Honeywell 2012 Annual Report Download - page 27

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 become subject to or be required to pay 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 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, the establishment of stricter state or federal toxicity standards with respect to
certain contaminants, 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 132,000 employees, including approximately 52,000 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
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