Edgar Filing: HONEYWELL INTERNATIONAL INC

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o 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		(I.R.S. Employer
incorporation or organization)		Identification No.)

101 Columbia Road
Morris Township, New Jersey		07962

(Address of principal executive offices)		(Zip Code)


	(973)455-2000

	(Registrant’s telephone number, including area code)

	Not Applicable

	(Former name, former address and former fiscal year,
	if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

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


Large accelerated filer x	Accelerated filer o	Non-Accelerated filer o	Smaller reporting company o

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

There were 766,182,091 shares of Common Stock outstanding at March 31, 2010.

Honeywell International Inc.
Index


Part I.	-	Financial Information	Page No.
	Item 1.	Financial Statements:
		Consolidated Statement of Operations (unaudited) – Three Months Ended March 31, 2010 and 2009	3
		Consolidated Balance Sheet (unaudited) – March 31, 2010 and December 31, 2009	4
		Consolidated Statement of Cash Flows (unaudited) – Three Months Ended March 31, 2010 and 2009	5
		Notes to Financial Statements (unaudited)	6
		Report of Independent Registered Public Accounting Firm	27
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 4.	Controls and Procedures	37
Part II.	-	Other Information
	Item 1.	Legal Proceedings	37
	Item 6.	Exhibits	38
Signatures			39


	Cautionary Statement about Forward-Looking Statements

	This report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management’s assumptions and assessments in the 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 from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. These forward-looking statements should be considered in the light of the information included in this report and our other filings with the Securities and Exchange Commission, including, without limitation, the Risk Factors, as well as the description of trends and other factors in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in our Form 10-K for the year ended December 31, 2009.

PART I. FINANCIAL INFORMATION

The financial information as of March 31, 2010 should be read in conjunction with the financial statements for the year ended December 31, 2009 contained in our Form 10-K filed on February 12, 2010.

ITEM 1. FINANCIAL STATEMENTS


Honeywell International Inc.
Consolidated Statement of Operations
(Unaudited)


	Three Months Ended March 31,

	2010			2009

	(Dollars in millions, except per share amounts)

Product sales	$	6,047		$	5,818
Service sales		1,729			1,752

Net sales		7,776			7,570


Costs, expenses and other
Cost of products sold		4,787			4,608
Cost of services sold		1,195			1,148

		5,982			5,756
Selling, general and administrative expenses		1,136			1,152
Other (income) expense		(2	)		2
Interest and other financial charges		107			117

		7,223			7,027


Income from continuing operations before taxes		553			543
Tax expense		160			144

Net income		393			399
Less: Net income attributable to the noncontrolling interest		7			2

Net income attributable to Honeywell	$	386		$	397


Earnings per share of common stock-basic	$	0.50		$	0.54


Earnings per share of common stock-assuming dilution	$	0.50		$	0.54


Cash dividends per share of common stock	$	0.3025		$	0.3025

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


Honeywell International Inc.
Consolidated Balance Sheet
(Unaudited)

	March 31, 2010			December 31, 2009

	(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2,851		$	2,801
Accounts, notes and other receivables		6,184			6,274
Inventories		3,568			3,446
Deferred income taxes		1,024			1,034
Investments and other current assets		706			381

Total current assets		14,333			13,936

Investments and long-term receivables		586			579
Property, plant and equipment - net		4,697			4,847
Goodwill		10,362			10,494
Other intangible assets - net		2,114			2,174
Insurance recoveries for asbestos
related liabilities		936			941
Deferred income taxes		1,973			2,017
Other assets		1,025			1,016

Total assets	$	36,026		$	36,004


LIABILITIES
Current liabilities:
Accounts payable	$	3,553		$	3,633
Short-term borrowings		44			45
Commercial paper		1,248			298
Current maturities of long-term debt		23			1,018
Accrued liabilities		6,233			6,153

Total current liabilities		11,101			11,147

Long-term debt		6,246			6,246
Deferred income taxes		570			542
Postretirement benefit obligations other than pensions		1,547			1,594
Asbestos related liabilities		1,049			1,040
Other liabilities		6,409			6,481

SHAREOWNERS’ EQUITY
Capital - common stock issued		958			958
- additional paid-in capital		3,859			3,823
Common stock held in treasury, at cost		(8,922	)		(8,995	)
Accumulated other comprehensive income (loss)		(4,543	)		(4,429	)
Retained earnings		17,635			17,487

Total Honeywell shareowners’ equity		8,987			8,844
Noncontrolling interest		117			110

Total shareowners’ equity		9,104			8,954

Total liabilities and shareowners’ equity	$	36,026		$	36,004

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

Honeywell International Inc.
Consolidated Statement of Cash Flows
(Unaudited)


	Three Months Ended March 31,

	2010			2009

	(Dollars in millions)
Cash flows from operating activities:
Net income attributable to Honeywell	$	386		$	397
Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities:
Depreciation and amortization		233			234
Repositioning and other charges		142			111
Net payments for repositioning and other charges		(119	)		(148	)
Pension and other postretirement expense		182			55
Pension and other postretirement payments		(36	)		(47	)
Stock compensation expense		50			42
Deferred income taxes		26			272
Excess tax benefits from share based payment arrangements		(2	)		—
Other		(96	)		(142	)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts, notes and other receivables		90			461
Inventories		(122	)		49
Other current assets		(28	)		(31	)
Accounts payable		(80	)		(629	)
Accrued liabilities		117			(283	)

Net cash provided by operating activities		743			341


Cash flows from investing activities:
Expenditures for property, plant and equipment		(70	)		(109	)
Proceeds from disposals of property, plant and equipment		1			8
Increase in investments		(296	)		—
Decrease in investments		—			1
Cash paid for acquisitions, net of cash acquired		—			(20	)
Other		(16	)		(6	)

Net cash used for investing activities		(381	)		(126	)


Cash flows from financing activities:
Net increase/(decrease) in commercial paper		950			(931	)
Net (decrease)/increase in short-term borrowings		(1	)		6
Proceeds from issuance of common stock		32			4
Proceeds from issuance of long-term debt		—			1,488
Payments of long-term debt		(1,001	)		(493	)
Excess tax benefits from share based payment arrangements		2			—
Cash dividends paid		(231	)		(224	)

Net cash used for financing activities		(249	)		(150	)


Effect of foreign exchange rate changes on cash and cash equivalents		(63	)		(78	)

Net increase/(decrease) in cash and cash equivalents		50			(13	)
Cash and cash equivalents at beginning of period		2,801			2,065

Cash and cash equivalents at end of period	$	2,851		$	2,052

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

Honeywell International Inc.
Notes to Financial Statements
(Unaudited)
(Dollars 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, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Honeywell International Inc. and its consolidated subsidiaries at March 31, 2010 and the results of operations for the three months ended March 31, 2010 and 2009 and cash flows for the three months ended March 31, 2010 and 2009. The results of operations for the three month period ended March 31, 2010 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year. We have evaluated subsequent events through the date of issuance of our consolidated financial statements.

We report our quarterly financial information using a calendar convention; that is, the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30, respectively. It has been our practice to establish actual quarterly closing dates using a predetermined “fiscal” calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our 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 that differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, we provide appropriate disclosures. Our actual closing dates for the three month periods ended March 31, 2010 and 2009 were April 3, 2010 and April 4, 2009, respectively.

The financial information as of March 31, 2010 should be read in conjunction with the financial statements for the year ended December 31, 2009 contained in our Form 10-K filed on February 12, 2010.

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

NOTE 2. Recent Accounting Pronouncements

Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for transfers of financial assets. The guidance requires additional disclosures for transfers of financial assets and changes the requirements for derecognizing financial assets. The guidance was effective for fiscal years beginning after November 15, 2009. The implementation of this standard did not have a material impact on our consolidated financial position and results of operations.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities. The guidance affects the overall consolidation analysis and requires enhanced disclosures on involvement with variable interest entities. The guidance was effective for fiscal

years beginning after November 15, 2009. The implementation of this standard did not have a material impact on our consolidated financial position and results of operations.

In October 2009, the FASB issued amendments to the accounting and disclosure for revenue recognition. These amendments, effective for fiscal years beginning on or after June 15, 2010 (early adoption is permitted), modify the criteria for recognizing revenue in multiple element arrangements and the scope of what constitutes a non-software deliverable. The Company has elected to early adopt this guidance, on a prospective basis for applicable transactions originating or materially modified after January 1, 2010. The implementation of this amended accounting guidance did not have a material impact on our consolidated financial position and results of operations in the period of adoption. Adoption impacts in future periods will vary based upon the nature and volume of new or materially modified transactions but are not expected to have a significant impact on sales.

NOTE 3. Repositioning and Other Charges

A summary of repositioning and other charges follows:


	Three Months Ended March 31,

	2010			2009

Severance	$	33		$	62
Asset impairments		8			2
Exit costs		4			1
Adjustments		(5	)		(21	)

Total net repositioning charge		40			44


Asbestos related litigation charges, net of insurance		38			36
Probable and reasonably estimable environmental liabilities		46			31

Other		18			—


Total net repositioning and other charges	$	142		$	111

The following table summarizes the pretax distribution of total net repositioning and other charges by income statement classification:


	Three Months Ended March 31,

	2010		2009

Cost of products and services sold	$	139	$	94
Selling, general and administrative expenses		3		17

	$	142	$	111

The following table summarizes the pretax impact of total net repositioning and other charges by segment:


	Three Months Ended March 31,

	2010		2009

Aerospace	$	—	$	(2	)
Automation and Control Solutions		24		23
Specialty Materials		11		4
Transportation Systems		59		51
Corporate		48		35

	$	142	$	111

In the first quarter of 2010 we recognized a net repositioning charge of $40 million including severance costs of $33 million related to workforce reductions of 617 manufacturing and administrative positions primarily in our Automation and Control Solutions and Transportation Systems segments. The workforce reductions were primarily related to the planned shutdown of certain manufacturing facilities in our Automation and Control Solutions and Transportation Systems segments. The repositioning charge also included asset impairments of $8 million principally related to manufacturing plant and equipment in facilities scheduled to close.

In the first quarter of 2009, we recognized repositioning charges totaling $65 million primarily for severance costs related to workforce reductions of 1,309 manufacturing and administrative positions across all of our segments. The workforce reductions were primarily related to the adverse market conditions experienced by many of our businesses as well as cost savings actions taken in connection with our ongoing functional transformation initiative. Also, $21 million of previously established accruals for severance, mainly at our Aerospace, Automation and Control Solutions and Transportation Systems segments, were returned to income in the first quarter of 2009 due to fewer employee separations than originally planned associated with prior severance programs and changes in the scope of previously announced repositioning actions.

The following table summarizes the status of our total repositioning reserves:


	Severance Costs			Asset Impairments			Exit Costs			Total

Balance at December 31, 2009	$	303		$	—		$	37		$	340
2010 charges		33			8			4			45
2010 usage		(54	)		(8	)		(2	)		(64	)
Adjustments		(5	)		—			—			(5	)


Balance at March 31, 2010	$	277		$	—		$	39		$	316

Certain repositioning projects in our Aerospace, Automation and Control Solutions and Transportation Systems segments included exit or disposal activities, the costs related to which will be recognized in future periods when the actual liability is incurred. The nature of these exit or disposal costs principally includes product recertification and requalification and employee training and travel. The following tables summarize by segment, expected, incurred and remaining exit and disposal costs related to 2010 and 2008 repositioning actions which we were not able to recognize at the time the actions were initiated. The exit and disposal costs related to the repositioning actions in 2009 which we were not able to recognize at the time the actions were initiated were not significant.


2008 Repositioning Actions	Aerospace			Automation and Control Solutions			Transpor- tation Systems			Total

Expected exit and disposal costs	$	96		$	27		$	6		$	129
Costs incurred year ended December 31, 2008		(12	)		—			(1	)		(13	)
Costs incurred year ended December 31, 2009		(44	)		(1	)		(2	)		(47	)
Costs incurred three months ended March 31, 2010		(10	)		(3	)		—			(13	)

Remaining exit and disposal costs at March 31, 2010	$	30		$	23		$	3		$	56


2010 Repositioning Actions	Automation and Control Solutions		Transpor- tation Systems		Total

Expected exit and disposal costs	$	6	$	3	$	9
Costs incurred three months ended March 31, 2010		—		—		—

Remaining exit and disposal costs at March 31, 2010	$	6	$	3	$	9

In the first quarter of 2010, we recognized a charge of $46 million for environmental liabilities deemed probable and reasonably estimable in the quarter. We recognized a charge of $38 million primarily representing an update to our estimated liability for the resolution of Bendix related asbestos claims as of March 31, 2010, net of probable insurance recoveries. Environmental and Asbestos matters are discussed in detail in Note 14, Commitments and Contingencies. We also recognized other charges of $18 million in connection with the evaluation of potential settlements of certain legal matters.

In the first quarter of 2009, we recognized a charge of $31 million for environmental liabilities deemed probable and reasonably estimable in the quarter. We also recognized a charge of $36 million primarily representing an update to our estimated liability for the resolution of Bendix related asbestos claims as of March 31, 2009, net of probable insurance recoveries.

NOTE 4. Other (income) expense.


	Three Months Ended March 31,

	2010			2009

Equity (income)/loss of affiliated companies	$	(4	)	$	(6	)
Interest income		(9	)		(12	)
Foreign exchange		11			22
Other, net		—			(2	)

	$	(2	)	$	2

NOTE 5. Earnings Per Share

The details of the earnings per share calculations for the three months ended March 31, 2010 and 2009 are as follows:


	2010		2009

Basic
Net income attributable to Honeywell	$	386	$	397
Weighted average number of common shares outstanding		765.7		737.7

Earnings per share of common stock	$	0.50	$	0.54


	2010		2009

Assuming Dilution
Net income attributable to Honeywell	$	386	$	397
Average Shares
Weighted average number of common shares outstanding		765.7		737.7
Dilutive securities issuable in connection with stock plans		6.0		1.6

Total weighted average number of common shares outstanding		771.7		739.3

Earnings per share of common stock	$	0.50	$	0.54

The diluted earnings per share calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. For the three months ended March 31, 2010 and 2009, the number of stock options excluded from the computations were 18.4 and 41.2 million, respectively. These stock options were outstanding at the end of each of the respective periods.

NOTE 6. Accounts, Notes and Other Receivables


	March 31, 2010			December 31, 2009

Trade	$	6,060		$	6,183
Other		356			326

		6,416			6,509
Less - Allowance for doubtful accounts		(232	)		(235	)

	$	6,184		$	6,274

NOTE 7. Inventories


	March 31, 2010			December 31, 2009

Raw materials	$	1,030		$	988
Work in process		820			796
Finished products		1,874			1,823

		3,724			3,607
Less – Progress payments		1			—
- Reduction to LIFO cost basis		(157	)		(161	)

	$	3,568		$	3,446

NOTE 8. Goodwill and Other Intangible Assets - Net

The change in the carrying amount of goodwill for the three months ended March 31, 2010 by segment is as follows:


	Dec. 31, 2009		Acquisitions		Divestitures		Currency Translation Adjustment			Mar, 31, 2010

Aerospace	$	1,891	$	—	$	—	$	(11	)	$	1,880
Automation and Control Solutions		6,918		8		—		(115	)		6,811
Specialty Materials		1,164		—		—		(6	)		1,158
Transportation Systems		521		—		—		(8	)		513

	$	10,494	$	8	$	—	$	(140	)	$	10,362

Other intangible assets are comprised of:


	March 31, 2010							December 31, 2009

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount


Intangible assets with determinable lives:
Patents and technology	$	1,055	$	(619	)	$	436	$	1,053	$	(595	)	$	458
Customer relationships		1,356		(311	)		1,045		1,359		(282	)		1,077
Trademarks		173		(67	)		106		164		(62	)		102
Other		482		(384	)		98		514		(406	)		108

		3,066		(1,381	)		1,685		3,090		(1,345	)		1,745


Trademarks with indefinite lives		429		—			429		429		—			429

	$	3,495	$	(1,381	)	$	2,114	$	3,519	$	(1,345	)	$	2,174

Amortization expense related to intangible assets for the three months ended March 31, 2010 and 2009 was $60 and $61 million, respectively.

We completed our annual impairment testing of goodwill and indefinite-lived intangibles as of March 31, 2010 and determined that there was no impairment as of that date.

NOTE 9. Long-term Debt and Credit Agreements


	March 31, 2010			December 31, 2009


7.50% notes due 2010		—			1,000
6.125% notes due 2011		500			500
5.625% notes due 2012		400			400
4.25% notes due 2013		600			600
3.875% notes due 2014		600			600
5.40% notes due 2016		400			400
5.30% notes due 2017		400			400
5.30% notes due 2018		900			900
5.00% notes due 2019		900			900
Industrial development bond obligations, floating rate maturing at various dates through 2037		47			47
6.625% debentures due 2028		216			216
9.065% debentures due 2033		51			51
5.70% notes due 2036		550			550
5.70% notes due 2037		600			600
Other (including capitalized leases), 0.61%-15.5% maturing at various dates through 2017		105			100

		6,269			7,264
Less-current portion		(23	)		(1,018	)

	$	6,246		$	6,246

The schedule of principal payments on long term debt is as follows:


	At March 31, 2010

2010	$	17
2011		520
2012		406
2013		605
2014		606
Thereafter		4,115

		6,269
Less-current portion		(23	)

	$	6,246

In the first quarter of 2010, the Company repaid $1,000 million of its 7.50% notes. The repayment was funded with the issuance of commercial paper and cash provided by operating activities.

We sell interests in designated pools of trade accounts receivables to third parties. As of March 31, 2010 and December 31, 2009 none of the receivables in the designated pools had been sold to third parties. The terms of the trade accounts receivable program permit the repurchase of receivables from the third parties at our discretion. As a result, program receivables remain on the Company’s balance sheet, reflected as Accounts, notes and other receivables with a corresponding amount recorded as either Short-term borrowings or Long-term debt. Program costs are recognized as Interest and other financial charges in the Consolidated Statement of Operations.

NOTE 10. Financial Instruments and Fair Value Measures

Credit and Market Risk—Financial instruments, including derivatives, expose us to counterparty credit risk for nonperformance and to market risk related to changes in interest and currency exchange rates and commodity prices. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. Our counterparties in derivative transactions are substantial investment and commercial banks with significant experience using such derivative instruments. We monitor the impact of market risk on the fair value and cash flows of our derivative and other financial instruments considering reasonably possible changes in interest rates, currency exchange rates and commodity prices and restrict the use of derivative financial instruments to hedging activities.

We continually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single customer or a small group of customers.

Foreign Currency Risk Management—We conduct our business on a multinational basis in a wide variety of foreign currencies. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. Our objective is to preserve the economic value of non-functional currency denominated cash flows. We attempt to hedge transaction exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign currency exchange forward and option contracts with third parties.

We hedge monetary assets and liabilities denominated in non-functional currencies. Prior to conversion into U.S. dollars, these assets and liabilities are remeasured at spot exchange rates in effect on the balance sheet date. The effects of changes in spot rates are recognized in earnings and included in Other (Income) Expense.

We partially hedge forecasted sales and purchases, which predominantly occur in the next twelve months and are denominated in non-functional currencies, with currency forward contracts. Changes in the forecasted non-functional currency cash flows due to movements in exchange rates are substantially offset by changes in the fair value of the currency forward contracts designated as hedges. Market value gains and losses on these contracts are recognized in earnings when the hedged transaction is recognized.

Open foreign currency exchange forward contracts mature predominantly in the next twelve months. At March 31, 2010 and December 31, 2009 we had contracts with notional amounts of $3,817 and $2,959 million, respectively, to exchange foreign currencies, principally the U.S. dollar, Euro, British pound, Canadian dollar, Hong Kong dollar, Mexican peso, Swiss franc, Czech koruna, Chinese renminbi, Indian rupee and Singapore dollar.

Commodity Price Risk Management—Our exposure to market risk for commodity prices can result in changes in our cost of production. We primarily mitigate our exposure to commodity price risk through the use of long-term, fixed-price contracts with our suppliers and formula price agreements with suppliers and customers. We also enter into forward commodity contracts with third parties designated as hedges of anticipated purchases of several commodities. Forward commodity contracts are marked-to-market, with the resulting gains and losses recognized in earnings when the hedged transaction is recognized. At March 31, 2010 and December 31, 2009 we had contracts with notional amounts of $39 and $52 million, respectively, related to forward commodity agreements, principally for base metals and natural gas.

Interest Rate Risk Management—We use a combination of financial instruments, including long-term, medium-term and short-term financing, variable-rate commercial paper, and interest rate swaps to manage the interest rate mix of our total debt portfolio and related overall cost of borrowing. At March 31, 2010 and

December 31, 2009, interest rate swap agreements designated as fair value hedges effectively changed $600 million of fixed rate debt at a rate of 3.875 percent to LIBOR based floating debt. Our interest rate swaps mature in 2014.

Fair Value of Financial Instrument—The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB’s guidance classifies the inputs used to measure fair value into the following hierarchy:


	Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities

	Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or

		Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or

		Inputs other than quoted prices that are observable for the asset or liability

	Level 3	Unobservable inputs for the asset or liability

The Company endeavors to utilize the best available information in measuring fair value. 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 Company has determined that our financial assets and liabilities are level 2 in the fair value hierarchy. 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, 2010		December 31, 2009


Assets:
Foreign currency exchange contracts	$	40	$	11
Available for sale investments		478		141
Interest rate swap agreements		4		1
Forward commodity contracts		5		4
Liabilities:
Foreign currency exchange contracts	$	21	$	3
Interest rate swap agreements		—		3
Forward commodity contracts		7		—

The foreign currency exchange contracts, interest rate swap agreements, and forward 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 marketable equity securities, commercial paper, certificates of deposits, and time deposits that are designated as available for sale and are valued using market transactions in over-the-counter markets. As such, these investments are classified within level 2.

The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper and short-term borrowings contained in the Consolidated Balance Sheet approximates fair value. The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:


	March 31, 2010				December 31, 2009

	Carrying Value		Fair Value		Carrying Value		Fair Value

Assets:
Long-term receivables	$	287	$	272	$	317	$	303
Liabilities :
Long-term debt and related current maturities	$	6,265	$	6,601	$	7,262	$	7,677

As of March 31, 2010 the Company had $14 million of nonfinancial assets, specifically property, plant and equipment, software, and intangible assets, which were accounted for at fair value on a nonrecurring basis. These assets were tested for impairment and based on the fair value of these assets the Company recognized losses of $13 million as of March 31, 2010. The Company has determined that our nonfinancial assets and nonfinancial liabilities are level 3 in the fair value hierarchy. As of March 31, 2009 the Company had $2 million of nonfinancial assets, specifically property, plant and equipment, that were accounted for at fair value on a nonrecurring basis as part of repositioning occurring in the first quarter of 2009. Based on the fair value of these assets the Company recognized losses of $2 million as of March 31, 2009.

The derivatives utilized for risk management purposes as detailed above are included on the Consolidated Balance Sheet and impacted the Statement of Operations as follows:

Fair value of asset derivatives consist of the following:


Designated as a Hedge	Balance Sheet Location	March 31, 2010			December 31, 2009


Foreign currency exchange contracts	Accounts, notes and other receivables		$	40		$	8

Interest rate swap agreements	Other assets			4			1

Commodity contracts	Accounts, notes and other receivables			5			4

Not Designated as a Hedge	Balance Sheet Location


Foreign currency exchange contracts	Accounts notes and other receivables		$	—		$	3

Fair value of liability derivatives consist of the following:


Designated as a Hedge	Balance Sheet Location	March 31, 2010			December 31, 2009


Foreign currency exchange contracts	Accrued liabilities		$	19		$	1

Interest rate swap agreements	Accrued liabilities			—			3

Commodity contracts	Accrued liabilities			7			—

Not Designated as a Hedge	Balance Sheet Location


Foreign currency exchange contracts	Accrued liabilities		$	2		$	3

Gains (losses) recognized in OCI consist of the following:


Designated as a Cash Flow Hedge	March 31, 2010				December 31, 2009

Foreign currency exchange contracts		$	20			$	18
Commodity contracts			(2	)			(1	)

Gains (losses) reclassified from AOCI to Income (effective portions) consist of the following:


Designated as a Cash Flow Hedge	Income Statement Location	March 31, 2010				March 31, 2009

Foreign currency exchange contracts	Product sales		$	(3	)		$	(2	)
	Cost of products sold			2				(2	)
	Selling general and administrative			1				—

Commodity contracts	Cost of products sold			(1	)			(1	)

Ineffective portions of commodity derivative instruments designated in cash flow hedge relationships were less than $1 million in the first quarter of 2010

and 2009 and are located in cost of products sold. Foreign currency exchange contracts designated in cash flow hedge relationships qualify as critical matched terms hedge relationships and as a result have no ineffectiveness.

Interest rate swap agreements are designated as hedge relationships with gains or (losses) on the derivative recognized in Interest and other financial charges offsetting the gains and losses on the underlying debt being hedged. Gains on interest rate swap agreements recognized in earnings were $4 million as of March 31, 2010. These gains were fully off-set by losses on the underlying debt being hedged. As of March 31, 2009 we had no interest rate swap agreements.

We also economically hedge our exposure to changes in foreign exchange rates principally with forward contracts. These contracts are marked-to-market with the resulting gains and losses recognized in earnings offsetting the gains and losses on the non-functional currency denominated monetary assets and liabilities being hedged. As of March 31, 2010 and 2009, we recognized $22 million and $39 million of expense, respectively in Other (Income) Expense.

NOTE 11. Comprehensive Income/(Loss)

Comprehensive income/(loss) consists of the following:


	Three Months Ended March 31,

	2010			2009


Net income	$	393		$	397

Foreign exchange translation adjustment		(284	)		(250	)
Pensions and other post retirement benefit adjustments		114			26
Changes in fair value of available for sale investments		49			(22	)
Changes in fair value of effective cash flow hedges		7			6

Total comprehensive income		279			157
Comprehensive income attributable to noncontrolling interest (1)		(7	)		(2	)

Comprehensive income (loss) attributable to Honeywell	$	272		$	155


	(1)	Comprehensive Income/(Loss) attributable to noncontrolling interest consisted predominately of net income.

In the first quarter of 2010 there were no increases or decreases to Honeywell additional paid in capital for purchases or sales of existing noncontrolling interests.

NOTE 12. Segment Financial Data

Honeywell’s senior management evaluates segment performance based on segment profit. Segment profit is measured as business unit income (loss) before taxes excluding general corporate unallocated expense, other income (expense), interest and other financial charges, pension and other postretirement benefits (expense), stock compensation expense, repositioning and other charges and accounting changes.


	Three Months Ended March 31,

	2010			2009

Net Sales
Aerospace	$	2,506		$	2,759
Automation and Control Solutions		3,124			3,001
Specialty Materials		1,139			1,054
Transportation Systems		1,007			756
Corporate		—			—

	$	7,776		$	7,570


Segment Profit
Aerospace	$	413		$	488
Automation and Control Solutions		386			311
Specialty Materials		170			125
Transportation Systems		96			(3	)
Corporate		(29	)		(45	)

Total Segment Profit		1,036			876

Other income/(expense) (A)		(2	)		(8	)
Interest and other financial charges		(107	)		(117	)
Stock compensation expense (B)		(50	)		(42	)
Pension (expense) (B)		(200	)		(26	)
Other postretirement income/(expense) (B)		18			(29	)
Repositioning and other charges (B)		(142	)		(111	)

Income from continuing operations before taxes	$	553		$	543


(A)	Equity income/(loss) of affiliated companies is included in Segment Profit.

(B)	Amounts included in cost of products and services sold and selling, general and administrative expenses.

NOTE 13. Pension and Other Postretirement Benefits

Net periodic pension and other postretirement benefits costs for our significant defined benefit plans include the following components:


	Three Months Ended March 31,

	2010			2009

Pension Benefits
Service cost	$	73		$	57
Interest cost		247			242
Expected return on plan assets		(311	)		(321	)
Amortization of prior service cost		5			7
Recognition of actuarial losses		176			36
Settlements and curtailments		4			—

	$	194		$	21


	Three Months Ended March 31,

	2010			2009

Other Postretirement Benefits
Service cost	$	1		$	3
Interest cost		24			29
Amortization of prior service (credit)		(10	)		(10	)
Recognition of actuarial losses		4			7
Settlements and curtailments		(37	)		—

	$	(18	)	$	29

On February 1, 2010, in connection with a new collective bargaining agreement reached with one of its union groups, Honeywell amended its U.S. retiree medical plan eliminating the subsidy for those union employees who retire after February 1, 2013. This plan amendment reduced the accumulated postretirement benefit obligation by $39 million which will be recognized as part of net periodic postretirement benefit cost over the average future service period to full eligibility of the remaining active union employees still eligible for a retiree medical subsidy. This plan amendment also resulted in a curtailment gain of $37 million in the first quarter of 2010 which was included as part of net periodic postretirement benefit cost. The curtailment gain represents the recognition of previously unrecognized negative prior service costs attributable to the future years of service of the union group for which future accrual of benefits has been eliminated.

We recorded a one-time, non-cash charge of $13 million related to income taxes in the first quarter of 2010, resulting from the March 2010 enactment of the Patient Protection and Affordable Care Act, including modifications made in the Health Care and Education Reconciliation Act of 2010. The charge results from a change in the tax treatment of the Medicare Part D program.

In April 2010, Honeywell contributed marketable securities valued at $100 million to one of its non-U.S. pension plans.

NOTE 14. Commitments and Contingencies

Environmental Matters

We are subject to various federal, state, local and foreign government requirements relating to the protection of the environment. We believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and personal injury and that our handling, manufacture, use and disposal of hazardous substances are in accordance

with environmental and safety laws and regulations. However, mainly because of past operations and operations of predecessor companies, we, like other companies engaged in similar businesses, have incurred remedial response and voluntary cleanup costs for site contamination and are a party to lawsuits and claims associated with environmental and safety matters, including past production of products containing hazardous substances. Additional lawsuits, claims and costs involving environmental matters are likely to continue to arise in the future.

With respect to environmental matters involving site contamination, we continually conduct studies, individually or jointly with other potentially responsible parties, to determine the feasibility of various remedial techniques. It is our policy to record appropriate liabilities for environmental matters when remedial efforts or damage claim payments are probable and the costs can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted future costs required to complete the remedial work. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical, regulatory or legal information becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially responsible parties, technology and information related to individual sites, we do not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of our recorded liabilities. We expect to fund expenditures for these matters from operating cash flow. The timing of cash expenditures depends on a number of factors, including the timing of remedial investigations and feasibility studies, the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties. The following table summarizes information concerning our recorded liabilities for environmental costs:


	Three Months Ended March 31, 2010

Beginning of period	$	779
Accruals for environmental matters deemed probable and reasonably estimable		50
Environmental liability payments		(39	)
Other		11

End of period	$	801

Environmental liabilities are included in the following balance sheet accounts:


	March 31, 2010		December 31, 2009

Accrued liabilities	$	318	$	314
Other liabilities		483		465

	$	801	$	779

Although we do not currently possess sufficient information to reasonably estimate the amounts of 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, they could be material to our consolidated results of operations or operating cash flows in the periods recognized or paid. However, considering our past experience and existing reserves, we do not expect that these environmental matters will have a material adverse effect on our consolidated financial position.

New Jersey Chrome Sites— The excavation and offsite disposal of approximately one million tons of chromium residue present at a predecessor Honeywell site located in Jersey City, New Jersey, known as Study Area 7 was completed in January 2010. We have also received approval of the United States District Court for the District of New Jersey for the implementation of related groundwater and sediment remedial actions, and are seeking the appropriate permits from state and federal agencies. Provisions have been made in our financial statements for the estimated cost of these remedies.

The above-referenced site is the most significant of the twenty-one sites located in Hudson County, New Jersey that are the subject of an Administrative Consent Order (ACO) entered into with the New Jersey Department of Environmental Protection (NJDEP) in 1993 (the “Honeywell ACO Sites”). Remedial investigations and activities consistent with the ACO have also been conducted and are underway at the other Honeywell ACO Sites. We have recorded reserves for the Honeywell ACO Sites where appropriate under the accounting policy described above.

On May 3, 2005, NJDEP filed a lawsuit in New Jersey Superior Court against Honeywell and two other companies seeking declaratory and injunctive relief, unspecified damages, and the reimbursement of unspecified total costs relating to sites in New Jersey allegedly contaminated with chrome ore processing residue. The claims against Honeywell relate to the activities of a predecessor company which ceased its New Jersey manufacturing operations in the mid-1950’s. Honeywell and the two other companies have agreed to settle this litigation with NJDEP, subject to Court approval. Under the settlement, Honeywell would pay $5 million of NJDEP’s past costs, as well as accept sole responsibility to remediate 24 of the 53 “Publicly Funded Sites” (i.e., those sites for which none of the three companies had previously accepted responsibility). Honeywell would also bear 50% of the costs at another 10 Publicly Funded Sites. We have recorded reserves for the Publicly Funded Sites where appropriate under the accounting policy described above.

We have entered into court-approved settlements of litigation filed in federal court against Honeywell and other landowners seeking the cleanup of chrome residue at groups of properties known as Study Areas 5, 6 South and 6 North of the Honeywell ACO Sites. The required remedial actions are consistent with our recorded reserves.

Dundalk Marine Terminal, Baltimore— Chrome residue from legacy chrome plant operations in Baltimore was deposited as fill at the Dundalk Marine Terminal (“DMT”), which is owned and operated by the Maryland Port Administration (“MPA”). Honeywell and the MPA have been sharing costs to investigate and mitigate related environmental issues, and have entered into a cost sharing agreement under which Honeywell will bear 77 percent of the costs of developing and implementing permanent remedies for the DMT facility. The investigative phase is ongoing, after which the appropriate remedies will be identified and chosen. We have negotiated a Consent Decree with the MPA and Maryland Department of the Environment (“MDE”) with respect to the investigation and remediation of the DMT facility. The Consent Decree is being challenged in federal court by BUILD, a Baltimore community group, together with a local church and two individuals (collectively “BUILD”). In October 2007, the Court dismissed with prejudice BUILD’s state law claims and dismissed without prejudice BUILD’s RCRA claims regarding neighborhoods near the DMT facility. In August 2008, the Court held a hearing on the Company’s motion to dismiss BUILD’s remaining claims on the grounds that MDE is diligently prosecuting the investigation and remediation of the DMT. We are awaiting the Court’s decision. We do not believe that this matter will have a material adverse impact on our consolidated financial position or operating cash flows. Given the scope and complexity of this project, it is possible that the cost of remediation, when determinable, could have a material adverse impact on our results of operations in the periods recognized.

Onondaga Lake, Syracuse, NY— We are implementing a combined dredging/capping remedy of Onondaga Lake pursuant to a consent decree approved by the United States District Court for the Northern District of New York in January 2007. We have accrued for our estimated cost of remediating Onondaga Lake based on currently available information and analysis performed by our engineering consultants. Honeywell is also conducting remedial investigations and activities at other sites in Syracuse. We have recorded reserves for these investigations and activities where appropriate under the accounting policy described above.

Honeywell has entered into a cooperative agreement with potential natural resource trustees to assess alleged natural resource damages relating to this site. It is not possible to predict the outcome or duration of this assessment, or the amounts of, or responsibility for, any damages.

Asbestos Matters

Like many other industrial companies, Honeywell is a defendant in personal injury actions related to asbestos. We did not mine or produce asbestos, nor did

we make or sell insulation products or other construction materials that have been identified as the primary cause of asbestos related disease in the vast majority of claimants. Products containing asbestos previously manufactured by Honeywell or by previously owned subsidiaries primarily fall into two general categories: refractory products and friction products.

Refractory Products—Honeywell owned North American Refractories Company (NARCO) from 1979 to 1986. NARCO produced refractory products (high temperature bricks and cement) that were sold largely to the steel industry in the East and Midwest. Less than 2 percent of NARCO’S products contained asbestos.

When we sold the NARCO business in 1986, we agreed to indemnify NARCO with respect to personal injury claims for products that had been discontinued prior to the sale (as defined in the sale agreement). NARCO retained all liability for all other claims. On January 4, 2002, NARCO filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

As a result of the NARCO bankruptcy filing, all of the claims pending against NARCO are automatically stayed pending the reorganization of NARCO. In addition, the bankruptcy court enjoined both the filing and prosecution of NARCO-related asbestos claims against Honeywell. The stay has remained in effect continuously since January 4, 2002. In connection with NARCO’s bankruptcy filing, we paid NARCO’s parent company $40 million and agreed to provide NARCO with up to $20 million in financing. We also agreed to pay $20 million to NARCO’s parent company upon the filing of a plan of reorganization for NARCO acceptable to Honeywell (which amount was paid in December 2005 following the filing of NARCO’s Third Amended Plan of Reorganization), and to pay NARCO’s parent company $40 million, and to forgive any outstanding NARCO indebtedness to Honeywell, upon the effective date of the plan of reorganization.

We believe that, as part of the NARCO plan of reorganization, a trust will be established for the benefit of all asbestos claimants, current and future, pursuant to Trust Distribution Procedures negotiated with the NARCO Asbestos Claimants Committee and the Court-appointed legal representative for future asbestos claimants. If the trust is put in place and approved by the Court as fair and equitable, Honeywell as well as NARCO will be entitled to 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 products to be made against the federally-supervised trust. Honeywell has reached agreement with the representative for future NARCO claimants and the Asbestos Claimants Committee to cap its annual contributions to the trust with respect to future claims at a level that would not have a material impact on Honeywell’s operating cash flows.

In November 2007, the Bankruptcy Court entered an amended order confirming the NARCO Plan without modification and approving the 524(g) trust and channeling injunction in favor of NARCO and Honeywell. In December 2007, certain insurers filed an appeal of the Bankruptcy Court Order in the United States District Court for the Western District of Pennsylvania. The District Court affirmed the Bankruptcy Court Order in July 2008. In August 2008, insurers filed a notice of appeal to the Third Circuit Court of Appeals. The appeal is fully briefed, oral argument took place on May 21, 2009, and the matter has been submitted for decision. We expect that the stay enjoining litigation against NARCO and Honeywell will remain in effect during the pendency of these proceedings.

Our consolidated financial statements reflect an estimated liability for settlement of pending and future NARCO-related asbestos claims as of March 31, 2010 and December 31, 2009 of $1.1 billion. The estimated liability for pending claims is based on terms and conditions, including evidentiary requirements, in definitive agreements with approximately 260,000 current claimants, and an estimate of the unsettled claims pending as of the time NARCO filed for bankruptcy protection. Substantially all settlement payments with respect to current claims have been made. Approximately $100 million of payments due pursuant to these settlements is due only upon establishment of the NARCO trust.

The estimated liability for future claims represents the estimated value of future asbestos related bodily injury claims expected to be asserted against NARCO through 2018 and the aforementioned obligations to NARCO’s parent. In light of the uncertainties inherent in making long-term projections we do not believe that we have a reasonable basis for estimating asbestos claims beyond 2018. The estimate is based upon the disease criteria and payment values contained in the NARCO Trust

Distribution Procedures negotiated with the NARCO Asbestos Claimants Committee and the NARCO future claimants’ representative. Honeywell projected the probable number and value, including trust claim handling costs, of asbestos related future liabilities based upon experience of asbestos claims filing rates in the tort system and in certain operating asbestos trusts, and the claims experience in those forums. The valuation methodology also includes an analysis of the population likely to have been exposed to asbestos containing products, epidemiological studies to estimate the number of people likely to develop asbestos related diseases, NARCO claims filing history, the pending inventory of NARCO asbestos related claims and payment rates expected to be established by the NARCO trust. This methodology used to estimate the liability for future claims has been commonly accepted by numerous courts and resulted in a range of estimated liability for future claims of $743 to $961 million. We believe that no amount within this range is a better estimate than any other amount and accordingly, we have recorded the minimum amount in the range.

As of March 31, 2010 and December 31, 2009, our consolidated financial statements reflect an insurance receivable corresponding to the liability for settlement of pending and future NARCO-related asbestos claims of $829 and $831 million, respectively. This coverage reimburses Honeywell for portions of the costs incurred to settle NARCO related claims and court judgments as well as defense costs and 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. At March 31, 2010, a significant portion of this coverage is with insurance companies with whom we have agreements to pay full policy limits based on corresponding Honeywell claims costs. We conduct analyses to determine the amount of insurance that we estimate is probable of recovery in relation to payment of current and estimated future claims. While the substantial majority of our insurance carriers are solvent, some of our individual carriers are insolvent, which has been considered in our analysis of probable recoveries. We made judgments concerning insurance coverage that we believe are reasonable and consistent with our historical dealings with our insurers, our knowledge of any pertinent solvency issues surrounding insurers and various judicial determinations relevant to our insurance programs.

In the second quarter of 2006, Travelers Casualty and Insurance Company (“Travelers”) filed a lawsuit against Honeywell and other insurance carriers in the Supreme Court of New York, County of New York, disputing obligations for NARCO-related asbestos claims under high excess insurance coverage issued by Travelers and other insurance carriers. Approximately $300 million of coverage under these policies is included in our NARCO-related insurance receivable at March 31, 2010. Honeywell believes it is entitled to the coverage at issue and expects to prevail in this matter. In the third quarter of 2007, Honeywell prevailed on a critical choice of law issue concerning the appropriate method of allocating NARCO-related asbestos liabilities to triggered policies. The plaintiffs appealed and the trial court’s ruling was upheld by the intermediate appellate court in the second quarter of 2009. Plaintiffs’ further appeal to the New York Appellate Division, the highest court in New York, was denied in October 2009. A related New Jersey action brought by Honeywell has been dismissed, but all coverage claims against plaintiffs have been preserved in the New York action. Based upon (i) our understanding of relevant facts and applicable law, (ii) the terms of insurance policies at issue, (iii) our experience on matters of this nature, and (iv) the advice of counsel, we believe that the amount due from Travelers and other insurance carriers is probable of recovery. While Honeywell expects to prevail in this matter, an adverse outcome could have a material impact on our results of operations in the period recognized but would not be material to our consolidated financial position or operating cash flows.

Projecting future events is subject to many uncertainties that could cause the NARCO related asbestos liabilities or assets to be higher or lower than those projected and recorded. There is no assurance that the plan of reorganization will become final, that insurance recoveries will be timely or whether there will be any NARCO related asbestos claims beyond 2018. Given the inherent uncertainty in predicting future events, we review our estimates periodically, and update them based on our experience and other relevant factors. Similarly we will reevaluate our projections concerning our probable insurance recoveries in light of any changes to the projected liability or other developments that may impact insurance recoveries.

Friction Products—Honeywell’s Bendix friction materials (Bendix) business manufactured automotive brake parts that contained chrysotile asbestos in an encapsulated form. Existing and potential 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.

From 1981 through March 31, 2010, we have resolved approximately 153,000 Bendix related asbestos claims. We had 129 trials resulting in favorable verdicts and 17 trials resulting in adverse verdicts. Four of these adverse verdicts were reversed on appeal, five verdicts were vacated on post-trial motions, three claims were settled and the remaining five have been or will be appealed. The claims portfolio was reduced in 2009 due to settlements, dismissals and the elimination of significantly aged (i.e., pending for more than six years), inactive (including claims for which the required medical and exposure showings have not been made) and duplicate claims. The following tables present information regarding Bendix related asbestos claims activity:


	Three Months Ended March 31, 2010		Year Ended December 31,

			2009			2008

Claims Activity
Claims Unresolved at the beginning of period		19,940		51,951			51,658
Claims Filed during the period		644		2,697			4,003
Claims Resolved and Reactivated during the period (1)		316		(34,708	)		(3,710	)

Claims Unresolved at the end of period		20,900		19,940			51,951

(1) Includes approximately 1,400 claims previously classified as inactive (93% non-malignant and accrued liability of approximately $1.8 million) which were activated during the current period.

Disease Distribution of Unresolved Claims


			December 31,

	March 31, 2010		2009		2008

Mesothelioma and Other Cancer Claims		4,890		4,727		5,575
Other Claims		16,010		15,213		46,376

Total Claims		20,900		19,940		51,951

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


	Year Ended December 31,

	2009		2008		2007		2006

	(in whole dollars)
Malignant claims	$	50,000	$	65,000	$	33,000	$	33,000
Nonmalignant claims	$	200	$	1,500	$	500	$	250

It is not possible to predict whether resolution values for Bendix related asbestos claims will increase, decrease or stabilize in the future.

Our consolidated financial statements reflect an estimated liability for resolution of pending and future Bendix related asbestos claims of $575 and $566 million at March 31, 2010 and December 31, 2009, respectively. Our liability for the estimated cost of future Bendix related asbestos claims is based on historic claims filing experience, disease classifications, expected resolution values, and historic dismissal rates. In the fourth quarter of each year we update our analysis of the estimated cost of future Bendix related asbestos claims. We have valued Bendix pending and future claims using average resolution values for the previous four years. Changes in the tort system which began in 2006 refocused asbestos litigation on mesothelioma cases, making the four year period 2006 through 2009 representative for forecasting purposes. We will continue to update

the expected resolution values used to estimate the cost of pending and future Bendix claims during the fourth quarter each year.

The estimated liability for future claims represents the estimated value of future asbestos related bodily injury claims expected to be asserted against Bendix over the next five years. In light of the uncertainties inherent in making long-term projections, as well as certain factors unique to friction product asbestos claims, we do not believe that we have a reasonable basis for estimating asbestos claims beyond the next five years. The estimate is based upon Bendix historical experience in the tort system for the four years ended December 31, 2009 with respect to claims filing and resolution values. The methodology used to estimate the liability for future claims has been commonly accepted by numerous courts. It is similar to that used to estimate the future NARCO related asbestos claims liability.

Honeywell currently has approximately $1.9 billion of insurance coverage remaining with respect to pending and potential future Bendix related asbestos claims, of which $169 and $172 million are reflected as receivables in our consolidated balance sheet at March 31, 2010 and December 31, 2009, respectively. This coverage 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. Insurance receivables are recorded in the financial statements simultaneous with the recording of the liability for the estimated value of the underlying asbestos claims. The amount of the insurance receivable recorded is based on our ongoing analysis of the insurance that we estimate is probable of recovery. This determination is based on our analysis of the underlying insurance policies, our historical experience with our insurers, our ongoing review of the solvency of our insurers, our interpretation of judicial determinations relevant to our insurance programs, and our consideration of the impacts of any settlements reached with our insurers. Insurance receivables are also recorded when structured insurance settlements provide for future fixed payment streams that are not contingent upon future claims or other events. Such amounts are recorded at the net present value of the fixed payment stream.

On a cumulative historical basis, Honeywell has recorded insurance receivables equal to approximately 45 percent of the value of the underlying asbestos claims recorded. However, because there are gaps in our coverage due to insurance company insolvencies, certain uninsured periods, and insurance settlements, this rate is expected to decline for any future Bendix related asbestos liabilities that may be recorded. Future recoverability rates may also be impacted by numerous other factors, such as future insurance settlements, insolvencies and judicial determinations relevant to our coverage program, which are difficult to predict. Assuming continued defense and indemnity spending at current levels, we estimate that the cumulative recoverability rate could decline over the next five years to approximately 35 percent.

Honeywell believes it has sufficient insurance coverage and reserves to cover all pending Bendix related asbestos claims and Bendix related asbestos claims estimated to be filed within the next five years. Although it is impossible to predict the outcome of either pending or future Bendix related asbestos claims, we do not believe that such claims would have a material adverse effect on our consolidated financial position in light of our insurance coverage and our prior experience in resolving such claims. If the rate and types of claims filed, the average resolution value of such claims and the period of time over which claim settlements are paid (collectively, the “Variable Claims Factors”) do not substantially change, Honeywell would not expect future Bendix related asbestos claims to have a material adverse effect on our results of operations or operating cash flows in any fiscal year. No assurances can be given, however, that the Variable Claims Factors will not change.

Refractory and Friction Products — The following tables summarize information concerning NARCO and Bendix asbestos related balances:

Asbestos Related Liabilities


	Three Months Ended March 31, 2010

	Bendix			NARCO			Total

Beginning of period	$	566		$	1,128		$	1,694
Accrual for update to estimated liability		41			1			42
Asbestos related liability payments		(32	)		(1	)		(33	)

End of period	$	575		$	1,128		$	1,703


Insurance Recoveries for Asbestos Related Liabilities

	Three Months Ended March 31, 2010

	Bendix			NARCO			Total

Beginning of period	$	172		$	831		$	1,003
Probable insurance recoveries related to estimated liability		4			—			4
Insurance receipts for asbestos related liabilities		(7	)		(2	)		(9	)

End of period	$	169		$	829		$	998

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


	March 31, 2010		December 31, 2009

Other current assets	$	62	$	62
Insurance recoveries for asbestos related liabilities		936		941

	$	998	$	1,003


Accrued liabilities	$	654	$	654
Asbestos related liabilities		1,049		1,040

	$	1,703	$	1,694

Other Matters

We are subject to a number of other lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible 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. Included in these other matters are the following:

Allen, et al. v. Honeywell Retirement Earnings Plan—Pursuant to a settlement approved by the U.S. District Court for the District of Arizona in February 2008, 18 of 21 claims alleged by plaintiffs in this class action lawsuit were dismissed with prejudice in exchange for approximately $35 million and the maximum aggregate liability for the remaining three claims (alleging that Honeywell impermissibly reduced the pension benefits of certain employees of a predecessor entity when the plan was amended in 1983 and failed to calculate benefits in accordance with the terms of the plan) was capped at $500 million. Any amounts payable, including the settlement amount, have or will be paid from the Company’s pension plan. In October 2009, the Court granted summary judgment in favor of the Honeywell Retirement Earnings Plan with respect to the claim regarding the calculation of benefits. We continue to expect to prevail on the remaining claims in light of applicable law and our substantial affirmative defenses, which have not yet been considered fully by the Court. Accordingly, we do not believe that a liability is probable of occurrence and reasonably estimable with respect to these claims and we have not recorded a provision for the remaining claims in our financial statements.

Quick Lube—On March 31, 2008, S&E Quick Lube, a filter distributor, filed suit in U.S. District Court for the District of Connecticut alleging that twelve filter manufacturers, including Honeywell, engaged in a conspiracy to fix prices, rig bids and allocate U.S. customers for aftermarket automotive filters. This suit is a purported class action on behalf of direct purchasers of filters from the defendants. Parallel purported class actions, including on behalf of indirect purchasers of filters, have been filed by other plaintiffs in a variety of jurisdictions in the United States and Canada. The U.S cases have been consolidated into a single multi-district litigation in the Northern District of Illinois. We intend to vigorously defend the claims raised in these actions. The Antitrust Division of the Department of Justice notified Honeywell on January 21, 2010 that it has officially closed its investigation into possible collusion in the replacement auto filters industry.

Given the uncertainty inherent in litigation and investigations (including the specific matters referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters. Considering our past experience and existing accruals, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our 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 us to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on our results of operations or operating cash flows in the periods recognized or paid.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareowners
of Honeywell International Inc.:

We have reviewed the accompanying consolidated balance sheet of Honeywell International Inc. and its subsidiaries as of March 31, 2010, and the related consolidated statement of operations for the three-month periods ended March 31, 2010 and 2009 and the consolidated statement of cash flows for the three-month periods ended March 31, 2010 and 2009. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2009, and the related consolidated statement of operations, of shareowners’ equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 11, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2009, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.


/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
April 22, 2010

The “Report of Independent Registered Public Accounting Firm” included above is not a “report” or “part of a Registration Statement” prepared or certified by an independent accountant within the meanings of Sections 7 and 11 of the Securities Act of 1933, and the accountants’ Section 11 liability does not extend to such report.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) (Dollars in millions, except per share amounts)

The following MD&A is intended to help the reader understand the results of operations and financial condition of Honeywell International Inc. (“Honeywell”) for the first quarter ended March 31, 2010. The financial information as of March 31, 2010 should be read in conjunction with the financial statements for the year ended December 31, 2009 contained in our Form 10-K filed on February 12, 2010.


A.	RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2010 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2009

Net Sales


	Three Months Ended March 31,

	2010			2009

Net sales	$	7,776		$	7,570
% change compared with prior period		3	%

The increase in net sales in the first quarter of 2010 compared with the first quarter of 2009 is attributable to the following:


Foreign Exchange	3	%
Price	1
Volume	(1	)
Acquisitions/Divestitures	—

	3	%

A discussion of net sales by segment can be found in the Review of Business Segments section of this MD&A.

Cost of Products and Services Sold


	Three Months Ended March 31,

	2010			2009

Cost of products and services sold	$	5,982		$	5,756
Gross Margin percentage		23.1	%		24.0	%

Cost of products and services sold increased by $226 million or 4 percent in 2010 compared with 2009. This increase is primarily due to higher pension expense (driven by an increase in amortization of losses in our U.S. plans) and increased sales as a result of the factors discussed within the Review of Business Segments section of this MD&A, partially offset by benefits from prior repositioning actions, the positive impact of indirect cost savings initiatives across each of our Business Segments and lower other postretirement benefits expense (primarily related to a curtailment gain, see Note 13 of Notes to Financial Statements).

Gross margin percentage decreased by 0.9 of a percentage point in the first quarter of 2010 compared with the first quarter of 2009 primarily due to higher pension expense and lower margins in our Aerospace segment, partially offset by higher margins in our Transportation Systems, Automation and Control Solutions and Specialty Materials segments and lower other postretirement benefits expense.

For further discussion of segment results see “Review of Business Segments”.

Selling, General and Administrative Expenses


	Three Months Ended March 31,

	2010			2009

Selling, general and administrative expenses	$	1,136		$	1,152
Percent of sales		14.6	%		15.2	%

Selling, general and administrative expenses (SG&A) as a percentage of sales decreased by 0.6 of a percentage point in the first quarter of 2010 compared with the first quarter of 2009 primarily due to increased sales and benefits of indirect cost savings initiatives across each of our Business Segments, partially offset by higher pension costs, resulting in decreased SG&A expense of $16 million.

Other (Income) Expense


	Three Months Ended March 31,

	2010			2009

Equity (income)/loss of affiliated companies	$	(4	)	$	(6	)
Interest income		(9	)		(12	)
Foreign exchange		11			22
Other net		—			(2	)

	$	(2	)	$	2

Other income of $2 million in the first quarter of 2010 compared with Other expense of $2 the first quarter of 2009 is primarily due to lower foreign exchange losses offset by lower interest income (primarily due to lower interest rates).

Interest and Other Financial Charges


	Three Months Ended March 31,

	2010			2009

Interest and other financial charges	$	107		$	117
% change compared with prior period		(9	)%

Interest and other financial charges decreased by 9 percent in the first quarter of 2010 compared with the first quarter of 2009, due to lower debt balances and lower borrowing costs.

Tax Expense


	Three Months Ended March 31,

	2010			2009

Tax expense	$	160		$	144
Effective tax rate		28.9	%		26.5	%

The effective tax rate in the first quarter of 2010 increased 2.4 percentage points compared to the first quarter of 2009 primarily due to the impact of an enacted change in the tax treatment of the Medicare Part D program (see Note 13 of Notes to Financial Statements).

The effective tax rate was lower than the statutory rate of 35 percent primarily due to foreign earnings taxed at lower tax rates.

Net Income Attributable to Honeywell


	Three Months Ended March 31,

	2010		2009

Net income attributable to Honeywell	$	386	$	397
Earnings per share of common stock – assuming dilution	$	0.50	$	0.54

Earnings per share of common stock – assuming dilution decreased by $0.04 per share in the first quarter of 2010 compared with the first quarter of 2009 primarily due primarily to higher pension expense, lower segment profit in our Aerospace segment and an increase in the number of shares outstanding, partially offset by higher segment profit in our Transportation Systems, Automation and Control Solutions and Specialty Materials segments and lower other postretirement expense.

Review of Business Segments


	Three Months Ended March 31,

	2010			2009

Net Sales
Aerospace	$	2,506		$	2,759
Automation and Control Solutions		3,124			3,001
Specialty Materials		1,139			1,054
Transportation Systems		1,007			756
Corporate		—			—

	$	7,776		$	7,570


Segment Profit
Aerospace	$	413		$	488
Automation and Control Solutions		386			311
Specialty Materials		170			125
Transportation Systems		96			(3	)
Corporate		(29	)		(45	)

Total Segment Profit		1,036			876


Other income/(expense) (A)		(2	)		(8	)
Interest and other financial charges		(107	)		(117	)
Stock compensation expense (B)		(50	)		(42	)
Pension (expense) (B)		(200	)		(26	)
Other postretirement income/(expense) (B)		18			(29	)
Repositioning and other charges (B)		(142	)		(111	)

Income from continuing operations before taxes	$	553		$	543


(A)	Equity income/(loss) of affiliated companies is included in Segment Profit.

(B)	Amounts included in cost of products and services sold and selling, general and administrative expenses.

Aerospace


	Three Months Ended March 31,

	2010			2009

Net sales	$	2,506		$	2,759
% change compared with prior period		(9	)%
Segment profit	$	413		$	488
% change compared with prior period		(15	)%

Aerospace sales by major customer end-markets for the first quarter ended March 31, 2010 and 2009 were as follows:


	Three Months Ended March 31,

	% of Aerospace Sales				% Changes in Sales

Customer End-Markets	2010		2009		2010 Versus 2009

Commercial:
Air transport and regional original equipment	13	%	14	%	(16	%)
Air transport and regional aftermarket	23		22		(4	)
Business and general aviation original equipment	5		11		(59	)
Business and general aviation aftermarket	9		8		1
Defense and Space	50		45		—


Total	100	%	100	%	(9	%)

Aerospace sales decreased by 9 percent in the first quarter of 2010 compared with the first quarter of 2009. Details regarding the changes in sales by customer end-markets are as follows:


	•	Air transport and regional original equipment (OE) sales decreased by 16 percent driven primarily by lower sales to our OE customers, consistent with production rates and platform mix.

	•	Air transport and regional aftermarket sales decreased by 4 percent primarily as a result of decreased sales of spare parts driven by higher parked aircraft and customer inventory initiatives, partially offset by the impact of increased flying hours of approximately 4 percent. While we expect global flying hours to increase slightly in 2010, we expect aftermarket sales to be flat for the full year 2010 compared to 2009.

	•	Business and general aviation OE sales decreased by 59 percent due to the expected decrease in new business jet deliveries reflecting rescheduling and cancellations of deliveries by OE customers.

	•	Business and general aviation aftermarket sales increased by 1 percent primarily due to increased sales of spare parts due to higher engine utilization.

	•	Defense and space sales were essentially unchanged, primarily due to higher sales of logistics services and original equipment for military platforms offset by lower sales related to commercial helicopters and


	program completions. Delays in defense and space programs could impact the timing of sales in this end-market over the course of 2010.

Aerospace segment profit decreased by 15 percent in the first quarter of 2010 compared with the first quarter of 2009 primarily due to lower sales as a result of the factors discussed above partially offset by volume related material cost reductions and reduced labor costs (reflecting reduced census, work schedule reductions and benefits from prior repositioning actions) and the positive impact of indirect cost savings initiatives.

Automation and Control Solutions


	Three Months Ended March 31,

	2010			2009

Net sales	$	3,124		$	3,001
% change compared with prior period		4	%
Segment profit	$	386		$	311
% change compared with prior period		24	%

Automation and Control Solutions (“ACS”) sales increased by 4 percent in the first quarter of 2010 compared with the first quarter of 2009, primarily due to the positive impact of foreign exchange of 5 percent. Regionally, we experienced strength in Asia, modest growth in North America and continued weakness in Europe.


	•	Sales in our Products businesses increased by 5 percent, including the positive impact of foreign exchange and higher sales volume in selected businesses. While we continue to see softness in commercial and residential end-markets, we have started to experience improvements in our businesses tied to industrial production resulting in increased sales volume of our sensing and control, scanning and mobility, gas detection and personal protective equipment products.

	•	Sales in our Solutions businesses increased by 2 percent primarily due to the positive impact of foreign exchange, growth in energy efficiency projects and acquisitions most significantly the RMG Group, partially offset by volume decreases largely due to continued soft demand for process solutions projects, most significantly refining. Orders and backlog increased in the first quarter primarily driven by energy efficiency projects, industrial field solutions and growth in emerging regions.

ACS segment profit increased by 24 percent in the first quarter of 2010 compared with the first quarter of 2009 principally due to the increased sales as a result of the factors noted above, benefits from prior repositioning actions and the positive impact of indirect cost savings initiatives, partially offset by inflation.

Specialty Materials


	Three Months Ended March 31,

	2010			2009

Net sales	$	1,139		$	1,054
% change compared with prior period		8	%
Segment profit	$	170		$	125
% change compared with prior period		36	%

Specialty Materials sales increased by 8 percent in the first quarter of 2010 compared with the first quarter of 2009 driven by (i) a 34 percent increase in our Resins and Chemicals business due to price increases (most significantly the result of formula pricing arrangements), (ii) a 20 percent increase in our Specialty Products business most significantly due to increased sales to our semiconductor customers, and (iii) a 20 percent increase in our Fluorine Products business primarily due to higher sales volume of refrigerants and insulating materials, partially offset by a 15 percent decrease in our UOP business due to lower catalyst sales and timing of project activity in the refining and petrochemical industries.

Specialty Materials segment profit increased by 36 percent in the first quarter of 2010 compared with the first quarter of 2009. The increase is due principally to higher sales volumes as a result of the factors discussed above and the positive impact of indirect cost savings initiatives. We anticipate the above noted positive trends in certain customer end markets to continue throughout 2010.

Transportation Systems


	Three Months Ended March 31,

	2010			2009

Net sales	$	1,007		$	756
% change compared with prior period		33	%
Segment profit	$	96		$	(3	)

Transportation Systems sales increased by 33 percent in the first quarter of 2010 compared with the first quarter of 2009, primarily due to higher volume and the positive impact of foreign exchange.


	•	Turbo Technologies, including Friction Materials, sales increased by 45 percent primarily due to increased turbocharger sales to both commercial and light vehicle engine manufacturers and the positive impact of foreign exchange. We expect increased volumes to continue as we benefit from new platform launches and increased diesel penetration rates in Western Europe.

	•	Consumer Products Group sales increased by 6 percent primarily due to the positive impacts of foreign exchange, improvements in sales volumes across each of our major brands and higher prices (primarily pass through of ethylene glycol cost increases).

Transportation Systems segment profit increased $99 million in the first quarter of 2010 compared with the first quarter of 2009 due principally to higher sales volume as a result of the factors discussed above and increased productivity driven by benefits from prior repositioning actions.

Repositioning and Other Charges

See Note 3 of Notes to Financial Statements for a discussion of repositioning and other charges incurred in the three months ended March 31, 2010 and 2009. Our repositioning actions are expected to generate incremental pretax savings of approximately $300 million in 2010 compared with 2009 principally from planned workforce reductions. Cash expenditures for severance and other exit costs necessary to execute these actions were $56 million in the first three months of 2010 and were funded through operating cash flows. Cash expenditures for severance and other costs necessary to execute the remaining actions will be approximately $225 million in 2010 and will be funded through operating cash flows.


B.	LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Summary

Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and 2009, are summarized as follows:


	2010			2009

Cash provided by/(used for):
Operating activities	$	743		$	341

Investing activities		(381	)		(126	)

Financing activities		(249	)		(150	)
Effect of exchange rate changes on cash		(63	)		(78	)

Net increase/(decrease) in cash and cash equivalents	$	50		$	(13	)

Cash provided by operating activities increased by $402 million during the first three months of 2010 compared with the first three months of 2009, primarily due to higher accrued expenses of $400 million (primarily increased customer advances and lower benefit and other employee related payments), partially offset by higher cash taxes of $214 million.

Cash used for investing activities increased by $255 million during the first three months of 2010 compared with the first three months of 2009 due primarily to investment in marketable securities of $296 million, partially offset by decreased expenditures for property, plant, and equipment of $39 million.

Cash used for financing activities increased by $99 million during the first three months of 2010 compared with the first three months of 2009 primarily due to a net repayment of debt (including commercial paper) in the first quarter 2010 of $52 million compared to net proceeds (including commercial paper) of $70 million in the first quarter of 2009 partially offset by an increase in proceeds from issuance of common stock, primarily related to stock option exercises, of $28 million.

Liquidity

The Company continues to manage its businesses to maximize operating cash flows as the primary source of liquidity. In addition to our available cash and operating cash flows, additional sources of liquidity include committed credit lines, short-term debt from the commercial paper market, long-term borrowings, access to the public debt and equity markets as well as the ability to sell trade accounts receivables. We continue to balance our cash and financing uses through investment in our existing core businesses, acquisition activity, share repurchases and dividends.

We continuously assess the relative strength of each business in our portfolio as to strategic fit, market position, profit and cash flow contribution in order to upgrade our combined portfolio and identify business units that will most benefit from increased investment. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses. We also identify business units that do not fit into our long-term strategic plan based on their market position, relative profitability or growth potential. These business units are considered for potential divestiture, restructuring or other repositioning actions subject to regulatory constraints.

In the first quarter of 2010, the Company repaid $1,000 million of its 7.50% notes. The repayment was funded with the issuance of commercial paper and cash provided by operating activities.

We plan to make voluntary contributions of Honeywell common stock to our U.S. pension plans in 2010 totaling approximately $400 million to improve the funded status of our plans. We also expect to make contributions to our non-U.S. plans of approximately $150 million in 2010, including $100 million of marketable securities that were contributed in April 2010.

Current global economic conditions or the current tightening of credit could adversely affect our customers’ or suppliers’ ability to obtain financing, particularly in our long cycle businesses and airline and automotive end markets. Customer or supplier bankruptcies, delays in their ability to obtain financing, or the unavailability of financing could adversely affect our cash flow or results of operations. To date we have not experienced material impacts from customer or supplier bankruptcy or liquidity issues. We continue to monitor and take measures to limit our exposures.


C.	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 a discussion of environmental, asbestos and other litigation matters in Note 14 of Notes to Financial Statements.

Critical Accounting Policies

The financial information as of March 31, 2010 should be read in conjunction with the financial statements for the year ended December 31, 2009 contained in our Form 10-K filed on February 12, 2010.

For a discussion of the Company’s critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K filed on February 12, 2010.

Recent Accounting Pronouncements

See Note 2 of Notes to Financial Statements for a discussion of recent accounting pronouncements.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See our 2009 Annual Report on Form 10-K (Item 7A). As of March 31, 2010, there has been no material change in this information.


ITEM 4.	CONTROLS AND PROCEDURES

Honeywell management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures 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 From 10-Q to ensure information required to be disclosed in the reports that Honeywell files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that it is accumulated and communicated to our management, including our CEO, our CFO, and our Controller, as appropriate, to allow timely decisions regarding required disclosure. There have been no changes that have materially affected, or are reasonably likely to materially affect, Honeywell’s internal control over financial reporting that have occurred during the period covered by this Quarterly Report on Form 10-Q.

PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

General Legal Matters

Environmental Matters Involving Potential Monetary Sanctions in Excess of $100,000

Although the outcome of the matters discussed below cannot be predicted with certainty, we do not believe that any of them, individually or in the aggregate, will have a material adverse effect on our consolidated financial position, consolidated results of operations or operating cash flows.

The United States Environmental Protection Agency and the United States Department of Justice (“federal authorities”) are investigating whether the storage of certain sludges generated during uranium hexafluoride production at our Metropolis, Illinois facility has been in compliance with the requirements of the Resource Conservation and Recovery Act. The federal authorities have convened a grand jury in this matter. This storage issue was previously voluntarily disclosed to the Illinois Environmental Protection Agency, with whom Honeywell has been working to resolve the matter. The Company has met with the federal authorities and is cooperating fully with the investigation. Although the outcome of this matter cannot be predicted with certainty, we do not believe that it will have a material adverse effect on our consolidated financial position, consolidated results of operations or operating cash flows.

Honeywell is negotiating with the New York State Department of Environmental Conservation to settle allegations that Honeywell failed to properly close out waste storage areas associated with the legacy operations in Syracuse, New York, which areas are known as the Solvay Settling Basins.

The United States Environmental Protection Agency and the United States Department of Justice are investigating whether the Company’s manufacturing facility in Hopewell, Virginia is in compliance with the requirements of the Clean Air Act and the facility’s air operating permit. Based on these investigations, the federal authorities have issued notices of violation with respect to the facility’s benzene waste operations, leak detection and repair program, emissions of nitrogen oxides and emissions of particulate matter. The Company has entered into negotiations with federal authorities to resolve the alleged violations.


ITEM 6.	EXHIBITS


	(a)	Exhibits. See the Exhibit Index on page 40 of this Quarterly Report on Form 10-Q.

SIGNATURES

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


	Honeywell International Inc.

Date: April 23, 2010	By:	/s/ Kathleen A. Winters

		Kathleen A. Winters
		Vice President and Controller
		(on behalf of the Registrant
		and as the Registrant’s
		Principal Accounting Officer)

EXHIBIT INDEX


Exhibit Number		Description

	10.1*	2006 Stock Incentive Plan of Honeywell International Inc. and its Affiliates – Form of Growth Plan Agreement (filed herewith)

	10.2*	Consulting Agreement between Larry E. Kittelberger and Honeywell International Inc. dated March 24, 2010 (filed herewith)

	11	Computation of Per Share Earnings (1)

	12	Computation of Ratio of Earnings to Fixed Charges (filed herewith)

	15	Independent Accountants’ Acknowledgment Letter as to the incorporation of their report relating to unaudited interim financial statements (filed herewith)

	31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

	31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

	32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

	32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

	101.INS	XBRL Instance Document (furnished herewith)

	101.SCH	XBRL Taxonomy Extension Schema (furnished herewith)

	101.CAL	XBRL Taxonomy Extension Calculation Linkbase (furnished herewith)

	101.DEF	XBRL Taxonomy Extension Definition Linkbase (furnished herewith)

	101.LAB	XBRL Taxonomy Extension Label Linkbase (furnished herewith)

	101.PRE	XBRL Taxonomy Extension Presentation Linkbase (furnished herewith)




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

(1)	Data required is provided in Note 5 to the consolidated financial statements in this report.