Honeywell 2012 Annual Report Download - page 73

remediation efforts progress or as additional technical, regulatory 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.
Asbestos Related Contingencies and Insurance Recoveries—Honeywell is a defendant in
personal injury actions related to products containing asbestos (refractory and friction products). We
recognize a liability for any asbestos related contingency that is probable of occurrence and reasonably
estimable. Regarding North American Refractories Company (NARCO) asbestos related claims, we
accrued for pending claims based on terms and conditions in agreements with NARCO, its former
parent company, and certain asbestos claimants, and an estimate of the unsettled claims pending as
of the time NARCO filed for bankruptcy protection. We also accrued for the estimated value of future
NARCO asbestos related claims expected to be asserted against the NARCO Trust through 2018 as
described in Note 22 Commitments and Contingencies of Notes to the Financial Statements. In light of
the inherent uncertainties in making long term projections and in connection with the initial operation of
a 524(g) trust, as well as the stay of all NARCO asbestos claims since January 2002, we do not
believe that we have a reasonable basis for estimating NARCO asbestos claims beyond 2018.
Regarding Bendix asbestos related claims, we accrued for the estimated value of pending claims using
average resolution values for the previous five years. We also accrued for the estimated value of future
anticipated claims related to Bendix for the next five years based on historic claims filing experience
and dismissal rates, disease classifications, and average resolution values in the tort system for the
previous five years. In light of the uncertainties inherent in making long-term projections, as well as
certain factors unique to friction product asbestos claims, we do not believe that we have a reasonable
basis for estimating asbestos claims beyond the next five years. We will continue to update the
resolution values used to estimate the cost of pending and future Bendix claims during the fourth
quarter each year. For additional information see Note 22. We continually assess the likelihood of any
adverse judgments or outcomes to our contingencies, as well as potential ranges of probable losses
and recognize a liability, if any, for these contingencies based on an analysis of each individual issue
with the assistance of outside legal counsel and, if applicable, other experts.
In connection with the recognition of liabilities for asbestos related matters, we record asbestos
related insurance recoveries that are deemed probable. In assessing the probability of insurance
recovery, we make judgments concerning insurance coverage that we believe are reasonable and
consistent with our historical experience with our insurers, our knowledge of any pertinent solvency
issues surrounding insurers, various judicial determinations relevant to our insurance programs and our
consideration of the impacts of any settlements with our insurers.
Aerospace Sales Incentives—We provide sales incentives to commercial aircraft manufacturers
and airlines in connection with their selection of our aircraft equipment, predominately wheel and
braking system hardware and auxiliary power units, for installation on commercial aircraft. These
incentives principally consist of free or deeply discounted products, but also include credits for future
purchases of product and upfront cash payments. These costs are recognized in the period incurred as
cost of products sold or as a reduction to sales, as appropriate. For aircraft manufacturers, incentives
are recorded when the products are delivered; for airlines, incentives are recorded when the
associated aircraft are delivered by the aircraft manufacturer to the airline.
Research and Development—Research and development costs for company-sponsored
research and development projects are expensed as incurred. Such costs are principally included in
Cost of Products Sold and were $1,847, $1,799 and $1,450 million in 2012, 2011 and 2010,
respectively.
Stock-Based Compensation Plans—The principal awards issued under our stock-based
compensation plans, which are described in Note 20 Stock-Based Compensation Plans of Notes to
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HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)