Murray Grainger – IR Dave Cote – Chairman and CEO. Dave Anderson – SVP and CFO

Jeff Sprague – Citi Investment Research John Inch – Merrill Lynch Scott Davis – Morgan Stanley Steven Wininger [ph] – Stanford Bernstein Robert Scholars [ph] – McLeary Howard Rubel – Jefferies Shannon O'Callaghan – Barclays Capital

Good day everyone and welcome to today’s Honeywell 2008 conference call, today’s conference is being recorded. And for opening remarks and introductions I would like to turn the call over to Mr. Murray Grainger, please go ahead sir.

Thank you Lisa. Good morning and welcome to Honeywell’s fourth quarter and full-year 2008 earnings conference call. With me here today are 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 deals of world and of our businesses as we see them today. Those elements can change and we would ask you interpret them in that light. This morning we will review our financial results for the fourth quarter and full-year of 2008, as well as our expectations for the first quarter of 2009 and of course allow time for your questions. With that I'll turn the call over to Dave.

Thanks, Murray. Good morning, everyone. I'm pleased to report a quarter of good results despite a challenging economic environment closing out over the great year of performance for Honeywell. Our results in 2008 reinforce the great positions we have in good industries. The investments we have made in process improvements through our five initiatives, the talent and depth of our management team, and of course the power of WON [ph] Honeywell. Dave will take us through the details of the quarter in a moment. Let me tell you I am extremely proud of this Honeywell team delivering EPS growth of 7% on a 6% sales decline and free cash conversion of a 155%, despite some unprecedented economic headwinds. Our well diversified and balanced portfolio is really helping drive overall strong performance and for the full-year 2008, we increased sales by 6% to $36.6 billion, increased earnings per share by 19% to $3.76 and converted free cash flow at an impressive rate of 110% of net income. During the year we completed a total of eight acquisitions for $2.2 billion including Norcross, Metrologic, Callidus, and IAC further building our growth platforms. Our acquisitions process continues to work incredibly well. We remain disciplined around price and our robust integration process insures that we deliver on our synergies. We also divested the Aerospace consumable solutions business in 2008 for proceeds of more than a $1 billion, a great deal from Honeywell and a credit to Rob Gillette’s Aerospace team. Our key initiatives continue to gain traction in our businesses and functions everyday and we have a lot of room for even further improvement. The Honeywell operating system has now been initiated in 70% of our manufacturing cost base with 80% targeted for 2009. We are starting to see the first sites reach bronze HOS certification and the results are impressive. Along the quality, delivery, safety, cost, and inventory improvements, we are seeing real changes in culture and attitude and after such that makes HOS a sustainable, repeatable platform for improvement. Functional transformation is basically HOS for administrative functions, the same concept, standard work and one robust process all designed to deliver better service at lower cost. We are targeting 5.3% of sales in ’09 down from more than 8% in 2004 with plenty of runway to reach world class. Finally, I just spent two days with our top 300 leaders where we concentrated almost exclusively on delivering results in this tough economic environment. While we should all be rightly cautious about the challenges that are ahead of us, particularly in the first half of ’09. I feel good about the investments we’ve been making in our businesses for the past six years that prepares for these times. HOS, FT, ERP, Velocity Product Development, Emerging Region Presence, and the acquisitions are all the seeds that we planted to help improve our growth productivity and cash flow. We have the right leadership team in place to deliver these improvements and we have taking the right proactive repositioning actions ahead of the curve to prepare ourselves for this challenging environment. So, in summary, with our great results for 2008 and the momentum we are building with our key initiatives, I feel confident in our outlook for ‘09 despite some very tough economic conditions. We are looking forward to keeping you undated on our progress and with that let me turn the call over to Dave to go through the financials in detail for the quarter. Dave?

Good morning. Thanks Dave. Let’s go to slide number 4, let me walk you thorough the summary of financial results for the quarter really building on Dave’s comments. And as he said, we all know in a tough incentive challenging economic conditions we posted overall good results in the fourth quarter importantly in line with the guidance we provided you in December. The reported sales were down 6% to 4% on an organic constant currency basis. However, our two biggest businesses, the Aerospace business and ACS, importantly both grew organically in the quarter both were up 2% on a constant currency organic basis. Segment margins for total Hon declined 40 basis points in the fourth quarter, but again importantly our two biggest businesses posted increases year-over-year. ACS was up an impressive 110 basis points, Aero was up 40 basis points in the quarter. It was unfortunately more than offset by continued weakness at transportation systems, which was down over 10 percentage points in the quarter on significant volume declines. Net income grew 3% driven primarily by favorable pension in OPEB as expected and also lower environment charges, which we communicated in the third quarter and our guidance for the fourth quarter. And of course in the third quarter we took you through the details of the consumable solutions gain and the associated actions, but to remind you we reviewed at that time a tax impact that indicated that we would have a higher ETR in the third quarter, which we did 30.5% and a lower ETR in the fourth quarter, which came in at 22%. We also indicated in the third quarter when we gave fourth quarter guidance that we would offset this lower fourth quarter effective tax rate with repositioning actions we indicated about $30 billion and in fact we just had $42 million in repositioning in the fourth quarter, which will further support our ’09 and ’10 outlook. EPS grew 7%, partially driven by lower share count and importantly as Dave pointed out, free cash flow conversion another high quality story in the quarter of 155% conversion. Overall a good quarter, tough conditions, and the end of another great year for Honeywell. Let’s go to slide 5, ill just summarize that as well. As you can see on slide 5, the total year is in the line with our December guidance, we reported sales of 6%, 2% on an organic constant currency basis. Importantly, three of the four businesses posted organic sales increases in the year with a similar story in terms of expansion of margins. So, while margins declined 20 basis points overall, Aero grew 20 points, ACS’ margins were up 30 points for the year and specialty materials grew 20 points all impressive performance in the environment that we are in. Net income grew 14% for the year with favorable pension in OPEB again, including more than 400 of – importantly though also including more than 400 million of repositioning actions in the year. All of this funded either through operational performance or gains. And of course again will provide great support for us in ’09 and ’10. EPS for the year as Dave said up an impressive 19% to $3.76, we generated $3.1 billion of free cash flow, a 110% of net income. So, now let’s go through each of the segments, starting with Aerospace on slide 6. The reported segment sales in the quarter were down 1% for Aero, but excluding the impact of the CS divestiture were up 2% on an organic basis with segment profit up 1% and margins up 40 basis points as I said earlier to an impressive 19.2%. On an organic basis total conversion sales that is the ATR and BGA businesses were up 2% in the quarter, with continued strong deliveries in the timing of the after-market activity in business jets being offset by the impact of the Boeing strike and lower global flight hours at air transport, which we had anticipated. The organic commercial all lead sales were up 2% driven by our business jet accruals [ph], which saw strong sales growth 16% in fourth quarter offset by air transport and regional sales, which were down 12% due to the Boeing strike. Importantly including the impact of Boeing, the ATR OE sales were up 13% in the quarter. Commercial after-market sales were up 1%. The AT&R after-market sales were flat, slightly higher than global flying hour which were down approximately 2%. Now the B&GA after-market sales were up 3% in the quarter driven by the timing of after-market events despite TMT hours, which were down 22% in the quarter. Defense and Space, a good quarter for Defense up 4% driven the strength in our logistics and services business, which were up 13%, Space, which was up 18%, and just as a reminder Defense and Space, of course more than 40% of the overall portfolio remains very well positioned and we expect nice growth out of this segment in 2009. So, in summary another strong quarter for Aero capping a great year where sale grew 3% to $12.7 billion, margin increased 20 basis points at 18.2% and importantly we won over 40 billion of new businesses in ’08, including approximately 30 billion of new applications for our HTF 7500 engine. Investments we’ve made in Aero are paying of the long-term outlook for this business remains very strong. Now let’s go to slide 7 and go through the highlights of ACS. Starting with the quarter, sales were up 3% 2% organic on a constant currency basis, if you exclude negative 9% foreign currency impact and the 10% positive contribution that we got from acquisitions. And by the way we had positive organic growth importantly in ACS across all regions in the other quarter, which is impressive. Our products businesses overall continued to perform well they were up 7% reported in the quarter. We saw continued strength in ECC and Life Safety business, particularly both ECC and Life Safety recorded mid-single digit organic including in both North America and Europe. The security distribution in sensing control businesses as expected continues to be impacted by weakness in residential and transportation end markets. And as you know, you would recall, we have discussed this in some depth in our outlook call in December. Now the solutions businesses continued to perform well. We had organic growth of 7% in the quarter, with demand for energy efficiency as well as the integration of compliment, fire and security controls for critical infrastructure all being important drivers at building solutions. And across the solutions the oil and gas production particularly upstream as well as distribution projects continue to be solid. Orders in the fourth quarter and solutions were essentially flat reflecting tough comps, we were up 30% in orders in the fourth quarter of 2007. Process solutions showed continued strength with orders growth in the high single digits. Building solutions orders were down in the quarter, but really due to project timing. For the year, orders for both businesses were strong and we exit the year with growth at our backlog as well as in our service bags. ACS’ segment profit was up 12% in the quarter as you can see representing an impressive 110 basis points increase in margin to 13.4%. The ACS team made great progress on new products that is a team by the way that is underlying obviously this performance as well as productivity and the contribution of acquisitions all those for positive contribution for ACS in the quarter. Sales for the year for ACS grew an impressive 12% to $14 billion, margins increased 30 basis points to 11.6%. Clearly what we are seeing is the strength of the multi-brand, multi-channel strategy as well as the investments that Roger and the ACS team has made in innovation in new product development. Also the strong positions in emerging regions that continues to drive positive growth for ACS and will continue to see increase our penetration in these markets despite signs of slowing growth in those markets. Now let’s turn to slide 8, Transportation Systems, which as we all expected and as we guided had a tough quarter capping of a very challenging year for 2008 and importantly and will regroup this in a little more depth as we get into the first quarter and ’09 updates, we expect these trends to continue through the majority of ’09. So, turning to slide 8 for TS, overall sales as you can see were down 35% including a 4% foreign currency headwind adding to the volume decline impact. At turbo, which was down 44% recorded we saw continued sharply lower vehicle production rates at European and US OEMs, as well as a continued consumer shift towards lower displacement engines due to CO2 taxation, as well as shift to gas engines due to continued high diesel prices at the pumps. So, in addition to the production, the reproduction volume in fact we also obviously had mix impact in terms of consumer fall. New platform launches continue to be pushed out for TS as OE struggled with lower sales of their current inventories. However our content on future platforms continues to grow. Despite the current challenges and the expectation for the continuation of those challenges into ’09, the overall macro trends for Turbo remain very positive, with energy efficiency and emissions, as well as our robust backlog of attractive new platforms. We had over $4 billion, just as a reminder over $4 billion of wins in 2008. They obviously give us confidence in the long-term prospects for this business. For CPG it was down 18% recorded, we continue to face headwinds in the US automotive after-market, the consumer after-market. Volumes were down in car care and filtration as economic concerns weigh on consumer confidence and discretionary spending. Segment profit for total TS was down 96% in the quarter, again due primarily to lower volumes at Turbo. And for the full-year, TS sales were $4.6 billion a decrease of 8%, segment margins were 8.8%, down 280 basis points from 2007. So, with that let’s go to SM, slide number 9. Sales in the quarter for SM were down 12%, segment profit was down 16% in the quarter primarily due to lower volumes at resins and chemicals and also electronic materials, due to significantly weaker global demand for commodities such as caprolactam, and also ammonium sulfate fertilizer, as well as capacity productions in semi-conductor industry. Now, fortunately the declines were partially offset by good performance at EOP, which saw increased catalyst sales in the quarter and also fluorine’s products which grew 7%. For the year, specialty material sales were up 8% to 5.3 billion margins increased 20 basis points to 13.7% including almost 30 million or 50 basis points of headwinds from hurricane impacts. So, really a good year overall for SM. And today SM is a much better protected businesses with fluctuations at commodity prices due to the torment in the pricing agreement and as you recall the portfolio has significantly transformed compared to prior down terms. So, now let’s go to slide 10 and just update you on our 2009 guidance. Given the increased visibility we have it is a result of the completion of ’08 and the beginning ’09. Now on the top of the slide, we have summarized the guidance we shared with you last month and at the bottom of slide 10 we’ve outlined a stat with some of the positive variances on the right and negative variances on the right, which are certain items since our December 15 call. Now, overall we expect to be in the range of the full-year guidance that we communicated last month. However, January trends continue into the first half of ’09, we would expect to be at the low end of this guidance range although economic conditions continue to be very fluid. Also as an update cash flow perspective, we expect to be 100% plus of free cash flow conversion for the year 2009. So, let’s walk through some of the specifics in the bottom half of slide 10, starting with pension. Now you will recall from the December guidance our base case pension assumptions were for the 12/31/08 plan returns and discount rate of 33% and 7.5% respectively, which would yield an expense for ’09 in the range of the $130 million. Now actual returns in ’08 ended the year slightly better, at 29% compared to that down 33% that was the mid-point of our guidance. However, we saw yields moved down significantly during the last few days of December and ended the year for us at our discount rate using the yield curve associated with the expected lives of our planned participants at 6.95%. We are still yet to finalize the 2000 numbers for the international plans, but based upon the US plan in accruals we’ve been expecting incremental $40 million to $50 million pension expense in ’09 bring the total year to approximately $175 million of expense. Now you note that we also took a 2.6 billion charge to equity that is an after-tax charge to equity at the end of ’08 reflecting the accounting treatment of the under-funded US plan as of December 31. We also made our first stock contribution of the US plant at the end of the fourth quarter and the amount of $200 million, which is in line with the funding plan that we communicated to you in December. For foreign exchange, our largest component that I have highlighted there are largest currency exposure, the euro continues to trade above our planned rates. For 2009, you would recall the 1.25 guidance and at current levels, let’s call it a 1.30 kind of range or 1.30 plus. This benefit would offset the incremental pension headwind, however it is obviously too early to change our assumptions for FX for the year. We thought it would be helpful just to give you a sense of the puts and takes that’s important in the current guidance range. Working the way down to the remaining positive on the left, the highlights that I gave you ACS, ACS continues to perform well, as evidenced by the 110 basis points improvement in margins and 2% organic sales growth in the fourth quarter. Again new product and acquisitions are the positive contributors to ACS’ results and Rogers and his team, the ACS team remains confident in our outlook for the year. On the purchasing side, we continue to see additional savings opportunities with raw materials at the current levels and these should benefit as particularly in the second half of ’09 and finally under productivity, we see opportunity to overdrive savings across a number of our repositioning and functional transformation projects that were already underway. On the other hand, we expect to see growth in China, Munich [ph], slower expectations for GDP growth in these regions and well below the expectation and now below I should say the expectations that we had in December. We have seen business activities slow in the region as well as increased levels of project deferrals and cancellations in some instances. Within Aero, we continue to see shifts in OE deliveries particularly with business jets, as our customers work to realign their schedules in the phase of increased deferrals and cancellations. We expect Aero transport and regional flight hours to now be at the low end of our communicated range down 2% for the full-year, previously we communicated down 1% to 2%, we now expect based upon the exit rate of the fourth quarter and what we are seeing the first quarter of this year to be down 2% for the full-year. Business jet engine TFE hours, we expect to continue with fourth quarter levels, which were down approximately 25% in the first quarter. Now within SM, the outlook for Electronic Materials Business weaker than expected capacity in the semiconductor industry continues to be reduced. And finally as we set ways to the quarters, our expectation is for a much weaker first half for both earnings and cash, while the second half will benefit from much easier comps, the approved run rate of instruction benefits, and also lower commodity costs as well as more minor, some foreign currency translation deferential. So, let’s background for the full-year and the update for the guidance for ’09, let’s take a high level look at the first quarter of ’09 on slide 11. We are planning as you can see on the slide, for total sales in the first quarter to be in the range $7.4 billion to $8.0 billion down 10% to 17% from the first quarter of ’08, including approximately 6 points of negative foreign currency impact We expect EPS to be in the range of $0.50 to $0.60 down approximately 30% to 40%. We also expect free cash flow to be soft and below prior year due to the reduced net income as well as right now, some anticipated one-time cash tax payments. Now clearly these numbers represent significant declines from prior – frankly our order books at this point in time are not reflecting these types of declines. However, given the continued negative economic news, this is the way we are planning our cost and managing our business. We anticipate Aero sales in the first quarter to be in the range of $2.6 billion to $2.8 billion down 6% to 13% including a negative 4 point impact from the sale of consumable solutions, so down to the down 9 absent that impact. We expect sales to OE customers to decline, due to the platform mix at Aero Transport and also reduce delivery schedules of business jets. In the after market, as I said we expect AT&R sales to decline slightly more than flight hours driven by volume behavior and we expect those flight hours to be down around 4% and by the way, that compares to global flying hours of 7.2% in the first quarter of 2008. And in business jets, TSE hours are expected to be down approximately 25% as I said earlier and that compares to up 1% in first quarter ’08. So, it gives you some insight in terms of the tough comps that we are facing particularly in its first quarter and first half of 2009. For ACS, we expect sales in the range of $3.0 billion to $3.2 billion up 2% to down 4% versus the prior year. By the way that includes a 4 point net headwind from FX and acquisitions. We expect similar trends that we saw in the fourth quarter with acquisitions, new products, and conversion of solutions backlog being offset by weakness in security and sensing in controls. At Transportation systems, sales for the first quarter we expect in the range of $700 million to $800 million down 33% to 41% again with similar trends that we saw in the fourth quarter, really in continuation of that turbo volume declines that we referenced. Finally, at FM we anticipate sales of $0.9 billion to $1.0 billion down more than 25% due to continued softness in resins and chemicals and electronic materials and extremely difficult comps at EOP. You will recall, we had the high margin canvas sales in the first quarter of 2008, we expect those to be down more than 30% in the first quarter of ’09. So, in summary we are preparing ourselves for an extremely tough quarter, we think this is representative of the industrial landscape that we think will unfold. However, as we discussed the environment remains fluid, orders at this point in time actually continue to be much more positive and we will update you again at our annual investor meeting in February. So, now let’s summarize on slide 12 before turning it back over to Murray for Dave and I for Q&A. We obviously had a good finish to 2008 despite tough economic and end markets in the last few months. We saw particularly in that December month and at year end much more challenging conditions. We saw the deterioration in markets such as Commercial Aerospace and Electronic Materials and we are planning for these trends to continue into the first half of 2009. Now we are expecting, given the relative strength of the first half of 2008, that the comparisons in the first half of 2009 will be very challenging year over year. In addition to foreign exchange, where the euro average comp was 1.5 in the first quarter of 2008, some of our key businesses such as Air Transporting and Regional Aftermarket, turbochargers and ULP, and resins and chemicals will face significant year-over-year headwinds. On the other hand, we will see incremental benefits from repositioning actions that we funded in 2008 in the second half of 2009 and these benefits in combination with easier year-over-year comps, seasonality in defense and space – defense and space just normally has the pattern of a larger second half, as well as the tailwind for lower raw material costs should drive a stronger second half for Honeywell. We therefore remain confident in our outlook for the year. However, we expect higher than usual quarter over quarter variability. As I stated previously, if the January trends continue into the first half of 2009, we would realistically expect to be at the low end of our annual guidance range. Now clearly, this environment is going to be a test for all companies. But for Honeywell, our portfolio is stronger, Aerospace is lean, customer focus has the stability of its $5 billion plus defense business, ACS has attractive new products that are being sold through multiple brands and multiple channels all over the world and by the way, they are showing the strength of their new product performance as well as the successful acquisition integrations. Specialty Materials, it is much better positioned today to protect its bottom line than in previous cycles. As always, our planning focus for 2009 is around achievable topline growth, while aggressively managing costs with contingency plans in place that maintain our flexibility, should economic conditions be more positive or more negative than we have assumed in this guidance. We continue to pursue, as Dave said, and see the fruits of HOS and FT. We are targeting more than 80% of our manufacturing cost base to be under HOS by the end of 2009 that is in facilities implemented; and our total functional costs to be down to 5.3% of sales in 2009, down from more than 8% in 2004. We have been investing and seed planting over the last six years. We feel that we are well prepared as a result for our proactive repositioning actions to weather the tough economic environment. And again, as a reminder, we will be hosting our Annual Investor Day. We look forward to seeing you all there in New York City on Monday, February 23. All our divisions, our business unit presidents, Dave and I will be there. We look forward to sharing more detail about our businesses and to update you on our outlook for 2009. So with that, Murray, I will turn it over to you for Q&A.

Thanks, Dave. Please open the line for questions.

Thank you, sir. The question and answer session will be conducted electronically. If you would like to ask a question, (Operator instructions). We will take our first question from Jeff Sprague with Citi Investment Research. Please go ahead. Jeff Sprague – Citi Investment Research: Thank you. Good morning, everyone. No one is surprised you are taking a cautious stance on Q1, it is pretty grim out there, but to Dave Anderson’s point, maybe the order trends don't quite get you to a Q1 that looks this tough just based on what you are seeing so far. But, maybe you could just give us a little more color on where the backlogs were as you exited 2009, I mean, exited 2008 relative to were they were in Q3, and a little more specificity on where the orders are okay versus where they are starting to falter a bit.

Why don't I just take a quick shot at that, Dave, and then you can add. As I said, Jeff, in general, the guidance that we have provided to you is consistent in terms of the assumptions that we used in December. The two notable exceptions really are in the Aerospace, where we have taken down the flight hour assumptions to the lower end of the range, and we have reflected that in terms of the kind of annualization of that in terms of a lower start to the year, We are actually at negative 4% for the first half of the year in terms of the global flight hour assumptions. That is a big one; that is an important one. At this point in time, we are actually seeing the numbers hold up pretty well from an order standpoint. A second key change that we have made here is really in specialty materials with the assumption on electronic materials, where we have seen material softness in terms of order rates and activity, particularly driven by the semiconductor industry, Intel, et cetera. If you look at the backlogs and where we finished the year in terms of our – a few of our long cycle businesses, they actually held up very well. For example, in the solutions business, as I indicated, we actually saw growth in backlog at year-end. So the trends that we are seeing overall are consistent with guidance, with notable exceptions and where we have really reflected that in terms of particularly in this first quarter and what would be implied in terms of our first half guidance is really in the Aero business with the expectation, the anticipation that we will be at the low end annually on the global flying hours and that will really be manifested in the first half of the year and then the impact of electronic materials.

I might add, Dave, if you want on the ACS new products, they are making a difference also. Jeff Sprague – Citi Investment Research: And then I am also just wondering relative to the restructuring payback, I think the 2009 goal is about $500 million gross savings. I think that is an incremental $350 million or so off the 2008 base. Is that still the right framework and maybe get a little color on how that builds over the course of the year?

Yes, Jeff, those are the right numbers and it really – it builds somewhat slowly in the first half and it is really weighted to the second half of the year. So it is about 60% to 70% weighted to the back of the year. Jeff Sprague – Citi Investment Research: And we should expect very little new restructuring spent in the first part of 2009?

That is right. Jeff Sprague – Citi Investment Research: Perfect. Thanks a lot.

And our next question comes from John Inch with Merrill Lynch. Please go ahead. John Inch – Merrill Lynch: Thank you. Good morning. Picking up on that last point, you know if you annualize based on normal historical seasonality, the first quarter really doesn't get you an EPS much above $3 per share. So, if there – other than that sort of $0.35 weighted to the back half, is there anything else about the first half or specifically this first quarter that you could talk to as to why you don’t simply use normal historical seasonality to annualize the $0.50 to $0.60, to come up with that sort of target number for 2009?

Well, just an overall comment, and then I will turn it over to Dave, but we are in an environment now where I'm not sure normal seasonality always applies so we're looking at where our businesses gained individually. Planning for a tougher environment, the comps are different as we – Dave talked to earlier and we don't think the normal seasonality applies here, this is very different environment. Dave?

Yes, I would just answer that that the – if you look at three of our very profitable business segments, Aerospace Aftermarket, UOP, and Turbo, just trying to use those as providing info to your question. As I mentioned, if you look at just the Aerospace Aftermarket, in the first quarter of 2008, global flying hours were up 7.2%, we are expecting global flying hours to be down 4% in the first quarter. Turbo volumes – volumes total global Turbo first quarter last year 2.5 million and exit rate by the way of about – in the fourth quarter of about 1.3 million. We're using 1.2 million as our planning assumption – our guidance assumption for the first quarter, down from the fourth quarter of 2008, but importantly, down 49% from the first quarter of 2008. So what you have is you have a distinctly different pattern in terms of how 2008 actually emerged today’s point with the timing and the distribution of revenues and profitability during the year and the phenomena of that fourth quarter exit rate now we're building into the first quarter. So when you look at the second half comps, the second half comps are just dramatically changed and easier compared to anything that we would have ever seen historically. John Inch – Merrill Lynch: That is fair, but to be clear, are you counting on any kind of – forgetting about comps, any kind of underlying macro improvement as part of the overall guide for 2009, whether it be North America, Europe or other places?

There is some improvement, but the improvement is really driven even if you look at the macro indicators like global flying hours or Turbo volume or even UOP catalysts, it is really largely attributable, John, to timing differences. The other thing of course, as I mentioned, and it is more minor is the foreign exchange headwinds. You know, we actually have a sequential tailwind with foreign exchange using our 1.25 assumption for the euro. Repositioning, as I mentioned in my response to Jeff’s question is repositioning benefits obviously are weighted to the second half, given the timing of the major repositioning that we did in the first or in the third quarter of this year and last year. So that, together with, and then it gets more smaller items, but defense and space timing et cetera. The buildup is really in the comparisons, the year-over-year comparisons together with repositioning the foreign currency and also the timing and the anticipated timing of lower commodity costs just getting the lag in terms of from a procurement standpoint or procurement contracts for other than FM. So for ACS, for Aero, for Transportation Systems, there is a lag effect in terms of when we see lower commodity costs actually translated into lower cost of goods sold and productivity benefits for us. That is also with support for our second half. John Inch – Merrill Lynch: That is very helpful. And lastly, Dave Anderson, the shareholders equity, that was down pretty substantially. Is that going to affect any prospective ability to repurchase shares? I know it is not part of your guide, but assuming some of this plays out, you still got a lot of cash that you're generating. Did those shareholder equity book numbers affect any kind of sort of thought process vis-à-vis share repurchase or liquidity or debt ratings or anything else that you care to comment on?

I think you said it, you said it well, John, which is really those are book entries that are non-economic. If you look at – we took almost the biggest hit in terms of our – due to the equity roll forward from the end of 2007 to the end of 2008, we took almost as big a hit in terms of our share buyback, in terms of our equity as we did from the pension. So it really comes back to the economic view of our free cash flow to debt relationship; we feel good about that and we feel good about being able to maintain our rating and as we have said, we will continue to be opportunistic in this environment. The important point that we have emphasized is one of managing our liquidity and ensuring that we have got some improvement in some of our credit ratios as a result of the economic downturn and the uncertainty of this environment

Just a couple of things to add to that, John. I'm sure you are familiar with what the accounting looks like when you repurchase shares and the impact that has on equity. Not that I say it makes sense, but you end up with driving equity down even more as you repurchase shares, but secondly, in the course of the year, we are a very good cash generator and we intend to focus a lot on generating cash and that is our first priority right now, it is just making sure they continue to do that. John Inch – Merrill Lynch: Thanks very much.

And we will take our next question from Scott Davis from Morgan Stanley. Scott Davis – Morgan Stanley: Hi, good morning guys. I think you mentioned that you made a stock contribution to the to the pension of a couple of hundred million and just looking at your balance sheet you have got a couple of billion in cash on the balance sheet, right? In the last cycle, you were in a bit of a pinch with (inaudible) and such and really had to make a stock contribution. But why do so now, and it seems like it is a fairly expensive way of the stock price to sure up the pension?

Well, you know Scott, we've weighed that pretty expensively and felt that in light of – again, our current metrics and what we want in terms of continued flexibility and liquidity that when we look at all the trade-offs, we felt that was the best option. You know, the other thing as we have stated when we gave our guidance call, this is our plan and we have a series – we deliberately staged the share contributions to the pension plan as a set of installments that we will evaluate over the course of the year. We will look to see how the pension plan actually performs, what is the return on assets and we look at our funded balance on a real-time or updated basis and we will just continue to judge that as we go through the year. But it is a pretty dynamic environment and we think that is the most prudent thing all things considered and importantly weighed all of those considerations in this decision. Scott Davis – Morgan Stanley: Understood. I do not want to harp on the same question that other guys asked, I do think that is going to be very topical to your – how your stock trades. I think when you think about the – your guidance is a little bit backend loaded, (inaudible) you have got commercial construction, probably about mid 2009 is going to get much tougher, same with process automation, ACS may have some headwinds that it doesn't have right now. Is there some level of comfort that – to offset that and let us just focus on ACS for now if you will that you can cut discretionary spending? I know you have interested pretty heavily in that business and do other things. I suppose there has been some restructuring in that segment as well to offset those declines. And you know just to go on a little bit more with this question; maybe you can just tell us how you are thinking about those end markets, some of us are certainly concerned.

When it comes to ACS, as we have said in the past, they generally plan their year based upon contingency spending. So they set up the whole year so that if sales materialize the way they say, then they will do the spending, but if sales don't materialize the way they plan, there is spending they just don't do. They pull the trigger on some of the spending depending upon how sales look. Even when we look at some of the short cycle stuff in ACS – though as Dave was pointing out earlier, we can't underestimate the impact that the new product introductions have had. These guys are really creating new market so it is just not a matter of taking share the way we might traditionally measure it, but the opportunities that we have seen from new products, even with our short cycle businesses is quite expensive and all that seed planting that they have done over the last six years really makes a difference here and helps to mitigate the cycle. And we're planning for it to be difficult. We have already – we are trying to anticipate that in every one of our businesses to be very wide-eyed in terms of how we look at the stuff and make sure that we understand how difficult it could be and plan accordingly. Dave?

Yes, the thing that I am going to add is just on a regional basis, and again, we have discussed this in December. The expectation is that the developed market is going to be down somewhere between 5% and 10%. So if you look at US and Europe, despite the fact that we actually grew as I said in the fourth quarter in ACS in all regions, we actually are expecting declines in developed markets and with relatively modest growth in the emerging regions, we have got 5% to 10% up in the emerging regions. So it really (inaudible) the fundamentals, the contingencies that are in place, the expectation is that we are going to see some softening obviously in the nonresidential space. Now importantly, as you know Scott, we have a very, very large flywheel that is in place in terms of the installed base in terms of buildings, hospitals, governments facilities etc. Energy efficiency which generates the retrofit or aftermarket for us, which is actually the majority of our revenues and in addition energy efficiency is continuing to grow and we are actually seeing double-digit growth driven by energy efficiency in ACS – in that segment of the business. So it is really a balance of all those factors, but I think Dave's point is the operative one, which is the planning assumption in addition to achievable sales is contingency in terms of the spending that in flexibility in terms of that spending that ACS will do only if in fact the market conditions support it. Scott Davis – Morgan Stanley: Makes sense. Dave, did you give us – did you update CapEx guidance, I didn't hear you say that anything about that on the call.

We would expect CapEx is going to be down year-over-year. We are still finalizing some of those numbers, Scott, but it is going to be down in the range of 5% to 10% relative to 2008 actuals. Scott Davis – Morgan Stanley: Okay, great. Thanks guys.

And our next question comes from Steven Wininger [ph] with Stanford Bernstein. Steven Wininger – Stanford Bernstein: Good morning. Just wanted to understand a couple of things. Obviously, under a different team in the last downturn you went through in time of laying off about 20,000 people and having an $8 billion write-off and no merit increases and things like that and now you're in a time frame where you can get on the front foot, given all the work over the last five or six years. Where do you plan to put that emphasis in terms of M&A, speed on the street, R&D in terms of not just product cost redesign but new products this year. So what are the kinds of things that you're talking about doing to come out faster on the other side of this?

Well, I think that the message that we want to have is that one of the reasons that we will be able to weather this downturn very differently than we did last time is we have been doing six years of seed planting across the board, whether it was new products, new geographies, getting our costs in better position. If you recall last time, it was very different position because the mergers had just occurred and there were a lot of moving parts to it at very difficult time. This is very different and that seed planting that we have done then is helping us now and that seed planting is going to continue. We are not shorting the future with the stuff that we are doing today. If you look at something like operating systems, that is going to continue to expand. Functional transformation is going to continue to expand. The work we're doing on velocity product development to keep introducing new products that customers want, getting it out there faster; that is going to continue. You can always point to something or program where we may have delayed a bit recognizing that launches maybe different on the other side. But at the end of the day, this seed planting is going to continue because that is what got us here and that is what is going to cause us to come out very big on the other side. Dave, anything you want to add?

No I think that it is okay. Steven Wininger – Stanford Bernstein: Okay, so maybe to follow that up a little bit. In terms of being more specific about on the repositioning side now for the programs that you're talking about that will lead to fruition in the second half. Can you talk about how execution on that front across specifically maybe Transportation Systems and Aero moving to low-cost countries and those programs in place?

I should, I mean starting with the last part first, we are not so much moving things as we are. We have been expanding in some of these other places and we have tried to be very judicious in how we added people. It is very easy to just keep adding during the good times and as a result of that when the tough times hit, you have to correct a bunch of that. If you take a look at what we have tried to do with a sense of for the last six years, we have been very judicious in how we have added and I think very thoughtful about it, so we didn't find ourselves in the same predicament. You will actually see a lot of big actions from us there in the restructuring that we have launched in the – say the previous 18 months. It takes time for the benefits of that to show up and we're expecting to see more of that arising in the second half – or the benefits of it. Dave?

No, that’s good Steven Wininger – Stanford Bernstein: And on Transportation Systems, just more color again around given all the program wins and all of the activity there. On the cost side, can you provide some more color about what is going to be different this year in terms of the cost structure of the company to handle this massive downturn?

In Transportation Systems, to sell them to a difficult market and one of the things that we have always told ourselves is that we have to have such a superb cost and technology advantage that we would always be the best alternative for any customer. That focus hasn't changed. And you saw some of the restructuring that occurred there where we have combined our CV and PV organizations, streamlining that further. So we have been adjusting the overall structural cost, while continuing to maintain just a terrific product cost relative to our competition and that is going to continue also. That focus is not going to change Steven Wininger – Stanford Bernstein: Okay, thank you.

Our next question comes from Robert Scholars [ph] with McLeary. Please go ahead. Robert Scholars – McLeary: Hi. First of all, you have mentioned over the first half you are going to face some pressures, particularly on the SM and Transportation. I was wondering if you could give us a feel for what the operating profits might be in those two divisions in the first half.

We're really not providing specifics on the first half, Robert. We have given you revenues for the first quarter for each of the businesses and then again for total HON and that is just the level that we are prepared to go to at this time in terms of the guidance that we have provided. Robert Scholars – McLeary: Okay, you mentioned on the business jets aftermarket that it was up slightly in Q4 but you are expecting flight hours to be down considerably in the first quarter and probably in the second quarter as well. What you expect the business jet aftermarket to do in the first half of the year?

We're excited about that in terms of the – specifically in terms of the business jet aftermarket. You know, we expect that to be down considerably measured in for us and indicators that there is no published global flying hour like there is as you know in air transport. So use as a representative number in terms of activity, TFE flight hours where we have got some visibility and we would expect that to be in the range for the first half of the year down 20% to 25% compared to first half of 2008. Robert Scholars – McLeary: There was nothing specifically unusual in Q4 then?

Well, Q4 was the precursor of what we believe will happen in the first half of this year. I mean, if you look at the pattern for 2008, the TFE hours were up as I said earlier 1% in the first quarter of 2008, down 4% in the second, down 11% in the third, and down 22% in the fourth. So the down 20% to 25% range, this level seems pretty logical and reasonable to us.

I think Robert, there is always timing differences between TFE hours and then service events on the business jet side but you are never going to have a one for one correlation in any quarter. So that is always going to distort the comparisons between hours and then aftermarket events in any one quarter.

That is right. Robert Scholars – McLeary: Okay, thank you.

Our next question comes from Howard Rubel with Jefferies. Please go ahead. Howard Rubel – Jefferies: Thank you very much. And Dave, with respect to working capital, the fourth quarter shows pretty big growth in receivables and inventories. Sort of two points – what are you doing to and it looks like it is a little bit higher than it was last year, so what are you doing to sort of manage that and then are you looking at credit losses and how are you making sure that you mitigate that problem?

Let me take the second one first. First of all, let me just give you some overall numbers. 2007 to 2008, we actually improved the inventory turns from 9.0 in 2007 to 9.5 in 2008 and overall working capital turns went from 5.5 to 5.9. So the backdrop is a positive story here in terms of what we have been able to achieve. You are right that we did see some growth in inventory at the end of the year, really reflective of the falloff of some of the OE demand, primarily in Aerospace and some of the deferrals and delays that we have experienced and is included in our guidance – in that cash flow guidance that I gave you, the 100% plus cash flow conversion for the full year. Really, what we're doing in terms of the receivables is aggressively day-to-day managing and monitoring the collections process and also our past dues. Frankly, we really haven't seen any meaningful movement in terms of past dues and we haven't seen anything in terms of significant insolvencies or otherwise that have impacted the quality of our receivables to date. Our businesses are very, very mindful of that and they're very much on top of it and as you recall, we actually write off, take to the P&L anything past a 180 days. So we are beyond that in terms of the 180 days past the terms should say in terms of collections. We take that the accrual for that. Howard Rubel – Jeffries: At 100%?

At 100%. So all of us are very, very focused on that. In terms of the inventory, we will see some further inventory pressure in the first quarter and into the first half mostly related to Aerospace and that is included as I said – when I said that the cash would be down year-over-year in the first quarter, that assumption is included in terms of some of that overhang in terms of aerospace inventory, as they work through some of the deferrals and some of the delays on the OE side, both on the BGA side and on the ATR site.. Howard Rubel – Jefferies: I mean I appreciate – at some point it could very well be fairly positive from (inaudible) as we move on but I do not want to too much positive. And then for Dave Cote, this is in some ways an unprecedented downturn and some of it requires just changing the way people behave and some of it requires just managing factories and facilities a little differently and since you spend a lot of time doing that, could do sort of talk about what you are doing and asking your operating executives to really address to get the most out of people and the most out of the facilities to deal with in some cases, 40% plus declines?

Yes, I say the first important point that we try to stress, Howard is that how you think about your business is no different during a tough time than it is during a good time. That focus on expense, really understanding your working capital, focusing on process, recognizing that you're always trying to do two competing things at the same time – none of that really changes and then it can be a mistake in business to have people start to think that all the times are different, so we don't do new products, we don't focus as much on the customer and we steadfastly try to avoid that. And instead, we continue to reinforce the point that we also make during the good times, which is first plan your sales conservatively. Even if times are good and your sales are going to be up 10%, think about in terms of 6%. If you think your sales in the tougher time are going to be down 5%, plan for down 8%. Then get your costs in line, your CapEx in line, think about your working capital that way, think about fly op planning, the sales inventory and operations planning, think of it that way and plan accordingly. So it is really just a reinforcement of the same points we make during the good times and the biggest thing is just to make sure that people are conservative enough in their planning for sales and we steadfastly tried to avoid this idea of the hope cast, the idea that it can’t possibly be this bad. The biggest thing we contribute is making sure that people address how bad it could be and making sure that we plan accordingly. So, it is not so much – hey times are different throw everything out the window that you have been working on. It’s more of a reinforcement about planning conservatively, really thinking about your cost how can you win at a time like this recognizing that we want to let others be the guys who cut back on customer service and new products, it is more of a reinforcement of what we are already doing in just making sure that people face their reality in their marketplace. Howard Rubel – Jefferies: Thank you.

I think we have time for one more question Lisa.

Our next question comes from Shannon O'Callaghan with Barclays Capital. Shannon O'Callaghan – Barclay’s Capital: Good morning guys.

Hey Shannon. Shannon O'Callaghan – Barclay’s Capital: So, just on EOP, I mean last year in the first quarter your specialty had kind of this blow out upside margin quarter driven by EOP, so the first quarter makes sense. Can you give us a little feel for what you are looking for the year EOP and what you are hearing from customers.

Yes, you know you are right Shannon, it is just a kind of reminder you know, the first quarter last year, EOP was 23%. They were up 27% in the second quarter, and so what we have is obviously a pretty significant headwind. I mentioned that earlier as one of the three drivers in terms of the year-over-year comps, in terms of the business driver’s year-over-year and that is really contributing. You know what we are seeing actually, we mentioned earlier two important things, number one, in the guidance call what we said is, for the first half of this year, we actually expected some deferrals and delays in terms of catalysts reloads based upon refining, particularly refining capacity utilization. We expect that that’s going to continue to play out that’s one data point and one input. The other one is that we actually saw a stronger than expected finish to the year for EOP and when you look at the diversification for EOP and that’s a very, very important point to remind it so. EOP has really expanded in terms of their offering and the breadth in terms of the issue of the markets, the sub markets that they serve, you know particularly in the natural gas segment. And also in terms of treatment of heavier crude, which is a much more significant input in terms of the whole petroleum refining chain. So, right now our expectation is we are going to see very, very tough comps for EOP for the first half based on this phenomenon of the very, very strong first half of ’08 and the deferrals delays in terms of the catalyst reloads as a result of just the slow down if you will in terms of the refining inverse. Shannon O'Callaghan – Barclay’s Capital: Okay thanks. And then on the ECS margins you know you guys are getting beaten up for a couple of years on these margins that they had something of a breakout type quarter even in a tougher environment, can you give us just a little more feel of what drove the quarter and where there things that were unusual or is it some of the cost actions that you have put in at segments starting to pay-off new products, can you give us a little more feel there?

I think it is really – I think you captured it towards the tail end of the question, I think it really – we saw very, very good productivity contribution at ACS in the fourth quarter. It is interesting because you know historically Murray and Dave and I laughed about this a little bit, because historically we talk about mix and acquisitions, we actually had poured an acquisition contribution in the fourth quarter, now into the revenue put, but actually the margin for the acquisition integration that I mentioned earlier is actually working and showing up in the numbers. The second thing is, we talked about mix. We actually had positive, if you would negative mix you could say, but positive solutions to products revenues in the quarter, but we had very, very nice margin contribution across the full business in ACS, which really points at the things that we have been talking about that are actually working. And it is also – in addition to productivity the point you made about new products and Dave emphasized that earlier, it is hard to over emphasis it because what we are really seeing with ACS is as they introduce new products, as they create more value for their customers, as they have increased the penetration in terms of the share of dollars that they get in a particular sale. The new wireless technology for residential applications are a great example of that where we are selling a higher value to consumer and rather than a consumer paying the installer to burst through the walls, strife all the wires, do all the connections, they are paying ACS for the technology. So, we are getting the greater share if you will in terms of that consumer spend for a comparable if you want an end product. That’s what happening – the phenomenon that is happening in ACS and it is one of the things that gives us confidence as we look to 2009 despite the fact that we are – our guidance is for the revenue reduction in ACS and as I mentioned for development markets, sales decline, and more modest emerging market growth. The fact of the matter is, we think this is a business that is going to continue to outperform. Shannon O'Callaghan – Barclay’s Capital: Great, thanks a lot guys.

You are welcome.

You are welcome.

Thanks. Just I’ll pass the call back to Dave for closing comments.

The times really are unprecedented. This is a very difficult time for all companies out there and you’ve heard me make a lot of statements to that effect and it’s true, everybody is going to be effected by it. Some look at it and say, what is going to happen to us and wonder if they will see a repeat of what happen last time and they won’t. If you take a look at all the changes that we have made, the fact that we invested during the good times to make sure that we could do the seed planting that would show up during tough times and then make it even better coming out is going to bode for a much better future for Honeywell and we look forward to being able to show you during the course of the year how true that is. These are tough times, but this is a different company and that seed planting is going to continue and is going to continue to pay. Thank you for listening and hope you have a good day.

Thanks. That concludes the call today. We look forward to seeing you on February 23. Thank you.

And that concludes today’s teleconference, thank you for your participation and you may now disconnect.