Honeywell 2005 Annual Report Download - page 102

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
cleanup of chromium residue at two Honeywell ACO Sites and by a citizens' group against Honeywell and thirteen other defendants
with respect to contamination on about a dozen of the Honeywell ACO Sites. For the reasons stated above, we do not believe these
lawsuits will significantly change our obligations with respect to the Honeywell ACO Sites.
Although it is not possible at this time to predict the outcome of matters discussed above, we believe that the allegations are
without merit and we intend to vigorously defend against these lawsuits. We do not expect these matters to have a material adverse
effect on our consolidated financial position. While we expect to prevail, an adverse litigation outcome could have a material adverse
impact on our consolidated results of operations and operating cash flows in the periods recognized or paid.
Onondaga Lake, Syracuse, NY—A predecessor company to Honeywell operated a chemical plant which is alleged to have
contributed mercury and other contaminants to the Lake. In July 2005, the New York State Department of Environmental
Conservation (the DEC) issued its Record of Decision with respect to remediation of industrial contamination in the Lake.
The Record of Decision calls for a combined dredging/capping remedy generally in line with the approach recommended in the
Feasibility Study submitted by Honeywell in May 2004. Based on currently available information and analysis performed by our
engineering consultants, we have accrued for our estimated cost of implementing the remedy set forth in the Record of Decision. Our
estimating process considered a range of possible outcomes and amounts recorded reflect our best estimate at this time. We do not
believe that this matter will have a material adverse impact on our consolidated financial position. Given the scope and complexity of
this project, it is possible that actual costs could exceed estimated costs by an amount that could have a material adverse impact on our
consolidated results of operations and operating cash flows in the periods recognized or paid. At this time, however, we cannot
identify any legal, regulatory or technical reason to conclude that a specific alternative outcome is more probable than the outcome for
which we have made provisions in our financial statements. The DEC's aggregate cost estimate, which is higher than the amount
reserved, is based on the high end of the range of potential costs for major elements of the Record of Decision and includes a
contingency. The actual cost of the Record of Decision will depend upon, among other things, the resolution of certain technical issues
during the design phase of the remediation.
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 primarily fall into two general categories; refractory products and friction products.
Refractory Products—Honeywell owned North American Refractories Company (NARCO) from 1979 to 1986. NARCO
produced refractory products (high temperature bricks and cement) which were sold largely to the steel industry in the East and
Midwest. Less than 2 percent of NARCO's products contained asbestos.
When we sold the NARCO business in 1986, we agreed to indemnify NARCO with respect to personal injury claims for products
that had been discontinued prior to the sale (as defined in the sale agreement). NARCO retained all liability for all other claims. On
January 4, 2002, NARCO filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
As a result of the NARCO bankruptcy filing, all of the claims pending against NARCO are automatically stayed pending the
reorganization of NARCO. In addition, the bankruptcy court enjoined
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