Honeywell Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

hon-20210331

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

__________________

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ 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)


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

300 South Tryon Street		28202
Charlotte,	NC
(Address of principal executive offices)		(Zip Code)


			(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. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	x	Accelerated filer	☐
Non-Accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

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

There were 694,555,603 shares of Common Stock outstanding at March 31, 2021.

TABLE OF CONTENTS


		Page No.
PART I	Financial Information	1
ITEM 1	Financial Statements:	1
	Consolidated Statement of Operations (unaudited) – Three Months Ended March 31, 2021 and 2020	1
	Consolidated Statement of Comprehensive Income (unaudited) – Three Months Ended March 31, 2021 and 2020	2
	Consolidated Balance Sheet (unaudited) – March 31, 2021 and December 31, 2020	3
	Consolidated Statement of Cash Flows (unaudited) – Three Months Ended March 31, 2021 and 2020	4
	Consolidated Statement of Shareowners' Equity (unaudited) – Three Months Ended March 31, 2021 and 2020	5
	Notes to Consolidated Financial Statements (unaudited)	6
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
ITEM 3	Quantitative and Qualitative Disclosures About Market Risks	44
ITEM 4	Controls and Procedures	44
PART II	Other Information	45
ITEM 1	Legal Proceedings	45
ITEM 1A	Risk Factors	45
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	45
ITEM 4	Mine Safety Disclosures	45
ITEM 5	Other Information	46
ITEM 6	Exhibits	47
	S ignatures	49

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

We describe many of the trends and other factors that drive our business and future results in the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other parts of this report (including Part II, Item 1A Risk Factors). Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events or developments that management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management’s assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, including the impact of the coronavirus pandemic (COVID-19), that can affect our performance in both the near- and long-term. These forward-looking statements should be considered in 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 2020 Annual Report on Form 10-K.

PART I. FINANCIAL INFORMATION

The financial statements and related footnotes as of March 31, 2021 should be read in conjunction with the financial statements for the year ended December 31, 2020 contained in our 2020 Annual Report on Form 10-K.

ITEM 1. FINANCIAL STATEMENTS

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
	2021		2020
	(Dollars in millions, except per share amounts)
Product sales	$	6,409	$	6,305
Service sales	2,045		2,158
Net sales	8,454		8,463
Costs, expenses and other
Cost of products sold	4,551		4,374
Cost of services sold	1,158		1,160
	5,709		5,534
Selling, general and administrative expenses	1,236		1,238
Other (income) expense	(442)		(317)
Interest and other financial charges	90		73
	6,593		6,528
Income before taxes	1,861		1,935
Tax expense (benefit)	413		329
Net income	1,448		1,606
Less: Net income attributable to the noncontrolling interest	21		25
Net income attributable to Honeywell	$	1,427	$	1,581
Earnings per share of common stock - basic	$	2.05	$	2.23
Earnings per share of common stock - assuming dilution	$	2.03	$	2.21

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

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HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2021		2020
	(Dollars in millions)
Net income	$	1,448	$	1,606
Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment	214		(276)


Prior service (credit) cost recognized	(22)		(20)
Pension and other postretirement benefit adjustments	(22)		(20)
Changes in fair value of available for sale investments	(3)		—
Cash flow hedges recognized in other comprehensive income (loss)	8		195
Less: Reclassification adjustment for gains (losses) included in net income	3		55
Changes in fair value of cash flow hedges	5		140
Other comprehensive income (loss), net of tax	194		(156)
Comprehensive income	1,642		1,450
Less: Comprehensive income attributable to the noncontrolling interest	22		18
Comprehensive income attributable to Honeywell	$	1,620	$	1,432

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

2 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)


	March 31, 2021		December 31, 2020
	(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	11,718	$	14,275
Short-term investments	942		945
Accounts receivable - net	6,675		6,827
Inventories	4,607		4,489
Other current assets	1,645		1,639
Total current assets	25,587		28,175
Investments and long-term receivables	746		685
Property, plant and equipment - net	5,547		5,570
Goodwill	16,981		16,058
Other intangible assets - net	3,799		3,560
Insurance recoveries for asbestos related liabilities	347		366
Deferred income taxes	762		760
Other assets	9,792		9,412
Total assets	$	63,561	$	64,586
LIABILITIES
Current liabilities:
Accounts payable	$	5,792	$	5,750
Commercial paper and other short-term borrowings	3,568		3,597
Current maturities of long-term debt	1,635		2,445
Accrued liabilities	6,955		7,405
Total current liabilities	17,950		19,197
Long-term debt	16,124		16,342
Deferred income taxes	2,309		2,113
Postretirement benefit obligations other than pensions	234		242
Asbestos-related liabilities	1,873		1,920
Other liabilities	6,812		6,975
Redeemable noncontrolling interest	7		7
SHAREOWNERS’ EQUITY
Capital - common stock issued	958		958
- additional paid-in capital	7,505		7,292
Common stock held in treasury, at cost	(27,975)		(27,229)
Accumulated other comprehensive loss	(3,184)		(3,377)
Retained earnings	40,682		39,905
Total Honeywell shareowners’ equity	17,986		17,549
Noncontrolling interest	266		241
Total shareowners’ equity	18,252		17,790
Total liabilities, redeemable noncontrolling interest and shareowners’ equity	$	63,561	$	64,586

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

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HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2021		2020
	(Dollars in millions)
Cash flows from operating activities:
Net income	$	1,448	$	1,606
Less: Net income attributable to the noncontrolling interest	21		25
Net income attributable to Honeywell	1,427		1,581
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:
Depreciation	171		153
Amortization	170		90
Gain on sale of non-strategic businesses and assets	(90)		—
Repositioning and other charges	141		62
Net payments for repositioning and other charges	(195)		(111)
Pension and other postretirement income	(293)		(212)
Pension and other postretirement benefit payments	(14)		(14)
Stock compensation expense	77		44
Deferred income taxes	63		(58)

Other	(96)		(179)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable	143		41
Inventories	(158)		(163)
Other current assets	(66)		166
Accounts payable	57		(54)
Accrued liabilities	(359)		(407)
Net cash provided by (used for) operating activities	978		939
Cash flows from investing activities:
Expenditures for property, plant and equipment	(221)		(139)
Proceeds from disposals of property, plant and equipment	14		7
Increase in investments	(736)		(648)
Decrease in investments	612		843
Receipts (payments) from settlements of derivative contracts	140		287
Cash paid for acquisitions, net of cash acquired	(1,303)		—
Proceeds from sales of businesses, net of fees paid	190		—
Net cash provided by (used for) investing activities	(1,304)		350
Cash flows from financing activities:
Proceeds from issuance of commercial paper and other short-term borrowings	1,268		3,455
Payments of commercial paper and other short-term borrowings	(1,266)		(3,373)
Proceeds from issuance of common stock	67		66
Proceeds from issuance of long-term debt	23		1,127
Payments of long-term debt	(817)		(1,125)
Repurchases of common stock	(822)		(1,923)
Cash dividends paid	(640)		(635)
Other	(30)		(38)
Net cash provided by (used for) financing activities	(2,217)		(2,446)
Effect of foreign exchange rate changes on cash and cash equivalents	(14)		(189)
Net increase (decrease) in cash and cash equivalents	(2,557)		(1,346)
Cash and cash equivalents at beginning of period	14,275		9,067
Cash and cash equivalents at end of period	$	11,718	$	7,721

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

4 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY

(Unaudited)


	Three Months Ended March 31,
	2021			2020
	Shares	$		Shares	$
	(In millions, except per share amounts)
Common stock, par value	957.6	958		957.6	958
Additional paid-in capital
Beginning balance		7,292			6,876
Issued for employee savings and option plans		136			127
Stock-based compensation expense		77			44

Ending balance		7,505			7,047
Treasury stock
Beginning balance	(260.8)	(27,229)		(246.5)	(23,836)
Reacquired stock or repurchases of common stock	(4.0)	(822)		(11.7)	(1,923)
Issued for employee savings and option plans	1.8	76		2.4	116
Ending balance	(263.0)	(27,975)		(255.8)	(25,643)
Retained earnings
Beginning balance		39,905			37,693

Net income attributable to Honeywell		1,427			1,581
Dividends on common stock		(650)			(639)


Ending balance		40,682			38,635
Accumulated other comprehensive income (loss)
Beginning balance		(3,377)			(3,197)
Foreign exchange translation adjustment		213			(276)
Pension and other postretirement benefit adjustments		(22)			(20)
Changes in fair value of available for sale investments		(3)			—
Changes in fair value of cash flow hedges		5			140
Ending balance		(3,184)			(3,353)
Noncontrolling interest
Beginning balance		241			212
Acquisitions, divestitures, and other		—			(6)
Net income attributable to noncontrolling interest		21			25
Foreign exchange translation adjustment		1			(7)
Dividends paid		(1)			(3)
Contributions from noncontrolling interest holders		4			—
Ending balance		266			221
Total shareowners' equity	694.6	18,252		701.8	17,865
Cash dividends per share of common stock		$	0.930		$	0.900

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

5 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 1. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Honeywell International Inc. and its consolidated subsidiaries (Honeywell or the Company) at March 31, 2021 and December 31, 2020, the cash flows for the three months ended March 31, 2021 and March 31, 2020, the results of operations for the three months ended March 31, 2021 and March 31, 2020 and the shareowners' equity for the three months ended March 31, 2021 and March 31, 2020. The results of operations for the three months ended March 31, 2021 and cash flows for the three months ended March 31, 2021 should not necessarily be taken as indicative of the entire year.

Honeywell reports its quarterly financial information using a calendar convention; the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30. It has been Honeywell's practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires Honeywell's businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. In the event that differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, Honeywell will provide appropriate disclosures. Honeywell's actual closing dates for the three months ended March 31, 2021 and March 31, 2020 were April 3, 2021 and March 28, 2020. We estimate that our sales in the first quarter of 2021 compared to the first quarter of 2020 include an approximate 3 percent benefit from additional reporting days in the current year period resulting from our normal quarterly closing procedures.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the Company are set forth in Note 1 to the Company's Consolidated Financial Statements contained in the Company’s 2020 Annual Report on Form 10-K. The Company includes herein certain updates to those policies.

RECLASSIFICATIONS

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

RECENT ACCOUNTING PRONOUNCEMENTS

The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our Consolidated Financial Statements.

In December 2019, the FASB issued an ASU 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 is not a business combination, intraperiod tax allocation exception to incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax law, and year-to-date loss limitation in interim-period tax accounting. Effective January 1, 2021, the Company adopted this standard. The adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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

NOTE 3. ACQUISITIONS AND DIVESTITURES

On February 12, 2021, the Company acquired 100% of the shares outstanding of Sparta Systems, a leading provider of enterprise quality management software for the life sciences industry, for $1,303 million. Sparta Systems is expected to further strengthen the Company's leadership in industrial automation, digital transformation solutions, and enterprise performance management software. The business is included within the Performance Materials and Technologies segment. The assets and liabilities acquired with Sparta Systems are included in the Consolidated Balance Sheet as of March 31, 2021, including $371 million of intangible assets and $1,036 million allocated to goodwill, which is non-deductible for tax purposes. The purchase accounting is subject to final adjustment, primarily for the valuation of intangible assets, amounts allocated to goodwill, tax balances, and certain pre-acquisition contingencies.

On March 15, 2021, the Company completed the sale of its retail footwear business in exchange for gross cash consideration of $230 million. The Company recognized a pre-tax gain of $90 million, which was recorded in Other (income) expense. The retail footwear business was previously included in the Safety and Productivity Solutions segment.

Please refer to Note 2 Acquisitions and Divestitures of Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for additional information regarding prior year.

NOTE 4. REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

Honeywell generates revenue from a comprehensive offering of products and services, including software and technologies, that are sold to a variety of customers in multiple end markets. See the following table and related discussions by operating segment for details.


	Three Months Ended March 31,
	2021		2020
Aerospace
Commercial Aviation Original Equipment	$	431	$	675
Commercial Aviation Aftermarket	910		1,385
Defense and Space	1,291		1,301
	2,632		3,361
Honeywell Building Technologies
Products	798		741
Building Solutions	560		540
	1,358		1,281
Performance Materials and Technologies
UOP	527		594
Process Solutions	1,096		1,151
Advanced Materials	723		652


	2,346		2,397
Safety and Productivity Solutions
Safety and Retail	743		502
Productivity Solutions and Services	343		287
Warehouse and Workflow Solutions	844		458
Advanced Sensing Technologies (formerly Sensing & Internet-of-Things)	188		177
	2,118		1,424
Net sales	$	8,454	$	8,463

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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

Aerospace – A global supplier of products, software and services for aircrafts that it sells to original equipment manufacturers (OEM) and other customers in a variety of end markets including: air transport, regional, business and general aviation aircraft, airlines, aircraft operators and defense and space contractors. Aerospace products and services include auxiliary power units, propulsion engines, environmental control systems, integrated avionics, wireless connectivity services, electric power systems, engine controls, flight safety, communications, navigation hardware, data and software applications, radar and surveillance systems, aircraft lighting, management and technical services, advanced systems and instruments, satellite and space components, aircraft wheels and brakes, repair and overhaul services and thermal systems. Aerospace also provides spare parts, repair, overhaul and maintenance services (principally to aircraft operators) for the aftermarket. Honeywell Forge solutions are leveraged by our customers as tools to turn data into predictive maintenance and predictive analytics to enable better fleet management and make flight operations more efficient.

Honeywell Building Technologies – A global provider of products, software, solutions and technologies that enable building owners and occupants to ensure their facilities are safe, energy efficient, sustainable and productive. Honeywell Building Technologies products and services include advanced software applications for building control and optimization; sensors, switches, control systems and instruments for energy management; access control; video surveillance; fire products; remote patient monitoring systems; and installation, maintenance and upgrades of systems. Honeywell Forge solutions enable our customers to digitally manage buildings, connecting data from different assets to enable smart maintenance, improve building performance and protect from incoming security threats.

Performance Materials and Technologies – A global provider in developing and manufacturing high-quality performance chemicals and materials, process technologies and automation solutions. The segment is comprised of Process Solutions, UOP and Advanced Materials. Process Solutions provides automation control, instrumentation, advanced software and related services for the oil and gas, refining, pulp and paper, industrial power generation, chemicals and petrochemicals, biofuels, life sciences, and metals, minerals and mining industries. Through its smart energy products, Process Solutions enables utilities and distribution companies to deploy advanced capabilities to improve operations, reliability and environmental sustainability. UOP provides process technology, products, including catalysts and adsorbents, equipment, and consulting services that enable customers to efficiently produce gasoline, diesel, jet fuel, petrochemicals and renewable fuels for the petroleum refining, gas processing, petrochemical, and other industries. Advanced Materials manufactures a wide variety of high-performance products, including materials used to manufacture end products such as bullet-resistant armor, nylon, computer chips and pharmaceutical packaging, and provides reduced and low global-warming-potential materials based on hydrofluoro-olefin technology. In the industrial environment, Honeywell Forge solutions enable integration and connectivity to provide a holistic view of operations and turn data into clear actions to maximize productivity and efficiency. Honeywell Forge's cybersecurity capabilities help identify risks and act on cyber-related incidents, together enabling improved operations and protecting processes, people and assets.

Safety and Productivity Solutions – A global provider of products and software that improve productivity, workplace safety and asset performance to customers around the globe. Safety products include personal protective equipment (PPE), apparel, gear, and footwear designed for work, play and outdoor activities; gas detection technology; and cloud-based notification and emergency messaging. Productivity Solutions products and services include mobile devices and software for computing, data collection and thermal printing; supply chain and warehouse automation equipment, software and solutions; custom-engineered sensors, switches and controls for sensing and productivity solutions; and software-based data and asset management productivity solutions. Honeywell Forge solutions digitally automate processes to improve efficiency while reducing downtime and safety costs.

For a summary by disaggregated product and services sales for each segment, refer to Note 18 Segment Financial Data.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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

The Company recognizes revenue from performance obligations to customers that are satisfied at a point in time and over time. The disaggregation of the Company's revenue based off timing of recognition is as follows:


	Three Months Ended March 31,
	2021		2020
Products, transferred point in time	58	%	61	%
Products, transferred over time	18		14
Net product sales	76		75
Services, transferred point in time	7		9
Services, transferred over time	17		16
Net service sales	24		25
Net sales	100	%	100	%

CONTRACT BALANCES

The Company records progress on satisfying performance obligations to customers, and the related billings and cash collections, on the Consolidated Balance Sheet in Accounts receivable - net and Other assets (unbilled receivables (contract assets) and billed receivables) and Accrued liabilities and Other liabilities (customer advances and deposits (contract liabilities)). Unbilled receivables (contract assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled receivable balance increases when the revenue associated with the contract is recognized prior to billing and decreases when billed in accordance with the terms of the contract. Contract liabilities increase when customers remit contractual cash payments in advance of the Company satisfying performance obligations under contractual arrangements, including those with performance obligations to be satisfied over a period of time. Contract liabilities decrease when revenue is recorded, either when a milestone is met triggering the contractual right to bill or when the performance obligation is satisfied.

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 the Company's contract assets and liabilities balances:


	2021		2020
Contract assets - January 1	$	1,618	$	1,602
Contract assets - March 31	1,789		1,699
Change in contract assets - increase (decrease)	$	171	$	97

Contract liabilities - January 1	$	(4,033)	$	(3,501)
Contract liabilities - March 31	(3,994)		(3,506)
Change in contract liabilities - decrease (increase)	$	39	$	(5)

Net change	$	210	$	92

The net change for the three months ended March 31, 2021 and 2020 was primarily driven by the recognition of revenue as performance obligations were satisfied prior to billing exceeding receipt of advance payments from customers.

For the three months ended March 31, 2021 and 2020, the Company recognized revenue of $1,120 million and $888 million that was previously included in the beginning balance of contract liabilities.

When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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

existing contract. The effect of a contract modification on the transaction price, and the Company's 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 the Company's contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. In situations when the Company's contract includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For any contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation. In such cases, the observable standalone sales are used to determine the standalone selling price.

Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract.

The following table outlines the Company's remaining performance obligations disaggregated by segment:


	March 31, 2021
Aerospace	$	9,055
Honeywell Building Technologies	6,564
Performance Materials and Technologies	7,076
Safety and Productivity Solutions	4,044
	$	26,739

Performance obligations recognized as of March 31, 2021 will be satisfied over the course of future periods. The Company's disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. Performance obligations expected to be satisfied within one year and greater than one year are 55% and 45%, respectively.

The timing of satisfaction of the Company's performance obligations does not significantly vary from the typical timing of payment. Typical payment terms of the Company's fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts we may be entitled to receive an advance payment.

The Company applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed.

10 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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

NOTE 5. REPOSITIONING AND OTHER CHARGES

A summary of repositioning and other charges follows:


	Three Months Ended March 31,
	2021		2020
Severance	$	28	$	66
Asset impairments	42		2
Exit costs	49		15
Reserve adjustments	1		(13)
Total net repositioning charge	120		70
Asbestos related litigation charges, net of insurance and reimbursements	21		11
Probable and reasonably estimable environmental liabilities, net of reimbursements	5		8
Other	(5)		(27)
Total net repositioning and other charges	$	141	$	62

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


	Three Months Ended March 31,
	2021		2020
Cost of products and services sold	$	98	$	20
Selling, general and administrative expenses	43		42

	$	141	$	62

The following table summarizes the pretax impact of total net repositioning and other charges by segment:


	Three Months Ended March 31,
	2021		2020
Aerospace	$	48	$	11
Honeywell Building Technologies	5		25
Performance Materials and Technologies	5		21
Safety and Productivity Solutions	37		6
Corporate	46		(1)
	$	141	$	62

In the three months ended March 31, 2021, we recognized gross repositioning charges totaling $119 million including severance costs of $28 million related to workforce reductions of 1,021 manufacturing and administrative positions mainly in our Aerospace and Safety and Productivity Solutions segments. The workforce reductions were primarily related to site transitions, mainly in Aerospace, to more cost-effective locations and to our productivity and ongoing functional transformation initiatives. The repositioning charge included asset impairments of $42 million primarily related to the write-down of certain manufacturing and other equipment due to their planned disposition. The repositioning charge included exit costs of $49 million primarily for closure obligations associated with site transitions, lease exit obligations for certain equipment in Corporate and current period exit costs incurred for previously approved repositioning projects.

In the three months ended March 31, 2020, we recognized gross repositioning charges totaling $83 million including severance costs of $66 million related to workforce reductions of 2,124 manufacturing and administrative positions across our segments. The workforce reductions were primarily related to our productivity and ongoing functional transformation initiatives.

11 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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

The following table summarizes the status of the Company's total repositioning reserves:


	Severance Costs		Asset Impairments		Exit Costs		Total
Balance at December 31, 2020	$	527	$	—	$	74	$	601
Charges	28		42		49		119
Usage - cash	(84)		—		(21)		(105)
Usage - noncash	—		(42)		—		(42)
Foreign currency translation	(3)		—		(2)		(5)
Adjustments	1		—		—		1
Balance at March 31, 2021	$	469	$	—	$	100	$	569

Certain repositioning projects will recognize exit costs in future periods when the actual liability is incurred. Such exit costs incurred in the three months ended March 31, 2021 and 2020 were $10 million and $11 million, respectively.

NOTE 6. INCOME TAXES

The effective tax rate increased for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily from tax benefits realized in the prior year as a result of tax law changes in India and the resolution of certain U.S. tax matters. Other changes to the tax rate include tax benefits for employee share-based compensation and the resolution of certain foreign tax matters in the current year.

The effective tax rate for the three months ended March 31, 2021 was higher than the U.S. federal statutory rate of 21% primarily due to incremental tax reserves and states taxes, partially offset by tax benefits for employee share based compensation and the resolution of certain foreign tax matters.

NOTE 7. ACCOUNTS RECEIVABLE - NET


	March 31, 2021		December 31, 2020
Trade	$	6,874	$	7,029
Less - Allowance for doubtful accounts	(199)		(202)
	$	6,675	$	6,827

Trade receivables include $1,750 million and $1,589 million of unbilled balances under long-term contracts as of March 31, 2021 and December 31, 2020. These amounts are billed in accordance with the terms of the customer contracts to which they relate.

NOTE 8. INVENTORIES


	March 31, 2021	December 31, 2020
Raw materials	$

Price	167.14	EPS	9
Shares	733	P/E	19
MCap	122,480	P/FCF	29
Net Debt	4,281	EBIT	7,512
TEV	126,761	TEV/EBIT	17
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-04-23
10-K	2020-12-31	Filed 2021-02-12
10-Q	2020-09-30	Filed 2020-10-30
10-Q	2020-06-30	Filed 2020-07-24
10-Q	2020-03-31	Filed 2020-05-01
10-K	2019-12-31	Filed 2020-02-14
10-Q	2019-09-30	Filed 2019-10-17
10-Q	2019-06-30	Filed 2019-07-18
10-Q	2019-03-31	Filed 2019-04-18
10-K	2018-12-31	Filed 2019-02-08
10-Q	2018-09-30	Filed 2018-10-19
10-Q	2018-06-30	Filed 2018-07-20
10-Q	2018-03-31	Filed 2018-04-20
10-K	2017-12-31	Filed 2018-02-09
10-Q	2017-09-30	Filed 2017-10-20
10-Q	2017-06-30	Filed 2017-07-21
10-Q	2017-03-31	Filed 2017-04-21
10-K	2016-12-31	Filed 2017-02-10
10-Q	2016-09-30	Filed 2016-10-21
10-Q	2016-06-30	Filed 2016-07-22
10-Q	2016-03-31	Filed 2016-04-22
10-K	2015-12-31	Filed 2016-02-12
10-Q	2015-09-30	Filed 2015-10-16
10-Q	2015-06-30	Filed 2015-07-17
10-Q	2015-03-31	Filed 2015-04-17
10-K	2014-12-31	Filed 2015-02-13
10-Q	2014-09-30	Filed 2014-10-17
10-Q	2014-06-30	Filed 2014-07-18
10-Q	2014-03-31	Filed 2014-04-17
10-K	2013-12-31	Filed 2014-02-14
10-Q	2013-09-30	Filed 2013-10-18
10-Q	2013-06-30	Filed 2013-07-19
10-Q	2013-03-31	Filed 2013-04-19
10-K	2012-12-31	Filed 2013-02-15
10-Q	2012-09-30	Filed 2012-10-19
10-Q	2012-06-30	Filed 2012-07-18
10-Q	2012-03-31	Filed 2012-04-20
10-K	2011-12-31	Filed 2012-02-17
10-Q	2011-09-30	Filed 2011-10-21
10-Q	2011-06-30	Filed 2011-07-22
10-Q	2011-03-31	Filed 2011-04-21
10-K	2010-12-31	Filed 2011-02-11
10-Q	2010-09-30	Filed 2010-10-22
10-Q	2010-06-30	Filed 2010-07-23
10-Q	2010-03-31	Filed 2010-04-23
10-K	2009-12-31	Filed 2010-02-12

8-K	2020-10-30
8-K	2020-10-23
8-K	2020-08-19
8-K	2020-07-24
8-K	2020-06-05
8-K	2020-05-18
8-K	2020-05-14
8-K	2020-05-01
8-K	2020-04-29
8-K	2020-04-10
8-K	2020-03-31
8-K	2020-03-10
8-K	2020-02-28
8-K	2020-01-31
8-K	2019-12-04
8-K	2019-10-17
8-K	2019-10-15
8-K	2019-10-07
8-K	2019-08-28
8-K	2019-08-08
8-K	2019-08-01
8-K	2019-07-26
8-K	2019-07-18
8-K	2019-07-08
8-K	2019-04-29
8-K	2019-04-29
8-K	2019-04-26
8-K	2019-04-18
8-K	2019-02-01
8-K	2018-10-29
8-K	2018-10-19
8-K	2018-10-19
8-K	2018-10-14
8-K	2018-10-02
8-K	2018-10-01
8-K	2018-09-12
8-K	2018-09-05
8-K	2018-08-23
8-K	2018-07-27
8-K	2018-07-20
8-K	2018-06-14
8-K	2018-05-30
8-K	2018-04-30
8-K	2018-04-27
8-K	2018-04-23
8-K	2018-04-23
8-K	2018-04-20
8-K	2018-02-16
8-K	2018-02-09
8-K	2018-01-30
8-K	2018-01-26

EX-10.1	exhibit10103312021.htm
EX-10.2	exhibit10203312021.htm
EX-10.3	exhibit10303312021.htm
EX-10.6	exhibit10603312021.htm
EX-10.7	exhibit10703312021.htm
EX-10.8	exhibit10803312021.htm
EX-10.9	exhibit10903312021.htm
EX-31.1	exhibit31-103312021.htm
EX-31.2	exhibit31-203312021.htm
EX-32.1	exhibit32-103312021.htm
EX-32.2	exhibit32-203312021.htm
EX-95	exhibit9503312021.htm

HON 10Q Quarterly Report

Honeywell Earnings 2021-03-31