Honeywell
Annual Report 2020

Plain-text annual report

2 0 2 0 A N N U A L R E P O R T 2020 SHAREOWNERS LETTER As the early weeks of 2020 unfolded, it quickly became clear that we were going to face challenges unlike any the company had encountered in our history – and hopefully, never will again. COVID-19 spread from nation to nation, key end markets faltered, and we had to quickly adjust our cost base to maintain our footing. I frequently say to my team that while easy economic conditions are far more fun than what we had to go through in 2020, it’s the toughest conditions that test us the most and enable us to grow stronger as leaders. In the face of the pandemic – one of the most disruptive events ever to affect our business – I could not be prouder of Honeywell’s team and how we responded to extremely difficult circumstances. Honeywell has earned a reputation for its ability to deliver in all economic cycles. We proved it during the Great Recession, and we proved it time and again throughout multiple downturns and upsets in our markets. Last year, however, we demonstrated more than the ability to move quickly to control costs under deteriorating conditions. We also pivoted rapidly to bring solutions forward that the world needed. It was a very pleasant and gratifying surprise to see how quickly Honeywell’s innovators brought forward new solutions that were desperately needed to fight the battle with COVID-19. Whether we were expanding our personal protective equipment (PPE) manufacturing capacity or introducing innovative new products to clean aircraft and support vaccine distribution … whether we were developing technologies to make buildings healthier for owners and tenants or installing remote operations solutions to allow our customers to keep their industrial facilities running safely … we stepped up when the world needed us most. While 2020 dealt us severe challenges, we entered 2021 well-positioned for recovery, with a wide portfolio of highly desirable offerings. In addition, we continued to drive what we call the three transformations: (cid:129) (cid:129) (cid:129) Honeywell Connected Enterprise is digitally transforming the way our customers work through Honeywell Forge, an enterprise performance management Software-as-a-Service (SaaS) offering. Honeywell Forge addresses the customer challenges of siloed data, enterprise complexity, and manual controls, enabling operations that get better over time. In a matter of days, Honeywell Forge delivers value to customers using their existing systems. Our recently announced partnerships with SAP and Microsoft will further accelerate our software-industrial leadership. Honeywell Digital is an ongoing process to run our businesses and support functions more effectively with standardized data sets, a robust IT infrastructure, and stronger governance. As a result, our business leaders can access better information to support our customers more effectively. Integrated Supply Chain Transformation represents an end-to-end modernization of our supply chain that makes our manufacturing operations and distribution simpler and more responsive to customer needs and changes in our markets. SHAREOWNERS 2020 was a rollercoaster ride for our share price. After dropping to just over $100 per share in late March, we rallied to close the year at over $212 per share. In late August, we had another surprise – the announcement of our return to the Dow Jones Industrial Average after a 12-year absence. Dow Jones’ decision reflects how important we are to the economy and confidence in our strategic direction and ability to perform over time. Whether you look at the short- or long-term, our investors have benefited from consistently outstanding returns measured against both peers and key indices. (See charts on the next page.) Outperformance Versus Multiple Benchmarks: 1-, 3-, 5-, and 10-Year Time Periods Multi-Industry Peer Median Compensation Peer Median XLI S&P 500 Honeywell 140% 423% 54% 49% 65% 51% 103% 85% 267% 212% 161% 128% 6% 5% 11% 23% 18% 24% 4% 2% 1-Year 3-Year 5-Year 10-Year Annual Total Shareowner Return Peformance Versus Key Benchmarks 24% 12% 15% 10% 13% 11% 6% 3% 6% 5% 4% 4% 3% 12% 8% 5% 5% 5% 1% -2% 2010 2011 2012 2013 2014 2015 -5% 2016 -4% 2017 2018 2019 2020 vs. XLI vs. S&P 500 Seed planting has always been an important key to our success. Even with the challenging 2020 environment, we never stopped investing for growth and returning capital to our shareowners. (See chart below.) Honeywell Capital Deployment 2015-2020 $9.9B $5.2 $1.7 $1.1 $1.9 $7.7B $6.1B $7.6B $2.6 $1.9 $1.1 $2.1 $0.1 $2.1 $1.0 $2.9 $0.5 $2.3 $0.8 $4.0 $7.8B $0.1 ~$2.5 $0.8 $4.4 $7.5B $0.3 * $2.6 $0.9 $3.7 2015 2016 2017 2018 2019 2020 Share Repurchases Capital Expenditures Dividends M&A *Announced $1.3 billion acquisition of Sparta Systems We made several strategic acquisitions near year-end, highlighted by the announced acquisition of Sparta Systems in December. Sparta brings to our portfolio an artificial intelligence-enabled enterprise quality management software offering, including a next-generation SaaS platform. Sparta also enhances our strong position in life sciences. Sparta has a high degree of synergy with our Process Solutions and Honeywell Connected Enterprise businesses, and we are excited about the value we will provide to customers. In addition to aggressive capital deployment, we also invested internally in high-return projects specifically focused on our expansion in PPE, which enabled us to establish a beachhead in health care. (See chart to the right.) The average internal rate of return for our 2020 growth capital projects, or those projects designed to introduce new products or to increase our production capacity, is greater than 50%. Our growth investments will continue to pay dividends for many years to come as we expand our presence in the health care and life sciences verticals. Capital Expenditures $839M $906M ~$200M Incremental Growth Capex 2019 2020 PANDEMIC RESPONSE Few, if any, companies in the world responded to the pandemic as comprehensively as Honeywell did across our portfolio: (cid:129) In a matter of weeks rather than months or years, we expanded respirator manufacturing capacity in the U.S., United Arab Emirates, India, U.K., and China to help front-line medical workers battle the virus. We also expanded production capacity for sensors, goggles, and shields. (cid:129) We rapidly launched a series of “healthy” solutions for a variety of industries that will help the world return to work, life, travel, and play. We introduced innovative offerings to clean aircraft cabins, conduct temperature screening, promote healthy buildings, and enable remote operations. (cid:129) We anticipated correctly that the development of COVID-19 vaccines would lead to a very high demand for glass vials, compounding the effects of an ongoing glass shortage. In response, we developed a packaging alternative called Aclar Edge™, which offers an alternative to glass that is more durable, lighter, and less susceptible to damage. (cid:129) We formed partnerships to apply our manufacturing operations, logistics, and software expertise to support and optimize mass vaccination events in Charlotte, and we are making those solutions available to other localities. (cid:129) We donated more than 2 million masks to frontline workers and homeless shelters around the world. (cid:129) We shifted a number of chemical manufacturing lines to produce hand sanitizer – and then we donated the output. COMMUNITIES Even while we helped fight the pandemic, we also stepped up to support our communities. In Charlotte, our headquarters city, we launched a flagship small business fund to support center city businesses that needed to pivot to other business models or touchless service to keep thriving. To date, the fund has disbursed $3.6 million to 116 businesses – the vast majority of which are owned by minorities, women, or veterans. In addition to COVID-19 relief, we supported a wide range of partners who reflect our values and our commitment to inclusion and diversity. We entered a five-year corporate sponsorship with the National Museum of African American History and Culture in Washington, D.C. We began sponsoring the Carolina Youth Coalition, a nonprofit organization that prepares high-achieving, under-resourced high school students to get into, excel at, and graduate from college. We also expanded recruitment efforts at diversity conferences and historically Black colleges and universities. CUSTOMERS AND EMPLOYEES In the early days of COVID-19, it proved very difficult to operate our manufacturing centers, even though many of our business segments are essential. We implemented a global, rigorous, daily focus on taking care of all manufacturing employees by enforcing social distancing, implementing widespread testing, providing PPE and sanitizer stations, and adopting numerous other procedures to minimize the probability of infection. We monitored the various regulations being put into place in the more than 70 countries in which we operate. Responding to those regulations and resulting shutdowns required daily acts of heroism. Our operational excellence – coupled with the outstanding dedication of our employees – enabled us to limit site closures to approximately one day on average across our global site network. Our office-based employees also pivoted quickly as they transitioned to remote work. We shored up our IT systems in a little over a week to enable nearly 50,000 office workers to work from home without skipping a beat. To help colleagues who were facing personal challenges, we established a $10 million employee relief fund. We also assisted employees during this difficult year by: (cid:129) (cid:129) Covering employees’ COVID-related health care expenses; Supplementing employees’ health care with private care in certain regions; (cid:129) (cid:129) (cid:129) (cid:129) Airlifting infected employees from areas where the local health care infrastructure wasn’t adequate; Suspending our accrual policy to provide earlier access to sick leave in the U.S.; Providing substantial financial assistance to families of employees who succumbed to the disease; and Issuing a special “thank you” payment to every direct manufacturing employee who was with us more than six months in 2020. We launched a comprehensive online training program for all middle managers. We also introduced mandatory unconscious bias awareness training for all employees. Reflecting our emphasis on inclusion and diversity, we produced global candidate slates that were 16% more diverse than the previous year. Across our management ranks, we increased diversity hiring by 11%. Two years ago, Honeywell launched the Women’s Advancement Program to pair rising female executives with career champions while providing them access to professional development and networking opportunities. We have now developed a similar program for Black and Hispanic employees and other diverse groups. We also created several new employee diversity networks with sponsorship by three company officers, including me. Our approach to diversity is end to end – from recruiting to enhancing the employee experience to ensuring that all employees are respected in the workplace and have every opportunity to contribute to their full potential. CLOSING THOUGHTS As we move into 2021, I want to thank two long-serving Board members who will retire in May, Lord Clive R. Hollick and Linnet F. Deily. Clive served on the Honeywell Board for nearly 18 years, with much of that time on the Management Development and Compensation Committee. He brought to the Board invaluable expertise in areas such as international markets, public policy, and trends in the U.K. and European markets; marketing and branding; and mergers and acquisitions, including in a private-equity context. He served for more than three decades as Chief Executive Officer of London-based United Business Media and its predecessor companies. Linnet served on the Honeywell Board for 15 years after serving as Deputy U.S. Trade Representative and U.S. Ambassador to the World Trade Organization and holding senior positions at The Charles Schwab Corp. and First Interstate Bank of Texas. She chaired the Corporate Governance and Responsibility Committee for 10 years and served on other committees, bringing exceptional insights into the international business environment, capital markets, corporate finance and controls, government and public policy, and advanced technology platforms. I also wanted to acknowledge Honeywell’s unique role in shaping a future that is safer and more sustainable for our children and grandchildren. We recently announced our commitment to become carbon neutral in our operations and facilities by 2035. We will achieve this through a combination of further investment in energy savings projects, conversion to renewable energy sources, completion of capital improvement projects at our sites and in our fleet of the company vehicles, and utilization of credible carbon credits. These initiatives represent a continuation of company’s sustainability efforts since 2004, which have already driven a more than 90% reduction in the greenhouse gas intensity of our operations and facilities. It is an understatement to say the year 2020 was like no other. The pandemic was a public health crisis, an economic crisis, and, for many people, a personal crisis. We extend our sympathy to all who were affected by COVID-19. Despite Honeywell’s highly challenging end markets, we acted quickly and decisively to adjust our cost structure to meet the new market realities, and we pivoted to new offerings in response to what the world needed. The people of Honeywell displayed courage and agility to successfully meet the challenges of the pandemic and to deliver for our employees, customers, communities, and shareowners. While recognizing that difficulties remain, we are optimistic and energized by what we will accomplish in 2021 and beyond. Thank you for your continued trust in Honeywell. Sincerely, DARIUS ADAMCZYK Chairman and Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8974 Honeywell International Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 300 South Tryon Street Charlotte, North Carolina (Address of principal executive offices) Registrant’s telephone number, including area code (704) 627-6200 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, par value $1 per share* 1.300% Senior Notes due 2023 0.000% Senior Notes due 2024 2.250% Senior Notes due 2028 0.750% Senior Notes due 2032 Trading Symbols HON HON 23A HON 24A HON 28A HON 32 22-2640650 (I.R.S. Employer Identification No.) 28202 (Zip Code) Name of each exchange on which registered The New York Stock Exchange The New York Stock Exchange The New York Stock Exchange The New York Stock Exchange The New York Stock Exchange * The common stock is also listed on the London Stock Exchange. Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ‘ No È 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 È No ‘ 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 È No ‘ 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 È 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 provided pursuant to section 13(a) of the Exchange Act. ‘ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes È No ‘ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È The aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $97.0 billion at June 30, 2020. There were 695,501,159 shares of Common Stock outstanding at January 29, 2021. Documents Incorporated by Reference Part III: Proxy Statement for Annual Meeting of Shareowners to be held May 21, 2021. TABLE OF CONTENTS ORGANIZATION OF OUR ANNUAL REPORT ON FORM 10-K The order and presentation of content in our Annual Report on Form 10-K (Form 10-K) differs from the traditional U.S. Securities and Exchange Commission (SEC) Form 10-K format. We believe that our format improves readability and better presents how we organize and manage our business. See Form 10-K Cross-Reference Index for a cross-reference to the traditional SEC Form 10-K format. Cautionary Statement About Forward-Looking Statements Business Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Risk Factors Quantitative and Qualitative Disclosures About Market Risks Liquidity and Capital Resources Critical Accounting Estimates Other Matters Information About our Executive Officers Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Management’s Report on Internal Control Over Financial Reporting Other Information Directors, and Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions and Director Independence Principal Accounting Fees and Services Exhibits and Financial Statement Schedules Form 10-K Summary Signatures Form 10-K Cross-Reference Index Page 1 2 8 9 24 32 33 38 41 42 43 43 43 43 44 46 114 114 114 114 115 115 115 117 117 117 117 123 125 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 under the section titled 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 Form 10-K, including, in particular, the factors discussed within the section titled Risk Factors. Such factors may be revised or supplemented in subsequent reports on Forms 10-Q and 8-K. 1 Honeywell International, Inc. BUSINESS Honeywell International Inc. (Honeywell or the Company) invents and commercializes technologies that address some of the world’s most critical challenges around energy, safety, security, air travel, productivity and global urbanization. As a diversified technology and manufacturing company, we are uniquely positioned to blend physical products with software to serve customers worldwide with aerospace products and services, energy efficient products and solutions for businesses, specialty chemicals, electronic and advanced materials, process technology for refining and petrochemicals, and productivity, sensing, safety and security technologies for buildings and industries. Our products and solutions enable a safer, more comfortable and more productive world, enhancing the quality of life of people around the globe. The Honeywell brand dates back to 1906, and the Company was incorporated in Delaware in 1985. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, are available free of charge on our website (honeywell.com) under the heading Investors (see SEC Filings) immediately after they are filed with, or furnished to, the SEC. In addition, in this Form 10-K, the Company incorporates by reference certain information from its definitive Proxy Statement for the 2021 Annual Meeting of Stockholders, which we expect to file with the SEC on or about April 9, 2021 (the Proxy Statement), and which will also be available free of charge on our website. MAJOR BUSINESSES We globally manage our business operations through four segments: Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. Financial information related to our segments is included in Note 23 Segment Financial Data of Notes to Consolidated Financial Statements. The major including Honeywell Forge solutions supported by Honeywell Connected Enterprise, products and services, customers, uses and key competitors of each of our segments are: AEROSPACE Aerospace is a leading 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 Honeywell Building Technologies is a leading 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, from incoming security threats. improve building performance and even protect Honeywell International, Inc. 2 PERFORMANCE MATERIALS AND TECHNOLOGIES leader Performance Materials and Technologies is a global 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, 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. fuel, petrochemicals and renewable fuels for jet SAFETY AND PRODUCTIVITY SOLUTIONS Safety and Productivity Solutions is a leading global provider of products and software that improve productivity, workplace safety and asset performance to customers around the globe. Safety products include personal protection equipment (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. COMPETITION We are subject to competition in substantially all product and service areas. Some of our key competitors include but are not limited to: (cid:129) (cid:129) (cid:129) (cid:129) Aerospace: Garmin, Raytheon Technologies, Safran and Thales Honeywell Building Technologies: Carrier Global, Johnson Controls, Schneider Electric and Siemens Performance Materials and Technologies: ABB, Albemarle, Arkema, BASF, Dupont, Emerson Electric, Exterran, Grace and Yokogawa Safety and Productivity Solutions: 3M, Kion Group, MSA Safety Incorporated, TE Connectivity and Zebra Technologies Our businesses compete on a variety of factors such as performance, applied technology, product innovation, product recognition, quality, reliability, customer service, delivery, and price. Brand identity, service to customers and quality are important competitive factors for our products and services. Our products face considerable price competition. While our competitive position varies among our products and services, we are a significant competitor in each of our major product and service classes. 3 Honeywell International, Inc. EXECUTIVE SUMMARY Despite a challenging 2020, we continued to deliver on our financial commitments and create long-term shareowner value. Although sales declined 11% to $32.6 billion, our differentiated solutions delivered double-digit sales growth in the defense and space, warehouse automation, PPE and recurring connected software businesses. We adapted to apply Honeywell’s capabilities toward addressing the COVID-19 challenges of our customers around the world. Our execution through the downturn demonstrated our ability to move quickly and decisively to reduce fixed costs, ensure liquidity, invest in growth, and position ourselves for recovery, while at the same time, remaining focused on our three transformation initiatives – Honeywell Connected Enterprise, Honeywell Digital, and Integrated Supply Chain. We maintained our commitment to create long-term shareowner value and, despite the downturn, we deployed $7.5 billion to capital expenditures, dividends, share repurchases and mergers and acquisitions, which was approximately $1.3 billion in excess of our operating cash flow for the year. Further, we improved our cash and short-term investments by $4.8 billion, which provided stability as well as opportunity for investment during challenging times. As we look forward, we intend to continue deploying capital to high-return opportunities, including software and services with recurring revenue streams, positioning our business for future growth. Orders for our warehouse automation, PPE, and healthy building solutions remain strong, and we carry a robust backlog of $26.4 billion as of the art December 31, 2020. We are a leading software-industrial company committed to introducing state of technology solutions to improve efficiency, productivity and safety in high growth businesses in broad-based, attractive industrial end markets. BUSINESS OBJECTIVES Our businesses are focused on the following objectives: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) Driving profitable growth by delivering innovative products through research and development and technological excellence, and through continued enhancement of our footprint in high growth regions; Continuing to execute on our strategy to be a premier software-industrial company, including the ongoing expansion of Honeywell Forge connected solutions for aircraft, buildings, cybersecurity, plants, and workers and driving a recurring revenue model across the Company. Honeywell Forge provides Enterprise Performance Management Software-as-a-Service solutions to help drive operational excellence for our customers, collecting operational data from various assets and organizing data into an ecosystem where it can be useful; Expanding margins by optimizing the Company’s performance through the Integrated Supply Chain and Honeywell Digital transformation initiatives, commercial excellence, repositioning, and other manufacturing and operational process improvements; Executing disciplined portfolio management integration processes to deliver growth and shareholder value; Controlling corporate costs, including costs incurred for asbestos and environmental matters, and pension and other post-retirement benefits; and Increasing availability of capital through strong cash flow generation and conversion from effective working capital management and proactive management of debt to enable the Company to strategically deploy capital for acquisitions, dividends, share repurchases and capital expenditures. through rigorous merger and acquisition, divestiture, and BACKLOG Our backlog represents the estimated remaining value of work to be performed under firm contracts. Backlog is equal to our remaining performance obligations under the contracts that meet the guidance on revenue from contracts with customers as discussed in Note 3 Revenue Recognition and Contracts with Customers of Notes to Consolidated Financial Statements. Backlog was $26,376 million and $25,612 million at December 31, 2020 and 2019. We expect to recognize approximately 55% of our remaining performance obligations as revenue in 2021, and the remaining balance thereafter. Honeywell International, Inc. 4 U.S. GOVERNMENT SALES The Company, principally through our Aerospace segment, sells to the U.S. Government acting through its various departments and agencies and through prime contractors, including the U.S. Department of Defense (as both a prime contractor and subcontractor). We do not expect our overall operating results to be significantly affected by any proposed changes in 2021 federal defense spending due to the varied mix of the government programs which impact us (OEM production, engineering development programs, aftermarket spares and repairs and overhaul programs), as well as our diversified customer base. U.S. Government Sales 2020 2019 2018 Years Ended December 31, Sales to the U.S. Department of Defense Sales to other U.S. Government departments and agencies Total Sales to the U.S. Government $ $ 3,661 $ 3,491 $ 557 566 4,218 $ 4,057 $ 2,832 571 3,403 INTERNATIONAL OPERATIONS We engage in manufacturing, sales, service and research and development globally. U.S. exports and non-U.S. manufactured products are significant to our operations. U.S. exports represented 12% of our total sales in 2020, 15% in 2019 and 13% in 2018. Non-U.S. manufactured products and services, mainly in Europe and Asia, were 40% of our total sales in 2020, 40% in 2019 and 43% in 2018. Manufactured Products and Systems and Performance of Services Aerospace Year Ended December 31, 2020 Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions (% of Segment Sales) U.S. exports Non-U.S. manufactured products/services 22 % 15 % 2 % 65 % 13 % 58 % 2 % 37 % Information related to risks related to our foreign operations is included in the section titled Risk Factors under the caption “Macroeconomic and Industry Risks.” RAW MATERIALS The principal raw materials used in our operations are readily available. Although we occasionally experience disruption in raw materials supply, we experienced no significant problems in the purchase of key raw materials or commodities in 2020. We are not dependent on any one supplier for a material amount of our raw materials. Prices of certain key raw materials, tungsten salts, ethylene, aluminum, and molybdenum in Performance Materials and Technologies and nickel, steel, titanium and other metals in Aerospace, are expected to fluctuate. We offset raw material cost increases with formula-driven or long-term supply agreements, price increases and hedging activities where feasible. We do not presently anticipate that a shortage of raw materials will cause any material adverse impacts during 2021. including copper, fluorspar, PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS Our segments are not dependent upon any single patent or related group of patents, trademarks, or any licenses or distribution rights. In our judgment, our intellectual property rights are adequate for the conduct of our business. We believe that, in the aggregate, the rights under our patents, trademarks, licenses and distribution rights are generally important to our operations, but we do not consider any individual patent, trademark or any licensing or distribution rights related to a specific process or product to be of material importance in relation to our total business. 5 Honeywell International, Inc. REGULATIONS The Company’s operations are subject to various federal, state, local and foreign government regulations, including requirements regarding the protection of human health and the environment. Our policies, practices and procedures are designed to prevent unreasonable risk of environmental damage, and of resulting financial liability, in connection with our business. Some risk of environmental damage is, however, inherent in some of our operations and products, as it is with other companies engaged in similar businesses. We engage in the handling, manufacturing, use and disposal of many substances classified as hazardous by one or more regulatory agencies. Our policies, practices and procedures are designed to prevent unreasonable risk of environmental damage and personal injury, and to ensure that our handling, manufacture, use and disposal of these substances meet or exceed environmental and safety laws and regulations. It is possible that future knowledge or other developments, such as improved capability to detect substances in the environment or increasingly strict environmental laws and standards and enforcement policies, could bring into question our current or past handling, manufacture, use or disposal of these substances. Among other environmental requirements, we are subject to the Federal Superfund and similar state and foreign laws and regulations, under which we have been designated as a potentially responsible party that may be liable for cleanup costs associated with current and former operating sites and various hazardous waste sites, some of which are on the U.S. Environmental Protection Agency’s National Priority List. While there is a possibility that a responsible party might be unable to obtain appropriate contribution from other responsible parties, we do not anticipate having to bear significantly more than our proportional share in multi-party situations taken as a whole. We do not believe that Federal, State and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, or any existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material effect in the foreseeable future on the Company’s business and we will continue to monitor emerging developments in this area. Beyond our compliance requirements with environmental regulations, compliance with other government regulations has not had, and based on laws and regulations currently in effect, is not expected to have a material effect on the Company’s capital expenditures, earnings or competitive position. See section titled Risk Factors for additional information on government regulation that could impact our business. HUMAN CAPITAL MANAGEMENT We believe a commitment to and investment in human capital management enables better decision making, helps us build competitive advantage, and furthers our long-term success. As of December 31, 2020, we employed approximately 103,000 employees across 70 countries, 41,000 of whom are in the United States. Human capital management is the key driver of our performance culture, which enables our workforce to respond to the fast- changing needs of our customers. Our performance culture is defined by a set of Honeywell Behaviors (Have a Passion for Winning, Be a Zealot for Growth, Think Big … Then Make It Happen, Act with Urgency, Be Courageous, Become Your Best, Be Committed, and Build Exceptional Talent), which reflect the bold, entrepreneurial spirit of our employees while emphasizing our goal to operate with speed and precision. At their foundation is a commitment to Integrity and Ethics, Inclusion and Diversity, and Workplace Respect, fundamental values that underlie everything we do. Our commitment to these fundamental values and the Honeywell Behaviors starts at the top with a diverse Board of Directors and executive management team, who represent a broad spectrum of backgrounds and perspectives. We believe that the diversity of our current Board of Directors (four women, two Hispanics, and two African Americans) and the diversity of Honeywell’s executive leadership (more than half of the Company’s nine executive officers is diverse by ethnic background or gender) supports our evolving business strategy and is a testament to Honeywell’s ongoing commitment to hiring, developing, and retaining diverse talent. The Company’s commitment to Inclusion and Diversity enables better decision-making, helps build competitive advantages, and furthers long-term success. In 2020, the Company established a Global Inclusion and Diversity Steering Committee co-sponsored by our Chairman and CEO, Senior Vice President and General Counsel, and Senior Vice President and Human Resources and fortified our inclusion and diversity governance structure by embedding Inclusion and Diversity Councils in each of our business groups. The re-designed governance structure provides a scalable model that supports our six affinity group employee networks for women, Black, Hispanic, veteran, LGBTQ, and disabled employees and facilitates the introduction of new networks to reflect the diverse characteristics of our workforce. These networks Honeywell International, Inc. 6 are designed to provide training and development opportunities and expand internal networks for promotional opportunities. In addition, our people managers are expected to model behaviors that promote a culture that is open and inclusive for all employees. We help managers develop this skill as they do any other leadership skill, though training programs, interactive learning and real time events, including the hiring and talent review processes. Our Leadership Edge program provides training in core management skills to more than 13,000 leaders across the organization. Training programs are available to all employees through our internal learning and development platform, which assigns curriculum tailored to an employee’s job responsibilities. Employees can also access additional trainings on-demand to continue to enhance their skills. This year, we also deployed a mandatory unconscious bias training program to our global workforce as a supplement to their other learning opportunities. Our internal talent acquisition and management platform is a key component to recruiting, hiring, and developing top-performing talent. Our hiring practices consider a diverse slate of candidates and our hiring managers are provided training and toolkits to reinforce their role in bringing diverse talent into the Company. Further, we partner with top academic institutions and external professional organizations to enhance the diversity of our workforce to attract and retain top talent. Our talent review process requires our people managers to have quarterly career discussions with each member of their teams to discuss the best opportunity for growth and development, which enhances our identification of candidates for internal promotion and succession planning. Finally, our Code of Business Conduct establishes the baseline requirements of our integrity and compliance program and promotes an environment where everyone is treated ethically and with respect. It outlines our pledge to recognize the dignity of each individual, respect each employee, provide compensation and benefits that are competitive, promote self-development through training, and value diversity of perspectives and ideas. All employees must complete Code of Business Conduct training and, where permitted by law, must also certify each year that they will comply with the Code. In 2020, we received certifications from 100% of officers and employees where permitted by law. Overall, we believe our culture, along with our internal tools and initiatives, enable us to effectively execute our human capital strategy. For discussion on the risks relating to our inability to attract and retain top-performing talent, please see section titled Risk Factors. 7 Honeywell International, Inc. SELECTED FINANCIAL DATA This selected financial data should be read in conjunction with the Company’s Consolidated Financial Statements and related Notes included elsewhere in this Annual Report as well as the section Management’s Discussion and Analysis of Financial Condition and Results of Operations. Years Ended December 31, 2020 2019 2018(1)(2) 2017(1) 2016 (Dollars in millions, except per share amounts) Results of Operations Net sales $ 32,637 $ 36,709 $ 41,802 $ 40,534 $ 39,302 Net income attributable to Honeywell 4,779 6,143 6,765 1,545 4,812 Earnings Per Common Share Earnings from operations: Basic Assuming dilution Dividends per share Balance Sheet Data Property, plant and equipment—net Total assets Short-term debt Long-term debt Total debt Redeemable noncontrolling interest 6.79 6.72 3.63 5,570 64,586 6,042 16,342 22,384 7 8.52 8.41 3.36 5,325 58,679 4,892 11,110 16,002 7 9.10 8.98 3.06 5,296 57,773 6,458 9,756 16,214 7 2.03 2.00 2.74 5,926 59,470 5,309 12,573 17,882 5 6.30 6.21 2.45 5,793 54,566 3,593 12,182 15,775 3 Shareowners’ equity 17,790 18,706 18,358 16,665 18,883 (1) 2018 and 2017 Net Income attributable to Honeywell and Earnings Per Common Share were impacted by the U.S. Tax Cuts and Jobs Act. (2) The results of operations for the Transportation Systems and Homes and Global Distribution businesses are included in the Consolidated Statement of Operations through the effective dates of the respective spin-offs, which occurred in 2018. Honeywell International, Inc. 8 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in tables and graphs in millions) The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell or the Company) for the three years ended December 31, 2020. All references to Notes relate to Notes to Consolidated Financial Statements in the section titled Financial Statements and Supplementary Data. On October 1, 2018, we completed the tax-free spin-off to Honeywell shareowners of our Transportation Systems business, previously part of Aerospace, into a standalone publicly-traded company, Garrett Motion Inc. (Garrett). On October 29, 2018, we completed the tax-free spin-off to Honeywell shareowners of our Homes and Global Distribution business, previously part of Home and Building Technologies (renamed Honeywell Building Inc. Technologies following the spin-off), (Resideo). into a standalone publicly-traded company, Resideo Technologies, We removed the assets and liabilities associated with Garrett and Resideo from our Consolidated Balance Sheet as of the effective dates of the respective spin-offs. We included the results of operations for Garrett and Resideo in our Consolidated Statement of Operations through the effective dates of the respective spin-offs. Total sales attributable to these spin-offs were $6.6 billion for the year ended December 31, 2018. A detailed discussion of the prior year 2019 to 2018 year-over-year changes are not included herein and can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the 2019 Annual Report on Form 10-K filed February 14, 2020. COVID-19 UPDATE In December 2019, a novel strain of coronavirus (COVID-19) was identified in Asia. Over the next several months, COVID-19 quickly spread across the world. In March 2020, the World Health Organization declared COVID-19 a worldwide pandemic. As of December 31, 2020, the virus continues to spread and many countries are experiencing the availability and a resurgence in infection rates. Although vaccines have recently been made available, distribution of the vaccines continue to provide challenges. Governments took unprecedented actions to contain the spread of COVID-19, temporarily shutting down non-essential businesses, issuing stay at home or “shelter in place” orders and asking citizens to avoid all In certain situations, governments closed borders and issued mandatory quarantines. non-essential Companies were asked, and in many cases were required, to allow non-essential employees to work remotely. Consumer spending declined, global travel demand declined significantly, and the world entered a global recession. travel. These events impacted our business operations in multiple ways. In the first quarter of 2020, we quickly responded to the changing environment. In January 2020, we implemented policies in select countries within Asia to restrict travel and require employees to work from home for all roles that allow for remote work. In March 2020, we expanded this work from home policy to include our employees worldwide. We introduced appropriate safety and hygiene protocols to enable our manufacturing employees to operate safely through the pandemic. We actively monitored the changing government rules and regulations for each of our locations worldwide. We remain cautious as many factors remain unpredictable, including the increasing rate of COVID-19 infections. We continue to monitor COVID-19 infection rates globally and acknowledge the risk of new surges in COVID-19 infections. We prepared procedures for the phased return of our employees to office sites and trained our local site leaders in the appropriate safety and hygiene protocols. As of December 31, 2020, all of our manufacturing sites continue to operate and, outside of India, most of our employees in Asia have returned to the workplace in some capacity. We also returned small numbers of workers to select office sites within Europe and North America. In many countries, including the U.S., most of our non-manufacturing employees continue to work from home (for all roles that allow for remote work). 9 Honeywell International, Inc. The global recession resulted in a slow-down in demand for many of the products and services that we offer. The impact on each of our businesses is outlined below: (cid:129) (cid:129) (cid:129) (cid:129) Aerospace – The decline in global travel negatively impacted many of our customers, resulting in lower demand for our products from OEMs and negatively impacted demand for our commercial aftermarket businesses. As a result, this segment’s sales and profits declined for the year ended December 31, 2020, compared to the year ended December 31, 2019. Performance Materials and Technologies – Many of our customers operate in the oil and gas industry. The decline in global travel, coupled with excessive oil and gas supply, negatively impacted many of our customers and resulted in lower demand for our products. As a result, this segment’s sales and profits declined for the year ended December 31, 2020, compared to the year ended December 31, 2019. Honeywell Building Technologies – Our customers own or manage buildings in a variety of industries including commercial real estate, hospitality, government, healthcare, banking and education. The global recession impacted many of these industries, resulting in a reduction of discretionary spending. As a result, this segment’s sales and profits declined for the year ended December 31, 2020, compared to the year ended December 31, 2019. Safety and Productivity Solutions – The global pandemic created significant demand for our respiratory PPE and warehouse automation driving increases in this segment’s sales and profits for the year ended December 31, 2020, compared to the year ended December 31, 2019. As a result of the slowdown in demand for our products, we implemented several cost reduction programs across our enterprise. We canceled our 2020 merit increases and reduced executive and Board of Director compensation. We initiated reduced work schedules across the company and implemented permanent census reductions. We also took several steps to secure additional liquidity. In March 2020, we entered into a $6.0 billion Delayed Draw Term Loan Agreement. In May 2020, we completed a public Senior Notes offering, which provided $3.0 billion of available liquidity and permanently reduced the undrawn commitments under the Delayed Draw Term Loan Agreement by $3.0 billion. In June 2020, we drew on the remaining $3.0 billion of commitments under the Delayed In August 2020, we completed a public Senior Notes offering, which provided Draw Term Loan Agreement. $3.0 billion of available liquidity and was used to repay the outstanding principal amount of $3.0 billion under the Delayed Draw Term Loan Agreement. As of December 31, 2020, there are no outstanding borrowings or commitments remaining under the Delayed Draw Term Loan Agreement. Further, we held $15.2 billion of available cash and cash equivalents, including short-term investments. We continue to monitor and respond to the changing conditions created by the pandemic. Employee Health, Safety, and Economic Wellness We continue to monitor the COVID-19 situation and its impacts globally. We are prioritizing the health and safety of our employees. Out of an abundance of caution for the health of our employees and to support local government initiatives to stem the spread of the 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: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) Limiting visitor site access to business-essential purposes; Introducing screening checks at certain sites where permissible or mandated; Enabling employees to work from home wherever and whenever required or appropriate; Continuously updating travel guidance, according to latest developments; and Complying with all local health authority guidance or regulations and our own protocols, including requesting employees to comply with self-quarantine requirements whenever advisable. We have taken a number of measures to support our employees during these difficult times. We extended medical benefits globally to cover out-of-pocket costs associated with testing for coronavirus, and for those on our U.S. company medical plans, we are also covering treatment costs. In Mexico, we introduced a medical benefit for employees at lower compensation levels to ensure access to private medical treatment. In the U.S., we changed our sick leave plan for non-exempt employees to make more sick time available earlier in the year if it is needed. We established a $10 million company-funded relief fund targeting employees worldwide at lower compensation levels, especially those on reduced work hours who did not receive high levels of income replacement from unemployment or other government assistance. Honeywell International, Inc. 10 In addition to the measures to assist our employees, Honeywell contributed $2 million to establish a Small Business Innovation Fund in Charlotte to help our local economy. The fund helps storefront businesses with 50 or fewer employees make investments in new technologies and business models to adjust to the realities of operating in the COVID-19 environment. The fund prioritizes businesses owned by women, minorities and veterans. Our Commitment to Public Health In a partnership with the State of North Carolina and other local businesses, we announced a goal to deliver 1 million COVID-19 vaccines in North Carolina by July 4, 2021. In Phoenix, where our Aerospace business is headquartered, we will sponsor a week-long vaccination program in February 2021. In addition, Honeywell funded the provision of approximately 10 million meals and a month’s supply of hygiene kits to families in India suffering hardships due to the crisis. As 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. To date, Honeywell has donated more than 2 million masks to frontline workers across multiple regions. Our customers and communities are depending on us more than ever to deliver for them and we are committed to supporting 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 PPE products. We will bring these products to market as quickly as possible. We are committed to healthcare professionals, to ensure our PPE products are being placed quickly and cost-effectively in the hands of those most in need. first responders, distributors and other stakeholders in an effort We announced our new capacity in the U.S. to make N95 masks, with production lines added in Rhode Island and Arizona that will collectively produce 40 million masks each month to support health, safety, and response workers globally. In addition, we are expanding our non-U.S. capacity with a new mask manufacturing line in the UK that is expected to produce 4.5 million masks each month, and a new line in India that is expected to produce 2 million masks each month. Separately, we are collaborating with Mubadala Investment Company’s subsidiary, Strata Manufacturing, in the UAE to produce 30 million masks annually. We have communicated the following principles to our authorized distributor network: (cid:129) Our expectation that, at a minimum, all of our partners will comply with all applicable laws prohibiting price gouging and apply appropriate diligence to the greatest extent possible to understand how our products are being purchased so that they are placed quickly and cost-effectively in the hands of those most in need - including first responders and medical professionals. (cid:129) While we do not control the prices that third parties set, we expect our partners to fairly price PPE used in the COVID-19 response effort. (cid:129) If we find that one of our partners is not upholding the letter or spirit of these principles, we reserve the right not to fulfill that partner’s orders and terminate our relationship with that party. We are also investing in developing and bringing to market a wide array of new COVID-related products, including but not limited to Healthy Buildings solutions, remote operations offerings, automation technologies to help speed vaccine development, vaccine packaging solutions, an ultraviolet cleaning system for aircraft, innovative dual-layer face covers and safety packs. Plant Productivity and Safety In situations where our businesses were deemed essential, we worked with local officials to determine how to safely operate our manufacturing facilities. We successfully operated these manufacturing facilities with minimal disruption in our productivity. In the second quarter of 2020, we repurposed certain manufacturing facilities to produce PPE that was in short supply around the world. As of December 31, 2020, more than 95% of our manufacturing sites were operating at normal production levels. 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 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. 11 Honeywell International, Inc. Customers and Suppliers Current global economic conditions due to COVID-19 have adversely affected and may continue to adversely affect our customers’ and suppliers’ ability to operate or obtain financing, particularly in our airline, oil and 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. We continue to actively monitor both supplier and customer financial health and take measures to manage our supply chain disruptions and limit our exposure. See section titled Risk Factors for discussion of risks associated to the COVID-19 pandemic. Honeywell International, Inc. 12 RESULTS OF OPERATIONS Consolidated Financial Results $41,802 $36,709 $32,637 $29,046 $24,339 $22,169 $4,772 $5,519 $6,051 $4,779 $6,143 $6,765 Net Sales Cost of Products and Services Sold Selling, General and Administrative Expenses Net Income Attributable to Honeywell 2020 2019 2018 Net Sales by Segment $32,637 $6,481 $9,423 $5,189 $11,544 2020 $36,709 $6,104 $10,834 $5,717 $14,054 2019 Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions $41,802 $6,337 $10,674 $9,298 $15,493 2018 13 Honeywell International, Inc. Net Sales Attributable to Spun-Off Entities $32,637 $32,637 $36,709 $41,802 $3,928 $2,622 $36,709 $35,252 2020 2019 2018 Honeywell Continuing Transportation Systems (previously part of Aerospace) Homes and Global Distribution (previously part of Honeywell Building Technologies) Segment Profit by Segment $6,665 $907 $1,851 $1,099 $2,904 $(96) 2020 $7,739 $790 $2,433 $1,165 $3,607 $(256) 2019 $8,190 $1,032 $2,328 $1,608 $3,503 $(281) 2018 Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions Corporate Honeywell International, Inc. 14 CONSOLIDATED OPERATING RESULTS Net Sales $32,637 $36,709 $41,802 2020 2019 2018 Net Sales The change in net sales was attributable to the following: Volume Price Foreign Currency Translation Acquisitions/Divestitures 2020 compared with 2019 2020 Versus 2019 2019 Versus 2018 (12)% 1 % — % — % (11)% 3 % 2 % (1)% (16)% (12)% 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 in 2020 was driven by: (cid:129) (cid:129) Lower sales across our businesses due to the impact of the global recession attributable to COVID-19 and volatility in the oil and gas industry, Partially offset by strength in respiratory PPE products, warehouse automation projects, and defense and space. 15 Honeywell International, Inc. Cost of Products and Services Sold $22,169 $24,339 $29,046 2020 2019 2018 Cost of Products and Services Sold 2020 compared with 2019 Cost of products and services sold decreased in 2020 primarily due to the following: (cid:129) (cid:129) Lower direct and indirect material costs by approximately $1,130 million and $310 million, Lower labor costs by approximately $800 million, driven by lower sales volumes and other cost actions to improve productivity. Gross Margin $10,468 32.1% $12,370 33.7% $12,756 30.5% 2020 2019 2018 Gross Margin Gross Margin as a percentage of Net Sales 2020 compared with 2019 Gross margin percentage decreased in 2020 primarily due to the following: (cid:129) (cid:129) Lower gross margin in the Performance Materials and Technologies, Aerospace, and Safety and Productivity Solutions segments, Partially offset by higher Honeywell Building Technologies gross margin. Honeywell International, Inc. 16 Selling, General and Administrative Expenses $4,772 14.6% $5,519 15.0% $6,051 14.5% 2020 2019 2018 Selling, general and administrative expenses Selling, general and administrative expenses as a percentage of Net sales 2020 compared with 2019 Selling, general and administrative expenses decreased due to higher productivity, including lower costs resulting from repositioning actions. Other (Income) Expense Other (income) expense 2020 compared with 2019 Other (income) expense changed due to the following: 2020 2019 2018 $ (675) $ (1,065) $ (1,149) (cid:129) (cid:129) (cid:129) (cid:129) Non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, Lower interest income, and Lower foreign exchange income, Partially offset by higher pension income, higher equity income of affiliated companies and higher other postretirement income. 17 Honeywell International, Inc. Tax Expense 2020 compared with 2019 $1,147 19.1% $1,329 17.6% $659 8.8% 2020 2019 2018 Tax Expense Effective Tax Rate The effective tax rate for 2020 was lower than the U.S. federal statutory rate of 21% primarily due to the favorable resolution of a foreign tax matter tax impact of restructuring, tax law changes in India, and the resolution of certain U.S. tax matters offset by accrued withholding taxes related to unremitted foreign earnings and non-cash charges related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax benefit. related to the previously completed spin-off transactions, The effective tax rate for 2019 was lower than the U.S. federal statutory rate of 21% primarily resulting from the impacts of revised guidance related to U.S. Tax Cuts and Jobs Act and internal restructuring initiatives that resulted in a $281 million reduction of accrued withholding taxes related to unremitted foreign earnings. For further discussion of changes in the effective tax rate, see Note 5 Income Taxes of Notes to Consolidated Financial Statements. Net Income Attributable to Honeywell $6,143 $8.41 $6,765 $8.98 $4,779 $6.72 2020 2019 2018 Net income attributable to Honeywell Earnings per share of common stock–assuming dilution 2020 compared with 2019 Earnings per share of common stock–assuming dilution decreased due to the following: (cid:129) (cid:129) (cid:129) (cid:129) Lower segment profit due to the impact of the global recession attributable to COVID-19 and volatility in the oil and gas industry, Non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, and Lower interest income, lower foreign exchange income, and higher repositioning costs, Partially offset by lower income taxes, higher pension income, and the favorable impact of lower outstanding share count resulting from the Company’s stock repurchases. Honeywell International, Inc. 18 REVIEW OF BUSINESS SEGMENTS We globally manage our business operations through four segments: Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. AEROSPACE $11,544 $5,826 $3,786 $1,932 2020 NET SALES $14,054 $5,326 $5,731 $2,997 2019 $15,493 $2,622 $4,665 $5,373 $2,833 2018 Commercial Aviation Original Equipment Commercial Aviation Aftermarket Defense and Space Transportation Systems (Spun-off Entity) 2020 2019 Change 2020 vs. 2019 Net sales $ 11,544 $ 14,054 (18)% $ Cost of products and services sold 7,813 9,398 Selling, general and administrative and other expenses Segment profit 827 $ 2,904 $ 1,049 3,607 (19)% $ 2018 15,493 10,837 1,153 3,503 Change 2019 vs. 2018 (9)% 3 % Factors Contributing to Year-Over-Year Change Organic Foreign currency translation Acquisitions, divestitures and other, net Total % Change 2020 vs. 2019 2019 vs. 2018 Net Sales Segment Profit Net Sales Segment Profit (18)% — % — % (18)% (20)% — % 1 % (19)% 9 % — % (18)% (9)% 21 % — % (18)% 3 % 19 Honeywell International, Inc. 2020 compared with 2019 Aerospace Net sales decreased due to lower sales volumes as the decline in global travel resulting form COVID-19 negatively impacted many of our customers, resulting in lower demand for our products from OEMs and reduced demand for our aftermarket products and services. (cid:129) (cid:129) (cid:129) Commercial Aviation Original Equipment sales decreased 36% (decreased 35% organic) due to lower demand from air transport and regional and business aviation OEMs. Commercial Aviation Aftermarket sales decreased 34% (decreased 34% organic) due to lower demand in air transport and regional and business aviation. Defense and Space sales increased 9% (increased 10% organic) driven by growth in U.S. and international defense. Aerospace segment profit decreased due to lower sales volume and lower sales of higher margin products and services, partially offset by favorable pricing. Cost of products and services sold decreased due to lower sales volumes. HONEYWELL BUILDING TECHNOLOGIES NET SALES $5,189 $2,194 $2,995 $5,717 $2,403 $3,314 $9,298 $3,928 $2,417 $2,953 2020 2019 2018 Products Building Solutions Homes and Global Distribution (Spun-off Entity) 2020 2019 Change 2020 vs. 2019 2018 Change 2019 vs. 2018 Net sales $ 5,189 $ Cost of products and services sold Selling, general and administrative and other expenses 3,067 1,023 Segment profit $ 1,099 $ 5,717 3,444 1,108 1,165 (9)% $ (6)% $ 9,298 6,066 1,624 1,608 (39)% (28)% Honeywell International, Inc. 20 Factors Contributing to Year-Over-Year Change Organic Foreign currency translation Acquisitions, divestitures and other, net Total % Change 2020 compared with 2019 2020 vs. 2019 2019 vs. 2018 Net Sales Segment Profit Net Sales Segment Profit (9)% — % — % (9)% (5)% (1)% — % (6)% 5 % (2)% (42)% (39)% 8 % (2)% (34)% (28)% Honeywell Building Technologies Net sales decreased due to lower organic sales. Our customers own or manage buildings in a variety of industries including commercial real estate, hospitality, airports and other government buildings, healthcare and education. The global recession resulting from the COVID-19 pandemic impacted many of these industries, resulting in a reduction of discretionary spending and demand for our products and services. (cid:129) (cid:129) Sales in Products decreased 10% (decreased 10% organic) primarily due to lower sales volumes. Sales in Building Solutions decreased 9% (decreased 8% organic) primarily due to lower sales volumes and the unfavorable impact of foreign currency translation. Honeywell Building Technologies segment profit decreased primarily due to lower sales volumes and the unfavorable impact of foreign currency translation, partially offset by favorable pricing. Cost of products and services sold decreased due to lower sales volumes. PERFORMANCE MATERIALS AND TECHNOLOGIES $9,423 $2,656 $4,590 $2,177 2020 NET SALES $10,834 $2,798 $10,674 $2,848 $5,146 $4,981 $2,890 2019 $2,845 2018 UOP Process Solutions Advanced Materials 21 Honeywell International, Inc. 2020 2019 Change 2020 vs. 2019 2018 Change 2019 vs. 2018 Net sales $ 9,423 $ 10,834 (13)% $ 10,674 1 % Cost of products and services sold 6,331 6,989 Selling, general and administrative and other expenses Segment profit 1,241 $ 1,851 $ 1,412 2,433 (24)% $ 6,948 1,398 2,328 5 % Factors Contributing to Year-Over-Year Change Organic Foreign currency translation Acquisitions, divestitures and other, net Total % Change 2020 compared with 2019 2020 vs. 2019 2019 vs. 2018 Net Sales Segment Profit Net Sales Segment Profit (13)% — % — % (13)% (24)% — % — % (24)% 4 % (3)% — % 1 % 6 % (1)% — % 5 % Performance Materials and Technologies Net sales decreased primarily due to lower sales volumes. Many of our customers operate in the oil and gas industry. The decline in global travel, coupled with excessive oil and gas supply, negatively impacted many of our customers, resulting in lower demand for our products and services. (cid:129) (cid:129) (cid:129) UOP sales decreased 25% (decreased 25% organic) driven primarily by decreases in catalyst volumes, licensing, and engineering sales volumes. Process Solutions sales decreased 11% (decreased 10% organic) primarily due to lower sales volumes in products businesses, automation projects and migration services. Advanced Materials sales decreased 5% (decreased 6% organic) driven primarily by decreased sales volumes in fluorine products due to lower demand in automotive refrigerants, partially offset by increased sales volumes in specialty products. Performance Materials and Technologies segment profit decreased primarily due to operating leverage on lower sales volumes and lower sales of higher margin products and services, partially offset by other productivity actions. Cost of products and services sold decreased primarily due to lower sales volumes. Honeywell International, Inc. 22 SAFETY AND PRODUCTIVITY SOLUTIONS NET SALES $6,481 $793 $2,018 $1,256 $2,414 2020 $6,104 $848 $1,771 $1,270 $2,215 2019 $6,337 $857 $1,662 $1,540 $2,278 2018 Safety and Retail Productivity Solutions and Services Warehouse and Workflow Solutions Sensing & Internet-of-Things (IoT) 2020 2019 Change 2020 vs. 2019 2018 Change 2019 vs. 2018 Net sales $ 6,481 $ Cost of products and services sold Selling, general and administrative and other expenses 4,532 1,042 Segment profit $ 907 $ 6,104 4,158 1,156 790 6 % $ 15 % $ 6,337 4,205 1,100 1,032 (4)% (23)% Factors Contributing to Year-Over-Year Change Organic Foreign currency translation Acquisitions, divestitures and other, net Total % Change 2020 vs. 2019 2019 vs. 2018 Net Sales Segment Profit Net Sales Segment Profit 6 % — % — % 6 % 16 % (1)% — % 15 % (4)% (2)% 2 % (4)% (23)% (2)% 2 % (23)% 23 Honeywell International, Inc. 2020 compared with 2019 Safety and Productivity Solutions Net sales increased primarily due to higher organic sales. The global pandemic has created significant increased demand for our respiratory PPE and additional demand for online shopping services, bolstering demand for our warehouse automation services. (cid:129) (cid:129) (cid:129) (cid:129) Sales in Safety and Retail increased 9% (increased 9% organic) primarily due to a significant increase in order volume for respiratory PPE due to the global pandemic, partially offset by lower demand for gas sensing and detection equipment. Sales in Productivity Solutions and Services decreased 1% (flat organic) due to the unfavorable impact of foreign currency translation. Sales in Warehouse and Workflow Solutions increased 14% (increased 14% organic) primarily due to strong demand for our warehouse automation services. Sales in Sensing & IoT decreased 6% (decreased 6% organic) due to lower organic sales volumes. Safety and Productivity Solutions segment profit increased as a result of higher productivity, higher sales volumes, and favorable pricing, partially offset by higher sales of lower margin products and the unfavorable impact of foreign currency translation. Cost of products and services sold increased primarily due to higher organic sales volumes, partially offset by higher productivity. REPOSITIONING CHARGES See Note 4 Repositioning and Other Charges of Notes to Consolidated Financial Statements for a discussion of our repositioning actions and related charges incurred in 2020, 2019 and 2018. Cash spending related to our repositioning actions was $564 million, $249 million and $285 million in 2020, 2019 and 2018, and was funded through operating cash flows. RISK FACTORS Our business, operating results, cash flows and financial condition are subject to the material risks and uncertainties set forth below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. MACROECONOMIC AND INDUSTRY RISKS Each of our businesses is subject to unique industry and economic conditions that may adversely affect the markets and operating conditions of our customers, which in turn can affect demand for our products and services and our results of operations. (cid:129) (cid:129) Aerospace—Our Aerospace business is impacted by customer buying patterns of aftermarket parts, supplier stability, factory transitions and global supply chain capacity constraints that may lead to shortages of crucial components. Operating results may be adversely affected by downturns in the global demand for air travel, which may impact new aircraft production or result in the delay or cancellation of new aircraft orders, delays in launch schedules for new aircraft, the retirement of aircraft and reductions in global flying hours, which impacts air transport and regional, business and general aviation aircraft utilization rates. Operating results may also be adversely affected by any decrease in air travel demand due to regional restrictions or suspension of service for public health, safety, or environmental events, such as the effects of the COVID-19 pandemic, which negatively impacted our operating results during 2020. Operating results could also be impacted by changes in overall trends related to end market demand for the product portfolio, as well as new entrants and non-traditional players entering the market. Operating results in our Defense and Space business unit may be affected by the mix of U.S. and foreign government appropriations for defense and space programs and by compliance risks. Results may also be impacted by the potential introduction of counterfeit parts into our global supply chain. Honeywell Building Technologies—Operating results may be adversely impacted by downturns in the level of global commercial construction activity (including retrofits and upgrades), lower capital spending and operating expenditures on building projects, decreased industrial plant expansion, changes in the competitive landscape including new market entrants and new technologies, and fluctuations in inventory levels in distribution channels. Honeywell International, Inc. 24 (cid:129) (cid:129) Performance Materials and Technologies—Operating results may be adversely impacted by downturns in capacity utilization for chemical, industrial, refining, petrochemical and semiconductor plants, our customers’ availability of capital for refinery construction and expansion, raw material demand and supply, product commoditization, continued illegal imports of hydrofluorocarbons into Europe and our ability to maximize our facilities’ production capacity and minimize downtime. Periods of increased volatility in oil and natural gas prices may result in less investment by our customers and therefore, lower demand for our products and services. Safety and Productivity Solutions—Operating results may be adversely impacted by reduced investments in process automation, safety monitoring, and plant capacity utilization initiatives, fluctuations in retail markets, a slowdown in demand for safety products, changes in the competitive landscape, including new market entrants and technology that may lead to product commoditization, and adverse industry economic conditions, all of which could result in lower market share, reduced selling prices and lower margins. The global COVID-19 coronavirus pandemic and related impacts adversely affect and may continue to adversely affect our business, financial condition, results of operations, liquidity, and cash flow. The global spread of coronavirus (COVID-19) creates significant volatility, uncertainty and economic disruption that impacts our business, operations and financial results and may continue to do so. The extent to which the COVID-19 pandemic will continue to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration, scope and severity of the pandemic, including the extent of the continued increase in cases across the United States in particular, as well as the timing and availability of effective medical treatments and vaccines; governmental, business and individual decisions and actions; the pace of vaccine deployment; the impact of the pandemic on economic activity; and the extent to which we or our employees, customers, suppliers, service providers or other business partners may be prevented from conducting normal business activities, including due to shutdowns or other restrictive measures that may be requested or mandated by governmental authorities. These factors could, among other things, continue to disrupt (i) the purchasing, contracting and payment behaviors of our customers and their end-users; (ii) our operations, including our manufacturing activities, the shipment of our products, and the performance of our suppliers and service providers; and (iii) our liquidity and cash flow. Risks arising from the COVID-19 pandemic impacting our business and that may continue to impact our business, financial condition, results of operations and prospects include, among other things: (cid:129) Customer Risk—Existing and potential customers and their end-users may continue to take actions to reduce or suspend operations, reduce or delay spending, cancel contracts, or cut costs in a manner that reduces demand for our products and services. In particular, lower demand for air travel may continue to cause our customers to delay or suspend spending in connection with the manufacturing, repair, overhaul or servicing of aircraft, and there may be long-term deterioration in demand for air travel that could impact our business beyond the current COVID-19 health crisis. Customers may also continue to attempt to renegotiate contracts and obtain concessions, face financial constraints on their ability to make payments to us on a timely basis or at all, or enter into bankruptcy or discontinue their business operations, and we may continue to be required to discount the pricing of our products. In addition, unfavorable customer site conditions, such as closure of or access restrictions to customer facilities, and disruptions to our customers’ third-party logistics, warehousing, inventory management and distribution services may continue to limit our ability to sell products, meet billing milestones or provide services. (cid:129) Operations Risk—The closure of our facilities, restrictions inhibiting our employees’ ability to access those facilities, and disruptions to the ability of our suppliers or service providers to deliver goods or services to us (including as a result of supplier facility closures or access restrictions, disruptions to their supply chains, and supplier liquidity or bankruptcy risk) could further disrupt our ability to provide our services and solutions and result in, among other things, terminations of customer contracts and losses of revenue. Because the COVID-19 pandemic could adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows, we have taken and may be required to redeploy significant cost actions, including but not limited to reducing discretionary expenses (such as non-essential travel, contractors, and consultants), reducing hiring, canceling annual merit increases, reducing executive and board of director pay, reducing work schedules across the enterprise, shortening or staggering work schedules to match production with demand, and reducing staffing levels, as well as increasing supplier-based productivity and enhancing spending-limit is not currently controls. However, revenue declines ascertainable; also, our to which our mitigation efforts are successful, costs may not decrease at the same pace as the extent if at all, 25 Honeywell International, Inc. as many of our costs are less variable in nature, and we may not be able to or may not choose to significantly reduce them in an effort to remain focused on long-term outlook and growth opportunities. Further, our management of the impact of COVID-19 will continue to require significant investment of time from our management and employees, as well as resources across our global enterprise. The focus on managing and mitigating the impacts of COVID-19 on our business may cause us to divert or delay the application of our resources toward new initiatives or investments, which may adversely impact our future results of operations. Issues relating to the COVID-19 pandemic may also result in legal claims or litigation against us. In addition, remote work has increased the frequency of cybersecurity attacks, including phishing and malware attempts that utilize COVID-19-related strategies, increasing the risk of a material cybersecurity incident that could result in the loss of proprietary or personal data, render us more vulnerable to future cybersecurity attacks, disrupt our operations, or otherwise cause us reputational or financial harm. Liquidity and Cash Flow Risk—Because of the customer and operations risks described above, our business may not continue to generate sufficient cash flow from operations in the future to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may need to use existing cash balances to service our debt, and if such balances are insufficient, then we may be required to engage in one or more alternatives, such as selling assets, restructuring of existing debt, issuing new debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. (cid:129) Due to the daily evolution of the COVID-19 pandemic and the responses to curb its spread, we cannot predict the ultimate impact the COVID-19 pandemic will have on our business, financial condition, results of operations, liquidity, and cash flow. Any recovery from the COVID-19 pandemic and related economic impact may be slowed or reversed by a variety of factors, such as, in the United States, the current widespread increase in COVID-19 infections. In addition, even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of its global economic impact, including the current recession and any recession that may occur in the future. Further, many of the factors disclosed under Risk Factors in this Form 10-K are, and we anticipate will continue to be further, heightened or exacerbated by the impact of the COVID-19 pandemic. A significant percentage of our sales and operations is in non-U.S. jurisdictions and is subject to the economic, political, regulatory, foreign exchange and other risks of international operations. Our international operations, including U.S. exports, represent more than half of the Company’s sales. Risks related to international operations include exchange control regulations, wage and price controls, antitrust regulations, employment regulations, foreign investment laws, import, export and other trade restrictions (such as sanctions and embargoes), differing levels of protection of intellectual property, acts of industrial espionage, violations by our employees of anti-corruption laws (despite our efforts to mitigate such risk), changes in regulations regarding transactions with state-owned enterprises, nationalization of private enterprises, acts of terrorism, and our ability to Instability and hire and maintain qualified staff and maintain the safety of our employees in these regions. uncertainties arising from the global geopolitical environment and the evolving international and domestic political, regulatory and economic landscape, including the potential for changes in global trade policies, including sanctions and trade barriers, and trends such as populism, economic nationalism and negative sentiment toward multinational companies, as well as the cost of compliance with increasingly complex and often conflicting regulations worldwide, can impair our flexibility in modifying product, marketing, pricing or other strategies for growing our businesses, as well as our ability to improve productivity and maintain acceptable operating margins. In December 2020, the United Kingdom and the European Union announced they had entered into a post-Brexit deal on certain aspects of trade and other strategic and political issues. Depending on the application of the terms of the trade and cooperation agreement between the United Kingdom and the European Union, we could face increased regulatory costs and challenges. The Company has developed plans to mitigate the potential impact of these costs and challenges, but the implications of these uncertainties could affect the Company’s business, financial position and results of operations. Existing free trade laws and regulations provide certain beneficial duties and tariffs for qualifying imports and exports. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products or from where we import products or raw materials, either directly or through our suppliers, could have an impact on our competitive position and financial results. The United States has commenced certain trade actions, including imposing tariffs on certain goods imported from China and other countries, which has resulted in retaliatory tariffs by China and other countries. Additional Honeywell International, Inc. 26 tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could increase the cost of our products. Given the change in the U.S. presidential administration, we face uncertainty with regard to U.S. government trade policy. Operating outside of the United States also exposes us to foreign exchange risk, which we monitor and seek to reduce through hedging activities. However, foreign exchange hedging activities bear a financial cost and may not always be available to us or be successful in eliminating such volatility. Finally, we generate significant amounts of cash outside of the United States that is invested with financial and non-financial counterparties. While we employ comprehensive controls regarding global cash management to guard against cash or investment loss and to ensure our ability to fund our operations and commitments, a material disruption to the counterparties with whom we transact business could expose Honeywell to financial loss. intellectual property risk. The laws and Operating outside the United States also exposes us to additional enforcement practices of certain jurisdictions in which we operate may not protect our intellectual property rights to the same extent as in the U.S. and may impose joint venture, technology transfer, local service or other foreign investment requirements and restrictions that potentially compromise control over our technology and proprietary information. Failure of foreign jurisdictions to protect our intellectual property rights, an inability to effectively enforce such rights in foreign jurisdictions, or the imposition of foreign jurisdiction investment or sourcing restrictions or requirements could result in loss of valuable proprietary information and could impact our competitive position and financial results. Risks related to our defined benefit pension plans may adversely impact our results of operations and cash flow. Significant changes in actual investment return on pension assets, discount rates, and other factors could adversely affect our results of operations and require cash pension contributions in future periods. Changes in discount rates and actual asset returns different than our anticipated asset returns can result in significant non-cash actuarial gains or losses, which we record in the fourth quarter of each fiscal year, and, if applicable, in any quarter in which an funding requirements for our interim re-measurement pension plans are largely dependent upon interest rates, actual investment returns on pension assets and the impact of legislative or regulatory changes related to pension funding obligations. is triggered. With regard to cash pension contributions, OPERATIONAL RISKS Raw material price fluctuations, the ability of key suppliers to meet quality and delivery requirements, or catastrophic events can increase the cost of our products and services, impact our ability to meet commitments to customers and cause us to incur significant liabilities. The cost of raw materials is a key element in the cost of our products, particularly in Performance Materials and Technologies (copper, fluorspar, tungsten salts, ethylene, aluminum, and molybdenum) and in Aerospace (nickel, steel, titanium and other metals). Our inability to offset material price inflation through increased prices to customers, formula-driven or long-term fixed price contracts with suppliers, productivity actions or commodity hedges could adversely affect our results of operations. Many major components, product equipment items and raw materials, particularly in Aerospace, are procured or subcontracted on a single or sole-source basis. Although we maintain a qualification and performance surveillance process and we believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long-lead time products during times of volatile demand. In addition, current or future global economic uncertainty, including the ongoing COVID-19 pandemic, may affect the financial stability of our key suppliers or their access to financing, which may in turn affect their ability to perform their obligations to us. If one or more of our suppliers experiences financial difficulties, delivery delays or other performance problems, our resulting inability to fill our supply needs would jeopardize our ability to fulfill obligations under commercial and government contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships. 27 Honeywell International, Inc. We may be unable to successfully execute or effectively integrate acquisitions, and divestitures may not occur as planned. We regularly review our portfolio of businesses and pursue growth through acquisitions and seek to divest non-core businesses. We may not be able to complete transactions on favorable terms, on a timely basis, or at all. In addition, our results of operations and cash flows may be adversely impacted by (i) the failure of acquired businesses to meet or exceed expected returns, including risk of impairment; (ii) the failure to integrate multiple acquired businesses into Honeywell simultaneously and on schedule and/or to achieve expected synergies; (iii) the inability to dispose of non-core assets and businesses on satisfactory terms and conditions; and (iv) the discovery of unanticipated labor relations difficulties, cybersecurity concerns, compliance issues or other problems in acquired liabilities, businesses for which we lack contractual protections, insurance or indemnities, or, with regard to divested businesses, claims by purchasers to whom we have provided contractual indemnification. Our future growth is largely dependent upon our ability to develop new technologies and introduce new products that achieve market acceptance in increasingly competitive markets with acceptable margins. Our future growth rate depends upon a number of factors, including our ability to (i) identify and evolve with emerging technological and broader industry trends in our target end-markets; (ii) develop and maintain competitive products; (iii) defend our market share against an ever-expanding number of competitors, including many new and non-traditional competitors; (iv) enhance our products by adding innovative features that differentiate our products from those of our competitors and prevent commoditization of our products; (v) develop, manufacture and bring compelling new products to market quickly and cost-effectively; (vi) monitor disruptive technologies and business models; (vii) achieve sufficient return on investment for new products introduced based on capital expenditures and research and development spending; (viii) respond to changes in overall trends related to end-market demand; and (ix) attract, develop and retain individuals with the requisite technical expertise and understanding of customers’ needs to develop new technologies and introduce new products. Competitors may also develop after-market services and parts for our products which attract customers and adversely affect our return on investment for new products. The failure of our technologies or products to gain market acceptance due to more attractive offerings by our competitors or the failure to address any of the above factors could significantly reduce our revenues and adversely affect our competitive standing and prospects. Failure to increase productivity through sustainable operational improvements, as well as an inability to successfully execute repositioning projects or to effectively manage our workforce, may reduce our profitability or adversely impact our businesses. Our profitability and margin growth are dependent upon our ability to drive sustainable improvements. We seek productivity and cost savings benefits through repositioning actions and projects, such as consolidation of manufacturing facilities, transitions to cost-competitive regions and product line rationalizations. Risks associated with these actions include delays in execution, additional unexpected costs, realization of fewer than estimated productivity improvements and adverse effects on employee morale. We may not realize the full operational or financial benefits we expect, the recognition of these benefits may be delayed, and these actions may potentially disrupt our operations. In addition, organizational changes, increased attrition, failure to create and implement a succession plan for key Company positions, not retaining key talent, inability to attract new employees with unique skills, labor relations difficulties, or workforce stoppage could have a material adverse effect on our business, reputation, financial position and results of operations. As a supplier to the U.S. Government, we are subject to unique risks, such as the right of the U.S. Government to terminate contracts for convenience and to conduct audits and investigations of our operations and performance. U.S. Government contracts are subject the government or for our failure to perform consistent with the terms of the applicable contract. Our contracts with the U.S. Government are also subject to government audits that may recommend downward price adjustments and other changes. When appropriate and prudent, we made adjustments and paid voluntary refunds in the past and may do so in the future. to termination by the government, either for the convenience of Honeywell International, Inc. 28 to government We are also subject investigations of business practices and compliance with government procurement and security regulations. If, as a result of any such investigation or other government investigations (including investigation of violations of certain environmental, employment or export laws), Honeywell or one of its businesses were found to have violated applicable law, then it could be suspended from bidding on or receiving awards of new government contracts, suspended from contract performance pending the completion of legal proceedings and/or have its export privileges suspended. Our operations and the prior operations of predecessor companies expose us to the risk of material environmental liabilities. Mainly because of past operations and operations of predecessor companies, we are subject to potentially material liabilities related to the remediation of environmental hazards and to claims of personal injuries or property damages that may be caused by hazardous substance releases and exposures. We continue to incur remedial response and voluntary clean-up costs for site contamination and are a party to lawsuits and claims associated with environmental and safety matters, including past production of products containing hazardous substances. Additional lawsuits, claims and costs involving environmental matters are likely to continue to arise in the future. Various federal, state, local and foreign governments regulate the use of certain materials, the discharge of materials into the environment, and/or communications respecting certain materials in our products, and can impose substantial fines and criminal sanctions for violations, and require injunctive relief measures, including installation of costly equipment, implementation of operational changes to limit emissions and/or decrease the likelihood of accidental hazardous substance releases, or limiting access of our products to markets, among others. In addition, changes in laws, regulations and enforcement of policies, the discovery of previously unknown contamination or new technology or information related to individual sites, to certain contaminants, or the imposition of new clean-up requirements or remedial techniques could require us to incur additional costs in the future that would have a negative effect on our financial condition or results of operations. the establishment of stricter toxicity standards with respect Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations. Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company, its products, its customers and/or its third party service providers, including cloud providers. Our customers, including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our products, and we may incur additional costs to comply with such demands. While we have experienced, and expect to continue to experience, these types of threats and incidents, none of them to date have been material to the Company. We seek to deploy comprehensive measures to deter, prevent, detect, respond to and mitigate these threats, including identity and access controls, data protection, vulnerability assessments, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems. Despite these efforts, cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. The potential consequences of a material cybersecurity incident include financial loss, reputational damage, litigation with third parties, theft of intellectual property, fines levied by the Federal Trade Commission, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs threats, which in turn could adversely affect our due to the increasing sophistication and proliferation of competitiveness and results of operations. 29 Honeywell International, Inc. The development of technology products and services presents security and safety risks. An increasing number of our products, services and technologies are delivered with Internet of Things (IoT) capabilities and the accompanying interconnected device networks, which include sensors, data and advanced computing capabilities. We have developed product software designs that we believe are less susceptible to cyber- attacks, but despite these efforts, if our products and services that include IoT solutions do not work as intended or are compromised, the possible consequences include financial loss, reputational damage, exposure to legal claims or enforcement actions, theft of intellectual property, and diminution in the value of our investment in research, development and engineering, which in turn could adversely affect our competitiveness and results of operations. Data privacy, data protection, and information security may require significant resources and present certain risks. We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary business information, personal data or other information that is subject to privacy and security laws, regulations and/ or customer-imposed controls. Despite our efforts to protect such data, we may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, or employee errors that could potentially lead to the compromising of such data, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions. In addition, we operate in an environment in which there are different and potentially conflicting data privacy laws in effect in the various U.S. states and foreign jurisdictions in which we operate and we must understand and comply with each law and standard in each of these jurisdictions while ensuring the data is secure. For example, the State of California recently passed legislation granting residents certain new data privacy rights and regulating the security of IoT devices, effective in January 2020, and California voters recently approved additional privacy legislation, which provides for the establishment of a California privacy regulator, modifies the current data privacy regulations and imposes additional data protection obligations and is effective in January 2023; European laws require us to have an approved legal mechanism to transfer personal data out of Europe; the European Union General Data Protection Regulation, which became enforceable in May 2018, superseded prior European Union data protection legislation and imposes more stringent requirements in how we collect and process personal data and provides for significantly greater penalties for noncompliance; and several other states and countries have passed or are considering laws that require personal data relating to their residents or citizens to be maintained on local servers and impose additional data transfer restrictions. Government enforcement actions can be costly and interrupt the regular operation of our business, and violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements. A material disruption of our operations, particularly at our manufacturing facilities or within our information technology infrastructure, could adversely affect our business. Our facilities, supply chains, distribution systems and information technology systems are subject to catastrophic loss due to natural disasters, including hurricanes and floods, power outages, fires, explosions, terrorism, equipment failures, sabotage, cyber incidents, any potential effects of climate change and adverse weather conditions, labor disputes, critical supply failure, inaccurate downtime forecast, political disruption, and other reasons, which can result in undesirable consequences, including financial losses and damaged relationships with customers. Another public health crises, like a regional or global pandemic, including the COVID-19 pandemic, could again disrupt our supply chain, distribution channels, production facilities, operations and customer demand, which could negatively impact our operations and adversely affect our business. We employ information technology systems and networks to support the business and rely on them to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Disruptions to our information technology infrastructure from system failures, shutdowns, power outages, telecommunication or utility failures, cybersecurity incidents, and other events, including disruptions at our cloud computing, server, systems and other third party IT service providers, could interfere with our operations, interrupt production and shipments, damage customer and business partner relationships, and negatively impact our reputation. Honeywell International, Inc. 30 Concentrations of credit, counterparty and market risk may adversely affect our results of operations and financial condition. We maintain long-term contractual relationships with many of our customers, suppliers, and other counterparties. While we monitor the financial health of these counterparties, we are exposed to credit and market risks of such counterparties, including those concentrated in the same or similar industries and geographic regions. Changes in economic conditions, including the impact of the COVID-19 pandemic and resulting recession, could also lead to concerns about the creditworthiness of counterparties in the same or similar industry or geography, impacting our ability to renew our long-term contractual arrangements or collect amounts due under these arrangements. Among other factors, changes in economic conditions could also result in the credit deterioration or insolvency of a significant counterparty. Garrett is currently subject to bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York. We have recorded an adjustment against the receivable amounts owed to us under agreements with Garrett, and depending on developments, we may be required to record an additional adjustment in whole or in part (together with a related statement of operations charge) in a future period or periods. We regularly review the aggregate carrying value of the reimbursement receivable amounts due from Garrett in connection with our indemnification and reimbursement agreement and our tax matters agreement with Garrett. On September 20, 2020, Garrett and certain of its affiliates filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). On January 11, 2021, Garrett accepted, in the bankruptcy proceedings, a revised agreement, originally proposed by Oaktree Capital Management, L.P. (Oaktree) and Centerbridge Partners, L.P. (Centerbridge), in coordination with Honeywell, and subsequently signed by additional equity holders that, collectively with the Company, Oaketree, and Centerbridge, represent approximately 58% of Garrett’s outstanding common stock and noteholders representing approximately 88% of the principal amount outstanding on Garrett’s senior notes (the Final COH Plan). Based on the Final COH Plan, we believe the present value of payments to us under the Final COH receivable amounts due in connection with the indemnification and Plan are an appropriate estimate of reimbursement agreement and the tax matters agreement. There can be no assurance that the Final COH Plan will be confirmed by the Bankruptcy Court or that Garrett will be able to substantially consummate the restructuring transactions contemplated in the Final COH Plan. The ultimate outcome of the bankruptcy process is uncertain. Should any of these assumptions change and depending on the transaction and/or plan of reorganization ultimately approved by the Bankruptcy Court, the amount collected could differ from the receivable amounts currently recorded in our financial statements. There can be no assurance that recording an additional adjustment (positive or negative) against the remaining receivable amounts in whole or in part (together with a related statement of operations charge) will not be necessary in a future period or periods. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for further details. LEGAL AND REGULATORY RISKS Our U.S. and non-U.S. tax liabilities are dependent, in part, upon the distribution of income among various jurisdictions in which we operate. Our future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, regulations and judicial rulings (or changes in the interpretation thereof), potential taxation of digital services, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures and various other governmental enforcement initiatives. Our tax expense includes estimates of tax reserves and reflects other estimates and assumptions, including assessments of future earnings of the Company, which could impact the valuation of our deferred tax assets. 31 Honeywell International, Inc. Changes in legislation or government regulations or policies can have a significant impact on our results of operations. including The sales and margins of each of our segments are directly impacted by government regulations, environmental, safety, performance and product certification regulations. Within Aerospace, the operating results of Commercial Original Equipment and Commercial Aftermarket may be impacted by, among other things, mandates of the Federal Aviation Administration and other similar international regulatory bodies requiring the installation of equipment on aircraft. Our Defense and Space business unit may be affected by changes in government procurement regulations. Within Honeywell Building Technologies and Safety and Productivity Solutions, the demand for and cost of providing products, services and solutions can be impacted by fire, security, safety, health care, environmental and energy efficiency standards and regulations. Performance Materials and Technologies’ results of operations can be impacted by environmental standards, regulations, and judicial determinations. Growth in all our businesses within emerging markets may be adversely impacted by the inability to acquire and retain qualified employees where local employment law mandates may be restrictive. Changes in such regulations and government policies could negatively impact us; for instance, noncompliance with legislation and regulations can result in fines and penalties, and compliance with any new regulations or policies may be burdensome and/or require significant expenditures. Increased public awareness and concern regarding global climate change may result in more international, regional and/or federal or other stakeholder requirements or expectations that could mandate more restrictive or expansive standards, such as stricter limits on greenhouse gas emissions or more prescriptive reporting of environmental, social, and governance metrics, than the voluntary commitments that the Company has adopted or require such changes on a more accelerated time frame. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty; however, under the new U.S. presidential administration, there likely will be renewed interest in such legislation. If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements upon the Company or its products, they could negatively impact the Company’s business, capital expenditures, results of operations, financial condition and competitive position. We cannot predict with certainty the outcome of litigation matters, government proceedings and other contingencies and uncertainties. the conduct of our business, including matters relating to commercial intellectual property, antitrust, anti-corruption, accounting, We are subject to a number of lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of transactions, liability (including asbestos), prior acquisitions and divestitures, employment, government contracts, product employee benefits plans, import and export, and environmental, health and safety matters. Our potential liabilities are subject to change over time due to new developments, changes in settlement strategy or the impact of evidentiary requirements, and we may become subject to or be required to pay damage awards or settlements that could have a material adverse effect on our results of operations, cash flows and financial condition. While we maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. The incurrence of significant liabilities for which there is no or insufficient insurance coverage could adversely affect our results of operations, cash flows, liquidity and financial condition. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Information relating to market risks is included within Liquidity and Capital Resources of our Form 10-K under the caption “Financial Instruments”. Honeywell International, Inc. 32 LIQUIDITY AND CAPITAL RESOURCES (Dollars in tables in millions) We continue to manage our businesses to maximize operating cash flows as the primary source of liquidity. Each of our businesses is focused on increasing operating cash flows through revenue growth, margin expansion and improved working capital turnover. Additional sources of liquidity include committed credit lines, short-term debt from the commercial paper market, long-term borrowings, access to the public debt and equity markets, U.S. cash balances and the ability to access non-U.S. cash as a result of the U.S. Tax Cuts and Jobs Act. CASH We monitor the third-party depository institutions that hold our cash and cash equivalents on a daily basis. Our emphasis is primarily safety of principal and secondarily maximizing yield of those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities. As of December 31, 2020 and 2019, we held $15.2 billion and $10.4 billion, respectively, of cash and cash equivalents, including our short- term investments. BORROWINGS Consolidated total borrowings were $22.4 billion and $16.0 billion as of December 31, 2020 and 2019. In response to COVID-19, the Company took several actions during 2020 to secure liquidity in light of the uncertainty in economic conditions and the credit markets, including a $6.0 billion Delayed Draw Term Loan and a total of $7.1 billion raised through Senior Note offerings. See Note 10 Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements for a summary of the actions taken by the Company to improve our short-term and long-term liquidity position in response to COVID-19. December 31, 2020 2019 Commercial paper and other short-term borrowings $ 3,597 $ 1,122 17,399 266 3,516 622 11,586 278 $ 22,384 $ 16,002 Variable rate notes Fixed rate notes Other Total borrowings A source of liquidity is our ability to access the commercial paper market. Commercial paper notes are sold at a discount or premium and have a maturity of not more than 365 days from date of issuance. Borrowings under the commercial paper program are available for general corporate purposes as well as for financing acquisitions. The weighted average interest rate on commercial paper and other short-term borrowings outstanding was 0.27% and (0.37%) as of December 31, 2020 and 2019. We also have the following revolving credit agreements: (cid:129) (cid:129) A $1.5 billion 364-Day Credit Agreement (the 364-Day Credit Agreement) with a syndicate of banks, dated April 10, 2020. This 364-Day Credit Agreement is maintained for general corporate purposes. The 364-Day Credit Agreement replaced the 364-day credit agreement dated as of April 26, 2019, which was terminated on April 10, 2020. As of December 31, 2020, there were no outstanding borrowings under our 364-Day Credit Agreement. A $4.0 billion Five Year Credit Agreement (the 5-Year Credit Agreement) with a syndicate of banks, dated April 26, 2019. This 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. As of December 31, 2020, there were no outstanding borrowings under our 5-Year Credit Agreement. 33 Honeywell International, Inc. We also have a current shelf registration statement filed with the SEC under which we may issue additional debt securities, common stock and preferred stock that may be offered in one or more offerings on terms to be determined at the time of the offering. We anticipate that net proceeds of any offering would be used for general corporate purposes, including repayment of existing indebtedness, share repurchases, capital expenditures and acquisitions. CREDIT RATINGS Our ability to access the global debt capital markets and the related cost of these borrowings, is affected by the strength of our credit rating and market conditions. Our credit ratings are periodically reviewed by the major independent debt-rating agencies. As of December 31, 2020, S&P, Fitch, and Moody’s have ratings on our debt set forth in the table below: Outlook Short-term Long-term CASH FLOW SUMMARY S&P Stable A-1 A Fitch Stable F1 A Moody’s Stable P1 A2 Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized as follows: Years Ended December 31, 2020 2019 2018 Cash provided by (used for): Operating activities Investing activities Financing activities Effect of exchange rate changes on cash $ 6,208 $ 6,897 $ (987) (81) 68 (533) (6,600) 16 Net increase (decrease) in cash and cash equivalents $ 5,208 $ (220) $ 6,434 1,027 (5,032) (201) 2,228 2020 compared with 2019 Cash provided by operating activities decreased by $689 million primarily due to lower net income of $1,364 million, partially offset by a favorable impact from working capital of $588 million (favorable accounts receivable and inventory, partially offset by accounts payable). Cash used for investing activities increased by $454 million primarily due to a $251 million increase in payments related to settlements of derivative contracts, $211 million increase in cash paid for acquisitions, net of cash acquired, and $67 million increase in capital expenditures, partially offset by a net decrease in investments of $61 million. Cash used for financing activities decreased by $6,519 million primarily due to a $7,399 million increase in proceeds from the issuance of long-term debt and a $686 million decrease in repurchases of common stock, partially offset by an increase in payments of long-term debt of $1,405 million. CASH REQUIREMENTS AND ASSESSMENT OF CURRENT LIQUIDITY In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, share repurchases, dividends, strategic acquisitions and debt repayments. Specifically, we expect our primary cash requirements in 2021 to be as follows: (cid:129) Capital expenditures—we expect to spend approximately $1 billion for capital expenditures in 2021 primarily for growth, production and capacity expansion, implementation of cost reduction measures, maintenance, and replacement. Honeywell International, Inc. 34 (cid:129) (cid:129) Share repurchases—under our share repurchase program, $3.3 billion was available as of December 31, 2020 for additional share repurchases. We expect to repurchase outstanding shares from time to time to offset the dilutive impact of employee stock-based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans. Additionally, we will seek to reduce share count via share repurchases as and when attractive opportunities arise. The amount and timing of future repurchases may vary depending on market conditions and our level of operating, financing and other investing activities. Dividends—we increased our quarterly dividend rate by 3% to $0.93 per share of common stock effective with the fourth quarter 2020 dividend. We intend to continue to pay quarterly dividends in 2021. We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers. In addition, multiple third-party financial institutions offer a voluntary supply chain financing (SCF) program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on terms that are negotiated between the supplier and the respective financial institution. We agree on commercial terms for the goods and services we procure from our suppliers, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program. Our suppliers’ voluntary participation in the SCF program has no bearing on our payment terms and we have no economic interest in a supplier’s decision to participate in the SCF program. Amounts due to our suppliers that elected to participate in the SCF programs are included in Accounts payable on the Consolidated Balance Sheet. At December 31, 2020, Accounts payable included $0.6 billion payable to suppliers who have elected to participate in the SCF program. Amounts settled with third-party financial institutions through the SCF program increased $0.5 billion for the year ended December 31, 2020. The increase for the year ended December 31, 2020 reflects a combination of an extension of payment terms with suppliers and increased utilization of our SCF program. All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected in cash flows from operating activities in our Consolidated Statement of Cash Flows. While access to SCF could decrease if our credit ratings are downgraded, we do not believe that changes in the availability of SCF will have a significant impact on our liquidity. The impact of this program is not material to our overall liquidity. We sell trade receivables to unaffiliated financial institutions without recourse. Transfers of the receivables are accounted for as sales and, accordingly, receivables sold are excluded from Accounts receivable—net on the Consolidated Balance Sheet and are reflected in cash flows from operating activities on the Consolidated Statement of Cash Flows. The difference between the carrying amount of the trade receivables sold and the cash received is recorded in Cost of products and services sold on the Consolidated Statement of Operations. Amounts settled with third-party financial for the year ended institutions related to accounts receivable factoring were not material December 31, 2020, and the impact of this program is not material to our overall liquidity. Finally, we continue to assess the relative strength of each business in our portfolio as to strategic fit, market position, profit and cash flow contribution in order to identify target investment and acquisition opportunities in order to upgrade our combined portfolio. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses. We also identify businesses that do not fit into our long-term strategic plan based on their market position, relative profitability or growth potential. These businesses are considered for potential divestiture, restructuring or other repositioning actions, subject to regulatory constraints. Based on past performance and current expectations, we believe that our operating cash flows will be sufficient to meet our future operating cash needs. Our available cash, committed credit lines and access to the public debt and equity markets provide additional sources of short-term and long-term liquidity to fund current operations, debt maturities, and future investment opportunities. See Note 10 Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements for additional discussion of items impacting our liquidity. 35 Honeywell International, Inc. CONTRACTUAL OBLIGATIONS Following is a summary of our significant contractual obligations and probable liability payments at December 31, 2020: Payments by Period Total(6)(7) 2021 2022 - 2023 2024 - 2025 Thereafter Long-term debt, including finance leases(1) $ 18,787 $ 2,445 $ 6,102 $ 2,647 $ 7,593 Interest payments on long-term debt, including finance leases Operating lease liabilities Purchase obligations(2) Estimated environmental liability payments(3) Asbestos related liability payments(4) Asbestos insurance recoveries(5) 3,674 913 3,595 660 2,220 (402) 372 204 624 306 1,374 1,204 225 300 (36) 213 495 (89) 507 172 559 181 397 (70) 2,171 231 458 41 1,028 (207) $ 29,447 $ 4,884 $ 8,855 $ 4,393 $ 11,315 (1) Assumes all long-term debt is outstanding until scheduled maturity. (2) Purchase obligations are entered into with various vendors in the normal course of business and are consistent with our expected requirements. This includes leases that were entered into and had not yet commenced as of December 31, 2020. (3) The payment amounts in the table only reflect the environmental liabilities which are probable and reasonably estimable as of December 31, 2020. (4) These amounts are estimates of asbestos related cash payments for NARCO and Bendix based on our asbestos related liabilities which are probable and reasonably estimable as of December 31, 2020. See Asbestos Matters in Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for additional information. (5) These amounts represent our insurance recoveries that are deemed probable for asbestos related liabilities as of December 31, 2020. See Asbestos Matters in Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for additional information. (6) The table excludes tax liability payments, including those for unrecognized tax benefits. See Note 5 Income Taxes of Notes to Consolidated Financial Statements for additional information. (7) The table excludes expected proceeds from the indemnification and reimbursement agreements entered into with Garrett and Resideo. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for additional information. ASBESTOS MATTERS Payments, net of insurance recoveries, related to known asbestos matters were $229 million, $163 million and $216 million for the years ended December 31, 2020, 2019 and 2018 and are estimated to be approximately $264 million in 2021. We expect to pay these asbestos matters from operating cash flows. The timing of these payments depends on several factors, including the timing of litigation and settlements of liability claims. Reimbursements from Garrett primarily for asbestos-related liability payments related to the Bendix business in the U.S., as defined in our indemnification and reimbursement agreement with Garrett, were $36 million in 2020. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of our asbestos matters and Garrett. Honeywell International, Inc. 36 ENVIRONMENTAL MATTERS Accruals during the year for environmental matters deemed probable and reasonably estimable were $173 million, $213 million and $395 million for the years ended December 31, 2020, 2019 and 2018. In addition, for the years ended December 31, 2020, 2019 and 2018, we incurred operating costs for ongoing businesses of approximately $88 million, $99 million and $95 million relating to compliance with environmental regulations. Payments related to known environmental matters were $216 million, $256 million and $218 million for the years ended December 31, 2020, 2019 and 2018 and are estimated to be approximately $225 million in 2021. We expect to pay these environmental matters from operating cash flows. The timing of these payments depends on several factors, including the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, execution timeframe of projects, remedial techniques to be utilized and agreement with other parties. Reimbursements from Resideo for payments related to environmental matters at certain sites, as defined in the indemnification and reimbursement agreement, were $140 million in 2020 and are expected to be $140 million in 2021. We received $35 million in reimbursement payments from Resideo in January 2021. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of our environmental matters and the indemnification and reimbursement agreement entered into with Resideo. FINANCIAL INSTRUMENTS The Company uses derivative financial instruments to reduce our risks from interest and foreign currency exchange rate fluctuations. Derivative financial instruments are not used for trading or other speculative purposes and we do not use leveraged derivative financial instruments. The following table illustrates the potential change in fair value for interest rate sensitive instruments based on a hypothetical immediate one percentage point increase in interest rates across all maturities and the potential change in fair value for foreign exchange rate sensitive instruments based on a 10% weakening of the U.S. Dollar versus local currency exchange rates across all maturities at December 31, 2020 and 2019. Face or Notional Amount Carrying Value(1) Fair Value(1) Estimated Increase (Decrease) in Fair Value(2) December 31, 2020 Interest Rate Sensitive Instruments Long-term debt (including current maturities) $ 18,787 $ (18,787) $ (20,176) $ (1,063) Interest rate swap agreements 3,950 194 194 (148) Foreign Exchange Rate Sensitive Instruments Foreign currency exchange contracts(3) Cross currency swap agreements December 31, 2019 Interest Rate Sensitive Instruments 16,123 1,200 52 (50) 52 (50) Long-term debt (including current maturities) $ 12,486 $ (12,486) $ (13,578) $ Interest rate swap agreements Foreign Exchange Rate Sensitive Instruments Foreign currency exchange contracts(3) Cross currency swap agreements 3,950 12,746 1,200 25 270 51 25 270 51 (334) (125) (677) (72) (676) (115) (1) Asset or (liability). (2) A hypothetical immediate one percentage point decrease in interest rates across all maturities and a potential change in fair value of foreign exchange rate sensitive instruments based on a 10% strengthening of the U.S. dollar versus local currency exchange rates across all maturities will result in a change in fair value approximately equal to the inverse of the amount disclosed in the table. (3) Changes in the fair value of foreign currency exchange contracts are offset by changes in the fair value, cash flows, or net investments of underlying hedged foreign currency transactions or foreign operations. 37 Honeywell International, Inc. See Note 12 Derivative Instruments and Hedging Transactions to Consolidated Financial Statements for further discussion. CRITICAL ACCOUNTING ESTIMATES The preparation of our consolidated financial statements in accordance with generally accepted accounting principles is based on the selection and application of accounting policies that require us to make significant the effects of matters that are inherently uncertain. Many estimates and estimates and assumptions about assumptions involved in the application of accounting principles have a material impact on reported financial condition and operating performance and on the comparability of such reported information over different reporting periods. Critical accounting estimates or assumptions are those where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the impact of the estimates and assumptions on financial condition or operating performance is material. We consider the estimates and assumptions discussed below to be critical to the understanding of our financial statements. Actual results could differ from our estimates and assumptions, and any such differences could be material to our consolidated financial statements. Sales Recognition on Long-Term Contracts—We recognize sales for long-term contracts with performance obligations satisfied over time using either an input or output method. We recognize revenue over time as we perform on these contracts based on the continuous transfer of control to the customer. With control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost input method of progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs. Under the cost-to-cost method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion requires judgment. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, incentive and award provisions associated with technical performance and price adjustment clauses (such as inflation or index-based clauses). Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Revenue and cost estimates are regularly monitored and revised based on changes in circumstances. Impacts from changes in estimates of net sales and cost of sales are recognized on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. Anticipated losses on long-term contracts are recognized when such losses become evident. We maintain financial controls over the customer qualification, contract pricing and estimation processes to reduce the risk of contract losses. Income Taxes—On a recurring basis, we assess the need for a valuation allowance against our deferred tax assets by considering all available positive and negative evidence, such as past operating results, projections of future taxable income, enacted tax law changes and the feasibility and impact of tax planning initiatives. Our projections of future taxable income include a number of estimates and assumptions regarding our volume, pricing and costs, as well as the timing and amount of reversals of taxable temporary differences. We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, including resolution of any related appeals and litigation. We assess our income tax positions based upon our evaluation of the facts, circumstances and information available at the reporting date. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. For further discussion of additional income tax policies, see Note 1 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. Honeywell International, Inc. 38 Reimbursement Receivables—In conjunction with the Garrett and Resideo spin-offs, the Company entered into reimbursement agreements under which Honeywell receives cash payments as reimbursement primarily for asbestos related liability payments related to the Bendix business in the U.S. (Garrett) and for net spending for environmental matters at certain sites as defined in the agreement (Resideo). Accordingly, the Company recorded receivables based on estimates of the underlying reimbursable Honeywell asbestos and environmental spend, and we monitor the recoverability of such receivables, which are subject to the terms of applicable credit agreements and general ability to pay. For Garrett, the Company established an allowance based on the developments associated with Garrett’s Chapter 11 bankruptcy filing. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of the recognition and measurement of our reimbursement receivables, including the allowance established for Garrett. Goodwill and Indefinite-Lived Intangible Assets Impairment Testing—Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual, or more frequent if necessary, impairment testing. In testing goodwill and indefinite-lived intangible assets, the fair value is estimated utilizing a discounted cash flow approach utilizing cash flow forecasts, including strategic and annual operating plans, adjusted for terminal value assumptions. These impairment tests involve the use of accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. To address this uncertainty, we perform sensitivity analyses on key estimates and assumptions. Once the fair value is determined, if the carrying amount exceeds the fair value, it is impaired. Any impairment is measured as the difference between the carrying amount and its fair value. Finite-Lived Intangible Assets—The determination of useful lives (for depreciation/amortization purposes) and whether or not intangible assets are impaired involves the use of accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. We evaluate the recoverability of the carrying amount of our finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of a finite-lived intangible asset group may not be fully recoverable. The principal factors in considering when to perform an impairment review are as follows: (cid:129) (cid:129) (cid:129) (cid:129) Significant under-performance (i.e., declines in sales, earnings or cash flows) of a business or product line in relation to expectations; Annual operating plans or strategic plan outlook that indicate an unfavorable trend in operating performance of a business or product line; Significant negative industry or economic trends; or Significant changes or planned changes in our use of the assets. Once it is determined that an impairment review is necessary, recoverability of assets is measured by comparing the carrying amount of the asset grouping to the estimated future undiscounted cash flows. If the carrying amount exceeds the estimated future undiscounted cash flows, the asset grouping is considered to be impaired. The impairment is then measured as the difference between the carrying amount of the asset grouping and its fair value. We endeavor to utilize the best information available to measure fair value, which is usually either market prices (if available), level 1 or level 2 of the fair value hierarchy, or an estimate of the future discounted cash flow, level 3 of the fair value hierarchy. The key estimates in our discounted cash flow analysis include assumptions as to expected industry and business growth rates, sales volume, selling prices and costs, cash flows, and the discount rate selected. These estimates are subject to changes in the economic environment, including market interest rates and expected volatility. Management believes the estimates of future cash flows and fair values are reasonable; however, changes in estimates due to variance from assumptions could materially affect the valuations. Defined Benefit Pension Plans—We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans. For financial reporting purposes, net periodic pension (income) expense is calculated annually based upon various actuarial assumptions, including a discount rate for plan obligations and an expected long-term rate of return on plan assets. Changes in the discount rate and expected long-term rate of return on plan assets could materially affect the annual pension (income) expense amount. Annual pension (income) expense is comprised of service and interest cost, assumed return on plan assets, prior service amortization (Pension Ongoing (Income) Expense) and a potential mark-to-market adjustment (MTM Adjustment). 39 Honeywell International, Inc. The key assumptions used in developing our net periodic pension (income) expense for our U.S. plans included the following: Discount Rate: Projected benefit obligation Service cost Interest cost Assets: Expected rate of return Actual rate of return Actual 10 year average annual compounded rate of return 2020 2019 2018 3.22 % 3.33 % 2.76 % 6.15 % 13.8 % 10.6 % 4.35 % 4.47 % 3.94 % 6.75 % 21.2 % 11.1 % 3.68 % 3.77 % 3.27 % 7.75 % (1.8)% 11.0 % The MTM Adjustment represents the recognition of net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor). Net actuarial gains and losses occur when the actual experience differs from any of the various assumptions used to value our pension plans or when assumptions change. The primary factors contributing to actuarial gains and losses are changes in the discount rate used to value pension obligations as of the measurement date each year and the difference between expected and actual returns on plan assets. The mark-to-market accounting method results in the potential for volatile and difficult to forecast MTM Adjustments. MTM Adjustments were $44 million, $123 million and $37 million for the years ended December 31, 2020, 2019 and 2018. We determine the expected long-term rate of return on plan assets utilizing historical plan asset returns over varying long-term periods combined with our expectations of future market conditions and asset mix considerations (see Note 21 Pension and Other Postretirement Benefits of Notes to Consolidated Financial Statements for details on the actual various asset classes and targeted asset allocation percentages for our pension plans). We plan to use an expected rate of return on plan assets of 6.15% for 2021, matching the assumption used for 2020. The discount rate reflects the market rate on December 31 (measurement date) for high-quality fixed-income investments with maturities corresponding to our benefit obligations and is subject to change each year. The discount rate can be volatile from year to year as it is determined based upon prevailing interest rates as of the measurement date. We used a 2.50% discount rate to determine benefit obligations as of December 31, 2020, reflecting a decrease in the market interest rate environment since the prior year-end. In addition to the potential for MTM Adjustments, changes in our expected rate of return on plan assets and discount rate resulting from economic events also affects future pension ongoing (income) expense. The following table highlights the sensitivity of our U.S. pension obligations and ongoing (income) expense to changes in these assumptions, assuming all other assumptions remain constant. These estimates exclude any potential MTM Adjustment: Change in Assumption Impact on 2021 Pension Ongoing Expense Impact on PBO 0.25 percentage point decrease in discount rate Decrease $32 million Increase $520 million 0.25 percentage point increase in discount rate Increase $30 million Decrease $500 million 0.25 percentage point decrease in expected rate of return on assets Increase $50 million 0.25 percentage point increase in expected rate of return on assets Decrease $50 million — — Pension ongoing income for our world-wide pension plans is expected to be approximately $1,046 million in 2021 compared with pension ongoing income of $785 million in 2020. The expected increase in pension income is primarily due to higher expected return on plan assets due to strong asset returns in our U.S. and UK plans in 2020, and lower interest cost from a decrease in discount rates in our U.S. and UK plans. Also, if required, a MTM Adjustment will be recorded in the fourth quarter of 2021 in accordance with our pension accounting method as previously described. It is difficult to reliably forecast or predict whether there will be a MTM Adjustment in 2021, and if one is required, what the magnitude of such adjustment will be. MTM Adjustments are primarily driven by events and circumstances beyond the control of the Company such as changes in interest rates and the performance of the financial markets. Honeywell International, Inc. 40 Asbestos Related Liabilities and Insurance Recoveries—In connection with the recognition of liabilities for asbestos related matters, we record asbestos related insurance recoveries that are deemed probable. In assessing the probability of insurance recovery, we make 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. 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. Projecting future events is subject to various uncertainties that could cause the insurance recovery on asbestos related liabilities to be higher or lower than that projected and recorded. Given the inherent uncertainty in making future projections, we reevaluate our projections concerning our probable insurance recoveries considering any changes to the projected liability, our recovery experience or other relevant factors that may impact future insurance recoveries. to qualification under the terms of Our involvement in asbestos related personal injury actions relates to two predecessor companies. Regarding North American Refractories Company (NARCO) asbestos related claims, we estimate our NARCO asbestos liability for the resolution of asserted Narco-related asbestos claims which qualify for payment under the NARCO Trust Distribution Procedures (Annual Contribution Claims) and for 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 the settlement agreements and Trust Distribution Procedures (Pre-Established Unliquidated Claims) using average payment values for the relevant historical period. We estimate our NARCO asbestos liability for unasserted claims based on historic and anticipated claims filing experience and payment rates, disease classifications and type of claim, and average payment values by the NARCO Trust for the relevant historical period. Our estimate also includes all years of epidemiological disease projection through 2059. Regarding Bendix Friction Materials (Bendix) asbestos related claims, we accrued for the estimated value of pending claims using average resolution values for the previous five years. We also accrued for the estimated value of future claims related to Bendix over the full term of epidemiological disease projection through 2059 based on historic and anticipated claims filing experience and dismissal rates, disease classifications, and average resolution values in the tort system for the previous five years. We update our assumptions on average payment values and average resolution values in the fourth quarter of each year. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of management’s judgments applied in the recognition and measurement of our asbestos related liabilities and related insurance recoveries. including matters relating to commercial transactions, government contracts, product Contingent Liabilities—We are subject to a number of lawsuits, investigations and claims (some of which involve substantial dollar amounts) that arise out of the conduct of our global business operations or those of previously owned entities, liability (including asbestos), prior acquisitions and divestitures, employee benefit plans, intellectual property, legal and environmental, health and safety matters. We continually assess the likelihood of any adverse judgments or outcomes to our contingencies, as well as potential amounts or ranges of probable losses, and recognize a liability, if any, for these contingencies based on a thorough analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Such analysis includes making judgments concerning matters such as the costs associated with environmental matters, the outcome of negotiations, the number and cost of pending and future asbestos claims, and the impact of evidentiary requirements. Because most contingencies are resolved over long periods of time, liabilities may change in the future due to new developments (including new discovery of facts, changes in legislation and outcomes of similar cases through the judicial system), changes in assumptions or changes in our settlement strategy. See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of management’s judgment applied in the recognition and measurement of our environmental and asbestos liabilities which represent our most significant contingencies. OTHER MATTERS LITIGATION See Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of environmental, asbestos and other litigation matters. RECENT ACCOUNTING PRONOUNCEMENTS See Note 1 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements. 41 Honeywell International, Inc. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The executive officers of Honeywell, listed as follows, are elected annually by the Board of Directors. There are no family relationships among them. Name, Age, Year First Elected an Executive Officer Darius Adamczyk, 55 2017(a) Que Thanh Dallara, 47 2018 Business Experience Chairman of the Board and Chief Executive Officer since April 2018. President and Chief Executive Officer from March 2017 to April 2018. Chief Operating Officer from April 2016 to March 2017. President and Chief Executive Officer Performance Materials and Technologies from April 2014 to April 2016. President of Honeywell Process Solutions from April 2012 to April 2014. President and Chief Executive Officer, Connected Enterprise since October 2018. Vice President and Chief Commercial Officer from January 2017 to October 2018. From 2007 to 2016, Ms. Dallara served in multiple leadership positions at TE Connectivity Ltd., most recently as Senior Vice President, Corporate Strategy and Analytics. Rajeev Gautam, 68 2016 President and Chief Executive Officer, Performance Materials and Technologies since April 2016. President of Honeywell UOP from January 2009 to April 2016. Vimal Kapur, 55 2018 President and Chief Executive Officer, Honeywell Building Technologies since May 2018. President of Honeywell Process Solutions from 2014 to May 2018. Gregory P. Lewis, 53 2018 Senior Vice President and Chief Financial Officer since August 2018. Vice President of Enterprise Information Management from October 2016 to April 2018, prior to being named Vice President, Corporate Finance in May 2018. Chief Financial Officer of Automation and Control Solutions from April 2013 to September 2016. Anne T. Madden, 56 2017 Senior Vice President and General Counsel since October 2017. Corporate Secretary from February 2018 to September 2019. Vice President of Corporate Development and Global Head of M&A from January 2002 to October 2017. Michael R. Madsen, 57 2019 President and Chief Executive Officer, Aerospace since October 2019. Vice President, Integrated Supply Chain of Aerospace from May 2015 to October 2019. President, Aerospace Defense and Space from October 2010 to May 2015. Karen Mattimore, 54 2020 Senior Vice President and Chief Human Resources Officer since June 2020. Vice President, Human Resources and Communications, Aerospace from February 2018 to June 2020. Vice President, Human Resources Services from April 2015 to February 2018. John F. Waldron, 45 2016 President and Chief Executive Officer, Safety and Productivity Solutions since July 2016. President of Sensing and Productivity Solutions from July 2015 to July 2016. President of Scanning and Mobility from April 2012 to July 2015. (a) Also a Director. Honeywell International, Inc. 42 UNRESOLVED STAFF COMMENTS None. PROPERTIES We have approximately 834 locations, of which 226 are manufacturing sites. Our properties and equipment are in good operating condition and are adequate for our present needs. We do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. LEGAL PROCEEDINGS We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business. See a discussion of environmental, asbestos and other litigation matters in Note 20 Commitments and Contingencies of Notes to Consolidated Financial Statements. There were no matters requiring disclosure pursuant to the requirement to disclose certain environmental matters involving potential monetary sanctions in excess of $300,000. MINE SAFETY DISCLOSURES One of our wholly-owned subsidiaries has a placer claim for and operates a chabazite ore surface mine in Arizona. Information concerning mine safety and other regulatory matters associated with this mine is required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K and is included in Exhibit 95 to this Form 10-K. 43 Honeywell International, Inc. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange under the ticker symbol “HON”. Dividend information for Honeywell’s common stock is included in Note 26 Unaudited Quarterly Financial Information of Notes to Consolidated Financial Statements. We increased our quarterly dividend rate by 3% to $0.93 per share of common stock effective with the fourth quarter 2020 dividend. We intend to continue to pay quarterly dividends in 2021. The number of record holders of our common stock at December 31, 2020 was 42,205. Information regarding securities authorized for issuance under equity compensation plans is included the section titled Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters under the caption “Equity Compensation Plans.” We purchased 7,619,919 shares of our common stock, par value $1 per share, in the quarter ending December 31, 2020. On April 29, 2019, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included amounts remaining under, and replaced, the previously approved share repurchase program. As of December 31, 2020, $3.3 billion remained available for additional share repurchases. We expect to repurchase outstanding shares from time to time to generally offset the dilutive impact of employee stock-based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans. Additionally, we seek to reduce share count via share repurchases as and when attractive opportunities arise. The amount and timing of future repurchases may vary depending on market conditions and the level of our operating, financing and other investing activities. The following table summarizes our purchases of Honeywell’s common stock for the three months ended December 31, 2020: Issuer Purchases of Equity Securities 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) — $ 2,430,000 $ 5,189,919 $ — 198.09 208.96 — $ 2,430,000 $ 5,189,919 $ 4,841 4,360 3,275 Period October 1 - 31, 2020 November 1 - 30, 2020 December 1 - 31, 2020 Honeywell International, Inc. 44 PERFORMANCE GRAPH The following graph compares the five-year cumulative total return on our common stock to the total returns on the Standard & Poor’s (S&P) 500 Stock Index and a composite of S&P’s Industrial Conglomerates and Aerospace and Defense indices, on a 55%/45% weighted basis (the Composite Index). The weighting of the components of the Composite Index are based on our segments’ relative contribution to total segment profit. The selection of the Industrial Conglomerates component of range of non-aerospace businesses conducted by Honeywell. The annual changes for the five-year period shown in the graph are based on the assumption that $100 was invested in Honeywell stock and each index on December 31, 2015 and that all dividends were reinvested. the Composite Index reflects the diverse and distinct COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN 250 200 S R A L L O D 150 100 50 0 2015 2016 2017 2018 2019 2020 Honeywell S&P 500 Index Composite Index Honeywell S&P 500 Index Composite Index Dec. 2015 Dec. 2016 Dec. 2017 Dec. 2018 Dec. 2019 Dec. 2020 100 100 100 114.98 111.96 113.33 155.34 136.40 129.15 142.57 130.42 105.37 194.89 171.49 134.31 239.66 203.04 132.19 45 Honeywell International, Inc. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA HONEYWELL INTERNATIONAL INC. CONSOLIDATED STATEMENT OF OPERATIONS Product sales Service sales Net sales Costs, expenses and other Cost of products sold Cost of services sold Selling, general and administrative expenses Other (income) expense Interest and other financial charges Income before taxes Tax expense Net income Less: Net income attributable to the noncontrolling interest Net income attributable to Honeywell Earnings per share of common stock—basic Earnings per share of common stock—assuming dilution $ $ $ Years Ended December 31, 2020 2019 2018 (Dollars in millions, except per share amounts) $ 24,737 $ 27,629 $ 32,848 7,900 32,637 17,638 4,531 22,169 4,772 (675) 359 26,625 6,012 1,147 4,865 86 4,779 6.79 6.72 $ $ $ 9,080 36,709 19,269 5,070 24,339 5,519 (1,065) 357 29,150 7,559 1,329 6,230 87 6,143 8.52 8.41 $ $ $ 8,954 41,802 23,634 5,412 29,046 6,051 (1,149) 367 34,315 7,487 659 6,828 63 6,765 9.10 8.98 The Notes to Consolidated Financial Statements are an integral part of this statement. Honeywell International, Inc. 46 HONEYWELL INTERNATIONAL INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Net income Other comprehensive income (loss), net of tax Foreign exchange translation adjustment Actuarial gains (losses) recognized Prior service credit (cost) recognized Prior service credit recognized during year Actuarial (gains) losses recognized during year Settlements and curtailments Foreign exchange translation and other Pensions and other postretirement benefit adjustments Changes in fair value of available for sale investments Cash flow hedges recognized in other comprehensive income Less: Reclassification adjustment for gains (losses) included in net income Changes in fair value of cash flow hedges Other comprehensive income (loss), net of tax Comprehensive income Years Ended December 31, 2020 2019 (Dollars in millions) 2018 $ 4,865 $ 6,230 $ 6,828 (211) 91 47 (82) 41 — (23) 74 4 10 54 (44) (177) 4,688 143 162 1 (79) 16 — (14) 86 — 103 92 11 240 6,470 (685) (602) 2 (74) 35 2 31 (606) — 89 4 85 (1,206) 5,622 Less: Comprehensive income attributable to the noncontrolling interest Comprehensive income attributable to Honeywell 89 82 53 $ 4,599 $ 6,388 $ 5,569 The Notes to Consolidated Financial Statements are an integral part of this statement. 47 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. CONSOLIDATED BALANCE SHEET $ $ $ ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable—net Inventories Other current assets Total current assets Investments and long-term receivables Property, plant and equipment—net Goodwill Other intangible assets—net Insurance recoveries for asbestos related liabilities Deferred income taxes Other assets Total assets LIABILITIES Current liabilities: Accounts payable Commercial paper and other short-term borrowings Current maturities of long-term debt Accrued liabilities Total current liabilities Long-term debt Deferred income taxes Postretirement benefit obligations other than pensions Asbestos related liabilities Other liabilities Redeemable noncontrolling interest SHAREOWNERS’ EQUITY Capital—common stock issued —additional paid-in capital Common stock held in treasury, at cost Accumulated other comprehensive income (loss) Retained earnings Total Honeywell shareowners’ equity Noncontrolling interest Total shareowners’ equity Total liabilities, redeemable noncontrolling interest and shareowners’ equity $ December 31, 2020 2019 (Dollars in millions) 14,275 945 6,827 4,489 1,639 28,175 685 5,570 16,058 3,560 366 760 9,412 64,586 5,750 3,597 2,445 7,405 19,197 16,342 2,113 242 1,920 6,975 7 958 7,292 (27,229) (3,377) 39,905 17,549 241 17,790 64,586 $ $ $ $ 9,067 1,349 7,493 4,421 1,973 24,303 588 5,325 15,563 3,734 392 86 8,688 58,679 5,730 3,516 1,376 7,476 18,098 11,110 1,670 326 1,996 6,766 7 958 6,876 (23,836) (3,197) 37,693 18,494 212 18,706 58,679 The Notes to Consolidated Financial Statements are an integral part of this statement. Honeywell International, Inc. 48 HONEYWELL INTERNATIONAL INC. CONSOLIDATED STATEMENT OF CASH FLOWS Years Ended December 31, 2020 2019 (Dollars in millions) 2018 Cash flows from operating activities: Net income Less: Net income attributable to the noncontrolling interest Net income attributable to Honeywell Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: $ 4,865 $ 6,230 $ 86 4,779 87 6,143 Depreciation Amortization Repositioning and other charges Net payments for repositioning and other charges Pension and other postretirement income Pension and other postretirement benefit payments Stock compensation expense Deferred income taxes Reimbursement receivables charge Other Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts receivable Inventories Other current assets Accounts payable Accrued liabilities 644 358 575 (833) (798) (47) 168 (175) 509 (335) 669 (67) 191 15 555 673 415 546 (376) (516) (78) 153 179 — (286) 11 (100) (430) 118 445 6,828 63 6,765 721 395 1,091 (652) (987) (80) 175 (586) — (694) (236) (503) 218 733 74 Net cash provided by (used for) operating activities 6,208 6,897 6,434 Cash flows from investing activities: Expenditures for property, plant and equipment Proceeds from disposals of property, plant and equipment Increase in investments Decrease in investments Receipts (payments) from settlements of derivative contracts Cash paid for acquisitions, net of cash acquired Net cash provided by (used for) investing activities Cash flows from financing activities: Proceeds from issuance of commercial paper and other short-term borrowings Payments of commercial paper and other short-term borrowings Proceeds from issuance of common stock Proceeds from issuance of long-term debt Payments of long-term debt Repurchases of common stock Cash dividends paid Pre-separation funding Spin-off cash Other Net cash provided by (used for) financing activities Effect of foreign exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (906) 57 (3,236) 3,508 (149) (261) (987) 10,474 (10,400) 393 10,125 (4,308) (3,714) (2,592) — — (59) (81) 68 5,208 9,067 (839) 43 (4,253) 4,464 102 (50) (533) 14,199 (14,199) 498 2,726 (2,903) (4,400) (2,442) — — (79) (6,600) 16 (220) 9,287 $ 14,275 $ 9,067 $ (828) 15 (4,059) 6,032 402 (535) 1,027 23,891 (24,095) 267 27 (1,330) (4,000) (2,272) 2,801 (179) (142) (5,032) (201) 2,228 7,059 9,287 The Notes to Consolidated Financial Statements are an integral part of this statement. 49 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY Common stock, par value Additional paid-in capital Beginning balance Issued for employee savings and option plans Stock-based compensation expense Ending balance Treasury stock Beginning balance Years Ended December 31, 2020 2019 2018 Shares $ Shares $ Shares $ (in millions, except per share amounts) 957.6 958 957.6 958 957.6 958 6,876 248 168 7,292 6,452 271 153 6,876 6,212 65 175 6,452 (246.5) (23,836) (228.0) (19,771) (206.7) (15,914) Reacquired stock or repurchases of common stock (20.7) (3,714) (26.5) (4,400) (26.5) (4,000) Issued for employee savings and option plans 6.4 321 8.0 335 5.2 143 Ending balance Retained earnings Beginning balance Adoption of new accounting standards Net income attributable to Honeywell Dividends on common stock Spin-offs Redemption value adjustment Ending balance Accumulated other comprehensive income (loss) Beginning balance Foreign exchange translation adjustment Pensions and other postretirement benefit adjustments Changes in fair value of available for sale investments Changes in fair value of cash flow hedges Ending balance Noncontrolling interest Beginning balance Acquisitions, divestitures, and other Net income attributable to noncontrolling interest Foreign exchange translation adjustment Dividends paid Ending balance (260.8) (27,229) (246.5) (23,836) (228.0) (19,771) 37,693 — 4,779 (2,567) — — 39,905 (3,197) (214) 74 4 (44) 33,978 — 6,143 (2,428) — — 37,693 (3,437) 143 86 — 11 (3,377) (3,197) 212 (6) 86 3 (54) 241 178 (3) 87 (5) (45) 212 27,481 264 6,765 (2,279) 1,749 (2) 33,978 (2,235) (728) (559) — 85 (3,437) 163 (12) 63 (10) (26) 178 Total shareowners’ equity 696.8 17,790 711.1 18,706 729.6 18,358 Cash dividends per share of common stock $ 3.630 $ 3.360 $ 3.055 The Notes to Consolidated Financial Statements are an integral part of this statement. Honeywell International, Inc. 50 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in millions, except per share amounts) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING PRINCIPLES The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The following is a description of Honeywell’s significant accounting policies. PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include the accounts of Honeywell its subsidiaries and entities in which a controlling interest is maintained. Our consolidation policy requires equity investments that we exercise significant influence over but do not control the investee and are not the primary beneficiary of the investee’s activities to be accounted for using the equity method. Investments through which we are not able to exercise significant influence over the investee and which we do not have readily determinable fair intercompany transactions and balances are eliminated in values are accounted for under the cost method. All consolidation. Inc. and all of International 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 statement of operations, balance sheet and cash flows (Consolidated Financial Statements). the FASB issued an ASU to simplify the accounting for income taxes. The standard’s In December 2019, 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 does 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 accounted 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. RESEARCH AND DEVELOPMENT Research and development costs for projects are expensed as incurred, unless these costs relate to contracts with customers where we receive reimbursements. Amounts expensed as incurred for Company-sponsored research and development projects are included in Cost of products and services sold and were $1,334 million, $1,556 million and $1,809 million for the years ended December 31, 2020, 2019 and 2018. Costs related to contracts with customers for customer-sponsored research and development projects are included as a contract cost and included in Cost of products and services sold when revenue from such contracts is recognized, consistent with our sales recognition policies. This revenue was $1,200 million, $1,079 million and $1,069 million for the years ended December 31, 2020, 2019 and 2018. 51 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and highly liquid investments having an original maturity of three months or less. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost, including any asset retirement obligations, less accumulated depreciation. For financial reporting, the straight-line method of depreciation is used over the estimated useful lives of 10 to 50 years for buildings and improvements and 2 to 16 years for machinery and equipment. Recognition of the fair value of obligations associated with the retirement of tangible long-lived assets is required when there is a legal obligation to incur such costs. Upon initial recognition of a liability, the cost is capitalized as part of the related long- lived asset and depreciated over the corresponding asset’s useful life. GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS Goodwill and indefinite-lived intangible assets are subject to impairment testing annually as of March 31, and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value. We completed our annual goodwill impairment test as of March 31, 2020 and determined that there was no impairment as of that date. In addition, due to the economic impact of COVID-19, we updated our assessment as of June 30, 2020, and determined there was no impairment. We are not aware of any additional triggering events. FINITE-LIVED INTANGIBLE ASSETS Other intangible assets with determinable lives consist of customer lists, technology, patents and trademarks and other intangibles and are amortized over their estimated useful lives, ranging from 2 to 24 years. FOREIGN CURRENCY TRANSLATION Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. Dollars are translated into U.S. Dollars using year-end exchange rates. Sales, costs and expenses are translated at the average exchange rates in effect during the year. Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive income (loss). For subsidiaries operating in highly inflationary environments, inventories and property, plant and equipment, including related expenses, are remeasured at the exchange rate in effect on the date the assets were acquired, while monetary assets and liabilities are remeasured at year-end exchange rates. Remeasurement adjustments for these subsidiaries are included in earnings. DERIVATIVE FINANCIAL INSTRUMENTS All derivative financial instruments are recorded on the balance sheet as assets or liabilities and measured at fair value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair values of both the derivatives and the hedged items are recorded in current earnings. For derivatives designated as cash flow hedges, the changes in fair value of the derivatives are recorded in Accumulated other comprehensive income (loss) and subsequently recognized in earnings when the hedged items impact earnings. Derivative financial instruments designated as hedges must be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Changes in fair value of the derivative contract must be highly correlated with changes in fair value of the underlying hedged item at inception and over the life of the hedge contract. Cash flows of such derivative financial instruments are classified consistent with the underlying hedged item. We elected to exclude the time value of the derivatives (i.e., the forward points) from the assessment of hedge effectiveness and recognize the initial value of the excluded component in earnings using the amortization approach. For derivative instruments that are designated and qualify as a net investment hedge, the gain or loss is reported as a component of Other comprehensive income (loss) and recorded in Accumulated other comprehensive income (loss). The gain or loss will be subsequently reclassified into net earnings when the hedged net investment is either sold or substantially liquidated. Honeywell International, Inc. 52 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) LEASES At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The assessment is based on (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. 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. Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in determining the lease liability. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments are incurred. 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. The Company primarily uses our incremental borrowing rate, which is based on the information available at the lease commencement date, in determining the present value of the lease payments. In determining the borrowing rate, we consider the lease term, secured incremental borrowing rate, and for leases denominated in a currency different than U.S. dollar, the collateralized borrowing rate in the foreign currency using the U.S. dollar and foreign currency swap spread, when available. PENSION BENEFITS The Company presents net periodic pensions costs by disaggregating the service cost component of such costs and reports those costs in the same line item or items in the Consolidated Statement of Operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other non-service components of such costs are required to be presented separately from the service cost component. The Company records the service cost component of Pension ongoing (income) expense in Costs of products and services sold and Selling, general and administrative expenses. The remaining components of costs within Pension ongoing (income) expense, primarily interest costs and assumed return on plan assets, are recorded in Other (income) expense. We recognize net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plan’s projected benefit obligation (the corridor) annually in the fourth quarter each year (MTM Adjustment). The MTM Adjustment is also reported in Other (income) expense. 53 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) SALES RECOGNITION Product and service sales are recognized when or as the Company transfers control of the promised products or services to its customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Service sales, principally representing repair, maintenance and engineering activities, are recognized over the contractual period or as services are rendered. Sales under long-term contracts with performance obligations satisfied over time are recognized using either an input or output method. We recognize revenue over time as we perform on these contracts because of the continuous transfer of control to the customer. With control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost input method of progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs. Under the cost-to-cost method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. We review our cost estimates on significant contracts on a periodic basis, or when circumstances change and warrant a modification to a previous estimate. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical influence these estimates include performance trends and other economic projections. Significant factors that inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Provisions for anticipated losses on long-term contracts are recorded in full when such losses become evident, to the extent required. The customer funding for costs incurred for nonrecurring engineering and development activities of our products under agreements with commercial customers is deferred and subsequently recognized as revenue as products are delivered to the customers. Additionally, expenses incurred, up to the customer agreed funded amount, are deferred as an asset and recognized as cost of sales when products are delivered to the customer. The deferred customer funding and costs result in recognition of deferred costs (asset) and deferred revenue (liability) on our Consolidated Balance Sheet. Capitalized contract fulfillment costs were approximately $1.3 billion and $1 billion as of December 31, 2020 and 2019. The amounts recognized as Cost of products and services sold were approximately $0.1 billion for the years ended December 31, 2020, 2019 and 2018. Revenues for our mechanical service programs are recognized as performance obligations that are satisfied over time, with recognition reflecting a series of distinct services using the output method. The terms of a contract or the historical business practice can give rise to variable consideration due to, but not limited to, cash-based incentives, rebates, performance awards, or credits. We estimate variable consideration at the most likely amount we will receive from customers. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely information (historical, current and forecasted) that is on an assessment of our anticipated performance and all reasonably available to us. STOCK-BASED COMPENSATION PLANS The principal awards issued under our stock-based compensation plans, which are described in Note 16 Stock- Based Compensation Plans, are non-qualified stock options and restricted stock units. The cost for such awards is measured at the grant date based on the fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award) and is included in Selling, general and administrative expenses. Forfeitures are estimated at the time of grant to recognize expense for those awards that are expected to vest and are based on our historical forfeiture rates. Honeywell International, Inc. 54 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) INCOME TAXES Significant judgment is required in evaluating tax positions. We establish reserves for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum recognition threshold. The approach for evaluating certain and uncertain tax positions is defined by the authoritative guidance which determines when a tax position is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, the Company and its subsidiaries are examined by various federal, state and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a change in estimate become known. During 2020, the Company revised the disclosure of deferred tax assets and deferred tax liabilities in Note 5 Income Taxes as of December 31, 2019, to present separately the deferred tax liability for Right-of-use assets of $159 million and the deferred tax asset for Lease liabilities of $167 million, which were previously reported net within the deferred tax liability for Property, plant and equipment. This had no other impact to our Consolidated Financial Statements. For additional information, see Note 5 Income Taxes. EARNINGS PER SHARE Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. ENVIRONMENTAL The Company accrues costs related to environmental matters when it is probable that it has incurred a liability related to a contaminated site and the amount can be reasonably estimated. For additional information, see Note 20 Commitments and Contingencies. ASBESTOS RELATED LIABILITIES AND INSURANCE RECOVERIES The Company recognizes a liability for any asbestos related contingency that In connection with the recognition of reasonably estimable. asbestos related insurance recoveries that are deemed probable. For additional Commitments and Contingencies. is probable of occurrence and liabilities for asbestos related matters, we record information, see Note 20 REIMBURSEMENT RECEIVABLES In conjunction with the Garrett and Resideo spin-offs, the Company entered into reimbursement agreements under which Honeywell receives cash payments as reimbursement primarily for asbestos related liability payments related to the Bendix business in the U.S. (Garrett) and for net spending for environmental matters at certain sites as defined in the agreement (Resideo). Accordingly, the Company recorded receivables based on estimates of the underlying reimbursable Honeywell asbestos and environmental spend, and we monitor the recoverability of such receivables, which are subject to the terms of applicable credit agreements and general ability to pay. For Garrett, the Company established an allowance based on the developments associated with Garrett’s Chapter 11 bankruptcy filing. See Note 20 Commitments and Contingencies for a discussion of the recognition and measurement of our reimbursement receivables, including the allowance established for Garrett. 55 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 2. ACQUISITIONS AND DIVESTITURES the Company acquired businesses for an aggregate cost (net of cash and debt assumed) of During 2020, approximately $261 million, which included the October 2020 acquisition of Rocky Research and the December 2020 acquisition of Sine Group. Rocky Research is a technology leader specializing in thermal, energy and power management solutions and is included within our Aerospace segment. Sine Group offers a Software-as-a-Service (SaaS) that handles visitor management, workplace and supply chain solutions and is included in the Honeywell Building Technologies segment. The preliminary determination of the assets and liabilities acquired with Rocky Research and Sine Group is included in the Consolidated Balance Sheet as of December 31, 2020, including $167 million allocated to goodwill, which is non-deductible for tax purposes. There were no significant divestitures during 2020. On December 22, 2020, the Company agreed to acquire 100% of the outstanding stock of Sparta Systems from New Mountain Capital in an all-cash transaction for $1.3 billion. Sparta Systems is a leading provider of enterprise quality management software for the life sciences industry and is expected to further strengthen the Company’s transformation solutions, and enterprise performance management leadership in industrial automation, digital software. The transaction is subject to regulatory review and approval and customary closing conditions. The transaction is expected to close in the first quarter of 2021 and the business will be reported within the Performance Materials and Technologies segment. During 2019, there were no significant acquisitions or divestitures individually or in the aggregate. During 2018, the Company acquired businesses for an aggregate cost (net of cash and debt assumed) of approximately $535 million, mainly due to the November 2018 acquisition of Transnorm, a global leader in high- performance conveyor and warehouse solutions, including approximately $380 million allocated to goodwill. Transnorm is part of Safety and Productivity Solutions. The goodwill is non-deductible for tax purposes. On October 1, 2018, the Company completed the tax-free spin-off to Honeywell shareowners of its Transportation Systems business, part of Aerospace, into a standalone publicly-traded company, Garrett. On October 29, 2018, the Company completed the tax-free spin-off to Honeywell shareowners of its Homes and Global Distribution business, part of Home and Building Technologies (renamed Honeywell Building Technologies following the spin-off), into a standalone publicly-traded company, Resideo. The assets of approximately $5.5 billion, including approximately $2.8 billion of goodwill and net of recorded receivables, and liabilities of approximately $7.2 billion, associated with the spin-off entities were removed through Retained Earnings from the Company’s Consolidated Balance Sheet as of the effective date of the spin-off. The results of operations and cash flows are included in the Consolidated Statement of Operations and Consolidated Statement of Cash Flows through the effective date of the spin-off. The Income before taxes attributable to the spin-off businesses were $0.4 billion for 2018. Honeywell shareowners of record as of the close of business on October 16, 2018 received one share of Resideo common stock for every 6 shares of Honeywell common stock. Immediately prior to the effective date of the spin-off, Resideo incurred debt of $1.2 billion to make a cash distribution to the Company. Honeywell shareowners of record as of the close of business on September 18, 2018 received one share of Garrett common stock for every 10 shares of Honeywell common stock. Immediately prior to the effective date of the spin-off, Garrett incurred debt of $1.6 billion to make a cash distribution to the Company. In 2018, in connection with the spin-off, the Company entered into certain agreements with Resideo and Garrett to effect our legal and structural separation, including transition services agreements to provide certain administrative and other services for a limited time, and tax matters and indemnification and reimbursement agreements. For additional information, see Note 20 Commitments and Contingencies. Honeywell International, Inc. 56 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 3. REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS The Company 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 disaggregated revenue table and related discussions by operating segment for details. Aerospace Commercial Aviation Original Equipment Commercial Aviation Aftermarket Defense and Space Transportation Systems Honeywell Building Technologies Homes Products and Software Distribution (ADI) Products Building Solutions Performance Materials and Technologies UOP Process Solutions Specialty Products Fluorine Products Safety and Productivity Solutions Safety and Retail Productivity Solutions and Services Warehouse and Workflow Solutions Sensing & Internet-of-Things (IoT) Years Ended December 31, 2020 2019 2018 $ 1,932 $ 2,997 $ 3,786 5,826 — 5,731 5,326 — 2,833 5,373 4,665 2,622 11,544 14,054 15,493 — — 2,995 2,194 5,189 2,177 4,590 1,075 1,581 9,423 2,414 1,256 2,018 793 6,481 — — 3,314 2,403 5,717 2,890 5,146 1,062 1,736 1,732 2,196 2,953 2,417 9,298 2,845 4,981 1,134 1,714 10,834 10,674 2,215 1,270 1,771 848 6,104 2,278 1,540 1,662 857 6,337 Net sales $ 32,637 $ 36,709 $ 41,802 Aerospace – A global supplier of products, software and services for aircrafts that it sells to 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. 57 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) 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 from incoming different assets to enable smart maintenance, security threats. improve building performance and even protect 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, 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. fuel, petrochemicals and renewable fuels for jet 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 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 23 Segment Financial Data. The Company recognizes revenue arising from performance obligations outlined in contracts with its customers that are satisfied at a point in time and over time. The disaggregation of our revenue based off timing of recognition is as follows: Products, transferred point in time Products, transferred over time Net product sales Services, transferred point in time Services, transferred over time Net service sales Net sales Years Ended December 31, 2020 2019 2018 61 % 61 % 67 % 15 76 8 16 24 14 75 9 16 25 12 79 7 14 21 100 % 100 % 100 % Honeywell International, Inc. 58 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) CONTRACT BALANCES The Company records progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded on the Consolidated Balance Sheet in Accounts receivable—net and Other assets (unbilled receivables (contract assets) and billed receivables) and Accrued liabilities and Other liabilities (customer advances and deposits (contract liabilities)). Unbilled receivables (contract assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance 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 the Company’s contract assets and liabilities balances: Contract assets—January 1 Contract assets—December 31 Change in contract assets—increase (decrease) Contract liabilities—January 1 Contract liabilities—December 31 Change in contract liabilities—(increase) decrease Net change 2020 2019 1,602 1,618 16 $ $ (3,501) $ (4,033) (532) $ (516) $ 1,548 1,602 54 (3,378) (3,501) (123) (69) $ $ $ $ $ The net change in 2020 and 2019 was primarily driven by the receipt of advance payments from customers exceeding recognition of revenue as performance obligations were satisfied prior to billing. For the years ended December 31, 2020 and 2019, the Company recognized revenue of $1,709 million and $1,543 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 for goods or services and 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. 59 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) PERFORMANCE OBLIGATIONS A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When our contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. In situations when our contract includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For any contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation. In such cases, the observable standalone sales are used to determine the stand alone selling price. Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. The following table outlines the Company’s remaining performance obligations disaggregated by segment: Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions December 31, 2020 $ 9,493 5,924 6,704 4,255 $ 26,376 Performance obligations recognized as of December 31, 2020 will be satisfied over the course of future periods. Our disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. Performance obligations expected to be satisfied within one year and greater than one year are 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 our fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts we may be entitled to receive an advance payment. The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed. Honeywell International, Inc. 60 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 4. REPOSITIONING AND OTHER CHARGES A summary of repositioning and other charges follows: Severance Asset impairments Exit costs Reserve adjustments Total net repositioning charge Asbestos related litigation charges, net of insurance and reimbursements Probable and reasonably estimable environmental liabilities, net of reimbursements Other $ Years Ended December 31, 2020 2019 2018 $ 475 21 69 (47) 518 50 27 (20) $ 260 95 83 (5) 433 42 59 12 289 162 79 (10) 520 163 345 63 Total net repositioning and other charges $ 575 $ 546 $ 1,091 The following table summarizes the pre-tax distribution of total net repositioning and other charges by classification: Cost of products and services sold Selling, general and administrative expenses Other (income) expense Years Ended December 31, 2020 2019 2018 $ $ 308 267 — 575 $ $ 276 270 — 546 $ $ 811 239 41 1,091 The following table summarizes the pre-tax impact of total net repositioning and other charges by segment: Years Ended December 31, Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions Corporate 2020 2019 2018 $ $ 157 100 167 41 110 575 $ $ 33 108 93 71 241 546 $ $ 154 111 191 133 502 1,091 the Company recognized repositioning charges totaling $565 million, including severance costs of In 2020, $475 million related to workforce reductions of 14,159 manufacturing and administrative positions across our segments, with a majority of the workforce reductions in Aerospace and Performance Materials and Technologies. The workforce reductions primarily related to the Company aligning its cost structure with the slowdown in demand for many of its products and services due to the global recession, and with our productivity and ongoing functional transformation initiatives and to site consolidations and hub strategies. The repositioning charge included exit costs of $69 million primarily related to current period exit costs incurred for previously approved repositioning projects. Also, $47 million of previously established reserves, primarily for severance, were returned to income mainly as a result of higher attrition than anticipated in prior severance actions resulting in lower payments. the Company recognized repositioning charges totaling $438 million, In 2019, including severance costs of $260 million related to workforce reductions of 5,336 manufacturing and administrative positions across our segments. The workforce reductions related to our productivity and ongoing functional transformation initiatives and to site transitions, mainly in Honeywell Building Technologies, as we transition manufacturing to more cost-effective 61 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) locations. The repositioning charge included asset impairments of $95 million largely related to a write down in connection with assets held for sale. The repositioning charge included exit costs of $83 million primarily related to current period exit costs incurred for previously approved repositioning projects, termination fees associated with the early cancellation of supply agreements for certain raw materials in Performance Materials and Technologies and Honeywell Building Technologies and for closure obligations associated with site transitions. the Company recognized repositioning charges totaling $530 million, In 2018, including severance costs of $289 million related to workforce reductions of 6,486 manufacturing and administrative positions across our segments. The workforce reductions were primarily related to planned site closures, mainly in Safety and Productivity Solutions, Performance Materials and Technologies and Honeywell Building Technologies, as we transition manufacturing sites to more cost-effective locations. The workforce reductions were also related to our productivity and ongoing functional transformation initiatives. The repositioning charge included asset impairments of $162 million mainly related to manufacturing plant and equipment associated with planned site closures. Asset impairments also included the write-down of a legacy property in Corporate in connection with its planned disposition and the write-off of certain capitalized assets in Corporate. The repositioning charge included exit costs of $79 million primarily related to a termination fee associated with the early cancellation of a supply agreement for certain raw materials in Performance Materials and Technologies and for closure obligations associated with planned site closures. The following table summarizes the status of the Company’s total repositioning reserves: Severance Costs Asset Impairments Exit Costs Total Balance at December 31, 2017 Charges Usage—cash Usage—noncash Divestitures Adjustments Foreign currency translation Balance at December 31, 2018 Charges Usage—cash Usage—noncash Divestitures Adjustments Foreign currency translation Balance at December 31, 2019 Charges Usage—cash Usage—noncash Divestitures Adjustments Foreign currency translation Balance at December 31, 2020 $ $ 442 289 (218) — (11) (8) (5) 489 260 (186) — — (8) — 555 475 (474) — — (44) 15 527 $ $ — $ 162 — (163) — 1 — — 95 — (100) — 5 — — 21 — (21) — — — — $ 71 79 (67) — (3) (3) — 77 83 (63) — — (2) 1 96 69 (90) — — (3) 2 74 $ $ 513 530 (285) (163) (14) (10) (5) 566 438 (249) (100) — (5) 1 651 565 (564) (21) — (47) 17 601 Certain repositioning projects will recognize exit costs in future periods when the actual liability is incurred. Such exit costs incurred in 2020, 2019 and 2018 were not significant. In 2018, the other charge of $63 million mainly relates to reserves taken due to the required wind-down of the Company’s activities in Iran and the evaluation of potential resolution of a certain legal matter. Honeywell International, Inc. 62 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 5. INCOME TAXES INCOME BEFORE TAXES U.S. Non-U.S. TAX EXPENSE (BENEFIT) Tax expense (benefit) consists of Current: U.S. Federal U.S. State Non-U.S. Deferred: U.S. Federal U.S. State Non-U.S. $ $ $ $ $ Years Ended December 31, 2020 2019 2018 3,318 2,694 6,012 $ $ 4,178 3,381 7,559 $ $ 2,919 4,568 7,487 Years Ended December 31, 2019 2018 2020 475 $ $ $ 79 768 1,322 234 39 (448) (175) $ $ $ 8 43 1,099 1,150 332 63 (216) 179 $ 1,147 $ 1,329 $ (21) 89 1,177 1,245 396 8 (990) (586) 659 The U.S. federal statutory income tax rate is reconciled to our effective income tax rate as follows: U.S. federal statutory income tax rate Taxes on non-U.S. earnings(1)(2) U.S. state income taxes(1) Reserves for tax contingencies Employee share-based payments Reduction of certain receivables U.S. Tax Cuts and Jobs Act Reduction of taxes on unremitted earnings Separation tax costs All other items—net (1) Net of changes in valuation allowance (2) Includes U.S. taxes on non-U.S. earnings 63 Honeywell International, Inc. Years Ended December 31, 2020 2019 2018 21.0 % (0.8) 21.0 % (0.5) 21.0 % 0.2 1.3 (2.6) (1.2) 2.0 — — — 1.1 2.0 (1.2) — (3.6) — — (0.6) 19.1 % (1.2) 17.6 % 1.6 0.3 (0.7) — (5.8) (14.2) 5.5 0.9 8.8 % HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The effective tax rate increased by 1.5 percentage points in 2020 compared to 2019. The increase was primarily attributable to accrued withholding taxes related to unremitted foreign earnings and non-cash charges related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax benefit, offset by the favorable resolution of a foreign tax matter related to the previously completed spin-off transactions, tax impact of restructuring, tax law changes in India, and the resolution of certain U.S. tax matters. The Company’s non-U.S. effective tax rate was 11.9%, a decrease of approximately 14.2 percentage points compared to 2019. The decrease in the foreign effective tax rate was primarily attributable to the favorable resolution of a foreign tax matter related to the previously completed spin-off transactions, tax impact of restructuring, and tax law changes in India offset by accrued withholding taxes related to unremitted foreign earnings. The effective tax rate increased by 8.8 percentage points in 2019 compared to 2018. The increase was primarily attributable to a lower income tax benefit resulting from revised guidance related to the U.S. Tax Cuts and Jobs Act and internal restructuring initiatives that resulted in a $281 million reduction of accrued withholding taxes related to unremitted foreign earnings when compared to the prior year. The Company’s non-U.S. effective tax rate was 26.1%, an increase of approximately 22.0 percentage points compared to 2018. The increase in the foreign effective tax rate was primarily attributable to a lower income tax benefit related to the Company’s internal restructuring initiatives when compared to the prior year. DEFERRED TAX ASSETS (LIABILITIES) The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows: Deferred tax assets: Postretirement benefits other than pensions Asbestos and environmental Employee compensation and benefits Lease liabilities Other accruals and reserves Net operating and capital losses Tax credit carryforwards Gross deferred tax assets Valuation allowance Total deferred tax assets Deferred tax liabilities: Pension Property, plant and equipment Right-of-use asset Intangibles Unremitted earnings of foreign subsidiaries Other asset basis differences Other Total deferred tax liabilities Net deferred tax liability December 31, 2020 2019 $ 85 $ 508 180 197 110 779 219 111 531 205 167 279 652 246 2,078 (766) 2,191 (656) 1,312 $ 1,535 (548) $ (437) (184) (898) (398) (169) (31) (2,665) (469) (477) (159) (1,296) (419) (136) (163) (3,119) (1,584) $ (1,353) $ $ $ Honeywell International, Inc. 64 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The Company’s gross deferred tax assets include $872 million related to non-U.S. operations comprised principally of net operating losses, capital loss and tax credit carryforwards (mainly in Canada, France, Germany, Luxembourg and the United Kingdom) and deductible temporary differences. We maintain a valuation allowance of $758 million against a portion of the non-U.S. gross deferred tax assets. The change in the valuation allowance resulted in an increase of $105 million, a decrease of $23 million and an increase of $57 million to income tax expense in 2020, 2019 and 2018. In the event we determine that we will not be able to realize our net deferred tax assets in the future, we will reduce such amounts through an increase to income tax expense in the period such determination is made. Conversely, if we determine that we will be able to realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded valuation allowance through a reduction to income tax expense in the period that such determination is made. As of December 31, 2020, the Company recorded a $398 million deferred tax liability on all our unremitted foreign earnings based on estimated earnings and profits of approximately $22.4 billion as of the balance sheet date. As of December 31, 2020, the Company’s net operating loss, capital follows: loss and tax credit carryforwards were as Jurisdiction U.S. Federal U.S. State Non-U.S. Non-U.S. Expiration Period 2040 2040 2040 Indefinite $ $ Net Operating and Capital Loss Carryforwards Tax Credit Carryforwards 24 $ 382 314 2,532 3,252 $ 92 21 111 — 224 Many jurisdictions impose limitations on the timing and utilization of net operating loss and tax credit carryforwards. In those instances, whereby there is an expected permanent limitation on the utilization of the net operating loss or tax credit carryforward, the deferred tax asset and amount of the carryforward have been reduced. Change in unrecognized tax benefits: Balance at beginning of year Gross increases related to current period tax positions Gross increases related to prior periods tax positions Gross decreases related to prior periods tax positions Decrease related to resolutions of audits with tax authorities Expiration of the statute of limitations for the assessment of taxes Foreign currency translation Balance at end of year Years Ended December 31, 2020 2019 2018 $ 1,164 $ 1,089 $ 94 68 (256) (35) (76) 32 51 83 (34) (3) (13) (9) 947 370 82 (201) (40) (50) (19) $ 991 $ 1,164 $ 1,089 As of December 31, 2020, 2019 and 2018, unrecognized tax benefits that if recognized would be recorded as a component of Tax expense. there were $991 million, $1,164 million, and $1,089 million of 65 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The following table summarizes tax years that remain subject to examination by major tax jurisdictions as of December 31, 2020: Jurisdiction U.S. Federal U.S. State Australia Canada(1) China France Germany(1) India Italy Netherlands Switzerland(1) United Kingdom Open Tax Years Based on Originally Filed Returns Examination in progress 2017 - 2018 2011 - 2019 N/A 2015 - 2018 2010 - 2019 2017 - 2019 2008 - 2018 1999 - 2018 2012 - 2017 2016 - 2017 2015 - 2018 2013 - 2018 Examination not yet initiated 2019 - 2020 2016 - 2019 2017 - 2020 2019 - 2020 2020 2020 2019 - 2020 2019 - 2020 2018 - 2020 2018 - 2020 2019 - 2020 2019 - 2020 (1) Includes provincial or similar local jurisdictions, as applicable. Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in our financial statements. In addition, the outcome of these examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in future periods. Unrecognized tax benefits for examinations in progress were $556 million, $413 million and $304 million, as of December 31, 2020, 2019 and 2018. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of Tax expense in the Consolidated Statement of Operations and totaled $80 million, $73 million and $45 million for the years ended December 31, 2020, 2019 and 2018. Accrued interest and penalties were $507 million, $487 million and $426 million, as of December 31, 2020, 2019 and 2018. NOTE 6. ACCOUNTS RECEIVABLE Trade Less—Allowance for doubtful accounts December 31, 2020 2019 $ $ 7,029 (202) 6,827 $ $ 7,639 (146) 7,493 Trade Receivables includes $1,589 million and $1,586 million of unbilled balances under long-term contracts as of December 31, 2020 and 2019. These amounts are billed in accordance with the terms of customer contracts to which they relate. Honeywell International, Inc. 66 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 7. INVENTORIES Raw materials Work in process Finished products Reduction to LIFO cost basis December 31, 2020 2019 $ 1,079 $ 798 2,612 4,489 — 1,056 817 2,593 4,466 (45) $ 4,489 $ 4,421 During the third quarter of 2020, the Company changed the method of valuing inventory from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method for inventories within our Performance Materials and Technologies segment not previously valued using FIFO. The Company believes the FIFO method is preferable and better reflects the current value of inventory reported in the Consolidated Balance Sheet. The cumulative effect of this change in accounting principle was $7 million and was recorded as a reduction to Cost of products sold for the year ended December 31, 2020. The inventories subject to this change totaled approximately 6% of consolidated inventories at the time of this change. This change was not material to the Consolidated Financial Statements, and therefore prior periods were not adjusted retrospectively. Inventories valued at LIFO amounted to $292 million at December 31, 2019. Had such LIFO inventories been valued at current costs, the carrying values would have been approximately $45 million higher at December 31, 2019. There are no remaining inventories valued at LIFO. NOTE 8. PROPERTY, PLANT AND EQUIPMENT—NET Land and improvements Machinery and equipment Buildings and improvements Construction in progress Less—Accumulated depreciation December 31, 2020 2019 $ 259 $ 10,008 3,245 825 14,337 (8,767) 251 9,586 3,152 724 13,713 (8,388) $ 5,570 $ 5,325 Depreciation expense was $644 million, $673 million and $721 million for the years ended December 31, 2020, 2019 and 2018. 67 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS—NET The following table summarizes the change in the carrying amount of goodwill for the years ended December 31, 2020 and 2019 by segment. December 31, 2019 Acquisitions/ Divestitures Currency Translation Adjustment December 31, 2020 Aerospace $ 2,266 $ 105 $ 7 $ Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions 3,215 5,105 4,977 62 — — 108 150 63 2,378 3,385 5,255 5,040 $ 15,563 $ 167 $ 328 $ 16,058 Other intangible assets are comprised of: December 31, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Determinable life intangibles: Patents and technology $ 2,159 $ (1,595) $ 564 $ 2,060 $ (1,481) $ Customer relationships Trademarks Other Indefinite life intangibles: Trademarks 3,889 327 298 6,673 1,046 (2,050) 1,839 (247) (267) 80 31 (4,159) 2,514 3,769 317 297 6,443 (1,766) (228) (262) (3,737) 2,706 $ 7,719 $ (4,159) $ 3,560 $ 7,471 $ (3,737) $ — 1,046 1,028 — 579 2,003 89 35 1,028 3,734 Intangible assets amortization expense was $358 million, $415 million and $395 million for the years ended December 31, 2020, 2019 and 2018. Estimated intangible asset amortization expense for each of the next five years approximates $335 million in 2021, $311 million in 2022, $272 million in 2023, $250 million in 2024 and $239 million in 2025. Honeywell International, Inc. 68 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 10. LONG-TERM DEBT AND CREDIT AGREEMENTS December 31, 2020 2019 $ — $ 800 1,500 2,500 600 1,100 1,534 300 614 750 1,250 1,500 920 750 1,000 614 441 462 417 445 750 22 201 51 266 1,123 800 1,500 — 600 600 1,404 300 — 750 — 1,500 842 750 — — 441 462 417 445 — 22 201 51 278 18,787 (2,445) 12,486 (1,376) $ 16,342 $ 11,110 0.65% Euro notes due 2020 4.25% notes due 2021 1.85% notes due 2021 0.483% notes due 2022 2.15% notes due 2022 Floating rate notes due 2022 1.30% Euro notes due 2023 3.35% notes due 2023 0.00% Euro notes due 2024 2.30% notes due 2024 1.35% notes due 2025 2.50% notes due 2026 2.25% Euro notes due 2028 2.70% notes due 2029 1.95% notes due 2030 0.75% Euro notes due 2032 5.70% notes due 2036 5.70% notes due 2037 5.375% notes due 2041 3.812% notes due 2047 2.80% notes due 2050 Industrial development bond obligations, floating rate maturing at various dates through 2037 6.625% debentures due 2028 9.065% debentures due 2033 Other (including capitalized leases and debt issuance costs), 8.9% weighted average interest rate maturing at various dates through 2025 Less-current portion 69 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The schedule of principal payments on long-term debt is as follows: 2021 2022 2023 2024 2025 Thereafter Less-current portion December 31, 2020 $ $ 2,445 4,240 1,862 1,392 1,255 7,593 18,787 (2,445) 16,342 On August 19, 2020, the Company issued $2.5 billion 0.483% Senior Notes due 2022 and $500 million Floating Rate Senior Notes due 2022 (collectively, the 2022 Callable Notes). The $500 million Floating Rate Senior Notes due 2022 were issued at a variable interest rate equal to the three-month LIBOR plus the applicable margin of 0.23%. The Company may redeem the 2022 fixed rate notes at any time, in whole or in part, at the Company’s option. The Company may redeem the 2022 floating rate notes at any time, in whole or in part, on or after August 19, 2021. The 2022 Callable Notes resulted in gross proceeds of $3.0 billion, offset by $10 million in discount and closing costs related to the offering. The Company used the proceeds of the offering to repay $3.0 billion of borrowings under the Term Loan Agreement (defined below). On May 18, 2020, the Company issued $1.25 billion 1.35% Senior Notes due 2025, $1.0 billion 1.95% Senior Notes due 2030, and $750 million 2.80% Senior Notes due 2050 (collectively, the 2020 Notes) to replace and, accordingly, permanently reduce $3.0 billion of undrawn commitments under the Term Loan Agreement, referenced below. The Company may redeem the 2020 Notes at any time, in whole or in part, at the Company’s option. The offering provided gross proceeds of $3.0 billion, offset by $27 million in discount and closing costs related to the offering. 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 offering provided gross proceeds of $1.1 billion, offset by $9 million in discount and closing costs related to the offering. The 2022 Callable Notes, 2020 Notes, and 2020 Euro Notes are senior unsecured and unsubordinated obligations of the Company and rank equally with each other and with all of the Company’s existing and future senior unsecured debt and senior to all of the Company’s subordinated debt. On April 10, 2020, the Company entered into a $1.5 billion 364-Day Credit Agreement (the 364-Day Credit is maintained for general corporate Agreement) with a syndicate of banks. This 364-Day Credit Agreement purposes. The 364-Day Credit Agreement replaced the previous 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 provided for a two-year, delayed draw term loan facility in the aggregate principal amount of $6.0 billion. Effective May 22, 2020, the Company permanently reduced the undrawn commitments under the Term Loan Agreement by an aggregate amount of $3.0 billion. On June 24, 2020, the Company drew on the remaining $3.0 billion of commitments under the Term Loan Agreement at a variable interest rate equal to the one-month LIBOR plus the applicable margin of 1.25%. The draw provided gross proceeds of $3.0 billion, offset by $7 million in closing costs related to the borrowing. On August 20, 2020, the Company prepaid the outstanding principal amount of $3.0 billion, using the proceeds from the offering of the 2022 Callable Notes. On February 21, 2020, the Company paid its 0.65% Euro notes due 2020. On April 26, 2019, the Company entered into a $4.0 billion Five Year Credit Agreement (the 5-Year Credit Agreement) with a syndicate of banks, dated April 26, 2019. This 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. 70 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) As of December 31, 2020, there were no outstanding borrowings under the 364-Day Credit Agreement, Term Loan Agreement, or 5-Year Credit Agreement. NOTE 11. LEASES A significant portion of the Company’s operating and finance lease portfolio includes corporate offices, research and development facilities, manufacturing sites, information technology equipment, and automobiles. The majority of our leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more. Operating lease ROU assets are included in Other assets. The current portion of operating lease liabilities are included in Accrued liabilities, and the non-current portion of operating lease liabilities are included in Other liabilities on the Consolidated Balance Sheet. Finance lease ROU assets are included in Property, plant and equipment—net. The current portion of finance lease liabilities are included in Current maturities of long-term debt, and the non-current portion of finance lease liabilities are included in Long-term debt on the Consolidated Balance Sheet. A portion of the Company’s real estate leases is generally subject to annual changes in the Consumer Price Index (CPI). The changes to the CPI are treated 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 and recognized in the period in which the obligation for those payments was incurred. Operating lease cost Variable lease cost Short-term lease cost Finance lease cost: Amortization of right-of-use assets Interest on lease liability Total finance lease cost Total lease cost Supplemental cash flow information related to leases was as follows: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases Operating cash flows for finance leases Financing cash flows for finance leases Right-of-use assets obtained in exchange for lease obligations: Operating leases Finance leases Years Ended December 31, 2020 2019 $ 214 $ 18 17 69 27 96 $ 345 $ 222 27 12 65 30 95 356 Years Ended December 31, 2020 2019 $ $ 206 $ 32 65 245 $ 27 224 32 61 179 34 71 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Supplemental balance sheet information related to leases was as follows: Operating leases Other assets Accrued liabilities Other liabilities Total operating lease liabilities Finance leases Property, plant and equipment Accumulated depreciation Property, plant and equipment—net Current maturities of long-term debt Long-term debt Total finance lease liabilities Weighted-average remaining lease term Operating leases Finance leases Weighted-average discount rate Operating leases Finance leases As of December 31, 2020, maturities of lease liabilities were as follows: 2021 2022 2023 2024 2025 Thereafter Total lease payments Less-interest Total December 31, 2020 2019 $ $ $ $ $ 773 187 641 828 357 (180) 177 60 124 184 7 years 3 years 2.9 % 16.3 % 673 171 534 705 361 (152) 209 59 156 215 6 years 4 years 3.3 % 16.2 % Operating Leases Finance Leases $ $ $ $ $ $ $ 204 169 137 103 69 231 913 (85) 83 63 46 40 13 — 245 (61) 184 $ 828 $ NOTE 12. DERIVATIVE INSTRUMENTS AND HEDGING TRANSACTIONS DERIVATIVES AND HEDGING ACTIVITIES The Company uses derivative financial instruments to manage its risks related to interest rates and foreign currency exchange rate fluctuations. Derivative financial instruments are not used for trading or other speculative purposes. To qualify as a hedge, derivative financial instruments must be evaluated for hedge effectiveness at the inception of the contract and designated as a hedge. Changes in fair value of the derivative contract must be highly correlated with changes in fair value of the underlying hedged item at inception and over the life of the hedge contract. Honeywell International, Inc. 72 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) FOREIGN CURRENCY RISK MANAGEMENT The Company operates a global business in a wide variety of foreign currencies. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. The Company’s objective is to preserve the U.S. Dollar value of foreign currency denominated cash flows and earnings. The Company monitors its collective foreign currency exposure and enters into foreign currency exchange forward and option contracts (foreign currency exchange contracts) with third parties, when necessary, to minimize the impact of changes in foreign currency exchange rates. The Company has monetary assets and liabilities denominated in non-functional currencies. Prior to conversion into U.S. dollars, these assets and liabilities are remeasured at spot exchange rates in effect on the balance sheet date. The effects of changes in spot rates are recognized in earnings and included in Other (income) expense. We use foreign currency exchange contracts to hedge our foreign currency exposure. 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. The Company uses foreign currency contracts to hedge forecasted sales and purchases, which are denominated in non-functional currencies. Changes in the forecasted non-functional currency cash flows due to movements in exchange rates are substantially offset by changes in the fair value of these foreign currency exchange contracts designated as hedges. Market value gains and losses on these contracts are recognized in earnings when the hedged transaction is recognized. As of the Company held contracts with notional amounts of $16,123 million and December 31, 2020 and 2019, $12,746 million to exchange foreign currencies, principally the U.S. Dollar, Euro, Canadian Dollar, British Pound, Swiss Franc, Mexican Peso, Chinese Renminbi, Indian Rupee, and Malaysian Ringgit. The Company also designates certain foreign currency debt and derivative contracts as hedges against portions of its net investment in foreign operations. Gains or losses of the foreign currency debt and derivative contracts designated as net investment hedges are recorded in the same manner as foreign currency translation adjustments. INTEREST RATE RISK MANAGEMENT Financial instruments, including derivatives, expose the Company to market risk related to changes in interest rates. The Company uses a combination of including long-term, medium-term and short-term instruments, financing, variable-rate commercial paper, and interest rate swaps to convert the interest rate mix of our total debt portfolio and related overall cost of borrowing. financial CREDIT RISK MANAGEMENT instruments, The Company continues to monitor the creditworthiness of its counterparties to mitigate the risk of nonperformance. Financial the Company grants credit terms to its customers in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single customer or a small group of customers. including derivatives, expose the Company to counterparty credit risk. In addition, 73 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) DERIVATIVE AND HEDGING INSTRUMENTS The following table summarizes the notional amounts and fair values of the Company’s outstanding derivatives by risk category and instrument type within the Consolidated Balance Sheet as of December 31, 2020 and 2019: Notional Fair Value Asset Fair Value (Liability) December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Derivatives in Fair Value Hedging Relationships: Interest rate swap agreements $ 3,950 $ 3,950 $ 194 $ 38 $ — $ (13) Derivatives in Cash Flow Hedging Relationships: Foreign currency exchange contracts Derivatives in Net Investment Hedging Relationships: Foreign currency exchange contracts Cross currency swap agreements Total Derivatives Designated as Hedging Instruments Derivatives Not Designated as Hedging Instruments: Foreign currency exchange contracts 488 3,340 65 218 (58) (16) 806 1,200 866 1,200 6,444 9,356 45 — 304 71 51 (1) (50) — — 378 (109) (29) Total Derivatives at Fair Value $ 21,273 $ 17,896 $ 396 $ 14,829 8,540 92 2 380 $ (91) (200) $ (5) (34) All derivative assets are presented in Other current assets or Other assets. All derivative liabilities are presented in Accrued liabilities or Other liabilities. As of December 31, 2020, cash collateral received that has not been offset against our derivatives of $34 million was recorded in Accrued liabilities and Other assets. the In addition to the foreign currency derivative contracts designated as net Company’s foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $4,414 million and $6,882 million as of December 31, 2020 and 2019. investment hedges, certain of 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. Gains and losses on interest rate swap agreements recognized in earnings were $169 million of income, $70 million of income and $37 million of expense for the years ended December 31, 2020, 2019 and 2018. Gains and losses are fully offset by losses and gains on the underlying debt being hedged. The following table sets forth the amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges: Line in the Consolidated Balance Sheet of Hedged Item December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Long-term debt $ 4,144 $ 3,975 $ 194 $ 25 Carrying Amount of the Hedged Item Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item Honeywell International, Inc. 74 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The following tables summarize the location and impact to the Consolidated Statement of Operations related to derivative instruments: Year Ended December 31, 2020 Cost of Products and Services Sold SG&A Other (Income) Expense Interest and Other Financial Charges Revenue $ 32,637 $ 22,169 $ 4,772 $ (675) $ 359 Gain or (loss) on cash flow hedges: Foreign Currency Exchange Contracts: Amount reclassified from accumulated other comprehensive income into income Amount excluded from effectiveness testing recognized in earnings using an amortization approach Gain or (loss) on fair value hedges: Interest Rate Swap Agreements: Hedged items Derivatives designated as hedges Gain or (loss) on net investment hedges: Foreign Currency Exchange Contracts: Amount excluded from effectiveness testing recognized in earnings using an amortization approach Gain or (loss) on derivatives not designated as hedging instruments: Foreign currency exchange contracts (3) — — — — — 54 13 — — — — (4) — — — — — 28 29 — — — (166) — — (169) 169 18 — 75 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Year Ended December 31, 2019 Cost of Products and Services Sold SG&A Other (Income) Expense Interest and Other Financial Charges Revenue $ 36,709 $ 24,339 $ 5,519 $ (1,065) $ 357 Gain or (loss) on cash flow hedges: Foreign Currency Exchange Contracts: Amount reclassified from accumulated other comprehensive income into income Amount excluded from effectiveness testing recognized in earnings using an amortization approach Gain or (loss) on fair value hedges: Interest Rate Swap Agreements: Hedged items Derivatives designated as hedges Gain or (loss) on net investment hedges: Foreign Currency Exchange Contracts: Amount excluded from effectiveness testing recognized in earnings using an amortization approach Gain or (loss) on derivatives not designated as hedging instruments: Foreign currency exchange contracts 3 — — — — — 44 22 — — — — 1 — — — — — 73 35 — — — 106 — — (70) 70 19 — As of December 31, 2020, the Company estimates that approximately $8 million of net derivative gains related to its cash flow hedges included in Accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months. The following table summarizes the amounts of gain or (loss) on net investment hedges recognized in Accumulated other comprehensive income (loss): Derivatives Net Investment Hedging Relationships Euro-denominated long-term debt Euro-denominated commercial paper Cross currency swap Foreign currency exchange contracts Years Ended December 31, 2020 2019 $ (256) $ (8) (109) (94) 68 71 32 23 Honeywell International, Inc. 76 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 13. FAIR VALUE MEASUREMENTS The accounting guidance for fair value measurements and disclosures establishes a three-level fair value hierarchy. (cid:129) (cid:129) (cid:129) Level 1 - Inputs are based on quoted prices in active markets for identical assets and liabilities. Level 2 - Inputs are based on observable inputs other than quoted prices in active markets for identical or similar assets and liabilities. Level 3 - One or more inputs are unobservable and significant. Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2020 and 2019: Assets: Foreign currency exchange contracts Available for sale investments Interest rate swap agreements Cross currency swap agreements Liabilities: Foreign currency exchange contracts Interest rate swap agreements Cross currency swap agreements December 31, 2020 2019 $ 202 $ 1,118 194 — $ 150 $ — 50 291 1,523 38 51 21 13 — 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 on 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. The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper 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: December 31, 2020 December 31, 2019 Carrying Value Fair Value Carrying Value Fair Value Assets: Long-term receivables Liabilities: Long-term debt and related current maturities $ $ 137 18,787 $ $ 132 20,176 $ $ 129 12,486 $ $ 127 13,578 77 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 14. ACCRUED LIABILITIES Customer advances and deferred income Compensation, benefit and other employee related Repositioning Asbestos related liabilities Income taxes Other taxes Environmental costs Operating lease liabilities Product warranties and performance guarantees Insurance Accrued interest Other (primarily operating expenses) NOTE 15. OTHER LIABILITIES Income taxes Pension and other employee related Deferred income Operating lease liabilities Environmental Insurance Product warranties and performance guarantees Asset retirement obligations Other December 31, 2020 2019 $ 2,932 $ 1,244 2,490 1,551 601 300 307 281 225 187 183 140 102 903 $ 7,405 $ 640 361 253 239 222 171 213 143 91 1,102 7,476 December 31, 2020 2019 $ 2,009 $ 1,923 1,356 641 435 280 60 31 2,115 1,873 1,310 534 487 247 56 61 240 6,975 $ 83 6,766 $ Honeywell International, Inc. 78 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 16. STOCK-BASED COMPENSATION PLANS The 2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (2016 Plan) and 2016 Stock Plan for Non-Employee Directors of Honeywell (2016 Directors Plan) were both approved by the Inc. shareowners at the Annual Meeting of Shareowners effective on April 25, 2016. At December 31, 2020, there were 34,104,522, and 832,309 shares of Honeywell common stock available for future grants under terms of the 2016 Plan and 2016 Directors Plan, respectively. International STOCK OPTIONS The exercise price, term and other conditions applicable to each option granted under the Company’s stock plans are generally determined by the Management Development and Compensation Committee of the Board of Directors. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of our stock on that date. The fair value is recognized as an expense over the employee’s requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on our common stock and historical volatility of our common stock. We used a Monte Carlo simulation model to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant. The following table summarizes the impact to the Consolidated Statement of Operations from stock options: Compensation expense Future income tax benefit recognized Years Ended December 31, 2020 2019 2018 $ 50 $ 10 47 $ 10 64 13 The following table sets forth fair value per share information, including related weighted-average assumptions, used to determine compensation cost. Weighted average fair value per share of options granted during the year(1) $ 21.30 $ 21.57 $ 23.63 Years Ended December 31, 2020 2019 2018 Assumptions: Expected annual dividend yield Expected volatility Risk-free rate of return Expected option term (years) 2.59 % 18.76 % 1.32 % 4.62 2.65 % 18.40 % 2.46 % 4.87 2.49 % 18.93 % 2.71 % 4.95 (1) Estimated on date of grant using Black-Scholes option-pricing model. 79 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The following table summarizes information about stock option activity for the three years ended December 31, 2020: Outstanding at December 31, 2017 Spin related adjustment(1) Granted Exercised Lapsed or canceled Outstanding at December 31, 2018 Granted Exercised Lapsed or canceled Outstanding at December 31, 2019 Granted Exercised Lapsed or canceled Outstanding at December 31, 2020 Vested and expected to vest at December 31, 2020(2) Exercisable at December 31, 2020 Number of Options Weighted Average Exercise Price 23,409,293 $ 94.16 989,158 3,303,722 (3,399,375) (1,824,217) 22,478,581 3,136,058 (5,897,060) (986,017) 18,731,562 3,192,693 (4,424,754) (930,972) 16,568,529 15,442,367 10,120,793 $ $ $ 148.48 78.29 123.01 97.83 155.43 84.31 136.15 109.87 176.93 88.96 156.62 125.75 122.63 103.89 (1) Additional options granted to offset the dilutive impact of the spin-offs on outstanding options. (2) Represents the sum of vested options of 10.1 million and expected to vest options of 5.3 million. Expected to vest options are derived by applying the pre-vesting forfeiture rate assumption to total outstanding unvested options of 6.4 million. The following table summarizes information about stock options outstanding and exercisable at December 31, 2020: Range of Exercise Prices $27.00–$64.99 $65.00–$89.99 $90.00–$99.99 $100.00–$134.99 $135.00–$180.99 Options Outstanding Options Exercisable Number Outstanding Weighted Average Life(1) Weighted Average Exercise Price Aggregate Intrinsic Value Number Exercisable Weighted Average Exercise Price Aggregate Intrinsic Value 236,938 2,541,403 3,980,975 2,892,011 6,917,202 1 $ 56.58 $ 2.7 4.68 6.78 8.34 78.96 98.80 119.58 163.40 37 340 453 270 341 236,938 $ 56.58 $ 2,541,403 3,980,975 1,985,364 1,376,113 78.96 98.80 118.64 151.53 37 340 453 187 84 16,568,529 6.22 $ 125.75 $ 1,441 10,120,793 $ 103.89 $ 1,101 (1) Average remaining contractual life in years. There were 11,620,992 and 14,073,120 options exercisable at weighted average exercise prices of $92.19 and $83.42 at December 31, 2019 and 2018. Honeywell International, Inc. 80 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The following table summarizes the financial statement impact from stock options exercised: Options Exercised Intrinsic value(1) Tax benefit realized Years Ended December 31, 2020 2019 2018 $ 379 $ 84 $ 483 117 238 47 (1) Represents the amount by which the stock price exceeded the exercise price of the options on the date of exercise. At December 31, 2020, there was $88 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 2.46 years. The total fair value of options vested for the years ended December 31, 2020, 2019 and 2018 was $55 million, $61 million and $73 million. RESTRICTED STOCK UNITS Restricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain key employees and directors as compensation at fair market value at the date of grant. RSUs generally become fully vested over periods ranging from three to six years and are payable in Honeywell common stock upon vesting. The following table summarizes information about RSU activity for the three years ended December 31, 2020: Non-vested at December 31, 2017 Spin related adjustment(1) Granted Vested Forfeited Non-vested at December 31, 2018 Granted Vested Forfeited Non-vested at December 31, 2019 Granted Vested Forfeited Non-vested at December 31, 2020 Number of Restricted Stock Units Weighted Average Grant Date Fair Value Per Share 3,946,827 $ 108.60 154,346 1,360,338 (988,787) (814,851) 3,657,873 1,200,202 (1,160,333) (457,677) 3,240,065 1,551,675 (1,001,101) (394,116) 3,396,523 $ 153.46 91.68 117.40 125.35 162.43 104.32 134.50 143.07 158.52 117.84 145.42 148.23 (1) Additional RSU grants to offset the dilutive impact of the spin-offs on non-vested RSUs. As of December 31, 2020, there was approximately $290 million of total unrecognized compensation cost related to non-vested RSUs granted under our stock plans which is expected to be recognized over a weighted-average period of 3.30 years. The following table summarizes the impact to the Consolidated Statement of Operations from RSUs: Compensation expense Future income tax benefit recognized 81 Honeywell International, Inc. Years Ended December 31, 2020 2019 2018 $ 118 $ 106 $ 24 21 111 21 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 17. EARNINGS PER SHARE The details of the earnings per share calculations for the years ended December 31, 2020, 2019 and 2018 are as follows (shares in millions): Basic Net income attributable to Honeywell Weighted average shares outstanding Earnings per share of common stock Assuming Dilution Net income attributable to Honeywell Average Shares Weighted average shares outstanding Dilutive securities issuable—stock plans Total weighted average diluted shares outstanding Years Ended December 31, 2020 2019 2018 4,779 704.1 6.79 $ $ 6,143 721.0 8.52 $ $ 6,765 743.0 9.10 Years Ended December 31, 2020 2019 2018 4,779 $ 6,143 $ 6,765 $ $ $ 704.1 7.1 711.2 721.0 9.3 730.3 743.0 10.0 753.0 8.98 Earnings per share of common stock—assuming dilution $ 6.72 $ 8.41 $ 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. In 2020, 2019 and 2018 the weighted number of stock options excluded from the computations were 5.5 million, 2.5 million and 2.5 million. These stock options were outstanding at the end of each of the respective periods. NOTE 18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The changes in Accumulated other comprehensive income (loss) are provided in the tables below. Comprehensive income (loss) attributable to noncontrolling interest consists predominantly of net income. Year Ended December 31, 2020 Foreign exchange translation adjustment Pensions and other postretirement benefit adjustments Changes in fair value of available for sale investments Changes in fair value of designated cash flow hedges Year Ended December 31, 2019 Foreign exchange translation adjustment Pensions and other postretirement benefit adjustments Changes in fair value of designated cash flow hedges Year Ended December 31, 2018 Foreign exchange translation adjustment Pensions and other postretirement benefit adjustments Changes in fair value of designated cash flow hedges Pre-tax Tax After-Tax $ $ $ $ $ $ (214) $ — $ (214) 76 4 (61) (195) $ (2) — 17 15 74 4 (44) $ (180) 143 115 20 $ — $ (29) (9) 278 $ (38) $ (728) $ — $ (727) 102 168 (17) 143 86 11 240 (728) (559) 85 (1,353) $ 151 $ (1,202) Honeywell International, Inc. 82 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Cumulative foreign exchange translation adjustment Pensions and other postretirement benefit adjustments Changes in fair value of available for sale investments Changes in fair value of designated cash flow hedges December 31, 2020 2019 $ (2,780) $ (2,566) (601) 4 — (675) — 44 $ (3,377) $ (3,197) CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT Foreign Exchange Translation Adjustment Pension and Other Postretirement Adjustments Changes in Fair Value of Available for Sale Investments Changes in Fair Value of Cash Flow Hedges Total Balance at December 31, 2018 $ (2,709) $ (761) $ — $ 33 $ (3,437) 103 408 (92) (168) 11 44 10 (54) (44) 240 $ (3,197) (72) (108) (180) $ — $ (3,377) Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income Net current period other comprehensive income (loss) 156 149 (13) 143 (63) 86 — — — Balance at December 31, 2019 $ (2,566) $ (675) $ — $ Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income Net current period other comprehensive income (loss) (201) 115 (13) (214) (41) 74 Balance at December 31, 2020 $ (2,780) $ (601) $ 4 — 4 4 83 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2020 Affected Line in the Consolidated Statement of Operations Product Sales Cost of Products Sold Cost of Services Sold Selling, General and Admin. Expenses Other (Income) Expense Interest and Other Financial Charges Total Amortization of Pension and Other Postretirement Items: Actuarial losses recognized Prior service (credit) recognized Losses (gains) on cash flow hedges Losses (gains) on excluded component of net investment hedges Total before tax $ Tax expense (benefit) $ — $ — $ — $ — $ 57 $ — $ 57 — 3 — 3 — (43) — (11) — — $ (43) $ (11) $ — 4 — 4 (108) (28) — — — (18) $ (79) $ (18) $ (108) (75) (18) (144) 36 Total reclassifications for the period, net of tax $ (108) Year Ended December 31, 2019 Affected Line in the Consolidated Statement of Operations Product Sales Cost of Products Sold Cost of Services Sold Selling, General and Admin. Expenses Other (Income) Expense Total Amortization of Pension and Other Postretirement Items: Actuarial losses recognized $ — $ — $ — $ — $ 135 $ Prior service (credit) recognized Losses (gains) on cash flow hedges Losses (gains) on excluded component of net investment hedges — (3) — — (35) — — (9) — — (1) — (104) (73) (19) Total before tax Tax expense (benefit) $ (3) $ (35) $ (9) $ (1) $ (61) $ Total reclassifications for the period, net of tax $ 135 (104) (121) (19) (109) (59) (168) Honeywell International, Inc. 84 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 19. CAPITAL STOCK The Company is authorized to issue up to 2,000,000,000 shares of common stock, with a par value of $1. Common shareowners are entitled to receive such dividends as may be declared by the Board of Directors, are entitled to one vote per share, and are entitled, in the event of liquidation, to share ratably in all the assets of the Company which are available for distribution to the common shareowners. Common shareowners do not have preemptive or conversion rights. Shares of common stock issued and outstanding or held in the treasury are not liable to further calls or assessments. There are no restrictions on the Company relative to dividends or the repurchase or redemption of common stock. In April 2019, the Board of Directors authorized the repurchase of up to a total of $10.0 billion of Honeywell common stock. Approximately $3.3 billion and $7.0 billion remained available as of December 31, 2020 and 2019 for additional share repurchases. Honeywell repurchased approximately 20.7 million and 26.5 million shares of its common stock during the years ended December 31, 2020 and 2019, for $3,714 million and $4,400 million. The Company is authorized to issue up to 40,000,000 shares of preferred stock, without par value, and can determine the number of shares of each series, and the rights, preferences and limitations of each series. At December 31, 2020, there was no preferred stock outstanding. NOTE 20. COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL MATTERS to various federal, state, local and foreign government requirements relating to the The Company is subject protection of the environment. We believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and personal injury and that our handling, manufacture, use and disposal of hazardous substances are in accordance with environmental and safety laws and regulations. However, mainly because of past operations and operations of predecessor companies, we, like other companies engaged in similar businesses, have incurred remedial response and voluntary cleanup costs for site contamination and are a party to lawsuits and claims associated with environmental and safety matters, including past production of products containing hazardous substances. Additional lawsuits, claims and costs involving environmental matters are likely to continue to arise in the future. With respect to environmental matters involving site contamination, the Company continually conducts studies, individually or jointly with other potentially responsible parties, to determine the feasibility of various remedial techniques. It is our policy to record appropriate liabilities for environmental matters when remedial efforts or damage claim payments are probable and the costs can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted future costs required to complete the remedial work. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical, regulatory or legal information becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially responsible parties, technology and information related to individual sites, we do not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of our recorded liabilities. We expect to fund expenditures for these matters from operating cash flow. The timing of cash expenditures depends on a number of factors, including the timing of remedial investigations and feasibility studies, the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties. 85 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The following table summarizes information concerning the Company’s recorded liabilities for environmental costs: Beginning of year Accruals for environmental matters deemed probable and reasonably estimable Environmental liability payments Other End of year Years Ended December 31, 2020 2019 2018 709 $ 755 $ 595 173 (216) (6) 213 (256) (3) 660 $ 709 $ 395 (218) (17) 755 $ $ Environmental liabilities are included in the following balance sheet accounts: Accrued liabilities Other liabilities December 31, 2020 2019 $ $ 225 $ 435 660 $ 222 487 709 information to reasonably estimate the amounts of The Company does not currently possess sufficient 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 Statement of Operations and operating cash flows in the periods recognized or paid. However, considering our past experience and existing reserves, the Company does not expect that environmental matters will have a material adverse effect on its Consolidated Balance Sheet. In conjunction with the Resideo spin-off, the Company entered into an indemnification and reimbursement agreement with a Resideo subsidiary, pursuant to which Resideo’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to 90% of Honeywell’s annual net spending for environmental matters at certain sites as defined in the agreement. The amount payable to Honeywell in any given year is subject to a cap of $140 million, and the obligation will continue until the earlier of December 31, 2043, or December 31 of the third consecutive year during which the annual payment obligation is less than $25 million. Reimbursements associated with this agreement are collected from Resideo quarterly and were $140 million in both 2020 and 2019 and offset operating cash outflows incurred by the Company. On July 28, 2020, the Company and Resideo agreed to a second amendment of the indemnification and reimbursement agreement to extend the payment due date to October 30, 2020 for the reimbursement amount of $35 million (originally due on April 30, 2020). The Company had previously agreed to extend the payment date for such amount to July 30, 2020. On October 30, 2020, Resideo paid Honeywell the regularly scheduled reimbursement amount of $35 million due on that date as well as the deferred reimbursement amount of $35 million. As the Company incurs costs for environmental matters deemed probable and reasonably estimable related to the sites covered by the indemnification and reimbursement agreement, a corresponding receivable from Resideo for 90% of such costs is also recorded. This receivable amount recorded in 2020 and 2019 was $146 million and $109 million, respectively. As of December 31, 2020, Other Current Assets and Other Assets included $140 million and $451 million, respectively, the receivable amount due from Resideo under the indemnification and reimbursement agreement. As of December 31, 2019, Other Current Assets and Other Assets included $140 million and $445 million, respectively, for the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement. for the short-term and long-term portion of Honeywell International, Inc. 86 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) ASBESTOS MATTERS Honeywell is named in asbestos related personal injury claims related to North American Refractories Company (NARCO), which was sold in 1986, and the Bendix Friction Materials (Bendix) business, which was sold in 2014. The following tables summarize information concerning NARCO and Bendix asbestos related balances: ASBESTOS RELATED LIABILITIES Beginning of year Accrual for update to estimated liability Change in estimated cost of future claims Update of expected resolution values for pending claims Asbestos related liability payments Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total $1,499 $ 858 $2,357 $1,623 $ 891 $2,514 $1,703 $ 907 $2,610 80 42 10 18 — — 98 42 10 78 (22) (4) 22 — — 100 197 (22) (72) (4) 1 32 — — 229 (72) 1 (190) (97) (287) (176) (55) (231) (206) (48) (254) End of year $1,441 $ 779 $2,220 $1,499 $ 858 $2,357 $1,623 $ 891 $2,514 INSURANCE RECOVERIES FOR ASBESTOS RELATED LIABILITIES Beginning of year Probable insurance recoveries related to estimated liability Insurance receipts for asbestos related liabilities Insurance receivables settlements and write offs End of year Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total $ 153 $ 281 $ 434 $ 170 $ 307 $ 477 $ 191 $ 312 $ 503 10 — 10 3 — 3 11 — 11 (33) (25) (58) (39) (29) (68) (33) (5) (38) 18 $ 148 (2) $ 254 16 $ 402 19 $ 153 3 $ 281 22 $ 434 1 $ 170 — $ 307 1 $ 477 NARCO and Bendix asbestos related balances are included in the following balance sheet accounts: Other current assets Insurance recoveries for asbestos related liabilities Accrued liabilities Asbestos related liabilities 87 Honeywell International, Inc. December 31, 2020 2019 $ $ $ $ 36 366 402 300 1,920 2,220 $ $ $ $ 42 392 434 361 1,996 2,357 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NARCO Products – NARCO manufactured high-grade, heat-resistant, refractory products for various industries. Honeywell’s predecessor, Allied Corporation, owned NARCO from 1979 to 1986. Allied Corporation sold the NARCO business in 1986 and entered into a cross-indemnity agreement which included an obligation to indemnify the purchaser for asbestos claims. Such claims arise primarily from alleged occupational exposure to asbestos- containing refractory brick and mortar for high-temperature applications. NARCO ceased manufacturing these products in 1980 and ultimately filed for bankruptcy in January 2002, at which point in time all then current and future NARCO asbestos claims were stayed against both NARCO and Honeywell pending the reorganization of NARCO. The Company established its initial liability for NARCO asbestos claims in 2002. NARCO emerged from bankruptcy in April 2013, at which time a federally authorized 524(g) trust was established to evaluate and resolve all existing NARCO asbestos claims (the Trust). Both Honeywell and NARCO are protected by a permanent channeling injunction barring all present and future individual actions in state or federal courts and requiring all asbestos-related claims based on exposure to NARCO asbestos-containing products to be made against the Trust. The NARCO Trust Agreement (TA) and the NARCO Trust Distribution Procedures (TDP) are the principal documents setting forth the structure of the Trust, establishing Honeywell’s evergreen funding obligations and the material operating rules for the Trust. Per the TA, the Trust is eligible to receive cash dividends from Harbison-Walker International Inc. (HWI), the reorganized and renamed entity that emerged, fully operational, from the NARCO bankruptcy. The cash dividends are required to be used to pay claims which qualify for payment under the TDP (Annual Contribution Claims) until those funds are exhausted, at which point Honeywell’s funding obligation, subject to an annual cap of $145 million, is triggered. The Company is also required to fund amounts owed pursuant to settlement agreements reached during the pendency of the NARCO bankruptcy proceedings that provide for the right to submit claims to the Trust subject to qualification under the terms of the settlement agreements and TDP (Pre-Established Unliquidated Claims), as well as fund the annual operating costs of the Trust. There is no annual funding cap relative to Pre-Established Unliquidated Claims. Dividends from HWI were exhausted during the fourth quarter of 2019 and there have been no further dividends from HWI to date. The operating rules per the TDP include Honeywell’s audit rights and the criteria claimants must meet for a claim to be considered valid and paid, which include adequate medical evidence of the claimant’s asbestos-related condition and credible evidence of exposure to a specific NARCO asbestos-containing product. Once operational in 2014, the Trust began to receive, process and pay claims, at which point the Company began to assert its audit rights to review and monitor the claims processor’s adherence to the established requirements of the TDP. While doing so, the Company identified several issues with the way the Trust was adhering to the TDP and the Company continues to identify and dispute these matters as further claims are processed. Although the Company is attempting to resolve instances where it believes the Trust is not processing claims in accordance with the established TDP, the Company reserves the right to seek judicial intervention should it fail to resolve the disputed issues. Due to the bankruptcy filing in 2002, claimants were not permitted to file additional claims until the Trust became operative in 2014. As a consequence, there was a large backlog of claims that were filed with the Trust upon becoming operative through December 31, 2017, the date by which these claims had to be filed or else be barred by the statute of limitations (subject to tolling exceptions in the TDP). Therefore, the claims filing rate did not start to the Company lacked a history of normalize until 2018 and thereafter. As a result, between 2002 and 2018, sufficiently reliable claims data to derive a reasonable estimate and the Company continued to update its original NARCO asbestos liability, as appropriate, using all available information. With three years of sufficiently reliable claims data, the Company updated its estimate of the NARCO asbestos liability utilizing claims data from January 1, 2018 through December 31, 2020. The Company utilized an asbestos liability valuation specialist to support our preparation of the NARCO asbestos liability estimates. Our estimates, which involve significant management judgment, include consideration of multiple scenarios, including the impact of the COVID-19 pandemic on the Trust’s ability to process claims during 2020. The estimate for the resolution of asserted Annual Contribution Claims and Pre-Established Unliquidated Claims uses average payment values for the relevant historical period. For unasserted claims, the estimate is based on historic and anticipated claims filing experience and payment rates, disease classifications and type of claim, and average payment values by the Trust for the relevant historical period. The Company’s estimate also includes all years of epidemiological disease projection through 2059. Honeywell International, Inc. 88 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Our updated estimate of NARCO asbestos liability, which was consistent with the previously recorded NARCO liability estimate, was $779 million as of December 31, 2020. The liability reflects an estimate for the resolution of Annual Contribution Claims and Pre-Established Unliquidated Claims filed with the Trust, as well as unasserted Annual Contribution Claims and Pre-Established Unliquidated Claims. The NARCO asbestos liability excludes the annual operating expenses of the Trust which are expensed as they are incurred. The Company’s insurance receivable of $254 million as of December 31, 2020, corresponding to the estimated liability for asserted and unasserted NARCO asbestos claims, reflects coverage which reimburses Honeywell for portions of NARCO-related indemnity and defense costs and is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Honeywell conducts analyses to estimate the probable amount of insurance that is recoverable for asbestos claims. Most of our insurance carriers remain solvent. However, select individual insurance carriers are now insolvent, which we have considered in our analysis of probable recoveries. Our judgments related to our insurance carriers and insurance coverages are reasonable and consistent with Honeywell’s historical dealings and Honeywell’s knowledge of any pertinent solvency issues surrounding insurers. Bendix Products – Bendix manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements. The following tables present information regarding Bendix related asbestos claims activity: Claims Activity Claims Unresolved at the beginning of year Claims Filed Claims Resolved Claims Unresolved at the end of year Disease Distribution of Unresolved Claims Mesothelioma and Other Cancer Claims Nonmalignant Claims Total Claims Years Ended December 31, 2020 2019 6,480 2,233 (2,471) 6,242 6,209 2,659 (2,388) 6,480 December 31, 2020 2019 3,422 2,820 6,242 3,399 3,081 6,480 Honeywell has experienced average resolution values per claim excluding legal costs as follows: Malignant claims Nonmalignant claims 2020 2019 2018 2017 2016 Years Ended December 31, (in whole dollars) $ $ 61,500 550 $ $ 50,200 3,900 $ $ 55,300 4,700 $ $ 56,000 2,800 $ $ 44,000 4,485 It is not possible to predict whether resolution values for Bendix-related asbestos claims will increase, decrease or stabilize in the future. The Consolidated Financial Statements reflect an estimated liability for resolution of asserted (claims filed as of the financial statement date) and unasserted Bendix-related asbestos claims and excludes the Company’s ongoing legal fees to defend such asbestos claims which will continue to be expensed as they are incurred. The Company has valued Bendix asserted and unasserted claims using average resolution values for the previous five years. The Company updates the resolution values used to estimate the cost of Bendix asserted and unasserted claims during the fourth quarter each year. The Company 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 89 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) claims is based on historic and anticipated claims filing experience and dismissal rates, disease classifications, and resolution values in the tort system for the previous five years. The Company’s insurance receivable corresponding to the liability for settlement of asserted and unasserted Bendix asbestos claims reflects coverage which is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Based on our ongoing analysis of 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 to our insurance programs, and our consideration of the impacts of any settlements reached with our insurers. the probable insurance recovery, judicial determinations relevant the solvency of our insurers, On October 31, 2018, David Kanefsky, a Honeywell shareholder, filed a putative class action complaint in the U.S. District Court for the District of New Jersey alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5 related to the prior accounting for Bendix asbestos claims. An Amended Complaint was filed on December 30, 2019, and on February 7, 2020, we filed a Motion to Dismiss. On May 18, 2020, the court denied our Motion to Dismiss. We believe the claims have no merit. GARRETT MATTER In conjunction with the Garrett spin-off, the Company entered into a binding indemnification and reimbursement agreement (Garrett Indemnity) with a Garrett subsidiary, pursuant to which Garrett’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to (i) 90% of Honeywell’s asbestos-related liability payments primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments, including the legal costs of defending and resolving such liabilities, less (ii) 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities. The amount payable to Honeywell in respect of such liabilities arising in any given year is subject to a cap of approximately Euro 150 million (equivalent to $175 million at the time the Garrett Indemnity was entered into). The obligation under the terms of the Garrett Indemnity continues until the earlier of December 31, 2048, or December 31 of the third consecutive year during which the annual obligation is less than the Euro equivalent, at the time the indemnification and reimbursement agreement was entered into, of $25 million. the fixed exchange rate at On June 12, 2020, the Company and Garrett entered into an amendment of the Garrett Indemnity in connection with Garrett’s amendment of its 2018 credit agreement. These amendments provided Garrett with temporary financial covenant relief with respect to the total leverage and interest coverage ratios, for a period that could extend to as late as June 30, 2022. Garrett’s payments to the Company under the Garrett Indemnity were deferred to the extent Garrett is (or to the extent such payments would cause Garrett to be) out of compliance with the original financial covenants and resume to the extent Garrett is in compliance with such original financial covenants. Any deferred amounts were to be paid to the extent Garrett was in compliance with such original financial covenants and had available capacity to make such payments pursuant to the terms of the Garrett Indemnity and its current credit agreement. Reimbursements associated with the Garrett Indemnity are scheduled under the agreement to be collected from Garrett quarterly and offset operating cash outflows incurred by the Company. As a result of the extension referenced above and below, such amounts were $36 million in 2020 as compared with $152 million in 2019. As the Company records the accruals for matters covered by the Garrett Indemnity, a corresponding receivable from Garrett is recorded for 90% of that accrual as determined by the terms of the Garrett Indemnity. In conjunction with the spin-off, Honeywell also entered into a binding tax matters agreement with Garrett and a Garrett subsidiary (the Tax Matters Agreement). The Tax Matters Agreement generally provides that Garrett is responsible and must indemnify Honeywell for all ordinary operating taxes, including income taxes, sales taxes, value-added taxes and payroll taxes, relating to Garrett for all periods, including periods prior to the spin-off, to the extent not paid prior to the spin-off date. In addition, among other items, as a result of the mandatory transition tax imposed by the U.S. Tax Cuts and Jobs Act, Garrett is required to make payments to Honeywell in the amount representing the net tax liability of Honeywell under the mandatory transition tax attributable to Garrett. Honeywell International, Inc. 90 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) GARRETT LITIGATION AND BANKRUPTCY PROCEEDINGS On December 2, 2019, Garrett and Garrett ASASCO Inc. filed a Summons with Notice and commenced a lawsuit in the Commercial Division of the Supreme Court of the State of New York, County of New York (the State Court), seeking to invalidate the Garrett Indemnity. Garrett sought damages and a declaratory judgment based on various claims set forth in the Summons with Notice. On January 15, 2020, Garrett filed its complaint in the action, which asserted the same claims, and on March 5, 2020, we filed a Motion to Dismiss. On June 12, 2020, given the challenges of operating in the COVID-19 environment, Honeywell and Garrett entered into a litigation status agreement pursuant to which (i) the parties agreed to make good faith efforts to limit near-term litigation spend on this matter, and (ii) the Company agreed to extend both the $2 million payment owed by Garrett to the Company on May 1, 2020 under the Garrett Indemnity and the $18 million payment owed by Garrett to the Company on April 1, 2020 under the Tax Matters Agreement until December 31, 2020 (which amounts, as previously disclosed, had been deferred to May 31, 2020). On July 17, 2020, the Company received a notice from Garrett asserting that Honeywell has caused material breaches of the Tax Matters Agreement and that the Tax Matters Agreement is unenforceable. On September 20, 2020, Garrett and 36 of its affiliates filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). On September 23, 2020, Garrett moved the existing State Court litigation against Honeywell to the Bankruptcy Court. Honeywell again moved to dismiss all of Garrett’s claims on October 13, 2020. On November 2, 2020, Garrett filed a motion seeking to establish procedures to estimate the value of Honeywell’s claims. Honeywell objected to the motion. On November 18, 2020, the Bankruptcy Court did not rule on the motion to dismiss but suggested that two weeks be set aside in February 2021 for an evidentiary hearing to establish the actual allowed amount or net amount of Honeywell’s claim against Garrett. Honeywell and Garrett agreed to proceed with the estimation of Honeywell’s claims. We believe we have fully complied with our obligations under the Garrett Indemnity and the Tax Matters Agreement and that both agreements are valid and enforceable. Garrett’s operations have and are expected to continue, without interruption, throughout the bankruptcy proceedings. Garrett initially proposed to sell its business while in bankruptcy, and entered into a Share and Asset Purchase Agreement, dated as of September 20, 2020, with KPS Capital Partners, LP (the Stalking Horse Agreement) and filed proposed bidding procedures for a marketing and sale process, auction and other procedures related to the proposed sale. In October 2020, Honeywell signed a coordination agreement with Oaktree Capital Management, L.P. (Oaktree) and Centerbridge Partners, L.P. (Centerbridge), which was subsequently signed by additional equity holders that, collectively with Honeywell, Centerbridge and Oaktree, represent approximately 58% of Garrett’s outstanding common stock and noteholders representing approximately 88% of the principal amount of Garrett’s outstanding senior notes (the Coordination Agreement). The Coordination Agreement and related term sheet set forth the terms of a proposed plan of reorganization (the Initial COH Proposal). In October 2020, the Bankruptcy Court approved the bidding procedures and the Stalking Horse Agreement (as amended), and Garrett conducted a marketing and auction process through January 8, 2021. On January 11, 2021, after further revisions to the Initial COH Proposal, Garrett determined that the revised proposal (the Final COH Plan) was higher and better than all other proposals received and entered into a plan support agreement (the Plan Support Agreement), pursuant to which all parties agreed to pursue Bankruptcy Court confirmation of the Final COH Plan. On January 15, 2021, KPS Capital Partners, LP terminated the Stalking Horse Agreement with Garrett. As set forth in the Plan Support Agreement, the Final COH Plan provides that, if it is confirmed by the Bankruptcy Court, Honeywell will receive from Garrett at the time of Garrett’s emergence from bankruptcy an initial payment of $375 million in cash and Series B Preferred Stock, which will provide for cash payments to Honeywell of $35 million in 2022 and $100 million per year from 2023 to 2030 (inclusive), subject to various put and call rights set forth therein. The initial cash payment, together with the Series B Preferred Stock, would be paid/issued in full and final satisfaction of Garrett’s obligations to Honeywell under the Garrett Indemnity and the Tax Matters Agreement. Upon Garrett’s emergence from bankruptcy, both agreements would be terminated, Honeywell and Garrett would mutually release each other from the claims asserted in all pending legal actions, and all pending litigation with Garrett would be resolved. In light of these developments, the hearing scheduled to estimate Honeywell’s claims and the adversary proceeding seeking to invalidate the Indemnity Agreement have been stayed and all related litigation suspended. If the Final COH Plan is confirmed by the Bankruptcy Court, both proceedings would be dismissed with prejudice on the effective date of the Final COH Plan. We regularly review the aggregate carrying value of the receivable amounts due in connection with the Garrett Indemnity and the Tax Matters Agreement. Following Garrett’s bankruptcy filing on September 20, 2020, the Company reduced the aggregate carrying value of the receivable by $350 million to reflect the present value of 91 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) amounts owed to us over the full term of these agreements. Because Garrett is now a party to the Plan Support Agreement, we believe the present value of payments to Honeywell under the Final COH Plan, discounted at a rate reflective of the terms of the agreement, is an appropriate estimate of receivable amounts. On this basis, Honeywell recorded an additional adjustment of $92 million to lower the aggregate carrying value of the receivable amounts due in connection with the Garrett Indemnity and Tax Matters Agreement to $959 million as of December 31, 2020. Other Current Assets and Other Assets include $10 million and $949 million, respectively, for the short-term and long-term portion of the receivable amount due from the Garrett Indemnity and Tax Matters Agreement. As of December 31, 2019, Other Current Assets and Other Assets include $133 million and $1,188 million, respectively, for the short-term and long-term portion of the receivable amount due from the Garrett Indemnity and Tax Matters Agreement. For the year ended December 31, 2020, a non-cash charge of $509 million is recognized in Other (income) expense, which includes the adjustments to the carrying value of the receivable described above. There can be no assurance that the Final COH Plan will be confirmed by the Bankruptcy Court or that Garrett will be able to substantially consummate the restructuring transactions contemplated in the Final COH Plan. The ultimate outcome of the bankruptcy process is uncertain. Depending on the transaction and/or plan of reorganization ultimately approved and confirmed by the Bankruptcy Court, the amount collected could differ from the receivable amounts currently recorded in our financial statements. There can be no assurance that recording an additional adjustment (positive or negative) against the remaining receivable amounts in whole or in part (together with a related statement of operations charge) will not be necessary in a future period or periods. Honeywell will continue to participate in the Bankruptcy Court proceedings in order to appropriately assess and enforce our rights in this matter. Should the Final COH Plan not be confirmed in the form currently contemplated, Honeywell intends to vigorously defend its rights to collect amounts due under the Garrett Indemnity and Tax Matters Agreement with Garrett. OTHER MATTERS to a number of other lawsuits, investigations and disputes (some of which involve The Company is subject substantial amounts claimed) arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Included in these other matters is the following: Honeywell v. United Auto Workers (UAW) et. al – In September 2011, the UAW and certain Honeywell retirees (Plaintiffs) filed a suit in the Eastern District of Michigan (the District Court) alleging that a series of Master Collective Bargaining Agreements (MCBAs) between Honeywell and the UAW provided the retirees with rights to lifetime, vested healthcare benefits that could never be changed or reduced. Plaintiffs alleged that Honeywell had violated those vested rights by implementing express limitations (CAPS) on the amount Honeywell contributed toward healthcare coverage for the retirees. Honeywell subsequently answered the UAW’s complaint and asserted counterclaims, including for breach of implied warranty. Between 2014 and 2015, Honeywell began enforcing the CAPS against former employees. In response, the UAW and certain of the Plaintiffs filed a motion seeking a ruling that the MCBAs do not limit Honeywell’s obligation to contribute to healthcare coverage for those retirees. On March 29, 2018, the District Court issued its opinion resolving all pending summary judgment motions, except for Honeywell’s counterclaim for breach of implied warranty, which has since been dismissed without prejudice. In the opinion, the District Court held that the MCBAs do not promise retirees vested, lifetime benefits that survive expiration of the MCBAs. Based on this ruling, Honeywell terminated the retirees healthcare coverage benefits altogether as of July 31, 2018. In response, the UAW filed a motion to enjoin Honeywell from completely terminating coverage as of July 31, 2018, arguing that the CAPS themselves are vested and that Honeywell must continue to provide retiree medical benefits at the capped level. On July 28, 2018, the District Court denied the UAW’s motion and entered a final judgment consistent with its March 2018 ruling. The UAW appealed this decision to the Sixth Circuit Court of Appeals. In the March 2018 opinion, the District Court also held that Honeywell is obligated under the MCBAs to pay the “full premium” for retiree healthcare rather than the capped amount. Based on this ruling, Honeywell would be required Honeywell International, Inc. 92 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) to pay monetary damages to retirees for any past years in which Honeywell paid less than the “full premium” of their healthcare coverage. Such damages would be limited, depending on the retiree group, to a two to three-year period ending when the 2017 MCBA expired, and Honeywell would have no ongoing obligation to continue funding healthcare coverage for subsequent periods. Honeywell appealed the District Court’s ruling on this “full premium” damages issue. On April 3, 2020, the Sixth Circuit Court of Appeals issued an opinion ruling for Honeywell in all respects. The Court of Appeals affirmed the District Court’s ruling that the MCBAs do not promise retirees vested, lifetime benefits that survive expiration of the MCBAs. In addition, the Court of Appeals reversed the District Court’s ruling that Honeywell was obligated under the MCBAs to pay the “full premium” for retiree healthcare, rather than the capped amount. As a result of these rulings, Honeywell is not required to pay any monetary damages to the Plaintiffs. Plaintiffs sought rehearing en banc from the Sixth Circuit Court of Appeals, which petition was denied. Plaintiffs failed to timely appeal the Sixth Circuit’s ruling to the Supreme Court of the United States. Accordingly, as of October 8, 2020, the case was fully resolved. 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. Given the uncertainty inherent in litigation and investigations (including the specific matters referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters (other than as specifically set forth above). Considering our past experience and existing accruals, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our time, potential consolidated financial position. Because most contingencies are resolved over long periods of liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause us to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on our Consolidated Results of Operations or operating cash flows in the periods recognized or paid. WARRANTIES AND GUARANTEES In the normal course of business, the Company issues product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. The following table summarizes information concerning our recorded obligations for product warranties and product performance guarantees. Beginning of year Accruals for warranties/guarantees issued during the year Adjustment of pre-existing warranties/guarantees Settlement of warranty/guarantee claims End of year Years Ended December 31, 2020 2019 2018 $ $ $ 269 164 (18) (172) $ 310 173 (34) (180) 243 $ 269 $ 408 208 (78) (228) 310 93 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Product warranties and product performance guarantees are included in the following balance sheet accounts: Accrued liabilities Other liabilities December 31, 2020 2019 $ $ 183 60 243 $ $ 213 56 269 NOTE 21. PENSION AND OTHER POSTRETIREMENT BENEFITS The Company sponsors a number of both funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of our U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. All non-union hourly and salaried employees joining Honeywell time after December 31, 2012, are not eligible to participate in Honeywell’s U.S. defined benefit pension plans. We also sponsor defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally the UK, Netherlands, Germany, and Canada. Other pension plans outside of the U.S. are not material to the Company either individually or in the aggregate. for the first The Company also sponsors postretirement benefit plans that provide health care benefits and life insurance coverage mainly to U.S. eligible retirees. None of Honeywell’s U.S. employees are eligible for a retiree medical subsidy from the Company. In addition, the vast majority of Honeywell’s U.S. retirees either have no Company subsidy or have a fixed-dollar subsidy amount. This significantly limits our exposure to the impact of future health care cost increases. The retiree medical and life insurance plans are not funded. Claims and expenses are paid from our cash flows from operations. Honeywell International, Inc. 94 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The following tables summarize the balance sheet impact, including the benefit obligations, assets and funded status associated with the Company’s significant pension and other postretirement benefit plans. Pension Benefits U.S. Plans Non-U.S. Plans 2020 2019 2020 2019 Change in benefit obligation: Benefit obligation at beginning of year $ 17,283 $ 16,141 $ 6,897 $ 6,182 Service cost Interest cost Plan amendments Actuarial (gains) losses(1) Benefits paid Settlements and curtailments Foreign currency translation Other 99 461 — 1,331 (1,100) (21) — 1 82 613 — 2,064 (1,111) (507) — 1 23 106 2 509 (246) — 291 88 22 142 — 708 (269) — 107 5 Benefit obligation at end of year 18,054 17,283 7,670 6,897 Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Company contributions Benefits paid Settlements and curtailments Foreign currency translation Other 18,995 2,475 46 (1,100) (21) — 1 17,109 3,458 45 (1,111) (507) — 1 7,307 918 116 (246) — 253 102 Fair value of plan assets at end of year 20,396 18,995 8,450 2,342 $ 1,712 $ 780 $ 6,481 863 62 (269) — 165 5 7,307 410 Funded status of plans Amounts recognized in Consolidated Balance Sheet consist of: Prepaid pension benefit cost(2) Accrued pension liabilities—current(3) Accrued pension liabilities—noncurrent(4) Net amount recognized $ $ $ 2,695 $ 2,069 $ 1,688 $ 1,196 (29) (324) (32) (325) (14) (894) 2,342 $ 1,712 $ 780 $ (13) (773) 410 (1) Actuarial losses incurred in 2020 related to our U.S. and non-U.S. plans are primarily the result of a decrease in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2020 compared to December 31, 2019. Actuarial losses incurred in 2019 related to our U.S. and non-U.S. plans are primarily the result of a decrease in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2019 compared to December 31, 2018. (2) Included in Other assets on the Consolidated Balance Sheet (3) Included in Accrued liabilities on the Consolidated Balance Sheet (4) Included in Other liabilities on the Consolidated Balance Sheet 95 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Change in benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Plan amendments Actuarial (gains) losses Benefits paid Benefit obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Company contributions Benefits paid Fair value of plan assets at end of year Funded status of plans Amounts recognized in Consolidated Balance Sheet consist of: Accrued liabilities Postretirement benefit obligations other than pensions(1) Net amount recognized Other Postretirement Benefits 2020 2019 $ 325 $ — 8 (65) (8) (31) 229 — — — — — 364 — 14 (2) (16) (35) 325 — — — — — $ $ $ (229) $ (325) (27) $ (202) (229) $ (40) (285) (325) (1) Excludes non-U.S. plan of $40 million and $41 million as of December 31, 2020 and 2019. Amounts recognized in Accumulated other comprehensive (income) loss associated with the Company’s significant pension and other postretirement benefit plans at December 31, 2020 and 2019 are as follows: Prior service (credit) cost Net actuarial (gain) loss Net amount recognized Prior service (credit) cost Net actuarial (gain) loss Net amount recognized Pension Benefits U.S. Plans Non-U.S. Plans 2020 2019 2020 2019 $ $ (134) $ (176) $ 505 371 $ 544 368 $ 23 629 652 $ $ 21 701 722 Other Postretirement Benefits 2020 2019 $ $ (165) (28) (193) $ $ (166) (20) (186) Honeywell International, Inc. 96 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The components of net periodic benefit (income) cost and other amounts recognized in Other comprehensive (income) loss for the Company’s significant pension and other postretirement benefit plans include the following components: U.S. Plans Non-U.S. Plans Pension Benefits Net Periodic Benefit Cost 2020 2019 2018 2020 2019 2018 Service cost Interest cost $ 99 $ 82 $ 461 613 140 573 Expected return on plan assets (1,135) (1,117) (1,426) $ 23 $ 22 $ 106 (336) 142 (331) 26 143 (443) (1) 37 (3) (42) 26 4 (42) 35 4 (43) — — — 18 — — 88 — $ (587) $ (425) $ (756) $ (189) $ (79) $ (241) U.S. Plans Non-U.S. Plans 2020 2019 2018 2020 2019 2018 $ (9) $ (277) $ 619 $ (73) $ 176 $ — 42 (30) — — 42 (39) — — 43 — — 2 — (18) 19 — — (88) 14 250 30 4 (37) (34) $ 3 $ (274) $ 662 $ (70) $ 102 $ 213 $ (584) $ (699) $ (94) $ (259) $ 23 $ (28) Amortization of prior service (credit) cost Recognition of actuarial losses Settlements and curtailments Net periodic benefit (income) cost Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive (Income) Loss Actuarial (gains) losses Prior service (credit) cost Prior service credit recognized during year Actuarial losses recognized during year Foreign currency translation Total recognized in other comprehensive (income) loss Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss 97 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Net Periodic Benefit Cost Service cost Interest cost Amortization of prior service (credit) cost Recognition of actuarial losses Net periodic benefit (income) cost Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive (Income) Loss Actuarial (gains) losses Prior service (credit) cost Prior service credit recognized during year Actuarial losses recognized during year Total recognized in other comprehensive (income) loss Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss Other Postretirement Benefits Years Ended December 31, 2020 2019 2018 — $ — $ 8 (66) — 14 (62) — (58) $ (48) $ — 15 (52) 3 (34) Years Ended December 31, 2020 2019 2018 (8) $ (16) $ (65) 66 — (7) $ (2) 62 — 44 $ (110) (34) 52 (3) (95) (65) $ (4) $ (129) $ $ $ $ $ Honeywell International, Inc. 98 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Major actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for our significant benefit plans are presented in the following table as weighted averages. Pension Benefits U.S. Plans Non-U.S. Plans 2020 2019 2018 2020 2019 2018 Actuarial assumptions used to determine benefit obligations as of December 31: Discount rate 2.50% 3.22% 4.35% 1.23% 1.81% 2.63% Expected annual rate of compensation increase Actuarial assumptions used to determine net periodic benefit (income) cost for years ended December 31: Discount rate—benefit obligation Discount rate—service cost Discount rate—interest cost Expected rate of return on plan assets Expected annual rate of compensation increase 3.25% 3.25% 3.25% 2.43% 2.47% 2.46% 3.22% 3.33% 2.76% 6.15% 4.35% 4.47% 3.94% 6.75% 3.68% 3.77% 3.27% 7.75% 1.81% 1.48% 1.56% 4.66% 2.63% 2.26% 2.34% 5.14% 2.36% 2.20% 2.08% 6.23% 3.25% 3.25% 4.50% 2.47% 2.46% 2.49% Other Postretirement Benefits 2020 2019 2018 Actuarial assumptions used to determine benefit obligations as of December 31: Discount rate 2.20% 3.03% 4.07% Actuarial assumptions used to determine net periodic benefit cost for years ended December 31: Discount rate(1) 2.36% 4.07% 3.39% (1) Discount rate was 3.03% for January 1, 2020 through September 30, 2020. The rate was changed to 2.36% for the remainder of 2020 due to a Plan remeasurement as of October 1, 2020. The discount rate for the Company’s U.S. pension and other postretirement benefits plans reflects the current rate at which the associated liabilities could be settled at the measurement date of December 31. To determine discount rates for our U.S. pension and other postretirement benefit plans, we use a modeling process that involves matching the expected cash outflows of our benefit plans to a yield curve constructed from a portfolio of high quality, fixed- income debt instruments. We use the single weighted-average yield of this hypothetical portfolio as a discount rate benchmark. We utilize a full yield curve approach in the estimation of the service and interest cost components of net periodic pension benefit (income) for our significant pension plans. This approach applies the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows and provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. For our U.S. pension plans, the single weighted average spot rates used to determine service and interest costs for 2021 are 2.67% and 1.76%. The discount rate used to determine the other postretirement benefit obligation is lower principally due to a shorter expected duration of other postretirement plan obligations as compared to pension plan obligations. 99 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The Company plans to use an expected rate of return on U.S. plan assets of 6.15% for 2021, matching the 6.15% assumption used for 2020. Our asset return assumption is based on historical plan asset returns over varying long- term periods combined with current market conditions and broad asset mix considerations with a focus on long-term trends rather than short-term market conditions. We review the expected rate of return on an annual basis and revise it as appropriate. For non-U.S. benefit plans actuarial assumptions reflect economic and market factors relevant to each country. PENSION BENEFITS The following amounts relate to the Company’s significant pension plans with accumulated benefit obligations exceeding the fair value of plan assets: Projected benefit obligation Accumulated benefit obligation Fair value of plan assets December 31, U.S. Plans Non-U.S. Plans 2020 2019 2020 2019 $ $ $ 353 341 $ $ — $ 357 347 $ $ — $ 2,116 2,042 1,208 $ $ $ 1,018 973 233 The accumulated benefit obligation for the Company’s U.S. defined benefit pension plans was $17.9 billion and $17.2 billion and for our Non-U.S. defined benefit pension plans was $7.6 billion and $6.8 billion at December 31, 2020 and 2019. The Company’s asset investment strategy for our U.S. pension plans focuses on maintaining a diversified portfolio using various asset classes in order to achieve our long-term investment objectives on a risk adjusted basis. During 2020, we continued to employ a de-risking strategy which increases the matching characteristics of our assets relative to our obligation. Our long-term target allocations are as follows: 55%-70% fixed income securities and cash, 25%-40% equity securities, 5%-10% real estate investments, and 10%-20% other types of investments. Equity securities include publicly-traded stock of companies located both inside and outside the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. Treasuries. Real estate investments include direct investments in commercial properties and investments in real estate funds. Other types of investments include investments in private equity and hedge funds that follow several different strategies. We review our assets on a regular basis to ensure that we are within the targeted asset allocation ranges and, if necessary, asset balances are adjusted back within target allocations. The Company’s non-U.S. pension assets are typically managed by decentralized fiduciary committees with the Honeywell Corporate Investments group providing funding and investment guidance. Our non-U.S. investment policies are different funding requirements, and financial and tax considerations are part of the funding and investment allocation process in each country. for each country as local regulations, In accordance with ASU 2015-07, “Fair Value Measurement (Topic 820)”, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the following tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets. Honeywell International, Inc. 100 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The fair values of both the Company’s U.S. and non-U.S. pension plans assets by asset category are as follows: Equities: Honeywell common stock U.S. equities Fixed income: Short term investments Government securities Corporate bonds Mortgage/Asset-backed securities Insurance contracts Direct investments: Direct private investments Real estate properties Total Investments measured at NAV: Private funds Real estate funds Commingled Funds Total assets at fair value Equities: Honeywell common stock U.S. equities Fixed income: Short term investments Government securities Corporate bonds Mortgage/Asset-backed securities Insurance contracts Direct investments: Direct private investments Real estate properties Total Investments measured at NAV: Private funds Real estate funds Commingled funds Total assets at fair value 101 Honeywell International, Inc. — — — — — — — — — — — — — — U.S. Plans December 31, 2020 Total Level 1 Level 2 Level 3 $ $ 3,319 — $ 3,319 — — $ — 1,314 — — — — — — 4,633 $ — 1,520 10,190 982 7 — — 12,699 1,314 1,520 10,190 982 7 1,220 651 19,203 1,105 26 62 20,396 $ 1,220 651 1,871 $ U.S. Plans December 31, 2019 Total Level 1 Level 2 Level 3 $ 2,857 1,227 $ 2,857 1,227 — $ — — 1,146 8,603 1,023 8 — — 10,780 $ $ 950 619 1,569 1,395 — — — — — — 5,479 1,395 1,146 8,603 1,023 8 950 619 17,828 1,019 42 106 18,995 $ $ $ $ $ $ HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Equities: U.S. equities Non-U.S. equities Fixed income: Short-term investments Government securities Corporate bonds Mortgage/Asset-backed securities Insurance contracts Insurance buy-in contracts Investments in private funds: Private funds Real estate funds Total Investments measured at NAV: Private funds Real estate funds Total assets at fair value Equities: U.S. equities Non-U.S. equities Fixed income: Short-term investments Government securities Corporate bonds Mortgage/Asset-backed securities Insurance contracts Insurance buy-in contracts Investments in private funds: Private funds Real estate funds Total Investments measured at NAV: Private funds Real estate funds Total assets at fair value Non-U.S. Plans December 31, 2020 Total Level 1 Level 2 Level 3 $ 207 $ — $ 207 $ 1,614 596 3,105 1,649 93 142 767 65 147 66 596 — — — — — — — 1,548 — 3,105 1,649 93 142 — 36 — $ 8,385 $ 662 $ 6,780 $ — — — — — — — 767 29 147 943 18 47 $ 8,450 Non-U.S. Plans December 31, 2019 Total Level 1 Level 2 Level 3 $ 149 $ — $ 149 $ 1,384 522 3,006 1,746 84 120 — 69 150 54 522 — — — — — — — 1,330 — 3,006 1,746 84 120 — 35 — $ 7,230 $ 576 $ 6,470 $ — — — — — — — — 34 150 184 21 56 $ 7,307 Honeywell International, Inc. 102 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) The following table summarizes changes in the fair value of Level 3 assets for both U.S. and Non-U.S. plans: U.S. Plans Non-U.S. Plans Direct Private Investments Real Estate Properties Private Funds Real Estate Funds Insurance Buy-in Contracts $ 829 $ 657 $ 34 $ 144 $ Balance at December 31, 2018 Actual return on plan assets: Relating to assets still held at year-end Relating to assets sold during the year Purchases Sales and settlements Balance at December 31, 2019 Actual return on plan assets: Relating to assets still held at year-end Relating to assets sold during the year Purchases Sales and settlements 15 89 216 (199) 950 100 53 221 (104) 40 (23) 48 (103) 619 (4) — 59 (23) 651 $ — — — — 34 (5) — — — 29 7 1 — (2) 150 (3) — — — $ 147 $ — — — — — — — — 767 — 767 Balance at December 31, 2020 $ 1,220 $ The Company enters into futures contracts to gain exposure to certain markets. Sufficient cash or cash equivalents are held by our pension plans to cover the notional value of the futures contracts. At December 31, 2020 and 2019, our U.S. plans had contracts with notional amounts of $3,673 million and $4,463 million. At December 31, 2020 and 2019, our non-U.S. plans had contracts with notional amounts of $564 million and $479 million. In both our U.S. and non-U.S. pension plans, the notional derivative exposure is related to outstanding equity and fixed income futures contracts. Common stocks, preferred stocks, real estate investment trusts, and short-term investments are valued at the closing price reported in the active market in which the individual securities are traded. Corporate bonds, mortgages/ asset-backed securities, and government securities are valued either by using pricing models, bids provided by brokers or dealers, quoted prices of securities with similar characteristics or discounted cash flows and as such include adjustments for certain risks that may not be observable such as credit and liquidity risks. Certain securities are held in collective trust funds which are valued using net asset values provided by the administrators of the funds. Investments in private equity, debt, real estate and hedge funds and direct private investments are valued at estimated fair value based on quarterly financial information received from the investment advisor and/or general partner. Investments in real estate properties are valued on a quarterly basis using the income approach. Valuation estimates are periodically supplemented by third party appraisals. The insurance buy-in contracts represent policies held by the Honeywell UK Pension Scheme, whereby the cost of providing pension benefits to plan participants is funded by the policies. The cash flows from the policies are intended to match the pension benefits. The fair value of these policies is based on an estimate of the policies’ exit price. The Company’s funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In 2020, 2019, and 2018, we were not required to make contributions to our U.S. pension plans and no contributions were made. We are not required to make any contributions to our U.S. pension plans in 2021. In 2020, contributions of $109 million were made to our non-U.S. pension plans to satisfy regulatory funding requirements. In 2021, we expect to make contributions of cash and/or marketable securities of approximately $85 million to our non-U.S. pension plans to satisfy regulatory funding standards. Contributions for both our U.S. and non-U.S. pension plans do not reflect benefits paid directly from Company assets. 103 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Benefit payments, including amounts to be paid from Company assets, and reflecting expected future service, as appropriate, are expected to be paid as follows: 2021 2022 2023 2024 2025 2026-2030 U.S. Plans Non-U.S. Plans $ $ 1,147 1,143 1,139 1,130 1,116 5,246 240 242 247 252 257 1,365 OTHER POSTRETIREMENT BENEFITS Assumed health care cost trend rate: Health care cost trend rate assumed for next year Rate that the cost trend rate gradually declines to Year that the rate reaches the rate it is assumed to remain at December 31, 2020 2019 7.00 % 5.00 % 2029 7.00 % 5.00 % 2029 Benefit payments reflecting expected future service, as appropriate, are expected to be paid as follows: 2021 2022 2023 2024 2025 2026-2030 Without Impact of Medicare Subsidy Net of Medicare Subsidy $ $ 29 28 26 15 14 61 27 25 24 14 13 57 Honeywell International, Inc. 104 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 22. OTHER (INCOME) EXPENSE Interest income Pension ongoing income—non-service Other postretirement income—non-service Equity income of affiliated companies Loss (gain) on sale of non-strategic business and assets Foreign exchange Separation costs Reimbursement receivables charge Other (net) Years Ended December 31, 2020 2019 2018 $ (107) $ (255) $ (901) (57) (66) 3 (68) — 509 12 (606) (47) (52) 1 (120) — — 14 (217) (1,165) (32) (50) — (63) 321 — 57 $ (675) $ (1,065) $ (1,149) Separation costs are associated with the spin-offs of the Company’s Homes and Global Distribution business and Transportation Systems business, and are primarily associated with third party services. For more information on the reimbursement receivables related to Garrett, see Note 20 Commitments and Contingencies. For the year ended December 31, 2018, Other (net) includes asset impairments in Corporate related to the write- down of a legacy property in connection with its planned disposition. See Note 4 Repositioning and Other Charges. 105 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 23. SEGMENT FINANCIAL DATA reportable operating segments. Segment Honeywell globally manages its business operations through four 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 income (expense), repositioning and other charges, and other items within Other (income) expense. financial charges, stock compensation expense, pension and other postretirement Net Sales Aerospace Product Service Total Honeywell Building Technologies Product Service Total Performance Materials and Technologies Product Service Total Safety and Productivity Solutions Product Service Total Depreciation and amortization Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions Corporate Segment Profit Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions Corporate Years Ended December 31, 2020 2019 2018 $ 7,194 $ 8,766 $ 10,415 4,350 11,544 3,868 1,321 5,189 7,548 1,875 9,423 6,127 354 6,481 5,288 14,054 4,395 1,322 5,717 8,732 2,102 10,834 5,736 368 6,104 5,078 15,493 7,868 1,430 9,298 8,589 2,085 10,674 5,976 361 6,337 32,637 $ 36,709 $ 41,802 $ 241 55 440 223 44 $ 234 63 493 222 76 281 112 452 216 55 1,003 $ 1,088 $ 1,116 $ $ $ $ 2,904 $ 3,607 $ 1,099 1,851 907 (96) 1,165 2,433 790 (256) $ 6,665 $ 7,739 $ 3,503 1,608 2,328 1,032 (281) 8,190 Honeywell International, Inc. 106 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) Capital expenditures Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions Corporate Total Assets Aerospace Honeywell Building Technologies Performance Materials and Technologies Safety and Productivity Solutions Corporate Years Ended December 31, 2020 2019 2018 $ 248 $ 272 $ 66 252 288 52 43 314 82 128 906 $ 839 $ 308 125 254 78 63 828 11,035 $ 11,378 $ 11,234 6,351 16,772 10,640 19,788 5,968 16,888 9,888 14,557 $ 64,586 $ 58,679 $ 6,010 17,827 9,886 12,816 57,773 $ $ A reconciliation of segment profit to consolidated income before taxes are as follows: Segment Profit Interest and other financial charges Stock compensation expense(1) Pension ongoing income (expense)(2) Pension mark-to-market expense(2) Other postretirement income(2) Repositioning and other charges(3) Other(4) Income before taxes Years Ended December 31, 2020 2019 2018 $ 6,665 $ 7,739 $ 8,190 (359) (168) 785 (44) 57 (575) (349) (357) (153) 592 (123) 47 (546) 360 (367) (175) 992 (37) 32 (1,091) (57) $ 6,012 $ 7,559 $ 7,487 (1) Amounts included in Selling, general and administrative expenses. (2) Amounts included in Cost of products and services sold and Selling, general and administrative expenses (service cost component) and Other (income) expense (non-service cost component). (3) Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and Other (income) expense. (4) Amounts include the other components of Other (income) expense not included within other categories in this reconciliation. Equity income of affiliated companies is included in segment profit. 107 Honeywell International, Inc. HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 24. GEOGRAPHIC AREAS—FINANCIAL DATA United States Europe Other International Net Sales(1) Long-lived Assets(2) Years Ended December 31, Years Ended December 31, 2020 2019 2018 2020 2019 2018 $ 19,665 $ 21,910 $ 23,841 $ 3,823 $ 3,649 $ 6,356 6,616 7,424 7,375 10,066 7,895 628 1,119 579 1,097 $ 32,637 $ 36,709 $ 41,802 $ 5,570 $ 5,325 $ 3,601 571 1,124 5,296 (1) Sales between geographic areas approximate market value and are not significant. Net sales are classified according to their country of origin. Included in United States Net sales are export sales of $4,000 million, $5,415 million and $5,293 million for the years ended December 31, 2020, 2019 and 2018. (2) Long-lived assets are comprised of Property, plant and equipment—net. NOTE 25. SUPPLEMENTAL CASH FLOW INFORMATION Years Ended December 31, 2020 2019 2018 Net payments for repositioning and other charges: Severance and exit cost payments $ (564) $ (249) $ Environmental payments Reimbursement receipts Insurance receipts for asbestos related liabilities Asbestos related liability payments Interest paid, net of amounts capitalized Income taxes paid, net of refunds Non-cash investing and financing activities: (216) 176 58 (287) (256) 292 68 (231) $ $ (833) $ (376) $ 329 $ 344 $ 1,173 1,564 Common stock contributed to savings plans Marketable securities contributed to non-U.S. pension plans 211 93 159 — (285) (218) 67 38 (254) (652) 353 1,566 52 99 Honeywell International, Inc. 108 HONEYWELL INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (Dollars in tables in millions, except per share amounts) NOTE 26. UNAUDITED QUARTERLY FINANCIAL INFORMATION Net sales Gross profit Net income attributable to Honeywell Earnings per common share—basic(1) Earnings per common share—assuming dilution(1) Cash dividends per common share March 31 June 30 September 30 December 31 Year 2020 $ 8,463 $ 7,477 $ 7,797 $ 8,900 $ 2,929 1,581 2.23 2.21 0.900 2,201 1,081 1.54 1.53 0.900 2,414 758 1.08 1.07 0.900 2019 2,924 1,359 1.94 1.91 0.930 32,637 10,468 4,779 6.79 6.72 3.630 March 31 June 30 September 30 December 31 Year Net sales Gross profit Net income attributable to Honeywell Earnings per common share—basic(1) Earnings per common share—assuming dilution(1) Cash dividends per common share $ 8,884 $ 9,243 $ 9,086 $ 9,496 $ 3,005 1,416 1.94 1.92 0.820 3,149 1,541 2.13 2.10 0.820 3,048 1,624 2.26 2.23 0.820 3,168 1,562 2.19 2.16 0.900 36,709 12,370 6,143 8.52 8.41 3.360 (1) Total for the full year may differ from the sum of the individual quarters due to the requirement to use weighted average shares each quarter, which may fluctuate with share repurchases and share issuances, and due to the impact of losses in a quarter. 109 Honeywell International, Inc. Report of Independent Registered Public Accounting Firm To the shareowners and the Board of Directors of Honeywell International Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Honeywell International Inc. and subsidiaries (the “Company” or “Honeywell”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income, shareowners’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria issued by the Committee of Sponsoring established in Internal Control — Integrated Framework (2013) Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Honeywell International, Inc. 110 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Asbestos Related Liabilities—North American Refractories Company (NARCO) Asbestos Liability – Refer to Note 20 to the financial statements Critical Audit Matter Description The Company records an estimated liability for asbestos related personal injury claims related to a predecessor company, NARCO. Such claims arise primarily from alleged occupational exposure to asbestos-containing refractory brick and mortar. The Company’s NARCO asbestos liability reflects an estimated liability for the resolution of asserted and unasserted NARCO-related asbestos claims that are probable of occurrence and reasonably estimable. The Company records an estimated liability for the resolution of asserted Annual Contribution Claims and Pre-Established Unliquidated Claims filed with the NARCO Trust using average payment values for the relevant historical period. The Company also records an estimated liability for unasserted Annual Contribution Claims and Pre-Established Unliquidated Claims based on historic and anticipated claims filing experience and payment rates, disease classifications and type of claim, and average payment values by the NARCO Trust for the relevant historical period. The Company’s estimate also includes all years of epidemiological disease projection through 2059 when estimating the liability for unasserted claims. Establishing the NARCO asbestos liability is an inherently subjective exercise as it requires management to make significant assumptions and judgements. Given the subjectivity related to estimating the NARCO asbestos liability and the lack of a history of sufficiently reliable claims data, auditing of the NARCO asbestos liability involved especially subjective judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the NARCO asbestos liability included the following, among others: (cid:129) We tested the effectiveness of internal controls over the estimate of the NARCO asbestos liability including management’s controls over the estimate for asserted and unasserted Annual Contribution Claims and Pre-Established Unliquidated Claims. (cid:129) We evaluated the methods and assumptions used by management to estimate the NARCO asbestos liability by: O Reading the Company’s analysis and third-party assessment to evaluate the Company’s methods used in the analysis. O Confirming the claims data with the NARCO Trust to evaluate the appropriateness of the underlying data used in the analysis. O Making inquiries of the Company’s third-party specialist to identify the significant assumptions used to develop the analysis. O Making inquiries of internal and external legal counsel regarding the regulatory and litigation environments related to the NARCO asbestos liability. (cid:129) With the assistance of our internal actuarial specialists, we developed a range of independent estimates and compared those to the Company’s recorded NARCO asbestos Liability. 111 Honeywell International, Inc. Revenue Recognition and Contracts with Customers – Long-Term Fixed Price Contracts (Performance Materials and Technologies (PMT)) – Refer to Note 1 and Note 3 to the financial statements Critical Audit Matter Description The Company’s PMT segment develops and manufactures performance chemicals and materials, process technologies, and automation solutions. A portion of PMT’s revenue is generated from long-term fixed price contracts whereby revenue is recognized over the contract term (“over time”) as the work progresses and control of the goods and services is transferred to the customer. Revenue for these contracts is recognized based on the extent of progress toward completion, generally measured by using a cost-to-cost basis input method. Accounting for PMT’s long-term fixed price contracts requires management’s judgment in estimating total contract costs. Contract costs, which can be incurred over several years, are largely determined based on negotiated or estimated purchase contract terms and consider factors such as historical performance, technical and schedule risk, internal and subcontractor performance trends, and anticipated labor agreements. Given the significant judgments necessary to estimate costs associated with these long-term contracts, auditing PMT’s long-term fixed price contracts requires a high degree of auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to PMT’s long-term fixed price contracts included the following, among others: (cid:129) We tested the effectiveness of internal controls over the recognition of revenue and the determination of estimated contract costs including controls over the review of management’s assumptions and key inputs used to recognize revenue and costs on long-term fixed price contracts using the cost-to-cost input method. (cid:129) We evaluated the appropriateness and consistency of management’s methods and assumptions used to recognize revenue and costs on long-term fixed price contracts using the cost-to-cost input method to recognize revenue over time. (cid:129) We selected a sample of long-term fixed price contracts and evaluated the estimates of total cost for each of the long-term fixed price contracts by: O Comparing costs incurred to date to the costs management estimated to be incurred to date. O Evaluating management’s ability to achieve the estimates of total cost by performing corroborating inquiries with Company personnel, including project managers, and comparing the estimates to documentation such as management’s work plans, contract terms and requirements, and purchase orders with suppliers. Our evaluation of management’s assumptions included consideration of historical and current project performance such as consistency of gross margin, identified risks related to project timing including technical and schedule matters, and the status of internal and third party activities such as hardware, software, and labor. Reimbursement Receivables - Garrett Motion Inc. (Garrett) – Refer to Note 20 to the financial statements Critical Audit Matter Description In connection with the spin-off of Garrett in October 2018, the Company entered into a binding indemnification and reimbursement agreement (Garrett Indemnity) with a Garrett subsidiary and a binding tax matters agreement with Garrett and a Garrett subsidiary (the Tax Matters Agreement). Accordingly, the Company recorded a receivable based on estimates of the amounts reimbursable to Honeywell. On September 20, 2020, Garrett and 36 of its affiliates filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). In October 2020, the Company signed a coordination agreement with Oaktree Capital Management, L.P. (Oaktree) and Centerbridge Partners, L.P. (Centerbridge), which was subsequently signed by additional equity holders that, collectively with Honeywell, Centerbridge and Oaktree, represent approximately 58% of Garrett’s outstanding common stock and noteholders representing approximately 88% of the principal amount of Garrett’s outstanding senior notes (the Coordination Agreement). The Coordination Agreement and related term sheet set forth the terms of a proposed plan of reorganization (the Initial COH Proposal). On January 11, 2021, after further revisions to the Initial COH Proposal, Garrett determined that the revised proposal (the Final COH Plan) was higher and better than all other proposals received and entered into a plan support agreement (the Plan Support Agreement), pursuant to which all parties agreed to pursue Bankruptcy Court confirmation of the Final COH Plan. Because Garrett is now a party to the Plan Support Agreement, the Company believes the present value of payments to Honeywell under the Final COH Plan, discounted at a rate reflective of the terms of the agreement, is an appropriate estimate of receivable amounts due in connection with the Garrett Indemnity and Tax Matters Agreement. Honeywell International, Inc. 112 Given the subjectivity in determining the present value of payments under the Final COH Plan, the auditing of the receivable amounts due in connection with the Garrett Indemnity and Tax Matters Agreement required a high degree of auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the receivable amounts due in connection with the Garrett Indemnity and Tax Matters Agreement included the following, among others: (cid:129) We tested the effectiveness of internal controls related to management’s evaluation of the recoverability of the receivable amounts due from Garrett. (cid:129) We made inquiries of internal legal counsel regarding the Garrett bankruptcy proceedings. (cid:129) We developed an understanding of the process used by management in determining the aggregate carrying Indemnity and Tax Matters balance of Agreement, which included obtaining and reading the Final COH Plan, evaluating the Company’s methods, evaluating the appropriateness of the underlying data used, and the identification of significant assumptions used to develop the accounting estimate. the receivable amounts due in connection with the Garrett (cid:129) With the assistance of our internal valuation specialists, we developed an independent expectation of the fair value of the Final COH Plan and compared our expectation to the Company’s recorded amount. /s/ Deloitte & Touche LLP February 12, 2021 We have served as the Company’s auditor since 2014. 113 Honeywell International, Inc. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. information required to be disclosed in reports filed under the Exchange Act CONTROLS AND PROCEDURES Honeywell management maintains disclosure controls and procedures designed to provide reasonable assurance that is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There have been no changes that have materially affected, or are reasonably likely to materially affect, Honeywell’s internal control over financial reporting that have occurred during the quarter ended December 31, 2020. Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of December 31, 2020. Based on these evaluations, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2020. MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Honeywell management is responsible for establishing and maintaining adequate internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act. Honeywell’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management assessed the effectiveness of Honeywell’s internal control over financial reporting as of December 31, 2020. forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). In making this assessment, management used the criteria set We have not experienced any material impact to our internal control over financial reporting during the COVID-19 pandemic. Most of our employees worked remotely during the year in which we prepared these financial statements due to the impact of COVID-19. We enhanced our oversight and monitoring during the close and reporting process, including investments in expanded VPN capabilities and higher scrutiny and monitoring of cybersecurity threats. Other than enhancing our oversight and monitoring processes, we did not alter or compromise our disclosure controls and procedures. We are continually monitoring and assessing the need to modify or enhance our disclosure controls to ensure disclosure controls and procedures continue to be effective. Based on this assessment, management determined that Honeywell maintained effective internal control over financial reporting as of December 31, 2020. In conducting management’s evaluation as described above, Rocky Research acquired October 7, 2020, and Sine Group acquired December 14, 2020, were excluded. The operations of Rocky Research and Sine Group, excluded from management’s assessment of internal control over financial reporting, collectively represent less than 0.1% of the Company’s total revenues and approximately 0.5% of total assets as of December 31, 2020. The effectiveness of Honeywell’s internal control over financial reporting as of December 31, 2020 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in the section titled Financial Statements and Supplementary Data. OTHER INFORMATION Not Applicable. Honeywell International, Inc. 114 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information relating to the Directors of Honeywell, as well as information relating to compliance with Section 16(a) of the Securities Exchange Act of 1934, will be contained in the Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A not later than 120 days after December 31, 2020, and such information is incorporated herein by reference. Certain information relating to the Executive Officers of Honeywell appears in this Form 10-K under the heading titled Information about our Executive Officers. The members of the Audit Committee of our Board of Directors are: George Paz (Chair), Kevin Burke, D. Scott Davis, Linnet F. Deily, Judd A. Gregg and Robin L. Washington. The Board has determined that Mr. Paz, Mr. Davis and Ms. Washington are audit committee financial experts as defined by applicable SEC rules and that Mr. Paz, Mr. Burke, Mr. Davis, Ms. Deily and Ms. Washington satisfy the accounting or related financial management expertise criteria established by the NYSE. All members of the Audit Committee are independent as that term is defined in applicable SEC rules and NYSE listing standards. Honeywell’s corporate governance policies and procedures, including the Code of Business Conduct, Corporate Governance Guidelines and Charters of the Committees of the Board of Directors are available, free of charge, on our website (honeywell.com) under the heading Investors (see Corporate Governance), or by writing to Honeywell, 300 South Tryon Street, Charlotte, North Carolina 28202, c/o Vice President and Corporate Secretary. Honeywell’s Code of Business Conduct applies to all Honeywell directors, officers (including the Chief Executive Officer, Chief Financial Officer and Controller) and employees. Amendments to or waivers of the Code of Business Conduct granted to any of Honeywell’s directors or executive officers will be published on our website within four business days of such amendment or waiver. EXECUTIVE COMPENSATION Information relating to executive compensation will be contained in the Proxy Statement, and such information is incorporated herein by reference. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information relating to security ownership of certain beneficial owners and management and related stockholder matters will be contained in the Proxy Statement, and such information is incorporated herein by reference. EQUITY COMPENSATION PLANS As of December 31, 2020, information about our equity compensation plans is as follows: Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) 20,223,330 (1) 261,718 (4) 20,485,048 $ $ 125.60 (2) N/A (5) 125.60 Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) 36,673,110 (3) N/A (6) 36,673,110 Plan category Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total (1) Equity compensation plans approved by shareowners which are included in column (a) of the table are the 2016 Stock Incentive Plan, the 2011 Stock Incentive Plan, and the 2006 Stock Incentive Plan (including 16,344,101 shares of Common Stock to be issued for options; 2,984,711 RSUs subject to continued employment; 196,542 RSUs at target level and subject to Company performance metrics and continued employment; and 471,395 deferred RSUs); and the 2016 Stock Plan for Non-Employee Directors and the 2006 Stock Plan for 115 Honeywell International, Inc. Non-Employee Directors (including 210,822 shares of Common Stock to be issued for options; and 15,759 RSUs subject to continued services). RSUs included in column (a) of the table represent the full number of RSUs awarded and outstanding whereas the number of shares of Common Stock to be issued upon vesting will be lower than what is reflected on the table because the value of shares required to meet employee tax withholding requirements are not issued. Because the number of future shares that may be distributed to employees participating in the Honeywell Global Stock Plan is unknown, no shares attributable to that plan are included in column (a) of the table above. (2) Column (b) relates to stock options and does not include any exercise price for RSUs because an RSU’s value is dependent upon attainment of certain performance goals or continued employment or service and they are settled for shares of Common Stock on a one-for-one basis. (3) The number of shares that may be issued under the 2016 Stock Incentive Plan as of December 31, 2020 is 34,104,522, which includes the following additional shares that may again be available for issuance: shares that are settled for cash, expire, are canceled, or under similar prior plans, are tendered as option exercise price or tax withholding obligations, are reacquired with cash option exercise price or with monies attributable to any tax deduction to Honeywell upon the exercise of an option, or are under any outstanding awards assumed under any equity compensation plan of an entity acquired by the Company. No securities are available for future issuance under the 2011 Stock Incentive Plan or the 2006 Stock Incentive Plan. The number of shares that may be issued under the Honeywell Global Stock Plan as of December 31, 2020 is 1,736,279. This plan is an umbrella plan for three plans described below maintained solely for eligible employees of participating non-U.S. countries. (cid:129) (cid:129) The UK Sharebuilder Plan allows an eligible UK employee to invest taxable earnings in Common Stock. The Company matches those shares and dividends paid are used to purchase additional shares of Common Stock. For the year ending December 31, 2020, 32,717 shares were credited to participants’ accounts under the UK Sharebuilder Plan. The Honeywell Aerospace Ireland Share Participation Plan and the Honeywell Measurex (Ireland) Limited Group Employee Profit Sharing Plan allow eligible Irish employees to contribute a percentage of base pay and/or bonus that is invested in Common Stock. For the year ending December 31, 2020, 1,816 shares of Common Stock were credited to participants’ accounts under these plans. The remaining 832,309 shares included in column (c) are shares remaining under the 2016 Stock Plan for Non-Employee Directors. (4) Equity compensation plans not approved by shareowners included in the table refer to the Honeywell Excess Benefit Plan and Supplemental Savings Plan. The Honeywell Excess Benefit Plan and Supplemental Savings Plan for highly compensated employees is an unfunded, non-tax qualified plan that provides benefits equal to the employee deferrals and Company matching allocations that would have been provided under Honeywell’s U.S. tax-qualified savings plan if the Internal Revenue Code limitations on compensation and contributions did not apply. The Company matching contribution is credited to participants’ accounts in the form of notional shares of Common Stock. The notional shares are distributed in the form of actual shares of Common Stock. The number of shares to be issued under this plan based on the value of the notional shares as of December 31, 2020 is 261,718. (5) Column (b) does not include any exercise price for notional shares allocated to employees under Honeywell’s equity compensation plans not approved by shareowners because all of these shares are only settled for shares of Common Stock on a one-for-one basis. (6) The amount of securities available for the Honeywell Excess Benefit Plan and future issuance under Supplemental Savings Plan is not determinable because the number of securities that may be issued under this plan depends upon the amount deferred to the plan by participants in future years. Honeywell International, Inc. 116 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information relating to certain relationships and related transactions and director independence will be contained in the Proxy Statement, and such information is incorporated herein by reference. PRINCIPAL ACCOUNTING FEES AND SERVICES Information relating to fees paid to and services performed by Deloitte & Touche LLP and our Audit Committee’s pre-approval policies and procedures with respect to non-audit services will be contained in the Proxy Statement, and such information is incorporated herein by reference. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Page Number in Form 10-K (a)(1.) Consolidated Financial Statements: Consolidated Statement of Operations for the years ended December 31, 2020, 2019 and 2018 Consolidated Statement of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018 Consolidated Balance Sheet at December 31, 2020 and 2019 Consolidated Statement of Cash Flows for the years ended December 31, 2020, 2019 and 2018 Consolidated Statement of Shareowners’ Equity for the years ended December 31, 2020, 2019 and 2018 Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 46 47 48 49 50 51 110 (a)(3.) Exhibits See the Exhibit Index of this Annual Report on Form 10-K FORM 10-K SUMMARY None. Page Number in Form 10-K 118 117 Honeywell International, Inc. EXHIBIT INDEX Exhibit No. 3(i) 3(ii) 4.1 4.2 10.1* 10.2* 10.3* 10.4* 10.5* 10.6* 10.7* 10.8* 10.9* 10.10* 10.11* 10.12* 10.13* 10.14* International International Inc. Securities to paragraph 4(iii)(A) of International Description of Honeywell Description Amended and Restated Certificate of Incorporation of Honeywell International Inc., as amended April 23, 2018 (incorporated by reference to Exhibit 3(i) to Honeywell’s Form 10-Q for the quarter ended June 30, 2018) By-laws of Honeywell International Inc., as amended April 23, 2018 (incorporated by reference to Exhibit 3(ii) to Honeywell’s Form 10-Q for the quarter ended June 30, 2018) Honeywell International Inc. is a party to several long-term debt instruments under which, in each case, the total amount of securities authorized does not exceed 10% of the total assets of Honeywell and its subsidiaries on a consolidated basis. Pursuant Item 601(b) of Regulation S-K, Honeywell agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request. Description of Honeywell Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed herewith) Deferred Compensation Plan for Non-Employee Directors of Honeywell Inc., as amended and restated (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended June 30, 2003) Amendment to Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 8-K filed December 21, 2004) Amendment to Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-K for the year ended December 31, 2005) Honeywell International Inc. Incentive Compensation Plan for Executive Employees, as amended and restated (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-K for the year ended December 31, 2018) Honeywell Excess Benefit Plan and Honeywell Supplemental Savings Plan, as amended and restated (filed herewith) Honeywell International Inc. Severance Plan for Designated Officers, as amended and restated (incorporated by reference to Exhibit 10.6 to Honeywell’s Form 10-K for the year ended December 31, 2013) Honeywell Deferred Incentive Compensation Plan, as amended and restated (filed herewith) Honeywell International Inc. Supplemental Pension Plan, as amended and restated (incorporated by reference to Exhibit 10.10 to Honeywell’s Form 10-K for the year ended December 31, 2008) Amendment to Honeywell International Inc. Supplemental Pension Plan, as amended and restated (incorporated by reference to Exhibit 10.10 to Honeywell’s Form 10-K for the year ended December 31, 2009) Amendment to Honeywell International Inc. Supplemental Pension Plan, as amended and restated (incorporated by reference to Exhibit 10.7 to Honeywell’s Form 10-K for the year ended December 31, 2015) Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.12 to Honeywell’s Form 10-K for the year ended December 31, 2008) Amendment to Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.12 to Honeywell’s Form 10-K for the year ended December 31, 2009) Amendment to Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.9 to Honeywell’s Form 10-K for the year ended December 31, 2013) Amendment to Honeywell International Inc. Supplemental Executive Retirement Plan for Executives in Career Band 6 and Above, as amended and restated (incorporated by reference to Exhibit 10.8 to Honeywell’s Form 10-K for the year ended December 31, 2015) Honeywell International, Inc. 118 Exhibit No. 10.15* 10.16* 10.17* 10.18* 10.19* 10.20* 10.21* 10.22* 10.23* 10.24* 10.25* 10.26* 10.27* 10.28* 10.29* 10.30* 10.31* 10.32* Description Honeywell Supplemental Defined Benefit Retirement Plan, as amended and restated (incorporated by reference to Exhibit 10.13 to Honeywell’s Form 10-K for the year ended December 31, 2008) Amendment to Honeywell Supplemental Defined Benefit Retirement Plan, as amended and restated (incorporated by reference to Exhibit 10.13 to Honeywell’s Form 10-K for the year ended December 31, 2009) Amendment to Honeywell Supplemental Defined Benefit Retirement Plan, as amended and restated (incorporated by reference to Exhibit 10.9 to Honeywell’s Form 10-K for the year ended December 31, 2015) Honeywell International Inc. Severance Plan for Corporate Staff Employees (Involuntary Termination Following a Change in Control), as amended and restated (incorporated by reference to Exhibit 10.12 to Honeywell’s Form 10-K for the year ended December 31, 2013) Honeywell Supplemental Retirement Plan (incorporated by reference to Exhibit 10.24 to Honeywell’s Form 10-K for the year ended December 31, 2006) 2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates, as amended and restated (incorporated by reference to Exhibit 10.26 to Honeywell’s Form 10-K for the year ended December 31, 2008) Amendment to the 2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates, as amended and restated (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2011) 2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Option Award Agreement (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended March 31, 2009) 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.31 to Honeywell’s Form 10-K for the year ended December 31, 2008) Amendment to 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.27 to Honeywell’s Form 10-K for the year ended December 31, 2011) Amendment to 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc., as amended and restated (incorporated by reference to Exhibit 10.24 to Honeywell’s Form 10-K for the year ended December 31, 2014) Inc.—Form of Option 2006 Stock Plan for Non-Employee Directors of Honeywell Agreement (incorporated by reference to Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended March 31, 2012) International 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc.—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-Q for the quarter ended March 31, 2012) 2007 Honeywell Global Employee Stock Plan (incorporated by reference to Exhibit A of Honeywell’s Proxy Statement, dated March 12, 2007, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934) 2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Option Award Agreement, Form 2 (incorporated by reference to Exhibit 10.37 to Honeywell’s Form 10-K for the year ended December 31, 2010) Letter Agreement dated September 3, 2009 between Honeywell and Timothy Mahoney (incorporated by reference to Exhibit 10.38 to Honeywell’s Form 10-K for the year ended December 31, 2010) Form of Honeywell International Inc. Noncompete Agreement for Senior Executives (incorporated by reference to Exhibit 10.39 to Honeywell’s Form 10-K for the year ended December 31, 2010) 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (incorporated by reference to Exhibit A of Honeywell’s Proxy Statement, dated March 10, 2011, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934) 119 Honeywell International, Inc. Exhibit No. 10.33* 10.34* 10.35* 10.36* 10.37* 10.38* 10.39* 10.40* 10.41* 10.42* 10.43* 10.44* 10.45* 10.46* 10.47* 10.48* 10.49* 10.50* Description International International to 2011 Stock Incentive Plan of Honeywell to 2011 Stock Incentive Plan of Honeywell Inc. and its Affiliates the year ended Amendment (incorporated by reference to Exhibit 10.36 to Honeywell’s Form 10-K for December 31, 2012) Amendment Inc. and its Affiliates (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014) 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014) 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement, Form 2 (incorporated by reference to Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014) 2011 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014) 2011 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Stock Option Award Agreement, Form 2 (incorporated by reference to Exhibit 10.39 to Honeywell’s Form 10-K for the year ended December 31, 2014) 2011 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates—Form of Growth Plan Agreement (incorporated by reference to Exhibit 10.5 to Honeywell’s Form 10-Q for the quarter ended March 31, 2014) 2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates–Form of Performance Plan Grant Agreement (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended March 31, 2017) Letter Agreement dated February 24, 2012 between Honeywell and Darius Adamczyk (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2016) Offer Letter dated March 31, 2016 from Honeywell (incorporated by reference to Exhibit 99.1 to Honeywell’s Form 8-K filed April 6, 2016) Employment Offer Letter dated March 1, 2017 between Honeywell and Darius Adamczyk (incorporated by reference to Exhibit 99.1 to Honeywell’s Form 8-K filed March 6, 2017) 2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (incorporated by reference to Exhibit A of Honeywell’s Proxy Statement, dated March 10, 2016, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934) 2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016) 2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Restricted Unit Agreement, Form 2 (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016) 2016 Stock Incentive Plan of Honeywell International Inc. and its Affiliates—Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016) 2016 Stock Plan for Non-Employee Directors (incorporated by reference to Exhibit B of Honeywell’s Proxy Statement, dated March 10, 2016, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934) 2016 Stock Plan for Non-Employee Directors of Honeywell International Inc.—Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.74 to Honeywell’s Form 10-K for the year ended December 31, 2017) 2016 Stock Plan for Non-Employee Directors of Honeywell International Inc.—Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.6 to Honeywell’s Form 10-Q for the quarter ended June 30, 2016) to Darius Adamczyk International Inc. Honeywell International, Inc. 120 Exhibit No. 10.51* 10.52* 10.53* 10.54 10.55 10.56* 10.57 10.58 10.59* 10.60* 10.61* 10.62* 10.63* 10.64* 10.65 10.66 10.67 financial institutional International institutions, and other institutions, and other institutional Description UOP LLC Supplemental Pension Plan, as amended and restated (incorporated by reference to Exhibit 10.76 to Honeywell’s 10-K for the year ended December 31, 2017) Letter Agreement dated April 1, 2016 between Honeywell and Rajeev Gautam (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2018) Letter Agreement dated July 27, 2018 between Honeywell and Greg Lewis (incorporated by reference to Exhibit 99.1 to Honeywell’s Form 8-K filed August 2, 2018) 364-Day Credit Agreement, dated as of April 10, 2020, among Honeywell International Inc., the banks, 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) Amended and Restated Five-Year Credit Agreement, dated as of April 26, 2019, among Honeywell International Inc., the banks, financial lenders parties thereto, Citibank, N.A., as administrative agent, Citibank Europe PLC, UK Branch, as swing line agent, JPMorgan Chase Bank, N.A., as syndication agent, Bank of America, N.A., Barclays Bank PLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners, LLC, and Wells Fargo Bank, National Association, as documentation agents, and Citibank, N.A. and JPMorgan Chase Bank, N.A., as joint lead arrangers and co-bookrunners (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 8-K filed April 29, 2019) Offer Letter dated July 9, 2018 between Honeywell Inc. and Mark R. James (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended March 31, 2019) Indemnification and Reimbursement Agreement, dated September 12, 2018, by and among Honeywell ASASCO Inc., Honeywell ASASCO 2 Inc., and Honeywell International Inc. (incorporated by reference to Exhibit 2.1 to Honeywell’s Form 8-K filed September 14, 2018) Indemnification and Reimbursement Agreement, dated October 14, 2018, by and among New HAPI Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 2.1 to Honeywell’s Form 8-K filed October 15, 2018) Amendment to the 2016 Stock Plan for Non-Employee Directors of Honeywell International Inc. (incorporated by reference to Exhibit 99.2 to Honeywell’s Form 8-K filed October 8, 2019) Amendment (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for September 30, 2020) Amendment to the 2016 Stock Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended June 30, 2020) 2016 Stock Plan for Non-Employee Directors of Honeywell International Inc. – Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to Honeywell’s Form 10-Q for the quarter ended June 30, 2020) 2016 Stock Plan for Non-Employee Directors of Honeywell International Inc. – Form of Restricted Unit Agreement (incorporated by reference to Exhibit 10.3 to Honeywell’s Form 10-Q for the quarter ended June 30, 2020) Retirement Agreement, dated July 20, 2020, between Honeywell and Mark R. James (incorporated by reference to Exhibit 10.4 to Honeywell’s Form 10-Q for the quarter ended June 30, 2020) Delayed Draw Term Loan Agreement, dated as of March 26, 2020, among Honeywell International Inc., the initial lenders named therein, Citibank, N.A., as administrative agent, and 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) Second Amendment, dated July 28, 2020, to Indemnification and Reimbursement Agreement dated October 14, 2018 among Honeywell and Resideo Intermediate Holding Inc. (incorporated by reference to Exhibit 10.1 to Honeywell’s Form 10-Q for the quarter ended September 30, 2020) First Amendment, dated April 21, 2020, to Indemnification and Reimbursement Agreement, dated October 14, 2018 among Honeywell and Resideo Intermediate Holding Inc. (incorporated by reference to Exhibit 10.6 to Honeywell’s Form 10-Q for the quarter ended June 30, 2020) to the 2016 Stock Incentive Plan of Honeywell Inc. and its Affiliates the quarter ended International 121 Honeywell International, Inc. Exhibit No. 10.68 10.69* 10.70* 21 23.1 24 31.1 31.2 32.1 32.2 Description First Amendment, dated June 12, 2020, to Indemnification and Reimbursement Agreement, dated September 12, 2018 among Honeywell, Honeywell Holdings International Inc. and Garrett ASASCO Inc. (incorporated by reference to Exhibit 10.7 to Honeywell’s Form 10-Q for the quarter ended June 30, 2020) Amendment to Honeywell International Inc. Incentive Compensation Plan for Executive Employees, as amended and restated (filed herewith) Letter agreement dated October 2, 2017, between Honeywell International Inc. and Anne Madden (filed herewith) Subsidiaries of the Registrant (filed herewith) Consent of Deloitte & Touche LLP (filed herewith) Powers of Attorney (filed herewith) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 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 (furnished herewith) 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 (furnished herewith) 95 Mine Safety Disclosures (filed herewith) 101.INS The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (v) Consolidated Statements of Shareholders’ Equity and (iv) Consolidated Balance Sheets, (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags. 101.SCH iXBRL Taxonomy Extension Schema (filed herewith) 101.CAL iXBRL Taxonomy Extension Calculation Linkbase (filed herewith) 101.DEF iXBRL Taxonomy Extension Definition Linkbase (filed herewith) 101.LAB iXBRL Taxonomy Extension Label Linkbase (filed herewith) 101.PRE iXBRL Taxonomy Extension Presentation Linkbase (filed herewith) 104 Cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL (and contained in Exhibit 101) The Exhibits identified above with an asterisk (*) are management contracts or compensatory plans or arrangements. Honeywell International, Inc. 122 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 12, 2021 By: /s/ Robert D. Mailloux HONEYWELL INTERNATIONAL INC. Robert D. Mailloux Vice President and Controller (on behalf of the Registrant and as the Registrant’s Principal Accounting Officer) 123 Honeywell International, Inc. Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: Name /s/ Darius E. Adamczyk Darius E. Adamczyk Chairman and Chief Executive Officer (Principal Executive Officer) * Duncan B. Angove Director * William S. Ayer Director * Kevin Burke Director * D. Scott Davis Director * Linnet F. Deily Director /s/ Gregory P. Lewis Gregory P. Lewis Senior Vice President and Chief Financial Officer (Principal Financial Officer) *By: February 12, 2021 /s/ Gregory P. Lewis (Gregory P. Lewis Attorney-in-fact) Name * Deborah Flint Director * Judd A. Gregg Director * Clive R. Hollick Director * Grace D. Lieblein Director * Raymond T. Odierno Director * George Paz Director * Robin L. Washington Director /s/ Robert D. Mailloux Robert D. Mailloux Vice President and Controller (Principal Accounting Officer) Honeywell International, Inc. 124 FORM 10-K CROSS-REFERENCE INDEX PART I ITEM 1 ITEM 1A. ITEM 1B. ITEM 2 ITEM 3 ITEM 4 PART II. ITEM 5 ITEM 6 ITEM 7 Business Information About our Executive Officers Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Page(s) 2 42 24 43 43 43 43 44 8 Management’s Discussion and Analysis of Financial Condition and Results of Operations 9 - 24, 33 - 41 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risks ITEM 8 ITEM 9 ITEM 9A. ITEM 9B. Part III. ITEM 10 ITEM 11 ITEM 12 ITEM 13 ITEM 14 Part IV. ITEM 15 ITEM 16 Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Exhibits and Financial Statement Schedules Form 10-K Summary Signatures 32 46 114 114 114 115 115 115 117 117 117 117 123 125 Honeywell International, Inc. LEADERSHIP TEAM AND CORPORATE OFFICERS DARIUS ADAMCZYK Chairman and Chief Executive Officer TORSTEN PILZ Senior Vice President and Chief Supply Chain Officer SHANE TEDJARATI President Global High Growth Regions SURESH VENKATARAYALU Chief Technology Officer JOHN F. WALDRON President and Chief Executive Officer Safety and Productivity Solutions HARSH BANSAL Vice President Investments MICHAEL BENNETT Vice President Communications and President Honeywell Hometown Solutions JIM CARROLL Senior Vice President Global Government Relations JIM COLBY Vice President and Treasurer ROBERT D. MAILLOUX Vice President and Controller QUE THANH DALLARA President and Chief Executive Officer Connected Enterprise RAJEEV GAUTAM President and Chief Executive Officer Performance Materials and Technologies VIMAL KAPUR President and Chief Executive Officer Honeywell Building Technologies JEFF KIMBELL Senior Vice President and Chief Commercial Officer GREGORY P. LEWIS Senior Vice President and Chief Financial Officer ANNE T. MADDEN Senior Vice President and General Counsel MICHAEL R. MADSEN President and Chief Executive Officer Aerospace TIMOTHY O. MAHONEY Senior Vice President Enterprise Transformation KAREN MATTIMORE Senior Vice President and Chief Human Resources Officer SHAREOWNER INFORMATION ANNUAL MEETING The Annual Meeting of Shareowners will be held at 10:30 a.m. EDT on Friday, May 21, 2021, in virtual format at the following link: www.virtualshareholdermeeting.com/HON2021. DIVIDENDS/SHAREOWNER MATTERS Honeywell’s Dividend Reinvestment and Share Purchase Plan provides for automatic reinvestment of common stock dividends at market price. Participants also may add cash for the purchase of additional shares of common stock without payment of any brokerage commission or service charge. Honeywell offers Direct Registration, or paperless stock ownership. This means that instead of getting a paper stock certificate to represent your shares, your shares are held in your name and tracked electronically in our records. The company has established a Direct Deposit of Dividends service enabling registered shareowners to have their quarterly dividend payments sent electronically to their bank accounts on the payment date. For more information on these services or for answers to questions about dividend checks, stock transfers, or other shareowner matters, please contact Honeywell’s transfer agent and registrar: EQ SHAREOWNER SERVICES 1110 Centre Pointe Curve, Suite 101 Mendota Heights, MN 55120 1-800-401-1957 (US) 1-651-450-4064 (International) http://www.shareowneronline.com HONEYWELL INTERNATIONAL INC. Corporate Publications 300 South Tryon Street Charlotte, NC 28202 1-704-627-6035 VICTOR J. MILLER Vice President, Deputy General Counsel, Corporate Secretary and Chief Compliance Officer STOCK EXCHANGE LISTINGS Honeywell’s Common Stock is listed on the New York Stock Exchange under the symbol HON. It is also listed on the London Stock Exchange. Shareowners of record as of December 31, 2020, totaled 42,205. GENERAL INQUIRIES For additional shareowner inquiries, please contact Honeywell’s Shareowner Services at 1-800-647-7147 or Honeywell Investor Relations at 1-704-627-6200. Aerospace Š Honeywell Building Technologies Š Performance Materials and Technologies Š Safety and Productivity Solutions Honeywell International Inc. 300 South Tryon Street Charlotte, NC 28202 USA For more information about Honeywell, visit www.honeywell.com 

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