EX-99 4 ex99-3.htm EXHIBIT 99.3

Summary Overview of
Background and Impact of
Change in Accounting Policy
for Aerospace Sales Incentives

May 31, 2006

Exhibit 99.3


Honeywell 8-K Dated 5/31/2006, Background

Effective the first quarter of 2006, the Company changed its accounting policy for
Aerospace sales incentives. The Company provides sales incentives to commercial
aircraft manufacturers and airlines in connection with their selection of our aircraft
wheel and braking system hardware and auxiliary power units for installation on
commercial aircraft. These incentives principally consist of free or deeply
discounted products but also include credits for future purchases of product and
upfront cash payments. Historically these incentives were capitalized and amortized
to cost of products sold or product sales, on a straight-line basis over their useful
economic life. Under the new policy, these costs are recognized as provided. For
aircraft manufacturers, incentives are recorded when the products are delivered; for
airlines, incentives are recorded when the associated aircraft are delivered by the
aircraft manufacturer to the airline. While the historical policy of capitalizing and
amortizing such costs was considered acceptable, the Company believes that the
new policy is preferable as it will improve decision-making and internal controls for
Aerospace sales incentives.  

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Honeywell 8-K Dated 5/31/2006, Summary

Change in accounting policy, Aerospace sales incentives

Effective First Quarter 2006

New policy preferable, improves decision-making and internal controls

Current report on Form 8-K filed to apply new policy
retrospectively to all periods presented in the previously filed
Form 10-K for the year ended December 31, 2005

Summary of revised annual and quarterly financial data attached

Impact consistent with Company announcement/press release on
February 16, 2006

Impact to Sales, Segment Profit, Net Income, EPS Not Material

No Change to 2006 Financial (Sales, EPS, Cash) Guidance

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Select Financial Data — Annual

Consolidated
($ Millions, except per share amounts)

 

 

                      Years Ended December 31,                    
  2005   2004   2003
  As
Previously
Reported		 As
Revised		 Change As
Previously
Reported		 As
Revised		 Change As
Previously
Reported		 As
Revised		 Change
Sales     $ 27,653   $ 27,652   $ (1 )   $ 25,601   $ 25,593   $ (8 )   $ 23,103   $ 23,095   $ (8 )
     

Income from continuing operations, before taxes

       2,323     2,296     (27 )     1,680     1,623     (57 )     1,640     1,583     (57 )
                                                               
Tax expense       742     732     (10 )     399     377     (22 )     296     274     (22 )
                                                               
Net income       1,655     1,638     (17 )     1,281     1,246     (35 )     1,324     1,289     (35 )
     

Earnings per share, assuming dilution

     $ 1.94   $ 1.92   $ (0.02 )   $ 1.49   $ 1.45   $ (0.04 )   $ 1.54   $ 1.50   $ (0.04 )
                                                               
                   
 
Aerospace
($ Millions) 		                                                             
                                                               
     
Years Ended December 31,
     
2005
2004
2003
     
As
Previously
Reported
As
Revised
Change
As
Previously
Reported
As
Revised
Change
As
Previously
Reported
As
Revised
Change
Sales     $
10,497
   $ 10,496   $ (1 )   $ 9,748   $ 9,740   $ (8 )   $ 8,813   $ 8,805   $ (8 )
                                                               
Segment profit       1,703     1,676     (27 )     1,479     1,422     (57 )     1,221     1,164     (57 )


 

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Honeywell 8-K Dated 5/31/2006




Select Financial Data — Quarterly


Consolidated, As Revised
($ Millions, except per share amounts)

  2005   2004
  Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Sales     $ 6,449   $ 7,028   $ 6,900   $ 7,275   $ 27,652     $ 6,178   $ 6,385   $ 6,391   $ 6,639   $ 25,593  
                                                                   
Net income       358     302     464     514     1,638       287     351     367     241     1,246  
                                                                   

Earnings per share, assuming dilution

     $ 0.42   $ 0.36   $ 0.54   $ 0.61   $ 1.92     $ 0.33   $ 0.41   $ 0.42   $ 0.29   $ 1.45  
                                                                   
 
Aerospace, As Revised*
($ Millions)		                                                                  
                                                                   
  2005   2004
  Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Sales     $ 2,500   $ 2,651   $ 2,620   $ 2,725   $ 10,496     $ 2,304   $ 2,450   $ 2,464   $ 2,522   $ 9,740  
                                                                   
Segment profit       378     409     429     460     1,676       294     351     371     406     1,422  

* Reflects impact on previously reported segment financial data.

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Honeywell 8-K Dated 5/31/2006