Honeywell 2013 Annual Report Download - page 63

range of reasonably possible environmental loss in excess of our recorded liabilities. We expect to fund
expenditures for these matters from operating cash flow. The timing of cash expenditures depends on
a number of factors, including the timing of litigation and settlements of remediation liability, personal
injury and property damage claims, regulatory approval of cleanup projects, execution timeframe of
projects, remedial techniques to be utilized and agreements with other parties.
Remedial response and voluntary cleanup costs charged against pretax earnings were $272, $234
and $240 million in 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, the recorded
liabilities for environmental matters was $643 and $654 million, respectively. In addition, in 2013 and
2012 we incurred operating costs for ongoing businesses of approximately $88 and $84 million,
respectively, relating to compliance with environmental regulations.
Remedial response and voluntary cleanup payments were $304, $320 and $270 million in 2013,
2012 and 2011, respectively, and are currently estimated to be approximately $300 million in 2014. We
expect to fund such expenditures from operating cash flow.
Although we do not currently possess sufficient information to reasonably estimate the amounts of
liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the
timing nor the amount of the ultimate costs associated with environmental matters can be determined,
they could be material to our consolidated results of operations or operating cash flows in the periods
recognized or paid. However, considering our past experience and existing reserves, we do not expect
that environmental matters will have a material adverse effect on our consolidated financial position.
See Note 22 Commitments and Contingencies of Notes to the Financial Statements for a
discussion of our commitments and contingencies, including those related to environmental matters
and toxic tort litigation.
Financial Instruments
As a result of our global operating and financing activities, we are exposed to market risks from
changes in interest and foreign currency exchange rates and commodity prices, which may adversely
affect our operating results and financial position. We minimize our risks from interest and foreign
currency exchange rate and commodity price fluctuations through our normal operating and financing
activities and, when deemed appropriate, through the use of derivative financial instruments. We do
not use derivative financial instruments for trading or other speculative purposes and do not use
leveraged derivative financial instruments. A summary of our accounting policies for derivative financial
instruments is included in Note 1 Summary of Significant Accounting Policies of Notes to the Financial
Statements. We also hold investments in marketable equity securities, which exposes us to market
volatility, as discussed in Note 16 Financial Instruments and Fair Value Measures of Notes to the
Financial Statements.
We conduct our business on a multinational basis in a wide variety of foreign currencies. Our
exposure to market risk from changes in foreign currency exchange rates arises from international
financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities
and anticipated transactions arising from international trade. Our objective is to preserve the economic
value of non-functional currency cash flows. We attempt to hedge transaction exposures with natural
offsets to the fullest extent possible and, once these opportunities have been exhausted, through
foreign currency forward and option agreements with third parties. Our principal currency exposures
relate to the U.S. Dollar, Euro, Canadian Dollar, British Pound, Mexican Peso, Indian Rupee, Chinese
Renminbi, Czech Koruna, Hong Kong Dollar, Korean Won, Singapore Dollar, Swiss Franc, United Arab
Emirates Dirham, Swedish Krona, Thai Baht and Romanian Leu.
Our exposure to market risk from changes in interest rates relates primarily to our net debt and
pension obligations. As described in Note 14 Long-term Debt and Credit Agreements and Note 16
Financial Instruments and Fair Value Measures of Notes to the Financial Statements, we issue both
fixed and variable rate debt and use interest rate swaps to manage our exposure to interest rate
movements and reduce overall borrowing costs.
Financial instruments, including derivatives, expose us to counterparty credit risk for nonperfor-
mance and to market risk related to changes in interest and foreign currency exchange rates and
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