EXHIBIT 99.2
AlliedSignal Honeywell
MERGER OVERVIEW
--------------------------------------
Larry A. Bossidy
&
Michael R. Bonsignore
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Information communicated during this presentation with respect to the
financial outlook for 1999 and targets through the year 2002 is
forward-looking and subject to risks and uncertainties. For these
statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
The following is a summary of certain factors, the results of which,
if markedly different than our planning assumptions, could cause
future results to differ materially from those expressed in the
forward-looking statements:
foreign currency translation of sales denominated in other currencies which
may fluctuate adversely based on local currency valuations;
economic conditions and customer demand in regions throughout the world in
which we do business;
* risks pertaining to performance and contracts, including
dependence on the performance of third parties;
* various competitive pressures, such as new technologies,
industry consolidation and deregulation of certain
industries;
* the ability of material suppliers or key customers to reduce
or eliminate risks to their business operations arising from
the year 2000 issue;
* availability of intellectual property rights for newly
developed products; and
* significant acquisitions or divestitures.
Please refer to the companies' reports on Forms 10-Q and 10-K that are
filed with the Securities and Exchange Commission for a more detailed
discussion of these and other factors that could impact future
results.
TRANSACTION SUMMARY
Expected Closing Date: Fourth Quarter, 1999
Transaction Form: Merger
Corporate Structure: HON will become a wholly-owned
subsidiary of ALD
Name: Honeywell
Exchange Ratio: 1.875 shares of ALD to 1 HON share
Resulting Ownership: 70:30 -- ALD:HON
Financial Structure: Pooling of Interests; tax free reorganization
Board of Directors: Comprised of 15 members, 6 chosen by HON
Senior Management: Michael Bonsignore will be CEO.
Larry Bossidy will remain Chairman until
retirement in April 1, 2000.
Headquarters Location: Morristown, NJ
STRATEGIC COMBINATION
STRATEGIC RATIONALE FOR THE MERGER
* Increased scale and business diversity drive consistent earnings
* Accelerated earnings growth
* Significant sales & cost synergies in aerospace business
* Combination of ALD's strong business portfolio and operating
discipline including 6 with HON's global brand, technology and systems
& services
* Greater capability for acquisitions
* Strong strategic leadership for the future
CREATING A GLOBAL TECHNOLOGY POWERHOUSE
HONEYWELL
[picture] BUSINESSES
-----------
* Home and Building Controls
* Industrial Controls
* Space and Aviation Controls
1998 STATISTICS STRENGTHS
--------------- ---------
Sales $8.4 B * Leader In Controls
Operating Margin 11.3% * Brand Strength & Recognition
EPS $4.48 * Global and Diverse Markets
* Strong Technical Capabilities
* Operational Excellence
GLOBAL LEADER IN COMFORT AND CONTROL PRODUCTS
ALLIEDSIGNAL
[picture] BUSINESSES
-----------
* Aerospace Systems
* Turbine Technologies
* Specialty Chemicals &
Electronic Solutions
* Performance Polymers
* Transportation Products
1998 STATISTICS STRENGTHS
--------------- ---------
Sales $15.1 B * Consistent Earnings Growth
Operating Margin 13.0% * Cost Productivity
EPS $2.32 * Six Sigma
* Driven Culture
* Well Positioned Businesses
STRONG BUSINESSES WITH STRONG LEADERSHIP
MARKET VALUE OF EQUITY
[Bar graph showing market value]
($ in Billions)
$343 $74 $46 $40 $33 $30 $29 $23 $19 $13 $11 $9
GE TYC ALD/HON SIE ALD UTX EMR RTN ISYS HON ROK SCD
Market Values as of June 4, 1999
CREATES A LEADING GLOBAL INDUSTRIAL FORCE
LAST TWELVE MONTHS' REVENUES
{Bar graph showing last twelve months' revenues]
($ in Billions)
SIE GE UTX ALD/HON TYC ISYS RTN ALD SCD HON ROK
- - --- --- --- ------- --- ---- --- --- --- --- ---
$68 $57 $26 $24 $21 $20 $20 $15 $9 $9 $7
SE excludes GE Capital
TYC includes AMP and US. Surgical
...WITH A SUBSTANTIAL REVENUE BASE
CREATING A BROADER-BASED COMPANY
COMBINED 1999 SALES $25B
[Pie graph showing sales by industry]
Home and Building Controls 15%
Aerospace 30%
Specialty Chem & EM 10%
Polymers 8%
Transportation 10%
Turbine 16%
Industrial Controls 11%
INCREASED DIVERSIFICATION, REDUCED RELIANCE ON ANY INDUSTRY
FINANCIAL HISTORY --
A RECORD OF PERFORMANCE
HISTORICAL PERFORMANCE - SALES GROWTH
[Bar graph showing sales growth]
AlliedSignal
94 95 96 97 98
- - ------ ------ ------ ------ ------
$10.4B $11.5B $12.5B $13.7B
$12.8B $14.3B $14.0B $14.5B $15.1B
CAGR = 10%*
Honeywell
94 95 96 97 98
- - ------ ------ ------ ------ ------
$6.1B $6.7B $7.3B $8.0B $8.4B
CAGR = 9%
* adj. for Brakes and Safety
CONSISTENT HIGH GROWTH
HISTORICAL PERFORMANCE -- OPERATING MARGINS
[Bar graph showing operating margins]
AlliedSignal
94 95 96 97 98
- - ------ ------ ------ ------ ------
9.0% 9.1% 10.7% 11.4% 13.0%
Honeywell
94 95 96 97 98
- - ------ ------ ------ ------ ------
10.8%*
8.0% 8.3% 9.2% 9.9% 11.3%
* adj. for Acct. Change
DELIVERING CONTINUOUS MARGIN IMPROVEMENT
HISTORICAL PERFORMANCE -- EARNINGS PER SHARE
[Bar graph showing earnings per share]
AlliedSignal
94 95 96 97 98
- - ------ ------ ------ ------ ------
$1.32 $1.52 $1.74 $2.01 $2.32
CAGR = 15%
Honeywell
94 95 96 97 98
- - ------ ------ ------ ------ ------
$4.25*
$2.15 $2.58 $3.11 $3.65 $4.48
* adj. For Acct. Change
CAGR = 20%
HISTORICAL PERFORMANCE -- FREE CASH FLOW
[Bar graphs showing free cash flow]
AlliedSignal
94 95 96 97 98
$302 $322 $313 $401 $554
CAGR = 16%
Honeywell
94 95 96 97 98
$121 $219 $154 $289 $351
CAGR = 31%
CASH FLOW GROWING FASTER THAN EARNINGS
HISTORICAL PERFORMANCE -- RETURN ON EQUITY
[Bar graphs showing return on equity]
AlliedSignal
94 95 96 97 98
28.9% 26.7% 26.3% 27.4% 27.8%
Honeywell
94 95 96 97 98
15.6% 17.1% 19.7% 20.8% 22.8%
TOP TIER RETURNS ON EQUITY
FINANCIAL HIGHLIGHTS
(1998 Actuals; $ Billions) AlliedSignal Honeywell Total
Sales $15.1 $8.4 $23.5
Operating Profit 1.96 0.95 2.91
Operating Margin 13.0% 11.3% 12.4%
Net Income 1.33 0.57 1.90
Free Cash Flow $554M $351M $905M
Net Debt/Capital 26.2%* 29.5% 27.4%
* adj. For AMP
STRONG BALANCE SHEET...
SIGNIFICANT OPPORTUNITY FOR GROWTH
GEOGRAPHIC STRENGTH
[Pie graph showing Geographic Strength]
AlliedSignal Honeywell Combined
U.S. - 79% U.S. - 62% U.S. - 73%
Int'l - 21% Int'l - 38% Int'l - 27%
STRONG GLOBAL COVERAGE
VALUE CREATION --
STRATEGIC STRENGTHS
CORPORATE STRENGTHS
AlliedSignal Honeywell
------------ ---------
Strong Operating Disciplines Strategic Leadership
Advanced 6-Sigma Culture HON Quality Value Business Model
Broad Business Portfolio Broad Technology Base
Capital Availability Global Growth Opportunity
Product Manufacturing & Systems & Solution Base
Engineering Solutions
SERVICES
COMPLEMENTARY STRENGTHS -- SUPERIOR VALUE CREATION
ACCELERATING GROWTH
* Financial strength to capitalize on growth
* Accelerated development of E-commerce business models
* Enhanced cost competitiveness across the portfolio through 6-sigma
* Increased R&D leverage -- Both directions
* Broader aerospace portfolio
* Larger, more diverse service capabilities
* Increased Honeywell brand leverage
SIGNIFICANT GROWTH SYNERGIES BY LEVERAGING BEST PRACTICES
AEROSPACE REVENUE SYNERGIES
"TOTAL COCKPIT" SOLUTION
Improved Equipment Compatibility:
* Complementary Capabilities In Flight Control, Navigation And Safety
* Lower Development and Production Costs
* Safety Improvements Affordable to Regional, Business and General
Aviation Customers
Safe Operations For All Aircraft
FREE FLIGHT
Complementary Technologies and Products:
* Complete GPS Air Navigation And Safety Capability
* Airport Systems: Linking ALD Airborne Capability with HON
Ground-Based Systems
Closer to a Reality
SAFER SKIES AT A LOWER COST
AVIONICS PRODUCT MATRIX
Air Transport Bizjet/Regional Military/Space
Buyer Furnished Equip.
Radar A A A
COM/NAV A H H
GPS/MMR A H A
Recorders/Data Mgmt A A A
CMU/ACARS A A A
TCAS A A A
Seller Furnished Equip.
GPWS/EGPWS A A A
Flight Mgmt System H H H
Flight Controls H H H
IRS/AHRS H H H
Air Data H H H
Displays H H H
Fight Info Services H A
A = ALD Strength H = HON Strength
MANY AREAS OF COMPLEMENTARY STRENGTHS
STRATEGIC GROWTH - ALLIEDSIGNAL
o New Products + New Geography * New Applications
Potential Cumulative Revenue '99-'05
SBU Product $200M-$500M $500M-$1B $1B+
- - --------------------------------------------------------------------------
Engines -AS900 o
Turbo -Turbogenerator * o
EAS -Safety Avionics * o
AES -Normalair Garrett +
-Lighting * o
MS&S -Hardware Products o *
Polymers -Films * o
-Plastics +
Spec Chem -Pharmaceuticals * o
-Consumer Waxes o
Elec Matls -Chip Packaging o
-Low Dielectric Mat'ls o
BROADENING OUR BUSINESSES INTO HIGHER GROWTH MARKETS
STRATEGIC GROWTH - HONEYWELL
o New Products + New Geography * New Applications
Potential Cumulative Revenue '99-'05
SBU Product $200M-$500M $500M-$1B $1B+
- - --------------------------------------------------------------------------
H&BC -Advanced Solutions o *
-Security Solutions o *
-Cooling & Refrigeration o *
IC -Hybrid Automation o *
(PlantScape)
-Adv. Software (Hi-Spec) o *
S&AC -Aviation Services o *
-Airport Systems o
-CNS/ATM o *
-Commercial Space *
-Tactical Guidance *
BROADENING OUR BUSINESSES INTO HIGHER GROWTH MARKETS
INTEGRATION
--------------------------------
LARRY A. BOSSIDY
CHAIRMAN
[Chart showing combined company leadership and reporting relationships]
Chairman
Bossidy
CEO
Bonsignore
COO/Exec VP* COO/Exec VP*
Johnson Ferrari
Finance* HR* Info & Bus Svcs* Integration*
Wallman Redlinger Porter Hjerpe/Stark
Law* Quality* Technology*
Kreindler Stark Burhardt
Aerospace All Other
Business Units o Business Units +
A STRONG LEADERSHIP TEAM
* Report to Bonsignore
o Report to Johnson
+ Report to Ferrari
INTEGRATION PLAN
KEY SUCCESS FACTORS * Focus on key activities that
drive the most value
* Clear Purpose * Initiate small, short-term,
* Comprehensive Plan fast-paced transition teams
* Controlled Process
* Compelling Pace [Graph showing that the shorter
* Committed People the time required to implement
integration plan the higher its
economic impact will be]
MAINTAIN MOMENTUM WITH A CLEAR DIRECTION
GUIDELINES FOR INTEGRATION TEAMS
* Use Concept that 1+1=1
* All Functional Costs - Not just personnel costs.
* Best People - Regardless of company affiliation.
* Integration Team - Functional experts
* Three Months to Plan
* Three Months to Implement
QUALITY & SPEED SHOULD BE THE GUIDING PRINCIPLES
COST SYNERGIES
Year 2002
---------
Six Sigma Acceleration $150M
Corporate/Shared Services $110M
Purchasing $100M
Aerospace SG&A and Field Services $90M
Research and Development $30M
International Infrastructure $20M
---------
TOTAL COST SYNERGIES* $500M
EPS Impact $0.32
* $250 Million in Savings in 2000
$500 MILLION IS REALISTIC AND ACHIEVABLE
ALLIEDSIGNAL SIX SIGMA SUCCESS
Number of Resources
[Bar graph showing number of resources]
1996 1997 1998
- - ------ ------ ------
2,000 4,000 7,700 (Greenbelts)
1,650 2,000 2,550 (Blackbelts)
Six Sigma Savings ($M)
[Bar graph showing savings]
1997 1998 1999 2001
- - ---- ---- ---- ----
$400 $500 $575 $750
Over $2B Realized Since 1992
Cumulative Projects
[Arrow chart showing increase in number of cumulative projects
from zero in 96 to 6500+ in 98]
Annual Productivity Increase
[Graph showing annual productivity increase]
1996 1997 1998
- - ---- ---- ----
6.0% 5.9% 6.0%
ADVANCED CAPABILITY
SIX SIGMA ACCELERATION
Operating
Productivity Margins
------------ ---------
AlliedSignal Average Annual Increase 6% 1.3 Pts
Honeywell Average Annual Increase 5% 0.8 Pts
Six Sigma will contribute $150M by 2002
Six Sigma Implementation Approach
* Leverage AlliedSignal's Master Blackbelts and Blackbelts
* Identify Blackbelts within Honeywell
* Apply AlliedSignal's training program to Honeywell's workforce
* Address quick, high return projects
APPLY PROVEN APPROACH TO SHOW QUICK RETURNS
CORPORATE AND SHARED SERVICES
CORPORATE OVERHEAD ALD'S SHARED SERVICES
[Bar graph showing corporate * Payroll and Benefits
overhead for Honeywell and * Accounts Payable
AlliedSignal before the merger * Fixed Asset Accounting
and for the combined company * HR Services
after the merger] * Travel Services
* Information Systems
$90 $200 $200 * Learning Centers
HON ALD Combined
Before After
Projected Savings $90M BENEFITS OF SHARED SERVICES
AlliedSignal has saved
over $150 million since 1994.
Leverage ALD Business Services
to absorb HON's decentralized
admin. functions.
Projected Savings $20M
FUNCTIONAL TEAMS ALREADY ESTABLISHED
PURCHASING
Source of AlliedSignal's 1999 Savings
- - -------------------------------------
[Pie graph showing source of AlliedSignal's 1999 savings]
Sourcing 34%
Supplier Programs 23%
Market 3%
Negotiations 40%
Source of Expected Synergies
- - ----------------------------
* Leverage Honeywell's purchasing through institution of formal
Purchasing Programs
* Added Buying Power due to increased size of the organization
[Graph showing in $billions AlliedSignal's and Honeywell's purchasing,
project savings and combined purchasing]
ALD $7.5
HON $2.8
Savings $0.1
Combined $10.2
$100M in Annual Savings
TEAM ESTABLISHED - CONSERVATIVE ESTIMATE
OTHER COST SYNERGIES
Aerospace SG&A and Field Services
[Bar graph showing Aerospace SG&A and Field Services for Honeywell and
AlliedSignal before the merger and for the combined company after the
merger]
$240 $590 $740
HON ALD Combined
Before After
Projected Savings $90M
AVIONICS R&D
[Bar graph showing Avionics R&D for Honeywell and AlliedSignal before
the merger and for the combined company after the merger]
$212 $127 $309
HON ALD Combined
Before After
Projected Savings $30M
International
Leverage Honeywell's International presence
significantly reducing AlliedSignal's infrastructure.
Projected Savings $20M
ELIMINATE DUPLICATION
INTEGRATION SPEED DRIVES PERFORMANCE
PERCENTAGE OF COMPANIES ACHIEVING GOAL
[Graph showing percentage of companies achieving goals in quick transition
and slow transition in the categories of gross margin, cash flow,
productivity, profitability, and speed to market]
Gross Margin 71% Quick Transitions
33% Slow Transitions
Cash Flow 68% Quick Transitions
48% Slow Transitions
Productivity 68% Quick Transitions
54% Slow Transitions
Profitability 66% Quick Transitions
41% Slow Transitions
Speed to Market 48% Quick Transitions
33% Slow Transitions
Source: PriceWaterhouseCoopers Integration Survey
SPEED MAXIMIZES RESULTS
FAST VS. SLOW TRANSITIONS
"We should have managed the transition..."
[Graph showing percentage of companies that state we should have managed
its transition either faster or slower]
Faster 89%
Slower 11%
Source: PriceWaterhouseCoopers Integration Survey
SPEED MAXIMIZES RESULTS
THE VALUE OF AN ACCELERATED TRANSITION
[Graph showing increased shareholder value for an accelerated transition, as
oppossed to a prolonged transition]
Source: PriceWaterhouseCoopers Integration Survey
SPEED MAXIMIZES RESULTS
TIMELINE FOR AN ACCELERATED TRANSITION
[Graph showing timeline for an accelerated transition, identifying
the 3 1/2 months from the announcement of the transaction
required for planning an accelerated transition and
identifying the approximate 3 1/2 months, beginning
approximately one half a month before closing, required
for implementation of an accelerated transition]
WELL ORCHESTRATED FOR MAXIMUM EFFICIENCY
COST SYNERGY SUMMARY
[Bar graph showing the cost synergies
expected to be derived from six sigma,
international business, aerospace, R&D, purchasing,
and corporate during the years 2000, 2001 and 2002]
2000 2001 2002
---- ---- ----
Six Sigma $25 $ 50 $150
International $10 $ 20 $ 20
Aerospace $50 $ 90 $ 90
R&D $20 $ 30 $ 30
Purchasing $70 $100 $100
Corporate $75 $110 $110
($ in millions)
2000 2001 2002
---- ---- ----
Cumulative Savings $250 $400 $500
Accretion $0.17 $0.26 $0.32
ACCELERATED SAVINGS
SUMMARY
-------------------
MICHAEL R. BONSIGNORE
CHIEF EXECUTIVE OFFICER
CONSOLIDATED FINANCIAL OUTLOOK
2000-2003 Outlook
---------------------------------
Sales 8 - 10% Solid Growth Platform
EPS Growth 15%+ Substantial Cost Synergies
Free Cash Flow Over $2B by 2002 Focus on Cash Conversion
Shareholder Benefit
---------------------------------
* Size Confidence in
* Portfolio Balance + Consistency of = Higher
* Mgmt Best Practices Earnings Growth Valuation
PLATFORM FOR ACCELERATED GROWTH & CASH GENERATION
SUMMARY -- THE NEW HONEYWELL
* Strong growth platform
* Financial strength to pursue major business opportunities
* Strong leadership for the future
* World-class operating disciplines and strategy development
* Leading aerospace supplier with strong aftermarket presence and
expanded growth opportunities
* Substantial cost synergies - accelerate earnings growth
A WORLD-CLASS VALUE CREATOR