===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - JULY 16, 1999
(June 4, 1999)
ALLIEDSIGNAL INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 1-8974 22-2640650
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction Identification
of incorporation) Number)
101 COLUMBIA ROAD, P.O. BOX 4000, MORRISTOWN, NEW JERSEY 07962-2497
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 455-2000
===========================================================================
Item 5. Other Events.
The following supplements the information contained in the
Current Report on Form 8-K (the "Original Form 8-K") filed by AlliedSignal
Inc., a Delaware corporation (the "Company"), with the SEC on June 8, 1999
regarding the Company's proposed merger (the "Merger") with Honeywell Inc.,
a Delaware corporation ("Honeywell"), pursuant to a merger agreement dated
as of June 4, 1999 (the "Merger Agreement").
As noted in the Original Form 8-K, on June 4, 1999, the Company
and Honeywell signed the Merger Agreement pursuant to which Honeywell
agreed to merge with one of the Company's wholly-owned subsidiaries and, as
a result, become a wholly-owned subsidiary of the Company. In the merger,
each outstanding share of common stock of Honeywell will be converted into
a right to receive 1.875 shares of common stock of the Company. At the
effective time of the Merger, the Company will change its name to
"Honeywell International Inc."
In addition, Michael R. Bonsignore, Chairman of the Board and
Chief Executive Officer of Honeywell, is to become Chief Executive Officer
of the combined company at the effective time of the Merger, and Mr.
Bonsignore is to become Chairman of the Board of the combined company on
April 1, 2000, or upon the earlier retirement of Lawrence A. Bossidy, the
Company's current Chairman of the Board and Chief Executive Officer.
The Merger is subject to numerous conditions, including:
- approval of the Merger by the shareowners of the Company and
Honeywell;
- expiration or termination of the relevant waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act;
- receipt of all material regulatory approvals that are
required to complete the Merger, including the approval of
the European Commission;
- the Company's and Honeywell's independent public accountants
confirming that the Merger will qualify for pooling of
interests accounting treatment;
- the Company's and Honeywell's attorneys having issued
opinions that the proposed Merger will qualify as a tax-free
reorganization;
- there being no legal proceeding existing in which a
governmental agency is seeking to require the combined
company to divest assets or to limit its ability to conduct
business to an extent that could be reasonably expected to
have a material adverse effect on the combined company; and
- there being no law or court order in effect that would be
reasonably expected to have a material adverse effect on the
combined company.
Based on the Company's and Honeywell's review of and assumptions
about the operations and infrastructure of the two companies, as indicated
in the Original Form 8-K, the Company and Honeywell expect that the
combined company will realize annual cost savings of approximately $250
million in 2000, $400 million in 2001 and $500 million in 2002. Based on
these estimates and the number of shares estimated to be outstanding
immediately following the Merger, the Company and Honeywell expect these
cost savings to have a benefit of approximately $.17 per share in 2000,
$.26 per share in 2001 and $.32 per share in 2002. The Company and
Honeywell expect to realize the approximately $500 million in cost savings
in 2002 as follows:
- $150 million, by accelerating implementation of the
Company's "Six Sigma" initiative to achieve defect-free
performance in manufacturing and other business processes,
and applying this initiative to Honeywell's business, to
further enhance the quality of the products and services of
the combined company and increase productivity;
- $100 million, by achieving procurement and purchasing
efficiencies by utilizing the Company's and Honeywell's
combined purchasing capabilities, centralizing the two
companies' purchasing processes and benefiting from the
added buying efficiencies that the Company expects as a
result of higher volume purchases;
- $90 million, by rationalizing corporate overhead costs
through the elimination of redundant corporate functions and
facilities;
- $90 million, by reducing overhead in the combined company's
aerospace businesses by eliminating redundancies in the
sales and administrative functions and field service
operations of these businesses;
- $30 million, by integrating the two companies' research and
development programs and achieving research and development
efficiencies;
- $20 million, by reducing the combined company's
infrastructure costs by integrating the Company's and
Honeywell's international operations and eliminating
infrastructure redundancies; and
- $20 million, by providing to Honeywell's business units
administrative services in the areas of accounting, human
resources, travel, information technology and training
through the Company's centralized shared services
organization, and eliminating similar services currently
provided by Honeywell to its business units.
In addition, based on separate company estimates of earnings and
free cash flow generated in the ordinary course of business plus the
expected cost savings expected as a result of the elimination of
redundancies and as indicated above, the Company expects that earnings per
share will grow at 15% annually or more, and that free cash flow will be
over $2 billion in 2002.
While the Company believes that the estimated cost savings,
earnings per share growth and free cash flow will be able to be achieved,
the Company can give no assurance that they will be actually realized.
Specifically, the Company's success in realizing the estimated benefits of
the Merger depends on the quality and speed of the integration of the two
companies. The Company and Honeywell have already established an
integration team that has identified specific areas for cost savings and is
continuing to plan the integration of the two companies. However, the
Company may not realize the estimated benefits from integrating the
operations of the two companies following the completion of the Merger as
fully or as quickly as the Company expects for a number of reasons,
including:
- the large size and worldwide presence and the resulting
complexity of the combined company;
- errors in planning or integration;
- unexpected events such as major changes in the markets in
which the two companies operate; and
- conditions regulatory authorities may impose in connection
with granting approval of the Merger, such as divestiture of
product lines.
The Company and Honeywell estimate that the combined company will
incur significant costs for severance and other integration-related
expenses, including the elimination of duplicate facilities and excess
capacity, operations realignment and related workforce reductions.
In addition, it is possible that the financial position or
results of operations of the combined company could be adversely affected
by two lawsuits previously brought by Litton Systems, Inc. against
Honeywell. Depending on the ultimate resolution of these lawsuits, which
allege that Honeywell is engaging in monopolistic practices in violation of
federal antitrust laws and has infringed a Litton patent, the combined
company may be required to make significant payments.
Earlier this year, a federal District Court entered a $750
million judgment against Honeywell on the antitrust claim. Although
Honeywell's obligation to satisfy this judgment is suspended pending
post-judgment motions and appeals, at this time, the Company is not able to
predict the outcome of these motions and appeals. The potential remains for
adverse judgments against Honeywell which may require the combined company
to make a significant payment and could have a material adverse impact on
the combined company's financial position or results of operations.
In January 1995, a $1.2 billion jury verdict rendered against
Honeywell in the patent infringement suit was set aside by a federal
District Court. On appeal, the Litton patent was found to be valid but not
literally infringed by Honeywell. The matter has been returned to the
District Court before which motions to dispose of the matter are now
pending. If the District Court does not dispose of the matter, Litton may
request a jury trial to address its allegations with respect to the patent
infringement claim and other claims under the state law. If the jury finds
Honeywell liable under any of these claims, it could return another verdict
against Honeywell which could have a material adverse impact on the
combined company's financial position or results of operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
99.2* Analysts Presentations, dated June 7, 1999.
- ------------------
* Restates the corresponding exhibit in the Company's Form 8-K filed
with the Securities and Exchange Commission on June 8, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: July 16, 1999 AlliedSignal Inc.
By: /s/ Peter M. Kreindler
---------------------------------
Peter M. Kreindler
Senior Vice President,
General Counsel and Secretary
AlliedSignal Inc.
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
99.2* Analysts Presentations, dated June 7, 1999
- ------------------
* Restates the corresponding exhibit in the Company's Form 8-K filed
with the Securities and Exchange Commission on June 8, 1999
EXHIBIT 99.2
AlliedSignal Honeywell
MERGER OVERVIEW
--------------------------------------
Larry A. Bossidy
&
Michael R. Bonsignore
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Information communicated during this presentation with respect to the
financial outlook for 1999 and targets through the year 2002 is
forward-looking and subject to risks and uncertainties. For these
statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
The following is a summary of certain factors, the results of which,
if markedly different than our planning assumptions, could cause
future results to differ materially from those expressed in the
forward-looking statements:
foreign currency translation of sales denominated in other currencies which
may fluctuate adversely based on local currency valuations;
economic conditions and customer demand in regions throughout the world in
which we do business;
* risks pertaining to performance and contracts, including
dependence on the performance of third parties;
* various competitive pressures, such as new technologies,
industry consolidation and deregulation of certain
industries;
* the ability of material suppliers or key customers to reduce
or eliminate risks to their business operations arising from
the year 2000 issue;
* availability of intellectual property rights for newly
developed products; and
* significant acquisitions or divestitures.
Please refer to the companies' reports on Forms 10-Q and 10-K that are
filed with the Securities and Exchange Commission for a more detailed
discussion of these and other factors that could impact future
results.
TRANSACTION SUMMARY
Expected Closing Date: Fourth Quarter, 1999
Transaction Form: Merger
Corporate Structure: HON will become a wholly-owned
subsidiary of ALD
Name: Honeywell
Exchange Ratio: 1.875 shares of ALD to 1 HON share
Resulting Ownership: 70:30 -- ALD:HON
Financial Structure: Pooling of Interests; tax free reorganization
Board of Directors: Comprised of 15 members, 6 chosen by HON
Senior Management: Michael Bonsignore will be CEO.
Larry Bossidy will remain Chairman until
retirement in April 1, 2000.
Headquarters Location: Morristown, NJ
STRATEGIC COMBINATION
STRATEGIC RATIONALE FOR THE MERGER
* Increased scale and business diversity drive consistent earnings
* Accelerated earnings growth
* Significant sales & cost synergies in aerospace business
* Combination of ALD's strong business portfolio and operating
discipline including 6 with HON's global brand, technology and systems
& services
* Greater capability for acquisitions
* Strong strategic leadership for the future
CREATING A GLOBAL TECHNOLOGY POWERHOUSE
HONEYWELL
[picture] BUSINESSES
-----------
* Home and Building Controls
* Industrial Controls
* Space and Aviation Controls
1998 STATISTICS STRENGTHS
--------------- ---------
Sales $8.4 B * Leader In Controls
Operating Margin 11.3% * Brand Strength & Recognition
EPS $4.48 * Global and Diverse Markets
* Strong Technical Capabilities
* Operational Excellence
GLOBAL LEADER IN COMFORT AND CONTROL PRODUCTS
ALLIEDSIGNAL
[picture] BUSINESSES
-----------
* Aerospace Systems
* Turbine Technologies
* Specialty Chemicals &
Electronic Solutions
* Performance Polymers
* Transportation Products
1998 STATISTICS STRENGTHS
--------------- ---------
Sales $15.1 B * Consistent Earnings Growth
Operating Margin 13.0% * Cost Productivity
EPS $2.32 * Six Sigma
* Driven Culture
* Well Positioned Businesses
STRONG BUSINESSES WITH STRONG LEADERSHIP
MARKET VALUE OF EQUITY
[Bar graph showing market value]
($ in Billions)
$343 $74 $46 $40 $33 $30 $29 $23 $19 $13 $11 $9
GE TYC ALD/HON SIE ALD UTX EMR RTN ISYS HON ROK SCD
Market Values as of June 4, 1999
CREATES A LEADING GLOBAL INDUSTRIAL FORCE
LAST TWELVE MONTHS' REVENUES
{Bar graph showing last twelve months' revenues]
($ in Billions)
SIE GE UTX ALD/HON TYC ISYS RTN ALD SCD HON ROK
- --- --- --- ------- --- ---- --- --- --- --- ---
$68 $57 $26 $24 $21 $20 $20 $15 $9 $9 $7
SE excludes GE Capital
TYC includes AMP and US. Surgical
...WITH A SUBSTANTIAL REVENUE BASE
CREATING A BROADER-BASED COMPANY
COMBINED 1999 SALES $25B
[Pie graph showing sales by industry]
Home and Building Controls 15%
Aerospace 30%
Specialty Chem & EM 10%
Polymers 8%
Transportation 10%
Turbine 16%
Industrial Controls 11%
INCREASED DIVERSIFICATION, REDUCED RELIANCE ON ANY INDUSTRY
FINANCIAL HISTORY --
A RECORD OF PERFORMANCE
HISTORICAL PERFORMANCE - SALES GROWTH
[Bar graph showing sales growth]
AlliedSignal
94 95 96 97 98
------ ------ ------ ------ ------
Adjusted Sales Revenue* $10.4B $11.5B $12.5B $13.7B $15.1B
Sales Revenue $12.8B $14.3B $14.0B $14.5B $15.1B
CAGR = 10%*
Honeywell
94 95 96 97 98
------ ------ ------ ------ ------
Sales Revenue $6.1B $6.7B $7.3B $8.0B $8.4B
CAGR = 9%
* adjusted to exclude sales of the divested brakes strategic business
unit in 1996 and safety restraints strategic business unit in 1997
CONSISTENT HIGH GROWTH
HISTORICAL PERFORMANCE -- OPERATING MARGINS
[Bar graph showing operating margins]
AlliedSignal
94 95 96 97 98
------ ------ ------ ------ ------
Operating Margins 9.0% 9.1% 10.7% 11.4% 13.0%
Honeywell
94 95 96 97 98
------ ------ ------ ------ ------
Adjusted Operating Margin* 8.0% 8.3% 9.2% 9.9% 10.8%
Operating Margins 8.0% 8.3% 9.2% 9.9% 11.3%
* adjusted to exclude the effect of a change in accounting method
DELIVERING CONTINUOUS MARGIN IMPROVEMENT
HISTORICAL PERFORMANCE -- EARNINGS PER SHARE
[Bar graph showing earnings per share]
AlliedSignal
94 95 96 97 98
------ ------ ------ ------ ------
Earnings Per Share, diluted $1.32 $1.52 $1.74 $2.01 $2.32
CAGR = 15%
Honeywell
94 95 96 97 98
------ ------ ------ ------ ------
Adjusted Earnings Per Share,
diluted* $2.15 $2.58 $3.11 $3.65 $4.25
Earnings Per Share, diluted $2.15 $2.58 $3.11 $3.65 $4.48
* adjusted to exclude the effect of a change in accounting method
CAGR = 20%
HISTORICAL PERFORMANCE -- FREE CASH FLOW
[Bar graphs showing free cash flow]
AlliedSignal
94 95 96 97 98
$302 $322 $313 $401 $554
CAGR = 16%
Honeywell
94 95 96 97 98
$121 $219 $154 $289 $351
CAGR = 31%
CASH FLOW GROWING FASTER THAN EARNINGS
HISTORICAL PERFORMANCE -- RETURN ON EQUITY
[Bar graphs showing return on equity]
AlliedSignal
94 95 96 97 98
28.9% 26.7% 26.3% 27.4% 27.8%
Honeywell
94 95 96 97 98
15.6% 17.1% 19.7% 20.8% 22.8%
TOP TIER RETURNS ON EQUITY
FINANCIAL HIGHLIGHTS
(1998 Actuals; $ Billions) AlliedSignal Honeywell Total
Sales $15.1 $8.4 $23.5
Operating Profit 1.96 0.95 2.91
Operating Margin 13.0% 11.3% 12.4%
Net Income 1.33 0.57 1.90
Free Cash Flow $554M $351M $905M
Net Debt/Capital 26.2%* 29.5% 27.4%
* adjusted to remove the investment in AMP Incorporated and related debt
STRONG BALANCE SHEET...
SIGNIFICANT OPPORTUNITY FOR GROWTH
GEOGRAPHIC STRENGTH
[Pie graph showing Geographic Strength]
AlliedSignal Honeywell Combined
U.S. - 79% U.S. - 62% U.S. - 73%
Int'l - 21% Int'l - 38% Int'l - 27%
STRONG GLOBAL COVERAGE
VALUE CREATION --
STRATEGIC STRENGTHS
CORPORATE STRENGTHS
AlliedSignal Honeywell
------------ ---------
Strong Operating Disciplines Strategic Leadership
Advanced 6-Sigma Culture HON Quality Value Business Model
Broad Business Portfolio Broad Technology Base
Capital Availability Global Growth Opportunity
Product Manufacturing & Systems & Solution Base
Engineering Solutions
SERVICES
COMPLEMENTARY STRENGTHS -- SUPERIOR VALUE CREATION
ACCELERATING GROWTH
* Financial strength to capitalize on growth
* Accelerated development of E-commerce business models
* Enhanced cost competitiveness across the portfolio through 6-sigma
* Increased R&D leverage -- Both directions
* Broader aerospace portfolio
* Larger, more diverse service capabilities
* Increased Honeywell brand leverage
SIGNIFICANT GROWTH SYNERGIES BY LEVERAGING BEST PRACTICES
AEROSPACE REVENUE SYNERGIES
"TOTAL COCKPIT" SOLUTION
Improved Equipment Compatibility:
* Complementary Capabilities In Flight Control, Navigation And Safety
* Lower Development and Production Costs
* Safety Improvements Affordable to Regional, Business and General
Aviation Customers
Safe Operations For All Aircraft
FREE FLIGHT
Complementary Technologies and Products:
* Complete GPS Air Navigation And Safety Capability
* Airport Systems: Linking ALD Airborne Capability with HON
Ground-Based Systems
Closer to a Reality
SAFER SKIES AT A LOWER COST
AVIONICS PRODUCT MATRIX
Air Transport Bizjet/Regional Military/Space
Buyer Furnished Equip.
Radar A A A
COM/NAV A H H
GPS/MMR A H A
Recorders/Data Mgmt A A A
CMU/ACARS A A A
TCAS A A A
Seller Furnished Equip.
GPWS/EGPWS A A A
Flight Mgmt System H H H
Flight Controls H H H
IRS/AHRS H H H
Air Data H H H
Displays H H H
Flight Info Services H A
A = ALD Strength H = HON Strength
MANY AREAS OF COMPLEMENTARY STRENGTHS
STRATEGIC GROWTH - ALLIEDSIGNAL
Potential Cumulative Revenue '99-'05
SBU Product $200M-$500M $500M-$1B $1B+
- --------------------------------------------------------------------------
Engines -AS900 o
Turbo -Turbogenerator * o
EAS -Safety Avionics * o
AES -Normalair Garrett +
-Lighting * o
MS&S -Hardware Products o *
Polymers -Films * o
-Plastics +
Spec Chem -Pharmaceuticals * o
-Consumer Waxes o
Elec Matls -Chip Packaging o
-Low Dielectric Mat'ls o
Legend: o New Products + New Geography * New Applications
BROADENING OUR BUSINESSES INTO HIGHER GROWTH MARKETS
STRATEGIC GROWTH - HONEYWELL
Potential Cumulative Revenue '99-'05
SBU Product $200M-$500M $500M-$1B $1B+
- --------------------------------------------------------------------------
H&BC -Advanced Solutions o *
-Security Solutions o *
-Cooling & Refrigeration o *
IC -Hybrid Automation o *
(PlantScape)
-Adv. Software (Hi-Spec) o *
S&AC -Aviation Services o *
-Airport Systems o
-CNS/ATM o *
-Commercial Space *
-Tactical Guidance *
Legend: o New Products + New Geography * New Applications
BROADENING OUR BUSINESSES INTO HIGHER GROWTH MARKETS
INTEGRATION
--------------------------------
LARRY A. BOSSIDY
CHAIRMAN
[Chart showing combined company leadership and reporting relationships]
Chairman
Bossidy
CEO
Bonsignore
COO/Exec VP* COO/Exec VP*
Johnson Ferrari
Finance* HR* Info & Bus Svcs* Integration*
Wallman Redlinger Porter Hjerpe/Stark
Law* Quality* Technology*
Kreindler Stark Burhardt
Aerospace All Other
Business Units o Business Units +
A STRONG LEADERSHIP TEAM
* Report to Bonsignore
o Report to Johnson
+ Report to Ferrari
INTEGRATION PLAN
KEY SUCCESS FACTORS * Focus on key activities that
drive the most value
* Clear Purpose * Initiate small, short-term,
* Comprehensive Plan fast-paced transition teams
* Controlled Process
* Compelling Pace [Graph showing that the shorter
* Committed People the time required to implement
integration plan the higher its
economic impact will be]
MAINTAIN MOMENTUM WITH A CLEAR DIRECTION
GUIDELINES FOR INTEGRATION TEAMS
* Use Concept that 1+1=1
* All Functional Costs - Not just personnel costs.
* Best People - Regardless of company affiliation.
* Integration Team - Functional experts
* Three Months to Plan
* Three Months to Implement
QUALITY & SPEED SHOULD BE THE GUIDING PRINCIPLES
COST SYNERGIES
Year 2002
---------
Six Sigma Acceleration $150M
Corporate/Shared Services $110M
Purchasing $100M
Aerospace SG&A and Field Services $90M
Research and Development $30M
International Infrastructure $20M
---------
TOTAL COST SYNERGIES* $500M
EPS Impact $0.32
* $250 Million in Savings in 2000
$500 MILLION IS REALISTIC AND ACHIEVABLE
ALLIEDSIGNAL SIX SIGMA SUCCESS
Number of Resources
[Bar graph showing number of resources]
1996 1997 1998
- ------ ------ ------
2,000 4,000 7,700 (Greenbelts)
1,650 2,000 2,550 (Blackbelts)
Six Sigma Savings ($M)
[Bar graph showing savings]
1997 1998 1999 2001
- ---- ---- ---- ----
$400 $500 $575 $750
Over $2B Realized Since 1992
Cumulative Projects
[Arrow chart showing increase in number of cumulative projects
from zero in 96 to 6500+ in 98]
Annual Productivity Increase
[Graph showing annual productivity increase]
1996 1997 1998
- ---- ---- ----
6.0% 5.9% 6.0%
ADVANCED CAPABILITY
SIX SIGMA ACCELERATION
Operating
Productivity Margins
------------ ---------
AlliedSignal Average Annual Increase 6% 1.3 Pts
Honeywell Average Annual Increase 5% 0.8 Pts
Six Sigma will contribute $150M by 2002
Six Sigma Implementation Approach
* Leverage AlliedSignal's Master Blackbelts and Blackbelts
* Identify Blackbelts within Honeywell
* Apply AlliedSignal's training program to Honeywell's workforce
* Address quick, high return projects
APPLY PROVEN APPROACH TO SHOW QUICK RETURNS
CORPORATE AND SHARED SERVICES
CORPORATE OVERHEAD ALD'S SHARED SERVICES
[Bar graph showing corporate * Payroll and Benefits
overhead for Honeywell and * Accounts Payable
AlliedSignal before the merger * Fixed Asset Accounting
and for the combined company * HR Services
after the merger] * Travel Services
* Information Systems
$90 $200 $200 * Learning Centers
HON ALD Combined
Before After
Projected Savings $90M BENEFITS OF SHARED SERVICES
AlliedSignal has saved
over $150 million since 1994.
Leverage ALD Business Services
to absorb HON's decentralized
admin. functions.
Projected Savings $20M
FUNCTIONAL TEAMS ALREADY ESTABLISHED
PURCHASING
Source of AlliedSignal's 1999 Savings
- -------------------------------------
[Pie graph showing source of AlliedSignal's 1999 savings]
Sourcing 34%
Supplier Programs 23%
Market 3%
Negotiations 40%
Source of Expected Synergies
- ----------------------------
* Leverage Honeywell's purchasing through institution of formal
Purchasing Programs
* Added Buying Power due to increased size of the organization
[Graph showing in $billions AlliedSignal's and Honeywell's purchasing,
project savings and combined purchasing]
ALD $7.5
HON $2.8
Savings $0.1
Combined $10.2
$100M in Annual Savings
TEAM ESTABLISHED - CONSERVATIVE ESTIMATE
OTHER COST SYNERGIES
Aerospace SG&A and Field Services
[Bar graph showing Aerospace SG&A and Field Services for Honeywell and
AlliedSignal before the merger and for the combined company after the
merger]
$240 $590 $740
HON ALD Combined
Before After
Projected Savings $90M
AVIONICS R&D
[Bar graph showing Avionics R&D for Honeywell and AlliedSignal before
the merger and for the combined company after the merger]
$212 $127 $309
HON ALD Combined
Before After
Projected Savings $30M
International
Leverage Honeywell's International presence
significantly reducing AlliedSignal's infrastructure.
Projected Savings $20M
ELIMINATE DUPLICATION
INTEGRATION SPEED DRIVES PERFORMANCE
PERCENTAGE OF COMPANIES ACHIEVING GOAL
[Graph showing percentage of companies achieving goals in quick transition
and slow transition in the categories of gross margin, cash flow,
productivity, profitability, and speed to market]
Gross Margin 71% Quick Transitions
33% Slow Transitions
Cash Flow 68% Quick Transitions
48% Slow Transitions
Productivity 68% Quick Transitions
54% Slow Transitions
Profitability 66% Quick Transitions
41% Slow Transitions
Speed to Market 48% Quick Transitions
33% Slow Transitions
Source: PriceWaterhouseCoopers Integration Survey
SPEED MAXIMIZES RESULTS
FAST VS. SLOW TRANSITIONS
"We should have managed the transition..."
[Graph showing percentage of companies that state we should have managed
its transition either faster or slower]
Faster 89%
Slower 11%
Source: PriceWaterhouseCoopers Integration Survey
SPEED MAXIMIZES RESULTS
THE VALUE OF AN ACCELERATED TRANSITION
[Graph showing increased shareholder value for an accelerated transition, as
oppossed to a prolonged transition]
Source: PriceWaterhouseCoopers Integration Survey
SPEED MAXIMIZES RESULTS
TIMELINE FOR AN ACCELERATED TRANSITION
[Graph showing timeline for an accelerated transition, identifying
the 3 1/2 months from the announcement of the transaction
required for planning an accelerated transition and
identifying the approximate 3 1/2 months, beginning
approximately one half a month before closing, required
for implementation of an accelerated transition]
WELL ORCHESTRATED FOR MAXIMUM EFFICIENCY
COST SYNERGY SUMMARY
[Bar graph showing the cost synergies
expected to be derived from six sigma,
international business, aerospace, R&D, purchasing,
and corporate during the years 2000, 2001 and 2002]
2000 2001 2002
---- ---- ----
Six Sigma $25 $ 50 $150
International $10 $ 20 $ 20
Aerospace $50 $ 90 $ 90
R&D $20 $ 30 $ 30
Purchasing $70 $100 $100
Corporate $75 $110 $110
($ in millions)
2000 2001 2002
---- ---- ----
Cumulative Savings $250 $400 $500
Accretion $0.17 $0.26 $0.32
ACCELERATED SAVINGS
SUMMARY
-------------------
MICHAEL R. BONSIGNORE
CHIEF EXECUTIVE OFFICER
CONSOLIDATED FINANCIAL OUTLOOK
2000-2003 Outlook
---------------------------------
Sales 8 - 10% Solid Growth Platform
EPS Growth 15%+ Substantial Cost Synergies
Free Cash Flow Over $2B by 2002 Focus on Cash Conversion
Shareholder Benefit
---------------------------------
* Size Confidence in
* Portfolio Balance + Consistency of = Higher
* Mgmt Best Practices Earnings Growth Valuation
PLATFORM FOR ACCELERATED GROWTH & CASH GENERATION
SUMMARY -- THE NEW HONEYWELL
* Strong growth platform
* Financial strength to pursue major business opportunities
* Strong leadership for the future
* World-class operating disciplines and strategy development
* Leading aerospace supplier with strong aftermarket presence and
expanded growth opportunities
* Substantial cost synergies - accelerate earnings growth
A WORLD-CLASS VALUE CREATOR