Honeywell International Inc. (HON)

Investment Accounting Policy

Investments in affiliates over which Honeywell has a significant influence, but not a controlling interest, are accounted for using the equity method of accounting. Other investments are carried at market value, if readily determinable, or at cost. All equity investments are periodically reviewed to determine if declines in fair value below cost basis are other-than-temporary. Significant and sustained decreases in quoted market prices or a series of historic and projected operating losses by investees are strong indicators of other-than-temporary declines. If the decline in fair value is determined to be other- than-temporary, an impairment loss is recorded and the investment is written down to a new carrying value.

Source: Honeywell International Inc., Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Honeywell International Inc., adjustment to Net Income Attributable To Honeywell

USD $ in millions

12 months ended	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net income attributable to Honeywell (as reported)	2,926	2,067	2,022	2,153	2,792
Add: Changes in fair value of available for sale investments	(6)	12	90	112	(51)
Net income attributable to Honeywell (adjusted)	2,920	2,079	2,112	2,265	2,741

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Honeywell International Inc., adjusted ratios

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net Profit Margin
Reported net profit margin	7.77%	5.66%	6.06%	6.97%	7.64%
Adjusted net profit margin	7.75%	5.69%	6.33%	7.33%	7.50%
Return on Equity (ROE)
Reported ROE	22.55%	19.13%	18.96%	24.34%	38.85%
Adjusted ROE	22.50%	19.24%	19.80%	25.61%	38.14%
Return on Assets (ROA)
Reported ROA	6.99%	5.19%	5.34%	5.98%	7.87%
Adjusted ROA	6.98%	5.22%	5.58%	6.29%	7.72%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Honeywell International Inc.'s adjusted net profit margin deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Honeywell International Inc.'s adjusted ROE deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Honeywell International Inc.'s adjusted ROA deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.

Adjusted Net Profit Margin

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income attributable to Honeywell (USD $ in millions)	2,926	2,067	2,022	2,153	2,792
Net sales (USD $ in millions)	37,665	36,529	33,370	30,908	36,556

Net profit margin¹	7.77%	5.66%	6.06%	6.97%	7.64%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income attributable to Honeywell (USD $ in millions)	2,920	2,079	2,112	2,265	2,741
Net sales (USD $ in millions)	37,665	36,529	33,370	30,908	36,556

Adjusted net profit margin²	7.75%	5.69%	6.33%	7.33%	7.50%

2012 Calculations

¹ Net profit margin = 100 × Net income attributable to Honeywell ÷ Net sales
= 100 × 2,926 ÷ 37,665 = 7.77%

² Adjusted net profit margin = 100 × Adjusted net income attributable to Honeywell ÷ Net sales
= 100 × 2,920 ÷ 37,665 = 7.75%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Honeywell International Inc.'s adjusted net profit margin deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.

Adjusted Return On Equity (ROE)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income attributable to Honeywell (USD $ in millions)	2,926	2,067	2,022	2,153	2,792
Total Honeywell shareowners' equity (USD $ in millions)	12,975	10,806	10,666	8,844	7,187

ROE¹	22.55%	19.13%	18.96%	24.34%	38.85%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income attributable to Honeywell (USD $ in millions)	2,920	2,079	2,112	2,265	2,741
Total Honeywell shareowners' equity (USD $ in millions)	12,975	10,806	10,666	8,844	7,187

Adjusted ROE²	22.50%	19.24%	19.80%	25.61%	38.14%

2012 Calculations

¹ ROE = 100 × Net income attributable to Honeywell ÷ Total Honeywell shareowners' equity
= 100 × 2,926 ÷ 12,975 = 22.55%

² Adjusted ROE = 100 × Adjusted net income attributable to Honeywell ÷ Total Honeywell shareowners' equity
= 100 × 2,920 ÷ 12,975 = 22.50%

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Honeywell International Inc.'s adjusted ROE deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.

Adjusted Return On Assets (ROA)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income attributable to Honeywell (USD $ in millions)	2,926	2,067	2,022	2,153	2,792
Total assets (USD $ in millions)	41,853	39,808	37,834	36,004	35,490

ROA¹	6.99%	5.19%	5.34%	5.98%	7.87%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income attributable to Honeywell (USD $ in millions)	2,920	2,079	2,112	2,265	2,741
Total assets (USD $ in millions)	41,853	39,808	37,834	36,004	35,490

Adjusted ROA²	6.98%	5.22%	5.58%	6.29%	7.72%

2012 Calculations

¹ ROA = 100 × Net income attributable to Honeywell ÷ Total assets
= 100 × 2,926 ÷ 41,853 = 6.99%

² Adjusted ROA = 100 × Adjusted net income attributable to Honeywell ÷ Total assets
= 100 × 2,920 ÷ 41,853 = 6.98%

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Honeywell International Inc.'s adjusted ROA deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.