Honeywell 2004 Annual Report Download - page 103

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
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.
The following table summarizes information concerning our recorded obligations for product warranties and product performance
guarantees:
Years Ended December 31,
2004 2003 2002
Beginning of year $ 275 $ 217 $ 217
Accruals for warranties/guarantees issued during the year 236 215 158
Adjustment of pre-existing warranties/guarantees 1 35 (18)
Settlement of warranty/guarantee claims (213) (192) (140)
End of year $ 299 $ 275 $ 217
Product warranties and product performance guarantees are included in the following balance sheet accounts:
December 31,
2004 2003
Accrued liabilities $270 $242
Other liabilities 29 33
$299 $275
Other Matters—We are subject to a number of other lawsuits, investigations and disputes (some of which involve substantial
amounts claimed) arising out of the conduct of our business, including matters relating to commercial transactions, government
contracts, product liability, prior acquisitions and divestitures, and health and safety matters. We recognize a liability for any
contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of
outcomes in these matters, as well as potential ranges of probable losses, based on a careful analysis of each matter with the assistance
of outside legal counsel and, if applicable, other experts. Given the uncertainty inherent in litigation, we do not believe it is possible to
develop estimates of the range of reasonably possible loss in excess of current accruals for these matters. Considering our past
experience and existing accruals, we do not expect the outcome of these matters, either individually or in the aggregate, to have a
material adverse effect on our consolidated financial position. Because most contingencies are resolved over long periods of time,
potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary
requirements, which could cause us to pay damage awards or settlements (or become subject to equitable remedies) that could have a
material adverse effect on our results of operations or operating cash flows in the periods recognized or paid.
Note 22—Pension and Other Postretirement Benefits
We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering the majority of our employees
and retirees. Pension benefits for substantially all U.S. employees are provided through non-contributory, qualified and non-qualified
defined benefit pension plans. U.S. defined benefit pension plans comprise 86 percent of our projected benefit obligation. Non-U.S.
employees, who are not U.S. citizens, are covered by various retirement benefit arrangements, some of which are considered to be
defined benefit pension plans for accounting purposes. Non-U.S. defined benefit pension plans comprise 14 percent of our projected
benefit obligation.
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