Honeywell 2003 Annual Report Download - page 409

Honeywell believes it has sufficient insurance coverage and reserves to cover
all pending Bendix related asbestos claims. Although it is impossible to predict
the outcome of pending claims or to reasonably estimate losses which could arise
from future Bendix related asbestos claims, we do not believe that such claims
would have a material adverse effect on our consolidated financial position in
light of our insurance coverage and our prior experience in resolving such
claims. If the rate and types of claims filed, the average indemnity cost of
such claims and the period of time over which claim settlements are paid
(collectively, the "Variable Claims Factors") does not substantially increase,
Honeywell would not expect future Bendix related asbestos claims to have a
material adverse effect on our results of operations or operating cash flows in
any fiscal year. No assurances can be given, however, that the Variable Claims
Factors will not substantially increase.
Refractory and Friction Products
During the twelve months ended December 31, 2003, we made asbestos related
payments of $557 million, including legal fees. During the twelve months ended
December 31, 2003, we received $664 million in insurance reimbursements
including $472 million in cash received from Equitas related to a comprehensive
policy buy-back settlement of all insurance claims by Honeywell against Equitas.
The settlement resolves all claims by Honeywell against Equitas arising from
asbestos claims related to NARCO and Bendix.
NARCO and Bendix asbestos related balances are included in the following balance
sheet accounts:
December 31,
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(Dollars in Millions) 2003 2002
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Other current assets ........................................ $ 130 $ 320
Insurance recoveries for asbestos related liabilities ....... 1,317 1,636
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$1,447 $1,956
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Accrued liabilities ......................................... $ 730 $ 741
Asbestos related liabilities ................................ 2,279 2,700
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$3,009 $3,441
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We are monitoring proposals for federal asbestos legislation pending in the
United States Congress. Due to the uncertainty surrounding the proposed
legislation, it is not possible at this point in time to determine what impact
such legislation would have on the NARCO bankruptcy strategy or our asbestos
liabilities and related insurance recoveries.
Warranties and Guarantees
We have issued or are a party to the following direct and indirect guarantees at
December 31, 2003:
Maximum
Potential
Future
(Dollars in Millions) Payments
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Operating lease residual values .................................... $ 73
Other third parties' financing ..................................... 5
Unconsolidated affiliates' financing ............................... 38
Customer and vendor financing ...................................... 24
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$140
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We do not expect that these guarantees will have a material adverse effect on
our consolidated results of operations, financial position or liquidity.
In connection with the disposition of certain businesses and facilities we have
indemnified the purchasers for the expected cost of remediation of environmental
contamination, if any, existing on the date of disposition. Such expected costs
are accrued when environmental assessments are made or remedial efforts are
probable and the costs can be reasonably estimated.
In the normal course of business we issue product warranties and product
performance guarantees. We accrue for the estimated cost of product warranties
and performance guarantees based on contract terms and historical experience at
the time of sale. Adjustments to initial obligations for warranties and
guarantees are made as changes in the obligations become reasonably estimable.