Murray Grainger - Vice President, Investor Relations Dave Cote - Chairman and CEO Dave Anderson - Senior Vice President and CFO

Scott Davis – Morgan Stanley Shannon O'Callaghan - Lehman Brothers John Inch - Merrill Lynch Christopher Glynn – Oppenheimer Jeff Sprague – Citigroup Investments Nigel Coe – Deutsche Bank

Good morning, at this time I’d like to welcome everyone to the Honeywell First Quarter 2008 Earnings Conference Call [Operator Instructions] I’ll now turn the call over to Mr. Murray Grainger, Vice President of Investor Relations. You may begin your conference sir.

Good morning everyone and welcome to Honeywell’s First Quarter 2008 Earnings Conference Call. With me here today in Morristown is our Chairman and CEO, Dave Cote and Senior Vice President and CFO, Dave Anderson. This call and webcast including any non-GAAP reconciliations are available on our website www.Honeywell.com/Investor. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our businesses as we see them today. Those elements can change, and we would ask that you interpret them in that light. This morning we will review our financial results for the first quarter and expectations for the remainder of the year and of course allow time for your questions. With that I’ll turn the call over to Dave Cote.

Good morning everyone. It is wonderful to report another quarter of strong results for Honeywell. Sales were up 11% to $8.9 billion with organic growth across all regions. Segment profit grew 16% to approximately $1.2 billion and margins increased 60 basis points to 14% and net income grew 22%. That solid profit growth, combined with lower share count for the quarter results in a 30% increase in EPS to $0.85 a share. You probably recognize this is $0.02 above the high end of our previous earnings guidance and it includes over $100 million of repositioning actions in the quarter. That repositioning will help us some in 2008 and more fully in 2009. Free cash flow for the quarter came in at $571 million which is up 25% for the quarter and more than $100 million over the prior year. We are really pleased with our first quarter performance and remain confident in the outlook for the year despite the tougher economic environment. We are raising our sales guidance and we are tightening our full year EPS guidance to the high end of our previously stated range. We now expect EPS to be in the range of $3.70 to $3.80 for this year, that’s an impressive 17% to 21% increase over last year. Overall, a great quarter financial performance for Honeywell and we continue to be on track for the remainder of the year. I think its worth spending a few minutes updating you on some of the highlights for the quarter and to reinforce some of the key themes that we believe have us well positioned for continued performance in the future. First, we really are benefiting from the diversity of our portfolio. We’ve got great positions in good industries and they continue to strengthen through our acquisitions and our investments in innovations we continue to win in the marketplace. Second, our mix of short cycle and long cycle businesses gives our portfolio balance and allows us to deliver consistent financial performance. Third, we continue to benefit from our strong increase in global presence especially our great position in emerging regions. All geographies experienced organic growth in the quarter, with Asia and the Middle East continuing to lead the way with healthy double digit growth rates. We also continue to be awarded major multi-year contracts and platforms and that really reinforces the confidence that our customers have in our technologies, our products and solutions and it really portends continued future growth. In Aerospace alone in the quarter we were awarded over $27 billion of new business including $1.5 billion from Airbus on the A350 Extra Wide Body, $3 billion from Gulfstream on the G650 and $23 billion from Embraer on the new MSJ and MLJ family biz jets. When combined with the major mechanical systems that we secured on the A350 XWB last year we’ve won over $40 billion worth of contracts which supports our favorable long term outlook. Next, we continue to effectively deploy our capital and that drives significant shareholder value. Our latest acquisition announcement of Norcross Safety Products is a great add to our ACS business and provides terrific growth opportunities in the attractive adjacent space of personal protection equipment. I’m confident our life safety team will deliver tremendous gains with this investment as they have with all the other acquisitions they have completed. It’s a great position in a good industry and we expect to do quite well with it. We expect the Norcross acquisition to close in the second quarter this year and despite the integration, financing and accounting costs all that stuff associated with the transaction we see no material impact EPS in 2008. Additionally, in the quarter we also repurchased 7.4 million shares. Finally, we are well positioned to execute and deliver results in a tougher economic environment. They key macro drivers of our businesses, safety, security, energy efficiency, energy generation, air travel; all these macro trends remain favorable. Despite pockets of softness in selected end markets our portfolio overall remains strong and we are confident in our ability to deliver on our commitments. With that summary let me turn the call over to Dave Anderson to go through the financials in detail for the fourth quarter and our outlook for the year.

Thanks everybody for participating this morning. Let’s go to slide number four and let me start by giving you a summary recap of what Dave just covered before going into the business segments, then talking more about the outlook for the rest of the year. As we said, sales and as the release states sales were up 11% in the quarter, 8% organic growth which includes 3% benefit from foreign exchange as you know we always break out for you those details. Sales came in at about $200 better in the quarter than we guided driven by foreign exchange and also very strong performance from UOP. As Dave said we continue to benefit from the global reach of Honeywell. About two thirds of the revenue growth that we experienced in the first quarter came from outside the United States. Segment profit was up nicely $170 million or 16% versus last years segment margin improved 60 basis points to 14%. Net income up 22% in the quarter with favorable segment profit, pension expense partially offset by higher interest expense and importantly that repositioning of over $103 million in the quarter. As we did throughout 2007 we are going to continue to take the opportunity to execute on attractive repositioning projects which will benefit us for the remainder of 2008 and particularly for 2009 and beyond. The strong profit performance in the quarter and well as the benefit of lower share count drove earnings per share up an impressive 30% to $0.85, again, $0.02 above the high end of the range that we communicated and again includes over $100 million of elective repositioning actions in the quarter. In a tougher environment we continue to execute very well and position ourselves for the future. We remain confident in our EPS outlook for the year. Free cash flow finally, on this slide was up $110 million or 25% to $571 million importantly another strong indication of operational excellence in our operational discipline. Working capital turns continue to improve and are up again in the quarter. Our free cash flow performance represents almost 90% conversion and is around two points higher in terms of conversion in the same period last year and supports our full year outlook for the $3.2 to $3.4 billion in free cash flow that we’ve given you for the quarter. In summary, a terrific start to ’08 and as Dave said we feel confident in the outlook for the year, we are raising our sales guidance, we are also tightening our EPS range at the high end of our previous range taking that now to $3.70 to $3.80. Let’s now go through each of the segments starting with Aerospace on slide number five. As you can see Aerospace segment sales were up 7%, segment profit was up 13%, importantly margins expanded 100 basis points to 18.6%. Total commercial sales for Aero up 8% in the quarter, Commercial OE was up 8% driven by continuing strong OE demand to support production of both new Air Transport and Business Jets. On the Air Transport side, Air Transport and regional OE sales were up 11%, BGA, Business and General Aviation OE sales were up 3% in the quarter and for BGA mainly due to timing of shipments in a tough comparison to ’07 where Business Jet OE sales were up 12%. The outlook for Business Jets continues to remain robust supported by the increasingly global nature of the industry. This is an interesting statistic; many of you know this, but worthwhile noting. International buyers now count for about 50% versus just 25% in 2003 just five years ago of the new aircraft deliveries that are projected over the next five years. This data is really consistent with our annual business aviation outlook that we publish NBAA survey that we published September of 2007. It really shows the purchase expectations that are up in Asia, Middle East, but also the continued rise in expectations in Europe. On the commercial aftermarket side for Aero sales were up 8% the ATR aftermarket sales were up 6% in line with expectations and by the way, also in line with global flying hours which were up approximately 7% in the first quarter. The B&GA aftermarket sales were up a very robust 11% driven by increased revenues on our maintenance service agreements, higher engine utilization and also the sales of spare parts. Defense and space sales for Aero were up 5% in the quarter due primarily to the contribution of Dimensions International and also strong performance in surface systems which the Tiger program and then also space benefiting from the Orion program. On the margin side, Aero again very strong performance up 100 basis points. Price and productivity more than offset inflation in the quarter. Again, a great quarter for Aero and as Dave mentioned it’s a business that continues to build a very strong base for the future, we are very very proud of the wins at Airbus, Gulfstream and Embraer in the quarter really positions us very well. For the full year 2008 we are reaffirming Aerospace sales in the range of $12.8 to $13 billion up 5% to 7%, margins in the 18.7% to 19% range so up 70 to 100 basis points over the full year of 2007. Now let’s go to slide six and talk about another very positive story in the quarter which is ACS. You can see sales for ACS up 14% and 8% organic including 5% from FX represents ACS’s 12th consecutive quarter of double digit revenue growth. Importantly, we had balance growth in the quarter between products and solutions as you can see from the slide and I’m going to take you through a little more detail there and orders trends continue to be positive across both these businesses. For Products, revenues were up 14% driven by growth at Life Safety and also Environmental and Combustion Controls and significant growth in China, India and the Middle East where we continue to benefit from the investments and increased presence that we have in these regions. As expected, we continue to see softness in the North American residential markets, that’s an ongoing story, part of our planning, part of our bottom of guidance, ECC and Security particularly. We also saw evidence as expected of slowing in Europe in these same end markets. On the Solutions side, again 14% up in revenues in the quarter. The Process business was particularly strong with double digit organic growth in Americas, Europe, as well as Asia. Our Building Solutions business saw continued growth in North America and Asia. However, they did see some softness in Europe due primarily to timing of projects and we expect that to come back to us in the second quarter. Again, importantly order rates continue to be strong for Solutions up 13% in the quarter. Overall ACS sales were up low single digits in the US, mid single digits in the Europe and over 20% in the emerging regions when adjusted for acquisitions. It really speaks to the continuation of the strength, the broad base and positioning that we have in ACS. Another good story in the quarter for ACS was the impressive 20% increase in segment profit, 50 basis points increase in margin to 10.3%, productivity and pricing were particularly strong showing the good progress the ACS team is making there. Dilution from acquisitions importantly were in line with our expectations, 50 basis points of dilution in the quarter so on an organic basis we actually had 100 basis point of margin expansion in ACS in the first quarter. For the full year we are raising our revenue guidance for ACS by $500 million to the rage of $13.8 to $14 billion, we are correcting primarily the impact of the Norcross acquisition announced but obviously not yet closed. We are assuming a second quarter close, and the benefit of some incremental foreign exchange. Despite the margin dilution caused by Norcross we are maintaining our segment margin guidance for the segment at 11.6% to 11.9% up 30 to 60 basis points from 2007. Now let’s go to Transportation Systems. The story at TS continues to be a contrast between the Turbo business which continues overall strong and the continued softness that we seeing in the Consumer Products Group. I’ll give you a little more color on that in a moment. Overall, as you can see, TS sales were up 6% in the quarter driven by a 12% increase at Turbo and a decrease of 3% at CPG. At Turbo we saw a nice rebound as we expected in commercial vehicle segment and we continue to focus on the flawless platform launches in our passenger vehicle business. We saw some softness develop in the European production rates for passenger vehicles in the quarter; you probably saw some of the press there was flat production in Europe. However, the positive was continued increase in diesel penetration in fact diesel penetration was up two points to 52% in the first quarter of ’07 to 54% this year. We also saw in the quarter some select OEM delays in new platform launches which will now be pushed out to 2009. This is another data point to support our expectations for a moderating European economic environment. However, we remain bullish on the outlook for Turbo overall and we see the platform delays which are relatively modest it’s only a minor impact to ’08 and of course positive for 2009. In CPG we continue to face headwinds in the US automotive after market. Volumes were down literally across the product lines as high gas prices and low consumer confidence continue to weigh on discretionary spending and the do it yourself after market channel. Segment profit in the quarter was down 4% for TS overall, margins were down 130 basis points to 11.7% really reflecting the CPG volume decline, inflation impacts and also the investments that we continue to make in Turbo product development to support future platform launches. For the full year ’08 we are maintaining our sales guidance for Transportation at $5.1 to $5.2 billion up 1% to 3% over ’07. However, we are lowering our expectations for margins by 50 basis points and we now expect something in the range for TS of 11.8% to 12.1% for the full year up about 20 to 50 basis points reflecting again primarily the CPG softness but also reflecting some additional softness in terms of European economy. Slide eight highlights Specialty Materials, an absolutely terrific quarter for SM. Sales were up 18%, segment profit as you can see increased an impressive 38% driving a 280 basis point improvement in segment margins. This is a slide we’d like to continue to look at and focus on. Not surprisingly UOP had a great quarter sales growth of 23% compared to the prior year. UOP just continues to experience very strong demand for its proprietary technologies for both refining and petro-chemical markets. Results in the quarter were particularly strong due to the timing of catalysts and absorbents sales as well as for both new as well as reload applications. You’ll recall and we’ll talk more about this in terms of the outlook for SM and UOP but we do experience variability in the quarters and we would expect some of this to be actually pull forward from the remainder of ’08 for UOP. Importantly for SM we also saw strength in the other businesses. While we highlight UOP, Fluorine Products were up 12% due to favorable pricing actions, Resins and Chemicals up 24% driven by continued strong demand for [inaudible] but also the impact of higher raw materials which has a one for one for us in terms of top line because of our formula pricing. As discussed, segment margins for TS very strong, increased 280 basis points obviously the favorable UOP volumes, high mix of catalysts and absorbents in the quarter, importantly also productivity and pricing actions by the business. The full year now 2008 we are raising SM sales guidance slightly to $5.1 to $5.2 billion up approximately 5% to 7% over last year and we are estimating segment margins to be in the 14.1% to 14.4% range up 60 to 90 basis points reflecting mix impacts and also the flow through of higher raw material costs which again given the formula pricing really is a one for one in terms of cost as well as top line. With that recap of the businesses let’s discuss a little bit now our perspective on the quarter and then the outlook for 2Q and the full year. Let’s go to slide number nine entitled Key Market Assumptions. This is exactly the same slide we showed you on our outlook call last December and again at our investor meeting in February. It’s really a summary slide but it’s subsidive because it reflects the in depth bottom up analysis that we did in terms of our key markets and the assumptions that we’ve used to develop our 2008 plans. The key assumptions here remain in tact. Continued strong performance at Aerospace, selected softening in the developed markets as ACS, continued robust demand in the emerging markets for ACS, passenger vehicle Turbo performance correlated to the European economy but with diesel penetration trends continuing positive. Commercial vehicle Turbo’s strengthening particularly rebounding off of 2007 and again UOP continuing to be quite strong in ’08. That’s just a stay setter and it’s great to think that six months after we actually pulled this slide together and about four months after we delivered it to you we look at it today and it’s in tact. Let’s go to the next slide, slide number 10. Just as we did at the investor day in February we are showing our business segments on the left hand side and on the right side we are showing our actual first quarter sales. Whereas the prior slide showed you the overall outlook for the markets we serve this in fact is the key assumptions in terms of actual and outlook for revenues for the company by major segment. You’ll note that the full year numbers do no include the incremental impact of 2008 acquisitions; this is the same numbers we showed you in February. For example, it doesn’t include the Norcross benefit or foreign exchange benefit but it’s meant to give you some insight to how we are tracking versus the outlook that we communicated previously. Let’s just take down a few of the key points. Aerospace performance in line with our expectations. ACS as you can see the Developed Markets are consistent with our view of a stronger first half versus the second half of 2008. Also on the ACS Developed Markets some benefits obviously in terms of foreign exchange, greater foreign exchange benefit in that first quarter. ACS Emerging Markets driven by continued strength in China, India and the Middle East. As I indicated we had reported revenue increases in those emerging markets for ACS over 20% in the first quarter. You can see, in fact, shown here ACS Emerging Markets up 33%. PV, Passenger Vehicle Turbo benefiting from foreign exchange but again an outlook consistent with our view of a weaker second half for Europe in auto production. The Commercial Vehicle rebound as expected and then finally UOP off to a terrific start primarily reflecting the timing of catalysts sales in the quarter. Overall we think that the first quarter performance sets up very well for the full year and again gives us confidence in achievability of our full year performance guidance. Let’s now go to the next slide which is the 2Q08 Preview. We expect total sales in the second quarter to be approximately $9.2 billion up 8% versus ’07 and EPS to be in the range of $0.92 to $0.94 up 18% to 21%. You can see the highlights there in terms of each of the business segments in terms of revenues. Aero we anticipate to be around $3.2 billion in sales up approximately 6% and again the themes are strong business aviation growth, flight hour growth and in line with our assumptions for the full year 2008 after market expectations of flying hours of around 5%. For ACS we expect revenues of about $3.4 billion in the quarter an increase of 12% and another quarter of balanced growth between products and solutions for ACS. At Transportation Systems we expect revenues of about $1.3 billion up 4% but similar trends to what we saw in the first quarter. In other words, continued growth at Turbo despite lower production rate expectations for European autos and CPG will continue to be challenged by soft end market conditions. Finally for 2Q for SM for Specialty Materials, we anticipate sales of about $1.3 billion up 7% driven by growth across all of the businesses. Overall for the company again reflecting our well diversified and balanced portfolio which is helping us to drive overall strong results for the quarter. With that now let’s go to the 2008 Financial Summary on slide number 12. We are reaffirming our full year expectations here raising our revenues by $700 million approximately to $36.8 to $37.4 billion. You’ll recall previous guidance for revenues in the 4% to 6% range increased for the year we are now expecting in the range of 6% to 8% reflecting primarily the contribution of Norcross and the positive impact of foreign exchange. We would not expect for the planning standpoint we are using about 145 Euro to Dollar relationship versus the 140 that we’d used previously. We are also reaffirming our margin expectations for the year at 14% to 14.3% representing a 50 to 80 basis point increase over ’07 that translates to a 10% to 15% increase in segment profitability to about $5.1 to $5.3 billion for the year. As Dave mentioned previously we are reaffirming our EPS guidance for the full year at $3.70 to $3.80 which is at the high end of our previously communicated range and represents a 17% to 21% increase for the year. Finally, as I stated previously $3.2 to $3.4 billion of free cash flow for the year. In summary, we feel pretty good, looking at slide number 13, about performance for the first quarter, we had obviously some tougher economic conditions but we executed very well, we delivered a strong start to the year. It’s really a reflection of, we talk about the planning disciplines, it’s also really a reflection of the operating disciplines, the execution focus, the cost focus in each of our businesses, really attributed to the leadership team of Honeywell. We also took the opportunity, this is just incredibly important, to launch $100 million of repositioning in the quarter. As in the past and as we’ve shared with you a very disciplined process for the review and the vetting of these projects and we are looking at attractive paybacks that will support our full year outlook and particularly benefit ’09 and ’10. The major contract wins in the quarter for Aero giving us significant runway and breadth and positive outlook for future periods. Really testimony to the strength of the technologies but also what Rob and his team have done in terms of customer facing and customer responsiveness of the organization. We continue to pursue HOS and FT initiatives; we are targeting more than 100 sites for HOS or roughly 70% of our manufacturing costs to be under HOS implementation by the end of ’08. Our functional costs are targeted to be down around 5.3% of sales in total by the end of the year that’s a reduction from a level of almost 8% in 2004. We are clearly seeing the benefits of Velocity Product Development as we continue to grow faster and the markets we serve due partly to the success of new product and productions. Again, reaffirming our EPS guidance at the high end of the range and remaining committed to the performance track record that we’ve been building over the last five years. In summary, we feel very confident about our plans to deliver our EPS guidance and very confident about the outlook for the remainder of the year. With that Murray I’ll turn it over to you for Q&A.

Operator, please open up the line for questions.

[Operator Instructions] Your first question comes from Scott Davis with Morgan Stanley. Scott Davis – Morgan Stanley: I hate saying good quarter to companies but this is a pretty darn impressive quarter. I’ve said that now for several quarters in a row I think it’s probably more than a fluke. The one thing I’ve got a question on, you’ve got some tail winds this quarter. If I’m doing the math right it looks like of the $0.19 delta in earnings you got about $0.05 of pension first of all tell me whether I’m doing that right because I’m pulling that off of your reconciliation. Also currency as to be a pretty nice tail wind for you and basically I’m trying to figure out what, in these operating numbers what we can model as being more sustainable as we look towards 2009 and what could be more of a timing issue as pensions could certainly go a little bit more negative on you next year I would guess.

Pensions, let’s talk specifically about pension and then we can talk about FX as well. I’d like to put the pension also in context. First of all, the pension numbers, we had about $40 million of benefit on a year over year basis for pension. When you look at pension and OPEB together and you do the math it would translate to about $0.04 for the quarter. Pretty close to what we had in terms of guidance for the quarter. Importantly, when you look at below the line, in other words the spreads got between segment profitability and PDT it’s basically even on a year over year basis. Essentially what we’ve done is manage all those below the line expenses to include the higher repositioning expense basically come out even on a year over year basis. With respect to foreign currency, we got clearly tail wind from FX in the quarter and it represented for us about $0.01 over what we had previously guided. Scott Davis – Morgan Stanley: I can’t recall exactly, had you previously guided a $0.02 tail wind and now you are a $0.03 tail wind?

Yes, that’s about right just a little under $0.03 in terms of what we had in the quarter versus around $0.02 of what we guided previously. Scott Davis – Morgan Stanley: Clearly UOP just had a phenomenal quarter so some of that is timing related. I always get a little nervous when I see a CEO like Nancy retire leaving on the top here. She’s had a nice run of course. I know refining margins are falling and the refineries are starting to have a little bit of pressure here how much of a correlation is there to UOP results with refining margins or is more of a correlation with sweet and sour where these guys obviously more sour crude coming through the pipes.

There are several dynamics that end up playing in there its not just refiner margins, while that is one of them. There is still a shortage of refining capacity in the world. As a result of that there are a lot of projects that are still in process, still on the boards. Not all of them end up happening but when you look at the pipeline of projects it’s pretty extensive, as you might expect most of them no in the US. Then there is the other that you mentioned on the need to be able to refine heavier oils and that’s a trend that we are also seeing and it’s important. Refining margins tended to be better on those heavy oils. We really see this; we don’t see a diminution in this trend for a while. As for Nancy, yes I agree, she did a great job for us, we weren’t happy to see her retire but when you are approaching 61 and see different things you want to do and yes, you’ve done pretty well you make those kinds of choices. I think you’ll be, when you take a look at what Andreas is able to do in ECC I think there is a lot of that same opportunity in Specialty Materials and I think you’ll be quite pleased with what you see ongoing there. What we’ve tried to do throughout the company is for any one of the businesses is to make sure that it’s not so dependent on the leader that if the leader moves on that the activities that were going on don’t continue. I feel pretty confident about the legacy that Nancy left in place continuing and being added to by Andreas. I think you’ll continue to see good SM news. Scott Davis – Morgan Stanley: You’ve essentially taken your capital structure up to more optimal levels but you probably in this kind of credit environment might be pushing up against some limits. How do you think about that and does it impact Norcross and other smaller deals you’ve done and impact your ability to buy back stock?

We are very focused on continuing to improve the absolute level of cash, and continue to maintain that very high cash flow increasing conversion that we’ve been demonstrating. It really starts with that. We are very mindful as we’ve said in the past of our credit metrics and very strong support that we’ve got received and receptiveness in the credit markets for the Honeywell name. You saw the bond offering that we did in the first quarter significant over subscription of that is really testimony of that. We’ll continue to strike the right balance as we’ve said before we think this is a very good opportunity for us in the acquisition arena. We are seeing continued rich pipeline and flow. I would expect our expectation for this year would be that we would see a stronger acquisition year versus share buy back year in terms of prioritization for Honeywell. Scott Davis – Morgan Stanley: More my question was additional debt capacity that you have. Where do you bump into some constraints here?

We feel like we’ve got the ability to fund over the course of the remainder of the year the acquisitions and the selective share buy back and we’ll do those. We’ll do the share buy back on the basis of what actually occurs in terms of acquisitions. We feel we have confidence in our ability to do that. I’m not prepared to share with you specific numbers in terms of debt capacity because it’s going to be very much it depends on the location of those acquisitions, US versus non-US it’s going to depend upon the character of those acquisitions and the timing of those through the remainder of the year. We feel confident in our ability to do that and maintain our credit standing.

Your next question comes from Shannon O'Callaghan with Lehman Brothers. Shannon O'Callaghan - Lehman Brothers: On the repositioning can you give us an update on what you are thinking for the year now? Also, how this foots a little bit with the segment profit guidance. The high end of the EPS guidance didn’t go up but the segment profit guidance high end did maybe that’s partly due to this. Can you give us the expectation for the year on repositioning and some of the other below the line?

In terms of the repositioning we’d be looking at raising our guidance, previously we had numbers in the 160 to 190 range in terms of guidance. We anticipate now being north of 200, 250 is probably possible depending on the performance on the rest of the year, what’s available to us in terms of repositioning opportunities. It’s a good point in terms of when you look at the math of the revenue increase the segment profit dollar increase that we’ve given you in terms of revised guidance it gives us confidence in terms of our ability to move to the high end of the EPS range despite the fact that we’re just through the first quarter. Also, from simply a planning standpoint we’ve got a holding place now in terms of additional repositioning to offset that higher segment profit. We’ll do it if the projects support the spending and if the business outlook or the business performance supports it as well.

Things are going well for us; it’s a good time to be investing to make sure that when we look out to ’09, ’10 we are laying the right kind of groundwork there. Just like you’ve seen us do in the past. Shannon O'Callaghan - Lehman Brothers: That’s getting up to around $0.25 of restructuring, most of that is the payback pretty quick on most of that.

Yes it is. We tend to look at projects in the one to two year timeframe. You are seeing some benefit obviously in ’08 from what we’ve already done. We’ll see very attractive returns for that in ’09, ’10. Shannon O'Callaghan - Lehman Brothers: On some of the margin differentials in the quarter, I know a specialty of the lumping is even adjusting for that it’s by far a record for the segment margin is there something else also going on there that leads you to believe that you are getting more traction on a margin improvement there outside of just the better mix?

Yes, actually I think Dave included some of this in his comments but we are seeing. As you know the specialty materials portfolio you go back a few years ago it wasn’t the prettiest. We’ve done a fair amount of work both in cleaning that up and in making each of those stronger businesses. When you take a look at the big three businesses in the there, UOP, Resins and Chemicals and Fluorine. Every single one of them performed very well based on the work we’ve done over the past couple of years. Shannon O'Callaghan - Lehman Brothers: Last one for me. Give the stresses we are seeing on a number of the airlines and the assumptions around flying hour growth how are you thinking about that in terms of your assumption for flying hour growth and how the after markets side of your business would hold up if the US portion of this flying hours comes down a bit.

At the end of the day our Aerospace business is global one and they end up being driven as much by what’s happening in Asia, Europe, everyplace else in the world as it is the US. The US can have an impact but at the end of the day people are still flying. What happens at an airline causes an issue for that airline or two but overall if people are still flying Aero keeps going and they keep needing spares. The biggest drivers of air travel I don’t think are going to change that much and that’s the global GDP keeps growing. The world is becoming more wealthy and there is still, even with some of the cost pressures tick price pressure is still there. Lower ticket prices drive a lot of volume and a lot of flights. Those dynamics don’t really change.

The guidance that we gave for ATR flying hours for the year up 5% we saw obviously stronger than that in the first quarter up 7%. To Dave’s point, and to our initial guidance our expectation has been relatively modest for continental US flying and significantly driven obviously by international flying and emerging market growth and emerging markets has really been supporting global flying hours. The bankruptcies, which obviously have been highly visible from a news standpoint, are really pretty modest carriers. When you look at them either individually or collectively in terms of the significance of the flying hour numbers I think they represent less than one tenth of one percent of just the US flying hours, its really deminimus from that standpoint. The other headlines take for example the headline of the Delta, Northwest merger you are really looking at very different fleets, Delta predominantly Boeing, Northwest predominantly Airbus fleets, and very different routes. As you saw some of the analysis of the potential merger synergies it’s really, if you will, back office or G&A. We would expect continued strong performance in terms of serving both of those important customers. Again, for the full year that 5% flying hour growth right now looks like it’s very much on track if not even a little bit conservative in terms of what’s built into our numbers. Shannon O'Callaghan - Lehman Brothers: So you are still seeing good order rates?

Yes, absolutely.

Your next question comes from John Inch with Merrill Lynch. John Inch - Merrill Lynch: Good morning and Dave Cote I guess you feel pretty darn good you don’t own a financial services company right now. I want to start with UOP you did up 23% the guidance for the year is up 5%. I understand your desire to want to be conservative but the implication is UOP is going to be flat to down the rest of the year is that really what you are telling us or how should we think about it?

That’s really what we are saying. What we saw, its one of those things where I think we’ve done a pretty darn good job of forecasting UOP for the full year. There is intra quarter variability because what we have is pull forward at times for example this quarter the pull forward particularly on catalysts reload as it occurred at the request of customers so we saw much more significant impact and increase in revenues and profitability in the first quarter. We’ll see in the second quarter somewhat of a sort of reverse we’ll see actually reasonable top line but we are going to see margin pressures as a result of lapping very strong royalties. You’ll recall in the second quarter of last year in UOP. It becomes very quarter specific but the short answer to your question is that we do expect flat to modest decline depending on the quarter for UOP for the remainder of the year in terms of what we are seeing right now in terms of forward visibility. John Inch - Merrill Lynch: If I’m not mistaken I think your guidance this year originally assumed that share count was going to be flat yet you did the 7 million of repo in the first quarter which seems like its going to have at least some benefit. What’s you capital, are you assuming that you are going to be a holding share count flat. It sounds to me like that, or it seems to me like this should provide even more cushion?

We are anticipating flat, we guided to the 760 previously. We would probably saw its somewhere in the 755 to 760 range in terms of average fully diluted shares outstanding for the full year. Again, back to my answer to Scott’s question, it’s going to depend at least in part on the pace and the size of acquisition activity for the remainder of the year. John Inch - Merrill Lynch: You’re not ruling out further share repurchase you are just saying you’re not planning on it.

That’s right. From a planning standpoint as Dave has indicated we talked about with you even prior to year we just see the acquisition pipeline is relatively rich. We see this as a great opportunity for Honeywell given the strength of our balance sheet, our strong operational performance. This could be a strong year of acquisitions for the company. John Inch - Merrill Lynch: Last one for me. Repositioning and other charges you had provided guidance of 500 to 600 you did about 200 in the quarter with the 100 of restructuring. How do you parse the 100 versus the original plan in the context of the 200 in the context of the 500 to 600 that you had laid out? How much more did you actually do versus what had been part of that plan?

What we had provided previously and just for clarification we are talking about pension, environmental net asbestos as well as repositioning. The sum of those items previously in terms of our guidance was in the 520 to 550 range. Now we would be probably looking at something closer to the 600 to 650 range as the result of the initial repositioning that we talked about. The other numbers if I could quickly add the other numbers are really on track. In other words, pension is in line with our previous guidance, environmental at 200 in line and also net asbestos at around 150 to 160 million this year is in line. John Inch - Merrill Lynch: This was all done this quarter, the extra 600 to 650?

Yes.

Your next question comes from Christopher Glynn with Oppenheimer. Christopher Glynn – Oppenheimer: I’m wondering if you would comment on the impact if any of currency on the ACS and the transportation margin.

It doesn’t have much impact on margin rate at all.

A little bit diluted actually because we tend to convert FX at a lower rate than our normal rate. It’s a little diluted to margins. Christopher Glynn – Oppenheimer: At ACS could we get the product and solutions growth excluding the acquisitions?

Sure, we can give you that number. Products and solutions excluding acquisitions on the revenue side what we saw for products was up about 6% and for solutions was up 10% excluding acquisitions.

Your next question comes from Jeff Sprague with Citigroup Investments. Jeff Sprague – Citigroup Investments: Just a couple clean up here. We covered a lot of ground. I wonder if you could give us a little more granularity on Aerospace margins clearly coming through really nicely. I’m wondering if there is anything that stands out whether it’s the OE profitability. Certainly not necessarily this quarter but certainly over the last year or two you would have said the mix is working against you with very strong OE versus after market but the margins have continued to go up. A little color on where you are getting the lift. Does anything really stand out as leading this?

I wouldn’t point to any one thing. My view, the Aero guys have been doing a nice job of really reformatting that business is a way to think about it. Getting away from all the fiefdoms that existed and more of a my product focus as opposed to a customer focus. That shift taking out the beurocracy cost that went along with it and becoming more focused on the technology and responsiveness to the customer has resulted in doing better on pricing, doing better on controlling inflation, doing a lot better when it comes to productivity and doing a lot better when it comes to winning orders. If I had to point to any segment where I’d say we haven’t benefited as much as the industry I’d still point to defense and that’s one where we are just in different markets and as a result of that over the last four or five years a lot of others have done better there than we have on the defense side. We’ll see it’s not a benefit so much as it is we won’t feel as much pain on the way down when defense spending does start to come down. Other than that that’s they way I’d say it.

I underscore your comment by saying that the combination of price and productivity was double the level of inflation for the business. It’s really to your point in terms of the way the organization is executing. Jeff Sprague – Citigroup Investments: A follow up, I’m personally not a huge fan of this Norcross deal, maybe I have it wrong. Explain it to me because in the back drop of what would seem to be a very target rich environment with the capital markets the way they are the business seems like in a side really. You can see how it works but it’s not really kind of a core business for you particularly given that we are still really focused on trying to get these ACS margins up. It feels like it could probably be a distraction.

Here’s the way I look at this one. If you were to look at the fire business and if we were acquiring the fire business you’d be looking at that and going why, what’s exciting about this prosaic product, how significant can it be just detectors on a panel? The fact is there is a lot of regulation that goes around it, you really have to understand your industry, people are loathe to change when they’ve got somebody that they can rely on because you need to make sure the stuff works and it needs to always be in compliance with these regulations. Channel and brand mean a lot as do new product introductions and you have to make sure that they are in accord with that. We’ve asked the Life Safety business, which fire is a part, is to look for other industries that are like that. Where are those places where the regulation is significant, where it may seem a prosaic product but the differentiation is significantly greater than people expect where channel and brand make a difference. When you look at this segment of personal protection equipment that’s exactly what that is. When you look at the pictures it looks like a glove, a boot, safety glasses, safety uniform, respirators. When you actually take a look at what goes into the product the technology differentiation that’s required and the amount of regulation you have to comply with it is a perfect model of that fire business. What you’ll see us do in this segment is the same thing that we’ve done in fire and this is going to be quite a winner for us. I’m actually quite intrigued with the whole space. This is not a case where we had extra money and said gee lets just buy something. This has met all our screens and even better. Jeff Sprague – Citigroup Investments: The math kind of seems like you are relying on some revenue synergy is that not the case?

Not in the financial model. We’ve modeled this the exact same way we have everything else and that is that this acquisition is more than justified just on cost synergies. We count on no sales synergies in our financial modeling. When it comes to sales synergies we do expect them and we push everybody to do it because while we justify an acquisition based upon a base case model we actually run them to an upside case model which includes the sales synergies because we don’t just want to get double on this stuff we want to grand slam on every acquisition we do. That’s by and large what happens and I’m pretty darn confident that’s going to happen here on Norcross and that you’ll see some quite good performance coming from us there. This is a team, we are grasping on to a team that executes extremely well. I’m always loathed to add an acquisition to a business that doesn’t perform well; I don’t think it makes sense. In this case we are grasping on to a business that performs extremely well. Jeff Sprague – Citigroup Investments: When you are thinking about ACS are there, maybe you have a whiteboard there with you with these type of ideas on it are there a handful of these kind of sub industries or sub categories that are in the sweet spot that you are waiting for the opportunity or was this kind of an unusual opportunity?

You’ve put your finger on something that we do focus on and its funny you use the word sub because we use that a lot ourselves. Rather than look at industries which can be too big sometimes and you look at stuff that $20 or $30 billion we’ve talked about looking at sub industries. When you think about gas detection for example that would be a sub industry. When you think about the imaging business, the handheld that we acquired that’s what I would call a sub industry. When you look at what we are doing here in personal protection equipment the very sophisticated PPE that’s a sub industry. We are just finding that that’s a better spot to look for fragmented growing highly profitable businesses and we are having a great success rate with it.

Your final question comes form Nigel Coe - Deutsche Bank Nigel Coe – Deutsche Bank: You talked about European passenger car launches being pushed out to 2009 is that just sort of the way it goes or is that because of economic weakness there, what’s driving the push backs?

I’d say it’s a little bit of both. As they look at how to spend that’s a piece of it, the other piece of it is launches do generally get pushed out a bit. I’d attribute it to both and we’ve viewed it as, always preferred for ’08 but that certainly gives us a nice boost to ’09 which as you might image we are always trying to look one or two years ahead. It’s actually kind of helps us, a two edged sword. It hurts in ’08 but it gives us a bigger boost in ’09.

To repeat what we talked about earlier relatively deminimus and its pretty consistent with what we are seeing in general as we talk about is anticipated which is European economy softening auto production rates so the consumer pull data in terms of registrations are reflecting that. The guidance that we’ve given out for the full year really is reflective of that kind of environment. Nigel Coe – Deutsche Bank: Turning to MTL you pack up the margin by 10 bps for the full year it sounds like that’s due to the resin mix coming through. What’s driving the resins growth is that just the resins I know you talked about some in China, is that’s what’s driving the increase?

Are you talking about SM in particular? Nigel Coe – Deutsche Bank: Exactly, yes.

There is a dynamic that because of the formula pricing as raw material costs go up and we pass them through on a one for one basis you do end up with higher material costs yielding lower margin rates. It doesn’t mean you make less you actually make more but it can impact your margin rate. Nigel Coe – Deutsche Bank: The driver of the resins growth is that emerging markets?

It’s really across the board the cap for demand where demand is exceeding supply but to your point emerging markets clearly are contributing in that. We’ve sighted the strength of sales to China for example on our R&C business relatively non-existent a year ago and very strong today. Its actually exporting product to China at attractive pricing and attractive margins. Nigel Coe – Deutsche Bank: Asbestos we’ve seen benefits almost half last year the when do we start to see that coming through as a benefit to the P&L and secondly on the pension OPEB I’ve noticed you’ve taken out point two to a range of point two to point three what’s driving that increase for full year?

I’m not sure I caught the first question, were you talking about claims… Nigel Coe – Deutsche Bank: [Inaudible] claims.

We’ve actually seen a reduction in claims and claim values. That’s a positive trend. We’ve seen a little bit higher miso as a percent of course that mix influences the overall expense recognition in the quarter. In general for us the asbestos number is within the guidance range that we’ve provided and is consistent with the full year expectation that we have for that. I’m sorry I missed your second question it was related to pension. Nigel Coe – Deutsche Bank: I think of pension OPEB you said point two billion for your guidance and I think now the range is point two to point three. I’m wondering why that’s increased.

Let me just tell you that in dollar amounts the guidance that we’ve given is $30 to $50 million a year for pension, $140 million for OPEB those numbers have stayed the same. Nigel Coe – Deutsche Bank: Just a follow up on the [inaudible] if claims keep coming down eventually that should see through into the P&L through a lower charge.

In the quarter we had $28 million for example the asbestos that would compare to an average quarterly run rate of $40 million if you took our original annual guidance of $160 million so we did see some favorability in this quarter relative to that full year guidance.

I’ll turn the call over to Dave to wrap things up.

Going back to what we said at the investor day we tried to make the point that this was no longer a company that you should look at and say gee can I get another year out of Honeywell. We really have put the time and effort over the last five or six years to position our portfolio in a way that would benefit from industry trends, macro trends that would favor us. We’ve also tried to put in all those processes that make the operations better every single day. The first quarter is not a fluke, its just one of those things that has come about because of our conservative thought process putting ourselves in the right positions when it came to where did we see industries going and from doing a better job every day when it came to our operating processes and we are quite pleased with how the quarter went but I would also say this is not the last time that you’ll be able to hear something like this from us. I really think that when it comes to looking at your investment at Honeywell this is going to be part of your long term portfolio and that you’ll end up saying it was a smart thing to do. Thanks for listening and nice sharing good news.

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