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

Stephen Whittaker - Sanford Bernstein Scott Davis – Morgan Stanley Shannon O'Callaghan – Barclays Capital Nigel Coe – Deutsche Bank Jeff Sprague – Citi Investment Research Robert Stallard – Macquarie

(Operator Instructions) Welcome to the Honeywell Second Quarter 2009 Earnings Conference Call. At this time I’d like to turn conference over to Murray Grainger, Vice President of Investor Relations.

Welcome to Honeywell’s Second Quarter 2009 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 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 second quarter and our 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.

We’re executing very, unfortunately it’s in a very tough economic environment. With sales of $7.6 billion we were able to generate earnings per share of $0.60 and that includes $66 million or $0.06 in earnings of additional repositioning actions. We also generated over $1 billion of free cash flow which really reinforces the quality of our earnings performance this quarter. While the top line environment continues to be very challenging, especially in Business Jets and Turbos, we were able to deliver these results because of the strong cost actions and controls that we have in place throughout Honeywell. These actions and controls as well as our conservative planning, particularly around where we plan our costs, are helping us to offset what we anticipate to be continued challenging end market conditions throughout the balance of the year. Despite this weak top line environment we still expect to deliver our full year EPS at the low end of our previous guidance range or about $2.85. We continue to drive productivity across the organization and remain focused on flawlessly executing the repositioning projects that we’ve initiated across the company. These projects yielded over $130 million of gross savings in the second quarter and should yield almost $650 million in gross savings this year. This focus on fixed cost remains a priority for us. We also continue to take other aggressive cost actions across our businesses. For example, our focus on reducing our indirect spend is working and will save us more than 20% of spend this year. Actions such as plant shut downs and furloughs are being taken where appropriate and we’ll save more than $140 million this year while also maintaining our full workforce. These were all difficult actions but our team is executing well and responding quickly to market conditions that continue to be dynamic. Our key process initiatives such as the Honeywell Operating System, Velocity Product Development and Functional Transformation have been huge enablers of these savings. With 75% of our manufacturing cost base now within HOS deployment and more than half of those at phase four or better where we start seeing transformational results, we’re seeing real momentum across the organization. Some of you visited our Life Safety sight in Lincolnshire, Illinois, for example, where the phase four HOS sight we were able to consolidate six sights into one, reducing our footprint by more than 40%, increasing our sales per employee by 60% while reducing inventory by 40% and cycle times from weeks to just days, impressive results and just one example of what is happening across the company. VPD continues to be a significant driver, it is yielding very real benefits for us today in places like UCC where we continue to win market share with new products and in places like Aerospace where our development costs and cycle times have been materially reduced. VPD further increases our competitive advantage on future platforms. Functional transformation is now on track to save $150 million this year, up from our previous estimate of $100 million and we continue to drive additional productivity through shared SAP infrastructure and applications as we near almost 60% completion of our company wide ERP rollout. We’ll continue to invest in these big process initiatives as well as other seed planting across the organization. Repositioning actions that help reduce our fixed costs and that have attractive returns benefiting 2010 and beyond. We’ve executed on $110 million or $0.11 so far this year and these actions alone should provide approximately $200 million of gross benefits next year. Seed planting, like technology investments that increase our leadership in next generation technologies and applications, like our win on the European Commission Single European Sky Air Traffic Management System, or as they refer to it SESAR. This win positions Honeywell as the only US based company involved in this initiative, with a target to improve European air traffic capacity by three times, improving safety by 10 times, reducing ATM costs by half, and reducing environmental impact by 10%. This win solidifies our leadership position in air traffic management. Finally, seed planting investments like our acquisition of RMG, that further strengthens our position in the attractive and rapidly growing gas segment. As you know, with more and more gas reserves being discovered around the world, gas is going to become a much bigger part of the energy cycle. RMG plays whenever that gas needs to be moved, measured, or stored. This will be another great acquisition for us. In summary, a good and importantly high quality quarter in a tough environment. Honeywell continues to execute and we continue to invest for the future. As I said last quarter, we want to be your best investment not just during these tough times but also when better times return, and they will return. With that let me turn it over to Dave.

Let’s go to slide four and go through the financial summary results for the quarter. Obviously as we all know in a very tough environment, Honeywell posted results that were in line with guidance that we provided you in April. Reported sales for the combined company down 22% or down 18% organically if we exclude the impact of foreign exchange and also acquisitions. We had reported declines across all regions but importantly sequential growth in the emerging regions of China, India, and the Middle East. Segment margins declined 90 basis points to 12.3% and we saw another good margin performance from ACS which was up 70 basis points in the quarter, by the way marks ACS third quarter in a row with margin expansion. An impressive quarter from Special Materials which was up 150 basis points. These gains were more than offset by the expected weakness at Transportation Systems which was down 800 basis points and also Aerospace which was down 160 basis points. Aero of course continues to experience soft conditions in the commercial after market. Net income in the quarter was down 38%, EPS declined 37%. In addition to higher pension expense which was $30 million in the quarter and a slightly lower share count there were a number of moving pieces that I want to take minute just to take you through. First, we were able to take, as Dave said an additional $66 million or approximately $0.06 of net repositioning actions, actually $84 million gross and we had some favorability from reversals of prior accruals in the quarter. Those are going to provide approximately $30 million of benefit in 2009 toward the end of the year, obviously in more than $100 million additional benefit in 2010. Second, we recognized impairment charges of $70 million or about $0.09 because of the mostly non-tax deducibility associated with this charge. Seventy million or $0.09 primarily related to the write down of shares which were received as partial consideration for the sale of Aero’s consumable solutions business. You recall we sold that business in the third quarter of last year. Finally, we recognized a gain of $98 million or approximately $0.10 positive related to changes that we made to our post employment benefits programs in the quarter. Therefore, on a net basis these items were actually a headwind of approximately $0.05 to our reported EPS of $0.60. Free cash flow was obviously strong in the quarter over $1 billion of free cash flow, despite more than $270 million declined net income. Working capital contributed more than $350 million driven by progress on inventory and receivables and CapEx also contributed down more than 35% year over year. We also benefited from the sale of some long term receivables which contributed just around $140 million which were partially offset by higher repositioning payments in the quarter. Through the first half of 2009 the cash flow conversion of 147% which really reinforces the quality of our earnings is a direct result of core process improvement, again, very positive performance. Let’s now turn to slide five and our market assumptions update. This is a format that you’re obviously familiar with. We’ve used this same format several times. I want to highlight that in large part our assumptions remain in tact but the outlook has been tempered by continued delays in the spending patterns for many of our end markets. The red circles indicate where we continue to see the most pressure, starting with the Air Transport and Regional aftermarket and the continued phenomenon of inventory destocking. Even though flight hours remain consistent at a decline of approximately 4% for the full year, we’re continuing to see airlines aggressively manage their spares and we’re not anticipating that this phenomenon will continue through the balance of the year. We’ll get into details of that when we go through Aero in just a moment. However, we continue to see Aero lines purchase fares at a rate that is seven times lower then flight hours, a disparity that’s much greater then the industry has experienced in the last downturn. At ACS we’re seeing industrial customers delay both Cap spending and operating spending across a number of businesses, driven by soft conditions. In the case of our process solutions business uncertainty around energy and commodity prices. The trend also applies to UOP where we continue to see catalyst reload and some project decisions pushed to the right. For Turbo, while the outlook for Western Europe auto sales has improved slightly, diesel penetration continues to decline and is now expected to be off seven points this year versus our previous estimate down five points. This is driven by temporary government incentives towards smaller, cheaper, gasoline cars, in large part. As you know, diesel cars are a significant part of our overall mix today and of course the overall Turbo industry. However, our mix and our penetration in gas engines will really begin to accelerate our new platforms that are due for release in 2010 and beyond. In summary on this slide, while the overall assumptions remain consistent, customer behavior spending delays continue to put pressure on the top line and we expect those trends to continue for the balance of the year. However, we’re obviously taking actions across the organization aided by our conservative planning on the cost side which will help mitigate the softness. Now let’s go through the highlights for each of the segments, starting with Aerospace on slide six. Reported Aero segment sales for the second quarter were down 17% but excluding the impact of the consumable solutions divestiture sales for Aero were down 14% on an organic basis with segment profit down 25%, margins down 160 basis points to 16.7% on lower volumes, partially offset by reduced expenses. On an organic basis total commercial sales, that is the sum of ATR and VGA were down 23% in the quarter with declines across both OE and aftermarket segments. Just to give you a little more color on that, organic commercial OE sales were down 29%, the ATR or Air Transport & Regional segment was down 15% as expected due to platform mix and also the timing of shipments to regional jet customers. Business Jet OE sales were down 42% in the quarter as the result of the significant customer reschedules that we discussed in the first quarter and that phenomenon just continues and we expect that to continue, obviously for the rest of the year. Commercial after market sales were down 19% in the second quarter, the ATR piece of that declined 3.6% which was actually better than our estimate of 5% for the quarter. Again that was flight hours down 3.6% better than our estimate of 5% down in flight hours for the quarter. However, our aftermarket sales were down 14% as airlines continued aggressive inventory initiatives and also leveraged the utilization parked aircraft for spares. To provide, again some additional color, our repair and overhaul R&O business was down in line with flight hours, however spares were down more than 25% or seven times greater than the flight hour reduction. BGA after market sales were down 31% in the quarter in line with expectations and in line with the turbo fan engines or TFE hours and maintenance events. Finally, Defense and Space sales for Aero were down slightly in the quarter, mostly driven by tough comps you recall the prior year was up 11% primarily due to program timing. Our Defense and Space portfolio continues to perform very well and remains well positioned for good growth in 2009. In summary, we had continued tough market conditions in Aero. Volume declines across the commercial portfolio particularly in business jets, however, the Aero team continues to execute well, they reacted quickly with additional cost actions across the businesses and they also continue to win, as Dave said, attractive new business. In addition to the Air Traffic management system for Europe, the SESAR program, Aerospace won a 10 year contract with the Marine Core for pre-positioning logistic support services with a potential over its life value of over $700 million. We’re also have great success in gaining significant share with our APU retrofit program which offers better fuel economy and lower maintenance versus competition. Another example in the quarter was aviation capital where we won a fleet of new airbus A320 with a contract valued at more than $40 million. Let’s turn now to slide number seven and go through the highlights for ACS. Reported sales for ACS were down 17% in the quarter, down 13% on a local currency organic basis. The biggest declines were in Europe and in the Americas, partially offset by essentially flat comparisons across the emerging regions. Segment margins were a good story in the quarter, up an impressive 70 basis points to an 11.5% margin for ACS. The Products businesses were down 16% organically with a continuation of the difficult trends we saw as we exited the first quarter. ECC and life safety while both down in the quarter continue to win in the marketplace and gain share with new products. On the Solutions business while down 6% in the quarter they actually continue to perform very well facing tough comps of 11% organic growth in the same period last year. Demand for energy efficiency as well as the integration of climate, fire and secure controls for critical infrastructure continues to drive building solutions. At Process Solutions, particularly oil and gas production, that is upstream as well as the distribution projects continue to be solid. However, refining remains weak and as I mentioned earlier, we’re seeing delays in both CapEx and OpEx across the board in this market segment. Orders in the second quarter in the Solutions business were down 7% organically reflecting tough comps at building solutions and also order delays particularly at Process Solutions. The service bank, however, increased in both building and process and we continue to see the benefit of our install base of over five million buildings and 10,000 industrial sites. Building solutions in fact had its second biggest order quarter ever in the Americas and Asia and were able to secure a contract for the US Army Core of Engineers to upgrade Federal buildings with energy efficient technology. As part of that contract, Honeywell will install utility monitoring and building control technologies such as heating, ventilation, and HVAC, fire alarm and light safety as well as security systems at Federal facilities in the US and abroad. After a pause in stimulus activities, at the start of the quarter we’ve seen an up-tick in bid and proposal and anticipate orders being awarded related to the stimulus in the third and fourth quarters in our Building Solutions business. The ACS segment profit, as I said, was down 11%, the segment profit dollars reflecting negative volume have what we saw an impressive 70 basis point increase in margin to 11.5% reflecting more than $50 million in reduced SG&A costs in the quarter and margin increases in our solutions businesses. It was a great effort by the ACS team and too continues to execute well on new product introductions, productivity actions, as well as acquisition integration. All of these contributed positively to their performance in the quarter. Let’s now go to slide eight and talk about Transportation Systems. As you can see, overall TS sales on slight eight were down 41% that included a 6% foreign currency impact on volume. We had declines primarily at Turbo as well as in Friction Materials in the quarter. Turbo saw again lower vehicle production rates at OEMs globally as consumers continue to shift towards cheaper, lower displacement gas engines. During the quarter, OEs also continued to significantly reduce our inventories which we estimate to be down approximately two million vehicles in Western Europe alone and that’s significantly obviously in terms of the importance of that market for us. We would therefore expect OEs to start increasing their production in the fourth quarter and for Honeywell to gain share as we benefit from a high win rate on new platforms into 2010. Another positive data point, you have to look for positive data points in this environment, we saw our shipments increase week over week during the quarter, indicating that demand is actually picking up. Starting to see, if you will, stabilization and some turn in this business. In the Consumer Products business which was down 11% reported but only 2% if you exclude foreign currency as well as the pass through impact of lower raw material prices, primarily ethylene glycol, we’re seeing much improved business performance with CPG recording its second quarter of profit and margin growth. Overall, Transportation Systems profit down 83% in the quarter due primarily to lower volumes at Turbo. However, the TS team also continues to make good progress with productivity and cost actions with six costs down more than 14% in the first half of this year. Let’s go now to slide number nine and go through the summary review of Specialty Materials. Kind of its backdrop here when you look at these numbers you may recall, I didn’t, but you may recall that during the last downturn, I think I put it out of my mind, Specialty Materials was only marginally profitable with total segment profit over the combined 2001-2002 period of less than $150 million. In this quarter alone Specialty Materials generated $150 million of segment profit, expanding margins by 150 basis points on sales down 28%. Clearly this is a very different business and a credit to the work that the SM team is doing and the portfolio reshaping that’s occurred here. As expected, sales of UOP were down 24% due to tough comps of catalyst sales, you’ll recall those were down 33% in the quarter but large shipments of catalyst in the first half of last year up approximately 45% in the first half of 2008. We’ve been anticipating these tough comps in the first half of the year for UOP. Overall, UOP continues to see deferrals in the short cycle catalyst reload business and the timing we anticipate now between third quarter and fourth quarter 2009 and the first quarter 2010 to be a little bit fluid, difficult to predict. We should have better visibility toward the end of this quarter in terms of the outlook for the catalyst reloads. Longer cycle projects continue to remain relatively stable. However, we’re seeing some delays due to weakness in CapEx spending in refining and in petrochemical end markets. For Resins and Chemicals sales were down 41% in the quarter driven by the impact of lower material costs on pricing despite higher export volumes to China and South America. Specialty Products declined 30% driven primarily by continued challenges in the semiconductor industry, however, we’re seeing sequential improvement in electronic materials as customers in that segment are signaling improved business conditions. As I mentioned earlier, segment profit for SM at $150 million was down 19% in the quarter, however, margins were up 150 basis points to 14.3% on terrific cost controls despite lower volumes and the negative mix impact of lower UOP catalyst sales, truly a great performance under these conditions. With that review of the four segments, let’s go to slide 10 and do a summary preview of the outlook for the third quarter. We’re planning for total sales in the third quarter to be in the range of $7.7 to $8.1 billion down approximately 12% to 16% from the prior year and we’re forecasting EPS in the range of $0.70 to $0.75 down approximately 23% to 28%. We anticipate Aero sales to be in the $2.7 to $2.8 billion range down 8% to 12% including the negative one point impact from the sale of the CS business. We expect sales to Air Transport OE customers to decline slightly due to platform mix and timing and we expect continued sharp declines in business aviation due to reduced delivery schedules to our OE customers. Business Aviation OE sales could be down as much as 70% to 80% which is indicative of the correction that’s occurring in this industry. In the after market we expect ATR sales to decline more than flight hours, again that phenomenon of buying behavior and inventory destocking which we expect flight hours to be down in the range of 4%. In business jets we expect TFE hours to be down consistent with our expectations for declines for the full year that is down about 15% in the third quarter. For ACS in the third, we expect sales in the $3.2 to $3.3 billion range down 11% to 13% versus prior year including a slight benefit from acquisitions. We expect similar trends that we saw in the second quarter with volume declines across all of the businesses, offset by cost actions and the benefits from previously funded repositioning actions. At Transportation we expect sales in the $0.8 to $0.9 billion down a little more than 20%. Again, with similar trends that we saw in the second quarter. Still high but declining inventories of passenger and commercial vehicles will continue to dampen production; however, this activity should continue to pick up in preparation for the expected production increases in the fourth quarter. Finally, at Specialty Materials we anticipate sales in the $1.0 to $1.1 billion range in the third quarter down 17% to 24% due to raw material pass through impacts at Resins and Chemicals offset by a pick up in catalyst reload activity at UOP. In summary, we’re preparing ourselves for another tough quarter with continued challenging top line, supported by aggressive cost actions. We expect to see top line declines moderating; however, as we move into the second half of ’09 as the businesses will still be below 2008 levels. Now let’s turn to the sales assumptions for the remainder of the year on slide 11. We thought this pictorial could be helpful for you in terms of just providing a perspective on what we’re looking at for the second half of this year and how that’s compared to the previous quarters including the first quarter of ’09 and the first half, if you will, of ’09 and the two halves of ’08. The message we’d like to convey here is that while our forecast implies some sequential growth in the second half of the year, we’re still planning for absolute levels of business activity to be below ’08 and in some cases although not shown in the chart, below 2007 levels. Let’s start with TS on the lower left since this shows the biggest difference between 2008 and 2009. As a reminder, in the second quarter of this year sales were down 40% and we expect sales in the third quarter to be in the range of $800 to $900 million with year over year declines moderating slightly. In the fourth quarter we expect sales for TS to be essentially flat with the prior year, however, still 30% below 2007 levels. What we’re looking at sequential increases 2Q, 3Q and 4Q we’re still only planning to reach depressed 2008 levels with the benefit of a tailwind of increased OE productions as the result of declining inventory and the benefit of new model launches. Overall for the year we now expect Transportation sales to be in the range of $3.3 billion and our revised Euro estimate of 1.36 for the year. Let’s go to the top left now on the same chart and look at Aero where we expect overall year to year declines to moderate over the second half of the year with growth in Defense offsetting the declines we’re expecting in business jet OE as well as the continued inventory destocking that’s occurring in the commercial aftermarket. We now expect Aero sales for the full year to be in the range of $11.2 billion. If you look at the upper right hand side of the same charge and look at ACS we see a similar trend, declines moderating throughout the year while still down year over year we expect lower declines at environmental combustion, ECC as well as life safety as they continue to improve their market positions and grow share in the third and the fourth quarters based upon recent contract wins and the success of new product introductions. We’re also expecting organic growth in the fourth quarter in Building Solutions calling moderate declines in the third quarter due to project timing. We expect these factors primarily to be offset by declines in process solutions due to customer spending delays that we discussed earlier. Overall we expect sales for the full year for ACS to be in the range of $12.8 billion. Finally, on the lower right hand side of the chart we expect the second half for Specialty Materials to benefit from planned catalyst reloads at UOP. As we discussed earlier the timing of these can be variable within the third and the fourth quarters and may even see some push into ’10 although our best estimate today is they should occur this year. We’ll also see more visibility as I said earlier towards the end of the third quarter. Our latest estimate for full year for Specialty Materials is revenues at $4.3 billion. Now let’s take a look at EPS for the remainder of the year and how we’d walk from the first half to our full year estimate on slide 12. You’ll recall this format, Dave presented this in May at EPG walking our first half actual results to our revised guidance now at approximately $2.85 EPS at the low end of our previous guidance range. Consistent with what we’ve already discussed for each of our businesses we’re planning for continued challenging market conditions to be offset by aggressive cost controls. As you can see the business timing and seasonality component of this walk is now lower then what we communicated in May, at that time Dave I think at EPG were north of $0.30 for that piece of it we’re now at $0.18 and that’s due to the continued customer spending delays that we discussed. While on the other hand the repositioning savings and cost control component of the walk or the bridge are higher, now anticipating $0.36 on a combined basis reflecting savings from repositioning actions that we took in the second quarter. Business timing for example Turbo and UOP are still more heavily weighted towards the fourth quarter as are the repositioning savings which are expected to benefit the fourth quarter of our rate approximately twice that of the third quarter. Also note that the first half run rate of $1.14 includes $0.11 of repositioning charges or headwind from the first half. Turning for a moment to 2010 we just spent last week with each of you in our four businesses, we’re going now to the next slide, the 2010 Framework. Obviously while too early to talk specific guidance we just want to verify some of the items on this chart, again this is a charge that Dave shared with you in May at EPG. The slide is titled 2010 Framework, slide number 13. Starting on the right hand side of the table, obviously in terms of positives we expect continued growth in ’10 from our Defense and Space business with base budget defense spending expected to rise slightly and benefiting key programs like the F35, the Joint Strike Fighter and also UOBs, under the current anticipated defense budget. We’ll also see continued year over year savings from repositioning actions that we funded across the organization. These projects, including the actions that we initiated this quarter, should be hitting full run rate in 2010 and are estimated to generate in 2010 somewhere between $150 and $200 million in incremental savings versus 2009. We also expect our Turbo charger at Commercial Aerospace after market business to rebound in ’10 following depressed ’09 levels, again as well as the inventory destocking that we’re seeing this year. Both of these businesses, the Turbo and Commercial Aero aftermarket businesses are very high margin contributors for Honeywell and we should see good benefits from any rebound in volumes. On the other hand as we’ve discussed, we anticipate that pension, if you look at the other side of the equation, to be a significant headwind in ’10 and we’re planning for Commercial Aerospace OE deliveries to turn down in ’10 as well as non-residential construction. However, a higher mix of government funded and energy efficiency projects including benefits from the stimulus funding should help mitigate some of this decline. Some items are obviously too early to call such as the shorter cycle ASC businesses, the refining in petrochemical businesses, OpEx and CapEx will be very much tied to stability in commodity pricing. All of those are clearly unknowns at this time. Foreign exchange is clearly too early to call as well as the timing and magnitude and any true rebound in the emerging markets. Clearly not all of the items on the page carry equal weighting but in all, our preliminary framework for 2010 remains well balanced between opportunities on risks on the operational side while a still number of unknowns which we’ll continue to monitor. Now let’s turn to slide 14 and summarize before turning it back to Murray and to you for Q&A. As Dave said, pleased to be able to report a second quarter that’s in line with guidance and this, despite continued very difficult economic conditions. We continued in the quarter to fund attractive repositioning projects, year to date we’ve recognized an additional $110 million or approximately $0.11 of repositioning which we’d expect to contribute around $70 million of savings this year and approximately $200 million of gross savings next year. We’ve also been able to generate more than $1.2 billion of free cash flow year to date which really reinforces the quality of our earning stream as well as the focus we have around disciplined capital allocation and working capital. However, as we discussed earlier, end market conditions remain tough. We continue to see top line pressure particularly in air transport after market, business jet OE and the Turbo business. We continue to see risk as customers delay capital spending and operating spending decisions, particularly in industrial, refining, and petrochemical segments. However, the organization is staying on top of these shifts, its responding quickly and effectively. We’re executing on repositioning, we continue to aggressively implement functional transformation and in addition we’ve initiated cost actions across the organizations including plant shut downs as appropriate, furloughs, changes to our benefit plans to further offset anticipated volume declines. We’re preparing ourselves for continued tough conditions in the second half but we remain confident in the cost actions that we’ve put in place to support our full year 2009 EPS guidance of approximately $2.85. Finally, as we’ve highlighted throughout the review today, we continue to invest in new products and services, our global footprint continues to strengthen and the key process initiatives that will help Honeywell outperform over the long term. In the near term we’re focused on executing in this environment and we’re planning for these conditions to continue through the rest of 2009 at a minimum. With that Murray let’s go back to you then for Q&A.

Please open the line for questions.

(Operator Instructions) Your first question comes from Stephen Whittaker - Sanford Bernstein Stephen Whittaker - Sanford Bernstein: I just wanted to first get a better idea on the EPS side the walk, I guess there was $0.19 difference between EPG and today and all of that that you mentioned in business timing and seasonality. Could you maybe expand on that a little bit more sort of beyond just some of the customer deferrals, is that what’s driving the reduction to the lower end, or the move to the lower end of guidance?

Let me give kind of an overall perspective then I’ll try to get more color commentary from Dave. What we’ve tried to do in the guidance we provide is make sure that we also contemplate how tough market conditions could be. As we went through the analysis over these last few months, every time we’re looking at it and saying what do our end markets look like and we’ve tried to contemplate would they be better than we thought or worse then we thought. We’ve tried to put that into our guidance. In this case we’d have to say that end market conditions have been tougher then we’d thought if we were looking at what the high end of our range was. That’s just closer to where we were on the low side. We tried to contemplate all the possible outcomes in the guidance we gave and I’d say overall it’s just a case where these end market conditions are continuing to stay tougher, the destocking has continued and we think there’s still the possibility of some more before we start to come out of it. I’d say it’s more of a reflection of that then anything else. It’s not a case of being surprised or anything it’s more a case where we tried to contemplate all the possible outcomes.

I think that summarizes, really if you look at sort of at a micro basis or business specific basis the numbers are all within the range of what we’ve been using in terms of our overall guidance and its really now at the lower end on the Aero aftermarket, at the lower end on the ESC products and at the lower end on UOP catalyst. Again, when you look at the high contribution margin businesses that are most impacted so they’ve really moved to that low end of the range. As we’ve talked about and as Dave said we’re just going in and putting in additional reinforcement in terms of our cost actions. Stephen Whittaker - Sanford Bernstein: As I look at Q4 if Q3 hits the number that you’re guiding to that means we’ve got $1.00 EPS in Q4 and that would probably be the best quarter at least in three years on an EPS basis. Part of that I’m assuming is a pickup in the spare parts assumptions in Q4. Are you assuming that the airlines have a surge at all in restocking in Q4 or are you assuming that the destocking that started and going through Q3 is going to persist?

I’d say it’s more a reflection of the cumulative effect of the cost actions that we’ve been taking. We’re really not counting on much market recovery expect for stuff where it clearly is going to happen like Turbo where they were pretty much shut down in the fourth quarter last year and you know the pain we took with that. With the destocking that’s already occurred and we think there’ll be a little bit more in the third quarter. It can’t happen in the fourth quarter because you can only hold your breath so long on something like that.

Its really just as you said, its really the cost actions and distribution I think I referenced earlier that if you look at the net repositioning benefit as well as some of the other cost actions its really a one third/two third phenomenon when you think of the distribution through the rest of the year that is the third quarter, fourth quarter distribution. It’s the size of those cost actions and it’s the distribution or timing of cost actions to create that phenomenon.

Your next question comes from Scott Davis – Morgan Stanley Scott Davis – Morgan Stanley: Last quarter you talked about pension headwind in 2010 being somewhere in that $0.50 range and I think things have gotten maybe a little bit better since then. Can you mark to market that number for us?

I think that’s probably still a pretty good estimate. Its just one of those that’s tough to call. The return on plan assets is better. On the other hand, the discount rate is probably hovering about where it was at year end. Net net I think for planning purposes as a place holder as we think about next year and as you think about us for next year I think I would just continue to use that $500 million number.

Discount rate bounces around a fair amount as you know. Scott Davis – Morgan Stanley: On OPEB a little bit maybe just educate me on what happens here on the accounting side. What changed in the plan that gave you the $0.10 gain and is that just a one time gain, does it relate to some of the headcount reductions is it related to less benefits or is it more of a discretionary line item.

It is a one time gain but there will be some small benefit on an annual basis going forward.

The change really was the elimination of the subsidy for retiree eligible but pre-65 employees or pre-Medicare employees in the company resulting in a curtailment gain. As Dave said, for planning purposes for the next five, six years or so they’ll continue to be a positive flow through if you will of that change of that benefit plan change that’ll be about $20 million a year. From a run rate, if you’re thinking historically about $100 million in terms of OPEB you’d be picking about $80 million for OPEB for us.

Just for the record, anybody who retires before July 31 we gave employees about four or five months notice on this one, that anybody who retires before July 31 they still get the benefit. Scott Davis – Morgan Stanley: You didn’t really talk much about cash reinvestment from here and I know you’ve talked about deals being expensive but yet you were able to get the R&G deal done at reasonably good pricing. Was that kind of a one off opportunity; is there more stuff out there any change to buy back some shares here given how depressed your stock is?

The acquisition environment is still a case where we look at hundreds to get one done because of fit, pricing, whatever. In this case it was just; we think a very good deal. You hear us talk maybe too much about the great positions in good industries. We think that whole natural gas area is just going to be a very good industry and you can see if was just all the gas finds that have been announced over the last couple years. There’s a substantial amount of gas being found and we think that is very much going to be part of the solution when people look at how to mitigate global warming and how to become more energy secure. We just think it’s a great spot and a great price. We probably looked at 100 to be able to get ourselves down to that one. It’s still a tougher environment, when it comes to overall acquisition environment. When it comes to cash deployment we are still going to, our mantra really hasn’t changed over the last six or seven years and it says we’re a good cash flow generator, we’re going to continue to do that. I think it shows in this quarter and we’re going to be judicious in how we think about acquisitions, repurchases, dividends and maintaining that single A rating which we think is an important thing for us to do.

Your next question comes from Shannon O'Callaghan – Barclays Capital Shannon O'Callaghan – Barclays Capital: A question on the Specialty margins, we normally wouldn’t see this kind of margin unless UOP was having a really good quarter. For that to happen with catalyst down that much is there anything unusual going on there? Are you positively surprised that they could deliver this kind of a quarter with a bad UOP quarter, what do you think?

I can’t say it came as a surprise. We knew it was going to happen this way.

It speaks to a couple things. Number one obviously the reshaping, the significant reshaping of, if you will, the legacy specialty materials portfolio, you just can’t state that enough. That includes the partial immunization in the Resins and Chemicals business, as you know this was a money loser in the last cycle. Given the formula based pricing, as well as what we’ve done to continue to position ourselves as the low cost global producer of [caphalactate] we’ve seen actually pretty healthy demand. I talked about the exports to for example China as well as exports most ammonium sulphates exports to Brazil and Latin America during the quarter. We have, we think, really positioned ourselves well in that business just as an example for the global marketplace, that’s a dramatic transformation, the before and after is dramatic. Fluorine products despite end market pressures had a good quarter; we’ve done a very nice job in terms of managing commercially and operationally. While we had some tough market conditions in Specialty Products they also managed well in the quarter. All the businesses across SM like all the businesses across Honeywell have been very proactive in their cost actions. Significant reduction, I think it was a 21% reduction in indirect spend in Specialty Materials in the quarter on a year over year basis. That’s really indicative, Andreas is just all over looking at every piece of it and not just the cost piece of it but really optimizing our sales force deployment, the operational improvement, plant attainment, all those things really contributed to their performance in the quarter.

If I could reinforce Dave’s choice of words, first time I’ve heard it but I think its pretty good is that immunization. We talked a lot about this last time in the last recession but it was a baby in the bath water kind of thing. So we took at look at Specialty Materials there really was a bifurcated portfolio and some of it was very good and some of the stuff was not. On all the stuff that’s not we’ve really managed to shed ourselves of most of the troublesome stuff and in Resins and Chemicals really transformed that business. We talked about it at the time that the highs would not be as high but the lows would also not be as low as the result of what we were doing and that’s showing up a lot now. Shannon O'Callaghan – Barclays Capital: You mentioned the stimulus activity into the second half. You guys giving a little more granularity mean any ability to give a little color on the size or the timing of the impact?

Maybe not so much on size because we’re still seeing orders flow but clearly we’re starting to see the benefit in orders and the impact will be felt more in the second half than going into ’10. The stimulus spending had this really perverse effect of actually slowing things down initially as municipalities waited to see what the package was going to look like before they completed projects that were already in process. We’re past that and its really starting to pick up. I wouldn’t be prepared to put a number on it. Shannon O'Callaghan – Barclays Capital: You mentioned in some of the things that took your assumptions down for this year some of it’s around after market destocking there, Turbo, things you expect to get better in 2010. To what extent are these items that are worse than 2009 changing your view of potentially how the delta could be better next year.

We’re still planning for a difficult 2010. As you know, markets are still very iffy, very dynamic and we just think the smart way to plan right now is to just assume 2010 is just as difficult as 2009, there’ll be puts and takes but we think the smart thing to do is plan for difficulty. If we get positively surprised then great but we’re not going to plan that way. Shannon O'Callaghan – Barclays Capital: Do you have a feel for how much of what’s going on do you expect to extend as sort of abnormal correction to the downside, things that have to come back a little bit? You mentioned the destocking in commercial after market, other areas like that; anything that you feel like sort of has to snap back as it’s abnormally to the downside.

You’d have to expect the whole destocking phenomenon which we’ve seen in Turbo, we’ve seen extensively in Aerospace, we’ve seen it in HDS, we’ve seen it some in Specialty Materials, you’d have to assume that can’t keep going. By the same token you don’t know exactly what happens to we’ll say Aerospace OEM schedules, you don’t know what happens in non-residential construction or residential construction so we just think its still too dynamic to be able to predict accurately. There are puts and takes and we just don’t know so we’re going to play it conservatively.

Your next question comes from Nigel Coe – Deutsche Bank Nigel Coe – Deutsche Bank: I’ve got say the Aerospace margins given some of the trends you’ve seen in both OE and after markets are pretty impressive. Mix becomes friends to you in 2010, would you go as far to say that Aero margins in the range of probably a good trough number?

We’ve given guidance for the full year. I would say I wouldn’t want to venture out anything beyond that. Nigel Coe – Deutsche Bank: Those segment margins you gave out earlier on they’re still good ranges?

Some tweaks to those relative to what we communicated in previous quarters is because of the dynamics of softer top line, additional cost savings. They’re in the range but there are tweaks pluses and minuses. Nigel Coe – Deutsche Bank: On UOP you mentioned that you’d have a better read through by the end of this quarter. How much variability do you think there is in the backlog at this stage and do you think that UOP and grow in 2010?

I’d say still tough to know at this point. Similar to the last question, we have a lot of puts and takes in the portfolio. So far, backlog has held up well given the environment. How that changes over the next year and a half is just tough to know.

It’s still pretty dynamic both on the petrochemical side as well as on the refining side as we mentioned earlier we had sort of a forecast for commodity costs and oil and crude and refining margins. Those are the kind of key assumptions that are going to drive this as well as credit availability for the non-nationals and the non-global players. There are a lot of things that are going to be in the mix here that are going to influence the shape of the economic recovery, the leading indicators are looking positive right now but some of these things actually will lag that so that the shape and timing of the recovery, all those things are going to influences. We’ll have a lot better visibility as we get towards the end of the year and as usual we’ll provide as much color as we can as we provide guidance for 2010.

The thing we do know is with any kind of economic recovery you know the energy crisis is coming back. There’s nothing that’s really been done over this past year and a half to change that equation. Recovery and more demand we’re going to be right back in that same profile. There’s still going to be the need for refining capacity, heavy crude I know there’s an article today about that those facilities aren’t being used as much but we’re going to be right back in that box again without any kind of recovery. How that plays through in ’10 and how quickly that adds to the backlog it’s just tough to know. Nigel Coe – Deutsche Bank: Some company have been a bit more granular on their, certainly have a stronger view on the inventory destock cycle, either calling for end to it or approaching an end to that process. Are you prepared to say that maybe there’s another quarter or so of inventory headwind before you get to that neutral situation or do you just want to go away from that question?

We’d like to think that they’re right about that. At least the history that we’ve seen in the past is having a true understanding of what that end market inventory is that they’re destocking from is not always the easiest thing to do. We’re trying to plan conservatively and say this just keeps going for at least another couple quarters because we think it’s the smarter bet to make.

Your next question comes from Jeff Sprague – Citi Investment Research Jeff Sprague – Citi Investment Research: I’d like to get an idea of the nature of the restructuring you’re doing now. The reason I ask the question is what you did here in the quarter seems to have very high and very rapid payback which would not have been my guess kind of two or three years into a fairly aggressive restructuring program. Can you give us a little color on actually what it is you’re doing and if there’s more of that kind of laying around in certain places that you continue to pick away at.

We just kind of keep these gems around waiting for a tougher time. Jeff Sprague – Citi Investment Research: Payback, that’s what $130 million.

Its really most census related and its really just reflective of our end market conditions, what we’re seeing, its also reflective of what the benefits we’re getting out of our initiatives, particularly HOS, we’re freeing up, I think you’ve seen some examples of that, freeing up meaningfully both square feet and labor capacity if you will as the result of HOS. FT and the FT actions that we continue to promulgate the FA enabled by the FAT and ERP rollout and it sounds like company buzz words but substantively that’s what’s driving or enabling our ability to continue to take a census. I think most of it is really, I refer to it as structural in terms of the cost benefit that’s going to endure, its going to support us in terms of 2010, 2011, and 2012. For the most part these are costs that are not coming back. Jeff Sprague – Citi Investment Research: Cash flow clearly looked good but the second biggest line after net income is other in the free cash flow statement. What is that and will that continue?

Some of the other includes the non-cash pension expense that’s in other and also some changes in accrued liabilities.

The big one are the long term receivables which we mentioned on the call is about $140 million but also there’s the currency translation fees on the cash flow statements is also in other. Between those two items they’re about the same about $140 million each. That is I think the majority of the change in other.

When you do the math again you look at the conversion adjusting for the guidance. For example, just adjusting for the sale of the long term receivable of $140 million that Murray referenced, we talked about earlier. You’re still looking at very high 180%, 190% type of conversion cash flow net income relationship in the quarter. Jeff Sprague – Citi Investment Research: The timing on the bev shares and the stock’s actually doubled since before in Q1, why now and how have they been marked and do they get marked back up if the stock moves around?

It’s really the arcane other than temporarily impaired accounting treatment that for equity financial instruments investments, the SEC really and FAS they really want you to mark the mark to market at the end of the year if there is material change and if you will sustain change in their valuation. In this case values are down not quite 50% from the values at the time that we did the acquisition in which we originally recorded the value, the six million shares. It’s really a one year mark. Again it’s really driven more by the regulatory guidelines and the accounting. We felt its prudent to do it, it’s the right thing to do and obviously its going to represent us a the time that we determine the right time to monetize those assets, the six million shares its going to represent that much more in terms of an up side for us in terms of the accounting gain. Jeff Sprague – Citi Investment Research: That value will now not move around until you actually sell the shares.

The only exception to that which we don’t anticipate at all would be any further share deterioration in their value and sustained deterioration over the next year so you’d be looking at it again at June 30, 2010 time period. We don’t anticipate that, shares are already up from the June 30 valuation. I think reasonably the expectation should be that this represents future gain for us.

We’re not saying it’s logical, it is the accounting.

Your last question comes from Robert Stallard – Macquarie Robert Stallard – Macquarie: On the destocking, this might be hard to do but how much do you think commercial and Aerospace after market inventories at the airlines have gone down, are we taking about months in reserves going down to weeks in reserves and when do you think this could come back?

Its interesting to see, when we do the comparison versus the last recession the destocking went on quite a while, let’s say like 15, 18 months, something like that. This time though it is significantly more rapid then it was last time. Last time they were doing it in small increments every quarter it has been very rapid this time. We’re seeing 4% decline in flight hours yielding 20% and 25% declines in spares whereas last time that would have been more like in the 10% to 15% range. If we had to guess we’d say the destocking cycle is more like nine or 12 months rather than the say 18 it went to last time. If we had to say when it changes we’d probably say sometime first half of 2010. It’s really just tough to peg as we were saying earlier because nobody really has a good handle on how much inventory is out there and the extent to which cannibalization can occur on parked aircraft, we just don’t know, nobody does. Robert Stallard – Macquarie: In terms of your assumptions for the full year, you’ve not built in any big reversion to the norm in your after market forecast right?

No.

That concludes the question and answer session for today. I’d like to turn the conference back over to Mr. Grainger for closing remarks.

I’d like to pass the call back to Dave for closing remarks.

It’s clearly a tough time and much tougher than it was in the last recession just six years ago. As you recall, we didn’t perform well or execute well during that last recession. We lost money two years in a row, our cash flow was sparse, and importantly, coming out of the recession our new product cupboard was bare. Investors weren’t happy and neither were our employees. Going into this recession investors had a lot of questions about whether this could be reprise of what happened to us last time. Hopefully by now we’ve been able to show its not. We’re a different company. We’re performing and we’re executing and most importantly we continue to invest in our future. We continue to invest in our big process initiatives, specifically the Honeywell Operating System, Functional Transformation and product development. We continue to invest geographically and our new product pipeline is very full and that’s in every business. This is very clearly a different company; the portfolio, the execution and the performance. We’re showing it in this down cycle and more importantly we’ll show it when the up swing happens. That up swing will happen. We intend to be your best investment not just during this tough time but also during the recovery. Thanks for listening.

Thank you for joining the call and I’m available for any follow up questions. Thank you.

That does conclude today’s conference. We appreciate everyone’s participation today. Have a wonderful day.