HONEYWELL INTERNATIONAL INC | 2013 | FY | 3


Note 3. Repositioning and Other Charges

 A summary of repositioning and other charges follows:
    
  Years Ended December 31, 
   2013  2012  2011 
Severance$186 $91 $246 
Asset impairments 23  12  86 
Exit costs 22  16  48 
Reserve adjustments (30)  (66)  (26) 
  Total net repositioning charge 201  53  354 
          
          
Asbestos related litigation charges, net of insurance 181  156  149 
Probable and reasonably estimable environmental liabilities 272  234  240 
Other 9  0  0 
          
  Total net repositioning and other charges$663$443$ 743

The following table summarizes the pretax distribution of total net repositioning and other charges by income statement classification:
     
  Years Ended December 31,  
  2013  2012  2011  
Cost of products and services sold$566 $428 $646  
Selling, general and administrative expenses 97  15  97  
 $663 $443 $743  
           

The following table summarizes the pretax impact of total net repositioning and other charges by segment:
    
  Years Ended December 31, 
  2013  2012  2011 
Aerospace$ 45 $(5) $ 29 
Automation and Control Solutions  93   18   191 
Performance Materials and Technologies  31   12   41 
Transportation Systems  190   197   228 
Corporate  304   221   254 
 $ 663 $ 443 $ 743 

In 2013, we recognized repositioning charges totaling $231 million including severance costs of $186 million related to workforce reductions of 3,081 manufacturing and administrative positions across all of our segments. The workforce reductions were primarily related to cost savings actions taken in connection with our productivity and ongoing functional transformation initiatives, achieving acquisition-related synergies in our Automation and Control Solutions segment, outsourcing of non-core components in our Aerospace and Transportation Systems segments, the shutdown of a manufacturing facility in our Performance Materials and Technologies segment, and factory transitions in our Automation and Control Solutions segment to more cost-effective locations. The repositioning charges include asset impairments of $23 million primarily related to manufacturing plant and equipment associated with the shutdown of a manufacturing facility in our Performance Materials and Technologies segment. The repositioning charges also includes exit costs of $22 million primarily related to closure obligations associated with the shutdown of manufacturing facilities and costs for early termination of lease contracts. Also, $30 million of previously established accruals, primarily for severance, in our Automation and Control Solutions and Performance Materials and Technologies segments were returned to income in 2013 due to changes in the scope of previously announced repositioning actions, lower than expected costs in completing the exit of a product line and fewer employee severance actions caused by higher attrition than originally planned associated with prior severance programs.

 

In 2012, we recognized repositioning charges totaling $119 million including severance costs of $91 million related to workforce reductions of 2,204 manufacturing and administrative positions across all of our segments. The workforce reductions were primarily related to the planned shutdown of a manufacturing facility in our Transportation Systems segment, the exit from a product line in our Performance Materials and Technologies segment, and cost savings actions taken in connection with our productivity and ongoing functional transformation initiatives. The repositioning charge also included asset impairments of $12 million principally related to manufacturing plant and equipment associated with the exit of a product line in our Performance Materials and Technologies segment. The repositioning charge also included exit costs of $16 million principally related to closure obligations associated with the planned shutdown of a manufacturing facility in our Transportation Systems segment and exit from a product line in our Performance Materials and Technologies segment. Also, $66 million of previously established accruals, primarily for severance, in our Automation and Control Solutions, Aerospace and Performance Materials and Technologies segments were returned to income in 2012 due primarily to fewer employee severance actions caused by higher attrition than originally planned associated with prior severance programs and changes in the scope of previously announced repositioning actions.

 

In 2011, we recognized repositioning charges totaling $380 million including severance costs of $246 million related to workforce reductions of 3,188 manufacturing and administrative positions across all of our segments. The workforce reductions were primarily related to the planned shutdown of a manufacturing facility in our Transportation Systems segment, cost savings actions taken in connection with our productivity and ongoing functional transformation initiatives, factory transitions in connection with acquisition-related synergies in our Automation and Control Solutions and Aerospace segments, the exit from and/or rationalization of certain product lines and markets in our Performance Materials and Technologies and Automation and Control Solutions segments, the consolidation of repair facilities in our Aerospace segment, and factory consolidations and/or rationalizations and organizational realignments of businesses in our Automation and Control Solutions segment. The repositioning charges included asset impairments of $86 million principally related to the write-off of certain intangible assets in our Automation and Control Solutions segment due to a change in branding strategy and manufacturing plant and equipment associated with the planned shutdown of a manufacturing facility and the exit of a product line and a factory transition as discussed above. The repositioning charges also included exit costs of $48 million principally for costs to terminate contracts related to the exit of a market and product line and a factory transition as discussed above. Exit costs also included closure obligations associated with the planned shutdown of a manufacturing facility and exit of a product line also as discussed above. Also, $26 million of previously established accruals, primarily for severance, in our Aerospace and Automation and Control Solutions segments, were returned to income in 2011 due principally to fewer employee separations than originally planned associated with prior severance programs.

  The following table summarizes the status of our total repositioning reserves:    
              
   Severance  Asset  Exit    
   Costs  Impairments  Costs  Total 
Balance at December 31, 2010$ 270 $ - $ 34 $ 304 
 2011 charges  246   86   48   380 
 2011 usage - cash  (136)   -   (23)   (159) 
 2011 usage - noncash  -   (86)   -   (86) 
 Adjustments  (26)   -   -   (26) 
 Foreign currency translation  (1)   -   -   (1) 
Balance at December 31, 2011  353   -   59   412 
 2012 charges  91   12   16   119 
 2012 usage - cash  (113)   -   (23)   (136) 
 2012 usage - noncash  -   (12)   -   (12) 
 Adjustments  (61)   -   (5)   (66) 
 Foreign currency translation  6   -   -   6 
Balance at December 31, 2012  276   -   47   323 
 2013 charges  186   23   22   231 
 2013 usage - cash  (139)   -   (21)   (160) 
 2013 usage - noncash  -   (23)   -   (23) 
 Adjustments  (27)   -   (3)   (30) 
 Foreign currency translation  6   -   -   6 
Balance at December 31, 2013$ 302 $ - $ 45 $ 347 
              

Certain repositioning projects in our Aerospace, Automation and Control Solutions and Transportation Systems segments included exit or disposal activities, the costs related to which will be recognized in future periods when the actual liability is incurred. The nature of these exit or disposal costs includes asset set-up and moving, product recertification and requalification, and employee retention, training and travel. The following table summarizes by segment, expected, incurred and remaining exit and disposal costs related to 2011 repositioning actions which we were not able to recognize at the time the actions were initiated. The exit and disposal costs related to the repositioning actions in 2013 and 2012 which we were not able to recognize at the time the actions were initiated were not significant.

 

     Automation and Transportation  
2011 Repositioning Actions Aerospace Control Solutions Systems Total
Expected exit and disposal costs$ 15$ 11$ 7$ 33
Costs incurred during:        
 Year ended December 31, 2011  (1)  -  -  (1)
 Year ended December 31, 2012  (2)  (3)  (1)  (6)
 Year ended December 31, 2013  (2)  (4)  (2)  (8)
Remaining exit and disposal costs at        
 December 31, 2013$10$4$4$18
          

In 2013, 2012 and 2011, we recognized charges of $272, $234 and $240 million, respectively, for environmental liabilities deemed probable and reasonably estimable during the year.  In 2013 this included a charge of $58 million in the fourth quarter related to Onondaga Lake in Syracuse, New York mainly reflecting updated estimates for completion of the dredging and capping components of the approved Lake remedy. In 2013, 2012 and 2011, we recognized asbestos related litigation charges, net of insurance, of $181, $156 and $149 million, respectively. Environmental and Asbestos matters are discussed in detail in Note 22 Commitments and Contingencies of Notes to the Financial Statements. In 2013 we also recognized other charges of $9 million related to the resolution of legal matters.


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