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Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ 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,	North Carolina
(Address of principal executive offices)		(Zip Code)


			(704)			627-6200
			(Registrant’s telephone number, including area code)

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
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
4.125% Senior Notes due 2034	HON 34	The Nasdaq Stock Market LLC

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 ☐

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 ☐

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 provided 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 665,676,749 shares of Common Stock outstanding at March 31, 2023.

TABLE OF CONTENTS


PART I	Financial Information
ITEM 1	Financial Statements and Supplementary Data (unaudited):	3
	Consolidated Statement of Operations (unaudited) – Three Months Ended March 31, 2023, and 2022	3
	Consolidated Statement of Comprehensive Income (unaudited) – Three Months Ended March 31, 2023, and 2022	4
	Consolidated Balance Sheet (unaudited) – March 31, 2023, and December 31, 2022	5
	Consolidated Statement of Cash Flows (unaudited) – Three Months Ended March 31, 2023, and 2022	6
	Consolidated Statement of Shareowners' Equity (unaudited) – Three Months Ended March 31, 2023, and 2022	7

	Note 1 – Basis of Presentation	8
	Note 2 – Summary of Significant Accounting Policies	8
	Note 3 – Acquisitions and Divestitures	9
	Note 4 – Revenue Recognition and Contracts with Customers	10
	Note 5 – Repositioning and Other Charges	13
	Note 6 – Income Taxes	15
	Note 7 – Inventories	15
	Note 8 – Long-term Debt and Credit Agreements	16
	Note 9 – Leases	17
	Note 10 – Derivative Instruments and Hedging Transactions	18
	Note 11 – Fair Value Measurements	20
	Note 12 – Earnings Per Share	21
	Note 13 – Accumulated Other Comprehensive Income (Loss)	22
	Note 14 – Commitments and Contingencies	22
	Note 15 – Pension Benefits	26
	Note 16 – Other (Income) Expense	27
	Note 17 – Segment Financial Data	27
	Note 18 – Subsequent Events	29
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
ITEM 3	Quantitative and Qualitative Disclosures a bout Market Risks	45
ITEM 4	Controls and Procedures	45
Part II	Other Information
ITEM 1	Legal Proceedings	46
ITEM 1A	Risk Factors	46
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	46
ITEM 4	Mine Safety Disclosures	47

ITEM 6	Exhibits	48
	Signatures	49

TABLE OF CONTENTS

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, except as required by applicable securities law. Our forward-looking statements are also subject to material risks and uncertainties that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this Form 10-Q can or will be achieved. 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 (SEC), 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 2022 Annual Report on Form 10-K. Any forward-looking plans described herein are not final and may be modified or abandoned at any time.

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ABOUT HONEYWELL

Honeywell International Inc. (Honeywell, we, us, our, 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. We are a leading software-industrial company committed to introducing state of the art technology solutions to improve efficiency, productivity, sustainability, and safety in high growth businesses in broad-based, attractive industrial end markets. 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 Investor Relations website (investor.honeywell.com) under the heading Financials (see SEC Filings) immediately after they are filed with, or furnished to, the SEC. Honeywell uses our Investor Relations website 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, including any reports available on, 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 in this Form 10-Q is intended to be an inactive textual reference only.

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PART I. FINANCIAL INFORMATION

The financial statements and related notes as of March 31, 2023, should be read in conjunction with the financial statements for the year ended December 31, 2022, contained in the Company's 2022 Annual Report on Form 10-K.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
		2023			2022
			(Dollars in millions, except per share amounts)
Product sales			$	6,310		$	6,132
Service sales			2,554			2,244
Net sales			8,864			8,376
Costs, expenses and other
Cost of products sold			4,068			4,059
Cost of services sold			1,430			1,265
Total Cost of products and services sold			5,498			5,324
Research and development expenses			357			350
Selling, general and administrative expenses			1,317			1,431
Other (income) expense			(260)			(319)
Interest and other financial charges			170			85
Total costs, expenses and other			7,082			6,871
Income before taxes			1,782			1,505
Tax expense			374			371
Net income			1,408			1,134
Less: Net income attributable to noncontrolling interest			14			—
Net income attributable to Honeywell			$	1,394		$	1,134
Earnings per share of common stock—basic			$	2.09		$	1.66
Earnings per share of common stock—assuming dilution			$	2.07		$	1.64

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

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HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
		2023			2022
			(Dollars in millions)
Net income			$	1,408		$	1,134
Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment			(58)			126



Pension and other postretirement benefit adjustments			(12)			(17)
Changes in fair value of available for sale investments			(6)			(6)
Cash flow hedges recognized in other comprehensive income (loss)			16			8
Less: Reclassification adjustment for gains included in net income			2			3
Changes in fair value of cash flow hedges			14			5
Other comprehensive income (loss), net of tax			(62)			108
Comprehensive income			1,346			1,242
Less: Comprehensive income attributable to the noncontrolling interest			15			—
Comprehensive income attributable to Honeywell			$	1,331		$	1,242

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

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HONEYWELL INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)


	March 31, 2023		December 31, 2022
	(Dollars in millions)
ASSETS
Current assets
Cash and cash equivalents	$	6,869	$	9,627
Short-term investments	371		483
Accounts receivable, less allowances of $336 and $326, respectively	7,862		7,440
Inventories	5,776		5,538
Other current assets	1,632		1,894
Total current assets	22,510		24,982
Investments and long-term receivables	905		945
Property, plant and equipment—net	5,472		5,471
Goodwill	17,587		17,497
Other intangible assets—net	3,168		3,222
Insurance recoveries for asbestos-related liabilities	239		224
Deferred income taxes	383		421
Other assets	9,619		9,513
Total assets	$	59,883	$	62,275
LIABILITIES
Current liabilities
Accounts payable	$	6,443	$	6,329
Commercial paper and other short-term borrowings	3,555		2,717
Current maturities of long-term debt	937		1,730
Accrued liabilities	6,961		9,162
Total current liabilities	17,896		19,938
Long-term debt	14,670		15,123
Deferred income taxes	2,303		2,093
Postretirement benefit obligations other than pensions	137		146
Asbestos-related liabilities	1,154		1,180
Other liabilities	6,201		6,469
Redeemable noncontrolling interest	7		7
SHAREOWNERS’ EQUITY
Capital—common stock issued	958		958
—additional paid-in capital	8,774		8,564
Common stock held in treasury, at cost	(35,072)		(34,443)
Accumulated other comprehensive loss	(3,538)		(3,475)
Retained earnings	45,797		45,093
Total Honeywell shareowners’ equity	16,919		16,697
Noncontrolling interest	596		622
Total shareowners’ equity	17,515		17,319
Total liabilities, redeemable noncontrolling interest and shareowners’ equity	$	59,883	$	62,275

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

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HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2023		2022
	(Dollars in millions)
Cash flows from operating activities
Net income	$	1,408	$	1,134
Less: Net income attributable to noncontrolling interest	14		—
Net income attributable to Honeywell	1,394		1,134
Adjustments to reconcile net income attributable to Honeywell to net cash provided by (used for) operating activities
Depreciation	161		167
Amortization	122		163

Repositioning and other charges	141		387
Net payments for repositioning and other charges	(41)		(108)
NARCO Buyout payment	(1,325)		—
Pension and other postretirement income	(136)		(261)
Pension and other postretirement benefit payments	(15)		(14)
Stock compensation expense	59		60
Deferred income taxes	225		21

Other	(350)		(67)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures
Accounts receivable	(422)		(285)
Inventories	(238)		(331)
Other current assets	110		(29)
Accounts payable	114		(199)
Accrued liabilities	(583)		(602)
Net cash provided by (used for) operating activities	(784)		36
Cash flows from investing activities
Capital expenditures	(193)		(183)
Proceeds from disposals of property, plant and equipment	11		10
Increase in investments	(226)		(223)
Decrease in investments	386		304
Receipts from Garrett Motion Inc.	—		197
Receipts (payments) from settlements of derivative contracts	(7)		61
Cash paid for acquisitions, net of cash acquired	—		(176)

Net cash used for investing activities	(29)		(10)
Cash flows from financing activities
Proceeds from issuance of commercial paper and other short-term borrowings	4,105		1,228
Payments of commercial paper and other short-term borrowings	(3,294)		(1,228)
Proceeds from issuance of common stock	37		23
Proceeds from issuance of long-term debt	—		1
Payments of long-term debt	(1,363)		(40)
Repurchases of common stock	(699)		(1,018)
Cash dividends paid	(725)		(668)
Other	(34)		(17)
Net cash used for financing activities	(1,973)		(1,719)
Effect of foreign exchange rate changes on cash and cash equivalents	28		15
Net decrease in cash and cash equivalents	(2,758)		(1,678)
Cash and cash equivalents at beginning of period	9,627		10,959
Cash and cash equivalents at end of period	$	6,869	$	9,281

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

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HONEYWELL INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY

(Unaudited)


	Three Months Ended March 31,
		2023	2022
			Shares		$			Shares		$
				(In millions, except per share amounts)
Common stock, par value				957.6		958			957.6		958
Additional paid-in capital
Beginning balance						8,564					8,141
Issued for employee savings and option plans						151					116
Stock-based compensation expense						59					69


Ending balance						8,774					8,326
Treasury stock
Beginning balance				(290.0)		(34,443)			(272.8)		(30,462)
Reacquired stock or repurchases of common stock				(3.5)		(699)			(5.5)		(1,018)
Issued for employee savings and option plans				1.6		70			1.4		60
Ending balance				(291.9)		(35,072)			(276.9)		(31,420)
Retained earnings
Beginning balance						45,093					42,827

Net income attributable to Honeywell						1,394					1,134
Dividends on common stock						(690)					(673)


Ending balance						45,797					43,288
Accumulated other comprehensive income (loss)
Beginning balance						(3,475)					(2,895)
Foreign exchange translation adjustment						(59)					126
Pension and other postretirement benefit adjustments						(12)					(17)
Changes in fair value of available for sale investments						(6)					(6)
Changes in fair value of cash flow hedges						14					5
Ending balance						(3,538)					(2,787)
Noncontrolling interest
Beginning balance						622					673

Net income attributable to noncontrolling interest						14					—
Foreign exchange translation adjustment						1					—
Dividends paid						(41)					(1)
Contributions from noncontrolling interest holders						—					14
Ending balance						596					686
Total shareowners' equity				665.7		17,515			680.7		19,051
Cash dividends per share of common stock						$	1.030				$	0.980

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

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 1. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments necessary to present fairly the financial position, results of operations, cash flows, and shareowners' equity of Honeywell International Inc. and its consolidated subsidiaries (Honeywell or the Company) for the periods presented. The interim results of operations and cash flows should not necessarily be taken as indicative of the entire year.

Honeywell reports its quarterly financial information using a calendar convention; the first, second, and third quarters are consistently reported as ending on March 31, June 30, and September 30, respectively. It is Honeywell's practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires Honeywell's businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on the Company's business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. In the event differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, Honeywell will provide appropriate disclosures. Honeywell's actual closing dates for the three months ended March 31, 2023, and 2022, were April 1, 2023, and April 2, 2022, respectively.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the Company are set forth in Note 1 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements in the Company’s 2022 Annual Report on Form 10-K. The Company includes herein certain updates to those policies.

RECLASSIFICATIONS

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

Historically, the Company included Company-sponsored costs and costs that relate to contracts with customers for research and development projects as a component of Cost of products and services sold on the Consolidated Statement of Operations. Effective January 1, 2023, the Company began classifying Company-sponsored costs for research and development projects as a separate financial statement line item, titled Research and development expenses, on the Consolidated Statement of Operations and recast prior period results for this reclassification. This reclassification had no impact on the Company's net income, earnings per share, cash flows, segment reporting, or financial position. The Company revised historical periods to reflect this change in presentation.

SUPPLY CHAIN FINANCING

The Company maintains agreements with third-party financial institutions that offer voluntary supply chain financing (SCF) programs to suppliers. The SCF programs enable suppliers, at their sole discretion, to sell their receivables to third-party financial institutions in order to receive payment on receivables earlier than the negotiated commercial terms between suppliers and the Company. Supplier sale of receivables to third-party financial institutions is on terms negotiated between the supplier and the respective third-party financial institution. The Company agrees on commercial terms for the goods and services procured from suppliers, including prices, quantities, and payment terms, which normally range between 60 and 120 days, regardless of whether the supplier elects to participate in the SCF programs. A suppliers’ voluntary participation in the SCF programs has no bearing on the Company's payment terms and the Company has no economic interest in a supplier’s decision to participate in the SCF programs. The Company agrees to pay participating third-party financial institutions the stated amount of confirmed invoices from suppliers on the original maturity dates of the invoices.

Amounts outstanding related to SCF programs are included in Accounts payable in the Consolidated Balance Sheet. Accounts payable included approximately $1,004 million and $992 million as of March 31, 2023, and December 31, 2022, respectively. The impact of these programs is not material to the Company's overall liquidity.

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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 the Company's Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Topic 405): Disclosure of Supplier Finance Program Obligations, to enhance the transparency of supplier finance programs. The new standard requires annual disclosure of the key terms of the program, a description of where in the financial statements amounts outstanding under the program are presented, a rollforward of such amounts, and interim disclosure of amounts outstanding as of the end of each period. The guidance does not affect recognition, measurement, or financial statement presentation of supplier finance programs. The ASU is effective on January 1, 2023, except for the rollforward, which is effective on January 1, 2024. The Company adopted this guidance on January 1, 2023, with the exception of the rollforward that will be effective beginning January 1, 2024. The adoption of this standard does not have a material impact on the Company’s Consolidated Financial Statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted. The Company adopted this guidance on January 1, 2022. The adoption of this standard does not have a material impact on the Company’s Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, to expand the scope of this guidance to include derivatives. 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. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022, to December 31, 2024. The Company will apply the guidance to impacted transactions during the transition period. The adoption of this standard does not have a material impact on the Company’s Consolidated Financial Statements.

NOTE 3. ACQUISITIONS AND DIVESTITURES

ACQUISITIONS

On April 22, 2023, the Company entered into a purchase agreement to acquire Compressor Controls Corporation, a turbomachinery services and controls company based in the United States, for estimated aggregate closing consideration of $670 million in cash. The business will be included in the Performance Materials and Technologies reportable business segment. The acquisition is subject to customary regulatory approvals and is expected to close in the second half of 2023.

On January 18, 2022, the Company acquired 100% of the issued and outstanding shares of US Digital Designs, Inc., a leading provider of technologies for first responders, for total consideration of $186 million. The business is included within the Honeywell Building Technologies reportable business segment. The Company finalized the evaluation for the fair value of all the assets and liabilities acquired with US Digital Designs, Inc. during the first quarter of 2023. Management recorded intangible assets of $53 million and allocated $129 million to goodwill, which is deductible for tax purposes.

DIVESTITURES

As of March 31, 2023, the Company had no material adjustments for divestitures completed during 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 4. 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 reportable business segment for details:


	Three Months Ended March 31,
		2023	2022
Aerospace
Commercial Aviation Original Equipment				$	541	$	478
Commercial Aviation Aftermarket				1,423		1,168
Defense and Space				1,147		1,103
Net Aerospace sales				3,111		2,749
Honeywell Building Technologies
Products				908		879
Building Solutions				579		550
Net Honeywell Building Technologies sales				1,487		1,429
Performance Materials and Technologies
UOP				565		480
Process Solutions				1,288		1,152
Advanced Materials				896		821


Net Performance Materials and Technologies sales				2,749		2,453
Safety and Productivity Solutions
Sensing and Safety Technologies				704		753
Productivity Solutions and Services				347		399
Warehouse and Workflow Solutions				464		592
Net Safety and Productivity Solutions sales				1,515		1,744
Corporate and All Other				2		1
Net sales				$	8,864	$	8,376

In July 2022, the Company realigned certain business units within the Safety and Productivity Solutions reportable business segment. The Safety and Retail business unit, which included our gas detection and safety business, combined with the Advanced Sensing Technologies business unit to form the Sensing and Safety Technologies business unit. The Company recast historical periods to reflect this realignment.

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

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HONEYWELL INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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; and installation, maintenance, and upgrades of systems. Honeywell Forge solutions enable the Company's customers to digitally manage buildings, connecting data from different assets to enable smart maintenance, improve building performance, and even protect from incoming security threats.

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

Safety and Productivity Solutions – A global provider of products and software that improve productivity, workplace safety, and asset performance to customers around the globe. Sensing and Safety Technologies products include personal protective equipment (PPE), apparel, gear, and footwear; gas detection technology; custom-engineered sensors, switches, and controls for sensing and productivity solutions; and cloud-based notification and emergency messaging. Productivity Solutions and Services products and services include mobile devices and software for computing, data collection, and thermal printing; and software-based data and asset management productivity solutions. Warehouse and Workflow Solutions products and services include system design and simulation, automation solutions, performance optimization software, and lifecycle services to enable accuracy, productivity, and predictability of warehouse operations. Honeywell Forge solutions digitally automate processes to improve efficiency while reducing downtime and safety costs.

Corporate and All Other – Corporate and All Other includes revenue from Honeywell's majority-owned investment in Quantinuum. Through Quantinuum, Honeywell provides a wide range of service offerings of fully integrated quantum computing hardware and software solutions.

For a summary by disaggregated product and services sales for each reportable business segment, refer to Note 17 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 the Company's revenue based off timing of recognition is as follows:


	Three Months Ended March 31,
		2023	2022
Products, transferred point in time				58	%	59	%
Products, transferred over time				13		14
Net product sales				71		73
Services, transferred point in time				9		8
Services, transferred over time				20		19
Net service sales				29		27
Net sales				100	%	100	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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 in 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. Contract 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 the Company 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:


	2023			2022
Contract assets—January 1		$	2,294		$	2,060
Contract assets—March 31		2,453			2,170
Change in contract assets - increase		$	159		$	110

Contract liabilities—January 1		$	(4,583)		$	(4,290)
Contract liabilities—March 31		(4,291)			(4,323)
Change in contract liabilities - decrease (increase)		$	292		$	(33)

Net change		$	451		$	77

For the three months ended March 31, 2023, and 2022, the Company recognized revenue of $953 million and $927 million, respectively, that was previously included in the beginning balance of contract liabilities.

Contract assets included $2,426 million and $2,265 million of unbilled balances under long-term contracts as of March 31, 2023, and December 31, 2022, respectively. These amounts are billed in accordance with the terms of customer contracts to which they relate.

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 the Company's measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.

PERFORMANCE OBLIGATIONS

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When the Company's contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. In situations when the Company's contracts includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For any contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the estimated relative stand-alone 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 stand-alone 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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


	March 31, 2023
Aerospace		$	12,592
Honeywell Building Technologies		6,836
Performance Materials and Technologies		8,381
Safety and Productivity Solutions		2,447
Corporate and All Other(1)		4
Total performance obligations		$	30,260

(1) The remaining performance obligations within Corporate and All Other relate to the Quantinuum business.

Performance obligations recognized as of March 31, 2023, will be satisfied over the course of future periods. The Company's disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. Performance obligations expected to be satisfied within one year and greater than one year are 61% and 39%, respectively.

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

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

NOTE 5. REPOSITIONING AND OTHER CHARGES

A summary of net repositioning and other charges follows:


	Three Months Ended March 31,
		2023	2022
Severance				$	67	$	7
Asset impairments				12		123
Exit costs				24		17
Reserve adjustments				(5)		(15)
Total net repositioning charge				98		132
Asbestos-related charges, net of insurance and reimbursements				21		46
Probable and reasonably estimable environmental liabilities, net of reimbursements				22		14
Other charges				—		195
Total net repositioning and other charges				$	141	$	387

The following table summarizes the pre-tax distribution of total net repositioning and other charges by classification in the Consolidated Statement of Operations:


	Three Months Ended March 31,
		2023	2022
Cost of products and services sold				$	80	$	199
Selling, general and administrative expenses				65		188
Other (income) expense				(4)		—
Total net repositioning and other charges				$	141	$	387

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

The following table summarizes the pre-tax amount of total net repositioning and other charges by reportable business segment. These amounts are excluded from segment profit as described in Note 17 Segment Financial Data:


	Three Months Ended March 31,
		2023	2022
Aerospace				$	3	$	21
Honeywell Building Technologies				27		14
Performance Materials and Technologies				19		159
Safety and Productivity Solutions				40		127
Corporate and All Other				52		66
Total net repositioning and other charges				$	141	$	387

In the three months ended March 31, 2023, the Company recognized repositioning charges totaling $103 million, including severance costs of $67 million related to workforce reductions of 1,797 manufacturing and administrative positions mainly in the Company's Honeywell Building Technologies, Safety and Productivity Solutions, and Performance Materials and Technologies reportable business segments. The workforce reductions were related to our productivity and ongoing functional transformation initiatives. The repositioning charges included asset impairments of $12 million related to the write-down of certain assets within our Safety and Productivity Solutions reportable business segment. The repositioning charges also included exit costs of $24 million related to current period costs incurred for closure obligations associated with site transitions across all of the Company's reportable business segments.

In the three months ended March 31, 2022, the Company recognized repositioning charges totaling $147 million, primarily related to closing and relocating the production of certain respiratory manufacturing from a US.-based facility to a non-U.S. facility. The repositioning charges included asset impairments of $123 million primarily related to the write-down of certain manufacturing equipment, and exit costs of $17 million primarily for current period costs incurred for previously approved repositioning projects, closure obligations associated with site transitions, and lease obligations for equipment. These charges also included severance costs of $7 million related to workforce reductions of 1,196 manufacturing and administrative positions across all of the Company's reportable business segments.

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


	Severance Costs			Asset Impairments			Exit Costs			Total
Balance at December 31, 2022		$	235		$	—		$	74		$	309
Charges		67			12			24			103
Usage—cash		(54)			—			(19)			(73)
Usage—noncash		—			(12)			—			(12)
Foreign currency translation		3			—			16			19
Adjustments		(1)			—			(4)			(5)
Balance at March 31, 2023		$	250		$	—		$	91		$	341

Certain repositioning projects will recognize exit costs in future periods when the actual liability is incurred. Such exit costs incurred in the three months ended March 31, 2023, and 2022, were $10 million and $11 million, respectively.

During the three months ended March 31, 2022, Selling, general and administrative expenses on the Consolidated Statement of Operations and within Other charges on the table above included $183 million of reserves against outstanding accounts receivable, contract assets, and impairments of other assets due to the suspension of substantially all of the Company's sales, distribution and service activities in Russia and Belarus, sanctions, and deteriorating trade relations in Russia due to the Russia-Ukraine conflict. Based on available information to date, the Company’s estimate of potential future impairments on the Company's businesses in Russia would not be material with respect to the Company's consolidated financial position.

Given the uncertainty inherent in the Company's remaining obligations related to contracts with Russian counterparties, the Company does 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). Based on available information to date, the Company’s estimate of potential future losses or other contingencies related to the wind down of our activities, including any guarantee payments or any litigation costs or as otherwise related to the Company's wind down in Russia, could adversely affect the Company's consolidated results of operations in the periods recognized but would not be material with respect to the Company's consolidated financial position. See Note 14 Commitments and Contingencies for a discussion of the recognition and measurement of estimate for contingencies.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 6. INCOME TAXES

The effective tax rate was equal to the U.S. federal statutory rate of 21% and decreased during 2023 compared to 2022 primarily due to increased benefits from taxes on non-U.S. earnings, tax reserves, and the absence of restructuring related expenses, partially offset by tax expense from accrued withholding tax related to unremitted foreign earnings and decreased benefits from employee share-based compensation.

NOTE 7. INVENTORIES


	March 31, 2023			December 31, 2022
Raw materials		$	1,496		$	1,407
Work in process		1,161			1,049
Finished products		3,119			3,082
Total Inventories		$	5,776		$	5,538

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 8. LONG-TERM DEBT AND CREDIT AGREEMENTS


	March 31, 2023			December 31, 2022






1.30% Euro notes due 2023		$	—		$	1,334
3.35% notes due 2023		300			300
0.00% Euro notes due 2024		543			534
2.30% notes due 2024		750			750
4.85% notes due 2024		400			400
1.35% notes due 2025		1,250			1,250
2.50% notes due 2026		1,500			1,500
1.10% notes due 2027		1,000			1,000
4.95% notes due 2028		500			500
2.25% Euro notes due 2028		814			800
2.70% notes due 2029		750			750
1.95% notes due 2030		1,000			1,000
1.75% notes due 2031		1,500			1,500
0.75% Euro notes due 2032		543			534
5.00% notes due 2033		1,100			1,100
4.125% Euro notes due 2034		1,085			1,067
5.70% notes due 2036		441			441
5.70% notes due 2037		462			462
5.375% notes due 2041		417			417
3.812% notes due 2047		445			445
2.80% notes due 2050		750			750
Industrial development bond obligations, floating rate maturing at various dates through 2037		22			22
6.625% debentures due 2028		201			201
9.065% debentures due 2033		51			51
Other (including capitalized leases), 8.6% weighted average interest rate maturing at various dates through 2029		232			265
Fair value of hedging instruments		(220)			(287)
Debt issuance costs		(229)			(233)
Total Long-term debt and current related maturities		15,607			16,853
Less: Current maturities of long-term debt		937			1,730
Total Long-term debt		$	14,670		$	15,123

On February 22, 2023, the Company repaid its 1.30% Euro notes due 2023.

On March 20, 2023, the Company entered into a $1.5 billion 364-day credit agreement (the 364-Day Credit Agreement) and a $4.0 billion amended and restated five-year credit agreement (the 5-Year Credit Agreement). The 364-Day Credit Agreement replaced the $1.5 billion 364-day credit agreement dated as of March 24, 2022, which was terminated in accordance with its terms effective March 20, 2023. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 18, 2024, unless (i) Honeywell elects to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on March 18, 2025, or (ii) the 364-Day Credit Agreement is terminated earlier pursuant to its terms. The 5-Year Credit Agreement amended and restated the previously reported $4.0 billion amended and restated five-year credit agreement dated as of March 24, 2022. 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 364-Day Credit Agreement and 5-Year Credit Agreement are maintained for general corporate purposes.

As of March 31, 2023, there were no outstanding borrowings under the 364-Day Credit Agreement or the 5-Year Credit Agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 9. LEASES

The Company's operating and finance lease portfolio is described in Note 10 Leases of Notes to Consolidated Financial Statements in the Company's 2022 Annual Report on Form 10-K.

Supplemental cash flow information related to leases was as follows:


	Three Months Ended March 31,
		2023	2022
Right-of-use assets obtained in exchange for lease obligations
Operating leases				$	20	$	47
Finance leases				31		17

Supplemental balance sheet information related to leases was as follows:


	March 31, 2023			December 31, 2022
Operating leases
Other assets		$	858		$	881
Accrued liabilities		193			192
Other liabilities		756			775
Total operating lease liabilities		949			967
Financing leases
Property, plant and equipment		388			383
Accumulated depreciation		(170)			(161)
Property, plant and equipment—net		218			222
Current maturities of long-term debt		80			77
Long-term debt		135			145
Total financing lease liabilities		$	215		$	222

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 10. DERIVATIVE INSTRUMENTS AND HEDGING TRANSACTIONS

Honeywell's foreign currency, interest rate, credit, and commodity price risk management policies are described in Note 11 Derivative Instruments and Hedging Transactions of Notes to Consolidated Financial Statements in the Company's 2022 Annual Report on Form 10-K.

The following table summarizes the notional amounts and fair values of the Company’s outstanding derivatives by risk category and instrument type within the Consolidated Balance Sheet as of March 31, 2023, and December 31, 2022:


	Notional						Fair Value Asset						Fair Value (Liability)
March 31, 2023		December 31, 2022				March 31, 2023		December 31, 2022				March 31, 2023		December 31, 2022
Derivatives in fair value hedging relationships
Interest rate swap agreements		$	5,007	$	4,984			$	31	$	16			$	(251)	$	(303)
Derivatives in cash flow hedging relationships
Foreign currency exchange contracts		683		866				36		19				(3)		(5)
Commodity contracts		7		9				—		—				—		(1)
Derivatives in net investment hedging relationships

Cross currency swap agreements		4,189		3,189				44		90				(12)		—
Total derivatives designated as hedging instruments		9,886		9,048				111		125				(266)		(309)
Derivatives not designated as hedging instruments
Foreign currency exchange contracts		8,454		9,679				2		74				(5)		(3)
Total derivatives at fair value		$	18,340	$	18,727			$	113	$	199			$	(271)	$	(312)

All derivative assets are presented in Other current assets or Other assets. All derivative liabilities are presented in Accrued liabilities or Other liabilities.

In addition to the foreign currency derivative contracts designated as net investment hedges, certain of the Company's foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $4,816 million and $3,836 million as of March 31, 2023, and December 31, 2022, respectively.

The following table sets forth the amounts recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:


	Carrying Amount of Hedged Item						Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item
March 31, 2023		December 31, 2022				March 31, 2023		December 31, 2022
Long-term debt		$	4,787	$	4,696			$	(220)	$	(287)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

The following tables summarize the location and impact to the Consolidated Statement of Operations related to derivative instruments:


	Three Months Ended March 31, 2023
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, General and Administrative Expenses			Other (Income) Expense			Interest and Other Financial Charges
		$	8,864		$	4,068		$	1,430		$	1,317		$	(260)		$	170
Gain or (loss) on cash flow hedges
Foreign currency exchange contracts
Amount reclassified from accumulated other comprehensive income into income		1			3			1			1			—			—



Gain or (loss) on fair value hedges
Interest rate swap agreements
Hedged items		—			—			—			—			—			(67)
Derivatives designated as hedges		—			—			—			—			—			67



Gain or (loss) on derivatives not designated as hedging instruments
Foreign currency exchange contracts		—			—			—			—			(80)			—


	Three Months Ended March 31, 2022
	Net Sales			Cost of Products Sold			Cost of Services Sold			Selling, General and Administrative Expenses			Other (Income) Expense			Interest and Other Financial Charges
		$	8,376		$	4,059		$	1,265		$	1,431		$	(319)		$	85
Gain or (loss) on cash flow hedges
Foreign currency exchange contracts
Amount reclassified from accumulated other comprehensive income into income		1			1			—			1			—			—

Gain or (loss) on fair value hedges
Interest rate swap agreements
Hedged items		—			—			—			—			—			137
Derivatives designated as hedges		—			—			—			—			—			(137)
Gain or (loss) on net investment hedges
Foreign currency exchange contracts
Amount excluded from effectiveness testing recognized in earnings using an amortization approach		—			—			—			—			—			4
Gain or (loss) on derivatives not designated as hedging instruments
Foreign currency exchange contracts		—			—			—			—			66			—

The following table summarizes the amounts of gain or (loss) on net investment hedges recognized in Accumulated other comprehensive income (loss):


	Three Months Ended March 31,
	2023	2022
Euro-denominated long-term debt			$	(49)	$	83
Euro-denominated commercial paper			(28)		17
Cross currency swap agreements			(57)		17

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 11. FAIR VALUE MEASUREMENTS

The accounting guidance for fair value measurements and disclosures establishes a three-level fair value hierarchy:

Level 1 - Inputs are based on quoted prices in active markets for identical assets and liabilities.
Level 2 - Inputs are based on observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.
Level 3 - One or more inputs are unobservable and significant.

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis:


	March 31, 2023												December 31, 2022
	Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Assets
Foreign currency exchange contracts		$	—		$	38		$	—		$	38		$	—		$	93		$	—		$	93
Available for sale investments		64			428			—			492			87			559			—			646
Interest rate swap agreements		—			31			—			31			—			16			—			16
Cross currency swap agreements		—			44			—			44			—			90			—			90

Investments in equity securities		22			32			—			54			22			32			—			54
Right to HWI Net Sale Proceeds		—			—			39			39			—			—			295			295
Total assets		$	86		$	573		$	39		$	698		$	109		$	790		$	295		$	1,194
Liabilities
Foreign currency exchange contracts		$	—		$	8		$	—		$	8		$	—		$	8		$	—		$	8
Interest rate swap agreements		—			251			—			251			—			303			—			303
Commodity contracts		—			—			—			—			—			1			—			1
Cross currency swap agreements		—			12			—			12			—			—			—			—
Total liabilities		$	—		$	271		$	—		$	271		$	—		$	312		$	—		$	312

The foreign currency exchange contracts, interest rate swap agreements, cross currency swap agreements, and commodity contracts 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, time deposits, and corporate debt securities that are designated as available for sale, as well as investments in equity securities. These investments are valued using published prices based on observable market data. As such, these investments are classified within level 2.

The Company holds certain available for sale investments in U.S. government securities and investments in equity securities. These investments are 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 other short-term borrowings approximates fair value.

As part of the NARCO Buyout (see Note 14 Commitments and Contingencies for definition), Honeywell holds a right to proceeds from the definitive sale agreement pursuant to which HarbisonWalker International Holdings, Inc. (HWI), the reorganized and renamed entity that emerged from the NARCO Bankruptcy, was acquired by an affiliate of Platinum Equity, LLC (HWI Sale). The right to these proceeds is considered a financial instrument. The significant input for the valuation of this right is unobservable, and as such, is classified within level 3.

The HWI Sale closed on February 16, 2023. In connection with the HWI Sale, Honeywell received initial cash proceeds of $256 million (HWI Net Sale Proceeds). The fair value of the remaining HWI Net Sale Proceeds as of March 31, 2023, represents contingent consideration to be paid in future periods if certain conditions under the definitive sale agreement for the HWI Sale are met.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

The following table sets forth a reconciliation of beginning and ending balances of assets and liabilities that were accounted for at fair value using level 3 measurements:


	March 31, 2023
Balance at beginning of period		$	295


Receipt of HWI Net Sale Proceeds		(256)
Balance at end of period		$	39

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:


	March 31, 2023						December 31, 2022
	Carrying Value			Fair Value			Carrying Value			Fair Value
Assets

Long-term receivables		$	221		$	177		$	229		$	183

Liabilities
Long-term debt and related current maturities		$	15,607		$	14,706		$	16,853		$	15,856

The Company determined the fair value of the long-term receivables by utilizing transactions in the listed markets for identical or similar assets. As such, the fair value of these receivables is considered level 2.

NOTE 12. EARNINGS PER SHARE

The details of the earnings per share calculations for the three months ended March 31, 2023, and 2022, are as follows (shares in millions):


	Three Months Ended March 31,
Basic		2023	2022
Net income attributable to Honeywell				$	1,394	$	1,134
Weighted average shares outstanding				667.8		684.7
Earnings per share of common stock—basic				$	2.09	$	1.66


	Three Months Ended March 31,
Assuming Dilution		2023	2022
Net income attributable to Honeywell				$	1,394	$	1,134
Average shares
Weighted average shares outstanding				667.8		684.7
Dilutive securities issuable—stock plans				5.2		6.6
Total weighted average diluted shares outstanding				673.0		691.3
Earnings per share of common stock—assuming dilution				$	2.07	$	1.64

The diluted earnings per share calculations exclude the effect of stock options when the cost to exercise an option exceeds the average market price of the common shares during the period. For the three months ended March 31, 2023, and 2022, the weighted average number of stock options excluded from the computations were 4 million and 3 million, respectively.

As of March 31, 2023, and 2022, the total shares outstanding were 665.7 million and 680.7 million, respectively, and as of March 31, 2023, and 2022, total shares issued were 957.6 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT


	Foreign Exchange Translation Adjustment			Pension and Other Postretirement Benefit Adjustments			Changes in Fair Value of Available for Sale Investments			Changes in Fair Value of Cash Flow Hedges			Total
Balance at December 31, 2022		$	(2,832)		$	(648)		$	(7)		$	12		$	(3,475)
Other comprehensive income (loss) before reclassifications		(59)			—			(6)			16			(49)
Amounts reclassified from accumulated other comprehensive income		—			(12)			—			(2)			(14)
Net current period other comprehensive income (loss)		(59)			(12)			(6)			14			(63)
Balance at March 31, 2023		$	(2,891)		$	(660)		$	(13)		$	26		$	(3,538)


	Foreign Exchange Translation Adjustment			Pension and Other Postretirement Benefit Adjustments			Changes in Fair Value of Available for Sale Investments			Changes in Fair Value of Cash Flow Hedges			Total
Balance at December 31, 2021		$	(2,478)		$	(415)		$	1		$	(3)		$	(2,895)
Other comprehensive income (loss) before reclassifications		129			—			(6)			8			131
Amounts reclassified from accumulated other comprehensive income		(3)			(17)			—			(3)			(23)
Net current period other comprehensive income (loss)		126			(17)			(6)			5			108
Balance at March 31, 2022		$	(2,352)		$	(432)		$	(5)		$	2		$	(2,787)

NOTE 14. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL MATTERS

Honeywell's environmental matters are described in Note 19 Commitments and Contingencies of Notes to Consolidated Financial Statements in the Company's 2022 Annual Report on Form 10-K.

The following table summarizes information concerning the Company's recorded liabilities for environmental costs:


Balance at December 31, 2022	$	615
Accruals for environmental matters deemed probable and reasonably estimable	82
Environmental liability payments	(24)

Balance at March 31, 2023	$	673

Environmental liabilities are included in the following balance sheet accounts:


	March 31, 2023			December 31, 2022
Accrued liabilities		$	222		$	222
Other liabilities		451			393
Total environmental liabilities		$	673		$	615

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

In conjunction with the Resideo Technologies, Inc. (Resideo) spin-off, the Company entered into an indemnification and reimbursement agreement with a Resideo subsidiary, pursuant to which Resideo’s subsidiary has an ongoing obligation to make cash payments to Honeywell in amounts equal to 90% of Honeywell’s annual net spending for environmental matters at certain sites as defined in the agreement. The amount payable to Honeywell in any given year is subject to a cap of $140 million, and the obligation will continue until the earlier of December 31, 2043, or December 31 of the third consecutive year during which the annual payment obligation is less than $25 million.

Reimbursements associated with this agreement are collected from Resideo quarterly and was $35 million in the three months ended March 31, 2023, and offset operating cash outflows incurred by the Company. As the Company incurs costs for environmental matters deemed probable and reasonably estimable related to the sites covered by the indemnification and reimbursement agreement, a corresponding receivable from Resideo for 90% of such costs is also recorded. This receivable amount recorded in the three months ended March 31, 2023, was $59 million. As of March 31, 2023, Other current assets and Other assets included $140 million and $498 million, respectively, for the short-term and long-term portion of the receivable amount due from Resideo under the indemnification and reimbursement agreement.

ASBESTOS MATTERS

Honeywell is named in asbestos-related personal injury claims related to North American Refractories Company (NARCO), which was sold in 1986, and 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


	Bendix			NARCO			Total
December 31, 2022		$	1,291		$	1,325		$	2,616
Accrual for update to estimated liability		10			3			13
Change in estimated cost of future claims		9			—			9
Asbestos-related liability payments		(36)			(1)			(37)
NARCO Buyout		—			(1,325)			(1,325)
March 31, 2023		$	1,274		$	2		$	1,276

INSURANCE RECOVERIES FOR ASBESTOS-RELATED LIABILITIES


	Bendix			NARCO			Total
December 31, 2022		$	130		$	135		$	265
Probable insurance recoveries related to estimated liability		6			—			6
Insurance receipts for asbestos-related liabilities		(4)			(7)			(11)

March 31, 2023		$	132		$	128		$	260

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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


	March 31, 2023			December 31, 2022
Other current assets		$	41		$	41
Insurance recoveries for asbestos-related liabilities		219			224
Total insurance recoveries for asbestos-related liabilities		$	260		$	265
Accrued liabilities		$	122		$	1,436
Asbestos-related liabilities		1,154			1,180
Total asbestos-related liabilities		$	1,276		$	2,616

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. NARCO ceased manufacturing asbestos containing products in 1980 and 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 (Channeling Injunction). The NARCO Trust Agreement and the NARCO Trust Distribution Procedures set forth the structure and operating rules of the Trust, and established Honeywell’s evergreen funding obligations.

On November 18, 2022, Honeywell entered into a definitive agreement with the Trust and certain other parties, which was subsequently amended on November 20, 2022 (Amended Buyout Agreement).

Pursuant to the terms of the Amended Buyout Agreement, Honeywell agreed to make a one-time, lump sum payment in the amount of $1.325 billion to the Trust (Buyout Amount), subject to certain deductions as described in the Amended Buyout Agreement and in exchange for the release by the Trust of Honeywell from all further and future obligations of any kind related to the Trust and/or any claimants who were exposed to asbestos-containing products manufactured, sold, or distributed by NARCO or its predecessors (the Honeywell Obligations) (the NARCO Buyout). In accordance with the Amended Buyout Agreement, the economic rights of the Trust in respect of the net proceeds from the HWI Sale (as defined in Note 11 Fair Value Measurements) inure to the benefit of Honeywell.

On December 8, 2022, the Bankruptcy Court issued an order that (A) approved the Amended Buyout Agreement, and (B) declared that the Channeling Injunction will remain in full force and effect without modification, dissolution, or termination.

On December 14, 2022, HWI (as defined in Note 11 Fair Value Measurements) entered into a definitive sale agreement for the sale of HWI to an affiliate of Platinum Equity, LLC subject to the terms set forth in the agreement.

On January 30, 2023, the Company paid the Buyout Amount to the Trust, the parties closed the transactions contemplated in the Amended Buyout Agreement, and Honeywell was released from the Honeywell Obligations. Honeywell continues to have the right to collect proceeds in connection with its NARCO asbestos-related insurance policies.

On February 16, 2023, the HWI Sale closed, and on March 17, 2023, pursuant to the terms of the Amended Buyout Agreement, Honeywell received initial proceeds from the HWI Sale in the amount of $256 million. See Note 11 Fair Value Measurements for further information on the related proceeds and remaining amount under the Amended Buyout Agreement.

For additional information, see our Annual Report on Form 10-K, filed with the SEC on February 10, 2023, under Note 19 Commitments and Contingencies.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Bendix Products – Bendix manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements. The following tables present information regarding Bendix-related asbestos claims activity:


	Three Months Ended March 31,		Years Ended December 31,
	2023		2022		2021
Claims unresolved at the beginning of period		5,608		6,401		6,242
Claims filed		400		2,014		2,611
Claims resolved		(302)		(2,807)		(2,452)
Claims unresolved at the end of period		5,706		5,608		6,401


	March 31,		December 31,
Disease Distribution of Unresolved Claims	2023		2022		2021
Mesothelioma and other cancer claims		3,442		3,283		3,760
Nonmalignant claims		2,264		2,325		2,641
Total claims		5,706		5,608		6,401

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


	Years Ended December 31,
	2022			2021			2020			2019			2018
	(in whole dollars)
Malignant claims		$	59,200		$	56,000		$	61,500		$	50,200		$	55,300
Nonmalignant claims		$	520		$	400		$	550		$	3,900		$	4,700

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, which exclude the Company’s ongoing legal fees to defend such asbestos claims which will continue to be expensed as they are incurred.

The Company reflects the inclusion of all years of epidemiological disease projection through 2059 when estimating the liability for unasserted Bendix-related asbestos claims. Such liability for unasserted Bendix-related asbestos claims is based on historic and anticipated claims filing experience and dismissal rates, disease classifications, and resolution values in the tort system for the previous five years. The Company valued Bendix asserted and unasserted claims using average resolution values for the previous five years. The Company updates the resolution values used to estimate the cost of Bendix asserted and unasserted claims during the fourth quarter each year.

The Company's insurance receivable corresponding to the liability for settlement of asserted and unasserted Bendix asbestos claims reflects coverage which is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Based on the Company's ongoing analysis of the probable insurance recovery, insurance receivables are recorded in the financial statements simultaneous with the recording of the estimated liability for the underlying asbestos claims. This determination is based on the Company's analysis of the underlying insurance policies, historical experience with insurers, ongoing review of the solvency of insurers, judicial determinations relevant to insurance programs, and consideration of the impacts of any settlements reached with the Company's insurers.

PETROBRAS AND UNAOIL MATTERS

On December 19, 2022, the Company reached a comprehensive resolution to the investigations by the U.S. Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and certain Brazilian authorities (Brazilian Authorities) relating to the Company's use of third parties who previously worked for the Company's UOP business in Brazil in relation to a project awarded in 2010 for Petróleo Brasileiro S.A. (Petrobras). The investigations focused on the Company’s compliance with the U.S. Foreign Corrupt Practices Act and similar Brazilian laws (UOP Matters). The comprehensive resolution also resolves DOJ and SEC investigations relating to a matter involving a foreign subsidiary’s prior contract with Unaoil S.A.M. in Algeria executed in 2011 (the Unaoil Matter).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

In connection with the comprehensive resolution, (i) the Company agreed to pay a total equivalent of $202.7 million, which payment occurred in January 2023, to the DOJ, the SEC, and the Brazilian Authorities, collectively, in penalties, disgorgement, and prejudgment interest, (ii) the Company’s subsidiary, UOP, LLC (UOP), entered into a three-year Deferred Prosecution Agreement with the DOJ for charges related to the UOP Matters, (iii) UOP entered into leniency agreements with the Brazilian authorities related to the UOP Matter in Brazil, and (iv) the Company entered into an agreement with the SEC that resolves allegations relating to the UOP Matters and the Unaoil Matter. Pursuant to these agreements, the Company agreed to undertake certain compliance measures and compliance reporting obligations. These agreements entirely resolve the Petrobras and Unaoil investigations.

OTHER MATTERS

The Company is subject to a number of other lawsuits, investigations, and disputes (some of which involve substantial amounts claimed) arising out of the conduct of the Company's 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. The Company recognizes liabilities for any contingency that is probable of occurrence and reasonably estimable. The Company continually assesses the likelihood of adverse judgments or outcomes in such matters, as well as potential ranges of probable 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.

Given the uncertainty inherent in litigation and investigations, the Company does not believe it is possible to develop estimates of reasonably possible loss (or a range of possible loss) in excess of current accruals for commitment and contingency matters, including those discussed in this Note 14. Considering the Company's past experience and existing accruals, the Company does not expect the outcome of such matters, either individually or in the aggregate, to have a material adverse effect on the Company's consolidated financial position. Because most contingencies are resolved over long periods of time, potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause the Company to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on the Company's consolidated results of operations or operating cash flows in the periods recognized or paid.

NOTE 15. PENSION BENEFITS

Net periodic pension benefit (income) cost for the Company's significant pension plans included the following components:


				U.S. Plans
	Three Months Ended March 31,
		2023	2022
Service cost					$	7	$	21
Interest cost					161		95
Expected return on plan assets					(278)		(320)
Amortization of prior service (credit) cost					(10)		(10)
Net periodic benefit income					$	(120)	$	(214)


				Non-U.S. Plans
	Three Months Ended March 31,
		2023	2022
Service cost					$	3	$	5
Interest cost					49		28
Expected return on plan assets					(67)		(75)


Net periodic benefit income					$	(15)	$	(42)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 16. OTHER (INCOME) EXPENSE


	Three Months Ended March 31,
		2023	2022
Interest income				$	(76)	$	(20)
Pension ongoing income – non-service				(146)		(285)
Other postretirement income – non-service				(6)		(10)
Equity income of affiliated companies				(35)		(14)


Foreign exchange				2		(2)

Benefit related to Russia-Ukraine Conflict				(4)		—
Other, net				5		12
Total Other (income) expense				$	(260)	$	(319)

NOTE 17. SEGMENT FINANCIAL DATA

Honeywell globally manages its business operations through four reportable business segments. Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions, and assesses operating performance.

Honeywell’s senior management evaluates segment performance based on segment profit. Each segment’s profit is measured as segment income (loss) before taxes excluding general corporate unallocated expense, interest and other financial charges, stock compensation expense, pension and other postretirement income (expense), repositioning and other charges, and other items within Other (income) expense.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	Three Months Ended March 31,
		2023	2022
Net sales
Aerospace
Products				$	1,672	$	1,461
Services				1,439		1,288
Net Aerospace sales				3,111		2,749
Honeywell Building Technologies
Products				1,132		1,082
Services				355		347
Net Honeywell Building Technologies sales				1,487		1,429
Performance Materials and Technologies
Products				2,182		1,956
Services				567		497
Net Performance Materials and Technologies sales				2,749		2,453
Safety and Productivity Solutions
Products				1,324		1,633
Services				191		111
Net Safety and Productivity Solutions sales				1,515		1,744
Corporate and All Other

Services				2		1
Net Corporate and All Other sales				2		1
Net sales				$	8,864	$	8,376
Segment profit
Aerospace				$	827	$	753
Honeywell Building Technologies				375		336
Performance Materials and Technologies				566		510
Safety and Productivity Solutions				260		253
Corporate and All Other				(81)		(86)
Total segment profit				1,947		1,766
Interest and other financial charges				(170)		(85)
Stock compensation expense(a)				(59)		(60)
Pension ongoing income(b)				130		251
Other postretirement income(b)				6		10
Repositioning and other charges(c)				(141)		(387)
Other(d)				69		10
Income before taxes				$	1,782	$	1,505


(a)			Amounts included in Selling, general and administrative expenses.
(b)			Amounts included in Cost of products and services sold, Selling, general and administrative expenses (service cost component) and Other (income) expense (non-service cost component).
(c)			Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and Other (income) expense.
(d)			Amounts include the other components of Other (income) expense not included within other categories in this reconciliation. Equity income of affiliated companies is included in segment profit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

NOTE 18. SUBSEQUENT EVENTS

See Note 3 Acquisitions and Divestitures for information related to a purchase agreement executed by the Company on April 22, 2023.

On April 24, 2023, the Board of Directors authorized the repurchase of up to $10 billion of the Company's common stock, including approximately $2.1 billion of remaining availability under the previously announced share repurchase program authorization. The repurchase authorization does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

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Next: Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS