Honeywell 2008 Annual Report Download - page 25

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 claims of 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 hazardous
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 pension
benefits.
With approximately 128,000 employees, including approximately 58,000 in the U.S., our expenses relating to
employee health and retiree health and pension 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, volatility in investment returns and discount rates, as well as changes in other assumptions
used to calculate retiree health and pension benefit expenses, may adversely affect our financial position, results
of operations or require significant contributions to our pension plans.
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 2008, our tax expense represented 26.5 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 could effect the valuation of our deferred tax
assets. Our future results could be adversely affected by changes in the effective tax rate as a result of a change
in the mix of earnings in countries with differing statutory tax rates, changes in the overall profitability of the
Company, changes in tax legislation, changes in the valuation of deferred tax assets and liabilities, the results of
audits and examinations of previously filed tax returns and continuing assessments of our tax exposures.
Volatility of credit markets or macro-economic factors could adversely affect our business
Changes in U.S. and global financial and equity markets, including market disruptions, limited liquidity, and
interest rate volatility, may increase the cost of financing as well as the risks of refinancing maturing debt. In
addition, our borrowing costs can be affected by short and long-term ratings assigned by independent rating
agencies. A decrease in these ratings could increase our cost of borrowing.
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