Honeywell 2004 Annual Report Download - page 215

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 International Inc., et al., the United States District Court for the
District of New Jersey held in May 2003 that a predecessor Honeywell site
located in Jersey City, New Jersey constituted an imminent and substantial
endangerment and ordered Honeywell to conduct the excavation and transport for
offsite disposal of approximately one million tons of chromium residue present
at the site. Honeywell strongly disagrees with the Court's determinations and
has appealed the Court's decision to the Third Circuit Court of Appeals. In
October 2003, the District Court denied Honeywell's motion for a stay of certain
aspects of its May 2003 order, and we have appealed the ruling to the Third
Circuit. 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 submitted a remedial action plan
for the excavation and offsite disposal directed under the Court's order to the
Special Master appointed by the Court, for which the estimated cost of
implementing such plan would be approximately $316 million. 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. Provisions have been made in our financial
statements for remedial costs
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