Honeywell International : 2021 Annual Report

2021 ANNUAL REPORT

T.THE FUTUR EFUTURE IS EIS WHAT W SWHAT WE M TWE MAKE I EMAKE IT. T

2021 SHAREOWNERS LETTER

DARIUS ADAMCZYK

Chairman and

Chief Executive Officer

2021 had its tough moments - from supply chain disruptions to inflation - and I'm incredibly proud of how the Honeywell team rose to face these challenges. Even more, they joined together to embrace innovation and create new solutions - like revolutionary plastics recycling technology and breakthroughs in quantum computing - to address some of the world's most pressing issues and shape a better future."

DEAR SHAREOWNER:

Let me start by saying thank you for your continued ownership of Honeywell, and I hope you and your families are safe and well. To review our performance in 2021 compared with our expectations entering the year, 2021 turned out to be a mixed story. First, the positive - with the exception of Defense and Space, all business units experienced strong demand, and that trend has continued into 2022. Overall, our orders were up 11% compared with 2020, and our backlog position was up 7% since the end of 2020.

While demand was not an issue for us in 2021, we experienced several unprecedented external factors, including supply chain challenges, inflation, labor availability, and the continued presence of COVID-19 in just about every country in which we operate. Of these, supply chain reliability proved to be the greatest and most persistent challenge. As the year progressed, we learned how to operate under these challenging conditions and adjusted our operating system accordingly. For example, entering 2022, we have proactively redesigned some of our key offerings to reduce our reliance on parts that are in short supply.

Inflation posed another significant challenge and our general managers had to revisit playbooks from several decades ago. We have improved our ability to manage in an aggressively inflationary period, acting quickly and decisively to take the necessary steps to pass on the costs we have experienced.

We continued to deploy capital to add to our strong portfolio, and completed or announced some significant transactions in 2021, including the acquisitions of:

• Sparta Systems, a key software piece to our emerging life sciences strategy, which will be EPS-accretive on a GAAP basis in the second year of ownership. Sparta provides enterprise quality management software (QMS), including a next-generationsoftware-as-a-service (SaaS) platform, for the life sciences industry. The acquisition further strengthens Honeywell's leadership in industrial automation, digital transformation solutions, and enterprise performance management software.
• Performix Inc., a provider of manufacturing execution system software for the pharmaceutical manufacturing and biotech industries. The acquisition further builds on Honeywell's strategy to create the world's leading integrated software platform for life sciences customers, who are striving to achieve faster compliance, improved reliability, and better production throughput at the highest levels of quality.
• US Digital Designs, which provides technologies for first responders to react substantially faster to emergencies and achieve safer outcomes for themselves and those they are focused on protecting. We expect to achieve a return on investment of more than 25% for this acquisition by year five.

To provide some highlights:

Within our Aerospace segment, our Commercial Aviation business grew orders by

59%.

Within Performance Materials and Technologies, Advanced Materials and UOP had orders growth of

15% and

17%, respectively.

Within Safety and Productivity Solutions, Productivity Solutions grew orders by

61%,

with Advanced Sensing Technologies at

33%,

and Gas Analysis and Safety at

23%.

Perhaps our most revolutionary transaction was the formation of Quantinuum, which combines the world's best quantum computing hardware company and the world's most advanced quantum software company. Honeywell remains the majority owner of Quantinuum, which - as the world's largest and most advanced full-stack quantum computing company - will be a key player in what is projected to become a $1 trillion industry over the coming decades. We were the first company to demonstrate quantum volume of 2,048, thanks to Quantinuum's advanced technology built on Honeywell's trapped-ion quantum computing technology. We have also secured numerous blue-chip customers such as JPMorgan, Merck, and DHL to advance research in financial analytics, molecular research, route optimization, and logistics operations.

We continue to make steady progress as we undergo our two digital transformations, one directed toward transforming the way our customers work through Honeywell Forge, an enterprise performance management SaaS offering, and the other (Honeywell Digital) directed toward running our businesses and support functions more effectively with standardized data sets, a robust IT infrastructure, and stronger governance. We made significant progress in both areas in 2021.

We experienced strong growth year-over-year in our recurring revenue streams across all our segments, supported by our Honeywell Connected Enterprise business as we continued on our journey to become a leading software-industrial company. Honeywell Connected Enterprise also formed key brand partnerships, with wins at Saudi Aramco, Horisont Energi, ADNOC, Globalworth, and Braskem Idesa.

In Honeywell Digital, we reduced the number of Enterprise Resource Planning systems (or ERPs) to 15 (down from 148 in 2016), standardized our data, stood up a scalable data warehouse across the enterprise, and developed common processes with consistent IT infrastructure. We have completed more than 100 projects that have developed and enhanced our IT platforms, enabling us to use data for business-related functions. As a result, we have realized approximately $0.5 billion in gross margin, productivity, and working capital improvements and continued to enable our leaders to make more data-driven decisions.

INNOVATION IS DRIVING BIG WINS

As always, Honeywell's ability to innovate is its greatest competitive differentiator. We push for each of our enterprises to cultivate breakthrough initiatives, which are new growth areas that can change the trajectory of the business. Like quantum computing, we have had several great breakthrough initiatives this year in urban air mobility and unmanned aerial systems (UAM/UAS) and sustainable technologies.

Last year, we announced the formation of a business unit dedicated to the growing UAM/UAS market, and we have achieved remarkable success. Our technologies in avionics, collision protection, actuation, and electronic motors have enabled us to secure more than $3.5 billion in awarded business and have ensured that Honeywell will continue to play a large role in the future of aviation. In 2021, we also launched Honeywell Anthem, a revolutionary connected avionics product that - due to its modularity - can be used across all aviation platforms, including UAM/UAS, air transport, business aviation, and even military aviation.

In January of this year, Honeywell was selected to provide our new HTS7500 turboshaft engine as the power behind the Sikorsky- Boeing DEFIANT X helicopter, which is currently a contender to win the U.S. Army's Future Long-Range Assault Aircraft (FLRAA) competition. This platform pursuit has the potential to result in more than $25 billion during the lifecycle of the program.

Additionally, we made tremendous progress in our Sustainable Technology Solutions business. Our portfolio has virtually every technology that will be relevant to the future of energy and sustainability, including hydrogen, flow batteries, carbon capture, green fuels, and plastics recycling. In 2021, we secured big green fuels wins with PBF Chalmette, CVR, and Euglena-Petronas, resulting in a year-over-year orders increase of 137%. Along with United Airlines, we announced a joint multimillion-dollar investment in Alder Fuels

• a cleantech company that is pioneering first-of-its-kind technologies for producing sustainable aviation fuel (SAF) at scale. When used together across the fuel lifecycle, the Alder technologies, coupled with Honeywell's Ecofining™ process, could have the ability to produce a carbon-negative fuel at spec with today's jet fuel. As part of the agreement, United Airlines is committing to purchase 1.5 billion gallons of SAF from Alder when produced to United Airlines' requirements. We also announced agreements to form a joint venture with Sacyr in Europe and a joint venture with Avangard in the U.S. for plastics recycling with our innovative UpCycle Process Technology, won the biggest North American carbon capture project at Wabash Valley, and joined forces with Duke Energy to field test flow battery technology.

Sustainable Technology Solutions will be a multibillion-dollar business before the turn of the decade and will enable a transition path from the current carbon-intensive industry to the future of energy. Our play in sustainability and energy transformation will be a pillar of Honeywell (along with our software-industrial transformation), and we will take bold steps to bring these highly impactful technologies and more to market faster, where our customers and the environment will greatly benefit from them.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) PROGRESS

We made significant progress against our ESG objectives in 2021. For more details on our ESG performance, I would point our shareowners to our annual Corporate Citizenship Report, available on the "About Us" page on our company website (honeywell.com), which we issued in the third quarter. When you read that document, I assure you that you will be proud of what Honeywell does for our communities and our broader world, and how we do it.

ENVIRONMENT

We have not only brought solutions to the world that will enable a broader, global energy transition, but we also have continued to make our current and past operations much more environmentally friendly. We spent approximately $200 million in 2021 to clean up legacy environmental issues. Additionally, environmental projects initiated or completed in 2021 will, we project, address a significant portion of our 2020 greenhouse gas footprint. And, we have completed 325 projects to enhance energy efficiency and reduce

greenhouse gas emissions, waste, and water use. We are particularly excited because we are on our way in 2022 to deploy a new solution to measure emissions in real timeat one of our own facilities in Geismar, Louisiana. This system will use our own technologies and can provide a method for real-time measurement of emissions that is more accurate than the existing mathematical models used and can serve as an automated system of record for carbon accounting.

SOCIAL IMPACT

We continued to play a strong role in the communities in which we operate. To help India cope with the Delta variant, Honeywell announced that it would establish COVID-19 care centers across five states in India. The company also donated 1,000 oxygen concentrators, 50 ventilators, 10,000 N95 respirators, and 2,500 personal protective equipment (PPE) kits to various government and private hospitals. In addition, since early 2020, Honeywell invested about $300 million in new mask production capacity globally to help first responders and others cope with the pandemic. This was no small sacrifice for Honeywell, especially given the decline in demand we have seen since then for N95 respirators, yet it was the right thing to do for the world and a decision we would make again.

GOVERNANCE

We continued to promote diversity and inclusion in our ranks. Our newest addition to our Board of Directors, Rose Lee of Cornerstone Building Brands, brings gender and ethnic diversity to a Board that already has been repeatedly recognized for its diversity. She also will provide deep insights on ESG topics and our overall strategy. Within our own ranks in Honeywell, we improved representation for every affinity group. Diversity and inclusion will continue to be a priority for Honeywell, and we will make progress every year.

OUTLOOK FOR 2022

Our markets are continuing to improve from the damage they suffered in 2020. A quick overview for each of our segments:

AEROSPACE				HONEYWELL BUILDING TECHNOLOGIES
We expect to see COVID-19 become less of a factor				We will continue to gain traction in our core markets,
as we exit the first half of 2022, with accelerating				especially as our "Healthy Buildings" solutions enable
consumer flight activity and increased business and				a broader return to offices and schools.
international travel. Our Defense and Space market
will stabilize and not be the headwind we
experienced in 2021.

PERFORMANCE MATERIALS AND

TECHNOLOGIES

We will see the return of the reinvestment upcycle in our core energy customer operations along with more pronounced investment in sustainable technologies. Honeywell is the partner that our customers will need to make the energy transition. It will be an area of focus for the future. We have an exceptionally healthy backlog of $7.2 billion, which will enable a very strong 2022 and beyond.

SAFETY AND PRODUCTIVITY SOLUTIONS

We expect a continuation of healthy growth in this segment, although the nearly 50% growth rate experienced by our warehouse automation business through much of 2021 will moderate. We continue to see very strong demand in our short-cycle business with backlog up 11% going into 2022.

In addition, Honeywell Connected Enterprise will deliver another year of double-digit growth in recurring revenues. As a leading industrial disruptor, we will continue to launch innovative enterprise performance management solutions to provide our customers a 360-degree view of their operations in order to make smarter and more accurate business decisions. From retail warehouses aiming to manage throughput to industrial giants working toward carbon neutrality, we are setting a new standard for our customers, all the while increasing cybersecurity to better monitor, mitigate, and contain cyberattacks.

In summary, Honeywell is well-positioned to continue to outperform in 2022 and beyond. We are bolstered by strong demand across our markets, an easing of supply chain challenges, and continued focus on digital transformation, breakthrough initiatives, and other strategic areas. All of this will drive terrific results for our shareowners and our employees and help our customers achieve their most important goals.

Thank you for your continued trust in Honeywell as we look forward to a strong 2022. Sincerely,

DARIUS ADAMCZYK

Chairman and Chief Executive Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
  OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to
  Commission file number 1-8974

Honeywell International Inc.

(Exact name of registrant as specified in its charter)

Delaware					22-2640650
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)
855 South Mint Street
Charlotte, North Carolina					28202
(Address of principal executive offices)						(Zip Code)
Registrant's telephone number, including area code [phone]
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class		Trading Symbols		Name of each exchange on which registered
Common Stock, par value $1 per share*		HON		The Nasdaq Stock Market LLC
1.300% Senior Notes due 2023		HON 23A		The Nasdaq Stock Market LLC
0.000% Senior Notes due 2024		HON 24A		The Nasdaq Stock Market LLC
2.250% Senior Notes due 2028		HON 28A		The Nasdaq Stock Market LLC
0.750% Senior Notes due 2032		HON 32		The Nasdaq Stock Market LLC

• The common stock is also listed on the London Stock Exchange.
  Securities registered pursuant to Section 12(g) of the Act: None
  Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ☐
  Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

The aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $152.8 billion at June 30, 2021. There were 685,818,771 shares of Common Stock outstanding at January 28, 2022.

Documents Incorporated by Reference

Part III: Proxy Statement for Annual Meeting of Shareowners to be held April 25, 2022.