Honeywell 2014 Annual Report Download - page 24

Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
(Dollars in millions, except per share amounts)
The following Management’s Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) is intended to help the reader understand the results of operations and financial
condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell or the Company)
for the three years ended December 31, 2014. All references to Notes relate to Notes to Financial
Statements in Item 8. Financial Statements and Supplementary Data.
In April 2014, the Company announced the realignment of our Honeywell Process Solutions
business from Automation and Control Solutions (ACS) into Performance Materials and Technologies
(PMT). The Company has reported its financial performance based on the inclusion of Honeywell
Process Solutions in Performance Materials and Technologies for all periods presented.
In July 2014, following the closing of the sale of its Friction Materials business, the Company
announced the realignment of its Transportation Systems business segment with its Aerospace
business segment. Under the realigned segment reporting structure, the Company has three business
segments: Aerospace, Automation and Control Solutions and Performance Materials and Technolo-
gies. The Company has reported its financial performance based on the inclusion of Transportation
Systems in Aerospace for all periods presented.
These realignments have no impact on the Company’s historical consolidated financial position,
results of operations or cash flows. Prior period amounts have been reclassified to conform to current
period presentation.
EXECUTIVE SUMMARY
For Honeywell, 2014 represented a year of strong performance despite a continued slow growth
global environment. Honeywell’s 2014 revenues were $40.3 billion representing a 3% improvement
compared to 2013 revenues of $39.1 billion. Our segment profit improved by 5%, more than one and
one-half times revenue growth, evidencing the Company’s continued focus on operational excellence.
We achieved strong segment profit expansion while reinvesting in our businesses through seed
planting and continued focus on effective repositioning. The Company’s operational excellence and
ability to expand profit faster than sales growth is due in part to a consistent, methodical application of
several key internal business processes, the Honeywell Enablers, which drive improvements in
organizational efficiency and service quality, bringing world-class products and services to markets
faster and more cost effectively for our customers. We continued to execute on our key strategies for
growth including penetration of high growth regions and investments in high return capital expenditures
and new products and technologies, while maintaining our cost disciplines and leveraging the
Honeywell Enablers.
The Company continues to invest for future growth as measured by a number of important
metrics:
•R&D spending at 4.7% of revenues was targeted at such high growth areas as natural gas
processing, low global warming refrigerants and blowing agents, avionics equipment and
technology, connected voice and wireless control devices and technologies, software and
mobile app development and data science to deliver value.
•Capital expenditures of $1,094 million (in addition to $947 million in 2013) principally related to
the construction and expansion of Aerospace and PMT manufacturing facilities, as well as
continued investment in our ACS facilities.
•The Company recognized $184 million of charges relating to repositioning actions to support
sustainable productivity in years to come.
•The Company continued to monitor its portfolio of businesses to ensure they fit our long-term
strategic plan. In 2014, the Company sold its Friction Materials business for approximately
$155 million. In addition, the Company signed a definitive agreement to acquire Datamax-O’Neil,
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