Honeywell 2008 Annual Report Download - page 59

purchasers of the receivable interest by limiting their losses in the event that a portion of the receivables sold
becomes uncollectible. At December 31, 2008, our retained subordinated and undivided interests at risk were
$93 and $480 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 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 hazardous 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 technical or legal information becomes available. Given the
uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially
responsible parties, technology and information related to individual sites, we do not believe it is possible to
develop an estimate of the range of reasonably possible environmental loss in excess of our recorded liabilities.
We expect to fund expenditures for these matters from operating cash flow. The timing of cash expenditures
depends on a number of factors, including the timing of litigation and settlements of remediation liability, personal
injury and property damage claims, regulatory approval of cleanup projects, execution timeframe of projects,
remedial techniques to be utilized and agreements with other parties.
Remedial response and voluntary cleanup payments were $320, $267 and $264 million in 2008, 2007 and
2006, respectively, and are currently estimated to be approximately $330 million in 2009. We expect to fund such
expenditures from operating cash flow.
Remedial response and voluntary cleanup costs charged against pretax earnings were $466, $230 and $218
million in 2008, 2007 and 2006, respectively. At December 31, 2008 and 2007, the recorded liabilities for
environmental matters was $946 and $799 million, respectively. In addition, in 2008 and 2007 we incurred
operating costs for ongoing businesses of approximately $69 and $81 million, respectively, relating to compliance
with environmental regulations.
Although we do not currently possess sufficient information to reasonably estimate the amounts of liabilities
to be recorded upon future completion of studies, litigation or settlements, and neither the timing nor the amount
of the ultimate costs associated with environmental matters can be determined, they could be material to our
consolidated results of operations or operating cash flows in the periods recognized or paid. However,
considering our past experience and existing reserves, we do not expect that environmental matters will have a
material adverse effect on our consolidated financial position.
See Note 21 to the financial statements for a discussion of our commitments and contingencies, including
those related to environmental matters and toxic tort litigation.
Financial Instruments
As a result of our global operating and financing activities, we are exposed to market risks from changes in
interest and foreign currency exchange rates and commodity prices, which may adversely
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