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 months ended March 31, 2025. The financial information as of March 31, 2025, should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2024, contained in our 2024 Annual Report on Form 10-K. 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 six months ended June 30, 2025. The financial information as of June 30, 2025, should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2024, contained in our 2024 Annual Report on Form 10-K.

Previous wording

We are closely monitoring evolving macroeconomic conditions and heightened geopolitical risks. During the first quarter of 2025, there was a marked increase in economic and trade policy uncertainty globally. Rising trade tensions and changes to trade policy could adversely impact global growth and contribute to inflationary pressures. Global conflicts, tariffs, labor disruptions, and regulations continue to generate volatility in global markets and can contribute to supply chain vulnerabilities and pricing fluctuations. We remain proactive in our collaboration with suppliers to mitigate potential shortages and reduce supply and price volatility. We anticipate a moderation in global growth in 2025 and a higher level of uncertainty with respect to inflation and other macroeconomic trends.

Current wording

We continue to monitor macroeconomic and geopolitical developments amid heightened trade tensions, economic and trade policy uncertainty, and inflationary risks. The trade policy volatility during 2025—including new tariffs and, in some cases, subsequent rollbacks or suspensions—could adversely impact global growth and contribute to inflationary pressures. Global conflicts, tariffs, labor disruptions, and regulations continue to generate volatility in global markets and can contribute to supply chain vulnerabilities and pricing fluctuations. We remain proactive in our collaboration with suppliers to minimize shortages and mitigate supply chain and pricing volatility.

Previous wording

Mitigation strategies remain crucial to meet customer demand in this evolving environment. Our mitigation strategies include pricing actions, hedging strategies, long-term strategies for constrained materials, direct engagement with key suppliers, and new supplier development. Strong relationships with strategic primary and secondary suppliers allow us to collaborate together to reliably source key components and raw materials, develop new products, commit our resources to assist certain suppliers, and at times, alter designs of existing products. We believe these mitigation strategies enable us to reduce supply risk, foster new product innovation, and expand our market presence. Additionally, due to the stringent quality controls and product qualification we perform on any new or altered product, these mitigation strategies have not impacted, and we do not expect them to impact, product quality or reliability.

Current wording

Mitigation strategies remain crucial to meet customer demand in this evolving environment. Our mitigation strategies include supply chain simplification, continued alignment to local supply sources, pricing actions and dual source strategies, long-term strategies for constrained materials, direct engagement with key suppliers, and new supplier development. Strong relationships with strategic primary and secondary suppliers allow us to collaborate together to reliably source key components and raw materials, develop new products, commit our resources to assist certain suppliers, and at times, alter designs of existing products. We believe these mitigation strategies enable us to reduce supply risk, foster new product innovation, and expand our market presence. Additionally, due to the stringent quality controls and product qualification we perform on any new or altered product, these mitigation strategies have not impacted, and we do not expect them to impact, product quality or reliability.

Previous wording

To date, our strategies successfully mitigated our exposure to these conditions. However, if we are not successful in sustaining or executing these strategies, these macroeconomic conditions could have a material adverse effect on our consolidated results of operations or operating cash flows.

Current wording

To date, our strategies have helped minimize our exposure to these conditions. However, if we are not successful in sustaining or executing these strategies, these macroeconomic conditions could have a material adverse effect on our consolidated results of operations or operating cash flows.

Previous wording

On October 8, 2024, the Company announced its intention to spin off its Advanced Materials business into Solstice Advanced Materials, an independent, U.S. publicly traded company, which is targeted to be completed by the end of 2025 or early 2026. The planned spin-off is intended to be a tax-free spin to Honeywell shareowners for U.S. federal income tax purposes. The spin-off will be subject to the satisfaction of a number of customary conditions, including, among others, finalization of the financial statements of Solstice Advanced Materials, the filing and effectiveness of applicable filings (including a Form 10 registration statement) with the SEC, assurance that the spin-off of Solstice Advanced Materials will be tax-free to Honeywell’s shareowners, receipt of applicable regulatory approvals, and final approval by Honeywell’s Board of Directors. The proposed spin-off is complex in nature, and may be affected by unanticipated developments, credit and equity markets, or changes in market conditions.

Current wording

In addition, on October 8, 2024, we announced our intention to spin off our Advanced Materials business into Solstice Advanced Materials, an independent, U.S. publicly traded company, which is targeted to be completed during the fourth quarter of 2025. The planned spin-off is intended to be a tax-free spin to Honeywell shareowners for U.S. federal income tax purposes. The spin-off will be subject to the satisfaction of a number of customary conditions, including, among others, finalization of the financial statements of Solstice Advanced Materials, the filing and effectiveness of applicable filings (including a Form 10 registration statement) with the SEC, assurance that the spin-off of Solstice Advanced Materials will be tax-free to Honeywell’s shareowners, receipt of applicable regulatory approvals, and final approval by Honeywell’s Board of Directors. The proposed spin-off is complex in nature, and may be affected by unanticipated developments, credit and equity markets, or changes in market conditions.

Previous wording

On February 6, 2025, the Company announced its intention to pursue a separation of its Automation and Aerospace Technologies businesses into independent, U.S. publicly traded companies, which is intended to be completed in the second half of 2026. The planned separation is intended to be a tax-free separation to Honeywell shareowners for U.S. federal income tax purposes. The separation will be subject to the satisfaction of a number of customary conditions, including, among others, the filing and effectiveness of applicable filings (including a Form 10 registration statement that includes required financial statements) with the SEC, assurance that the separation of the businesses will be tax-free to Honeywell’s shareowners, receipt of applicable regulatory approvals, and final approval by Honeywell’s Board of Directors. The proposed separation is complex in nature, and may be affected by unanticipated developments, credit and equity markets, or changes in market conditions.

Current wording

On February 6, 2025, we announced our intention to pursue a separation of our Automation and Aerospace Technologies businesses into independent, U.S. publicly traded companies, which is intended to be completed in the second half of 2026. The planned separation is intended to be a tax-free separation to Honeywell shareowners for U.S. federal income tax purposes. The separation will be subject to the satisfaction of a number of customary conditions, including, among others, the filing and effectiveness of applicable filings (including a Form 10 registration statement that includes required financial statements) with the SEC, assurance that the separation of the businesses will be tax-free to Honeywell’s shareowners, receipt of applicable regulatory approvals, and final approval by Honeywell’s Board of Directors. The proposed separation is complex in nature, and may be affected by unanticipated developments, credit and equity markets, or changes in market conditions.

Previous wording

Our backlog of orders increased 13% to $36.1 billion, as of March 31, 2025, compared to March 31, 2024. Backlog represents the estimated remaining value of work to be performed or products to be shipped under firm contracts. Backlog is equal to our remaining performance obligations under the contracts that meet the guidance on revenue from contracts with customers as discussed in Note 4 Revenue Recogn ition and Contracts with Customers of Notes to Consolidated Financial Statements. Our backlog by reportable business segment is as follows:

Current wording

Our backlog of orders increased 14% to $36.6 billion, as of June 30, 2025, compared to June 30, 2024. Backlog represents the estimated remaining value of work to be performed or products to be shipped under firm contracts. Backlog is equal to our remaining performance obligations under the contracts that meet the guidance on revenue from contracts with customers as discussed in Note 4 Revenue Recognition and Contracts with Customers of Notes to Consolidated Financial Statements. Our backlog by reportable business segment is as follows:

Previous wording

•Incremental costs from recent acquisitions of approximately $0.3 billion or 5%,

Current wording

•Incremental costs from recent acquisitions of approximately $0.3 billion or 5%, and

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

Current wording

•Higher direct and indirect material costs and higher labor costs of approximately $0.2 billion or 3%.

Previous wording

Gross margin increased by approximately $0.3 billion and gross margin percentage decreased 20 basis points to 38.5% compared to 38.7% for the same period of 2024.

Current wording

Gross margin increased by approximately $0.6 billion and gross margin percentage decreased 10 basis points to 38.7% compared to 38.8% for the same period of 2024.

Previous wording

Research and development expenses increased due to increased spending, primarily in our Aerospace Technologies business.

Current wording

Research and development expenses increased as a percentage of net sales due to increased investment in new product development in our Aerospace Technologies business.

Previous wording

•Partially offset by higher productivity of approximately $0.2 billion or 4%.

Current wording

•Partially offset by higher productivity of approximately $0.1 billion or 4%.

Previous wording

An impairment charge was recorded on assets held for sale related to the PPE business during the three months ended March 31, 2025.

Current wording

An impairment charge was recorded on assets held for sale related to the PPE business during the six months ended June 30, 2025.

Previous wording

Other income decreased due to higher divestiture-related costs.

Current wording

Other income decreased due to the following:

Previous wording

Interest and other financial charges increased due to prior year issuances of long-term debt.

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Interest and other financial charges increased due to higher interest rates on issuances of long-term debt in past years.

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

Current wording

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

Previous wording

•Partially offset by higher segment profit ($0.20 after tax).

Current wording

•Higher segment profit ($0.20 after tax) and

Previous wording

Sales increased $503 million due to higher organic sales of $243 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 $135 million in Defense and Space driven by higher sales volumes due to increased shipments. Additionally, the acquisitions of CAES and Civitanavi Systems contributed $180 million to 2025 sales.

Current wording

Sales increased $416 million due to higher organic sales of $180 million in Defense and Space driven by higher sales volumes due to increased shipments and higher organic sales of $118 million in Commercial Aviation Aftermarket driven by increased pricing in air transport. Additionally, the acquisitions of CAES and Civitanavi Systems contributed $197 million to sales in the three months ended June 30, 2025.

Previous wording

Sales decreased $100 million due to lower organic sales of $48 million in Productivity Solutions and Services driven by a decrease in license and settlement payments, lower organic sales of $21 million in Sensing and Safety Technologies driven by lower demand for personal protective equipment, and unfavorable impact of foreign currency translation of $42 million.

Current wording

Sales decreased $226 million due to lower sales of $141 million driven by the sale of our PPE business on May 21, 2025, and lower organic sales of $68 million in Productivity Solutions and Services driven by a decrease in license and settlement payments.

Previous wording

Segment profit decreased $50 million and segment margin percentage decreased 130 basis points to 17.8% compared to 19.1% for the same period in 2024.

Current wording

Segment profit decreased $71 million and segment margin percentage decreased 60 basis points to 18.5% compared to 19.1% for the same period in 2024.

Previous wording

Sales increased $266 million due to higher organic sales of $68 million in Building Solutions and higher organic sales of $51 million in Products, both driven by higher demand. The acquisition of Access Solutions contributed $179 million to first quarter 2025 sales.

Current wording

Sales increased $521 million due to higher organic sales of $135 million in Products and higher organic sales of $104 million in Building Solutions, both driven by higher demand. Additionally, the acquisition of Access Solutions contributed $302 million of inorganic sales in the six months ended June 30, 2025.

Previous wording

On October 8, 2024, the Company announced its intention to spin off its Advanced Materials business into Solstice Advanced Materials, an independent, U.S. publicly traded company.

Current wording

On October 8, 2024, the Company announced its intention to spin off its Advanced Materials business into Solstice Advanced Materials, an independent, U.S. publicly traded company, which is expected to be completed during the fourth quarter of 2025.

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 three months ended March 31, 2025, and 2024. Cash spending related to our repositioning actions was $43 million in the three months ended March 31, 2025, 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 six months ended June 30, 2025, and 2024. Cash spending related to our repositioning actions was $81 million in the six months ended June 30, 2025, and was funded through operating cash flows.

Previous wording

As of March 31, 2025, and December 31, 2024, we held $10.1 billion and $11.0 billion, respectively, of cash and cash equivalents, including our short-term investments. We monitor 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 June 30, 2025, and December 31, 2024, we held $10.7 billion and $11.0 billion, respectively, of cash and cash equivalents, including our short-term investments. We monitor 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 March 31, 2025, we held $8.0 billion of the Company’s cash, cash equivalents, and short-term investments in 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 June 30, 2025, we held $9.2 billion of the Company’s cash, cash equivalents, and short-term investments in 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 used for investing activities was driven by $251 million of capital expenditures and $125 million of net payments from settlements of derivative contracts.

Current wording

Net cash used for investing activities was driven by $2,163 million of cash paid for acquisitions, $554 million of capital expenditures, and $415 million of net payments from settlements of derivative contracts, partially offset by $1,157 million of proceeds from the sale of the PPE business.

Previous wording

Net cash used for financing activities was driven by $1,902 million of repurchases of common stock and $732 million of cash dividends paid, partially offset by $1,442 million of net proceeds of commercial paper.

Current wording

Net cash used for financing activities was driven by $3,604 million of repurchases of common stock, $1,479 million of cash dividends paid, and $1,309 million of payments of long-term debt, partially offset by $4,035 million of long-term debt proceeds and $1,873 million of net proceeds of commercial paper.

Previous wording

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Current wording

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Previous wording

Net cash provided by operating activities increased by $149 million, driven by a $423 million favorable impact of other operating activities due to timing of customer advances, partially offset by a $286 million unfavorable impact of working capital driven by an increase in accounts receivable due to timing of customer cash collections.

Current wording

Net cash provided by operating activities increased by $97 million, driven by a $424 million favorable impact of other operating activities due to timing of customer advances and $230 million increase in noncash adjustments driven by higher depreciation and amortization, partially offset by a $569 million unfavorable impact of working capital driven by an increase in accounts receivable due to timing of customer cash collections.

Previous wording

Net cash used for investing activities increased by $98 million, driven by a $168 million net increase in payments from settlements of derivative contracts, partially offset by $70 million net decrease in investments.

Current wording

Net cash used for investing activities decreased by $3,525 million, driven by a $2,750 million decrease in cash paid for acquisitions and $1,157 million increase in proceeds from the sale of the PPE business, partially offset by a $491 million increase in net payments from settlements of derivative contracts.

Previous wording

Net cash (used for) provided by financing activities decreased by $4,876 million, driven by a $5,664 million decrease in long-term debt proceeds, as we issued long-term debt in 2024 to fund acquisitions, and a $1,231 million increase in repurchases of common stock, partially offset by a $1,689 million increase in net proceeds of commercial paper and a $529 million decrease in payments of long-term debt.

Current wording

Net cash used for financing activities increased by $5,719 million, driven by a $2,404 million increase in repurchases of common stock, $1,675 million decrease in long-term debt proceeds, $704 million increase in payments of long-term debt, $631 million decrease in net proceeds of commercial paper, and $211 million decrease in proceeds from the issuance of common stock.

Previous wording

CASH REQUIREMENTS AND ASSESSMENT OF CURRENT LIQUIDITY

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ASSESSMENT OF CURRENT LIQUIDITY AND CASH REQUIREMENTS

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 for at least the next twelve months. 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.

Current wording

Based on past performance and current expectations, we believe our operating cash flows will be sufficient to meet our future operating cash needs for at least the next twelve months. If necessary, 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.

Previous wording

In addition to our normal operating cash requirements, our principal future cash requirements will include funding capital expenditures, share repurchases, dividends, strategic acquisitions, and debt repayments. During the three months ended March 31, 2025, we repurchased common stock of $1.9 billion. Refer to the section titled Liquidity and Capital Resources of our 2024 Form 10-K for a discussion of our expected capital expenditures, share repurchases, mergers and acquisitions activity, and dividends for 2025.

Current wording

In addition to normal operating cash requirements, our principal future cash requirements include funding capital expenditures, share repurchases, dividends, strategic acquisitions, and debt repayments. During the six months ended June 30, 2025, we repurchased common stock of $3.6 billion. Refer to the section titled Liquidity and Capital Resources of our 2024 Form 10-K for a discussion of our expected capital expenditures, share repurchases, mergers and acquisitions activity, and dividends for 2025.

Previous wording

Additionally, 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 first quarter of 2025, we announced our intention to acquire Sundyne for approximately $2.2 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. On October 8, 2024, we announced our intention to spin off the Advanced Materials business into Solstice Advanced Materials, an independent, U.S. publicly traded company, which is targeted to be completed by the end of 2025 or early 2026. In addition, on November 22, 2024, we announced an agreement to sell our personal protective equipment business for $1.3 billion, with the assets and liabilities of the business classified as held for sale until the closing date of a sale. On February 6, 2025, the Company announced its intention to separate its Automation and Aerospace Technologies businesses into independent, U.S. publicly traded companies. See Note 3 Acquisitions, Divestitures, and Assets and Liabilities Held for Sale of Notes to Consolidated Financial Statements for additional discussion.

Current wording

We continually 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 2025, we acquired Sundyne for total consideration of $2.2 billion, net of cash acquired, as well as announced our agreement to acquire Johnson Matthey's Catalyst Technologies business segment for £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. On October 8, 2024, we announced our intention to spin off the Advanced Materials business into Solstice Advanced Materials, an independent, U.S. publicly traded company, which is targeted to be completed during the fourth quarter of 2025. On February 6, 2025, we announced our intention to separate its Automation and Aerospace Technologies businesses into independent, U.S. publicly traded companies, which is intended to be completed in the second half of 2026. On May 21, 2025, we completed the sale of our PPE business for $1.2 billion, net of cash transferred. In addition, on July 8, 2025, we announced we are evaluating strategic alternatives for our Productivity Solutions and Services and Warehouse and Workflow Solutions businesses within the Industrial Automation reportable business segment. See Note 3 Acquisitions and Divestitures of Notes to Consolidated Financial Statements for additional discussion.

Previous wording

We leverage a variety of debt instruments to manage our overall borrowing costs. As of March 31, 2025, and December 31, 2024, our total borrowings were $32.8 billion and $31.1 billion, respectively.

Current wording

We leverage a variety of debt instruments to manage our overall borrowing costs. As of June 30, 2025, and December 31, 2024, our total borrowings were $36.5 billion and $31.1 billion, respectively.

Previous wording

We also have the following loan and revolving credit agreements:

Current wording

In addition, we have the following loan and revolving credit agreements: