as the Intelligrated business.Under the realigned segment reporting structure, the Company’s reportable operating segments are Aerospace, Home and Building Technologies, Performance Materials and Technologies and Safety and Productivity Solutions.

These realignments have no impact on the Company’s historical consolidated financial position, results of operations or cash flows. Prior period amounts have been reclassified to conform to current period segment presentation.

  Years Ended December 31,
Net Sales 2016 2015 2014
Aerospace            
Product $9,926  $10,379  $10,773 
Service  4,825   4,858   4,825 
Total  14,751   15,237   15,598 
Home and Building Technologies            
Product  9,374   7,985   8,267 
Service  1,280   1,176   1,218 
Total  10,654   9,161   9,485 
Performance Materials and Technologies            
Product  7,601   7,674   8,662 
Service  1,671   1,801   1,815 
Total  9,272   9,475   10,477 
Safety and Productivity Solutions            
Product  4,461   4,657   4,696 
Service  164   51   50 
Total  4,625   4,708   4,746 
  $39,302  $38,581  $40,306 
             
Depreciation and amortization            
Aerospace $275  $267  $277 
Home and Building Technologies  192   101   114 
Performance Materials and Technologies  314   285   292 
Safety and Productivity Solutions  188   173   184 
Corporate  61   57   57 
  $1,030  $883  $924 
             
Segment Profit            
Aerospace $2,991  $3,218  $2,915 
Home and Building Technologies  1,683   1,512   1,455 
Performance Materials and Technologies  2,050   1,990   1,876 
Safety and Productivity Solutions  680   746   686 
Corporate  (218)  (210)  (236)
  $7,186  $7,256  $6,696 
80

HONEYWELL INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS – (CONTINUED)

(Dollars in millions, except per share amounts)

  Years Ended December 31,
Capital expenditures 2016 2015 2014
Aerospace $331  $314  $315 
Home and Building Technologies  110   103   83 
Performance Materials and Technologies  455   481   538 
Safety and Productivity Solutions  55   47   61 
Corporate  144   128   97 
  $1,095  $1,073  $1,094 
             
  December 31,
Total Assets 2016 2015 2014
Aerospace $11,426  $11,235  $11,151 
Home and Building Technologies  13,201   13,950   9,857 
Performance Materials and Technologies  13,026   11,699   9,805 
Safety and Productivity Solutions  8,951   7,006   7,228 
Corporate  7,542   5,426   7,410 
  $54,146  $49,316  $45,451 


 December 31,
2019 2018 2017
Capital expenditures     
Aerospace$272
 $308
 $380
Honeywell Building Technologies43
 125
 88
Performance Materials and Technologies314
 254
 303
Safety and Productivity Solutions82
 78
 79
Corporate128
 63
 181
 $839
 $828
 $1,031
Total Assets     
Aerospace$11,378
 $11,234
 $11,769
Honeywell Building Technologies5,968
 6,010
 10,592
Performance Materials and Technologies16,888
 17,827
 17,203
Safety and Productivity Solutions9,888
 9,886
 9,456
Corporate14,557
 12,816
 10,450
 $58,679
 $57,773
 $59,470

A reconciliation of segment profit to consolidated income from continuing operations before taxes are as follows:

  Years Ended December 31,
  2016 2015 2014
Segment Profit $7,186  $7,256  $6,696 
Other income (expense)(1)  71   38   269 
Interest and other financial charges  (338)  (310)  (318)
Stock compensation expense(2)  (184)  (175)  (187)
Pension ongoing income (expense)(2)  601   430   254 
Pension mark-to-market expense(2)  (273)  (67)  (249)
Other postretirement income (expense)(2)  32   (40)  (49)
Repositioning and other charges(2)  (648)  (546)  (598)
Income from continuing operations before taxes $6,447  $6,586  $5,818 

 Years Ended December 31,
2019 2018 2017
Segment Profit$7,739
 $8,190
 $7,690
Interest and other financial charges(357) (367) (316)
Stock compensation expense(1)
(153) (175) (176)
Pension ongoing income (expense)(2)
592
 992
 713
Pension mark-to-market expense(2)
(123) (37) (87)
Other postretirement income(2)
47
 32
 21
Repositioning and other charges(3)
(546) (1,091) (973)
Other(4)
360
 (57) 78
Income before taxes$7,559
 $7,487
 $6,950
(1)
(1)Amounts included in Selling, general and administrative expenses.
(2)Amounts included in Cost of products and services sold and Selling, general and administrative expenses (service costs) and Other income/expense (non-service cost components).
(3)Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and Other income/expense.
(4)Amounts include the other components of Other income/expense not included within other categories in this reconciliation. Equity income (loss)income/loss of affiliated companies is included in Segment Profit.
(2)Amounts included in cost of products and services sold and selling, general and administrative expenses.segment profit.

Note 22. Geographic Areas - Financial Data

  Net Sales(1) Long-lived Assets(2)
  Years Ended December 31, December 31,
  2016 2015 2014 2016 2015 2014
United States $22,652  $23,771  $23,911  $3,744  $3,939  $3,612 
Europe  9,966   8,674   9,870   741   746   741 
Other International  6,684   6,136   6,525   1,308   1,104   1,030 
  $39,302  $38,581  $40,306  $5,793  $5,789  $5,383 

(1) Sales between geographic areas approximate market and are not significant. Net sales are classified according to their country of origin. Included in United States net sales are export sales of $5,290 million, $5,526 million and $5,647 million in 2016, 2015 and 2014.

(2) Long-lived assets are comprised of property, plant and equipment - net.

81

90

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STATEMENTS—(Continued)

(Dollars in millions, except per share amounts)



Note 23. Geographic Areas—Financial Data
 
Net Sales(1)
 
Long-lived Assets(2)
Years Ended December 31, December 31,
 2019 2018 2017 2019 2018 2017
United States$21,910
 $23,841
 $22,722
 $3,649
 $3,601
 $3,604
Europe7,424
 10,066
 10,400
 579
 571
 927
Other International7,375
 7,895
 7,412
 1,097
 1,124
 1,395
 $36,709
 $41,802
 $40,534
 $5,325
 $5,296
 $5,926
(1)Sales between geographic areas approximate market and are not significant. Net sales are classified according to their country of origin. Included in United States net sales are export sales of $5,415 million, $5,293 million and $4,974 million in 2019, 2018 and 2017.
(2)Long-lived assets are comprised of property, plant and equipment - net.

Note 23.24. Supplemental Cash Flow Information

  Years Ended December 31,
  2016 2015 2014
Payments for repositioning and other charges:            
Severance and exit cost payments $(228) $(118) $(161)
Environmental payments  (228)  (273)  (321)
Insurance receipts for asbestos related liabilities  43   63   211 
Asbestos related liability payments  (212)  (209)  (259)
  $(625) $(537) $(530)
             
Interest paid, net of amounts capitalized $329  $310  $312 
Income taxes paid, net of refunds  1,142   1,192   1,142 
Non-cash investing and financing activities:            
Common stock contributed to savings plans  168   174   168 
Marketable securities contributed to non-U.S. pension plans  106   109   117 
 Years Ended December 31,
2019 2018 2017
Net payments for repositioning and other charges:     
Severance and exit cost payments$(249) $(285) $(177)
Environmental payments(256) (218) (212)
Reimbursement receipts292
 67
 —
Insurance receipts for asbestos related liabilities68
 38
 27
Asbestos related liability payments(231) (254) (266)
 $(376) $(652) $(628)
Interest paid, net of amounts capitalized$344
 $353
 $306
Income taxes paid, net of refunds1,564
 1,566
 1,751
Non-cash investing and financing activities:     
Common stock contributed to savings plans159
 52
 172
Marketable securities contributed to non-U.S. pension plans—
 99
 89


91
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)


Note 24.25. Unaudited Quarterly Financial Information

  2016
  Mar. 31 June 30 Sept. 30 Dec. 31 Year
Net Sales $9,522  $9,991  $9,804  $9,985  $39,302 
Gross Profit  2,975   3,170   2,901   3,106   12,152 
Net income attributable to Honeywell  1,216   1,319   1,240   1,034   4,809 
Earnings per share - basic  1.58   1.73   1.62   1.36   6.29 
Earnings per share - assuming dilution  1.56   1.70   1.60   1.34   6.20 
Dividends paid per share  0.5950   0.5950   0.5950   0.6650   2.45 
Market Price per share                    
High  113.23   117.32   119.88   118.09   119.88 
Low  96.24   111.46   111.60   105.78   96.24 

  2015
  Mar. 31 June 30 Sept. 30 Dec. 31 Year
Net Sales $9,213  $9,775  $9,611  $9,982  $38,581 
Gross Profit  2,851   2,961   2,957   3,065   11,834 
Net income attributable to Honeywell  1,116   1,194   1,264   1,194   4,768 
Earnings per share - basic  1.42   1.52   1.62   1.55   6.11 
Earnings per share - assuming dilution  1.41   1.51   1.60   1.53   6.04 
Dividends paid per share  0.5175   0.5175   0.5175   0.5950   2.15 
Market Price per share                    
High  101.76   104.17   104.29   101.65   104.29 
Low  98.78   102.87   101.72   92.93   92.93 
 2019
Mar. 31 June 30 Sept. 30 Dec. 31 Year
Net sales$8,884
 $9,243
 $9,086
 $9,496
 $36,709
Gross profit3,005
 3,149
 3,048
 3,168
 12,370
Net income attributable to Honeywell1,416
 1,541
 1,624
 1,562
 6,143
Earnings per common share—basic(1)
1.94
 2.13
 2.26
 2.19
 8.52
Earnings per common share—assuming dilution(1)
1.92
 2.10
 2.23
 2.16
 8.41
Cash dividends per common share0.820
 0.820
 0.820
 0.900
 3.360
 
2018(2)
Mar. 31 June 30 Sept. 30 Dec. 31 Year
Net sales$10,392
 $10,919
 $10,762
 $9,729
 $41,802
Gross profit3,201
 3,305
 3,206
 3,044
 12,756
Net income attributable to Honeywell1,439
 1,267
 2,338
 1,721
 6,765
Earnings per common share—basic(1)
1.92
 1.70
 3.15
 2.34
 9.10
Earnings per common share—assuming dilution(1)
1.89
 1.68
 3.11
 2.31
 8.98
Cash dividends per common share0.745
 0.745
 0.745
 0.820
 3.055
82
(1)Total for the full year may differ from the sum of the individual quarters due to the requirement to use weighted average shares each quarter, which may fluctuate with share repurchases and share issuances, and due to the impact of losses in a quarter.
(2)The results of operations for Transportation Systems business and Homes and Global Distribution business are included in the Consolidated Statement of Operations through the effective dates of the respective spin-offs.

92

Report of Independent Registered Public Accounting Firm

To the shareowners and the Board of Directors and Shareholders of Honeywell International Inc.

Morris Plains, New Jersey:

Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Honeywell International Inc. and subsidiaries (the “Company”"Company") as of December 31, 20162019 and 2015,2018, and the related consolidated statements of operations, comprehensive income, shareowners’ equity, and cash flows, for each of the three years in the period ended December 31, 2019, and shareowners’ equity for the years then ended.related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 20162019, based on the criteria established inInternal Control—Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the financial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.



Because of theits inherent limitations, of internal control over financial reporting including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be preventedprevent or detected on a timely basis.detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In

Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, referredtaken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to above present fairly, in all material respects,which they relate.
Asbestos Related Liabilities - North American Refractories Company (NARCO) Trust Liability - Refer to Note 20 to the financial positionstatements
Critical Audit Matter Description
The Company is named in asbestos related personal injury claims related to a predecessor company, NARCO. Such claims arise primarily from alleged occupational exposure to asbestos-containing refractory brick and mortar for high-temperature applications.
Since becoming effective in 2013, the NARCO Trust has experienced delays in becoming fully operational. Disputes and challenges regarding violations of Honeywell International Inc.the Trust Distribution Procedures, an expired 18-month standstill agreement and subsidiaries aslimited claims payments, have all contributed to a lack of December 31, 2016 and 2015, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally acceptedsufficient normalized data based on actual claims processing experience in the United States of America. Also, in our opinion,NARCO Trust.
Although the Company maintained,knows the number of claims filed with the NARCO Trust each year, it is not able at this time to determine the portion of the NARCO Trust Liability which represents asserted versus unasserted claims due to the lack of sufficiently reliable claims data.
Maintaining the NARCO Trust Liability is inherently subjective as it requires management to make significant assumptions and judgements regarding the sufficiency and reliability of historical claims filing data and experience and expected future claims filing rates.
Given the subjectivity in all material respects, effectivemaintaining the NARCO Trust Liability the auditing of the NARCO Trust Liability required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the NARCO Trust Liability included the following, among others:
We tested the effectiveness of internal controls over the annual third-party assessment of the sufficiency and reliability of the NARCO Trust claims data including controls over the review of management’s assumptions and claims data used to estimate the NARCO Trust Liability.
We made inquiries of internal and external legal counsel regarding the regulatory and litigation environments related to the NARCO Trust Liability.
With the assistance of our internal actuarial specialists, we evaluated NARCO Trust claims data to assess the reasonableness of management’s conclusion that such data is not sufficiently reliable to enable the Company to update the estimate of the recorded NARCO Trust Liability.
Revenue Recognition and Contracts with Customers - Long-Term Fixed Price Contracts (Performance Materials and Technologies (PMT)) - Refer to Note 1 and Note 7 to the financial statements
Critical Audit Matter Description
The Company’s PMT segment develops and manufactures advanced materials, process technologies, and automation solutions. A portion of PMT’s revenue is generated from long-term fixed price contracts whereby revenue is recognized over the contract term (“over time”) as the work progresses and control over financial reporting as of December 31, 2016,the goods and services is transferred to the customer. Revenue for these contracts is recognized based on the criteria establishedextent of progress toward completion, generally measured by using a cost-to-cost basis input method.

Accounting for PMT’s long-term fixed price contracts requires management’s judgment inInternal Control—Integrated Framework (2013)issued by estimating total contract costs. Contract costs, which can be incurred over several years, are largely determined based on negotiated or estimated purchase contract terms and consider factors such as historical performance, technical and schedule risk, internal and subcontractor performance trends, and anticipated labor agreements.
Given the Committeesignificant judgments necessary to estimate costs associated with these long-term contracts, auditing PMT’s long-term fixed price contracts requires a high degree of Sponsoring Organizationsauditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to PMT’s long-term fixed price contracts included the following, among others:
We tested the effectiveness of internal controls over the recognition of revenue and the determination of estimated contract costs including controls over the review of management’s assumptions and key inputs used to recognize revenue and costs on long-term fixed price contracts using the cost-to-cost input method.
We evaluated the appropriateness and consistency of management’s methods and assumptions used to recognize revenue and costs on long-term fixed price contracts using the cost-to-cost input method to recognize revenue over time.
We selected a sample of long-term fixed price contracts and evaluated the estimates of total cost for each of the Treadway Commission.

long-term fixed price contracts by:
83
▪Comparing costs incurred to date to the costs management estimated to be incurred to date.
▪Evaluating management’s ability to achieve the estimates of total cost by performing corroborating inquiries with Company personnel, including project managers, and comparing the estimates to documentation such as management’s work plans, contract terms and requirements, and purchase orders with suppliers. Our evaluation of management’s assumptions included consideration of historical and current project performance such as consistency of gross margin, identified risks related to project timing including technical and schedule matters, and the status of internal and third-party activities such as hardware, software, and labor.
▪Performing a substantive analytical procedure, in which we compared the estimated costs to complete to an independent estimate of costs to complete that factored in information obtained from the corroborating inquiries and documentation obtained such as management’s work plans, contract terms and requirements, and purchase orders with suppliers.

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for employee share-based payments in 2016 and 2015 due to the adoption of Financial Accounting Standards Board’s Accounting Standards Update No. 2016-09,Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

Charlotte, North Carolina
February 10, 2017

84
14, 2020

Report of Independent Registered Public Accounting Firm

To The Board of Directors and Shareholders of Honeywell International Inc.:

In our opinion, the accompanying consolidated statements of income, comprehensive income, shareholders’ equity and cash flowsfor the year ended December 31, 2014 present fairly, in all material respects, the results of operations and cash flows of Honeywell International Inc. and its subsidiaries for the year ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility ofWe have served as the Company’s management. Our responsibility is to express an opinion on these financial statementsbased on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Florham Park, NJ

February 13, 2015, except for the change in composition of reportable segments discussed in Note 21 to the consolidated financial statements, as to which the date is February 10, 2017

85
auditor since 2014.


95


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

Item 9A. Controls and Procedures

Honeywell management maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (Exchange Act) is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There have been no changes that have materially affected, or are reasonably likely to materially affect, Honeywell’s internal control over financial reporting that have occurred during the quarter ended December 31, 2016.

2019.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) at December 31, 2016.2019. Based on these evaluations, our CEO and CFO concluded that our disclosure controls and procedures required by paragraph (b) of Rules 13a-15 or 15d-15 were effective as of December 31, 2016.

2019.

Management’s Report on Internal Control Over Financial Reporting

Honeywell management is responsible for establishing and maintaining adequate internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Honeywell’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management assessed the effectiveness of Honeywell’s internal control over financial reporting as of December 31, 2016.2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control – Control—Integrated Framework (2013).

Based on this assessment, management determined that Honeywell maintained effective internal control over financial reporting as of December 31, 2016.

2019.

The effectiveness of Honeywell’s internal control over financial reporting as of December 31, 20162019 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8. Financial Statements and Supplementary Data.

Item 9B. Other Information

Under the Iran Threat Reduction and Syrian Human Rights Act of 2012, which added Section 13(r) of the Securities Exchange Act of 1934, Honeywell is required to disclose in its periodic reports if it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with entities or individuals designated pursuant to certain Executive Orders. All of our activities in Iran during the three months ended December 31, 2016, including the activities disclosed below, were conducted by our non-U.S. subsidiaries under General License H and otherwise in compliance with all applicable laws, including sanctions regulations administered by U.S. Treasury’s Office of Foreign Assets Control (OFAC).

In the three months ended December 31, 2016, the UOP business, part of Performance Materials and Technologies, engaged in the following activities related to Iran’s oil, gas and/or petrochemical sectors:

86
·Settled outstanding claims with Iranian counterparties under contracts originally entered into in compliance with then-applicable sanctions laws. Revenue in the three months ended December 31, 2016 from these settlements was approximately $28.6 million.
·Delivered services to Iranian counterparties pursuant to new and existing contracts, which resulted in revenue of approximately $1.3 million in the three months ended December 31, 2016, (expected total value of these contracts is approximately $4.2 million).
·Sold non-U.S. origin products to non-U.S. third-parties for end-use in Iran pursuant to new and existing contracts, which resulted in revenue of approximately $0.1 million in the three months ended December 31, 2016 (expected total value of these contracts is approximately $0.9 million).

In the three months ended December 31, 2016, the Process Solutions business, part of Performance Materials and Technologies, sold approximately $1.7 million of non-U.S. origin products to distributors (including an Iranian distributor) for use in the gas distribution sector in Iran.

In the three months ended December 31, 2016, the Industrial Safety business, part of Safety and Productivity Solutions, sold approximately $0.1 million of non-U.S. origin products to a non-U.S. distributor for use in the oil sector in Iran.

In addition to the activities described above, we previously disclosed in our periodic reports activities, transactions or dealings relating to Iran occurring in the first, second and third quarters of 2016. Our non-U.S. subsidiaries intend to continue doing business in Iran under General License H in compliance with all applicable laws, which sales may require additional disclosure pursuant to Section 13(r) of the Act.

87
Not Applicable.

96


PART III.

Item 10. Directors and Executive Officers of the Registrant

Information relating to the Directors of Honeywell, as well as information relating to compliance with Section 16(a) of the Securities Exchange Act of 1934, will be contained in our definitive Proxy Statement involving the election of the Directors, which will be filed with the SEC pursuant to Regulation 14A not later than 120 days after December 31, 2016,2019, and such information is incorporated herein by reference. Certain other information relating to the Executive Officers of Honeywell appears in Part I of this Annual Report on Form 10-K under the heading Executive Officers of the Registrant.

The members of the Audit Committee of our Board of Directors are: George Paz (Chair), Kevin Burke, Jaime Chico Pardo (ex officio member), D. Scott Davis, Linnet Deily, Judd Gregg and Robin L. Washington. The Board has determined that Mr. Paz, Mr. Davis and Ms. Washington are audit committee financial experts as defined by applicable SEC rules and that Mr. Paz, Mr. Burke, Mr. Davis, Ms. Deily and Ms. Washington satisfy the accounting or related financial management expertise criteria established by the NYSE. All members of the Audit Committee are independent as that term is defined in applicable SEC rules and NYSE listing standards.

Honeywell’s corporate governance policies and procedures, including the Code of Business Conduct, Corporate Governance Guidelines and Charters of the Committees of the Board of Directors are available, free of charge, on our website under the heading Investor Relations (see Corporate Governance), or by writing to Honeywell, 115 Tabor Road, Morris Plains, New Jersey 07950,300 South Tryon Street, Charlotte, North Carolina 28202, c/o Vice President and Corporate Secretary. Honeywell’s Code of Business Conduct applies to all Honeywell directors, officers (including the Chief Executive Officer, Chief Financial Officer and Controller) and employees. Amendments to or waivers of the Code of Business Conduct granted to any of Honeywell’s directors or executive officers will be published on our website within five business days of such amendment or waiver.

Item 11. Executive Compensation

Information relating to executive compensation is contained in the Proxy Statement referred to above in Item 10. Directors and Executive Officers of the Registrant, and such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information relating to security ownership of certain beneficial owners and management and related stockholder matters is contained in the Proxy Statement referred to above in Item 10. Directors and Executive Officers of the Registrant, and such information is incorporated herein by reference.

88

EQUITY COMPENSATION PLANS

As of December 31, 20162019, information about our equity compensation plans is as follows:

  Number of Shares
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights		 Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights		 Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
Plan category ( a )  ( b ) ( c )
Equity compensation plans approved by security holders 35,267,728(1) $79.48(2) 49,233,195(3)
Equity compensation plans not approved by security holders 447,739(4)  N/A(5) N/A(6)
Total 35,715,467  79.48 49,233,195
Plan category
Number of Shares
to be Issued Upon
Exercise of
Outstanding Options, Warrants
and Rights
 
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
 
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(a) (b) (c)
Equity compensation plans approved by security holders22,496,879 (1) 109.87 (2) 40,001,939 (3)
Equity compensation plans not approved by security holders293,763 (4) N/A (5) N/A (6)
Total22,790,642   109.87   40,001,939  

(1)Equity compensation plans approved by shareowners which are included in column (a) of the table are the 2016 Stock Incentive Plan, the 2011 Stock Incentive Plan, and the 2006 Stock Incentive Plan (including 28,603,165 shares of Common Stock to be issued for options; 16,091 shares to be issued for stock appreciation rights; 4,443,936 RSUs subject to continued employment; and 1,884,115 deferred RSUs); and the 2016 Stock Plan for Non-Employee Directors and the 2006 Stock Plan for Non-Employee Directors (including 297,014 shares of Common Stock to be issued for options; and 23,40718,473,640


shares of Common Stock to be issued for options; 2,820,462 RSUs subject to continued employment; 402,054 RSUs at target level and subject to company performance metrics and continued employment, and 525,252 deferred RSUs); and the 2016 Stock Plan for Non-Employee Directors and the 2006 Stock Plan for Non-Employee Directors (including 257,922 shares of Common Stock to be issued for options; and 17,549 RSUs subject to continued services). RSUs included in column (a) of the table represent the full number of RSUs awarded and outstanding whereas the number of shares of Common Stock to be issued upon vesting will be lower than what is reflected on the table because the value of shares required to meet employee tax withholding requirements are not issued.

1,336,202 growth plan units were issued and remain outstanding for the performance cycle commencing January 1, 2014 and ended December 31, 2015 and 1,600,359 growth plan units were issued and remain outstanding for the performance cycle commencing January 1, 2016 and ending December 31, 2017, both pursuant to the 2011 Stock Incentive Plan. The value of this growth plan award will be paid in cash and, thus, growth plan unitsshares required to meet employee tax withholding requirements are not included in the table above.

issued.


Because the number of future shares that may be distributed to employees participating in the Honeywell Global Stock Plan is unknown, no shares attributable to that plan are included in column (a) of the table above.


(2)Column (b) relates to stock options and does not include any exercise price for RSUs because an RSU’s value is dependent upon attainment of certain performance goals or continued employment or service and they are settled for shares of Common Stock on a one-for-one basis.


(3)The number of shares that may be issued under the 2016 Stock Incentive Plan as of December 31, 20162019 is 46,365,60937,364,854 which includes the following additional shares that may again be available for issuance: shares that are settled for cash, expire, are canceled, or under similar prior plans, are tendered as option exercise price or tax withholding obligations, are reacquired with cash option exercise price or with monies attributable to any tax deduction enjoyed byto Honeywell toupon the exercise of an option, or are under any outstanding awards assumed under any equity compensation plan of an entity acquired by Honeywell. No securities are available for future issuance under the 2011 Stock Incentive Plan or the 2006 Stock Incentive Plan.
89

The number of shares that may be issued under the Honeywell Global Stock Plan as of December 31, 20162019 is 1,906,977.1,770,812. This plan is an umbrella plan for three plans described below maintained solely for eligible employees of participating non-U.S. countries.

·The UK Sharebuilder Plan allows an eligible UK employee to invest taxable earnings in Common Stock. The Company matches those shares and dividends paid are used to purchase additional shares of Common Stock. For the year ending December 31, 2016, 58,353 shares were credited to participants’ accounts under the UK Sharebuilder Plan.
·The Honeywell International Technologies Employees Share Ownership Plan (Ireland) and the Honeywell Measurex (Ireland) Limited Group Employee Profit Sharing Scheme, allow eligible employees in Ireland to contribute specified percentages of base pay, bonus or performance pay that are then invested in Common Stock. For the year ending December 31, 2016, 7,139 shares of Common Stock were credited to participants’ accounts under these two plans.


The UK Sharebuilder Plan allows an eligible UK employee to invest taxable earnings in Common Stock. The Company matches those shares and dividends paid are used to purchase additional shares of Common Stock. For the year ending December 31, 2019, 34,787 shares were credited to participants’ accounts under the UK Sharebuilder Plan.
The Honeywell Aerospace Ireland Share Participation Plan and the Honeywell Measurex (Ireland) Limited Group Employee Profit Sharing Plan allow eligible Irish employees to contribute a percentage of base pay and/or bonus that is invested in Common Stock. For the year ending December 31, 2019, 2,083 shares of Common Stock were credited to participants’ accounts under these plans.

The remaining 960,609866,273 shares included in column (c) are shares remaining under the 2016 Stock Plan for Non-Employee Directors.


(4)Equity compensation plans not approved by shareowners included in the table refers to the Honeywell Excess Benefit Plan and Supplemental Non-Qualified Savings Plan for Highly Compensated Employees.Plan.


The Honeywell Excess Benefit Plan and Supplemental Non-Qualified Savings Plan for Highly Compensated Employeeshighly compensated employees is an unfunded, non-tax qualified plan that provides benefits equal to the employee deferrals and company matching allocations that would have been provided under Honeywell’s U.S. tax-qualified savings plan if the Internal Revenue Code limitations on compensation and contributions did not apply. The Company matching contribution is credited to participants’ accounts in the form of notional shares of Common Stock. The notional shares are distributed in the form of actual shares of Common Stock. The number of shares to be issued under this plan based on the value of the notional shares as of December 31, 20162019 is 438,998.

The AlliedSignal Incentive Compensation Plan for Executive Employees was a cash incentive compensation plan maintained by AlliedSignal Inc. This plan has expired. Employees were permitted to defer receipt of a cash bonus payable under the plan and invest the deferred bonus in notional shares of Common Stock. The notional shares are distributed in the form of actual shares of Common Stock. The number of shares of Common Stock that remain to be issued as of December 31, 2016 is 8,741.

293,763.

(5)Column (b) does not include any exercise price for notional shares allocated to employees under Honeywell’s equity compensation plans not approved by shareowners because all of these shares are only settled for shares of Common Stock on a one-for-one basis.


(6)The amount of securities available for future issuance under the Honeywell Excess Benefit Plan and Supplemental Non-Qualified Savings Plan for Highly Compensated Employees is not determinable because the number of securities that may be issued under this plan depends upon the amount deferred to the plan by participants in future years.


98


Item 13. Certain Relationships and Related Transactions

Information relating to certain relationships and related transactions is contained in the Proxy Statement referred to above in Item 10. Directors and Executive Officers of the Registrant, and such information is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

Information relating to fees paid to and services performed by Deloitte & Touche LLP and our Audit Committee’s pre-approval policies and procedures with respect to non-audit services are contained in the Proxy Statement referred to above in Item 10. Directors and Executive Officers of the Registrant, and such information is incorporated herein by reference.

90

99


PART IV.

Item 15. Exhibits and Financial Statement Schedules

Page Number
in Form 10-K
 
Page Number
in Form 10-K
(a)(1.) Consolidated Financial Statements: 
Consolidated Statement of Operations for the years ended December 31, 2016, 20152019, 2018 and 2014201734
33
Consolidated Statement of Comprehensive Income for the years ended December 31, 2016, 20152019, 2018 and 2014201735
34
Consolidated Balance Sheet at December 31, 20162019 and 2015201836
35
Consolidated Statement of Cash Flows for the years ended December 2016, 20152019, 2018 and 2014201737
36
Consolidated Statement of Shareowners’ Equity for the years ended December 31, 2016, 20152019, 2018 and 2014201738
37
Notes to Consolidated Financial Statements39
38
Report of Independent Registered Public Accounting Firm83
93
 
Page Number
in Form 10-K
(a)(2.) Exhibits 
See the Exhibit Index of this Annual Report on Form 10-K94
91100
Item 16. Form 10-K Summary
None.



EXHIBIT INDEX

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Exhibit No. Honeywell International Inc.
Date:  February 10, 2017By:/s/ Jennifer H. Mak  
Jennifer H. Mak
Vice President and Controller
(on behalf of the Registrant
and as the Registrant’s
Principal Accounting Officer)
92

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:

NameName
**
David M. CoteJudd Gregg
Chairman of the Board andDirector
Chief Executive Officer
(Principal Executive Officer)
**
Darius AdamczykClive Hollick
President and Chief Operating OfficerDirector
and Director
**
William S. AyerGrace D. Lieblein
DirectorDirector
**
Kevin BurkeGeorge Paz
DirectorDirector
**
Jaime Chico PardoBradley T. Sheares, Ph.D.
DirectorDirector
**
D. Scott DavisRobin L. Washington
DirectorDirector
*
Linnet F. Deily
Director
/s/ Thomas A. Szlosek/s/ Jennifer H. Mak
Thomas A. SzlosekJennifer H. Mak
Senior Vice President andVice President and Controller
Chief Financial Officer(Principal Accounting Officer)
(Principal Financial Officer)
*By:/s/ Thomas A. Szlosek
(Thomas A. Szlosek
Attorney-in-fact)
February 10, 2017
93

EXHIBIT INDEX

Exhibit
No.		Description
3(i)
Amended and Restated Certificate of Incorporation of Honeywell International Inc., as amended April 26, 201023, 2018 (incorporated by reference to Exhibit 3(i) to Honeywell’s Form 8-K filed April 27, 2010)
10-Q for the quarter ended June 30, 2018)
3(ii)
By-laws of Honeywell International Inc., as amended February 12, 2016April 23, 2018 (incorporated by reference to Exhibit 3(ii) to Honeywell’s Form 8-K filed February 12, 2016)10-Q for the quarter ended June 30, 2018)
4.1
4
 Honeywell International Inc. is a party to several long-term debt instruments under which, in each case, the total amount of securities authorized does not exceed 10% of the total assets of Honeywell and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Honeywell agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.
4.2
 
Description of Honeywell International Inc. Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed herewith)
10.1*
Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for quarter ended June 30, 2003)
10.2*
Amendment to Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc., as amended and amendedrestated (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 8-K filed December 21, 20042004)
10.3*
Amendment to Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-K for the year ended December 31, 20052005)
10.4*
 
10.2*

Honeywell International Inc. Incentive Compensation Plan for Executive Employees, as amended and restated (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-K for the year ended December 31, 2013)

2018)
10.5*
 
10.3*
Honeywell Excess Benefit Plan and Honeywell Supplemental Non-Qualified Savings Plan, for Highly Compensated Employees of Honeywell International Inc. and its Subsidiaries, as amended and restated (incorporated by reference to Exhibit 10.6 to Honeywell’s Form 10-K for the year ended December 31, 2008), and amended by Exhibit 10.5 to Honeywell’s Form 10-K for the year ended December 31, 2010, Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, 2012, Exhibit 10.5 to Honeywell’s Form 10-K for the year ended December 31, 2013 and Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, 2015(filed herewith)
10.6*
 
10.4*

Honeywell International Inc. Severance Plan for Designated Officers, as amended and restated (incorporated by reference to Exhibit 10.6 to Honeywell’s Form 10-K for the year ended December 31, 2013)

10.7*
 
10.5*Salary and
Honeywell Deferred Incentive Award DeferralCompensation Plan, for Selected Employees of Honeywell International Inc. and its Affiliates, as amended and restated (incorporated by reference to Exhibit 10.8 to Honeywell’s Form 10-K for the year ended December 31, 2008), and amended by Exhibit 10.7 to Honeywell’s Form 10-K for the year ended December 31, 2013(filed herewith)
10.8*
 
10.6*
Honeywell International Inc. Supplemental Pension Plan, as amended and restated (incorporated by reference to Exhibit 10.10 to Honeywell’s Form 10-K for the year ended December 31, 2008),
10.9*
Amendment to Honeywell International Inc. Supplemental Pension Plan, as amended and amendedrestated (incorporated by reference to Exhibit 10.10 to Honeywell’s Form 10-K for the year ended December 31, 20092009)
10.10*
Amendment to Honeywell International Inc. Supplemental Pension Plan, as amended and restated (incorporated by reference to Exhibit 10.7 to Honeywell’s Form 10-K for the year ended December 31, 20152015)
10.11*
 
10.7*
Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.12 to Honeywell’s Form 10-K for the year ended December 31, 2008),
10.12*
Amendment to Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.12 to Honeywell’s Form 10-K for the year ended December 31, 2009,2009)
10.13*
Amendment to Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.9 to Honeywell’s Form 10-K for the year ended December 31, 2013,2013)
10.14*
Amendment to Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.8 to Honeywell’s Form 10-K for the year ended December 31, 2015
942015)


Exhibit
No.		 Description
10.8*10.15* 
Honeywell Supplemental Defined Benefit Retirement Plan, as amended and restated (incorporated by reference to Exhibit 10.13 to Honeywell’s Form 10-K for the year ended December 31, 2008),
10.16*
Amendment to Honeywell Supplemental Defined Benefit Retirement Plan, as amended and amendedrestated (incorporated by reference to Exhibit 10.13 to Honeywell’s Form 10-K for the year ended December 31, 20092009)
10.17*
Amendment to Honeywell Supplemental Defined Benefit Retirement Plan, as amended and restated (incorporated by reference to Exhibit 10.9 to Honeywell’s Form 10-K for the year ended December 31, 20152015)
10.18* 
10.9*
Honeywell International Inc. Severance Plan for Corporate Staff Employees (Involuntary Termination Following a Change in Control), as amended and restated (incorporated by reference to Exhibit 10.12 to Honeywell’s Form 10-K for the year ended December 31, 2013)
10.19* 
10.10*Employment Agreement dated as of February 18, 2002 between Honeywell and David M. Cote (incorporated by reference to Exhibit 10.24 to Honeywell’s Form 8-K filed March 4, 2002), and amended by Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended September 30, 2008, Exhibit 10.17 to Honeywell’s Form 10-K for the year ended December 31, 2008, and Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2013
10.11*Deferred Compensation Agreement dated August 4, 2006 between Honeywell and David M. Cote (incorporated by reference to Exhibit 10.22 to Honeywell’s Form 10-K for the year ended December 31, 2006) and amended by Exhibit 10.22 to Honeywell’s Form 10-K for the year ended December 31, 2009
10.12*
Honeywell Supplemental Retirement Plan (incorporated by reference to Exhibit 10.24 to Honeywell’s Form 10-K for the year ended December 31, 2006)
10.20* 
10.13*

Pittway Corporation Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.25 to Honeywell’s Form 10-K for the year ended December 31, 2006) and amended by Exhibit 10.25 to Honeywell’s Form 10-K for the year ended December 31, 2008, Exhibit 10.25 to Honeywell’s 10-K for the year ended December 31, 2009, and amended by Exhibit 10.16 to Honeywell’s Form 10-K for the year ended December 31, 2015

10.14*

2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates, as amended and restated (incorporated by reference to Exhibit 10.26 to Honeywell’s Form 10-K for the year ended December 31, 2008),
10.21*
Amendment to the 2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates, as amended and restated (incorporated by reference to Exhibit 10.1 to Honeywell’s 10-Q for the quarter ended March 31, 2011

2011)
10.22* 
10.15*

2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Option Award Agreement (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended March 31, 2009)

10.23* 
10.16*2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2009)
10.17*

2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates— Form of Performance Share Agreement (incorporated by reference to Exhibit 10.30 to Honeywell’s Form 10-K for the year ended December 31, 2006)

10.18*
2006 Stock Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.31 to Honeywell’s Form 10-K for the year ended December 31, 2008)
10.24*
Amendment to 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc., as amended and amendedrestated (incorporated by reference to Exhibit 10.27 to Honeywell’s Form 10-K for the year ended December 31, 20112011)
10.25*
Amendment to 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.24 to Honeywell’s Form 10-K for the year ended December 31, 20142014)
95
Exhibit
No.10.26*		 Description
10.19*
2006 Stock Plan for Non-Employee Directors of Honeywell International Inc.—Form of Option Agreement (incorporated by reference to Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended March 31, 2012)
10.27* 
10.20*
2006 Stock Plan for Non-Employee Directors of Honeywell International Inc.—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-Q for the quarter ended March 31, 2012)
10.28* 
10.21*
2007 Honeywell Global Employee Stock Plan (incorporated by reference to Honeywell’s Proxy Statement, dated March 12, 2007, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934)
10.29* 
10.22*Letter Agreement dated July 20, 2007 between Honeywell and Roger Fradin (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended September 30, 2007) and amended by Exhibit 10.36 to Honeywell’s Form 10-K for the year ended December 31, 2009
10.23*Letter Agreement dated October 6, 2010 between Honeywell and Roger Fradin (incorporated by reference to Exhibit 10.34 to Honeywell’s Form 10-K for the year ended December 31, 2010) and amended by Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended September 30, 2012
10.24*Employee Non-Competition Agreement dated October 26, 2010 for Andreas Kramvis (incorporated by reference to Exhibit 10.35 to Honeywell’s Form 10-K for the year ended December 31, 2010)
10.25*2006 Stock Incentive Plan of Honeywell International Inc. and its Affiliates — Form of Restricted Unit Agreement, Form 2 (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended June 30, 2010)
10.26*
2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Option Award Agreement, Form 2 (incorporated by reference to Exhibit 10.37 to Honeywell’s Form 10-K for the year ended December 31, 2010)
10.30* 
10.27*
Letter Agreement dated September 3, 2009 between Honeywell and Timothy Mahoney (incorporated by reference to Exhibit 10.38 to Honeywell’s Form 10-K for the year ended December 31, 2010)
10.31* 
10.28*
Form of Honeywell International Inc. Noncompete Agreement for Senior Executives (incorporated by reference to Exhibit 10.39 to Honeywell’s Form 10-K for the year ended December 31, 2010)
10.32* 
10.29*
2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (incorporated by reference to Honeywell’s Proxy Statement, dated March 10, 2011, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934),


Exhibit No.Description
10.33*
Amendment to 2011 Stock Incentive Plan of Honeywell International Inc. and amendedits Affiliates (incorporated by reference to Exhibit 10.36 to Honeywell’s Form 10-K for the year ended December 31, 20122012)
10.34*
Amendment to 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 20142014)
10.35* 
10.30*
2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014)
10.36* 
10.31*
2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement, Form 2 (incorporated by reference to Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014)
10.37* 
10.32*
2011 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014)
96
Exhibit
No.10.38*		 Description
10.33*
2011 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Stock Option Award Agreement, Form 2 (incorporated by reference to Exhibit 10.39 to Honeywell’s Form 10-K for the year ended December 31, 2014)
10.39* 
10.34*
2011 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Growth Plan Agreement (incorporated by reference to Exhibit 10.5 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014)
10.40* 
10.35*Letter Agreement dated August 4, 2011 between
2016 Stock Incentive Plan of Honeywell International Inc. and David M. Coteits Affiliates–Form of Performance Plan Grant Agreement (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended September 30, 2011)
10.36*Letter Agreement dated April 7, 2014 between Honeywell International Inc. and Roger Fradin (incorporated by reference to Exhibit 10.810.2 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014)
10.37*Letter Agreement dated April 7, 2014 between Honeywell International Inc. and Andreas Kramvis (incorporated by reference to Exhibit 10.9 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014)
10.38*Letter Agreement dated April 7, 2014 between Honeywell International Inc. and Thomas A. Szlosek (incorporated by reference to Exhibit 10.10 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014)
10.39*CEO Retention Agreement, as approved by the Board of Directors of Honeywell International Inc. on October 31, 2014 and agreed to by David M. Cote on December 11, 2014 (incorporated by reference to Exhibit 99.2 to Honeywell’s Form 8-K filed December 12, 2014)
10.40*Chief Executive Officer Business Continuity Agreement as approved by the Board of Directors of Honeywell International Inc. on June 28, 2016 (incorporated by reference to Exhibit 99.1 to Honeywell’s Form 8-K filed June 28, 2016)
2017)
10.41* 
Letter Agreement dated February 24, 2012 between Honeywell and Darius Adamczyk (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2016)
10.42* 
Offer letter dated March 31, 2016 from Honeywell International Inc. to Darius Adamczyk (incorporated by reference to Exhibit 99.1 to Honeywell’s Form 8-K filed April 6, 2016)
10.43* 
Employment Offer Letter dated March 1, 2017 between Honeywell and Darius Adamczyk (incorporated by reference to Exhibit 99.1 to Honeywell’s Form 8-K filed March 6, 2017)
10.44*
Offer letter dated March 11, 2013 from Honeywell International Inc. to Krishna Mikkilineni (filed herewith)(incorporated by reference to Exhibit 10.43 to Honeywell’s Form 10-K for the year ended December 31, 2016)
10.45* 
10.44*
2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (incorporated by reference to Honeywell’s Proxy Statement, dated March 10, 2016, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934)
10.46* 
10.45*
2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016)
10.47* 
10.46*
2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement, Form 2 (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016)
97
Exhibit
No.10.48*		 Description
10.47*
2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016)
10.48*2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Growth Plan Agreement (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016) 
10.49* 
2016 Stock Plan for Non-Employee Directors (incorporated by reference to Honeywell’s Proxy Statement, dated March 10, 2016, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934)
10.50* 
2016 Stock Plan for Non-Employee Directors of Honeywell International Inc.—Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.510.74 to Honeywell’s Form 10-Q10-K for the quarteryear ended June 30, 2016)
December 31, 2017)
10.51* 
2016 Stock Plan for Non-Employee Directors of Honeywell International Inc.—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.6 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016)


Exhibit No. Description
10.5210.52*
 Amended
UOP LLC Supplemental Pension Plan, as amended and Restated Five Year Creditrestated (incorporated by reference to Exhibit 10.76 to Honeywell’s 10-K for the year ended December 31, 2017)
10.53*
Letter Agreement dated as of July 10, 2015 amongApril 1, 2016 between Honeywell International Inc., the banks, financial institutions and other institutional lenders parties thereto, Citibank, N.A., as administrative agent, Citibank International Limited, as swing line agent, JPMorgan Chase Bank, N.A., as syndication agent, Bank of America, N.A., Barclays Bank PLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Bank, National Association, as documentation agents, and Citigroup Global Markets Inc., and J.P. Morgan Securities LLC, as joint lead arrangers and co-book managersRajeev Gautam (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 8-K filed July 10, 2015)10-Q for the quarter ended March 31, 2018)
10.54*
 
10.53Amendment No. 1, dated as of September 30, 2015, to the Amended and Restated Five Year Credit
Letter Agreement dated as of July 10, 2015 among27, 2018 between Honeywell International Inc., the banks, financial institutions and other institutional lenders parties thereto, Citibank, N.A., as administrative agent, Citibank International Limited, as swing line agent, JPMorgan Chase Bank, N.A., as syndication agent, Bank of America, N.A., Barclays Bank PLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Bank, National Association, as documentation agents, and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as joint lead arrangers and co-book managers.Greg Lewis (incorporated by reference to Exhibit 10.199.1 to Honeywell’s Form 8-K filed October 1, 2015)
10.54Amendment No.August 2, dated as of April 29, 2016, to the Amended and Restated Five Year Credit Agreement dated as of July 10, 2015, as amended by Amendment No. 1 dated as of September 30, 2015, among Honeywell International Inc., the banks, financial institutions and other institutional lenders parties thereto, Citibank, N.A., as administrative agent, Citibank International Limited, as swing line agent, JPMorgan Chase Bank, N.A., as syndication agent, Bank of America, N.A., Barclays Bank PLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners, LLC and Wells Fargo Bank, National Association, as documentation agents, and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as joint lead arrangers and co-book managers. (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 8-K filed April 29, 2016)
98
2018)
Exhibit  
No.		Description
10.55
364-Day Credit Agreement, dated as of April 29, 2016,26, 2019, among Honeywell International Inc., the banks, financial institutions, and other institutional lenders parties thereto, Citibank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, Bank of America, N.A., Barclays Bank PLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners, LLC, and Wells Fargo Bank, National Association, as documentation agents, and Citigroup Global Markets Inc.Citibank N.A. and JPMorgan Chase Bank, N.A., as joint lead arrangers and co-book managers.managers (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 8-K filed April 29, 2016)26, 2019)
10.56
 
Amended and Restated Five-Year Credit Agreement, dated as of April  26, 2019, among Honeywell International Inc., the banks, financial institutions, and other institutional lenders parties thereto, Citibank, N.A., as administrative agent, Citibank Europe PLC, UK Branch, as swing line agent, JPMorgan Chase Bank, N.A., as syndication agent, Bank of America, N.A., Barclays Bank PLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners, LLC, and Wells Fargo Bank, National Association, as documentation agents, and Citibank, N.A. and J.P. Morgan Chase Bank N.A., as joint lead arrangers and co-bookrunners (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 8-K filed April 26, 2019)
1210.57*
 Statement re: Computation of Ratio of Earnings
Offer Letter dated July 9, 2018 between Honeywell International Inc. and Mark R. James (incorporated by reference to Fixed Charges (filed herewith)Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2019)
10.58
 
Indemnification and Reimbursement Agreement, dated September 12, 2018, by and among Honeywell ASASCO Inc., Honeywell ASASCO 2 Inc., and Honeywell International Inc. (incorporated by reference to Exhibit 2.1 to Honeywell’s Form 8-K filed September 14, 2018)
10.59
Indemnification and Reimbursement Agreement dated October 14, 2018 by and among New HAPI Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 2.1 to Honeywell’s Form 8-K filed October 15, 2018)
10.60*
Retirement Agreement dated February 7, 2019 between Honeywell and Krishna Mikkilineni (incorporated by reference to Exhibit 10.72 to Honeywell’s Form 10-K for the year ended December 31, 2018)
10.61*
Amendment to the 2016 Stock Plan for Non-Employee Directors of Honeywell International Inc. (incorporated by reference to Exhibit 99.2 to Honeywell's Form 8-K filed October 8, 2019)
21
Subsidiaries of the Registrant (filed herewith)
23.1

Consent of Deloitte & Touche LLP (filed herewith)

23.2Consent of PricewaterhouseCoopers LLC (filed herewith)
24
Powers of Attorney (filed herewith)
31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
95
 
Mine Safety Disclosures (filed herewith)


Exhibit No.Description
101.INS XBRL Instance Document (filed herewith)The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
101.SCH XBRL Taxonomy Extension Schema (filed herewith)
101.CAL XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

The Exhibits identified above with an asterisk (*) are management contracts or compensatory plans or arrangements.
** Certain schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules and similar attachments upon request by the U.S. Securities and Exchange Commission.

105


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  HONEYWELL INTERNATIONAL INC.
Date: February 14, 2020By:/s/ Robert D. Mailloux
Robert D. Mailloux
Vice President and Controller
(on behalf of the Registrant
and as the Registrant’s
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
NameName
/s/ Darius Adamczyk*
Darius Adamczyk
Chairman and Chief Executive Officer
(Principal Executive Officer)
Linnet F. Deily
Director
The Exhibits identified above with an asterisk (*) are management contracts or compensatory plans or arrangements.
**
Duncan B. Angove
Director
Deborah Flint
Director
**
William S. Ayer
Director
Judd Gregg
Director
**
Kevin Burke
Director
Clive Hollick
Director
**
Jaime Chico Pardo
Director
Grace D. Lieblein
Director
**
D. Scott Davis
Director
George Paz
Director
*
Robin L. Washington
Director
/s/ Gregory P. Lewis/s/ Robert D. Mailloux
Gregory P. Lewis
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Robert D. Mailloux
Vice President and Controller
(Principal Accounting Officer)
99
*By:/s/ Gregory P. Lewis
(Gregory P. Lewis
Attorney-in-fact)
February 14, 2020

106