Honeywell International 10-Q 2021-09-30

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

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									22-2640650
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)
855 South Mint Street									28202
Charlotte,			NC
(Address of principal executive offices)									(Zip Code)

			(704)			627-6200
			(Registrant’s telephone number, including area code)
			300 South Tryon Street, Charlotte, NC 28202
			(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Common Stock, par value $1 per share*						HON						The NASDAQ Stock Market LLC
1.300% Senior Notes due 2023						HON 23A						The NASDAQ Stock Market LLC
0.000% Senior Notes due 2024						HON 24A						The NASDAQ Stock Market LLC
2.250% Senior Notes due 2028						HON 28A						The NASDAQ Stock Market LLC
0.750% Senior Notes due 2032						HON 32						The NASDAQ Stock Market LLC

• The common stock is also listed on the London Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

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

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

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

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

There were 688,422,975 shares of Common Stock outstanding at September 30, 2021.

TABLE OF CONTENTS

						Page No.
PART I			Financial Information			1
ITEM 1			Financial Statements:			1
			Consolidated Statement of Operations (unaudited) – Three and Nine Months Ended September 30, 2021 and 2020			1
			Consolidated Statement of Comprehensive Income (unaudited) – Three and Nine Months Ended September 30, 2021 and 2020			2
			Consolidated Balance Sheet (unaudited) – September 30, 2021 and December 31, 2020			3
			Consolidated Statement of Cash Flows (unaudited) – Nine Months Ended September 30, 2021 and 2020			4
			Consolidated Statement of Shareowners' Equity (unaudited) – Three and Nine Months Ended September 30, 2021 and 2020			5
			Notes to Consolidated Financial Statements (unaudited)			6
ITEM 2			Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
ITEM 3			Quantitative and Qualitative Disclosures About Market Risks			51
ITEM 4			Controls and Procedures			52
PART II			Other Information			52
ITEM 1			Legal Proceedings			52
ITEM 1A			Risk Factors			52
ITEM 2			Unregistered Sales of Equity Securities and Use of Proceeds			53
ITEM 4			Mine Safety Disclosures			53
ITEM 5			Other Information			1
ITEM 6			Exhibits			54
			Signatures			55

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

We describe many of the trends and other factors that drive our business and future results in the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other parts of this report (including Part II, Item 1A Risk Factors). Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events or developments that management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management’s assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, including the impact of the coronavirus pandemic (COVID-19), that can affect our performance in both the near- and long-term. These forward-looking statements should be considered in light of the information included in this report and our other filings with the Securities and Exchange Commission, including, without limitation, the Risk Factors, as well as the description of trends and other factors in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in this report and our 2020 Annual Report on Form 10-K.

ABOUT HONEYWELL

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. Honeywell uses our Investor Relations website, investor.honeywell.com, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media. Information contained on or accessible through our website is not a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q or any other report or document we file with the SEC. Any reference to our website is intended to be an inactive textual reference only.

PART I. FINANCIAL INFORMATION

The financial statements and related notes as of September 30, 2021, should be read in conjunction with the financial statements for the year ended December 31, 2020, contained in our 2020 Annual Report on Form 10-K.

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
			(Dollars in millions, except per share amounts)
Product sales			$	6,233					$	5,885					$	19,281					$	17,933
Service sales			2,240						1,912						6,454						5,804
Net sales			8,473						7,797						25,735						23,737
Costs, expenses and other
Cost of products sold			4,463						4,315						13,748						12,852
Cost of services sold			1,283						1,068						3,710						3,341
			5,746						5,383						17,458						16,193
Selling, general and administrative expenses			1,152						1,103						3,595						3,524
Other (income) expense			(215)						62						(1,023)						(546)
Interest and other financial charges			90						101						263						264
			6,773						6,649						20,293						19,435
Income before taxes			1,700						1,148						5,442						4,302
Tax expense			427						367						1,274						816
Net income			1,273						781						4,168						3,486
Less: Net income attributable to the noncontrolling interest			16						23						54						66
Net income attributable to Honeywell			$	1,257					$	758					$	4,114					$	3,420
Earnings per share of common stock - basic			$	1.82					$	1.08					$	5.93					$	4.85
Earnings per share of common stock - assuming dilution			$	1.80					$	1.07					$	5.86					$	4.81

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

1 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
			(Dollars in millions)
Net income			$	1,273					$	781					$	4,168					$	3,486
Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment			(93)						(82)						250						(237)
Actuarial (gains) losses recognized during year			(1)						—						(1)						—
Prior service (credit) cost recognized			(21)						(20)						(64)						(60)
Pension and other postretirement benefit adjustments			(22)						(20)						(65)						(60)
Changes in fair value of available for sale investments			—						—						(3)						—
Cash flow hedges recognized in other comprehensive income (loss)			1						(54)						16						50
Less: Reclassification adjustment for gains (losses) included in net income			5						(30)						14						(8)
Changes in fair value of cash flow hedges			(4)						(24)						2						58
Other comprehensive income (loss), net of tax			(119)						(126)						184						(239)
Comprehensive income			1,154						655						4,352						3,247
Less: Comprehensive income attributable to the noncontrolling interest			15						29						54						68
Comprehensive income attributable to Honeywell			$	1,139					$	626					$	4,298					$	3,179

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

2 Honeywell International Inc.

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			September 30, 2021						December 31, 2020
			(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents			$	11,087					$	14,275
Short-term investments			1,049						945
Accounts receivable - net			7,239						6,827
Inventories			4,967						4,489
Other current assets			1,691						1,639
Total current assets			26,033						28,175
Investments and long-term receivables			1,243						685
Property, plant and equipment - net			5,514						5,570
Goodwill			16,963						16,058
Other intangible assets - net			3,637						3,560
Insurance recoveries for asbestos related liabilities			330						366
Deferred income taxes			760						760
Other assets			9,711						9,412
Total assets			$	64,191					$	64,586
LIABILITIES
Current liabilities:
Accounts payable			$	6,116					$	5,750
Commercial paper and other short-term borrowings			3,559						3,597
Current maturities of long-term debt			3,344						2,445
Accrued liabilities			7,188						7,405
Total current liabilities			20,207						19,197
Long-term debt			14,346						16,342
Deferred income taxes			2,372						2,113
Postretirement benefit obligations other than pensions			225						242
Asbestos-related liabilities			1,765						1,920
Other liabilities			7,155						6,975
Redeemable noncontrolling interest

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(Dollars in tables and graphs in millions)

The following Management Discussion and Analysis is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell or the Company) for the three and nine months ended September 30, 2021. The financial information as of September 30, 2021, should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2020, contained in our 2020 Annual Report on Form 10-K. See Note 3 Acquisitions and Divestitures of Notes to Consolidated Financial Statements for a discussion of acquisition and divestiture activity during the nine months ended September 30, 2021.

COVID-19 UPDATE

Our business faced significant disruptions due to the COVID-19 pandemic in 2020 and the resulting global recession, causing a slow-down in demand for many of our products and services. Our business continues to recover from the effects of the pandemic. We continue to monitor several macroeconomic effects, including, supply chain constraints and materials and labor shortages.

As new variants of the virus emerge, we remain cautious as many factors remain unpredictable. We actively monitor and respond to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of our employees, dedicating resources to support our communities, and innovating to address our customers’ needs.

On September 9, 2021, President Biden issued an executive order for U.S. Government contractors. We are taking steps to comply with the executive order and announced a vaccine mandate for all U.S.-based employees, contractors, and subcontractors that work on or in support of contracts with the U.S. Government be fully vaccinated or receive an approved medical or religious exemption by December 8, 2021. In addition, on September 9, 2021, President Biden announced that he directed the Occupational Safety and Health Administration (OSHA) to develop an Emergency Temporary Standard (ETS) mandating either the full vaccination or weekly testing of employees for employers with 100 or more employees. Employees who are not subject to the executive order and who are not fully vaccinated may be subject to the ETS that will require them to get a COVID-19 test at least once a week. OSHA has not issued the ETS nor provided any additional information on its contents or requirements. See Item 1A. Risk Factors in this Form 10-Q, for discussion of risks associated with the potential adverse effects on our workforce of the U.S. Government vaccine mandate for employees, contractors, and subcontractors that service federal contracts and the OSHA requirement on our workforce.. Additionally, see the section titled Risk Factors in our 2020 Annual Report on Form 10-K for discussion of risks associated with the COVID-19 pandemic. A discussion of the impact of COVID-19 can also be found in the Results of Operations section of this Management Discussion and Analysis.

32 Honeywell International Inc.

RESULTS OF OPERATIONS

Consolidated Financial Results

33 Honeywell International Inc.

Net Sales by Segment

34 Honeywell International Inc.

Segment Profit by Segment

35 Honeywell International Inc.

CONSOLIDATED OPERATING RESULTS

Net Sales

The change in net sales was attributable to the following:

			Q3 2021 vs. Q3 2020						Year to Date 2021 vs. 2020
Volume			4		%				3		%
Price			4		%				3		%
Foreign Currency Translation			1		%				2		%
			9		%				8		%

Q3 2021 compared to Q3 2020

Net sales increased due to the following:

• Higher sales volumes due to an increase in demand for certain products and services as the global economy showed signs of recovery from the COVID-19 pandemic,

• Favorable pricing, and

• The favorable impact of foreign currency translation, driven by the weakening of the U.S. Dollar against the currencies of the majority of our international markets, primarily the Australian Dollar, British Pound, Euro, and Chinese Renminbi.

YTD 2021 compared to YTD 2020

Net sales increased due to the following:

• Higher sales volumes due to an increase in demand for certain products and services as the global economy showed signs of recovery from the COVID-19 pandemic,

• Favorable pricing, and

• The favorable impact of foreign currency translation, driven by the weakening of the U.S. Dollar against the currencies of the majority of our international markets, primarily the Euro, British Pound, Australian Dollar, and Chinese Renminbi.

36 Honeywell International Inc.

Cost of Products and Services Sold

Q3 2021 compared to Q3 2020

Cost of products and services sold increased due to the following:

• Higher direct and indirect material costs of approximately $290 million and higher labor costs of approximately $80 million primarily driven by higher volumes due to an increase in demand in certain of our products and services,

• Partially offset by lower repositioning and other charges of approximately $30 million.

YTD 2021 compared to YTD 2020

Cost of products and services sold increased due to the following:

• Higher direct and indirect material costs of approximately $1,150 million and higher labor costs of approximately $80 million primarily driven by higher volumes due to an increase in demand in certain of our products and services,

• Partially offset by lower repositioning and other charges of approximately $40 million.

Gross Margin

37 Honeywell International Inc.

Q3 2021 compared to Q3 2020

Gross margin and Gross margin as a percentage of net sales increased due to the following:

• Higher gross margins due to an increase in demand for certain products and services as the global economy showed signs of recovery from the COVID-19 pandemic,

• Higher volume leverage on a lower fixed-cost base,

• Lower repositioning and other charges of approximately $30 million, and

• Favorable pricing,

• Partially offset by a larger portion of our sales being driven by our Safety and Productivity Solutions segment.

YTD 2021 compared to YTD 2020

Gross margin and Gross margin as a percentage of net sales increased due to the following:

• Higher gross margins due to an increase in demand for certain products and services as the global economy showed signs of recovery from the COVID-19 pandemic,

• Higher volume leverage on a lower fixed-cost base,

• Lower repositioning and other charges of approximately $40 million, and

• Favorable pricing,

• Partially offset by a larger portion of our sales being driven by our Safety and Productivity Solutions segment.

Selling, General and Administrative Expenses

Q3 2021 compared to Q3 2020

Selling, general and administrative expenses increased due to the following:

• Higher expenses due to increased sales volumes and labor expense,

• Partially offset by cost savings from repositioning actions.

Selling, general and administrative expenses as a percentage of net sales decreased due to net sales growing at a faster rate than the increase in selling, general and administrative expenses.

38 Honeywell International Inc.

YTD 2021 compared to YTD 2020

Selling, general and administrative expenses increased due to the following:

• Higher expenses due to increased sales volumes, the unfavorable impact of foreign currency translation and labor expense,

• Partially offset by cost savings from repositioning actions.

Selling, general and administrative expenses as a percentage of net sales decreased due to net sales growing at a faster rate than the increase in selling, general and administrative expenses.

Other (Income) Expense

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Other (income) expense			$	(215)					$	62					$	(1,023)					$	(546)

Q3 2021 compared to Q3 2020

Other income increased due to the following:

• Prior year non-cash charge associated with the reduction in carrying value to present value of reimbursement receivables due from Garrett,

• Higher pension income,

• Partially offset by the recognition of an expense related to UOP matters.

YTD 2021 compared to YTD 2020

Other income increased due to the following:

• Prior year non-cash charge associated with the reduction in carrying value to present value of reimbursement receivables due from Garrett,

• Higher pension income, and

• Gain on sale of the retail footwear business,

• Partially offset by the recognition of an expense related to UOP matters.

39 Honeywell International Inc.

Tax Expense

Q3 2021 compared to Q3 2020

The effective tax rate decreased due to the absence of a non-cash charge related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax benefit in the prior year, partially offset by the recognition of an expense related to UOP matters with no corresponding tax benefit, incremental tax reserves and state taxes, increased tax benefits for employee share-based compensation and the favorable resolution of certain foreign tax matters in the current year.

The effective tax rate for the three months ended September 30, 2021, was higher than the U.S. federal statutory rate of 21% primarily due to the recognition of an expense related to UOP matters with no corresponding tax benefit, incremental tax reserves and state taxes, partially offset by tax benefits for employee share-based compensation and the resolution of certain foreign tax matters.

The effective tax rate for the three months ended September 30, 2020 was higher than the U.S. federal statutory rate of 21% primarily from a non-cash charge related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax benefit, incremental tax reserves and state taxes partially offset by foreign earnings taxed at lower foreign tax rates.

YTD 2021 compared to YTD 2020

The effective tax rate increased during 2021 compared to 2020 primarily from the recognition of an expense related to UOP matters with no corresponding tax benefit, incremental tax reserves and state taxes partially offset by increased tax benefits for employee share-based compensation and the favorable resolution of certain foreign tax matters in the current year along with the absence of prior year items including a non-cash charge related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax benefit, tax benefits realized as a result of the favorable resolution of a foreign tax matter related to the spin-off transactions, tax law changes in India and the resolution of certain U.S. tax matters.

40 Honeywell International Inc.

Net Income Attributable to Honeywell

Q3 2021 compared to Q3 2020

Earnings per share of common stock–assuming dilution increased, driven by the following:

• Prior year non-cash charge associated with the reduction in carrying value to present value of reimbursement receivables due from Garrett,

• Higher segment profit,

• Higher pension income,

• Lower repositioning and other charges, and

• Favorable impact of lower share count,

• Partially offset by the recognition of an expense related to UOP matters and higher income taxes.

YTD 2021 compared to YTD 2020

Earnings per share of common stock–assuming dilution increased, driven by the following:

• Higher segment profit,

• Prior year non-cash charge associated with the reduction in carrying value to present value of reimbursement receivables due from Garrett,

• Higher pension income,

• Lower repositioning and other charges,

• Gain on sale of the retail footwear business, and

• Favorable impact of lower share count,

• Partially offset by higher income taxes and the recognition of an expense related to UOP matters.

41 Honeywell International Inc.

REVIEW OF BUSINESS SEGMENTS

We globally manage our business operations through four segments: Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions.

AEROSPACE

NET SALES

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2021						2020						% Change						2021						2020						% Change
Net sales			$	2,732					$	2,662					3		%				$	8,130					$	8,566					(5)		%
Cost of products and services sold			1,828						1,854												5,330						5,848
Selling, general and administrative and other expenses			164						191												588						636
Segment profit			$	740					$	617					20		%				$	2,212					$	2,082					6		%

			2021 vs. 2020
			Three Months Ended September 30,												Nine Months Ended September 30,
Factors Contributing to Year-Over-Year Change			Sales						Segment Profit						Sales						Segment Profit
Organic(1)			2		%				17		%				(6)		%				5		%
Foreign currency translation			—		%				1		%				1		%				—		%
Acquisitions, divestitures and other, net			1		%				2		%				—		%				1		%
Total % change			3		%				20		%				(5)		%				6		%

(1) Organic sales % change is defined as the change in net sales, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Q3 2021 compared to Q3 2020

Sales increased primarily due to higher demand for our commercial OEMs and aftermarket products and services, and favorable pricing, partially offset by lower demand in domestic and international defense.

• Commercial Aviation Original Equipment sales increased 1% (increased 1% organic) due to increases in regional and business aviation, partially offset by lower demand from air transport.

42 Honeywell International Inc.

• Commercial Aviation Aftermarket sales increased 39% (increased 38% organic) due to higher demand in air transport and regional and business aviation.

• Defense and Space sales decreased 16% (decreased 17% organic) driven by supply chain constraints and lower demand in U.S. and international defense.

Cost of products and services sold decreased due to higher sales volumes of higher margin products and higher productivity.

Segment profit increased due to favorable pricing, higher sales volumes of higher margin products, and increased productivity.

YTD 2021 compared to YTD 2020

Sales decreased due to weakness in global travel due to the COVID-19 pandemic, resulting in lower demand for our products and services from the commercial aviation markets, and a decrease in demand from domestic and international defense spend, partially offset by favorable pricing and favorable impact of foreign currency translation.

• Commercial Aviation Original Equipment sales decreased 16% (decreased 17% organic) due to lower demand from air transport and regional and business aviation.

• Commercial Aviation Aftermarket sales increased 6% (increased 6% organic) due to higher demand in regional and business aviation, partially offset by lower demand in air transport.

• Defense and Space sales decreased 9% (decreased 10% organic) driven by lower demand in U.S and international defense.

Cost of products and services sold decreased due to lower sales volumes and higher productivity.

Segment profit increased due to favorable pricing, higher productivity, and higher sales volumes of higher margin products, partially offset by lower sales volumes.

HONEYWELL BUILDING TECHNOLOGIES

NET SALES

43 Honeywell International Inc.

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2021						2020						% Change						2021						2020						% Change
Net sales			$	1,370					$	1,305					5		%				$	4,135					$	3,763					10		%
Cost of products and services sold			798						770												2,409						2,223
Selling, general and administrative and other expenses			250						253												784						746
Segment profit			$	322					$	282					14		%				$	942					$	794					19		%

			2021 vs. 2020
			Three Months Ended September 30,												Nine Months Ended September 30,
Factors Contributing to Year-Over-Year Change			Sales						Segment Profit						Sales						Segment Profit
Organic			3		%				14		%				6		%				15		%
Foreign currency translation			2		%				1		%				4		%				5		%
Acquisitions, divestitures and other, net			—		%				(1)		%				—		%				(1)		%
Total % change			5		%				14		%				10		%				19		%

Q3 2021 compared to Q3 2020

Sales increased due to increased pricing in response to the rising cost of materials and the favorable impact of foreign currency translation.

• Sales in Products increased 8% (increased 6% organic) due to higher sales volumes, increased pricing, and the favorable impact of foreign currency translation.

• Sales in Building Solutions increased 1% (decreased 1% organic) due to the favorable impact of foreign currency translation and increased pricing, partially offset by lower sales volumes due to project delays.

Cost of products and services sold increased primarily due to the rising cost of materials and the unfavorable impact of foreign currency translation, partially offset by higher productivity.

Segment profit increased primarily due to higher productivity and higher sales volumes of higher margin products.

YTD 2021 compared to YTD 2020

Sales increased due to the favorable impact of foreign currency translation, higher sales volumes, and favorable pricing. Customer demand increased as the global economy began to show signs of recovery.

• Sales in Products increased 13% (increased 9% organic) due to higher sales volumes, favorable pricing, and the favorable impact of foreign currency translation.

• Sales in Building Solutions increased 5% (increased 1% organic) due to the favorable impact of foreign currency translation and favorable pricing.

Cost of products and services sold increased due to higher sales volumes, and the unfavorable impact of foreign currency translation, partially offset by higher productivity.

Segment profit increased due to favorable pricing, higher productivity, the favorable impact of foreign currency translation, and higher sales volumes.

44 Honeywell International Inc.

PERFORMANCE MATERIALS AND TECHNOLOGIES

NET SALES

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2021						2020						% Change						2021						2020						% Change
Net sales			$	2,510					$	2,252					11		%				$	7,408					$	6,867					8		%
Cost of products and services sold			1,653						1,523												4,940						4,572
Selling, general and administrative and other expenses			299						287												946						922
Segment profit			$	558					$	442					26		%				$	1,522					$	1,373					11		%

			2021 vs. 2020
			Three Months Ended September 30,												Nine Months Ended September 30,
Factors Contributing to Year-Over-Year Change			Sales						Segment Profit						Sales						Segment Profit
Organic			9		%				26		%				4		%				9		%
Foreign currency translation			1		%				1		%				3		%				3		%
Acquisitions, divestitures, and other, net			1		%				(1)		%				1		%				(1)		%
Total % change			11		%				26		%				8		%				11		%

Q3 2021 compared to Q3 2020

Sales increased due to higher sales volumes, favorable pricing, the acquisition of Sparta Systems, and the favorable impact of foreign currency translation. Increased activity in the oil and gas industry and higher demand within Advanced Materials resulted in higher sales of our products and services.

• UOP sales increased 30% (increased 29% organic) due to higher demand for oil and gas products.

• Process Solutions sales increased 2% (decreased 2% organic) driven by the acquisition of Sparta Systems and the favorable impact of foreign currency translation.

• Advanced Materials sales increased 14% (increased 14% organic) driven by increased demand in specialty and fluorine products.

Cost of products and services sold increased due to higher sales volumes and the rising cost of materials, partially offset by higher productivity.

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Segment profit increased due to favorable pricing and higher productivity, partially offset by the rising cost of materials.

YTD 2021 compared to YTD 2020

Sales increased due to the favorable impact of foreign currency translation, favorable pricing, the acquisition of Sparta Systems, and higher sales volumes. There was higher demand within Advanced Materials and increased activity in the oil and gas industry which positively impacted many of our UOP customers.

• UOP sales increased 8% (increased 6% organic) due to higher demand for oil and gas products and services and the favorable impact of foreign currency translation.

• Process Solutions sales increased 1% (decreased 4% organic) driven by the acquisition of Sparta Systems and the favorable impact of foreign currency translation, partially offset by lower demand for products and services.

• Advanced Materials sales increased 19% (increased 17% organic) driven by increased demand in fluorine and specialty products and the favorable impact of foreign currency translation.

Cost of products and services sold increased due to higher sales volumes of lower margin products, the rising cost of materials, and the unfavorable impact of foreign currency translation, partially offset by higher productivity.

Segment profit increased due to favorable pricing, higher productivity, and the favorable impact of foreign currency translation, partially offset by the rising cost of materials, and higher sales volumes of lower margin products.

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SAFETY AND PRODUCTIVITY SOLUTIONS

NET SALES

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2021						2020						% Change						2021						2020						% Change
Net sales			$	1,861					$	1,578					18		%				$	6,062					$	4,541					33		%
Cost of products and services sold			1,369						1,113												4,442						3,164
Selling, general and administrative and other expenses			247						246												780						767
Segment profit			$	245					$	219					12		%				$	840					$	610					38		%

			2021 vs. 2020
			Three Months Ended September 30,												Nine Months Ended September 30,
Factors Contributing to Year-Over-Year Change			Sales						Segment Profit						Sales						Segment Profit
Organic			21		%				14		%				34		%				36		%
Foreign currency translation			1		%				3		%				2		%				4		%
Acquisitions, divestitures, and other, net			(4)		%				(5)		%				(3)		%				(2)		%
Total % change			18		%				12		%				33		%				38		%

Q3 2021 compared to Q3 2020

Sales increased due to higher sales volumes and favorable pricing, partially offset by the sale of the retail footwear business. The higher sales volumes were primarily driven by warehouse automation and services and Productivity Solutions and Services.

• Sales in Safety and Retail decreased 12% (decreased 5% organic) due to the sale of the retail footwear business and lower sales volumes, partially offset by favorable pricing.

• Sales in Productivity Solutions and Services increased 26% (increased 25% organic) due to higher demand.

• Sales in Warehouse and Workflow Solutions increased 61% (increased 60% organic) due to higher sales volumes. Sales volume growth was driven by strong demand for our warehouse automation and services.

• Sales in Advanced Sensing Technologies was flat (decreased 1% organic) due to the favorable impact of foreign currency translation, offset by lower sales volumes.

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Cost of products and services sold increased due to higher sales volumes on lower margin products, the rising cost of materials, and labor installation inefficiencies due to supply chain constraints.

Segment profit increased primarily due to higher sales volumes, partially offset by higher sales of lower margin products, the rising cost of materials, and labor installation inefficiencies due to supply chain constraints.

YTD 2021 compared to YTD 2020

Sales increased due to higher sales volumes, favorable pricing, and the favorable impact of foreign currency translation, partially offset by the sale of the retail footwear business. The higher sales volumes were driven by warehouse automation and services and Productivity Solutions and Services.

• Sales in Safety and Retail increased 17% (increased 21% organic) due to higher sales volumes, favorable pricing, and the favorable impact of foreign currency translation, partially offset by the sale of the retail footwear business.

• Sales in Productivity Solutions and Services increased 29% (increased 26% organic) due to higher demand and the favorable impact of foreign currency translation.

• Sales in Warehouse and Workflow Solutions increased 67% (increased 66% organic) due to higher sales volumes. Sales volume growth was driven by strong demand for our warehouse automation and services.

• Sales in Advanced Sensing Technologies increased 2% (decreased 1% organic) due to the favorable impact of foreign currency translation, partially offset by lower sales volumes.

Cost of products and services sold increased due to higher sales volumes on lower margin products, the rising cost of materials, and the unfavorable impact of foreign currency translation.

Segment profit increased primarily due to higher sales volumes, partially offset by higher sales volumes of lower margin products, and the rising cost of materials.

REPOSITIONING CHARGES

See Note 5 Repositioning and Other Charges of Notes to Consolidated Financial Statements for a discussion of our repositioning actions and related charges incurred in the nine months ended September 30, 2021 and 2020. Cash spending related to our repositioning actions was $286 million in the nine months ended September 30, 2021, and was funded through operating cash flows.

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 September 30, 2021, and December 31, 2020, we held $12.1 billion and $15.2 billion, respectively, of cash and cash equivalents, including our short-term investments.

48 Honeywell International Inc.

BORROWINGS

Consolidated total borrowings were $21.2 billion and $22.4 billion as of September 30, 2021, and December 31, 2020.

			September 30, 2021						December 31, 2020
Commercial paper and other short-term borrowings			$	3,559					$	3,597
Variable rate notes			622						1,122
Fixed rate notes			16,897						17,399
Other			171						266
Total borrowings			$	21,249					$	22,384

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

We also have the following revolving credit agreements, which can provide financing for general corporate purposes:

• A $1.5 billion 364-Day Credit Agreement (the 364-Day Credit Agreement) with a syndicate of banks, dated March 31, 2021. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 30, 2022, unless (i) we elect to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on March 30, 2023, or (ii) the 364-Day Credit Agreement is terminated earlier pursuant to its terms. The 364-Day Credit Agreement replaces the previously reported $1.5 billion 364-day credit agreement dated as of April 10, 2020, which was terminated in accordance with its terms effective March 31, 2021. As of September 30, 2021, there were no outstanding borrowings under our 364-Day Credit Agreement.

• A $4.0 billion Five Year Credit Agreement (the 5-Year Credit Agreement) with a syndicate of banks, dated March 31, 2021. Commitments under the 5-Year Credit Agreement can be increased pursuant to the terms of the 5-Year Credit Agreement to an aggregate amount not to exceed $4.5 billion. The 5-Year Credit Agreement amended and restated the previously reported $4.0 billion amended and restated five year credit agreement dated as of April 26, 2019. As of September 30, 2021, there were no outstanding borrowings under our 5-Year Credit Agreement.

We also have a current shelf registration statement with the SEC under which we may issue additional debt securities, common stock and preferred stock that may be offered in one or more offerings on terms to be determined at the time of the offering. We anticipate that net proceeds of any offering would be used for general corporate purposes, including repayment of existing indebtedness, share repurchases, capital expenditures and acquisitions.

For additional information, see Note 9 Long-Term Debt and Credit Agreements for discussion of long-term debt issuances and redemptions during the nine months ended September 30, 2021.

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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 September 30, 2021, Standard & Poor's (S&P), Fitch, and Moody’s have ratings on our debt set forth in the table below:

			S&P						Fitch						Moody's
Outlook			Stable						Stable						Stable
Short-term			A-1						F1						P1
Long-term			A						A						A2

CASH FLOW SUMMARY

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

			Nine Months Ended September 30,
			2021						2020
Cash provided by (used for):
Operating activities			$	3,375					$	3,426
Investing activities			(1,347)						(410)
Financing activities			(5,195)						1,972
Effect of exchange rate changes on cash			(21)						(19)
Net increase (decrease) in cash and cash equivalents			$	(3,188)					$	4,969

Cash provided by operating activities decreased by $51 million due to an unfavorable impact to working capital of $427 million, a net unfavorable impact of changes in assets and liabilities, which resulted in a $183 million use of cash during the nine months ended September 30, 2021, compared to providing cash of $135 million during the nine months ended September 30, 2020. The overall change was partially offset by an increase in net income of $694 million.

Cash used for investing activities increased by $937 million primarily due to $1,334 million in cash paid for acquisitions and $346 million net increase in investments, partially offset by $375 million cash receipt from Garrett Motion Inc. (Garrett), $203 million in proceeds from the sale of the retail footwear business, and $163 million increase in cash receipts from settlements of derivative contracts.

Cash used for financing activities increased by $7,167 million primarily due to $7,596 million decrease of proceeds from the issuance of long-term debt, $350 million increase in repurchases of common stock, $62 million decrease in the net proceeds from the issuance of commercial paper and other short-term borrowings, and $29 million increase in cash dividends paid. This was partially offset by a $882 million decrease in repayments of long-term debt.

CASH REQUIREMENTS AND ASSESSMENT OF CURRENT LIQUIDITY

In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, share repurchases, dividends, strategic acquisitions and debt repayments. On February 12, 2021, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included amounts remaining under, and replaced, the previously approved share repurchase program. During the nine months ended September 30, 2021, the Company repurchased common stock of $2,499 million. Refer to the section titled Liquidity and Capital Resources of our 2020 Form 10-K for a discussion of our expected capital expenditures, share repurchases and dividends for 2021.

We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers and sales of our trade receivables to unaffiliated financial institutions without recourse. The impact of these programs are not material to our overall liquidity.

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

OTHER MATTERS

LITIGATION

We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business. See Note 15 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of environmental, asbestos and other litigation matters.

CRITICAL ACCOUNTING ESTIMATES

Other than as noted below, there have been no material changes to our Critical Accounting Estimates presented in our 2020 Annual Report on Form 10-K. For a discussion of the Company’s Critical Accounting Estimates, see the section titled Critical Accounting Estimates in our 2020 Annual Report on Form 10-K.

On April 26, 2021, the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) confirmed Garrett's amended Chapter 11 plan of reorganization (the Confirmed Plan) and on April 30, 2021, Garrett emerged from bankruptcy. In accordance with Garrett’s emergence from bankruptcy and the Confirmed Plan, the Company received from Garrett an initial payment of $375 million and 834.8 million shares of Series B Preferred Stock in full satisfaction of our indemnification and reimbursement agreement and tax matters agreement. As a result, we updated our Critical Accounting Estimate for Reimbursement Receivables to exclude receivable amounts from Garrett which were satisfied in full. See Note 15 Commitments and Contingencies of Notes to the Consolidated Financial Statements for further discussion on Garrett.

Reimbursement Receivables—In conjunction with the Resideo Technologies, Inc. (Resideo) spin-off, the Company entered into a reimbursement agreement under which Honeywell receives cash payments as reimbursement primarily related to net spending for environmental matters at certain sites as defined in the reimbursement agreement. Accordingly, the Company recorded receivables based on estimates of the underlying reimbursable Honeywell 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.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.

For a discussion of the Company’s quantitative and qualitative disclosures about market risks, see the section titled Quantitative and Qualitative Disclosures About Market Risks in our 2020 Annual Report on Form 10-K. As of September 30, 2021, there has been no material change in this information.

51 Honeywell International Inc.

Honeywell management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that such disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure information required to be disclosed in the reports that Honeywell files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer, our Chief Financial Officer, and our Controller, as appropriate, to allow timely decisions regarding required disclosure. There were no changes that materially affected, or are reasonably likely to materially affect, Honeywell’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business. See Note 15 Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of environmental, asbestos and other litigation matters.

There were no matters requiring disclosure pursuant to the requirement to disclose certain environmental matters involving potential monetary sanctions in excess of $300,000.

Other than as noted below, there have been no material changes to our Risk Factors presented in our 2020 Annual Report on Form 10-K under the section titled Risk Factors. For further discussion of our Risk Factors, refer to the section titled Risk Factors in our 2020 Annual Report on Form 10-K.

The U.S. presidential executive order concerning mandatory COVID-19 vaccination of U.S.-based employees of companies that work on or in support of federal contracts could have a material adverse impact on our business and results of operations.

On September 9, 2021, President Biden issued an executive order requiring all employers with U.S. Government contracts to ensure that their U.S.-based employees, contractors, and subcontractors, that work on or in support of U.S. Government contracts, are fully vaccinated by December 8, 2021. The executive order includes on-site and remote U.S.-based employees, contractors and subcontractors and it only permits limited exceptions for medical and religious reasons.

In addition, on September 9, 2021, President Biden announced that he has directed OSHA to develop an ETS mandating either the full vaccination or weekly testing of employees for employers with 100 or more employees. OSHA has not issued the ETS nor provided any additional information on its contents or requirements.

It is currently not possible to predict with certainty the impact the executive order or OSHA ETS will have on our workforce. As a U.S. Government contractor, we are requiring all U.S. based employees, contractors and subcontractors that service or support our U.S. Government contracts to be fully vaccinated by December 8, 2021. Employees who are not subject to this requirement and who are not fully vaccinated may be subject to the ETS that will require them to get a COVID-19 test at least once a week. Additional vaccine mandates may be announced in jurisdictions in which our businesses operate. Our implementation of these requirements may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business, financial condition, and results of operations.

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Garrett Emergence from Bankruptcy

On April 26, 2021, the Bankruptcy Court confirmed Garrett's amended Chapter 11 plan of reorganization and on April 30, 2021, Garrett emerged from bankruptcy. As such, the risk factor discussing Garrett and the potential outcome of Garrett's bankruptcy proceedings as disclosed in our 2020 Annual Report on Form 10-K under the section titled Risk Factors was no longer a risk as of June 30, 2021. See Note 15 Commitments and Contingencies of Notes to the Consolidated Financial Statements for further discussion on Garrett.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Honeywell purchased 2,910,464 shares of its common stock, par value $1 per share, in the quarter ended September 30, 2021. On February 12, 2021, the Board of Directors authorized the repurchase of up to a total of $10 billion of Honeywell common stock, which included approximately $2.8 billion remaining under, and replaced, the previously approved share repurchase program, which was approved in April 2019, and authorized repurchases of up to $10 billion.

Repurchases may be made through a variety of methods, which could include open market purchases, accelerated share repurchase transactions, negotiated block transactions, 10b5-1 plans, other transactions that may be structured through investment banking institutions or privately negotiated, or a combination of the foregoing. Honeywell presently expects to repurchase outstanding shares from time to time (i) to offset the dilutive impact of employee stock-based compensation plans, including option exercises, restricted unit vesting and matching contributions under our savings plans, and (ii) to reduce share count via share repurchases as and when attractive opportunities arise. The amount and timing of future repurchases may vary depending on market conditions and the level of operating, financing and other investing activities.

As of September 30, 2021, $8.0 billion remained available for additional share repurchases. The following table summarizes Honeywell’s purchase of its common stock for the quarter ended September 30, 2021:

Issuer Purchases of Equity Securities
Period			Total Number of Shares Purchased						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs						Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs (Dollars in millions)
July 1-31, 2021			295,024						$	220.55					295,024						$	8,572
August 1-31, 2021			932,000						$	230.92					932,000						$	8,357
September 1-30, 2021			1,683,440						$	219.79					1,683,440						$	7,987

ITEM 4. MINE SAFETY DISCLOSURES

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

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Exhibit No.						Description
10.1*						Retirement Agreement dated July 20, 2021 between Honeywell International Inc. and Rajeev Gautum, and Exhibit A (Consulting Agreement) thereto (incorporated by reference to Exhibit 10.8 to Honeywell's Form 10-Q for the quarter ended June 30, 2021).
31.1						Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2						Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
95						Mine Safety Disclosures (filed herewith)
101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH						Inline XBRL Taxonomy Extension Schema (filed herewith)
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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

54 Honeywell International Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Honeywell International Inc.
Date: October 22, 2021			By:			/s/ Robert D. Mailloux
						Robert D. Mailloux Vice President and Controller (on behalf of the Registrant and as the Registrant’s Principal Accounting Officer)

55 Honeywell International Inc.