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 ended December 31, ~~2017~~
2021

OR
o

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-8974

Honeywell International Inc.

(Exact name of registrant as specified in its charter)


Delaware			22-2640650

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
~~115 Tabor Road~~ ~~Morris Plains, New Jersey~~			~~07950~~
855 South Mint Street			28202
Charlotte,	North Carolina
(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:

Title of Each Class

Trading Symbols

Name of ~~Each Exchange~~
each exchange on ~~Which Registered~~

which registered

Common Stock, par value $1 per share*

~~New York~~HON

The Nasdaq Stock ~~Exchange~~

Market LLC

~~Floating Rate Senior Notes due 2018~~

~~New York Stock Exchange~~

~~0.650% Senior Notes due 2020~~

~~New York Stock Exchange~~

1.300% Senior Notes due 2023

~~New York~~HON 23A

The Nasdaq Stock ~~Exchange~~

Market LLC

0.000% Senior Notes due 2024

HON 24A

The Nasdaq Stock Market LLC

2.250% Senior Notes due 2028

~~New York~~HON 28A

The Nasdaq Stock ~~Exchange~~

Market LLC

0.750% Senior Notes due 2032

HON 32

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

Market LLC

* 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. Yes x No o

☐

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. Yes o☐ No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

☐

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate 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). Yes x No o

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, or an emerging growth company. See ~~definition~~definitions of ~~“accelerated filer,”~~ “large accelerated filer,” ~~and~~“accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check One):~~

~~Large accelerated filer~~ x ~~Accelerated filer~~ o ~~Non-accelerated filer~~ o ~~Smaller reporting company~~ o

~~Emerging growth company~~ o

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 provided pursuant to section 13(a) of the Exchange Act. o

☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o☐ No x

The aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately ~~$101.4~~$152.8 billion at June 30, ~~2017.~~

2021.

There were ~~752,002,033~~685,818,771 shares of Common Stock outstanding at January ~~26, 2018.~~

28, 2022.

Documents Incorporated by Reference

Part III: Proxy Statement for Annual Meeting of Shareowners to be held April ~~23, 2018.~~

25, 2022.

TABLE OF CONTENTS

Item

Page
Part I

1.

Business

1

Executive Officers of the Registrant

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

35

8.

Financial Statements and Supplementary Data

36

9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

90

9A.

Controls and Procedures

90

9B.

Other Information

90
Part III.

10.

Directors and Executive Officers of the Registrant

91

11.

Executive Compensation

92

12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

92

13.

Certain Relationships and Related Transactions

93

14.

Principal Accounting Fees and Services

93
Part IV.

15.

Exhibits and Financial Statement Schedules

94

16.

Form 10-K Summary

94
Signatures

95

ORGANIZATION OF OUR ANNUAL REPORT ON FORM 10-K

The order and presentation of content in our Annual Report on Form 10-K (Form 10-K) differs from the traditional U.S. Securities and Exchange Commission (SEC) Form 10-K format. We believe that our format improves readability and better presents how we organize and manage our business. See Form 10-K Cross-Reference Index for a cross-reference to the traditional SEC Form 10-K format.


1			Cautionary Statement About Forward-Looking Statements
2			About Honeywell
15			Management’s Discussion and Analysis of Financial Condition and Results of Operations
24			Review of Business Segments
29			Risk Factors
38			Quantitative and Qualitative Disclosures About Market Risks
39			Liquidity and Capital Resources
44			Critical Accounting Estimates
48			Other Matters
49			Information About our Executive Officers
50			Unresolved Staff Comments
50			Properties
50			Legal Proceedings
50			Mine Safety Disclosures
51			Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
53			Financial Statements and Supplementary Data
113			Report of Independent Registered Public Accounting Firm
116			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
116			Controls and Procedures
116			Management's Report on Internal Control Over Financial Reporting
116			Other Information
117			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
117			Directors, Executive Officers and Corporate Governance
117			Executive Compensation
118			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
119			Certain Relationships and Related Transactions , and Director Independence
119			Principal Accounting Fees and Services
119			Exhibits and Financial Statement Schedules
119			Form 10-K Summary
124			Signatures
125			Form 10-K Cross-Reference Index

~~PART I.~~

~~Item 1. Business~~

CAUTIONARY STATEMENT ABOUT
FORWARD-LOOKING STATEMENTS

We describe many of the trends and other factors that drive our business and future results in the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other parts of this report (including under the section titled Risk Factors). Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). 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, except as required by applicable securities law. Our forward-looking statements are also subject to risks and uncertainties, including the impact of the COVID-19 pandemic, that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal commitment, expectation, or prospect set forth in this Form 10-K can or will be achieved. These forward-looking statements should be considered in light of the information included in this Form 10-K, including, in particular, the factors discussed within the section titled Risk Factors. Such factors may be revised or supplemented in subsequent reports on Forms 10-Q and 8-K.

Honeywell International Inc. ~~(“Honeywell”~~1

ABOUT HONEYWELL

Honeywell International Inc. (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. We are a leading software-industrial company committed to introducing state of the art technology solutions to improve efficiency, productivity, sustainability, and safety in high growth businesses in broad-based, attractive industrial end markets. 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. The Honeywell brand dates back to 1906, and the Company 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)~~(honeywell.com) under the heading ~~Investor Relations~~Investors (see SEC ~~Filings and Reports)~~Filings) immediately after they are filed with, or furnished to, the ~~Securities~~SEC. Honeywell uses our Investor Relations website, investor.honeywell.com, as a means of disclosing information which may be of interest or material to our investors and ~~Exchange Commission (SEC).~~ for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media. Information contained on or accessible through, including any reports available on, our website is not a part of, and is not incorporated by reference into, this Form 10-K or any other report or document we file with the SEC. Any reference to our website in this Form 10-K is intended to be an inactive textual reference only.

In addition, in this ~~Annual Report on~~ Form 10-K, the Company incorporates by reference certain information from ~~parts of~~ its definitive Proxy Statement for the ~~2018~~2022 Annual Meeting of Stockholders, which we expect to file with the SEC on or about March ~~8, 2018,~~11, 2022 (the Proxy Statement), and which will also be available free of charge on our website.

~~Major Businesses~~

2 Honeywell International Inc.

ABOUT HONEYWELL

EXECUTIVE SUMMARY

The COVID-19 pandemic continued to impact the global economy and certain of our business; however, our execution during 2021 allowed us to grow our market share, exceed our financial commitments, and strategically position our business for continued success. In 2021, we delivered sales growth of 5% to $34.4 billion, led by strong demand in our Warehouse and Workflow Solutions, Productivity Solutions and Services, Advanced Materials, and Commercial Aviation businesses.

We deepened focus on our three transformation initiatives to actively deploy capital to achieve portfolio optimization, drive a culture of innovation enabling growth, and lead in Environmental, Social, and Governance objectives. In executing on these initiatives, we completed four acquisitions, drove growth in sustainable technologies and positively impacted our communities that face continued challenges from the COVID-19 pandemic and other socioeconomic factors. While executing our strategy, we maintained our commitment to create long-term shareowner value by realizing the benefits of operating efficiencies and deploying $8.2 billion to capital expenditures, dividends, share repurchases, and mergers and acquisitions, which was approximately $2.2 billion in excess of our operating cash flow for the year.

As we look forward, we intend to continue deploying capital to high-return opportunities, including software and services with recurring revenue streams, and sustainable technologies, positioning our business for future growth. Overall, our orders were up 11%, compared to 2020, and we carry a robust backlog of $27.7 billion as of December 31, 2021. We continue to monitor and respond to several ongoing macroeconomic factors, including supply chain constraints accompanied by shortages and rising costs for materials and labor. We implemented and continue to identify actions to mitigate the effect of these factors and reduce the impact on our businesses.

YEAR IN REVIEW

Sales up by 5% to

Diluted EPS up by

Operating cash flows of

$34.4 BILLION

17.7%

$6 BILLION

led by strong demand in certain of our businesses as result of the recovery from the global recession created by the COVID-19 pandemic

reflecting strong earnings in our core businesses and continued deployment of capital for share repurchases

as we remain focused on increasing operating cash flows through revenue growth, margin expansion, and improved working capital turnover

Honeywell International Inc. 3

ABOUT HONEYWELL

BUSINESS OBJECTIVES

Our businesses are focused on the following objectives:


			Driving profitable growth by 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 be a premier software-industrial company, including the ongoing expansion of Honeywell Forge connected solutions for aircraft, buildings, cybersecurity, plants, and workers and driving a recurring revenue model across the Company. Honeywell Forge is an enterprise performance management solution for digital transformation of operations. Honeywell Forge includes a mix of software products and enabling services that help companies use operational data to drive insights that improve processes, enhance productivity, support sustainability initiatives, and empower workers;

			Expanding margins by optimizing the Company’s performance through the Integrated Supply Chain and Honeywell Digital transformation initiatives, commercial excellence, repositioning, and other manufacturing and operational process improvements;

			Executing disciplined portfolio management through rigorous merger and acquisition, divestiture, and integration processes to deliver growth and shareholder value;

			Controlling corporate costs, including costs incurred for asbestos and environmental matters, and pension and other post-retirement benefits;

			Increasing availability of capital through strong cash flow generation and conversion from effective working capital management and proactive management of debt to enable the Company to strategically deploy capital for acquisitions, dividends, share repurchases and capital expenditures; and

			Committing to uphold our environmental, social, and governance principles, as a leader in responsible corporate citizenship.

4 Honeywell International Inc.

ABOUT HONEYWELL

MAJOR BUSINESSES

We globally manage our business operations through four reportable segments: Aerospace, ~~Home and~~Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. The remainder of Honeywell's operations is presented in Corporate and All Other, which is not a reportable business segment. Financial information related to our segments is included in Note 2122 Segment Financial Data of Notes to Consolidated Financial Statements. Effective October 2017, the Company realigned the Smart Energy business, previously part of the Home and Building Technologies segment, into the Process Solutions business within the Performance Materials and Technologies segment. The business descriptions below reflect that realignment.

The major ~~products/~~products and services, ~~customers/~~including Honeywell Forge solutions supported by Honeywell Connected Enterprise, customers, uses and key competitors of each of our reportable segments are:

~~Aerospace~~

Aerospace is a leading global supplier of products, software and services for aircraft and vehicles that it sells to original equipment manufacturers (OEM) and other customers in a variety of end markets: air transport, regional, business and general aviation aircraft, airlines, aircraft operators, 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,and turbochargers 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. Aerospace products and services include auxiliary power units, propulsion engines, environmental control systems, wireless connectivity services, electric power systems, engine controls, flight safety, communications, navigation hardware and software, 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 and Building Technologies~~

Home and 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; and enable commercial building owners and occupants to ensure their facilities are safe, energy efficient, sustainable and productive. Home and Building Technologies products and services include controls and displays for heating, cooling, indoor air quality, ventilation, humidification,



AEROSPACE Aerospace is a leading global supplier of products, software and services for aircrafts that it sells to original equipment manufacturers (OEM) and other customers in a variety of end markets including: air transport, regional, business and general aviation aircraft, airlines, aircraft operators, and defense and space 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, and thermal systems. Aerospace also provides spare parts, repair, overhaul, and maintenance services (principally to aircraft operators) for the aftermarket. Honeywell Forge solutions are leveraged by our customers as tools to turn data into predictive maintenance and predictive analytics to enable better fleet management and make flight operations more efficient.



HONEYWELL BUILDING TECHNOLOGIES Honeywell Building Technologies is a leading global provider of products, software, solutions and technologies that enable building owners and occupants to ensure their facilities are safe, energy efficient, sustainable and productive. Honeywell Building Technologies products and services include advanced software applications for building control and optimization; sensors, switches, control systems and instruments for energy management; access control; video surveillance; fire products; and installation, maintenance and upgrades of systems. Honeywell Forge solutions enable our customers to digitally manage buildings, connecting data from different assets to enable smart maintenance, improve building performance and even protect from incoming security threats.

Honeywell International Inc. 5

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; access control; video surveillance; fire products; remote patient monitoring systems; and installation, maintenance and upgrades of systems that keep buildings safe, comfortable and productive.

~~Performance Materials and Technologies~~

Performance Materials and Technologies is a global leader in developing and manufacturing advanced materials, process technologies and automation solutions. 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. Through its metering business, Process Solutions also enables utilities and distribution companies to deploy advanced capabilities that transform operations, improve reliability and environmental sustainability, and better serve customers. Advanced Materials manufactures a wide variety of high-performance products, including fluorocarbons, hydrofluoroolefins, specialty films, waxes, additives, advanced fibers, customized research chemicals and intermediates, and electronic materials and chemicals.

~~Safety and Productivity Solutions~~

Safety and Productivity Solutions is a leading global provider of products, software and connected solutions to customers around the globe that improve productivity, workplace safety and asset performance. Safety products include personal protection equipment and footwear designed for work, play and outdoor activities. 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.

~~Competition~~

ABOUT HONEYWELL



PERFORMANCE MATERIALS AND TECHNOLOGIES Performance Materials and Technologies is a global leader in developing and manufacturing high-quality performance chemicals and materials, process technologies and automation solutions. The segment is comprised of 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. Advanced Materials manufactures a wide variety of high-performance products, including materials used to manufacture end products such as bullet-resistant armor, nylon, computer chips and pharmaceutical packaging, and provides reduced and low global-warming-potential materials based on hydrofluoro-olefin technology. In the industrial environment, Honeywell Forge solutions enable integration and 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 with enabling improved operations and protecting processes, people, and assets.



SAFETY AND PRODUCTIVITY SOLUTIONS Safety and Productivity Solutions is a leading global provider of products and software that improve productivity, workplace safety, and asset performance to customers around the globe. Safety products include personal protection equipment (PPE), apparel, gear, and footwear; gas detection technology; and cloud-based notification and emergency messaging. Productivity Solutions products and services include 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.

6 Honeywell International Inc.

ABOUT HONEYWELL

COMPETITION

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

include but are not limited to:

•

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

AEROSPACE

HONEYWELL BUILDING TECHNOLOGIES

•Garmin

•L3 Harris

•Northrop Grumman

•

Raytheon Technologies

•Safran

•Thales

~~Home and Building Technologies: Emerson Electric, Itron,~~

•Carrier Global

•Johnson Controls

•Schneider ~~and~~ Electric

•Siemens

PERFORMANCE MATERIALS AND TECHNOLOGIES

•

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

SAFETY AND PRODUCTIVITY SOLUTIONS

•Arkema

•Axens

•Chemours

•DSM

•

Emerson Electric

•Haldor Topsoe

•Lummus Technology

•Rockwell Automation

~~Safety and Productivity Solutions:~~

•3M ~~Mine Safety Appliances (MSA),~~

•Kion Group

•MSA Safety Incorporated

•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, product recognition, quality, reliability, customer service, delivery, and ~~product recognition.~~price. Brand identity, service to customers, and quality are important competitive factors for our products and ~~services, and there is~~services. Our products face 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~~

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 3 Revenue Recognition and Contracts with Customers of Notes to Consolidated Financial Statements. Backlog was $27,682 million and $25,769 million at December 31, 2021 and 2020. The backlog previously disclosed as of December 31, 2020, is revised to reflect a prior period correction, which had no impact on our results of operations. We expect to recognize approximately 59% of our ~~competitors have substantial~~

~~financial resources~~remaining performance obligations as revenue in 2022, and ~~significant technological capabilities. In addition, some of~~the remaining balance thereafter.

U.S. GOVERNMENT SALES

The Company, principally through our ~~products compete with the captive component divisions of OEMs.~~

~~Aerospace Sales~~

~~Our~~ Aerospace segment, sales were 36%, 38% and 39% of our total sales in 2017, 2016 and 2015. Our sales to commercial aerospace OEMs were 6%, 6% and 8% of our total sales in 2017, 2016 and 2015. In addition, our sales to commercial aftermarket customers of aerospace products and services were 13%, 12% and 12% of our total sales in 2017, 2016 and 2015.

~~U.S. Government Sales~~

~~Sales~~sells to the U.S. ~~Government (principally by Aerospace),~~government acting through its various departments and agencies and through prime contractors, ~~amounted to $3,203 million, $3,330 million and $3,743 million in 2017, 2016 and 2015, which included sales to~~including the U.S. Department of Defense as(as both a prime contractor and ~~subcontractor, of $2,546 million, $2,647 million and $2,680 million in 2017, 2016 and 2015. U.S. defense spending decreased in 2017 compared to 2016.~~subcontractor). We do not expect our overall operating results to be significantly affected by any proposed changes in ~~2018~~2022 federal defense spending due ~~principally~~ to the varied mix of the government programs which impact us ~~(OEMs’~~(OEM 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, 2017 and 2016 was $17,690 million and $17,277 million.~~ customer base.


U.S. Government Sales ($ in millions)	Years Ended December 31,
	2021		2020		2019
Sales to the U.S. Department of Defense	$	3,219	$	3,661	$	3,491
Sales to other U.S. government departments and agencies	703		557		566
Total Sales to the U.S. Government	$	3,922	$	4,218	$	4,057

Honeywell International Inc. 7

ABOUT HONEYWELL

INTERNATIONAL OPERATIONS

We anticipate that approximately $12,337 million of the 2017 backlog will be filled in 2018. 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. The 2016 backlog previously disclosed has been revised to apply the methodology used for the 2017 backlog and excludes certain previously included amounts that do not meet the criteria for inclusion.

~~International Operations~~

~~We are engaged~~engage 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~~represented 12% of our total sales in ~~2017, 13%~~ in ~~2016~~2021 and ~~14%~~2020, and 15% in ~~2015.~~2019. Non-U.S. manufactured products and services, mainly in Europe and Asia, were ~~44%~~40% of our total sales in ~~2017, 43% in 2016~~2021, 2020, and ~~39% in 2015.~~

Manufactured Products and Systems and
Performance of Services

Year Ended December 31, 2017

Aerospace

Home and
Building
Technologies

Performance
Materials and
Technologies

Safety and
Productivity
Solutions

(% of Segment Sales)
U.S. Exports

21
%

1
%

15
%

4
%

Non-U.S.

34
%

50
%

54
%

41
%

2019.


Manufactured Products and Systems and Performance of Services	Year Ended December 31, 2021
	Aerospace		Honeywell Building Technologies		Performance Materials and Technologies		Safety and Productivity Solutions
	(% of Segment Sales)
U.S. exports	23	%	2	%	13	%	1	%
Non-U.S. manufactured products/services	15	%	66	%	57	%	35	%

Information related to risks ~~attendant~~related to our foreign operations is included in ~~Item 1A.~~the section titled Risk Factors under the caption “Macroeconomic and Industry Risks.”

~~Raw Materials~~

RAW MATERIALS

The vast majority of principal raw materials used in our operations are ~~generally~~ readily ~~available. Although we occasionally experience disruption in raw materials supply,~~available; however, during 2021, we experienced ~~no significant problems in~~supply chain constraints for certain raw materials. While the ~~purchase~~current supply chain constraints have not significantly impacted our business, to reduce the impact of ~~key raw materials or commodities in 2017.~~current and future disruptions we have implemented short-term and long-term strategies to reduce the impact of current and future disruptions, and digital solutions to manage shortages and prioritize mitigation actions. We continue to leverage existing supplier relationships, and 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 ~~perchloroethylene~~molybdenum 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~~formula-driven or long-term supply agreements, price increases and hedging activities where feasible. We anticipate that supply chain constraints for certain raw materials will continue into 2022; however, we believe our short-term and long-term strategies position us well to mitigate and reduce the impact these factors may have on our businesses. As such, we do not presently anticipate that a shortage of raw materials will cause any material adverse impacts during ~~2018.~~

~~Patents, Trademarks, Licenses and Distribution Rights~~

2022.

PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS

Our segments are not dependent upon any single patent or related group of patents, trademarks, 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, licenses and ~~licenses~~distribution rights 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~~

REGULATIONS

The Company’s principal research and development activities are in the U.S., India, Europe, and China. Research and development expense totaled $1,835 million, $1,864 million and $1,856 million in 2017, 2016 and 2015. R&D expense was 5% of sales in each of 2017, 2016 and 2015. Customer-sponsored (principally by the U.S. Government) R&D activities amounted to an additional $876 million, $967 million and $998 million in 2017, 2016 and 2015.

~~Environment~~

Weoperations are subject to various federal, state, local, and foreign government regulations, including requirements regarding the protection of human health and the environment. ~~We believe that, as a general matter, our~~Our 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 engaged~~engage in the handling, manufacturing, use, and disposal of many substances classified as hazardous by one or more regulatory agencies. ~~We believe that, as a general matter, our~~Our policies, practices and procedures are ~~properly~~ designed to prevent unreasonable risk of environmental damage and personal injury, and to ensure that our handling, manufacture, use, and disposal of these substances ~~are in accord with~~meet 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.

8 Honeywell International Inc.

ABOUT HONEYWELL

Among other environmental requirements, we are subject to the ~~federal~~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. ~~Although~~While there is a possibility that a responsible party might ~~have to bear more than its proportional share of the cleanup costs if it is~~be 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. We~~and we will continue to monitor emerging developments in this area.

~~Employees~~

Beyond our compliance requirements with environmental regulations, compliance with other government regulations has not had, and based on laws and regulations currently in effect, is not expected to have a material effect on the Company's capital expenditures, earnings or competitive position. See section titled Risk Factors for additional information on government regulation that could impact our business.

Honeywell International Inc. 9

ABOUT HONEYWELL

SUSTAINABLE COMMITMENTS AND SOLUTIONS

In April 2021, we committed to become carbon neutral in our operations and facilities by 2035. We ~~have approximately 131,000 employees~~plan to accomplish this through a combination of innovative investments in energy savings projects, conversion to renewable energy sources, completion of capital improvement projects at our sites, upgrading our fleet of vehicles, and, if necessary, using credible carbon credits. Our greenhouse gas reduction program initially began in 2004, in our view setting us well on our way to achieving this commitment.

We see ourselves as a responsible corporate citizen, leading sustainable change within the global marketplace. While we focus on our own sustainability commitments, we seek to partner as an agent of change with our customers around the world through sustainable products, services, and solutions.

1Available through the Honeywell Partnership Ecosystem.

Additional information regarding our sustainability initiatives and strategy is included in our 2021 Corporate Citizenship Report, which can be found on our website (honeywell.com); this report is not incorporated into this Form 10-K by reference and should not be considered part of this Form 10-K.

10 Honeywell International Inc.

ABOUT HONEYWELL

HUMAN CAPITAL MANAGEMENT

We believe a commitment to and investment in human capital management enables better decision making, helps us build competitive advantage, and furthers our long-term success. As of December 31, ~~2017,~~2021, we employed approximately 99,000(1) employees across 82 countries, 34,000(1) of whom ~~approximately 46,000~~ are ~~located~~ in the United States.

~~Executive Officers~~ Human capital management is the key driver of our performance culture, which enables our workforce to respond to the fast-changing needs of our customers. Our performance culture is defined by a set of eight Honeywell Behaviors, which reflect the bold, entrepreneurial spirit we seek to foster while emphasizing our goal to operate with speed and precision. At their foundation is a commitment to Integrity and Ethics, Inclusion and Diversity, and Workplace Respect, fundamental values that underlie everything we do.

As of December 31, 2021, we employed approximately

99,000 EMPLOYEES(1)

Across

82 COUNTRIES

34,000(1)

of whom are in the United States.

(1) Excludes Sandia National Laboratories (Sandia) and Kansas City National Security Campus (KCNSC) work forces of approximately 21,000 employees. Sandia and KCNSC are U.S. Department of Energy facilities. Honeywell manages these facilities as a contract operator and does not establish or control their human resource policies.

HONEYWELL BEHAVIORS

HAVE A PASSION FOR WINNING

BE COURAGEOUS

BE A ZEALOT FOR GROWTH

BECOME YOUR BEST

THINK BIG...
THEN MAKE IT HAPPEN

BE COMMITTED

ACT WITH URGENCY

BUILD EXCEPTIONAL TALENT

In 2021, we furthered our foundational principles of Inclusion and Diversity by appointing a Chief Inclusion and Diversity Officer and Inclusion and Diversity leaders for each business unit focusing on three key priorities:

Representation

Retention

Recognition

Cultivate a workforce that reflects our communities and the world

Create employee development and advancement opportunities

Be a global employer of choice for Inclusion and Diversity

Sustain a pipeline of diverse talent from campus to the C-Suite

Foster community engagement and belonging

Leverage our culture as a competitive advantage

Promote a culture of inclusion, accessibility, and respect

Offer competitive compensation, rewards, and recognition

Lead on Inclusion and Diversity practices

Our commitment to these fundamental values and the Honeywell Behaviors starts at the top with a diverse Board of Directors and executive management team, who represent a broad spectrum of backgrounds and perspectives. We believe that the diversity of our current Board of Directors (four women, and two Hispanic, two African American, and one Asian American director) and the diversity of Honeywell’s executive leadership (more than half of the ~~Registrant~~

~~The~~Company’s nine executive officers are diverse by ethnic background, non-U.S. place of birth or gender) supports our evolving business strategy and is a testament to Honeywell’s ongoing commitment to hiring, developing, and retaining diverse talent. The Company’s commitment to Inclusion and Diversity enables better decision-making, helps build competitive advantages, and furthers long-term success.

Honeywell ~~listed~~International Inc. 11

ABOUT HONEYWELL

In 2020, we established a Global Inclusion and Diversity Steering Committee co-sponsored by our Chairman and CEO, Senior Vice President and General Counsel, and Senior Vice President and Chief Human Resources Officer and fortified our inclusion and diversity governance structure by embedding Inclusion and Diversity Councils in each of our business groups. The governance structure provides a scalable model that supports our seven affinity group employee networks and facilitates the introduction of new networks to reflect the diverse characteristics of our workforce. These networks are designed to provide training and development opportunities and expand internal networks for promotional opportunities.


Employee Networks
•Honeywell AllAbilities Employee Network •Honeywell Asian Employee Network •Honeywell Black Employee Network •Honeywell Women’s Employee Network			•Honeywell LGBTQ+ Employee Network •Honeywell Veterans Employee Network •Honeywell Hispanic Employee Network


Commitment to Inclusion and Diversity


Board Gender Diversity	Board Ethnic or Racial Diversity	Executive Officer Diversity(1)



Global Workforce(2)			U.S. Workforce(2)



(1) Reflects Executive Officers as of December 31, 2021. (2) As of December 31, 2021. Excludes work forces at Sandia and KCNSC.

12 Honeywell International Inc.

ABOUT HONEYWELL

In addition, our people managers are expected to model behaviors that promote a culture that is open and inclusive for all employees. We help managers develop this skill as ~~follows,~~they do any other leadership skill, though training programs, interactive learning and real time events, including the hiring and talent review processes. Our Leadership Edge program provides training in core management skills to leaders across the organization.

Training programs are ~~elected annually~~available to all employees through our internal learning and development platform, which assigns curriculum tailored to an employee’s job responsibilities. Employees can also access additional trainings on-demand to continue to enhance their skills. We deploy unconscious bias and inclusive leadership training to our global workforce to educate and influence behavior.

Our internal talent acquisition and management platform is a key component to recruiting, hiring, and developing top-performing talent. Our hiring practices consider a diverse slate of candidates and our hiring managers are provided training and toolkits to reinforce their role in bringing diverse talent into the Company. Further, we partner with top academic institutions and external professional organizations to enhance the diversity of our workforce to attract and retain top talent. Our talent review process requires our people managers to have semi-annual career discussions with each member of their teams to discuss the best opportunity for growth and development, which enhances our identification of candidates for internal promotion and succession planning.

Finally, our Code of Business Conduct establishes the baseline requirements of our integrity and compliance program and promotes an environment where everyone is treated ethically and with respect. It outlines our pledge to recognize the dignity of each individual, respect each employee, provide compensation and benefits that are competitive, promote self-development through training, and value diversity of perspectives and ideas. All employees must complete Code of Business Conduct training and, where permitted by law, must also certify each year that they will comply with the Code.

Overall, we believe our culture, along with our internal tools and initiatives, enable us to effectively execute our human capital strategy. For discussion on the risks relating to our inability to attract and retain top-performing talent, please see section titled Risk Factors.

Honeywell International Inc. 13

ABOUT HONEYWELL

SELECTED FINANCIAL DATA

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


	Years Ended December 31,
	2021		2020		2019		2018(1)(2)		2017(1)
	(Dollars in millions, except per share amounts)
Results of Operations
Net sales	$	34,392	$	32,637	$	36,709	$	41,802	$	40,534
Net income attributable to Honeywell	5,542		4,779		6,143		6,765		1,545
Earnings Per Common Share
Earnings from operations:
Basic	8.01		6.79		8.52		9.10		2.03
Assuming dilution	7.91		6.72		8.41		8.98		2.00
Dividends per share	3.77		3.63		3.36		3.06		2.74
Balance Sheet Data
Property, plant and equipment—net	5,562		5,570		5,325		5,296		5,926
Total assets	64,470		64,586		58,679		57,773		59,470
Short-term debt	5,345		6,042		4,892		6,458		5,309
Long-term debt	14,254		16,342		11,110		9,756		12,573
Total debt	19,599		22,384		16,002		16,214		17,882
Redeemable noncontrolling interest	7		7		7		7		5
Shareowners’ equity	19,242		17,790		18,706		18,358		16,665

(1)2018 and 2017 Net Income attributable to Honeywell and Earnings Per Common Share were impacted by the ~~Board~~U.S. Tax Cuts and Jobs Act.

(2)The results of ~~Directors. There~~operations for the Transportation Systems and Homes and Global Distribution businesses are ~~no family relationships among them.~~


~~Name, Age,~~ ~~Date First~~ ~~Elected an~~ ~~Executive Officer~~		~~Business Experience~~
~~Darius Adamczyk, 52~~ ~~2017(a)~~		President and Chief Executive Officer since April 2017. Chief Operating Officer since from April 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.
~~Rajeev Gautam, 65~~ ~~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, 56~~ ~~2007~~		~~Senior Vice President Human Resources, Procurement and Communications since November 2007.~~
~~Anne T. Madden, 53~~ ~~2017~~		~~Senior Vice President and General Counsel since October 2017. Vice President of Corporate Development and Global M&A from January 2002 to October 2017.~~
~~Timothy O. Mahoney, 61~~ ~~2009~~		~~President and Chief Executive Officer Aerospace since September 2009.~~
~~Gary S. Michel, 55~~ ~~2017~~		~~President and Chief Executive Officer Home and Building Technologies since October 2017.~~
~~Krishna Mikkilineni, 58~~ ~~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, 54~~ ~~2014~~		Senior Vice President and Chief Financial Officer since April 2014. Vice President of Corporate Finance from April 2013 to April 2014. Chief Financial Officer of Automation and Control Solutions from February 2007 to April 2013.
~~John F. Waldron, 42~~ ~~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.~~

~~Item 1A. Risk Factors~~

~~Cautionary~~included in the Consolidated Statement ~~About Forward-Looking Statements~~

~~We describe many~~of Operations through the effective dates of the ~~trends~~respective spin-offs, which occurred in 2018.

14 Honeywell International Inc.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in tables and ~~other factors that drive our business and future results~~graphs in ~~Item 7.~~millions)

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 or the Company) for the three years ended December 31, 2021. All references to Notes relate to Notes to Consolidated Financial Statements in the section titled Financial Statements and Supplementary Data.

On November 29, 2021, Honeywell Quantum Solutions, a wholly-owned subsidiary of Honeywell, which was previously reported within the Aerospace reportable business segment, combined with Cambridge Quantum Computing, to form Quantinuum. Following the combination, Honeywell consolidated and reported Quantinuum within Corporate and All Other. Quantinuum is considered a separate operating segment, but does not meet aggregation criteria for presentation as a separate reportable segment. For this reason, it is reported within Corporate and All Other, which is not considered a reportable business segment. For the eleven months ended November 30, 2021 and the years ended December 31, 2020 and 20219, Honeywell Quantum Solutions incurred operating losses of $50 million, $41 million, and $36 million, respectively. Prior to November 29, 2021, our Aerospace business segment included the operating results of Honeywell Quantum Solutions.

Quantinuum is well-positioned to lead the quantum computing industry by offering advanced, fully integrated hardware and software solutions at an unprecedented pace, scale, and level of performance to large high-growth markets worldwide. Quantinuum supports customer needs for improved computation in cyber security, drug discovery and delivery, material science, finance, and optimization across all major industrial markets.

A detailed discussion of the prior year 2020 to 2019 year-over-year changes is not included herein and can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the 2020 Annual Report on Form 10-K filed February 12, 2021.

COVID-19 UPDATE

In 2021, the COVID-19 pandemic continues to have a significant impact around the world. Many jurisdictions worldwide continue to distribute vaccines as a method to limit and control infections; however, the pandemic continues to impact our business as vaccine efforts face challenges and new variants of the virus emerge. Select governments continue to place restrictions on businesses (impacting manufacturing capabilities and distribution channels). Global supply shortages emerged for certain products (including electrical components), leading to delays in delivery schedules. Historically reliable supply chains were disrupted, impacting certain of our businesses. In certain parts of the world, labor shortages intensified.

These events continue to impact our business operations. As new variants of the virus emerge, we remain cautious as many factors remain unpredictable. We actively monitor and respond to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of our employees, dedicating resources to support our communities, and innovating to address our customers’ needs.

In 2021, we actively promoted vaccines as a mechanism to protect the health of our employees. We supported several large-scale vaccination events to provide vaccines to our employees, their families, and the surrounding communities. In situations when local medical care was unavailable, we provided additional support to our employees to ensure they received the medical care needed. We continue to adapt our safety and hygiene protocols to enable our manufacturing employees to operate safely through the pandemic. We also continue to utilize our procedures for a phased return of our employees to our office sites, and in ~~other~~many parts of ~~this report (including this Item 1A). Such discussions contain forward-looking statements within~~ the ~~meaning~~world, we returned our non-manufacturing employees to the workplace. However, in certain countries, our non-manufacturing employees continue to work from home (for roles that allow for remote work).

On September 9, 2021, President Biden announced several initiatives to drive higher vaccination rates in the U.S., including an executive order for U.S. Government contractors to mandate vaccination against COVID-19. In response to these initiatives, we implemented a vaccine mandate requiring all U.S.-based employees at work locations that work on or in support of ~~Section 21E~~contracts with the U.S. Government to receive their first vaccine dose, or a medical or religious exemption, by January 4, 2022. Similarly, the Company adopted a vaccine mandate for all prospective and future employees and announced a timeline for a vaccine mandate for our remaining U.S. employees.

We continue to monitor and respond to the changing conditions created by the pandemic.

Honeywell International Inc. 15

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EMPLOYEE HEALTH, SAFETY, AND ECONOMIC WELLNESS

We continue to monitor the COVID-19 situation and its impacts globally. We are prioritizing the health and safety of our employees. Out of an abundance of caution for the health of our employees and to support local government initiatives to stem the spread of the ~~Securities Exchange Act~~virus, we implemented several precautions at various sites around the world. These include, but are not limited to:

•Limiting visitor site access to business-essential purposes;

•Enabling employees to work from home wherever and whenever required or appropriate;

•Continuously updating travel guidance, according to latest developments; and

•Complying with all local health authority guidance or regulations and our own protocols, including requesting employees to comply with self-quarantine requirements whenever advisable.

PLANT PRODUCTIVITY AND SAFETY

We continue to operate our manufacturing facilities with minimal disruption in our productivity. As 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~~December 31, 2021, all of our manufacturing sites were operating at normal production levels. We continue to provide essential services and produce essential goods around the world. We employ standards such as screening checks, use of masks, face coverings, and other safety equipment and social distancing practices along production lines in our production facilities at all times in compliance with local government requirements and CDC guidelines. We take appropriate actions including disinfecting and quarantine procedures when a suspected COVID-19 case is identified.

CUSTOMERS AND SUPPLIERS

Current global economic conditions due to COVID-19 continue to impact our customers’ and suppliers’ ability to operate at normal levels. We continue to work with our suppliers to manage our supply chain disruptions and limit our exposure. We also work closely with our customers to manage expectations and meet their demand needs.

See the section titled Risk Factors for a discussion of risks associated with the potential adverse effects of the COVID-19 pandemic, including the impact of any applicable vaccine mandates.

16 Honeywell International Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Consolidated Financial Results

Net Sales by Segment

Honeywell International Inc. 17

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Profit by Segment

18 Honeywell International Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONSOLIDATED OPERATING RESULTS

Net Sales

The change in net sales was attributable to the following:


	2021 Versus 2020		2020 Versus 2019
Volume	1	%	(12)	%
Price	3	%	1	%
Foreign Currency Translation	1	%	—	%
Acquisitions/Divestitures	—	%	—	%
	5	%	(11)	%

2021 compared with 2020

A discussion of net sales by segment can be found in the ~~future. They~~

~~are based on management’s assumptions~~Review of Business Segments section of this Management Discussion and ~~assessments~~Analysis.

Net sales increased due to the following:

•Favorable pricing and price increases to offset the rising cost of materials,

•The favorable impact of foreign currency translation, driven by the weakening of the U.S. Dollar against the currencies of the majority of our international markets, primarily the Euro, British Pound, Chinese Renminbi, Canadian Dollar, and Australian Dollar, and

•Higher sales volumes due to an increase in ~~light~~demand for certain products and services as the global economy showed signs of ~~past experience~~recovery from the COVID-19 pandemic.

Honeywell International Inc. 19

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cost of Products and ~~trends, current economic~~Services Sold

2021 compared with 2020

Cost of products and ~~industry conditions, expected future developments~~services sold increased in 2021 primarily due to the following:

•Higher direct and indirect material costs of approximately $1,350 million, due in part to supply chain constraints, and

•Higher repositioning and other ~~relevant factors. They are~~costs of approximately $150 million,

•Partially offset by cost actions to improve productivity of approximately $380 million.

Gross Margin

2021 compared with 2020

Gross margin increased due to the following:

•Favorable pricing,

•Higher productivity,

•The favorable impact of foreign currency translation, and

•Increased demand for our products,

•Partially offset by higher direct and indirect material costs, higher repositioning and other costs of approximately $150 million, and a larger portion of our sales being driven by our Safety and Productivity Solutions segment.

20 Honeywell International Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Selling, General and Administrative Expenses

2021 compared with 2020

Selling, general and administrative expenses and Selling, general and administrative expenses as a percentage of net sales changed due to the following:

•Higher expenses due to increased sales volumes and labor expense,

•Partially offset by higher productivity, including lower costs resulting from repositioning actions.

Honeywell International Inc. 21

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other (Income) Expense


	2021		2020		2019
Other (Income) Expense	$	(1,378)	$	(675)	$	(1,065)

2021 compared with 2020

Other (income) expense increased due to the following:

•Prior year non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett,

•Higher pension income, and

•Gain on sale of the retail footwear business,

•Partially offset by the recognition of an expense related to UOP matters and increased foreign exchange expense. See Note 19 Commitments and Contingencies of Notes to the Consolidated Financial Statements for additional information on UOP Matters.

Tax Expense

2021 compared with 2020

The effective tax rate for 2021 was higher than the U.S. federal statutory rate of 21% primarily due to the following:

•Accrued withholding taxes related to unremitted foreign earnings,

•The establishment of a valuation allowance for deferred tax assets not ~~guarantees~~expected to be realized, and

•Incremental tax reserves and state taxes,

•Partially offset by the tax impact of ~~future performance,~~restructuring.

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

22 Honeywell International Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net Income Attributable to Honeywell

2021 compared with 2020

Earnings per share of common stock–assuming dilution increased due to the following:

•Higher segment profit,

•Prior year non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett,

•Higher pension income,

•Gain on sale of the retail footwear business, and ~~actual results, developments~~

•Favorable impact of lower share count,

•Partially offset by higher income taxes, an expense related to UOP matters, and higher foreign exchange expense.

Honeywell International Inc. 23

REVIEW OF BUSINESS SEGMENTS

We globally manage our business operations through four segments: Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

AEROSPACE

Net Sales


	2021			2020			Change 2021 vs. 2020			2019			Change 2020 vs. 2019
Net sales		$	11,026		$	11,544		(4)	%		$	14,054		(18)	%
Cost of products and services sold		7,191			7,813						9,398
Selling, general and administrative and other expenses		784			827						1,049
Segment profit		$	3,051		$	2,904		5	%		$	3,607		(19)	%


Factors Contributing to Year-Over-Year Change	2021 vs. 2020						2020 vs. 2019
	Net Sales			Segment Profit			Net Sales			Segment Profit
Organic(1)		(5)	%		4	%		(18)	%		(20)	%
Foreign currency translation		1	%		—	%		—	%		—	%
Acquisitions, divestitures and other, net		—	%		1	%		—	%		1	%
Total % Change		(4)	%		5	%		(18)	%		(19)	%

(1) Organic sales % change, presented for all of our reportable business segments, is defined as the change in net sales, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this non-GAAP measure is useful to investors and management in understanding the ongoing operations and analysis of ongoing operating trends.

2021 compared with 2020

Sales decreased due to lower demand from our commercial OEMs, and domestic and international defense, partially offset by higher demand for our aftermarket products and services, and favorable pricing.

•Commercial Aviation Original Equipment sales decreased 11% (decreased 12% organic) due to lower demand in air transport and regional and business ~~decisions may differ significantly from those envisaged~~aviation.

•Commercial Aviation Aftermarket sales increased 9% (increased 9% organic) due to higher demand in business aviation.

•Defense and Space sales decreased 11% (decreased 12% organic) driven by lower demand in U.S. and international defense and supply chain constraints.

24 Honeywell International Inc.

Cost of products and services sold decreased due to lower sales volumes and higher productivity.

Segment profit increased due to favorable pricing, higher productivity, and higher sales volume of higher margin products and services, partially offset by overall lower sales volume.

HONEYWELL BUILDING TECHNOLOGIES

Net Sales


	2021			2020			Change 2021 vs. 2020			2019			Change 2020 vs. 2019
Net sales		$	5,539		$	5,189		7	%		$	5,717		(9)	%
Cost of products and services sold		3,242			3,067						3,444
Selling, general and administrative and other expenses		1,059			1,023						1,108
Segment profit		$	1,238		$	1,099		13	%		$	1,165		(6)	%


Factors Contributing to Year-Over-Year Change	2021 vs. 2020						2020 vs. 2019
	Net Sales			Segment Profit			Net Sales			Segment Profit
Organic		4	%		11	%		(9)	%		(5)	%
Foreign currency translation		3	%		3	%		—	%		(1)	%
Acquisitions, divestitures and other, net		—	%		(1)	%		—	%		—	%
Total % Change		7	%		13	%		(9)	%		(6)	%

2021 compared with 2020

Sales increased primarily due to the favorable impact of foreign currency translation and favorable pricing.

•Sales in Products increased 9% (increased 6% organic) due to higher demand for certain of our ~~forward-looking statements, including~~product offerings, and the favorable impact of foreign currency translation.

•Sales in Building Solutions increased 4% (flat on an organic basis) due to higher demand for our services businesses, and the favorable impact of foreign currency translation.

Cost of products and services sold increased primarily due to the rising cost of materials and the unfavorable impact of foreign currency translation, partially offset by higher productivity.

Segment profit increased primarily due to higher productivity, higher demand for certain products and services, favorable pricing, and the favorable impact of foreign currency translation, partially offset by the rising cost of materials.

Honeywell International Inc. 25

REVIEW OF BUSINESS SEGMENTS

PERFORMANCE MATERIALS AND TECHNOLOGIES

Net Sales


	2021			2020			Change 2021 vs. 2020			2019			Change 2020 vs. 2019
Net sales		$	10,013		$	9,423		6	%		$	10,834		(13)	%
Cost of products and services sold		6,637			6,331						6,989
Selling, general and administrative and other expenses		1,256			1,241						1,412
Segment profit		$	2,120		$	1,851		15	%		$	2,433		(24)	%


Factors Contributing to Year-Over-Year Change	2021 vs. 2020						2020 vs. 2019
	Net Sales			Segment Profit			Net Sales			Segment Profit
Organic		3	%		14	%		(13)	%		(24)	%
Foreign currency translation		2	%		2	%		—	%		—	%
Acquisitions, divestitures and other, net		1	%		(1)	%		—	%		—	%
Total % Change		6	%		15	%		(13)	%		(24)	%

2021 compared with ~~respect~~2020

Sales increased due to ~~any changes~~the impact of foreign currency translation, higher demand for certain products, and the acquisition of Sparta Systems.

•UOP sales increased 8% (increased 6% organic) due to higher demand for oil and gas products and services, and the favorable impact of foreign currency translation.

•Process Solutions sales were flat (decreased 4% organic). The acquisition of Sparta Systems and the favorable impact of foreign currency translation was offset by lower demand for projects and services.

•Advanced Materials sales increased 15% (increased 13% organic) due to higher demand for fluorine products and the favorable impact of foreign currency translation.

Cost of products and services sold increased due to the rising cost of materials, partially offset by higher productivity.

Segment profit increased due to higher demand for certain products, favorable pricing, partially offset by the rising cost of materials.

26 Honeywell International Inc.

REVIEW OF BUSINESS SEGMENTS

SAFETY AND PRODUCTIVITY SOLUTIONS

Net Sales


	2021			2020			Change 2021 vs. 2020			2019			Change 2020 vs. 2019
Net sales		$	7,814		$	6,481		21	%		$	6,104		6	%
Cost of products and services sold		5,738			4,532						4,158
Selling, general and administrative and other expenses		1,047			1,042						1,156
Segment profit		$	1,029		$	907		13	%		$	790		15	%


Factors Contributing to Year-Over-Year Change	2021 vs. 2020						2020 vs. 2019
	Net Sales			Segment Profit			Net Sales			Segment Profit
Organic		22	%		14	%		6	%		16	%
Foreign currency translation		2	%		2	%		—	%		(1)	%
Acquisitions, divestitures and other, net		(3)	%		(3)	%		—	%		—	%
Total % Change		21	%		13	%		6	%		15	%

2021 compared with 2020

Sales increased due to increased demand for certain products and favorable pricing.

•Sales in ~~or abandonment~~Safety and Retail decreased 1% (increased 5% organic) due to the sale of the ~~proposed spin-offs. We do~~retail footwear business, partially offset by increased demand for certain products.

•Sales in Productivity Solutions and Services increased 27% (increased 25% organic) due to higher demand on certain products.

•Sales in Warehouse and Workflow Solutions increased 50% (increased 49% organic) due to higher demand for warehouse automation and services.

•Sales in Advanced Sensing Technologies increased 5% (increased 3% organic) due to higher demand for certain products and the favorable impact of foreign currency translation.

Cost of products and services sold increased primarily due to higher sales volumes, higher sales on lower margin products, the rising cost of materials, partially offset by the sale of the retail footwear business.

Segment profit increased due to higher sales volumes and favorable pricing, partially offset by higher sales of lower margin products and the rising cost of materials.

Honeywell International Inc. 27

REVIEW OF BUSINESS SEGMENTS

CORPORATE AND ALL OTHER

Corporate and All Other primarily includes unallocated corporate costs, interest expense on holding-company debt and the controlling majority-owned interest in Quantinuum. Corporate and All Other is not ~~undertake~~considered a separate reportable business segment as segment reporting criteria is not met for the activities reported with Corporate and All Other and the Company does not believe the results of operations are meaningful to ~~update or revise any~~investors. The Company continues to monitor the activities in Corporate and All Other to determine the need for further reportable business segment disaggregation.

REPOSITIONING CHARGES

See Note 4 Repositioning and Other Charges of Notes to Consolidated Financial Statements for a discussion of our ~~forward-looking statements. Our forward-looking statements are also subject~~repositioning actions and related charges incurred in 2021, 2020, and 2019. Cash spending related to ~~risks~~our repositioning actions was $382 million, $564 million and ~~uncertainties that can affect our performance~~$249 million in both the near-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-Q2021, 2020, and ~~8-K.~~

~~Risk Factors~~

2019, and was funded through operating cash flows.

28 Honeywell International Inc.

RISK FACTORS

Our business, operating results, cash flows and financial condition are subject to the ~~principal~~material 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~~

MACROECONOMIC AND INDUSTRY RISKS

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 of Aerospace are directly tied to cyclical industry and economic conditions, as well as changes in customer buying patterns of aftermarket parts, supplier stability, factory transitions and capacity constraints. The 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 could also be impacted by changes in overall trends related to end market demand for the product 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. 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, growing importance of automotive electrification, consumer demand and spending for automotive aftermarket products and delays in launch schedules for new automobile and truck platforms.

•

~~Home and Building Technologies~~—Operating results 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, 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.

•

~~Safety and Productivity Solutions~~~~—Operating results may be adversely impacted by downturns in the level of global capital spending and operating expenditures, including in the~~

•Aerospace—Our Aerospace business is impacted by customer buying patterns of aftermarket parts, supplier stability, factory transitions, and global supply chain capacity constraints that may lead to shortages of crucial components. Operating results may be adversely affected by downturns in the global demand for air travel, which may impact new aircraft production or result in the delay or cancellation of new aircraft orders, delays in launch schedules for new aircraft, the retirement of aircraft and reductions in global flying hours, which impacts air transport and regional, business, and general aviation aircraft utilization rates. Operating results may also be adversely affected by any decrease in air travel demand due to regional restrictions or suspension of service for public health, safety, or environmental events, such as the effects of the COVID-19 pandemic, which impacted our operating results. Operating results could also be impacted by changes in overall trends related to end market demand for the product 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 may be adversely impacted by downturns in the level of global commercial construction activity (including retrofits and upgrades), lower capital spending and operating expenditures on building projects, 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, product commoditization, continued illegal imports of hydrofluorocarbons into Europe, and our ability to maximize our facilities’ production capacity and minimize downtime. Periods of increased volatility in oil and natural gas prices may result in less investment by our customers and therefore, lower demand for our products and services.

•Safety and Productivity Solutions—Operating results may be adversely impacted by reduced investments in process automation, safety monitoring, and plant capacity utilization initiatives, fluctuations in retail markets, a slowdown in demand for safety products, 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.

The global COVID-19 pandemic and related impacts have adversely affected and may continue to adversely affect, our business, financial condition, results of operations, liquidity, and cash flow.

The continued global spread of COVID-19 creates significant volatility, uncertainty and economic disruption that have impacted our business, operations, and financial results and may continue to do so. The extent to which the COVID-19 pandemic will continue to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration, scope and severity of the pandemic, including emergence and impact of new variants; some of which have been, and may be in the future, more virulent or transmissible than the initial strain, and any continued increase in cases globally and across the United States in particular, including breakthrough infections among the fully vaccinated population, as well as the timing, availability, and acceptance of effective medical treatments and vaccines; the pace of vaccine deployment; the impact of vaccine mandates, governmental, business and individual decisions and actions; the impact of the pandemic on economic activity; and the extent to which we or our employees, customers, suppliers, service providers or other business partners may be prevented from conducting normal business activities, including due to shutdowns or other restrictive measures that may be requested or mandated by governmental authorities. These factors could, among other things, continue to disrupt (i) the purchasing, contracting and payment behaviors of our customers and their end-users; (ii) our operations, including our manufacturing activities, the shipment of our products, and the performance of our suppliers and service providers; and (iii) our liquidity and cash flow.

Honeywell International Inc. 29

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.

RISK FACTORS

Risks arising from the COVID-19 pandemic impacting our business and that may continue to impact our business, financial condition, results of operations and prospects include, among other things:

•Customer Risk—Existing and potential customers and their end-users may continue to take actions to reduce or suspend operations, reduce or delay spending, cancel contracts, or cut costs in a manner that reduces demand for our products and services. In particular, lower demand for air travel may continue to cause our customers to delay or suspend spending in connection with the manufacturing, repair, overhaul or servicing of aircraft, and there may be long-term deterioration in demand for air travel that could impact our business beyond the current COVID-19 health crisis. Customers may also continue to attempt to renegotiate contracts and obtain concessions, face financial constraints on their ability to make payments to us on a timely basis or at all, or enter into bankruptcy or discontinue their business operations, and we may continue to be required to discount the pricing of our products. In addition, unfavorable customer site conditions, such as closure of or access restrictions to customer facilities, and disruptions to our customers’ third-party logistics, warehousing, inventory management, and distribution services may continue to limit our ability to sell products, meet billing milestones, or provide services.

•Operations Risk—The closure of our facilities, restrictions inhibiting our employees’ ability to access those facilities, materials and labor shortages, and disruptions to the ability of our suppliers or service providers to deliver goods or services to us (including as a result of supplier facility closures or access restrictions, disruptions to their supply chains, and supplier liquidity or bankruptcy risk) could further disrupt our ability to provide our services and solutions and result in, among other things, higher costs which may not be recoverable under customer contracts, claims for liquidated damages in the event of delays, terminations of customer contracts and losses of revenue. Because the COVID-19 pandemic could adversely affect our near-term and long-term revenues, earnings, liquidity, and cash flows, we have taken and may be required to redeploy significant cost actions, including but not limited to reducing discretionary expenses (such as non-essential travel, contractors, and consultants), reducing hiring, canceling annual merit increases, reducing executive and board of director pay, reducing work schedules across the enterprise, shortening or staggering work schedules to match production with demand, and reducing staffing levels, as well as increasing supplier-based productivity and enhancing spending-limit controls. However, the extent to which our mitigation efforts are successful, if at all, is not currently ascertainable; also, our costs may not decrease at the same pace as revenue declines as many of our costs are less variable in nature, and we may not be able to or may not choose to significantly reduce them in an effort to remain focused on long-term outlook and growth opportunities. Further, our management of the impact of COVID-19 will continue to require significant investment of time from our management and employees, as well as resources across our global enterprise. The focus on managing and mitigating the impacts of COVID-19 on our business may cause us to divert or delay the application of our resources toward new initiatives or investments, which may adversely impact our future results of operations. Issues relating to the COVID-19 pandemic may also result in legal claims or litigation against us. In addition, remote work has increased the frequency of cybersecurity attacks, including phishing, and malware attempts that utilize COVID-19-related strategies, increasing the risk of a material cybersecurity incident that could result in the loss of proprietary or personal data, render us more vulnerable to future cybersecurity attacks, disrupt our operations, or otherwise cause us reputational or financial harm.

•Liquidity and Cash Flow Risk—Because of the customer and operations risks described above, our business may not continue to generate sufficient cash flow from operations in the future to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may need to use existing cash balances to service our debt, and if such balances are insufficient, then we may be required to engage in one or more alternatives, such as selling assets, restructuring of existing debt, issuing new debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.

Due to the changing landscape of the COVID-19 pandemic and the responses to curb its spread, we cannot predict the ultimate impact the COVID-19 pandemic will have on our business, financial condition, results of operations, liquidity, and cash flow. Any recovery from the COVID-19 pandemic and related economic impact may be slowed or reversed by a variety of factors. In addition, even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of its global economic impact, including any recession that may occur in the future. Further, many of the factors disclosed under Risk Factors in this Form 10-K are, and we anticipate will continue to be further, heightened or exacerbated by the impact of the COVID-19 pandemic.

A significant 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)~~such risk), changes in regulations regarding transactions with state-owned enterprises, nationalization of private enterprises, acts of terrorism, acts of war, civil strife, 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 international and domestic political, regulatory, and economic landscape, including the potential for changes in global trade policies, including sanctions and trade barriers, and trends such as populism, economic nationalism and negative sentiment toward multinational companies, ~~and~~as well as 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.

30 Honeywell International Inc.

RISK FACTORS

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 continues to implement 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, export controls and sanctions laws 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. The United States and other countries may implement actions, including trade actions, tariffs, export controls, and sanctions, against other countries or localities, including potentially against certain Russian government, government-related, or other entities or individuals related to actions in Ukraine, which along with any retaliatory measures could increase costs, adversely affect our operations, or adversely affect our ability to meet contractual and financial obligations.

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 United States 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.

~~Operational Risks~~

OPERATIONAL RISKS

Raw material price fluctuations, inflation, 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). As of December 31, 2021, Aerospace and Performance Materials and Technologies had 80% and 63%, respectively, of raw materials supply base under contract. Due to supply chain constraints and labor shortages, including as a result of the ongoing COVID-19 pandemic, there have been recent inflationary trends in the cost of raw materials, including increases in labor and freight costs, for the transportation of raw materials. Our inability to offset material price or labor inflation through increased prices to customers, ~~formula~~formula-driven 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, in addition to other supply chain disruptions, may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long-lead time products during times of volatile demand. ~~Our~~In addition, current or future global economic uncertainty, including the ongoing COVID-19 pandemic, may affect the financial stability of our key suppliers or their access to financing, which may in turn affect their ability to perform their obligations to us. If one or more of our suppliers experiences financial difficulties, delivery delays or other performance problems, our resulting 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.

Honeywell International Inc. 31

RISK FACTORS

32 Honeywell International Inc.
RISK FACTORS

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.

The proposed spin-offs of our Homes and Global Distribution business and of our Transportation Systems business into two stand-alone, publicly-traded companies are each contingent upon the satisfaction of a number of conditions, may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.

On October 10, 2017, the Company announced its intention to separately spin-off our Homes and Global Distribution business, which is part of our Home and Building Technologies segment, and our Transportation Systems business, which is part of our Aerospace segment, into two stand-alone, publicly-traded companies. Completion of each proposed spin-off is subject to readiness of each spin-off to operate as an independent public company, finalization of the financial statements of the spun-off business, assurance that the separation will be tax-free to our shareowners for U.S. federal income tax purposes, finalization of the capital structure of the three corporations, the effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, final approval of the Board of Directors, and other customary matters. Each proposed spin-off is complex in nature, and may be affected by unanticipated developments, credit and equity markets, or changes in market conditions. These or other unanticipated developments could delay or prevent the proposed spin-offs or cause the proposed spin-offs to occur on terms or conditions that are less favorable than anticipated, including without limitation, the failure to qualify as tax-free to our shareowners, and the inability of the two spun-off companies to incur sufficient indebtedness to allow for a distribution to Honeywell of proceeds concurrently with the consummation of the spin-offs or to make ongoing cash contributions towards the satisfaction of certain of our legacy asbestos and environmental remediation liabilities. Furthermore, if the spin-offs are completed, we cannot assure you that each will be successful in meeting its objectives. There is the potential for business disruption and significant separation costs. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or the price of our common stock.

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 business ~~models,~~models; (vii) achieve sufficient return on investment for new products introduced based on capital expenditures and research and development ~~spending,~~spending; (viii) respond to changes in overall trends related to ~~end market demand,~~end-market demand; and ~~(x)~~(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~~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, trends in rising labor costs and labor availability, 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,~~government, we are subject to unique risks, such as the right of the U.S. ~~Government~~government to terminate contracts for convenience and to conduct audits and investigations of our operations and performance.

U.S. ~~Government~~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~~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 procurement and security 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.

Honeywell International Inc. 33

RISK FACTORS

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 use of certain materials, the discharge of materials into the environment, and/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, orimplementation of 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 (against us or parties with whom we contract), 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 and its effects include financial loss, reputational damage, litigation with third parties, theft of intellectual property, fines levied by the Federal Trade Commission or other government agencies, 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.

In addition, cybersecurity laws and regulations continue to evolve, and are increasingly demanding, both in the U.S. and globally, which adds compliance complexity and may increase our costs of compliance and expose us to reputational damage or litigation, monetary damages, regulatory enforcement actions or fines in one or more jurisdictions. While we carry cyber insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

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 that 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.

34 Honeywell International Inc.

RISK FACTORS

Data privacy, ~~identity~~data protection, and information security may require significant resources and ~~presents~~present certain risks.

We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary business information, personal data ~~and~~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, 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 states and countries have passed or are considering laws that require personal data relating to their residents or 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 or other disruptions, including hurricanes and floods, power outages, fires, explosions, terrorism, equipment failures, sabotage, cyber incidents, any potential effects of climate change and adverse weather conditions, ~~public health crises,~~ labor disputes, critical supply failure, inaccurate downtime forecast, political disruption, public health crises, like a regional or global pandemic, and other reasons, which can result in undesirable consequences, including financial losses and damaged relationships with customers. The ongoing COVID-19 pandemic has disrupted and may continue to disrupt our supply chain, distribution channels, production facilities, operations and customer demand, which has negatively impacted our operations and adversely affected our business and could continue to do so. 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.

~~Legal~~

Concentrations of credit, counterparty and ~~Regulatory Risks~~

market risk may adversely affect our results of operations and financial condition.

We maintain long-term contractual 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 of such counterparties, including those concentrated in the same or similar industries and geographic regions. Changes in economic conditions, including the impact of the COVID-19 pandemic, could also lead to concerns about the creditworthiness of counterparties in the same or similar industry or geography, impacting our ability to renew our long-term contractual arrangements or collect amounts due under these arrangements. Among other factors, changes in economic conditions could also result in the credit deterioration or insolvency of a significant counterparty.

Honeywell International Inc. 35

RISK FACTORS
We are impacted by increasing stakeholder interest in public company performance, disclosure, and goal-setting with respect to environmental, social, and governance (ESG) matters.
In response to growing customer, investor, employee, governmental, and other stakeholder interest in our ESG practices, including our procedures, standards, performance metrics, and goals, we have increased reporting of our ESG programs and performance and have established and announced goals and other objectives related to ESG matters. These goal statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve any goal or objective, including with respect to ESG initiatives, is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) evolving regulatory requirements affecting ESG standards or disclosures, (3) the availability of suppliers that can meet our sustainability, diversity and other standards, (4) our ability to recruit, develop, and retain diverse talent in our labor markets, and (5) the impact of our organic growth and acquisitions or dispositions of businesses or operations. In addition, standards for tracking and reporting on ESG matters have not been harmonized and continue to evolve. Our processes and controls for reporting of ESG matters may not always comply with evolving and disparate standards for identifying, measuring, and reporting ESG metrics, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our performance metrics, goals or reported progress in achieving such goals. In addition, certain of our products and services, including offerings in our Defense and Space business unit, are unattractive to certain investors and may cause us to be increasingly subject to ESG-driven investment practices that preclude investment in our debt and equity.
If our ESG practices or business portfolio do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, supplier, business partner, or acquiror could be negatively impacted. In addition, our failure or perceived failure to pursue or fulfill our goals, targets, and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could have similar negative impacts and expose us to government enforcement actions and private litigation.
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 (e.g., potential tax law changes in the United States to increase the U.S. Corporate tax rate), 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 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 action items provided by the Organization for Economic Co-operation and Development (OECD), will increase tax uncertainty and 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 environmental, 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 economy~~regulations. Within Honeywell Building Technologies and ~~energy efficiency standards for motor vehicles can impact Transportation Systems. Within Home~~Safety 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 impacted by environmental standards, regulations, and judicial ~~determinations.~~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~~Changes in such regulations and government policies could negatively impact us; for instance, noncompliance with legislation and regulations can result in fines and ~~penalties.~~

penalties, and compliance with any new regulations or policies may be burdensome and/or require significant expenditures.

Increased public awareness and concern regarding global climate change and other ESG matters may result in more international, regional and/or federal regulatory 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, practices and targets, 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; however, there has been an increasing amount of legislative and regulatory activity, particularly in the European Union, United Kingdom, and U.S. 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.

36 Honeywell International Inc.

RISK FACTORS

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, anti-corruption, 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.

~~Item 1B. Unresolved Staff Comments~~

~~None~~

~~Item 2. Properties~~

~~We have approximately 1,287 locations,~~

Vaccine mandates applicable to us, including the U.S. presidential executive order concerning mandatory COVID-19 vaccination of which 296 are 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 expireU.S.-based employees of companies that work on or in ~~finding alternative facilities.~~

~~Item 3. Legal Proceedings~~

~~We are subject~~support of federal contracts could have a material adverse impact on our business and results of operations.

On September 9, 2021, President Biden issued an executive order for U.S. government contractors to mandate vaccination against COVID-19. The executive order covers U.S.-based employees at work locations that directly work on or in support of contracts with the U.S. government. On December 7, 2021, the U.S. District Court for the Southern District of Georgia imposed a ~~number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out~~nationwide injunction of the ~~conduct~~executive order, temporarily staying all requirements in the executive order. The District Court’s order was appealed to the Eleventh Circuit Court of ~~our business. See~~Appeals, which declined to lift the injunction. It is expected that the U.S. government will appeal the stay to the United States Supreme Court. We implemented a ~~discussion~~vaccine mandate requiring all U.S.-based employees at work locations that work on or in support of ~~environmental, asbestos~~contracts with the U.S. government to receive their first vaccine dose, or a medical or religious exemption, by January 4, 2022. Employees who did not satisfy these requirements, which represented less than 1% of eligible employees, were placed on unpaid leave effective January 10, 2022, and ~~other litigation matters~~were terminated if they had not taken steps to comply by January 28, 2022. The Company has adopted a vaccine mandate for all U.S.-based prospective and future employees.

In addition, on September 9, 2021, President Biden announced that he directed the OSHA to develop an ETS mandating either the full vaccination or weekly testing of employees for employers with 100 or more employees. The OSHA ETS was published in ~~Note 19 Commitments~~the federal register on November 5, 2021, and ~~Contingencies~~mandates that employees of ~~Notes~~employers with 100 or more employees either become fully vaccinated by receiving the final dose of an approved COVID-19 vaccine on or before January 4, 2022, or undergo weekly testing. On January 13, 2022, the U.S. Supreme Court re-imposed a stay of the ETS and returned the case to ~~Consolidated Financial Statements.~~

~~Item 4. Mine Safety Disclosures~~

~~Not applicable.~~

~~Part II.~~

~~Item 5.~~ ~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases~~the Sixth Circuit Court of ~~Equity Securities~~

~~Honeywell’s common stock is listed~~Appeals. The majority of the Supreme Court held that the challengers to the ETS were likely to prevail on the ~~New York Stock Exchange. Market and dividend information for Honeywell’s common stock is included in Note 24 Unaudited Quarterly Financial Information of Notes to Consolidated Financial Statements.~~

~~The number of record holders of our common stock at December 31, 2017 was 47,678.~~

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 undermerits because OSHA exceeded its statutory authority. While the ~~caption “Equity Compensation Plans.”~~

~~Honeywell purchased 10,300,000 shares of~~Supreme Court’s ruling enjoined OSHA from imposing its ~~common stock, par value $1 per share, in~~mandate, the quarter ending December 31, 2017. In December 2017, the Board of Directors authorized the repurchase of up to a total of $8 billion of Honeywell common stock, which included amounts remaining under and replaced the previously approved share repurchase program. $7.7 billion remained available as of as of December 31, 2017 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. 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 purchase of its common stock for the three months ended December 31, 2017:~~

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 2017

—

—

—

—

November 2017

4,200,000

$

146.89

4,200,000

$

2,125

December 2017

6,100,000

$

153.54

6,100,000

$

7,737

~~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%/35% 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, 2012 and that all dividends were reinvested.

~~COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN~~

~~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,

2017(1)

2016

2015

2014

2013

(Dollars in millions, except per share amounts)
Results of Operations

Net sales

$

40,534

$

39,302

$

38,581

$

40,306

$

39,055

Net income attributable to Honeywell

1,655

4,809

4,768

4,239

3,924

Earnings Per Common Share

Earnings from continuing operations:

Basic

2.17

6.29

6.11

5.40

4.99

Assuming dilution

2.14

6.20

6.04

5.33

4.92

Dividends per share

2.74

2.45

2.15

1.87

1.68

Financial Position at Year-End

Property, plant and equipment-net

5,926

5,793

5,789

5,383

5,278

Total assets

59,387

54,146

49,316

45,451

45,435

Short-term debt

5,309

3,593

6,514

2,637

2,028

Long-term debt

12,573

12,182

5,554

6,046

6,801

Total debt

17,882

15,775

12,068

8,683

8,829

Redeemable noncontrolling interest

5

3

290

219

167

Shareowners’ equity

17,439

19,547

18,418

17,784

17,579

~~(1)~~

2017 Net Income attributable to Honeywell and Earnings Per Common Share were impacted by the Tax Cuts and Jobs Act; see Note 5 Income Taxes of Notes to Consolidated Financial Statements for further details.

~~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” or “the Company”) for the three years ended December 31, 2017. All references to Notes relate to Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

In October 2017, the Company announced the results of a comprehensive portfolio review which included the announcement of our intent to spin-off our Homes and Global Distribution business, as well as our Transportation Systems business, into two stand-alone, publicly traded companies.

Effective October 2017, we realigned the Smart Energy business, previously part of the Home and Building Technologies segment, into the Process Solutions business within the Performance Materials and Technologies segment. Effective July 2016, the Company realigned the business units comprising its Automation and Control Solutions segment by forming two new segments: Home and Building Technologies and Safety and Productivity Solutions. These realignments haveruling has no impact on the ~~Company’s historical consolidated~~ability of private employers to impose their own vaccine mandate. On January 25, 2022, OSHA announced it was withdrawing the ETS as a result of the U.S. Supreme Court ruling. However, Honeywell has implemented a vaccine mandate for its U.S. employees who were not subject to the executive order described in the above paragraph.

Additional vaccine mandates, or the requirement for employees to receive vaccine booster doses, may be announced in other jurisdictions in which our businesses operate. Our implementation of existing or additional vaccine mandates may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business, financial ~~position,~~condition, and results of ~~operations or cash flows. Prior period amounts have been reclassified~~operations.

Honeywell International Inc. 37

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Information relating to ~~conform to current period segment presentation.~~

~~On October 1, 2016, the Company completed the tax-free spin-off of its Resins~~market risks is included within Liquidity and Chemicals business, part of Performance Materials and Technologies, into a standalone, publicly-traded company (named AdvanSix Inc. (“AdvanSix”)) to Honeywell shareowners. The assets and liabilities associated with AdvanSix have been removed from the Company’s Consolidated Balance Sheet as of the effective date of the spin-off. The results of operations for AdvanSix are included in the Consolidated Statement of Operations through the effective date of the spin-off.

On September 16, 2016, the Company completed the sale of the Aerospace government services business, Honeywell Technology Solutions Inc (“HTSI” or “government services business”). The assets and liabilities associated with HTSI have been removed from the Company’s Consolidated Balance Sheet as of the effective date of the sale. The results of operations for HTSI are included in the Consolidated Statement of Operations through the effective date of the sale.

~~EXECUTIVE SUMMARY~~

During 2017, Honeywell continued to successfully deliver on its financial commitments while still creating long-term value for our shareowners. We grew net sales 3% to $40,534 million and grew income before taxes 7% to $6,902 million. The improvement in year over year income before taxes was attributable to both organic sales growth as well as operational improvements that increased operating margins. We believe our ability to consistently grow earnings derives from the consistent, rigorous deployment of the Honeywell Operating System as well as a long history of identifying and investing in productivity initiatives. We have made concerted efforts to revitalize our commercial excellence processes, such as Velocity Product Development (“VPD”), which enables higher organic revenue at better margins.

We are careful to not allow the attainment of short-term financial results imperil the creation of long-term, sustainable shareowner value. Hence, as part of the announcement in October 2017 of the resultsCapital Resources of our ~~portfolio review, we affirmed our commitment to a strategy and investments that are intended to enable us to become one of~~Form 10-K under the world’s leading software industrial companies. Our refocused strategy and investments are intended to take better advantage of our core technological and software strengths in high growth businesses that participate in six attractive industrial end markets. Each of these end markets is characterized by favorable global mega-trends including energy efficiency, infrastructure investment, urbanization and safety.

~~In 2017 we deployed capital of over $6 billion, including the following:~~

•

~~Share Repurchases~~—we continue to repurchase our shares with the goal of keeping share count flat by offsetting the dilutive impact of employee stock based compensation and savings plans. Additionally, we seek to reduce share count via share repurchases as and when attractive opportunities arise. In 2017, we repurchased 20.5 million shares for $2.9 billion.

•

~~Dividend~~—In 2017, we paid cash dividends of $2.1 billion and increased our annual dividend rate by 12%, as we seek to continue to grow the dividend faster than earnings. Since 2010, we have increased the dividend rate by 10% or more eight times.

•

~~Capital Investment in Facilities~~~~—we invested over $1 billion in capital expenditures focused on high return projects.~~

~~CONSOLIDATED RESULTS OF OPERATIONS~~

~~Net Sales~~

2017

2016

2015
Net sales

$

40,534

$

39,302

$

38,581

% change compared with prior period

3
%

2
%

~~The change in net sales is attributable to the following:~~

2017
Versus
2016

2016
Versus
2015
Volume

3%

(2)%

Price

1%

—

Acquisitions/Divestitures

(1)%

5%

Foreign Currency Translation

—

(1)%

3%

2%

~~A discussion of net sales by segment can be found in the Review of Business Segments section of this MD&A.~~

~~The foreign currency translation impact in 2017 compared with 2016 was flat. The strengthening of the Euro was offset by the weakening of the British Pound against the U.S. Dollar.~~

The foreign currency translation impact in 2016 compared with 2015 is 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.

~~Cost of Products and Services Sold~~

2017

2016

2015
Cost of products and services sold

$

27,575

$

27,150

$

26,747

% change compared with prior period

2
%

2
%

Gross Margin percentage

32.0
%

30.9
%

30.7
%

Cost of products and services sold increased in 2017 compared with 2016 principally due to increased direct material costs of approximately $290 million (driven by higher sales volume and acquisitions partially offset by divestitures and productivity, net of inflation), higher repositioning and other charges of approximately $260 million and higher depreciation and amortization of approximately $90 million, partially offset by higher pension and other postretirement benefits income, and lower pension mark-to-market expense, allocated to cost of products and services sold of approximately $110 million, and decreased indirect material costs of approximately $70 million.

Gross margin percentage increased in 2017 compared with 2016 principally due to higher gross margin in Aerospace and Performance Materials and Technologies (approximately 1.7 percentage point impact collectively) and higher pension and other postretirement benefits income and lower pension market to market expense allocated to cost of products and services sold (approximately 0.3 percentage point impact), partially offset by higher repositioning and other charges (approximately

~~0.6 percentage point impact) and by lower gross margin in Home and Building Solutions and Safety and Productivity Solutions (approximately 0.3 percentage point impact collectively)~~caption “Financial Instruments”.

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 0.2 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 Technologies and Safety and Productivity Solutions an (approximately 0.3 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).

~~Selling, General and Administrative Expenses~~

2017

2016

2015
Selling, general and administrative expense

$

5,808

$

5,469

$

5,006

% of sales

14.3
%

13.9
%

13.0
%

Selling, general and administrative expenses (SG&A) increased in 2017 compared with 2016 primarily due to increased labor costs (driven primarily by acquisitions, net of divestitures, investment for growth and merit increases), and higher repositioning charges, partially offset by decreased pension mark-to-market expense allocated to SG&A.

SG&A increased in 2016 compared with 2015 primarily due to increased labor costs (driven primarily by acquisitions, net of divestitures, investment for growth and merit increases), increased pension mark-to-market expense allocated to SG&A and higher repositioning charges, partially offset by the favorable impact from foreign currency translation and increased pension income allocated to SG&A.

~~Tax Expense~~

2017

2016

2015
Tax expense

$

5,204

$

1,601

$

1,739

Effective tax rate

75.4
%

24.8
%

26.4
%

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”) that instituted fundamental changes to the U.S. tax system. The Tax Act includes changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The Tax Act also permanently reduces the corporate tax rate from 35% to 21%, imposes a one-time mandatory transition tax on the historical earnings of foreign affiliates and implements a territorial style tax system. The impacts of these changes are reflected in the 2017 tax expense which resulted in a provisional charge of approximately $3.8 billion, which is subject to adjustment given the provisional nature of the charge. This resulted in an effective tax rate higher than the statutory rate in 2017.

~~The effective tax rates for 2016 and 2015 were lower than the U.S. statutory rate of 35% primarily due to lower tax rates on non-U.S. earnings.~~

The Company currently expects the effective tax rate for 2018 to be in the range of 22.0% and 23.0%. The effective tax rate may vary from quarter to quarter due to unusual or infrequently occurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, taxes incurred in connection to the territorial style tax system, or other items such as pension mark-to-market adjustments.

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

~~Net Income Attributable to Honeywell~~

2017

2016

2015
Net income attributable to Honeywell

$

1,655

$

4,809

$

4,768

Earnings per share of common stock–assuming dilution

$

2.14

$

6.20

$

6.04

Earnings per share of common stock–assuming dilution decreased in 2017 compared with 2016 primarily driven by additional income tax expense from the Tax Act, higher repositioning and other charges, partially offset by higher segment profit across all segments, lower pension mark-to-market expense and increased pension and other postretirement income.

Earnings per share of common stock–assuming dilution increased in 2016 compared with 2015 primarily driven by increased pension and other postretirement income, higher segment profit in Home and Building Technologies and Performance Materials and Technologies, the gain related to the

38 Honeywell ~~Technology Solutions,~~International Inc. divestiture, a decrease in the weighted average shares outstanding and the tax benefit from adoption of the Financial Accounting Standards Board’s (FASB) 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.

~~BUSINESS OVERVIEW~~

~~Our consolidated results are principally impacted by:~~

•

~~Changes in global economic growth rates and industry conditions and demand in our key end markets;~~

•

~~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;~~

•

~~The impact of the pension discount rate and asset returns on pension expense, including mark-to-market adjustments, and funding requirements; and~~

•

~~The impact from the Tax Act.~~

~~Our 2018 areas of focus, most of which are applicable to each of our segments include:~~

•

~~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;~~

•

~~Expanding margins by maintaining and improving the Company’s cost structure through manufacturing and administrative process improvements, repositioning, and other productivity actions;~~

•

~~Executing disciplined, rigorous M&A and integration processes to deliver growth through acquisitions;~~

•

Ensuring the successful completion of the proposed spin-offs of our Homes and Global Distribution business, as well as our Transportation Systems business, into two stand-alone, publicly traded companies;

•

~~Controlling corporate costs, including costs incurred for asbestos and environmental matters, pension and other post-retirement benefits;~~

•

~~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; and~~

•

~~Aligning our operating structure to benefit from the territorial tax system being implemented by the Tax Act.~~

~~Review of Business Segments~~

Years Ended December 31,

% Change

2017
Versus
2016

2016
Versus
2015

2017

2016

2015
Aerospace Sales

Commercial Aviation Original Equipment

$

2,475

$

2,525

$

2,905

(2
)%

(13
)%

Commercial Aviation Aftermarket

5,103

4,796

4,656

6
%

3
%

Defense and Space

4,053

4,375

4,715

(7
)%

(7
)%

Transportation Systems

3,148

3,055

2,961

3
%

3
%

Total Aerospace Sales

14,779

14,751

15,237

Home and Building Technologies Sales

Home and Building Products

4,928

4,803

4,576

3
%

5
%

Home and Building Distribution

4,849

4,687

4,450

3
%

5
%

Total Home and Building Technologies Sales

9,777

9,490

9,026

Performance Materials and Technologies Sales

UOP

2,753

2,469

2,976

12
%

(17
)%

Process Solutions

4,795

4,640

3,124

3
%

49
%

Advanced Materials

2,791

3,327

3,510

(16
)%

(5
)%

Total Performance Materials and Technologies Sales

10,339

10,436

9,610

Safety and Productivity Solutions Sales

Safety

2,169

2,075

2,135

5
%

(3
)%

Productivity Solutions

3,470

2,550

2,573

36
%

(1
)%

Total Safety and Productivity Solutions Sales

5,639

4,625

4,708

Net Sales

$

40,534

$

39,302

$

38,581

~~Aerospace~~

2017

2016

Change

2015

Change
Net sales

$

14,779

$

14,751

—

$

15,237

(3
)%

Cost of products and services sold

10,320

10,820

11,068

Selling, general and administrative and other expenses

1,171

940

951

Segment profit

$

3,288

$

2,991

10
%

$

3,218

(7
)%

Factors Contributing to Year-Over-Year Change

2017 vs. 2016

2016 vs. 2015

Sales

Segment
Profit

Sales

Segment
Profit
Organic growth/ Operational segment profit

2
%

11
%

(3
)%

(6
)%

Foreign currency translation

—

—

—

(1
)%

Acquisitions, divestitures and other, net

(2
)%

(1
)%

—

—

Total % Change

—

10
%

(3
)%

(7
)%

~~2017 compared with 2016~~

~~Aerospace sales were flat due to organic sales growth, offset by the government services business divestiture.~~

•

~~Commercial Original Equipment sales decreased 2% (decreased 2% organic) primarily due to lower shipments to business jet OEMs, partially offset by lower air transport and regional OEM incentives.~~

•

~~Commercial Aftermarket sales increased 6% (increased 6% organic) primarily driven by higher repair and overhaul activities and increased spares shipments.~~

•

~~Defense and Space sales decreased 7% (increased 1% organic) primarily due to the government services business divestiture and lower Space sales, partially offset by growth in U.S. defense.~~

•

Transportation Systems sales increased 3% (increased 2% organic) primarily driven by higher commercial vehicle volumes, gas turbo penetration and the favorable impact from foreign currency translation, partially offset by lower diesel turbo volumes.

Aerospace segment profit increased due to an increase in operational segment profit, partially offset by the government services business divestiture. The increase in operational segment profit was driven primarily by productivity, net of inflation, including restructuring benefits, lower OEM incentives and higher organic sales volume, partially offset by the government services business divestiture. Cost of products and services sold decreased primarily driven by the government services business divestiture and productivity, net of inflation, partially offset by higher organic sales volume.

~~2016 compared with 2015~~

Aerospace sales decreased primarily due to higher OEM incentives, a decrease in organic sales volumes and the government services business divestiture, which was partially offset by growth from acquisitions.

•

Commercial Original Equipment sales decreased by 13% (decreased 12% organic) primarily due to higher OEM incentives and decreased demand from business and general aviation original equipment manufacturers, partially offset by higher shipments to air transport OEMs.

•

~~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% decrease in operational segment profit and a 1% unfavorable impact from foreign currency translation. The decrease in operational segment profit was 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.

~~Home and Building Technologies~~

2017

2016

Change

2015

Change
Net sales

$

9,777

$

9,490

3
%

$

9,026

5
%

Cost of products and services sold

6,430

6,152

5,859

Selling, general and administrative and other expenses

1,697

1,717

1,675

Segment profit

$

1,650

$

1,621

2
%

$

1,492

9
%

Factors Contributing to Year-Over-Year Change

2017 vs. 2016

2016 vs. 2015

Sales

Segment
Profit

Sales

Segment
Profit
Organic growth/ Operational segment profit

2
%

1
%

5
%

8
%

Foreign currency translation

—

1
%

(2
)%

(2
)%

Acquisitions and divestitures, net

1
%

—

2
%

3
%

Total % Change

3
%

2
%

5
%

9
%

~~2017 compared with 2016~~

~~Home and Building Technologies sales increased primarily due to an increase in organic sales, pricing, and acquisitions.~~

•

Sales in Home and Building Products increased by 3% (increased 2% organic) due to an increase in organic sales growth and acquisitions. Organic sales growth was primarily attributable to sales volume in Environmental & Energy Solutions, and Security and Fire businesses.

•

~~Sales in Home and Building Distribution increased by 3% (increased 3% organic) due to organic sales growth in the global distribution business and Building Solutions.~~

Home and Building Technologies segment profit increased due to an increase in operational segment profit and the favorable impact of foreign currency translation. The increase in operational segment profit was primarily driven by productivity, net of inflation, and pricing, partially offset by unfavorable product mix. Cost of products and services increased due to higher organic sales and acquisitions.

~~2016 compared with 2015~~

~~Home and Building Technologies sales increased primarily due to growth from organic sales growth and acquisitions partially offset by the unfavorable impact of foreign currency translation.~~

•

Sales in Home and Building Products increased by 5% (increased 2% organic) principally driven by organic sales growth and 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 global distribution business and Building Solutions.

Home and Building Technologies segment profit increased primarily due to an increase in operational segment profit and acquisition partially offset by the unfavorable impact of foreign currency translation. The increase in operational segment profit was primarily driven by productivity net of inflation and pricing. Cost of products and services increased due to growth from organic sales and acquisitions, partially offset by the favorable impact of foreign currency translation and productivity, net of inflation.

~~Performance Materials and Technologies~~

2017

2016

Change

2015

Change
Net sales

$

10,339

$

10,436

(1
)%

$

9,610

9
%

Cost of products and services sold

6,764

6,978

6,516

Selling, general and administrative and other expenses

1,369

1,346

1,084

Segment profit

$

2,206

$

2,112

4
%

$

2,010

5
%

Factors Contributing to Year-Over-Year Change

2017 vs. 2016

2016 vs. 2015

Sales

Segment
Profit

Sales

Segment
Profit
Organic growth/ Operational segment profit

8
%

10
%

(3
)%

2
%

Foreign currency translation

—

—

(1
)%

(2
)%

Acquisitions and divestitures, net

(9
)%

(6
)%

13
%

5
%

Total % Change

(1
)%

4
%

9
%

5
%

~~2017 compared with 2016~~

~~Performance Materials and Technologies sales decreased primarily due to divestitures, partially offset by organic sales growth.~~

•

UOP sales increased by 12% (increased 12% organic) driven primarily by higher gas processing project revenues, increased catalyst volumes, increased equipment sales, and increased engineering revenues, partially offset by decreased licensing revenues.

•

Process Solutions sales increased by 3% (increased 3% organic) driven primarily by higher revenue in smart energy, services, thermal solutions, and software, partially offset by lower field products sales.

•

Advanced Materials sales decreased by 16% (increased 11% organic) driven primarily by the spin-off of the former resins and chemicals business, partially offset by increased volumes in fluorine products.

Performance Materials and Technologies segment profit increased primarily due to an increase in operational segment profit, partially offset by divestitures. The increase in operational segment profit is primarily due to productivity, net of inflation, higher organic sales volume and pricing, partially offset by unfavorable product mix and continued investments for growth. Cost of products and services sold decreased primarily due to divestitures and productivity, net of inflation, partially offset by higher organic sales volumes.

~~2016 compared with 2015~~

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

•

UOP sales decreased by 17% (decreased 16% 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 49% (increased 4% organic) driven primarily by increased volumes driven by acquisitions, net of divestitures, 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 the former resins and chemicals business and lower market pricing, as well as lower raw material pass-through pricing in the former resins and chemicals business in the first nine months, partially offset by increased volumes in fluorine and specialty products.

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 by lower organic sales volumes and continued investments for growth. Cost of products and services sold increased primarily due to acquisitions, net of divestitures, partially offset by lower organic sales volumes, favorable foreign currency translation, and productivity, net of inflation.

~~Safety and Productivity Solutions~~

2017

2016

Change

2015

Change
Net sales

$

5,639

$

4,625

22
%

$

4,708

(2
)%

Cost of products and services sold

3,714

3,001

3,020

Selling, general and administrative and other expenses

1,073

944

942

Segment profit

$

852

$

680

25
%

$

746

(9
)%

Factors Contributing to Year-Over-Year Change

2017 vs. 2016

2016 vs. 2015

Sales

Segment
Profit

Sales

Segment
Profit
Organic growth/ Operational segment profit

5
%

18
%

(7
)%

(8
)%

Foreign currency translation

—

—

(1
)%

(2
)%

Acquisitions and divestitures, net

17
%

7
%

6
%

1
%

Total % Change

22
%

25
%

(2
)%

(9
)%

~~2017 compared with 2016~~

~~Safety and Productivity Solutions sales increased primarily due to acquisitions and organic sales volume.~~

•

Sales in Safety increased by 5% (increased 4% organic) due to increased sales volume in the Industrial Safety business, higher distribution in the Retail business, and the favorable impact of foreign currency translation.

•

~~Sales in Productivity Solutions increased by 36% (increased 6% organic) principally due to growth from acquisitions (Intelligrated was acquired in August 2016).~~

Safety and Productivity Solutions segment profit increased due to an increase from operational segment profit and acquisitions. The increase in operational segment profit is driven by higher productivity, net of inflation, and sales volume. Cost of products and services increased primarily due to acquisitions and higher sales volume offset by productivity, net of inflation.

~~2016 compared with 2015~~

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

•

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 to a decrease in operational segment profit 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 and productivity, net of inflation, 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.

~~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 2017, 2016 and 2015. These repositioning actions are expected to generate incremental pre-tax savings of $300 million in 2018 compared with 2017 principally from planned workforce reductions. Cash spending related to our repositioning actions was $177 million, $228 million and $118 million in 2017, 2016 and 2015, and was funded through operating cash flows. In 2018, we expect cash spending for repositioning actions to be approximately $250 million and to be funded through operating cash flows.

LIQUIDITY AND CAPITAL RESOURCES

~~The Company continues~~

(Dollars in tables in millions)

We continue to manage ~~its~~our businesses to maximize operating cash flows as the primary source of liquidity. ~~In addition to~~Each of our ~~available cash and~~businesses is focused on increasing operating cash flows ~~additional~~through revenue growth, margin expansion, and improved working capital turnover. Additional sources of liquidity include committed credit lines, short-term debt from the commercial paper market, long-term borrowings, access to the public debt and equity markets, U.S. cash balances, and the ability to access non-U.S. cash ~~as a result of the Tax Act. We continue to balance our cash and financing uses through investment in our existing core businesses, acquisition activity, share repurchases and dividends.~~

~~Cash Flow Summary~~

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

Years Ended December 31,

2017

2016

2015
Cash provided by (used for):

Operating activities

$

5,966

$

5,498

$

5,519

Investing activities

(3,574
)

(3,342
)

(6,514
)

Financing activities

(3,516
)

346

37

Effect of exchange rate changes on cash

340

(114
)

��

(546
)

Net (decrease) increase in cash and cash equivalents

$

(784
)

$

2,388

$

(1,504
)

~~2017 compared with 2016~~

Cash provided by operating activities increased by $468 million primarily due to a $504 million increase in segment profit and a $294 million favorable impact from working capital (favorable accounts payable partially offset by inventory and accounts receivable), partially offset by higher cash tax payments of $609 million.

Cash used for investing activities increased by $232 million primarily due to (i) a net $2,056 million increase in investments, primarily short-term marketable securities, (ii) an increase of $500 million of settlement payments of foreign currency exchange contracts used as economic hedges on certain non-functional currency denominated monetary assets and liabilities and (iii) a decrease in proceeds from the sales of businesses of $296 million (most significantly Honeywell Technology Solutions Inc. in 2016), partially offset by a decrease in cash paid for acquisitions of $2,491 million (most significantly Intelligrated in 2016).

Cash used for financing activities increased by $3,862 million primarily due to a decrease in the net proceeds from debt issuances of $2,827 million, an increase in net repurchases of common stock of $699 million and an increase in cash dividends paid of $204 million.

~~2016 compared with 2015~~

Cash provided by operating activities decreased by $21 million primarily due to a $725 million unfavorable impact from working capital, 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 million increase in investments, primarily short-term marketable securities.

Cash provided by financing activities increased by $309 million primarily due to an increase in the net proceeds from debt issuances of $497 million, partially offset by an increase in cash dividends paid of $189 million including amounts paid to the former UOP Russell LLC noncontrolling shareholder.

~~Liquidity~~

Each of our businesses is focused on implementing strategies to increase 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, we 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.

balances.

CASH

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.

As of December 31, 2021 and 2020, we held $11.5 billion and $15.2 billion, respectively, of cash and cash equivalents, including our short-term investments.

BORROWINGS

Consolidated total borrowings were $19.6 billion and $22.4 billion as of December 31, 2021 and 2020, respectively.


	December 31,
	2021			2020
Commercial paper and other short-term borrowings		$	3,542		$	3,597
Variable rate notes		622			1,122
Fixed rate notes		15,314			17,399
Other		121			266
Total borrowings		$	19,599		$	22,384

A source of liquidity is our ability to ~~issue short-term debt in~~access 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 commercial paper and other short-term borrowings outstanding were 0.07% and ~~commercial paper outstanding~~0.27% as of December 31, ~~2017~~2021 and 2020.

We also have the following revolving credit agreements:

•A $1.5 billion 364-Day Credit Agreement (the 364-Day Credit Agreement) with a syndicate of banks, dated March 31, 2021, and amended on November 18, 2021. This 364-Day Credit Agreement is maintained for general corporate purposes. The 364-Day Credit Agreement replaced the 364-day credit agreement dated as of April 10, 2020, which was ~~(0.17%) and as~~terminated on March 31, 2021. As of December 31, ~~2016 was (0.13%).~~

2021, there were no outstanding borrowings under our 364-Day Credit Agreement.

•A $4.0 billion Five Year Credit Agreement (the 5-Year Credit Agreement) with a syndicate of banks, dated March 31, 2021, and amended on November 18, 2021. This 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 5-Year Credit Agreement amended and restated the previously reported $4.0 billion amended and restated five-year credit agreement dated as of April 26, 2019. As of December 31, 2021, there were no outstanding borrowings under our 5-Year Credit Agreement.

We also have a current shelf registration statement filed with the SEC 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. We anticipate that net proceeds of any offering would be used for general corporate purposes, including repayment of existing indebtedness, share repurchases, capital expenditures and acquisitions.

Honeywell International Inc. 39

LIQUIDITY AND CAPITAL RESOURCES

CREDIT RATINGS

Our ability to access the ~~commercial paper market,~~global debt capital markets 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, ~~2017, Standard and Poor’s~~2021, S&P Global Inc. (S&P), Fitch Ratings Inc. (Fitch), and Moody’s Investor Service (Moody's) have ratings on our debt set forth in the table below:

S&P

Fitch

Moody's

Outlook

Stable

Short-term

A-1

Long-term

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:


	Years Ended December 31,
	2021			2020			2019
Cash provided by (used for):
Operating activities		$	6,038		$	6,208		$	6,897
Investing activities		(1,061)			(987)			(533)
Financing activities		(8,254)			(81)			(6,600)
Effect of exchange rate changes on cash		(39)			68			16
Net increase (decrease) in cash and cash equivalents		$	(3,316)		$	5,208		$	(220)

2021 compared with 2020

Cash provided by operating activities decreased primarily due to an unfavorable impact to working capital, partially offset by the increase in net income attributable to Honeywell during 2021, which excludes the 2020 non-cash charges associated with the reduction in value of the reimbursement receivables due from Garrett Motion Inc. (Garrett).

Cash used for investing activities increased by $74 million primarily due to a $1,065 million increase in cash paid for acquisitions, net of cash acquired, and $120 million net increase in investments, partially offset by $586 million cash receipts from Garrett, $341 million increase in cash receipts from settlements of derivative contracts, and $203 million in proceeds from the sale of the retail footwear business.

Cash used for financing activities increased by $8,173 million primarily due to a $7,608 million decrease in proceeds from the issuance of long-term debt and a $609 million increase in repayments of ~~A, A and A2 and short-term~~long-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~~partially offset by a decrease in ~~our ability to access these sources~~repurchases 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 2 Acquisitions and Divestitures and Note 12 Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements for additional discussion of items impacting our liquidity.~~

In 2017, the Company repurchased $2,889 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. Additionally, we sought to reduce share count via share repurchases as and when attractive opportunities arose. In December 2017, the Board of Directors authorized the repurchase of up to a total of $8 billion of Honeywell common stock of which $7.7 billion remained available as of December 31, 2017 for additional share repurchases. This authorization included amounts remaining under and replaced the previously approved share repurchase program. $334 million.

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

At December 31, 2017, a substantial portion of the Company’s cash and cash equivalents were held by foreign subsidiaries. As a result of the Tax Act, the Company no longer intends to permanently reinvest its historical foreign earnings and plans to repatriate at least $7 billion of such earnings to the U.S. over the next two years.

International Inc.

LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS AND ASSESSMENT OF CURRENT LIQUIDITY

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 ~~2018~~2022 to be as follows:

•

•Capital expenditures—we expect to spend approximately $1.2 billion for capital expenditures in 2022 primarily for growth, production and capacity expansion, implementation of cost reduction measures, maintenance, and replacement.

•Share repurchases—under our share repurchase program, $7.1 billion was available as of December 31, 2021 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 our level of operating, financing and other investing activities.

•Dividends—we increased our quarterly dividend rate by 5% to $0.98 per share of common stock effective with the fourth quarter 2021 dividend. We intend to continue to pay quarterly dividends in 2022.

We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers. In addition, multiple third-party financial institutions offer a voluntary supply chain financing (SCF) program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on terms that are negotiated between the supplier and the respective financial institution. We agree on commercial terms for the goods and services we procure from our suppliers, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program. Our suppliers’ voluntary participation in the SCF program has no bearing on our payment terms and we have no economic interest in a supplier’s decision to participate in the SCF program.

Amounts due to our suppliers that elected to participate in the SCF programs are included in Accounts payable on the Consolidated Balance Sheet. At December 31, 2021, Accounts payable included approximately $700 million payable to suppliers who have elected to participate in the SCF program. Amounts settled with third-party financial institutions through the SCF program increased approximately $300 million for the year ended December 31, 2021. The increase for the year ended December 31, 2021, reflects a combination of an extension of payment terms with suppliers and increased utilization of our SCF program. All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected in Cash flows from operating activities in our Consolidated Statement of Cash Flows. While access to SCF could decrease if our credit ratings are downgraded, we do not believe that changes in the availability of SCF will have a significant impact on our liquidity. The impact of this program is not material to our overall liquidity.

We sell trade receivables to unaffiliated financial institutions without recourse. Transfers of the receivables are accounted for as sales and, accordingly, receivables sold are excluded from Accounts receivable—net on the Consolidated Balance Sheet and are reflected in Cash flows from operating activities on the Consolidated Statement of Cash Flows. The difference between the carrying amount of the trade receivables sold and the cash received is recorded in Cost of products and services sold on the Consolidated Statement of Operations.

Finally, we ~~expect to spend approximately $900 million for capital expenditures in 2018 primarily for growth, production and capacity expansion, cost reduction, maintenance, and replacement.~~

•

Share repurchases—under the Company’s share repurchase program, $7.7 billion is available as of December 31, 2017 for additional share repurchases. Honeywell presently expects to repurchase outstanding shares from time to time to offset the dilutive impact of employee stock-based compensation plans, including 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 our level of operating, financing and other investing activities.

•

~~Dividends—we increased our quarterly dividend rate by 12% to $.745 per share of common stock effective with the fourth quarter 2017 dividend. The Company intends to~~ continue to ~~pay quarterly dividends in 2018.~~

•

~~Asbestos claims—we expect our cash spending for asbestos claims and our cash receipts for related insurance recoveries to be approximately $350 million and $24 million in 2018.~~

•

Pension contributions—in 2018, we are not required to make contributions to our U.S. pension plans. We plan to make contributions of cash and/or marketable securities of approximately $140 million ($99 million of marketable securities were contributed in January 2018) to our non-U.S. plans to satisfy regulatory funding standards. The timing and amount of contributions to both our U.S. and non-U.S. plans may be impacted by a number of factors, including the funded status of the plans.

•

~~Repositioning actions—we expect that cash spending for severance and other exit costs necessary to execute repositioning actions will be approximately $250 million in 2018.~~

•

~~Environmental remediation costs—we expect to spend approximately $225 million in 2018 for remedial response and voluntary clean-up costs.~~

•

Spin-off separation costs—we expect to incur significant cash expenditures associated with the announced spin-off transactions, including third party professional services and tax costs, the amounts of which are still being determined.

~~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, we realized $565 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~~

See Note 9 Long-term Debt and ~~Probable Liability Payments~~

Credit Agreements of Notes to Consolidated Financial Statements for additional discussion of items impacting our liquidity.

Honeywell International Inc. 41

LIQUIDITY AND CAPITAL RESOURCES

CONTRACTUAL OBLIGATIONS

Following is a summary of our significant contractual obligations and probable liability payments at December 31, ~~2017:~~

Total(6)

Payments by Period

Thereafter

2018

2019-
2020

2021-
2022
Long-term debt, including capitalized leases(1)

$

13,924

$

1,351

$

4,225

$

2,310

$

6,038

Interest payments on long-term debt, including capitalized leases

3,267

307

559

422

1,979

Minimum operating lease payments

1,126

295

387

218

226

Purchase obligations(2)

1,713

819

523

323

48

Estimated environmental liability payments(3)

595

226

271

89

9

Asbestos related liability payments(4)

1,523

350

731

407

35

Asbestos insurance recoveries(5)

(435
)

(24
)

(114
)

(84
)

(213
)

$

21,713

$

3,324

$

6,582

$

3,685

$

8,122

~~(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, 2017.~~

~~(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, 2017.~~2021:


	Total(6)(7)			Payments by Period									Thereafter
				2022			2023 - 2024			2025 - 2026
Long-term debt, including finance leases(1)		$	16,057		$	1,803		$	3,154		$	2,761		$	8,339
Interest payments on long-term debt, including finance leases		4,030			356			679			586			2,409
Operating lease liabilities		1,164			215			341			204			404
Purchase obligations(2)		2,585			1,067			784			562			172
Estimated environmental liability payments(3)		618			225			241			115			37
Asbestos related liability payments(4)		2,061			261			456			396			948
Asbestos insurance recoveries(5)		(363)			(41)			(74)			(54)			(194)
		$	26,152		$	3,886		$	5,581		$	4,570		$	12,115

(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, 2021.

(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, 2021. See Asbestos ~~Matters in Note 19 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, 2017. See Asbestos Matters in Note 19 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.~~

~~Environmental~~ Matters

in Note 19 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, 2021. See Asbestos Matters in Note 19 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 Resideo. See Note 19 Commitments and Contingencies of Notes to Consolidated Financial Statements for additional information.

ASBESTOS MATTERS

Payments, net of insurance recoveries, related to known asbestos matters were $240 million, $229 million and $163 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are estimated to be approximately $220 million in 2022. We expect to make payment associated with 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.

ENVIRONMENTAL MATTERS

Accruals during the year for environmental matters deemed probable and reasonably estimable were ~~$287~~$168 million, ~~$195~~$173 million and ~~$194~~$213 million ~~in 2017, 2016~~for the years ended December 31, 2021, 2020 and ~~2015.~~2019, respectively. In addition, ~~in 2017~~for the years ended December 31, 2021, 2020 and ~~2016~~2019, we incurred operating costs for ongoing businesses of approximately ~~$82~~$88 million, $88 million and ~~$83~~$99 million, respectively, relating to compliance with environmental regulations.

~~Spending~~

Payments related to known environmental matters ~~was $212~~were $210 million, ~~$228~~$216 million and ~~$273~~$256 million ~~in 2017, 2016~~for the years ended December 31, 2021, 2020 and ~~2015~~2019, respectively, and isare estimated to be approximately $225 million in ~~2018.~~2022. We expect to ~~fund expenditures for~~make payment associated with these environmental matters from operating cash ~~flow.~~flows. The timing of ~~cash expenditures~~these 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, were $140 million in 2021 and are expected to be $140 million in 2022.

See Note 19 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of our environmental ~~matters.~~

~~Financial Instruments~~

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

42 Honeywell International Inc.

LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments to reduce our risks from interest and foreign currency exchange rate fluctuations. Derivative financial instruments are not used for trading or other speculative purposes and we do not use leveraged derivative 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, ~~2017~~2021 and ~~2016.~~

Face or
Notional
Amount

Carrying
Value(1)

Fair
Value(1)

Estimated
Increase
(Decrease)
in Fair
Value(2)
December 31, 2017

Interest Rate Sensitive Instruments

Long-term debt (including current maturities)

$

13,924

$

(13,924
)

$

(14,695
)

$

(782
)

Interest rate swap agreements

2,600

(8
)

(8
)

(233
)

Foreign Exchange Rate Sensitive Instruments

Foreign currency exchange contracts(3)

9,273

(53
)

(53
)

(58
)

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
)

~~(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 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, cash flows, or net investments of underlying hedged foreign currency transactions or foreign operations.

2020.


	Face or Notional Amount			Carrying Value(1)			Fair Value(1)			Estimated Increase (Decrease) in Fair Value(2)
December 31, 2021
Interest Rate Sensitive Instruments
Long-term debt (including current maturities)		$	16,057		$	(16,057)		$	(17,022)		$	(1,148)
Interest rate swap agreements		3,150			60			60			(112)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3)		12,671			92			92			(628)
Cross currency swap agreements		1,200			39			39			(116)
December 31, 2020
Interest Rate Sensitive Instruments
Long-term debt (including current maturities)		$	18,787		$	(18,787)		$	(20,176)		$	(1,063)
Interest rate swap agreements		3,950			194			194			(148)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3)		16,123			52			52			(334)
Cross currency swap agreements		1,200			(50)			(50)			(125)

(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, cash flows, or net investments of underlying hedged foreign currency transactions or foreign operations.

See Note ~~14 Financial~~11 Derivative Instruments and ~~Fair Value Measures of Notes~~Hedging Transactions to Consolidated Financial Statements for further ~~discussion on the agreements.~~

discussion.

Honeywell International Inc. 43

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 policies~~estimates 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.

Sales Recognition on Long-Term Contracts—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 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 input 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 performance obligations, the estimation of total revenue and 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). 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.

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 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 of Notes to Consolidated Financial Statements.

44 Honeywell International Inc.

CRITICAL ACCOUNTING ESTIMATES
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, including 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 analyses on key estimates and assumptions. Once the fair value is determined, if the carrying amount exceeds the fair value, it is impaired. Any impairment is measured as the difference between the carrying amount and its fair value.
Finite-Lived Intangible Assets—The determination of useful lives (for depreciation/amortization purposes) and whether or not 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 finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of a finite-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 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.
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 various 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 service and interest cost, assumed return on plan assets, prior service amortization (Pension ongoing (income) expense) and a potential mark-to-market adjustment (MTM Adjustment).
The key assumptions used in developing our net periodic pension (income) expense for our U.S. plans included the following:
2021 2020 2019
Discount Rate:
Projected benefit obligation 2.50 % 3.22 % 4.35 %
Service cost 2.68 % 3.33 % 4.47 %
Interest cost 1.76 % 2.76 % 3.94 %
Assets:
Expected rate of return 6.15 % 6.15 % 6.75 %
Actual rate of return 6.84 % 13.81 % 21.20 %
Actual 10 year average annual compounded rate of return 11.37 % 10.64 % 11.10 %
The MTM Adjustment represents the recognition of 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). 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 Adjustments were expenses of $40 million, $44 million and $123 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Honeywell International Inc. 45
CRITICAL ACCOUNTING ESTIMATES
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 20 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 use an expected rate of return on plan assets of 6.40% for 2022, which is an increase in the assumption used for 2021.
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 2.87% discount rate to determine benefit obligations as of December 31, 2021, reflecting an increase 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:
Change in Assumption
Impact on 2022 Pension
Ongoing Expense
Impact on PBO
0.25 percentage point decrease in discount rate Decrease $29 million Increase $500 million
0.25 percentage point increase in discount rate Increase $27 million Decrease $475 million
0.25 percentage point decrease in expected rate of return on assets Increase $50 million —
0.25 percentage point increase in expected rate of return on assets Decrease $50 million —
Pension ongoing income for our world-wide pension plans is expected to be approximately $1,008 million in 2022 compared with Pension ongoing income of $1,083 million in 2021. The expected decrease in pension income is primarily due to lower expected return on plan assets caused by a change in allocation of UK plan assets and higher interest costs caused by increased discount rates in our U.S. and UK plans. Also, if required, a MTM Adjustment will be recorded in the fourth quarter of 2022 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 2022, 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.
Asbestos Related Liabilities and Insurance Recoveries—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 considering any changes to the projected liability, our recovery experience or other relevant factors that may impact future insurance recoveries.
Our involvement in asbestos related personal injury actions relates to two predecessor companies. Regarding North American Refractories Company (NARCO) asbestos related claims, we estimate our NARCO asbestos liability for the resolution of asserted NARCO-related asbestos claims which qualify for payment under the NARCO Trust Distribution Procedures (Annual Contribution Claims) and for 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 (Pre-Established Unliquidated Claims) using average payment values for the relevant historical period. We estimate our NARCO asbestos liability for unasserted claims based on historic and anticipated claims filing experience and payment rates, disease classifications and type of claim, and average payment values by the NARCO Trust for the relevant historical period. Our estimate also includes all years of epidemiological disease projection through 2059. 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 disease projection 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. We update our assumptions on average payment values and average resolution values in the fourth quarter of each year.
See Note 19 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.
46 Honeywell International Inc.
CRITICAL ACCOUNTING ESTIMATES

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 thorough 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 19 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 Contingencies 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 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 also 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. The estimated value of the future NARCO liability reflects 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. Given the Trust’s lack of sufficient claims processing experience since NARCO emerged from bankruptcy protection, it is not yet possible to reliably estimate future claim costs based on actual Trust experience. 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 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 of any changes to the projected liability, our recovery experience or other relevant factors that may impact future insurance recoveries.

See Note 19 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.

~~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 service and interest cost, assumed return on plan assets, prior service amortization (Pension Ongoing (Income) Expense) and a potential mark-to-market adjustment (MTM Adjustment).

Honeywell International Inc. 47

~~The key assumptions used in developing our 2017, 2016 and 2015 net periodic pension (income) expense for our U.S. plans included the following:~~

2017

2016

2015
Discount Rate:

Projected benefit obligation

4.20
%

4.46
%

4.08
%

Service cost(1)

4.42
%

4.69
%

N/A

Interest cost(1)

3.49
%

3.59
%

N/A

Assets:

Expected rate of return

7.75
%

7.75
%

7.75
%

Actual rate of return

20.5
%

9.7
%

1.5
%

Actual 10 year average annual compounded rate of return

7.4
%

6.4
%

6.8
%

~~(1)~~

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

The MTM Adjustment represents the recognition of 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). 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 $87 million, $273 million and $67 million in 2017, 2016 and 2015.

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 20 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% for 2018 as this is a long-term rate based on historical plan asset returns over varying long term periods combined with our expectations of future market conditions and the asset mix of the plan’s investments.

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 3.68% discount rate to determine benefit obligations as of December 31, 2017, reflecting the 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:


~~Change in Assumption~~	~~Impact on 2018~~ ~~Pension Ongoing~~ ~~Expense~~	~~Impact on PBO~~
~~0.25 percentage point decrease in discount rate~~	~~Decrease $22 million~~	~~Increase $520 million~~
~~0.25 percentage point increase in discount rate~~	~~Increase $22 million~~	~~Decrease $510 million~~
~~0.25 percentage point decrease in expected rate of return on assets~~	~~Increase $47 million~~	—
~~0.25 percentage point increase in expected rate of return on assets~~	~~Decrease $46 million~~	—

~~Pension ongoing income for all of our pension plans is expected to be approximately $984 million in 2018 compared with pension ongoing income of $713 million in 2017. The expected increase is~~

primarily due to higher asset returns in 2017 in our U.S. and UK plans. Also, if required, an MTM Adjustment will be recorded in the fourth quarter of 2018 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 2018, 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)~~—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-lived assets whenever events or changes in circumstances indicate that the carrying amount of a long-lived 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.~~

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 year 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 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.

~~Sales Recognition on Long-Term Contracts~~—In 2017, we recognized approximately 16% of our total net sales using 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 estimating total contract revenue and cost. 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. 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~~

LITIGATION

See Note 19 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of environmental, asbestos and other litigation matters.

~~Recent Accounting Pronouncements~~

RECENT ACCOUNTING PRONOUNCEMENTS

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

48 Honeywell International Inc.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS
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, Year First
Elected an Executive Officer Business Experience
Darius Adamczyk, 56
2017(a)
Chairman of the Board and Chief Executive Officer since April 2018. President and Chief Executive Officer from April 2017 to April 2018. Chief Operating Officer from April 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.
Que Thanh Dallara, 48
2018
President and Chief Executive Officer, Connected Enterprise since October 2018. Vice President and Chief Commercial Officer from January 2017 to 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.
Vimal Kapur, 56
2018
President and Chief Executive Officer, Performance Materials and Technologies since July 2021. President and Chief Executive Officer, Honeywell Building Technologies from June 2018 to June 2021. President of Honeywell Process Solutions from 2014 to May 2018.
George Koutsaftes, 52
April 2022(b)
Chief Operating Officer, Safety and Productivity Solutions since January 2022. President of the Advanced Materials business in Honeywell’s Performance Materials and Technologies segment from November 2017 to January 2022 and interim global leader of Business Development and Mergers and Acquisitions from May 2019 to December 2019.
Gregory P. Lewis, 54
2018
Senior Vice President and Chief Financial Officer since August 2018. Vice President of Enterprise Information Management from October 2016 to April 2018, prior to being named Vice President, Corporate Finance in May 2018. Chief Financial Officer of Automation and Control Solutions from April 2013 to September 2016.
Anne T. Madden, 57
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, 58
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.
Karen Mattimore, 55
2020
Senior Vice President and Chief Human Resources Officer since June 2020. Vice President, Human Resources and Communications, Aerospace from February 2018 to June 2020. Vice President, Human Resources Services from April 2015 to February 2018.
John F. Waldron, 46
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.
Doug Wright, 51
2021
President and Chief Executive Officer, Honeywell Building Technologies since July 2021. President of the global Fire & Security business from July 2020 to June 2021. From 2013 to 2020, Mr. Wright served as President and Chief Executive Officer of Source Photonics, a global provider of optical communication products used in telecommunication systems and data communication networks.
(a)Also a Director.
(b)Mr. Koutsaftes will become President and Chief Executive Officer of Safety and Productivity Solutions and an Executive Officer of the Company effective April 1, 2022, succeeding Mr. Waldron in such position
Honeywell International Inc. 49

UNRESOLVED STAFF COMMENTS
None.
PROPERTIES
We have approximately 750 locations, of which 210 are 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.
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 19 Commitments and Contingencies of Notes to Consolidated Financial Statements.
There were no matters requiring disclosure pursuant to the requirement to disclose certain environmental matters involving potential monetary sanctions in excess of $300,000.
MINE SAFETY DISCLOSURES

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 ~~7A. Quantitative~~104 of Regulation S-K and ~~Qualitative Disclosures About Market Risks~~

~~Information relating to market risks~~ is included in ~~Item 7. Management’s Discussion~~Exhibit 95 to this Form 10-K.

50 Honeywell International Inc.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Since May 11, 2021, our common stock has been listed on The Nasdaq Stock Market LLC (Nasdaq) under the ticker symbol “HON”. Prior to May 11, 2021, our common stock was listed and ~~Analysis~~traded on the New York Stock Exchange. We increased our quarterly dividend rate by 5% to $0.98 per share of ~~Financial Condition~~common stock effective with the fourth quarter 2021 dividend. We intend to continue to pay quarterly dividends in 2022.

The number of record holders of our common stock at December 31, 2021 was 40,420.

Information regarding securities authorized for issuance under equity compensation plans is included the section titled Security Ownership of Certain Beneficial Owners and ~~Results of Operations~~Management and Related Stockholder Matters under the caption ~~“Financial Instruments”.~~

~~ITEM 8. Financial Statements~~“Equity Compensation Plans.”

We purchased 4,256,144 shares of our common stock, par value $1 per share, in the quarter ended December 31, 2021. On February 12, 2021, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included amounts remaining under, and ~~Supplementary Data~~

replaced, the previously approved share repurchase program. As of December 31, 2021, $7.1 billion remained available for additional share repurchases. 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. 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 our purchases of Honeywell's common stock for the three months ended December 31, 2021:


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 1 - 31, 2021		189,536		$	213.76		189,536		$	7,946
November 1 - 30, 2021		—		$	—		—		$	7,946
December 1 - 31, 2021		4,066,608		$	206.51		4,066,608		$	7,106

Honeywell International Inc. 51

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PERFORMANCE GRAPH

The following graph compares the five-year cumulative total return on our common stock to the total returns on the S&P 500 Stock Index, composite of S&P’s Industrial Conglomerates and Aerospace and Defense indices, on a 55%/45% weighted basis (the Composite Index) and Nasdaq Industrial Select Sector (XLI 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 was invested in Honeywell stock and each index on December 31, 2016 and that all dividends were reinvested.

Comparison of Cumulative Five Year Total Return


	Dec. 2016	Dec. 2017	Dec. 2018	Dec. 2019	Dec. 2020	Dec. 2021
Honeywell	100	135.10	123.99	169.49	208.43	207.82
S&P 500 Index	100	121.83	116.49	153.17	181.35	233.41
Composite Index	100	113.96	92.97	118.5	116.63	126.92
XLI Composite Index	100	123.98	107.55	138.84	153.98	186.44

52 Honeywell International Inc.

FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF OPERATIONS

Years Ended December 31,

2017

2016

2015

(Dollars in millions,
except per share amounts)
Product sales

$

32,317

$

31,362

$

30,695

Service sales

8,217

7,940

7,886

Net sales

40,534

39,302

38,581

Costs, expenses and other

Cost of products sold

22,659

22,170

21,775

Cost of services sold

4,916

4,980

4,972

27,575

27,150

26,747

Selling, general and administrative expenses

5,808

5,469

5,006

Other (income) expense

(67
)

(102
)

(68
)

Interest and other financial charges

316

338

310

33,632

32,855

31,995

Income before taxes

6,902

6,447

6,586

Tax expense

5,204

1,601

1,739

Net income

1,698

4,846

4,847

Less: Net income attributable to the noncontrolling interest

43

37

79

Net income attributable to Honeywell

$

1,655

$

4,809

$

4,768

Earnings per share of common stock—basic

$

2.17

$

6.29

$

6.11

Earnings per share of common stock—assuming dilution

$

2.14

$

6.20

$

6.04

Cash dividends per share of common stock

$

2.74

$

2.45

$

2.15


	Years Ended December 31,
	2021		2020		2019
	(Dollars in millions, except per share amounts)
Product sales	$	25,643	$	24,737	$	27,629
Service sales	8,749		7,900		9,080
Net sales	34,392		32,637		36,709
Costs, expenses and other
Cost of products sold	18,344		17,638		19,269
Cost of services sold	5,050		4,531		5,070
	23,394		22,169		24,339
Selling, general and administrative expenses	4,798		4,772		5,519
Other (income) expense	(1,378)		(675)		(1,065)
Interest and other financial charges	343		359		357
	27,157		26,625		29,150
Income before taxes	7,235		6,012		7,559
Tax expense	1,625		1,147		1,329
Net income	5,610		4,865		6,230
Less: Net income attributable to the noncontrolling interest	68		86		87
Net income attributable to Honeywell	$	5,542	$	4,779	$	6,143
Earnings per share of common stock—basic	$	8.01	$	6.79	$	8.52
Earnings per share of common stock—assuming dilution	$	7.91	$	6.72	$	8.41

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

Honeywell International Inc. 53

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Years Ended December 31,

2017

2016

2015

(Dollars in millions)
Net income

$

1,698

$

4,846

$

4,847

Other comprehensive income (loss), net of tax

Foreign exchange translation adjustment

(37
)

(52
)

(1,152
)

Actuarial gains/(losses)

753

(443
)

(464
)

Prior service (cost) credit

(59
)

(18
)

446

Prior service credit recognized during year

(70
)

(78
)

(13
)

Actuarial losses recognized during year

83

236

72

Settlements and curtailments

19

(5
)

2

Foreign exchange translation and other

(49
)

73

41

Pensions and other postretirement benefit adjustments

677

(235
)

84

Effective portion of cash flow hedges recognized in other comprehensive income

(101
)

103

91

Less: reclassification adjustment for (losses) gains included in net income

60

(5
)

99

Changes in fair value of effective cash flow hedges

(161
)

108

(8
)

Other comprehensive income (loss), net of tax

479

(179
)

(1,076
)

Comprehensive income

2,177

4,667

3,771

Less: Comprehensive income attributable to the noncontrolling interest

51

29

73

Comprehensive income attributable to Honeywell

$

2,126

$

4,638

$

3,698


	Years Ended December 31,
	2021		2020		2019
	(Dollars in millions)
Net income	$	5,610	$	4,865	$	6,230
Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment	302		(211)		143
Actuarial gains (losses) recognized	256		91		162
Prior service credit (cost) recognized	7		47		1
Prior service credit recognized during year	(87)		(82)		(79)
Actuarial (gains) losses recognized during year	5		41		16

Foreign exchange translation and other	5		(23)		(14)
Pensions and other postretirement benefit adjustments	186		74		86
Changes in fair value of available for sale investments	(3)		4		—
Cash flow hedges recognized in other comprehensive income	17		10		103
Less: Reclassification adjustment for gains (losses) included in net income	20		54		92
Changes in fair value of cash flow hedges	(3)		(44)		11
Other comprehensive income (loss), net of tax	482		(177)		240
Comprehensive income	6,092		4,688		6,470
Less: Comprehensive income attributable to the noncontrolling interest	64		89		82
Comprehensive income attributable to Honeywell	$	6,028	$	4,599	$	6,388

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

54 Honeywell International, Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEET

December 31,

2017

2016

(Dollars in millions)
ASSETS

Current assets:

Cash and cash equivalents

$

7,059

$

7,843

Short-term investments

3,758

1,520

Accounts receivable—net

8,866

8,177

Inventories

4,613

4,366

Other current assets

1,706

1,152

Total current assets

26,002

23,058

Investments and long-term receivables

667

587

Property, plant and equipment—net

5,926

5,793

Goodwill

18,277

17,707

Other intangible assets—net

4,496

4,634

Insurance recoveries for asbestos related liabilities

411

417

Deferred income taxes

236

347

Other assets

3,372

1,603

Total assets

$

59,387

$

54,146

LIABILITIES

Current liabilities:

Accounts payable

$

6,584

$

5,690

Commercial paper and other short-term borrowings

3,958

3,366

Current maturities of long-term debt

1,351

227

Accrued liabilities

6,968

7,048

Total current liabilities

18,861

16,331

Long-term debt

12,573

12,182

Deferred income taxes

2,894

486

Postretirement benefit obligations other than pensions

512

473

Asbestos related liabilities

1,173

1,014

Other liabilities

5,930

4,110

Redeemable noncontrolling interest

5

3

SHAREOWNERS’ EQUITY

Capital—common stock issued

958

958

—additional paid-in capital

6,212

5,781

Common stock held in treasury, at cost

(15,914
)

(13,366
)

Accumulated other comprehensive income (loss)

(2,235
)

(2,714
)

Retained earnings

28,255

28,710

Total Honeywell shareowners’ equity

17,276

19,369

Noncontrolling interest

163

178

Total shareowners’ equity

17,439

19,547

Total liabilities, redeemable noncontrolling interest and shareowners’ equity

$

59,387

$

54,146


	December 31,
	2021		2020
	(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	10,959	$	14,275
Short-term investments	564		945
Accounts receivable, less allowances of $177 and $202, respectively	6,830		6,827
Inventories	5,138		4,489
Other current assets	1,881		1,639
Total current assets	25,372		28,175
Investments and long-term receivables	1,222		685
Property, plant and equipment—net	5,562		5,570
Goodwill	17,756		16,058
Other intangible assets—net	3,613		3,560
Insurance recoveries for asbestos related liabilities	322		366
Deferred income taxes	489		760
Other assets	10,134		9,412
Total assets	$	64,470	$	64,586
LIABILITIES
Current liabilities:
Accounts payable	$	6,484	$	5,750
Commercial paper and other short-term borrowings	3,542		3,597
Current maturities of long-term debt	1,803		2,445
Accrued liabilities	7,679		7,405
Total current liabilities	19,508		19,197
Long-term debt	14,254		16,342
Deferred income taxes	2,364		2,113
Postretirement benefit obligations other than pensions	208		242
Asbestos related liabilities	1,800		1,920
Other liabilities	7,087		6,975
Redeemable noncontrolling interest	7		7
SHAREOWNERS’ EQUITY
Capital—common stock issued	958		958
—additional paid-in capital	8,141		7,292
Common stock held in treasury, at cost	(30,462)		(27,229)
Accumulated other comprehensive income (loss)	(2,895)		(3,377)
Retained earnings	42,827		39,905
Total Honeywell shareowners’ equity	18,569		17,549
Noncontrolling interest	673		241
Total shareowners’ equity	19,242		17,790
Total liabilities, redeemable noncontrolling interest and shareowners’ equity	$	64,470	$	64,586

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

Honeywell International Inc. 55

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Years Ended December 31,

2017

2016

2015

(Dollars in millions)
Cash flows from operating activities:

Net income

$

1,698

$

4,846

$

4,847

Less: Net income attributable to the noncontrolling interest

43

37

79

Net income attributable to Honeywell

1,655

4,809

4,768

Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:

Depreciation

717

726

672

Amortization

398

304

211

(Gain) loss on sale of non-strategic businesses and assets

7

(178
)

1

Repositioning and other charges

1,021

695

546

Net payments for repositioning and other charges

(628
)

(625
)

(537
)

Pension and other postretirement (income) expense

(647
)

(360
)

(323
)

Pension and other postretirement benefit payments

(106
)

(143
)

(122
)

Stock compensation expense

176

184

175

Deferred income taxes

2,294

76

315

Excess tax benefits from share based payment arrangements

—

—

(81
)

Other

1,642

194

57

Changes in assets and liabilities, net of the effects of acquisitions and divestitures:

Accounts receivable

(682
)

(547
)

201

Inventories

(259
)

(18
)

230

Other current assets

(568
)

(106
)

90

Accounts payable

924

254

(17
)

Accrued liabilities

22

233

(667
)

Net cash provided by operating activities

5,966

5,498

5,519

Cash flows from investing activities:

Expenditures for property, plant and equipment

(1,031
)

(1,095
)

(1,073
)

Proceeds from disposals of property, plant and equipment

86

21

15

Increase in investments

(6,743
)

(3,954
)

(6,714
)

Decrease in investments

4,414

3,681

6,587

Cash paid for acquisitions, net of cash acquired

(82
)

(2,573
)

(5,228
)

Proceeds from sales of businesses, net of fees paid

—

296

1

Other

(218
)

282

(102
)

Net cash used for investing activities

(3,574
)

(3,342
)

(6,514
)

Cash flows from financing activities:

Proceeds from issuance of commercial paper and other short-term borrowings

13,701

18,997

12,992

Payments of commercial paper and other short-term borrowings

(13,532
)

(21,461
)

(8,727
)

Proceeds from issuance of common stock

520

409

186

Proceeds from issuance of long-term debt

1,238

9,245

60

Payments of long-term debt

(292
)

(2,839
)

(880
)

Excess tax benefits from share based payment arrangements

—

—

81

Repurchases of common stock

(2,889
)

(2,079
)

(1,884
)

Cash dividends paid

(2,119
)

(1,915
)

(1,726
)

Payments to purchase the noncontrolling interest

—

(238
)

—

AdvanSix pre-separation funding

—

269

—

AdvanSix pre-spin borrowing

—

38

—

AdvanSix cash at spin-off

—

(38
)

—

Other

(143
)

(42
)

(65
)

Net cash (used for) provided by financing activities

(3,516
)

346

37

Effect of foreign exchange rate changes on cash and cash equivalents

340

(114
)

(546
)

Net (decrease) increase in cash and cash equivalents

(784
)

2,388

(1,504
)

Cash and cash equivalents at beginning of period

7,843

5,455

6,959

Cash and cash equivalents at end of period

$

7,059

$

7,843

$

5,455


	Years Ended December 31,
	2021		2020		2019
	(Dollars in millions)
Cash flows from operating activities:
Net income	$	5,610	$	4,865	$	6,230
Less: Net income attributable to the noncontrolling interest	68		86		87
Net income attributable to Honeywell	5,542		4,779		6,143
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:
Depreciation	674		644		673
Amortization	549		358		415
(Gain) loss on sale of non-strategic businesses and assets	(102)		3		1
Repositioning and other charges	569		575		546
Net payments for repositioning and other charges	(692)		(833)		(376)
Pension and other postretirement income	(1,114)		(798)		(516)
Pension and other postretirement benefit payments	(43)		(47)		(78)
Stock compensation expense	217		168		153
Deferred income taxes	178		(175)		179
Reimbursement receivables charge	—		509		—
Other	(28)		(338)		(287)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable	(8)		669		11
Inventories	(685)		(67)		(100)
Other current assets	(276)		191		(430)
Accounts payable	744		15		118
Accrued liabilities	513		555		445
Net cash provided by (used for) operating activities	6,038		6,208		6,897
Cash flows from investing activities:
Expenditures for property, plant and equipment	(895)		(906)		(839)
Proceeds from disposals of property, plant and equipment	27		57		43
Increase in investments	(2,373)		(3,236)		(4,253)
Decrease in investments	2,525		3,508		4,464
Receipts from Garrett Motion Inc.	586		—		—
Receipts (payments) from settlements of derivative contracts	192		(149)		102
Cash paid for acquisitions, net of cash acquired	(1,326)		(261)		(50)
Proceeds from sales of businesses, net of fees paid	203		—		—
Net cash provided by (used for) investing activities	(1,061)		(987)		(533)
Cash flows from financing activities:
Proceeds from issuance of commercial paper and other short-term borrowings	5,194		10,474		14,199
Payments of commercial paper and other short-term borrowings	(5,190)		(10,400)		(14,199)
Proceeds from issuance of common stock	229		393		498
Proceeds from issuance of long-term debt	2,517		10,125		2,726
Payments of long-term debt	(4,917)		(4,308)		(2,903)
Repurchases of common stock	(3,380)		(3,714)		(4,400)
Cash dividends paid	(2,626)		(2,592)		(2,442)


Other	(81)		(59)		(79)
Net cash provided by (used for) financing activities	(8,254)		(81)		(6,600)
Effect of foreign exchange rate changes on cash and cash equivalents	(39)		68		16
Net increase (decrease) in cash and cash equivalents	(3,316)		5,208		(220)
Cash and cash equivalents at beginning of period	14,275		9,067		9,287
Cash and cash equivalents at end of period	$	10,959	$	14,275	$	9,067

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

56 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY

Years Ended December 31,

2017

2016

2015

Shares

$

Shares

$

Shares

$

(in millions)
Common stock, par value

957.6

958

957.6

958

957.6

958

Additional paid-in capital

Beginning balance

5,781

5,377

5,038

Issued for employee savings and option plans

255

183

164

Stock-based compensation expense

176

171

175

Other owner changes

—

50

—

Ending balance

6,212

5,781

5,377

Treasury stock

Beginning balance

(196.8
)

(13,366
)

(187.2
)

(11,664
)

(175.4
)

(9,995
)

Reacquired stock or repurchases of common stock

(20.5
)

(2,889
)

(19.3
)

(2,079
)

(18.8
)

(1,884
)

Issued for employee savings and option plans

10.6

341

9.7

377

6.7

215

Other owner changes

—

—

—

—

0.3

—

Ending balance

(206.7
)

(15,914
)

(196.8
)

(13,366
)

(187.2
)

(11,664
)

Retained earnings

Beginning balance

28,710

26,147

23,115

Net income attributable to Honeywell

1,655

4,809

4,768

Dividends on common stock

(2,101
)

(1,883
)

(1,686
)

AdvanSix spin-off

(9
)

(362
)

—

Redemption value adjustment

—

(1
)

(50
)

Ending balance

28,255

28,710

26,147

Accumulated other comprehensive income (loss)

Beginning balance

(2,714
)

(2,535
)

(1,459
)

Foreign exchange translation adjustment

(37
)

(52
)

(1,152
)

Pensions and other postretirement benefit adjustments

677

(235
)

84

Changes in fair value of effective cash flow hedges

(161
)

108

(8
)

Ending balance

(2,235
)

(2,714
)

(2,535
)

Noncontrolling interest

Beginning balance

178

135

127

Acquisitions

—

1

3

Net income attributable to noncontrolling interest

43

37

35

Foreign exchange translation adjustment

8

(8
)

(6
)

Dividends paid

(55
)

(17
)

(26
)

Other owner changes

(11
)

30

2

Ending balance

163

178

135

Total shareowners’ equity

750.9

17,439

760.8

19,547

770.4

18,418


	Years Ended December 31,
	2021			2020			2019
	Shares	$		Shares	$		Shares	$
	(in millions, except per share amounts)
Common stock, par value	957.6	958		957.6	958		957.6	958
Additional paid-in capital
Beginning balance		7,292			6,876			6,452
Issued for employee savings and option plans		184			248			271
Stock-based compensation expense		217			168			153
Impact of Quantinuum contribution		448			—			—
Ending balance		8,141			7,292			6,876
Treasury stock
Beginning balance	(260.8)	(27,229)		(246.5)	(23,836)		(228.0)	(19,771)
Reacquired stock or repurchases of common stock	(15.8)	(3,380)		(20.7)	(3,714)		(26.5)	(4,400)
Issued for employee savings and option plans	3.8	147		6.4	321		8.0	335
Ending balance	(272.8)	(30,462)		(260.8)	(27,229)		(246.5)	(23,836)
Retained earnings
Beginning balance		39,905			37,693			33,978

Net income attributable to Honeywell		5,542			4,779			6,143
Dividends on common stock		(2,620)			(2,567)			(2,428)


Ending balance		42,827			39,905			37,693
Accumulated other comprehensive income (loss)
Beginning balance		(3,377)			(3,197)			(3,437)
Foreign exchange translation adjustment		302			(214)			143
Pensions and other postretirement benefit adjustments		186			74			86
Changes in fair value of available for sale investments		(3)			4			—
Changes in fair value of cash flow hedges		(3)			(44)			11
Ending balance		(2,895)			(3,377)			(3,197)
Noncontrolling interest
Beginning balance		241			212			178
Acquisitions, divestitures, and other		397			(6)			(3)
Net income attributable to noncontrolling interest		68			86			87
Foreign exchange translation adjustment		(4)			3			(5)
Dividends paid		(33)			(54)			(45)
Contributions from noncontrolling interest holders		4			—			—
Ending balance		673			241			212
Total shareowners’ equity	684.8	19,242		696.8	17,790		711.1	18,706
Cash dividends per share of common stock		$	3.770		$	3.630		$	3.360

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

Honeywell International Inc. 57

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in tables in millions, except per share amounts)

~~Note 1. Summary of Significant Accounting Policies~~

~~Accounting Principles~~—

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~~—

PRINCIPLES OF CONSOLIDATION

The ~~consolidated financial statements~~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~~The Company's consolidation policy requires equity investments that ~~we exercise~~the Company exercises 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~~the Company is not able to exercise significant influence over the investee and which ~~we do~~the Company does not have readily determinable fair values are accounted for under the cost method. All intercompany transactions and balances are eliminated in consolidation.

~~Property, Plant~~

RECLASSIFICATIONS

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

RECENT ACCOUNTING PRONOUNCEMENTS

The Company considers the applicability and ~~Equipment~~—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 the Company's consolidated statement of operations, balance sheet and cash flows (Consolidated Financial Statements).

In December 2019, the FASB issued ASU 2019-12, Simplifying 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 is not a business combination, intraperiod tax allocation exception to incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax law, and year-to-date loss limitation in interim-period tax accounting. Effective January 1, 2021, the Company adopted this standard. The adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounted principles to contracts, hedging relationships, and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, to expand the scope of this guidance to include derivatives. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company will apply the guidance to impacted transactions during the transition period. The Company does not expect the adoption of this standard to have a material impact on the Company’s Consolidated Financial Statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements. The Company does not expect the adoption of this standard to have a material impact on the Company’s Consolidated Financial Statements.

58 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

RESEARCH AND DEVELOPMENT

Research and development costs for projects are expensed as incurred, unless these costs relate to contracts with customers where the Company receives reimbursements. Amounts expensed as incurred for Company-sponsored research and development projects are included in Cost of products and services sold and were $1,333 million, $1,334 million and $1,556 million for the years ended December 31, 2021, 2020 and 2019, respectively. Costs related to contracts with customers for customer-sponsored research and development projects are included as a contract cost and included in Cost of products and services sold when revenue from such contracts is recognized, consistent with the Company's sales recognition policies. This revenue was $1,284 million, $1,200 million and $1,079 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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.

INVENTORIES

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (FIFO) basis. Carrying value adjustments for inventory obsolescence is equal to the difference between the cost and net realizable value. Net realizable value is the estimate selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

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~~and 3 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

Goodwill and indefinite-lived intangible assets are subject to impairment testing annually as of March 31, ~~and whenever events~~or if a triggering event occurs 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. WeThe Company completed ~~our~~its annual goodwill impairment test as of March 31, ~~2017~~2021, and determined that there was no impairment as of that date.

~~Other Intangible Assets with Determinable Lives~~— The Company is not aware of any additional triggering events.

FINITE-LIVED INTANGIBLE ASSETS

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 2422 years.

~~Sales Recognition~~—Product and service sales are recognized when persuasive evidence of an arrangement exists, product delivery has occurred or services have been rendered, pricing is fixed or determinable, and collection is reasonably assured. 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 are 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 are recorded in full when such losses become evident. Revenues from contracts with multiple element arrangements are recognized as each element is earned based on the relative fair value of each element provided the delivered elements have value to customers on a standalone basis. Amounts allocated to each element are based on its objectively determined fair value, such as the sales price for the product or service when it is sold separately or competitor prices for similar products or services.

~~Environmental~~—We accrue 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 19 Commitments and Contingencies.

~~Asbestos Related Contingencies and Insurance Recoveries~~—We recognize 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 19 Commitments and Contingencies.

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

~~Aerospace Sales Incentives~~—We provide sales incentives to commercial aircraft manufacturers and airlines in connection with their selection of our aircraft equipment, predominately wheel and braking system hardware, avionics, and auxiliary power units, for installation on commercial aircraft. These incentives consist of free or deeply discounted products, credits for future purchases of product and upfront cash payments. These costs are recognized in the period incurred as cost of products sold or as a reduction to 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 sold and were $1,835 million, $1,864 million and $1,856 million in 2017, 2016 and 2015. The 2016 research and development costs previously disclosed have been revised to reflect the amounts recorded in the 2016 Consolidated Statement of Operations and had no impact on the results of operations.

~~Stock-Based Compensation Plans~~—The principal awards issued under our stock-based compensation plans, which are described in Note 18 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~~—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, in any quarter in which an interim remeasurement is triggered. The remaining components of pension (income) expense, primarily service and interest costs and assumed return on plan assets, are recognized on a quarterly basis (Pension ongoing (income) expense).

~~Foreign Currency Translation~~—

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 Accumulated 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 minimize 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~~

Honeywell International Inc. 59

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

DERIVATIVE FINANCIAL INSTRUMENTS

All derivative financial ~~instruments. Derivative financial~~ instruments are used to manage risk and are not used for trading or other speculative purposes. 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 Accumulated other comprehensive income (loss) and subsequently recognized in earnings when the hedged items impact earnings.

Derivative financial instruments designated as hedges must be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Changes in fair value of the derivative contract must be highly correlated with changes in fair value of the underlying hedged item at inception and over the life of the hedge contract. Cash flows of such derivative financial instruments are

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

classified consistent with the underlying hedged item. The Company 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 ~~effective portion of the derivative’s~~ 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.

~~Income Taxes~~—

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 the Company's right to use an underlying asset during the reasonably certain lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company 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. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately.

The Company primarily uses its 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, the Company considers 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.

PENSION BENEFITS

The Company presents net periodic pensions costs by disaggregating the service cost component of such 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 such 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 costs within Pension ongoing (income) expense, primarily interest costs and assumed return on plan assets, are recorded in Other (income) expense. The Company recognizes net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plan's projected benefit obligation (the corridor) annually in the fourth quarter each year (MTM Adjustment). The MTM Adjustment is also reported in Other (income) expense. See Note 22 Segment Financial Data for a definition of Pension ongoing (income) expense.

60 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

SALES RECOGNITION

Product and service sales are recognized when or as the Company transfers control of the promised products or services to its customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or 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. The Company recognizes revenue over time as the Company performs 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. The Company generally uses the cost-to-cost input method of progress for contracts because it best depicts the transfer of control to the customer that occurs as the Company incurs costs. Under the cost-to-cost input 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. The Company reviews its 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 the Company's 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 the Company's Consolidated Balance Sheet. Capitalized contract fulfillment costs were approximately $1.3 billion as of December 31, 2021 and 2020. The amounts recognized as Cost of products and services sold were approximately $0.1 billion for the years ended December 31, 2021, 2020 and 2019.

Revenues for the Company's mechanical service programs are recognized as performance obligations that 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. The Company estimates variable consideration at the most likely amount the Company will receive from customers. The Company includes 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. The Company's estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company's anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company.

STOCK-BASED COMPENSATION PLANS

The principal awards issued under the Company's stock-based compensation plans, which are described in Note 15 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 the Company's historical forfeiture rates.

Honeywell International Inc. 61

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

INCOME TAXES

Significant judgment is required in evaluating tax positions. ~~We establish additional~~The Company establishes 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. WeThe Company regularly ~~assess~~assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of ~~our~~the Company's provision for income taxes. WeThe Company continually ~~assess~~assesses 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.

~~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~~— For additional information, see Note 5 Income Taxes.

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~~

ENVIRONMENTAL

The Company accrues costs related to ~~conform~~environmental matters when it is probable that it has incurred a liability related to a contaminated site and the amount can be reasonably estimated. For additional information, see Note 19 Commitments and Contingencies.

ASBESTOS RELATED LIABILITIES AND INSURANCE RECOVERIES

The 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, the Company records asbestos related insurance recoveries that are deemed probable. For additional information, see Note 19 Commitments and Contingencies.

REIMBURSEMENT RECEIVABLES

In conjunction with the Resideo Technologies, Inc. (Resideo) spin-off, the Company entered into a reimbursement agreement under which Honeywell receives cash payments as reimbursement primarily related to net spending for environmental matters at certain sites as defined in the reimbursement agreement. Accordingly, the Company recorded receivables based on estimates of the underlying reimbursable Honeywell environmental spend, and the Company monitors the recoverability of such receivables, which are subject to the ~~current year presentation.~~

~~Recent Accounting Pronouncements~~~~—We consider the applicability~~terms of applicable credit agreements and ~~impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined~~general ability 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, and in following related amendments, the FASB issued guidance on revenue from contracts with customers that supersedes upon adoption previous revenue recognition guidance, including industry-specific guidance. The underlying principle requires an entity to recognize revenue for the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and in certain circumstances, allowing estimates of variable consideration to be recognized before contingencies are resolved. 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 Company has completed its evaluation of the new standard and has assessed the impacts of adoption on the Consolidated Financial Statements and disclosures. Based on the evaluation of our current contracts and revenue streams, revenue recognition is mostly consistent under both the previous and new standard, with the exception of two key revenue streams within our Aerospace segment, which are described below.

First, the previous accounting policy for costs incurred for nonrecurring engineering and development activities of our Aerospace products with commercial customers was generally to record the expense as incurred. Any customer funding received for such efforts was recognized when earned as a reduction of cost of sales. Upon adoption of the new standard, the customer funding is generally classified as revenue and not as a reduction of cost of sales. Such revenues are deferred and

pay.

62 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

subsequently recognized as products are delivered to the customers. Additionally, under the new guidance, expenses incurred, up to the customer agreed funded amount, are deferred as an asset and subsequently recognized as cost of sales as products are delivered to the customer. As a result of these changes, both deferred costs (assets) and deferred revenue (liability) increased by approximately $1,090 million effective January 1, 2018. The aforementioned change in classification within the Consolidated Statement of Operations and timing difference in recognition is expected to have a minor impact on our gross margin percentage but no change to gross profit.

Second, the accounting for revenues for our mechanical service programs at our Aerospace segment are impacted. Our previous policy was to recognize revenue over time as costs were incurred (input method). Upon adoption, we continue to recognize revenue over time, but recognition is based on a series of distinct services using the output method. At adoption, this change results in unbilled receivables and deferred revenue being eliminated through retained earnings.

We adopted the new standard effective January 1, 2018 using the modified retrospective transition method. The cumulative effect recorded to the opening balance of retained earnings of the above impacted revenue streams is $75 million.

The disclosures in our notes to Consolidated Financial Statements related to revenue recognition will be significantly expanded under the new standard, specifically around the quantitative and qualitative information about performance obligations, changes in contract assets and liabilities, and disaggregation of revenue.

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 periods beginning after December 15, 2018, with early adoption permitted. We expect to adopt the requirements of the new standard effective January 1, 2019. The guidance requires the use of a modified retrospective approach. We are currently evaluating our lease portfolio to assess overall financial statement impact and planning for adoption and implementation of this standard. We will continue to evaluate the adoption impact of this standard on our consolidated financial position, results of operations, and related notes to financial statements.

In October 2016, the FASB issued an accounting standard update which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, at the time the entity transfer occurs rather than when the asset is ultimately transferred to a third party, as required under current U.S. GAAP. The guidance is intended to reduce diversity in practice, particularly for transfers involving intellectual property. Subsequent to 2017 fiscal year, we adopted the accounting standard update as of January 1, 2018. The guidance requires application on a modified retrospective basis. The adoption of this guidance increases our deferred tax assets by approximately $340 million with a cumulative-effect adjustment to retained earnings of the same amount.

In March 2017, the FASB issued guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires that an employer disaggregate the service cost component of net benefit cost. The employer is required to report the service cost component in the same line item or items in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component, such as in other income and expense. The guidance is effective for fiscal years beginning after December 15, 2017. Subsequent to 2017 fiscal year, we adopted the accounting standard update as of January 1, 2018. This guidance impacts the presentation of our Consolidated Financial Statements. Our current presentation of the service cost component is consistent with the requirements of the new standard. We will present the other components within Other (income) expense (we currently present the other components within Cost of products and services sold and

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

Selling, general, and administrative expenses). All components will continue to be excluded from Segment Profit (see Note 20 Pension and Other Postretirement Benefits for components of net period benefit cost).

In August 2017, the FASB issued amendments to hedge accounting guidance. These amendments are intended to better align a company’s risk management strategies and financial reporting for hedging relationships. Under the new guidance, more hedging strategies will be eligible for hedge accounting and the application of hedge accounting is simplified. In addition, the new guidance amends presentation and disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including the interim periods within those years. The guidance requires the use of a modified retrospective approach. We are currently evaluating whether to early adopt the new guidance and the impact of this amendment on our consolidated financial position, results of operations, and related notes to financial statements.

~~Note~~

NOTE 2. ~~Acquisitions~~ACQUISITIONS AND DIVESTITURES

ACQUISITIONS

On November 29, 2021, Honeywell Quantum Solutions, a wholly-owned subsidiary of Honeywell, and ~~Divestitures~~

Cambridge Quantum Computing, a leading developer of quantum computing and quantum software, combined to form Quantinuum. Prior to closing the transaction, Honeywell held a 4.2% ownership interest in Cambridge Quantum Computing. At closing of the business combination, Honeywell contributed an additional $270 million of cash and is the controlling majority-owner of Quantinuum, with an overall 54% ownership in the business. Quantinuum is well positioned to lead the quantum computing industry by offering advanced, fully integrated hardware and software solutions at an unprecedented pace, scale and level of performance to large high-growth markets worldwide. Quantinuum supports customer needs for improved computation in cyber security, drug discovery and delivery, material science, finance, and optimization across all major industrial markets. The business is included within Corporate and All Other, which is not considered a reportable business segment. The combination was accounted for under the acquisition method of accounting; as such, assets and liabilities of Quantinuum are consolidated by Honeywell and included in the Consolidated Balance Sheet. Upon close of the transaction, Honeywell recorded a non-cash adjustment of $460 million in Additional paid-in-capital on the Consolidated Balance Sheet as the contribution of ownership interest in Honeywell Quantum Solutions and Cambridge Quantum Computing for the formation of Quantinuum. In addition, Honeywell recognized a gain of $22 million related to the fair value remeasurement of Honeywell's existing 4.2% ownership interest in Cambridge Quantum Computing, which was recorded in Other (income) expense on in the Consolidated Statement of Operations. At close of the transaction, the fair value of Cambridge Quantum Computing's noncontrolling interest in Quantinuum was $419 million. In December 2021, Cambridge Quantum Computing contributed cash of $12 million to Quantinuum, increasing their noncontrolling interest and decreasing Honeywell's additional-paid-in-capital. As of December 31, 2021, the assets and liabilities in Honeywell's Consolidated Balance Sheet includes $90 million of intangible assets and $943 million allocated to goodwill, which is non-deductible for tax purposes. The purchase accounting is subject to final adjustments, primarily for the valuation of intangible assets and goodwill.

On February 12, 2021, the Company acquired 100% of the shares outstanding of Sparta Systems, a leading provider of enterprise quality management software for the life sciences industry, for $1,303 million. Sparta Systems is expected to further strengthen the Company's leadership in industrial automation, digital transformation solutions, and enterprise performance management software. The business is included within the Performance Materials and Technologies segment. The assets and liabilities acquired with Sparta Systems are included in the Consolidated Balance Sheet as of December 31, 2021, including $383 million of intangible assets and $1,011 million allocated to goodwill, which is nondeductible for tax purposes. The purchase accounting is subject to final adjustment, primarily for the valuation of intangible assets, amounts allocated to goodwill, tax balances, and certain pre-acquisition contingencies.

During ~~2017 there were no significant acquisitions individually or in aggregate. During 2016, we~~2020, the Company acquired businesses for an aggregate cost (net of cash and debt assumed) of ~~$2,538 million.~~

~~In August 2016,~~$261 million, which included the ~~Company acquired Intelligrated,~~October 2020 acquisition of Rocky Research and the December 2020 acquisition of Sine Group. Rocky Research is a ~~leading provider of~~technology leader specializing in thermal, energy and power management solutions and is included within the Aerospace segment. Sine Group offers a Software-as-a-Service (SaaS) that handles visitor management, workplace and supply chain solutions and ~~warehouse automation technologies, for an aggregate value, net~~is included in the Honeywell Building Technologies segment. The acquisition of ~~cash acquired, of $1,488 million. Intelligrated is part of Safety~~Rocky Research and ~~Productivity Solutions. In the third quarter of 2017, we completed our evaluation of the fair value of all of the assets and liabilities acquired. Management recorded~~Sine Group included approximately $167 million allocated to goodwill, and intangible assets acquired of, $1,121 million and $507 million, respectively. The Intelligrated identifiable intangible assets primarily include customer relationships, technology, and trade name that are being amortized over their estimated lives ranging from 1 to 15 years using straight line and accelerated amortization methods. The goodwillwhich 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.

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

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

~~Performance Materials and Technologies. The following table summarizes the fair value of the acquired Elster assets and liabilities.~~


~~Current assets~~	$	~~519~~
~~Intangible assets~~		~~2,163~~
~~Other noncurrent assets~~		~~193~~
~~Current liabilities~~		~~(566~~	)
~~Noncurrent liabilities~~		~~(973~~	)

~~Net assets acquired~~		~~1,336~~
~~Noncontrolling interest~~		(2	)
~~Goodwill~~		~~3,565~~

~~Purchase Price~~	$	~~4,899~~

~~The Elster identifiable intangible assets primarily include customer relationships, trade names and technology~~

During 2019, there were no significant acquisitions 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.~~

On October 1, 2016, the Company completed the tax-free spin-off of its Resins and Chemicals business, part of Performance Materials and Technologies, into a standalone, publicly-traded company (named AdvanSix Inc. (“AdvanSix”)) to Honeywell shareowners. The assets and liabilities associated with AdvanSix have been removed from the Company’s Consolidated Balance Sheet. The results of operations for AdvanSix are includedclosed individually or in the ~~Consolidated Statement of Operations through the effective date of the spin-off.~~

Honeywell shareowners of record as of the close of business on September 16, 2016 received one share of AdvanSix common stock for every 25 shares of Honeywell common stock. Immediately prior to the effective date of the spin-off, AdvanSix incurred debt to make a cash distribution of $269 million to the Company. At the same time, AdvanSix also incurred $38 million of borrowings in order to fund its post spin-off working capital.

In 2016 in connection with the spin-off, the Company entered into certain agreements with AdvanSix to effect our legal and structural separation including a transition services agreement with AdvanSix to provide certain administrative and other services for a limited time. As of the end of 2017, most of those agreements have ended.

aggregate.

DIVESTITURES

On ~~September 16, 2016,~~March 15, 2021, the Company completed the sale of ~~Honeywell Technology Solutions Inc.~~its retail footwear business in exchange for ~~a sale price~~gross cash consideration of ~~$300~~$230 million. The Company recognized a pre-tax gain of ~~$176~~$95 million for the twelve months ended December 31, 2021, which was recorded in Other (income) expense. The ~~Honeywell Technology Solutions Inc.~~retail footwear business was ~~part of Aerospace.~~

previously included in the Safety and Productivity Solutions segment.

During 2020 and 2019, there were no significant divestitures that closed individually or in the aggregate.

Honeywell International Inc. 63

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

NOTE 3. 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.


	Years Ended December 31,
	2021			2020			2019
Aerospace
Commercial Aviation Original Equipment		$	1,720		$	1,940		$	2,999
Commercial Aviation Aftermarket		4,155			3,812			5,761
Defense and Space		5,151			5,792			5,294

		11,026			11,544			14,054
Honeywell Building Technologies


Products		3,243			2,971			3,293
Building Solutions		2,296			2,218			2,424
		5,539			5,189			5,717
Performance Materials and Technologies
UOP		2,348			2,177			2,890
Process Solutions		4,611			4,590			5,146
Advanced Materials		3,054			2,656			2,798
		10,013			9,423			10,834
Safety and Productivity Solutions
Safety and Retail		2,387			2,414			2,215
Productivity Solutions and Services		1,610			1,270			1,285
Warehouse and Workflow Solutions		2,944			1,965			1,719
Advanced Sensing Technologies		873			832			885
		7,814			6,481			6,104
Corporate and All Other		—			—			—
Net sales		$	34,392		$	32,637		$	36,709

Aerospace– A global supplier of products, software and services for aircrafts that it sells to OEM and other customers in a variety of end markets including: air transport, regional, business and general aviation aircraft, airlines, aircraft operators and defense and space 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 and thermal systems. Aerospace also provides spare parts, repair, overhaul and maintenance services (principally to aircraft operators) for the aftermarket. Honeywell Forge solutions are leveraged by the Company's customers as tools to turn data into predictive maintenance and predictive analytics to enable better fleet management and make flight operations more efficient.

Honeywell Building Technologies – A global provider of products, software, solutions, and technologies that enable building owners and occupants to ensure their facilities are safe, energy efficient, sustainable, and productive. Honeywell Building Technologies products and services include advanced software applications for building control and optimization; sensors, switches, control systems, and instruments for energy management; access control; video surveillance; fire products; and installation, maintenance and upgrades of systems. Honeywell Forge solutions enable the Company's customers to digitally manage buildings, connecting data from different assets to enable smart maintenance, improve building performance, and even protect from incoming security threats.

64 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

Performance Materials and Technologies – A global provider in developing and manufacturing high-quality performance chemicals and materials, process technologies, and automation solutions. The segment is comprised of 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. Advanced Materials manufactures a wide variety of high-performance products, including materials used to manufacture end products such as bullet-resistant armor, nylon, computer chips, and pharmaceutical packaging, and provides reduced and low global-warming-potential materials based on hydrofluoro-olefin technology. In the industrial environment, Honeywell Forge solutions enable integration and 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 – A global provider of products and software that improve productivity, workplace safety and asset performance to customers around the globe. Safety products include PPE, apparel, gear, and footwear; gas detection technology; and cloud-based notification and emergency messaging. Productivity Solutions products and services include 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.

Corporate and All Other –Corporate and All Other includes revenue from Honeywell's majority-owned investment in Quantinuum. Through Quantinuum, Honeywell provides a wide range of service offerings of fully integrated quantum computing hardware and software solutions.

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 the Company's revenue based off timing of recognition is as follows:


	Years Ended December 31,
	2021			2020			2019
Products, transferred point in time		58	%		61	%		61	%
Products, transferred over time		17			15			14
Net product sales		75			76			75
Services, transferred point in time		8			8			9
Services, transferred over time		17			16			16
Net service sales		25			24			25
Net sales		100	%		100	%		100	%

CONTRACT BALANCES

The Company records 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 receivable—net and Other 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. Contract 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.

Honeywell International Inc. 65

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables 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:


	2021			2020
Contract assets—January 1		$	1,618		$	1,602
Contract assets—December 31		2,060			1,618
Change in contract assets—increase (decrease)		$	442		$	16
Contract liabilities—January 1		$	(4,033)		$	(3,501)
Contract liabilities—December 31		(4,290)			(4,033)
Change in contract liabilities—(increase) decrease		$	(257)		$	(532)
Net change		$	185		$	(516)

The net change in 2021 and 2020 was primarily driven by the receipt of advance payments from customers exceeding recognition of revenue as performance obligations were satisfied prior to billing. For the years ended December 31, 2021 and 2020, the Company recognized revenue of $1,925 million and $1,709 million, respectively, that was previously included in the beginning balance of contract liabilities.

Contract assets include $2,035 million and $1,589 million of unbilled balances under long-term contracts as of December 31, 2021 and 2020, respectively. These amounts are billed in accordance with the terms of customer contracts to which they relate.

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 the Company's 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 the Company's 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 the Company's contracts 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, the Company allocates 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.

The following table outlines the Company's remaining performance obligations disaggregated by segment:


	December 31, 2021
Aerospace		$	9,423
Honeywell Building Technologies		6,871
Performance Materials and Technologies		7,243
Safety and Productivity Solutions		4,143
Corporate and All Other(1)		2
		$	27,682

(1) The remaining performance obligations within Corporate and All Other relate to the Quantinuum business.

66 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

Performance obligations recognized as of December 31, 2021 will be satisfied over the course of future periods. The Company's 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 59% and 41%, respectively.

The timing of satisfaction of the Company's performance obligations does not significantly vary from the typical timing of payment. Typical payment terms of the Company's fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts the Company 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 the Company recognizes revenue in proportion to the amount the Company has the right to invoice for services performed.

Honeywell International Inc. 67

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~Note 3. Repositioning and Other Charges~~

NOTE 4. REPOSITIONING AND OTHER CHARGES

A summary of repositioning and other charges follows:

Years Ended December 31,

2017

2016

2015
Severance

$

305

$

283

$

197

Asset impairments

142

43

13

Exit costs

60

43

6

Reserve adjustments

(16
)

(109
)

(53
)

Total net repositioning charge

491

260

163

Asbestos related litigation charges, net of insurance

207

222

189

Probable and reasonably estimable environmental liabilities

287

195

194

Other

36

18

—

Total net repositioning and other charges

$

1,021

$

695

$

546


	Years Ended December 31,
	2021			2020			2019
Severance		$	80		$	475		$	260
Asset impairments		117			21			95
Exit costs		134			69			83
Reserve adjustments		(13)			(47)			(5)
Total net repositioning charge		318			518			433
Asbestos related litigation charges, net of insurance and reimbursements		129			50			42
Probable and reasonably estimable environmental liabilities, net of reimbursements		22			27			59
Other charges		100			(20)			12
Total net repositioning and other charges		$	569		$	575		$	546

The following table summarizes the pre-tax distribution of total net repositioning and other charges by ~~classification:~~

Years Ended December 31,

2017

2016

2015
Cost of products and services sold

$

784

$

522

$

483

Selling, general and administrative expenses

187

126

63

Other (income) expense

50

47

—

$

1,021

$

695

$

546

classification in the Consolidated Statement of Operations:


	Years Ended December 31,
	2021			2020			2019
Cost of products and services sold		$	457		$	308		$	276
Selling, general and administrative expenses		112			267			270
Other (income) expense		—			—			—
		$	569		$	575		$	546

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

Years Ended December 31,

2017

2016

2015
Aerospace

$

296

$

298

$

211

Home and Building Technologies

78

28

43

Performance Materials and Technologies

102

101

40

Safety and Productivity Solutions

51

1

34

Corporate

494

267

218

$

1,021

$

695

$

546

segment. These amounts are excluded from segment profit as described in Note 22 Segment Financial Data.


	Years Ended December 31,
	2021			2020			2019
Aerospace		$	62		$	157		$	33
Honeywell Building Technologies		13			100			108
Performance Materials and Technologies		24			167			93
Safety and Productivity Solutions		268			41			71
Corporate and All Other		202			110			241
		$	569		$	575		$	546

68 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

In ~~2017, we~~2021, the Company recognized repositioning charges totaling ~~$507~~$331 million, including severance costs of ~~$305~~$80 million related to workforce reductions of ~~7,096~~6,432 manufacturing and administrative positions ~~across our~~mainly in the Company's Safety and Productivity Solutions and Aerospace segments. The workforce reductions were primarily related to the re-alignment of a product line in the Company's Safety and Productivity Solutions segment, site transitions, mainly in Aerospace, to more cost-effective locations, and the Company's productivity and ongoing functional transformation initiatives. The repositioning charge included asset impairments of $117 million primarily related to the write-down of certain manufacturing and other equipment. The repositioning charge included exit costs of $134 million primarily for current period exit costs incurred for previously approved repositioning projects, closure obligations associated with site transitions, and lease obligations for equipment. Also, $13 million of previously established reserves, primarily for severance, were returned to income due to adjustments to the scope of previously announced repositioning actions.

In 2021, Other charges include $105 million of incremental long-term contract labor cost ~~savings actions taken~~inefficiencies due to severe supply chain disruptions (attributable to the COVID-19 pandemic) relating to the warehouse automation business within the Safety and Productivity Solutions segment. Certain of these costs incurred include amounts and provisions for anticipated losses recognized during the fourth quarter when total estimated costs at completion for certain of the business’ long-term contracts exceeded total estimated revenue. These costs represent unproductive labor costs due to unexpected supply delays and the resulting downstream installation issues, demobilization and remobilization of contract workers, and resolution of contractor disputes. These costs do not include normal operational inefficiencies experienced during a challenging operating environment in ~~connection~~2021.

In 2020, the Company recognized repositioning charges totaling $565 million, including severance costs of $475 million related to workforce reductions of 14,159 manufacturing and administrative positions across the Company's segments, with ~~our~~a majority of the workforce reductions in Aerospace and Performance Materials and Technologies. The workforce reductions primarily related to the Company aligning its cost structure with the slowdown in demand for many of its products and services due to the global recession, the Company's productivity and ongoing functional transformation initiatives, and ~~with~~to site consolidations and hub strategies. The repositioning charge included exit costs of $69 million primarily related to current period exit costs incurred for previously approved repositioning projects. Also, $47 million of previously established reserves, primarily for severance, were returned to income mainly as a result of higher attrition than anticipated in prior severance actions resulting in lower payments.

In 2019, the Company recognized repositioning charges totaling $438 million, including severance costs of $260 million related to workforce reductions of 5,336 manufacturing and administrative positions across the Company's segments. The workforce reductions related to the Company's productivity and ongoing functional transformation initiatives and to site transitions, mainly in ~~each of our segments,~~Honeywell Building Technologies, as the Company transitions manufacturing to more cost-effective locations. The repositioning charge included asset impairments of ~~$142~~$95 million ~~principally in our Corporate segment~~largely related to ~~the write-down of legacy properties and certain equipment~~a write down in connection with ~~their planned disposition and the write-down of a research and development facility in connection with a planned exit from such facility.~~assets held for sale. The repositioning charge included exit costs of ~~$60~~$83 million ~~principally~~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 each of our segments and for lease exit obligations in our Corporate segment.~~

In 2016, we recognized repositioning charges totaling $369 million including severance costs of $283 million related to workforce reductions of 6,585 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; the separation of the

transitions.

Honeywell International Inc. 69

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

former Automation and Control Solutions reporting segment into two new reporting segments; site transitions in each of our segments to more cost-effective locations; and achieving acquisition-related synergies. The repositioning charge included asset impairments of $43 million principally related to the write-off of certain intangible assets in connection with the sale of a Performance Materials and Technologies business. The repositioning charge included exit costs of $43 million principally for expenses related to the spin-off of our AdvanSix business and closure obligations associated with site 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.

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.

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

Severance
Costs

Asset
Impairments

Exit
Costs

Total
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

2017 charges

305

142

60

507

2017 usage—cash

(163
)

—

(14
)

(177
)

2017 usage—noncash

—

(142
)

—

(142
)

Adjustments and reclassifications

(13
)

—

(10
)

(23
)

Foreign currency translation

15

—

2

17

Balance at December 31, 2017

$

442

$

—

$

71

$

513

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


	Severance Costs			Asset Impairments			Exit Costs			Total
Balance at December 31, 2018		$	489		$	—		$	77		$	566
Charges		260			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
Charges		475			21			69			565
Usage—cash		(474)			—			(90)			(564)
Usage—noncash		—			(21)			—			(21)
Divestitures		—			—			—			—
Adjustments		(44)			—			(3)			(47)
Foreign currency translation		15			—			2			17
Balance at December 31, 2020		527			—			74			601
Charges		80			117			134			331
Usage—cash		(299)			—			(83)			(382)
Usage—noncash		—			(119)			—			(119)
Divestitures		—			—			—			—
Adjustments		(14)			2			(1)			(13)
Foreign currency translation		(5)			—			(2)			(7)
Balance at December 31, 2021		$	289		$	—		$	122		$	411

Certain repositioning projects ~~in each of our reportable operating segments in 2017, 2016 and 2015 included~~will 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 2021, 2020, and ~~disposal costs~~2019 were not significant.

~~Note 4. Other (Income) Expense~~

Years Ended December 31,

2017

2016

2015
Equity (income) loss of affiliated companies

$

(39
)

$

(31
)

$

(30
)

(Gain) loss on sale of non-strategic businesses and assets

7

(178
)

1

Interest income

(151
)

(106
)

(104
)

Foreign exchange

18

12

43

Other, net

98

201

22

$

(67
)

$

(102
)

$

(68
)

~~Refer to Note 2 Acquisitions and Divestitures and Note 12 Long-term Debt and Credit Agreements for further details of transactions recognized in 2016 within Other (income) expense.~~

~~Note 5. Income Taxes~~

~~Income before taxes~~

Years Ended December 31,

2017

2016

2015
U.S.

$

2,825

$

2,976

$

3,361

Non-U.S.

4,077

3,471

3,225

$

6,902

$

6,447

$

6,586

~~Tax expense (benefit)~~

Years Ended December 31,

2017

2016

2015
Tax expense (benefit) consists of

Current:

U.S. Federal

$

2,061

$

869

$

786

U.S. State

62

97

78

Non-U.S.

787

559

560

$

2,910

$

1,525

$

1,424

Deferred:

U.S. Federal

$

39

$

38

$

196

U.S. State

132

17

49

Non-U.S.

2,123

21

70

2,294

76

315

$

5,204

$

1,601

$

1,739

70 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

Years Ended December 31,

2017

2016

2015
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)

(12.9
)

(8.0
)

(8.0
)

U.S. state income taxes(1)

1.4

1.1

1.2

Manufacturing incentives

(0.7
)

(0.7
)

(1.5
)

Employee stock ownership plan dividend tax benefit

(0.4
)

(0.5
)

(0.4
)

Tax credits

(0.9
)

(0.7
)

(1.0
)

Reserves for tax contingencies

1.6

1.2

0.7

Employee share-based payments

(2.9
)

(2.0
)

—

U.S. Tax Cuts and Jobs Act enactment

54.4

—

—

All other items—net

0.8

(0.6
)

0.4

75.4
%

24.8
%

26.4
%

~~(1)~~

~~Net of changes in valuation allowance~~

NOTE 5. INCOME TAXES

INCOME BEFORE TAXES


	Years Ended December 31,
	2021			2020			2019
U.S.		$	3,955		$	3,318		$	4,178
Non-U.S.		3,280			2,694			3,381
		$	7,235		$	6,012		$	7,559

TAX EXPENSE (BENEFIT)


	Years Ended December 31,
	2021			2020			2019
Tax expense (benefit) consists of
Current:
U.S. Federal		$	415		$	475		$	8
U.S. State		146			79			43
Non-U.S.		886			768			1,099
		$	1,447		$	1,322		$	1,150
Deferred:
U.S. Federal		$	173		$	234		$	332
U.S. State		37			39			63
Non-U.S.		(32)			(448)			(216)
		178			(175)			179
		$	1,625		$	1,147		$	1,329


	Years Ended December 31,
	2021			2020			2019
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%
Taxes on non-U.S. earnings(1)(2)		(1.4)			(0.8)			(0.5)
U.S. state income taxes(1)		1.5			1.3			1.1
Reserves for tax contingencies		2.2			(2.6)			2.0
Employee share-based payments		(0.7)			(1.2)			(1.2)
Reduction of certain receivables		—			2.0			—
U.S. Tax Cuts and Jobs Act		—			—			(3.6)
Restructuring		(1.4)			—			—
U.S. Valuation Allowance		2.0			0.1			—
All other items—net		(0.7)			(0.7)			(1.2)
		22.5	%		19.1	%		17.6	%

(1)Net of changes in valuation allowance

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

Honeywell International Inc. 71

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

The effective tax rate increased by ~~50.6~~3.4 percentage points in ~~2017~~2021 compared to ~~2016.~~2020. The increase was primarily ~~attributable~~due to the ~~provisional impact~~establishment of a valuation allowance for deferred tax assets not expected to be realized, incremental tax reserves, a lower tax benefit from restructuring and the absence of prior year items including tax benefits realized as a result of the favorable resolution of a foreign tax matter related to the spin-off transactions, tax law changes in India and the resolution of certain U.S. tax ~~reform (see “The Tax Cuts and Jobs Act” further below), partially~~matters offset by ~~increased~~a non-cash charge related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax ~~benefits from foreign tax credits and for employee share-based payments.~~benefit. The Company’s non-U.S. effective tax rate was ~~71.4%~~26.0%, an increase of approximately ~~54.7~~14.1 percentage points compared to ~~2016.~~2020. The ~~year-over-year~~ increase in the ~~non-U.S.~~foreign effective tax rate was primarily driven by the Company’s change in assertion regarding foreign unremitted earnings, increased expense for reserves in various jurisdictions and increased withholding taxes, partially offset by higher earnings in low tax rate jurisdictions.

~~The effective tax rate decreased by 1.6 percentage points in 2016 compared to 2015. The decrease was primarily~~ attributable to ~~excess~~incremental tax ~~benefits from employee share-based payments arising from adoption of the FASB’s amended guidance related to employee share-based payment accounting, partially offset by increased tax~~ reserves, in various jurisdictions and lower tax benefits from manufacturing incentives. The Company’s non-U.S effective tax rate was 16.7%, a decrease of approximately 2.8 percentage points compared to 2015. The year-over-year decrease 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 absence of prior year items including the favorable resolution of a foreign tax matter related to the previously completed spin-off transactions and tax law changes in India.

The effective tax rate increased by 1.5 percentage points in 2020 compared to 2019. The increase was ~~lower than~~primarily attributable to accrued withholding taxes related to unremitted foreign earnings and non-cash charges related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax benefit, offset by the favorable resolution of a foreign tax matter related to the previously completed spin-off transactions, tax impact of restructuring, tax law changes in India, and the resolution of certain U.S. ~~federal statutory~~tax matters. The Company’s non-U.S. effective tax rate was 11.9%, a decrease of ~~35%~~approximately 14.2 percentage points compared to 2019. The decrease in the foreign effective tax rate was primarily ~~due~~attributable to ~~overall non-U.S. earnings taxed at lower rates.~~

~~HONEYWELL INTERNATIONAL INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~
~~(Dollars~~the favorable resolution of a foreign tax matter related to the previously completed spin-off transactions, tax impact of restructuring, and tax law changes in ~~millions, except per share amounts)~~

~~Deferred tax assets (liabilities)~~

India offset by accrued withholding taxes related to unremitted foreign earnings.

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:

Deferred tax assets:

December 31,

2017

2016
Pension

$

—

$

411

Postretirement benefits other than pensions

177

262

Asbestos and environmental

325

471

Employee compensation and benefits

218

418

Other accruals and reserves

376

765

Net operating and capital losses

632

669

Tax credit carryforwards

510

206

Gross deferred tax assets

2,238

3,202

Valuation allowance

(663
)

(621
)

Total deferred tax assets

$

1,575

$

2,581

Deferred tax liabilities:

Pension

$

(40
)

$

—

Property, plant and equipment

(439
)

(560
)

Intangibles

(1,326
)

(1,843
)

Unremitted earnings of foreign subsidiaries

(2,151
)

(43
)

Other asset basis differences

(210
)

(231
)

Other

(67
)

(43
)

Total deferred tax liabilities

(4,233
)

(2,720
)

Net deferred tax liability

$

(2,658
)

$

(139
)

As discussed further below under “The Tax Cuts and Jobs Act,” the Company no longer intends to reinvest the historical earnings of its foreign subsidiaries as of December 31, 2017 and has recorded a provisional deferred tax liability mainly comprised of non-U.S. withholding taxes of approximately $2.1 billion.

~~Our~~


Deferred tax assets:	December 31,
	2021			2020
Postretirement benefits other than pensions		$	77		$	85
Asbestos and environmental		468			508
Employee compensation and benefits		174			180
Lease liabilities		242			197
Other accruals and reserves		260			110
Net operating and capital losses		734			779
Capital loss limitation and carryover		151			—
Tax credit carryforwards		164			219
Gross deferred tax assets		2,270			2,078
Valuation allowance		(857)			(766)
Total deferred tax assets		$	1,413		$	1,312
Deferred tax liabilities:
Pension		$	(948)		$	(548)
Property, plant and equipment		(464)			(437)
Right-of-use asset		(230)			(184)
Intangibles		(883)			(898)
Unremitted earnings of foreign subsidiaries		(426)			(398)
Other asset basis differences		(334)			(169)
Other		(2)			(31)
Total deferred tax liabilities		(3,287)			(2,665)
Net deferred tax liability		$	(1,874)		$	(1,353)

72 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

The Company's gross deferred tax assets include ~~$794~~$901 million related to non-U.S. operations comprised principally of net operating losses, capital loss and tax credit carryforwards, ~~(mainly~~primarily in Canada, France, Germany, Luxembourg, and the United ~~Kingdom)~~Kingdom, and deductible temporary differences. ~~We maintain~~The Company maintains a valuation allowance of ~~$660~~$703 million against a portion of the non-U.S. gross deferred tax assets. Additionally, a valuation allowance of $150 million was established against the U.S. gross deferred tax asset for capital losses generated from restructuring transactions during the year. The change in the valuation allowance resulted in ~~increases~~an increase of $4$124 million, ~~$69~~increase of $105 million, and ~~$114~~a decrease of $23 million to income tax expense in ~~2017, 2016~~2021, 2020 and ~~2015.~~2019, respectively. In the event ~~we determine~~the Company determines that weit will not be able to realize ~~our~~its net deferred tax assets in the future, wethe Company will reduce such amounts through an increase to income tax expense in the period such determination is made. Conversely, if ~~we determine~~the Company determines that weit will be able to realize net deferred tax assets in excess of the carrying amounts, wethe Company will decrease the recorded valuation allowance through a reduction to income tax expense in the period that such determination is made.

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

As of December 31, ~~2017, our~~2021, the Company recorded a $426 million deferred tax liability on all unremitted foreign earnings based on estimated earnings and profits of approximately $17.1 billion as of the balance sheet date.

As of December 31, 2021, 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

2037

$

16

$

332

U.S. State

2037

508

24

Non-U.S.

2037

607

159

Non-U.S.

Indefinite

2,211

—

$

3,342

$

515


Jurisdiction	Expiration Period	Net Operating and Capital Loss Carryforwards			Tax Credit Carryforwards
U.S. Federal	2040		$	684		$	97
U.S. State	2040		390			21
Non-U.S.	2041		466			50
Non-U.S.	Indefinite		2,185			—
			$	3,725		$	168

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.

2017

2016

2015
Change in unrecognized tax benefits:

Balance at beginning of year

$

877

$

765

$

659

Gross increases related to current period tax positions

94

96

56

Gross increases related to prior periods tax positions

153

88

175

Gross decreases related to prior periods tax positions

(91
)

(33
)

(72
)

Decrease related to resolutions of audits with tax authorities

(76
)

(3
)

(11
)

Expiration of the statute of limitations for the assessment of taxes

(54
)

(10
)

(13
)

Foreign currency translation

44

(26
)

(29
)

Balance at end of year

$

947

$

877

$

765


	Years Ended December 31,
	2021			2020			2019
Change in unrecognized tax benefits:
Balance at beginning of year		$	991		$	1,164		$	1,089
Gross increases related to current period tax positions		93			94			51
Gross increases related to prior periods tax positions		39			68			83
Gross decreases related to prior periods tax positions		(27)			(256)			(34)
Decrease related to resolutions of audits with tax authorities		(1)			(35)			(3)
Expiration of the statute of limitations for the assessment of taxes		(12)			(76)			(13)
Foreign currency translation		(22)			32			(9)
Balance at end of year		$	1,061		$	991		$	1,164

As of December 31, ~~2017, 2016,~~2021, 2020 and ~~2015~~2019, there were ~~$947~~$1,061 million, ~~$877~~$991 million, and ~~$765~~$1,164 million, respectively, of unrecognized tax benefits that if recognized would be recorded as a component of Tax expense.

Honeywell International Inc. 73

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

The following table summarizes tax years that remain subject to examination by major tax jurisdictions as of December 31, ~~2017:~~

2021:


Jurisdiction			Open Tax Years Based on Originally Filed Returns
		Examination in progress		Examination not yet initiated
U.S. Federal	2017-2018	~~2013 – 2016~~		~~2015 – 2017~~ 2019-2021
U.S. State	2013-2019	~~2011 – 2016~~		~~2012 – 2017~~ 2017-2021
Australia	n/a	~~N/A~~		~~2016 – 2017~~ 2018-2021
~~Canada(1)~~ Canada(1)	2015-2018	~~2012 – 2014, 2016~~		~~2015 – 2017~~ 2019-2021
China	2011-2020	~~2003 – 2017~~		~~N/A~~ 2021
France	2018-2020	~~2012 – 2017~~		~~2006 – 2011~~ 2021
~~Germany(1)~~ Germany(1)	2009-2018	~~2008 – 2015~~		~~2016 – 2017~~ 2019-2021
India	1999-2020	~~1999 – 2015~~		~~2016 – 2017~~ 2021
~~Switzerland(1)~~ Italy	2012-2018	~~2012 – 2016~~		~~2017~~ 2019-2021
~~United Kingdom~~ Netherlands	n/a	~~2013 – 2015~~		~~2016 – 2017~~

2018-2021

Switzerland(1)

~~(1)~~

2016-2018

2019-2021

United Kingdom

~~Includes provincial or similar local jurisdictions, as applicable.~~

2013-2019

2020-2021

(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~~the Company's 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.

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

Unrecognized tax benefits for examinations in progress were ~~$487~~$592 million, ~~$398~~$556 million, and ~~$349~~$413 million, as of December 31, ~~2017, 2016,~~2021, 2020 and ~~2015.~~2019, respectively. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of Tax expense in the Consolidated Statement of Operations and totaled ~~$28~~$79 million, ~~$18~~$80 million, and ~~$11~~$73 million for the years ended December 31, ~~2017, 2016,~~2021, 2020 and ~~2015.~~2019, respectively. Accrued interest and penalties were ~~$423~~$580 million, ~~$395~~$507 million, and ~~$336~~$487 million, as of December 31, ~~2017, 2016,~~2021, 2020 and ~~2015.~~

~~The Tax Cuts and Jobs Act~~

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”) that instituted fundamental changes to the taxation of multinational corporations. The Tax Act includes changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The Tax Act also includes a permanent reduction in the corporate tax rate to 21%, repeal of the corporate alternative minimum tax, expensing of capital investment, and limitation of the deduction for interest expense. Furthermore, as part of the transition to the new tax system, a one-time transition tax is imposed on a U.S. shareholder’s historical undistributed earnings of foreign affiliates. Although the Tax Act is generally effective January 1, 2018, GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date, which was December 22, 2017.

As a result of the impacts of the Tax Act, the SEC provided guidance that allows the Company to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment. As of December 31, 2017, the Company has not completed the accounting for the tax effects of the Tax Act. Therefore, we have recorded provisional amounts for the effects of the Tax Act. The primary impacts of the Tax Act relate to the re-measurement of deferred tax assets and liabilities resulting from the change in the corporate tax rate (“Corporate Tax Rate Change”); the one-time mandatory transition tax on undistributed earnings of foreign affiliates (“Mandatory Transition Tax”); and deferred taxes in connection with a change in the Company’s intent to permanently reinvest the historical undistributed earnings of its foreign affiliates (“Undistributed Foreign Earnings”).

~~Corporate Tax Rate Change~~~~—For the year ended December 31, 2017, we recorded a tax benefit of approximately $235 million due to the decrease in the corporate tax rate from 35% to 21%.~~

At the date of enactment, the Company had a deferred tax liability 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. Due to the Tax Act, this additional taxable income will be subject to tax at a lower corporate tax rate, consequently reducing the Company’s deferred tax liability as of the date of enactment.

~~Mandatory Transition Tax~~—For the year ended December 31, 2017, we recorded a provisional tax charge of approximately $1.9 billion due to the imposition of the mandatory transition tax (“MTT”) on the deemed repatriation of undistributed foreign earnings.

The Tax Act imposes a one-time tax on undistributed and previously untaxed post-1986 foreign earnings and profits (E&P), as determined in accordance with U.S. tax principles, of certain foreign corporations owned by U.S. shareholders. In general, we have estimated $20 billion of E&P related to our foreign affiliates that is subject to the MTT. The MTT is imposed at a rate of 15.5% to the extent of the cash and cash equivalents that are held by the foreign affiliates at certain testing dates; the remaining E&P is taxed at a rate of 8.0%. In accordance with the Tax Act, the Company will elect to pay the MTT liability over a period of eight years, with the first installment of $144 million due in 2018; the remainder of the balance is recorded in Other liabilities (noncurrent). As of December 31, 2017, the Company has recorded a provisional amount because certain information related to the computation of E&P is not readily available, some of the testing dates to determine taxable amounts have not yet occurred, and there is limited information from federal and state taxing authorities regarding the

2019, respectively.

NOTE 6. INVENTORIES


	December 31,
	2021			2020
Raw materials		$	1,352		$	1,079
Work in process		861			798
Finished products		2,925			2,612
		$	5,138		$	4,489

74 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~application~~

NOTE 7. PROPERTY, PLANT AND EQUIPMENT—NET


	December 31,
	2021			2020
Land and improvements		$	226		$	259
Machinery and equipment		10,143			10,008
Buildings and improvements		3,225			3,245
Construction in progress		856			825
		14,450			14,337
Less—Accumulated depreciation		(8,888)			(8,767)
		$	5,562		$	5,570

Depreciation expense was $674 million, $644 million and interpretation of the recently enacted legislation. The Company will disclose the impact to the provisional amount in the reporting period in which the accounting is completed, which will not exceed one year from the date of enactment of the Tax Act.

~~Undistributed Foreign Earnings~~—For the year ended December 31, 2017, we recorded a provisional tax charge of approximately $2.1 billion due to the Company’s intent to no longer permanently reinvest the historical undistributed earnings of its foreign affiliates.

We previously considered substantially all of the earnings in our non-U.S. subsidiaries to be permanently reinvested and, accordingly, recorded no deferred income taxes on such earnings. As a result of the fundamental changes to the taxation of multinational corporations created by the Tax Act, the Company no longer intends to permanently reinvest the historical undistributed earnings of its foreign affiliates, which amounted to approximately $20 billion as of December 31, 2017 (including current year earnings). GAAP requires recognition of a deferred tax liability in the reporting period in which its intent to no longer permanently reinvest its historical undistributed foreign earnings is made. Although no U.S. federal taxes will be imposed on such future distributions of foreign earnings, in many cases the cash transfer will be subject to foreign withholding and other local taxes. Accordingly, at December 31, 2017 the Company has included a provisional deferred tax liability, mostly related to non-U.S. withholding taxes. The Company has recorded a provisional amount because certain information related to the computation of E&P, distributable reserves and foreign exchange gains and losses is not readily available. The Company will disclose the impact to the provisional amount in the reporting period in which the accounting is completed, which will not exceed one year from the date of enactment of the Tax Act. The provisional amount is based on the Company’s current legal ownership structure which may change in the future. Any future tax impacts resulting from changes to the legal ownership structure will not be considered changes to the provisional amount and will be recorded in the reporting period in which a plan to modify the legal structure is adopted, which may exceed one year from the date of enactment of the Tax Act.

~~Global Intangible Low Taxed Income~~—In addition to the changes described above, the Tax Act 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. The computation of GILTI is still subject to interpretation and additional clarifying guidance is expected, but 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. In accordance with guidance issued by FASB, 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.

~~Note 6. Earnings Per Share~~

~~The details of the earnings per share calculations~~$673 million for the years ended December 31, ~~2017, 2016~~2021, 2020 and ~~2015 are as follows:~~

Basic

Years Ended December 31,

2017

2016

2015
Net income attributable to Honeywell

$

1,655

$

4,809

$

4,768

Weighted average shares outstanding

762.1

764.3

779.8

Earnings per share of common stock

$

2.17

$

6.29

$

6.11

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

Assuming Dilution

Years Ended December 31,

2017

2016

2015
Net income attributable to Honeywell

$

1,655

$

4,809

$

4,768

Average Shares

Weighted average shares outstanding

762.1

764.3

779.8

Dilutive securities issuable—stock plans

10.0

11.0

9.5

Total weighted average diluted shares outstanding

772.1

775.3

789.3

Earnings per share of common stock—assuming dilution

$

2.14

$

6.20

$

6.04

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 2017, 2016, and 2015 the weighted number of stock options excluded from the computations were 2.8 million, 7.5 million, and 7.1 million. These stock options were outstanding at the end of each of the respective periods.

~~Note 7. Accounts Receivable~~

December 31,

2017

2016
Trade

$

9,068

$

8,449

Less—Allowance for doubtful accounts

(202
)

(272
)

8,866

8,177

Trade Receivables includes $1,853 million and $1,626 million of unbilled balances under long-term contracts as of December 31, 2017 and December 31, 2016. These amounts are billed in accordance with the terms of customer contracts to which they relate.

~~Note~~2019, respectively.

NOTE 8. ~~Inventories~~

December 31,

2017

2016
Raw materials

$

1,193

$

1,104

Work in process

790

775

Finished products

2,669

2,552

4,652

4,431

Reduction to LIFO cost basis

(39
)

(65
)

$

4,613

$

4,366

Inventories valued at LIFO amounted to $324 million and $296 million at December 31, 2017 and 2016. Had such LIFO inventories been valued at current costs, their carrying values would have been approximately $39 million and $65 million higher at December 31, 2017 and 2016.

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

~~Note 9. Property, Plant and Equipment—Net~~

December 31,

2017

2016
Land and improvements

$

287

$

363

Machinery and equipment

10,762

9,956

Buildings and improvements

3,463

3,248

Construction in progress

675

940

15,187

14,507

Less—Accumulated depreciation

(9,261
)

(8,714
)

$

5,926

$

5,793

~~Depreciation expense was $717 million, $726 million and $672 million in 2017, 2016 and 2015.~~

~~Note 10. Goodwill and Other Intangible Assets—Net~~

GOODWILL AND OTHER INTANGIBLE ASSETS—NET

The following table summarizes the change in the carrying amount of goodwill for the years ended December 31, ~~2017~~2021 and ~~2016~~2020 by segment. ~~Certain prior period balances have been recast due to a business realignment; Refer to Note 21 Segment Financial Data.~~

December 31,
2016

Acquisitions/
Divestitures

Currency
Translation
Adjustment

December 31,
2017
Aerospace

$

2,441

$

2

$

25

$

2,468

Home and Building Technologies

5,807

(32
)

185

5,960

Performance Materials and Technologies

4,924

34

284

5,242

Safety and Productivity Solutions

4,535

(8
)

80

4,607

$

17,707

$

(4
)

$

574

$

18,277


	December 31, 2020			Acquisitions/ Divestitures			Currency Translation Adjustment			December 31, 2021
Aerospace		$	2,378		$	21		$	—		$	2,399
Honeywell Building Technologies		3,385			20			(88)			3,317
Performance Materials and Technologies		5,255			1,019			(136)			6,138
Safety and Productivity Solutions		5,040			(32)			(47)			4,961
Corporate and All Other		—			943			(2)			941
		$	16,058		$	1,971		$	(273)		$	17,756

Other intangible assets are comprised of:

December 31, 2017

December 31, 2016

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount
Determinable life intangibles:

Patents and technology

$

1,990

$

(1,272
)

$

718

$

1,841

$

(1,141
)

$

700

Customer relationships

3,911

(1,366
)

2,545

3,816

(1,098
)

2,718

Trademarks

328

(189
)

139

284

(156
)

128

Other

353

(304
)

49

359

(284
)

75

6,582

(3,131
)

3,451

6,300

(2,679
)

3,621

Indefinite life intangibles:

Trademarks

1,045

—

1,045

1,013

—

1,013

$

7,627

$

(3,131
)

$

4,496

$

7,313

$

(2,679
)

$

4,634


	December 31, 2021									December 31, 2020
	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
Determinable life intangibles:
Patents and technology		$	2,345		$	(1,678)		$	667		$	2,159		$	(1,595)		$	564
Customer relationships		4,045			(2,235)			1,810			3,889			(2,050)			1,839
Trademarks		356			(261)			95			327			(247)			80
Other		298			(271)			27			298			(267)			31
		7,044			(4,445)			2,599			6,673			(4,159)			2,514
Indefinite life intangibles:
Trademarks		1,014			—			1,014			1,046			—			1,046
		$	8,058		$	(4,445)		$	3,613		$	7,719		$	(4,159)		$	3,560

Intangible assets amortization expense was ~~$398~~$465 million, ~~$304~~$358 million and ~~$211~~$415 million ~~in 2017, 2016, 2015.~~for the years ended December 31, 2021, 2020 and 2019, respectively. Estimated intangible asset amortization expense for each of the next five years approximates ~~$403~~$310 million in ~~2018, $399~~2022, $273 million in ~~2019, $359~~2023, $250 million in ~~2020, $319~~2024, $241 million in ~~2021,~~2025 and ~~$293~~$203 million in ~~2022.~~

2026.

Honeywell International Inc. 75

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

NOTE 9. LONG-TERM DEBT AND CREDIT AGREEMENTS


	December 31,
	2021			2020

4.25% notes due 2021		$	—	$	800
1.85% notes due 2021		—		1,500
0.483% notes due 2022		500		2,500
2.15% notes due 2022		600		600
Floating rate notes due 2022		600		1,100
1.30% Euro notes due 2023		1,416		1,534
3.35% notes due 2023		300		300
0.00% Euro notes due 2024		566		614
2.30% notes due 2024		750		750
1.35% notes due 2025		1,250		1,250
2.50% notes due 2026		1,500		1,500
1.10% notes due 2027		1,000		—
2.25% Euro notes due 2028		849		920
2.70% notes due 2029		750		750
1.95% notes due 2030		1,000		1,000
1.75% notes due 2031		1,500		—
0.75% Euro notes due 2032		566		614
5.70% notes due 2036		441		441
5.70% notes due 2037		462		462
5.375% notes due 2041		417		417
3.812% notes due 2047		445		445
2.80% notes due 2050		750		750
Industrial development bond obligations, floating rate maturing at various dates through 2037		22		22
6.625% debentures due 2028		201		201
9.065% debentures due 2033		51		51
Other (including capitalized leases and debt issuance costs), 8.2% weighted average interest rate maturing at various dates through 2026		121		266
		16,057		18,787
Less-current portion		(1,803)		(2,445)
		$	14,254	$	16,342

76 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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


	December 31, 2021
2022		$	1,803
2023		1,810
2024		1,344
2025		1,258
2026		1,503
Thereafter		8,339
		16,057
Less-current portion		(1,803)
		$	14,254

On November 1, 2021, the Company repaid its 1.85% notes due 2021.

On August 16, 2021 the Company issued $1.0 billion 1.10% Senior Notes due 2027 and $1.5 billion 1.75% Senior Notes due 2031 (collectively, the Notes). The Company may redeem the Notes at any time, and from time to time, in whole or in part, at the Company's option at the applicable make-whole redemption price. The Notes are senior unsecured and unsubordinated obligations of the Company and rank equally with each other and with all of the Company's existing and future senior unsecured debt and senior to all of the Company's subordinated debt. The offering provided gross proceeds of $2.5 billion, offset by $18.0 million in discount and closing costs related to the offering. The Company used the proceeds of the offering to redeem at par $2 billion of the $2.5 billion in outstanding principal amount of the callable 0.483% Senior Notes due 2022 and to redeem in full and at par $500 million callable Floating rate Senior Notes due 2022 that the Company issued in August 2020.

On March 31, 2021, the Company entered into a $4.0 billion Amended and Restated Five Year Credit Agreement (the 5-Year Credit Agreement) and a $1.5 billion 364-Day Credit Agreement (the 364-Day Credit Agreement). The 5-Year Credit Agreement amended and restated the previously reported $4.0 billion amended and restated five-year credit agreement dated as of April 26, 2019. 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 364-Day Credit Agreement replaced the $1.5 billion 364-day credit agreement dated as of April 10, 2020, which was terminated in accordance with its terms effective March 31, 2021. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 30, 2022, unless (i) Honeywell elects to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on March 30, 2023, or (ii) the 364-Day Credit Agreement is terminated earlier pursuant to its terms. The 5-Year Credit Agreement and the 364-Day Credit Agreement are maintained for general corporate purposes. On November 18, 2021, the Company amended the 364-Day Credit Agreement and the 5-Year Credit Agreement to transition from LIBOR-based benchmark rates to the appropriate replacement rates.

On March 1, 2021, the Company repaid its 4.25% notes due 2021.

As of December 31, 2021, there were no outstanding borrowings under the 364-Day Credit Agreement or 5-Year Credit Agreement.

On August 19, 2020, the Company issued $2.5 billion 0.483% Senior Notes due 2022 and $500 million Floating Rate Senior Notes due 2022 (collectively, the 2022 Callable Notes). The $500 million Floating Rate Senior Notes due 2022 were issued at a variable interest rate equal to the three-month LIBOR plus the applicable margin of 0.23%. The Company may redeem the 2022 fixed rate notes at any time, in whole or in part, at the Company's option. The Company may redeem the 2022 floating rate notes at any time, in whole or in part, on or after August 19, 2021. The 2022 Callable Notes resulted in gross proceeds of $3.0 billion, offset by $10 million in discount and closing costs related to the offering. The Company used the proceeds of the offering to repay $3.0 billion of borrowings under the Term Loan Agreement (defined below).

On May 18, 2020, the Company issued $1.25 billion 1.35% Senior Notes due 2025, $1.0 billion 1.95% Senior Notes due 2030, and $750 million 2.80% Senior Notes due 2050 (collectively, the 2020 Notes) to replace and, accordingly, permanently reduce $3.0 billion of undrawn commitments under the Term Loan Agreement, referenced below. The Company may redeem the 2020 Notes at any time, in whole or in part, at the Company's option. The offering provided gross proceeds of $3.0 billion, offset by $27 million in discount and closing costs related to the offering.

On March 10, 2020, the Company issued €500 million 0.00% Senior Notes due 2024 and €500 million 0.75% Senior Notes due 2032 (collectively, the 2020 Euro Notes). The offering provided gross proceeds of $1.1 billion, offset by $9 million in discount and closing costs related to the offering.

The 2022 Callable Notes, 2020 Notes, and 2020 Euro Notes are senior unsecured and unsubordinated obligations of the Company and rank equally with each other and with all of the Company's existing and future senior unsecured debt and senior to all of the Company's subordinated debt.

Honeywell International Inc. 77

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

On March 26, 2020, the Company entered into a Delayed Draw Term Loan Agreement (the Term Loan Agreement) with a syndicate of banks. The Term Loan Agreement provided for a two-year, delayed draw term loan facility in the aggregate principal amount of $6.0 billion. Effective May 22, 2020, the Company permanently reduced the undrawn commitments under the Term Loan Agreement by an aggregate amount of $3.0 billion. On June 24, 2020, the Company drew on the remaining $3.0 billion of commitments under the Term Loan Agreement at a variable interest rate equal to the one-month LIBOR plus the applicable margin of 1.25%. The draw provided gross proceeds of $3.0 billion, offset by $7 million in closing costs related to the borrowing. On August 20, 2020, the Company prepaid the outstanding principal amount of $3.0 billion, using the proceeds from the offering of the 2022 Callable Notes.

On February 21, 2020, the Company paid its 0.65% Euro notes due 2020.

NOTE 10. LEASES

A significant portion of the Company's operating and finance lease portfolio includes corporate offices, research and development facilities, manufacturing sites, information technology equipment, and automobiles. The majority of the Company's 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 included in Other assets. The current portion of operating lease liabilities are included in Accrued liabilities, and the non-current portion of operating lease liabilities are included in Other liabilities on the Consolidated Balance Sheet. Finance lease ROU assets are included in Property, plant and equipment—net. The current portion of finance lease liabilities are included in Current maturities of long-term debt, and the non-current portion of finance lease liabilities are included in Long-term debt on the Consolidated Balance Sheet.

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 the Company's automobile leases are 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.


	Years Ended December 31,
	2021			2020
Operating lease cost		$	228		$	214
Variable lease cost		14			18
Short-term lease cost		15			17
Finance lease cost:
Amortization of right-of-use assets		65			69
Interest on lease liability		24			27
Total finance lease cost		89			96
Total lease cost		$	346		$	345

Supplemental cash flow information related to leases was as follows:


	Years Ended December 31,
	2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	215		$	206
Operating cash flows for finance leases		24			32
Financing cash flows for finance leases		67			65
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	350		$	245
Finance leases		32			27

Supplemental balance sheet information related to leases was as follows:

78 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)


	December 31,
	2021				2020
Operating leases:
Other assets		$	947			$	773
Accrued liabilities		185				187
Other liabilities		847				641
Total operating lease liabilities		$	1,032			$	828
Finance leases:
Property, plant and equipment		$	325			$	357
Accumulated depreciation		(177)				(180)
Property, plant and equipment—net		$	148			$	177
Current maturities of long-term debt		$	57			$	60
Long-term debt		99				124
Total finance lease liabilities		$	156			$	184
Weighted-average remaining lease term:
Operating leases	9 years				7 years
Finance leases	3 years				3 years
Weighted-average discount rate:
Operating leases		2.3		%		2.9		%
Finance leases		11.0		%		16.3		%

As of December 31, 2021, maturities of lease liabilities were as follows:


	Operating Leases			Finance Leases
2022		$	215		$	77
2023		188			59
2024		153			47
2025		113			14
2026		91			—
Thereafter		404			—
Total lease payments		1,164			197
Less-interest		(132)			(41)
Total		$	1,032		$	156

Honeywell International Inc. 79

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING TRANSACTIONS

DERIVATIVES AND HEDGING ACTIVITIES

The Company uses derivative financial instruments to manage its risks related to interest rates and foreign currency exchange rate fluctuations. Derivative financial instruments are not used for trading or other speculative purposes. To qualify as a hedge, derivative financial instruments must be evaluated for hedge effectiveness at the inception of the contract and designated as a hedge. Changes in fair value of the derivative contract must be highly correlated with changes in fair value of the underlying hedged item at inception and over the life of the hedge contract.

FOREIGN CURRENCY RISK MANAGEMENT

The Company operates a global business in a wide variety of foreign currencies. The Company's 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. The Company's objective is to preserve the U.S. Dollar value of foreign currency denominated cash flows and earnings. The Company monitors its collective foreign currency exposure and enters into foreign currency exchange forward and option contracts (foreign currency exchange contracts) with third parties, 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. The Company uses foreign currency exchange contracts to hedge its foreign currency exposure. 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.The Company uses foreign currency contracts to hedge forecasted sales and purchases, which are denominated in non-functional currencies. 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 these 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. As of December 31, 2021, and 2020, the Company held contracts with notional amounts of $12,671 million and $16,123 million to exchange foreign currencies, principally the U.S. Dollar, Euro, Canadian Dollar, British Pound, Mexican Peso, Chinese Renminbi, and Indian Rupee.

The Company also designates certain foreign currency debt and derivative contracts as hedges against portions of its net investment in foreign operations. Gains or losses of the foreign currency debt and derivative contracts designated as net investment hedges are recorded in the same manner as foreign currency translation adjustments.

INTEREST RATE RISK MANAGEMENT

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 convert the interest rate mix of the Company's total debt portfolio and related overall cost of borrowing.

CREDIT RISK MANAGEMENT

The Company continues to monitor the creditworthiness of its counterparties to mitigate the risk of nonperformance. Financial instruments, including derivatives, expose the Company to counterparty credit risk. In addition, the Company grants credit terms to its customers in the normal course of business. The terms and conditions of the Company's credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. The Company's sales are not materially dependent on a single customer or a small group of customers.

80 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

DERIVATIVE AND HEDGING INSTRUMENTS

The following table summarizes the notional amounts and fair values of the Company’s outstanding derivatives by risk category and instrument type within the Consolidated Balance Sheet:


	Notional						Fair Value Asset						Fair Value (Liability)
	December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020
Derivatives in Fair Value Hedging Relationships:
Interest rate swap agreements		$	3,150		$	3,950		$	60		$	194		$	—		$	—
Derivatives in Cash Flow Hedging Relationships:
Foreign currency exchange contracts		647			488			4			65			—			(58)
Derivatives in Net Investment Hedging Relationships:
Foreign currency exchange contracts		746			806			92			45			—			(1)
Cross currency swap agreements		1,200			1,200			39			—			—			(50)
Total Derivatives Designated as Hedging Instruments		5,743			6,444			195			304			—			(109)
Derivatives Not Designated as Hedging Instruments:
Foreign currency exchange contracts		11,278			14,829			278			92			(282)			(91)
Total Derivatives at Fair Value		$	17,021		$	21,273		$	473		$	396		$	(282)		$	(200)

All derivative assets are presented in Other current assets or Other assets. All derivative liabilities are presented in Accrued liabilities or Other liabilities.

In addition to the foreign currency derivative contracts designated as net investment hedges, certain of the Company's foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $4,074 million and $4,414 million as of December 31, 2021 and 2020, respectively.

Interest rate swap agreements are designated as hedge relationships with gains or losses on the derivative recognized in Interest and other financial charges offsetting the gains and losses on the underlying debt being hedged. Gains and losses on interest rate swap agreements recognized in earnings were $135 million of expense, $169 million of income and $70 million of expense for the years ended December 31, 2021, 2020 and 2019, respectively. Gains and losses are fully offset by losses and gains on the underlying debt being hedged.

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
Line in the Consolidated Balance Sheet of Hedged Item	December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020
Long-term debt		$	3,210		$	4,144		$	60		$	194

Honeywell International Inc. 81

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

The following tables summarize the location and impact to the Consolidated Statement of Operations related to derivative instruments:


	Year Ended December 31, 2021
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, general and administrative expenses			Other (Income) Expense			Interest and Other Financial Charges
		$	34,392		$	18,344		$	5,050		$	4,798		$	(1,378)		$	343
Gain or (loss) on cash flow hedges:
Foreign Currency Exchange Contracts:
Amount reclassified from accumulated other comprehensive income into income		5			8			2			9			—			—

Gain or (loss) on fair value hedges:
Interest Rate Swap Agreements:
Hedged items		—			—			—			—			—			135
Derivatives designated as hedges		—			—			—			—			—			(135)
Gain or (loss) on net investment hedges:
Foreign Currency Exchange Contracts:
Amount excluded from effectiveness testing recognized in earnings using an amortization approach		—			—			—			—			—			16
Gain or (loss) on derivatives not designated as hedging instruments:
Foreign currency exchange contracts		—			—			—			—			195			—


	Year Ended December 31, 2020
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, general and administrative expenses			Other (Income) Expense			Interest and Other Financial Charges
		$	32,637		$	17,638		$	4,531		$	4,772		$	(675)		$	359
Gain or (loss) on cash flow hedges:
Foreign Currency Exchange Contracts:
Amount reclassified from accumulated other comprehensive income into income		(3)			43			11			(4)			28			—
Amount excluded from effectiveness testing recognized in earnings using an amortization approach		—			10			3			—			29			—
Gain or (loss) on fair value hedges:
Interest Rate Swap Agreements:
Hedged items		—			—			—			—			—			(169)
Derivatives designated as hedges		—			—			—			—			—			169
Gain or (loss) on net investment hedges:
Foreign Currency Exchange Contracts:
Amount excluded from effectiveness testing recognized in earnings using an amortization approach		—			—			—			—			—			18
Gain or (loss) on derivatives not designated as hedging instruments:
Foreign currency exchange contracts		—			—			—			—			(166)			—

82 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)


	Year Ended December 31, 2019
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, general and administrative expenses			Other (Income) Expense			Interest and Other Financial Charges
		$	36,709		$	19,269		$	5,070		$	5,519		$	(1,065)		$	357
Gain or (loss) on cash flow hedges:
Foreign Currency Exchange Contracts:
Amount reclassified from accumulated other comprehensive income into income		3			35			9			1			73			—
Amount excluded from effectiveness testing recognized in earnings using an amortization approach		—			16			6			—			35			—
Gain or (loss) on fair value hedges:
Interest Rate Swap Agreements:
Hedged items		—			—			—			—			—			(70)
Derivatives designated as hedges		—			—			—			—			—			70
Gain or (loss) on net investment hedges:
Foreign Currency Exchange Contracts:
Amount excluded from effectiveness testing recognized in earnings using an amortization approach		—			—			—			—			—			19
Gain or (loss) on derivatives not designated as hedging instruments:
Foreign currency exchange contracts		—			—			—			—			106			—

As of December 31, 2021, the Company estimates that approximately $10 million of net derivative gains related to its cash flow hedges included in Accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months.

The following table summarizes the amounts of gain or (loss) on net investment hedges recognized in Accumulated other comprehensive income (loss):


Derivatives Net Investment Hedging Relationships	Years Ended December 31,
	2021			2020
Euro-denominated long-term debt		$	284		$	(256)
Euro-denominated commercial paper		57			(8)
Cross currency swap		88			(109)
Foreign currency exchange contracts		40			(94)

Honeywell International Inc. 83

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

NOTE 12. FAIR VALUE MEASUREMENTS

The accounting guidance for fair value measurements 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 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:


	December 31,
	2021			2020
Assets:
Foreign currency exchange contracts		$	374		$	202
Available for sale investments		742			1,118
Interest rate swap agreements		60			194
Cross currency swap agreements		39			—
Investments in equity securities		57			11
Liabilities:
Foreign currency exchange contracts		$	282		$	150

Cross currency swap agreements		—			50

The foreign currency exchange contracts, 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, as well as investments in equity securities, which are valued using published prices based on observable market data. As such, these investments are classified within level 2.

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

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:


	December 31, 2021						December 31, 2020
	Carrying Value			Fair Value			Carrying Value			Fair Value
Assets:
Short-term investment		$	34		$	34		$	—		$	—
Long-term receivables		170			152			137			132
Long-term investment		366			366			—			—
Liabilities:
Long-term debt and related current maturities		$	16,057		$	17,022		$	18,787		$	20,176

The Company determined the fair value of the long-term receivables by utilizing transactions in the listed markets for identical or similar assets. As such, the fair value of these receivables is considered level 2.

84 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

The fair value of the short-term and long-term investments are based on the present value of the mandatory redemptions as reflected within Garrett Motion Inc.'s (Garrett) Series B Preferred Stock (Series B Preferred Stock) Certificate of Designation, as amended. Fair Value of the Series B Preferred Stock is not impacted by early redemptions until receipt of payment. The investment is designated as held to maturity and was initially recognized at fair value. The fair value of Garrett's Series B Preferred Stock was determined using observable market data and is considered level 2. Refer to Note ~~11. Accrued Liabilities~~

December 31,

2017

2016
Customer advances and deferred income

$

2,198

$

2,151

Compensation, benefit and other employee related

1,420

1,489

Asbestos related liabilities

350

546

Repositioning

508

322

Product warranties and performance guarantees

307

351

Environmental costs

226

252

Income taxes

134

430

Accrued interest

94

97

Other taxes

277

290

Insurance

199

172

Other (primarily operating expenses)

1,255

948

$

6,968

$

7,048

19 Commitments and Contingencies for further discussion of the Company’s investment in Garrett's Series B Preferred Stock.

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.

NOTE 13. ACCRUED LIABILITIES


	December 31,
	2021			2020
Customer advances and deferred income		$	3,163		$	2,932
Compensation, benefit and other employee related		1,273			1,244
Repositioning		411			601
Asbestos related liabilities		261			300
Income taxes		393			307
Other taxes		269			281
Environmental costs		225			225
Operating lease liabilities		185			187
Product warranties and performance guarantees		180			183
Insurance		101			140
Accrued interest		100			102
Other (primarily operating expenses)		1,118			903
		$	7,679		$	7,405

~~Note 12. Long-term Debt and Credit Agreements~~

December 31,

2017

2016
Two year floating rate Euro notes due 2018

$

1,199

$

1,054

1.40% notes due 2019

1,250

1,250

Three year floating rate notes due 2019

250

250

Two year floating rate notes due 2019

450

—

1.80% notes due 2019

750

—

0.65% Euro notes due 2020

1,199

1,054

4.25% notes due 2021

800

800

1.85% notes due 2021

1,500

1,500

1.30% Euro notes due 2023

1,499

1,317

3.35% notes due 2023

300

300

2.50% notes due 2026

1,500

1,500

2.25% Euro notes due 2028

900

790

5.70% notes due 2036

441

550

5.70% notes due 2037

462

600

5.375% notes due 2041

417

600

3.812% notes due 2047

445

—

Industrial development bond obligations, floating rate maturing at various dates through 2037

22

30

6.625% debentures due 2028

201

216

9.065% debentures due 2033

51

51

Other (including capitalized leases and debt issuance costs), 0.4% weighted average maturing at various dates through 2023

288

547

13,924

12,409

Less: current portion

(1,351
)

(227
)

$

12,573

$

12,182

NOTE 14. OTHER LIABILITIES


	December 31,
	2021			2020
Income taxes		$	2,152		$	2,009
Pension and other employee related		1,672			1,923
Deferred income		1,324			1,356
Operating lease liabilities		847			641
Environmental		393			435
Insurance		299			280
Product warranties and performance guarantees		43			60
Asset retirement obligations		26			31
Other		331			240
		$	7,087		$	6,975

Honeywell International Inc. 85

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

NOTE 15. STOCK-BASED COMPENSATION PLANS

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

December 31,
2017
2018

$

1,351

2019

2,835

2020

1,390

2021

2,306

2022

4

Thereafter

6,038

13,924

Less-current portion

(1,351
)

$

12,573

~~In November of 2017, the Company issued $445 million 3.812% Senior Notes due 2047 (the “Exchange Notes”). The Exchange Notes are senior unsecured and unsubordinated obligations~~2016 Stock Incentive Plan of Honeywell International Inc. and ~~rank equally with all of Honeywell’s existing~~its Affiliates (2016 Plan) and ~~future senior unsecured debt and senior to all of Honeywell’s subordinated debt. The Exchange Notes were issued in partial exchange~~2016 Stock Plan for ~~the 6.625% Debentures due 2028, the 5.70% Notes due 2036, the 5.70% Notes due 2037 and the 5.375% Notes due 2041. The Company paid $133 million to bondholders in connection with the partial exchange.~~

In the October of 2017, the Company issued $450 million Floating Rate Senior Notes due 2019 and $750 million 1.80% Senior Notes due 2019 (collectively, the “2017 Notes”). The 2017 Notes are senior unsecured and unsubordinated obligationsNon-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. At December 31, 2021, there were 32,337,638, and rank equally with all of Honeywell’s existing and future senior unsecured debt and senior to all of Honeywell’s subordinated debt. The offering resulted in gross proceeds of $1,200 million, offset by $5 million in discount and closing costs related to the offering.

In the fourth quarter of 2016, the Company repurchased the entire outstanding principal amount of its $400 million 5.30 % Senior Notes due 2017, $900 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.

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 obligations815,299 shares of Honeywell common stock available for future grants under terms of the 2016 Plan and ~~rank equally with all~~2016 Directors Plan, respectively.

STOCK OPTIONS

The exercise price, term and other conditions applicable to each option granted under the Company's stock plans are generally determined by the Management Development and Compensation Committee of ~~Honeywell’s existing~~the Board of Directors. The exercise price of stock options is set on the grant date and ~~future senior unsecured debt and senior to all~~may not be less than the fair market value per share of ~~Honeywell’s subordinated debt.~~the Company's stock on that date. The ~~offering resulted in gross proceeds of $4,500 million, offset by $27 million in discount and closing costs related to the offering.~~

~~In February 2016, the Company issued~~€~~1,000 million Floating Rate Senior Notes due 2018,~~€~~1,000 million 0.65% Senior Notes due 2020,~~€~~1,250 million 1.30% Senior Notes due 2023 and~~€750 million 2.25% Senior Notes due 2028 (collectively, the “Euro Notes”). The Euro Notes are senior unsecured and unsubordinated obligations of Honeywell and rank equally with all of Honeywell’s existing and future senior unsecured debt and 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.

~~For the issuances described above, unless otherwise noted, all debt issuance costs are deferred and~~fair value is recognized as ~~a direct deduction to the related debt liability and are amortized to interest~~an expense over the ~~debt term.~~

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 the Company's common stock. The Company 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.

The following table summarizes the impact to the Consolidated Statement of Operations from stock options:


	Years Ended December 31,
	2021			2020			2019
Compensation expense		$	55		$	50		$	47
Future income tax benefit recognized		11			10			10

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


	Years Ended December 31,
	2021				2020				2019
Weighted average fair value per share of options granted during the year(1)		$	32.42			$	21.30			$	21.57
Assumptions:
Expected annual dividend yield		2.31		%		2.59		%		2.65		%
Expected volatility		24.69		%		18.76		%		18.40		%
Risk-free rate of return		0.48		%		1.32		%		2.46		%
Expected option term (years)		4.54				4.62				4.87

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

86 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~On April 28, 2017,~~

The following table summarizes information about stock option activity for the ~~Company entered into Amendment No. 3 (Amendment)~~three years ended December 31, 2021:


	Number of Options		Weighted Average Exercise Price
Outstanding at December 31, 2018		22,478,581		$	97.83
Granted		3,136,058		155.43
Exercised		(5,897,060)		84.31
Lapsed or canceled		(986,017)		136.15
Outstanding at December 31, 2019		18,731,562		109.87
Granted		3,192,693		176.93
Exercised		(4,424,754)		88.96
Lapsed or canceled		(930,972)		156.62
Outstanding at December 31, 2020		16,568,529		125.75
Granted		2,065,574		204.99
Exercised		(2,016,489)		113.01
Lapsed or canceled		(764,675)		175.42
Outstanding at December 31, 2021		15,852,939		$	135.31
Vested and expected to vest at December 31, 2021(1)		14,694,701		$	131.08
Exercisable at December 31, 2021		10,664,625		$	113.30

(1)Represents the sum of vested options of10.7 million and expected to vest options of 4.0 million. Expected to vest options are derived by applying the ~~Amended~~pre-vesting forfeiture rate assumption to total outstanding unvested options of 5.2 million.

The following table summarizes information about stock options outstanding and ~~Restated $4 billion Credit Agreement dated as~~exercisable at December 31, 2021:


Range of Exercise Prices	Options Outstanding										Options Exercisable
	Number Outstanding		Weighted Average Life(1)		Weighted Average Exercise Price per share			Aggregate Intrinsic Value			Number Exercisable		Weighted Average Exercise Price per share			Aggregate Intrinsic Value
$27.00–$64.99		90,181		0.17		$	56.97		$	14		90,181		$	56.97		$	14
$65.00–$89.99		2,293,585		1.68		79.39			296			2,293,585		79.39			296
$90.00–$99.99		3,341,048		3.44		98.80			367			3,341,048		98.80			366
$100.00–$134.99		2,435,321		5.04		119.69			216			2,314,755		119.19			214
$135.00–$232.99		7,692,804		7.55		173.71			271			2,625,056		158.14			232
		15,852,939		5.41		$	135.28		$	1,164		10,664,625		$	113.30		$	1,122

(1)Average remaining contractual life in years.

There were 10,120,793 and 11,620,992 options exercisable at weighted average exercise prices of ~~July 10, 2015, as amended~~$103.89 and $92.19 at December 31, 2020 and 2019, respectively.

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


Options Exercised	Years Ended December 31,
	2021			2020			2019
Intrinsic value(1)		$	219		$	379		$	483
Tax benefit realized		48			84			117

(1)Represents the amount by ~~Amendment No. 1 dated as of September 30, 2015 and Amendment No. 2 dated as of April 29, 2016 (as so amended,~~which the ~~“Credit Agreement”), with a syndicate of banks. The Credit Agreement is maintained for general corporate purposes. Commitments under~~stock price exceeded the ~~Credit Agreement can be increased pursuant to the terms~~exercise price of the ~~Credit Agreement~~options on the date of exercise.

At December 31, 2021, there was $100 million of total unrecognized compensation cost related to ~~an aggregate amount not~~non-vested stock option awards which is expected to ~~exceed $4.5 billion.~~be recognized over a weighted-average period of 2.46 years. The ~~Amendment, among other things, extends~~total fair value of options vested for the ~~Credit Agreement’s termination date from July 10,~~years ended December 31, 2021, ~~to April 28, 2022.~~

On April 28, 2017, the Company entered into a $1.5 billion 364-Day Credit Agreement (364-Day Credit Agreement) with a syndicate of banks. The 364-Day Credit Agreement is maintained for general corporate purposes.

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

~~Note 13. Lease Commitments~~

~~Future minimum lease payments under operating leases having initial or remaining noncancellable lease terms in excess of one year are as follows:~~

At December 31,
2017
2018

$

295

2019

226

2020

161

2021

121

2022

97

Thereafter

226

$

1,126

~~Rent expense~~2020 and 2019 was ~~$385~~$52 million, ~~$387~~$55 million and ~~$390~~$61 million, ~~in 2017, 2016 and 2015.~~

~~Note 14. Financial Instruments and Fair Value Measures~~

~~Credit and Market Risk~~—Financial instruments, including derivatives, expose us to counterparty credit risk for nonperformance and to market risk related to changes in interest and currency exchange rates. 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 continually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single customer or a small group of customers.

~~Foreign Currency Risk Management~~—We conduct our business on a multinational basis in a wide variety of foreign currencies. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. Our primary objective is to preserve the U.S. Dollar value of foreign currency denominated cash flows and earnings. We attempt to hedge currency exposures with natural offsets to the fullest extent possible

respectively.

Honeywell International Inc. 87

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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 ~~once these opportunities have been exhausted, through foreign currency exchange forward and option contracts (foreign currency exchange contracts) with third parties.~~

~~We hedge monetary assets and liabilities denominated in non-functional currencies. Prior~~directors as compensation at fair market value at the date of grant. RSUs generally become fully vested over periods ranging from three to conversion into U.S. dollars, these assets and liabilities are remeasured at spot exchange rates in effect on the balance sheet date. The effects of changes in spot rates are recognized in earnings and included in other (income) expense. We partially hedge forecasted sales and purchases, which occur in the next twelve monthssix years and are ~~denominated~~payable in ~~non-functional currencies, with foreign currency exchange contracts. Changes in~~Honeywell common stock upon vesting.

The following table summarizes information about RSU activity for the forecasted non-functional currency cash flows due to movements in exchange rates are substantially offset by changes in the fair value of the 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. At December 31, 2017 and 2016, we had contracts with notional amounts of $9,273 million and $9,554 million to exchange foreign currencies, principally the U.S. Dollar, Euro, British Pound, Canadian Dollar, Chinese Renminbi, Indian Rupee, Mexican Peso, and Singapore Dollar.

~~We have also designated foreign currency debt and certain derivative contracts as hedges against portions of our net investment in foreign operations during the year~~three years ended December 31, ~~2017. Gains or losses on the effective portion~~2021:


	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value Per Share
Non-vested at December 31, 2018		3,657,873		$	125.35
Granted		1,200,202		162.43
Vested		(1,160,333)		104.32
Forfeited		(457,677)		134.50
Non-vested at December 31, 2019		3,240,065		143.07
Granted		1,551,675		158.52
Vested		(1,001,101)		117.84
Forfeited		(394,116)		145.42
Non-vested at December 31, 2020		3,396,523		148.23
Granted		992,854		214.61
Vested		(1,123,547)		144.34
Forfeited		(308,293)		156.74
Non-vested at December 31, 2021		2,957,536		$	171.73

As of ~~the foreign currency debt designated as a net investment hedge are recorded in the same manner as foreign currency translation adjustments. The Company did not have ineffectiveness~~December 31, 2021, there was approximately $273 million of total unrecognized compensation cost related to ~~net investment hedges during~~non-vested RSUs granted under the ~~year ended December 31, 2017.~~

~~Interest Rate Risk Management~~~~—We use~~Company's stock plans which is expected to be recognized over a ~~combination~~weighted-average period 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, 2017 and 2016, interest rate swap agreements designated as fair value hedges effectively changed $2,600 million and $1,850 million of fixed rate debt at rates of 2.93% and 3.39% to LIBOR based floating rate debt. Our interest rate swaps mature at various dates through 2026.

~~Fair Value of Financial Instruments~~—The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

~~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.~~ 2.23 years.

The following table ~~sets forth~~summarizes the ~~Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as~~impact to the Consolidated Statement of ~~December 31, 2017 and 2016:~~

December 31,

2017

2016
Assets:

Foreign currency exchange contracts

$

17

$

152

Available for sale investments

3,916

1,670

Interest rate swap agreements

44

69

Liabilities:

Foreign currency exchange contracts

$

70

$

2

Interest rate swap agreements

52

48

The foreign currency exchange contracts and interest rate swap agreements are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. 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.

Operations from RSUs:
Years Ended December 31,
2021 2020 2019
Compensation expense $ 162 $ 118 $ 106
Future income tax benefit recognized 23 24 21

88 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~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 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, 2017

December 31, 2016

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
Assets

Long-term receivables

$

296

$

289

$

280

$

273

Liabilities

Long-term debt and related current maturities

$

13,924

$

14,695

$

12,409

$

13,008

The Company determined the fair value of the long-term receivables by discounting based upon the terms of the receivable and counterparty details including credit quality. 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.

Interest rate swap agreements are designated as hedge relationships with gains or losses on the derivative recognized in interest and other financial charges offsetting the gains and losses on the underlying debt being hedged. Losses on interest rate swap agreements recognized in earnings were $29 million and $71 million in the years ended December 31, 2017 and 2016 and were $2 million in the year ended December 31, 2015. Gains and losses are fully offset by losses and gains on the underlying debt being hedged.

We also economically hedge our exposure to changes in foreign exchange rates principally with forward contracts. These contracts are marked-to-market with the resulting gains and losses recognized in earnings offsetting the gains and losses on the non-functional currency denominated monetary assets and liabilities being hedged. We recognized $207 million of expense and $232 million of income in Other (income) expense in the years ended December 31, 2017 and 2016. We recognized $86 million of expense in Other (income) expense in the year ended December 31, 2015. See Note 4 Other (Income) Expense for further details of the net impact of these economic foreign currency hedges.

~~Note 15. Other Liabilities~~

Years Ended
December 31,

2017

2016
Pension and other employee related

$

1,986

$

2,084

Income taxes

2,898

1,041

Environmental

369

259

Insurance

233

253

Product warranties and performance guarantees

101

136

Asset retirement obligations

82

63

Deferred income

76

81

Other

185

193

$

5,930

$

4,110

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

~~Note 16. Capital Stock~~

We are 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 December 2017, the Board of Directors authorized the repurchase of up to $8 billion of Honeywell common stock, which replaces the previously approved share repurchase program. Approximately $7.7 billion remained available as of December 31, 2017. This authorization included amounts remaining under and replaced the previously approved share repurchase program. Under that previous share repurchase plan announced in April 2016 the Board of Directors authorized the repurchase of up to $5 billion of Honeywell common stock and $4.1 billion remained available as of December 31, 2016.

~~For the year ended December 31, 2017, we repurchased approximately 20.5 million shares of our common stock for $2,889 million.~~

~~For the year ended December 31, 2016, we repurchased approximately 19.3 million shares of our common stock for $2,079 million.~~

We are 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, 2017, there was no preferred stock outstanding.

~~Note 17. Accumulated Other Comprehensive Income (Loss)~~

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

Pre-tax

Tax

After-Tax
Year Ended December 31, 2017

Foreign exchange translation adjustment

$

(37
)

$

—

$

(37
)

Pensions and other postretirement benefit adjustments

847

(170
)

677

Changes in fair value of effective cash flow hedges

(194
)

33

(161
)

$

616

$

(137
)

$

479

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
)

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

~~Components of Accumulated Other Comprehensive Income (Loss)~~

December 31,

2017

2016
Cumulative foreign exchange translation adjustment

$

(1,981
)

$

(1,944
)

Pensions and other postretirement benefit adjustments

(202
)

(879
)

Fair value of available for sale investments

—

—

Fair value of effective cash flow hedges

(52
)

109

$

(2,235
)

$

(2,714
)

~~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, 2015

$

(1,892
)

$

(644
)

$

1

$

(2,535
)

Other comprehensive income (loss) before reclassifications

(52
)

(388
)

103

(337
)

Amounts reclassified from accumulated other comprehensive income (loss)

—

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
)

Other comprehensive income (loss) before reclassifications

(37
)

645

(101
)

507

Amounts reclassified from accumulated other comprehensive income

—

32

(60
)

(28
)

Net current period other comprehensive income (loss)

(37
)

677

(161
)

479

Balance at December 31, 2017

$

(1,981
)

$

(202
)

$

(52
)

$

(2,235
)

~~Reclassifications Out of Accumulated Other Comprehensive Income (Loss)~~

Year Ended December 31, 2017
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

$

—

$

79

$

15

$

16

$

110

Prior service (credit) recognized

—

(74
)

(14
)

(15
)

(103
)

Settlements and curtailments

—

17

3

4

24

Losses (gains) on cash flow hedges

(15
)

(22
)

(4
)

(28
)

(69
)

Total before tax

$

(15
)

$

—

$

—

$

(23
)

$

(38
)

Tax expense (benefit)

10

Total reclassifications for the period, net of tax

$

(28
)

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

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

~~Note 18. Stock-Based Compensation Plans~~

NOTE 16. EARNINGS PER SHARE

The ~~2016 Stock Incentive Plan~~details of the earnings per share calculations for the years ended December 31, 2021, 2020 and 2019 are as follows (shares in millions):


Basic	Years Ended December 31,
	2021			2020			2019
Net income attributable to Honeywell		$	5,542		$	4,779		$	6,143
Weighted average shares outstanding		692.3			704.1			721.0
Earnings per share of common stock		$	8.01		$	6.79		$	8.52


Assuming Dilution	Years Ended December 31,
	2021			2020			2019
Net income attributable to Honeywell		$	5,542		$	4,779		$	6,143
Average Shares
Weighted average shares outstanding		692.3			704.1			721.0
Dilutive securities issuable—stock plans		8.1			7.1			9.3
Total weighted average diluted shares outstanding		700.4			711.2			730.3
Earnings per share of common stock—assuming dilution		$	7.91		$	6.72		$	8.41

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 2021, 2020 and 2019 the weighted number of stock options excluded from the computations were 1.7 million, 5.5 million and 2.5 million, respectively. These stock options were outstanding at the end of each of the respective periods.

NOTE 17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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


	Pre-tax			Tax			After-Tax
Year Ended December 31, 2021
Foreign exchange translation adjustment		$	302		$	—		$	302
Pensions and other postretirement benefit adjustments		245			(59)			186
Changes in fair value of available for sale investments		(3)			—			(3)
Changes in fair value of designated cash flow hedges		(4)			1			(3)
		$	540		$	(58)		$	482
Year Ended December 31, 2020
Foreign exchange translation adjustment		$	(214)		$	—		$	(214)
Pensions and other postretirement benefit adjustments		76			(2)			74
Changes in fair value of available for sale investments		4			—			4
Changes in fair value of designated cash flow hedges		(61)			17			(44)
		$	(195)		$	15		$	(180)
Year Ended December 31, 2019
Foreign exchange translation adjustment		$	143		$	—		$	143
Pensions and other postretirement benefit adjustments		115			(29)			86
Changes in fair value of designated cash flow hedges		20			(9)			11
		$	278		$	(38)		$	240

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, 2017, there were 42,025,990, and 924,694 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 our 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.

~~The following table summarizes the impact to the Consolidated Statement of Operations from stock options:~~

Years Ended December 31,

2017

2016

2015
Compensation expense

$

79

$

87

$

78

Future income tax benefit recognized

17

29

26

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in 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.~~

Years Ended December 31,

2017

2016

2015
Weighted average fair value per share of options granted during the year(1)

$

16.68

$

15.59

$

17.21

Assumptions:

Expected annual dividend yield

2.81
%

2.92
%

1.98
%

Expected volatility

18.96
%

23.07
%

21.55
%

Risk-free rate of return

2.02
%

1.29
%

1.61
%

Expected option term (years)

5.04

4.97

4.96

~~(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, 2017:~~

Number of
Options

Weighted
Average
Exercise
Price
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

Granted

5,098,569

125.16

Exercised

(8,840,019
)

62.34

Lapsed or canceled

(1,516,557
)

109.04

Outstanding at December 31, 2017

23,409,293

$

94.16

Vested and expected to vest at December 31, 2017(1)

21,979,487

$

92.58

Exercisable at December 31, 2017

12,288,854

$

78.35

~~(1)~~

Represents the sum of vested options of 12.3 million and expected to vest options of 9.7 million. Expected to vest options are derived by applying the pre-vesting forfeiture rate assumption to total outstanding unvested options of 11.2 million.

COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)


	December 31,
	2021			2020
Cumulative foreign exchange translation adjustment		$	(2,478)		$	(2,780)
Pensions and other postretirement benefit adjustments		(415)			(601)
Fair value adjustments of available for sale investments		1			4
Fair value adjustments of designated cash flow hedges		(3)			—
		$	(2,895)		$	(3,377)

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT


	Foreign Exchange Translation Adjustment			Pension and Other Postretirement Adjustments			Changes in Fair Value of Available for Sale Investments			Changes in Fair Value of Cash Flow Hedges			Total
Balance at December 31, 2018		$	(2,709)		$	(761)		$	—		$	33		$	(3,437)
Other comprehensive income (loss) before reclassifications		156			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)
Other comprehensive income (loss) before reclassifications		(201)			115			4			10			(72)
Amounts reclassified from accumulated other comprehensive income		(13)			(41)			—			(54)			(108)

Net current period other comprehensive income (loss)		(214)			74			4			(44)			(180)
Balance at December 31, 2020		$	(2,780)		$	(601)		$	4		$	—		$	(3,377)
Other comprehensive income (loss) before reclassifications		314			268			(3)			17			596
Amounts reclassified from accumulated other comprehensive income		(12)			(82)			—			(20)			(114)
Net current period other comprehensive income (loss)		302			186			(3)			(3)			482
Balance at December 31, 2021		$	(2,478)		$	(415)		$	1		$	(3)		$	(2,895)

90 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~The following table summarizes information about stock options outstanding and exercisable at December 31, 2017:~~

Range of Exercise prices

Options 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
$28.19–$64.99

4,204,045

3.38

$

54.75

$

415

4,204,045

$

54.75

$

415

$65.00–$89.99

2,402,025

5.17

69.59

201

2,401,220

69.59

201

$90.00–$99.99

3,189,936

6.16

93.41

191

2,239,440

93.41

134

$100.00–$114.99

8,974,559

7.71

103.45

448

3,427,616

103.37

172

$115.00–$134.00

4,638,728

9.17

125.15

131

16,533

124.20

—

23,409,293

6.75

94.16

$

1,386

12,288,854

78.35

$

922

~~(1)~~

~~Average remaining contractual life in years.~~

~~There were 15,536,961, and 17,202,377 options exercisable at weighted average exercise prices of $63.39 and $55.11 at December 31, 2016 and 2015.~~

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

Options Exercised

Years Ended December 31,

2017

2016

2015
Intrinsic value(1)

$

620

$

395

$

210

Tax benefit realized

221

137

73

~~(1)~~

~~Represents the amount by which the stock price exceeded the exercise price of the options on the date of exercise.~~

At December 31, 2017 there was $108 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 2.32 years. The total fair value of options vested during 2017, 2016 and 2015 was $87 million, $76 million and $73 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 seven years and are payable in

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)


	Year Ended December 31, 2021
	Affected Line in the Consolidated Statement of Operations
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, general and administrative expenses			Other (Income) Expense			Interest and Other Financial Charges			Total
Amortization of Pension and Other Postretirement Items:
Actuarial losses recognized		$	—		$	—		$	—		$	—		$	7		$	—		$	7
Prior service (credit) recognized		—			—			—			—			(116)			—			(116)

Losses (gains) on cash flow hedges		(5)			(8)			(2)			(9)			—			—			(24)
Losses (gains) on excluded component of net investment hedges		—			—			—			—			—			(16)			(16)
Total before tax		$	(5)		$	(8)		$	(2)		$	(9)		$	(109)		$	(16)		$	(149)
Tax expense (benefit)																				35
Total reclassifications for the period, net of tax																				$	(114)


	Year Ended December 31, 2020
	Affected Line in the Consolidated Statement of Operations
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, general and administrative expenses			Other (Income) Expense			Interest and Other Financial Charges			Total
Amortization of Pension and Other Postretirement Items:
Actuarial losses recognized		$	—		$	—		$	—		$	—		$	57		$	—		$	57
Prior service (credit) recognized		—			—			—			—			(108)			—			(108)

Losses (gains) on cash flow hedges		3			(43)			(11)			4			(28)			—			(75)
Losses (gains) on excluded component of net investment hedges		—			—			—			—			—			(18)			(18)
Total before tax		$	3		$	(43)		$	(11)		$	4		$	(79)		$	(18)		$	(144)
Tax expense (benefit)																				36
Total reclassifications for the period, net of tax																				$	(108)

Honeywell ~~common stock upon vesting.~~

International Inc. 91

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)


	Year Ended December 31, 2019
	Affected Line in the Consolidated Statement of Operations
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, general and administrative expenses			Other (Income) Expense			Interest and Other Financial Charges			Total
Amortization of Pension and Other Postretirement Items:
Actuarial losses recognized		$	—		$	—		$	—		$	—		$	135		$	—		$	135
Prior service (credit) recognized		—			—			—			—			(104)			—			(104)

Losses (gains) on cash flow hedges		(3)			(35)			(9)			(1)			(73)			—			(121)
Losses (gains) on excluded component of net investment hedges		—			—			—			—			—			(19)			(19)
Total before tax		$	(3)		$	(35)		$	(9)		$	(1)		$	(42)		$	(19)		$	(109)
Tax expense (benefit)																				(59)
Total reclassifications for the period, net of tax																				$	(168)

NOTE 18. CAPITAL STOCK

The ~~following table summarizes information about RSU activity~~Company 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 the Company which are available for distribution to the ~~three~~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 the Company relative to dividends or the repurchase or redemption of common stock.

In April 2019, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock. On February 12, 2021 the Board of Directors authorized another repurchase of up to a total of $10 billion of Honeywell common stock, which included $2.8 billion remaining under, and replaced, the previously approved share repurchase authorization. Approximately $7.1 billion and $3.3 billion remained available as of December 31, 2021 and 2020, respectively, for additional share repurchases.

Honeywell repurchased approximately 15.8 million and 20.7 million shares of its common stock during the years ended December 31, ~~2017:~~

Number of
Restricted
Stock Units

Weighted
Average
Grant Date
Fair Value
Per Share
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

Granted

1,274,791

129.71

Vested

(1,289,892
)

81.37

Forfeited

(505,415
)

103.06

Non-vested at December 31, 2017

3,946,827

$

108.60

As2021 and 2020, for $3,380 million and $3,714 million.

The Company 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, ~~2017,~~2021, there was ~~approximately $210 million of total unrecognized compensation cost related to non-vested RSUs granted under our~~no preferred stock ~~plans which is expected to be recognized over a weighted-average period of 3.15 years.~~

~~The following table summarizes the impact to the Consolidated Statement of Operations from RSUs:~~

Years Ended December 31,

2017

2016

2015
Compensation expense

$

97

$

97

$

97

Future income tax benefit recognized

19

30

29

outstanding.

92 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~Note~~

NOTE 19. ~~Commitments and Contingencies~~

~~Environmental Matters~~

~~We are~~COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL MATTERS

The Company is subject to various federal, state, local and foreign government requirements relating to the protection of the environment. ~~We believe~~The Company believes that, as a general matter, ~~our~~the Company's policies, practices, and procedures are properly designed to prevent unreasonable risk of environmental damage and personal injury and that ~~our~~the 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,~~the Company, 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 ~~conduct~~conducts studies, individually or jointly with other potentially responsible parties, to determine the feasibility of various remedial techniques. It is ~~our~~the Company's 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

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

progress or as additional technical, regulatory, or legal information becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially responsible parties, technology, and information related to individual sites, ~~we do~~the Company does not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of ~~our~~the Company's recorded liabilities. ~~We expect~~The Company expects to fund expenditures for these matters from operating cash flow. The timing of cash expenditures depends on a number of factors, including the timing of remedial investigations and feasibility studies, the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, remedial techniques to be utilized, and agreements with other parties.

The following table summarizes information concerning our recorded liabilities for environmental costs:

Years Ended December 31,

2017

2016

2015
Beginning of year

$

511

$

518

$

591

Accruals for environmental matters deemed probable and reasonably estimable

287

195

194

Environmental liability payments

(212
)

(228
)

(273
)

Other

9

26

6

End of year

$

595

$

511

$

518


	Years Ended December 31,
	2021			2020			2019
Beginning of year		$	660		$	709		$	755
Accruals for environmental matters deemed probable and reasonably estimable		168			173			213
Environmental liability payments		(210)			(216)			(256)
Other		—			(6)			(3)
End of year		$	618		$	660		$	709

Environmental liabilities are included in the following balance sheet accounts:

December 31,

2017

2016
Accrued liabilities

$

226

$

252

Other liabilities

369

259

$

595

$

511

~~We do~~


	December 31,
	2021			2020
Accrued liabilities		$	225		$	225
Other liabilities		393			435
		$	618		$	660

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~~the Company's consolidated results of operations and operating cash flows in the periods recognized or paid. However, considering ~~our~~the Company's past experience and existing reserves, ~~we do~~the Company does not expect that environmental matters will have a material adverse effect on ~~our~~its consolidated financial position.

~~Onondaga Lake, Syracuse, NY~~—

In ~~2016, we largely completed~~conjunction with the Resideo spin-off, the Company entered into an indemnification and reimbursement agreement with a ~~dredging/capping remedy of Onondaga Lake~~Resideo subsidiary, pursuant to which Resideo’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to 90% 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 approved by~~cap of $140 million, and the ~~United States District Court for the Northern District of New York in January 2007. Some additional long-term monitoring and maintenance activities~~obligation will continue ~~as required by~~until the ~~consent decree.~~ earlier of December 31, 2043, or December 31 of the third consecutive year during which the annual payment obligation is less than $25 million.

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 and the federal and New York State natural resource trustees have submitted a consent decree to the federal court requesting approval for a negotiated settlement of natural resource damages claims for this site.

International Inc. 93

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~Asbestos Matters~~

Reimbursements associated with this agreement are collected from Resideo quarterly and were $140 million in both 2021 and 2020 and offset operating cash outflows incurred by the Company. As the Company incurs costs for environmental matters deemed probable and reasonably estimable related to the sites covered by the indemnification and reimbursement agreement, a corresponding receivable from Resideo for 90% of such costs is also recorded. This receivable amount recorded in 2021 and 2020 was $146 million and $146 million, respectively. As of December 31, 2021, Other current assets and Other assets included $140 million and $457 million, respectively, for the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement. As of December 31, 2020, Other current assets and Other assets included $140 million and $451 million, respectively, for the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement.

ASBESTOS RELATED LIABILITIES

Honeywell is ~~a defendant~~named in ~~asbestos related~~asbestos-related personal injury ~~actions~~claims 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.

North American Refractories Company (NARCO), which was sold in 1986, and the Bendix Friction Materials (Bendix) business, which was sold in 2014.

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

~~Asbestos Related Liabilities~~

Year Ended December 31,

Year Ended December 31,

Year Ended December 31,

2017

2016

2015

Bendix

NARCO

Total

Bendix

NARCO

Total

Bendix

NARCO

Total
Beginning of year

$

641

$

919

$

1,560

$

622

$

921

$

1,543

$

623

$

929

$

1,552

Accrual for update to estimated liability

199

31

230

203

9

212

180

8

188

Change in estimated cost of future claims

(4
)

—

(4
)

13

—

13

11

—

11

Update of expected resolution values for pending claims

3

—

3

4

—

4

1

—

1

Asbestos related liability payments

(223
)

(43
)

(266
)

(201
)

(11
)

(212
)

(193
)

(16
)

(209
)

End of year

$

616

$

907

$

1,523

$

641

$

919

$

1,560

$

622

$

921

$

1,543

~~Insurance Recoveries for Asbestos Related Liabilities~~

Year Ended December 31,

Year Ended December 31,

Year Ended December 31,

2017

2016

2015

Bendix

NARCO

Total

Bendix

NARCO

Total

Bendix

NARCO

Total
Beginning of year

$

121

$

319

$

440

$

124

$

325

$

449

$

135

$

350

$

485

Probable insurance recoveries related to estimated liability

22

—

22

26

—

26

21

—

21

Insurance receipts for asbestos related liabilities

(20
)

(7
)

(27
)

(37
)

(6
)

(43
)

(33
)

(30
)

(63
)

Insurance receivables settlements and write offs

—

—

—

7

—

7

1

6

7

Other

—

—

—

1

—

1

—

(1
)

(1
)

End of year

$

123

$

312

$

435

$

121

$

319

$

440

$

124

$

325

$

449

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


	Year Ended December 31, 2021									Year Ended December 31, 2020									Year Ended December 31, 2019
	Bendix			NARCO			Total			Bendix			NARCO			Total			Bendix			NARCO			Total
Beginning of year		$	1,441		$	779		$	2,220		$	1,499		$	858		$	2,357		$	1,623		$	891		$	2,514
Accrual for update to estimated liability		64			31			95			80			18			98			78			22			100
Change in estimated cost of future claims		29			—			29			42			—			42			(22)			—			(22)
Update of expected resolution values for pending claims		3			—			3			10			—			10			(4)			—			(4)
Asbestos related liability payments		(165)			(121)			(286)			(190)			(97)			(287)			(176)			(55)			(231)
End of year		$	1,372		$	689		$	2,061		$	1,441		$	779		$	2,220		$	1,499		$	858		$	2,357

INSURANCE RECOVERIES FOR ASBESTOS RELATED LIABILITIES


	Year Ended December 31, 2021									Year Ended December 31, 2020									Year Ended December 31, 2019
	Bendix			NARCO			Total			Bendix			NARCO			Total			Bendix			NARCO			Total
Beginning of year		$	148		$	254		$	402		$	153		$	281		$	434		$	170		$	307		$	477
Probable insurance recoveries related to estimated liability		7			—			7			10			—			10			3			—			3
Insurance receipts for asbestos related liabilities		(13)			(33)			(46)			(33)			(25)			(58)			(39)			(29)			(68)
Insurance receivables settlements and write offs		—			—			—			18			(2)			16			19			3			22

End of year		$	142		$	221		$	363		$	148		$	254		$	402		$	153		$	281		$	434

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

December 31,

2017

2016
Other current assets

$

24

$

23

Insurance recoveries for asbestos related liabilities

411

417

$

435

$

440

Accrued liabilities

$

350

$

546

Asbestos related liabilities

1,173

1,014

$

1,523

$

1,560

December 31,
2021 2020
Other current assets $ 41 $ 36
Insurance recoveries for asbestos related liabilities 322 366
$ 363 $ 402
Accrued liabilities $ 261 $ 300
Asbestos related liabilities 1,800 1,920
$ 2,061 $ 2,220

94 Honeywell International Inc.

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

NARCO Products~~—In connection with NARCO’s emergence~~ – NARCO manufactured high-grade, heat-resistant, refractory products for various industries. Honeywell’s predecessor, Allied Corporation, owned NARCO from 1979 to 1986. Allied Corporation sold the NARCO business in 1986 and entered into a cross-indemnity agreement which included an obligation to indemnify the purchaser for asbestos claims, arising primarily from alleged occupational exposure to asbestos-containing refractory brick and mortar for high-temperature applications. NARCO ceased manufacturing these products in 1980 and filed for bankruptcy in January 2002, at which point in time all then current and future NARCO asbestos claims were stayed against both NARCO and Honeywell pending the reorganization of NARCO. The Company established its initial liability for NARCO asbestos claims in 2002.

NARCO emerged from bankruptcy onin April ~~30,~~ 2013, at which time a federally authorized 524(g) trust ~~(NARCO Trust)~~ was established ~~for the evaluation~~to evaluate and ~~resolution of~~resolve all existing ~~and future~~ NARCO asbestos ~~claims.~~claims (the Trust). 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~~asbestos-related claims based on exposure to NARCO asbestos-containing products to be made against the ~~NARCO~~ Trust. The NARCO Trust ~~reviews submitted claims~~Agreement (TA) and ~~determines award amounts in accordance with established~~the NARCO Trust Distribution Procedures ~~approved by the Bankruptcy Court which~~(TDP) set forth the ~~criteria claimants must meet to qualify for compensation including, among other things, exposure~~structure 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 processor’s adherence to the established requirementsoperating rules of the Trust, ~~Distribution Procedures.~~

~~Honeywell~~and established Honeywell’s evergreen funding obligations.

In accordance with the TA, the Trust is ~~obligated~~eligible to ~~fund NARCO asbestos claims submitted to~~receive cash dividends from Harbison-Walker International Inc. (HWI), the reorganized and renamed entity that emerged from the NARCO ~~Trust~~bankruptcy. HWI cash dividends are required to be used to pay asbestos-related claims which qualify for payment under the ~~Trust Distribution Procedures~~TDP (Annual Contribution Claims), until those funds are exhausted, at which point Honeywell’s funding obligation, subject to an annual ~~caps~~cap of ~~$140 million in 2018 and~~ $145 million, ~~for each year thereafter. However, the initial $100 million of claims processed through the NARCO~~is triggered. The 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. In 2015, Honeywell filed suit against the NARCO Trustreceived dividend payments from HWI in ~~Bankruptcy Court alleging breach of certain provisions of the Trust Agreement and Trust Distribution Procedures.~~2021. The parties agreed to dismiss the proceeding without prejudice pursuant to an 18 month Standstill Agreement. Claims processing continued during this period as the parties attempted to resolve disputed issues. The Standstill Agreement expired on October 12, 2017. Notwithstanding its expiration, claims processing continues, and Honeywell continues to negotiate and attempt to resolve remaining disputed issues (that is, instances where Honeywell believes the Trust is not processing claims in accordance with established Trust Distribution Procedures). Honeywell reserves its right to seek judicial intervention should negotiations fail or prove futile. As of December 31, 2017, Honeywell has not made any payments to the NARCO Trust for Annual Contribution Claims.

~~Honeywell~~Company is also ~~responsible for payments due~~required to ~~claimants~~fund 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~~TDP (Pre-Established Unliquidated Claims), which amounts are estimated at $150 million and are expected to be paid during the initial years of trust operations ($5 million of which has been paid since the effective date of the 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)~~, as well as ~~unsettled claims pending as~~fund the annual operating costs of the ~~time~~Trust. There is no annual funding cap relative to Pre-Established Unliquidated Claims.

The operating rules per the TDP define criteria claimants must meet for a claim to be considered valid and paid, which include adequate medical evidence of the claimant’s asbestos-related condition and credible evidence of exposure to a specific NARCO ~~filed for bankruptcy protection~~asbestos-containing product. The TDP allows Honeywell to audit claim support documents against these criteria. Once operational in 2014, the Trust began to receive, process and ~~operating and legal costs related~~pay claims. The Company identified several issues with the way the Trust was adhering to the TDP in audits subsequent to the Trust ~~(collectively $19 million)~~becoming operational. The Company consistently raised with the Trust concern that the Trust adopted an improper practice of paying claimants who have not demonstrated the requisite exposure. The Trust refused to alter its practices for payment of claims, and in September 2021, Honeywell filed suit against the Trust in the United States Bankruptcy Court for the ~~estimated value~~Western District of ~~future NARCO asbestos~~Pennsylvania (Bankruptcy Court) alleging that the Trust has breached its duties in managing the Trust, including breaches of certain provisions of the TA and TDP. Honeywell's lawsuit seeks appropriate relief preventing the Trust from continuing these practices. The Trust also filed suit against Honeywell, alleging Honeywell has breached its obligations under the Trust's governing documents. Honeywell moved to dismiss the Trust’s suit, and on December 15, 2021, the Bankruptcy Court granted Honeywell’s motion to dismiss subject to granting the Trust leave to file an amended complaint. On December 28, 2021, the Trust filed an answer with counterclaims in response to Honeywell’s complaint and in lieu of filing an amended complaint. At this time, the Company cannot predict the outcome of these matters, or the potential impact on the asbestos-related liabilities.

Due to the bankruptcy filing in 2002, claimants were not permitted to file additional claims ~~expected~~until the Trust became operative in 2014. As a consequence, there was a large backlog of claims filed with the Trust upon it becoming operative in 2014 through December 31, 2017, the date by which these claims had to be ~~asserted against~~filed or else be barred by the expiration of the statute of limitations. Therefore, the claims filing rate did not start to normalize until 2018 and thereafter. As a result, between 2002 and 2018, the Company lacked a history of sufficiently reliable claims data to derive a reasonable estimate of its NARCO asbestos-related liability, and the Company continued to update its original estimate, as appropriate, using all available information.

Beginning in 2020, with three years of sufficiently reliable claims data, the Company updated its estimate of the NARCO asbestos-related liability. The estimate for the resolution of asserted Annual Contribution Claims and Pre-Established Unliquidated Claims uses average payment values for the relevant historical period. The estimate for unasserted claims is based on historic and anticipated claims filing experience and payment rates, disease classifications and type of claim, and average payment values by the Trust

for the relevant historical period. The Company utilizes an asbestos liability valuation specialist to support the preparation of the NARCO asbestos-related liability estimates during the fourth quarter each year. The Company's estimates, which involve significant management judgment, and consider multiple scenarios, include all years of epidemiological disease projection through 2059.

The NARCO asbestos-related liability reflects an estimate for the resolution of Annual Contribution Claims and Pre-Established Unliquidated Claims filed with the Trust, as well as for unasserted Annual Contribution Claims and Pre-Established Unliquidated Claims. The NARCO asbestos-related liability excludes the annual operating expenses of the Trust which are expensed as they are incurred.

Honeywell International Inc. 95

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~($743 million).~~

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 also 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. The estimated value of the future NARCO liability reflects 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. Given the Trust’s lack of sufficient claims processing experience since NARCO emerged from bankruptcy protection, it is not yet possible to reliably estimate future claim costs based on actual Trust experience.

~~Our~~Company's NARCO-related insurance receivable ~~corresponding to the estimated liability for pending and future NARCO asbestos claims~~ reflects coverage which reimburses Honeywell for portions of NARCO-related ~~indemnity~~claims and defense ~~costs and~~costs. This coverage is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. ~~We conduct analyses to~~Honeywell's NARCO-related insurance receivable is an estimate of the probable amount of insurance that is recoverable for asbestos claims. ~~While~~The Company's judgments related to the ~~substantial majority of our~~Company's 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~~and insurance ~~coverage that we believe~~coverages are reasonable and consistent with ~~our~~Honeywell's historical dealings and ~~our~~Honeywell's knowledge of any pertinent solvency issues surrounding insurers.

~~Projecting future events is subject~~

Bendix Products – Bendix manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to ~~many uncertainties that could cause~~asbestos from brakes from either performing or being in 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 lightvicinity of ~~any changes to the projected liability or other developments that may impact insurance recoveries.~~

~~Bendix Products~~—individuals who performed brake replacements. The following tables present information regarding Bendix related asbestos claims activity:

Claims Activity

Years Ended December 31,

2017

2016
Claims Unresolved at the beginning of year

7,724

7,779

Claims Filed

2,645

2,830

Claims Resolved

(4,089
)

(2,885
)

Claims Unresolved at the end of year

6,280

7,724

Disease Distribution of Unresolved Claims

December 31,

2017

2016
Mesothelioma and Other Cancer Claims

3,062

3,490

Nonmalignant Claims

3,218

4,234

Total Claims

6,280

7,724

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


Claims Activity	Years Ended December 31,
	2021		2020
Claims Unresolved at the beginning of year		6,242		6,480
Claims Filed		2,611		2,233
Claims Resolved		(2,452)		(2,471)
Claims Unresolved at the end of year		6,401		6,242


Disease Distribution of Unresolved Claims	Years Ended December 31,
	2021		2020
Mesothelioma and Other Cancer Claims		3,760		3,422
Nonmalignant Claims		2,641		2,820
Total Claims		6,401		6,242

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

Years Ended December 31,

2017

2016

2015

2014

2013

(in whole dollars)
Malignant claims

$

56,000

$

44,000

$

44,000

$

53,500

$

51,000

Nonmalignant claims

$

2,800

$

4,485

$

100

$

120

$

850


	Years Ended December 31,
	2021			2020			2019			2018			2017
		(in whole dollars)
Malignant claims		$	56,000		$	61,500		$	50,200		$	55,300		$	56,000
Nonmalignant claims		$	400		$	550		$	3,900		$	4,700		$	2,800

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

~~Our consolidated financial statements~~

The Consolidated Financial Statements reflect an estimated liability for resolution of ~~pending~~asserted (claims ~~actually~~ filed as of the financial statement date) and ~~future~~unasserted Bendix-related asbestos claims, which exclude the Company’s ongoing legal fees to defend such asbestos claims which will continue to be expensed as they are incurred.

The Company reflects the inclusion of all years of epidemiological disease projection through 2059 when estimating the liability for unasserted Bendix-related asbestos claims. We have valued Bendix pending and future claims using average resolution values for the previous five years. We update the resolution values used to estimate the cost of Bendix pending and future claims during the fourth quarter each year.

~~The~~Such liability for ~~future claims represents the estimated value of future asbestos related bodily injury claims expected to be asserted against Bendix over the next five years. Such estimated cost of future~~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 Company has valued Bendix asserted and unasserted claims using average resolution values for 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 nextprevious five years. The ~~methodology~~Company updates the resolution values used to estimate the ~~liability for future~~cost of Bendix asserted and unasserted claims ~~is similar to that used to estimate~~during the ~~liability for future NARCO-related asbestos claims.~~

~~Our~~fourth quarter each year.

The Company's insurance receivable corresponding to the liability for settlement of ~~pending~~asserted and ~~future~~unasserted 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~~the Company's 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~~the Company's 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~~the Company's insurers.

96 Honeywell ~~believes it~~International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

On October 31, 2018, David Kanefsky (Plaintiff), a Honeywell shareholder, filed a putative class action complaint in the U.S. District Court for the District of New Jersey (the Court) alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5 related to the prior accounting for Bendix asbestos claims. An Amended Complaint was filed on December 30, 2019, and on February 7, 2020, the Company filed a Motion to Dismiss. On May 18, 2020, the Court denied the Motion to Dismiss. On December 7, 2021, the parties filed a Stipulation of Settlement (Settlement Agreement) and Plaintiff filed a motion for preliminary approval of the Settlement Agreement, which includes payment by Honeywell of $10 million to settle the claims in dispute. Honeywell continues to believe the claims lack merit and denies wrongdoing as well as any liability for the claims made against Honeywell in the action. The Settlement Agreement remains subject to final court approval and other conditions.

GARRETT LITIGATION AND BANKRUPTCY PROCEEDINGS

In conjunction with the Garrett spin-off, the Company entered into a binding indemnification and reimbursement agreement (Garrett Indemnity) and a binding tax matters agreement (Tax Matters Agreement) with Garrett and a Garrett subsidiary. On December 2, 2019, Garrett 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 (the State Court), seeking to invalidate the Garrett Indemnity. Garrett sought damages and a declaratory judgment based on various claims set forth in the Summons with Notice. On July 17, 2020, the Company received a notice from Garrett asserting that the Company had caused material breaches of the Tax Matters Agreement and that the Tax Matters Agreement was unenforceable.

On September 20, 2020, Garrett and 36 of its affiliates filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). On September 24, 2020, Garrett moved the existing State Court litigation against Honeywell to the Bankruptcy Court. For the year ended December 31, 2020, the Company reviewed the aggregate carrying value of the receivable amounts due in connection with the Garrett Indemnity and Tax Matters Agreement and reduced the aggregate carrying value of the receivable by $509 million to reflect the present value of the amounts owed to the Company over the full term of these agreements.

On April 26, 2021, the Bankruptcy Court confirmed Garrett’s amended Chapter 11 plan of reorganization (the Confirmed Plan), and on April 30, 2021 (the Effective Date), Garrett emerged from bankruptcy. On the Effective Date, and in accordance with the Confirmed Plan, (i) the Company received from Garrett an initial payment of $375 million and 834.8 million shares of Garrett's Series B Preferred Stock in full and final satisfaction of the Garrett Indemnity and Tax Matters Agreement, (ii) the Garrett Indemnity and Tax Matters Agreement were terminated, (iii) the Company and Garrett mutually released each other from the claims asserted in all pending legal actions related to the Garrett Indemnity and Tax Matters Agreement, and (iv) all pending litigation between the Company and Garrett in connection with those agreements was resolved.

The original Series B Preferred Stock Certificate of Designation provides for mandatory redemptions by Garrett of $35 million in 2022 and $100 million per year from 2023 to 2030 (inclusive) at the anniversary of the Effective Date, unless (i) Garrett’s consolidated EBITDA as of the end of the most recently completed fiscal year is less than $425 million, or (ii) Garrett does not have sufficient funds available to pay the redemption, at which point the redemption amounts past due will accrue interest. The Series B Preferred Stock Certificate of Designation also includes rights which allow (a) the Company to put the Series B Preferred Stock to Garrett if certain EBITDA conditions are met, and (b) Garrett to call the Series B Preferred Stock in whole or in part if certain EBITDA conditions are met.

On September 30, 2021, Garrett filed an Amended and Restated Series B Preferred Stock Certificate of Designation (Amendment) with the Secretary of State of Delaware. The Amendment required Garrett to partially redeem a portion of the Series B Preferred Stock on or before March 31, 2022, such that the present value of remaining outstanding shares of the Series B Preferred Stock would be $400 million (First Partial Redemption), subject to applicable law, including that Garrett had funds legally available for the partial redemption. The First Partial Redemption would be applied to the latest scheduled redemption dates, beginning with the shares to be redeemed in 2030. The Amendment also provides that the Company cannot exercise its right to put the Series B Preferred Stock to Garrett until after December 31, 2022, subject to the EBITDA conditions described in the above section, unless the partial redemption does not occur on or before March 31, 2022. All other material terms and conditions in the Amendment were unchanged from the original Series B Preferred Stock Certificate of Designation.

On December 16, 2021, Garrett filed a Second Amended and Restated Series B Preferred Stock Certificate of Designation (Second Amendment) with the Secretary of State of Delaware. The Second Amendment accelerates the First Partial Redemption from March 31, 2022, to December 30, 2021, and allows Garrett to partially redeem an additional portion of the Series B Preferred Stock on or before March 31, 2022, such that the present value of remaining outstanding shares of the Series B Preferred Stock will be $207 million (Second Partial Redemption). The Second Partial Redemption is subject to similar terms as the First Partial Redemption, including that Garrett has funds legally available for the partial redemption. However, the Second Partial Redemption is also contingent upon Garrett completing the First Partial Redemption and either (i) increasing their revolving credit facility, or (ii) the Garrett Board of Directors determining that Garrett otherwise has sufficient ~~insurance coverage and reserves~~liquidity to ~~cover all pending Bendix-related asbestos claims and Bendix-related asbestos claims estimated~~effect the Second Partial Redemption. The Second Partial Redemption would be applied to the earliest scheduled redemptions beginning with the shares to be ~~filed within~~redeemed on April 30, 2022.

Honeywell International Inc. 97

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

On December 17, 2021, Garrett announced their intention to effect the ~~next five years. Although it~~First Partial Redemption on December 28, 2021, in the amount of $211 million, and plan to effect the Second Partial Redemption during the first quarter of 2022 for a corresponding payment of $200 million. On December 28, 2021, Garrett paid $211 million for the amount due as the First Partial Redemption.

The Company recorded the Series B Preferred Stock at fair value at the Effective Date. The Company believes the present value of the mandatory redemptions is ~~impossible to predict~~an appropriate basis for determining the ~~outcome~~fair value 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~~the Series B Preferred Stock. The Company's present value reflects amortized cost determined by the present value of ~~our insurance coverage and our prior experience in resolving such claims. If~~the mandatory redemptions discounted at 7.25%, which is the rate reflected in the Series B Preferred Stock Certificate of Designation. The discount amount will accrete into interest income over the mandatory redemption period. In addition to the Series B Preferred Stock, the Company subscribed for 4.2 million shares of Garrett's Series A Preferred Stock, which are convertible into Garrett’s Common Stock if certain conditions are met. Prior to and ~~types~~following Garrett’s emergence from bankruptcy, the Company also held 2.9 million shares of ~~claims filed,~~Garrett’s Common Stock. As of December 31, 2021, Short-term investments included $34 million and Investments and long-term receivables included $423 million for the ~~average resolution value of such claims~~Company's investments in Garrett's Series B Preferred Stock, Series A Preferred Stock and the period of time over which claim settlements are paid (collectively, the Variable Claims Factors) do not substantially change, Honeywell would not expect future Bendix-related asbestos claims to have a material adverse effect on our results of operations or operating cash flows in any fiscal year. No assurances can be given, however, that the Variable Claims Factors will not change.

~~Other Matters~~

~~We are~~Common Stock.

OTHER MATTERS

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~~the Company's 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~~matters (including the matter described below). The Company recognizes liabilities for any contingency that is probable of occurrence and reasonably estimable. WeThe Company continually ~~assess~~assesses the likelihood of adverse judgments ofor outcomes in ~~these~~such matters, as well as

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

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~~

Such matters include:

•Petrobras and Unaoil – The Company continues to cooperate with investigations by the U.S. Department of Justice (DOJ), the Securities and Exchange Commission (SEC) and the Brazilian authorities relating to the Company's use of third parties who previously worked for the Company's UOP business in Brazil in relation to Petróleo Brasileiro S.A. (Petrobras) in connection with a project awarded in 2010. The investigations focus on compliance with the U.S. Foreign Corrupt Practices Act and similar Brazilian laws (the UOP Matters), 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 contract with Unaoil S.A.M. in Algeria executed in 2011. The Company continues to be engaged in discussions with the authorities with respect to a potential comprehensive resolution of these ~~other matters~~matters.

As the discussions are both ongoing and at different stages with regards to each respective authority, there can be no assurance as to whether the ~~following:~~

~~Honeywell v. United Auto Workers (UAW) et. al~~~~—In September 2011,~~Company will reach a resolution with such authorities or as to the ~~UAW~~potential timing, terms, or collateral consequences of any such resolution. As a result, the Company cannot predict the ultimate outcome of these UOP Matters or the potential impact on the Company. Based on available information to date, the Company estimates that a potential comprehensive resolution of these UOP Matters would result in a probable loss of at least $160 million, and ~~certain Honeywell retirees filed~~the Company has recorded a ~~suit~~charge in this amount in the ~~Eastern District~~Company's Consolidated Statement of ~~Michigan alleging that~~Operations, and accrued a corresponding liability on the ~~Master Collective Bargaining Agreements (MCBAs) between Honeywell and~~Consolidated Balance Sheet. Amounts payable to authorities pursuant to any potential final comprehensive resolution could differ from the UAW do not provide for limitations on Honeywell’s obligation to contribute toward healthcare coverage for former employees who retired under the MCBAs (“CAPS”). Honeywell subsequently answered the UAW’s complaint and asserted counterclaims.

~~Honeywell began enforcing the CAPS against former employees who retired after the initial inclusion of the CAPS~~amount recorded in the ~~2003 MCBA (the post-2003 retirees)~~Company's consolidated financial statements. Based on ~~January 1, 2014. The UAW and certain of~~available information to date, the ~~plaintiffs filed a motion for partial summary judgment~~Company does not expect that any such difference would be material with respect to the post-2003 retirees, seeking a ruling that the 2003 MCBA did not limit Honeywell’s obligation to contribute to healthcare coverage for those retirees. That motion remains pending. Honeywell is confident that the District Court will find that the 2003 MCBA does, in fact, limit Honeywell’s retiree healthcare obligation for the post-2003 retirees. In the event of an adverse ruling, however, Honeywell’s other postretirement benefits for post-2003 retirees would increase by approximately $79 million, reflecting the estimated value of these CAPS.

In the second quarter of 2014, the parties agreed to stay the proceedings with respect to former employees who retired before the initial inclusion of the CAPS in the 2003 MCBA (the pre-2003 retirees) until the Supreme Court decided~~M&G Polymers USA, LLC v. Tackett~~. The Supreme Court decided the case on January 26, 2015 and, based on the ruling, Honeywell began enforcing the CAPS against the pre-2003 retirees on May 1, 2015. Honeywell is confident that the CAPS will be upheld by the District Court 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 $103 million, reflecting the estimated value of these CAPS.

Company's consolidated financial position.

Given the uncertainty inherent in litigation and investigations, ~~(including~~ the ~~specific matter referenced above), we do~~Company does not believe it is possible to develop estimates of reasonably possible ~~loss~~losses (or a range of possible losses) in excess of current accruals for ~~these matters (other than as specifically set forth above).~~such matters. Considering ~~our~~the Company's past experience and existing accruals, ~~we do~~the Company does not expect the outcome of ~~these~~such matters, either individually or in the aggregate, to have a material adverse effect on ~~our~~the Company's 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~~the Company's consolidated results of operations or operating cash flows in the periods recognized or paid.

~~Warranties and Guarantees~~

98 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

WARRANTIES AND GUARANTEES

In the normal course of business, ~~we issue~~the Company issues product warranties and product performance guarantees. ~~We accrue~~The Company accrues 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.

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

The following table summarizes information concerning ~~our~~the Company's recorded obligations for product warranties and product performance guarantees.

Years Ended
December 31,

2017

2016

2015
Beginning of year

$

487

$

416

$

403

Accruals for warranties/guarantees issued during the year

215

326

206

Adjustment of pre-existing warranties/guarantees

(27
)

(40
)

13

Settlement of warranty/guarantee claims

(267
)

(215
)

(206
)

End of year

$

408

$

487

$

416


	Years Ended December 31,
	2021			2020			2019
Beginning of year		$	243		$	269		$	310
Accruals for warranties/guarantees issued during the year		146			164			173
Adjustment of pre-existing warranties/guarantees		(7)			(18)			(34)
Settlement of warranty/guarantee claims		(159)			(172)			(180)
End of year		$	223		$	243		$	269

Product warranties and product performance guarantees are included in the following balance sheet accounts:

December 31,

2017

2016
Accrued liabilities

$

307

$

351

Other liabilities

101

136

$

408

$

487


	December 31,
	2021			2020
Accrued liabilities		$	180		$	183
Other liabilities		43			60
		$	223		$	243

Honeywell International Inc. 99

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

~~Note~~

NOTE 20. ~~Pension and Other Postretirement Benefits~~

~~We sponsor~~PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors a number of both funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of ~~our~~the Company's 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. WeThe Company also ~~sponsor~~sponsors 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.

The Company also ~~sponsor~~sponsors 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, 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~~the Company's 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~~the Company's cash ~~flow.~~

flows from operations.

100 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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

Pension Benefits

U.S. Plans

Non-U.S. Plans

2017

2016

2017

2016
Change in benefit obligation:

Benefit obligation at beginning of year

$

17,414

$

17,298

$

6,483

$

6,338

Service cost

172

191

40

47

Interest cost

586

600

147

179

Plan amendments

—

—

(1
)

—

Actuarial (gains) losses

1,234

448

(24
)

1,125

Benefits paid

(1,146
)

(1,135
)

(253
)

(243
)

Settlements and curtailments

(109
)

—

—

(50
)

Foreign currency translation

—

—

614

(930
)

Other

—

12

13

17

Benefit obligation at end of year

18,151

17,414

7,019

6,483

Change in plan assets:

Fair value of plan assets at beginning of year

16,814

16,349

6,120

6,117

Actual return on plan assets

3,287

1,554

539

1,006

Company contributions

139

36

161

186

Benefits paid

(1,146
)

(1,135
)

(253
)

(243
)

Settlements and curtailments

(109
)

—

—

—

Foreign currency translation

—

—

569

(957
)

Other

—

10

15

11

Fair value of plan assets at end of year

18,985

16,814

7,151

6,120

Funded status of plans

$

834

$

(600
)

$

132

$

(363
)

Amounts recognized in Consolidated Balance

Sheet consist of:

Prepaid pension benefit cost(1)

$

1,205

$

—

$

944

$

380

Accrued pension liabilities—current(2)

(27
)

(106
)

(12
)

(11
)

Accrued pension liabilities—noncurrent(3)

(344
)

(494
)

(800
)

(732
)

Net amount recognized

$

834

$

(600
)

$

132

$

(363
)

~~(1)~~

~~Included in Other assets on Consolidated Balance Sheet~~

~~(2)~~

~~Included in Accrued liabilities on Consolidated Balance Sheet~~

~~(3)~~

~~Included in Other liabilities on Consolidated Balance Sheet~~


	Pension Benefits
	U.S. Plans						Non-U.S. Plans
	2021			2020			2021			2020
Change in benefit obligation:
Benefit obligation at beginning of year		$	18,054		$	17,283		$	7,670		$	6,897
Service cost		105			99			26			23
Interest cost		306			461			77			106
Plan amendments		—			—			(3)			2
Actuarial (gains) losses(1)		141			1,331			(403)			509
Benefits paid		(1,221)			(1,100)			(249)			(246)
Settlements and curtailments		—			(21)			—			—
Foreign currency translation		—			—			(121)			291
Other		6			1			2			88
Benefit obligation at end of year		17,391			18,054			6,999			7,670
Change in plan assets:
Fair value of plan assets at beginning of year		20,396			18,995			8,450			7,307
Actual return on plan assets		1,344			2,475			166			918
Company contributions		35			46			101			116
Benefits paid		(1,221)			(1,100)			(249)			(246)
Settlements and curtailments		—			(21)			—			—
Foreign currency translation		—			—			(74)			253
Other		6			1			2			102
Fair value of plan assets at end of year		20,560			20,396			8,396			8,450
Funded status of plans		$	3,169		$	2,342		$	1,397		$	780
Amounts recognized in Consolidated Balance Sheet consist of:
Prepaid pension benefit cost(2)		$	3,528		$	2,695		$	2,105		$	1,688
Accrued pension liabilities—current(3)		(33)			(29)			(14)			(14)
Accrued pension liabilities—noncurrent(4)		(326)			(324)			(694)			(894)
Net amount recognized		$	3,169		$	2,342		$	1,397		$	780

(1)The actuarial losses incurred in 2021 related to the Company's U.S. plans are primarily the result of changes in demographic experience and demographic assumptions, partially offset by actuarial gains due to an increase in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2021 compared to December 31, 2020. Actuarial gains incurred in 2021 related to the Company's non-U.S. plans are primarily the result of an increase in the discount rate assumption used to estimate the benefit obligations as of December 31, 2021 compared to December 31, 2020. Actuarial losses incurred in 2020 related to the Company's U.S. and non-U.S. plans are primarily the result of a decrease in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2020 compared to December 31, 2019.

(2)Included in Other assets on the Consolidated Balance Sheet

(3)Included in Accrued liabilities on the Consolidated Balance Sheet

(4)Included in Other liabilities on the Consolidated Balance Sheet

Honeywell International Inc. 101

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

Other
Postretirement
Benefits

2017

2016
Change in benefit obligation:

Benefit obligation at beginning of year

$

492

$

569

Service cost

—

—

Interest cost

19

20

Plan amendments

91

27

Actuarial (gains) losses

(14
)

(31
)

Benefits paid

(58
)

(93
)

Benefit obligation at end of year

530

492

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

$

(530
)

$

(492
)

Amounts recognized in Consolidated Balance Sheet consist of:

Accrued liabilities

$

(62
)

$

(62
)

Postretirement benefit obligations other than pensions(1)

(468
)

(430
)

Net amount recognized

$

(530
)

$

(492
)

~~(1)~~

~~Excludes non-U.S. plans of $44 million and $43 million in 2017 and 2016.~~


	Other Postretirement Benefits
	2021			2020
Change in benefit obligation:
Benefit obligation at beginning of year		$	229		$	325
Service cost		—			—
Interest cost		5			8
Plan amendments		—			(65)
Actuarial (gains) losses		(8)			(8)
Benefits paid		(30)			(31)
Benefit obligation at end of year		196			229
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		$	(196)		$	(229)
Amounts recognized in Consolidated Balance Sheet consist of:
Accrued liabilities		$	(25)		$	(27)
Postretirement benefit obligations other than pensions(1)		(171)			(202)
Net amount recognized		$	(196)		$	(229)

(1)Excludes non-U.S. plan of $37 million and $40 million as of December 31, 2021 and 2020.

Amounts recognized in Accumulated other comprehensive (income) loss associated with ~~our~~the Company's significant pension and other postretirement benefit plans at December 31, ~~2017~~2021 and ~~2016~~2020 are as follows:

Pension Benefits

U.S. Plans

Non-U.S. Plans

2017

2016

2017

2016
Prior service (credit)

$

(268
)

$

(312
)

$

(13
)

$

(11
)

Net actuarial loss

248

1,099

427

582

Net amount recognized

$

(20
)

$

787

$

414

$

571

Other
Postretirement
Benefits

2017

2016
Prior service (credit)

$

(244
)

$

(393
)

Net actuarial loss

109

136

Net amount recognized

$

(135
)

$

(257
)


	Pension Benefits
	U.S. Plans						Non-U.S. Plans
	2021			2020			2021			2020
Prior service (credit) cost		$	(92)		$	(134)		$	20		$	23
Net actuarial (gain) loss		492			505			397			629
Net amount recognized		$	400		$	371		$	417		$	652


	Other Postretirement Benefits
	2021			2020
Prior service (credit) cost		$	(92)		$	(165)
Net actuarial (gain) loss		(34)			(28)
Net amount recognized		$	(126)		$	(193)

102 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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

Net Periodic Benefit Cost

Pension Benefits

U.S. Plans

Non-U.S. Plans

2017

2016

2015

2017

2016

2015
Service cost

$

172

$

191

$

223

$

40

$

47

$

51

Interest cost

586

600

696

147

179

177

Expected return on plan assets

(1,262
)

(1,226
)

(1,278
)

(411
)

(377
)

(358
)

Amortization of transition obligation

—

—

—

—

—

1

Amortization of prior service (credit) cost

(43
)

(43
)

13

(1
)

(3
)

(3
)

Recognition of actuarial losses

41

27

52

46

246

15

Settlements and curtailments

18

—

8

—

(7
)

2

Net periodic benefit (income) cost

$

(488
)

$

(451
)

$

(286
)

$

(179
)

$

85

$

(115
)

Other Changes in Plan Assets and
Benefits Obligations Recognized in
Other Comprehensive (Income) Loss

U.S. Plans

Non-U.S. Plans

2017

2016

2015

2017

2016

2015
Actuarial (gains) losses

$

(792
)

$

121

$

775

$

(153
)

$

447

$

27

Prior service (credit)

—

—

(429
)

(1
)

—

—

Transition obligation recognized during year

—

—

—

—

—

(1
)

Prior service (cost) credit recognized during year

43

43

(13
)

1

10

3

Actuarial losses recognized during year

(59
)

(27
)

(52
)

(46
)

(246
)

(17
)

Foreign currency translation

—

—

—

43

(83
)

(37
)

Total recognized in other comprehensive (income) loss

$

(808
)

$

137

$

281

$

(156
)

$

128

$

(25
)

Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss

$

(1,296
)

$

(314
)

$

(5
)

$

(335
)

$

213

$

(140
)

The estimated prior service (credit) for pension benefits that will be amortized from Accumulated other comprehensive (income) loss into net periodic benefit (income) cost in 2018 are expected to be ($43) million and ($1) million for U.S. and non-U.S. pension plans.

Net Periodic Benefit Cost

Other Postretirement
Benefits Years Ended
December 31,

2017

2016

2015
Service cost

$

—

$

—

$

—

Interest cost

19

20

33

Amortization of prior service (credit)

(58
)

(76
)

(30
)

Recognition of actuarial losses

13

22

34

Net periodic benefit (income) cost

$

(26
)

$

(34
)

$

37


Net Periodic Benefit Cost	Pension Benefits
	U.S. Plans									Non-U.S. Plans
	2021			2020			2019			2021			2020			2019
Service cost		$	105		$	99		$	82		$	26		$	23		$	22
Interest cost		306			461			613			77			106			142
Expected return on plan assets		(1,220)			(1,135)			(1,117)			(348)			(336)			(331)
Amortization of prior service (credit) cost		(42)			(42)			(42)			—			—			—
Recognition of actuarial losses		31			26			35			9			18			88
Settlements and curtailments		—			4			4			—			—			—
Net periodic benefit (income) cost		$	(820)		$	(587)		$	(425)		$	(236)		$	(189)		$	(79)


Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive (Income) Loss	U.S. Plans									Non-U.S. Plans
	2021			2020			2019			2021			2020			2019
Actuarial (gains) losses		$	(14)		$	(9)		$	(277)		$	(221)		$	(73)		$	176
Prior service (credit) cost		—			—			—			(3)			2			—
Prior service credit recognized during year		43			42			42			(1)			—			—
Actuarial losses recognized during year		—			(30)			(39)			(9)			(18)			(88)
Foreign currency translation		—			—			—			(1)			19			14
Total recognized in other comprehensive (income) loss		$	29		$	3		$	(274)		$	(235)		$	(70)		$	102
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss		$	(791)		$	(584)		$	(699)		$	(471)		$	(259)		$	23


Net Periodic Benefit Cost	Other Postretirement Benefits
	Years Ended December 31,
	2021			2020			2019
Service cost		$	—		$	—		$	—
Interest cost		5			8			14
Amortization of prior service (credit) cost		(74)			(66)			(62)
Recognition of actuarial (gains) losses		(2)			—			—
Net periodic benefit (income) cost		$	(71)		$	(58)		$	(48)


Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive (Income) Loss	Years Ended December 31,
	2021			2020			2019
Actuarial (gains) losses		$	(8)		$	(8)		$	(16)
Prior service (credit) cost		—			(65)			(2)
Prior service credit recognized during year		74			66			62
Actuarial (gains) losses recognized during year		2			—			—
Total recognized in other comprehensive (income) loss		$	68		$	(7)		$	44
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss		$	(3)		$	(65)		$	(4)

Honeywell International Inc. 103

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

Other Changes in Plan Assets and Benefits Obligations
Recognized in Other Comprehensive (Income) Loss

Years Ended December 31,

2017

2016

2015
Actuarial (gains) losses

$

(14
)

$

(31
)

$

(55
)

Prior service cost (credit)

91

27

(290
)

Prior service credit recognized during year

58

76

30

Actuarial losses recognized during year

(13
)

(22
)

(34
)

Total recognized in other comprehensive (income) loss

$

122

$

50

$

(349
)

Total recognized in net periodic benefit cost and other comprehensive (income) loss

$

96

$

16

$

(312
)

The estimated net loss and prior service (credit) for other postretirement benefits that will be amortized from Accumulated other comprehensive (income) loss into net periodic benefit (income) in 2018 are expected to be $9 million and ($52) million.

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

Pension Benefits

U.S. Plans

Non-U.S. Plans

2017

2016

2015

2017

2016

2015
Actuarial assumptions used to determine benefit obligations as of December 31:

Discount rate

3.68
%

4.20
%

4.46
%

2.36
%

2.51
%

3.49
%

Expected annual rate of compensation increase

4.50
%

4.50
%

4.48
%

0.73
%

2.17
%

2.11
%

Actuarial assumptions used to determine net periodic benefit (income) cost for years ended December 31:

Discount rate—benefit obligation

4.20
%

4.46
%

4.08
%

2.51
%

3.49
%

3.26
%

Discount rate—service cost

4.42
%

4.69

N/A

2.14
%

2.92

N/A

Discount rate—interest cost

3.49
%

3.59

N/A

2.19
%

3.07

N/A

Expected rate of return on plan assets

7.75
%

7.75
%

7.75
%

6.43
%

6.65
%

6.94
%

Expected annual rate of compensation increase

4.50
%

4.48
%

4.50
%

2.17
%

2.11
%

2.53
%

Other
Postretirement
Benefits

2017

2016

2015
Actuarial assumptions used to determine benefit obligations as of December 31:

Discount rate

3.39
%

3.65
%

3.80
%

Actuarial assumptions used to determine net periodic benefit cost for years ended December 31:

Discount rate(1)

3.60
%

3.80
%

3.45
%

~~(1)~~

~~Discount rate was 3.65% for 1/1/17 through 2/28/17. Rate was changed to 3.60% for the remainder of 2017 due to Plan remeasurement as of 3/1/17.~~


	Pension Benefits
	U.S. Plans									Non-U.S. Plans
	2021			2020			2019			2021			2020			2019
Actuarial assumptions used to determine benefit obligations as of December 31:
Discount rate		2.87	%		2.50	%		3.22	%		1.79	%		1.23	%		1.81	%
Expected annual rate of compensation increase		3.25	%		3.25	%		3.25	%		2.56	%		2.43	%		2.47	%
Actuarial assumptions used to determine net periodic benefit (income) cost for years ended December 31:
Discount rate—benefit obligation		2.50	%		3.22	%		4.35	%		1.24	%		1.81	%		2.63	%
Discount rate—service cost		2.68	%		3.33	%		4.47	%		1.00	%		1.48	%		2.26	%
Discount rate—interest cost		1.76	%		2.76	%		3.94	%		1.00	%		1.56	%		2.34	%
Expected rate of return on plan assets		6.15	%		6.15	%		6.75	%		4.03	%		4.66	%		5.14	%
Expected annual rate of compensation increase		3.25	%		3.25	%		3.25	%		2.43	%		2.47	%		2.46	%


	Other Postretirement Benefits
	2021			2020			2019
Actuarial assumptions used to determine benefit obligations as of December 31:
Discount rate		2.66	%		2.20	%		3.03	%
Actuarial assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate(1)		2.20	%		2.36	%		4.07	%

(1)Discount rate was 3.03% for January 1, 2020 through September 30, 2020. The rate was changed to 2.36% for the remainder of 2020 due to a Plan remeasurement as of October 1, 2020.

The discount rate for ~~our~~the 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~~the Company's U.S. pension and other postretirement benefit plans, ~~we use~~the Company uses a modeling process that involves matching the expected cash outflows of ~~our~~the Company's benefit plans to a yield curve constructed from a portfolio of high quality, fixed-income debt instruments. ~~We use~~The Company uses the single

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

weighted-average yield of this hypothetical portfolio as a discount rate benchmark. 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.

During the fourth quarter of 2015 we changed the methodology used to estimate the service and interest cost components of net periodic 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 methodologyCompany utilizes a full yield curve approach in the estimation of ~~these~~the service and interest cost components ~~by applying~~of net periodic pension benefit (income) for the Company's significant pension plans. This approach applies 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~~For the ~~measurement of our pension obligation and was applied prospectively as a change in estimate. For our~~Company's U.S. pension plans, the single weighted average spot rates used to determine service and interest costs for ~~2018~~2022 are ~~3.77%~~2.97% and ~~3.27%~~2.26%.

~~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.

The Company plans to use an expected rate of return on U.S. plan assets of ~~7.75%~~6.40% for 2022, which represents an increase from the 6.15% assumption used for 2021. The Company's 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. We review~~considerations with a focus on long-term trends rather than short-term market conditions. The Company reviews 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~~

104 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

PENSION BENEFITS

The following amounts relate to ~~our~~the Company's significant pension plans with accumulated benefit obligations exceeding the fair value of plan ~~assets.~~

December 31,

U.S. Plans

Non-U.S. Plans

2017

2016

2017

2016
Projected benefit obligation

$

371

$

17,414

$

1,082

$

2,294

Accumulated benefit obligation

$

360

$

17,263

$

1,018

$

2,220

Fair value of plan assets

—

$

16,814

$

269

$

1,552

~~Accumulated~~assets:


	December 31,
	U.S. Plans						Non-U.S. Plans
	2021			2020			2021			2020
Projected benefit obligation		$	359		$	353		$	964		$	2,116
Accumulated benefit obligation		$	346		$	341		$	932		$	2,042
Fair value of plan assets		$	—		$	—		$	256		$	1,208

The accumulated benefit obligation for ~~our~~the Company's U.S. defined benefit pension plans ~~were $18.1 billion and~~was $17.3 billion and $17.9 billion and for ~~our~~the Company's Non-U.S. defined benefit pension plans ~~were~~was $6.9 billion and ~~$6.4~~$7.6 billion at December 31, ~~2017~~2021 and ~~2016.~~

~~Our~~2020.

The Company's asset investment strategy for ~~our~~its U.S. pension plans focuses on maintaining a diversified portfolio using various asset classes in order to achieve ~~our~~the Company's long-term investment objectives on a risk adjusted basis. ~~Our actual invested positions in various securities change over time based on short and longer-term investment opportunities. To achieve our objectives, we have established~~The Company's 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~~The Company reviews its assets on a regular basis to ensure that ~~we are~~the Company is 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~~The Company's non-U.S.

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

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.

Honeywell International Inc. 105

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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

U.S. Plans

December 31, 2017

Total

Level 1

Level 2

Level 3
Equities:

Honeywell common stock

$

2,832

$

2,832

$

—

$

—

U.S. equities

3,573

3,573

—

—

Non-U.S. equities

2,631

2,618

13

—

Real estate investment trusts

265

265

—

—

Fixed income:

Short term investments

919

919

—

—

Government securities

428

—

428

—

Corporate bonds

5,052

—

5,052

—

Mortgage/Asset-backed securities

742

—

742

—

Insurance contracts

8

—

8

—

Direct investments:

Direct private investments

752

—

—

752

Real estate properties

597

—

—

597

Total

17,799

$

10,207

$

6,243

$

1,349

Investments measured at NAV:

Private funds

901

Real estate funds

84

Hedge funds

20

Commingled Funds

181

Total assets at fair value

$

18,985


	U.S. Plans
	December 31, 2021
	Total			Level 1			Level 2			Level 3
Equities:
Honeywell common stock		$	3,251		$	3,251		$	—		$	—
U.S. equities		—			—			—			—


Fixed income:
Short term investments		1,767			1,767			—			—
Government securities		1,373			—			1,373			—
Corporate bonds		9,588			—			9,588			—
Mortgage/Asset-backed securities		1,072			—			1,072			—
Insurance contracts		8			—			8			—
Direct investments:
Direct private investments		1,336			—			—			1,336
Real estate properties		843			—			—			843
Total		$	19,238		$	5,018		$	12,041		$	2,179
Investments measured at NAV:
Private funds		1,244
Real estate funds		14

Commingled Funds		64
Total assets at fair value		$	20,560


	U.S. Plans
	December 31, 2020
	Total			Level 1			Level 2			Level 3
Equities:
Honeywell common stock		$	3,319		$	3,319		$	—		$	—
U.S. equities		—			—			—			—


Fixed income:
Short term investments		1,314			1,314			—			—
Government securities		1,520			—			1,520			—
Corporate bonds		10,190			—			10,190			—
Mortgage/Asset-backed securities		982			—			982			—
Insurance contracts		7			—			7			—
Direct investments:
Direct private investments		1,220			—			—			1,220
Real estate properties		651			—			—			651
Total		$	19,203		$	4,633		$	12,699		$	1,871
Investments measured at NAV:
Private funds		1,105
Real estate funds		26

Commingled funds		62
Total assets at fair value		$	20,396

106 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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

Non-U.S. Plans

December 31, 2017

Total

Level 1

Level 2

Level 3
Equities:

U.S. equities

$

573

$

420

$

153

$

—

Non-U.S. equities

2,801

99

2,702

—

Fixed income:

Short-term investments

238

238

—

—

Government securities

1,685

—

1,685

—

Corporate bonds

1,364

—

1,364

—

Mortgage/Asset-backed securities

47

—

47

—

Insurance contracts

157

—

157

—

Investments in private funds:

Private funds

52

—

21

31

Real estate funds

149

—

—

149

Total

7,066

$

757

$

6,129

$

180

Investments measured at NAV:

Private funds

29

Real estate funds

56

Total assets at fair value

$

7,151


	Non-U.S. Plans
	December 31, 2021
	Total			Level 1			Level 2			Level 3
Equities:
U.S. equities		$	229		$	1		$	228		$	—
Non-U.S. equities		824			—			824			—
Fixed income:
Short-term investments		571			571			—			—
Government securities		3,893			—			3,893			—
Corporate bonds		1,681			—			1,681			—
Mortgage/Asset-backed securities		79			—			79			—
Insurance contracts		123			—			123			—
Insurance buy-in contracts		691			—			—			691
Investments in private funds:
Private funds		74			—			41			33
Real estate funds		163			—			—			163
Total		$	8,328		$	572		$	6,869		$	887
Investments measured at NAV:
Private funds		17
Real estate funds		51
Total assets at fair value		$	8,396


	Non-U.S. Plans
	December 31, 2020
	Total			Level 1			Level 2			Level 3
Equities:
U.S. equities		$	207		$	—		$	207		$	—
Non-U.S. equities		1,614			66			1,548			—
Fixed income:
Short-term investments		596			596			—			—
Government securities		3,105			—			3,105			—
Corporate bonds		1,649			—			1,649			—
Mortgage/Asset-backed securities		93			—			93			—
Insurance contracts		142			—			142			—
Insurance buy-in contracts		767			—			—			767
Investments in private funds:
Private funds		65			—			36			29
Real estate funds		147			—			—			147
Total		$	8,385		$	662		$	6,780		$	943
Investments measured at NAV:
Private funds		18
Real estate funds		47
Total assets at fair value		$	8,450

Honeywell International Inc. 107

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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

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
Investments

Real Estate
Properties

Private
Funds

Real Estate
Funds
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

Actual return on plan assets:

Relating to assets still held at year-end

33

2

5

26

Relating to assets sold during the year

51

31

—

—

Purchases

148

18

6

—

Sales and settlements

(89
)

(118
)

(3
)

(1
)

Balance at December 31, 2017

$

752

$

597

$

31

$

149


	U.S. Plans						Non-U.S. Plans
	Direct Private Investments			Real Estate Properties			Private Funds			Real Estate Funds			Insurance Buy-in Contracts
Balance at December 31, 2019		$	950		$	619		$	34		$	150		$	—
Actual return on plan assets:
Relating to assets still held at year-end		100			(4)			(5)			(3)			—
Relating to assets sold during the year		53			—			—			—			—
Purchases		221			59			—			—			767
Sales and settlements		(104)			(23)			—			—			—
Balance at December 31, 2020		1,220			651			29			147			767
Actual return on plan assets:
Relating to assets still held at year-end		11			96			4			23			(76)
Relating to assets sold during the year		174			—			—			4			—
Purchases		194			99			—			—			—
Sales and settlements		(263)			(3)			—			(11)			—
Balance at December 31, 2021		$	1,336		$	843		$	33		$	163		$	691

The Company enters into futures contracts to gain exposure to certain markets. Sufficient cash or cash equivalents are held by ~~our~~the Company's pension plans to cover the notional value of the futures contracts. At December 31, ~~2017~~2021 and ~~2016, our~~2020, the Company's U.S. plans had contracts with notional amounts of ~~$4,188~~$4,415 million and ~~$3,775~~$3,673 million. At December 31, ~~2017~~2021 and ~~2016, our~~2020, the Company's non-U.S. plans had contracts with notional amounts of ~~$133~~$311 million and ~~$55 million.~~$564 million, respectively. In both ~~our~~the Company's 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,~~ mortgages/asset-backed securities, and government securities are valued either by

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

using pricing models, bids provided by brokers 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 insurance buy-in contracts represent policies held by the Honeywell UK Pension Scheme, whereby the cost of providing pension benefits to plan participants is funded by the policies. The cash flows from the policies are intended to match the pension benefits. The fair value of these policies is based on an estimate of the policies' exit price.

The Company's funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In ~~2017, 2016,~~2021, 2020, and ~~2015, we were~~2019, the Company was not required to make contributions to ~~our~~the U.S. pension plans and no contributions were made. ~~We are~~The Company is not required to make any contributions to ~~our~~the U.S. pension plans in ~~2018.~~2022. In ~~2017,~~2021, contributions of ~~$136~~$94 million were made to ~~our~~the non-U.S. pension plans to satisfy regulatory funding requirements. In ~~2018, we expect~~2022, the Company expects to make contributions of cash and/or marketable securities of approximately ~~$142~~$11 million to ~~our~~the non-U.S. pension plans to satisfy regulatory funding standards. Contributions for both ~~our~~the U.S. and non-U.S. pension plans do not reflect benefits paid directly from Company assets.

108 Honeywell International Inc.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in tables in millions, except per share amounts)

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

U.S. Plans

Non-U.S. Plans
2018

$

1,170

$

261

2019

1,159

256

2020

1,165

264

2021

1,169

271

2022

1,176

289

2023-2027

5,795

1,477

~~Other Postretirement Benefits~~

December 31,

2017

2016
Assumed health care cost trend rate:

Health care cost trend rate assumed for next year

6.50
%

6.50
%

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

~~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

$

28

$

(22
)


	U.S. Plans		Non-U.S. Plans
2022	$	1,135	$	261
2023	1,124		263
2024	1,115		268
2025	1,107		275
2026	1,097		284
2027-2031	5,152		1,455


	Item		Page
Part I	1.	Business	1
		Executive Officers of the Registrant	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	35
	8.	Financial Statements and Supplementary Data	36
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	90
	9A.	Controls and Procedures	90
	9B.	Other Information	90
Part III.	10.	Directors and Executive Officers of the Registrant	91
	11.	Executive Compensation	92
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	92
	13.	Certain Relationships and Related Transactions	93
	14.	Principal Accounting Fees and Services	93
Part IV.	15.	Exhibits and Financial Statement Schedules	94
	16.	Form 10-K Summary	94
Signatures			95


Manufactured Products and Systems and Performance of Services	Year Ended December 31, 2017
	Aerospace			Home and Building Technologies			Performance Materials and Technologies			Safety and Productivity Solutions
	(% of Segment Sales)
U.S. Exports		21	%		1	%		15	%		4	%
Non-U.S.		34	%		50	%		54	%		41	%


	Years Ended December 31,
	2017(1)			2016			2015			2014			2013
	(Dollars in millions, except per share amounts)
Results of Operations
Net sales		$	40,534		$	39,302		$	38,581		$	40,306		$	39,055
Net income attributable to Honeywell			1,655			4,809			4,768			4,239			3,924
Earnings Per Common Share
Earnings from continuing operations:
Basic			2.17			6.29			6.11			5.40			4.99
Assuming dilution			2.14			6.20			6.04			5.33			4.92
Dividends per share			2.74			2.45			2.15			1.87			1.68
Financial Position at Year-End
Property, plant and equipment-net			5,926			5,793			5,789			5,383			5,278
Total assets			59,387			54,146			49,316			45,451			45,435
Short-term debt			5,309			3,593			6,514			2,637			2,028
Long-term debt			12,573			12,182			5,554			6,046			6,801
Total debt			17,882			15,775			12,068			8,683			8,829
Redeemable noncontrolling interest			5			3			290			219			167
Shareowners’ equity			17,439			19,547			18,418			17,784			17,579


	2017 Versus 2016		2016 Versus 2015
Volume		3%		(2)%
Price		1%		—
Acquisitions/Divestitures		(1)%		5%
Foreign Currency Translation		—		(1)%

		3%		2%


	Years Ended December 31,									% Change
										2017 Versus 2016			2016 Versus 2015
	2017			2016			2015
Aerospace Sales
Commercial Aviation Original Equipment		$	2,475		$	2,525		$	2,905		(2	)%		(13	)%
Commercial Aviation Aftermarket			5,103			4,796			4,656		6	%		3	%
Defense and Space			4,053			4,375			4,715		(7	)%		(7	)%
Transportation Systems			3,148			3,055			2,961		3	%		3	%

Total Aerospace Sales			14,779			14,751			15,237
Home and Building Technologies Sales
Home and Building Products			4,928			4,803			4,576		3	%		5	%
Home and Building Distribution			4,849			4,687			4,450		3	%		5	%

Total Home and Building Technologies Sales			9,777			9,490			9,026
Performance Materials and Technologies Sales
UOP			2,753			2,469			2,976		12	%		(17	)%
Process Solutions			4,795			4,640			3,124		3	%		49	%
Advanced Materials			2,791			3,327			3,510		(16	)%		(5	)%

Total Performance Materials and Technologies Sales			10,339			10,436			9,610
Safety and Productivity Solutions Sales
Safety			2,169			2,075			2,135		5	%		(3	)%
Productivity Solutions			3,470			2,550			2,573		36	%		(1	)%

Total Safety and Productivity Solutions Sales			5,639			4,625			4,708

Net Sales		$	40,534		$	39,302		$	38,581


	2017			2016			Change			2015			Change
Net sales		$	14,779		$	14,751		—			$	15,237		(3	)%
Cost of products and services sold			10,320			10,820						11,068
Selling, general and administrative and other expenses			1,171			940						951

Segment profit		$	3,288		$	2,991		10	%		$	3,218		(7	)%


Factors Contributing to Year-Over-Year Change	2017 vs. 2016						2016 vs. 2015
	Sales			Segment Profit			Sales			Segment Profit
Organic growth/ Operational segment profit		2	%		11	%		(3	)%		(6	)%
Foreign currency translation		—			—			—			(1	)%
Acquisitions, divestitures and other, net		(2	)%		(1	)%		—			—

Total % Change		—			10	%		(3	)%		(7	)%


	Total(6)				Payments by Period												Thereafter
					2018				2019- 2020				2021- 2022
Long-term debt, including capitalized leases(1)		$	13,924			$	1,351			$	4,225			$	2,310			$	6,038
Interest payments on long-term debt, including capitalized leases			3,267				307				559				422				1,979
Minimum operating lease payments			1,126				295				387				218				226
Purchase obligations(2)			1,713				819				523				323				48
Estimated environmental liability payments(3)			595				226				271				89				9
Asbestos related liability payments(4)			1,523				350				731				407				35
Asbestos insurance recoveries(5)			(435	)			(24	)			(114	)			(84	)			(213	)

		$	21,713			$	3,324			$	6,582			$	3,685			$	8,122


Name, Age, Year First Elected an Executive Officer		Business Experience
	Darius Adamczyk, 56 2017(a)	Chairman of the Board and Chief Executive Officer since April 2018. President and Chief Executive Officer from April 2017 to April 2018. Chief Operating Officer from April 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.
	Que Thanh Dallara, 48 2018	President and Chief Executive Officer, Connected Enterprise since October 2018. Vice President and Chief Commercial Officer from January 2017 to 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.
	Vimal Kapur, 56 2018	President and Chief Executive Officer, Performance Materials and Technologies since July 2021. President and Chief Executive Officer, Honeywell Building Technologies from June 2018 to June 2021. President of Honeywell Process Solutions from 2014 to May 2018.
	George Koutsaftes, 52 April 2022(b)	Chief Operating Officer, Safety and Productivity Solutions since January 2022. President of the Advanced Materials business in Honeywell’s Performance Materials and Technologies segment from November 2017 to January 2022 and interim global leader of Business Development and Mergers and Acquisitions from May 2019 to December 2019.
	Gregory P. Lewis, 54 2018	Senior Vice President and Chief Financial Officer since August 2018. Vice President of Enterprise Information Management from October 2016 to April 2018, prior to being named Vice President, Corporate Finance in May 2018. Chief Financial Officer of Automation and Control Solutions from April 2013 to September 2016.
	Anne T. Madden, 57 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, 58 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.
	Karen Mattimore, 55 2020	Senior Vice President and Chief Human Resources Officer since June 2020. Vice President, Human Resources and Communications, Aerospace from February 2018 to June 2020. Vice President, Human Resources Services from April 2015 to February 2018.
	John F. Waldron, 46 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.
	Doug Wright, 51 2021	President and Chief Executive Officer, Honeywell Building Technologies since July 2021. President of the global Fire & Security business from July 2020 to June 2021. From 2013 to 2020, Mr. Wright served as President and Chief Executive Officer of Source Photonics, a global provider of optical communication products used in telecommunication systems and data communication networks.


	December 31, 2016			Acquisitions/ Divestitures				Currency Translation Adjustment			December 31, 2017
Aerospace		$	2,441		$	2			$	25		$	2,468
Home and Building Technologies			5,807			(32	)			185			5,960
Performance Materials and Technologies			4,924			34				284			5,242
Safety and Productivity Solutions			4,535			(8	)			80			4,607

		$	17,707		$	(4	)		$	574		$	18,277


	December 31, 2017										December 31, 2016
	Gross Carrying Amount			Accumulated Amortization				Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization				Net Carrying Amount
Determinable life intangibles:
Patents and technology		$	1,990		$	(1,272	)		$	718		$	1,841		$	(1,141	)		$	700
Customer relationships			3,911			(1,366	)			2,545			3,816			(1,098	)			2,718
Trademarks			328			(189	)			139			284			(156	)			128
Other			353			(304	)			49			359			(284	)			75

			6,582			(3,131	)			3,451			6,300			(2,679	)			3,621

Indefinite life intangibles:
Trademarks			1,045			—				1,045			1,013			—				1,013

		$	7,627		$	(3,131	)		$	4,496		$	7,313		$	(2,679	)		$	4,634


	At December 31, 2017
2018		$	295
2019			226
2020			161
2021			121
2022			97
Thereafter			226

		$	1,126


	Years Ended December 31,
	2017			2016
Pension and other employee related		$	1,986		$	2,084
Income taxes			2,898			1,041
Environmental			369			259
Insurance			233			253
Product warranties and performance guarantees			101			136
Asset retirement obligations			82			63
Deferred income			76			81
Other			185			193

		$	5,930		$	4,110


	Foreign Exchange Translation Adjustment				Pension and Other Postretirement Adjustments				Changes in Fair Value of Effective Cash Flow Hedges				Total
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 (loss)			—				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	)

Other comprehensive income (loss) before reclassifications			(37	)			645				(101	)			507
Amounts reclassified from accumulated other comprehensive income			—				32				(60	)			(28	)

Net current period other comprehensive income (loss)			(37	)			677				(161	)			479

Balance at December 31, 2017		$	(1,981	)		$	(202	)		$	(52	)		$	(2,235	)


	Year Ended December 31, 2017 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		$	—			$	79			$	15			$	16			$	110
Prior service (credit) recognized			—				(74	)			(14	)			(15	)			(103	)
Settlements and curtailments			—				17				3				4				24
Losses (gains) on cash flow hedges			(15	)			(22	)			(4	)			(28	)			(69	)

Total before tax		$	(15	)		$	—			$	—			$	(23	)		$	(38	)

Tax expense (benefit)																			10

Total reclassifications for the period, net of tax																		$	(28	)


	Number of Options			Weighted Average Exercise Price
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
Granted		5,098,569				125.16
Exercised		(8,840,019	)			62.34
Lapsed or canceled		(1,516,557	)			109.04

Outstanding at December 31, 2017		23,409,293			$	94.16

Vested and expected to vest at December 31, 2017(1)		21,979,487			$	92.58

Exercisable at December 31, 2017		12,288,854			$	78.35


	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share
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
Granted		1,274,791				129.71
Vested		(1,289,892	)			81.37
Forfeited		(505,415	)			103.06

Non-vested at December 31, 2017		3,946,827			$	108.60


	Year Ended December 31,												Year Ended December 31,												Year Ended December 31,
	2017												2016												2015
	Bendix				NARCO				Total				Bendix				NARCO				Total				Bendix				NARCO				Total
Beginning of year		$	641			$	919			$	1,560			$	622			$	921			$	1,543			$	623			$	929			$	1,552
Accrual for update to estimated liability			199				31				230				203				9				212				180				8				188
Change in estimated cost of future claims			(4	)			—				(4	)			13				—				13				11				—				11
Update of expected resolution values for pending claims			3				—				3				4				—				4				1				—				1
Asbestos related liability payments			(223	)			(43	)			(266	)			(201	)			(11	)			(212	)			(193	)			(16	)			(209	)

End of year		$	616			$	907			$	1,523			$	641			$	919			$	1,560			$	622			$	921			$	1,543


Net Periodic Benefit Cost	Other Postretirement Benefits Years Ended December 31,
Net Periodic Benefit Cost	2017				2016				2015
Service cost		$	—			$	—			$	—
Interest cost			19				20				33
Amortization of prior service (credit)			(58	)			(76	)			(30	)
Recognition of actuarial losses			13				22				34

Net periodic benefit (income) cost		$	(26	)		$	(34	)		$	37


	1 percentage point
	Increase			Decrease
Effect on total of service and interest cost components		$	1		$	(1	)
Effect on postretirement benefit obligation		$	28		$	(22	)


	Without Impact of Medicare Subsidy		Net of Medicare Subsidy
2022	$	27	$	25
2023	25		24
2024	14		14
2025	14		13
2026	13		12
2027-2031	57		53


	Net Sales(1)									Long-lived Assets(2)
	Years Ended December 31,									December 31,
	2017			2016			2015			2017			2016			2015
United States		$	22,722		$	22,652		$	23,771		$	3,604		$	3,744		$	3,939
Europe			10,400			9,966			8,674			927			741			746
Other International			7,412			6,684			6,136			1,395			1,308			1,104

		$	40,534		$	39,302		$	38,581		$	5,926		$	5,793		$	5,789


	2017
	Mar. 31			June 30			Sept. 30			Dec. 31(3)				Year
Net Sales		$	9,492		$	10,078		$	10,121		$	10,843			$	40,534
Gross Profit			3,136			3,228			3,248			3,347				12,959
Net income (loss) attributable to Honeywell			1,326			1,392			1,348			(2,411	)			1,655
Earnings (loss) per common share—basic(1)			1.74			1.82			1.77			(3.18	)			2.17
Earnings (loss) per common share—assuming dilution(1)(2)			1.71			1.80			1.75			(3.18	)			2.14
Cash dividends per common share			0.6650			0.6650			0.6650			0.7450				2.74
Market price per common share
High			127.25			135.84			141.75			155.96				155.96
Low			116.18			122.50			133.37			142.55				116.18


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))
Plan category	(a)			(b)				(c)
Equity compensation plans approved by security holders		29,299,135	(1)		$	94.16	(2)		44,805,201	(3)
Equity compensation plans not approved by security holders		404,048	(4)			N/A	(5)		N/A	(6)

Total		29,703,183			$	94.16			44,805,201


		Page Number in Form 10-K
(a)(1.)	Consolidated Financial Statements:
	Consolidated Statement of Operations for the years ended December 31, ~~2017, 2016~~2021, 2020 and ~~2015~~ 2019		36	53
	Consolidated Statement of Comprehensive Income for the years ended December 31, ~~2017, 2016~~2021, 2020 and ~~2015~~ 2019		37	54
	Consolidated Balance Sheet at December 31, ~~2017~~2021 and ~~2016~~ 2020		38	55
	Consolidated Statement of Cash Flows for the years ended December ~~2017, 2016~~31, 2021, 2020 and ~~2015~~ 2019		39	56
	Consolidated Statement of Shareowners’ Equity for the years ended December 31, ~~2017, 2016~~2021, 2020 and ~~2015~~ 2019		40	57
	Notes to Consolidated Financial Statements		41	58
	Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)		88	113


Exhibit No.			H~~ONEYWELL~~ I~~NTERNATIONAL~~ INC. Description
3(i)
~~Date: February 9, 2018~~	~~By:~~	~~/s/ Jennifer H. Mak~~

		~~Jennifer H. Mak~~ ~~Vice President and Controller~~ ~~(on behalf of the Registrant~~ ~~and as the Registrant’s~~ ~~Principal Accounting Officer)~~


~~Name~~		~~Name~~

*		*

~~David M. Cote~~ ~~Chairman of the Board~~		~~Judd Gregg~~ ~~Director~~

*		*

~~Darius Adamczyk~~ ~~President and Chief Executive Officer~~ ~~and Director~~ ~~(Principal Executive Officer)~~		~~Clive Hollick~~ ~~Director~~

*		*

~~William S. Ayer~~ ~~Director~~		~~Grace D. Lieblein~~ ~~Director~~

*		*

~~Kevin Burke~~ ~~Director~~		~~George Paz~~ ~~Director~~

*		*

~~Jaime Chico Pardo~~ ~~Director~~		~~Bradley T. Sheares, Ph.D.~~ ~~Director~~

*		*

~~D. Scott Davis~~ ~~Director~~		~~Robin L. Washington~~ ~~Director~~

*

~~Linnet F. Deily~~ ~~Director~~

~~/s/ Thomas A. Szlosek~~		~~/s/ Jennifer H. Mak~~

~~Thomas A. Szlosek~~ ~~Senior Vice President and~~ ~~Chief Financial Officer~~ ~~(Principal Financial Officer)~~		~~Jennifer H. Mak~~ ~~Vice President and Controller~~ ~~(Principal Accounting Officer)~~



*By:		~~/s/ Thomas A. Szlosek~~

		~~(Thomas A. Szlosek~~ ~~Attorney-in-fact)~~


~~Exhibit No.~~	~~Description~~

~~3(i)~~	Amended and Restated Certificate of Incorporation of Honeywell International Inc., as amended April ~~26, 2010~~23, 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, 2016~~April 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 4.1		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.
10.1* 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 the quarter ended June 30, 2003)
10.2*		Amendment to Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 8-K filed December 21, 2004)
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, 2005)
10.4*		Omnibus Amendment to Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, 2021)
10.5*		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* 10.6*		~~Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of~~Amendment to Honeywell International Inc. ~~and its Subsidiaries,~~Incentive Compensation Plan for Executive Employees, as amended and restated (incorporated by reference to Exhibit ~~10.6~~10.69 to Honeywell’s Form 10-K for the year ended December 31, ~~2008)~~2020)
10.6* 10.7*		Omnibus Amendment to ~~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 10.5 to Honeywell’s Form 10-K for the year ended December 31, 2010)~~
10.7*	~~Amendment to Supplemental Non-Qualified Savings~~Incentive Compensation Plan for ~~Highly Compensated~~Executive Employees, ~~of Honeywell International Inc. and its Subsidiaries,~~ as amended and restated (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, ~~2012)~~2021)
10.8*		~~Amendment to~~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~~(incorporated by reference to Exhibit 10.5 to Honeywell’s Form 10-K for the year ended December 31, ~~2013)~~2020)
10.9*		Omnibus Amendment to 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 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, ~~2015)~~2021)
10.10*		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)
10.11*


10.22* Exhibit No.						Description
10.22*						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, 2015)
10.23*						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)
10.24*						~~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)~~