Honeywell 2007 Annual Report Download - page 57

from the Medicare prescription subsidy. See Note 22 to the financial statements for further discussion of our
pension and OPEB plans.
Off-Balance Sheet Arrangements
Following is a summary of our off-balance sheet arrangements:
Guarantees—We have issued or are a party to the following direct and indirect guarantees at December 31,
2007:
Maximum
Potential
Future
Payments
(Dollars in millions)
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.
Retained Interests in Factored Pools of Trade Accounts Receivables—As a source of liquidity, we sell
interests in designated pools of trade accounts receivables to third parties. The sold receivables ($500 million at
December 31, 2007) are over-collateralized and we retain a subordinated interest in the pool of receivables
representing that over-collateralization as well as an undivided interest in the balance of the receivables pools.
The over-collateralization provides credit support to the purchasers of the receivable interest by limiting their
losses in the event that a portion of the receivables sold becomes uncollectible. At December 31, 2007, our
retained subordinated and undivided interests at risk were $101 and $721 million, respectively. Based on the
underlying credit quality of the receivables placed into the designated pools of receivables being sold, we do not
expect that any losses related to our retained interests at risk will have a material adverse effect on our
consolidated results of operations, financial position or liquidity.
Environmental Matters
We are subject to various federal, state, local and foreign government requirements relating to the protection
of the environment. We believe that, as a general matter, our policies, practices and procedures are properly
designed to prevent unreasonable risk of environmental damage and personal injury and that our handling,
manufacture, use and disposal of hazardous or toxic substances are in accordance with environmental and
safety laws and regulations. However, mainly because of past operations and operations of predecessor
companies, we, like other companies engaged in similar businesses, have incurred remedial response and
voluntary cleanup 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.
With respect to environmental matters involving site contamination, we continually conduct studies,
individually or jointly with other potentially responsible parties, to determine the feasibility of various remedial
techniques to address environmental matters. It is our policy (see Note 1 to the financial statements) to record
appropriate liabilities for environmental matters when remedial efforts or damage claim payments are probable
and the costs can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted
future costs required to complete the remedial work. The recorded liabilities are adjusted periodically as
remediation efforts progress or as additional
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