Honeywell 2005 Annual Report Download - page 109

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
cash flows in the periods recognized or paid. We do not believe that an adverse outcome in either matter would have a material
adverse effect on our consolidated financial position.
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, employee benefit plans, 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.
Warranties and Guarantees—We have issued or are a party to the following direct and indirect guarantees at December 31, 2005:
Maximum
Potential
Future
Payments
Operating lease residual values $ 37
Other third parties' financing 11
Unconsolidated affiliates' financing 25
Customer financing 34
$ 107
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.
The following table summarizes information concerning our recorded obligations for product warranties and product performance
guarantees:
81