Honeywell Aerospace Inc.
10/28/2026 | Press release | Distributed by Public on 10/28/2026 15:01
Quarterly Report for Quarter Ending September 26, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in tables and graphs in millions, except per share amounts)
The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Honeywell Aerospace Inc. ("Honeywell Aerospace", "we", "us", or "our") for the three and nine months ended September 26, 2026. The financial information as of September 26, 2026, should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations included in the final Information Statement dated as of June 15, 2026 (the "Information Statement"), which was furnished as Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on June 15, 2026.
OVERVIEW
Business Overview
We are a leading global tier-1 aerospace and defense supplier of mission critical systems and technologies that enable the production, maintenance, and safe operation of aerospace and defense platforms. Our systems and technologies support original equipment manufacturer ("OEM"), government, defense prime contractors, and aircraft operator customers across the Commercial Air Transport, Business Aviation, and Defense and Space end markets. Our comprehensive portfolio of market leading systems and technologies are organized into the following segments: Electronic Solutions ("ES"), Engines & Power Systems ("E&PS"), and Control Systems ("CS").
Spin-off from Honeywell
On June 29, 2026 (the "Distribution Date"), Honeywell completed the spin-off of the Aerospace Business (the "Spin-off") through a pro-rata distribution (the "Distribution") of all of our outstanding common shares to holders of record of Honeywell's common shares as of the close of business on June 15, 2026 (the "Record Date"), at which time each holder of Honeywell's common shares received one Aerospace common share for every two Honeywell common shares held as of the close of business on the Record Date, resulting in the Distribution of 316.9 million of our common shares. Upon completion of the Distribution, we became an independent public company. Our common stock is listed under the symbol "HONA" on The Nasdaq Stock Market LLC ("Nasdaq").
Relationship with Honeywell
Prior to the Spin-off, the financial statements included herein were derived from Honeywell's historical accounting records and presented on a standalone basis as if our operations had been conducted independently from Honeywell in accordance with GAAP. The accompanying financial statements for periods prior to the Spin-off include certain assets and liabilities that have historically been held at the Honeywell corporate level but are specifically identifiable or otherwise attributable to us. Prior to the Spin-off, Honeywell provided certain services, such as legal, accounting, information technology, human resources, and other infrastructure support, on behalf of us. We consider allocations of these costs to be a reasonable reflection of the benefits we received. However, the financial information presented in the Condensed Consolidated Financial Statements may not reflect our consolidated financial position, operating results, and cash flows had we been a separate standalone entity during the periods presented. Actual costs that would have been incurred if we had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. We consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by us during the periods prior to the Spin-off.
In connection with the Spin-off, we entered into the Separation and Distribution Agreement and certain other agreements with Honeywell, including the Transition Services Agreement, the Tax Matters Agreement, the
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Employee Matters Agreement, the Intellectual Property License Agreement, and the Trademark License Agreement. We will utilize Honeywell's services for a transitional period following the Spin-off before we replace these services over time with services supplied either internally or by third parties. The expenses for such services may vary from the historical costs directly billed and allocated to us.
We have incurred and expect to incur certain costs in connection with our establishment as a standalone public company (the "transaction costs"). The transaction costs include non-recurring expenses associated with the Spin-off and stand up of functions required to operate as a standalone public entity. These non-recurring costs primarily relate to system implementation costs, business and facilities separation, applicable employee-related costs, the evolution of our brand, and other matters. The transaction costs are expected to continue through at least fiscal year 2027. Additionally, we have incurred and will further incur increased costs as a result of becoming an independent, publicly traded company, primarily from establishing or expanding the corporate support for our businesses, including IT, human resources, treasury, tax, internal audit, risk management, stock-based compensation programs, accounting and financial reporting, investor relations, governance, legal, procurement, and other services.
Macroeconomic Conditions
We continue to monitor elevated macroeconomic and geopolitical developments, including armed conflict in the Middle East and its effects on global energy markets and maritime shipping, evolving U.S. trade policy and tariff authorities, inflationary pressures, and financial market uncertainty. Moderated global growth projections and tariffs imposed during 2025 and 2026, together with evolving U.S. trade policy and international negotiations, contributed to increased volatility across global supply chains. Elevated energy prices, tariff-related cost impacts, and continued market uncertainty may continue to contribute to supply chain disruptions, cost inflation, and pricing volatility. We continue to work proactively with our suppliers and customers to mitigate shortages, maintain supply continuity, and manage cost impacts.
Within Honeywell Aerospace, supply conditions remain varied, with certain suppliers continuing to experience constraints in skilled labor, manufacturing capacity, and sub-tier supply availability, as well as quality and delivery execution challenges. These conditions can limit suppliers' ability to support production requirements and recover past-due deliveries, and contribute to lead-time uncertainty and cost pressures. We continue to address these challenges through direct engagement with critical suppliers, targeted supplier development and recovery plans, production-rate and capacity validation, improved demand and supply planning, long-term supply agreements, and selective inventory investments. Where feasible, we are also pursuing alternate-source qualification and design changes to improve supply resilience. The timing and effectiveness of these actions depend on supplier execution and applicable engineering, qualification, and customer approval requirements, which can limit our ability to transition supply in the near term. We have also announced the planned expansion of our manufacturing facilities in Tempe, Arizona. These measures are intended to improve supply continuity and support customer commitments while maintaining product quality and reliability; however, supply constraints and associated cost pressures may persist.
To date, these actions have mitigated some of the effects of these conditions; however, supply chain constraints continue to affect certain aspects of our business and may continue to do so in future periods. Their continued effectiveness depends on successful execution, the availability of alternative sources of supply and the duration and severity of the underlying market conditions. If these conditions worsen or our mitigation efforts prove insufficient, our results of operations, cash flows, or financial condition could be materially adversely affected.
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RESULTS OF OPERATIONS
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Net Sales by Segment
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Total Segment Profit/Segment Adjusted EBIT by Segment
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CONSOLIDATED OPERATING RESULTS
Net Sales
The following table sets forth the factors contributing to year-over-year changes in our Net sales for the three and nine months ended September 26, 2026:
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Change in net sales from prior period
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Q3 2026 vs. Q3 2025 | YTD Q3 2026 vs. YTD Q3 2025 | |||||||||
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Organic(1)
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2 | % | 5 | % | |||||||
| Foreign currency translation | - | % | - | % | |||||||
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Acquisitions
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- | % | - | % | |||||||
| Other | - | % | - | % | |||||||
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Total % change in Net sales
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2 | % | 5 | % | |||||||
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(1)See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for the definition of Organic sales growth.
A discussion of Net sales by reportable segment can be found under the "Segment Results" section within this "Management's Discussion and Analysis of Financial Condition and Results of Operations".
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
Net sales increased $111 million due to higher organic sales of $77 million in ES and $35 million in E&PS.
Further, based on our end markets, net sales increased due to higher organic sales of $49 million in Commercial Original Equipment, $39 million in Commercial Aftermarket, and $22 million in Defense and Space.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
Net sales increased $622 million due to higher organic sales of $389 million in ES and $191 million in E&PS.
Further, based on our end markets, net sales increased due to higher organic sales of $291 million in Commercial Aftermarket, $198 million in Defense and Space, and $110 million in Commercial Original Equipment.
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Cost of Products and Services Sold
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
Cost of products and services sold increased $53 million primarily due to $67 million of higher direct and indirect material costs, net of U.S. government International Emergency Economic Powers Act ("IEEPA") tariff refunds that reduced cost of products and services sold. Gross margin percentage remained flat.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
Cost of products and services sold increased $440 million primarily due to $386 million of higher direct and indirect material costs, net of IEEPA tariff refunds that reduced cost of products and services sold, and an approximately $70 million increase in inventory obsolescence charges. Gross margin percentage decreased by 1%.
Research and Development Expenses
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For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
Research and development expenses increased $30 million, and as a percentage of Net sales increased 1%, compared to the three months ended September 27, 2025, due to increased investment in new product development.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
Research and development expenses increased $66 million compared to the nine months ended September 27, 2025, but remained flat as a percentage of Net sales.
A summary of our research and development costs for the three and nine months ended September 26, 2026 and September 27, 2025 is as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | September 26, 2026 | September 27, 2025 | ||||||||||||||||||||
| Company funded research and development expenses | $ | 216 | $ | 186 | $ | 586 | $ | 520 | |||||||||||||||
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Customer-sponsored research and development(1)
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288 | 281 | 913 | 830 | |||||||||||||||||||
| Total research and development costs | $ | 504 | $ | 467 | $ | 1,499 | $ | 1,350 | |||||||||||||||
(1)Includes expenditures on customer programs with significant engineering performance obligations, included in Cost of products and services sold in the Condensed Consolidated Statements of Operations, and capitalized expenditures on deferred customer funded nonrecurring engineering and development activities, included in Other assets in the Condensed Consolidated Balance Sheets.
Selling, General and Administrative Expenses
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
Selling, general and administrative expenses increased $30 million primarily due to $54 million of expense associated with the Honeywell trademark license and $26 million of higher labor costs, partially offset by $69 million of lower transaction costs incurred in the period related to the Spin-off. Refer to Note 3. Related Party
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Transactions of the Notes to the Condensed Consolidated Financial Statements for a discussion of the Honeywell trademark license.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
Selling, general and administrative expenses increased $568 million primarily due to $342 million of incremental transaction costs incurred in the period related to the Spin-off, $142 million of higher labor costs, and $54 million of expense associated with the Honeywell trademark license.
Interest Expense (Income), Net
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
Interest expense, net increased $192 million related to the $16.0 billion of senior unsecured notes issued in connection with the Spin-off. Refer to Note 9. Debt and Credit Agreements of the Notes to the Condensed Consolidated Financial Statements for further information.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
Interest expense, net increased $418 million related to the $16.0 billion of senior unsecured notes issued in connection with the Spin-off.
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Other (Income) Expense, Net
Other (income) expense, net primarily includes the following:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | September 26, 2026 | September 27, 2025 | ||||||||||||||||||||
| Environmental expenses | $ | 16 | $ | 231 | $ | 53 | $ | 324 | |||||||||||||||
| Transaction costs | 18 | 74 | 127 | 89 | |||||||||||||||||||
| Pension (income) expense | (81) | 1 | (81) | 3 | |||||||||||||||||||
| Equity income of affiliated companies | (6) | (6) | (18) | (17) | |||||||||||||||||||
| Other (income) expense, net | (7) | (6) | 19 | (24) | |||||||||||||||||||
| Total Other (income) expense, net | $ | (60) | $ | 294 | $ | 100 | $ | 375 | |||||||||||||||
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
Other income, net increased by $354 million for the three months ended September 26, 2026, primarily due to lower environmental expenses of $215 million, higher pension income of $82 million related to the transfer of the U.S. pension plans following the Spin-off, and lower transaction costs of $56 million related to the Spin-off. Refer to Note 15. Pension Plans and Note 16. Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements for a discussion of the pension plans and environmental matters.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
Other expense, net decreased by $275 million for the nine months ended September 26, 2026, driven by lower environmental expenses of $271 million and higher pension income of $84 million related to the transfer of the U.S. pension plans following the Spin-off, partially offset by higher transaction costs of $38 million related to the Spin-off.
Income Tax Expense
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For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
The effective tax rate for the three months ended September 26, 2026, increased 650 basis points compared to the effective tax rate for the three months ended September 27, 2025, primarily due to tax benefits recorded in 2025 related to changes in estimates on prior tax positions (600 basis points), and additional Pillar Two tax expense as a standalone company (270 basis points), partially offset by tax benefits from lower nondeductible transaction costs (300 basis points).
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
The effective tax rate for the nine months ended September 26, 2026, increased 710 basis points compared to the effective tax rate for the nine months ended September 27, 2025, primarily due to nondeductible transaction costs and frictional tax costs in advance of the Spin-off (360 basis points), changes in estimates on prior tax positions (320 basis points), and additional Pillar Two tax expense as a standalone company (160 basis points), partially offset by favorable changes in the jurisdictional mix of earnings (140 basis points).
Net Income Attributable to Aerospace
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
The earnings per share of common stock-diluted for the three months ended September 26, 2026 increased $0.26 primarily due to lower environmental expenses ($0.57 after tax) and lower transaction costs ($0.37 after tax) related to the Spin-off, partially offset by higher interest expense ($0.50 after tax) related to the $16.0 billion of senior unsecured notes issued in connection with the Spin-off, and the expense associated with the Honeywell trademark license ($0.14 after tax).
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
The earnings per share of common stock-diluted for the nine months ended September 26, 2026 decreased $2.09 primarily due to incremental transaction costs ($1.14 after tax) related to the Spin-off, higher interest expense ($1.04 after tax) related to the $16.0 billion of senior unsecured notes issued in connection with the Spin-off, higher income tax expense ($0.35 after tax), and the expense associated with the Honeywell trademark license ($0.13 after tax), partially offset by lower environmental expenses ($0.72 after tax).
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SEGMENT RESULTS
We manage and report our operating results through three reportable segments: Electronic Solutions, Engines & Power Systems, and Control Systems. The remainder of our operations are presented in Corporate and All Other, which is not a reportable business segment.
Electronic Solutions
The following table sets forth the operating results for our ES segment for the three and nine months ended September 26, 2026 and September 27, 2025:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | September 26, 2026 | September 27, 2025 | ||||||||||||||||||||
| Net sales | $ | 1,784 | $ | 1,708 | $ | 5,299 | $ | 4,903 | |||||||||||||||
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Segment profit/Segment adjusted EBIT(1)
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564 | 510 | 1,533 | 1,395 | |||||||||||||||||||
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Segment profit margin/Segment adjusted EBIT margin(1)
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32 | % | 30 | % | 29 | % | 28 | % | |||||||||||||||
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(1)See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for the definition of Segment adjusted EBIT and Segment adjusted EBIT margin.
The following table sets forth the factors contributing to year-over-year changes in our ES segment's Net sales for the three and nine months ended September 26, 2026:
| Q3 2026 vs. Q3 2025 | YTD Q3 2026 vs. YTD Q3 2025 | ||||||||||
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Organic(1)
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5 | % | 8 | % | |||||||
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Foreign currency translation
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(1) | % | - | % | |||||||
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Acquisitions
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- | % | - | % | |||||||
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Other
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- | % | - | % | |||||||
| Total % change in Net sales | 4 | % | 8 | % | |||||||
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(1)See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for the definition of Organic sales growth.
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
ES Net sales increased $76 million due to higher organic sales of $54 million in Commercial Original Equipment and $42 million in Defense and Space, offset by lower organic sales of $20 million in Commercial Aftermarket.
Segment Profit and Segment adjusted EBIT increased by $54 million or 11% and Segment profit margin and Segment adjusted EBIT margin increased 2% for the three months ended September 26, 2026.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
ES Net sales increased $396 million due to higher organic sales of $216 million in Defense and Space and $162 million in Commercial Original Equipment.
Segment Profit and Segment adjusted EBIT increased by $138 million or 10% and Segment profit margin and Segment adjusted EBIT margin increased 1% for the nine months ended September 26, 2026.
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Engines & Power Systems
The following table sets forth the operating results for our E&PS segment for the three and nine months ended September 26, 2026 and September 27, 2025:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | September 26, 2026 | September 27, 2025 | ||||||||||||||||||||
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Net sales
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$ | 1,515 | $ | 1,478 | $ | 4,341 | $ | 4,142 | |||||||||||||||
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Segment profit/Segment adjusted EBIT(1)
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250 | 299 | 705 | 748 | |||||||||||||||||||
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Segment profit margin/Segment adjusted EBIT margin(1)
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17 | % | 20 | % | 16 | % | 18 | % | |||||||||||||||
(1)See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for the definition of Segment adjusted EBIT and Segment adjusted EBIT margin.
The following table sets forth the factors contributing to year-over-year changes in our E&PS segment's Net sales for the three and nine months ended September 26, 2026:
| Q3 2026 vs. Q3 2025 | YTD Q3 2026 vs. YTD Q3 2025 | ||||||||||
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Organic(1)
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2 | % | 5 | % | |||||||
| Foreign currency translation | 1 | % | - | % | |||||||
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Acquisitions
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- | % | - | % | |||||||
| Other | - | % | - | % | |||||||
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Total % change in Net sales
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3 | % | 5 | % | |||||||
(1)See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for the definition of Organic sales growth.
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
E&PS Net sales increased $37 million primarily due to higher organic sales of $74 million in Commercial Aftermarket, partially offset by lower organic sales of $30 million in Defense and Space.
Segment profit and Segment adjusted EBIT decreased by $49 million or 16% and Segment profit margin and Segment adjusted EBIT margin decreased 3% for the three months ended September 26, 2026.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
E&PS Net sales increased $199 million primarily due to higher organic sales of $231 million in Commercial Aftermarket, partially offset by lower organic sales of $43 million in Defense and Space.
Segment profit and Segment adjusted EBIT decreased by $43 million or 6% and Segment profit margin and Segment adjusted EBIT margin decreased 2% for the nine months ended September 26, 2026.
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Control Systems
The following table sets forth the operating results for our CS segment for the three and nine months ended September 26, 2026 and September 27, 2025:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | September 26, 2026 | September 27, 2025 | ||||||||||||||||||||
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Net sales
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$ | 1,345 | $ | 1,347 | $ | 3,878 | $ | 3,851 | |||||||||||||||
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Segment Profit/Segment adjusted EBIT(1)
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382 | 376 | 1,098 | 1,184 | |||||||||||||||||||
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Segment Profit margin/Segment adjusted EBIT margin(1)
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28 | % | 28 | % | 28 | % | 31 | % | |||||||||||||||
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(1)See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for the definition of Segment adjusted EBIT and Segment adjusted EBIT margin.
The following table sets forth the factors contributing to year-over-year changes in our CS segment's Net sales for the three and nine months ended September 26, 2026:
| Q3 2026 vs. Q3 2025 | YTD Q3 2026 vs. YTD Q3 2025 | ||||||||||
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Organic(1)
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- | % | - | % | |||||||
| Foreign currency translation | - | % | 1 | % | |||||||
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Acquisitions
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- | % | - | % | |||||||
| Other | - | % | - | % | |||||||
| Total % change in Net sales | - | % | 1 | % | |||||||
(1)See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for the definition of Organic sales growth.
For the three months ended September 26, 2026 compared with the three months ended September 27, 2025
CS Net sales remained flat due to lower organic sales of $15 million in Commercial Aftermarket, partially offset by higher organic sales of $9 million in Defense and Space.
Segment profit and Segment adjusted EBIT increased by $6 million or 2% and Segment profit margin and Segment adjusted EBIT margin remained flat for the three months ended September 26, 2026.
For the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025
CS Net sales increased $27 million due to higher organic sales of $50 million in Commercial Aftermarket and $24 million in Defense and Space, partially offset by lower organic sales of $56 million in Commercial Original Equipment.
Segment profit and Segment adjusted EBIT decreased by $86 million or 7% and Segment profit margin and Segment adjusted EBIT margin decreased 3% for the nine months ended September 26, 2026.
Corporate and All Other
Corporate and All Other primarily includes unallocated corporate costs and is not a separate reportable business segment. We monitor the activities in Corporate and All Other to determine the need for further reportable business segment disaggregation.
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NON-GAAP FINANCIAL MEASURES
We use non-GAAP financial measures to supplement the financial measures prepared in accordance with GAAP. These include (1) Organic sales growth, (2) Total segment profit, (3) Adjusted EBIT, (4) Adjusted EBIT margin, (5) Segment adjusted EBIT, and (6) Segment adjusted EBIT margin.
Below are definitions and reconciliations of certain non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. Management believes these non-GAAP financial measures provide investors with a more meaningful measure of its performance period to period, align with how management evaluates performance internally, and make it easier for investors to compare our performance to peers. These measures should be considered in addition to, and not as replacements for, the most directly comparable GAAP measure. The non-GAAP financial measures we use are as follows:
•Organic sales growth: We define organic sales growth as the change in reported Net sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date, and other items that are unusual and non-recurring in nature (e.g. impact of comprehensive settlement related to Flexjet litigation). We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
•Total segment profit: We define Total segment profit as Net income excluding taxes, interest, amortization of acquisition-related intangibles, stock compensation expense, environmental expense, pension (income) expense, repositioning and other charges, transaction costs, expenses associated with the Honeywell trademark license, and other items within Other (income) expense, net. We believe this measure is useful to investors as it provides greater transparency with respect to supplemental information used by management in its financial and operational decision making, as well as for understanding ongoing operating trends.
•Adjusted EBIT and Adjusted EBIT margin: We define Adjusted EBIT as Net income excluding taxes, interest, amortization of acquisition-related intangibles, stock compensation expense, environmental expense, pension (income) expense, repositioning and other charges, transaction costs, expenses associated with the Honeywell trademark license, other items within Other (income) expense, net, and other items that are unusual or non-recurring in nature, including but not limited to impairment charges and litigation charges (e.g., comprehensive settlement related to Flexjet litigation). We define Adjusted EBIT margin as Adjusted EBIT divided by Net sales adjusted for the impact of the Flexjet-related litigation settlement. We believe these measures are useful to investors as they provide greater transparency with respect to supplemental information used by management in its financial and operational decision making, as well as for understanding ongoing operating trends.
•Segment adjusted EBIT and Segment adjusted EBIT margin: We define Segment adjusted EBIT as Income before taxes excluding interest, amortization of acquisition-related intangibles, stock compensation expense, environmental expense, pension (income) expense, repositioning and other charges, transaction costs, expenses associated with the Honeywell trademark license, other items within Other (income) expense, net, and other items that are otherwise of an unusual or non-recurring in nature, including but not limited to impairment charges and litigation charges (e.g., comprehensive settlement related to Flexjet litigation). We define Segment adjusted EBIT margin as Segment adjusted EBIT divided by Net sales adjusted for the impact of the Flexjet-related litigation settlement. We believe these measures are useful to investors as they provide greater transparency with respect to supplemental information used by management in its financial and operational decision making, as well as for understanding ongoing operating trends.
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| Three Months Ended | |||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | ||||||||||||||||||||||
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Amount
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Percentage of Net Sales
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Amount
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Percentage of Net Sales
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| Net Income | $ | 737 | 16 | % | $ | 654 | 14 | % | |||||||||||||||
| Income tax expense | 164 | 4 | % | 87 | 2 | % | |||||||||||||||||
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Amortization of acquisition-related intangibles(1)
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28 | 1 | % | 3 | - | % | |||||||||||||||||
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Stock compensation expense(2)
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28 | 1 | % | 16 | - | % | |||||||||||||||||
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Environmental expense(3)
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19 | - | % | 258 | 6 | % | |||||||||||||||||
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Transaction costs(4)
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18 | - | % | 143 | 3 | % | |||||||||||||||||
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Honeywell trademark license expense(2)
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54 | 1 | % | - | - | % | |||||||||||||||||
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Pension (income) expense(5)
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(76) | (2) | % | 1 | - | % | |||||||||||||||||
| Interest expense (income), net | 187 | 4 | % | (5) | - | % | |||||||||||||||||
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Other, net(6)
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2 | - | % | (6) | - | % | |||||||||||||||||
| Total segment profit/Segment adjusted EBIT | $ | 1,161 | 25 | % | $ | 1,151 | 25 | % | |||||||||||||||
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(1)Amounts included in Cost of products and services sold and Selling, general and administrative.
(2)Amounts included in Selling, general and administrative expenses.
(3)Amounts included in Cost of products and services sold and Other (income) expense, net.
(4)Amounts included in Selling, general and administrative expenses and Other (income) expense, net.
(5)Amounts included in Cost of products and services sold, Selling, general and administrative, Research and development, and Other (income) expense, net.
(6)Amounts include repositioning and other charges.
| Three Months Ended September 26, 2026 | |||||||||||||||||||||||||||||||||||
| Electronic Solutions | Engines & Power Systems | Control Systems | |||||||||||||||||||||||||||||||||
| Amount | Margin % | Amount | Margin % | Amount | Margin % | ||||||||||||||||||||||||||||||
| Segment profit/Segment adjusted EBIT | $ | 564 | 32 | % | $ | 250 | 17 | % | $ | 382 | 28 | % | |||||||||||||||||||||||
| Three Months Ended September 27, 2025 | |||||||||||||||||||||||||||||||||||
| Electronic Solutions | Engines & Power Systems | Control Systems | |||||||||||||||||||||||||||||||||
| Amount | Margin % | Amount | Margin % | Amount | Margin % | ||||||||||||||||||||||||||||||
| Segment profit/Segment adjusted EBIT | $ | 510 | 30 | % | $ | 299 | 20 | % | $ | 376 | 28 | % | |||||||||||||||||||||||
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| Nine Months Ended | |||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | ||||||||||||||||||||||
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Amount
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Percentage of Net Sales
|
Amount
|
Percentage of Net Sales
|
||||||||||||||||||||
| Net Income | $ | 1,635 | 12 | % | $ | 2,292 | 18 | % | |||||||||||||||
| Income tax expense | 444 | 3 | % | 382 | 3 | % | |||||||||||||||||
|
Amortization of acquisition-related intangibles(1)
|
72 | 1 | % | 37 | - | % | |||||||||||||||||
|
Stock compensation expense(2)
|
89 | 1 | % | 62 | - | % | |||||||||||||||||
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Environmental expense(3)
|
61 | 1 | % | 363 | 3 | % | |||||||||||||||||
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Transaction costs(4)
|
540 | 4 | % | 160 | 1 | % | |||||||||||||||||
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Honeywell trademark license expense(2)
|
54 | - | % | - | - | % | |||||||||||||||||
|
Pension (income) expense(5)
|
(72) | (1) | % | 4 | - | % | |||||||||||||||||
| Interest expense (income), net | 404 | 3 | % | (14) | - | % | |||||||||||||||||
|
Other, net(6)
|
24 | - | % | (29) | - | % | |||||||||||||||||
| Total segment profit/Segment adjusted EBIT | $ | 3,251 | 24 | % | $ | 3,257 | 25 | % | |||||||||||||||
__________________
(1)Amounts included in Cost of products and services sold and Selling, general and administrative.
(2)Amounts included in Selling, general and administrative expenses.
(3)Amounts included in Cost of products and services sold and Other (income) expense, net.
(4)Amounts included in Selling, general and administrative expenses and Other (income) expense, net.
(5)Amounts included in Cost of products and services sold, Selling, general and administrative, Research and development, and Other (income) expense, net.
(6)Amounts include repositioning and other charges.
| Nine Months Ended September 26, 2026 | |||||||||||||||||||||||||||||||||||
| Electronic Solutions | Engines & Power Systems | Control Systems | |||||||||||||||||||||||||||||||||
| Amount | Margin % | Amount | Margin % | Amount | Margin % | ||||||||||||||||||||||||||||||
| Segment profit/Segment adjusted EBIT | $ | 1,533 | 29 | % | $ | 705 | 16 | % | $ | 1,098 | 28 | % | |||||||||||||||||||||||
| Nine Months Ended September 27, 2025 | |||||||||||||||||||||||||||||||||||
| Electronic Solutions | Engines & Power Systems | Control Systems | |||||||||||||||||||||||||||||||||
| Amount | Margin % | Amount | Margin % | Amount | Margin % | ||||||||||||||||||||||||||||||
| Segment profit/Segment adjusted EBIT | $ | 1,395 | 28 | % | $ | 748 | 18 | % | $ | 1,184 | 31 | % | |||||||||||||||||||||||
LIQUIDITY AND CAPITAL RESOURCES
Historically, as part of Honeywell, we were dependent upon Honeywell for its working capital and financing requirements. Honeywell used a centralized approach to cash management and financing of its operations. Our excess cash in participating bank accounts was transferred to Honeywell daily, and Honeywell funded our operating and investing activities as needed. This arrangement was not reflective of the manner in which we would have financed our operations had we been a standalone business separate from Honeywell during the periods presented prior to the Spin-off. Transfers of cash between Honeywell and us have been included within Net transfers to Parent in the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Equity.
Following our Spin-off, we no longer participate in Honeywell's centralized treasury management and funding programs. Our ability to fund our operating needs depends on our ability to continue to generate positive cash flows from operations, and on our ability to obtain debt or equity financing on acceptable terms. We believe that our cash balances and funds provided by operating activities, along with expected borrowing capacity and access to capital markets, taken as a whole, will provide (i) adequate liquidity to meet all of our
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current and long-term obligations when due, including for at least the next 12 months, and fund capital expenditures and (ii) flexibility to make investment opportunities, including acquisitions, that may arise. However, there can be no assurance that we will be able to obtain additional debt or equity financing on acceptable terms in the future.
We expect to utilize our cash flows to continue to invest in our business, growth strategies, people, and the communities in which we operate; service and repay our indebtedness over time; and create shareholder value through dividends and share repurchases.
In connection with the Spin-off, we issued senior unsecured notes in an aggregate principal amount of $16.0 billion. We distributed $6.0 billion of notes due 2046, 2056, and 2066 and $9.1 billion of net cash proceeds from the remaining series of senior unsecured notes to Honeywell as partial consideration for the contribution of assets by Honeywell to us in connection with the distribution. The balance was retained to pay fees and expenses related to the separation, the distribution, the debt transactions, and for general corporate purposes.
In addition, we entered into a 364-day senior unsecured revolving credit facility and a five-year senior unsecured revolving credit facility, together in an aggregate committed amount as of the date of distribution of $4.0 billion, and a $4.0 billion senior unsecured commercial paper program. The undrawn portion of the credit facilities serves as a backup facility for the issuance of the commercial paper program. We expect to use proceeds from the senior unsecured revolving credit facilities and senior unsecured commercial paper program for general corporate purposes.
Cash and Cash Requirements
Summary
As of September 26, 2026 and December 31, 2025, our cash and cash equivalents totaled $1.6 billion and $213 million, respectively. Our ability to generate positive cash flows from operations is dependent on general economic conditions and the competitive environment in our industry and is subject to the business and other risk factors described in the section of the Information Statement titled "Risk Factors." If we are unable to generate sufficient cash flows from operations or otherwise comply with the terms of any external borrowings, we may be required to seek additional financing alternatives.
We continually assess the relative strength of each business in our portfolio as to strategic fit, industry position, profit, and cash flow contribution to identify target investment and acquisition opportunities that would strengthen our portfolio. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses.
Share Repurchase Program
On July 23, 2026, our Board of Directors authorized a share repurchase program under which we may repurchase up to $3.5 billion of our outstanding common stock. The program has no expiration date and may be modified, suspended, or discontinued at any time without prior notice, and it does not obligate us to repurchase any shares. We expect to fund repurchases from operating cash flows and available liquidity. The program is intended to return capital to shareholders and offset dilution from our equity compensation programs, as well as manage our capital structure. To date, we have not repurchased any shares under the program.
Dividends
On October 28, 2026, we announced that our Board of Directors declared a dividend of $0.40 per share of common stock outstanding, payable on December 4, 2026, to shareholders on record as of November 13, 2026. Future dividends, if any, will remain subject to approval and declaration by our Board of Directors.
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Cash and Cash Equivalents Held by Foreign Subsidiaries
Cash and cash equivalents held by our foreign subsidiaries were $1.0 billion and $209 million as of September 26, 2026 and December 31, 2025.
Cash Flow Summary
Summarized cash flow information for the nine months ended September 26, 2026 and 2025 are as follows:
| Nine Months Ended | |||||||||||
| September 26, 2026 | September 27, 2025 | ||||||||||
|
Net cash provided by operating activities
|
$ | 1,014 | $ | 1,864 | |||||||
|
Net cash used for investing activities
|
(385) | (392) | |||||||||
|
Net cash provided by (used for) financing activities
|
739 | (1,265) | |||||||||
Operating
Net cash provided by operating activities decreased $850 million for the nine months ended September 26, 2026 compared to the same period in 2025. The decrease in net cash provided by operating activities is primarily attributable to increases of $391 million in interest payments on debt, $380 million in transaction costs paid related to the Spin-off, and $377 million driven by the Flexjet litigation settlement payments, partially offset by $159 million due to timing of customer cash collections.
Investing
Net cash used for investing activities remained flat for the nine months ended September 26, 2026 compared to the same period in 2025.
Financing
Net cash provided by financing activities increased $2.0 billion for the nine months ended September 26, 2026 compared to the same period in 2025, primarily due to net proceeds from the issuance of senior unsecured notes in connection with the Spin-off of $15.8 billion, partially offset by higher net transfers to Honeywell of $13.9 billion.
Borrowings
We leverage a variety of debt instruments to manage our overall borrowing costs. As of September 26, 2026, our total borrowings were $15.9 billion. We had immaterial borrowings outstanding as of December 31, 2025.
| September 26, 2026 | December 31, 2025 | ||||||||||
| Fixed rate notes | $ | 15,500 | $ | - | |||||||
|
Variable rate notes
|
500 | - | |||||||||
| Other | 5 | 9 | |||||||||
| Debt issuance costs | (149) | - | |||||||||
|
Total borrowings
|
$ | 15,856 | $ | 9 | |||||||
A key source of liquidity is our ability to access the corporate bond markets. Through these markets, we issue a variety of long-term fixed rate and variable rate notes to manage our overall funding costs.
Another key source of liquidity is our ability to access the commercial paper market. Commercial paper notes are sold at par less a discount representing an interest factor, or if interest bearing, at par, and have a maturity of not more than 397 days from date of issuance. Borrowings under the commercial paper program are available for general corporate purposes.
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We also have the following revolving credit agreements:
•A $1.0 billion 364-day credit agreement (the 364-Day Credit Agreement) with a syndicate of banks, dated as of March 6, 2026. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 5, 2027, unless (i) we elect to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on March 5, 2028, or (ii) the 364-Day Credit Agreement is terminated earlier pursuant to its terms. As of September 26, 2026, there were no outstanding borrowings under our 364-Day Credit Agreement.
•A $3.0 billion five-year credit agreement (the Five-Year Credit Agreement) with a syndicate of banks, dated as of March 6, 2026. As of September 26, 2026, there were no outstanding borrowings under our Five-Year Credit Agreement.
Refer to Note 9. Debt and Credit Agreements of the Notes to the Condensed Consolidated Financial Statements for additional information regarding our debt instruments.
Credit Ratings
Our ability to access the global debt capital markets and the related cost of these borrowings is affected by the strength of our credit rating and market conditions. Our credit ratings are periodically reviewed by the major independent debt rating agencies. As of September 26, 2026, S&P Global Ratings ("S&P"), Fitch Ratings Inc. ("Fitch"), and Moody's Investors Service ("Moody's") had ratings on our debt set forth in the table below:
| S&P | Fitch | Moody's | |||||||||||||||
| Outlook | Positive | Stable | Stable | ||||||||||||||
| Short-term | A-2 | F1 | P-2 | ||||||||||||||
| Long-term | BBB+ | A- | A3 | ||||||||||||||
OTHER MATTERS
Critical Accounting Estimates
Other than the item disclosed below, there were no material changes during the three and nine months ended September 26, 2026, to the items disclosed as critical accounting estimates in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Information Statement.
Defined Benefit Pension Plans
For periods prior to the Spin-off, certain employees of Honeywell Aerospace participated in U.S. pension plans sponsored by Honeywell. Following the Spin-off, we sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans. For financial reporting purposes, net periodic pension (income) expense is calculated annually based upon various actuarial assumptions, including a discount rate for plan obligations and an expected long-term rate of return on plan assets. Changes in the discount rate and expected long-term rate of return on plan assets could materially affect the pension (income) expense amount. Pension (income) expense is comprised of service and interest cost, assumed return on plan assets, prior service amortization (Pension ongoing (income) expense), and potential mark-to-market adjustment (MTM Adjustment).
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The key assumptions used in developing our net periodic pension (income) expense for our U.S. plans included the following:
| September 26, 2026 | |||||
| Discount rate | |||||
| Projected benefit obligation | 5.50 | % | |||
| Service cost | 5.47 | % | |||
| Interest cost | 5.16 | % | |||
| Assets | |||||
| Expected rate of return | 7.25 | % | |||
The MTM Adjustment represents the recognition of net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plans' projected benefit obligation (the corridor). Net actuarial gains or losses occur when the actual experience differs from any of the various assumptions used to value our pension plans or when assumptions change. The primary factors contributing to actuarial gains or losses are changes in the discount rate used to value pension obligations as of the measurement date each year and the difference between expected and actual returns on plan assets. The mark-to-market accounting method results in the potential for volatile and difficult to forecast MTM Adjustments. There was no MTM adjustment in the three months ended September 26, 2026.
We determine the expected long-term rate of return on plan assets utilizing historical plan asset returns over varying long-term periods combined with our expectations of future market conditions and asset mix considerations (see Note 15. Pension Plans of the Notes to the Condensed Consolidated Financial Statements for details on the actual various asset classes and targeted asset allocation percentages for our pension plans). We are using an expected rate of return on plan assets of 7.25% for 2026.
The discount rate reflects the market rate on the measurement date for high-quality fixed income investments with maturities corresponding to our benefit obligations and is subject to change each year. The discount rate can be volatile from year to year as it is determined based upon prevailing interest rates as of the measurement date. We used a 5.50% discount rate to determine benefit obligations as of September 26, 2026.
Changes in our expected rate of return on plan assets and discount rate resulting from economic events also affect future Pension ongoing (income) expense. The following table highlights the sensitivity of our U.S. pension obligations and ongoing (income) expense to changes in these assumptions, with all other assumptions remaining constant:
| Change in Assumption |
Impact on Pension Ongoing Expense |
Impact on Projected Benefit Obligation | |||||||||
| 0.25 percentage point decrease in discount rate | Decrease $9 million | Increase $112 million | |||||||||
| 0.25 percentage point increase in discount rate | Increase $9 million | Decrease $108 million | |||||||||
| 0.25 percentage point decrease in expected rate of return on assets | Increase $5 million | - | |||||||||
| 0.25 percentage point increase in expected rate of return on assets | Decrease $5 million | - | |||||||||
Pension ongoing income for our world-wide pension plans is expected to be approximately $150 million in 2026. Also, if required, a MTM Adjustment will be recorded in the fourth quarter of 2026 in accordance with our pension accounting method. It is difficult to reliably forecast or predict whether there will be a MTM Adjustment in 2026, and if one is required, what the magnitude of such adjustment will be. MTM Adjustments are primarily driven by events and circumstances beyond our control such as changes in interest rates and the performance of the financial markets.
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Recent Accounting Pronouncements
Refer to Note 2. Summary of Significant Accounting Policies of the Notes to the Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.
Honeywell Aerospace Inc. published this content on October 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 28, 2026 at 21:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]