Electrical Products Group

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1 Electrical Products Group Dave Cote Chairman & CEO Longboat Key, Florida May 18, 2005

2 Forward Looking Statements These materials contain certain statements that may be deemed forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 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 these materials 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 forwardlooking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. 2 Electrical Products Group May 18, 2005

3 Honeywell Today Aerospace Automation 38% 31% 17% 14% Transportation Specialty Materials 109,000 employees in nearly 100 countries A Fortune 75 company $26 billion in sales in 2004 One of 30 select companies in the DJIA 3 Electrical Products Group May 18, 2005

4 Honeywell Building a World That s Safer and More Secure More Comfortable and Energy Efficient Aerospace Integrated Safety Avionics Aftermarket Logistics Transportation Systems Bendix Brakes Keyless Sensors Aerospace HTF7000 Engine Environmental Control Systems Transportation Systems Turbochargers FRAM Filters Automated and Control Solutions Optoelectronic Sensors Honeywell Instant Alert Specialty Materials Spectra Body Armor Aclar Protected Tablets Automated and Control Solutions Indoor Air Quality Energy Performance Contracts Specialty Materials Enovate 3000 Genetron More Innovative and Productive Aerospace Integrated Flight Mgmt Systems MEMS Transportation Systems Next Generation Turbochargers Prestone All Makes All Models Automated and Control Solutions Experion PKS LifeCare, Connected Home Specialty Materials Aegis Resin Lumilux Pigments Macro Trends Support Our Growth Platforms 4 Electrical Products Group May 18, 2005

5 Financial Goals 2003 Investor Conference 5% Annual Sales Growth Double Digit Income Growth +85% Free Cash Flow Conversion Today 5% Annual Sales Growth Double Digit Income Growth 100% Free Cash Flow Conversion Sales And Income Growth Goals On Track Free Cash Flow Conversion Increased From 85% 5 Electrical Products Group May 18, 2005

6 Aerospace Profile Strengths: 2005E Revenue: $ B Technology Depth 15-16% Op. Margin Breadth of Products Growth Initiatives HTF7000, Precision Munitions Systems Integration - EPIC, A380 Air Transport 31% Regional Transport 11% Business & General Aviation 15% Defense & Space 43% Technology Based Leadership 6 Electrical Products Group May 18, 2005

7 Aerospace Progress Sales ($B): Segment Margin %: % 15% % 5% E FROM - Great depth and breadth of products - Market downturn - New products in development, untested Well Positioned For Long Term Success 7 Electrical Products Group May 18, % TO E - Even better today - Strong commercial, defense and space outlook - Great success with Primus Epic, HTF7000 and high technology electronic solutions

Initiatives Technology, Leading Brands New Products

Thermostats CCTV/ DVR Speed and Position Sensors

Systems System Panels Pressure Sensors Gas Valves Home

8 Automation & Control Solutions Profile 2005E Sales: $ B 10-11% Segment Margin Strengths: Growth Initiatives Technology, Leading Brands New Products Introduced Large Installed Base Global Expansion ECC $2.0B Security $1.9B Life Safety $0.8B Sensing and Control $0.8B Building Solutions $1.9B Process Solutions $1.9B Motion / Human Presence Sensors Fire/Smoke Sensors Thermostats CCTV/ DVR Speed and Position Sensors Buildings Process Controls Water Control Control Systems System Panels Pressure Sensors Gas Valves Home Medical Care Instant Alert Distributed Control Leader in Great Industries Where Technology Wins 8 Electrical Products Group May 18, 2005

9 Automation & Control Solutions Progress Sales ($B): Segment Margin %: * 15% 10% 5% * % E E FROM - Service business in decline - Disarray in Solutions businesses - Disjointed Products strategy * Includes Novar for remaining 9 months of 2005 (estimate) TO - New management/products and market success - Focused strategy supported by increased marketing and R&D - Novar acquisition a great add Reinvigorated Business, Achieving Results 9 Electrical Products Group May 18, 2005

10 Transportation Systems Profile 2005E Sales: $ B 13-14% Segment Margin Strengths: Growth Initiatives Turbo Technology / Aero Influence Game Changing Turbo Technologies Strong Brands Brand Extensions Turbo 51% Consumer Products Group 28% Friction Materials 21% Strong Growth Driven By Turbo Technology 10 Electrical Products Group May 18, 2005

11 Transportation Systems Progress 4.6 Sales ($B): 4.3 Segment Margin %: % % % E 0% E FROM - Western European focus - CPG performance flat TO - Global leadership - CPG brand strategy working - Friction remains work in progress Turbo And CPG Strategies Working 11 Electrical Products Group May 18, 2005

12 Specialty Materials Profile Strengths: Growth Initiatives 2005E Sales: $ B Proprietary Technologies Environmentally Friendly HFCs 6-7% Segment Margin Global Presence Advanced Fibers and Composites Electronic Materials 10% Chemicals 29% Performance Products 12% Nylon 49% UOP 50/50 JV Transformation Nearly Complete 12 Electrical Products Group May 18, 2005

13 Specialty Materials Transformation Sales ($B): Segment Margin %: E 7% CAGR 10% 5% 0% E Core Non-Core FROM - Volume driven, mature, cyclical portfolio - Domestic, low growth businesses - Undifferentiated products TO - Value driven, technology oriented segments - Global presence - Differentiated with over 1,100 new patents Core Growth And Continued Portfolio Progress 13 Electrical Products Group May 18, 2005

14 Five Initiatives - Growth 95% 90% 85% 80% 75% 70% Superb Job for Customers Delivery Up While Inventory Down Globalization New / Expanded R&D - Bangalore, India; Shanghai, China; Brno, Czech Republic to Support Growth - From 500 to 3500 Emerging Market Headcount From 16K to 21K Sourcing, Manufacturing, Sales All Expanding Non-US Sales From 39% 2001 to 44% Results and Resources Delivery DOS Sales and Marketing Focus Focus on Functional Excellence Functionalization / Agglomerated Fiefdoms Strategic Marketing Course Great Strides More To Go Robust Technology Roadmaps Technology Resources / Spending Expanded During Downturn Velocity Product Development Working - Good Marketing Input Helps Design For Six Sigma An Increasing Reality Lots of New Products Coming 14 Electrical Products Group May 18, 2005

15 Five Initiatives Productivity Typical Materials, Labor, etc. Honeywell Operating System Functional Costs Focus - Excellent Margin Opportunity Sales Working Capital Turns $23.7B 3.9 Cash $25.6B Historic Strength Expanding Coordinated, Standardized Global Performance and Development System Twelve Behaviors People Salary / Bonus Differentiation Broadened Honeywell Hometown Solutions Great Leadership Team The Ultimate Differentiator Saved $1.9B Cash Through Better Operating Practices Enablers Six Sigma was 60% DMAIC Trained, 0% DFSS - Focused on Manufacturing Productivity - Now Close To 100% on Both - Shifting To Support Growth, VPD, and HOS DigitalWorks Cost Focused - Now Process Enabler and Cost - Key to Functional Costs Focus Growing Capability to Achieve First Four Initiatives Five Initiatives Working and Providing Clear Path 15 Electrical Products Group May 18, 2005

16 Honeywell Operating System Update Based on Toyota Production System: - Integrate Six Sigma Plus methods; rapid lean implementation - Accelerate improvements in Safety, Quality, Delivery and Cost Piloting in 17 Plants; Early Results Compelling - Chihuahua, Mexico Combined 3 factory buildings into 1; 50% square foot reduction Reduced factory costs 15% 48% improvement in delivery; 65% reduction in customer defect rate - Emmen, Netherlands Reduced factory costs 15% - Juarez, Mexico 50 point improvement in delivery; 42% cycle time reduction, inventory reduced 20% - Golden Valley, Minnesota Reduced OT by 50%; inventory by 20%; 37% cycle time reduction Integrated System Built on Six Sigma Plus Foundation 16 Electrical Products Group May 18, 2005

17 Capital Allocation 2004: $2.3B Operating Cash Flow Acquisitions Dividend Repurchase Capex Allocation Strategy: Capital Expenditures - Growth, ROI focus Acquisitions - Build strong cores, adjacencies Dividends - Competitive payout Share Repurchase - Minimize dilution 2005: Capital Expenditures, 23% increase for growth/expansion Acquisitions, ~$2.4B cash for Novar Dividend, increased 10% to $710M Share Repurchase, continue to evaluate American Jobs Creation Act, ~$2.6B eligible for dividend Disciplined Strategies 17 Electrical Products Group May 18, 2005

18 2005 Cash and Debt Scenario ($M) US Non-US Total Cash at 12/31/04 $180 $3,410 $3, Free Cash Flow 1, , Dividends (710) - (710) Investment Maturities Novar Acquisition, Net of Cash - (2,400) (2,400) Divestiture of Indalex and Check Printing ($1.0 - $1.5B) - 1,250* 1,250 Cash Repatriation 2,600 (2,600) - Associated Taxes (200) - (200) Debt Repayment (1,180) (20) (1,200) Debt Issuance Cash at 12/31/05 $2,025 $490 $2,515 Debt at 12/31/04 $4,860 $410 $5,270 Debt Repayment (1,180) (20) (1,200) Debt Issuance Debt at 12/31/05 $3,680 $640 $4,320 * Mid-point of range for illustration purposes only Shifting Cash And Debt Balances 18 Electrical Products Group May 18, 2005

19 Acquisitions Old Un-Process Little Strategic Tie-in Due Diligence Weak - Findings Sometimes Ignored Valuation Heavily Reliant on Elusive Sales Synergies Integration Underresourced and Frequently Ineffective Lots of Failure Modes New Process Fixed the Historic Process Issues Process Documented and Scrupulously Followed Integration Reviews at Days, Quarterly Thereafter - Over $50M, CEO Review Disciplined and Effective Results 26 Acquisitions In Last 3 Years - $1.2B Sales, Purchase Price $1.2B - 24 Ahead, 2 Behind Plan 2002/2003 Deals, EPS Accretive $0.07 in 2004 Well Understood, Disciplined Process That s Working 19 Electrical Products Group May 18, 2005

20 Novar-ACS A Terrific Combination IBS $1.2 Aluminum Check $0.6 $0.9 Novar Sales: $2.7B - IBS + ACS = $ B - Divest Check, Aluminum What Novar brings to Honeywell IBS Technology: - Life Safety, ECC, Building Controls, Security Leading Brands: - Gent, Eltek, Alerton, ADE, Digitek, visioprime Geographic Expansion - New Channels, Northern European Presence Sales (B$) HON ACS Novar IBS* Combined Products - Life Safety $0.5 $0.3 $ Security ECC S&C Building Solutions Process Solutions Total Sales $ $0.9 $ * 9 months 2005 Estimate Global Expansion And Opportunities For ACS 20 Electrical Products Group May 18, 2005

21 1Q Financials ($M) 1Q04 1Q05 Sales $6,178 $6,453 4% growth 6% Organic; 1% F/X (2%) Acq./Div. Segment Profit $654 $750 - Margin % 10.6% 11.6% 15% growth Strong volume conversion EPS $0.34 $ % growth (1) Free Cash Flow $202 $194 Flat (1) Free Cash Flow = Cash From Operations - Capital Expenditures Terrific Start To Electrical Products Group May 18, 2005

22 2Q Financials ($B) 2Q04 2Q05E Sales $6.4 $ % growth Base business 4-5% Novar IBS 4% EPS $0.42 $ % growth Operating Cash Flow $505 $ % growth 2Q EPS Guidance Of $ Strong Performance Continues 22 Electrical Products Group May 18, 2005

23 2005 Financial Summary ($B) E V 04 Sales $25.6 $ % Ex. Acquisitions/Divestitures 5-7% Segment Profit $3.0 $ % - Margin % 11.6% 12-13% pt. EPS $1.49 $ % Free Cash Flow $1.6 $ Flat - 7% Conversion 127% +100% Note: 2005E Sales and Segment Profit include Novar IBS. 2005E EPS includes Novar IBS and Novar non-core assets (SPS and IAS) but excludes impact of FAS 123 stock option expensing and American Jobs Creation Act of Outlook For High End Of Range 23 Electrical Products Group May 18, 2005

24 Summary Businesses in Great Shape - Aerospace - Breadth, Depth of Products/Technologies - ACS - Well Positioned in Growing Industries - TS - Global Leader in Turbo Technology - SM - Portfolio Transformation and Core Growth Five Initiatives Working Strong Start To Electrical Products Group May 18, 2005

25 Appendix Reconciliation of non-gaap Measures to GAAP Measures 25 Electrical Products Group May 18, 2005

26 Reconciliation of Segment Profit to Operating Income and Calculation of Segment Profit and Operating Income Margin ($M ) 1Q04 1Q05 Sales $6,178 $6,453 Cost of Products and Services Sold (4,930) (5,085) Selling, General and Administrative Expenses (808) (854) Operating Income $440 $514 Environmental, Litigation and Net Repositioning (1) Charges $54 $99 (1) Pension and OPEB Expense Segment Profit $654 $750 Operating Income $440 $514 Sales $6,178 $6,453 Operating Income Margin % 7.1% 8.0% Segment Profit $654 $750 Sales $6,178 $6,453 Segment Profit Margin % 10.6% 11.6% (1) Included in costs of goods sold and selling, general and administrative expenses 26 Electrical Products Group May 18, 2005

27 Reconciliation of Free Cash Flow to Cash Provided by Operating Activities and Calculation of Cash Flow Conversion ($M ) 1Q04 1Q05 Cash Provided by Operating Activities $337 $329 Expenditures for Property, Plant and Equipment (135) (135) Free Cash Flow Cash Provided by Operating Activities $337 $329 Net Income Operating Cash Flow Conversion % 114% 92% Free Cash Flow $202 $194 Net Income Free Cash Flow Conversion % 68% 54% 27 Electrical Products Group May 18, 2005

28 Reconciliation of Segment Profit to Operating Income and Calculation of Segment Profit and Operating Income Margin ($B) E Sales $25.6 $ $27.6 Cost of Goods Sold (20.7) (21.4) - (21.6) Selling, General and Administrative Expenses (3.3) (3.5) - (3.5) Operating Income $1.6 $2.4 - $2.5 Environmental, Litigation and Net Repositioning (1) Charges (1) Pension and OPEB Expense Segment Profit $3.0 $3.3 - $3.4 Operating Income $1.6 $2.4 - $2.5 Sales $25.6 $ $27.6 Operating Income Margin % 6.4% ~9% Segment Profit $3.0 $3.3 - $3.4 Sales $25.6 $ $27.6 Segment Profit Margin % 11.6% 12-13% (1) Included in costs of goods sold and selling, general and administrative expenses 28 Electrical Products Group May 18, 2005

29 Reconciliation of Free Cash Flow to Cash Provided by Operating Activities and Calculation of Cash Flow Conversion ($M) E Cash Provided by Operating Activities $2,253 $2,400-2,500 Expenditures for Property, Plant and Equipment (629) (800) Free Cash Flow 1,624 $1,600-1,700 Cash Provided by Operating Activities $2,253 $2,400-2,500 Net Income 1,281 1,600-1,700 Operating Cash Flow Conversion % 176% 150% Free Cash Flow $1,624 $1,600-1,700 Net Income 1,281 1,600-1,700 Free Cash Flow Conversion % 127% 100% 29 Electrical Products Group May 18, 2005

Bank of America Investment Conference

Bank of America Investment Conference Dave Anderson, Senior V.P. and CFO San Francisco, CA September 18, 2006 Forward Looking Statements This report contains forward-looking statements within the meaning