What are the main financial targets for Honeywell executives' 2009 incentive compensation?

The main financial targets for 2009 are Earnings Per Share (EPS) between $3.20-$3.55, Free Cash Flow Conversion (FCF Conversion) over 100%, and Working Capital Turns (WCT) of 6.3. These metrics will be used to determine annual incentive compensation payable in the first quarter of 2010.

How will Honeywell's relative performance affect the executive bonuses?

The EPS component of the annual incentive bonus pool is adjustable. For every percentile that Honeywell's EPS growth exceeds or falls below the median EPS growth of its 33 peer companies, the EPS portion of the bonus pool will be adjusted by approximately one percent, up or down by a maximum of 25%.

Are these financial targets the only factors determining executive bonuses?

No, while EPS, FCF Conversion, and WCT are the primary metrics, the Management Development and Compensation Committee can also consider other factors. These include year-over-year improvements in operating income, margin expansion, revenue conversion, free cash flow, relative business group performance, and prevailing industry and economic conditions.

What is 'FCF Conversion' and 'Working Capital Turns' as defined by Honeywell?

FCF Conversion is defined as free cash flow (cash flow from operations minus capital expenditures) divided by net income. Working Capital Turns (WCT) is defined as sales divided by working capital, calculated on a 13-month rolling average. Working capital itself is defined as trade accounts receivable plus inventory less accounts payable and customer advances, excluding the impact of current year acquisitions.

HON/HONIV 8-K: Leadership Changes

Summary

Honeywell International Inc. (HON) filed an 8-K on February 17, 2009, detailing the 2009 financial objectives approved by its Management Development and Compensation Committee for the executive Incentive Compensation Plan. The primary financial metrics for determining annual incentive compensation for executives in the first quarter of 2010 are Earnings Per Share (EPS), Free Cash Flow Conversion (FCF Conversion), and Working Capital Turns (WCT). The company has established target ranges for these metrics, with EPS targeted between $3.20 and $3.55, FCF Conversion over 100%, and WCT at 6.3. Notably, the EPS component of the incentive bonus pool is subject to an adjustment of up to 25% based on Honeywell's relative EPS growth compared to a peer group of 33 companies. The Committee also retains discretion to consider other qualitative and quantitative factors beyond these core metrics.

Key Highlights

1Honeywell's Compensation Committee set 2009 financial targets for executive incentive compensation.
2Key performance metrics for 2009 bonuses include Earnings Per Share (EPS), Free Cash Flow Conversion (FCF Conversion), and Working Capital Turns (WCT).
3Target EPS for 2009 is set between $3.20 and $3.55.
4FCF Conversion target is set above 100%, indicating a focus on strong cash generation relative to net income.
5Working Capital Turns target is set at 6.3, aiming for efficient management of working capital.
6The EPS component of bonuses can be adjusted by up to 25% based on relative EPS growth performance against a peer group of 33 companies.
7The Committee may consider additional factors beyond these core metrics when determining bonus payouts, allowing for flexibility.

HONEYWELL INTERNATIONAL INC 8-K Report, Executive Changes (Feb 18, 2009)

Summary

Key Highlights

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