HONEYWELL INTERNATIONAL INC. 
The following Management Discussion and Analysis is intended to help the reader understand the results of operations and financial condition ofHoneywell International Inc. and its consolidated subsidiaries (Honeywell or the Company) for the three and nine months endedSeptember 30, 2021 . The financial information as ofSeptember 30, 2021 , should be read in conjunction with the Consolidated Financial Statements for the year endedDecember 31, 2020 , contained in our 2020 Annual Report on Form 10-K. See Note 3 Acquisitions and Divestitures of Notes to Consolidated Financial Statements for a discussion of acquisition and divestiture activity during the nine months endedSeptember 30, 2021 . COVID-19 UPDATE Our business faced significant disruptions due to the COVID-19 pandemic in 2020 and the resulting global recession, causing a slow-down in demand for many of our products and services. Our business continues to recover from the effects of the pandemic. We continue to monitor several macroeconomic effects, including, supply chain constraints and materials and labor shortages. As new variants of the virus emerge, we remain cautious as many factors remain unpredictable. We actively monitor and respond to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of our employees, dedicating resources to support our communities, and innovating to address our customers' needs. OnSeptember 9, 2021 ,President Biden issued an executive order forU.S. Government contractors. We are taking steps to comply with the executive order and announced a vaccine mandate for allU.S. -based employees, contractors, and subcontractors that work on or in support of contracts with theU.S. Government be fully vaccinated or receive an approved medical or religious exemption byDecember 8, 2021 . In addition, onSeptember 9, 2021 ,President Biden announced that he directed theOccupational Safety and Health Administration (OSHA) to develop an Emergency Temporary Standard (ETS) mandating either the full vaccination or weekly testing of employees for employers with 100 or more employees. Employees who are not subject to the executive order and who are not fully vaccinated may be subject to the ETS that will require them to get a COVID-19 test at least once a week.OSHA has not issued the ETS nor provided any additional information on its contents or requirements. See Item 1A. Risk Factors in this Form 10-Q, for discussion of risks associated with the potential adverse effects on our workforce of theU.S. Government vaccine mandate for employees, contractors, and subcontractors that service federal contracts and theOSHA requirement on our workforce.. Additionally, see the section titled Risk Factors in our 2020 Annual Report on Form 10-K for discussion of risks associated with the COVID-19 pandemic. A discussion of the impact of COVID-19 can also be found in the Results of Operations section of this Management Discussion and Analysis.
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RESULTS OF OPERATIONS
Consolidated Financial Results
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Segment Profit by Segment
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CONSOLIDATED OPERATING RESULTSNet Sales
[[Image Removed: hon-20210930_g8.jpg]][[Image Removed: hon-20210930_g9.jpg]] The change in net sales was attributable to the following:
Q3 2021 vs. Q3 2020 Year to Date 2021 vs. 2020
Volume 4 % 3 %
Price 4 % 3 %
Foreign Currency Translation 1 % 2 %
9 % 8 %
Q3 2021 compared to Q3 2020
Net sales increased due to the following:
•Higher sales volumes due to an increase in demand for certain products and
services as the global economy showed signs of recovery from the COVID-19
pandemic,
•Favorable pricing, and
•The favorable impact of foreign currency translation, driven by the weakening
of the U.S. Dollar against the currencies of the majority of our international
markets, primarily the Australian Dollar, British Pound, Euro, and Chinese
Renminbi.
YTD 2021 compared to YTD 2020
Net sales increased due to the following:
•Higher sales volumes due to an increase in demand for certain products and
services as the global economy showed signs of recovery from the COVID-19
pandemic,
•Favorable pricing, and
•The favorable impact of foreign currency translation, driven by the weakening
of the U.S. Dollar against the currencies of the majority of our international
markets, primarily the Euro, British Pound, Australian Dollar, and Chinese
Renminbi.
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Cost of Products and Services Sold
[[Image Removed: hon-20210930_g10.jpg]][[Image Removed: hon-20210930_g11.jpg]] Q3 2021 compared to Q3 2020 Cost of products and services sold increased due to the following: •Higher direct and indirect material costs of approximately$290 million and higher labor costs of approximately$80 million primarily driven by higher volumes due to an increase in demand in certain of our products and services, •Partially offset by lower repositioning and other charges of approximately$30 million . YTD 2021 compared to YTD 2020 Cost of products and services sold increased due to the following: •Higher direct and indirect material costs of approximately$1,150 million and higher labor costs of approximately$80 million primarily driven by higher volumes due to an increase in demand in certain of our products and services, •Partially offset by lower repositioning and other charges of approximately$40 million . Gross Margin [[Image Removed: hon-20210930_g12.jpg]][[Image Removed: hon-20210930_g13.jpg]][[Image Removed: hon-20210930_g14.jpg]]
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Q3 2021 compared to Q3 2020 Gross margin and Gross margin as a percentage of net sales increased due to the following: •Higher gross margins due to an increase in demand for certain products and services as the global economy showed signs of recovery from the COVID-19 pandemic, •Higher volume leverage on a lower fixed-cost base, •Lower repositioning and other charges of approximately$30 million , and •Favorable pricing, •Partially offset by a larger portion of our sales being driven by our Safety and Productivity Solutions segment. YTD 2021 compared to YTD 2020 Gross margin and Gross margin as a percentage of net sales increased due to the following: •Higher gross margins due to an increase in demand for certain products and services as the global economy showed signs of recovery from the COVID-19 pandemic, •Higher volume leverage on a lower fixed-cost base, •Lower repositioning and other charges of approximately$40 million , and •Favorable pricing, •Partially offset by a larger portion of our sales being driven by our Safety and Productivity Solutions segment. Selling, General and Administrative Expenses [[Image Removed: hon-20210930_g15.jpg]][[Image Removed: hon-20210930_g16.jpg]][[Image Removed: hon-20210930_g17.jpg]] Q3 2021 compared to Q3 2020 Selling, general and administrative expenses increased due to the following: •Higher expenses due to increased sales volumes and labor expense, •Partially offset by cost savings from repositioning actions. Selling, general and administrative expenses as a percentage of net sales decreased due to net sales growing at a faster rate than the increase in selling, general and administrative expenses.
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YTD 2021 compared to YTD 2020
Selling, general and administrative expenses increased due to the following:
•Higher expenses due to increased sales volumes, the unfavorable impact of
foreign currency translation and labor expense,
•Partially offset by cost savings from repositioning actions.
Selling, general and administrative expenses as a percentage of net sales
decreased due to net sales growing at a faster rate than the increase in
selling, general and administrative expenses.
Other (Income) Expense
Three Months Ended
2021 2020 2021 2020
Other (income) expense $ (215) $ 62 $ (1,023) $ (546)
Q3 2021 compared to Q3 2020
Other income increased due to the following:
•Prior year non-cash charge associated with the reduction in carrying value to
present value of reimbursement receivables due from Garrett,
•Higher pension income,
•Partially offset by the recognition of an expense related to UOP matters.
YTD 2021 compared to YTD 2020
Other income increased due to the following:
•Prior year non-cash charge associated with the reduction in carrying value to
present value of reimbursement receivables due from Garrett,
•Higher pension income, and
•Gain on sale of the retail footwear business,
•Partially offset by the recognition of an expense related to UOP matters.
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Tax Expense
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Q3 2021 compared to Q3 2020
The effective tax rate decreased due to the absence of a non-cash charge related
to the reduction of the aggregate carrying value of certain receivables with no
corresponding tax benefit in the prior year, partially offset by the recognition
of an expense related to UOP matters with no corresponding tax benefit,
incremental tax reserves and state taxes, increased tax benefits for employee
share-based compensation and the favorable resolution of certain foreign tax
matters in the current year.
The effective tax rate for the three months ended September 30, 2021 , was higher
than the U.S. federal statutory rate of 21% primarily due to the recognition of
an expense related to UOP matters with no corresponding tax benefit, incremental
tax reserves and state taxes, partially offset by tax benefits for employee
share-based compensation and the resolution of certain foreign tax matters.
The effective tax rate for the three months ended September 30, 2020 was higher
than the U.S. federal statutory rate of 21% primarily from a non-cash charge
related to the reduction of the aggregate carrying value of certain receivables
with no corresponding tax benefit, incremental tax reserves and state taxes
partially offset by foreign earnings taxed at lower foreign tax rates.
YTD 2021 compared to YTD 2020
The effective tax rate increased during 2021 compared to 2020 primarily from the
recognition of an expense related to UOP matters with no corresponding tax
benefit, incremental tax reserves and state taxes partially offset by increased
tax benefits for employee share-based compensation and the favorable resolution
of certain foreign tax matters in the current year along with the absence of
prior year items including a non-cash charge related to the reduction of the
aggregate carrying value of certain receivables with no corresponding tax
benefit, tax benefits realized as a result of the favorable resolution of a
foreign tax matter related to the spin-off transactions, tax law changes in
India and the resolution of certain U.S. tax matters.
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Net Income Attributable to Honeywell
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Q3 2021 compared to Q3 2020
Earnings per share of common stock-assuming dilution increased, driven by the
following:
•Prior year non-cash charge associated with the reduction in carrying value to
present value of reimbursement receivables due from Garrett,
•Higher segment profit,
•Higher pension income,
•Lower repositioning and other charges, and
•Favorable impact of lower share count,
•Partially offset by the recognition of an expense related to UOP matters and
higher income taxes.
YTD 2021 compared to YTD 2020
Earnings per share of common stock-assuming dilution increased, driven by the
following:
•Higher segment profit,
•Prior year non-cash charge associated with the reduction in carrying value to
present value of reimbursement receivables due from Garrett,
•Higher pension income,
•Lower repositioning and other charges,
•Gain on sale of the retail footwear business, and
•Favorable impact of lower share count,
•Partially offset by higher income taxes and the recognition of an expense
related to UOP matters.
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REVIEW OF BUSINESS SEGMENTS We globally manage our business operations through four segments: Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. AEROSPACENET SALES [[Image Removed: hon-20210930_g24.jpg]][[Image Removed: hon-20210930_g25.jpg]][[Image Removed: hon-20210930_g26.jpg]] Three Months Ended Nine Months Ended September 30, September 30, % % 2021 2020 Change 2021 2020 Change Net sales$ 2,732 $ 2,662 3 %$ 8,130 $ 8,566 (5) % Cost of products and services sold 1,828 1,854 5,330 5,848 Selling, general and administrative and other expenses 164 191 588 636 Segment profit$ 740 $ 617 20 %$ 2,212 $ 2,082 6 % 2021 vs. 2020 Three Months Ended Nine Months Ended September 30, September 30, Segment Segment Factors Contributing to Year-Over-Year Change Sales Profit Sales Profit Organic(1) 2 % 17 % (6) % 5 % Foreign currency translation - % 1 % 1 % - % Acquisitions, divestitures and other, net 1 % 2 % - % 1 % Total % change 3 % 20 % (5) % 6 % (1) Organic sales % change is defined as the change in net sales, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. Q3 2021 compared to Q3 2020 Sales increased primarily due to higher demand for our commercial OEMs and aftermarket products and services, and favorable pricing, partially offset by lower demand in domestic and international defense. •Commercial Aviation Original Equipment sales increased 1% (increased 1% organic) due to increases in regional and business aviation, partially offset by lower demand from air transport. 42Honeywell International Inc. -------------------------------------------------------------------------------- •Commercial Aviation Aftermarket sales increased 39% (increased 38% organic) due to higher demand in air transport and regional and business aviation. •Defense and Space sales decreased 16% (decreased 17% organic) driven by supply chain constraints and lower demand inU.S. and international defense. Cost of products and services sold decreased due to higher sales volumes of higher margin products and higher productivity. Segment profit increased due to favorable pricing, higher sales volumes of higher margin products, and increased productivity. YTD 2021 compared to YTD 2020 Sales decreased due to weakness in global travel due to the COVID-19 pandemic, resulting in lower demand for our products and services from the commercial aviation markets, and a decrease in demand from domestic and international defense spend, partially offset by favorable pricing and favorable impact of foreign currency translation. •Commercial Aviation Original Equipment sales decreased 16% (decreased 17% organic) due to lower demand from air transport and regional and business aviation. •Commercial Aviation Aftermarket sales increased 6% (increased 6% organic) due to higher demand in regional and business aviation, partially offset by lower demand in air transport. •Defense and Space sales decreased 9% (decreased 10% organic) driven by lower demand inU.S and international defense. Cost of products and services sold decreased due to lower sales volumes and higher productivity. Segment profit increased due to favorable pricing, higher productivity, and higher sales volumes of higher margin products, partially offset by lower sales volumes. HONEYWELL BUILDING TECHNOLOGIES NET SALES [[Image Removed: hon-20210930_g27.jpg]][[Image Removed: hon-20210930_g28.jpg]][[Image Removed: hon-20210930_g29.jpg]] 43Honeywell International Inc. --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 % Change 2021 2020 % Change
Net sales $ 1,370 $ 1,305 5 % $ 4,135 $ 3,763 10 %
Cost of products and services sold 798 770 2,409 2,223
Selling, general and administrative and other
expenses 250 253 784 746
Segment profit $ 322 $ 282 14 % $ 942 $ 794 19 %
2021 vs. 2020
Three Months Ended Nine Months Ended
September 30, September 30,
Segment Segment
Factors Contributing to Year-Over-Year Change Sales Profit Sales Profit
Organic 3 % 14 % 6 % 15 %
Foreign currency translation 2 % 1 % 4 % 5 %
Acquisitions, divestitures and other, net - % (1) % - % (1) %
Total % change 5 % 14 % 10 % 19 %
Q3 2021 compared to Q3 2020
Sales increased due to increased pricing in response to the rising cost of
materials and the favorable impact of foreign currency translation.
•Sales in Products increased 8% (increased 6% organic) due to higher sales
volumes, increased pricing, and the favorable impact of foreign currency
translation.
•Sales in Building Solutions increased 1% (decreased 1% organic) due to the
favorable impact of foreign currency translation and increased pricing,
partially offset by lower sales volumes due to project delays.
Cost of products and services sold increased primarily due to the rising cost of
materials and the unfavorable impact of foreign currency translation, partially
offset by higher productivity.
Segment profit increased primarily due to higher productivity and higher sales
volumes of higher margin products.
YTD 2021 compared to YTD 2020
Sales increased due to the favorable impact of foreign currency translation,
higher sales volumes, and favorable pricing. Customer demand increased as the
global economy began to show signs of recovery.
•Sales in Products increased 13% (increased 9% organic) due to higher sales
volumes, favorable pricing, and the favorable impact of foreign currency
translation.
•Sales in Building Solutions increased 5% (increased 1% organic) due to the
favorable impact of foreign currency translation and favorable pricing.
Cost of products and services sold increased due to higher sales volumes, and
the unfavorable impact of foreign currency translation, partially offset by
higher productivity.
Segment profit increased due to favorable pricing, higher productivity, the
favorable impact of foreign currency translation, and higher sales volumes.
44 Honeywell International Inc.
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PERFORMANCE MATERIALS AND TECHNOLOGIES
NET SALES
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Three Months Ended Nine Months Ended
September 30, September 30,
% %
2021 2020 Change 2021 2020 Change
Net sales $ 2,510 $ 2,252 11 % $ 7,408 $ 6,867 8 %
Cost of products and services sold 1,653 1,523 4,940 4,572
Selling, general and administrative and other
expenses 299 287 946 922
Segment profit $ 558 $ 442 26 % $ 1,522 $ 1,373 11 %
2021 vs. 2020
Three Months Ended
September 30, Nine Months Ended September 30,
Segment Segment
Factors Contributing to Year-Over-Year Change Sales Profit Sales Profit
Organic 9 % 26 % 4 % 9 %
Foreign currency translation 1 % 1 % 3 % 3 %
Acquisitions, divestitures, and other, net 1 % (1) % 1 % (1) %
Total % change 11 % 26 % 8 % 11 %
Q3 2021 compared to Q3 2020
Sales increased due to higher sales volumes, favorable pricing, the acquisition
of Sparta Systems, and the favorable impact of foreign currency translation.
Increased activity in the oil and gas industry and higher demand within Advanced
Materials resulted in higher sales of our products and services.
•UOP sales increased 30% (increased 29% organic) due to higher demand for oil
and gas products.
•Process Solutions sales increased 2% (decreased 2% organic) driven by the
acquisition of Sparta Systems and the favorable impact of foreign currency
translation.
•Advanced Materials sales increased 14% (increased 14% organic) driven by
increased demand in specialty and fluorine products.
Cost of products and services sold increased due to higher sales volumes and the
rising cost of materials, partially offset by higher productivity.
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Segment profit increased due to favorable pricing and higher productivity,
partially offset by the rising cost of materials.
YTD 2021 compared to YTD 2020
Sales increased due to the favorable impact of foreign currency translation,
favorable pricing, the acquisition of Sparta Systems, and higher sales volumes.
There was higher demand within Advanced Materials and increased activity in the
oil and gas industry which positively impacted many of our UOP customers.
•UOP sales increased 8% (increased 6% organic) due to higher demand for oil and
gas products and services and the favorable impact of foreign currency
translation.
•Process Solutions sales increased 1% (decreased 4% organic) driven by the
acquisition of Sparta Systems and the favorable impact of foreign currency
translation, partially offset by lower demand for products and services.
•Advanced Materials sales increased 19% (increased 17% organic) driven by
increased demand in fluorine and specialty products and the favorable impact of
foreign currency translation.
Cost of products and services sold increased due to higher sales volumes of
lower margin products, the rising cost of materials, and the unfavorable impact
of foreign currency translation, partially offset by higher productivity.
Segment profit increased due to favorable pricing, higher productivity, and the
favorable impact of foreign currency translation, partially offset by the rising
cost of materials, and higher sales volumes of lower margin products.
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SAFETY AND PRODUCTIVITY SOLUTIONSNET SALES [[Image Removed: hon-20210930_g33.jpg]][[Image Removed: hon-20210930_g34.jpg]][[Image Removed: hon-20210930_g35.jpg]] Three Months Ended Nine Months Ended September 30, September 30, % % 2021 2020 Change 2021 2020 Change Net sales$ 1,861 $ 1,578 18 %$ 6,062 $ 4,541 33 % Cost of products and services sold 1,369 1,113 4,442 3,164 Selling, general and administrative and other expenses 247 246 780 767 Segment profit$ 245 $ 219 12 %$ 840 $ 610 38 % 2021 vs. 2020 Three Months Ended Nine Months Ended September 30, September 30, Segment Segment Factors Contributing to Year-Over-Year Change Sales Profit Sales Profit Organic 21 % 14 % 34 % 36 % Foreign currency translation 1 % 3 % 2 % 4 % Acquisitions, divestitures, and other, net (4) % (5) % (3) % (2) % Total % change 18 % 12 % 33 % 38 % Q3 2021 compared to Q3 2020 Sales increased due to higher sales volumes and favorable pricing, partially offset by the sale of the retail footwear business. The higher sales volumes were primarily driven by warehouse automation and services and Productivity Solutions and Services. •Sales in Safety and Retail decreased 12% (decreased 5% organic) due to the sale of the retail footwear business and lower sales volumes, partially offset by favorable pricing. •Sales in Productivity Solutions and Services increased 26% (increased 25% organic) due to higher demand. •Sales in Warehouse and Workflow Solutions increased 61% (increased 60% organic) due to higher sales volumes. Sales volume growth was driven by strong demand for our warehouse automation and services. •Sales in Advanced Sensing Technologies was flat (decreased 1% organic) due to the favorable impact of foreign currency translation, offset by lower sales volumes. 47Honeywell International Inc. -------------------------------------------------------------------------------- Cost of products and services sold increased due to higher sales volumes on lower margin products, the rising cost of materials, and labor installation inefficiencies due to supply chain constraints. Segment profit increased primarily due to higher sales volumes, partially offset by higher sales of lower margin products, the rising cost of materials, and labor installation inefficiencies due to supply chain constraints. YTD 2021 compared to YTD 2020 Sales increased due to higher sales volumes, favorable pricing, and the favorable impact of foreign currency translation, partially offset by the sale of the retail footwear business. The higher sales volumes were driven by warehouse automation and services and Productivity Solutions and Services. •Sales in Safety and Retail increased 17% (increased 21% organic) due to higher sales volumes, favorable pricing, and the favorable impact of foreign currency translation, partially offset by the sale of the retail footwear business. •Sales in Productivity Solutions and Services increased 29% (increased 26% organic) due to higher demand and the favorable impact of foreign currency translation. •Sales in Warehouse and Workflow Solutions increased 67% (increased 66% organic) due to higher sales volumes. Sales volume growth was driven by strong demand for our warehouse automation and services. •Sales in Advanced Sensing Technologies increased 2% (decreased 1% organic) due to the favorable impact of foreign currency translation, partially offset by lower sales volumes. Cost of products and services sold increased due to higher sales volumes on lower margin products, the rising cost of materials, and the unfavorable impact of foreign currency translation. Segment profit increased primarily due to higher sales volumes, partially offset by higher sales volumes of lower margin products, and the rising cost of materials. REPOSITIONING CHARGES See Note 5 Repositioning and Other Charges of Notes to Consolidated Financial Statements for a discussion of our repositioning actions and related charges incurred in the nine months endedSeptember 30, 2021 and 2020. Cash spending related to our repositioning actions was$286 million in the nine months endedSeptember 30, 2021 , and was funded through operating cash flows. LIQUIDITY AND CAPITAL RESOURCES (Dollars in tables in millions) We continue to manage our businesses to maximize operating cash flows as the primary source of liquidity. Each of our businesses is focused on increasing operating cash flows through revenue growth, margin expansion and improved working capital turnover. Additional sources of liquidity include committed credit lines, short-term debt from the commercial paper market, long-term borrowings, access to the public debt and equity markets,U.S. cash balances and the ability to access non-U.S. cash as a result of theU.S. Tax Cuts and Jobs Act. CASH We monitor the third-party depository institutions that hold our cash and cash equivalents on a daily basis. Our emphasis is primarily safety of principal and secondarily maximizing yield of those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities. As ofSeptember 30, 2021 , andDecember 31, 2020 , we held$12.1 billion and$15.2 billion , respectively, of cash and cash equivalents, including our short-term investments.
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BORROWINGS
Consolidated total borrowings were
September 30,
2021 December 31, 2020
Commercial paper and other short-term borrowings $ 3,559 $ 3,597
Variable rate notes 622 1,122
Fixed rate notes 16,897 17,399
Other 171 266
Total borrowings $ 21,249 $ 22,384
A source of liquidity is our ability to access the commercial paper market.
Commercial paper notes are sold at a discount or premium and have a maturity of
not more than 365 days from date of issuance. Borrowings under the commercial
paper program are available for general corporate purposes as well as for
financing acquisitions.
We also have the following revolving credit agreements, which can provide
financing for general corporate purposes:
•A $1.5 billion 364-Day Credit Agreement (the 364-Day Credit Agreement) with a
syndicate of banks, dated March 31, 2021 . Amounts borrowed under the 364-Day
Credit Agreement are required to be repaid no later than March 30, 2022 , unless
(i) we elect to convert all then outstanding amounts into a term loan, upon
which such amounts shall be repaid in full on March 30, 2023 , or (ii) the
364-Day Credit Agreement is terminated earlier pursuant to its terms. The
364-Day Credit Agreement replaces the previously reported $1.5 billion 364-day
credit agreement dated as of April 10, 2020 , which was terminated in accordance
with its terms effective March 31, 2021 . As of September 30, 2021 , there were no
outstanding borrowings under our 364-Day Credit Agreement.
•A $4.0 billion Five Year Credit Agreement (the 5-Year Credit Agreement) with a
syndicate of banks, dated March 31, 2021 . Commitments under the 5-Year Credit
Agreement can be increased pursuant to the terms of the 5-Year Credit Agreement
to an aggregate amount not to exceed $4.5 billion . The 5-Year Credit Agreement
amended and restated the previously reported $4.0 billion amended and restated
five year credit agreement dated as of April 26, 2019 . As of September 30, 2021 ,
there were no outstanding borrowings under our 5-Year Credit Agreement.
We also have a current shelf registration statement with the SEC under which we
may issue additional debt securities, common stock and preferred stock that may
be offered in one or more offerings on terms to be determined at the time of the
offering. We anticipate that net proceeds of any offering would be used for
general corporate purposes, including repayment of existing indebtedness, share
repurchases, capital expenditures and acquisitions.
For additional information, see Note 9 Long-Term Debt and Credit Agreements for
discussion of long-term debt issuances and redemptions during the nine months
ended September 30, 2021 .
49 Honeywell International Inc.
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CREDIT RATINGS
Our ability to access the global debt capital markets and the related cost of
these borrowings, is affected by the strength of our credit rating and market
conditions. Our credit ratings are periodically reviewed by the major
independent debt-rating agencies. As of September 30, 2021 , Standard & Poor's
(S&P), Fitch, and Moody's have ratings on our debt set forth in the table below:
S&P Fitch Moody's
Outlook Stable Stable Stable
Short-term A-1 F1 P1
Long-term A A A2
CASH FLOW SUMMARY
Our cash flows from operating, investing and financing activities, as reflected
in the Consolidated Statement of Cash Flows, are summarized as follows:
Nine
Months Ended
2021 2020
Cash provided by (used for):
Operating activities $ 3,375 $ 3,426
Investing activities (1,347) (410)
Financing activities (5,195) 1,972
Effect of exchange rate changes on cash (21) (19)
Net increase (decrease) in cash and cash equivalents $
(3,188)
Cash provided by operating activities decreased by$51 million due to an unfavorable impact to working capital of$427 million , a net unfavorable impact of changes in assets and liabilities, which resulted in a$183 million use of cash during the nine months endedSeptember 30, 2021 , compared to providing cash of$135 million during the nine months endedSeptember 30, 2020 . The overall change was partially offset by an increase in net income of$694 million . Cash used for investing activities increased by$937 million primarily due to$1,334 million in cash paid for acquisitions and$346 million net increase in investments, partially offset by$375 million cash receipt from Garrett Motion Inc. (Garrett),$203 million in proceeds from the sale of the retail footwear business, and$163 million increase in cash receipts from settlements of derivative contracts. Cash used for financing activities increased by$7,167 million primarily due to$7,596 million decrease of proceeds from the issuance of long-term debt,$350 million increase in repurchases of common stock,$62 million decrease in the net proceeds from the issuance of commercial paper and other short-term borrowings, and$29 million increase in cash dividends paid. This was partially offset by a$882 million decrease in repayments of long-term debt. CASH REQUIREMENTS AND ASSESSMENT OF CURRENT LIQUIDITY In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, share repurchases, dividends, strategic acquisitions and debt repayments. OnFebruary 12, 2021 , the Board of Directors authorized the repurchase of up to a total of$10 billion of Honeywell common stock, which included amounts remaining under, and replaced, the previously approved share repurchase program. During the nine months endedSeptember 30, 2021 , the Company repurchased common stock of$2,499 million . Refer to the section titled Liquidity and Capital Resources of our 2020 Form 10-K for a discussion of our expected capital expenditures, share repurchases and dividends for 2021. We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers and sales of our trade receivables to unaffiliated financial institutions without recourse. The impact of these programs are not material to our overall liquidity. 50Honeywell International Inc.
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We continue to assess the relative strength of each business in our portfolio as to strategic fit, market position, profit and cash flow contribution in order to identify target investment and acquisition opportunities in order to upgrade our combined portfolio. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses. We also identify businesses that do not fit into our long-term strategic plan based on their market position, relative profitability or growth potential. These businesses are considered for potential divestiture, restructuring or other repositioning actions, subject to regulatory constraints. Based on past performance and current expectations, we believe that our operating cash flows will be sufficient to meet our future operating cash needs. Our available cash, committed credit lines and access to the public debt and equity markets provide additional sources of short-term and long-term liquidity to fund current operations, debt maturities, and future investment opportunities. See Note 9 Long-term Debt and Credit Agreements of Notes to Consolidated Financial Statements for additional discussion of items impacting our liquidity. OTHER MATTERS LITIGATION We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts) arising out of the conduct of our business. See Note 15 Commitments and Contingencies of Notes to Consolidated Financial Statements for further discussion of environmental, asbestos and other litigation matters. CRITICAL ACCOUNTING ESTIMATES Other than as noted below, there have been no material changes to our Critical Accounting Estimates presented in our 2020 Annual Report on Form 10-K. For a discussion of the Company's Critical Accounting Estimates, see the section titled Critical Accounting Estimates in our 2020 Annual Report on Form 10-K. OnApril 26, 2021 , theUnited States Bankruptcy Court for the Southern District of New York (theBankruptcy Court ) confirmed Garrett's amended Chapter 11 plan of reorganization (the Confirmed Plan) and onApril 30, 2021 , Garrett emerged from bankruptcy. In accordance with Garrett's emergence from bankruptcy and the Confirmed Plan, the Company received from Garrett an initial payment of$375 million and 834.8 million shares of Series B Preferred Stock in full satisfaction of our indemnification and reimbursement agreement and tax matters agreement. As a result, we updated our Critical Accounting Estimate for Reimbursement Receivables to exclude receivable amounts from Garrett which were satisfied in full. See Note 15 Commitments and Contingencies of Notes to the Consolidated Financial Statements for further discussion on Garrett. Reimbursement Receivables-In conjunction with the Resideo Technologies, Inc. (Resideo) spin-off, the Company entered into a reimbursement agreement under which Honeywell receives cash payments as reimbursement primarily related to net spending for environmental matters at certain sites as defined in the reimbursement agreement. Accordingly, the Company recorded receivables based on estimates of the underlying reimbursable Honeywell environmental spend, and we monitor the recoverability of such receivables, which are subject to the terms of applicable credit agreements and general ability to pay. RECENT ACCOUNTING PRONOUNCEMENTS See Note 2 Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.
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