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________________________________________________________________________________
________________________________________________________________________________
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, 2002
OR
[ ] 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)
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DELAWARE 22-2640650
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey 07962-2497
- --------------------------------------- ------------------------------------
(Address of principal executive (Zip Code)
offices)
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Registrant's telephone number, including area code (973)455-2000
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange
Title of Each Class on Which Registered
- --------------------------------------- ------------------------------------
Common Stock, par value $1 per share* New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
New York Stock Exchange
9.20% Debentures due February 15, 2003 New York Stock Exchange
Zero Coupon Serial Bonds due 2009 New York Stock Exchange
9 1/2% Debentures due June 1, 2016 New York Stock Exchange
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* The common stock is also listed for trading on the London stock exchange.
Securities registered pursuant to Section 12(g) of the Act: None
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 _
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 [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No _
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $28.9 billion at June 30, 2002.
There were 855,585,367 shares of Common Stock outstanding at February 21, 2003.
________________________________________________________________________________
________________________________________________________________________________
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TABLE OF CONTENTS
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ITEM PAGE
---- ----
Part I. 1 Business.................................................................................... 1
2 Properties.................................................................................. 10
3 Legal Proceedings........................................................................... 10
4 Submission of Matters to a Vote of Security Holders......................................... 14
Executive Officers of the Registrant........................................................... 14
Part II. 5 Market for Registrant's Common Equity and Related Stockholder Matters....................... 16
6 Selected Financial Data..................................................................... 16
7 Management's Discussion and Analysis of Financial Condition and Results of Operations....... 16
7A Quantitative and Qualitative Disclosures About Market Risk.................................. 16
8 Financial Statements and Supplementary Data................................................. 16
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 16
Part III. 10 Directors and Executive Officers of the Registrant.......................................... 16
11 Executive Compensation...................................................................... 17
12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters................................................................................. 17
13 Certain Relationships and Related Transactions.............................................. 17
14 Controls and Procedures..................................................................... 17
15 [Reserved].................................................................................. 17
16 Principal Accountant Fees and Services...................................................... 17
Part IV. 17 Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 18
Signatures................................................................................................ 19
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This report contains certain statements that may be deemed 'forward-looking
statements' within the meaning of Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical fact, that address
activities, events or developments that we or our management intends, expects,
projects, believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are based upon certain assumptions
and assessments made by our management in light of their experience and their
perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. The
forward-looking statements included in this report are also subject to a number
of material risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting our operations,
markets, products, services and prices. Such forward-looking statements are not
guarantees of future performance, and actual results, developments and business
decisions may differ from those envisaged by such forward-looking statements.
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PART I.
ITEM 1. BUSINESS
Honeywell International Inc. (Honeywell) is a diversified technology and
manufacturing company, serving customers worldwide with aerospace products and
services, control, sensing and security technologies for buildings, homes and
industry, automotive products, specialty chemicals, fibers, and electronic and
advanced materials. Honeywell was incorporated in Delaware in 1985.
MAJOR BUSINESSES
We globally manage our business operations through strategic business units,
which have been aggregated under four reportable segments: Aerospace, Automation
and Control Solutions, Specialty Materials and Transportation and Power Systems.
Financial information related to our reportable segments is included in Note 23
of Notes to Financial Statements in our 2002 Annual Report to Shareowners which
is incorporated herein by reference.
Following is a description of our strategic business units:
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
AEROSPACE
Engines, Systems Turbine propulsion TFE731 turbofan Business, regional United Technologies
and Services engines TPE331 turboprop and military trainer aircraft (Pratt & Whitney
TFE1042 turbofan Commercial and military Canada)
F124 turbofan helicopters Rolls Royce/
LF502 turbofan Military vehicles Allison
LF507 turbofan Turbomeca
CFE738 turbofan Williams
AS907 turbofan
T53, T55 turboshaft
LT101 turboshaft
T800 turboshaft
AGT1500 turboshaft
LV 100 turboshaft
Retrofits
Repair, overhaul and
spare parts
----------------------------------------------------------------------------------------------------------
Auxiliary power units Airborne auxiliary Commercial, regional, United Technologies
(APUs) power units business and (Pratt & Whitney
Jet fuel starters military aircraft Canada)
Secondary power Ground power United Technologies
systems (Hamilton
Ground power units Sundstrand)
Repair, overhaul and
spare parts
----------------------------------------------------------------------------------------------------------
Environmental control Air management systems: Commercial, regional Auxilec
systems Air conditioning and general Barber Colman
Bleed air aviation aircraft Dukes
Cabin pressure control Military aircraft Eaton-Vickers
Air purification and Ground vehicles Liebherr
treatment Spacecraft Litton Breathing
Electrical power systems: Systems
Power distribution and Pacific Scientific
control Parker Hannifin
Emergency power United Technologies
generation (Hamilton
Repair, overhaul and Sundstrand)
spare parts Smiths
TAT
Goodrich (Lucas
Aerospace)
----------------------------------------------------------------------------------------------------------
Engine systems and Electronic and Commercial, regional and BAE Controls
accessories hydromechanical general aviation aircraft Goodrich
fuel controls Military aircraft (Chandler-Evans)
Engine start systems Parker Hannifin
Electronic engine Goodrich (Lucas
controls Aerospace)
Sensors United Technologies
Electric and pneumatic (Hamilton
power generation systems Sundstrand)
Thrust reverser
actuation, pneumatic and
electric
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
Aircraft hardware Consumable hardware, Commercial, regional, business Anixter (Pentacon)
distribution including fasteners, and military aviation Arrow Pemco
bearings, bolts and aircraft Avnet
o-rings BE Aerospace (M&M
Adhesives, sealants, Aerospace)
lubricants, cleaners Dixie
and paints Fairchild Direct
Electrical connectors, Wesco Aircraft
switches, relays and
circuit breakers
Value-added services,
repair and overhaul
kitting and point-of-use
replenishment
- -------------------------------------------------------------------------------------------------------------------------------
Aerospace Avionics systems Flight safety systems: Commercial, business Airshow, Inc.
Electronic Enhanced Ground and general aviation aircraft BAE
Systems Proximity Warning Government aviation Boeing/Jeppesen
Systems (EGPWS) Century
Traffic Alert and Garmin
Collision Avoidance Goodrich
Systems (TCAS) Kaiser
Windshear detection L3
systems Lockheed Martin
Flight data and cockpit Northrop Grumman
voice recorders Rockwell Collins
Weather Radar Smiths
Communication, navigation S-tec
and surveillance Thales
systems: Trimble/Terra
Weather radar Universal Avionics
Navigation Universal Weather
& communication radios
Air-to-ground telephones
Global positioning
systems
Automatic flight control
systems
Satellite systems
Surveillance systems
Integrated systems
Flight management systems
Cockpit display systems
Data management and
aircraft performance
monitoring systems
Vehicle management
systems
Aircraft information
systems
Network file servers
Wireless network
transceivers
Satellite TV systems
Audio/Video equipment
Weather information
network
Navigation database
information
Cabin management systems
Vibration detection and
monitoring
Mission management
systems
Tactical data management
systems
----------------------------------------------------------------------------------------------------------
Airfield, Obstruction, and Inset lights Airports Safegate
Aircraft lighting Control and monitoring Commercial, regional, business Siemens
systems and military aviation
Regulators aircraft
Tower and obstruction
lights
Interior and exterior
aircraft lighting
Visual docking guidance
systems
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
Inertial sensor Inertial sensor systems Military and Astronautics-
for guidance, commercial vehicles Kearfott
stabilization, Commercial spacecraft BAE
navigation and control and launch vehicles Ball
Gyroscopes, Commercial, regional, business GEC
accelerometers, inertial and military aircraft L3 Com
measurement units and Transportation KVH
thermal switches Missiles Northrop Grumman
Munitions Rockwell
Smiths
----------------------------------------------------------------------------------------------------------
Automatic test EW ATE Boeing Northrop Grumman
equipment Avionics ATE USAF Lockheed
Vehicle health
Management
----------------------------------------------------------------------------------------------------------
Control products Radar altimeters Military aircraft Ball Brothers
Pressure products Missiles, UAVs BAE
Air data products Commercial Druck
Thermal switches applications Goodrich
Magnetic sensors Solarton
RF sensors NavCom
Rosemount
Northrop Grumman
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Space products and Guidance subsystems Commercial spacecraft BAE
subsystems Control subsystems DOD Ithaco
Processing subsystems FAA L3
Radiation hardended NASA Northrop Grumman
electronics and Raytheon
integrated circuits
GPS-based range safety
systems
----------------------------------------------------------------------------------------------------------
Management and technical Maintenance/operation U.S. and foreign government Boeing
services and provision of space space communications, Computer Sciences
systems, services logistics and information Dyncorp
and facilities services ITT
Systems engineering Commercial space ground Lockheed Martin
and integration segment systems and services Raytheon
Information technology Local governments SAIC
services United Space
Logistics and sustainment Alliance
- -------------------------------------------------------------------------------------------------------------------------------
Aircraft Landing Landing systems Wheels and brakes Commercial and Aircraft Braking
Systems Friction products military aircraft Systems
Wheel and brake Dunlop
overhaul services Goodrich
Messier-Bugatti
- -------------------------------------------------------------------------------------------------------------------------------
Federal Management services Maintenance/ U.S. government Bechtel
Manufacturing & operation of facilities Lockheed Martin
Technologies The Washington
Group
- -------------------------------------------------------------------------------------------------------------------------------
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
AUTOMATION AND CONTROL SOLUTIONS
Automation and Control Products Heating, ventilating and Original equipment Carrier
Control Products air conditioning manufacturers (OEMs) Cherry
controls and components Distributors Danfoss
for homes and buildings Contractors Eaton
Indoor air quality Retailers Emerson
products including System integrators Endruss & Hauser
zoning, air cleaners, Commercial customers and Holmes
humidification, heat and homeowners served by the Invensys
energy recovery distributor, wholesaler, Johnson Controls
ventilators contractor, retail and Kavlico
Controls plus integrated utility channels Motorola
electronic systems for Package and materials handling Omron
burners, boilers and operations Siemens
furnaces Appliance manufacturers SPX (EST)
Consumer household Automotive companies Yokogawa
products including Aviation companies
humidifiers and Food and beverage processors
thermostats Medical equipment
Water controls Heat treat processors
Sensors, measurement, Computer and business
control and industrial equipment manufacturers
components Data acquisition companies
Process control
instrumentation
Field instrumentation
Analytical
instrumentation
Recorders
Controllers
Datacom components
----------------------------------------------------------------------------------------------------------
Security and fire Security products and OEMs Bosch
products and services systems Retailers GE (Interlogix)
Fire products and systems Distributors Pelco
Access controls and Commercial customers Phillips
closed circuit and homeowners served by the Siemens
television distributor, wholesaler, SPX (EST)
contractor, retail and Tyco
utility channels
- -------------------------------------------------------------------------------------------------------------------------------
Industry Solutions Industrial automation Advanced control software Refining and petrochemical Asea Brown Boveri
solutions and industrial companies Aspentech
automation systems for Chemical manufacturers Emerson (Fisher-
control and monitoring Oil and gas producers Rosemount)
of continuous, batch and Food and beverage processors Invensys
hybrid operations Pharmaceutical companies Siemens
Production management Utilities Yokogawa
software Film and coated producers
Communications systems Pulp and paper industry
for Industrial Control Continuous web producers in
equipment and systems the paper, plastics, metals,
Consulting, networking rubber, non-wovens and
engineering and printing industries
installation
- -------------------------------------------------------------------------------------------------------------------------------
Service Solutions and services HVAC and building control Building managers and owners GroupMac
solutions and services Contractors, architects and Invensys
Energy management developers Johnson Controls
solutions and services Consulting engineers Local contractors
Security and asset Security directors and utilities
management solutions and Plant managers Siemens
services Utilities Trane
Enterprise building Large, global corporations
integration solutions Public school systems
Building information Universities
services Local governments
Critical environment
control solutions and
services
Aftermarket maintenance, See Industry Solutions above See Industry
repair and upgrade for Solutions above
Industry Solutions
projects
- -------------------------------------------------------------------------------------------------------------------------------
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
SPECIALTY MATERIALS
Specialty Materials Nylon products and Nylon filament and Commercial, residential and BASF
services staple yarns specialty carpet markets Bayer
Bulk continuous Nylon for fibers, DSM
filament engineered resins and film DuPont
Nylon polymer Fertilizer ingredients EMS
Caprolactam Specialty chemicals Enichem
Ammonium sulfate Vitamins Hoechst
Cyclohexanol Paper milling Kolon
Cyclohexanone Food and pharmaceutical Monsanto
Sulfuric acid packaging Rexam Custom
Ammonia Housings (e.g., electric hand Rhodia
Thermoplastic nylon tools, chain saws) Solutia
Thermoplastic alloys Industrial applications Toyoto
and blends Automotive components UBE
Post-consumer Office furniture
recycled PET resins Electrical and electronics
Cast nylon
Biaxially oriented nylon
film
Fluoropolymer film
----------------------------------------------------------------------------------------------------------
Performance fibers Industrial nylon and Passenger car and truck tires Acordis
polyester yarns Passenger car and light truck Akra
Extended-chain seatbelts and airbags DSM
polyethylene composites Broad woven fabrics DuPont
Ropes and mechanical Hyosung
rubber goods Kolon
Luggage Kosa
Sports gear Solutia
Bullet resistant vests, Teijin
helmets and heavy armor
Cut-resistant workwear
Sailcloth
Cordage
----------------------------------------------------------------------------------------------------------
Fluorocarbons Genetron'r' refrigerants, Refrigeration Atofina
aerosol and Air conditioning DuPont
insulation foam blowing Polyurethane foam INEOS Fluor
agents Precision cleaning Solvay
Genesolv'r' solvents Optical
Oxyfume sterilant gases Metalworking
Ennovate 3000 blowing Hospitals
agent for refrigeration Medical equipment
insulation manufacturers
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Hydrofluoric acid (HF) Anhydrous and aqueous Fluorocarbons Ashland
hydrofluoric acid Steel Atofina
Oil refining DuPont
Chemical intermediates E. Merck
Hashimoto
Norfluor
Quimica Fluor
----------------------------------------------------------------------------------------------------------
Fluorine specialties Sulfur hexafluoride Electric utilities Air Products
(SF[u]6) Magnesium Asahi Glass
Iodine pentafluoride Gear manufacturers Atofina
(IF[u]5) Ausimont
Antimony pentafluoride Kanto Denko Kogyo
(SbF[u]5) Solvay Fluor
----------------------------------------------------------------------------------------------------------
Nuclear services UF[u]6 conversion services Nuclear fuel British Nuclear
Electric utilities Fuels
Cameco
Cogema
Tennex
----------------------------------------------------------------------------------------------------------
Life sciences Active pharmaceutical Agrichemicals Avecia
ingredients Pharmaceuticals Degussa
Oxime-based fine Biotech DSM
chemicals Lonza
Fluoroaromatics
Bromoaromatics
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
Electronic chemicals Ultra high purity HF Semiconductors Ashland
Solvents Arch
Inorganic acids E. Merck
High purity solvents Sigma Aldrich
----------------------------------------------------------------------------------------------------------
Performance chemicals HF derivatives Diverse by product type Atotech
Imaging chemicals Fluoroaromatics BASF
Chemical processing Phosphors Solvay
Display chemicals Catalysts
Surface treatment Oxime silanes
Catalysts Hydroxylamine
Sealants
----------------------------------------------------------------------------------------------------------
Specialty waxes Polyethylene waxes Coatings BASF
Petroleum waxes and Inks Clariant
blends Candles Eastman
Tire/Rubber Exxon
Personal care IGI
Packaging Leuna
Schumann-Sasol
----------------------------------------------------------------------------------------------------------
Specialty additives Polyethylene waxes PVC Eastman
Petroleum waxes and Plastics Henkel
blends Reflective coatings PolyOne
PVC lubricant systems
Plastic additives
Luminescent photodyes
----------------------------------------------------------------------------------------------------------
Wafer Interconnect- Semiconductors Applied Materials
fabrication dielectrics Microelectronics Dow Chemical
materials and Interconnect-metals Telecommunications Dow Corning
services Semiconductor packaging Japan Energy
materials JSR
Advanced polymers Material Research
Sapphire substrates Tokyo-Ohka
Anti-reflective coatings Tosoh SMD
Global services VMC/Ulvac
----------------------------------------------------------------------------------------------------------
Specialty Amorphous metal ribbons Electrical components Allegheny Ludlum
electronic and components Distribution and industrial Amotech YuYu
materials transformers AM&T
High frequency Hitachi Metals
magnetics Kawasaki Steel
Metal joining Morgan/VAC
Theft deterrent Toshiba
systems
Printed circuit
boards
----------------------------------------------------------------------------------------------------------
UOP (50%-owned joint Processes Petroleum, ABB Lummus
venture) Catalysts petrochemical, gas Axens
Molecular sieves processing and ExxonMobil
Adsorbents chemical industries Procatalyse
Design of process, Shell/Criterion
plants and equipment Stone & Webster
Customer catalyst Zeochem
manufacturing
- -------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION AND POWER SYSTEMS
Garrett Engine Charge-air systems Turbochargers Passenger car, truck ABB
Boosting Systems Remanufactured components and off-highway Aisin Seiki
OEMs Borg-Warner
Engine manufacturers Hitachi
Aftermarket distributors Holset
and dealers IHI
MHI
----------------------------------------------------------------------------------------------------------
Thermal systems Charge-air coolers Passenger car, truck Behr/McCord
Aluminum radiators and off-highway OEMs Modine
Aluminum cooling Engine manufacturers Valeo
modules Aftermarket distributors
Exhaust gas coolers and dealers
- -------------------------------------------------------------------------------------------------------------------------------
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<Caption>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
Consumer Products Aftermarket Oil, air, fuel, Automotive and heavy AC Delco
Group filters, spark plugs, transmission and coolant vehicle aftermarket channels, Bosch
electronic components and filters OEMs and OES Champion
car care products PCV valves Auto supply retailers Champ Labs
Spark plugs Specialty installers Havoline/Texaco
Wire and cable Mass merchandisers Mann & Hummel
Antifreeze/coolant NGK
Ice-fighter products Peak/Old World
Windshield washer fluids Industries
Waxes, washes and Pennzoil-Quaker
specialty cleaners State
Purolator/Arvin Ind
STP/ArmorAll/
Clorox
Turtle Wax
Various Private
Label
Wix/Dana
Zerex/Valvoline
- -------------------------------------------------------------------------------------------------------------------------------
Friction Materials Friction materials Disc brake pads and shoes Automotive and heavy vehicle Akebono
Aftermarket brake hard Drum brake linings OEMs, OES, brake Dana
parts Brake blocks manufacturers and aftermarket Delphi
Disc and drum brake channels Federal-Mogul
components Mass merchandisers ITT Galfer
Brake hydraulic Installers JBI
components Railway and commercial/ Nisshinbo
Brake fluid military aircraft OEMs TMD
Aircraft brake linings and brake manufacturers Roulunds
Railway linings
- -------------------------------------------------------------------------------------------------------------------------------
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AEROSPACE SALES
Our sales to aerospace customers were 40, 41 and 40 percent of our total
sales in 2002, 2001 and 2000, respectively. Our sales to commercial aerospace
original equipment manufacturers were 9, 12 and 11 percent of our total sales in
2002, 2001 and 2000, respectively. If there were a large decline in sales of
aircraft that use our components, operating results could be negatively
impacted. In addition, our sales to commercial aftermarket customers of
aerospace products and services were 14, 15 and 17 percent of our total sales in
2002, 2001 and 2000, respectively. If there were a large decline in the number
of flight hours for aircraft that use our components or services, operating
results could be negatively impacted. The terrorist attacks on September 11,
2001 resulted in an abrupt downturn in the aviation industry which was already
negatively impacted by a weak economy. This dramatic downturn in the commercial
air transport industry continued to adversely impact the operating results of
our Aerospace segment in 2002. In response, we have accelerated our
cost-reduction actions to mitigate the impact of this downturn.
U.S. GOVERNMENT SALES
Sales to the U.S. Government (principally by our Aerospace segment), acting
through its various departments and agencies and through prime contractors,
amounted to $2,277, $2,491 and $2,219 million in 2002, 2001 and 2000,
respectively, which included sales to the U.S. Department of Defense of $1,833,
$1,631 and $1,548 million in 2002, 2001 and 2000, respectively. U.S. defense
spending increased in 2002 and is also expected to increase in 2003.
In addition to normal business risks, companies engaged in supplying
military and other equipment to the U.S. Government are subject to unusual
risks, including dependence on Congressional appropriations and administrative
allotment of funds, changes in governmental procurement legislation and
regulations and other policies that may reflect military and political
developments, significant changes in contract scheduling, complexity of designs
and the rapidity with which they become obsolete, necessity for constant design
improvements, intense competition for U.S. Government business necessitating
increases in time and investment for design and development, difficulty of
forecasting costs and schedules when bidding on developmental and highly
sophisticated technical work and other factors characteristic of the industry.
Changes are customary over the life of U.S. Government contracts, particularly
development contracts, and generally result in adjustments of contract prices.
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We, like other government contractors, are subject to government
investigations of business practices and compliance with government procurement
regulations. Although such regulations provide that a contractor may be
suspended or barred from government contracts under certain circumstances, and
the outcome of pending government investigations cannot be predicted with
certainty, we are not currently aware of any such investigations that we expect,
individually or in the aggregate, will have a material adverse effect on us. In
addition, we have a proactive business compliance program designed to ensure
compliance and sound business practices.
BACKLOG
Our total backlog at year-end 2002 and 2001 was $7,332 and $7,178 million,
respectively. We anticipate that approximately $6,194 million of the 2002
backlog will be filled in 2003. 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.
COMPETITION
We are subject to active competition in substantially all product and
service areas. Competition is expected to continue in all geographic regions.
Competitive conditions vary widely among the thousands of products and services
provided by us, and vary country by country. Depending on the particular
customer or market involved, our businesses compete on a variety of factors,
such as price, quality, reliability, delivery, customer service, performance,
applied technology, product innovation and product recognition. Brand identity,
service to customers and quality are generally important competitive factors for
our products and services, and there is considerable price competition. Other
competitive factors for certain products 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.
However, a number of our products and services are sold in competition with
those of a large number of other companies, some of which have substantial
financial resources and significant technological capabilities. In addition,
some of our products compete with the captive component divisions of original
equipment manufacturers.
INTERNATIONAL OPERATIONS
We are engaged in manufacturing, sales and research and development mainly
in the United States, Europe, Canada, Asia and Latin America. U.S. exports and
foreign manufactured products are significant to our operations.
Our international operations, including U.S. exports, are potentially
subject to a number of unique risks and limitations, including: fluctuations in
currency value; exchange control regulations; wage and price controls;
employment regulations; foreign investment laws; import and trade restrictions,
including embargoes; and governmental instability. However, we have limited
exposure in high risk countries and have taken action to mitigate these risks.
Financial information related to geographic areas is included in Note 24 of
Notes to Financial Statements in our 2002 Annual Report to Shareowners which is
incorporated herein by reference.
RAW MATERIALS
The principal raw materials used in our operations are generally readily
available. We experienced no significant or unusual problems in the purchase of
key raw materials and commodities in 2002. We are not dependent on any one
supplier for a material amount of our raw materials. However, we are highly
dependent on our suppliers and subcontractors in order to meet commitments to
our customers. In addition, many major components and product equipment items
are procured or subcontracted on a sole-source basis with a number of domestic
and foreign companies. We maintain a qualification and performance surveillance
process to control risk associated with such reliance on third parties. While we
believe that sources of supply for raw materials and components are generally
adequate, it is difficult to predict what effects shortages or price increases
may have in the future. A prolonged and substantial increase above recent
historical levels in petroleum prices would adversely affect our Specialty
Materials businesses which use petroleum byproducts as raw materials. However,
at present,
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we have no reason to believe a shortage of raw materials will cause any material
adverse impact during 2003.
PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS
Our business as a whole, and that of our strategic business units, are not
dependent upon any single patent or related group of patents, or any licenses or
distribution rights. We own, or are licensed under, a large number of patents,
patent applications and trademarks acquired over a period of many years, which
relate to many of our products or improvements to those products and which are
of importance to our business. From time to time, new patents and trademarks are
obtained, and patent and trademark licenses and rights are acquired from others.
We also have distribution rights of varying terms for a number of products and
services produced by other companies. In our judgment, those rights are adequate
for the conduct of our business. We believe that, in the aggregate, the rights
under our patents, trademarks and licenses are generally important to our
operations, but we do not consider any patent, trademark or related group of
patents, or any licensing or distribution rights related to a specific process
or product to be of material importance in relation to our total business.
We have registered trademarks for a number of our products, including such
consumer brands as Honeywell, Prestone, FRAM, Anso and Autolite.
RESEARCH AND DEVELOPMENT
Our research activities are directed toward the discovery and development of
new products and processes, improvements in existing products and processes, and
the development of new uses for existing products.
Research and development expense totaled $757, $832 and $818 million in
2002, 2001 and 2000, respectively. The decrease in research and development
expense in 2002 compared with 2001 relates mainly to lower spending by our
Aerospace segment due primarily to program completions and fewer new program
launches by original equipment manufacturers. Customer-sponsored (principally
the U.S. Government) research and development activities amounted to an
additional $603, $697 and $560 million in 2002, 2001 and 2000, respectively.
ENVIRONMENT
We are subject to various federal, state and local government requirements
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment. It is our policy to comply with these
requirements, and we believe that, as a general matter, 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 in the handling, manufacture, use and disposal
of many substances classified as hazardous or toxic by one or more regulatory
agencies. We believe that, as a general matter, our handling, manufacture, use
and disposal of these substances are in accord with environmental laws and
regulations. It is possible, however, 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 handling, manufacture, use
or disposal of these substances.
Among other environmental requirements, we are subject to the federal
superfund law, and similar state laws, under which we have been designated as a
potentially responsible party that may be liable for cleanup costs associated
with various hazardous waste sites, some of which are on the U.S. Environmental
Protection Agency's superfund priority list. Although, under some court
interpretations of these laws, there is a possibility that a responsible party
might have to bear more than its proportional share of the cleanup costs if it
is unable to obtain appropriate contribution from other responsible parties, we
have not had to bear significantly more than our proportional share in multi-
party situations taken as a whole.
Further information regarding environmental matters is included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in our 2002 Annual Report to Shareowners
9
<Page>
which is incorporated herein by reference and in Item 3. Legal Proceedings of
this Annual Report on Form 10-K.
EMPLOYEES
We have approximately 108,000 employees at December 31, 2002, of which
approximately 63,000 were located in the United States.
ITEM 2. PROPERTIES
We have over 1,000 locations consisting of plants, research laboratories,
sales offices and other facilities. Our headquarters and administrative complex
is located at Morristown, New Jersey. Our plants are generally located to serve
large marketing areas and to provide accessibility to raw materials and labor
pools. Our properties are generally maintained in good operating condition.
Utilization of these plants may vary with sales to customers and other business
conditions; however, no major operating facility is significantly idle. We own
or lease warehouses, railroad cars, barges, automobiles, trucks, airplanes and
materials handling and data processing equipment. We also lease space for
administrative and sales staffs. 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.
Our principal plants, which are owned in fee unless otherwise indicated, are
as follows:
<Table>
AEROSPACE
---------
Glendale, AZ South Bend, IN Albuquerque, NM
(partially leased) Olathe, KS (leased) Rocky Mount, NC
Phoenix, AZ Minneapolis, MN Urbana, OH
Tempe, AZ Plymouth, MN Redmond, WA
Tucson, AZ Teterboro, NJ Toronto, Canada
Torrance, CA Yeovil, Somerset
(partially leased) United Kingdom
Clearwater, FL
AUTOMATION AND CONTROL SOLUTIONS
--------------------------------
Phoenix, AZ Northford, CT Golden Valley, MN
San Diego, CA Freeport, IL Syosset, NY
SPECIALTY MATERIALS
-------------------
Baton Rouge, LA Pottsville, PA Hopewell, VA
Geismar, LA Columbia, SC Seelze, Germany
Moncure, NC Chesterfield, VA Longlaville, France
TRANSPORTATION AND POWER SYSTEMS
--------------------------------
Mexicali, Mexico Thaon-Les-Vosges, France Atessa, Italy
Glinde, Germany Skelmersdale, United
Kingdom
</Table>
ITEM 3. LEGAL PROCEEDINGS
SHAREOWNER LITIGATION -- Honeywell and seven of its current and former
officers were named as defendants in several purported class action lawsuits
filed in the United States District Court for the District of New Jersey (the
Securities Law Complaints). The Securities Law Complaints principally allege
that the defendants violated federal securities laws by purportedly making false
and misleading statements and by failing to disclose material information
concerning Honeywell's financial performance, thereby allegedly causing the
value of Honeywell's stock to be artificially inflated. On January 15, 2002, the
District Court dismissed the consolidated complaint against four of Honeywell's
current and former officers. The Court has granted plaintiffs' motion for class
certification defining the purported class as all purchasers of Honeywell stock
between December 20, 1999 and June 19, 2000.
The parties have agreed to participate in a two day settlement mediation in
April, 2003 in an attempt to resolve the cases without resort to a trial. All
significant discovery in the cases has been stayed pending further order of the
court.
10
<Page>
Notwithstanding our agreement to mediate, we believe there is no factual or
legal basis for the allegations in the Securities Law Complaints. Although it is
not possible at this time to predict the litigation outcome of these cases, we
expect to prevail if the cases are not resolved through mediation. However, an
adverse litigation outcome could be material to our consolidated financial
position or results of operations. As a result of the uncertainty regarding the
outcome of this matter no provision has been made in our financial statements
with respect to this contingent liability.
ENVIRONMENTAL MATTERS -- We are subject to various federal, state and local
government requirements relating to the protection of employee health and safety
and the environment. We believe that, as a general matter, our policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and personal injury to our employees and employees of our
customers and that our handling, manufacture, use and disposal of hazardous or
toxic substances are in accord with environmental laws and regulations. However,
mainly because of past operations and operations of predecessor companies, we,
like other companies engaged in similar businesses, have incurred remedial
response and voluntary cleanup costs for site contamination and are a party to
lawsuits and claims associated with environmental matters, including past
production of products containing toxic substances. Additional lawsuits, claims
and costs involving environmental matters are likely to continue to arise in the
future.
With respect to environmental matters involving site contamination, we
continually conduct studies, individually at our owned sites, and jointly as a
member of industry groups at non-owned sites, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy
to record appropriate liabilities for environmental matters when environmental
assessments are made or remedial efforts or damage claim payments are probable
and the costs can be reasonably estimated. With respect to site contamination,
the timing of these accruals is generally no later than the completion of
feasibility studies. We expect to fund expenditures for these matters from
operating cash flow. The timing of cash expenditures depends on a number of
factors, including the timing of litigation and settlements of personal injury
and property damage claims, regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.
Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations. However,
considering our past experience and existing reserves, we do not expect that
these matters will have a material adverse effect on our consolidated financial
position.
ASBESTOS MATTERS -- Like many other industrial companies, Honeywell is a
defendant in personal injury actions related to asbestos. We did not mine or
produce asbestos, nor did we make or sell insulation products or other
construction materials that have been identified as the primary cause of
asbestos related disease in the vast majority of claimants. Rather, we made
several products that contained small amounts of asbestos.
Honeywell's Bendix Friction Materials business manufactured automotive brake
pads that included asbestos in an encapsulated form. There is a group of
potential claimants consisting largely of professional brake mechanics. From
1981 through December 31, 2002, we have resolved approximately 60,000 Bendix
claims at an average indemnity cost per claim of approximately two thousand
dollars. Through the second quarter of 2002, Honeywell had no out-of-pocket
costs for these cases since its insurance deductible was satisfied many years
ago. Beginning with claim payments made in the third quarter of 2002, Honeywell
began advancing indemnity and defense claim costs which amounted to
approximately $70 million in payments in the second half of 2002. A substantial
portion of this amount is expected to be reimbursed by insurance and $57 million
has been recorded as a receivable. There are currently approximately 50,000
claims pending and we have no reason to believe that the historic rate of
dismissal will change.
On January 30, 2003, Honeywell and Federal-Mogul Corp. (Federal-Mogul)
entered into a letter of intent (LOI) pursuant to which Federal-Mogul would
acquire Honeywell's automotive Bendix Friction Materials (Bendix) business, with
the exception of certain U.S.-based assets. In exchange, Honeywell would receive
a permanent channeling injunction shielding it from all current and future
personal injury asbestos liabilities related to Honeywell's Bendix business.
11
<Page>
Federal-Mogul, its U.S. subsidiaries and certain of its United Kingdom
subsidiaries voluntarily filed for financial restructuring under Chapter 11 of
the U.S. Bankruptcy Code in October 2001. Federal-Mogul will seek to establish
one or more trusts under Section 524(g) of the U.S. Bankruptcy Code as part of
its reorganization plan, including a trust for the benefit of Bendix asbestos
claimants. The reorganization plan to be submitted to the Bankruptcy Court for
approval will contemplate that the U.S. Bankruptcy Court in Delaware would issue
an injunction in favor of Honeywell that would channel to the Bendix 524(g)
trust all present and future asbestos claims relating to Honeywell's Bendix
business. The 524(g) trust created for the benefit of the Bendix claimants would
receive the rights to proceeds from Honeywell's Bendix related insurance
policies and would make these proceeds available to the Bendix claimants.
Honeywell would have no obligation to contribute any additional amounts toward
the settlement or resolution of Bendix related asbestos claims.
In the fourth quarter of 2002, we recorded a charge of $167 million
consisting of a $131 million reserve for the sale of Bendix to Federal-Mogul,
our estimate of asbestos related liabilities net of insurance recoveries and
costs to complete the anticipated transaction with Federal-Mogul. Completion of
the transaction contemplated by the LOI is subject to the negotiation of
definitive agreements, the confirmation of Federal-Mogul's plan of
reorganization by the Bankruptcy Court, the issuance of a final, non-appealable
524(g) channeling injunction permanently enjoining any Bendix related asbestos
claims against Honeywell, and the receipt of all required governmental
approvals. We do not believe that completion of such transaction would have a
material adverse impact on our consolidated results of operations or financial
position. There can be no assurance, however, that the transaction contemplated
by the LOI will be completed. Honeywell presently has $2 billion of insurance
coverage remaining with respect to Bendix related asbestos claims. Although it
is impossible to predict the outcome of pending or future claims, in light of
our potential exposure, our prior experience in resolving these claims, and our
insurance coverage, we do not believe that the Bendix related asbestos claims
will have a material adverse effect on our consolidated results of operations or
financial position.
Another source of claims is refractory products (high temperature bricks and
cement) sold largely to the steel industry in the East and Midwest by North
American Refractories Company (NARCO), a business we owned from 1979 to 1986.
Less than 2 percent of NARCO's products contained asbestos.
When we sold the NARCO business in 1986, we agreed to indemnify NARCO with
respect to personal injury claims for products that had been discontinued prior
to the sale (as defined in the sale agreement). NARCO retained all liability for
all other claims. NARCO had resolved approximately 176,000 claims through
January 4, 2002, the date NARCO filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code, at an average cost per claim of two thousand two hundred
dollars. Of those claims, 43 percent were dismissed on the ground that there was
insufficient evidence that NARCO was responsible for the claimant's asbestos
exposure. As of the date of NARCO's bankruptcy filing, there were approximately
116,000 remaining claims pending against NARCO, including approximately 7
percent in which Honeywell was also named as a defendant. Since 1983, Honeywell
and our insurers have contributed to the defense and settlement costs associated
with NARCO claims. We have approximately $2 billion of insurance remaining that
can be specifically allocated to NARCO related liability.
As a result of the NARCO bankruptcy filing, all of the claims pending
against NARCO are automatically stayed pending the reorganization of NARCO. In
addition, because the claims pending against Honeywell necessarily will impact
the liabilities of NARCO, because the insurance policies held by Honeywell are
essential to a successful NARCO reorganization, and because Honeywell has
offered to commit the value of those policies to the reorganization, the
bankruptcy court has temporarily enjoined any claims against Honeywell, current
or future, related to NARCO. Although the stay has been extended eleven times
since January 4, 2002, there is no assurance that such stay will remain in
effect. In connection with NARCO's bankruptcy filing, we paid NARCO's parent
company $40 million and agreed to provide NARCO with up to $20 million in
financing. We also agreed to pay $20 million to NARCO's parent company upon the
filing of a plan of reorganization for NARCO acceptable to Honeywell, and to pay
NARCO's parent company $40 million, and to forgive any outstanding NARCO
indebtedness, upon the confirmation and consummation of such a plan.
As a result of ongoing negotiations with counsel representing NARCO related
asbestos claimants regarding settlement of all pending and potential NARCO
related asbestos claims against Honeywell,
12
<Page>
we have reached definitive agreements or agreements in principle with
approximately 236,000 claimants, which represents approximately 90 percent of
the approximately 260,000 current claimants who are now expected to file a claim
as part of the NARCO reorganization process. We are also in discussions with the
NARCO Committee of Asbestos Creditors on Trust Distribution Procedures for
NARCO. We believe that, as part of the NARCO plan of reorganization, a trust
will be established pursuant to these Trust Distribution Procedures for the
benefit of all asbestos claimants, current and future. If the trust is put in
place and approved by the court as fair and equitable, Honeywell as well as
NARCO will be entitled to a permanent channeling injunction barring all present
and future individual actions in state or federal courts and requiring all
asbestos related claims based on exposure to NARCO products to be made against
the federally-supervised trust. As part of its ongoing settlement negotiations,
Honeywell is seeking to cap its annual contributions to the trust with respect
to future claims at a level that would not have a material impact on Honeywell's
operating cash flows. Given the substantial progress of negotiations between
Honeywell and NARCO related asbestos claimants and between Honeywell and the
Committee of Asbestos Creditors during the fourth quarter of 2002, Honeywell has
developed an estimated liability for settlement of pending and future asbestos
claims.
During the fourth quarter 2002, Honeywell recorded a charge of $1.4 billion
for NARCO related asbestos litigation charges, net of insurance recoveries. This
charge consists of the estimated liability to settle current asbestos related
claims, the estimated liability related to future asbestos related claims
through 2018 and obligations to NARCO's parent, net of insurance recoveries of
$1.8 billion.
The estimated liability for current claims is based on terms and conditions,
including evidentiary requirements, in definitive agreements or agreements in
principle with approximately 90 percent of current claimants. Once finalized,
settlement payments with respect to current claims are expected to be made over
approximately a four-year period.
The liability for future claims estimates the probable value of future
asbestos related bodily injury claims asserted against NARCO over a 15 year
period and obligations to NARCO's parent as discussed above. In light of the
uncertainties inherent in making long-term projections we do not believe that we
have a reasonable basis for estimating asbestos claims beyond 2018 under
Statement of Financial Accounting Standard No. 5 'Accounting for Contingencies.'
Honeywell retained the expert services of Hamilton, Rabinovitz and Alschuler,
Inc. (HR&A) to project the probable number and value, including trust claim
handling costs, of asbestos related future liabilities. The methodology used to
estimate the liability for future claims has been commonly accepted by numerous
courts and is the same methodology that is utilized by the expert who is
routinely retained by the asbestos claimants committee in asbestos related
bankruptcies. The valuation methodology includes an analysis of the population
likely to have been exposed to asbestos containing products, epidemiological
studies to estimate the number of people likely to develop asbestos related
diseases, NARCO claims filing history and the pending inventory of NARCO
asbestos related claims.
Honeywell has substantial insurance that reimburses it for portions of the
costs incurred to settle NARCO related claims and court judgments as well as
defense 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. Over one-half of this coverage is with Equitas and
other London-based insurance companies with a majority of this coverage subject
to a coverage-in-place agreement. Coverage-in-place agreements are settlement
agreements between policyholders and the insurers specifying the terms and
conditions under which coverage will be applied as claims are presented for
payment. These agreements govern such things as what events will be deemed to
trigger coverage, how liability for a claim will be allocated among insurers and
what procedures the policyholder must follow in order to obligate the insurer to
pay claims. We conducted an analysis to determine the amount of insurance that
we estimate is probable that we will recover in relation to payment of current
and projected future claims. While the substantial majority of our insurance
carriers are solvent, some of our individual carriers are insolvent, which has
been considered in our analysis of probable recoveries. Some of our insurance
carriers have challenged our right to enter into settlement agreements resolving
all NARCO related asbestos claims against Honeywell. However, we believe there
is no factual or legal basis for such challenges and we believe that it is
probable that we will prevail in the resolution of, or in any litigation that is
brought regarding these disputes and have recognized approximately $900 million
in probable insurance recoveries from these carriers. We made
13
<Page>
judgments concerning insurance coverage that we believe are reasonable and
consistent with our historical dealings with our insurers, our knowledge of any
pertinent solvency issues surrounding insurers and various judicial
determinations relevant to our insurance programs. Based on our analysis, we
recorded insurance recoveries that are deemed probable through 2018 of
$1.8 billion.
Projecting future events is subject to many uncertainties that could cause
the NARCO related asbestos liabilities to be higher or lower than those
projected and recorded. There is no assurance that ongoing settlement
negotiations will be successfully completed, that a plan of reorganization will
be proposed or confirmed, that insurance recoveries will be timely or whether
there will be any NARCO related asbestos claims beyond 2018. Given the inherent
uncertainty in predicting future events, we plan to review our estimates
periodically, and update them based on our experience and other relevant
factors. Similarly we will reevaluate our projections concerning our probable
insurance recoveries in light of any changes to the projected liability or other
developments that may impact insurance recoveries.
OTHER MATTERS -- We are subject to a number of other lawsuits,
investigations and claims (some of which involve substantial amounts) arising
out of the conduct of our business. With respect to all these other matters,
including those relating to commercial transactions, government contracts,
product liability and non-environmental health and safety matters, while the
ultimate results of these lawsuits, investigations and claims cannot be
determined, we do not expect that these matters will have a material adverse
effect on our consolidated results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Honeywell, listed as follows, are elected annually
by the Board of Directors. There are no family relationships among them.
<Table>
<Caption>
NAME, AGE,
DATE FIRST
ELECTED AN
EXECUTIVE OFFICER BUSINESS EXPERIENCE
----------------- -----------------------------------------------------------
David M. Cote (a), 50 Chairman of the Board and Chief Executive Officer since
2002 July 2002. President and Chief Executive Officer from
February 2002 to June 2002. Chairman of the Board,
President and Chief Executive Officer of TRW
(manufacturer of aerospace and automotive products) from
August 2001 to February 2002. President and Chief
Executive Officer of TRW from February 2001 to July 2001.
President and Chief Operating Officer of TRW from
November 1999 to January 2001. Senior Vice President of
General Electric Company and President and Chief
Executive Officer of GE Appliances from June 1996 to
November 1999.
Dr. Nance K. Dicciani, 55 President and Chief Executive Officer Specialty Materials
2001 since November 2001. Senior Vice President and Business
Group Executive of Chemical Specialties and Director,
European Region of Rohm and Haas (chemical company) from
June 1998 until October 2001. Vice President and General
Manager of Monomers Division of Rohm and Haas from May
1996 until May 1998.
</Table>
- ---------
(a) Also a Director.
14
<Page>
<Table>
<Caption>
NAME, AGE,
DATE FIRST
ELECTED AN
EXECUTIVE OFFICER BUSINESS EXPERIENCE
----------------- -----------------------------------------------------------
Robert J. Gillette, 43 President and Chief Executive Officer Transportation and
2001 Power Systems since July 2001. President of Garrett
Engine Boosting Systems from July 2000 until June 2001.
Vice President and General Manager of Engineering
Plastics from December 1996 until June 2000.
J. Kevin Gilligan, 48 President and Chief Executive Officer Automation and
2001 Control Solutions since July 2001. President of Home and
Building Control from January 2000 until June 2001.
President of Home and Building Control's Solutions and
Services business from October 1997 until December 1999.
Robert D. Johnson, 55 President and Chief Executive Officer Aerospace since July
1998 2001. Chief Operating Officer and Executive Vice
President, Aerospace, from December 1999 to June 2001.
President and Chief Executive Officer of AlliedSignal
Aerospace from April 1999 to November 1999.
President -- Aerospace Marketing, Sales and Services from
January 1999 to March 1999. President -- Aerospace
Electronic & Avionics Systems from October 1997 to
December 1998.
Larry E. Kittelberger, 54 Senior Vice President Administration and Chief Information
2001 Officer since August 2001. Senior Vice President and
Chief Information Officer of Lucent Technologies Inc.
from November 1999 until August 2001. Senior Vice
President and Chief Information Officer of AlliedSignal
Inc from February 1999 until November 1999. Vice
President and Chief Information Officer from August 1995
to January 1999.
Peter M. Kreindler, 57 Senior Vice President and General Counsel since
1992 March 1992. Secretary from December 1994 through
November 1999.
Richard F. Wallman, 51 Senior Vice President and Chief Financial Officer since
1995 March 1995.
Thomas W. Weidenkopf, 44 Senior Vice President Human Resources and Communications
2002 since April 2002. Vice President of Human Resources of
Aerospace from March 1999 to March 2002. Vice President,
Human Resources -- Aerospace Marketing, Sales & Services
from March 1997 to February 1999.
</Table>
15
<Page>
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market and dividend information for Honeywell's common stock is included in
Note 25 of Notes to Financial Statements of our 2002 Annual Report to
Shareowners which is incorporated herein by reference.
The number of record holders of our common stock at December 31, 2002 was
89,758.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 25 of our 2002 Annual Report to Shareowners
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
'Management's Discussion and Analysis' on pages 26 through 39 of our 2002
Annual Report to Shareowners is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information relating to market risk is included under the caption 'Financial
Instruments' in 'Management's Discussion and Analysis' on pages 36 and 37 of our
2002 Annual Report to Shareowners, and such information is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated February 6, 2003, appearing on pages 40 through
66 of our 2002 Annual Report to Shareowners, are incorporated herein by
reference. With the exception of the aforementioned information and the
information incorporated by reference in Items 1, 5, 6, 7 and 7A, the 2002
Annual Report to Shareowners is not to be deemed filed as part of this
Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the Directors of Honeywell, as well as information
relating to compliance with Section 16(a) of the Securities Exchange Act of
1934, will be contained in our definitive Proxy Statement involving the election
of the Directors which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after December 31, 2002, and
such information is incorporated herein by reference. Certain other information
relating to the Executive Officers of Honeywell appears in Part I. of this Form
10-K Annual Report under the heading 'Executive Officers of the Registrant'.
We maintain an internet website at http://www.honeywell.com. 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 under the heading 'Investor Relations' (see 'SEC Filings') as soon
as reasonably practicable after they are filed with, or furnished to, the
Securities and Exchange Commission. Honeywell's Code of Business Conduct,
Corporate Governance Guidelines and Charters of the Committees of the Board of
Directors are also available, free of charge, on our website under the heading
'Investor Relations' (see 'Corporate Governance'). Honeywell's Code of Business
Conduct applies to all Honeywell directors, officers (including the Chief
Executive Officer, Chief Financial Officer and Controller) and employees.
Amendments to or waivers of the Code of
16
<Page>
Business Conduct will be published on our website within five business days of
such amendment or waiver.
The members of the Audit Committee of our Board of Directors are: Russell E.
Palmer (Chair), Hans W. Becherer, Marshall N. Carter, Ann M. Fudge, James J.
Howard, John R. Stafford, and Michael W. Wright. The Board has determined that
each of the members of the Audit Committee satisfies the financial literacy
requirements of the New York Stock Exchange and that Mr. Palmer satisfies the
'audit committee financial expert' criteria established by the Securities and
Exchange Commission and the 'financial expert' criteria proposed by the New York
Stock Exchange. Mr Palmer is 'independent' as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is contained in the Proxy
Statement referred to above in 'Item 10. Directors and Executive Officers of the
Registrant,' and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information relating to security ownership of certain beneficial owners and
management and equity compensation plans is contained in the Proxy Statement
referred to above in 'Item 10. Directors and Executive Officers of the
Registrant,' and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions is
contained in the Proxy Statement referred to above in 'Item 10. Directors and
Executive Officers of the Registrant,' and such information is incorporated
herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
Within the 90 days prior to the filing of this report, Honeywell management,
including the Chief Executive Officer and Chief Financial Officer, conducted an
evaluation of the effectiveness of our disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that such disclosure
controls and procedures are effective in alerting them on a timely basis to
material information relating to Honeywell required to be included in
Honeywell's periodic filings under the Exchange Act. There have been no
significant changes in internal controls or in factors that could significantly
affect internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses, subsequent to the date the
Chief Executive Officer and Chief Financial Officer completed their evaluation.
ITEM 15. [RESERVED]
ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information relating to fees paid to and services performed by
PricewaterhouseCoopers LLP in 2002 and 2001 and our Audit Committee's
pre-approval policies and procedures with respect to non-audit services are
contained in the Proxy Statement referred to above in 'Item 10. Directors and
Executive Officers of the Registrant,' and such information is incorporated
herein by reference.
17
<Page>
PART IV.
ITEM 17. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<Table>
<Caption>
PAGE NUMBER IN
ANNUAL REPORT
TO SHAREOWNERS
--------------
(a)(1.) Consolidated Financial Statements:
Incorporated by reference to the 2002 Annual
Report to Shareowners:
Consolidated Statement of Operations for the
years ended December 31, 2002, 2001 and
2000 40
Consolidated Balance Sheet at December 31,
2002 and 2001 41
Consolidated Statement of Cash Flows for the
years ended December 31, 2002, 2001 and
2000 42
Consolidated Statement of Shareowners'
Equity for the years ended December 31,
2002, 2001 and 2000 43
Notes to Financial Statements 44
Report of Independent Accountants 66
</Table>
<Table>
<Caption>
PAGE NUMBER
IN FORM 10-K
------------
(a)(2.) Consolidated Financial Statement Schedules:
Report of Independent Accountants on Financial
Statement Schedule 25
Schedule II -- Valuation and Qualifying Accounts 26
</Table>
All other financial statement schedules have been omitted because they are
not applicable to us or the required information is shown in the consolidated
financial statements or notes thereto.
(a)(3.) Exhibits
See the Exhibit Index on pages 22 through 24 of this Form 10-K Annual
Report.
(b) Reports on Form 8-K
During the three months ended December 31, 2002, a Current Report on Form
8-K was filed on December 30, reporting the contribution of $700 million of our
stock to our U.S. pension plans.
18
<Page>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HONEYWELL INTERNATIONAL INC.
March 6, 2003 By: /s/ JOHN J. TUS
-----------------------------------
John J. Tus
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
NAME
----
*
-------------------------------------------
David M. Cote
Chairman of the Board,
Chief Executive Officer
and Director
*
-------------------------------------------
Hans W. Becherer
Director
*
-------------------------------------------
Gordon M. Bethune
Director
*
-------------------------------------------
Marshall N. Carter
Director
*
-------------------------------------------
Jaime Chico Pardo
Director
*
-------------------------------------------
Ann M. Fudge
Director
/s/ RICHARD F. WALLMAN
-------------------------------------------
Richard F. Wallman
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
*By: /s/ RICHARD F. WALLMAN
------------------------------------------
(Richard F. Wallman
Attorney-in-fact)
*
-------------------------------------------
James J. Howard
Director
*
-------------------------------------------
Bruce Karatz
Director
*
-------------------------------------------
Robert P. Luciano
Director
*
-------------------------------------------
Russell E. Palmer
Director
*
-------------------------------------------
Ivan G. Seidenberg
Director
*
-------------------------------------------
John R. Stafford
Director
*
-------------------------------------------
Michael W. Wright
Director
/s/ JOHN J. TUS
-------------------------------------------
John J. Tus
Vice President and Controller
(Principal Accounting Officer)
March 6, 2003
19
<Page>
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, David M. Cote, Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K of Honeywell
International Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the 'Evaluation Date'); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 6, 2003 By: /s/ DAVID M. COTE
.................................
David M. Cote
Chief Executive Officer
20
<Page>
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Richard F. Wallman, Chief Financial Officer, certify that:
1. I have reviewed this annual report on Form 10-K of Honeywell
International Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the 'Evaluation Date'); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 6, 2003 By: /s/ RICHARD F. WALLMAN
.................................
Richard F. Wallman
Chief Financial Officer
21
<Page>
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2 Omitted (Inapplicable)
3(i) Restated Certificate of Incorporation of Honeywell
(incorporated by reference to Exhibit 3(i) to Honeywell's
Form 8-K filed December 3, 1999)
3(ii) By-laws of Honeywell, as amended (incorporated by reference
to Exhibit 3(ii) to Honeywell's Form 10-Q for the quarter
ended September 30, 2001)
4 Honeywell 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.
9 Omitted (Inapplicable)
10.1 Master Support Agreement, dated February 26, 1986, as
amended and restated January 27, 1987, as further amended
July 1, 1987 and as again amended and restated
December 7, 1988, by and among Honeywell, Wheelabrator
Technologies Inc., certain subsidiaries of Wheelabrator
Technologies Inc., The Henley Group, Inc. and Henley Newco
Inc. (incorporated by reference to Exhibit 10.1 to
Honeywell's Form 10-K for the year ended December 31,
1988)
10.2* Deferred Compensation Plan for Non-Employee Directors of
AlliedSignal Inc., as amended (incorporated by reference
to Exhibit 10.2 to Honeywell's Form 10-K for the year
ended December 31, 1996)
10.3* Stock Plan for Non-Employee Directors of AlliedSignal Inc.,
as amended (incorporated by reference to Exhibit C to
Honeywell's Proxy Statement, dated March 10, 1994, filed
pursuant to Rule 14a-6 of the Securities Exchange Act of
1934)
10.4* 1985 Stock Plan for Employees of AlliedSignal Inc. and its
Subsidiaries, as amended (incorporated by reference to
Exhibit 19.3 to Honeywell's Form 10-Q for the quarter
ended September 30, 1991)
10.5* AlliedSignal Inc. Incentive Compensation Plan for Executive
Employees, as amended (incorporated by reference to
Exhibit B to Honeywell's Proxy Statement, dated March 10,
1994, filed pursuant to Rule 14a-6 of the Securities
Exchange Act of 1934, and to Exhibit 10.5 to Honeywell's
Form 10-Q for the quarter ended June 30, 1999)
10.6* Supplemental Non-Qualified Savings Plan for Highly
Compensated Employees of Honeywell International Inc. and
its Subsidiaries, as amended and restated (filed herewith)
10.7* AlliedSignal Inc. Severance Plan for Senior Executives, as
amended and restated (incorporated by reference to
Exhibit 10.7 to Honeywell's Form 10-K for the year ended
December 31, 2000)
10.8* Salary and Incentive Award Deferral Plan for Selected
Employees of Honeywell International Inc. and its
Affiliates, as amended and restated (filed herewith)
</Table>
22
<Page>
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.9* 1993 Stock Plan for Employees of Honeywell International
Inc. and its Affiliates (incorporated by reference to
Exhibit A to Honeywell's Proxy Statement, dated March 10,
1994, filed pursuant to Rule 14a-6 of the Securities
Exchange Act of 1934)
10.10 364-Day Credit Agreement dated as of November 27, 2002 among
Honeywell, the initial lenders named therein, Citibank,
N.A., as administrative agent, JPMorgan Chase Bank,
Deutsche Bank AG, New York Branch, Bank of America, N.A.
and Barclays Bank PLC, as syndication agents, and Salomon
Smith Barney Inc., as lead arranger and book manager, as
amended (filed herewith)
10.11 Amendment No. 1 to the Five-Year Credit Agreement dated as
of November 27, 2002 among Honeywell, the initial lenders
named therein, Citibank, N.A., as administrative agent,
JPMorgan Chase Bank, Deutsche Bank AG and Bank of America,
N.A., as syndication agents, and Salomon Smith Barney
Inc., as lead arranger and book manager (filed herewith)
10.12* Honeywell International Inc. Supplemental Pension Plan, as
amended and restated (incorporated by reference to
Exhibit 10.13 to Honeywell's Form 10-K for the year ended
December 31, 2000)
10.13* Employment Agreement dated as of December 1, 1999 between
Honeywell and Michael R. Bonsignore (incorporated by
reference to Exhibit 10.14 to Honeywell's Form 8-K filed
December 3, 1999)
10.14* Long Term Performance Plan for Key Executives of Honeywell
International Inc. (incorporated by reference to Exhibit
10.16 to Honeywell's Form 10-Q for the quarter ended
March 31, 2000)
10.15* Honeywell International Inc. Supplemental Executive
Retirement Plan for Executives in Career Band 6 and Above
(incorporated by reference to Exhibit 10.16 to Honeywell's
Form 10-K for the year ended December 31, 2000)
10.16* Honeywell Supplemental Defined Benefit Retirement Plan, as
amended and restated (incorporated by reference to
Exhibit 10.17 to Honeywell's Form 10-K for the year ended
December 31, 2000)
10.17* Form of Escrow Agreement used to secure certain supplemental
retirement benefits for certain executive officers of
Honeywell (incorporated by reference to Exhibit 10.18 to
Honeywell's Form 10-K for the year ended December 31,
2000)
10.18* Form of Promissory Note representing loans to certain
executive officers of Honeywell of required withholding
taxes relating to the securing of certain supplemental
retirement benefits (incorporated by reference to Exhibit
10.19 to Honeywell's Form 10-K for the year ended
December 31, 2000)
10.19* Honeywell International Inc. Severance Plan for Corporate
Staff Employees (Involuntary Termination Following a
Change in Control), as amended and restated (filed
herewith)
10.20* Employment Agreement dated as of July 3, 2001 between
Honeywell and Lawrence A. Bossidy (incorporated by
reference to Exhibit 10.21 to Honeywell's Form 10-Q for
the quarter ended June 30, 2001)
</Table>
23
<Page>
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.21* Early Retirement Agreement dated as of July 3, 2001 between
Honeywell and Michael R. Bonsignore (incorporated by
reference to Exhibit 10.22 to Honeywell's Form 10-Q for
the quarter ended June 30, 2001)
10.22* Settlement Agreement between Honeywell International Inc.,
Honeywell Europe S.A. and their affiliates and
Giannantonio Ferrari, dated July 27, 2001 (incorporated
by reference to Exhibit 10.23 to Honeywell's Form 10-Q for
the quarter ended September 30, 2001)
10.23* 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)
10.24* Employment Separation Agreement and Release dated
February 18, 2002, between Honeywell and Dr. Barry C.
Johnson (incorporated by reference to Exhibit 10.25 to
Honeywell's Form 10-Q for the quarter ended March 31,
2002)
11 Omitted (Inapplicable)
12 Statement re: Computation of Ratio of Earnings to Fixed
Charges (filed herewith)
13 Pages 25 through 66 of Honeywell's 2002 Annual Report to
Shareowners (filed herewith)
16 Omitted (Inapplicable)
18 Omitted (Inapplicable)
21 Subsidiaries of the Registrant (filed herewith)
22 Omitted (Inapplicable)
23 Consent of PricewaterhouseCoopers LLP (filed herewith)
24 Powers of Attorney (filed herewith)
99.1 Certification of Principal Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
99.2 Certification of Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
</Table>
- ---------
The Exhibits identified above with an asterisk(*) are management contracts
or compensatory plans or arrangements.
24
<Page>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareowners of
HONEYWELL INTERNATIONAL INC.
Our audits of the consolidated financial statements referred to in our
report dated February 6, 2003, appearing in the 2002 Annual Report to
Shareowners of Honeywell International Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed in
Item 17(a)(2) of this Form 10-K. In our opinion, the Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 6, 2003
25
<Page>
HONEYWELL INTERNATIONAL INC
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2002
(IN MILLIONS)
<Table>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Balance December 31, 1999................................... $ 84
Provision charged to income............................. 52
Deductions from reserves(1)............................. (37)
----
Balance December 31, 2000................................... 99
Provision charged to income............................. 84
Deductions from reserves(1)............................. (55)
----
Balance December 31, 2001................................... 128
Provision charged to income............................. 109
Deductions from reserves(1)............................. (90)
----
Balance December 31, 2002................................... $147
----
----
</Table>
- ---------
(1) Represents uncollectible accounts written off, less recoveries, translation
adjustments and reserves acquired.
26
STATEMENT OF DIFFERENCES
------------------------
The British pound sterling sign shall be expressed as.................. 'L'
The Japanese Yen sign shall be expressed as............................ 'Y'
The Euro sign shall be expressed as.................................... 'E'
The registered trademark symbol shall be expressed as.................. 'r'
Characters normally expressed as subscript shall be preceded by........ [u]