United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

__________________

x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2019~~2020

o☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission file number 1-8974

Honeywell International Inc.

(Exact name of registrant as specified in its charter)



~~Honeywell International Inc.~~
~~(Exact name of registrant as specified in its charter)~~



Delaware		22-2640650
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~115 Tabor Road~~ ~~Morris Plains, New Jersey~~ 300 South Tryon Street		~~07950~~28202
Charlotte,	NC	~~07950~~28202
(Address of principal executive offices)		(Zip Code)



	~~(973) 455-2000~~704	627-6200
	(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1 per share*	HON	The New York Stock Exchange
1.300% Senior Notes due 2023	HON 23A	The New York Stock Exchange
0.000% Senior Notes due 2024	HON 24A	The New York Stock Exchange
2.250% Senior Notes due 2028	HON 28A	The New York Stock Exchange
0.750% Senior Notes due 2032	HON 32	The 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. Yesx 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). Yesx No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer~~ x		~~Accelerated filer~~o
Large Accelerated Filer	x	Accelerated filer	☐
Non-Accelerated filero	☐	Smaller reporting companyo	☐
		Emerging growth companyo	☐

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 section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x

There were ~~727,742,035~~701,847,786 shares of Common Stock outstanding at March 31, ~~2019.~~2020.

Honeywell International Inc.

Index



Part I.		Financial Information	Page No.
	Item 1.	Financial Statements:

		Consolidated Statement of Operations (unaudited) – Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	3

		Consolidated Statement of Comprehensive Income (unaudited) – Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	4

		Consolidated Balance Sheet (unaudited) – March 31, ~~2019~~2020 and December 31, ~~2018~~2019	5

		Consolidated Statement of Cash Flows (unaudited) – Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	6

		Consolidated Statement of Shareowners' Equity (unaudited) – Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	7

		Notes to Consolidated Financial Statements (unaudited)	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3130

	Item 3.	Quantitative and Qualitative Disclosures About Market Risks	41

	Item 4.	Controls and Procedures	41

Part II.		Other Information

	Item 1.	Legal Proceedings	42

	Item 1A.	Risk Factors	42

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

	~~Item 6.~~	~~Exhibits~~	43

	Item 4.	Mine Safety Disclosures	43

	Item 5.	Other Information	43

	Item 6.	Exhibits	44

Signatures			4445

Cautionary Statement about Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. 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 from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, including the impact of the coronavirus pandemic (COVID-19), which 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 ~~2018~~2019 Annual Report on Form 10-K.

PART I. FINANCIAL INFORMATION

The financial statements and related footnotes as of March 31, ~~2019~~2020 should be read in conjunction with the financial statements for the year ended December 31, ~~2018~~2019 contained in our ~~2018~~2019 Annual Report on Form 10-K.

ITEM 1. FINANCIAL STATEMENTS

Honeywell International Inc.

Consolidated Statement of Operations

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
	(Dollars in millions, except per share amounts)						(Dollars in millions, except per share amounts)
Product sales	$	6,713		$	8,234		$	6,305		$	6,713
Service sales	2,171			2,158			2,158			2,171
Net sales	8,884			10,392			8,463			8,884
Costs, expenses and other
Cost of products sold	4,622			5,905			4,374			4,622
Cost of services sold	1,257			1,286			1,160			1,257
	5,879			7,191			5,534			5,879
Selling, general and administrative expenses	1,363			1,475			1,238			1,363
Other (income) expense	(285		)	(268		)	(317		)	(285		)
Interest and other financial charges	85			83			73			85
	7,042			8,481			6,528			7,042
Income before taxes	1,842			1,911			1,935			1,842
Tax expense	406			459
Tax expense (benefit)							329			406
Net income	1,436			1,452			1,606			1,436
Less: Net income attributable to the noncontrolling interest	20			13			25			20
Net income attributable to Honeywell	$	1,416		$	1,439		$	1,581		$	1,416
Earnings per share of common stock - basic	$	1.94		$	1.92		$	2.23		$	1.94
Earnings per share of common stock - assuming dilution	$	1.92		$	1.89		$	2.21		$	1.92

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

Honeywell International Inc.

Consolidated Statement of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
	(Dollars in millions)						(Dollars in millions)
Net income	$	1,436		$	1,452		$	1,606		$	1,436
Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment	205			91			(276		)	205

Actuarial (gains) losses recognized	—			2
Prior service (credit) cost recognized	(19		)	(18		)	(20		)	(19		)
Pension and other postretirement benefits adjustments	(19		)	(16		)	(20		)	(19		)

Cash flow hedges recognized in other comprehensive income (loss)	38			(32		)	195			38
Less: Reclassification adjustment for gains (losses) included in net income	32			(18		)	55			32
Changes in fair value of cash flow hedges	6			(14		)	140			6
Other comprehensive income (loss), net of tax	192			61			(156		)	192
Comprehensive income	1,628			1,513			1,450			1,628
Less: Comprehensive income attributable to the noncontrolling interest	24			18			18			24
Comprehensive income attributable to Honeywell	$	1,604		$	1,495		$	1,432		$	1,604

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

Honeywell International Inc.

Consolidated Balance Sheet

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

Honeywell International Inc.

Consolidated Statement of Cash Flows

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

Honeywell International Inc.

Consolidated Statement of Shareowners' Equity

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

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

Note 1. Basis of Presentation

In the opinion of management, the accompanying unaudited ~~consolidated financial statements~~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” or “the Company”) at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the cash flows for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 and the results of operations for the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019. The results of operations for the three months ended March 31, ~~2019~~2020 and cash flows for the three months ended March 31, ~~2019~~2020 should not necessarily be taken as indicative of the entire year.

We report our 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 our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our 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, we will provide appropriate disclosures. Our actual closing dates for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 were March ~~30, 2019~~28, 2020 and March ~~31, 2018.~~30, 2019.

On October 1, 2018, the Company completed the tax-free spin-off to Honeywell shareowners of its Transportation Systems business, previously part of Aerospace, into a standalone publicly-traded company, Garrett Motion Inc. (“Garrett”). The assets and liabilities associated with Garrett have been removed from the Company’s Consolidated Balance Sheet as of the effective date of the spin-off. The results of operations for Garrett are included in the Consolidated Statement of Operations through the effective date of the spin-off.

On October 29, 2018, the Company completed the tax-free spin-off to Honeywell shareowners of its Homes and Global Distribution business, previously part of Home and Building Technologies (renamed Honeywell Building Technologies following the spin-off), into a standalone publicly-traded company, Resideo Technologies, Inc. (“Resideo”). The assets and liabilities associated with Resideo have been removed from the Company’s Consolidated Balance Sheet as of the effective date of the spin-off. The results of operations for Resideo are included in the Consolidated Statement of Operations through the effective date of the spin-off.

Note 2. Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in Note 1 to Consolidated Financial Statements contained in the Company’s ~~2018~~2019 Annual Report on Form 10-K. We include herein certain updates to those policies.

~~Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation.~~

~~Leases~~—All significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases) and we recognize lease expense for these leases as incurred over the lease term.

ROU assets represent our right to use an underlying asset during the reasonably certain lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We primarily use our incremental borrowing rate, which is updated quarterly, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately.

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

Recent Accounting Pronouncements—~~We consider~~The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs ~~not yet adopted that are~~ not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated ~~result~~results of operations, financial position and cash ~~flows.~~flows (Consolidated Financial Statements).

In ~~February 2018,~~December 2019, the FASB issued ~~guidance~~an accounting standard update to simplify the accounting for income taxes. The standard's amendments include changes in various subtopics of accounting for income taxes including, but not limited to, accounting for "hybrid" tax regimes, tax basis step-up in goodwill obtained in a transaction that ~~allows~~is not a business combination, intraperiod tax allocation exception to incremental approach, ownership changes in investments, interim-period accounting for ~~an entity to elect to reclassify from accumulated other comprehensive income to retained earnings the income~~enacted changes in tax ~~effects on items resulting from what is commonly referred to as the U.S. Tax Cuts~~law, and ~~Jobs Act (“U.S. Tax Reform”).~~year-to-date loss limitation in interim-period tax accounting. The guidance is effective for fiscal years beginning after December 15, ~~2018~~2020 with early adoption permitted, including the interim periods within those years. ~~The Company has elected~~We are currently evaluating impacts of these amendments on our Consolidated Financial Statements, and related notes to the Financial Statements. We do not ~~reclassify~~expect the ~~stranded income tax effects~~adoption of ~~U.S. Tax Reform from accumulated other comprehensive income~~this standard to ~~retained earnings.~~

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, the Company adopted this standard. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

Note 3. Repositioning and Other Charges

A summary of repositioning and other charges follows:



	Three Months Ended March 31,
	2020			2019
Severance	$	66		$	31
Asset impairments	2			11
Exit costs	15			18
Reserve adjustments	(13		)	(2		)
Total net repositioning charge	70			58
Asbestos related litigation charges, net of insurance and reimbursements	11			11
Probable and reasonably estimable environmental liabilities, net of reimbursements	8			14
Other	(27		)	1
Total net repositioning and other charges	$	62		$	84

Three Months Ended March 31,
2019 2018
Severance $ 31
$ 31
Asset impairments 11
47
Exit costs 18
8
Reserve adjustments (2 ) (1 )
Total net repositioning charge 58
85
Asbestos related litigation charges, net of insurance and indemnities 11
49
Probable and reasonably estimable environmental liabilities, net of indemnities 14
57
Other 1
—
Total net repositioning and other charges $ 84
$ 191

The following table summarizes the pretax distribution of total net repositioning and other charges by classification:



	Three Months Ended March 31,
	2020		2019
Cost of products and services sold	$	20	$	55
Selling, general and administrative expenses	42		29
Other (income) expense	—		—
	$	62	$	84

Three Months Ended March 31,
2019 2018
Cost of products and services sold $ 55
$ 128
Selling, general and administrative expenses 29
22
Other (income) expense —
41
$ 84
$ 191

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 Technologies	25			8
Performance Materials and Technologies	21			(1		)
Safety and Productivity Solutions	6			5
Corporate	(1		)	56
	$	62		$	84

Three Months Ended March 31,
2019 2018
Aerospace $ 16
$ 68
Honeywell Building Technologies 8
4
Performance Materials and Technologies (1 ) 4
Safety and Productivity Solutions 5
7
Corporate 56
108
$ 84
$ 191

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

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.

~~In the quarter ended~~ ~~March 31, 2018, we recognized gross repositioning charges totaling $86 million including severance costs of $31 million related~~

Honeywell International Inc.

Notes to ~~workforce reductions of 1,153 manufacturing and administrative positions mainly~~Consolidated Financial Statements

(Unaudited)

(Dollars in Aerospace and Safety and Productivity Solutions. The workforce reductions were primarily related to site transitions to more cost-effective locations. The repositioning charges included asset impairments of $47 million primarily in our Corporate segment related to the write-down of a legacy property in connection with its planned disposition.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
Charges	66			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

Severance
Costs

Asset
Impairments

Exit
Costs
Total
December 31, 2018 $ 489
$ —
$ 77
$ 566
Charges 31
11
18
60
Usage - cash (35 ) —
(9 ) (44 )
Usage - noncash —
(11 ) —
(11 )
Foreign currency translation 1
—
—
1
Adjustments (1 ) —
(1 ) (2 )
March 31, 2019 $ 485
$ —
$ 85
$ 570

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 ~~2018 were not significant.~~

$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	)

Three Months Ended March 31,
2019 2018
Interest income (67 ) (50 )
Pension ongoing income – non-service (184 ) (304 )
Other postretirement income – non-service (12 ) (6 )
Equity income of affiliated companies (9 ) (11 )
Foreign exchange (11 ) (1 )
Separation costs —
55
Other (net) (2 ) 49
(285 ) (268 )

~~Separation costs are associated with the spin-offs of our Homes and Global Distribution business and Transportation Systems business, and are primarily associated with third party services.~~

Note 5. Income Taxes

The effective tax rate decreased for the ~~quarter~~three months ended March 31, 2020 compared to the three months ended March 31, 2019 ~~compared to the quarter ended March 31, 2018~~ primarily from ~~increased~~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, fewer tax reserves and lower tax costs related to the 2018 spin-offs.~~compensation.

The effective tax rate for the ~~quarter~~three months ended March 31, ~~2019~~2020 was ~~higher~~lower than the U.S. federal statutory rate of 21% primarily from ~~incremental tax reserves and state taxes, partially offset by~~ foreign earnings taxed at lower foreign tax ~~rates.~~rates, tax law changes in India and the resolution of certain U.S. tax matters, partially offset by incremental tax reserves and state taxes.

Note 6. Earnings Per Share



	Three Months Ended March 31,
Basic	2020		2019
Net income attributable to Honeywell	$	1,581	$	1,416
Weighted average shares outstanding	709.6		729.7
Earnings per share of common stock	$	2.23	$	1.94

Three Months Ended March 31,
Basic 2019 2018
Net income attributable to Honeywell $ 1,416
$ 1,439
Weighted average shares outstanding 729.7
750.6
Earnings per share of common stock $ 1.94
$ 1.92

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)



	Three Months Ended March 31,
Assuming Dilution	2020		2019
Net income attributable to Honeywell	$	1,581	$	1,416
Average Shares
Weighted average shares outstanding	709.6		729.7
Dilutive securities issuable - stock plans	7.4		9.1
Total weighted average shares outstanding	717.0		738.8
Earnings per share of common stock	$	2.21	$	1.92

Three Months Ended March 31,
Assuming Dilution 2019 2018
Net income attributable to Honeywell $ 1,416
$ 1,439
Average Shares
Weighted average shares outstanding 729.7
750.6
Dilutive securities issuable - stock plans 9.1
10.4
Total weighted average shares outstanding 738.8
761.0
Earnings per share of common stock $ 1.92
$ 1.89

The diluted earnings per share calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the weighted average number of stock options excluded from the computations were ~~3.7~~4.3 million and ~~1.1~~3.7 million. These stock options were outstanding at the end of each of the respective periods.

As of March 31, ~~2019~~2020 and ~~2018~~2019, total shares outstanding were ~~727.7~~701.8 million and ~~746.9~~727.7 million and as of March 31, ~~2019~~2020 and ~~2018~~2019, total shares issued were 957.6 million.

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

Note 7. Revenue Recognition and Contracts with Customers

Honeywell has 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,
	2020		2019
Aerospace
Commercial Aviation Original Equipment	$	672	$	759
Commercial Aviation Aftermarket	1,380		1,361
Defense and Space	1,309		1,221
	3,361		3,341
Honeywell Building Technologies
Products	748		810
Building Solutions	533		579
	1,281		1,389
Performance Materials and Technologies
UOP	594		610
Process Solutions	1,151		1,246
Specialty Products	253		269
Fluorine Products	399		447
	2,397		2,572
Safety and Productivity Solutions
Safety and Retail	502		538
Productivity Products	251		271
Warehouse and Workflow Solutions	494		558
Sensing & Internet-of-Things (IoT)	177		215
	1,424		1,582
Net sales	$	8,463	$	8,884

Three Months Ended
March 31,
2019 2018
Aerospace
Commercial Aviation Original Equipment $ 759
$ 695
Commercial Aviation Aftermarket 1,361
1,268
Defense and Space 1,221
1,086
Transportation Systems —
928
3,341
3,977
Honeywell Building Technologies
Homes Products and Software —
519
Distribution (ADI) —
638
Products 810
714
Building Solutions 579
562
1,389
2,433
Performance Materials and Technologies
UOP 610
612
Process Solutions 1,246
1,214
Specialty Products 269
277
Fluorine Products 447
431
2,572
2,534
Safety and Productivity Solutions
Safety and Retail 538
551
Productivity Products 271
329
Warehouse and Workflow Solutions 558
367
Sensing & Internet-of-Things (IoT) 215
201
1,582
1,448
Net sales $ 8,884
$ 10,392

~~Aerospace~~ – A global supplier of products, software and services for aircraft. Products include aircraft propulsion engines, auxiliary power units, environmental control systems, integrated avionics, electric power systems, hardware for engine controls, flight safety, communications, and navigation, satellite and space components, aircraft wheels and brakes, and thermal systems. Software includes engine controls, flight safety, communications, navigation, radar and surveillance systems, internet connectivity and aircraft instrumentation. Services are provided to customers for the repair, overhaul, retrofit and modification of propulsion engines, auxiliary power units, avionics and mechanical systems and aircraft wheels and brakes.

~~Honeywell Building Technologies~~ – A global provider of products, software, solutions and technologies for buildings. Products include controls and displays for heating, cooling, indoor air quality, ventilation, humidification, combustion, and lighting; sensors, switches, control systems and instruments for measuring pressure, air flow, temperature and electrical current; access control; video surveillance; fire detection; and installation, maintenance and upgrades of systems that keep buildings safe, comfortable and productive. Software includes monitoring and managing heating, cooling, indoor air quality, ventilation, humidification, combustion, and lighting; advanced applications for

1211

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

~~building control and optimization; video surveillance; and remote patient monitoring systems. Installation, maintenance and upgrade services~~Aerospace – A global supplier of products, ~~used~~software and services for aircrafts that it sells to original equipment manufacturers (OEM) and other customers in ~~commercial building~~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 ~~heating, cooling, maintaining indoor air quality, ventilation, humidification, combustion, lighting, video surveillance~~the aftermarket. Honeywell Forge solutions are designed to identify and ~~fire safety.~~resolve problems faster, making fleet management and flight operations more efficient.

~~Performance Materials and~~Honeywell Building Technologies – A global provider of products, software, solutions and ~~technologies. Products~~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 ~~catalysts, absorbents, equipment and high-performance materials, devices~~advanced software applications for ~~measurement, regulation,~~building control and ~~metering~~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 ~~gases~~systems. Honeywell Forge solutions are designed to digitally manage buildings to use space intelligently, cut operating expenses and ~~electricity,~~reduce maintenance.

Performance Materials and ~~metering~~Technologies – A global provider in developing and ~~communications systems for water utilities~~manufacturing high-quality performance chemicals and ~~industries. Software is provided to support~~materials, process technologies ~~supporting~~and automation solutions, including Honeywell Forge connected solutions. The segment comprises Process Solutions, UOP and ~~to monitor a variety of industrial processes used in industries such as~~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. ~~Services are provided~~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 ~~installation~~the petroleum refining, gas processing, petrochemical, and ~~maintenance~~other industries. Advanced Materials manufactures a wide variety of ~~products.~~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 ~~solutions. Products~~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 ~~mobile computing, data collection~~ and thermal printing devices, automation equipment for supply chain and warehouse automation and custom-engineered sensors, switches and controls. Software and solutions are provided to customers for supply chain and warehouse automation, to manage data and assets to drive productivity andsoftware for computing, data collection and thermal ~~printing.~~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.

~~We recognize~~

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 ~~our~~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 time	61	%	61	%
Products, transferred over time	14		15
Net product sales	75		76
Services, transferred point in time	9		9
Services, transferred over time	16		15
Net service sales	25		24
Net sales	100	%	100	%

Three Months Ended March 31,
2019 2018
Products, transferred point in time 61 % 69 %
Products, transferred over time 15
10
Net product sales 76
79
Services, transferred point in time 9
7
Services, transferred over time 15
14
Net service sales 24
21
Net sales 100 % 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 ~~(the current and noncurrent portions, respectively, of unbilled~~(unbilled receivables (contract assets) and billed receivables) and Accrued liabilities and Other liabilities ~~(the current and noncurrent portions, respectively, of customer~~(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 obligations 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.

Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.

The following table summarizes ~~our~~the Company's contract assets and liabilities balances:



	2020			2019
Contract assets - January 1	$	1,602		$	1,548
Contract assets - March 31	1,699			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

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

2019 2018
Contract assets - Beginning period $ 1,548
$ 1,721
Contract assets - March 31 1,700
1,672
Change in contract assets - increase (decrease) $ 152
$ (49 )

Contract liabilities - Beginning period $ (3,378 ) $ (2,973 )
Contract liabilities - March 31 (3,426 ) (3,081 )
Change in contract liabilities - (increase) decrease $ (48 ) $ (108 )

Net change $ 104
$ (157 )

The net change for the ~~quarter~~three months ended March 31, 2020 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.

The net change for the quarter ended March 31, 2018 was primarily driven by the receipt of advance payments from customers exceeding reductions from recognition of revenue as performance obligations were satisfied and related billings.

For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, we recognized revenue of ~~$720~~$888 million and ~~$581~~$720 million that was previously included in the beginning balance of contract liabilities.

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars 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 ~~our~~the Company's remaining performance obligations disaggregated by ~~segment.~~

segment:



	March 31, 2020
Aerospace	$	10,849
Honeywell Building Technologies	5,146
Performance Materials and Technologies	6,686
Safety and Productivity Solutions	2,603
	$	25,284

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

March 31, 2019
Aerospace $ 10,890
Honeywell Building Technologies 5,657
Performance Materials and Technologies 6,347
Safety and Productivity Solutions 1,850
$ 24,744

Performance obligations recognized as of March 31, ~~2019~~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 ~~56%~~58% and ~~44%~~42%, respectively.

The timing of satisfaction of ~~our~~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.

~~We have~~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 - Net



	March 31, 2020			December 31, 2019
Trade	$	7,600		$	7,639
Less - Allowance for doubtful accounts	(148		)	(146		)
	$	7,452		$	7,493

March 31, 2019 December 31, 2018
Trade $ 7,499

$ 7,705
Less - Allowance for doubtful accounts (192 )
(197 )
$ 7,307

$ 7,508

Trade receivables include ~~$1,696~~$1,660 million and ~~$1,543~~$1,586 million of unbilled balances under long-term contracts as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019. These amounts are billed in accordance with the terms of the customer contracts to which they relate.

Note 9. Inventories



	March 31, 2020			December 31, 2019
Raw materials	$	1,079		$	1,056
Work in process	859			817
Finished products	2,681			2,593
	4,619			4,466
Reduction to LIFO cost basis	(35		)	(45		)
	$	4,584		$	4,421

March 31, 2019 December 31, 2018
Raw materials $ 1,170

$ 1,109
Work in process 847

811
Finished products 2,577

2,445
4,594

4,365
Reduction to LIFO cost basis (46 )
(39 )
$ 4,548

$ 4,326

1514

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

Note 10. Leases

~~Adoption~~

Effective January 1, 2019, the Company adopted the new lease accounting standard using the modified retrospective method of applying the new standard at the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry forward the historical lease classification. Adoption of this standard resulted in the recording of net operating lease right-of-use (ROU) assets and corresponding operating lease liabilities of $0.7 billion. Financial position for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance.

~~A significant portion of our~~The Company's operating and finance lease portfolio ~~includes corporate offices, research and development facilities, manufacturing sites, information technology (IT) equipment, and automobiles. The majority~~is described in Note 14, Leases of ~~our leases have remaining lease terms of 1 year~~the Notes to 20 years, some of which include options to extend the leases for 5 years or more. Operating lease ROU assets are presented within Other assets. The current portion of operating lease liabilities are presented within Accrued liabilities, and the non-current portion of operating lease liabilities are presented within Other liabilities on the Consolidated ~~Balance Sheet. Finance lease assets are included~~Financial Statements in ~~Property, plant and equipment - net, and the finance lease obligations are included in Current maturities of long-term debt, and in Long-term debt~~our 2019 Annual Report on ~~the Consolidated Balance Sheet.~~Form 10-K.

~~A portion of our real estate~~Supplemental cash flow information related to leases ~~is generally subject to annual changes in the Consumer Price Index (CPI). The changes to the CPI are treated~~was as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of our automobile leases is considered variable. The variable lease payments for such automobiles leases are based on actual mileage incurred at the stated contractual rate.

follows:



	Three Months Ended March 31,
	2020	2019
Net right-of-use assets obtained in exchange for lease obligations:
Operating leases	68	$	10
Finance leases	3	4

Three Months Ended
March 31, 2019
Operating lease cost $ 54
Variable lease cost 8
Short-term lease cost 3
Financing lease cost:
Amortization of right-of-use assets 14
Interest on lease liability 8
Total financing lease cost 22
Total lease cost $ 87

Supplemental balance sheet information related to leases was as follows:



	March 31, 2020			December 31, 2019
Operating leases
Other assets	$	699		$	673
Accrued liabilities	169			171
Other liabilities	575			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 debt	57			59
Long-term debt	144			156
Total financing lease liabilities	$	201		$	215

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

~~Supplemental cash flow information related to leases was as follows:~~

Three Months Ended
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 61
Operating cash flows from finance leases 1
Financing cash flows from finance leases 10
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 10
Finance leases 4

~~Supplemental balance sheet information related to leases was as follows:~~

March 31, 2019
Operating leases
Other assets $ 669
Accrued liabilities 177
Other liabilities 527
Total operating lease liabilities $ 704
Financing leases
Property, plant and equipment $ 313
Accumulated depreciation (100 )
Property, plant and equipment - net $ 213
Current maturities of long-term debt 51
Long-term debt 162
Total financing lease liabilities $ 213
Weighted-average remaining lease term
Operating leases 6 years
Financing leases 5 years
Weighted-average discount rate
Operating leases 3.2 %
Financing leases 17.0 %

~~As of March 31, 2019, maturities of lease liabilities were as follows:~~

Operating Leases Financing Leases
2019 $ 161
$ 61
2020 168
71
2021 137
60
2022 103
45
2023 72
39
Thereafter 157
48
Total lease payments 798
324
Less: interest (94 ) (111 )
Total $ 704
$ 213

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year would have been as follows:

At December 31, 2018
2019 $ 210
2020 168
2021 142
2022 109
2023 80
Thereafter 147

$ 856

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 2021	800			800
1.85% notes due 2021	1,500			1,500
2.15% notes due 2022	600			600
Floating rate notes due 2022	600			600
1.30% Euro notes due 2023	1,376			1,404
3.35% notes due 2023	300			300
0.00% Euro notes due 2024	550			—
2.30% notes due 2024	750			750
2.50% notes due 2026	1,500			1,500
2.25% Euro notes due 2028	825			842
2.70% notes due 2029	750			750
0.75% Euro notes due 2032	550			—
5.70% notes due 2036	441			441
5.70% notes due 2037	462			462
5.375% notes due 2041	417			417
3.812% notes due 2047	445			445
Industrial development bond obligations, floating rate maturing at various dates through 2037	22			22
6.625% debentures due 2028	201			201
9.065% debentures due 2033	51			51
Other (including capitalized leases and debt issuance costs), 7.0% weighted average maturing at various dates through 2025	444			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 "2020 Euro 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 in gross proceeds of $1,136 million, offset by $9 million in discount and closing costs related to the offering.

On August 8, 2019, the Company issued $600 million 2.15% Senior Notes due 2022, $600 million Floating Rate Senior 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 2019 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 in gross proceeds of $2,700 million, offset by $18 million in discount and closing costs related to 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.

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.

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

March 31, 2019 December 31, 2018
1.40% notes due 2019 $ 1,250
$ 1,250
Three year floating rate notes due 2019 250
250
Two year floating rate notes due 2019 450
450
1.80% notes due 2019 750
750
0.65% Euro notes due 2020 1,123
1,145
4.25% notes due 2021 800
800
1.85% notes due 2021 1,500
1,500
1.30% Euro notes due 2023 1,404
1,432
3.35% notes due 2023 300
300
2.50% notes due 2026 1,500
1,500
2.25% Euro notes due 2028 842
859
5.70% notes due 2036 441
441
5.70% notes due 2037 462
462
5.375% notes due 2041 417
417
3.812% notes due 2047 445
445
Industrial development bond obligations, floating rate maturing at various dates through 2037 22
22
6.625% debentures due 2028 201
201
9.065% debentures due 2033 51
51
Other (including capitalized leases and debt issuance costs), 5.2% weighted average maturing at various dates through 2025 390
353
12,598
12,628
Less: current portion (4,000 ) (2,872 )
$ 8,598
$ 9,756

On April ~~27, 2018,~~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, the Company entered into a $4.0 billion Amended and Restated Five Year Credit Agreement (the “5-Year Credit 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.

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

On The 5-Year Credit Agreement amends and restates the previously reported $4.0 billion amended and restated five-year credit agreement dated as of April 27, 2018 ~~the Company entered into a $1.5 billion 364-Day~~(the "Prior Agreement"). The 5-Year Credit Agreement ~~with a syndicate~~has substantially the same material terms and conditions of ~~banks. This 364-Day Credit Agreement is maintained for general corporate purposes.~~the Prior Agreement.

As of March 31, ~~2019,~~2020, there are no outstanding borrowings under any of our credit agreements.

Note 12. Financial Instruments and Fair Value Measures

Our credit, market, foreign currency and interest rate risk management policies are described in Note 15, Financial Instruments and Fair Value Measures of Notes to Consolidated Financial Statements in our ~~2018~~2019 Annual Report on Form 10-K.

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 investments	1,241		1,523
Interest rate swap agreements	230		38
Cross currency swap agreements	60		51
Liabilities:
Foreign currency exchange contracts	$	74	$	21
Interest rate swap agreements	—		13

March 31, 2019 December 31, 2018
Assets:
Foreign currency exchange contracts $ 180
$ 119
Available for sale investments 2,214
1,784
Interest rate swap agreements 25
20
Cross currency swap agreements 45
32
Liabilities:
Foreign currency exchange contracts $ 9
$ 4
Interest rate swap agreements 46
65

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.

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

March 31, 2019 December 31, 2018

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
Assets
Long-term receivables $ 343
$ 336
$ 333
$ 329
Liabilities
Long-term debt and related current maturities $ 12,598
$ 13,299
$ 12,629
$ 13,133

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
Line in the Consolidated Balance Sheet of Hedged Item	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Long-term debt	$	4,180	$	3,975	$	230	$	25

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

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, 2019 December 31, 2018 March 31, 2019 December 31, 2018
Long-term debt $ 2,579
$ 2,555
$ (21 ) $ (45 )

The Company determined the fair value of the long-term receivables by ~~discounting based upon~~utilizing transactions in the ~~terms of the receivable and counterparty details including credit quality.~~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 as well.~~2.

Interest rate swap agreements are designated as hedge relationships with gains or losses on the derivative recognized in Interest and other financial charges offsetting the gains and losses on the underlying debt being hedged. For the three months ended March 31, ~~2019~~2020, we recognized ~~$24~~$205 million of gains in earnings on interest rate swap agreements. For the three months ended March 31, ~~2018,~~2019, we recognized ~~$46~~$24 millionof ~~losses~~gains in earnings on interest rate swap agreements. Gains and losses are fully offset by losses and gains on the underlying debt being hedged.

WeThe Company economically ~~hedge our~~hedges its exposure to changes in foreign exchange rates ~~primarily~~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 March 31, 2020, we recognized $284 million of income in Other (income) expense. For the three months ended March 31, 2019 ~~and 2018,~~, we recognized $47 ~~million and $129~~ 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 liabilities and Other Assets.

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

The following tables summarize the location and impact to the Consolidated Statement of Operations related to fair value and cash flow hedging relationships:


			Three Months Ended March 31, 2019												Three Months Ended March 31, 2020
			Revenue		Cost of Products Sold		SG&A		Other (Income) Expense			Interest and Other Financial Charges			Revenue		Cost of Products Sold		SG&A		Other (Income) Expense			Interest and Other Financial Charges
			$	8,884	$	4,622	$	1,363	$	(285	)	$	85		$	8,463	$	4,374	$	1,238	$	(317	)	$	73
Gain or (loss) on cash flow hedges:	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			—
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:	Gain or (loss) on fair value hedges:
	Interest Rate Swap Agreements:
		Hedged Items	—		—		—		—			(24		)
		Derivatives designated as hedges	—		—		—		—			24
Interest Rate Swap Agreements:
Hedged items															—		—		—		—			(205		)
Derivatives designated as hedges															—		—		—		—			205

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~


			Three Months Ended March 31, 2018														Three Months Ended March 31, 2019
			Revenue			Cost of Products Sold			SG&A		Other (Income) Expense			Interest and Other Financial Charges			Revenue		Cost of Products Sold		SG&A		Other (Income) Expense			Interest and Other Financial Charges
			$	10,392		$	5,905		$	1,475	$	(268	)	$	83		$	8,884	$	4,622	$	1,363	$	(285	)	$	85
Gain or (loss) on cash flow hedges:	Gain or (loss) on cash flow hedges:
	Foreign Currency Exchange Contracts:
		Amount reclassified from accumulated other comprehensive income into income	(3		)	(22		)	2		—			—
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:	Gain or (loss) on fair value hedges:
	Interest Rate Swap Agreements:
		Hedged Items	—			—			—		—			46
		Derivatives designated as hedges	—			—			—		—			(46		)
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 Relationships	2020			2019
Euro-denominated long-term debt	$	124		$	68
Euro-denominated commercial paper	70			71
Cross currency swap	(26		)	13
Foreign currency exchange contracts	84			7

Three Months Ended
March 31,
Derivatives Net Investment Hedging Relationships 2019 2018
Euro-denominated long-term debt $ 68
$ (82 )
Euro-denominated commercial paper 71
(101 )
Cross currency swap 13
(58 )
Foreign currency exchange contracts 7
—

~~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, 2018 $ (2,709 ) $ (761 ) $ 33
$ (3,437 )
Other comprehensive income (loss) before reclassifications 205
—
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 )

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

Foreign
Exchange
Translation
Adjustment

Pension
and Other
Postretirement
Benefits
Adjustments

Changes in
Fair Value
of
Cash Flow
Hedges
Total
Balance at December 31, 2017 $ (1,981 ) $ (202 ) $ (52 ) $ (2,235 )
Other comprehensive income (loss) before reclassifications 91
—
(32 ) 59
Amounts reclassified from accumulated other comprehensive income —
(16 ) 18
2
Net current period other comprehensive income (loss) 91
(16 ) (14 ) 61
Balance at March 31, 2018 $ (1,890 ) $ (218 ) $ (66 ) $ (2,174 )

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 reclassifications	205			—			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	)

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

Note 14. Segment Financial Data

We globally manage our business operations through ~~four~~4 reportable operating segments. Segment information is consistent with how management reviews the businesses, makes investing 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,						Three Months Ended March 31,
	2019			2018			2020			2019
Net sales
Aerospace
Products	$	2,075		$	2,728		$	2,079		$	2,075
Services	1,266			1,249			1,282			1,266
Total	3,341			3,977			3,361			3,341
Honeywell Building Technologies
Products	1,073			2,083			970			1,073
Services	316			350			311			316
Total	1,389			2,433			1,281			1,389
Performance Materials and Technologies
Products	2,070			2,063			1,914			2,070
Services	502			471			483			502
Total	2,572			2,534			2,397			2,572
Safety and Productivity Solutions
Products	1,495			1,360			1,342			1,495
Services	87			88			82			87
Total	1,582			1,448			1,424			1,582
	$	8,884		$	10,392		$	8,463		$	8,884
Segment profit
Aerospace	$	838		$	893		$	937		$	838
Honeywell Building Technologies	271			416			262			271
Performance Materials and Technologies	564			519			512			564
Safety and Productivity Solutions	212			231			178			212
Corporate	(76		)	(64		)	(41		)	(76		)
Total segment profit	1,809			1,995			1,848			1,809
Interest and other financial charges	(85		)	(83		)	(73		)	(85		)
Stock compensation expense(a)	(41		)	(52		)	(44		)	(41		)
Pension ongoing income(b)	151			248			198			151
Other postretirement income(b)	12			6			13			12
Repositioning and other charges(c)	(84		)	(191		)	(62		)	(84		)
Other(d)	80			(12		)	55			80
Income before taxes	$	1,842		$	1,911		$	1,935		$	1,842

(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 costs) and Other income/expense (non-service cost components).

2321

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

(c) Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and Other income/expense.

(d) Amounts include the other components of Other income/expense not included within other categories in this reconciliation. Equity income/loss of affiliated companies is included in segment profit.

Note 15. Pension Benefits

Net periodic pension benefit costs for our significant defined benefit plans include the following components:


	U.S. Plans						U.S. Plans
	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
Service cost	$	21		$	35		$	25		$	21
Interest cost	153			143			115			153
Expected return on plan assets	(279		)	(357		)	(284		)	(279		)
Amortization of prior service (credit)	(11		)	(11		)	(11		)	(11		)
	$	(116	)	$	(190	)	$	(155	)	$	(116	)



	Non-U.S. Plans
	Three Months Ended March 31,
	2020			2019
Service cost	$	6		$	6
Interest cost	26			36
Expected return on plan assets	(84		)	(84		)
Amortization of prior service (credit)	—			—
	$	(52	)	$	(42	)

Non-U.S. Plans
Three Months Ended
March 31,
2019 2018
Service cost $ 6
$ 7
Interest cost 36
37
Expected return on plan assets (84 ) (115 )
Amortization of prior service (credit) —
—
$ (42 ) $ (71 )

InDuring the ~~first quarter of~~ 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.

Note 16. Commitments and Contingencies

Environmental Matters

Our environmental matters are described in Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements in our ~~2018~~2019 Annual Report on Form 10-K.

The following table summarizes information concerning our recorded liabilities for environmental costs:



December 31, 2019	$	709
Accruals for environmental matters deemed probable and reasonably estimable	42
Environmental liability payments	(34		)
Other	(2		)
March 31, 2020	$	715

December 31, 2018 $ 755
Accruals for environmental matters deemed probable and reasonably estimable 86
Environmental liability payments (28 )
Other (1 )
March 31, 2019 $ 812

~~In the quarter ended March 31, 2019 we recorded a gain of $43 million related to the sale of a legacy remediated property.~~

~~Environmental liabilities are included in the following balance sheet accounts:~~

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

Environmental liabilities are included in the following balance sheet accounts:



	March 31, 2020		December 31, 2019
Accrued liabilities	$	222	$	222
Other liabilities	493		487
	$	715	$	709

March 31, 2019 December 31, 2018
Accrued liabilities $ 175
$ 175
Other liabilities 637
580
$ 812
$ 755

~~We do~~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, ~~and the indemnification and reimbursement agreement with a Resideo subsidiary (as explained below),~~ 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 ~~the indemnification and reimbursement~~this agreement with a Resideo subsidiary were $35 million in the ~~quarter~~three months ended March 31, ~~2019~~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 ~~accrual~~accruals is also recorded. This receivable amount recorded in the ~~quarter~~three months ended March 31, ~~2019~~2020 was ~~$28~~$34 million. As of March 31, ~~2019,~~2020, Other Current Assets and Other Assets includes $140 million and ~~$469~~$444 million representing the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement.

Honeywell is ~~a defendant~~named in asbestos related personal injury ~~actions~~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 liability	16			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

Asbestos-Related Liabilities
Bendix NARCO Total
December 31, 2018 $ 1,623
$ 891
$ 2,514
Accrual for update to estimated liability 15
6
21
Asbestos related liability payments (44 ) —
(44 )
March 31, 2019 $ 1,594
$ 897
$ 2,491

Insurance Recoveries for Asbestos-Related Liabilities

Bendix NARCO Total
December 31, 2018 $ 170
$ 307
$ 477
Insurance receipts for asbestos related liabilities (2 ) (6 ) (8 )
March 31, 2019 $ 168
$ 301
$ 469

~~NARCO and Bendix asbestos related balances are included in the following balance sheet accounts:~~

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

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 liabilities	383		392
	$	425	$	434
Accrued liabilities	$	361	$	361
Asbestos-related liabilities	1,948		1,996
	$	2,309	$	2,357

March 31, December 31,
2019 2018
Other current assets $ 40
$ 40
Insurance recoveries for asbestos related liabilities 429
437
$ 469
$ 477
Accrued liabilities $ 245
$ 245
Asbestos related liabilities 2,246
2,269
$ 2,491
$ 2,514

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 wethe Company first established ~~our~~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.

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~~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~~"Initial Claims ~~Amount)~~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 ~~its~~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:

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 ~~maintained~~continues to maintain the 2006 NARCO Trust Liability Estimate (the $743 million accrual ~~for~~less payments made by Honeywell to the NARCO Trust ~~Liability,~~for Annual Contribution Claims), as there has not been sufficiently reliable claims data history to enable usthe 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.

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

As of March 31, ~~2019, our~~2020, the Company's total NARCO asbestos liability of ~~$897~~$844 million reflects Pre-bankruptcy NARCO ~~liability~~Liability of ~~$154~~$148 million and NARCO Trust Liability of $696 million (the $743 ~~million.~~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, ~~2019,~~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~~bankruptcy related obligations were paid in 2013 and no further liability is recorded.

~~Honeywell International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

As of March 31, 2019, Honeywell has not made any payments to the NARCO Trust for Annual Contribution Claims as any Annual Contribution Claims which have been paid since the Trust became operational have been funded by cash dividends from HWI.

Honeywell continues to evaluate the appropriateness of the ~~$743 million~~2006 NARCO Trust ~~Liability.~~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. The $743 million~~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 ~~$301~~$275 million as of March 31, ~~2019,~~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 Activity	2020		2019		2018
Claims unresolved at the beginning of period	6,480		6,209		6,280
Claims filed	509		2,659		2,430
Claims resolved	(708	)	(2,388	)	(2,501	)
Claims unresolved at the end of period	6,281		6,480		6,209



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

Honeywell International Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollars in millions, except per share amounts)

Three Months Ended
March 31, Years Ended
December 31,
Claims Activity 2019 2018 2017
Claims unresolved at the beginning of period 6,209
6,280
7,724
Claims filed 631
2,430
2,645
Claims resolved (626 ) (2,501 ) (4,089 )
Claims unresolved at the end of period 6,214
6,209
6,280

Disease Distribution of Unresolved Claims March 31, December 31,
2019 2018 2017
Mesothelioma and other cancer claims 3,028
2,949
3,062
Nonmalignant claims 3,186
3,260
3,218
Total claims 6,214
6,209
6,280

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

follows:

Years Ended December 31,
2018 2017 2016 2015 2014
(in whole dollars)
Malignant claims $ 55,300
$ 56,000
$ 44,000
$ 44,000
$ 53,500
Nonmalignant claims $ 4,700
$ 2,800
$ 4,485
$ 100
$ 120



	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.

~~Honeywell International Inc.~~

~~Notes to~~The Company's Consolidated Financial Statements

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

~~Our 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.

~~Reimbursements associated~~In conjunction with the Garrett Motion, Inc. ("Garrett") spin-off, the Company entered into an indemnification and reimbursement agreement with a Garrett subsidiary, ~~(the "Agreement")~~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 ~~$39~~$36 million for the ~~quarter~~three months ended March 31, ~~2019~~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 ~~indemnification and reimbursement~~ agreement, a corresponding receivable from Garrett is recorded for 90 percent of ~~such~~that accrual ~~is also recorded.~~as determined by the terms of the agreement. This receivable amount recorded was $13 million in the ~~quarter~~three months ended March 31, ~~2019.~~2020. As of March 31, ~~2019,~~2020, Other Current Assets and Other Assets includes ~~$169~~$112 million and ~~$1,022~~$901 million representing the short-term and long-term portion of the receivable amount due from Garrett under the indemnification and reimbursement agreement.

~~In our ongoing communications~~

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 ~~respect~~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 the Agreement and Garrett’s associated material weakness disclosure in its Form 10-K for the year ended December 31, 2018, Garrett has taken the position that (i) Honeywell has not satisfied all of its obligations under the Agreement, and (ii) the Agreement is unenforceable either in whole or in part.Dismiss. We strongly believe that ~~Garrett’s~~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 in its entirety. We intend to continue to have ongoing discussions with Garrett to try to resolve this matter.~~enforceable.

On September 13, 2018, following completion of the Securities and Exchange Commission (SEC) Division of Corporation Finance’s review of our prior accounting for liabilities for unasserted Bendix-related asbestos claims, the SEC Division of Enforcement advised that it has opened an investigation related to this matter. Honeywell intends to provide requested information and otherwise fully cooperate with the SEC staff. 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 ~~Complaint has~~claims have no merit.

~~We are~~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 International Inc.~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~(Dollars in millions, except per share amounts)~~

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 ~~has~~ appealed this decision to the Sixth Circuit Court of Appeals. ~~Honeywell believes the District Court’s ruling will be upheld.~~

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 ~~2016~~2017 MCBA expired, and Honeywell would have no ongoing obligation to continue funding healthcare coverage for subsequent periods. Honeywell ~~has~~ appealed the District Court’s ruling on this “full premium” damages ~~issue, and believes that~~issue.

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 ~~will reverse~~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 ~~on that issue. In the event the Sixth Circuit were to sustain~~of Appeals reversed the District ~~Court’s~~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 ~~issue,~~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 ~~would~~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 ~~liable for damages of at least $12 million.~~named as a defendant in the future.

Given the uncertainty inherent in litigation and investigations (including the specific ~~matter~~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.

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” or “the Company”) for the three months ended March 31, ~~2019.~~2020. The financial information as of March 31, ~~2019~~2020 should be read in conjunction with the ~~consolidated financial statements~~Consolidated Financial Statements for the year ended December 31, ~~2018~~2019 contained in our ~~2018~~2019 Annual Report on Form 10-K.

~~On October 1, 2018,~~COVID-19 UPDATE

The markets around the ~~Company completed~~world continue to experience significant volatility due to the ~~tax-free spin-off~~COVID-19 pandemic. We are actively managing our businesses to ~~Honeywell shareowners~~respond to its impacts. We cannot reasonably estimate the duration and severity of this pandemic, which could have a material adverse impact 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 ~~Transportation Systems business, previously part~~impacts globally. We are prioritizing the health and safety of ~~Aerospace, into a standalone publicly-traded company, Garrett Motion Inc. (“Garrett”). The assets~~our employees. Out of an abundance of caution for the health of our employees and ~~liabilities associated with Garrett have been removed from~~to support local government initiatives to stem the ~~Company’s Consolidated Balance Sheet as~~spread of the ~~effective date~~virus, 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:

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 role in the health and well-being of people and economies, and our customers and communities are depending on us more than ever to deliver for them. We are committed to supporting the ~~spin-off. The~~safety of our employees, customers and fellow citizens around the world.

We are investing in new production facilities and continue to expand existing facilities to increase production 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:

Plant Productivity and Safety

We continue to provide essential services and produce essential goods around the world. We employ standards such as screening checks, use of masks, face coverings and other safety equipment and social distancing practices along production lines 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, particularly in our airline, oil & gas, 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 for Garrett are included in the Consolidated Statement of Operations through the effective date of the spin-off.~~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.

The change in net sales compared to the prior year period is attributable to the following:

A discussion of net sales by segment can be found in the Review of Business Segments section of this Management Discussion &and Analysis.

The unfavorable volume impact is driven by lower sales in certain products across our businesses, partially due to the impacts of COVID-19. The unfavorable impact of foreign currency translation ~~impact~~ in the quarter is driven by the strengthening of the U.S. Dollar inagainst the currencies of the majority of our international markets, primarily the Euro, Chinese Renminbi, Australian Dollar and British Pound.

~~The acquisitions/divestitures impact is driven by the spin-off of the Transportation Systems and Homes businesses.~~

Cost of products and services sold decreased in the quarter primarily due to lower direct and indirect material costs of approximately ~~$950~~$130 million ~~(driven by the spin-off of the Transportation Systems~~ and ~~Homes businesses~~$80 million and ~~productivity, partially offset by higher sales and inflation),~~ lower labor costs of approximately ~~$150~~$100 million ~~(driven~~(primarily driven by ~~the spin-off of the Transportation Systems and Homes businesses partially offset by higher~~lower sales ~~and inflation) and lower repositioning and other charges of approximately $70 million.~~volumes).

Gross margin percentage increased in the quarter primarily due to higher ~~gross margin in the segments (approximately 2.0 percentage points), with higher~~ Aerospace and Honeywell Building Technologies ~~and Performance Materials and Technologies~~segment gross margins, ~~partially offset by lower Safety and Productivity Solutions segment gross margin,~~ and due to the lower costs within cost of products and services sold for repositioning and other ~~charges (approximately 0.8 percentage point impact) and pension service costs (approximately 0.2 percentage point impact).~~charges.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $125 million in the quarter primarily due to ~~the absence of costs of the Transportation Systems and Homes businesses following their spin-offs, and the favorable foreign currency translation impact,~~productivity, partially offset by labor inflation.

Other ~~(income) expense~~income increased for the quarter primarily due to ~~the absence of separation costs,~~ higher ~~interest~~pension non-service income ~~and favorable impacts of foreign currency,~~ partially offset by lower ~~pension non-service~~interest income.

Tax Expense (Benefit)

The effective tax rate decreased for the quarter ~~primarily from increased~~ended March 31, 2020 compared to the quarter ended March 31, 2019 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, fewer tax reserves and lower tax costs related to the 2018 spin-offs.~~compensation.

The effective tax rate for the ~~three months~~quarter 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.

The effective tax rate for the three months ended March 31, 2018 was higher than the U.S. federal statutory rate of 21% primarily from anti-deferral rules that impose U.S. taxes on foreign earnings, tax reserves and state taxes, partially offset by foreign earnings taxed at lower foreign tax rates.

Net Income Attributable to Honeywell

Earnings per share of common stock – assuming dilution increased in the quarter primarily driven by ~~increased operational~~lower income tax expense, higher segment profit, ~~lower repositioning and other charges, absence of separation costs during the quarter, and~~ the favorable impact of lower share count, ~~partially offset by lower segment profit associated with the spin-off of the Transportation Systems~~ and ~~Homes businesses and lower~~higher pension ongoing income.

Review of Business Segments

Aerospace sales ~~decreased~~increased for the quarter ended March 31, 2020 due to ~~the divestiture impacts following the spin-off of the Transportation Systems business, partially offset by an increase in~~ organic ~~sales~~ growth.

Aerospace segment profit ~~decreased due to the divestiture impacts following the spin-off of the Transportation Systems business, partially offset by an increase in operational segment profit,~~increased primarily driven by ~~volume~~lower sales of lower margin products and ~~price.~~favorable pricing. Cost of products and services sold decreased due to ~~the spin-off~~lower sales of ~~the Transportation Systems business and productivity, net of inflation, partially offset by higher sales volumes.~~lower margin products.

Honeywell Building Technologies

Honeywell Building Technologies sales decreased for the quarter ended March 31, 2020 due to ~~the divestiture impacts following the spin-off of the Homes business~~lower organic sales and the unfavorable impact of foreign currency ~~partially offset by an increase in organic growth.~~translation.

~~Honeywell Building Technologies segment profit decreased due to the divestiture impacts following the spin-off of the Homes business~~ and the unfavorable impact of foreign currency translation, partially offset by ~~an increase in operational segment profit. The increase in operational~~favorable pricing.

Honeywell Building Technologies segment profit ~~was~~decreased primarily ~~driven by volume~~due to lower sales volumes, inflation and ~~price,~~the unfavorable impact of foreign currency translation, partially offset by ~~inflation.~~favorable pricing and higher productivity. Cost of products and services sold decreased due to lower sales volumes and the ~~Homes divestiture and~~favorable impact of foreign currency translation, partially offset by ~~higher sales volumes.~~inflation.

Performance Materials and Technologies

Performance Materials and Technologies sales ~~increased~~decreased for the quarter ended March 31, 2020 primarily due to ~~organic growth, partially offset by~~lower sales volumes and the unfavorable impact of foreign currency translation.

Performance Materials and Technologies segment profit ~~increased~~decreased due to ~~an increase in operational segment profit~~lower sales volumes, higher sales of lower margin products, and ~~acquisitions, partially offset by~~ the unfavorable impact of foreign currency ~~translation. The increase in operational segment profit is primarily due to productivity, price, and higher sales volumes,~~translation, partially offset by favorable pricing and productivity, net of inflation. Cost of products and services sold decreased primarily due to ~~foreign currency translation and productivity, partially offset by higher~~lower sales volumes and ~~inflation.~~the favorable impact of foreign currency translation.

Safety and Productivity Solutions

Safety and Productivity Solutions sales ~~increased~~decreased for the quarter ended March 31, 2020 primarily due to lower organic sales ~~growth from sales volume~~ and ~~price, and acquisitions, partially offset by~~ 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 ~~in Productivity Products~~ and ~~inflation,~~higher productivity, net of ~~productivity. Cost of products and services sold increased primarily due to higher organic sales, acquisitions, and inflation, partially offset by favorable foreign currency translation.~~inflation.

Repositioning and Other Charges

Cash spending related to our repositioning actions was ~~$44~~$88 million in the three months ended March 31, ~~2019~~2020 and was funded through operating cash flows. We expect cash spending for repositioning actions to be approximately $300 million in ~~2019~~2020 and to be funded through operating cash flows.

~~Cash Flow Summary~~

Three Months Ended
March 31,
2019 2018
Cash provided by (used for):

Operating activities $ 1,134
$ 1,136
Investing activities (609 ) 994
Financing activities (1,235 ) (1,448 )
Effect of exchange rate changes on cash 48
156
Net (decrease) increase in cash and cash equivalents $ (662 ) $ 838

Cash provided by operating activities decreased by $2 million primarily due to increased cash tax payments of $154 million and a $ 56 million decrease in customer advances and deferred income, partially offset by a $115 million favorable impact from working capital (favorable accounts receivable, partially offset by accounts payable and inventory) and reimbursements associated with the indemnification and reimbursement agreements with subsidiaries of Garrett and Resideo of $74 million.

Cash used for investing activities increased by $1,603 million primarily due to a net $1,685 million increase in investments, primarily short term marketable securities, partially offset by a decrease of $83 million in settlement payments of foreign currency exchange contracts used as economic hedges on certain non-functional currency denominated monetary assets and liabilities.

Cash used for financing activities decreased by $213 million primarily due to a decrease in repurchases of common stock of $190 million and an increase in proceeds from the issuance of common stock of $85 million partially offset by an increase in net debt payments of $98 million.

~~The Company continues~~We continue to manage ~~its~~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.

Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized as follows:

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.


	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(Dollars in millions)						(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	8,625		$	9,287		$	7,721		$	9,067
Short-term investments	2,059			1,623			1,070			1,349
Accounts receivable - net	7,307			7,508			7,452			7,493
Inventories	4,548			4,326			4,584			4,421
Other current assets	1,795			1,618			1,786			1,973
Total current assets	24,334			24,362			22,613			24,303
Investments and long-term receivables	747			742			613			588
Property, plant and equipment - net	5,276			5,296			5,214			5,325
Goodwill	15,555			15,546			15,282			15,563
Other intangible assets - net	4,039			4,139			3,580			3,734
Insurance recoveries for asbestos related liabilities	429			437			383			392
Deferred income taxes	362			382			71			86
Other assets	7,818			6,869			9,666			8,688
Total assets	$	58,560		$	57,773		$	57,422		$	58,679
LIABILITIES
Current liabilities:
Accounts payable	$	5,582		$	5,607		$	5,676		$	5,730
Commercial paper and other short-term borrowings	3,514			3,586			3,528			3,516
Current maturities of long-term debt	4,000			2,872			1,042			1,376
Accrued liabilities	6,497			6,859			7,131			7,476
Total current liabilities	19,593			18,924			17,377			18,098
Long-term debt	8,598			9,756			11,542			11,110
Deferred income taxes	1,850			1,713			1,670			1,670
Postretirement benefit obligations other than pensions	333			344			314			326
Asbestos related liabilities	2,246			2,269			1,948			1,996
Other liabilities	6,977			6,402			6,699			6,766
Redeemable noncontrolling interest	7			7			7			7
SHAREOWNERS’ EQUITY
Capital - common stock issued	958			958			958			958
- additional paid-in capital	6,652			6,452			7,047			6,876
Common stock held in treasury, at cost	(20,392		)	(19,771		)	(25,643		)	(23,836		)
Accumulated other comprehensive loss	(3,245		)	(3,437		)	(3,353		)	(3,197		)
Retained earnings	34,794			33,978			38,635			37,693
Total Honeywell shareowners’ equity	18,767			18,180			17,644			18,494
Noncontrolling interest	189			178			221			212
Total shareowners’ equity	18,956			18,358			17,865			18,706
Total liabilities, redeemable noncontrolling interest and shareowners’ equity	$	58,560		$	57,773		$	57,422		$	58,679


	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
	(Dollars in millions)						(Dollars in millions)
Cash flows from operating activities:
Net income	$	1,436		$	1,452		$	1,606		$	1,436
Less: Net income attributable to the noncontrolling interest	20			13			25			20
Net income attributable to Honeywell	1,416			1,439			1,581			1,416
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:
Depreciation	163			179			153			163
Amortization	98			109			90			98
Repositioning and other charges	84			191			62			84
Net payments for repositioning and other charges	(34		)	(141		)	(111		)	(34		)
Pension and other postretirement income	(163		)	(254		)	(212		)	(163		)
Pension and other postretirement benefit payments	(30		)	(36		)	(14		)	(30		)
Stock compensation expense	41			52			44			41
Deferred income taxes	80			47			(58		)	80
Other	(4		)	2			(179		)	(4		)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable	198			(61		)	41			198
Inventories	(221		)	(163		)	(163		)	(221		)
Other current assets	(217		)	(43		)	166			(217		)
Accounts payable	(29		)	57			(54		)	(29		)
Accrued liabilities	(248		)	(242		)	(407		)	(248		)
Net cash provided by operating activities	1,134			1,136
Net cash provided by (used for) operating activities							939			1,134
Cash flows from investing activities:
Expenditures for property, plant and equipment	(141		)	(140		)	(139		)	(141		)
Proceeds from disposals of property, plant and equipment	2			2			7			2
Increase in investments	(1,226		)	(583		)	(648		)	(1,226		)
Decrease in investments	796			1,838			843			796
Other	(40		)	(123		)
Net cash (used for) provided by investing activities	(609		)	994
Receipts (payments) from settlements of derivative contracts							287			(40		)
Net cash provided by (used for) investing activities							350			(609		)
Cash flows from financing activities:
Proceeds from issuance of commercial paper and other short-term borrowings	3,318			6,676			3,455			3,318
Payments of commercial paper and other short-term borrowings	(3,319		)	(5,329		)	(3,373		)	(3,319		)
Proceeds from issuance of common stock	145			60			66			145
Proceeds from issuance of long-term debt	20			3			1,127			20
Payments of long-term debt	(13		)	(1,246		)	(1,125		)	(13		)
Repurchases of common stock	(750		)	(940		)	(1,923		)	(750		)
Cash dividends paid	(606		)	(556		)	(635		)	(606		)
Other	(30		)	(116		)	(38		)	(30		)
Net cash used for financing activities	(1,235		)	(1,448		)
Net cash provided by (used for) financing activities							(2,446		)	(1,235		)
Effect of foreign exchange rate changes on cash and cash equivalents	48			156			(189		)	48
Net (decrease) increase in cash and cash equivalents	(662		)	838
Net increase (decrease) in cash and cash equivalents							(1,346		)	(662		)
Cash and cash equivalents at beginning of period	9,287			7,059			9,067			9,287
Cash and cash equivalents at end of period	$	8,625		7,897			$	7,721		$	8,625


	Three Months Ended March 31,										Three Months Ended March 31,
	2019					2018					2020					2019
	Shares		$			Shares		$			Shares		$			Shares		$
	(Dollars in millions, except per share amounts)										(Dollars in millions, except per share amounts)
Common stock, par value	957.6		958			957.6		958			957.6		958			957.6		958
Additional paid-in capital
Beginning balance			6,452					6,212					6,876					6,452
Issued for employee savings and option plans			159					(14		)			127					159
Stock-based compensation expense			41					52					44					41
Ending balance			6,652					6,250					7,047					6,652
Treasury stock
Beginning balance	(228.0	)	(19,771		)	(206.7	)	(15,914		)	(246.5	)	(23,836		)	(228.0	)	(19,771		)
Reacquired stock or repurchases of common stock	(5.1	)	(750		)	(6.1	)	(940		)	(11.7	)	(1,923		)	(5.1	)	(750		)
Issued for employee savings and option plans	3.2		129			2.1		20			2.4		116			3.2		129
Ending balance	(229.9	)	(20,392		)	(210.7	)	(16,834		)	(255.8	)	(25,643		)	(229.9	)	(20,392		)
Retained earnings
Beginning balance			33,978					27,481					37,693					33,978
Adoption of new accounting standards			—					264
Net income attributable to Honeywell			1,416					1,439					1,581					1,416
Dividends on common stock			(600		)			(561		)			(639		)			(600		)
Ending balance			34,794					28,623					38,635					34,794
Accumulated other comprehensive income (loss)
Beginning balance			(3,437		)			(2,235		)			(3,197		)			(3,437		)
Foreign exchange translation adjustment			205					91					(276		)			205
Pensions and other postretirement benefit adjustments			(19		)			(16		)			(20		)			(19		)
Changes in fair value of cash flow hedges			6					(14		)			140					6
Ending balance			(3,245		)			(2,174		)			(3,353		)			(3,245		)
Noncontrolling interest
Beginning balance			178					163					212					178
Acquisitions, divestitures, and other			—					1					(6		)			—
Net income attributable to noncontrolling interest			20					14					25					20
Foreign exchange translation adjustment			4					4					(7		)			4
Dividends paid			(13		)			(3		)			(3		)			(13		)
Ending balance			189					179					221					189
Total shareowners' equity	727.7		18,956			746.9		17,002			701.8		17,865			727.7		18,956
Cash dividends per share of common stock			$	0.820				$	0.745				$	0.900				$	0.820



	2019			2018
Contract assets - Beginning period	$	1,548		$	1,721
Contract assets - March 31	1,700			1,672
Change in contract assets - increase (decrease)	$	152		$	(49	)

Contract liabilities - Beginning period	$	(3,378	)	$	(2,973	)
Contract liabilities - March 31	(3,426		)	(3,081		)
Change in contract liabilities - (increase) decrease	$	(48	)	$	(108	)

Net change	$	104		$	(157	)



	March 31, 2019
Aerospace	$	10,890
Honeywell Building Technologies	5,657
Performance Materials and Technologies	6,347
Safety and Productivity Solutions	1,850
	$	24,744



	Three Months Ended March 31, 2019
Operating lease cost	$	54
Variable lease cost	8
Short-term lease cost	3
Financing lease cost:
Amortization of right-of-use assets	14
Interest on lease liability	8
Total financing lease cost	22
Total lease cost	$	87



	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	61
Operating cash flows from finance leases	1
Financing cash flows from finance leases	10
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	10
Finance leases	4



	At December 31, 2018
2019	$	210
2020	168
2021	142
2022	109
2023	80
Thereafter	147
	$	856



	March 31, 2019			December 31, 2018
1.40% notes due 2019	$	1,250		$	1,250
Three year floating rate notes due 2019	250			250
Two year floating rate notes due 2019	450			450
1.80% notes due 2019	750			750
0.65% Euro notes due 2020	1,123			1,145
4.25% notes due 2021	800			800
1.85% notes due 2021	1,500			1,500
1.30% Euro notes due 2023	1,404			1,432
3.35% notes due 2023	300			300
2.50% notes due 2026	1,500			1,500
2.25% Euro notes due 2028	842			859
5.70% notes due 2036	441			441
5.70% notes due 2037	462			462
5.375% notes due 2041	417			417
3.812% notes due 2047	445			445
Industrial development bond obligations, floating rate maturing at various dates through 2037	22			22
6.625% debentures due 2028	201			201
9.065% debentures due 2033	51			51
Other (including capitalized leases and debt issuance costs), 5.2% weighted average maturing at various dates through 2025	390			353
	12,598			12,628
Less: current portion	(4,000		)	(2,872		)
	$	8,598		$	9,756


(ii)	liability for claims asserted after the NARCO Trust became operational but not yet paid.



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



A.	Results of Operations – three months ended March 31, ~~2019~~2020 compared with the three months ended March 31, ~~2018~~2019



	Three Months
Volume	6(5	)%
Price	21	%
Foreign Currency Translation	(31	)%
Acquisitions/Divestitures	~~(20~~—	)%
	(155	)%


	2019 vs. 2018				2020 vs. 2019
	Three Months Ended March 31,				Three Months Ended March 31,
Factors Contributing to Year-Over-Year Change	Sales		Segment Profit		Sales		Segment Profit
Organic growth/ Operational segment profit	10	%	19	%
Organic					1	%	12	%
Foreign currency translation	—	%	(1	)%	—	%	—	%
Acquisitions, divestitures and other, net	(26	)%	(24	)%	—	%	—	%
Total % change	(16	)%	(6	)%	1	%	12	%


	2019 vs. 2018
	Three Months Ended				2020 vs. 2019
	March 31,				Three Months Ended March 31,
Factors Contributing to Year-Over-Year Change	Sales		Segment Profit		Sales		Segment Profit
Organic growth/ Operational segment profit	9	%	7	%
Organic					(6	)%	(2	)%
Foreign currency translation	(3	)%	(3	)%	(2	)%	(1	)%
Acquisitions, divestitures and other, net	(49	)%	(39	)%	—	%	—	%
Total % change	(43	)%	(35	)%	(8	)%	(3	)%



	Environmental Matters Involving Potential Monetary Sanctions in Excess of $100,000



Issuer Purchases of Equity Securities
	(a)	(b)		(c)	(d)
Period	Total 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 2019	1,728,710	$	138.83	1,728,710	$	3,497
February 2019	867,877	$	149.77	867,877	$	3,367
March 2019	2,456,461	$	154.67	2,456,461	$	2,987



Exhibit No.		Description
10.1*10.1		~~Offer Letter~~Delayed Draw Term Loan Agreement, dated ~~July 9, 2018 between~~as of March 26, 2020, among Honeywell International Inc., the initial lenders named therein, Citibank, N.A., as administrative agent, and ~~Mark R. James (filed herewith)~~Citibank, N.A., Bank of America, N.A., 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).

31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

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 herewith)

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 herewith)

95		Mine Safety Disclosures

101.INS	~~XBRL Instance Document (filed herewith)~~	The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

101.SCH		Inline XBRL Taxonomy Extension Schema (filed herewith)

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

104		Cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL (and contained in Exhibit 101)



	Honeywell International Inc.

Date: ~~April 18, 2019~~May 1, 2020	By:	/s/ ~~John J. Tus~~Robert D. Mailloux
		~~John J. Tus~~Robert D. Mailloux Vice President and Controller (on behalf of the Registrant and as the Registrant’s Principal Accounting Officer)