Honeywell 2014 Annual Report Download - page 71

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NARCO and Bendix asbestos related balances are included in the following balance sheet
accounts:
2014 2013
December 31,
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31 $ 77
Insurance recoveries for asbestos related liabilities. . . . . . . . . . . . . . . . . . . . . . 454 595
$ 485 $ 672
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 352 $ 461
Asbestos related liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,150
$1,552 $1,611
NARCO Products—In connection with NARCO’s emergence from bankruptcy on April 30, 2013, a
federally authorized 524(g) trust (NARCO Trust) was established for the evaluation and resolution of all
existing and future NARCO asbestos claims. Both Honeywell and NARCO are protected by a
permanent channeling injunction barring all present and future individual actions in state or federal
courts and requiring all asbestos related claims based on exposure to NARCO products to be made
against the NARCO Trust. The NARCO Trust reviews submitted claims and determines award
amounts in accordance with established Trust Distribution Procedures approved by the Bankruptcy
Court which set forth the criteria claimants must meet to qualify for compensation including, among
other things, exposure and medical criteria that determine the award amount. In addition, Honeywell
provided, and continues to provide, input to the design of control procedures for processing NARCO
claims, and has on-going audit rights to review and monitor the claims processors’ adherence to the
established requirements of the Trust Distribution Procedures.
Honeywell is obligated to fund NARCO asbestos claims submitted to the NARCO Trust which
qualify for payment under the Trust Distribution Procedures (Annual Contribution Claims), subject to
annual caps of $140 million in the years 2015 through 2018 and $145 million for each year thereafter.
However, the initial $100 million of claims processed through the NARCO Trust (the Initial Claims
Amount) will not count against the annual cap and any unused portion of the Initial Claims Amount will
roll over to subsequent years until fully utilized. As of December 31, 2014, Honeywell has not made
any payments to the NARCO Trust for Annual Contribution Claims.
Honeywell is also responsible for payments due to claimants pursuant to settlement agreements
reached during the pendency of the NARCO bankruptcy proceedings that provide for the right to
submit claims to the NARCO Trust subject to qualification under the terms of the settlement
agreements and Trust Distribution Procedures criteria (Pre-established Unliquidated Claims), which
amounts are estimated at $150 million and are expected to be paid during the initial years of trust
operations ($3 million of which was paid in 2014). Such payments are not subject to the annual cap
described above.
Our consolidated financial statements reflect an estimated liability for pre-established unliquidated
claims ($147 million), unsettled claims pending as of the time NARCO filed for bankruptcy protection
($39 million) and for the estimated value of future NARCO asbestos claims expected to be asserted
against the NARCO Trust through 2018 ($743 million). In the absence of actual trust experience on
which to base the estimate, Honeywell projected the probable value of asbestos related future
liabilities, including trust claim handling costs, based on a commonly accepted methodology used by
numerous bankruptcy courts addressing 524(g) trusts. Some critical assumptions underlying this
methodology include claims filing rates, disease criteria and payment values contained in the Trust
Distribution Procedures, estimated approval rates of claims submitted to the NARCO Trust and
epidemiological studies estimating disease instances. This projection resulted in a range of estimated
liability of $743 million to $961 million. We believe that no amount within this range is a better estimate
than any other amount and accordingly, we have recorded the minimum amount in the range. In light of
62
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)