HONEYWELL INTERNATIONAL INC

Previous wording

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell, we, us, our, or the Company) for the three and six months ended June 30, 2024. The financial information as of June 30, 2024, should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2023, contained in our 2023 Annual Report on Form 10-K. See Note 3 Acquisitions and Divestitures of Notes to Consolidated Financial Statements for a discussion of acquisition and divestiture activity during the six months ended June 30, 2024. Certain prior year amounts are reclassified to conform to the current year presentation.

Current wording

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell, we, us, our, or the Company) for the three and nine months ended September 30, 2024. The financial information as of September 30, 2024, should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2023, contained in our 2023 Annual Report on Form 10-K. See Note 3 Acquisitions, Divestitures and Assets and Liabilities Held for Sale of Notes to Consolidated Financial Statements for a discussion of acquisition and divestiture activity during the nine months ended September 30, 2024. Certain prior year amounts are reclassified to conform to the current year presentation.

Previous wording

We continue to monitor the impacts of ongoing macroeconomic conditions and geopolitical events. Global conflicts continue to create volatility in global financial and energy markets and contribute to supply chain shortages adding to the inflationary pressures in the global economy. We continue to actively collaborate with our suppliers to minimize impacts of supply shortages on our manufacturing capabilities.

Current wording

We continue to monitor the impacts of ongoing macroeconomic conditions and geopolitical events. Global conflicts, tariffs, labor disruptions, and regulations continue to create volatility in global markets and contribute to supply chain shortages and pricing volatility. Inflationary pressures from earlier tariffs and sanctions are subsiding but the risk of supplier price volatility remains. We continue to actively collaborate with our suppliers to minimize shortages and reduce supply and price volatility. Slowing global growth has temporarily alleviated pressure on logistics, freight, and service capacities.

Previous wording

•Higher direct and indirect material costs and higher labor costs of approximately $0.3 billion or 3%,

Current wording

•Higher direct and indirect material costs and higher labor costs of approximately $0.2 billion or 4%, and

Previous wording

Cost of products and services sold increased due to higher direct and indirect material costs and higher labor costs.

Current wording

•Higher direct and indirect material costs and higher labor costs of approximately $0.6 billion or 4%, and

Previous wording

•Partially offset by higher productivity of approximately $0.1 billion or 1%.

Current wording

•Partially offset by higher productivity of approximately $0.2 billion or 1%.

Previous wording

Gross margin increased by approximately $0.2 billion and gross margin percentage increased 40 basis points to 38.9% compared to 38.5% for the same period of 2023.

Current wording

Gross margin increased by approximately $0.2 billion and gross margin percentage increased 10 basis points to 38.5% compared to 38.4% for the same period of 2023.

Previous wording

Gross margin increased by approximately $0.4 billion and gross margin percentage increased 60 basis points to 38.8% compared to 38.2% for the same period of 2023.

Current wording

Gross margin increased by approximately $0.6 billion and gross margin percentage increased 40 basis points to 38.7% compared to 38.3% for the same period of 2023.

Previous wording

The effective tax rate remained unchanged primarily driven by increased benefits from taxes on non-U.S. earnings, offset by incremental tax expense from tax reserve activity.

Current wording

The effective tax rate decreased 60 basis-points primarily driven by incremental expense from tax reserve activity and increased benefit from taxes on non-U.S. earnings, partially offset by a nondeductible impairment loss on assets held for sale.

Previous wording

The effective tax rate decreased 20 basis-points primarily driven by increased benefits from taxes on non-U.S. earnings.

Current wording

The effective tax rate decreased 20 basis-points primarily driven by increased benefits from taxes on non-U.S. earnings and employee share-based compensation, partially offset by a nondeductible impairment loss on assets held for sale.

Previous wording

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

Current wording

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

Previous wording

•Partially offset by higher interest expense (loss of $0.07 after tax).

Current wording

•Partially offset by higher interest expense ($0.24 after tax), and

Previous wording

During the first quarter of 2024, the Company realigned certain of its business units as reflected in Note 18 Segment Financial Data, which impacts the composition of its reportable segments. The Company recast historical periods to reflect this change in segment presentation. See Note 18 Segment Financial Data to Notes to Consolidated Financial Statements for further discussion.

Current wording

During the first quarter of 2024, the Company realigned certain of its business units as reflected in Note 18 Segment Financial Data, which impacted the composition of its reportable segments. The Company recast historical periods to reflect this change in segment presentation. See Note 18 Segment Financial Data of Notes to Consolidated Financial Statements for further discussion.

Previous wording

Sales increased $1,108 million due to higher organic sales of $504 million in Commercial Aviation Aftermarket driven by higher sales volumes in air transport due to an increase in flight hours and higher organic sales of $412 million in Defense and Space driven by higher sales volumes due to increased shipments.

Current wording

Sales increased $413 million due to higher organic sales of $176 million in Defense and Space driven by higher sales volumes due to increased shipments and higher organic sales of $124 million in Commercial Aviation Aftermarket driven by increased pricing in air transport. Additionally, the acquisitions of CAES and Civitanavi Systems contributed $59 million to sales in the three months ended September 30, 2024.

Previous wording

Sales increased $550 million due to higher organic sales of $267 million in Commercial Aviation Aftermarket driven by higher sales volumes in air transport due to an increase in flight hours and higher organic sales of $225 million in Defense and Space driven by higher sales volumes due to increased shipments.

Current wording

Sales increased $1,521 million due to higher organic sales of $629 million in Commercial Aviation Aftermarket driven by higher sales volumes in air transport due to an increase in flight hours and higher organic sales of $588 million in Defense and Space driven by higher sales volumes due to increased shipments.

Previous wording

Segment profit increased $334 million and segment margin percentage increased 40 basis points to 27.7% compared to 27.3% for the same period of 2023.

Current wording

Segment profit increased $448 million and segment margin percentage increased 30 basis points to 27.7% compared to 27.4% for the same period of 2023.

Previous wording

Sales decreased $221 million due to lower organic sales of $165 million in Warehouse and Workflow Solutions driven by lower demand for projects and lower organic sales of $49 million in Sensing and Safety Technologies driven by lower demand for personal protective equipment.

Current wording

Sales decreased $129 million due to lower organic sales of $96 million in Warehouse and Workflow Solutions driven by lower demand for projects and lower organic sales of $47 million in Sensing and Safety Technologies driven by lower demand for personal protective equipment.

Previous wording

Segment profit decreased $179 million and segment margin percentage decreased 130 basis points to 19.1% compared to 20.4% for the same period in 2023.

Current wording

Segment profit decreased $11 million and segment margin percentage increased 60 basis points to 20.3% compared to 19.7% for the same period in 2023.

Previous wording

Sales decreased $546 million due to lower organic sales of $419 million in Warehouse and Workflow Solutions driven by lower demand for projects and lower organic sales of $89 million in Sensing and Safety Technologies driven by lower demand for sensing products.

Current wording

Sales decreased $675 million due to lower organic sales of $516 million in Warehouse and Workflow Solutions driven by lower demand for projects and lower organic sales of $137 million in Sensing and Safety Technologies driven by lower demand for personal protective equipment.

Previous wording

Segment profit decreased $67 million and segment margin percentage decreased 90 basis points to 19.0% compared to 19.9% for the same period in 2023.

Current wording

Segment profit decreased $190 million and segment margin percentage decreased 70 basis points to 19.5% compared to 20.2% for the same period in 2023.

Previous wording

Sales were flat due to higher organic sales of $120 million in Building Solutions driven by higher demand for building projects and services, partially offset by lower organic sales of $152 million in Products driven by lower demand. Additionally, the acquisition of Access Solutions contributed $62 million to sales in the six months ended June 30, 2024.

Current wording

Sales increased $215 million due to higher organic sales of $51 million in Building Solutions driven by higher demand for building projects and services. Additionally, the acquisition of Access Solutions contributed $177 million in the three months ended September 30, 2024.

Previous wording

Sales increased $61 million due to higher organic sales of $82 million in Building Solutions driven by higher demand for building projects and services, partially offset by lower organic sales of $63 million in Products driven by lower demand. Additionally, the acquisition of Access Solutions contributed $62 million to sales in the three months ended June 30, 2024.

Current wording

Sales increased $215 million due to higher organic sales of $171 million in Building Solutions driven by higher demand for building projects and services, partially offset by lower organic sales of $165 million in Products driven by lower demand. Additionally, the acquisition of Access Solutions contributed $238 million in the nine months ended September 30, 2024.

Previous wording

Segment profit increased $6 million and segment margin percentage decreased 60 basis points to 25.3% compared to 25.9% for the same period of 2023.

Current wording

Segment profit increased $35 million and segment margin percentage decreased 40 basis points to 25.3% compared to 25.7% for the same period of 2023.

Previous wording

Sales increased $37 million due to higher organic sales of $72 million in Advanced Materials driven by higher demand for fluorine products, partially offset by lower organic sales of $22 million in UOP driven by lower gas processing project demand and by the unfavorable impact of foreign currency translation of $13 million.

Current wording

Sales increased $113 million due to higher organic sales of $153 million in Advanced Materials driven by higher demand for fluorine products, partially offset by lower organic sales of $23 million in UOP driven by lower gas processing project demand.

Previous wording

See Note 5 Repositioning and Other Charges of Notes to Consolidated Financial Statements for a discussion of our repositioning actions and related charges incurred in the six months ended June 30, 2024, and 2023. Cash spending related to our repositioning actions was $109 million in the six months ended June 30, 2024, and was funded through operating cash flows.

Current wording

See Note 5 Repositioning and Other Charges of Notes to Consolidated Financial Statements for a discussion of our repositioning actions and related charges incurred in the nine months ended September 30, 2024, and 2023. Cash spending related to our repositioning actions was $145 million in the nine months ended September 30, 2024, and was funded through operating cash flows.

Previous wording

As of June 30, 2024, and December 31, 2023, we held $9.8 billion and $8.1 billion, respectively, of cash and cash equivalents, including our short-term investments. We monitor the third-party depository institutions that hold our cash and cash equivalents on a daily basis. Our emphasis is primarily safety of principal and secondarily maximizing yield of those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one counterparty.

Current wording

As of September 30, 2024, and December 31, 2023, we held $10.9 billion and $8.1 billion, respectively, of cash and cash equivalents, including our short-term investments. We monitor the third-party depository institutions that hold our cash and cash equivalents on a daily basis. Our emphasis is primarily safety of principal and secondarily maximizing yield of those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one counterparty.

Previous wording

As of June 30, 2024, $6.1 billion of the Company’s cash, cash equivalents, and short-term investments were held by non-U.S. subsidiaries. We do not have material amounts related to any jurisdiction subject to currency control restrictions that impact our ability to access and repatriate such amounts. Under current laws, we do not expect taxes on repatriation or restrictions on amounts held outside of the U.S. to have a material effect on our overall liquidity.

Current wording

As of September 30, 2024, $6.8 billion of the Company’s cash, cash equivalents, and short-term investments were held by non-U.S. subsidiaries. We do not have material amounts related to any jurisdiction subject to currency control restrictions that impact our ability to access and repatriate such amounts. Under current laws, we do not expect taxes on repatriation or restrictions on amounts held outside of the U.S. to have a material effect on our overall liquidity.

Previous wording

Net cash provided by operating activities was $1,819 million, driven by $3,007 million of Net income attributable to Honeywell, adjusted for $600 million of depreciation and amortization, partially offset by $583 million of other operating activities, driven by higher tax payments, $471 million decrease in Accrued liabilities, driven by a decrease in accrued employee compensation and benefits costs, $423 million decrease in Accounts payable, due to increased disbursements, and $295 million of pension and other postretirement income.

Current wording

Net cash provided by operating activities was $3,816 million, driven by $4,420 million of Net income attributable to Honeywell, adjusted for $957 million of depreciation and amortization, partially offset by $641 million of other operating activities, driven by higher tax payments, $443 million of pension and other postretirement income, and $329 million of net payments for repositioning and other charges.

Previous wording

Net cash used for investing activities was $5,405 million, driven by $4,913 million of cash paid for acquisitions and $492 million of capital expenditures.

Current wording

Net cash used for investing activities was $8,202 million, driven by $7,047 million of cash paid for acquisitions and $771 million of capital expenditures.

Previous wording

Net cash provided by financing activities was $5,298 million, driven by $5,710 million of proceeds from issuance of long-term debt primarily to fund the Access Solutions acquisition and $2,504 million of net proceeds from issuance of commercial paper, partially offset by $1,446 million of cash dividends paid and $1,200 million of repurchases of common stock.

Current wording

Net cash provided by financing activities was $7,058 million, driven by $10,407 million of proceeds from the issuance of long-term debt, primarily to fund recent acquisitions, and $1,039 million of net proceeds of commercial paper, partially offset by $2,161 million of cash dividends paid, $1,381 million of repayments of long-term debt, and $1,200 million of repurchases of common stock.

Previous wording

Six months ended June 30, 2024 compared with six months ended June 30, 2023

Current wording

Nine months ended September 30, 2024 compared with nine months ended September 30, 2023

Previous wording

Net cash provided by operating activities increased by $1,243 million due to the $1,325 million payment made by the Company pursuant to the NARCO Amended Buyout Agreement in 2023, partially offset by $328 million decrease of noncash adjustments, driven by $232 million decline in deferred income taxes and $106 million decline in repositioning and other charges.

Current wording

Net cash provided by operating activities increased by $1,431 million, primarily due to the $1,325 million payment made by the Company pursuant to the NARCO Amended Buyout Agreement in 2023.

Previous wording

Net cash used for investing activities increased by $4,696 million due to a $4,252 million increase in cash paid for acquisitions and $479 million net increase in investments.

Current wording

Net cash used for investing activities increased by $7,448 million, driven by a $6,331 million increase in cash paid for acquisitions, $538 million net increase in investments, and $462 million net increase in cash payments from settlements of derivative contracts.

Previous wording

Net cash provided by financing activities increased by $6,161 million due to a $2,744 million increase in proceeds from issuance of long-term debt, $2,434 million increase in net proceeds of commercial paper, and $779 million decrease in payments of long-term debt.

Current wording

Net cash provided by financing activities increased by $10,485 million, driven by a $7,422 million increase in proceeds from the issuance of long-term debt, primarily to fund recent acquisitions, $1,796 million increase in net proceeds of commercial paper, and $987 million decrease in repurchases of common stock.

Previous wording

In addition to our normal operating cash requirements, we expect our principal future cash requirements will be to fund capital expenditures, share repurchases, dividends, strategic acquisitions, and debt repayments. On April 24, 2023, the Board of Directors authorized the repurchase of up to $10 billion of Honeywell common stock, including approximately $2.1 billion of remaining availability under the previously announced $10 billion share repurchase authorization. During the six months ended June 30, 2024, we repurchased common stock of $1.2 billion. Refer to the section titled Liquidity and Capital Resources of our 2023 Form 10-K for a discussion of our expected capital expenditures, share repurchases, mergers and acquisitions activity, and dividends for 2024.

Current wording

In addition to our operating cash requirements, our principal future cash requirements will include funding capital expenditures, share repurchases, dividends, strategic acquisitions, and debt repayments. During the nine months ended September 30, 2024, we repurchased common stock of $1.2 billion. Refer to the section titled Liquidity and Capital Resources of our 2023 Form 10-K for a discussion of our expected capital expenditures, share repurchases, mergers and acquisitions activity, and dividends for 2024.

Previous wording

We continue to assess the relative strength of each business in our portfolio as to strategic fit, market position, profit, and cash flow contribution in order to identify target investment and acquisition opportunities in order to upgrade our combined portfolio. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses. In the second quarter of 2024, we acquired Access Solutions for total consideration of $4.9 billion, net of cash acquired, as well as announced our intention to acquire CAES Systems Holdings LLC for approximately $1.9 billion and Air Products' liquefied natural gas process technology and equipment business for approximately $1.8 billion. We also identify businesses that do not fit into our long-term strategic plan based on their market position, relative profitability, or growth potential. These businesses are considered for potential divestiture, restructuring, or other repositioning actions, subject to regulatory constraints. See Note 3 Acquisitions and Divestitures of Notes to Consolidated Financial Statements for additional discussion

Current wording

We continue to assess the relative strength of each business in our portfolio as to strategic fit, market position, profit, and cash flow contribution in order to identify target investment and acquisition opportunities in order to upgrade our combined portfolio. We identify acquisition candidates that are expected to further our strategic plan and strengthen our existing core businesses. During the nine months ended September 30, 2024, we acquired Access Solutions for total consideration of $4.9 billion, net of cash acquired, CAES Systems Holdings LLC for total consideration of $1.9 billion, net of cash acquired, and Civitanavi Systems S.p.A. for total consideration of $200 million, net of cash acquired. During the fourth quarter of 2024, we acquired Air Products' liquefied natural gas process technology and equipment business for $1.8 billion, net of cash acquired. We also identify businesses that do not fit into our long-term strategic plan based on their market position, relative profitability, or growth potential. These businesses are considered for potential divestiture, restructuring, or other repositioning actions, subject to regulatory constraints. During the third quarter of 2024, we classified the assets and liabilities of the personal protective equipment business as held for sale. See Note 3 Acquisitions, Divestitures and Assets and Liabilities Held for Sale of Notes to Consolidated Financial Statements for additional discussion. In addition, on October 8, 2024, we announced our intention to spin off the Advanced Materials business into an independent, U.S. publicly traded company, which is targeted to be completed by the end of 2025 or early 2026.

Previous wording

In early 2023, we made payments of approximately $1.5 billion in connection with the NARCO Buyout and UOP Matters. Pursuant to the NARCO Amended Buyout Agreement, we received proceeds of $275 million from the HWI Sale during the year ended December 31, 2023. During the three and six months ended June 30, 2024, we received $3 million of proceeds from the HWI Sale and may receive additional consideration in future periods if certain conditions under the definitive sale agreement for the HWI Sale are met. These payments and receipts have not materially impacted our liquidity position. See Note 12 Fair Value Measurements of Notes to Consolidated Financial Statements for additional discussion related to the fair value of future proceeds from the HWI Sale.

Current wording

In early 2023, we made payments of approximately $1.5 billion in connection with the NARCO Buyout and UOP Matters. Pursuant to the NARCO Amended Buyout Agreement, we received proceeds of $275 million from the HWI Sale during the year ended December 31, 2023. During the nine months ended September 30, 2024, we received $3 million of proceeds from the HWI Sale and may receive additional consideration in future periods if certain conditions under the definitive sale agreement for the HWI Sale are met. These payments and receipts have not materially impacted our liquidity position. See Note 12 Fair Value Measurements of Notes to Consolidated Financial Statements for additional discussion related to the fair value of future proceeds from the HWI Sale.

Previous wording

Based on past performance and current expectations, we believe that our operating cash flows will be sufficient to meet our future operating cash needs. Our available cash, committed credit lines, and access to the public debt and equity markets provide additional sources of short-term and long-term liquidity to fund current operations, debt maturities, and future investment opportunities. During the first quarter of 2024, our net cash provided by financing activities included proceeds of $5.7 billion from the issuance of long-term debt primarily to fund the Access Solutions acquisition.

Current wording

Based on past performance and current expectations, we believe that our operating cash flows will be sufficient to meet our future operating cash needs. Our available cash, committed credit lines, and access to the public debt and equity markets provide additional sources of short-term and long-term liquidity to fund current operations, debt maturities, and future investment opportunities. During the nine months ended September 30, 2024, our net cash provided by financing activities included proceeds of $10.4 billion from the issuance of long-term debt primarily to fund the Access Solutions, Civitanavi Systems S.p.A., CAES, and LNG acquisitions.

Previous wording

We leverage a variety of debt instruments to manage our overall borrowing costs. As of June 30, 2024, and December 31, 2023, our total borrowings were $27.9 billion and $20.4 billion, respectively.

Current wording

We leverage a variety of debt instruments to manage our overall borrowing costs. As of September 30, 2024, and December 31, 2023, our total borrowings were $30.8 billion and $20.4 billion, respectively.

Previous wording

We also have the following revolving credit agreements:

Current wording

We also have the following loan and revolving credit agreements:

Previous wording

•A $1.5 billion second 364-day credit agreement (the Second 364-Day Credit Agreement) with a syndicate of banks, dated as of July 2, 2024. Amounts borrowed under the Second 364-Day Credit Agreement are required to be repaid no later than July 1, 2025, unless (i) we elect to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on July 1, 2026, or (ii) the Second 364-Day Credit Agreement is terminated earlier pursuant to its terms. As of July 25, 2024, there were no outstanding borrowings under our Second 364-Day Credit Agreement.

Current wording

•A $1.0 billion Fixed Rate Term Loan Credit Agreement (the Fixed Rate Term Loan Credit Agreement) with a syndicate of banks, dated as of August 12, 2024. Amounts borrowed under the Fixed Rate Term Loan Credit Agreement are required to be repaid no later than August 12, 2027, unless the Fixed Rate Term Loan Credit Agreement is terminated earlier pursuant to its terms. As of September 30, 2024, there were $1.0 billion of borrowings outstanding under the Fixed Rate Term Loan Credit Agreement.