Honeywell Reports 2005 Sales of $27.7 Billion; Earnings Per Share up 30%; Cash Flow from Operations of $2.4 Billion; 2006 Earnings Per Share Guidance Increased to $2.40 - $2.50

Fourth-quarter sales were up 10% to $7.3 billion. Earnings were up107% to $0.62 per share versus $0.30 per share in 2004. Cash flow fromoperations was $839 million and free cash flow was up 13% to $611million from $540 million in the fourth quarter last year.

"2005 was another good year for Honeywell," said Chairman andChief Executive Officer Dave Cote. "Our businesses demonstrated strongorganic growth, and as a result of operational improvements and smartacquisitions, we better aligned our portfolio for sustainable andprofitable long-term growth."

"We are confident in our outlook for 2006 given the strength ofthe global economy, favorable macro-trends, such as energy efficiency,safety and security, and continued strong operational execution,"continued Cote. "Sales are expected to top $30 billion and weanticipate margin expansion in each of our businesses. We areincreasing the low end of our 2006 EPS range by $0.05, as a result oflower than anticipated pension expense, to $2.40 - $2.50."

Fourth Quarter Segment Highlights

Aerospace

-- Sales were up 8%, compared with the fourth quarter of 2004, driven by strong Air Transport and Business and General Aviation OE deliveries, which were partially offset by lower FAA mandate sales.

-- Segment margins were 17.2%, compared with 16.9% a year ago, due to strong volume growth partially offset by lower FAA mandate sales and continued investment in ERP.

-- Lufthansa Airlines selected Honeywell's Runway Awareness and Advisory System (RAAS) on its fleet of 251 aircraft. RAAS is a safety system designed to improve situational awareness during airport operations and reduce runway incursions. Other airlines that have purchased RAAS include Malaysia Airlines, Thai Airlines, FedEx, Air France and Alaska Airlines.

-- Honeywell's Ovation(TM) C Series cabin management system was selected for installation on Gulfstream's G150 aircraft. Ovation C Series has been installed on more than 600 business aircraft to date. Honeywell's content on the G150 includes engines, cabin pressure control systems, auxiliary power units, external lighting and cabin management systems and is valued at $500 million over the anticipated life of the program.

-- Honeywell won the U.S. Army contract for Total InteGrated Engine Revitalization (TIGER), a program that will improve and extend the life of the AGT1500 turbine engine used to power the Abrams family of vehicles. The TIGER contract includes an initial 12-month term worth $69 million and three one-year options. The performance-based contract has a potential value of $1.4 billion over 48 months.

Automation and Control Solutions

-- Sales were up 22%, compared with the fourth quarter of 2004, driven by the impact of acquisitions of 17% and organic sales growth of 5%, primarily in the Life Safety, Environmental Combustion and Controls and Security businesses.

-- Segment margins were 12.4%, compared with 12.1% a year ago, as strong volume growth and productivity more than offset the negative impact of inflation and the dilutive impact of acquisitions.

-- Security was awarded a $3 million contract to equip George Bush Intercontinental and William P. Hobby airports in Houston, Texas, with Radar Video Surveillance, which tracks ground-based moving targets. Both airports will also serve as beta sites for Honeywell's Advanced Video Processing System, which monitors and analyzes certain behaviors captured by video. These two "first-of-its-kind" perimeter and intrusion detection systems provide the airports with the most advanced surveillance capabilities of any airport in the United States.

-- Building Solutions secured more than $20 million of energy-savings and modernization contracts with key wins at Luke Air Force Base, Glendale, Ariz., and at Highland Community Unit School District No. 5 in Highland, Ill. Luke Air Force Base will significantly lower energy and operational costs through infrastructure improvements, renewable energy saving measures and long-term preventive maintenance services. The Highland school upgrades will modernize buildings, increase student and faculty comfort and safety, and reduce carbon dioxide emissions.

-- Process Solutions signed an $11 million contract, to be completed over the next 3 years, with Bulgaria's largest thermal power operator to supply its Experion(R) Process Knowledge System, field instrumentation, basic design, and engineering and installation services.

Transportation Systems

-- Sales were down 3%, compared with the fourth quarter of 2004, due to a shift in European consumer demand among automotive platforms, the impact of slightly lower European light vehicle production on Turbo Technologies sales and the exit of the Friction Materials OE braking business in North America, offset by continued growth in Turbo Technologies North American sales and the Consumer Products Group.

-- Segment margins were 11.0%, compared with 12.8% a year ago, due to higher raw material costs, unfavorable mix and the additional operational costs associated with the exit of the Friction Materials OE braking business in North America, partially offset by productivity gains.

-- Turbo Technologies was selected by Hyundai to provide its third-generation VNT(TM) turbo technology and its dual-stage turbocharger for two new engine platforms. Estimated volume of the program is 280,000 units per year, commencing in 2008.

-- Honeywell completed the exit of the Friction Materials OE braking business in North America with the closing of its facilities in Cleveland, Tenn. and Lynn Haven, Fla.

Specialty Materials

-- Sales were flat, compared with the fourth quarter of 2004, driven by 7% organic growth, primarily in the Electronic Materials and Resins and Chemicals businesses and the acquisition of UOP LLC, offset by the loss of sales from the divested Performance Fibers, Industrial Wax and North American nylon carpet fiber operations.

-- Segment margins were 7.2%, compared with 5.4% a year ago, with price increases and volume growth more than offsetting higher raw material costs and the net impact of acquisitions and divestitures.

-- Honeywell completed the acquisition of full ownership of UOP LLC, a leading international supplier and licensor of process technology, catalysts, process plants and consulting services to the petroleum refining, petrochemical and gas processing industries.

-- Spectra Shield(R) composite material will armor 164 U.S. Marine Corps Sea Knight helicopters with Light Weight Armor Replacement System kits. The Sea Knight helicopters help the Marine Corps provide all-weather, day-or-night assault transport of combat troops, supplies and equipment.

-- Specialty Materials completed the divestiture of its North American nylon carpet fiber operations. The remaining business has been renamed Honeywell Resins and Chemicals.

Honeywell will discuss its results during its investor conferencecall today starting at 8:00 a.m. EST. To participate, please dial(706) 643-7681 a few minutes before the 8:00 a.m. EST start. Pleasemention to the operator that you are dialing in for Honeywell'sinvestor conference call. The live webcast of the investor call willbe available through the "Investor Relations" section of the company'sWebsite (http://www.honeywell.com/investor). Investors can access areplay of the webcast starting at 11:00 a.m. EST, January 26, until5:00 p.m. EST, February 2, by dialing (706) 645-9291. The access codeis 4024481.

Honeywell International is a $28 billion diversified technologyand manufacturing leader, serving customers worldwide with aerospaceproducts and services; control technologies for buildings, homes andindustry; automotive products; turbochargers; and specialty materials.Based in Morris Township, N.J., Honeywell's shares are traded on theNew York, London, Chicago and Pacific Stock Exchanges. It is one ofthe 30 stocks that make up the Dow Jones Industrial Average and isalso a component of the Standard & Poor's 500 Index. For additionalinformation, please visit www.honeywell.com.

This release contains forward-looking statements as defined inSection 21E of the Securities Exchange Act of 1934, includingstatements about future business operations, financial performance andmarket conditions. Such forward-looking statements involve risks anduncertainties inherent in business forecasts as further described inour 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,
---------------------
2005 2004
------ ------

Product sales $5,847 $5,393
Service sales 1,428 1,247
------ ------
7,275 6,640
------ ------

Costs, expenses and other
Cost of products sold 4,652 (A) 4,561 (D)
Cost of services sold 976 (A) 897 (D)
Selling, general and administrative expenses 936 865 (D)
(Gain) loss on sale of non-strategic businesses (25)(B) 15 (E)
Equity in (income) loss of affiliated companies (52)(A) (34)
Other (income) expense (34) (14)(D)
Interest and other financial charges 96 84
------ ------
6,549 6,374
------ ------

Income from continuing operations before taxes 726 266
Tax expense 215 13
------ ------

Income from continuing operations 511 253
Income from discontinued operations, net of
taxes 30 -
Cumulative effect of accounting change, net of
taxes (21)(C) -
------ ------
Net income $ 520 $ 253
====== ======

Earnings per share of common stock - basic:
Income from continuing operations $ 0.61 $ 0.30
Income from discontinued operations 0.04 -
Cumulative effect of accounting change (0.03) -
------ ------
Net income $ 0.62 $ 0.30
====== ======

Earnings per share of common stock - assuming
dilution:
Income from continuing operations $ 0.61 $ 0.30
Income from discontinued operations 0.04 -
Cumulative effect of accounting change (0.03) -
------ ------
Net income $ 0.62 $ 0.30
====== ======

Weighted average number of shares outstanding-
basic 836 854
====== ======

Weighted average number of shares outstanding -
assuming dilution 839 857
====== ======

(A) Cost of products and services sold include provisions of $80
million (net of a $73 million credit related to a re-estimation of
NARCO-related asbestos reserves in connection with the resolution
of certain outstanding claims) for environmental, litigation, net
repositioning and other charges. Equity in (income) loss of
affiliated companies includes a $15 million gain on the sale of an
equity investment. Total net pretax charges were $65 million
(after-tax $54 million, or $0.06 per share).
(B) Represents pretax gain on the sale of our Nylon business and
adjustments related to businesses sold in prior periods (after-tax
$3 million, with no effect on earnings per share).
(C) Effective December 31, 2005, we adopted the Financial Accounting
Standards Board (FASB) Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations, an interpretation of
FASB Statement No. 143", which resulted in an after-tax cumulative
effect expense adjustment of $21 million, or $0.03 per share.
(D) Cost of products and services sold, selling, general and
administrative expenses and other (income) expense include
provisions of $355, $16 and $5 million, respectively, for
environmental, litigation, net repositioning and other charges.
The total net pretax charges were $376 million (after-tax $227
million, or $0.26 per share).
(E) 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).




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

Twelve Months Ended
December 31,
--------------------------
2005 2004
------- -------

Product sales $22,258 $20,408
Service sales 5,395 5,193
------- -------
27,653 25,601
------- -------

Costs, expenses and other
Cost of products sold 17,655 (A) 17,022 (E)
Cost of services sold 3,843 (A) 3,681 (E)
Selling, general and administrative
expenses 3,707 (A) 3,316 (E)
(Gain) loss on sale of non-strategic
businesses (36)(B) (255)(F)
Equity in (income) loss of affiliated
companies (134)(A) (82)(E)
Other (income) expense (61)(A) (92)(E)(G)
Interest and other financial charges 356 331
------- -------
25,330 23,921
------- -------

Income from continuing operations before
taxes 2,323 1,680
Tax expense 742 (C) 399
------- -------

Income from continuing operations 1,581 1,281
Income from discontinued operations, net of
taxes 95 -
Cumulative effect of accounting change, net
of taxes (21)(D) -
------- -------
Net income $ 1,655 $ 1,281
======= =======

Earnings per share of common stock - basic:
Income from continuing operations $ 1.87 $ 1.49
Income from discontinued operations 0.11 -
Cumulative effect of accounting change (0.03) -
------- -------
Net income $ 1.95 $ 1.49
======= =======

Earnings per share of common stock -
assuming dilution:
Income from continuing operations $ 1.86 $ 1.49
Income from discontinued operations 0.11 -
Cumulative effect of accounting change (0.03) -
------- -------
Net income $ 1.94 $ 1.49
======= =======

Weighted average number of shares
outstanding-basic 849 859
======= =======

Weighted average number of shares
outstanding - assuming dilution 852 862
======= =======

(A) Cost of products and services sold, selling, general and
administrative expenses, equity in (income) loss of affiliated
companies and other (income) expense include provisions of $357
million (net of a $73 million credit related to a re-estimation of
NARCO-related asbestos reserves in connection with the resolution
of certain outstanding claims and a $67 million credit for a
favorable arbitration ruling), $43, $2 and $10 million,
respectively, for environmental, litigation, net repositioning and
other charges (credits). Equity in (income) loss of affiliated
companies also includes a $15 million gain on the sale of an
equity investment. Total net pretax charges were $397 million
(after-tax $296 million, or $0.35 per share).
(B) Represents pretax gain on the sale of our Nylon business and
adjustments related to businesses sold in prior periods, partially
offset by the pretax loss on the sale of our Industrial Wax
business (after-tax gain $60 million, or $0.07 per share). The
after-tax gain has been impacted by the higher tax basis than book
basis on the sale of our Industrial Wax business.
(C) Includes a tax provision of $155 million, or $0.18 per share for
the repatriation of foreign earnings related to the provisions of
the American Jobs Creation Act of 2004.
(D) Effective December 31, 2005, we adopted the Financial Accounting
Standards Board (FASB) Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations, an interpretation of
FASB Statement No. 143", which resulted in an after-tax cumulative
expense adjustment of $21 million, or $0.03 per share.
(E) Cost of products and services sold, selling, general and
administrative expenses, equity in (income) loss of affiliated
companies and other (income) expense include provisions of $739,
$25, $6 and $5 million, respectively, for environmental,
litigation, net repositioning and other charges. Total net pretax
charges were $775 million (after-tax $476 million, or $0.55 per
share).
(F) 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).
(G) Includes a gain of $27 million (after-tax $17 million, or $0.02
per share) related to the settlement of a patent infringement
lawsuit.



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


Periods Ended December 31,
------------------------------------
Net Sales Three Months Twelve Months
--------- ----------------- -----------------
2005 2004 2005 2004
------- ------- ------- -------

Aerospace $ 2,725 $ 2,523 $10,497 $ 9,748

Automation and Control Solutions 2,592 2,122 9,416 8,031

Specialty Materials 865 864 3,234 3,497

Transportation Systems 1,093 1,130 4,505 4,323

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

Total $ 7,275 $ 6,640 $27,653 $25,601
======= ======= ======= =======


Periods Ended December 31,
------------------------------------
Segment Profit Three Months Twelve Months
-------------- ----------------- -----------------
2005 2004 2005 2004
------- ------- ------- -------

Aerospace $ 469 $ 426 $ 1,703 $ 1,479

Automation and Control Solutions 322 257 1,065 894

Specialty Materials 62 47 257 184

Transportation Systems 120 145 557 575

Corporate (44) (41) (173) (158)
------- ------- ------- -------

Total Segment Profit 929 834 3,409 2,974
Gain (loss) on sale of non-
strategic businesses 25 (15) 36 255
Equity in income of affiliated
companies 52 34 134 82
Other income 34 14 61 92
Interest and other financial
charges (96) (84) (356) (331)
Pension and other postretirement
benefits (expense) (A) (138) (146) (561) (628)
Repositioning, environmental,
litigation and other (charges)
credits (A) (80) (371) (400) (764)
------- ------- ------- -------

Income from continuing
operations before taxes $ 726 $ 266 $ 2,323 $ 1,680
======= ======= ======= =======

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




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

December 31, December 31,
2005 2004
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,234 $ 3,586
Accounts, notes and other receivables 4,904 4,243
Inventories 3,401 3,160
Deferred income taxes 1,243 1,289
Other current assets 655 542
Assets held for disposal 525 -
----------- -----------
Total current assets 11,962 12,820

Investments and long-term receivables 370 542
Property, plant and equipment - net 4,658 4,331
Goodwill 7,660 6,013
Other intangible assets - net 1,597 1,241
Insurance recoveries for asbestos related
liabilities 1,302 1,412
Deferred income taxes 588 613
Prepaid pension benefit cost 2,716 2,985
Other assets 1,441 1,105
----------- -----------

Total assets $ 32,294 $ 31,062
=========== ===========

LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 2,886 $ 2,564
Short-term borrowings 275 28
Commercial paper 754 220
Current maturities of long-term debt 995 956
Accrued liabilities 5,359 4,971
Liabilities related to assets held for
disposal 161 -
----------- -----------
Total current liabilities 10,430 8,739

Long-term debt 3,082 4,069
Deferred income taxes 503 397
Postretirement benefit obligations other
than pensions 1,786 1,713
Asbestos related liabilities 1,549 2,006
Other liabilities 3,690 2,886
Shareowners' equity 11,254 11,252
----------- -----------

Total liabilities and shareowners' equity $ 32,294 $ 31,062
=========== ===========





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


Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Cash flows from operating
activities:
Net income $ 520 $ 253 $ 1,655 $ 1,281
Adjustments to reconcile net
income to net cash provided by
operating activities:
Cumulative effect of accounting
change 21 - 21 -
(Gain) loss on sale of non-
strategic businesses (25) 15 (36) (255)
Repositioning, environmental,
litigation and other charges
(credits) 65 376 397 775
Severance and exit cost payments (66) (41) (171) (164)
Environmental payments (89) (129) (247) (248)
Asbestos related liability
payments (332) (94) (750) (518)
Insurance receipts for asbestos
related liabilities 50 6 160 67
Depreciation and amortization 169 156 685 650
Undistributed earnings of equity
affiliates (38) (22) (30) (75)
Deferred income taxes (40) 71 41 223
Pension and other postretirement
benefits expense 138 146 561 628
Pension contributions - U.S.
plans - (30) - (40)
Other postretirement benefit
payments (47) (55) (192) (207)
Other (31) (19) (30) (121)
Changes in assets and
liabilities, net of the effects
of acquisitions and
divestitures:
Accounts, notes and other
receivables 179 (152) (94) (470)
Inventories 123 (42) 37 (84)
Other current assets 41 (78) 61 (77)
Accounts payable 212 222 181 408
Accrued liabilities (11) 183 193 480
------- ------- ------- -------
Net cash provided by operating
activities 839 766 2,442 2,253
------- ------- ------- -------

Cash flows from investing
activities:
Expenditures for property, plant
and equipment (228) (226) (684) (629)
Proceeds from disposals of
property, plant and equipment 32 26 71 38
Decrease in investments - - 285 80
(Increase) in investments - (115) - (115)
Cash acquired in acquisition of
Novar plc - - 86 -
Cash paid for acquisitions (718) (164) (2,765) (384)
Proceeds from sales of businesses 962 35 997 426
------- ------- ------- -------
Net cash provided by (used for)
investing activities 48 (444) (2,010) (584)
------- ------- ------- -------

Cash flows from financing
activities:
Net increase in commercial paper 329 200 534 220
Net increase (decrease) in short-
term borrowings 91 5 100 (121)
Payment of debt assumed in the
acquisition of Novar plc - - (702) -
Proceeds from issuance of common
stock 33 12 167 74
Payments of long-term debt (834) (6) (982) (29)
Repurchases of common stock (554) (382) (1,133) (724)
Cash dividends on common stock (172) (160) (700) (643)
------- ------- ------- -------
Net cash (used for) financing
activities (1,107) (331) (2,716) (1,223)
------- ------- ------- -------

Effect of foreign exchange rate
changes on cash and cash
equivalents 2 162 (68) 190
------- ------- ------- -------

Net (decrease) increase in cash
and cash equivalents (218) 153 (2,352) 636
Cash and cash equivalents at
beginning of period 1,452 3,433 3,586 2,950
------- ------- ------- -------
Cash and cash equivalents at end
of period $ 1,234 $ 3,586 $ 1,234 $ 3,586
======= ======= ======= =======




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,
--------------- ---------------
2005 2004 2005 2004
------ ------ ------ ------

Cash provided by operating activities $ 839 $ 766 $2,442 $2,253

Expenditures for property, plant and
equipment (228) (226) (684) (629)
------ ------ ------ ------

Free cash flow $ 611 $ 540 $1,758 $1,624
====== ====== ====== ======




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.