Honeywell 2004 Earnings Per Share $1.68; Cash from Operations $2.3 Bil

Honeywell 2004 Earnings Per Share $1.68; Cash from Operations $2.3 Billion; Fourth-Quarter Earnings Per Share $0.49 and Cash from Operations $766 Million; 2005 Earnings Per Share Range Increased to $1.95-$2.05

    Business Editors

    MORRIS TOWNSHIP, N.J.--(BUSINESS WIRE)--Jan. 28, 2005--Honeywell (NYSE: HON) today announced 2004 full-year earnings of $1.68 per share, in line with prior guidance and up 9% versus 2003. Sales of $25.6 billion were up 11% compared to 2003, resulting from organic growth in all four operating segments. Full-year cash flow from operations was $2.3 billion and free cash flow (cash flow from operations less capital expenditures) was $1.6 billion.
    Fourth-quarter earnings were $0.49 per share, in line with prior guidance and up 4% versus 2003. Sales of $6.6 billion were up 7% from 2003, including the impact of fewer reporting days in the fourth quarter versus prior year. Free cash flow was $540 million.
    "In 2004, Honeywell experienced strong organic growth in each of its operating segments; exceeded its sales, earnings and cash targets; and executed on key acquisitions and divestitures," said Honeywell Chairman and Chief Executive Officer Dave Cote. "We announced a 10% increase in our dividend, our first increase in five years, and moved to bolster our Automation and Control Solutions business with our announced offer to acquire the shares of Novar plc. Overall, 2004 was a year of significant progress across the company."
    "In the fourth quarter, we continued to experience improvements in our end markets and results from our investments in growth initiatives," continued Cote. "Aerospace won new contracts on Boeing's 7E7 Dreamliner, continued to grow its strong defense business and benefited from another quarter of increased global flying hours. Automation and Control Solutions continued to experience orders growth in both Building and Process Solutions, with key installation, energy retrofit and overseas contract wins. In Transportation Systems, Turbo Technologies recorded its tenth consecutive quarter of double-digit sales growth. Specialty Materials continued to grow its core portfolio and completed the divestiture of its non-core Performance Fibers business."
    Honeywell increased its 2005 EPS range to $1.95-$2.05, in light of strong order rates, as well as lower than anticipated 2005 non-cash pension expense.
    Honeywell will review its results during its investor webcast at 8:00 a.m. EST today. The webcast and related presentation materials will be available at www.honeywell.com/investor.

    Fourth-Quarter Segment Highlights

    Sales comparisons set forth below include the impact of fewer reporting days in the 2004 fourth quarter versus prior year.

    Aerospace

--	Sales were up 7%, compared with the fourth quarter of 2003, as a result of 10% growth in Commercial and 4% growth in Defense and Space sales.
--	Segment margins were 16.9%, compared with 15.9% a year ago, due to strong volume and productivity gains.
--	Honeywell's Astreon(TM) light emitting diode systems were selected for flight critical exterior lighting on Boeing's 7E7 Dreamliner. This is Honeywell's fourth award on the 7E7, bringing the total potential program value to in excess of $2.6 billion.
--	The Department of Defense awarded Honeywell a $40 million contract to develop an Organic Air Vehicle for extended range operation in adverse weather to provide battlefield and/or area surveillance and reconnaissance.

    Automation and Control Solutions

    -- Sales were up 4%, compared with the fourth quarter of 2003, as
    a result of organic growth and favorable foreign currency
    exchange, offset by the impact of the second quarter
    divestiture of Security Monitoring.

    -- Segment margins were 12.1%, compared with 12.3% a year ago,
    reflecting favorable volume conversion, more than offset by
    continued investment and the impact of the divestiture of
    Security Monitoring.

    -- Honeywell acquired majority ownership in its Tata Honeywell
    joint venture in Pune, India, providing a platform for growth
    in the region.

    -- Building Solutions established a new standard in seaport
    safety and security to meet U.S. Department of Homeland
    Security requirements and was awarded over $7 million in
    contracts to install digital surveillance systems for the
    Ports of San Juan, Puerto Rico, and Mobile, Alabama.

    -- Process Solutions was awarded a $60 million contract for an
    automation project at Naftec Spa's refinery in Arzew, Algeria.

    Transportation Systems

    -- Sales were up 13%, compared with the fourth quarter of 2003,
    primarily due to continued strong demand for our proprietary
    Turbo technologies.

    -- Segment margins were 12.8%, compared with 13.2% a year ago,
    due to increased raw material prices, partially offset by
    strong volume conversion.

    -- Turbo Technologies was selected by Daewoo Motors of South
    Korea to provide its latest generation VNT(TM) turbo
    technology for Daewoo's 2.0-liter diesel.

    -- Consumer Products Group continued to introduce new, high-value
    products with its rollout of FRAM(R) High Mileage oil filters.

    Specialty Materials

    -- Sales were up 9%, compared with the fourth quarter of 2003, as
    a result of continued growth in core businesses and improved
    pricing.

    -- Segment margins were 5.4%, compared with 4.7% a year ago, due
    to increases in price and core volume, partially offset by
    higher raw material costs in non-core businesses.

    -- Honeywell acquired sole ownership of its GEM Microelectronics
    Materials joint venture, which provides ultra-high purity
    straight, wet-etch and cleaning chemistries to the
    semiconductor industry.

    -- Specialty Materials continued to execute on its portfolio
    repositioning, and completed the divestiture of its
    Performance Fibers business.

    Honeywell International is a $26 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell's shares are traded on the New York, London, Chicago and Pacific Stock Exchanges. It is one of the 30 stocks that make up the Dow Jones Industrial Average and is also a component of the Standard & Poor's 500 Index. For additional information, please visit www.honeywell.com.

    This release contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, including statements about future business operations, financial performance and market conditions. Such forward-looking statements involve risks and uncertainties inherent in business forecasts as further described in our filings under the Securities Exchange Act.

Honeywell International Inc. Consolidated Statement of Operations (Unaudited) ------------------------------------------------ (In millions except per share amounts)

Three Months Ended December 31, ------------------ 2004 2003 ------- -------

Net sales $6,640 $6,187 ------- -------

Costs, expenses and other Cost of goods sold 5,180 (A) 4,972 (C) Selling, general and administrative expenses 865 (A) 756 (C) (Gain) loss on sale of non-strategic businesses 15 (B) 2 (D) Equity in (income) loss of affiliated companies (34) (27) Other (income) expense (14)(A) 35 Interest and other financial charges 84 82 ------- ------- 6,096 5,820 ------- -------

Income before taxes 544 367 Tax expense (benefit) 125 (40) ------- -------

Net income $419 $407 ======= =======

Earnings per share of common stock - basic $0.49 $0.47 ======= =======

Earnings per share of common stock - assuming dilution $0.49 $0.47 ======= =======

Weighted average number of shares outstanding- basic 854 864 ======= =======

Weighted average number of shares outstanding - assuming dilution 857 866 ======= =======

(A) Cost of goods sold, selling, general and administrative expenses and other (income) expense include provisions of $77, $16 and $5 million, respectively, for environmental, litigation, business impairment, net repositioning and other charges. The total net pretax charges were $98 million (after-tax $61 million, or $0.07 per share).

(B) Represents the pretax loss on the sale of our Performance Fibers business, and adjustments related to businesses sold in prior periods (after-tax $3 million, with no effect on earnings per share).

(C) Cost of goods sold and selling, general and administrative expenses include provisions (credits) of $217 and ($3) million respectively, for environmental, net repositioning and other charges. Total net pretax charges were $214 million (after-tax $19 million, or $0.02 per share). The after-tax charge includes a tax benefit associated with the redesignation of our Friction Materials business from held for sale to held and used.

(D) Represents adjustments to sales of non-strategic businesses in the third quarter of 2003 (after-tax loss $2 million, with no effect on earnings per share).

Honeywell International Inc. Consolidated Statement of Operations (Unaudited) ------------------------------------------------ (In millions except per share amounts)

Twelve Months Ended December 31, ----------------------- 2004 2003 -------- --------

Net sales $25,601 $23,103 -------- --------

Costs, expenses and other Cost of goods sold 20,425 (A) 18,235 (D) Selling, general and administrative expenses 3,316 (A) 2,950 (D) (Gain) loss on sale of non-strategic businesses (255)(B) (38)(E) Equity in (income) loss of affiliated companies (82)(A) (38)(D) Other (income) expense (92)(A)(C) 19 (F) Interest and other financial charges 331 335 -------- -------- 23,643 21,463 -------- --------

Income before taxes and cumulative effect of accounting change 1,958 1,640 Tax expense 511 296 -------- --------

Income before cumulative effect of accounting change 1,447 1,344 Cumulative effect of accounting change - (20)(G) -------- --------

Net income $1,447 $1,324 ======== ========

Earnings per share of common stock - basic: Income before cumulative effect of accounting change $1.68 $1.56 Cumulative effect of accounting change - (0.02)(G) -------- -------- Net income $1.68 $1.54 ======== ========

Earnings per share of common stock - assuming dilution: Income before cumulative effect of accounting change $1.68 $1.56 Cumulative effect of accounting change - (0.02)(G) -------- -------- Net income $1.68 $1.54 ======== ========

Weighted average number of shares outstanding-basic 859 861 ======== ========

Weighted average number of shares outstanding - assuming dilution 862 862 ======== ========

(A) Cost of goods sold, selling, general and administrative expenses, equity in (income) loss of affiliated companies and other (income) expense include provisions of $461, $25, $6 and $5 million, respectively, for environmental, litigation, business impairment, net repositioning and other charges. Total net pretax charges were $497 million (after-tax $310 million, or $0.36 per share).

(B) Represents the pretax gains on the sales of our VCSEL Optical Products and Security Monitoring businesses, the pretax loss on the sale of our Performance Fibers business, and adjustments related to businesses sold in prior periods (after-tax $144 million, or $0.17 per share).

(C) Includes a gain of $27 million (after-tax $17 million, or $0.02 per share) related to the settlement of a patent infringement lawsuit.

(D) Cost of goods sold, selling, general and administrative expenses and equity in (income) loss of affiliated companies include provisions of $272, $4 and $2 million, respectively, for environmental, net repositioning and other charges. Total net pretax charges were $278 million (after-tax $41 million, or $0.05 per share). The after-tax charge includes tax benefits from the redesignation of our Friction Materials business from held for sale to held and used and a tax settlement related to a prior year asset impairment.

(E) Represents the pretax gain on the sale of our Engineering Plastics and several other non-strategic businesses (after-tax $4 million, with no effect on earnings per share). The after-tax gain includes tax benefits associated with prior capital losses.

(F) Includes a gain of $20 million (after-tax $15 million, or $0.02 per share) related to the settlement of a patent infringement lawsuit.

(G) Effective January 1, 2003, we adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143). SFAS No. 143 requires recognition of the fair value of obligations associated with the retirement of tangible long- lived assets when there is a legal obligation to incur such costs. This adoption resulted in an after-tax cumulative effect expense adjustment of $20 million, or $0.02 per share.

Honeywell International Inc. Segment Data (Unaudited) ------------------------ (Dollars in millions)

Net Sales Periods Ended December 31, --------- --------------------------------- Three Months Twelve Months --------------- ----------------- 2004 2003 2004 2003 ------- ------- -------- --------

Aerospace $2,523 $2,359 $9,748 $8,813

Automation and Control Solutions 2,122 2,035 8,031 7,464

Specialty Materials 864 792 3,497 3,169

Transportation Systems 1,130 1,000 4,323 3,650

Corporate 1 1 2 7 ------- ------- -------- --------

Total $6,640 $6,187 $25,601 $23,103 ======= ======= ======== ========

Segment Profit Periods Ended December 31, -------------- --------------------------------- Three Months Twelve Months --------------- ----------------- 2004 2003 2004 2003 ------- ------- -------- --------

Aerospace $426 $374 $1,479 $1,221

Automation and Control Solutions 257 251 894 843

Specialty Materials 47 37 184 136

Transportation Systems 145 132 575 461

Corporate (41) (43) (158) (142) ------- ------- -------- --------

Total Segment Profit 834 751 2,974 2,519 Gain (loss) on sale of non-strategic businesses (15) (2) 255 38 Equity in income of affiliated companies 34 27 82 38 Other income (expense) 14 (35) 92 (19) Interest and other financial charges (84) (82) (331) (335) Pension and other postretirement benefits (expense) (A) (146) (78) (628) (325) Repositioning, environmental, litigation, business impairment and other charges (A) (93) (214) (486) (276) ------- ------- -------- --------

Income before taxes and cumulative effect of accounting change $544 $367 $1,958 $1,640 ======= ======= ======== ========

(A) Amounts included in cost of goods sold and selling, general and administrative expenses.

Honeywell International Inc. Consolidated Balance Sheet (Unaudited) -------------------------------------- (Dollars in millions)

December December 31, 31, 2004 2003 -------- -------- ASSETS Current assets: Cash and cash equivalents $3,701 $2,950 Accounts, notes and other receivables 4,243 3,643 Inventories 3,160 3,040 Deferred income taxes 1,238 1,526 Other current assets 542 465 -------- -------- Total current assets 12,884 11,624

Investments and long-term receivables 427 569 Property, plant and equipment - net 4,331 4,295 Goodwill 6,013 5,789 Other intangible assets - net 1,241 1,098 Insurance recoveries for asbestos related liabilities 1,412 1,317 Deferred income taxes 598 342 Prepaid pension benefit cost 2,985 3,173 Other assets 1,105 1,107 -------- --------

Total assets $30,996 $29,314 ======== ========

LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Accounts payable $2,564 $2,240 Short-term borrowings 28 152 Commercial paper 220 - Current maturities of long-term debt 956 47 Accrued liabilities 4,901 4,314 -------- -------- Total current liabilities 8,669 6,753

Long-term debt 4,069 4,961 Deferred income taxes 444 316 Postretirement benefit obligations other than pensions 1,713 1,683 Asbestos related liabilities 2,006 2,279 Other liabilities 2,677 2,593 Shareowners' equity 11,418 10,729 -------- --------

Total liabilities and shareowners' equity $30,996 $29,314 ======== ========

Certain prior year amounts have been reclassified to conform with the current year presentation.

Honeywell International Inc. Consolidated Statement of Cash Flows (Unaudited) ------------------------------------------------ (Dollars in millions)

Three Months Twelve Months Ended Ended December 31, December 31, ---------------- ---------------- 2004 2003 2004 2003 -------- ------- -------- ------- Cash flows from operating activities: Net income $419 $407 $1,447 $1,324 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change - - - 20 (Gain) loss on sale of non- strategic businesses 15 2 (255) (38) Repositioning, environmental, litigation and business impairment charges 98 214 497 278 Severance and exit cost payments (41) (53) (164) (200) Environmental and non- asbestos litigation payments (142) (32) (273) (91) Asbestos related liability payments (94) (90) (518) (557) Insurance receipts for asbestos related liabilities 6 187 67 664 Depreciation and amortization 156 176 650 661 Undistributed earnings of equity affiliates (22) (27) (75) (38) Deferred income taxes 183 (11) 335 344 Pension and other postretirement benefits expense 146 78 628 325 Pension contributions - U.S. Plans (30) (500) (40) (670) Other postretirement benefit payments (55) (60) (207) (203) Other (19) 119 (121) (16) Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables (152) (164) (470) (236) Inventories (42) 101 (84) 118 Other current assets (78) 1 (77) (20) Accounts payable 222 122 408 240 Accrued liabilities 196 33 505 294 -------- ------- -------- ------- Net cash provided by operating activities 766 503 2,253 2,199 -------- ------- -------- -------

Cash flows from investing activities: Expenditures for property, plant and equipment (226) (248) (629) (655) Proceeds from disposals of property, plant and equipment 26 24 38 37 Decrease in investments - - 80 - Cash paid for acquisitions (164) (75) (384) (199) Proceeds from sales of businesses 35 - 426 137 -------- ------- -------- ------- Net cash (used for) investing activities (329) (299) (469) (680) -------- ------- -------- -------

Cash flows from financing activities: Net increase (decrease) in commercial paper 200 - 220 (201) Net increase (decrease) in short-term borrowings 5 - (121) 81 Proceeds from issuance of common stock 12 15 74 54 Payments of long-term debt (6) (66) (29) (147) Repurchases of common stock (382) (37) (724) (37) Cash dividends on common stock (160) (162) (643) (645) -------- ------- -------- ------- Net cash (used for) financing activities (331) (250) (1,223) (895) -------- ------- -------- -------

Effect of foreign exchange rate changes on cash and cash equivalents 162 126 190 305 -------- ------- -------- -------

Net increase in cash and cash equivalents 268 80 751 929 Cash and cash equivalents at beginning of period 3,433 2,870 2,950 2,021 -------- ------- -------- ------- Cash and cash equivalents at end of period $3,701 $2,950 $3,701 $2,950 ======== ======= ======== =======

Honeywell International Inc. Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited) ---------------------------------------------------------------------- (Dollars in millions)

Three Months Twelve Months Ended Ended December 31, December 31, ------------- --------------- 2004 2003 2004 2003 ------- ----- ------- -------

Cash provided by operating activities $766 $503 $2,253 $2,199

Expenditures for property, plant and equipment (226) (248) (629) (655) ------- ----- ------- -------

Free cash flow $540 $255 $1,624 $1,544 ======= ===== ======= =======

We define free cash flow as cash provided by operating activities, less cash expenditures for property, plant and equipment.

We believe that this metric is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, and to pay dividends, repurchase stock, or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from business operations and the impact that this cash flow has on our liquidity.

--30--DB/ny*

CONTACT: Honeywell Media Robert C. Ferris, 973-455-3388 rob.ferris@honeywell.com or Investor Relations Nicholas Noviello, 973-455-2222 nicholas.noviello@honeywell.com

KEYWORD: NEW JERSEY INDUSTRY KEYWORD: HARDWARE AEROSPACE/DEFENSE GOVERNMENT AUTOMOTIVE EARNINGS CONFERENCE CALLS SOURCE: Honeywell

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