Honeywell 2003 Annual Report Download - page 399

NOTE 21--COMMITMENTS AND CONTINGENCIES
Shareowner Litigation
Honeywell and three of its former officers are defendants in a class action
lawsuit filed in the United States District Court for the District of New
Jersey. Plaintiffs allege, among other things, that the defendants violated
federal securities laws by purportedly making false and misleading statements
and by failing to disclose material information concerning Honeywell's financial
performance, thereby allegedly causing the value of Honeywell's stock to be
artificially inflated. The Court has certified a class consisting of all
purchasers of Honeywell stock between December 20, 1999 and June 19, 2000.
Discovery is ongoing. Although we continue to believe that the allegations in
this matter are without merit, we are engaged in mediation with the plaintiffs
in an effort to resolve the matter without resorting to a trial. While we cannot
be certain that the parties will be able to resolve the matter through
mediation, a provision has been made in our financial statements regarding a
potential settlement. Although it is not possible at this time to predict the
outcome of this matter, we expect to prevail if the parties are unable to
resolve this litigation through mediation. However, an adverse outcome could be
material to our consolidated financial position or results of operations.
ERISA Class Action Lawsuit
Honeywell and several of its current and former officers and directors are
defendants in a purported class action lawsuit filed in the United States
District Court for the District of New Jersey. The complaint principally alleges
that the defendants breached their fiduciary duties to participants in the
Honeywell Savings and Ownership Plan (the "Savings Plan") by purportedly making
false and misleading statements, failing to disclose material information
concerning Honeywell's financial performance, and failing to diversify the
Savings Plan's assets and monitor the prudence of Honeywell stock as a Savings
Plan investment. In September 2003, Honeywell filed a motion to dismiss this
matter.
Although it is not possible at this time to predict the outcome of this matter,
we believe that the allegations in this matter are without merit and we expect
to prevail. An adverse litigation outcome could, however, be material to our
consolidated financial position or results of operations. As a result of the
uncertainty regarding the outcome of this matter, no provision has been made in
our financial statements with respect to this contingent liability.
Environmental Matters
We are subject to various federal, state and local government requirements
relating to the protection of the environment. We believe that, as a general
matter, our policies, practices and procedures are properly designed to prevent
unreasonable risk of environmental damage and personal injury and that our
handling, manufacture, use and disposal of hazardous or toxic substances are in
accord with environmental and safety laws and regulations. However, mainly
because of past operations and operations of predecessor companies, we, like
other companies engaged in similar businesses, have incurred remedial response
and voluntary cleanup costs for site contamination and are a party to lawsuits
and claims associated with environmental and safety matters, including past
production of products containing toxic substances. Additional lawsuits, claims
and costs involving environmental matters are likely to continue to arise in the
future.
With respect to environmental matters involving site contamination, we
continually conduct studies, individually at our owned sites, and jointly as a
member of industry groups at non-owned sites, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy
to record appropriate liabilities for environmental matters when environmental
assessments are made or remedial efforts or damage claim payments are probable
and the costs can be reasonably estimated. With respect to site contamination,
the timing of these accruals is generally no later than the completion of
feasibility studies. We expect to fund expenditures for these matters from
operating cash flow. The timing of cash expenditures depends on a number of
factors, including the timing of litigation and settlements of personal injury
and property damage claims, regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.
Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations or operating cash
flows in the periods recognized or paid. However, considering our past
experience and existing reserves, we do not expect that these environmental
matters will have a material adverse effect on our consolidated financial
position.
In the matter entitled Interfaith Community Organization, et al. v. Honeywell