EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread
Economic Profit Margin

Honeywell International Inc., economic profit calculation

US$ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 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), 10-K (filing date: 2015-02-13).

2018 Calculations

¹ NOPAT. See Details »

² Cost of capital. See Details »

³ Invested capital. See Details »

⁴ Economic profit = NOPAT – Cost of capital × Invested capital
= hidden – hidden × hidden = hidden

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Honeywell International Inc.’s economic profit declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Honeywell International Inc., NOPAT calculation

US$ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net income attributable to Honeywell
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in customer advances and deferred income⁴
	Increase (decrease) in obligations for product warranties and product performance guarantees⁵
	Increase (decrease) in repositioning reserves⁶
	Increase (decrease) in equity equivalents⁷
	Interest and other financial charges
	Interest expense, operating lease liability⁸
	Adjusted interest and other financial charges
	Tax benefit of interest and other financial charges⁹
	Adjusted interest and other financial charges, after taxes¹⁰
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income¹¹
	Investment income, after taxes¹²
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 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), 10-K (filing date: 2015-02-13).

2018 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in LIFO reserve. See Details »

⁴ Addition of increase (decrease) in customer advances and deferred income.

⁵ Addition of increase (decrease) in obligations for product warranties and product performance guarantees.

⁶ Addition of increase (decrease) in repositioning reserves.

⁷ Addition of increase (decrease) in equity equivalents to net income attributable to Honeywell.

⁸ Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

⁹ Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= hidden × 21.00% = hidden

¹⁰ Addition of after taxes interest expense to net income attributable to Honeywell.

¹¹ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

¹² Elimination of after taxes investment income.

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Honeywell International Inc.’s NOPAT declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Honeywell International Inc., cash operating taxes calculation

US$ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Tax expense
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest and other financial charges
	Less: Tax imposed on investment income
	Cash operating taxes

Based on: 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), 10-K (filing date: 2015-02-13).

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Honeywell International Inc.’s cash operating taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Honeywell International Inc., invested capital calculation (financing approach)

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Commercial paper and other short-term borrowings
	Current maturities of long-term debt
	Long-term debt, excluding current maturities
	Operating lease liability¹
	Total reported debt & leases
	Total Honeywell shareowners’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	LIFO reserve⁴
	Customer advances and deferred income⁵
	Obligations for product warranties and product performance guarantees⁶
	Repositioning reserves⁷
	Equity equivalents⁸
	Accumulated other comprehensive (income) loss, net of tax⁹
	Redeemable noncontrolling interest
	Noncontrolling interest
	Adjusted total Honeywell shareowners’ equity
	Construction in progress¹⁰
	Available for sale investments¹¹
	Invested capital

Based on: 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), 10-K (filing date: 2015-02-13).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See Details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See Details »

⁵ Addition of customer advances and deferred income.

⁶ Addition of obligations for product warranties and product performance guarantees.

⁷ Addition of repositioning reserves.

⁸ Addition of equity equivalents to total Honeywell shareowners’ equity.

⁹ Removal of accumulated other comprehensive income.

¹⁰ Subtraction of construction in progress.

¹¹ Subtraction of available for sale investments.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Honeywell International Inc.’s invested capital increased from 2016 to 2017 and from 2017 to 2018.

Honeywell International Inc., cost of capital calculations


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 21.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2019-02-08).

¹ US$ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2018-02-09).

¹ US$ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2017-02-10).

¹ US$ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2016-02-12).

¹ US$ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2015-02-13).

¹ US$ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ Operating lease liability. See Details »

Honeywell International Inc., economic spread calculation

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Selected Financial Data (US$ in millions)
	Economic profit¹
	Invested capital²
	Ratio
	Economic spread³

Based on: 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), 10-K (filing date: 2015-02-13).

2018 Calculations

¹ Economic profit. See Details »

² Invested capital. See Details »

³ Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Economic spread	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Honeywell International Inc.’s economic spread deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Honeywell International Inc., economic profit margin calculation

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Selected Financial Data (US$ in millions)
	Economic profit¹
	Net sales
	Add: Increase (decrease) in customer advances and deferred income
	Adjusted net sales
	Ratio
	Economic profit margin²

Based on: 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), 10-K (filing date: 2015-02-13).

2018 Calculations

¹ Economic profit. See Details »

² Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Honeywell International Inc.’s economic profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

	Honeywell International Inc.	Other companies (not purchased previously)
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Analysis
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Long-term Trends
Analysis
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Honeywell International Inc. (HON)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Dec 31, 2018

Dec 31, 2017

Dec 31, 2016

Dec 31, 2015

Dec 31, 2014

Economic Spread

Economic Profit Margin