Honeywell 2003 Annual Report Download - page 401

sion to the Third Circuit Court of Appeals. Per the Appeals Court's order, the
parties are engaged in mediation. In October 2003, the District Court denied
Honeywell's motion for a stay of certain aspects of its May 2003 order, and we
are considering whether to appeal such ruling. The site at issue is one of
twenty-one sites located in Jersey City, New Jersey which are the subject of an
Administrative Consent Order (ACO) entered into with the New Jersey Department
of Environmental Protection (NJDEP) in 1993. Under the ACO, Honeywell agreed to
study and remediate these sites in accordance with NJDEP's directions, provided
that the total costs of such studies and remediation do not exceed $60 million.
Honeywell has cooperated with the NJDEP under the ACO and believes that
decisions regarding site cleanups should be made by the NJDEP under the ACO. We
are confident that proceeding under the ACO will ensure a safe remediation and
allow the property to be placed back into productive use much faster and at a
cost significantly less than the remedies required by the Court's order. We have
not completed development of a remedial action plan for the excavation and
offsite disposal directed under the Court's order and therefore are unable to
estimate the cost of such actions. At trial, plaintiff's expert testified that
the excavation and offsite disposal cost might be $400 million. However, there
are significant variables in the implementation of the Court's order and
depending on the method of implementation chosen, the estimate could increase
or decrease. Prior to 2003, provisions were made in our financial statements as
to remedial costs consistent with the ACO and during the three months ended
June 30, 2003 we provided for additional costs which are likely to be incurred
during the pendency of our appeal, which provisions do not assume excavation and
offsite removal of chromium from the site. There are alternative outcomes and
remedies beyond the scope of the ACO that could result from the remanding,
reversal or replacement of the Court's decision and order. At this time, we
can neither identify a probable alternative outcome nor reasonably estimate
the cost of an alternative remedy. Although we expect the Court's decision and
order to be remanded, reversed or replaced, should the remedies prescribed in
the Court's decision and order ultimately be upheld, such outcome could have a
material adverse impact on our consolidated results of operations or operating
cash flows in the periods recognized or paid. We do not expect that this matter
will have a material adverse effect on our consolidated financial position.
In accordance with a 1992 consent decree with the State of New York, Honeywell
is studying environmental conditions in and around Onondaga Lake (the Lake), in
Syracuse, New York. The purpose of the study is to identify, evaluate and
propose remedial measures that can be taken to remedy historic industrial
contamination in the Lake. A predecessor company to Honeywell operated a
chemical plant which is alleged to have contributed mercury and other
contaminants to the Lake and certain surrounding areas. In May 2003, Honeywell
submitted to the New York State Department of Environmental Conservation (DEC) a
draft Feasibility Study for the Lake and certain surrounding areas. In November
2003, the DEC issued formal comments on the Feasibility Study. Those comments
include a request for further evaluation of remedies for the Lake and
surrounding areas. Accordingly, pursuant to the consent decree, Honeywell is
required to submit a revised Feasibility Study on or before May 3, 2004.
Provisions have been made in our financial statements based on our expected
revisions to our Feasibility Study. We do not expect that this matter will have
a material adverse effect on our consolidated financial position. However,
should the DEC ultimately require a substantially more extensive remedy than
that expected to be proposed in the revised Feasibility Study and should
Honeywell agree to undertake such a remedy, such outcome could have a material
adverse impact on our consolidated results of operations and operating cash
flows in the periods recognized or paid.
During 2003, three incidents occurred at Honeywell's Baton Rouge, Louisiana
chemical plant including a release of chlorine, a release of antimony
pentachloride which resulted in an employee fatality, and an employee exposure
to hydrofluoric acid. As a result of these incidents, the United States
Environmental Protection Agency (USEPA), Occupational Health and Safety
Administration (OSHA), the Chemical Safety Board and state and local agencies
commenced investigations. A number of potential government claims have been
settled, including a $110,000 penalty paid to OSHA for citations arising from
the incidents. The USEPA and Chemical Safety Board investigations are ongoing
however no charges have been filed or claims asserted. Honeywell has been served
with several civil lawsuits. We do not expect that these matters will have a
material adverse effect on our consolidated financial position, consolidated
results of operations or operating cash flows.
Asbestos Matters
Like many other industrial companies, Honeywell is a defendant in personal
injury actions related to asbestos. We did not mine or produce asbestos, nor did
we make or sell insulation products or other construction materials that have
been identified as the primary cause of asbestos related disease in the vast
majority of claimants. Products containing asbestos previously manufactured by
Honeywell or by previously owned subsidiaries fall into two general categories;
refractory products and friction products.
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