Honeywell 2007 Annual Report Download - page 127

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
not recorded a provision for the remaining claims in our financial statements. Although we expect to prevail on all
three of the remaining claims, an adverse ruling on one or more of these claims could have a material adverse
effect on our results of operations in the periods recognized. We do not believe that an adverse outcome in this
matter would have a material adverse effect on our consolidated operating cash flows or 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,
intellectual property, 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 (taking into consideration any insurance
recoveries), 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, 2007:
Maximum
Potential
Future
Payments
Operating lease residual values $ 39
Other third parties' financing 4
Unconsolidated affiliates' financing 3
Customer financing 23
$ 69
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:
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