Honeywell 2007 Annual Report Download - page 16

Aerospace Sales
Our sales to aerospace customers were 35 percent of our total sales in each of 2007 and 2006 and 38
percent of our total sales in 2005, respectively. Our sales to commercial aerospace original equipment
manufacturers were 10, 10 and 9 percent of our total sales in 2007, 2006 and 2005, respectively. In addition, our
sales to commercial aftermarket customers of aerospace products and services were 11, 11 and 15 percent of
our total sales in 2007, 2006 and 2005, respectively. Our Aerospace results of operations can be impacted by
various industry and economic conditions. See "Item 1A. Risk Factors."
U.S. Government Sales
Sales to the U.S. Government (principally by our Aerospace segment), acting through its various
departments and agencies and through prime contractors, amounted to $4,011, $3,688 and $3,719 million in
2007, 2006 and 2005, respectively, which included sales to the U.S. Department of Defense, as a prime
contractor and subcontractor, of $3,192, $3,052 and $2,939 million in 2007, 2006 and 2005, respectively. U.S.
defense spending increased in 2007 and is also expected to increase in 2008. We do not expect to be
significantly affected by any proposed changes in 2008 federal spending due principally to the varied mix of the
government programs which impact us (OEM production, engineering development programs, aftermarket
spares and repairs and overhaul programs). Our contracts with the U.S. Government are subject to audits,
investigations, and termination by the government. See "Item 1A. Risk Factors."
Backlog
Our total backlog at December 31, 2007 and 2006 was $12,303 and $10,674 million, respectively. We
anticipate that approximately $9,155 million of the 2007 backlog will be filled in 2008. We believe that backlog is
not necessarily a reliable indicator of our future sales because a substantial portion of the orders constituting this
backlog may be canceled at the customer's option.
Competition
We are subject to active competition in substantially all product and service areas. Competition is expected
to continue in all geographic regions. Competitive conditions vary widely among the thousands of products and
services provided by us, and vary by country. Depending on the particular customer or market involved, our
businesses compete on a variety of factors, such as price, quality, reliability, delivery, customer service,
performance, applied technology, product innovation and product recognition. Brand identity, service to
customers and quality are generally important competitive factors for our products and services, and there is
considerable price competition. Other competitive factors for certain products include breadth of product line,
research and development efforts and technical and managerial capability. While our competitive position varies
among our products and services, we believe we are a significant competitor in each of our major product and
service classes. However, a number of our products and services are sold in competition with those of a large
number of other companies, some of which have substantial financial resources and significant technological
capabilities. In addition, some of our products compete with the captive component divisions of original
equipment manufacturers.
International Operations
We are engaged in manufacturing, sales, service and research and development mainly in the United States,
Europe, Canada, Asia and Latin America. U.S. exports and foreign manufactured products are significant to our
operations. U.S. exports comprised 10, 11 and 10 percent of our total sales in 2007, 2006 and 2005,
respectively. Foreign manufactured products and services, mainly in Europe, were 39, 37 and 35 percent of our
total sales in 2007, 2006 and 2005, respectively.
Approximately 18 percent of total 2007 sales of Aerospace-related products and services were exports of
U.S. manufactured products and systems and performance of services such as aircraft repair and overhaul.
Exports were principally made to Europe, Canada, Asia and Latin America. Foreign manufactured products and
systems and performance of services comprised approximately 14
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