8-KMaterial Agreements

HONEYWELL INTERNATIONAL INC 8-K Report, Material Agreement (Feb 21, 2006)

Filed February 21, 2006For Securities:HONHONIV

Summary

Honeywell International Inc. (HON) filed an 8-K on February 21, 2006, detailing the compensation structure for its executives for the fiscal year 2006. The company's Management Development and Compensation Committee has established specific financial objectives and their weightings that will determine the incentive compensation pool and individual awards for its executives. This structure emphasizes key performance indicators crucial for operational success and shareholder value. Investors should note that the 2006 incentive compensation will be primarily driven by Earnings Per Share (EPS), free cash flow, and working capital turns, with weightings of 50%, 25%, and 25% respectively. The EPS component is particularly notable as it includes an upward or downward adjustment of up to 25% based on Honeywell's relative EPS growth compared to a peer group of 36 companies within the S&P 500. This mechanism aligns executive compensation directly with market performance and competitive positioning.

Key Highlights

  • 1Honeywell's 2006 executive incentive compensation plan has been approved by the Management Development and Compensation Committee.
  • 2Key financial objectives for 2006 are Earnings Per Share (EPS), free cash flow, and working capital turns.
  • 3The weighting for these objectives is set at 50% for EPS, 25% for free cash flow, and 25% for working capital turns.
  • 4Working capital turns are defined as sales divided by working capital (AR + Inventory - AP).
  • 5The EPS component is subject to a +/- 25% adjustment based on Honeywell's relative EPS growth against a defined peer group of 36 companies.
  • 6Executive bonus targets generally range from 75% to 125% of base salary.
  • 7Actual incentive awards can range from 0% to 200% of target, dependent on performance against financial and other specific management objectives.

Frequently Asked Questions

The primary performance metrics for Honeywell's 2006 executive compensation are Earnings Per Share (EPS) weighted at 50%, free cash flow at 25%, and working capital turns at 25%.

The EPS component is subject to an upward or downward adjustment of up to 25% based on Honeywell's relative EPS growth performance compared to a pre-established group of 36 peer companies from the S&P 500 Index.

While executive bonus targets typically range from 75% to 125% of base salary, actual incentive awards can vary significantly, ranging from 0% to 200% of the target amount, depending on performance against the defined financial and management objectives.

Working capital turns is defined as the company's sales divided by its working capital. Working capital itself is calculated as accounts receivable plus inventory minus accounts payable.