Honeywell 2007 Annual Report Download - page 23

We cannot predict with certainty the outcome of litigation matters, government proceedings and other
contingencies and uncertainties.
We are subject to a number of 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 (including asbestos), prior acquisitions and divestitures,
employment, employee benefits plans, intellectual property, import and export matters and environmental, health
and safety matters. Resolution of these matters can be prolonged and costly, and the ultimate results or
judgments are uncertain due to the inherent uncertainty in litigation and other proceedings. Moreover, our
potential liabilities are subject to change over time due to new developments, changes in settlement strategy or
the impact of evidentiary requirements, and we may be required to pay damage awards or settlements, or
become subject to damage awards or settlements, that could have a material adverse effect on our results of
operations, cash flows and financial condition. While we maintain insurance for certain risks, the amount of our
insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. It also is
not possible to obtain insurance to protect against all our operational risks and liabilities. The incurrence of
significant liabilities for which there is no or insufficient insurance coverage could adversely affect our results of
operations, cash flows, liquidity and financial condition.
Our operations and the prior operations of predecessor companies expose us to the risk of material
environmental liabilities.
Mainly because of past operations and operations of predecessor companies, we are subject to potentially
material liabilities related to the remediation of environmental hazards and to personal injuries or property
damages that may be caused by hazardous substance releases and exposures. We have incurred remedial
response and voluntary clean-up costs for site contamination and are a party to lawsuits and claims associated
with environmental and safety matters, including past production of products containing toxic substances.
Additional lawsuits, claims and costs involving environmental matters are likely to continue to arise in the future.
We are subject to various federal, state, local and foreign government requirements regulating the discharge of
materials into the environment or otherwise relating to the protection of the environment. These laws and
regulations can impose substantial fines and criminal sanctions for violations, and require installation of costly
equipment or operational changes to limit emissions and/or decrease the likelihood of accidental hazardous
substance releases. We incur, and expect to continue to incur capital and operating costs to comply with these
laws and regulations. In addition, changes in laws, regulations and enforcement of policies, the discovery of
previously unknown contamination or new technology or information related to individual sites, or the imposition
of new clean-up requirements or remedial techniques could require us to incur costs in the future that would have
a negative effect on our financial condition or results of operations.
Our expenses include significant costs related to employee health and retiree health and income
benefits.
With approximately 122,000 employees, including 57,000 in the U.S., our expenses relating to employee
health and retiree health and income benefits are significant. In recent years, we have experienced significant
increases in certain of these costs, largely as a result of economic factors beyond our control, in particular,
ongoing increases in health care costs well in excess of the rate of inflation. Continued increasing health-care
costs, and changes in other assumptions used to calculate retiree health and income benefit expenses, may
affect our future profitability.
Additional tax expense or additional tax exposures could affect our future profitability
We are subject to income taxes in both the United States and various non-U.S. jurisdictions, and our
domestic and international tax liabilities are dependent upon the distribution of income among these different
jurisdictions. In 2007, our tax expense represented 26.4 percent of our income before tax, and includes estimates
of additional tax which may be incurred for tax exposures and reflects various estimates and assumptions,
including assessments of future earnings of the Company that
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