Honeywell International 10-Q 2024-09-30

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 September 30, 2024

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)

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

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.

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 650,247,380 shares of Common Stock outstanding at September 30, 2024.

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The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell, we, us, our, or the Company) for the three and nine months ended September 30, 2024. The financial information as of September 30, 2024, should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2023, contained in our 2023 Annual Report on Form 10-K. See Note 3 Acquisitions, Divestitures and Assets and Liabilities Held for Sale of Notes to Consolidated Financial Statements for a discussion of acquisition and divestiture activity during the nine months ended September 30, 2024. Certain prior year amounts are reclassified to conform to the current year presentation.

BUSINESS UPDATE

MACROECONOMIC CONDITIONS

We continue to monitor the impacts of ongoing macroeconomic conditions and geopolitical events. Global conflicts, tariffs, labor disruptions, and regulations continue to create volatility in global markets and contribute to supply chain shortages and pricing volatility. Inflationary pressures from earlier tariffs and sanctions are subsiding but the risk of supplier price volatility remains. We continue to actively collaborate with our suppliers to minimize shortages and reduce supply and price volatility. Slowing global growth has temporarily alleviated pressure on logistics, freight, and service capacities.

Our mitigation strategies include pricing actions and hedging strategies, longer term planning for constrained materials, new supplier development, material supply tracking tools, and direct engagement with key suppliers to meet customer demand. Our relationships with primary and secondary suppliers allow us to reliably source key components and raw materials, which include considering altering existing products, developing new products, and committing our own resources to assist certain suppliers. We believe these mitigation strategies enable us to reduce supply risk, accelerate new product innovation, and expand our penetration in the markets we serve. Additionally, due to the strenuous quality controls and product qualification we perform on a new or altered product, we do not expect these mitigation strategies to impact product quality or reliability.

To date, our strategies have successfully mitigated our exposure to these conditions. However, if we are not successful in sustaining or executing these strategies, these macroeconomic conditions could have a material adverse effect on our consolidated results of operations or operating cash flows.

SPIN-OFF OF ADVANCED MATERIALS

On October 8, 2024, the Company announced its intention to spin off its Advanced Materials business into an independent, U.S. publicly traded company, which is targeted to be completed by the end of 2025 or early 2026.The planned spin-off is intended to be a tax-free spin to Honeywell shareowners for U.S. federal income tax purposes. The spin-off will be subject to the satisfaction of a number of customary conditions, including, among others, finalization of the financial statements of the Advanced Materials business, the filing and effectiveness of applicable filings (including a Form 10 registration statement) with the SEC, assurance that the spin-off of the Advanced Materials business will be tax-free to Honeywell’s shareowners, receipt of applicable regulatory approvals and final approval by Honeywell’s Board of Directors. The proposed spin-off is complex in nature, and may be affected by unanticipated developments, credit and equity markets or changes in market conditions.

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RESULTS OF OPERATIONS

Consolidated Financial Results

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Net Sales by Segment

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Segment Profit by Segment

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CONSOLIDATED OPERATING RESULTS

Net Sales

The change in Net sales was attributable to the following:

A discussion of Net sales by reportable business segment can be found in the Review of Business Segments section of this Management's Discussion and Analysis.

Q3 2024 compared with Q3 2023

Net sales increased due to the following:

• Increased pricing and price adjustments to offset inflation, and

• Incremental sales from recent acquisitions.

YTD 2024 compared with YTD 2023

Net sales increased due to the following:

• Increased pricing and price adjustments to offset inflation, and

• Incremental sales from recent acquisitions.

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Cost of Products and Services Sold

Q3 2024 compared with Q3 2023

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

• Higher direct and indirect material costs and higher labor costs of approximately $0.2 billion or 4%, and

• Incremental costs from recent acquisitions of approximately $0.1 billion or 2%,

• Partially offset by higher productivity of approximately $0.1 billion or 2%.

YTD 2024 compared with YTD 2023

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

• Higher direct and indirect material costs and higher labor costs of approximately $0.6 billion or 4%, and

• Higher sales volumes of lower margin products of approximately $0.3 billion or 2%,

• Partially offset by higher productivity of approximately $0.2 billion or 1%.

Gross Margin

Q3 2024 compared with Q3 2023

Gross margin increased by approximately $0.2 billion and gross margin percentage increased 10 basis points to 38.5% compared to 38.4% for the same period of 2023.

YTD 2024 compared with YTD 2023

Gross margin increased by approximately $0.6 billion and gross margin percentage increased 40 basis points to 38.7% compared to 38.3% for the same period of 2023.

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Research and Development Expenses

Q3 2024 compared with Q3 2023

Research and development expenses were largely unchanged.

YTD 2024 compared with YTD 2023

Research and development expenses were largely unchanged.

Selling, General and Administrative Expenses

Q3 2024 compared with Q3 2023

Selling, general and administrative expenses increased due to higher labor costs.

YTD 2024 compared to YTD 2023

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

• Higher labor costs of approximately $0.2 billion or 5%, and

• Incremental costs from acquisitions of approximately $0.1 billion or 3%,

• Partially offset by higher productivity of approximately $0.1 billion or 3%.

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Impairment of Assets Held for Sale

Q3 2024 compared with Q3 2023

An impairment charge was recorded on assets held for sale related to the personal protective equipment business during the three months ended September 30, 2024.

YTD 2024 compared to YTD 2023

An impairment charge was recorded on assets held for sale related to the personal protective equipment business during the nine months ended September 30, 2024.

Other (Income) Expense

Q3 2024 compared with Q3 2023

Other income increased due primarily to higher interest income.

YTD 2024 compared to YTD 2023

Other income increased due primarily to higher interest income.

Tax Expense

Q3 2024 compared with Q3 2023

The effective tax rate decreased 60 basis-points primarily driven by incremental expense from tax reserve activity and increased benefit from taxes on non-U.S. earnings, partially offset by a nondeductible impairment loss on assets held for sale.

YTD 2024 compared with YTD 2023

The effective tax rate decreased 20 basis-points primarily driven by increased benefits from taxes on non-U.S. earnings and employee share-based compensation, partially offset by a nondeductible impairment loss on assets held for sale.

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Net Income Attributable to Honeywell

Q3 2024 compared to Q3 2023

Earnings per share of common stock–assuming dilution decreased due to the following:

• Impairment charges on assets held for sale ($0.19 after tax), and

• Higher interest expense ($0.10 after tax),

• Partially offset by higher segment profit ($0.15 after tax), and

• Lower income tax expense ($0.06 after tax).

YTD 2024 compared with YTD 2023

Earnings per share of common stock–assuming dilution increased due to the following:

• Higher segment profit ($0.34 after tax),

• Lower repositioning and other charges ($0.16 after tax), and

• Lower share count ($0.15 after tax),

• Partially offset by higher interest expense ($0.24 after tax), and

• Impairment charges on assets held for sale ($0.19 after tax).

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REVIEW OF BUSINESS SEGMENTS

During the first quarter of 2024, the Company realigned certain of its business units as reflected in Note 18 Segment Financial Data, which impacted the composition of its reportable segments. The Company recast historical periods to reflect this change in segment presentation. See Note 18 Segment Financial Data of Notes to Consolidated Financial Statements for further discussion.

We globally manage our business operations through four reportable business segments: Aerospace Technologies, Industrial Automation, Building Automation, and Energy and Sustainability Solutions.

AEROSPACE TECHNOLOGIES

Net Sales

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Q3 2024 compared to Q3 2023

Sales increased $413 million due to higher organic sales of $176 million in Defense and Space driven by higher sales volumes due to increased shipments and higher organic sales of $124 million in Commercial Aviation Aftermarket driven by increased pricing in air transport. Additionally, the acquisitions of CAES and Civitanavi Systems contributed $59 million to sales in the three months ended September 30, 2024.

Segment profit increased $114 million and segment margin percentage was flat at 27.7% compared to the same period of 2023.

YTD 2024 compared to YTD 2023

Sales increased $1,521 million due to higher organic sales of $629 million in Commercial Aviation Aftermarket driven by higher sales volumes in air transport due to an increase in flight hours and higher organic sales of $588 million in Defense and Space driven by higher sales volumes due to increased shipments.

Segment profit increased $448 million and segment margin percentage increased 30 basis points to 27.7% compared to 27.4% for the same period of 2023.

INDUSTRIAL AUTOMATION

Net Sales

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Q3 2024 compared to Q3 2023

Sales decreased $129 million due to lower organic sales of $96 million in Warehouse and Workflow Solutions driven by lower demand for projects and lower organic sales of $47 million in Sensing and Safety Technologies driven by lower demand for personal protective equipment.

Segment profit decreased $11 million and segment margin percentage increased 60 basis points to 20.3% compared to 19.7% for the same period in 2023.

YTD 2024 compared to YTD 2023

Sales decreased $675 million due to lower organic sales of $516 million in Warehouse and Workflow Solutions driven by lower demand for projects and lower organic sales of $137 million in Sensing and Safety Technologies driven by lower demand for personal protective equipment.

Segment profit decreased $190 million and segment margin percentage decreased 70 basis points to 19.5% compared to 20.2% for the same period in 2023.

During the second quarter of 2022, our Productivity Solutions and Services business entered into a license and settlement agreement (the Agreement). Under the Agreement, we received $360 million, paid in equal quarterly installments over eight quarters, beginning with the second quarter of 2022 and ending with the first quarter of 2024. The Agreement provides each party a license to its existing patent portfolio for use by the other party’s existing products and resolved the patent-related litigation between the parties.

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BUILDING AUTOMATION

Net Sales

Q3 2024 compared to Q3 2023

Sales increased $215 million due to higher organic sales of $51 million in Building Solutions driven by higher demand for building projects and services. Additionally, the acquisition of Access Solutions contributed $177 million in the three months ended September 30, 2024.

Segment profit increased $60 million and segment margin percentage increased 30 basis points to 25.9% compared to 25.6% for the same period of 2023.

YTD 2024 compared to YTD 2023

Sales increased $215 million due to higher organic sales of $171 million in Building Solutions driven by higher demand for building projects and services, partially offset by lower organic sales of $165 million in Products driven by lower demand. Additionally, the acquisition of Access Solutions contributed $238 million in the nine months ended September 30, 2024.

Segment profit increased $35 million and segment margin percentage decreased 40 basis points to 25.3% compared to 25.7% for the same period of 2023.

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ENERGY AND SUSTAINABILITY SOLUTIONS

Net Sales

Q3 2024 compared to Q3 2023

Sales increased $12 million due to higher organic sales of $26 million in Advanced Materials driven by higher demand for specialty chemicals and materials, partially offset by lower organic sales of $15 million in UOP driven by lower gas processing project demand.

Segment profit increased $5 million and segment margin percentage increased 10 basis points to 24.5% compared to 24.4% for the same period of 2023.

YTD 2024 compared to YTD 2023

Sales increased $113 million due to higher organic sales of $153 million in Advanced Materials driven by higher demand for fluorine products, partially offset by lower organic sales of $23 million in UOP driven by lower gas processing project demand.

Segment profit increased $48 million and segment margin percentage increased 50 basis points to 23.3% compared to 22.8% for the same period of 2023.

On October 8, 2024, the Company announced its intention to spin off its Advanced Materials business into an independent, U.S. publicly traded company.

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CORPORATE AND ALL OTHER

Corporate and All Other primarily includes unallocated corporate costs, interest expense on holding-company debt, and the controlling majority-owned interest in Quantinuum. Corporate and All Other is not a separate reportable business segment as segment reporting criteria is not met. The Company continues to monitor the activities in Corporate and All Other to determine the need for further reportable business segment disaggregation.

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, 2024, and 2023. Cash spending related to our repositioning actions was $145 million in the nine months ended September 30, 2024, and was funded through operating cash flows.

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LIQUIDITY AND CAPITAL RESOURCES

(Dollars in tables in millions)

We 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 U.S. cash balances, and the ability to access non-U.S. cash balances, short-term debt from the commercial paper market, long-term borrowings, committed credit lines, and access to the public debt and equity markets.

CASH

As of September 30, 2024, and December 31, 2023, we held $10.9 billion and $8.1 billion, respectively, of cash and cash equivalents, including our short-term investments. 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 counterparty.

As of September 30, 2024, $6.8 billion of the Company’s cash, cash equivalents, and short-term investments were held by non-U.S. subsidiaries. We do not have material amounts related to any jurisdiction subject to currency control restrictions that impact our ability to access and repatriate such amounts. Under current laws, we do not expect taxes on repatriation or restrictions on amounts held outside of the U.S. to have a material effect on our overall liquidity.

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, 2024

Net cash provided by operating activities was $3,816 million, driven by $4,420 million of Net income attributable to Honeywell, adjusted for $957 million of depreciation and amortization, partially offset by $641 million of other operating activities, driven by higher tax payments, $443 million of pension and other postretirement income, and $329 million of net payments for repositioning and other charges.

Net cash used for investing activities was $8,202 million, driven by $7,047 million of cash paid for acquisitions and $771 million of capital expenditures.

Net cash provided by financing activities was $7,058 million, driven by $10,407 million of proceeds from the issuance of long-term debt, primarily to fund recent acquisitions, and $1,039 million of net proceeds of commercial paper, partially offset by $2,161 million of cash dividends paid, $1,381 million of repayments of long-term debt, and $1,200 million of repurchases of common stock.

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Nine months ended September 30, 2024 compared with nine months ended September 30, 2023

Net cash provided by operating activities increased by $1,431 million, primarily due to the $1,325 million payment made by the Company pursuant to the NARCO Amended Buyout Agreement in 2023.

Net cash used for investing activities increased by $7,448 million, driven by a $6,331 million increase in cash paid for acquisitions, $538 million net increase in investments, and $462 million net increase in cash payments from settlements of derivative contracts.

Net cash provided by financing activities increased by $10,485 million, driven by a $7,422 million increase in proceeds from the issuance of long-term debt, primarily to fund recent acquisitions, $1,796 million increase in net proceeds of commercial paper, and $987 million decrease in repurchases of common stock.

CASH REQUIREMENTS AND ASSESSMENT OF CURRENT LIQUIDITY

In addition to our operating cash requirements, our principal future cash requirements will include funding capital expenditures, share repurchases, dividends, strategic acquisitions, and debt repayments. During the nine months ended September 30, 2024, we repurchased common stock of $1.2 billion. Refer to the section titled Liquidity and Capital Resources of our 2023 Form 10-K for a discussion of our expected capital expenditures, share repurchases, mergers and acquisitions activity, and dividends for 2024.

We continually seek opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers and transfer of our trade receivables to unaffiliated financial institutions on a true sale basis. The impact of these programs is not material to our overall liquidity.

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 are expected to further our strategic plan and strengthen our existing core businesses. During the nine months ended September 30, 2024, we acquired Access Solutions for total consideration of $4.9 billion, net of cash acquired, CAES Systems Holdings LLC for total consideration of $1.9 billion, net of cash acquired, and Civitanavi Systems S.p.A. for total consideration of $200 million, net of cash acquired. During the fourth quarter of 2024, we acquired Air Products' liquefied natural gas process technology and equipment business for $1.8 billion, net of cash acquired. 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. During the third quarter of 2024, we classified the assets and liabilities of the personal protective equipment business as held for sale. See Note 3 Acquisitions, Divestitures and Assets and Liabilities Held for Sale of Notes to Consolidated Financial Statements for additional discussion. In addition, on October 8, 2024, we announced our intention to spin off the Advanced Materials business into an independent, U.S. publicly traded company, which is targeted to be completed by the end of 2025 or early 2026.

In early 2023, we made payments of approximately $1.5 billion in connection with the NARCO Buyout and UOP Matters. Pursuant to the NARCO Amended Buyout Agreement, we received proceeds of $275 million from the HWI Sale during the year ended December 31, 2023. During the nine months ended September 30, 2024, we received $3 million of proceeds from the HWI Sale and may receive additional consideration in future periods if certain conditions under the definitive sale agreement for the HWI Sale are met. These payments and receipts have not materially impacted our liquidity position. See Note 12 Fair Value Measurements of Notes to Consolidated Financial Statements for additional discussion related to the fair value of future proceeds from the HWI Sale.

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. During the nine months ended September 30, 2024, our net cash provided by financing activities included proceeds of $10.4 billion from the issuance of long-term debt primarily to fund the Access Solutions, Civitanavi Systems S.p.A., CAES, and LNG acquisitions.

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

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BORROWINGS

We leverage a variety of debt instruments to manage our overall borrowing costs. As of September 30, 2024, and December 31, 2023, our total borrowings were $30.8 billion and $20.4 billion, respectively.

A primary source of liquidity is our ability to access the corporate bond markets. Through these markets, we issue a variety of long-term fixed rate notes, in a variety of currencies, to manage our overall funding costs.

Another primary 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 365 days or less 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 loan and revolving credit agreements:

• A $1.0 billion Fixed Rate Term Loan Credit Agreement (the Fixed Rate Term Loan Credit Agreement) with a syndicate of banks, dated as of August 12, 2024. Amounts borrowed under the Fixed Rate Term Loan Credit Agreement are required to be repaid no later than August 12, 2027, unless the Fixed Rate Term Loan Credit Agreement is terminated earlier pursuant to its terms. As of September 30, 2024, there were $1.0 billion of borrowings outstanding under the Fixed Rate Term Loan Credit Agreement.

• A $1.5 billion 364-day credit agreement (the 364-Day Credit Agreement) with a syndicate of banks, dated as of March 18, 2024. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 17, 2025, 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 17, 2026, or (ii) the 364-Day Credit Agreement is terminated earlier pursuant to its terms. The 364-Day Credit Agreement replaced the previously reported $1.5 billion 364-day credit agreement dated as of March 20, 2023, which was terminated in accordance with its terms effective March 18, 2024. As of September 30, 2024, 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 as of March 18, 2024. 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 March 20, 2023. As of September 30, 2024, there were no outstanding borrowings under our 5-Year Credit Agreement.

See Note 9 Long-Term Debt and Credit Agreements of Notes to Consolidated Financial Statements for additional information regarding our debt instruments.

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, 2024, S&P Global Inc. (S&P), Fitch Ratings Inc. (Fitch), and Moody’s Investor Service (Moody's) have ratings on our debt set forth in the table below:

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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 2023 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 2023 Annual Report on Form 10-K.

Goodwill and Indefinite-Lived Intangible Assets Impairment Testing—The Company’s business combinations typically result in the recognition of goodwill and intangible assets. The Company generally engages an independent third-party valuation specialist for assistance in the allocation of the purchase price and determination of the fair value of goodwill and intangible assets, which involves the use of accounting estimates and assumptions based on information available at or near the acquisition date. The Company believes the accounting estimates and assumptions are reasonable based on information available at the date of acquisition through historical experience and information obtained from management of the acquired entity; however, there is inherent uncertainty in the accounting estimates as assumptions are forward looking and could be affected by future economic and market conditions.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual, or more frequent if necessary, impairment testing. In testing goodwill and indefinite-lived intangible assets, the fair value is estimated utilizing a discounted cash flow approach, including strategic and annual operating plans, adjusted for terminal value assumptions. These impairment tests involve the use of accounting estimates and assumptions, and changes to those assumptions could materially impact our financial condition or operating performance if actual results differ from such accounting estimates and assumptions. To address this uncertainty, we perform sensitivity analyses on key accounting estimates and assumptions. Once the fair value is determined, if the carrying amount exceeds the fair value, it is impaired. Any impairment is measured as the difference between the carrying amount and its fair value.

Definite-Lived Intangible Assets—The Company’s business combinations typically result in the recognition of customer relationships, patents, and trademarks, in addition to other definite-lived intangible assets. The determination of fair value for definite-lived intangible assets, useful lives (for depreciation / amortization purposes) and whether or not intangible assets are impaired involves the use of accounting estimates and assumptions. The assumptions used in developing the accounting estimates may include business growth rates, sales volume, selling prices and costs, cash flows, and the discount rate selected and changes to those assumptions could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions.

We evaluate the recoverability of the carrying amount of our definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of a definite-lived intangible asset group may not be fully recoverable. The principal factors in considering when to perform an impairment review are as follows:

• Significant under-performance (i.e., declines in sales, earnings, or cash flows) of a business or product line in relation to expectations;

• Annual operating plans or strategic plan outlook that indicates an unfavorable trend in operating performance of a business or product line;

• Significant negative industry or economic trends; or

• Significant changes or planned changes in our use of the assets.

Once it is determined that an impairment review is necessary, recoverability of assets is measured by comparing the carrying amount of the asset group to the estimated future undiscounted cash flows. If the carrying amount exceeds the estimated future undiscounted cash flows, impairment is then measured as the excess, if any, of the carrying amount of the asset group over its fair value.

The fair value estimates are subject to changes in the economic environment, including market interest rates and expected volatility. Management believes the estimates of future cash flows and fair values are reasonable; however, changes in estimates due to variances from assumptions could materially affect the valuations.

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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 2023 Annual Report on Form 10-K. As of September 30, 2024, there has been no material change in this information.

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 SEC'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.

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PART II. OTHER INFORMATION

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

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

Other than as noted below, there have been no material changes to our Risk Factors presented in our 2023 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 2023 Annual Report on Form 10-K.

The Company is subject to risks related to its plan to spin off its Advanced Materials business into a standalone, publicly traded company.

On October 8, 2024, the Company announced its intent to spin off its Advanced Materials business, which is part of its Energy and Sustainability Solutions reportable business segment, into an independent, U.S. publicly traded company, in a transaction that is intended to be tax-free for the Company’s shareowners for U.S. federal income tax purposes. The spin-off will be subject to the satisfaction of a number of customary conditions, including, among others, finalization of the financial statements of the Advanced Materials business, the filing and effectiveness of applicable filings (including a Form 10 registration statement) with the SEC, assurance that the spin-off of the Advanced Materials business will be tax-free to Honeywell’s shareowners, receipt of applicable regulatory approvals and final approval by Honeywell’s Board of Directors. The failure to satisfy all of the required conditions, as well as additional factors such as conditions in the equity and debt markets, other external conditions, and developments or challenges involving the intended spin-off, the Company or any of its businesses, many of which are outside of the Company’s control, could delay the completion of the spin-off relative to the anticipated timeline or prevent it from occurring. These or other unanticipated developments could delay or prevent the proposed spin-off or cause the proposed spin-off to occur on terms or conditions that are less favorable than anticipated, including without limitation, the failure to qualify as tax-free to our shareowners (which could result in significant income tax liabilities to the Company and/or its shareholders), and the inability of the spun-off company to incur sufficient indebtedness to allow for a distribution to Honeywell of proceeds concurrently with the consummation of the spin-off. Furthermore, if the spin-off is completed, there is no guarantee that it will be successful in meeting its objectives or achieving its intended benefits. Whether or not the spin-off is ultimately completed, the Company and our business may face challenges as a result of the transaction, including potential business disruption; the diversion of management’s time; and potential negative impacts on the Company’s relationships with its customers, employees, regulators and other counterparties. Any of these factors could negatively impact our business, financial condition, results of operations, cash flows, and the price of our common stock.

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

On April 24, 2023, the Board of Directors authorized the repurchase of up to $10 billion of Honeywell common stock, including approximately $2.1 billion of remaining availability under the previously announced $10 billion share repurchase 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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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.

During the three months ended September 30, 2024, no shares were repurchased by the Company. As of September 30, 2024, $5.9 billion remained available for additional share repurchases. The following table summarizes our purchases of Honeywell's common stock for the three months ended September 30, 2024:

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.

EQUITY TRADING ARRANGEMENTS ELECTIONS

Certain executive officers and directors of the Company may execute purchases and sales of the Company's common stock through Rule 10b5-1 and non-Rule 10b5-1 equity trading arrangements.

During the three months ended September 30, 2024, none of our executive officers or directors adopted, terminated, or modified a "Rule 10b5-1 trading arrangement," or adopted, terminated, or modified any "non-Rule 10b5-1 trading arrangement" (each as defined in Item 408 of Regulation S-K).

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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.

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