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Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Income Tax Expense (Benefit)

Honeywell International Inc., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended:	Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	U.S. Federal
	U.S. State
	Non-U.S.
	Current
	U.S. Federal
	U.S. State
	Non-U.S.
	Deferred
	Tax expense

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Honeywell International Inc.’s current decreased from 2017 to 2018 and from 2018 to 2019.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Honeywell International Inc.’s deferred decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
Tax expense	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Honeywell International Inc.’s tax expense decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Effective Income Tax Rate (EITR)

Honeywell International Inc., effective income tax rate (EITR) reconciliation

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	U.S. federal statutory income tax rate
	Taxes on non-U.S. earnings
	U.S. state income taxes
	Reserves for tax contingencies
	Employee share-based payments
	Reduction of taxes on unremitted earnings
	Separation tax costs
	All other items, net
	Effective income tax rate, before U.S. Tax Reform
	U.S. Tax Reform
	Effective income tax rate

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

Item	Description	The company
Effective income tax rate, before U.S. Tax Reform	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Honeywell International Inc.’s effective income tax rate, before U.S. Tax Reform decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Components of Deferred Tax Assets and Liabilities

Honeywell International Inc., components of deferred tax assets and liabilities

US$ in millions

		Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Pension
	Postretirement benefits other than pensions
	Asbestos and environmental
	Employee compensation and benefits
	Other accruals and reserves
	Net operating and capital losses
	Tax credit carryforwards
	Gross deferred tax assets
	Valuation allowance
	Deferred tax assets
	Pension
	Property, plant and equipment
	Intangibles
	Unremitted earnings of foreign subsidiaries
	Other asset basis differences
	Other
	Deferred tax liabilities
	Net deferred tax asset (liability)

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

Item	Description	The company
Gross deferred tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Honeywell International Inc.’s gross deferred tax assets decreased from 2017 to 2018 and from 2018 to 2019.
Deferred tax assets	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Honeywell International Inc.’s deferred tax assets decreased from 2017 to 2018 and from 2018 to 2019.
Net deferred tax asset (liability)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Honeywell International Inc.’s net deferred tax asset (liability) increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

Honeywell International Inc., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Deferred tax assets
	Deferred tax liabilities

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

Item	Description	The company
Deferred tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Honeywell International Inc.’s deferred tax assets increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Deferred tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Honeywell International Inc.’s deferred tax liabilities decreased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

Honeywell International Inc., adjustments to financial statements

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Total Honeywell Shareowners’ Equity
	Total Honeywell shareowners’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Total Honeywell shareowners’ equity (adjusted)
	Adjustment to Net Income Attributable To Honeywell
	Net income attributable to Honeywell (as reported)
	Add: Deferred income tax expense (benefit)
	Net income attributable to Honeywell (adjusted)

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

Honeywell International Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Honeywell International Inc., adjusted financial ratios

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Honeywell International Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Honeywell International Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Honeywell International Inc.’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Honeywell International Inc.’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Honeywell International Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

Honeywell International Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to Honeywell
	Net sales
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to Honeywell
	Net sales
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

¹ Net profit margin = 100 × Net income attributable to Honeywell ÷ Net sales
= 100 × ÷ =

² Adjusted net profit margin = 100 × Adjusted net income attributable to Honeywell ÷ Net sales
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Honeywell International Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net sales
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Net sales
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Honeywell International Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Financial Leverage

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Total Honeywell shareowners’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted total Honeywell shareowners’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

¹ Financial leverage = Total assets ÷ Total Honeywell shareowners’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Honeywell shareowners’ equity
= ÷ =

Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Honeywell International Inc.’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to Honeywell
	Total Honeywell shareowners’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to Honeywell
	Adjusted total Honeywell shareowners’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

¹ ROE = 100 × Net income attributable to Honeywell ÷ Total Honeywell shareowners’ equity
= 100 × ÷ =

² Adjusted ROE = 100 × Adjusted net income attributable to Honeywell ÷ Adjusted total Honeywell shareowners’ equity
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Honeywell International Inc.’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Return on Assets (ROA)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to Honeywell
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to Honeywell
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

¹ ROA = 100 × Net income attributable to Honeywell ÷ Total assets
= 100 × ÷ =

² Adjusted ROA = 100 × Adjusted net income attributable to Honeywell ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Honeywell International Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

	Honeywell International Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

Honeywell International Inc. (NYSE:HON)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

Honeywell International Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Honeywell International Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)