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Honeywell International Inc. (HON) | Analysis of Investments

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

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  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

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    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

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    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)

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    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)

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    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.