HONEYWELL INTERNATIONAL INC - 10-K Annual Report

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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, 2003

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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

101 Columbia Road
Morris Township, New Jersey 07962
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(Address of principal executive
offices) (Zip Code)

Registrant's telephone number, including area code (973) 455-2000

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, par value $1 per share* New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
Zero Coupon Serial Bonds due 2009 New York Stock Exchange
9 1/2% Debentures due June 1, 2016 New York Stock Exchange

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* The common stock is also listed for trading on the London stock exchange.

Securities registered pursuant to Section 12(g) of the Act: None

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No _

The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $23.1 billion at June 30, 2003.

There were 858,794,651 shares of Common Stock outstanding at February 27, 2004.

Documents Incorporated by Reference
Part I and II: Annual Report to Shareowners for the Year Ended December 31,
2003.

Part III: Proxy Statement for Annual Meeting of Shareowners to be held
April 26, 2004.

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TABLE OF CONTENTS

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This report contains certain statements that may be deemed 'forward-looking
statements' within the meaning of Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical fact, that address
activities, events or developments that we or our management intends, expects,
projects, believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are based upon certain assumptions
and assessments made by our management in light of their experience and their
perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. The
forward-looking statements included in this report are also subject to a number
of material risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting our operations,
markets, products, services and prices. Such forward-looking statements are not
guarantees of future performance, and actual results, developments and business
decisions may differ from those envisaged by such forward-looking statements.

PART I.

Item 1. Business

Honeywell International Inc. (Honeywell) is a diversified technology and
manufacturing company, serving customers worldwide with aerospace products and
services, control, sensing and security technologies for buildings, homes and
industry, automotive products, specialty chemicals, fibers, and electronic and
advanced materials. Honeywell was incorporated in Delaware in 1985.

We maintain an internet website at http://www.honeywell.com. Our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and any amendments to those reports, are available free of charge on
our website under the heading 'Investor Relations' (see 'SEC Filings')
immediately after they are filed with, or furnished to, the Securities and
Exchange Commission (SEC). Honeywell's Code of Business Conduct, Corporate
Governance Guidelines and Charters of the Committees of the Board of Directors
are also available, free of charge, on our website under the heading 'Investor
Relations' (see 'Corporate Governance'), or by writing to Honeywell, 101
Columbia Road, Morris Township, New Jersey 07962, c/o Vice President and
Corporate Secretary. Honeywell's Code of Business Conduct applies to all
Honeywell directors, officers (including the Chief Executive Officer, Chief
Financial Officer and Controller) and employees.

Major Businesses

We globally manage our business operations through strategic business units,
which have been aggregated under four reportable segments: Aerospace, Automation
and Control Solutions, Specialty Materials and Transportation Systems. Financial
information related to our reportable segments is included in Note 23 of Notes
to Financial Statements in our 2003 Annual Report to Shareowners which is
incorporated herein by reference.

Following is further information about our four reportable segments which
are comprised of various strategic business units and product classes that serve
multiple end markets:

Aerospace Sales

Our sales to aerospace customers were 38, 40 and 41 percent of our total
sales in 2003, 2002 and 2001, respectively. Our sales to commercial aerospace
original equipment manufacturers were 7, 9 and 12 percent of our total sales in
2003, 2002 and 2001, respectively. If there were a large decline in sales of
aircraft that use our components, operating results could be negatively
impacted. In addition, our sales to commercial aftermarket customers of
aerospace products and services were 15, 16 and 16 percent of our total sales in
2003, 2002 and 2001, respectively. If there were a large decline in the number
of global flying hours or landings for aircraft that use our components or
services, operating results could be negatively impacted. The terrorist attacks
on September 11, 2001 resulted in an abrupt downturn in the aviation industry
which was already negatively impacted by a weak economy. This dramatic downturn
in the commercial air transport industry continued to adversely impact the
operating results of our Aerospace segment in 2003.

U.S. Government Sales

Sales to the U.S. Government (principally by our Aerospace segment), acting
through its various departments and agencies and through prime contractors,
amounted to $2,595, $2,277 and $2,491 million in 2003, 2002 and 2001,
respectively, which included sales to the U.S. Department of Defense, as a prime
contractor and subcontractor, of $2,269, $1,833 and $1,631 million in 2003, 2002
and 2001, respectively. U.S. defense spending increased in 2003 and is also
expected to increase in 2004.

In addition to normal business risks, companies engaged in supplying
military and other equipment to the U.S. Government are subject to unusual
risks, including dependence on Congressional appropriations and administrative
allotment of funds, changes in governmental procurement legislation and
regulations and other policies that may reflect military and political
developments, significant changes in contract scheduling, complexity of designs
and the rapidity with which they become obsolete, necessity for constant design
improvements, intense competition for U.S. Government business necessitating
increases in time and investment for design and development, difficulty of
forecasting costs and schedules when bidding on developmental and highly
sophisticated technical work and other factors characteristic of the industry.
Changes are customary over the life of U.S. Government contracts, particularly
development contracts, and generally result in adjustments of contract prices.

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We, like other government contractors, are subject to government
investigations of business practices and compliance with government procurement
regulations. Although such regulations provide that a contractor may be
suspended or barred from government contracts under certain circumstances, and
the outcome of pending government investigations cannot be predicted with
certainty, we are not currently aware of any such investigations that we expect,
individually or in the aggregate, will have a material adverse effect on us. In
addition, we have a proactive business compliance program designed to ensure
compliance and sound business practices.

Backlog

Our total backlog at year-end 2003 and 2002 was $7,191 and $7,332 million,
respectively. We anticipate that approximately $5,573 million of the 2003
backlog will be filled in 2004. We believe that backlog is not necessarily a
reliable indicator of our future sales because a substantial portion of the
orders constituting this backlog may be canceled at the customer's option.

Competition

We are subject to active competition in substantially all product and
service areas. Competition is expected to continue in all geographic regions.
Competitive conditions vary widely among the thousands of products and services
provided by us, and vary country by country. Depending on the particular
customer or market involved, our businesses compete on a variety of factors,
such as price, quality, reliability, delivery, customer service, performance,
applied technology, product innovation and product recognition. Brand identity,
service to customers and quality are generally important competitive factors for
our products and services, and there is considerable price competition. Other
competitive factors for certain products include breadth of product line,
research and development efforts and technical and managerial capability. While
our competitive position varies among our products and services, we believe we
are a significant competitor in each of our major product and service classes.
However, a number of our products and services are sold in competition with
those of a large number of other companies, some of which have substantial
financial resources and significant technological capabilities. In addition,
some of our products compete with the captive component divisions of original
equipment manufacturers.

International Operations

We are engaged in manufacturing, sales, service and research and development
mainly in the United States, Europe, Canada, Asia and Latin America. U.S.
exports and foreign manufactured products are significant to our operations.
U.S. exports comprised 10 percent of our total net sales in both 2003 and 2002.
Foreign manufactured products and services, mainly in Europe, were 34 and 30
percent of our total net sales in 2003 and 2002, respectively.

Our international operations, including U.S. exports, are potentially
subject to a number of unique risks and limitations, including: fluctuations in
currency value; exchange control regulations; wage and price controls;
employment regulations; foreign investment laws; import and trade restrictions,
including embargoes; and governmental instability. However, we have limited
exposure in high risk countries and have taken action to mitigate these risks.

Approximately 19 percent of total net sales of Aerospace-related products
and services were exports of U.S. manufactured products and systems and
performance of services such as aircraft repair and overhaul. Exports were
principally made to Europe, Asia and Canada. Foreign manufactured products and
services comprised 14 percent of total Aerospace net sales.

Approximately 2 percent of total net sales of Automation and Control
Solutions products were exports of U.S. manufactured products. Foreign
manufactured products and services accounted for 48 percent of total net sales
of Automation and Control Solutions. The principal manufacturing facilities
outside the U.S. are in Europe, with less significant operations in Asia and
Canada.

Approximately 12 percent of total net sales of Specialty Materials were
exports of U.S. manufactured products. Exports were principally made to Asia,
Europe, Latin America and Canada. Foreign manufactured products comprised 28
percent of total net sales of Specialty Materials. The principal manufacturing
facilities outside the U.S. are in Europe, with less significant operations in
Asia and Canada.

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Exports of U.S. manufactured products comprised 1 percent of total net sales
of Transportation Systems products. Foreign manufactured products accounted for
62 percent of total net sales of Transportation Systems. The principal
manufacturing facilities outside the U.S. are in Europe, with less significant
operations in Asia, Latin America and Canada.

Raw Materials

The principal raw materials used in our operations are generally readily
available. We experienced no significant or unusual problems in the purchase of
key raw materials and commodities in 2003. We are not dependent on any one
supplier for a material amount of our raw materials. However, we are highly
dependent on our suppliers and subcontractors in order to meet commitments to
our customers. In addition, many major components and product equipment items
are procured or subcontracted on a sole-source basis with a number of domestic
and foreign companies. We maintain a qualification and performance surveillance
process to control risk associated with such reliance on third parties. While we
believe that sources of supply for raw materials and components are generally
adequate, it is difficult to predict what effects shortages or price increases
may have in the future. The costs of certain key raw materials, including
natural gas and benzene, in our Specialty Materials' business were at
historically high levels in 2003 and are expected to remain at those levels in
2004. Based on current volume usage, a 10 percent increase in the year-end price
of natural gas and benzene would increase our costs by $12 and $15 million,
respectively. At present, we have no reason to believe a shortage of raw
materials will cause any material adverse impact during 2004.

Patents, Trademarks, Licenses and Distribution Rights

Our business as a whole, and that of our strategic business units, are not
dependent upon any single patent or related group of patents, or any licenses or
distribution rights. We own, or are licensed under, a large number of patents,
patent applications and trademarks acquired over a period of many years, which
relate to many of our products or improvements to those products and which are
of importance to our business. From time to time, new patents and trademarks are
obtained, and patent and trademark licenses and rights are acquired from others.
We also have distribution rights of varying terms for a number of products and
services produced by other companies. In our judgment, those rights are adequate
for the conduct of our business. We believe that, in the aggregate, the rights
under our patents, trademarks and licenses are generally important to our
operations, but we do not consider any patent, trademark or related group of
patents, or any licensing or distribution rights related to a specific process
or product to be of material importance in relation to our total business.

We have registered trademarks for a number of our products, including such
consumer brands as Honeywell, Prestone, FRAM, Anso, Autolite, Bendix King and
Garrett.

Research and Development

Our research activities are directed toward the discovery and development of
new products and processes, improvements in existing products and processes, and
the development of new uses for existing products.

Research and development expense totaled $751, $757 and $832 million in
2003, 2002 and 2001, respectively. The decrease in research and development
expense in 2002 compared with 2001 related mainly to lower spending by our
Aerospace segment due primarily to program completions and fewer new program
launches by original equipment manufacturers. Customer-sponsored (principally
the U.S. Government) research and development activities amounted to an
additional $608, $603 and $697 million in 2003, 2002 and 2001, respectively.

Environment

We are subject to various federal, state and local government requirements
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment. It is our policy to comply with these
requirements, and we believe that, as a general matter, our policies, practices
and procedures are properly designed to prevent unreasonable risk of
environmental damage, and of resulting financial liability, in connection with
our business. Some risk of environmental damage is, however, inherent in some of
our operations and products, as it is with other companies engaged in similar
businesses.

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We are and have been engaged in the handling, manufacture, use and disposal
of many substances classified as hazardous or toxic by one or more regulatory
agencies. We believe that, as a general matter, our policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and personal injury, and that our handling, manufacture, use and disposal
of these substances are in accord with environmental and safety laws and
regulations. It is possible, however, that future knowledge or other
developments, such as improved capability to detect substances in the
environment or increasingly strict environmental laws and standards and
enforcement policies, could bring into question our handling, manufacture, use
or disposal of these substances.

Among other environmental requirements, we are subject to the federal
superfund law, and similar state laws, under which we have been designated as a
potentially responsible party that may be liable for cleanup costs associated
with various hazardous waste sites, some of which are on the U.S. Environmental
Protection Agency's superfund priority list. Although, under some court
interpretations of these laws, there is a possibility that a responsible party
might have to bear more than its proportional share of the cleanup costs if it
is unable to obtain appropriate contribution from other responsible parties, we
have not had to bear significantly more than our proportional share in multi-
party situations taken as a whole.

In the matter entitled Interfaith Community Organization, et al. v.
Honeywell International Inc., et al., the United States District Court for the
District of New Jersey held in May 2003 that a predecessor Honeywell site
located in Jersey City, New Jersey constituted an imminent and substantial
endangerment and ordered Honeywell to conduct the excavation and transport for
offsite disposal of approximately one million tons of chromium residue present
at the site. Honeywell strongly disagrees with the Court's determinations and
has appealed the Court's decision to the Third Circuit Court of Appeals. Per the
Appeals Court's order, the parties are engaged in mediation. In October 2003,
the District Court denied Honeywell's motion for a stay of certain aspects of
its May 2003 order, and we are considering whether to appeal such ruling. The
site at issue is one of twenty-one sites located in Jersey City, New Jersey
which are the subject of an Administrative Consent Order (ACO) entered into with
the New Jersey Department of Environmental Protection (NJDEP) in 1993. Under the
ACO, Honeywell agreed to study and remediate these sites in accordance with
NJDEP's directions, provided that the total costs of such studies and
remediation do not exceed $60 million. Honeywell has cooperated with the NJDEP
under the ACO and believes that decisions regarding site cleanups should be made
by the NJDEP under the ACO. We are confident that proceeding under the ACO will
ensure a safe remediation and allow the property to be placed back into
productive use much faster and at a cost significantly less than the remedies
required by the Court's order. We have not completed development of a remedial
action plan for the excavation and offsite disposal directed under the Court's
order and therefore are unable to estimate the cost of such actions. At trial,
plaintiff's expert testified that the excavation and offsite disposal cost might
be $400 million. However, there are significant variables in the implementation
of the Court's order and depending on the method of implementation chosen, the
estimate could increase or decrease. Prior to 2003, provisions were made in our
financial statements as to remedial costs consistent with the ACO and during the
three months ended June 30, 2003 we provided for additional costs which are
likely to be incurred during the pendency of our appeal, which provisions do not
assume excavation and offsite removal of chromium from the site. There are
alternative outcomes and remedies beyond the scope of the ACO that could result
from the remanding, reversal or replacement of the Court's decision and order.
At this time, we can neither identify a probable alternative outcome nor
reasonably estimate the cost of an alternative remedy. Although we expect the
Court's decision and order to be remanded, reversed or replaced, should the
remedies prescribed in the Court's decision and order ultimately be upheld, such
outcome could have a material adverse impact on our consolidated results of
operations or operating cash flows in the periods recognized or paid. We do not
expect that this matter will have a material adverse effect on our consolidated
financial position.

In accordance with a 1992 consent decree with the State of New York,
Honeywell is studying environmental conditions in and around Onondaga Lake (the
Lake), in Syracuse, New York. The purpose of the study is to identify, evaluate
and propose remedial measures that can be taken to remedy historic industrial
contamination in the Lake. A predecessor company to Honeywell operated a

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chemical plant which is alleged to have contributed mercury and other
contaminants to the Lake and certain surrounding areas. In May 2003, Honeywell
submitted to the New York State Department of Environmental Conservation (DEC) a
draft Feasibility Study for the Lake and certain surrounding areas. In November
2003, the DEC issued formal comments on the Feasibility Study. Those comments
include a request for further evaluation of remedies for the Lake and
surrounding areas. Accordingly, pursuant to the consent decree, Honeywell is
required to submit a revised Feasibility Study on or before May 3, 2004.
Provisions have been made in our financial statements based on our expected
revisions to our Feasibility Study. We do not expect that this matter will have
a material adverse effect on our consolidated financial position. However,
should the DEC ultimately require a substantially more extensive remedy than
that expected to be proposed in the revised Feasibility Study and should
Honeywell agree to undertake such a remedy, such outcome could have a material
adverse impact on our consolidated results of operations and operating cash
flows in the periods recognized or paid.

During 2003, three incidents occurred at our Baton Rouge, Louisiana chemical
plant including a release of chlorine, a release of antimony pentachloride which
resulted in an employee fatality, and an employee exposure to hydrofluoric acid.
As a result of these incidents, the United States Environmental Protection
Agency (USEPA), Occupational Health and Safety Administration (OSHA), the
Chemical Safety Board and state and local agencies commenced investigations. A
number of potential government claims have been settled, including a $110,000
penalty paid to OSHA for citations arising from the incidents. The USEPA and
Chemical Safety Board investigations are ongoing however no charges have been
filed or claims asserted. Honeywell has been served with several civil lawsuits.
We do not expect that these matters will have a material adverse effect on our
consolidated financial position, consolidated results of operations or operating
cash flows.

Further information regarding environmental matters is included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations of our 2003 Annual Report to Shareowners which is incorporated
herein by reference.

Employees

We have approximately 108,000 employees at December 31, 2003, of which
approximately 61,000 were located in the United States.

Item 2. Properties

We have over 1,000 locations consisting of plants, research laboratories,
sales offices and other facilities. Our headquarters and administrative complex
is located at Morris Township, New Jersey. Our plants are generally located to
serve large marketing areas and to provide accessibility to raw materials and
labor pools. Our properties are generally maintained in good operating
condition. Utilization of these plants may vary with sales to customers and
other business conditions; however, no major operating facility is significantly
idle. We own or lease warehouses, railroad cars, barges, automobiles, trucks,
airplanes and materials handling and data processing equipment. We also lease
space for administrative and sales staffs. Our properties and equipment are in
good operating condition and are adequate for our present needs. We do not
anticipate difficulty in renewing existing leases as they expire or in finding
alternative facilities.

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Our principal plants, which are owned in fee unless otherwise indicated, are
as follows:

Aerospace
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Glendale, AZ South Bend, IN Albuquerque, NM
(partially leased) Olathe, KS Rocky Mount, NC
Phoenix, AZ Minneapolis, MN Urbana, OH
Tempe, AZ Plymouth, MN Redmond, WA (leased)
Tucson, AZ Teterboro, NJ Toronto, Canada
Torrance, CA
(partially leased)
Clearwater, FL

Automation and Control Solutions
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Phoenix, AZ Northford, CT Golden Valley, MN
San Diego, CA Freeport, IL Juarez, Mexico

Specialty Materials
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Baton Rouge, LA Pottsville, PA Hopewell, VA
Geismar, LA Columbia, SC Seelze, Germany
Moncure, NC Chesterfield, VA Longlaville, France

Transportation Systems
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Mexicali, Mexico Thaon-Les-Vosges, France Atessa, Italy
Glinde, Germany Skelmersdale, United
Kingdom

Item 3. Legal Proceedings

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 a discussion of environmental, asbestos and other litigation matters in
Note 21 of Notes to Financial Statements of our 2003 Annual Report to
Shareowners which is incorporated herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable.

Executive Officers of the Registrant

The executive officers of Honeywell, listed as follows, are elected annually
by the Board of Directors. There are no family relationships among them.

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(a) Also a Director.

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Part II.

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities

Market and dividend information for Honeywell's common stock is included in
Note 26 of Notes to Financial Statements of our 2003 Annual Report to
Shareowners which is incorporated herein by reference.

The number of record holders of our common stock at December 31, 2003 was
88,454.

The following table summarizes Honeywell's purchases of its common stock,
par value $1 per share, for the year ending December 31, 2003:

Issuer Purchases of Equity Securities

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(A) In November 2003 Honeywell announced its intention to repurchase sufficient
outstanding shares of its common stock to offset the dilutive impact of
employee stock based compensation plans, including future option exercises,
restricted unit vesting and matching contributions under our savings plans.
We estimate share repurchases of approximately 10 million shares annually.

Item 6. Selected Financial Data

Selected Financial Data on page 26 of our 2003 Annual Report to Shareowners
is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

'Management's Discussion and Analysis' on pages 27 through 44 of our 2003
Annual Report to Shareowners is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Information relating to market risk is included under the caption 'Financial
Instruments' in 'Management's Discussion and Analysis' on pages 43 and 44 of our
2003 Annual Report to Shareowners, and such information is incorporated herein
by reference.

Item 8. Financial Statements and Supplementary Data

Our consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated February 5, 2004, appearing on pages 45 through
76 of our 2003 Annual Report to Shareowners, are incorporated herein by
reference. With the exception of the aforementioned information and the
information incorporated by reference in Items 1, 3, 5, 6, 7 and 7A, the 2003
Annual Report to Shareowners is not to be deemed filed as part of this
Annual Report on Form 10-K .

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not Applicable.

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Item 9A. Controls and Procedures

Honeywell management, including the Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
Annual Report on Form 10-K. Based upon that evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that such disclosure controls
and procedures were effective as of the end of the period covered by this Annual
Report on Form 10-K in alerting them on a timely basis to material information
relating to Honeywell required to be included in Honeywell's periodic filings
under the Exchange Act. There have been no changes that have materially
affected, or are reasonably likely to materially affect, Honeywell's internal
control over financial reporting that have occurred during the period covered by
this Annual Report on Form 10-K.

Part III.

Item 10. Directors and Executive Officers of the Registrant

Information relating to the Directors of Honeywell, as well as information
relating to compliance with Section 16(a) of the Securities Exchange Act of
1934, will be contained in our definitive Proxy Statement involving the election
of the Directors which will be filed with the SEC pursuant to Regulation 14A not
later than 120 days after December 31, 2003, and such information is
incorporated herein by reference. Certain other information relating to the
Executive Officers of Honeywell appears in Part I of this Annual Report on
Form 10-K under the heading 'Executive Officers of the Registrant'.

The members of the Audit Committee of our Board of Directors are: Russell E.
Palmer (Chair), Marshall N. Carter, James J. Howard, Eric K. Shinseki, John R.
Stafford, and Michael W. Wright. The Board has determined that Mr. Palmer
satisfies the 'audit committee financial expert' criteria established by the SEC
and the 'accounting or related financial management expertise' criteria
established by the New York Stock Exchange (NYSE). All members of the Audit
Committee are 'independent' as that term is defined in applicable SEC Rules and
NYSE listing standards.

Honeywell's Code of Business Conduct is available, free of charge, on our
website under the heading 'Investor Relations' (see 'Corporate Governance'), or
by writing to Honeywell, 101 Columbia Road, Morris Township, New Jersey 07962,
c/o Vice President and Corporate Secretary. Honeywell's Code of Business Conduct
applies to all Honeywell directors, officers (including the Chief Executive
Officer, Chief Financial Officer and Controller) and employees. Amendments to or
waivers of the Code of Business Conduct granted to any of Honeywell's directors
or executive officers will be published on our website within five business days
of such amendment or waiver.

Item 11. Executive Compensation

Information relating to executive compensation is contained in the Proxy
Statement referred to above in 'Item 10. Directors and Executive Officers of the
Registrant,' and such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information relating to security ownership of certain beneficial owners and
management is contained in the Proxy Statement referred to above in 'Item 10.
Directors and Executive Officers of the Registrant,' and such information is
incorporated herein by reference.

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Equity Compensation Plans

Information about our equity compensation plans is as follows:

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(1) Equity compensation plans approved by shareowners that are included in
column (a) of the table are the 2003 Stock Incentive Plan of Honeywell
International Inc. and its Affiliates (the 2003 Stock Incentive Plan)
(524,500 common shares to be issued for options; 1,391,000 restricted units
subject to attainment of certain performance goals or continued employment;
and 543,600 deferred restricted units of previously earned and vested awards
under prior plans approved by shareowners where delivery of shares has been
deferred); the 1993 Stock Plan for Employees of Honeywell International Inc.
and its Affiliates (47,254,305 common shares to be issued for options;
190,725 shares to be issued for SARs; and 1,712,513 restricted units subject
to attainment of certain performance goals or continued employment); the
1985 Stock Plan for Employees of AlliedSignal Inc. and its Subsidiaries
(40,000 common shares to be issued for options); and the Stock Plan for
Non-Employee Directors of Honeywell International Inc. and predecessor plans
(154,000 common shares to be issued for options and 51,000 shares of
restricted stock). The 2003 Stock Incentive Plan has issued 628,830 growth
plan units for the two-year performance cycle beginning January 1, 2003 and
ending December 31, 2004. Growth plan units are denominated in cash units
and the percentage of such units that are payable depends upon the
achievement of pre-established performance goals during the two-year
performance cycle relating to growth in earnings per share, revenue and
return on investment. The value of any growth plan unit is not determinable
and may be paid in cash or shares of Honeywell common stock. Growth plan
units are therefore not included in the table above.

(2) Column (b) does not include any exercise price for restricted units or
growth plan units granted to employees or non-employee directors under
equity compensation plans approved by shareowners. Restricted units do not
have an exercise price because their value is dependent upon attainment of
certain performance goals or continued employment or service and they are
settled for shares of Honeywell common stock on a one-for-one basis. Growth
plan units are denominated in cash units and the ultimate value of the award
is dependent upon attainment of certain performance goals.

(3) The number of shares that may be issued under the 2003 Stock Incentive Plan
as of December 31, 2003 is 27,942,430 except that the following additional
shares under the 2003 Stock Incentive Plan (or any Prior Plan as defined in
the 2003 Stock Incentive Plan) may again be available for issuance: shares
that are settled for cash, expire, are tendered in satisfaction of an option
exercise price or tax withholding obligations, shares reacquired with cash
tendered in satisfaction of an option exercise price or with monies
attributable to any tax deduction enjoyed by Honeywell to the exercise of an
option, and shares under any outstanding awards assumed under any equity
compensation plan of an entity acquired by Honeywell. The remaining 172,000
shares included in column (c) are shares remaining for future grants under
the Stock Plan for Non-Employee Directors of Honeywell International Inc.
(footnotes continued on next page)

16

(footnotes continued from previous page)

(4) Equity compensation plans not approved by shareowners that are included in
the table are the Supplemental Non-Qualified Savings Plans for Highly
Compensated Employees of Honeywell International Inc. and its Subsidiaries,
the AlliedSignal Incentive Compensation Plan for Executive Employees of
AlliedSignal Inc. and its Subsidiaries, and the Deferred Compensation Plan
for Non-Employee Directors of Honeywell International Inc.

The Supplemental Non-Qualified Savings Plans for Highly Compensated
Employees of Honeywell International Inc. and its Subsidiaries are unfunded,
nonqualified plans that provide benefits equal to the employee deferrals and
company matching allocations that would have been provided under Honeywell's
U.S. tax-qualified savings plan if the Internal Revenue Code limitations on
compensation and contributions did not apply. The company matching
contribution is credited to participants' accounts in the form of notional
shares of Honeywell common stock. Additional notional shares are credited to
participants' accounts equal to the value of any cash dividends payable on
actual shares of Honeywell common stock. The notional shares are distributed
in the form of actual shares of Honeywell common stock when payments are
made to participants under the plans.

The AlliedSignal Incentive Compensation Plan for Executive Employees of
AlliedSignal Inc. and its Subsidiaries was a cash incentive compensation
plan maintained by AlliedSignal Inc. This plan has expired. Employees were
permitted to defer receipt of a cash bonus payable under the plan and invest
the deferred bonus in notional shares of Honeywell common stock. The
notional shares are distributed in the form of actual shares of Honeywell
common stock when payments are made to participants under the plan. No
further deferrals can be made under this plan. The number of Honeywell
securities that remain to be issued under this expired plan is 55,910.

The Deferred Compensation Plan for Non-Employee Directors of Honeywell
International Inc. provides for mandatory and elective deferral of certain
payments to non-employee directors. Mandatory deferrals are invested in
notional shares of Honeywell common stock. Directors may also invest any
elective deferrals in notional shares of Honeywell common stock. Additional
notional shares are credited to participant accounts equal to the value of
any cash dividends payable on actual shares of Honeywell common stock.
Notional shares of Honeywell common stock are converted to an equivalent
amount of cash at the time the distributions are made from the plan to
directors. However, two former directors are entitled to receive periodic
distributions of actual shares of Honeywell common stock that were
notionally allocated to their accounts in years prior to 1992. The number of
Honeywell securities that remain to be issued to these two directors is
4,772.

(5) Column (b) does not include any exercise price for notional shares allocated
to employees under Honeywell's equity compensation plans not approved by
shareowners because all of these shares are notionally allocated as a
matching contribution under the non-qualified savings plans or as a notional
investment of deferred bonuses or fees under the cash incentive compensation
and directors' plans as described in note 4 and are only settled for shares
of Honeywell common stock on a one-for-one basis.

(6) No securities are available for future issuance under the AlliedSignal
Incentive Compensation Plan for Executive Employees of AlliedSignal Inc. and
its Subsidiaries and the Deferred Compensation Plan for Non-Employee
Directors of Honeywell International Inc. The cash incentive compensation
plan has expired. All notional investments in shares of Honeywell common
stock are converted to cash when payments are made under the directors' plan
(other than with respect to 4,772 shares of Honeywell common stock included
in column (a) that is payable to two former directors). The amount of
securities available for future issuance under the Supplemental
Non-Qualified Savings Plan for Highly Compensated Employees of Honeywell
International Inc. and its Subsidiaries is not determinable because the
number of securities that may be issued under these plans depends upon the
amount deferred to the plans by participants in future years.

The table does not contain information for the following plans and arrangements:

Employee benefit plans of Honeywell intended to meet the requirements
of Section 401(a) of the Internal Revenue Code and a small number of
foreign employee benefit plans which are similar to such Section 401(a)
plans.

17

Equity compensation plans maintained by Honeywell Inc. immediately
prior to the merger of Honeywell Inc. and AlliedSignal Inc. on
December 1, 1999. The right to receive Honeywell International Inc.
securities was substituted for the right to receive Honeywell Inc.
securities under these plans. No new awards have been granted under
these plans after the merger date. The number of shares to be issued
under these plans upon exercise of outstanding options, warrants and
rights is 6,280,816 and their weighted-average exercise price is
$41.88.

The Honeywell Global Employee Stock Purchase Plan. This plan is
maintained solely for eligible employees of participating non-U.S.
affiliates. Eligible employees can contribute between 2 and 8 percent
of base pay from January through October of each year to purchase
shares of Honeywell common stock in November of that year at a 15
percent discount. Honeywell has historically purchased shares through
non-dilutive, open market purchases and intends to continue this
practice. Employees purchased 343,484 shares of common stock at $20.349
per share in 2002 and 351,283 shares of common stock at $21.233 per
share in 2003.

Item 13. Certain Relationships and Related Transactions

Information relating to certain relationships and related transactions is
contained in the Proxy Statement referred to above in 'Item 10. Directors and
Executive Officers of the Registrant,' and such information is incorporated
herein by reference.

Item 14. Principal Accountant Fees and Services

Information relating to fees paid to and services performed by
PricewaterhouseCoopers LLP in 2003 and 2002 and our Audit Committee's
pre-approval policies and procedures with respect to non-audit services are
contained in the Proxy Statement referred to above in 'Item 10. Directors and
Executive Officers of the Registrant,' and such information is incorporated
herein by reference.

Part IV.

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

All other financial statement schedules have been omitted because they are
not applicable to us or the required information is shown in the consolidated
financial statements or notes thereto.

(a)(3.) Exhibits

See the Exhibit Index on pages 20 through 22 of this Annual Report on
Form 10-K.

(b) Reports on Form 8-K

During the three months ended December 31, 2003, Current Reports on Form 8-K
were filed on October 16, reporting third quarter 2003 financial results and on
November 17, reporting the expiration of a letter of intent to acquire our
automotive Bendix Friction Materials business.

18

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.

HONEYWELL INTERNATIONAL INC.

March 4, 2004 By: /s/ JOHN J. TUS
-------------------------------------
John J. Tus
Vice President and Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:

March 4, 2004

19

EXHIBIT INDEX

- ---------

The Exhibits identified above with an asterisk(*) are management contracts
or compensatory plans or arrangements.

22

REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
HONEYWELL INTERNATIONAL INC.

Our audits of the consolidated financial statements referred to in our
report dated February 5, 2004 appearing in the 2003 Annual Report to Shareowners
of Honeywell International Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in
Item 15(a)(2) of this Form 10-K. In our opinion, the Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.

/s/ PricewaterhouseCoopers LLP

Florham Park, New Jersey
February 5, 2004

23

HONEYWELL INTERNATIONAL INC

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Three Years Ended December 31, 2003
(In millions)

- ---------

(1) Represents uncollectible accounts written off, less recoveries, translation
adjustments and reserves acquired.

24

STATEMENT OF DIFFERENCES
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