XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions with Honeywell
9 Months Ended
Sep. 30, 2018
Related Party Transactions [Abstract]  
Related Party Transactions with Honeywell

Note 3. Related Party Transactions with Honeywell

The unaudited Combined Interim Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Honeywell.

Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Company. The cost of these services has been allocated to the Company on the basis of the proportion of revenues. The Company and Honeywell consider the allocations to be a reasonable reflection of the benefits received by the Company. During the three months ended September 30, 2018 and 2017, the Company was allocated $66 million and $74 million, respectively, of general corporate expenses incurred by Honeywell. During the nine months ended September 30, 2018 and 2017, the Company was allocated $203 million and $211 million, respectively, of general corporate expenses incurred by Honeywell. Such amounts are included within Selling, general and administrative expenses in the Combined Interim Statements of Operations. As certain expenses reflected in the unaudited Combined Interim Financial Statements include allocations of corporate expenses from Honeywell, these statements could differ from those that would have been prepared had the Company operated on a stand-alone basis.

All significant intercompany transactions between the Company and Honeywell have been included in these unaudited Combined Interim Financial Statements and are considered to have been effectively settled. Sales to Honeywell during the three and nine months ended September 30, 2018 were $8 million and $23 million, respectively. Costs of goods sold to Honeywell during the three and nine months ended September 30, 2018 were $5 million and $18 million, respectively. Purchases from Honeywell during the three and nine months ended September 30, 2018 were $32 million and $149 million, respectively.

Sales to Honeywell during the three and nine months ended September 30, 2017 were $8 million and $27 million, respectively. Costs of goods sold to Honeywell during the three and nine months ended September 30, 2017 were $7 million and $22 million, respectively. Purchases from Honeywell during the three and nine months ended September 30, 2017 were $57 million and $162 million, respectively.

The total net effect of the settlement of these intercompany transactions is reflected in the Combined Interim Statements of Cash Flows as a financing activity and in the Combined Interim Balance Sheet as invested equity. Honeywell uses a centralized approach for the purpose of cash management and financing of its operations. Historically, the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed. The Company operates a centralized non-interest-bearing cash pool in the U.S. and regional interest-bearing cash pools outside of the U.S.

Honeywell centrally hedges its exposure to changes in foreign exchange rates principally with forward contracts. Certain contracts were specifically designated to and entered on behalf of the Company with the Parent as a counterparty and are used to hedge known or probable anticipated foreign currency sales and purchases. The Company designates these hedges as cash flow hedges. These hedges are marked-to-market with the effective portion of the changes in fair value of the derivatives recorded in Accumulated other comprehensive income (loss) and subsequently recognized in earnings when the hedged items impact earnings.

Due from related parties, current consists of the following:

 

 

 

September 30,

2018

 

 

December 31,

2017

 

Cash pooling and short-term notes receivable, net

 

$

21

 

 

$

10

 

Receivables from related parties

 

 

5

 

 

 

6

 

Related party notes payables

 

 

-

 

 

 

7

 

 

 

$

26

 

 

$

23

 

 

Due to related parties, current consists of the following:

 

 

 

September 30,

2018

 

 

December 31,

2017

 

Cash pooling and short-term notes payables, net

 

$

140

 

 

$

23

 

Payables to related parties

 

 

21

 

 

 

36

 

Foreign currency exchange contracts

 

 

1

 

 

 

-

 

Related party notes payables

 

 

-

 

 

 

1

 

 

 

$

162

 

 

$

60

 

 

Net transfers to and from Honeywell are included within invested equity on the Combined Interim Statements of Equity. The components of the net transfers to and from Honeywell for the three and nine months ended September 30, 2018 and 2017 are as follows:

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

General financing activities

 

$

(200

)

 

$

(199

)

 

$

(618

)

 

$

(465

)

Unbilled corporate allocations

 

 

66

 

 

 

74

 

 

 

203

 

 

 

211

 

Sales to Honeywell

 

 

(4

)

 

 

(2

)

 

 

(11

)

 

 

(9

)

Purchases from Honeywell

 

 

27

 

 

 

45

 

 

 

119

 

 

 

127

 

Stock compensation expense and other compensation awards

 

 

7

 

 

 

4

 

 

 

14

 

 

 

12

 

Unbilled pension expense

 

 

3

 

 

 

4

 

 

 

10

 

 

 

12

 

Net increase (decrease) in invested equity

 

$

(101

)

 

$

(74

)

 

$

(283

)

 

$

(112

)