United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
__________________
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20202021
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

hon-20210331_g1.jpg
Honeywell International Inc.
(Exact name of registrant as specified in its charter)

Delaware22-2640650
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
300 South Tryon Street28202
Charlotte,NC
(Address of principal executive offices)(Zip Code)
(704)627-6200
(Registrant’s telephone number, including area code)
DelawareNot Applicable22-2640650
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
300 South Tryon Street28202
Charlotte,NC
(Address of principal executive offices)(Zip Code)
704627-6200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,

if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1 per share*HONThe New York Stock Exchange
1.300% Senior Notes due 2023HON 23AThe New York Stock Exchange
0.000% Senior Notes due 2024HON 24AThe New York Stock Exchange
2.250% Senior Notes due 2028HON 28AThe New York Stock Exchange
0.750% Senior Notes due 2032HON 32The New York Stock Exchange
* The common stock is also listed on the London Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerxAccelerated filer☐
Non-Accelerated filer☐Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to sectionSection 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No x
There were 701,847,786694,555,603 shares of Common Stock outstanding at March 31, 2020.2021.








TABLE OF CONTENTS
Honeywell International Inc.
Index

Part I.
Financial Information
Page No.
1
1
31
42
53
64
75
86
30
4144
4144
45
Other Information
Item 1.
4245
4245
4345
4345
4346
4447
4549
 
Cautionary Statement about Forward-Looking StatementsCAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
ThisWe describe many of the trends and other factors that drive our business and future results in the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other parts of this report contains “forward-looking statements”(including Part II, Item 1A Risk Factors). Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management’s assumptions and assessments in the light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, including the impact of the coronavirus pandemic (COVID-19), whichthat can affect our performance and financial results in both the near- and long-term. These forward-looking statements should be considered in the light of the information included in this report and our other filings with the Securities and Exchange Commission, including, without limitation, the Risk Factors, as well as the description of trends and other factors in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in this report and our 20192020 Annual Report on Form 10-K.


2









PART I. FINANCIAL INFORMATION
The financial statements and related footnotes as of March 31, 20202021 should be read in conjunction with the financial statements for the year ended December 31, 20192020 contained in our 20192020 Annual Report on Form 10-K. 

ITEM 1. FINANCIAL STATEMENTS

HONEYWELL INTERNATIONAL INC.
Honeywell International Inc.
Consolidated Statement of OperationsCONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31, Three Months Ended March 31,
2020 2019 20212020
(Dollars in millions, except per share amounts) (Dollars in millions, except per share amounts)
Product sales$6,305
 $6,713
Product sales$6,409 $6,305 
Service sales2,158
 2,171
Service sales2,045 2,158 
Net sales8,463
 8,884
Net sales8,454 8,463 
Costs, expenses and other   Costs, expenses and other
Cost of products sold4,374
 4,622
Cost of products sold4,551 4,374 
Cost of services sold1,160
 1,257
Cost of services sold1,158 1,160 
5,534
 5,879
 5,709 5,534 
Selling, general and administrative expenses1,238
 1,363
Selling, general and administrative expenses1,236 1,238 
Other (income) expense(317) (285)Other (income) expense(442)(317)
Interest and other financial charges73
 85
Interest and other financial charges90 73 
6,528
 7,042
 6,593 6,528 
Income before taxes1,935
 1,842
Income before taxes1,861 1,935 
Tax expense (benefit)329
 406
Tax expense (benefit)413 329 
Net income1,606
 1,436
Net income1,448 1,606 
Less: Net income attributable to the noncontrolling interest25
 20
Less: Net income attributable to the noncontrolling interest21 25 
Net income attributable to Honeywell$1,581
 $1,416
Net income attributable to Honeywell$1,427 $1,581 
Earnings per share of common stock - basic$2.23
 $1.94
Earnings per share of common stock - basic$2.05 $2.23 
Earnings per share of common stock - assuming dilution$2.21
 $1.92
Earnings per share of common stock - assuming dilution$2.03 $2.21 
 
The Notes to Consolidated Financial Statements are an integral part of this statement.

3




1Honeywell International Inc.
Consolidated Statement of Comprehensive Income






HONEYWELL INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31, Three Months Ended March 31,
2020 2019 20212020
(Dollars in millions) (Dollars in millions)
Net income$1,606
 $1,436
Net income$1,448 $1,606 
Other comprehensive income (loss), net of tax   Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment(276) 205
Foreign exchange translation adjustment214 (276)
Prior service (credit) cost recognized(20) (19)Prior service (credit) cost recognized(22)(20)
Pension and other postretirement benefits adjustments(20) (19)
Pension and other postretirement benefit adjustmentsPension and other postretirement benefit adjustments(22)(20)
Changes in fair value of available for sale investmentsChanges in fair value of available for sale investments(3)0 
Cash flow hedges recognized in other comprehensive income (loss)195
 38
Cash flow hedges recognized in other comprehensive income (loss)8 195 
Less: Reclassification adjustment for gains (losses) included in net income55
 32
Less: Reclassification adjustment for gains (losses) included in net income3 55 
Changes in fair value of cash flow hedges140
 6
Changes in fair value of cash flow hedges5 140 
Other comprehensive income (loss), net of tax(156) 192
Other comprehensive income (loss), net of tax194 (156)
Comprehensive income1,450
 1,628
Comprehensive income1,642 1,450 
Less: Comprehensive income attributable to the noncontrolling interest18
 24
Less: Comprehensive income attributable to the noncontrolling interest22 18 
Comprehensive income attributable to Honeywell$1,432
 $1,604
Comprehensive income attributable to Honeywell$1,620 $1,432 
 
The Notes to Consolidated Financial Statements are an integral part of this statement.

4




2Honeywell International Inc.
Consolidated Balance Sheet






HONEYWELL INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 2020 December 31, 2019 March 31, 2021December 31, 2020
(Dollars in millions) (Dollars in millions)
ASSETS   ASSETS 
Current assets: 
  
Current assets:  
Cash and cash equivalents$7,721
 $9,067
Cash and cash equivalents$11,718 $14,275 
Short-term investments1,070
 1,349
Short-term investments942 945 
Accounts receivable - net7,452
 7,493
Accounts receivable - net6,675 6,827 
Inventories4,584
 4,421
Inventories4,607 4,489 
Other current assets1,786
 1,973
Other current assets1,645 1,639 
Total current assets22,613
 24,303
Total current assets25,587 28,175 
Investments and long-term receivables613
 588
Investments and long-term receivables746 685 
Property, plant and equipment - net5,214
 5,325
Property, plant and equipment - net5,547 5,570 
Goodwill15,282
 15,563
Goodwill16,981 16,058 
Other intangible assets - net3,580
 3,734
Other intangible assets - net3,799 3,560 
Insurance recoveries for asbestos related liabilities383
 392
Insurance recoveries for asbestos related liabilities347 366 
Deferred income taxes71
 86
Deferred income taxes762 760 
Other assets9,666
 8,688
Other assets9,792 9,412 
Total assets$57,422
 $58,679
Total assets$63,561 $64,586 
LIABILITIES   LIABILITIES
Current liabilities:   Current liabilities:
Accounts payable$5,676
 $5,730
Accounts payable$5,792 $5,750 
Commercial paper and other short-term borrowings3,528
 3,516
Commercial paper and other short-term borrowings3,568 3,597 
Current maturities of long-term debt1,042
 1,376
Current maturities of long-term debt1,635 2,445 
Accrued liabilities7,131
 7,476
Accrued liabilities6,955 7,405 
Total current liabilities17,377
 18,098
Total current liabilities17,950 19,197 
Long-term debt11,542
 11,110
Long-term debt16,124 16,342 
Deferred income taxes1,670
 1,670
Deferred income taxes2,309 2,113 
Postretirement benefit obligations other than pensions314
 326
Postretirement benefit obligations other than pensions234 242 
Asbestos related liabilities1,948
 1,996
Asbestos-related liabilitiesAsbestos-related liabilities1,873 1,920 
Other liabilities6,699
 6,766
Other liabilities6,812 6,975 
Redeemable noncontrolling interest7
 7
Redeemable noncontrolling interest7 7 
SHAREOWNERS’ EQUITY   SHAREOWNERS’ EQUITY
Capital - common stock issued958
 958
Capital - common stock issued958 958 
- additional paid-in capital7,047
 6,876
 - additional paid-in capital7,505 7,292 
Common stock held in treasury, at cost(25,643) (23,836)Common stock held in treasury, at cost(27,975)(27,229)
Accumulated other comprehensive loss(3,353) (3,197)Accumulated other comprehensive loss(3,184)(3,377)
Retained earnings38,635
 37,693
Retained earnings40,682 39,905 
Total Honeywell shareowners’ equity17,644
 18,494
Total Honeywell shareowners’ equity17,986 17,549 
Noncontrolling interest221
 212
Noncontrolling interest266 241 
Total shareowners’ equity17,865
 18,706
Total shareowners’ equity18,252 17,790 
Total liabilities, redeemable noncontrolling interest and shareowners’ equity$57,422
 $58,679
Total liabilities, redeemable noncontrolling interest and shareowners’ equity$63,561 $64,586 
 
The Notes to Consolidated Financial Statements are an integral part of this statement.

5




3Honeywell International Inc.
Consolidated Statement of Cash Flows






HONEYWELL INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, Three Months Ended March 31,
2020 2019 20212020
(Dollars in millions) (Dollars in millions)
Cash flows from operating activities: 
  
Cash flows from operating activities:  
Net income$1,606
 $1,436
Net income$1,448 $1,606 
Less: Net income attributable to the noncontrolling interest25
 20
Less: Net income attributable to the noncontrolling interest21 25 
Net income attributable to Honeywell1,581
 1,416
Net income attributable to Honeywell1,427 1,581 
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:   Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:
Depreciation153
 163
Depreciation171 153 
Amortization90
 98
Amortization170 90 
Gain on sale of non-strategic businesses and assetsGain on sale of non-strategic businesses and assets(90)0 
Repositioning and other charges62
 84
Repositioning and other charges141 62 
Net payments for repositioning and other charges(111) (34)Net payments for repositioning and other charges(195)(111)
Pension and other postretirement income(212) (163)Pension and other postretirement income(293)(212)
Pension and other postretirement benefit payments(14) (30)Pension and other postretirement benefit payments(14)(14)
Stock compensation expense44
 41
Stock compensation expense77 44 
Deferred income taxes(58) 80
Deferred income taxes63 (58)
Other(179) (4)Other(96)(179)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:   Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable41
 198
Accounts receivable143 41 
Inventories(163) (221)Inventories(158)(163)
Other current assets166
 (217)Other current assets(66)166 
Accounts payable(54) (29)Accounts payable57 (54)
Accrued liabilities(407) (248)Accrued liabilities(359)(407)
Net cash provided by (used for) operating activities939
 1,134
Net cash provided by (used for) operating activities978 939 
Cash flows from investing activities:   Cash flows from investing activities:
Expenditures for property, plant and equipment(139) (141)Expenditures for property, plant and equipment(221)(139)
Proceeds from disposals of property, plant and equipment7
 2
Proceeds from disposals of property, plant and equipment14 7 
Increase in investments(648) (1,226)Increase in investments(736)(648)
Decrease in investments843
 796
Decrease in investments612 843 
Receipts (payments) from settlements of derivative contracts287
 (40)Receipts (payments) from settlements of derivative contracts140 287 
Cash paid for acquisitions, net of cash acquiredCash paid for acquisitions, net of cash acquired(1,303)0 
Proceeds from sales of businesses, net of fees paidProceeds from sales of businesses, net of fees paid190 0 
Net cash provided by (used for) investing activities350
 (609)Net cash provided by (used for) investing activities(1,304)350 
Cash flows from financing activities:   Cash flows from financing activities:
Proceeds from issuance of commercial paper and other short-term borrowings3,455
 3,318
Proceeds from issuance of commercial paper and other short-term borrowings1,268 3,455 
Payments of commercial paper and other short-term borrowings(3,373) (3,319)Payments of commercial paper and other short-term borrowings(1,266)(3,373)
Proceeds from issuance of common stock66
 145
Proceeds from issuance of common stock67 66 
Proceeds from issuance of long-term debt1,127
 20
Proceeds from issuance of long-term debt23 1,127 
Payments of long-term debt(1,125) (13)Payments of long-term debt(817)(1,125)
Repurchases of common stock(1,923) (750)Repurchases of common stock(822)(1,923)
Cash dividends paid(635) (606)Cash dividends paid(640)(635)
Other(38) (30)Other(30)(38)
Net cash provided by (used for) financing activities(2,446) (1,235)Net cash provided by (used for) financing activities(2,217)(2,446)
Effect of foreign exchange rate changes on cash and cash equivalents(189) 48
Effect of foreign exchange rate changes on cash and cash equivalents(14)(189)
Net increase (decrease) in cash and cash equivalents(1,346) (662)Net increase (decrease) in cash and cash equivalents(2,557)(1,346)
Cash and cash equivalents at beginning of period9,067
 9,287
Cash and cash equivalents at beginning of period14,275 9,067 
Cash and cash equivalents at end of period$7,721
 $8,625
Cash and cash equivalents at end of period$11,718 $7,721 
 
The Notes to Consolidated Financial Statements are an integral part of this statement.

6




4Honeywell International Inc.
Consolidated Statement of Shareowners' Equity






HONEYWELL INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
(Unaudited)
Three Months Ended March 31, Three Months Ended March 31,
2020 201920212020
Shares $ Shares $Shares$Shares$
(Dollars in millions, except per share amounts) (In millions, except per share amounts)
Common stock, par value957.6
 958
 957.6
 958
Common stock, par value957.6 958 957.6 958 
Additional paid-in capital       Additional paid-in capital
Beginning balance  6,876
   6,452
Beginning balance7,292 6,876 
Issued for employee savings and option plans  127
   159
 Issued for employee savings and option plans136 127 
Stock-based compensation expense  44
   41
 Stock-based compensation expense77 44 
Ending balance  7,047
   6,652
Ending balance7,505 7,047 
Treasury stock       Treasury stock
Beginning balance(246.5) (23,836) (228.0) (19,771)Beginning balance(260.8)(27,229)(246.5)(23,836)
Reacquired stock or repurchases of common stock(11.7) (1,923) (5.1) (750) Reacquired stock or repurchases of common stock(4.0)(822)(11.7)(1,923)
Issued for employee savings and option plans2.4
 116
 3.2
 129
 Issued for employee savings and option plans1.8 76 2.4 116 
Ending balance(255.8) (25,643) (229.9) (20,392)Ending balance(263.0)(27,975)(255.8)(25,643)
Retained earnings       Retained earnings
Beginning balance  37,693
   33,978
Beginning balance39,905 37,693 
Net income attributable to Honeywell  1,581
   1,416
 Net income attributable to Honeywell1,427 1,581 
Dividends on common stock  (639)   (600) Dividends on common stock(650)(639)
Ending balance  38,635
   34,794
Ending balance40,682 38,635 
Accumulated other comprehensive income (loss)       Accumulated other comprehensive income (loss)
Beginning balance  (3,197)   (3,437)Beginning balance(3,377)(3,197)
Foreign exchange translation adjustment  (276)   205
 Foreign exchange translation adjustment213 (276)
Pensions and other postretirement benefit adjustments  (20)   (19)
Pension and other postretirement benefit adjustments Pension and other postretirement benefit adjustments(22)(20)
Changes in fair value of available for sale investments Changes in fair value of available for sale investments(3)0 
Changes in fair value of cash flow hedges  140
   6
 Changes in fair value of cash flow hedges5 140 
Ending balance  (3,353)   (3,245)Ending balance(3,184)(3,353)
Noncontrolling interest       Noncontrolling interest
Beginning balance  212
   178
Beginning balance241 212 
Acquisitions, divestitures, and other  (6)   —
 Acquisitions, divestitures, and other0 (6)
Net income attributable to noncontrolling interest  25
   20
 Net income attributable to noncontrolling interest21 25 
Foreign exchange translation adjustment  (7)   4
 Foreign exchange translation adjustment1 (7)
Dividends paid  (3)   (13) Dividends paid(1)(3)
Contributions from noncontrolling interest holders Contributions from noncontrolling interest holders4 0 
Ending balance  221
   189
Ending balance266 221 
Total shareowners' equity701.8
 17,865
 727.7
 18,956
Total shareowners' equity694.6 18,252 701.8 17,865 
Cash dividends per share of common stock  $0.900
   $0.820
Cash dividends per share of common stock$0.930 $0.900 

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

7

5Honeywell International Inc.
Notes to Consolidated Financial Statements
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in tables in millions, except per share amounts)





NoteNOTE 1. Basis of PresentationBASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Honeywell International Inc. and its consolidated subsidiaries (“Honeywell”(Honeywell or “the Company”)the Company) at March 31, 20202021 and December 31, 2019,2020, the cash flows for the three months ended March 31, 20202021 and 2019 andMarch 31, 2020, the results of operations for the three months ended March 31, 2021 and March 31, 2020 and 2019.the shareowners' equity for the three months ended March 31, 2021 and March 31, 2020. The results of operations for the three months ended March 31, 20202021 and cash flows for the three months ended March 31, 20202021 should not necessarily be taken as indicative of the entire year.
We report ourHoneywell reports its quarterly financial information using a calendar convention; the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30. It has been ourHoneywell's practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires ourHoneywell's businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. In the event that differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, weHoneywell will provide appropriate disclosures. OurHoneywell's actual closing dates for the three months ended March 31, 2021 and March 31, 2020 were April 3, 2021 and 2019 were March 28, 2020. We estimate that our sales in the first quarter of 2021 compared to the first quarter of 2020 and March 30, 2019. include an approximate 3 percent benefit from additional reporting days in the current year period resulting from our normal quarterly closing procedures.

NoteNOTE 2. Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are set forth in Note 1 to the Company's Consolidated Financial Statements contained in the Company’s 20192020 Annual Report on Form 10-K. We includeThe Company includes herein certain updates to those policies.
RECLASSIFICATIONS
Recent Accounting Pronouncements—Certain prior year amounts have been reclassified to conform to the current year presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated results of operations, financial position and cash flows (ConsolidatedConsolidated Financial Statements).

Statements.
In December 2019, the FASB issued an accounting standard updateASU to simplify the accounting for income taxes. The standard'sstandard’s amendments include changes in various subtopics of accounting for income taxes including, but not limited to, accounting for "hybrid"“hybrid” tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, intraperiod tax allocation exception to incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax law, and year-to-date loss limitation in interim-period tax accounting. The guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted, including the interim periods within those years. We are currently evaluating impacts of these amendments on our Consolidated Financial Statements, and related notes to the Financial Statements. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.
In June 2016, the FASB issued an accounting standard that requires companies to utilize an impairment model (current expected credit loss, or CECL) for most financial assets measured at amortized cost and certain other financial instruments, which include, but are not limited to, trade and other receivables. This accounting standard replaced the incurred loss model with a model that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate those losses. Effective January 1, 2020,2021, the Company adopted this standard. The adoption of this standard did not have a material impact on ourthe Company's Consolidated Financial Statements.

In March 2020, the FASB issued guidance that provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements. The Company does not expect the adoption of this standard to have a material impact on the Company’s Consolidated Financial Statements.
8

6Honeywell International Inc.
Notes to Consolidated Financial Statements
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
NOTE 3. ACQUISITIONS AND DIVESTITURES
On February 12, 2021, the Company acquired 100% of the shares outstanding of Sparta Systems, a leading provider of enterprise quality management software for the life sciences industry, for $1,303 million. Sparta Systems is expected to further strengthen the Company's leadership in industrial automation, digital transformation solutions, and enterprise performance management software. The business is included within the Performance Materials and Technologies segment. The assets and liabilities acquired with Sparta Systems are included in the Consolidated Balance Sheet as of March 31, 2021, including $371 million of intangible assets and $1,036 million allocated to goodwill, which is non-deductible for tax purposes. The purchase accounting is subject to final adjustment, primarily for the valuation of intangible assets, amounts allocated to goodwill, tax balances, and certain pre-acquisition contingencies.
On March 15, 2021, the Company completed the sale of its retail footwear business in exchange for gross cash consideration of $230 million. The Company recognized a pre-tax gain of $90 million, which was recorded in Other (income) expense. The retail footwear business was previously included in the Safety and Productivity Solutions segment.
Please refer to Note 2 Acquisitions and Divestitures of Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for additional information regarding prior year.
NOTE 4. REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS
Honeywell generates revenue from a comprehensive offering of products and services, including software and technologies, that are sold to a variety of customers in multiple end markets. See the following table and related discussions by operating segment for details.
 Three Months Ended March 31,
20212020
Aerospace
Commercial Aviation Original Equipment$431 $675 
Commercial Aviation Aftermarket910 1,385 
Defense and Space1,291 1,301 
2,632 3,361 
Honeywell Building Technologies
Products798 741 
Building Solutions560 540 
1,358 1,281 
Performance Materials and Technologies
UOP527 594 
Process Solutions1,096 1,151 
Advanced Materials723 652 
2,346 2,397 
Safety and Productivity Solutions
Safety and Retail743 502 
Productivity Solutions and Services343 287 
Warehouse and Workflow Solutions844 458 
Advanced Sensing Technologies (formerly Sensing & Internet-of-Things)188 177 
2,118 1,424 
Net sales$8,454 $8,463 
7 Honeywell International Inc.

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

Aerospace – A global supplier of products, software and services for aircrafts that it sells to original equipment manufacturers (OEM) and other customers in a variety of end markets including: air transport, regional, business and general aviation aircraft, airlines, aircraft operators and defense and space contractors. Aerospace products and services include auxiliary power units, propulsion engines, environmental control systems, integrated avionics, wireless connectivity services, electric power systems, engine controls, flight safety, communications, navigation hardware, data and software applications, radar and surveillance systems, aircraft lighting, management and technical services, advanced systems and instruments, satellite and space components, aircraft wheels and brakes, repair and overhaul services and thermal systems. Aerospace also provides spare parts, repair, overhaul and maintenance services (principally to aircraft operators) for the aftermarket. Honeywell Forge solutions are leveraged by our customers as tools to turn data into predictive maintenance and predictive analytics to enable better fleet management and make flight operations more efficient.
Honeywell Building Technologies – A global provider of products, software, solutions and technologies that enable building owners and occupants to ensure their facilities are safe, energy efficient, sustainable and productive. Honeywell Building Technologies products and services include advanced software applications for building control and optimization; sensors, switches, control systems and instruments for energy management; access control; video surveillance; fire products; remote patient monitoring systems; and installation, maintenance and upgrades of systems. Honeywell Forge solutions enable our customers to digitally manage buildings, connecting data from different assets to enable smart maintenance, improve building performance and protect from incoming security threats.
Performance Materials and Technologies – A global provider in developing and manufacturing high-quality performance chemicals and materials, process technologies and automation solutions. The segment is comprised of Process Solutions, UOP and Advanced Materials. Process Solutions provides automation control, instrumentation, advanced software and related services for the oil and gas, refining, pulp and paper, industrial power generation, chemicals and petrochemicals, biofuels, life sciences, and metals, minerals and mining industries. Through its smart energy products, Process Solutions enables utilities and distribution companies to deploy advanced capabilities to improve operations, reliability and environmental sustainability. UOP provides process technology, products, including catalysts and adsorbents, equipment, and consulting services that enable customers to efficiently produce gasoline, diesel, jet fuel, petrochemicals and renewable fuels for the petroleum refining, gas processing, petrochemical, and other industries. Advanced Materials manufactures a wide variety of high-performance products, including materials used to manufacture end products such as bullet-resistant armor, nylon, computer chips and pharmaceutical packaging, and provides reduced and low global-warming-potential materials based on hydrofluoro-olefin technology. In the industrial environment, Honeywell Forge solutions enable integration and connectivity to provide a holistic view of operations and turn data into clear actions to maximize productivity and efficiency. Honeywell Forge's cybersecurity capabilities help identify risks and act on cyber-related incidents, together enabling improved operations and protecting processes, people and assets.
Safety and Productivity Solutions – A global provider of products and software that improve productivity, workplace safety and asset performance to customers around the globe. Safety products include personal protective equipment (PPE), apparel, gear, and footwear designed for work, play and outdoor activities; gas detection technology; and cloud-based notification and emergency messaging. Productivity Solutions products and services include mobile devices and software for computing, data collection and thermal printing; supply chain and warehouse automation equipment, software and solutions; custom-engineered sensors, switches and controls for sensing and productivity solutions; and software-based data and asset management productivity solutions. Honeywell Forge solutions digitally automate processes to improve efficiency while reducing downtime and safety costs.
For a summary by disaggregated product and services sales for each segment, refer to Note 3. Repositioning18 Segment Financial Data. 
8 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
The Company recognizes revenue from performance obligations to customers that are satisfied at a point in time and over time. The disaggregation of the Company's revenue based off timing of recognition is as follows:
Three Months Ended March 31,
20212020
Products, transferred point in time58 %61 %
Products, transferred over time18 14 
Net product sales76 75 
Services, transferred point in time7 9 
Services, transferred over time17 16 
Net service sales24 25 
Net sales100 %100 %
CONTRACT BALANCES
The Company records progress on satisfying performance obligations to customers, and the related billings and cash collections, on the Consolidated Balance Sheet in Accounts receivable - net and Other Chargesassets (unbilled receivables (contract assets) and billed receivables) and Accrued liabilities and Other liabilities (customer advances and deposits (contract liabilities)). Unbilled receivables (contract assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled receivable balance increases when the revenue associated with the contract is recognized prior to billing and decreases when billed in accordance with the terms of the contract. Contract liabilities increase when customers remit contractual cash payments in advance of the Company satisfying performance obligations under contractual arrangements, including those with performance obligations to be satisfied over a period of time. Contract liabilities decrease when revenue is recorded, either when a milestone is met triggering the contractual right to bill or when the performance obligation is satisfied. 
A summaryContract balances are classified as assets or liabilities on a contract-by-contract basis at the end of repositioning and other charges follows:
 Three Months Ended March 31,
 2020 2019
Severance$66
 $31
Asset impairments2
 11
Exit costs15
 18
Reserve adjustments(13) (2)
Total net repositioning charge70
 58
Asbestos related litigation charges, net of insurance and reimbursements11
 11
Probable and reasonably estimable environmental liabilities, net of reimbursements8
 14
Other(27) 1
Total net repositioning and other charges$62
 $84


each reporting period.
The following table summarizes the pretax distribution of total net repositioningCompany's contract assets and other charges by classification:liabilities balances: 
 Three Months Ended March 31,
 2020 2019
Cost of products and services sold$20
 $55
Selling, general and administrative expenses42
 29
Other (income) expense—
 —
 $62
 $84


 20212020
Contract assets - January 1$1,618 $1,602 
Contract assets - March 311,789 1,699 
Change in contract assets - increase (decrease)$171 $97 
 
Contract liabilities - January 1$(4,033)$(3,501)
Contract liabilities - March 31(3,994)(3,506)
Change in contract liabilities - decrease (increase)$39 $(5)
 
Net change$210 $92 
The following table summarizes the pretax impact of total net repositioning and other charges by segment:
 Three Months Ended March 31,
 2020 2019
Aerospace$11
 $16
Honeywell Building Technologies25
 8
Performance Materials and Technologies21
 (1)
Safety and Productivity Solutions6
 5
Corporate(1) 56
 $62
 $84

In the quarter ended March 31, 2020, we recognized gross repositioning charges totaling $83 million including severance costs of $66 million related to workforce reductions of 2,124 manufacturing and administrative positions across our segments. The workforce reductions were primarily related to our productivity and ongoing functional transformation initiatives. 
In the quarter ended March 31, 2019, we recognized gross repositioning charges totaling $60 million including severance costs of $31 million related to workforce reductions of 1,047 manufacturing and administrative positions mainly in Corporate, Aerospace and Honeywell Building Technologies. The workforce reductions were primarily related to our productivity and ongoing functional transformation initiatives and to site transitions in Aerospace to more cost-effective locations. 


9

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


The following table summarizes the status of our total repositioning reserves:
 
Severance
Costs
 
Asset
Impairments
 
Exit
Costs
 Total
December 31, 2019$555
 $—
 $96
 $651
Charges66
 2
 15
 83
Usage - cash(70) —
 (18) (88)
Usage - noncash—
 (2) —
 (2)
Foreign currency translation(6) —
 —
 (6)
Adjustments(12) —
 (1) (13)
March 31, 2020$533
 $—
 $92
 $625


 Certain repositioning projects will recognize exit costs in future periods when the actual liability is incurred. Such exit costs incurred in the quarters ended March 31, 2020 and 2019 were $11 million and $3 million, respectively.
Note 4. Other (Income) Expense
 Three Months Ended March 31,
 2020 2019
Interest income$(44) $(67)
Pension ongoing income – non-service(237) (184)
Other postretirement income – non-service(13) (12)
Equity income of affiliated companies(12) (9)
Foreign exchange(12) (11)
Other (net)1
 (2)
 $(317) $(285)


Note 5. Income Taxes
The effective tax rate decreasedchange for the three months ended March 31, 2021 and 2020 comparedwas primarily driven by the recognition of revenue as performance obligations were satisfied prior to billing exceeding receipt of advance payments from customers.
For the three months ended March 31, 2019 primarily from tax law2021 and 2020, the Company recognized revenue of $1,120 million and $888 million that was previously included in the beginning balance of contract liabilities.
When contracts are modified to account for changes in Indiacontract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that
9 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
existing contract. The effect of a contract modification on the transaction price, and the resolutionCompany's measure of certain U.S. tax matters, partially offsetprogress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively. 
PERFORMANCE OBLIGATIONS
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When the Company's contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. In situations when the Company's contract includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For any contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation. In such cases, the observable standalone sales are used to determine the standalone selling price.
Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by decreased tax benefitscontracts with customers, providing a framework for employee share-based compensation.the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract.
The following table outlines the Company's remaining performance obligations disaggregated by segment: 
March 31, 2021
Aerospace$9,055 
Honeywell Building Technologies6,564 
Performance Materials and Technologies7,076 
Safety and Productivity Solutions4,044 
$26,739 
 
The effective tax rate for the three months endedPerformance obligations recognized as of March 31, 2020 was lower2021 will be satisfied over the course of future periods. The Company's disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. Performance obligations expected to be satisfied within one year and greater than one year are 55% and 45%, respectively. 
The timing of satisfaction of the U.S. federal statutory rateCompany's performance obligations does not significantly vary from the typical timing of 21% primarily from foreign earnings taxed at lower foreign tax rates, tax law changespayment. Typical payment terms of the Company's fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts we may be entitled to receive an advance payment. 
The Company applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in India andproportion to the resolution of certain U.S. tax matters, partially offset by incremental tax reserves and state taxes.amount we have the right to invoice for services performed.

10 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
Note 6. Earnings Per ShareNOTE 5. REPOSITIONING AND OTHER CHARGES
A summary of repositioning and other charges follows:
Three Months Ended March 31,
 20212020
Severance$28 $66 
Asset impairments42 2 
Exit costs49 15 
Reserve adjustments1 (13)
Total net repositioning charge120 70 
Asbestos related litigation charges, net of insurance and reimbursements21 11 
Probable and reasonably estimable environmental liabilities, net of reimbursements5 8 
Other(5)(27)
Total net repositioning and other charges$141 $62 

The following table summarizes the pretax distribution of total net repositioning and other charges by classification:
 Three Months Ended March 31,
 20212020
Cost of products and services sold$98 $20 
Selling, general and administrative expenses43 42 
 $141 $62 

The following table summarizes the pretax impact of total net repositioning and other charges by segment:
Three Months Ended March 31,
 20212020
Aerospace$48 $11 
Honeywell Building Technologies5 25 
Performance Materials and Technologies5 21 
Safety and Productivity Solutions37 6 
Corporate46 (1)
 $141 $62 

In the three months ended March 31, 2021, we recognized gross repositioning charges totaling $119 million including severance costs of $28 million related to workforce reductions of 1,021 manufacturing and administrative positions mainly in our Aerospace and Safety and Productivity Solutions segments. The workforce reductions were primarily related to site transitions, mainly in Aerospace, to more cost-effective locations and to our productivity and ongoing functional transformation initiatives. The repositioning charge included asset impairments of $42 million primarily related to the write-down of certain manufacturing and other equipment due to their planned disposition. The repositioning charge included exit costs of $49 million primarily for closure obligations associated with site transitions, lease exit obligations for certain equipment in Corporate and current period exit costs incurred for previously approved repositioning projects.
In the three months ended March 31, 2020, we recognized gross repositioning charges totaling $83 million including severance costs of $66 million related to workforce reductions of 2,124 manufacturing and administrative positions across our segments. The workforce reductions were primarily related to our productivity and ongoing functional transformation initiatives.
 Three Months Ended March 31,
Basic2020 2019
Net income attributable to Honeywell$1,581
 $1,416
Weighted average shares outstanding709.6
 729.7
Earnings per share of common stock$2.23
 $1.94
11 Honeywell International Inc.


10

Honeywell International Inc.HONEYWELL INTERNATIONAL INC.
Notes to Consolidated Financial StatementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)


The following table summarizes the status of the Company's total repositioning reserves:
 Three Months Ended March 31,
Assuming Dilution2020 2019
Net income attributable to Honeywell$1,581
 $1,416
Average Shares   
Weighted average shares outstanding709.6
 729.7
Dilutive securities issuable - stock plans7.4
 9.1
Total weighted average shares outstanding717.0
 738.8
Earnings per share of common stock$2.21
 $1.92

Severance
Costs		Asset
Impairments		Exit
Costs		Total
Balance at December 31, 2020$527 $0 $74 $601 
Charges28 42 49 119 
Usage - cash(84)0 (21)(105)
Usage - noncash0 (42)0 (42)
Foreign currency translation(3)0 (2)(5)
Adjustments1 0 0 1 
Balance at March 31, 2021$469 $0 $100 $569 

The diluted earnings per share calculations exclude the effect of stock optionsCertain repositioning projects will recognize exit costs in future periods when the options’ assumed proceeds exceed the average market price of the common shares during the period. Foractual liability is incurred. Such exit costs incurred in the three months ended March 31, 2021 and 2020 were $10 million and $11 million, respectively.
NOTE 6. INCOME TAXES
The effective tax rate increased for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily from tax benefits realized in the prior year as a result of tax law changes in India and the resolution of certain U.S. tax matters. Other changes to the tax rate include tax benefits for employee share-based compensation and the resolution of certain foreign tax matters in the current year.
The effective tax rate for the three months ended March 31, 2021 was higher than the U.S. federal statutory rate of 21% primarily due to incremental tax reserves and states taxes, partially offset by tax benefits for employee share based compensation and the resolution of certain foreign tax matters.
NOTE 7. ACCOUNTS RECEIVABLE - NET and 2019, the weighted average number of stock options excluded from the computations were 4.3 million and 3.7 million. These stock options were outstanding at the end of each of the respective periods.
 
As
March 31, 2021December 31, 2020
Trade$6,874 $7,029 
Less - Allowance for doubtful accounts(199)(202)
 $6,675 $6,827 
Trade receivables include $1,750 million and $1,589 million of unbilled balances under long-term contracts as of March 31, 20202021 and 2019, total shares outstanding were 701.8 million and 727.7 million and as of MarchDecember 31, 2020 and 2019, total shares issued were 957.6 million.

Note 7. Revenue Recognition and Contracts with Customers
Honeywell has a comprehensive offering of products and services, including software and technologies, that2020. These amounts are sold to a variety of customers in multiple end markets. See the following table and related discussions by operating segment for details.
 Three Months Ended March 31,
 2020 2019
Aerospace   
Commercial Aviation Original Equipment$672
 $759
Commercial Aviation Aftermarket1,380
 1,361
Defense and Space1,309
 1,221
 3,361
 3,341
Honeywell Building Technologies   
Products748
 810
Building Solutions533
 579
 1,281
 1,389
Performance Materials and Technologies   
UOP594
 610
Process Solutions1,151
 1,246
Specialty Products253
 269
Fluorine Products399
 447
 2,397
 2,572
Safety and Productivity Solutions   
Safety and Retail502
 538
Productivity Products251
 271
Warehouse and Workflow Solutions494
 558
Sensing & Internet-of-Things (IoT)177
 215
 1,424
 1,582
Net sales$8,463
 $8,884


11

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


Aerospace – A global supplier of products, software and services for aircrafts that it sells to original equipment manufacturers (OEM) and other customers in a variety of end markets including: air transport, regional, business and general aviation aircraft, airlines, aircraft operators and defense and space contractors. Aerospace products and services include auxiliary power units, propulsion engines, environmental control systems, integrated avionics, wireless connectivity services, electric power systems, engine controls, flight safety, communications, navigation hardware, data and software applications, radar and surveillance systems, aircraft lighting, management and technical services, advanced systems and instruments, satellite and space components, aircraft wheels and brakes, repair and overhaul services and thermal systems. Aerospace also provides spare parts, repair, overhaul and maintenance services (principally to aircraft operators) for the aftermarket. Honeywell Forge solutions are designed to identify and resolve problems faster, making fleet management and flight operations more efficient.
Honeywell Building Technologies – A global provider of products, software, solutions and technologies that enable building owners and occupants to ensure their facilities are safe, energy efficient, sustainable and productive. Honeywell Building Technologies products and services include advanced software applications for building control and optimization; sensors, switches, control systems and instruments for energy management; access control; video surveillance; fire products; remote patient monitoring systems; and installation, maintenance and upgrades of systems. Honeywell Forge solutions are designed to digitally manage buildings to use space intelligently, cut operating expenses and reduce maintenance.
Performance Materials and Technologies – A global provider in developing and manufacturing high-quality performance chemicals and materials, process technologies and automation solutions, including Honeywell Forge connected solutions. The segment comprises Process Solutions, UOP and Advanced Materials. Process Solutions provides automation control, instrumentation, advanced software and related services for the oil and gas, refining, pulp and paper, industrial power generation, chemicals and petrochemicals, biofuels, life sciences, and metals, minerals and mining industries. Through its smart energy products, Process Solutions enables utilities and distribution companies to deploy advanced capabilities to improve operations, reliability and environmental sustainability. UOP provides process technology, products, including catalysts and adsorbents, equipment, and consulting services that enable customers to efficiently produce gasoline, diesel, jet fuel, petrochemicals and renewable fuels for the petroleum refining, gas processing, petrochemical, and other industries. Advanced Materials manufactures a wide variety of high-performance products, including materials used to manufacture end products such as bullet-resistant armor, nylon, computer chips and pharmaceutical packaging, and provides reduced and low global-warming-potential (GWP) materials based on hydrofluoro-olefin technology. In the industrial environment, Honeywell Forge solutions enable integration and connectivity to provide a holistic view of operations and turn data into clear actions to maximize productivity and efficiency. Honeywell Forge's cybersecurity capabilities help identify risks and act on cyber-related incidents, together enabling improved operations and protecting processes, people and assets.
Safety and Productivity Solutions – A global provider of products and software that improve productivity, workplace safety and asset performance to customers around the globe. Safety products include personal protection equipment, apparel, gear, and footwear designed for work, play and outdoor activities; gas detection technology; and cloud-based notification and emergency messaging. Productivity Solutions products and services include mobile devices and software for computing, data collection and thermal printing; supply chain and warehouse automation equipment, software and solutions; custom-engineered sensors, switches and controls for sensing and productivity solutions; and software-based data and asset management productivity solutions. Honeywell Forge solutions digitally automate processes to improve efficiency while reducing downtime and safety costs.
For a summary by disaggregated product and services sales for each segment, refer to Note 14 Segment Financial Data of Notes to Consolidated Financial Statements.

12

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


The Company recognizes revenue arising from performance obligations outlined in contracts with its customers that are satisfied at a point in time and over time. The disaggregation of our revenue based off timing of recognition is as follows:
 Three Months Ended March 31,
 2020 2019
Products, transferred point in time61% 61%
Products, transferred over time14
 15
Net product sales75
 76
Services, transferred point in time9
 9
Services, transferred over time16
 15
Net service sales25
 24
Net sales100% 100%

Contract Balances
Progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded on the Consolidated Balance Sheet in Accounts receivable - net and Other assets (unbilled receivables (contract assets) and billed receivables) and Accrued liabilities and Other liabilities (customer advances and deposits (contract liabilities)). Unbilled receivables (contract assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligationscustomer contracts to be satisfied over a period of time. Contract liabilities are derecognized when revenue is recorded, either when a milestone is met triggering the contractual right to bill or when the performance obligation is satisfied.which they relate. 
Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.NOTE 8. INVENTORIES
 March 31, 2021December 31, 2020
Raw materials$1,152 $1,079 
Work in process811 798 
Finished products2,644 2,612 
 $4,607 $4,489 
The following table summarizes the Company's contract assets and liabilities balances: 
 2020 2019
Contract assets - January 1$1,602
 $1,548
Contract assets - March 311,699
 1,700
Change in contract assets - increase (decrease)$97
 $152
    
Contract liabilities - January 1$(3,501) $(3,378)
Contract liabilities - March 31(3,506) (3,426)
Change in contract liabilities - decrease (increase)$(5) $(48)
    
Net change$92
 $104

The net change for the three months ended March 31, 202012 and 2019 was primarily driven by the recognition of revenue as performance obligations were satisfied prior to billing exceeding receipt of advance payments from customers.

For the three months ended March 31, 2020 and 2019, we recognized revenue of $888 million and $720 million that was previously included in the beginning balance of contract liabilities.

13

Honeywell International Inc.
Notes to Consolidated Financial Statements
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)


When contracts are modified to account for changes in contract specifications and requirements, we consider whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When our contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. In situations when our contract includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For any contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation. In such cases, the observable standalone sales are used to determine the stand alone selling price.
Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract.

The following table outlines the Company's remaining performance obligations disaggregated by segment: 
 March 31, 2020
Aerospace$10,849
Honeywell Building Technologies5,146
Performance Materials and Technologies6,686
Safety and Productivity Solutions2,603
 $25,284

Performance obligations recognized as of March 31, 2020 will be satisfied over the course of future periods. Our disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. Performance obligations expected to be satisfied within one year and greater than one year are 58% and 42%, respectively.
The timing of satisfaction of the Company's performance obligations does not significantly vary from the typical timing of payment. Typical payment terms of our fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts we may be entitled to receive an advance payment.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed.

Note 8. Accounts Receivable - NetNOTE 9. LONG-TERM DEBT AND CREDIT AGREEMENTS
 March 31, 2021December 31, 2020
4.25% notes due 2021$0 $800 
1.85% notes due 20211,500 1,500 
0.483% notes due 20222,500 2,500 
2.15% notes due 2022600 600 
Floating rate notes due 20221,100 1,100 
1.30% Euro notes due 20231,471 1,534 
3.35% notes due 2023300 300 
0.00% Euro notes due 2024589 614 
2.30% notes due 2024750 750 
1.35% notes due 20251,250 1,250 
2.50% notes due 20261,500 1,500 
2.25% Euro notes due 2028883 920 
2.70% notes due 2029750 750 
1.95% notes due 20301,000 1,000 
0.75% Euro notes due 2032589 614 
5.70% notes due 2036441 441 
5.70% notes due 2037462 462 
5.375% notes due 2041417 417 
3.812% notes due 2047445 445 
2.80% notes due 2050750 750 
Industrial development bond obligations, floating rate maturing at various dates through 203722 22 
6.625% debentures due 2028201 201 
9.065% debentures due 203351 51 
Other (including capitalized leases and debt issuance costs), 8.2% weighted average interest rate maturing at various dates through 2025188 266 
 17,759 18,787 
Less-current portion(1,635)(2,445)
 $16,124 $16,342 
 March 31, 2020 December 31, 2019
Trade$7,600
 $7,639
Less - Allowance for doubtful accounts(148) (146)
 $7,452
 $7,493

Trade receivables include $1,660On August 19, 2020, the Company issued $2.5 billion 0.483% Senior Notes due 2022 and $500 million Floating Rate Senior Notes due 2022 (collectively, the 2022 Callable Notes). The $500 million Floating Rate Senior Notes due 2022 were issued at a variable interest rate equal to the three-month LIBOR plus the applicable margin of 0.23%. The Company may redeem the 2022 fixed rate notes at any time, in whole or in part, at the Company's option. The Company may redeem the 2022 floating rate notes at any time, in whole or in part, on or after August 19, 2021. The offering provided gross proceeds of $3.0 billion, offset by $10 million in discount and $1,586 million of unbilled balances under long-term contracts as of March 31, 2020 and December 31, 2019. These amounts are billed in accordance withclosing costs related to the termsoffering. The Company used the proceeds of the customer contractsoffering to which they relate. repay $3.0 billion of borrowings under the Term Loan Agreement (defined below). 

Note 9. InventoriesOn May 18, 2020, the Company issued $1.25 billion 1.35% Senior Notes due 2025, $1.0 billion 1.95% Senior Notes due 2030, and $750 million 2.80% Senior Notes due 2050 (collectively, the 2020 Notes) to replace and, accordingly, permanently reduce $3.0 billion of undrawn commitments under the Term Loan Agreement, referenced below. The Company may redeem the 2020 Notes at any time, in whole or in part, at the Company's option. The offering provided gross proceeds of $3.0 billion, offset by $27 million in discount and closing costs related to the offering.
 March 31, 2020 December 31, 2019
Raw materials$1,079
 $1,056
Work in process859
 817
Finished products2,681
 2,593
 4,619
 4,466
Reduction to LIFO cost basis(35) (45)
 $4,584
 $4,421

13


14

Honeywell International Inc.
Notes to Consolidated Financial Statements
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)


Note 10. Leases

The Company's operating and finance lease portfolio is described in Note 14, Leases of the Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.

Supplemental cash flow information related to leases was as follows:
 Three Months Ended March 31,
 2020 2019
Net right-of-use assets obtained in exchange for lease obligations:   
Operating leases68
 $10
Finance leases3
 4

Supplemental balance sheet information related to leases was as follows:
 March 31, 2020 December 31, 2019
Operating leases   
Other assets$699
 $673
Accrued liabilities169
 171
Other liabilities575
 534
Total operating lease liabilities$744
 $705
Financing leases   
Property, plant and equipment$351
 $361
Accumulated depreciation(155) (152)
Property, plant and equipment - net$196
 $209
Current maturities of long-term debt57
 59
Long-term debt144
 156
Total financing lease liabilities$201
 $215



15

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


Note 11. Long-term Debt and Credit Agreements
 March 31, 2020 December 31, 2019
0.65% Euro notes due 2020—
 1,123
4.25% notes due 2021800
 800
1.85% notes due 20211,500
 1,500
2.15% notes due 2022600
 600
Floating rate notes due 2022600
 600
1.30% Euro notes due 20231,376
 1,404
3.35% notes due 2023300
 300
0.00% Euro notes due 2024550
 —
2.30% notes due 2024750
 750
2.50% notes due 20261,500
 1,500
2.25% Euro notes due 2028825
 842
2.70% notes due 2029750
 750
0.75% Euro notes due 2032550
 —
5.70% notes due 2036441
 441
5.70% notes due 2037462
 462
5.375% notes due 2041417
 417
3.812% notes due 2047445
 445
Industrial development bond obligations, floating rate maturing at various dates through 203722
 22
6.625% debentures due 2028201
 201
9.065% debentures due 203351
 51
Other (including capitalized leases and debt issuance costs), 7.0% weighted average maturing at various dates through 2025444
 278
 12,584
 12,486
Less: current portion(1,042) (1,376)
 $11,542
 $11,110

On March 10, 2020, the Company issued €500 million 0.00% Senior Notes due 2024 and €500 million 0.75% Senior Notes due 2032 (collectively, the "20202020 Euro Notes")Notes). The 2020 Euro Notes are senior unsecured and unsubordinated obligations of Honeywell and rank equally with all of Honeywell's existing and future senior unsecured debt and senior to all of Honeywell's subordinated debt. The offering resulted inprovided gross proceeds of $1,136 million,$1.1 billion, offset by $9 million in discount and closing costs related to the offering.

On August 8, 2019, the Company issued $600 million 2.15% SeniorThe 2022 Callable Notes, due 2022, $600 million Floating Rate Senior2020 Notes, due 2022, $750 million 2.30% Senior Notes due 2024 and $750 million 2.70% Senior Notes due 2029 (collectively, the "2019 Notes"). The 20192020 Euro Notes are senior unsecured and unsubordinated obligations of Honeywellthe Company and rank equally with each other and with all of Honeywell'sthe Company's existing and future senior unsecured debt and senior to all of Honeywell'sthe Company's subordinated debt. The offering resulted in gross proceeds of $2,700 million, offset by $18 million in discount and closing costs related to
On March 1, 2021, the offering.

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

Company paid its 4.25% notes due 2021.
On February 21, 2020, the Company paid its 0.65% Euro notes due 2020.

On October 30, 2019, the Company paid its 1.40% notes due 2019, Three year floating-rate notes due 2019, Two year floating rate notes due 2019 and 1.80% notes due 2019.

16

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


On April 10, 2020, the Company entered into a $1.5 billion 364-Day Credit Agreement (the "364-Day Credit Agreement") with a syndicate of banks. This 364-Day Credit Agreement is maintained for general corporate purposes. The 364-Day Credit Agreement replaces the previously reported 364-day credit agreement dated as of April 26, 2019, which was terminated on April 10, 2020.
On March 26, 2020, the Company entered into a Delayed Draw Term Loan Agreement (the “Term Loan Agreement”) with a syndicate of banks. The Term Loan Agreement provides for a two-year, delayed draw term loan facility in the aggregate principal amount of up to $6.0 billion and is maintained for general corporate purposes. Commitments under the Term Loan Agreement can be increased pursuant to the terms of the Term Loan Agreement by an aggregate amount not to exceed $2.0 billion. Advances may be made on up to three different business days during the period from March 26, 2020 to the date that is the earlier of (a) June 26, 2020 and (b) such date on which the Term Loan Agreement is terminated pursuant to its terms (the earlier of such date). The amounts borrowed under the Term Loan Agreement are required to be repaid no later than March 26, 2022, unless the Term Loan Agreement is terminated earlier pursuant to its terms and may not be reborrowed.

On April 26, 2019,31, 2021, the Company entered into a $4.0 billion Amended and Restated Five Year Credit Agreement (the “5-Year5-Year Credit Agreement”)Agreement) with a syndicate of banks. The 5-Year Credit Agreement is maintained for general corporate purposes. Commitments under the 5-Year Credit Agreement can be increased pursuant to the terms of the 5-Year Credit Agreement to an aggregate amount not to exceed $4.5 billion. The 5-Year Credit Agreement amendsamended and restatesrestated the previously reported $4.0 billion amended and restated five-yearfive year credit agreement dated as of April 27, 201826, 2019 (the "Prior Agreement")Prior 5-Year Agreement).
On March 31, 2021, the Company entered into a $1.5 billion 364-Day Credit Agreement (the 364-Day Credit Agreement) with a syndicate of banks. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 30, 2022, unless (i) Honeywell elects to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on March 30, 2023, or (ii) the 364-Day Credit Agreement is terminated earlier pursuant to its terms. The 364-Day Credit Agreement is maintained for general corporate purposes and replaces the previously reported $1.5 billion 364-day credit agreement dated as of April 10, 2020 (the Prior 364-Day Agreement), which was terminated in accordance with its terms effective March 31, 2021.
On March 26, 2020, the Company entered into a Delayed Draw Term Loan Agreement (the Term Loan Agreement) with a syndicate of banks. The Term Loan Agreement provided for a two-year, delayed draw term loan facility in the aggregate principal amount of $6.0 billion. Effective May 22, 2020, the Company permanently reduced the undrawn commitments under the Term Loan Agreement by an aggregate amount of $3.0 billion. On June 24, 2020, the Company drew on the remaining $3.0 billion of commitments under the Term Loan Agreement at a variable interest rate equal to the one-month LIBOR plus the applicable margin of 1.25%. The 5-Year Credit Agreement has substantiallydraw provided gross proceeds of $3.0 billion, offset by $7 million in closing costs related to the same material terms and conditionsborrowing. On August 20, 2020 the Company prepaid the outstanding principal amount of $3.0 billion, using the proceeds from the offering of the Prior2022 Callable Notes. As of August 21, 2020, there were no borrowings outstanding or commitments remaining under the Term Loan Agreement.
As of March 31, 2020,2021, there arewere no outstanding borrowings under anythe 5-Year Credit Agreement or the 364-Day Credit Agreement.

14 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
NOTE 10. LEASES
The Company's operating and finance lease portfolio is described in Note 11 Leases of Notes to Consolidated Financial Statements in our credit agreements.2020 Annual Report on Form 10-K.
Supplemental cash flow information related to leases was as follows:
Three Months Ended March 31,
20212020
Net right-of-use assets obtained in exchange for lease obligations:
Operating leases$33 $68 
Finance leases3 3 

Supplemental balance sheet information related to leases was as follows:
March 31, 2021December 31, 2020
Operating leases
Other assets$774 $773 
Accrued liabilities187 187 
Other liabilities640 641 
Total operating lease liabilities$827 $828 
Finance leases
Property, plant and equipment$351 $357 
Accumulated depreciation(185)(180)
Property, plant and equipment - net$166 $177 
Current maturities of long-term debt59 60 
Long-term debt114 124 
Total finance lease liabilities$173 $184 
Note 12. Financial Instruments and Fair Value Measures








15 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING TRANSACTIONS
Our credit, market, foreign currency and interest rate risk management policies are described in Note 15, Financial12 Derivative Instruments and Fair Value MeasuresHedging Transactions of Notes to Consolidated Financial Statements in our 20192020 Annual Report on Form 10-K. All derivative assets are presented in Other current assets or Other assets. All derivative liabilities are presented in Accrued liabilities or Other liabilities.
The following table summarizes the notional amounts and fair values of the Company’s outstanding derivatives by risk category and instrument type within the Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020:
NotionalFair Value AssetFair Value (Liability)
March 31, 2021December 31, 2020March 31, 2021December 31, 2020March 31, 2021December 31, 2020
Derivatives in Fair Value Hedging Relationships:   
Interest rate swap agreements$3,150 $3,950 $100 $194 $0 $0 
Derivatives in Cash Flow Hedging Relationships:
Foreign currency exchange contracts422 488 15 65 0 (58)
Derivatives in Net Investment Hedging Relationships:
Foreign currency exchange contracts792 806 49 45 (3)(1)
Cross currency swap agreements1,200 1,200 0 0 (5)(50)
Total Derivatives Designated as Hedging Instruments5,564 6,444 164 304 (8)(109)
Derivatives Not Designated as Hedging Instruments:
Foreign currency exchange contracts13,403 14,829 161 92 (163)(91)
Total Derivatives at Fair Value$18,967 $21,273 $325 $396 $(171)$(200)
In addition to the derivative instruments listed above, certain of the Company's foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $4,235 million and $4,414 million as of March 31, 2021 and December 31, 2020.
The following table sets forth the amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:
Line in the Consolidated Balance
Sheet of Hedged Item		Carrying Amount of the Hedged ItemCumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
March 31, 2021December 31, 2020March 31, 2021December 31, 2020
Long-term debt$3,250 $4,144 $100 $194 
16 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
The following tables summarize the location and impact to the Consolidated Statement of Operations related to derivative instruments:
 Three Months Ended March 31, 2021
RevenueCost of
Products and Services
Sold		SG&AOther
(Income)
Expense		Interest
and Other
Financial
Charges
$8,454 $5,709 $1,236 $(442)$90 
Gain or (loss) on cash flow hedges:
Foreign Currency Exchange Contracts:
Amount reclassified from accumulated other comprehensive income into income1 1 2 0 0 
Amount excluded from effectiveness testing recognized in earnings using an amortization approach0 0 0 0 0 
Gain or (loss) on fair value hedges:
Interest Rate Swap Agreements:
Hedged items0 0 0 0 94 
Derivatives designated as hedges0 0 0 0 (94)
Gain or (loss) on net investment hedges:
Foreign Currency Exchange Contracts:
Amount excluded from effectiveness testing recognized in earnings using an amortization approach0 0 0 0 4 
Gain or (loss) on derivatives not designated as hedging instruments: 
Foreign currency exchange contracts0 0 0 60 0 
17 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
 Three Months Ended March 31, 2020
RevenueCost of
Products and Services
Sold		SG&AOther (Income) ExpenseInterest
and Other
Financial
Charges
$8,463 $5,534 $1,238 $(317)$73 
Gain or (loss) on cash flow hedges:
Foreign Currency Exchange Contracts:
Amount reclassified from accumulated other comprehensive income into income0 27 0 40 0 
Amount excluded from effectiveness testing recognized in earnings using an amortization approach0 4 0 8 0 
Gain or (loss) on fair value hedges:
Interest Rate Swap Agreements:
Hedged items0 0 0 0 (205)
Derivatives designated as hedges0 0 0 0 205 
Gain or (loss) on net investment hedges:
Foreign Currency Exchange Contracts:
Amount excluded from effectiveness testing recognized in earnings using an amortization approach0 0 0 0 5 
Gain or (loss) on derivatives not designated as hedging instruments:
Foreign currency exchange contracts0 0 0 284 0 

The following table summarizes the amounts of gain or (loss) on net investment hedges recognized in Accumulated other comprehensive income (loss):
Derivatives Net Investment Hedging RelationshipsThree Months Ended March 31,
20212020
Euro-denominated long-term debt$150 $124 
Euro-denominated commercial paper30 70 
Cross currency swap44 (26)
Foreign currency exchange contracts(2)84 

18 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
NOTE 12. FAIR VALUE MEASUREMENTS
The accounting guidance for fair value measurements and disclosures establishes a three-level fair value hierarchy.
•Level 1 - Inputs are based on quoted prices in active markets for identical assets and liabilities.
•Level 2 - Inputs are based on observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.
•Level 3 - One or more inputs are unobservable and significant.
Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis:
 March 31, 2020 December 31, 2019
Assets:   
Foreign currency exchange contracts$647
 $291
Available for sale investments1,241
 1,523
Interest rate swap agreements230
 38
Cross currency swap agreements60
 51
Liabilities:   
Foreign currency exchange contracts$74
 $21
Interest rate swap agreements—
 13

 March 31, 2021December 31, 2020
Assets:  
Foreign currency exchange contracts$225 $202 
Available for sale investments1,122 1,118 
Interest rate swap agreements100 194 
Liabilities:
Foreign currency exchange contracts$166 $150 
Cross currency swap agreements5 50 
The foreign currency exchange contracts, interest rate swap agreements, and cross currency swap agreements are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2. The Company also holds investments in commercial paper, certificates of deposits, and time deposits that are designated as available for sale and are valued using published prices based off observable market data. As such, these investments are classified within level 2. The Company also holds available for sale investments in U.S. government and corporate debt securities valued utilizing published prices based on quoted market pricing, which are classified within level 1.

17

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper, (of which $3,119 million and $3,513 million was Euro denominated as of March 31, 2020 and December 31, 2019) and short-term borrowings contained in the Consolidated Balance Sheet approximates fair value.

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:
 March 31, 2020 December 31, 2019
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
Assets       
Long-term receivables$145
 $138
 $129
 $127
Liabilities       
Long-term debt and related current maturities$12,584
 $13,238
 $12,486
 $13,578

The following table sets forth the amounts on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:
Line in the Consolidated Balance Sheet of Hedged Item Carrying Amount of the Hedged Item Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
 March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019
Long-term debt $4,180
 $3,975
 $230
 $25


 March 31, 2021December 31, 2020
 Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Assets    
Long-term receivables$161 $155 $137 $132 
Liabilities
Long-term debt and related current maturities$17,759 $18,861 $18,787 $20,176 
The Company determined the fair value of the long-term receivables by utilizing transactions in the listed markets for identical or similar assets. As such, the fair value of these receivables is considered level 2. The Company determined the fair value of the long-term debt and related current maturities utilizing transactions in the listed markets for identical or similar liabilities. As such, the fair value of the long-term debt and related current maturities is considered level 2.
 
Interest rate swap agreements are designated as hedge relationships with gains or losses on
19 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
NOTE 13. EARNINGS PER SHARE
Three Months Ended March 31,
Basic20212020
Net income attributable to Honeywell$1,427 $1,581 
Weighted average shares outstanding696.2 709.6 
Earnings per share of common stock - basic$2.05 $2.23 
 Three Months Ended March 31,
Assuming Dilution20212020
Net income attributable to Honeywell$1,427 $1,581 
Average Shares
Weighted average shares outstanding696.2 709.6 
Dilutive securities issuable - stock plans8.3 7.4 
Total weighted average diluted shares outstanding704.5 717.0 
Earnings per share of common stock - assuming dilution$2.03 $2.21 
The diluted earnings per share calculations exclude the derivative recognized in Interest and other financial charges offsettingeffect of stock options when the gains and losses onoptions’ exercise price exceed the underlying debt being hedged. Foraverage market price of the three months ended March 31, 2020, we recognized $205 million of gains in earnings on interest rate swap agreements.common shares during the period. For the three months ended March 31, 2019, we recognized $242021 and 2020, the weighted average number of stock options excluded from the computations were 1.0 million and 4.3 million. These stock options were outstanding at the end of gains in earnings on interest rate swap agreements. Gains and losses are fully offset by losses and gains oneach of the underlying debt being hedged.respective periods. 
The Company economically hedges its exposure to changes in foreign exchange rates principally with forward contracts. These contracts are marked-to-market with the resulting gains and losses recognized in earnings offsetting the gains and losses on the non-functional currency denominated monetary assets and liabilities being hedged. For the three months ended As of March 31, 2021 and 2020,, we recognized $284 total shares outstanding were 694.6 million and 701.8 million and as of income in Other (income) expense. For the three months ended March 31, 2019, we recognized $47 million of expense in Other (income) expense. As of March 31, 2020, cash collateral received that has not been offset against our derivatives of $591 million was recorded in Accrued liabilities2021 and Other Assets.2020, total shares issued were 957.6 million.




18

20Honeywell International Inc.
Notes to Consolidated Financial Statements
HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)


NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables summarize the location and impact to the Consolidated Statement of Operations related to fair value and cash flow hedging relationships:CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT

 Foreign
Exchange
Translation
Adjustment		Pension
and Other
Postretirement
Benefits
Adjustments		Changes in Fair Value of Available for Sale InvestmentsChanges in
Fair Value
of Cash Flow
Hedges  		Total
Balance at December 31, 2020$(2,780)$(601)$4 $0 $(3,377)
Other comprehensive income (loss) before reclassifications216 0 (3)8 221 
Amounts reclassified from accumulated other comprehensive income(3)(22)0 (3)(28)
Net current period other comprehensive income (loss)213 (22)(3)5 193 
Balance at March 31, 2021$(2,567)$(623)$1 $5 $(3,184)
 Three Months Ended March 31, 2020
 Revenue Cost of Products Sold SG&A Other (Income) Expense Interest and Other Financial Charges
 $8,463
 $4,374
 $1,238
 $(317) $73
Gain or (loss) on cash flow hedges:         
Foreign Currency Exchange Contracts:         
Amount reclassified from accumulated other comprehensive income into income—
 27
 —
 40
 —
Amount excluded from effectiveness testing recognized in earnings using an amortization approach—
 4
 —
 8
 —
Gain or (loss) on fair value hedges:         
Interest Rate Swap Agreements:         
Hedged items—
 —
 —
 —
 (205)
Derivatives designated as hedges—
 —
 —
 —
 205
 Foreign
Exchange
Translation
Adjustment		Pension
and Other
Postretirement
Benefits
Adjustments  		Changes in Fair Value of Available for Sale InvestmentsChanges in
Fair Value
of Cash Flow
Hedges		Total
Balance at December 31, 2019$(2,566)$(675)$0 $44 $(3,197)
Other comprehensive income (loss) before reclassifications(273)0 0 195 (78)
Amounts reclassified from accumulated other comprehensive income(3)(20)0 (55)(78)
Net current period other comprehensive income (loss)(276)(20)0 140 (156)
Balance at March 31, 2020$(2,842)$(695)$0 $184 $(3,353)

 Three Months Ended March 31, 2019
 Revenue Cost of Products Sold SG&A Other (Income) Expense Interest and Other Financial Charges
 $8,884
 $4,622
 $1,363
 $(285) $85
Gain or (loss) on cash flow hedges:         
Foreign Currency Exchange Contracts:         
Amount reclassified from accumulated other comprehensive income into income—
 16
 —
 24
 —
Amount excluded from effectiveness testing recognized in earnings using an amortization approach—
 6
 —
 9
 —
Gain or (loss) on fair value hedges:         
Interest Rate Swap Agreements:         
Hedged items—
 —
 —
 —
 (24)
Derivatives designated as hedges—
 —
 —
 —
 24

The following table summarizes the amounts of gain or (loss) on net investment hedges recognized in Accumulated other comprehensive income (loss):
 Three Months Ended March 31,
Derivatives Net Investment Hedging Relationships2020 2019
Euro-denominated long-term debt$124
 $68
Euro-denominated commercial paper70
 71
Cross currency swap(26) 13
Foreign currency exchange contracts84
 7



19

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


Note 13. Accumulated Other Comprehensive Income (Loss)
Changes in Accumulated Other Comprehensive Income (Loss) by Component
 
Foreign
Exchange
Translation
Adjustment
 
Pension
and Other
Postretirement
Benefits
Adjustments
 
Changes in
Fair Value
of Cash Flow
Hedges  
 Total
Balance at December 31, 2019$(2,566) $(675) $44
 $(3,197)
Other comprehensive income (loss) before reclassifications(273) —
 195
 (78)
Amounts reclassified from accumulated other comprehensive income(3) (20) (55) (78)
Net current period other comprehensive income (loss)(276) (20) 140
 (156)
Balance at March 31, 2020$(2,842) $(695) $184
 $(3,353)
 
Foreign
Exchange
Translation
Adjustment
 
Pension 
and Other
Postretirement
Benefits
Adjustments  
 
Changes in
Fair Value
of
Cash Flow
Hedges
 Total
Balance at December 31, 2018$(2,709) $(761) $33
 $(3,437)
Other comprehensive income (loss) before reclassifications205
 —
 38
 243
Amounts reclassified from accumulated other comprehensive income—
 (19) (32) (51)
Net current period other comprehensive income (loss)205
 (19) 6
 192
Balance at March 31, 2019$(2,504) $(780) $39
 $(3,245)



20

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


NOTE 15. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS
Our environmental matters are described in Note 14. Segment Financial Data
We globally manage our business operations through 4 reportable operating segments. Segment information is consistent with how management reviews the businesses, makes investing20 Commitments and resource allocation decisions and assesses operating performance.
Honeywell’s senior management evaluates segment performance based on segment profit. Each segment’s profit is measured as segment income (loss) before taxes excluding general corporate unallocated expense, interest and other financial charges, stock compensation expense, pension and other postretirement income (expense), repositioning and other charges, and other items within Other (income) expense. 
 Three Months Ended March 31,
 2020 2019
Net sales 
  
Aerospace 
  
Products$2,079
 $2,075
Services1,282
 1,266
Total3,361
 3,341
Honeywell Building Technologies   
Products970
 1,073
Services311
 316
Total1,281
 1,389
Performance Materials and Technologies   
Products1,914
 2,070
Services483
 502
Total2,397
 2,572
Safety and Productivity Solutions   
Products1,342
 1,495
Services82
 87
Total1,424
 1,582
 $8,463
 $8,884
Segment profit   
Aerospace$937
 $838
Honeywell Building Technologies262
 271
Performance Materials and Technologies512
 564
Safety and Productivity Solutions178
 212
Corporate(41) (76)
Total segment profit1,848
 1,809
Interest and other financial charges(73) (85)
Stock compensation expense(a)
(44) (41)
Pension ongoing income(b)
198
 151
Other postretirement income(b)
13
 12
Repositioning and other charges(c)
(62) (84)
Other(d)
55
 80
Income before taxes$1,935
 $1,842
(a) Amounts included in Selling, general and administrative expenses.
(b) Amounts included in CostContingencies of products and services sold and Selling, general and administrative expenses (service costs) and Other income/expense (non-service cost components).

21

Honeywell International Inc.
Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K.
The following table summarizes information concerning our recorded liabilities for environmental costs:
Balance at December 31, 2020$660 
Accruals for environmental matters deemed probable and reasonably estimable41 
Environmental liability payments(79)
Other1 
Balance at March 31, 2021$623 
21 Honeywell International Inc.

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


(c) AmountsEnvironmental liabilities are included in Costthe following balance sheet accounts: 
March 31, 2021December 31, 2020
Accrued liabilities$225 $225 
Other liabilities398 435 
 $623 $660 
The Company does not currently possess sufficient information to reasonably estimate the amounts of productsenvironmental liabilities to be recorded upon future completion of studies, litigation or settlements, and services sold, Selling, generalneither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to our consolidated results of operations and administrative expenses,operating cash flows in the periods recognized or paid. However, considering our past experience and existing reserves, the Company does not expect that environmental matters will have a material adverse effect on its consolidated financial position.
In conjunction with the Resideo Technologies, Inc. (Resideo) spin-off, the Company entered into an indemnification and reimbursement agreement with a Resideo subsidiary, pursuant to which Resideo’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to 90% of Honeywell’s annual net spending for environmental matters at certain sites as defined in the agreement. The amount payable to Honeywell in any given year is subject to a cap of $140 million, and the obligation will continue until the earlier of December 31, 2043, or December 31 of the third consecutive year during which the annual payment obligation is less than $25 million.
Reimbursements associated with this agreement are collected from Resideo quarterly and were $35 million in the three months ended March 31, 2021 and offset operating cash outflows incurred by the Company. As the Company incurs costs for environmental matters deemed probable and reasonably estimable related to the sites covered by the indemnification and reimbursement agreement, a corresponding receivable from Resideo for 90% of such costs is also recorded. This receivable amount recorded in the three months ended March 31, 2021 was $36 million. As of March 31, 2021, Other Current Assets and Other income/expense.Assets included $140 million and $452 million, respectively, for the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement.  
(d) AmountsASBESTOS MATTERS
Honeywell is named in asbestos-related personal injury claims related to North American Refractories Company (NARCO), which was sold in 1986, and the Bendix Friction Materials (Bendix) business, which was sold in 2014. 
The following tables summarize information concerning NARCO and Bendix asbestos-related balances:
ASBESTOS RELATED LIABILITIES
 BendixNARCOTotal
December 31, 2020$1,441 $779 $2,220 
Accrual for update to estimated liability10 8 18 
Asbestos-related liability payments(35)(30)(65)
March 31, 2021$1,416 $757 $2,173 
INSURANCE RECOVERIES FOR ASBESTOS RELATED LIABILITIES
 BendixNARCOTotal
December 31, 2020$148 $254 $402 
Probable insurance recoveries related to estimated liability0 0 0 
Insurance receipts for asbestos-related liabilities(5)(14)(19)
Insurance receivables settlements0 0 0 
March 31, 2021$143 $240 $383 
22 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
NARCO and Bendix asbestos-related balances are included in the following balance sheet accounts:
March 31, 2021December 31, 2020
Other current assets$36 $36 
Insurance recoveries for asbestos related liabilities347 366 
$383 $402 
Accrued liabilities$300 $300 
Asbestos-related liabilities1,873 1,920 
 $2,173 $2,220 
NARCO Products – NARCO manufactured high-grade, heat-resistant, refractory products for various industries. Honeywell’s predecessor, Allied Corporation, owned NARCO from 1979 to 1986. Allied Corporation sold the NARCO business in 1986 and entered into a cross-indemnity agreement which included an obligation to indemnify the purchaser for asbestos claims. Such claims arise primarily from alleged occupational exposure to asbestos-containing refractory brick and mortar for high-temperature applications. NARCO ceased manufacturing these products in 1980 and ultimately filed for bankruptcy in January 2002, at which point in time all then current and future NARCO asbestos claims were stayed against both NARCO and Honeywell pending the reorganization of NARCO. The Company established its initial liability for NARCO asbestos claims in 2002.
NARCO emerged from bankruptcy in April 2013, at which time a federally authorized 524(g) trust was established to evaluate and resolve all existing NARCO asbestos claims (the Trust). Both Honeywell and NARCO are protected by a permanent channeling injunction barring all present and future individual actions in state or federal courts and requiring all asbestos-related claims based on exposure to NARCO asbestos-containing products to be made against the Trust. The NARCO Trust Agreement (TA) and the NARCO Trust Distribution Procedures (TDP) are the principal documents setting forth the structure of the Trust, establishing Honeywell’s evergreen funding obligations and the material operating rules for the Trust.
Per the TA, the Trust is eligible to receive cash dividends from Harbison-Walker International Inc. (HWI), the reorganized and renamed entity that emerged, fully operational, from the NARCO bankruptcy. The cash dividends are required to be used to pay claims which qualify for payment under the TDP (Annual Contribution Claims) until those funds are exhausted, at which point Honeywell’s funding obligation, subject to an annual cap of $145 million, is triggered. The Company is also required to fund amounts owed pursuant to settlement agreements reached during the pendency of the NARCO bankruptcy proceedings that provide for the right to submit claims to the Trust subject to qualification under the terms of the settlement agreements and TDP (Pre-Established Unliquidated Claims), as well as fund the annual operating costs of the Trust. There is no annual funding cap relative to Pre-Established Unliquidated Claims. Dividends from HWI were exhausted during the fourth quarter of 2019 and there have been no further dividends from HWI to date.
The operating rules per the TDP include Honeywell’s audit rights and the criteria claimants must meet for a claim to be considered valid and paid, which include adequate medical evidence of the claimant’s asbestos-related condition and credible evidence of exposure to a specific NARCO asbestos-containing product. Once operational in 2014, the Trust began to receive, process and pay claims, at which point the Company began to assert its audit rights to review and monitor the claims processor’s adherence to the established requirements of the TDP. While doing so, the Company identified several issues with the way the Trust was adhering to the TDP and the Company continues to identify and dispute these matters as further claims are processed. Although the Company is attempting to resolve instances where it believes the Trust is not processing claims in accordance with the established TDP, the Company reserves the right to seek judicial intervention should it fail to resolve the disputed issues.
Due to the bankruptcy filing in 2002, claimants were not permitted to file additional claims until the Trust became operative in 2014. As a consequence, there was a large backlog of claims that were filed with the Trust upon becoming operative through December 31, 2017, the date by which these claims had to be filed or else be barred by the statute of limitations (subject to tolling exceptions in the TDP). Therefore, the claims filing rate did not start to normalize until 2018 and thereafter. As a result, between 2002 and 2018, the Company lacked a history of sufficiently reliable claims data to derive a reasonable estimate and the Company continued to update its original NARCO asbestos liability, as appropriate, using all available information.
23 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
With three years of sufficiently reliable claims data, the Company updated its estimate of the NARCO asbestos liability utilizing claims data from January 1, 2018 through December 31, 2020. The Company utilized an asbestos liability valuation specialist to support our preparation of the NARCO asbestos liability estimates. Our estimates, which involve significant management judgment, include consideration of multiple scenarios, including a scenario adjusting for the impact of the COVID-19 pandemic on the Trust's ability to process claims during 2020. The estimate for the resolution of asserted Annual Contribution Claims and Pre-Established Unliquidated Claims uses average payment values for the relevant historical period. For unasserted claims, the estimate is based on historic and anticipated claims filing experience and payment rates, disease classifications and type of claim, and average payment values by the Trust for the relevant historical period. The Company's estimate also includes all years of epidemiological disease projection through 2059.
The liability reflects an estimate for the resolution of Annual Contribution Claims and Pre-Established Unliquidated Claims filed with the Trust, as well as for unasserted Annual Contribution Claims and Pre-Established Unliquidated Claims. The NARCO asbestos liability excludes the annual operating expenses of the Trust which are expensed as they are incurred.
The Company's NARCO related insurance receivable reflects coverage which reimburses Honeywell for portions of NARCO-related claims and 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. Honeywell's NARCO related insurance receivable is an estimate of the probable amount of insurance that is recoverable for asbestos claims. Most of our insurance carriers remain solvent. However, select individual insurance carriers are now insolvent, which we have considered in our analysis of probable recoveries. Our judgments related to our insurance carriers and insurance coverages are reasonable and consistent with Honeywell's historical dealings and Honeywell's knowledge of any pertinent solvency issues surrounding insurers.
Bendix Products – Bendix manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements. The following tables present information regarding Bendix-related asbestos claims activity: 
Three Months Ended
March 31,		Years Ended 
December 31,
Claims Activity202120202019
Claims unresolved at the beginning of period6,242 6,480 6,209 
Claims filed617 2,233 2,659 
Claims resolved(486)(2,471)(2,388)
Claims unresolved at the end of period6,373 6,242 6,480 
March 31,December 31,
Disease Distribution of Unresolved Claims202120202019
Mesothelioma and other cancer claims3,566 3,422 3,399 
Nonmalignant claims2,807 2,820 3,081 
Total claims6,373 6,242 6,480 

Honeywell has experienced average resolution values per claim excluding legal costs as follows:
 Years Ended December 31,
 20202019201820172016
 (in whole dollars)
Malignant claims$61,500 $50,200 $55,300 $56,000 $44,000 
Nonmalignant claims$550 $3,900 $4,700 $2,800 $4,485 
It is not possible to predict whether resolution values for Bendix-related asbestos claims will increase, decrease or stabilize in the future. 
24 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
The Consolidated Financial Statements reflect an estimated liability for resolution of asserted (claims filed as of the financial statement date) and unasserted Bendix-related asbestos claims, which exclude the Company’s ongoing legal fees to defend such asbestos claims which will continue to be expensed as they are incurred.
The Company reflects the inclusion of all years of epidemiological disease projection through 2059 when estimating the liability for unasserted Bendix-related asbestos claims. Such liability for unasserted Bendix-related asbestos claims is based on historic and anticipated claims filing experience and dismissal rates, disease classifications, and resolution values in the tort system for the previous five years. The Company has valued Bendix asserted and unasserted claims using average resolution values for the previous five years. The Company updates the resolution values used to estimate the cost of Bendix asserted and unasserted claims during the fourth quarter each year.
The Company's insurance receivable corresponding to the liability for settlement of asserted and unasserted Bendix asbestos claims reflects coverage which is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Based on our ongoing analysis of the probable insurance recovery, insurance receivables are recorded in the financial statements simultaneous with the recording of the estimated liability for the underlying asbestos claims. This determination is based on our analysis of the underlying insurance policies, our historical experience with our insurers, our ongoing review of the solvency of our insurers, judicial determinations relevant to our insurance programs, and our consideration of the impacts of any settlements reached with our insurers.
On October 31, 2018, David Kanefsky, a Honeywell shareholder, filed a putative class action complaint in the U.S. District Court for the District of New Jersey alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5 related to the prior accounting for Bendix asbestos claims. An Amended Complaint was filed on December 30, 2019, and on February 7, 2020, we filed a Motion to Dismiss. On May 18, 2020, the court denied our Motion to Dismiss. We believe the claims have no merit.
GARRETT MATTER
In conjunction with the Garrett spin-off, the Company entered into a binding indemnification and reimbursement agreement (Garrett Indemnity) with a Garrett subsidiary, pursuant to which Garrett’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to (i) 90% of Honeywell’s asbestos-related liability payments primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments, including the legal costs of defending and resolving such liabilities, less (ii) 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other componentsrecoveries associated with such liabilities. The amount payable to Honeywell in respect of such liabilities arising in any given year is subject to a cap of approximately Euro 150 million (equivalent to $175 million at the time the Garrett Indemnity was entered into). The obligation under the terms of the Garrett Indemnity continues until the earlier of December 31, 2048, or December 31 of the third consecutive year during which the annual obligation is less than the Euro equivalent, at the fixed exchange rate at the time the Garrett Indemnity was entered into, of $25 million.
On June 12, 2020, the Company and Garrett entered into an amendment of the Garrett Indemnity in connection with Garrett’s amendment of its 2018 credit agreement. These amendments provided Garrett with temporary financial covenant relief with respect to the total leverage and interest coverage ratios, for a period that could extend to as late as June 30, 2022. Garrett’s payments to the Company under the Garrett Indemnity were deferred to the extent Garrett is (or to the extent such payments would cause Garrett to be) out of compliance with the original financial covenants and resume to the extent Garrett is in compliance with such original financial covenants. Any deferred amounts were to be paid to the extent Garrett was in compliance with such original financial covenants and had available capacity to make such payments pursuant to the terms of the Garrett Indemnity and its current credit agreement.
In conjunction with the spin-off, Honeywell also entered into a binding tax matters agreement with Garrett and a Garrett subsidiary (the Tax Matters Agreement). The Tax Matters Agreement generally provides that Garrett is responsible and must indemnify Honeywell for all ordinary operating taxes, including income taxes, sales taxes, value-added taxes and payroll taxes, relating to Garrett for all periods, including periods prior to the spin-off, to the extent not paid prior to the spin-off date. In addition, among other items, as a result of the mandatory transition tax imposed by the U.S. Tax Cuts and Jobs Act, Garrett is required to make payments to Honeywell in the amount representing the net tax liability of Honeywell under the mandatory transition tax attributable to Garrett.
25 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
GARRETT LITIGATION AND BANKRUPTCY PROCEEDINGS
On December 2, 2019, Garrett and Garrett ASASCO Inc. filed a Summons with Notice and commenced a lawsuit in the Commercial Division of the Supreme Court of the State of New York, County of New York (the State Court), seeking to invalidate the Garrett Indemnity. Garrett sought damages and a declaratory judgment based on various claims set forth in the Summons with Notice. On January 15, 2020, Garrett filed its complaint in the action, which asserted the same claims, and on March 5, 2020, we filed a Motion to Dismiss. On June 12, 2020, given the challenges of operating in the COVID-19 environment, Honeywell and Garrett entered into a litigation status agreement pursuant to which (i) the parties agreed to make good faith efforts to limit near-term litigation spend on this matter, and (ii) the Company agreed to extend both the $2 million payment owed by Garrett to the Company on May 1, 2020 under the Garrett Indemnity and the $18 million payment owed by Garrett to the Company on April 1, 2020 under the Tax Matters Agreement until December 31, 2020 (which amounts, as previously disclosed, had been deferred to May 31, 2020). On July 17, 2020, the Company received a notice from Garrett asserting that Honeywell has caused material breaches of the Tax Matters Agreement and that the Tax Matters Agreement is unenforceable.
On September 20, 2020, Garrett and 36 of its affiliates filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). On September 24, 2020, Garrett moved the existing State Court litigation against Honeywell to the Bankruptcy Court. Honeywell again moved to dismiss all of Garrett’s claims on October 13, 2020. On November 2, 2020, Garrett filed a motion seeking to establish procedures to estimate the value of Honeywell’s claims. Honeywell objected to the motion. On November 18, 2020, the Bankruptcy Court held a hearing on the motion to establish procedures with respect to Honeywell’s claims and the motion to dismiss. The Bankruptcy Court did not rule on the motion to dismiss but suggested that two weeks be set aside in February 2021 for an evidentiary hearing to establish the actual allowed amount or net amount of Honeywell’s claim against Garrett. Honeywell and Garrett agreed to proceed with the estimation of Honeywell’s claims but later agreed to suspend the estimation process pending the settlement and release of Honeywell’s claims in connection with the confirmation of a plan of reorganization as discussed below. We continue to believe we have fully complied with our obligations under the Garrett Indemnity and the Tax Matters Agreement and that both agreements are valid and enforceable.
Garrett’s operations have and are expected to continue, without interruption, throughout the bankruptcy proceedings. Garrett initially proposed to sell its business while in bankruptcy, and entered into a Share and Asset Purchase Agreement, dated as of September 20, 2020, with KPS Capital Partners, LP (the Stalking Horse Agreement) and filed proposed bidding procedures for a marketing and sale process, auction and other procedures related to the proposed sale. In October 2020, Honeywell signed a coordination agreement with Oaktree Capital Management, L.P. (Oaktree) and Centerbridge Partners, L.P. (Centerbridge), which was subsequently signed by additional equity holders that, collectively with Honeywell, Centerbridge and Oaktree, represent approximately 58% of Garrett’s outstanding common stock and noteholders representing approximately 88% of the principal amount of Garrett’s outstanding senior notes (the Coordination Agreement). The Coordination Agreement and related term sheet set forth the terms of a proposed plan of reorganization (the Initial COH Proposal).
In October 2020, the Bankruptcy Court approved the bidding procedures and the Stalking Horse Agreement (as amended), and Garrett conducted a marketing and auction process through January 8, 2021. On January 11, 2021, after further revisions to the Initial COH Proposal, Garrett determined that the revised proposal (the Final COH Proposal) was higher and better than all other proposals received and entered into a plan support agreement (the Plan Support Agreement), pursuant to which all parties agreed to pursue Bankruptcy Court confirmation of the Final COH Proposal. KPS Capital Partners, LP subsequently terminated the Stalking Horse Agreement with Garrett.
As set forth in the Plan Support Agreement, the Final COH Proposal, which will be implemented through Garrett’s chapter 11 plan (the Plan) provides that, if the Plan is confirmed by the Bankruptcy Court (scheduled Plan confirmation hearing date is April 23, 2021), Honeywell will receive from Garrett on the effective date of the Plan an initial payment of $375 million in cash and Series B Preferred Stock, which will provide for cash payments to Honeywell of approximately $35 million in 2022 and $100 million per year from 2023 to 2030 (inclusive), subject to various put and call rights set forth therein. The initial cash payment, together with the Series B Preferred Stock, would be paid/issued in full and final satisfaction of Garrett’s obligations to Honeywell under the Garrett Indemnity and the Tax Matters Agreement. Upon Garrett’s emergence from bankruptcy, both agreements would be terminated, Honeywell and Garrett would mutually release each other from the claims asserted in all pending legal actions, and all pending litigation with Garrett in connection with those agreements will be resolved. In light of these developments, the hearing scheduled to estimate Honeywell’s claims and the adversary proceeding seeking to
26 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
invalidate the Indemnity Agreement have been stayed and all related litigation suspended. If the Plan is confirmed by the Bankruptcy Court, both proceedings will be dismissed with prejudice on the effective date of the Plan.
We regularly review the aggregate carrying value of the receivable amounts due in connection with the Garrett Indemnity and the Tax Matters Agreement. Because Garrett is now a party to the Plan Support Agreement, we believe the present value of payments to Honeywell under the Plan, discounted at a rate reflective of the terms of the agreement, is an appropriate estimate of receivable amounts. As of December 31, 2020, Other income/expenseCurrent Assets and Other Assets included $10 million and $949 million, respectively, for the short-term and long-term portion of the receivable amount due from the Garrett Indemnity and Tax Matters Agreement. During the three months ended March 31, 2021, there were no adjustments to the carrying value of the receivable.
There can be no assurance that the Plan will be confirmed by the Bankruptcy Court or that Garrett will be able to substantially consummate the restructuring transactions contemplated in the Plan. The ultimate outcome of the bankruptcy process is uncertain. Depending on the transaction and/or plan of reorganization ultimately approved and confirmed by the Bankruptcy Court, the amount collected could differ from the receivable amounts currently recorded in our financial statements. There can be no assurance that recording an additional adjustment (positive or negative) against the remaining receivable amounts in whole or in part (together with a related statement of operations charge) will not included within other categoriesbe necessary in a future period or periods. Honeywell will continue to participate in the Bankruptcy Court proceedings in order to appropriately assess and enforce our rights in this reconciliation. Equity income/matter. Should the Plan not be confirmed in the form currently contemplated, Honeywell intends to vigorously defend its rights to collect amounts due under the Garrett Indemnity and Tax Matters Agreement with Garrett.
OTHER MATTERS
The Company is subject to a number of other lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Included in these other matters is the following:
Petrobras and Unaoil – We are cooperating with certain investigations by the U.S. Department of Justice (DOJ), the Securities and Exchange Commission (SEC) and the Brazilian authorities relating to our use of third parties who previously worked for our UOP business in Brazil in relation to Petróleo Brasileiro S.A. (Petrobras). The investigations are focused on compliance with the U.S. Foreign Corrupt Practices Act and similar Brazilian laws, and involve, among other things, document production and interviews with former and current management and employees. The DOJ and the SEC are also examining a matter involving a foreign subsidiary’s prior engagement of Unaoil S.A.M. in Algeria. We are cooperating with the authorities in each of the above matters. While we cannot predict the outcome of these matters, based on the facts currently known to us, we do not anticipate that these matters will have a material adverse effect on our financial condition, results of operations, or cash flows.
Given the uncertainty inherent in litigation and investigations (including the specific matter referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in excess of affiliated companies is includedcurrent accruals for these matters (other than as specifically set forth above). Considering our past experience and existing accruals, we do not expect the outcome of these matters, either individually or in segment profit. the aggregate, to have a material adverse effect on our consolidated financial position. Because most contingencies are resolved over long periods of time, potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause us to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on our consolidated results of operations or operating cash flows in the periods recognized or paid.

27 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)
Note 15. Pension Benefits
NOTE 16. PENSION BENEFITS
Net periodic pension benefit costs for ourthe Company's significant defined benefit plans include the following components:
 U.S. Plans
Three Months Ended March 31,
 20212020
Service cost$26 $25 
Interest cost77 115 
Expected return on plan assets(305)(284)
Amortization of prior service (credit)(11)(11)
 $(213)$(155)
 U.S. Plans
 Three Months Ended March 31,
 2020 2019
Service cost$25
 $21
Interest cost115
 153
Expected return on plan assets(284) (279)
Amortization of prior service (credit)(11) (11)
 $(155) $(116)
 Non-U.S. Plans
 Three Months Ended March 31,
 2020 2019
Service cost$6
 $6
Interest cost26
 36
Expected return on plan assets(84) (84)
Amortization of prior service (credit)—
 —
 $(52) $(42)


During the three months ended March 31, 2020 and 2019, the Company repurchased $100 million and $100 million, respectively, of outstanding Honeywell shares from the Honeywell U.S. Pension Plan Master Trust.
 Non-U.S. Plans
 Three Months Ended March 31,
 20212020
Service cost$7 $6 
Interest cost19 26 
Expected return on plan assets(87)(84)
Amortization of prior service (credit)0 0 
 $(61)$(52)

Note 16. Commitments and ContingenciesNOTE 17. OTHER (INCOME) EXPENSE
 Three Months Ended March 31,
 20212020
Interest income$(19)$(44)
Pension ongoing income – non-service(310)(237)
Other postretirement income – non-service(17)(13)
Equity income of affiliated companies(14)(12)
Gain on sale of non-strategic business and assets(90)0 
Foreign exchange5 (12)
Other (net)3 1 
 $(442)$(317)

Environmental Matters

NOTE 18. SEGMENT FINANCIAL DATA
Our environmental matters are described in Note 20 CommitmentsHoneywell globally manages its business operations through 4 reportable operating segments. Segment information is consistent with how management reviews the businesses, makes investing and Contingenciesresource allocation decisions and assesses operating performance.
Honeywell’s senior management evaluates segment performance based on segment profit. Each segment’s profit is measured as segment income (loss) before taxes excluding general corporate unallocated expense, interest and other financial charges, stock compensation expense, pension and other postretirement income (expense), repositioning and other charges, and other items within Other (income) expense. 
28 of Notes to Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.Honeywell International Inc.

The following table summarizes information concerning our recorded liabilities for environmental costs:
December 31, 2019$709
Accruals for environmental matters deemed probable and reasonably estimable42
Environmental liability payments(34)
Other(2)
March 31, 2020$715


22

Honeywell International Inc.HONEYWELL INTERNATIONAL INC.
Notes to Consolidated Financial StatementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
(Dollars in tables in millions, except per share amounts)

 Three Months Ended March 31,
 20212020
Net sales  
Aerospace  
Products$1,515 $2,079 
Services1,117 1,282 
Total2,632 3,361 
Honeywell Building Technologies
Products1,009 970 
Services349 311 
Total1,358 1,281 
Performance Materials and Technologies
Products1,869 1,914 
Services477 483 
Total2,346 2,397 
Safety and Productivity Solutions
Products2,016 1,342 
Services102 82 
Total2,118 1,424 
 $8,454 $8,463 
Segment profit
Aerospace$762 $937 
Honeywell Building Technologies305 262 
Performance Materials and Technologies434 512 
Safety and Productivity Solutions303 178 
Corporate(29)(41)
Total segment profit1,775 1,848 
Interest and other financial charges(90)(73)
Stock compensation expense(a)
(77)(44)
Pension ongoing income(b)
276 198 
Other postretirement income(b)
17 13 
Repositioning and other charges(c)
(141)(62)
Other(d)
101 55 
Income before taxes$1,861 $1,935 

Environmental liabilities are(a)     Amounts included in Selling, general and administrative expenses.
(b)     Amounts included in Cost of products and services sold and Selling, general and administrative expenses (service cost component) and Other (income) expense (non-service cost component).
(c)     Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and Other (income) expense.
(d)     Amounts include the following balance sheet accounts:other components of Other (income) expense not included within other categories in this reconciliation. Equity income of affiliated companies is included in segment profit. 
 March 31, 2020 December 31, 2019
Accrued liabilities$222
 $222
Other liabilities493
 487
 $715
 $709

29 Honeywell International Inc.
The Company does not currently possess sufficient information to reasonably estimate the amounts of environmental liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount of the ultimate costs associated with environmental matters can be determined although they could be material to our consolidated results of operations and operating cash flows in the periods recognized or paid. However, considering our past experience and existing reserves, we do not expect that environmental matters will have a material adverse effect on our consolidated financial position.

In conjunction with the Resideo Technologies, Inc. ("Resideo") spin-off, the Company entered into an indemnification and reimbursement agreement with a Resideo subsidiary, pursuant to which Resideo’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to 90 percent of Honeywell’s annual net spending for environmental matters at certain sites as defined in the agreement. The amount payable to Honeywell in any given year is subject to a cap of $140 million, and the obligation will continue until the earlier of December 31, 2043, or December 31 of the third consecutive year during which the annual payment obligation has been less than $25 million. Reimbursements associated with this agreement with a Resideo subsidiary were $35 million in the three months ended March 31, 2020 and offset operating cash outflows incurred by the Company. The Company agreed to extend the payment due date from April 30, 2020 to July 30, 2020 for the next reimbursement amount of $35 million while also agreeing to extend the payment due date from May 30, 2020 to July 30, 2020 for royalty payments of approximately $7 million owed to the Company under the Trademark License Agreement that the parties executed in connection with the spin-off. As the Company records the accruals for environmental matters deemed probable and reasonably estimable related to the sites covered by the indemnification and reimbursement agreement, a corresponding receivable from Resideo for 90 percent of such accruals is also recorded. This receivable amount recorded in the three months ended March 31, 2020 was $34 million. As of March 31, 2020, Other Current Assets and Other Assets includes $140 million and $444 million representing the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement.
Asbestos Matters
Honeywell is named in asbestos related personal injury claims related to North American Refractories Company (“NARCO”), which was sold in 1986, and Bendix Friction Materials (“Bendix”) business, which was sold in 2014.
The following tables summarize information concerning NARCO and Bendix asbestos-related balances:
Asbestos-Related Liabilities     
 Bendix NARCO Total
December 31, 2019$1,499
 $858
 $2,357
Accrual for update to estimated liability16
 5
 21
Asbestos related liability payments(50) (19) (69)
March 31, 2020$1,465
 $844
 $2,309


Insurance Recoveries for Asbestos-Related Liabilities 
  
  
 Bendix NARCO Total
December 31, 2019$153
 $281
 $434
Insurance receipts for asbestos-related liabilities(3) (6) (9)
Insurance receivables settlements—
 —
 —
March 31, 2020$150
 $275
 $425



23

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in millions, except per share amounts)tables and graphs in millions)


NARCO and Bendix asbestos-related balances are included in the following balance sheet accounts:
 March 31, 2020 December 31, 2019
Other current assets$42
 $42
Insurance recoveries for asbestos-related liabilities383
 392
 $425
 $434
Accrued liabilities$361
 $361
Asbestos-related liabilities1,948
 1,996
 $2,309
 $2,357

NARCO Products – Honeywell’s predecessor, Allied Corporation owned NARCO from 1979 to 1986. When the NARCO business was sold, Honeywell’s predecessor entered into a cross-indemnity agreement with NARCO which included an obligation to indemnify the purchaser for asbestos claims. Such claims arise primarily from alleged occupational exposure to asbestos-containing refractory brick and mortar for high-temperature applications. NARCO ceased manufacturing these products in 1980, and the first asbestos claims were filed in the tort system against NARCO in 1983. Claims filings and related costs increased dramatically in the late 1990s through 2001, which led to NARCO filing for bankruptcy in January 2002. Once NARCO filed for bankruptcy, all then current and future NARCO asbestos claims were stayed against both NARCO and Honeywell pending the reorganization of NARCO.
Following the bankruptcy filing, in December 2002 Honeywell recorded a total NARCO asbestos liability of $3.2 billion, which was comprised of three components: (i) the estimated liability to settle pre-bankruptcy petition NARCO claims and certain post-petition settlements ($2.2 billion, referred to as “Pre-bankruptcy NARCO Liability”), (ii) the estimated liability related to then unasserted NARCO claims for the period 2004 through 2018 ($950 million, referred to as “NARCO Trust Liability”), and (iii) other NARCO bankruptcy-related obligations totaling $73 million.
When the NARCO Trust Liability of $950 million was established in 2002, the methodology for estimating the potential liability was based primarily on: (a) epidemiological projections of the future incidence of disease for the period 2004 through 2018, a fifteen-year period; (b) historical claims rates in the tort system for the five-year period prior to the bankruptcy filing date; and (c) anticipated NARCO Trust payment values set forth in the then current draft of the NARCO Trust Distribution Procedures. The methodology required estimating, by disease, three critical inputs: (i) likely number of claims to be asserted against the NARCO Trust in the future, (ii) percentage of those claims likely to receive payment, and (iii) payment values. The Company utilized outside asbestos liability valuation specialists to support its preparation of the NARCO Trust Liability estimate, which was based on a commonly accepted methodology used by numerous bankruptcy courts addressing 524(g) trusts.
In 2002, when the Company first established its initial liability, NARCO asbestos claims resolution shifted from the tort system to an anticipated NARCO Trust framework, where claims would be processed in accordance with established NARCO Trust Distribution Procedures, including strict medical and exposure criteria for a plaintiff to receive compensation. We believed at the time that the NARCO Trust’s claims filing and resolution experience after the NARCO Trust became operational would be significantly different from pre-bankruptcy tort system experience in light of these more rigorous claims processing requirements in the NARCO Trust Distribution Procedures and Honeywell’s active oversight of claims processing and approval. Given these anticipated differences, we believed that a 15-year time period was the appropriate horizon for establishing a probable and reasonably estimable liability for then unasserted NARCO claims as it represented our best estimate of the time period it would take for the NARCO Trust to be approved by the Bankruptcy Court, become fully operational and generate sufficiently reliable claims data (i.e., a data set which is statistically representative) to enable us to update our NARCO Trust Liability.
The NARCO Trust Distribution Procedures were finalized in 2006, and the Company updated its NARCO Trust Liability to reflect the final terms and payment values. The original 15-year period (from 2004 through 2018) for unasserted claims did not change as asbestos claims filings continued to be stayed against both Honeywell and NARCO. The 2006 update resulted in a range of the estimated liability for unasserted claims of $743 million to $961 million, and we believed that no amount within this range was a better estimate than any other amount. In accordance with ASC 450 – Contingencies (“ASC 450”), we recorded the low end of the range of $743 million (the "2006 NARCO Trust Liability Estimate") which resulted in a reduction of $207 million in our NARCO Trust Liability.

24

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


NARCO emerged from bankruptcy on April 30, 2013, at which time a federally authorized 524(g) trust was established for the evaluation and resolution of all existing and future NARCO asbestos claims. Both Honeywell and NARCO are protected by a permanent channeling injunction barring all present and future individual actions in state or federal courts and requiring all asbestos-related claims based on exposure to NARCO asbestos-containing products to be made against the NARCO Trust.
The NARCO Trust Agreement and the NARCO Trust Distribution Procedures are the principal documents setting forth the structure of the NARCO Trust. These documents establish Honeywell’s evergreen funding obligations. Honeywell is obligated to fund NARCO asbestos claims submitted to the NARCO Trust which qualify for payment under the Trust Distribution Procedures (Annual Contribution Claims), subject to an annual cap of $145 million. However, the initial $100 million of claims processed through the NARCO Trust (the "Initial Claims Amount") will not count against the annual cap and any unused portion of the Initial Claims Amount will roll over to subsequent years until fully utilized. These documents also establish the material operating rules for the NARCO Trust, including Honeywell audit rights and the criteria claimants must meet to have a valid claim paid. These claims payment criteria include providing the NARCO Trust with adequate medical evidence of the claimant’s asbestos-related condition and credible evidence of exposure to a specific NARCO asbestos-containing product. Further, the NARCO Trust is eligible to receive cash dividends from Harbison-Walker International Inc (“HWI”), the reorganized and renamed entity that emerged, fully operational, from the NARCO bankruptcy. The NARCO Trust is required to use any funding received from HWI to pay Annual Contribution Claims until those funds are exhausted. It is only at this point that Honeywell’s funding obligation to the Trust is triggered. Thus, there is an unrelated primary source for funding that affects Honeywell’s funding of the NARCO Trust Liability.
Once operational, the NARCO Trust began to receive, process and pay claims that had been previously stayed pending the Trust becoming operational. As the NARCO Trust began to pay claims in 2014, we began to assert our on-going audit rights to review and monitor the claims processor’s adherence to the established requirements of the NARCO Trust Distribution Procedures. While doing so, we identified several issues with the way the Trust was implementing the NARCO Trust Distribution Procedures. In 2015, Honeywell filed suit against the NARCO Trust in Bankruptcy Court alleging breach of certain provisions of the NARCO Trust Agreement and NARCO Trust Distribution Procedures. The parties agreed to dismiss the proceeding without prejudice pursuant to an 18-month Standstill Agreement, which expired in October 2017. Notwithstanding its expiration, claims processing continues, and Honeywell continues to negotiate and attempt to resolve remaining disputed issues (that is, instances where Honeywell believes the NARCO Trust is not processing claims in accordance with established NARCO Trust Distribution Procedures). Honeywell reserves the right to seek judicial intervention should negotiations fail.
After the NARCO Trust became effective in 2013, the $743 million NARCO Trust Liability was then comprised of:
(i)liability for unasserted claims; and
(ii)liability for claims asserted after the NARCO Trust became operational but not yet paid.

Although we know the number of claims filed with the NARCO Trust each year, we are not able to determine at this time the portion of the NARCO Trust Liability which represents asserted versus unasserted claims due to the lack of sufficiently reliable claims data because of the claims processing issues described previously.
Honeywell continues to maintain the 2006 NARCO Trust Liability Estimate (the $743 million accrual less payments made by Honeywell to the NARCO Trust for Annual Contribution Claims), as there has not been sufficiently reliable claims data history to enable the Company to update that liability.

As of December 31, 2019, all cash dividends paid to the NARCO Trust by HWI had been used to pay Annual Contribution Claims. In the first quarter of 2020, Honeywell funded $18 million to the NARCO Trust for the payment of Annual Contribution Claims.

25

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


As of March 31, 2020, the Company's total NARCO asbestos liability of $844 million reflects Pre-bankruptcy NARCO Liability of $148 million and NARCO Trust Liability of $696 million (the $743 million accrual for the 2006 NARCO Trust Liability Estimate was reduced by $47 million of payments by Honeywell to the NARCO Trust for Annual Contribution Claims since HWI cash dividend funding had been fully exhausted in the fourth quarter of 2019 and there have been no further dividends from HWI). Through March 31, 2020, Pre-bankruptcy NARCO Liability has been reduced by approximately $2 billion since first established in 2002, largely related to settlement payments. The remaining Pre-bankruptcy NARCO Liability principally represents estimated amounts owed pursuant to settlement agreements reached during the pendency of the NARCO bankruptcy proceedings that provide for the right to submit claims to the NARCO Trust subject to qualification under the terms of the settlement agreements and Trust Distribution Procedures. The other NARCO bankruptcy related obligations were paid in 2013 and no further liability is recorded.
Honeywell continues to evaluate the appropriateness of the 2006 NARCO Trust Liability Estimate. Despite becoming effective in 2013, the NARCO Trust has experienced delays in becoming fully operational. Violations of the Trust Distribution Procedures and the resulting disputes and challenges, a standstill pending dispute resolution, and limited claims payments, have all contributed to the lack of sufficient normalized data based on actual claims processing experience in the Trust since it became operational. As a result, we have not been able to further update the NARCO Trust Liability aside from deducting Honeywell payments to the NARCO Trust for Annual Contribution Claims. The 2006 NARCO Trust Liability Estimate continues to be appropriate because of the unresolved pending claims in the Trust, some portion of which will result in payouts in the future, and because new claims continue to be filed with the NARCO Trust. When sufficiently reliable claims data exists, we will update our estimate of the NARCO Trust Liability and it is possible that a material change may need to be recognized.
Our insurance receivable of $275 million as of March 31, 2020, corresponding to the estimated liability for asserted and unasserted NARCO asbestos claims, reflects coverage which reimburses Honeywell for portions of NARCO-related indemnity and defense costs and is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. We conduct analyses to estimate the probable amount of insurance that is recoverable for asbestos 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. We made judgments concerning insurance coverage that we believe are reasonable and consistent with our historical dealings and our knowledge of any pertinent solvency issues surrounding insurers.
Bendix Products—Bendix manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements. The following tables present information regarding Bendix-related asbestos claims activity:
 Three Months Ended
March 31,		 Years Ended
December 31,
Claims Activity2020 2019 2018
Claims unresolved at the beginning of period6,480
 6,209
 6,280
Claims filed509
 2,659
 2,430
Claims resolved(708) (2,388) (2,501)
Claims unresolved at the end of period6,281
 6,480
 6,209


Disease Distribution of Unresolved ClaimsMarch 31, December 31,
 2020 2019 2018
Mesothelioma and other cancer claims3,221
 3,399
 2,949
Nonmalignant claims3,060
 3,081
 3,260
Total claims6,281
 6,480
 6,209



26

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


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

 Years Ended December 31,
 2019 2018 2017 2016 2015
 (in whole dollars)
Malignant claims$50,200
 $55,300
 $56,000
 $44,000
 $44,000
Nonmalignant claims$3,900
 $4,700
 $2,800
 $4,485
 $100


It is not possible to predict whether resolution values for Bendix-related asbestos claims will increase, decrease or stabilize in the future.
The Company's Consolidated Financial Statements reflect an estimated liability for resolution of asserted (claims filed as of the financial statement date) and unasserted Bendix-related asbestos claims and excludes the Company’s legal fees to defend such asbestos claims which will continue to be expensed by the Company as they are incurred. We have valued Bendix asserted and unasserted claims using average resolution values for the previous five years. We update the resolution values used to estimate the cost of Bendix asserted and unasserted claims during the fourth quarter each year.

Honeywell reflects the inclusion of all years of epidemiological disease projection through 2059 when estimating the liability for unasserted Bendix-related asbestos claims. Such liability for unasserted Bendix-related asbestos claims is based on historic and anticipated claims filing experience and dismissal rates, disease classifications, and resolution values in the tort system for the previous five years.
Our insurance receivable corresponding to the liability for settlement of asserted and unasserted Bendix asbestos claims reflects coverage which is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Based on our ongoing analysis of the probable insurance recovery, insurance receivables are recorded in the financial statements simultaneous with the recording of the estimated liability for the underlying asbestos claims. This determination is based on our analysis of the underlying insurance policies, our historical experience with our insurers, our ongoing review of the solvency of our insurers, judicial determinations relevant to our insurance programs, and our consideration of the impacts of any settlements reached with our insurers.

In conjunction with the Garrett Motion, Inc. ("Garrett") spin-off, the Company entered into an indemnification and reimbursement agreement with a Garrett subsidiary, pursuant to which Garrett’s subsidiary will have an obligation to make cash payments to Honeywell in amounts equal to (i) 90% of Honeywell’s asbestos-related liability payments primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments, in each case related to legacy elements of the Garrett business, including the legal costs of defending and resolving such liabilities, less (ii) 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities. The amount payable to Honeywell in respect of such liabilities arising in any given year will be subject to a cap of approximately Euro 150 million (equivalent to $175 million at the time the indemnification and reimbursement agreement was entered into). The obligation will continue until the earlier of December 31, 2048, or December 31 of the third consecutive year during which the annual obligation has been less than the Euro equivalent, at the fixed exchange rate at time of the indemnification and reimbursement agreement was entered into, of $25 million. Reimbursements associated with this agreement were $36 million for the three months ended March 31, 2020 and offset operating cash outflows incurred by the Company. The Company agreed to extend the payment due date from May 1, 2020 to May 31, 2020 for the next reimbursement amount of $2 million while also agreeing to extend the payment due date from April 1, 2020 to May 31, 2020 for the mandatory transition tax reimbursement of $18 million owed by Garrett to the Company under the tax matters agreement that the parties executed in connection with the spin-off. As the Company records the accruals for matters covered by the agreement, a corresponding receivable from Garrett is recorded for 90 percent of that accrual as determined by the terms of the agreement. This receivable amount recorded was $13 million in the three months ended March 31, 2020. As of March 31, 2020, Other Current Assets and Other Assets includes $112 million and $901 million representing the short-term and long-term portion of the receivable amount due from Garrett under the indemnification and reimbursement agreement.


27

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


On December 2, 2019, Garrett Motion Inc. and Garrett ASASCO Inc. filed a Summons with Notice and commenced a lawsuit in the Commercial Division of the Supreme Court of the State of New York, County of New York seeking to invalidate the indemnification and reimbursement agreement between Garrett and Honeywell. Garrett seeks damages and a declaratory judgment based on various claims set forth in the Summons with Notice. On January 15, 2020, Garrett filed its complaint in the action, which asserted the same claims, and on March 5, 2020, we filed a Motion to Dismiss. We strongly believe that Garrett's allegations have no merit, nor are they material to Honeywell. We believe we have fully complied with our obligations under the Agreement and that the Agreement is enforceable.

On October 31, 2018, David Kanefsky, a Honeywell shareholder, filed a putative class action complaint in the U.S. District Court for the District of New Jersey alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5 related to the prior accounting for Bendix asbestos claims. An Amended Complaint was filed on December 30, 2019, and on February 7, 2020, we filed a Motion to Dismiss. We believe the claims have no merit.

Other Matters
The Company is subject to a number of other lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Included in these other matters are the following:
Honeywell v. United Auto Workers (UAW) et. al—In September 2011, the UAW and certain Honeywell retirees (Plaintiffs) filed a suit in the Eastern District of Michigan (the District Court) alleging that a series of Master Collective Bargaining Agreements (MCBAs) between Honeywell and the UAW provided the retirees with rights to lifetime, vested healthcare benefits that could never be changed or reduced. Plaintiffs alleged that Honeywell had violated those vested rights by implementing express limitations (CAPS) on the amount Honeywell contributed toward healthcare coverage for the retirees. Honeywell subsequently answered the UAW’s complaint and asserted counterclaims, including for breach of implied warranty.
Between 2014 and 2015, Honeywell began enforcing the CAPS against former employees. In response, the UAW and certain of the Plaintiffs filed a motion seeking a ruling that the MCBAs do not limit Honeywell’s obligation to contribute to healthcare coverage for those retirees.
On March 29, 2018, the District Court issued its opinion resolving all pending summary judgment motions, except for Honeywell’s counterclaim for breach of implied warranty, which has since been dismissed without prejudice.

In the opinion, the District Court held that the MCBAs do not promise retirees vested, lifetime benefits that survive expiration of the MCBAs. Based on this ruling, Honeywell terminated the retirees healthcare coverage benefits altogether as of July 31, 2018. In response, the UAW filed a motion to enjoin Honeywell from completely terminating coverage as of July 31, 2018, arguing that the CAPS themselves are vested and that Honeywell must continue to provide retiree medical benefits at the capped level. On July 28, 2018, the District Court denied the UAW’s motion and entered a final judgment consistent with its March 2018 ruling. The UAW appealed this decision to the Sixth Circuit Court of Appeals.

In the March 2018 opinion, the District Court also held that Honeywell is obligated under the MCBAs to pay the “full premium” for retiree healthcare rather than the capped amount. Based on this ruling, Honeywell would be required to pay monetary damages to retirees for any past years in which Honeywell paid less than the “full premium” of their healthcare coverage. Such damages would be limited, depending on the retiree group, to a two to three-year period ending when the 2017 MCBA expired, and Honeywell would have no ongoing obligation to continue funding healthcare coverage for subsequent periods. Honeywell appealed the District Court’s ruling on this “full premium” damages issue.


28

Honeywell International Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except per share amounts)


On April 3, 2020, the Sixth Circuit Court of Appeals issued an opinion ruling for Honeywell in all respects. The Court of Appeals affirmed the District Court's ruling that the MCBAs do not promise retirees vested, lifetime benefits that survive expiration of the MCBAs. In addition, the Court of Appeals reversed the District Court's ruling that Honeywell was obligated under the MCBAs to pay the "full premium" for retiree healthcare, rather than the capped amount. As a result of these rulings, Honeywell is not required to pay any monetary damages to the Plaintiffs.

Plaintiffs have the option to seek rehearing en banc and file a petition for certiorari with the Supreme Court of the United States, but it is unknown at this time whether they will do so. If plaintiffs choose to make those filings, Honeywell does not believe they will be successful.

Petrobras and Unaoil—We are cooperating with certain investigations by the U.S. Department of Justice (DOJ), the SEC and Brazilian authorities relating to our use of third parties who previously worked for our UOP business in Brazil in relation to Petróleo Brasileiro S.A. (Petrobras). The investigations are focused on compliance with the U.S. Foreign Corrupt Practices Act and similar Brazilian laws, and involve, among other things, document production and interviews with former and current management and employees. The DOJ and the SEC are also examining a matter involving a foreign subsidiary’s prior engagement of Unaoil S.A.M. in Algeria. We are cooperating with the authorities in each of the above matters. While we cannot predict the outcome of these matters, based on the facts currently known to us, we do not anticipate that these matters will have a material adverse effect on our financial condition, results of operations, or cash flows.

In re Resideo Technologies, Inc. Securities Litigation—On January 7, 2020, The Gabelli Asset Fund and certain related parties filed a putative class action complaint against Resideo and Honeywell in the U.S. District Court for the District of Minnesota alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5 related to Resideo's spinoff from Honeywell in October 2018.  On January 27, 2020, this putative class action was consolidated with certain previously-filed actions asserting claims relating to substantially the same matters into a single class action under the title In re Resideo Technologies, Inc. Securities Litigation.  We believe the allegations against Honeywell regarding the Resideo spinoff have no merit. On April 10, 2020, the plaintiffs filed an Amended Consolidated Class Action Complaint and did not name Honeywell. Accordingly, Honeywell is no longer party to this matter. However, it is possible that Honeywell could be named as a defendant in the future.

Given the uncertainty inherent in litigation and investigations (including the specific matters referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters (other than as specifically set forth above). Considering our past experience and existing accruals, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our consolidated financial position. Because most contingencies are resolved over long periods of time, potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause us to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on our results of operations or operating cash flows in the periods recognized or paid.



29




ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in millions, except per share amounts)

The following Management Discussion and Analysis is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and its consolidated subsidiaries (“Honeywell”(Honeywell or “the Company”)the Company) for the three months (quarter) ended March 31, 2020.2021. The financial information as of March 31, 20202021 should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 20192020 contained in our 20192020 Annual Report on Form 10-K.

 See Note 1 Basis of Presentation of Notes to Financial Statements for discussion on the estimated impact from additional reporting days resulting from our normal quarterly closing procedures. See Note 3 Acquisitions and Divestitures of Notes to Consolidated Financial Statements for a discussion of acquisition and divestiture activity during the quarter ended March 31, 2021.
COVID-19 UPDATE

The markets around the world continue to experienceOur business faced significant volatilitydisruptions due to the COVID-19 pandemic. pandemic in 2020 and the resulting global recession, causing a slow-down in demand for many of our products and services. Although many jurisdictions worldwide authorized the emergency use of vaccines as a method to limit and control infections, as of March 31, 2021, the pandemic continues to impact our business as vaccination efforts continue to face challenges and new variants of the virus continue to emerge. When compared to the three months ended March 31, 2020, the pandemic resulted in a decline of sales for the Aerospace and Performance Materials and Technologies segments. Sales for the Safety and Productivity Solutions segment continue to benefit from significant demand for our respiratory PPE and warehouse automation services, and the Honeywell Building Technologies segment is showing early signs of improvement as our customers prepare to safely return to the office, school, and travel.
We areremain cautious as many factors remain unpredictable. We actively managing our businesses tomonitor and respond to its impacts. We cannot reasonably estimate the duration and severity of thischanging conditions created by the pandemic, which could have a material adverse impactwith focus on our business, result of operations, financial position and cash flows. See Item Part II, 1A Risk Factors for discussion of risks related to the COVID-19 pandemic.

Employee Health, Safety, and Economic Wellness

We continue to monitor the COVID-19 situation and its impacts globally. We are prioritizing the health and safety of our employees. Out of an abundance of caution foremployees, dedicating resources to support our communities, and innovating to address our customers’ needs. During the health ofthree months ended March 31, 2021, we made the following commitments to our employees and communities:
•In January 2021, Honeywell, Atrium Health, Tepper Sports & Entertainment and Charlotte Motor Speedway launched a unique public-private initiative, with support from North Carolina Governor Roy Cooper, Charlotte Mayor Vi Lyles and leaders from Mecklenburg County, to support local government initiatives to stem the spread of the virus,optimize mass vaccination events. The partnership has fully vaccinated more than 46,000 people.
•In February 2021, we implemented several precautions at various sites around the world at all times in compliance with local government requirements and Centers for Disease Control and Prevention ("CDC") guidelines. These include, but are not limited to:

Limiting visitor site access to business-essential purposes;
Introducing screening checks at certain sites where permissible or mandated;
Enabling employees to work from home wherever and whenever required or possible;
Continuously updating travel guidance, according to latest developments;
Complying with all local health authority guidance or regulations and our own protocols, including requesting employees to comply with self-quarantine requirements whenever advisable; and
Reimbursing employees for COVID-19 testing and out-of-pocket treatment costs.

Our Commitment to Public Health

We produce critical worker safety gear such as face masks, gloves, goggles, safety suits, and protective footwear. We play an essential rolesponsored a week-long vaccination program in the health and well-being of people and economies, andPhoenix area, supported by volunteers from our customers and communities are depending on us more than ever to deliver for them. Aerospace business.
•We are committed to supporting the safety of our employees, customers and fellow citizens around the world.

We are investing in new production facilities andannounced that we will continue to expand existing facilities to increase productionpay out-of-pocket prescribed coronavirus testing costs for all employees worldwide and treatment costs incurred by employees and their dependents enrolled in Honeywell medical plans through December 31, 2021. This is an extension beyond our previously communicated end date of essential Personal Protective Equipment ("PPE") products. We will bring these products to market as quickly as possible. We are committed to healthcare professionals, first responders, distributors and other stakeholders in an effort to ensure our PPE products are being placed quickly and cost-effectively in the hands of those most in need.

We announced our new capacity in the U.S. to make N95 masks, with production lines being added in Rhode Island and Arizona that will collectively produce 20 million masks each month to support health, safety, and response workers globally.

We have communicated the following principles to our authorized distributor network:
Our expectation that, at a minimum, all of our partners will comply with all applicable laws prohibiting price gouging and apply appropriate diligence to the greatest extent possible to understand how our products are being purchased so that they are placed quickly and cost-effectively in the hands of those most in need - including first responders and medical professionals.

30




While we do not control the prices that third parties set, we expect our partners to fairly price PPE used in the COVID-19 response effort.
If we find that one of our partners is not upholding the letter or spirit of these principles, we reserve the right not to fulfill that partner’s orders and terminate our relationship with that party.

Plant Productivity and Safety

March 31.
We continue to provide essential servicesmonitor COVID-19 infection rates globally and produce essential goods aroundacknowledge the world. We employ standards such as screening checks, userisk of masks, face coverings and other safety equipment and social distancing practices along production linesnew surges in many of our production facilities at all times in compliance with local government requirements and CDC guidelines. We take appropriate actions including disinfecting and quarantine procedures when a suspected COVID-19 case is identified.

Customers and Suppliers

Current global economic conditions due to COVID-19 may adversely affect our customers’ or suppliers’ ability to operate or obtain financing, particularlyinfections. Please see section titled Risk Factors in our airline, oil & gas,2020 Annual Report on Form 10-K for discussion of risks associated with the COVID-19 pandemic. A discussion of the impact of COVID-19 can also be found in the Review of Business Segments section of this Management Discussion and automotive end markets. Customer or supplier bankruptcies, delays in their ability to obtain financing, or the unavailability of financing could adversely affect our cash flow or results of operations. We continue to actively monitor both supplier and customer financial health and take measures to manage our supply chain disruptions and limit our exposure.Analysis.



30 Honeywell International Inc.



A.Results of Operations – three months ended March 31, 2020 compared with the three months ended March 31, 2019
RESULTS OF OPERATIONS
Consolidated Financial Results
hon-20210331_g2.jpg
Net Sales by Segment
hon-20210331_g3.jpg
31 Honeywell International Inc.



Net Sales 
 Three Months Ended March 31,
 2020 2019
Net sales$8,463
 $8,884
% change compared with prior period(5)%  
Segment Profit by Segment
hon-20210331_g4.jpg


32 Honeywell International Inc.



CONSOLIDATED OPERATING RESULTS
Net Sales
hon-20210331_g5.jpg
The change in net sales compared to the prior year period iswas attributable to the following:
Three MonthsQ1 2021 vs. Q1 2020
Volume(5(4))%
Price12 %
Foreign Currency Translation(12 )%
Acquisitions/Divestitures—%
(5— )%

Q1 2021 compared to Q1 2020
A discussion of net sales by segment can be found in the Review of Business Segments section of this Management Discussion and Analysis.

Net sales is largely unchanged. The unfavorable volume impact isoverall mix of sales between our business segments changed, driven by lowerthe following:
•Lower sales in certain productsvolumes across our businesses, partiallyAerospace segment due to the impactsimpact of COVID-19. the global recession attributable to COVID-19,
•Offset by increased demand for our respiratory PPE and warehouse automation businesses in the Safety and Productivity Solutions segment.
The unfavorablefavorable impact of foreign currency translation in the quarter is driven by the strengtheningweakening of the U.S. Dollar against the currencies of the majority of our international markets, primarily the Euro, Chinese Renminbi, British Pound, Australian Dollar, and British Pound.Canadian Dollar.


31
33 Honeywell International Inc.




Cost of Products and Services Sold
hon-20210331_g6.jpg
Cost of Products and Services Sold   
 Three Months Ended March 31,
 2020 2019
Cost of products and services sold$5,534
 $5,879
% change compared with prior period(6)%  
Gross margin percentage34.6 % 33.8%

Q1 2021 compared to Q1 2020
Cost of products and services sold decreased in the quarter primarilyincreased due to lowerthe following:
•Higher direct and indirect material costs of approximately $130$170 million and higher repositioning and other charges of approximately $80 million, and
•Partially offset by lower labor costs of approximately $100 million (primarily driven by lower sales volumes).million.
Gross Margin
hon-20210331_g7.jpg
Q1 2021 compared to Q1 2020
Gross margin and Gross margin as a percentage increased in the quarter primarilyof net sales decreased due to higherthe following:
•A larger portion of our sales was driven by our Safety and Productivity Solutions segment,
•Higher repositioning and other charges of approximately $80 million, and
•Lower gross margins in our Performance Materials and Technologies segment,
•Partially offset by gross margin expansion in our Aerospace and Honeywell Building Technologies segment gross margins, and due to the lower costs within cost of products and services sold for repositioning and other charges.segments.

34 Honeywell International Inc.



Selling, General and Administrative Expenses
hon-20210331_g8.jpg
 Three Months Ended March 31,
 2020 2019
Selling, general and administrative expense$1,238
 $1,363
% of sales14.6% 15.3%

Q1 2021 compared to Q1 2020
Selling, general and administrative expenses decreased $125 millionand Selling, general and administrative expenses as a percentage of net sales were largely unchanged.
•Cost savings from repositioning actions resulted in the quarter primarily due to productivity, partially offset by labor inflation.lower expenses,
•
Offset by the unfavorable impact of foreign currency translation and higher share-based compensation expense.
Other (Income) Expense   
 Three Months Ended March 31,
 2020 2019
Other (income) expense$(317) $(285)

Other (Income) Expense
    
 Three Months Ended March 31,
 20212020
Other (income) expense$(442)$(317)
Q1 2021 compared to Q1 2020
Other income increased for the quarter primarily due to the following:
•Gain on sale of the retail footwear business and higher pension non-service income, partially
•Partially offset by lower interest income and lower foreign exchange income.
35 Honeywell International Inc.



Tax Expense (Benefit) 
hon-20210331_g9.jpg
 Three Months Ended March 31,
 2020 2019
Tax expense (benefit)$329
 $406
Effective tax rate17.0% 22.0%
Q1 2021 compared to Q1 2020
The effective tax rate decreased forincreased primarily from tax benefits realized in the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019prior year as a result of tax law changes in India and the resolution of certain U.S. tax matters, partially offset by decreased tax benefits for employee share-based compensation.
matters.
The effective tax rate for the quarterthree months ended March 31, 2021 was higher than the U.S. federal statutory rate of 21% primarily due to incremental tax reserves and states taxes, partially offset by tax benefits for employee share-based compensation and the resolution of certain foreign tax matters.
The effective tax rate for the three months ended March 31, 2020 was lower than the U.S. federal statutory rate of 21% primarily from foreign earnings taxed at lower foreign tax rates, tax law changes in India and the resolution of certain U.S. tax matters, partially offset by incremental tax reserves and state taxes.

The effective tax rate for the quarter ended March 31, 2019 was higher than the U.S. federal statutory rate of 21% primarily due to incremental tax reserves and state taxes, partially offset by foreign earnings taxed at lower foreign tax rates.



32




Net Income Attributable to Honeywell
hon-20210331_g10.jpg
 Three Months Ended March 31,
 2020 2019
Net income attributable to Honeywell$1,581
 $1,416
Earnings per share of common stock – assuming dilution$2.21
 $1.92
Q1 2021 compared to Q1 2020
Earnings per share of common stock – stock–assuming dilution increased in the quarter primarilydecreased, driven by lower income tax expense, higherthe following:
•Higher repositioning and other charges,
•Lower segment profit,
•Higher income taxes,
•Higher share-based compensation expense and lower interest income,
•Partially offset by a gain on sale of the favorable impact of lower share count,retail footwear business and higher pension ongoing income.


33
36 Honeywell International Inc.



REVIEW OF BUSINESS SEGMENTS
We globally manage our business operations through four segments: Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.
AEROSPACE
hon-20210331_g11.jpg
 Three Months Ended
March 31,
 20212020%
Change
Net sales$2,632 $3,361 (22)%
Cost of products and services sold1,656 2,199 
Selling, general and administrative and other expenses214 225 
Segment profit$762 $937 (19)%

 2021 vs. 2020
 Three Months Ended
March 31,
Factors Contributing to Year-Over-Year ChangeSalesSegment
Profit
Organic(1)
(22)%(19)%
Foreign currency translation— %— %
Acquisitions, divestitures and other, net— %— %
Total % change(22)%(19)%
(1) Organic sales % change is defined as the change in net sales, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

37 Honeywell International Inc.


Review of Business Segments
 Three Months Ended March 31,
 2020 2019 
%
Change
Aerospace sales     
Commercial Aviation Original Equipment$672
 $759
 (11)%
Commercial Aviation Aftermarket1,380
 1,361
 1 %
Defense and Space1,309
 1,221
 7 %
Total Aerospace sales3,361
 3,341
  
Honeywell Building Technologies sales     
Buildings1,281
 1,389
 (8)%
Total Honeywell Building Technologies sales1,281
 1,389
  
Performance Materials and Technologies sales     
UOP594
 610
 (3)%
Process Solutions1,151
 1,246
 (8)%
Advanced Materials652
 716
 (9)%
Total Performance Materials and Technologies sales2,397
 2,572
  
Safety and Productivity Solutions sales     
Safety502
 538
 (7)%
Productivity Solutions922
 1,044
 (12)%
Total Safety and Productivity Solutions sales1,424
 1,582
  
Net sales$8,463
 $8,884
  


34





Q1 2021 compared to Q1 2020
Aerospace

 Three Months Ended
March 31,
 2020 2019 
%
Change
Net sales$3,361
 $3,341
 1%
Cost of products and services sold2,199
 2,232
  
Selling, general and administrative and other expenses225
 271
  
Segment profit$937
 $838
 12%

 2020 vs. 2019
 Three Months Ended
March 31,
Factors Contributing to Year-Over-Year ChangeSales 
Segment
Profit
Organic1% 12%
Foreign currency translation—% —%
Acquisitions, divestitures and other, net—% —%
Total % change1% 12%

Aerospace sales increased for the quarter ended March 31, 2020Sales decreased due to organic growth.lower sales volumes as the decline in global travel and flight hours negatively impacted many of our customers, resulting in lower demand for our products from OEMs and reduced demand for our aftermarket products and services.

•Commercial Aviation Original Equipment sales decreased 11%36% (decreased 11%37% organic) primarilyin the quarter due to lower demand from airportair transport and regional original equipment manufacturers (OEM), partially offset by growth inand business aviation OEM.aviation.

•Commercial Aviation Aftermarket sales increased 1% (increased 1%decreased 34% (decreased 34% organic) primarilyin the quarter due to growthlower demand in air transport and regional partially offset by lower demand inand business aviation.

•Defense and Space sales increased 7% (increased 7%decreased 1% (decreased 2% organic) driven by growth in U.S. and international defense.

Aerospace segment profit increased primarilythe quarter driven by lower sales ofvolumes in international defense.
Segment profit decreased in the quarter driven by lower margin products andsales volumes partially offset by favorable pricing. Cost of products and services sold decreased in the quarter due to lower sales of lower margin products.volumes.

HONEYWELL BUILDING TECHNOLOGIES
hon-20210331_g12.jpg
Three Months Ended
March 31,
 20212020% Change
Net sales$1,358 $1,281 6 %
Cost of products and services sold789 754 
Selling, general and administrative and other expenses264 265 
Segment profit$305 $262 16 %

 2021 vs. 2020
 Three Months Ended
March 31,
Factors Contributing to Year-Over-Year ChangeSalesSegment
Profit
Organic2 %12 %
Foreign currency translation4 %4 %
Acquisitions, divestitures and other, net— %— %
Total % change6 %16 %
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38 Honeywell International Inc.





Q1 2021 compared to Q1 2020
Honeywell Building Technologies
 Three Months Ended
March 31,
 2020 2019 % Change
Net sales$1,281
 $1,389
 (8)%
Cost of products and services sold754
 846
  
Selling, general and administrative and other expenses265
 272
  
Segment profit$262
 $271
 (3)%


 2020 vs. 2019
 Three Months Ended
March 31,
Factors Contributing to Year-Over-Year ChangeSales 
Segment
Profit
Organic(6)% (2)%
Foreign currency translation(2)% (1)%
Acquisitions, divestitures and other, net— % — %
Total % change(8)% (3)%

Honeywell Building Technologies sales decreased for the quarter ended March 31, 2020Sales increased due to the favorable impact of foreign currency translation and organic growth. Demand increased in the current quarter compared to the prior year as the global economy recovers from the recession resulting from the COVID-19 pandemic.
•Sales in Products increased 8% (increased 4% organic) due to the favorable impact of foreign currency translation, higher sales volumes and pricing.
•Sales in Building Solutions increased 4% (decreased 1% organic) due to the favorable impact of foreign currency translation, partially offset by lower organic sales volumes due to the timing of projects.
Segment profit increased primarily due to higher productivity, pricing and the favorable impact of foreign currency translation. Cost of products and services sold increased primarily due to the unfavorable impact of foreign currency translation.translation, partially offset by higher productivity.
PERFORMANCE MATERIALS AND TECHNOLOGIES
hon-20210331_g13.jpg
 Three Months Ended
March 31,
 20212020%
Change
Net sales$2,346 $2,397 (2)%
Cost of products and services sold1,591 1,559 
Selling, general and administrative and other expenses321 326 
Segment profit$434 $512 (15)%

39 Honeywell International Inc.



 2021 vs. 2020
 Three Months Ended March 31,
Factors Contributing to Year-Over-Year ChangeSalesSegment
Profit
Organic(6)%(17)%
Foreign currency translation3 %3 %
Acquisitions, divestitures, and other, net1 %(1)%
Total % change(2)%(15)%
 
Q1 2021 compared to Q1 2020
Sales in Building Technologies decreased 8% (decreased 6% organic) primarily due to lower sales volumes partially offset by the favorable impact of foreign currency translation. The decline in both Productsglobal travel, coupled with reduced investment in the oil and Buildinggas industry, negatively impacted many of our customers resulting in lower demand for our products and services.
•UOP sales decreased 11% (decreased 14% organic) in the quarter due to lower demand for oil and gas products and services partially offset by the favorable impact of foreign currency translation.
•Process Solutions sales decreased 5% (decreased 9% organic) in the quarter driven by delays in automation projects and lower demand for products and services partially offset by the favorable impact of foreign currency translation.
•Advanced Materials sales increased 11% (increased 8% organic) in the quarter driven by increased demand in fluorine and specialty products and the favorable impact of foreign currency translation.
Segment profit decreased due to lower sales of higher margin products. Cost of products and services sold increased due to lower sales of higher margin products and services within UOP and the unfavorable impact of foreign currency translation, partially offset by favorable pricing.a decrease in sales volumes.

SAFETY AND PRODUCTIVITY SOLUTIONS
hon-20210331_g14.jpg
40Honeywell Building Technologies segment profit decreased primarilyInternational Inc.



 Three Months Ended
March 31,
 20212020%
Change
Net sales$2,118 $1,424 49 %
Cost of products and services sold1,550 972  
Selling, general and administrative and other expenses265 274  
Segment profit$303 $178 70 %
 2021 vs. 2020
 Three Months Ended
March 31,
Factors Contributing to Year-Over-Year ChangeSalesSegment
Profit
Organic47 %67 %
Foreign currency translation3 %4 %
Acquisitions, divestitures, and other, net(1)%(1)%
Total % change49 %70 %
Q1 2021 compared to Q1 2020
Sales increased due to lower sales volumes, inflation and the unfavorable impact of foreign currency translation, partially offset by favorable pricing and higher productivity. Cost of products and services sold decreased due to lower sales volumesorganic growth and the favorable impact of foreign currency translation, partially offset by inflation.


36




Performance Materialsa divestiture. The segment continues to benefit from increased demand for respiratory PPE and Technologies
 Three Months Ended
March 31,
 2020 2019 
%
Change
Net sales$2,397
 $2,572
 (7)%
Cost of products and services sold1,559
 1,648
  
Selling, general and administrative and other expenses326
 360
  
Segment profit$512
 $564
 (9)%

 2020 vs. 2019
 Three Months Ended March 31,
Factors Contributing to Year-Over-Year ChangeSales 
Segment
Profit
Organic(5)% (8)%
Foreign currency translation(2)% (1)%
Acquisitions, divestitures, and other, net— % — %
Total % change(7)% (9)%

Performance Materials and Technologies sales decreased forwarehouse automation services. Demand increased across other verticals in the segment in the quarter ended March 31, 2020 primarilycompared to the prior year as the global economy recovers from the recession attributable to the COVID-19 pandemic.
•Sales in Safety and Retail increased 48% (increased 47% organic) in the quarter due to lowerorganic sales volumesgrowth and the unfavorable impact of foreign currency translation.
UOP sales decreased 3% (decreased 2% organic) driven primarily by a decrease in gas processing volumes due to volatility in oil and gas end markets, and the unfavorablefavorable impact of foreign currency translation, partially offset by growtha divestiture. Safety experienced a significant increase in equipment sales.sales volumes for respiratory PPE in the quarter due to the COVID-19 pandemic.

Process•Sales in Productivity Solutions sales decreased 8% (decreased 6%and Services increased 19% (increased 16% organic) primarily driven by decreases in thermal solutions, automation projects, field productsdue to higher organic sales volumes and the unfavorablefavorable impact of foreign currency translation, partially offset by increasestranslation.
•Sales in software sales.

Advanced Materials sales decreased 9% (decreased 8%Warehouse and Workflow Solutions increased 84% (increased 84% organic) for the quarter driven primarily by decreased volumes in fluorine products due to lowerstrong demand for our warehouse automation services.
•Sales in automotive refrigerantsAdvanced Sensing Technologies (formerly Sensing & Internet-of-Things) increased 6% (increased 4% organic) due to higher organic sales volumes and the unfavorablefavorable impact of foreign currency translation.

Performance Materials and Technologies segmentSegment profit decreasedincreased in the quarter primarily due to higher sales volumes, improved productivity, and favorable pricing, partially offset by higher sales of lower margin products. Cost of products and services sold increased in the quarter due to higher sales volumes, higher sales of lower margin products, and the unfavorable impact of foreign currency translation, partially offset by favorable pricingtranslation.
REPOSITIONING CHARGES
See Note 5 Repositioning and productivity, netOther Charges of inflation. CostNotes to Consolidated Financial Statements for a discussion of productsour repositioning actions and services sold decreased primarily due to lower sales volumes andrelated charges incurred in the favorable impact of foreign currency translation.

37





Safety and Productivity Solutions

 Three Months Ended
March 31,
 2020 2019 
%
Change
Net sales$1,424
 $1,582
 (10)%
Cost of products and services sold972
 1,079
  
Selling, general and administrative and other expenses274
 291
  
Segment profit$178
 $212
 (16)%
 2020 vs. 2019
 Three Months Ended
March 31,
Factors Contributing to Year-Over-Year ChangeSales 
Segment
Profit
Organic(9)% (15)%
Foreign currency translation(1)% (1)%
Acquisitions, divestitures, and other, net— % — %
Total % change(10)% (16)%
Safety and Productivity Solutions sales decreased for the quarterthree months ended March 31, 2020 primarily due to lower organic sales2021 and the unfavorable impact of foreign currency translation.
Sales in Safety decreased 7% (decreased 5% organic) primarily due to lower sales volumes and the unfavorable impact of foreign currency translation. Safety experienced a significant increase in order volume for worker safety equipment in the first quarter due to COVID-19.

Sales in Productivity Solutions decreased 12% (decreased 11% organic) primarily attributable to lower sales volumes in Intelligrated and Sensing and IoT, and the unfavorable impact of foreign currency translation.

Safety and Productivity Solutions segment profit decreased primarily due to lower sales volumes, partially offset by higher productivity, net of inflation. Cost of products and services sold decreased for the quarter primarily due to lower sales volume and higher productivity, net of inflation.



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Repositioning and Other Charges
2020. Cash spending related to our repositioning actions was $88$105 million in the three months ended March 31, 20202021 and was funded through operating cash flows. We expect cash spending for repositioning actions to be approximately $300 million
41 Honeywell International Inc.



LIQUIDITY AND CAPITAL RESOURCES
(Dollars in 2020 and to be funded through operating cash flows.

B.Liquidity and Capital Resources
tables in millions)
We continue to manage our businesses to maximize operating cash flows as the primary source of liquidity. In addition to our available cash and operating cash flows, we maintain additional sources of liquidity, including committed credit lines, short-term debt from the commercial paper market, long-term borrowings, access to the public debt and equity markets and the ability to access non-U.S. cash as a result of U.S. Tax Reform. We use cash generated through operations to invest in our existing core businesses, acquisitions, share repurchases and dividends.

Cash Flow Summary

Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized as follows:
 Three Months Ended March 31,
 2020 2019
Cash provided by (used for): 
  
Operating activities$939
 $1,134
Investing activities350
 (609)
Financing activities(2,446) (1,235)
Effect of exchange rate changes on cash(189) 48
Net increase (decrease) in cash and cash equivalents$(1,346) $(662)
Cash provided by operating activities decreased by $195 million primarily due to a $124 million unfavorable impact from working capital and a $77 million increase in net payments for repositioning and other charges, partially offset by a decrease in cash tax payments of $183 million.
Cash provided by investing activities increased by $959 million primarily due to a net $625 million decrease in investments, primarily short term marketable securities, and an increase in cash provided by other investing activities of $327 million.
Cash used for financing activities increased by $1,211 million primarily due to an increase in repurchases of common stock of $1,173 million and a decrease in proceeds from the issuance of common stock of $79 million, partially offset by an increase in net proceeds from the issuance of commercial paper of $83 million.
Liquidity
Each of our businesses is focused on increasing operating cash flows through revenue growth, margin expansion and improved working capital turnover. We believe that cash balances and operating cash flow will continue to be our principal source of liquidity. In addition to the available cash and operating cash flows, additionalAdditional sources of liquidity include committed credit lines, short-term debt from the commercial paper markets,market, long-term borrowings, and access to the public debt and equity markets. To date,markets, U.S. cash balances and the Company has not experienced any limitations in our ability to access these sourcesnon-U.S. cash as a result of liquidity. Also, considering the current economic environment in which each of our businesses operate, our business strategiesU.S. Tax Cuts and our productivity initiatives, we believe that our cash balances and operating cash flows will remain our principal source of liquidity.Jobs Act.


39




CASH
We monitor the third-party depository institutions that hold our cash and cash equivalents on a daily basis. Our emphasis is primarily safety of principal and secondarily maximizing yield of those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities. As of March 31, 2021 and December 31, 2020, we held $8.8$12.7 billion and $15.2 billion, respectively, of cash and cash equivalents, andincluding our short-term investments.

BORROWINGS
Consolidated total borrowings were $21.3 billion and $22.4 billion as of March 31, 2021 and December 31, 2020. In response to COVID-19, the Company took several actions during 2020 to secure liquidity in light of the uncertainty in economic conditions and the credit markets. See Note 9 Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements for a summary of the actions taken by the Company to improve its short-term and long-term liquidity position in response to COVID-19.
March 31, 2021December 31, 2020
Commercial paper and other short-term borrowings$3,568 $3,597 
Variable rate notes1,1221,122
Fixed rate notes16,44917,399
Other188 266 
Total borrowings$21,327 $22,384 

A source of liquidity is our ability to access the commercial paper market. Commercial paper notes are sold at a discount or premium and have a maturity of not more than 365 days from date of issuance. Borrowings under the commercial paper program are available for general corporate purposes as well as for financing acquisitions. As of March 31, 2020, we had $3.5 billion of commercial paper notes outstanding.

On March 26, 2020, we entered into a Delayed Draw Term Loan Agreement (the “Term Loan Agreement”) with a syndicate of banks. The Term Loan Agreement provides for a two-year, delayed draw term loan facility inWe also have the aggregate principal amount of up to $6.0 billion and is maintainedfollowing revolving credit agreements, which can provide financing for general corporate purposes. We elected to enter into the Term Loan Agreement to maximize financial flexibility, further bolster liquidity, and further strengthen resilience in uncertain times. In addition, on April 10, 2020, the Company entered into apurposes:
•A $1.5 billion 364-Day Credit Agreement (the "364-Day364-Day Credit Agreement")Agreement) with a syndicate of banks. Thisbanks, dated March 31, 2021. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 30, 2022, unless (i) we elect to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on March 30, 2023, or (ii) the 364-Day Credit Agreement is maintained for general corporate purposes.terminated earlier pursuant to its terms. The 364-Day Credit Agreement replaces the previously reported $1.5 billion 364-day credit agreement dated as of April 10, 2020 (the Prior 364-Day Agreement), which was terminated in accordance with its terms effective March 31, 2021. As of March 31, 2021, there were no outstanding borrowings under our 364-Day Credit Agreement.
•A $4.0 billion Five Year Credit Agreement (the 5-Year Credit Agreement) with a syndicate of banks, dated March 31, 2021. Commitments under the 5-Year Credit Agreement can be increased pursuant to the terms of the 5-Year Credit Agreement to an aggregate amount not to exceed $4.5 billion. The 5-Year Credit Agreement amended and restated the previously reported $4.0 billion amended and restated five year credit agreement dated as of April 26, 2019 which was terminated on April 10, 2020.(the Prior 5-Year Agreement). As of March 31, 2021, there were no outstanding borrowings under our 5-Year Credit Agreement.
42 Honeywell International Inc.



We continuouslyalso have a current shelf registration statement with the SEC under which we may issue additional debt securities, common stock and preferred stock that may be offered in one or more offerings on terms to be determined at the time of the offering. We anticipate that net proceeds of any offering would be used for general corporate purposes, including repayment of existing indebtedness, share repurchases, capital expenditures and acquisitions.
CREDIT RATINGS
Our ability to access the global debt capital markets and the related cost of these borrowings, is affected by the strength of our credit rating and market conditions. Our credit ratings are periodically reviewed by the major independent debt-rating agencies. As of March 31, 2021, S&P, Fitch, and Moody’s have ratings on our debt set forth in the table below:
S&PFitchMoody's
OutlookStableStableStable
Short-termA-1F1P1
Long-termAAA2

CASH FLOW SUMMARY
Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized as follows:
 Three Months Ended March 31,
 20212020
Cash provided by (used for):  
Operating activities$978 $939 
Investing activities(1,304)350 
Financing activities(2,217)(2,446)
Effect of exchange rate changes on cash(14)(189)
Net increase (decrease) in cash and cash equivalents$(2,557)$(1,346)

Cash provided by operating activities increased by $39 million primarily due to a favorable impact from working capital of $218 million (favorable accounts payable, accounts receivable, and inventories), partially offset by a decrease in net income of $154 million.
Cash used for investing activities increased by $1,654 million primarily due to $1,303 million in cash paid for an acquisition, a $319 million increase in investments and a $147 million decrease in receipts related to settlements of derivative contracts, partially offset by $190 million in proceeds from the sale of the retail footwear business.
Cash used for financing activities decreased by $229 million primarily due to a decrease in share repurchases of $1,101 million, partially offset by an increase of $796 million due to net repayments of long-term debt during the three months ended March 31, 2021.
CASH REQUIREMENTS AND ASSESSMENT OF CURRENT LIQUIDITY
In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, share repurchases, dividends, strategic acquisitions and debt repayments. On February 12, 2021, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included amounts remaining under, and replaced, the previously approved share repurchase program. During the three months ended March 31, 2021, the Company repurchased common stock of $822 million. Please refer to the section titled Liquidity and Capital Resources of our 2020 Form 10-K for a discussion of our expected capital expenditures, share repurchases and dividends for 2021.
We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers and sales of our trade receivables to unaffiliated financial institutions without recourse. The impact of these programs are not material to our overall liquidity.
43 Honeywell International Inc.



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 and identify business units that will most benefit from increased investment.portfolio. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses. We also identify business unitsbusinesses that do not fit into our long-term strategic plan based on their market position, relative profitability or growth potential. These businesses are considered for potential divestiture, restructuring or other repositioning actions, subject to regulatory constraints.
In the three months ended March 31, 2020, the Company repurchased $1,923 million of outstanding shares. In April 2019, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included amounts remaining under, and replaced, the previously approved share repurchase program. As of March 31, 2020, $5.1 billion remained available for additional share repurchases. Honeywell presently expects to repurchase outstanding shares from time to time to offset the dilutive impact over the long-term of employee stock-based compensation plans, including future option exercises, restricted unit vesting and matching contributions under our savings plans. Additionally, we will seek to reduce share count via share repurchases as and when attractive opportunities arise. The amount and timing of future repurchases may vary depending on market conditions and the level of operating, financing and other investing activities.

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. See Item Part II, 1A Risk Factors for discussion of risks related to the COVID-19 pandemic.

The Company increased the quarterly dividend rate by 10% to $.90 per share of common stock effective with the fourth quarter 2019 dividend.

See Note 11 9 Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements for additional discussion of items impacting our liquidity.

OTHER MATTERS
C. Other MattersLITIGATION
Litigation
We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business. See Item 3. Legal Proceedings in our 2019 Annual Report on Form 10-K and Note 16 15 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of environmental, asbestos and other litigation matters.

40




Critical Accounting Policies
CRITICAL ACCOUNTING ESTIMATES
The financial information as of March 31, 20202021 should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 20192020 contained in our 20192020 Annual Report on Form 10-K.
For a discussion of the Company’s critical accounting policies,estimates, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operationsthe section titled Critical Accounting Estimates in our 20192020 Annual Report on Form 10-K.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements
See Note 2 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.
Item 3.Quantitative and Qualitative Disclosures About Market Risks
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
For a discussion of the Company’s quantitative and qualitative disclosures about market risks, see Item 7A.the section titled Quantitative and Qualitative Disclosures About Market Risks, in our 20192020 Annual Report on Form 10-K. As of March 31, 2020,2021, there has been no material change in this information.information.
Item 4.Controls and Procedures
ITEM 4. CONTROLS AND PROCEDURES  
Honeywell management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that such disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure information required to be disclosed in the reports that Honeywell files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange CommissionCommission's rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer, our Chief Financial Officer, and our Controller, as appropriate, to allow timely decisions regarding required disclosure. There have beenwere no changes that materially affected, or are reasonably likely to materially affect, Honeywell’s internal control over financial reporting that have occurred during the period covered by this Quarterly Report on Form 10-Q.

44 Honeywell International Inc.
We have not experienced any material impact to our internal control over financial reporting during the COVID-19 pandemic. Most of our employees worked remotely during the period in which we prepared these financial statements due to the impact of COVID-19. We enhanced our oversight and monitoring during the close and reporting process, including investments in expanded VPN capabilities and higher scrutiny and monitoring of cybersecurity threats. Other than enhancing our oversight and monitoring processes, we did not alter or compromise our disclosure controls and procedures. We are continually monitoring and assessing the need to modify or enhance our disclosure controls to ensure disclosure controls and procedures continue to be effective.


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PartPART II. Other InformationOTHER INFORMATION
 
Item 1.Legal Proceedings
General Legal Matters
ITEM 1. LEGAL PROCEEDINGS
We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business. See Note 16 15 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of environmental, asbestos and other litigation matters.
There were no matters requiring disclosure pursuant to the requirement to disclose certain environmental matters involving potential monetary sanctions in excess of $300,000.
Environmental Matters Involving Potential Monetary Sanctions in Excess of $100,000

See Item 3. Legal Proceedings in our 2019 Annual Report on Form 10-K for a discussion of a matter settled in the period covered by this Quarterly Report on Form 10-Q.
Item 1A.Risk Factors
ITEM 1A. RISK FACTORS 
Other than as noted below, thereThere have been no material changes to the disclosure presented in our 20192020 Annual Report on Form 10-K under Item 1A.the section titled Risk Factors. For a further discussion of our Risk Factors, refer to the “Risk Factors” discussion containedsection titled Risk Factors in our 20192020 Annual Report on Form 10-K.

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

The global spread of the coronavirus (COVID-19) has created significant volatility, uncertainty and economic disruption. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration, scope and severity of the pandemic; governmental, business and individual decisions and actions; the impact of the pandemic on economic activity; and the extent to which we or our employees, customers, suppliers, service providers or other business partners may be prevented from conducting normal business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. These factors could, among other things, disrupt the purchasing and payment behaviors of our customers and their end-users; our operations, including our manufacturing activities, the shipment of our products, and the performance of our suppliers and service providers; and our liquidity and cash flow.

Customer Risk. Existing and potential customers and their end-users may choose to reduce or delay spending. In particular, lower demand for air travel may continue to cause our customers to delay spending in connection with the manufacturing, repair, overhaul or servicing of aircraft. Customers may also attempt to renegotiate contracts and obtain concessions, face financial constraints on their ability to make payments to us on a timely basis or at all, or discontinue their business operations, and we may be required to discount the pricing of our products, all of which may materially and negatively impact our operating results, financial condition and prospects. In addition, unfavorable customer site conditions, such as closure of or access restrictions to customer facilities, and disruptions to our customers’ third-party logistics, warehousing, inventory management and distribution services may limit our ability to sell products and provide services.

Operations Risk. The closure of our facilities, restrictions inhibiting our employees’ ability to access those facilities, and disruptions to the ability of our suppliers or service providers to deliver goods or services to us (including as a result of supplier facility closures or access restrictions, disruptions to their supply chains, and supplier liquidity or bankruptcy risk) could disrupt our ability to provide our services and solutions and result in, among other things, terminations of customer contracts and losses of revenue. Because the COVID-19 pandemic could adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows, we have begun to take and may be required to continue taking significant cost actions, including but not limited to reducing discretionary expenses (such as non-essential travel, contractors, and consultants), reducing hiring, canceling annual merit increases; reducing executive and board of director pay, reducing work schedules across the enterprise, shortening or staggering work schedules to match production with demand, and reducing

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staffing levels. Remote work and increased frequency of cybersecurity attacks, including phishing and malware attempts that utilize COVID-19-related strategies, increase the risk of a material cybersecurity incident that could result in the loss of proprietary or personal data, render us more vulnerable to future cybersecurity attacks, disrupt our operations, or otherwise cause us reputational or financial harm.

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

The scope and impact of the COVID-19 pandemic is changing rapidly, and additional impacts may arise. A sustained or prolonged COVID-19 outbreak could exacerbate the negative impacts described above, and the resumption of normal business operations may be delayed or constrained by lingering effects on our suppliers, third-party service providers, and/or customers. These effects, alone or taken together, could further impact each of the risks described above.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Honeywell purchased 11,652,2144,000,000 shares of its common stock, par value $1 per share, in the quarter ended March 31, 2020.2021. On April 29, 2019,February 12, 2021, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included amountsapproximately $2.8 billion remaining under, and replaced, the previously approved share repurchase program. program, which was approved in April 2019 and authorized repurchases of up to $10 billion.
Repurchases may be made through a variety of methods, which could include open market purchases, accelerated share repurchase transactions, negotiated block transactions, 10b5-1 plans, other transactions that may be structured through investment banking institutions or privately negotiated, or a combination of the foregoing. Honeywell presently expects to repurchase outstanding shares from time to time (i) to offset the dilutive impact of employee stock-based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans, and (ii) to reduce share count via share repurchases as and when attractive opportunities arise. The amount and timing of future repurchases may vary depending on market conditions and the level of operating, financing and other investing activities.
As of March 31, 2020, $5.12021, $9.7 billion remained available for additional share repurchases. The following table summarizes Honeywell’s purchase of its common stock for the quarter ended March 31, 2020:2021:

Issuer Purchases of Equity Securities
 (a)(b)(c)(d)
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs (Dollars in millions)
January 1-31, 20212,305,713 $203.99 2,305,713 $2,804 
February 1-28, 2021464,368 $204.23 464,368 $9,920 
March 1-31, 20211,229,919 $208.44 1,229,919 $9,664 
Issuer Purchases of Equity Securities
 (a) (b) (c) (d)
PeriodTotal Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs (Dollars in millions)
January 2020—
 $—
 —
 $6,989
February 20203,922,888
 $178.55
 3,922,888
 $6,289
March 20207,729,326
 $158.20
 7,729,326
 $5,066


Item 4.Mine Safety Disclosures

ITEM 4. MINE SAFETY DISCLOSURES
One of our wholly-owned subsidiaries has a placer claim for and operates a chabazite ore surface mine in Arizona. Information concerning mine safety and other regulatory matters associated with this mine is required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K and is included in Exhibit 95 to this quarterly report.

45 Honeywell International Inc.



Item 5.Other Information
ITEM 5. OTHER INFORMATION

On November 16, 2020 and February 12, 2021, the Company entered into amendments to the indemnification and reimbursement agreement with Resideo, which are filed herewith as Exhibits 10.2 and 10.3, respectively. The amendments modified the affirmative and negative covenants set forth in Exhibit G of the indemnification and reimbursement agreement, including to substantially conform the covenants with those contained in Resideo's credit agreement (as amended in connection with Resideo's debt refinancing).
46 Honeywell International Inc.
The Company has determined that in order to maximize financial flexibility, further bolster liquidity, and further strengthen resilience in uncertain times, it will fully utilize and draw on the $6.0 billion aggregate principal amount available under the Delayed Draw Term Loan Agreement described in Note 11
Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements on or prior to June 26, 2020.


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Item 6.Exhibits
EXHIBIT INDEX
ITEM 6. EXHIBITS
Exhibit

No.
Description
10.110.1*
Letter agreement dated July 20, 2016, between Honeywell International Inc. and John Waldron (filed herewith)
Delayed Draw Term Loan10.2
10.3
10.4
10.5
Amended and Restated Five Year Credit Agreement, dated as of March 26, 2020,31, 2021, among Honeywell International Inc., the initialbanks, financial institutions, and other institutional lenders named therein, Citibank,parties thereto, Bank of America, N.A., as administrative agent, and Citibank, N.A., Bank of America N.A.,Europe Designated Activity Company, London Branch, as swing line agent and JPMorgan Chase Bank, N.A., and Wells Fargo Bank, National Association, as syndication agents (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 8-K filed on March 31, 2020.

10.2
364-Day Credit Agreement, dated as of April 10, 2020, among Honeywell International Inc., the banks, financial institutions, and other institutional lenders parties thereto, Citibank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as syndication agent (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 8-K filed on April 10, 2020). 2, 2021)
10.6*
2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement (filed herewith)
31.110.7*
2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement, Form 2 (filed herewith)
10.8*
2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Stock Option Award Agreement (filed herewith)
10.9*
10.10*
Honeywell Excess Benefit Plan and Honeywell Supplemental Savings Plan, as amended and restated (incorporated by reference to Exhibit 10.5 to Honeywell's Form 10-K for the year ended December 31, 2020)
10.11*
Honeywell Deferred Incentive Compensation Plan, as amended and restated (incorporated by reference to Exhibit 10.7 to Honeywell's Form 10-K for the year ended December 31, 2020)
10.12*
Amendment to Honeywell International Inc. Incentive Compensation Plan for Executive Employees, as amended and restated (incorporated by reference to Exhibit 10.69 to Honeywell's Form 10-K for the year ended December 31, 2020)
31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed(furnished herewith)
31.2
31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed (furnished herewith)
32.1
32.1
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(furnished herewith)
32.2
32.2
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(furnished herewith)
95
95
Mine Safety Disclosures(filed herewith)


47 Honeywell International Inc.



Exhibit
No.		Description
101.INS
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,2021, formatted in Inline XBRL:XBRL (iXBRL): (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, (v) Consolidated Statements of Shareowners' Equity and (v)(vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.tags
101.SCH
101.SCH
Inline XBRLiXBRL Taxonomy Extension Schema (filed herewith)
101.CAL
101.CAL
Inline XBRLiXBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF
101.DEF
Inline XBRLiXBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB
101.LAB
Inline XBRLiXBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE
101.PRE
Inline XBRLiXBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104
104
Cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,2021, formatted in Inline XBRL (and contained in Exhibit 101)

The Exhibits identified with an asterisk (*) are management contracts or compensatory plans or arrangements.


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48 Honeywell International Inc.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Honeywell International Inc.
Date: April 23, 2021By:/s/ Robert D. Mailloux
Robert D. Mailloux
Vice President and Controller
(on behalf of the Registrant
and as the Registrant’s
Principal Accounting Officer)
Honeywell International Inc.
Date: May 1, 2020By:/s/ Robert D. Mailloux
Robert D. Mailloux
Vice President and Controller
(on behalf of the Registrant
and as the Registrant’s
Principal Accounting Officer)
49 Honeywell International Inc.

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