Honeywell 2009 Annual Report Download - page 25

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 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 and retiree health benefits.
With approximately 122,000 employees, including approximately 54,000 in the U.S., our expenses relating to
employee health and retiree health 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, legislative or regulatory changes, and volatility in discount rates, as well as changes in other assumptions
used to calculate retiree health benefit expenses, may adversely affect our financial position and results of
operations.
Risks related to our defined benefit pension plans may adversely impact our results of operations and
cash flow.
Significant changes in actual investment return on pension assets, discount rates, and other factors could
adversely affect our results of operations and pension contributions in future periods. U.S. generally accepted
accounting principles require that we calculate income or expense for the plans using actuarial valuations. These
valuations reflect assumptions about financial markets and interest rates, which may change based on economic
conditions. Funding requirements for our U.S. pension plans may become more significant. However, the ultimate
amounts to be contributed are dependent upon, among other things, interest rates, underlying asset returns and
the impact of legislative or regulatory changes related to pension funding obligations. For a discussion regarding
the significant assumptions used to estimate pension expense, including discount rate and the expected long-
term rate of return on plan assets, and how our financial statements can be affected by pension plan accounting
policies, see "Critical Accounting Policies" included in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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 2009, our tax expense represented 26.5 percent of our income before
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