Honeywell 2013 Annual Report Download - page 117

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prior to the initial inclusion of the CAPS in the 2003 MCBA are not covered by the CAPS as a matter of
law. In December 2011, the New Jersey action was dismissed on forum grounds. Honeywell appealed
the New Jersey court’s dismissal to the United States Court of Appeals for the Third Circuit. The Third
Circuit denied the appeal. Honeywell has now answered the UAW’s complaint in Michigan and has
asserted counterclaims for fraudulent inducement, negligent misrepresentation and breach of implied
warranty. The parties stipulated to the certification of a class of all potentially affected retirees,
surviving spouses, and eligible dependents. The UAW filed a motion to dismiss these counterclaims.
The court dismissed Honeywell’s fraudulent inducement and negligent misrepresentation claims, but let
stand the claim for breach of implied warranty. Honeywell is confident that the CAPS will be upheld and
that its liability for healthcare coverage premiums with respect to the putative class will be limited as
negotiated and expressly set forth in the applicable MCBAs. In the event of an adverse ruling,
however, Honeywell’s other postretirement benefits for pre-2003 retirees would increase by
approximately $180 million, reflecting the estimated value of these CAPS.
Joint Strike Fighter Investigation—In 2013 the Company received subpoenas from the
Department of Justice requesting information relating primarily to parts manufactured in the United
Kingdom and China used in the F-35 fighter jet. The Company is cooperating fully with the
investigation. While we believe that Honeywell has complied with all relevant U.S. laws and regulations
regarding the manufacture of these sensors, it is not possible to predict the outcome of the
investigation or what action, if any, may result from it.
Given the uncertainty inherent in litigation and investigations (including the specific matters
referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in
excess of current accruals for these matters (other than as specifically set forth above). Considering
our past experience and existing accruals, we do not expect the outcome of these matters, either
individually or in the aggregate, to have a material adverse effect on our consolidated financial position.
Because most contingencies are resolved over long periods of time, potential liabilities are subject to
change due to new developments, changes in settlement strategy or the impact of evidentiary
requirements, which could cause us to pay damage awards or settlements (or become subject to
equitable remedies) that could have a material adverse effect on our results of operations or operating
cash flows in the periods recognized or paid.
Warranties and Guarantees—We have issued or are a party to the following direct and indirect
guarantees at December 31, 2013:
Maximum
Potential
Future
Payments
Operating lease residual values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40
Other third parties’ financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Customer financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
$49
We do not expect that these guarantees will have a material adverse effect on our consolidated
results of operations, financial position or liquidity.
In connection with the disposition of certain businesses and facilities we have indemnified the
purchasers for the expected cost of remediation of environmental contamination, if any, existing on the
date of disposition. Such expected costs are accrued when environmental assessments are made or
remedial efforts are probable and the costs can be reasonably estimated.
In the normal course of business we issue product warranties and product performance
guarantees. We accrue for the estimated cost of product warranties and performance guarantees
based on contract terms and historical experience at the time of sale. Adjustments to initial obligations
for warranties and guarantees are made as changes in the obligations become reasonably estimable.
105
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)