Honeywell 2004 Annual Report Download - page 46

In 2002, we recognized repositioning charges totaling $453 million for workforce reductions across all of our reportable segments
and our UOP process technology joint venture. The charge also related to costs for the planned shutdown and consolidation of
manufacturing plants in our Specialty Materials and Automation and Control Solutions reportable segments. Severance costs related to
announced workforce reductions of approximately 8,100 manufacturing and administrative positions. Asset impairments principally
related to manufacturing plant and equipment held for sale and capable of being taken out of service and actively marketed in the
period of impairment. Exit costs related principally to incremental costs to exit facilities, including lease termination losses negotiated
or subject to reasonable estimation related mainly to closed facilities in our Automation and Control Solutions and Specialty Materials
reportable segments. Also, $76 million of previously established severance accruals were returned to income in 2002, due to fewer
employee separations than originally planned associated with certain prior repositioning actions and higher than expected voluntary
employee attrition, resulting in reduced severance liabilities in our Aerospace, Automation and Control Solutions and Specialty
Materials reportable segments.
Our 2004 repositioning actions are expected to generate incremental pretax savings of approximately $75 million in 2005
compared with 2004 principally from planned workforce reductions. Cash expenditures for severance and other exit costs necessary to
execute our repositioning actions were $164, $200 and $447 million in 2004, 2003 and 2002, respectively. Such expenditures for
severance and other exit costs have been funded principally through operating cash flows. Cash expenditures for severance and other
exit costs necessary to execute the remaining actions will approximate $100 million in 2005 and will be funded principally through
operating cash flows.
In 2004, we recognized a charge of $565 million for other probable and reasonably estimable legal and environmental liabilities.
This includes $536 million for legacy environmental liabilities, primarily related to the denial of our appeal of the matter entitled
Interfaith Community Organization, et. al. v. Honeywell International Inc., et al., and estimated liabilities for remediation of
environmental conditions in and around Onondaga Lake in Syracuse, New York. Both of these environmental matters are discussed in
further detail in Note 21 of Notes to Financial Statements in “Item 8. Financial Statements and Supplementary Data.” We recognized a
charge of $29 million for various legal settlements including property damage claims in our Automation and Control Solutions
reportable segment. We recognized a charge of $76 million primarily for Bendix related asbestos claims and defense costs incurred in
2004 including an update of expected resolution values with respect to pending claims. The charge was net of probable Bendix related
insurance recoveries and an additional $47 million of NARCO insurance deemed probable of recovery. See Note 21 of Notes to
Financial Statements in “Item 8. Financial Statements and Supplementary Data” for further discussion. We recognized an impairment
charge of $42 million in the second quarter of 2004 related principally to the write-down of property, plant and equipment of our
Performance Fibers business in our Specialty Materials reportable segment. This business was sold in December 2004. We recognized
a charge of $14 million for the write-off of receivables, inventories and other assets. We also reversed a reserve of $10 million
established in the prior year for a contract settlement.
In 2003, we recognized a charge of $261 million for other probable and reasonably estimable legal and environmental liabilities.
This included $235 million for environmental liabilities mainly related to the matter entitled Interfaith Community Organization, et al.
v. Honeywell International Inc., et al. and for remediation of environmental conditions in and around Onondaga Lake in Syracuse,
New York, both as discussed in Note 21 of Notes to Financial Statements in “Item 8. Financial Statements and Supplementary Data.”
We also recognized a charge of $4 million in our Specialty Materials reportable segment including a loss on sale of an investment
owned by an equity investee.
In 2002, we recognized business impairment charges of $877 million related to businesses in our Specialty Materials and
Automation and Control Solutions reportable segments, as well as our Friction Materials business. Based on current operating losses
and deteriorating economic conditions in certain chemical and telecommunications end-markets, we performed impairment tests and
recognized impairment charges of $785 million principally related to the write-down of property, plant and equipment held and used
in our Nylon System, Performance Fibers and Metglas Specialty Materials businesses, as well as an Automation and Control Solutions
communication business. We also
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