Honeywell 2015 Annual Report Download - page 69

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS —(Continued)
(Dollars in millions, except per share amounts)
District of Michigan alleging that the MCBAs do not provide for CAPS on the Company
’ s liability for healthcare coverage.
The New Jersey action was dismissed and Honeywell subsequently answered the UAW
’ s complaint in Michigan and asserted
counterclaims for fraudulent inducement, negligent misrepresentation and breach of implied warranty. 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. In the second quarter of 2014, the parties
agreed to stay the proceedings with respect to those retirees who retired before the initial inclusions of the CAPS in the
2003 MCBA until the Supreme Court decided the M&G Polymers USA, LLC v. Tackett case. In a ruling on January 26, 2015,
the Supreme Court held that retiree health insurance benefits provided in collective bargaining agreements do not carry an
inference that they are vested or guaranteed to continue for life and that the “vesting” issue must be decided pursuant to
ordinary principles of contract law. The stay of the proceedings has been lifted and the case is again proceeding in the
normal course. Based on the Supreme Court
’ s ruling, 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 $176 million, reflecting the estimated value of these CAPS.
In December 2013, the UAW and certain of the plaintiffs filed a motion for partial summary judgment with respect to
those retirees who retired after the initial inclusion of the CAPS in the 2003 MCBA. The UAW sought a ruling that the 2003
MCBA did not limit Honeywell
’ s obligation to contribute to healthcare coverage for the post-2003 retirees. That motion
remains pending. Honeywell is confident that the Court will find that the 2003 MCBA does, in fact, limit Honeywell
’ s retiree
healthcare obligation for post-2003 retirees. In the event of an adverse ruling, however, Honeywell
’ s other postretirement
benefits for post- 2003 retirees would increase by approximately $110 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
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.
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