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

Nigel Coe – Deutsche Bank John Inch – Merrill Lynch Scott Davis – Morgan Stanley Shannon O'Callaghan – Barclays Capital Jeff Sprague – Citi Investment Research

(Operator Instructions) Welcome to the Honeywell Fourth Quarter and Full Year 2009 Conference Call. At this time I’d like to turn call over to Elena Doom, Vice President of Investor Relations.

Welcome to our Fourth Quarter and Full Year 2009 Earnings Conference Call. Here with me 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 fourth quarter and the full year 2009 as well as our expectations for the first quarter of 2010 and of course allow time for your questions. With that I’ll turn the call over to Dave Cote.

I’m pleased to report a strong finish to 2009 with another quarter of good results despite a continued tough economic environment and it closes out an interesting year marked by the worst recession in 8 years. Our results in 2009 reinforce the significance of our long standing company strategy. Our focus on having great positions in good industries, the continued investments we have made in exciting new products, emerging region expansion, and our key process improvement levers, our five initiatives, the talent and depth of our management team, and the power of One Honeywell. Dave will take us through the details of the quarter in a moment but let me say I’m extremely proud of this Honeywell team delivered on the financial commitments we set earlier in the year despite worsening and unprecedented economic headwinds. We proved were a company that could be trusted to perform in both the good times and the bad. With that let’s look at the quarter. We executed well with sales of $8.1 billion. We were able to generate earnings per share of $0.91 including covering an addition $34 million or $0.03 in earnings of repositioning actions. While the top line environment continued to be challenging we were able to deliver these results because of the strong growth initiatives and aggressive cost actions we put in place throughout Honeywell, as evidenced by our ability to preserve and grow margins in this environment. Segment margins were 15.3% in the quarter up 200 basis points prior year and we finished the year at 13.3% flat on almost $6 billion less in sales. In the quarter we generated over $1 billion of free cash flow taking free cash for the year over $3.3 billion, exceeding both our expectations and prior year which really reinforces the quality of our earnings. Our key initiatives continue to gain traction in our businesses and functions every day and we have a lot more room for even further improvement. We continue to drive productivity across the organization and remain focused on flawless executing the repositioning projects we’ve already initiated. The focus on fixed costs remains a priority for us. For example, our focus on reducing our indirect spend in working and saved us more than 20% of spend in 2009. Actions like plant shut downs and furloughs were taken where appropriate and saved approximately $200 million this year while also maintaining our industrial base. These are all difficult actions but our team executed well and responded quickly to changing market conditions. We accomplished these results while continuing our seed planting for the future where we’ve continued to invest even in these turbulent times. Seed planting investments and strategic innovative platforms like smart controls that tied to revamped electric grid. We’re well positioned to support the development of a Smart Grid through our industry leading building and residential controls, energy efficient solutions and wireless technology, all of which are key components to a successful Smart Grid. These solutions are not only enhancing Honeywell’s position in the very attractive segment but the opportunity for energy efficiency is significant because residential and commercial buildings consume 80% of the electricity in the United States. There are energy efficiency opportunities in each of our businesses. If aggressively applied today, Honeywell products and services could reduce energy consumption by 15% to 20%. Our investments and focus in emerging regions are also really paying off with sales growth in the quarter offsetting some of the declines we saw in developed regions. In the quarter specialty materials opened up a new technology center at Gurgaon, India to expand their global research capabilities in refining, petrochemical, and other technologies in order to better serve the region. Investing approximately $34 million the center will primarily house pilot plans for developing and demonstrating UOP process technologies. Strengthening our commercialization capabilities globally but especially in Asia where it will complement our existing research center in Shanghai. The challenge for us as well as the opportunity is to move at an even faster pace in these regions. Also we continue to invest in our big process initiatives as well as other seed planting across the organization such as the Honeywell Operating System, Velocity Product Development and Functional Transformation which have been huge enablers for growth and cost savings this year. With 80% of our manufacturing cost base now within HOS deployment and many of them in phase four or better, where we start seeing transformational results, we are seeing real momentum across the organization. Velocity Product Development of VPD continues to be a significant driver and is yielding very real benefits for us today in businesses like ECC where we continue to win market share with new products and in Aerospace where our development costs and cycle times have been materially reduced thus further increasing our competitive advantage on future platforms. Functional Transformation saved the company over $200 million this year while service quality improved. We continue to drive additional productivity through shared SAP infrastructure and applications as we near almost 60% completion of our company wide VRP rollout. Finally, I just spent two days with our top 300 leaders where we concentrated almost exclusively on preparing ourselves for the pending recovery. While it is difficult to predict when and what it will look like, we are as usual planning conservatively in 2010 with modest organic sales growth and we will continue to be judicious about maintaining good cost controls. While we should all be cautious about the year ahead of us, particularly in the first half, I feel good about the investments we have been making in our businesses for the past eight years to prepare us for an even better recovery. HLS, FT, ERP, Velocity Product Development, emerging region presence and acquisitions are all seeds that we have planted to help improve our growth, productivity and cash flow. We have the right leadership team in place to deliver even better results in the recovery and I’ve asked all of our business leaders to be prepared for a rapid recovery. We believe that because we maintained our industrial base we are prepared internally. We will be focusing even more attention on the preparedness of our supply base. In summary, a strong finish to a difficult year, decisively demonstrating Honeywell is very different company able to execute well operationally, deliver on our financial commitments and continue to invest in the future even in a tough economic environment. With that let me turn it over to Dave.

Please turn to slide four entitled financial summary and as you can see and as Dave said we’ve posted earnings results that were in line with the guidance we provided you in October. Reported sales for the quarter were down 7% in line with expectations or down 12% organically that is excluding the impact of both foreign exchange as well as acquisitions net of divestitures. Despite the drop in sales, segment profit in the quarter increased 6% over the prior year with segment margins up a full 200 basis points to 15.3%. We saw further good margin performance from ACS which was up 130 basis points in the quarter and impressive year over year gains in both specialty materials and transportation systems. These gains in margin points were partially offset by the expected weakness of Aero which was down 60 basis points on continued weakness in the commercial after market. Net income in the quarter declined 1%, EPS declined 6%. As you’ll recall we reviewed the effective tax rate assumptions with you last quarter and we indicated we have a higher ETR in the fourth quarter of about 30% that’s where we came in. That compares to last quarter’s lower tax rate, the third quarter lower tax rate of 22%. We also had higher pension and OPEB expense of $22 million in the quarter and relative to our guidance and expectations we had higher asbestos about $24 million in higher repositioning about $26 million, those expenses were offset by a gain on an asset sale so again relative to our expectations these items most offset and in line with guidance. Free cash flow, as Dave said, particularly strong in the quarter over $1 billion approximately flat with the prior year. A very high quality story that equates to 154% conversion to net income in the quarter. Again, reinforcing the core processes we have in place around the organization to drive cash and again reinforcing the quality of the earnings. On slide five, looking at the full year now 2009 results, you can see in line with our guidance that we gave you. Reported sales were down 15% for the year or around $5.7 billion less compared to 2008 obviously reflecting the tough economic environment over ’09. We had of course declines in all of the four business units. However, what’s impressive is our ability to take out approximately $5 billion of costs, holding segment margins flat to the 2008 levels at 13.3%. Each of the businesses responded exceptionally well to the progressively weakening end markets that we experienced over the course of 2009, staying on top of these market shifts, aggressively reducing costs while also maintaining our industrial base and continuing to invest for the future. Both ACS and SM actually saw margin rate improvement on a year over year basis. Net income for the full year 2009 was down 23% with higher pension expenses including $171 million of net also that results reflect $171 million of net funded repositioning actions in the year. All of this funding came through operational performance and gains which provide even greater support of course for 2010 and 2011. EPS for the year was down 24% to our targeted $2.85 for the year. We generated, as Dave said, a record $3.3 billion in free cash flow or 155% of net income again another high quality year. Before I take you through the individual segments I want to remind you that in 2009 we also had a number of policy related actions that allowed us to reduce labor costs in these times while still being able to reserve our industrial base. These actions include furloughs, reduced work schedules, merit lower incentive compensation, and all of these favorably impact every businesses margin performance in the year depending on the shape of their end market conditions for ’09. For planning purposes you’ll recall from our December 16th guidance, we’ve built most of these costs back into 2010 as we believe they’re essential to maintaining the organizations momentum to achieve our long term growth strategy and also consistent with the outlook of the economic assumptions and market assumptions that we’ve used for our 2010 guidance. While this represents an approximately $500 million headwind that is those costs coming back in, in ’10 or approximately 160 basis points of margin we look to offset most of all that headwind, you’ll recall that from our December 16th EPS walk with incremental repositioning benefits as well as lower year over year repositioning expense in ’10 a total of approximately $400 million. With that background on the full year for 2009 let’s go through each of the segments starting with slide number six, Aerospace. Aero sales for the quarter were down 18% with segment profit down 20%, margins down 60 basis points, as I said, as lower volumes were partially offset by productivity improvement driven by cost savings initiatives and also the benefits from prior repositioning actions. Total commercial sales, that is the sum of the ATR, Air Transport Business, and BGA, Business and General Aviation were down 29% in the quarter with declines across both OE and after market. Commercial OE sales were down 39% with Air Transport and Regional sales up 12% on a reported basis however when you take into account the impact of the fourth quarter 2008 Boeing strike, sales would have been down 15% due to platform mix at Airbus and the timing of shipments to regional jet customers. Business Jet OE sales were down 76% as a result of the significant customer reschedule and cancellations and of deliveries that occurred in ’09. That number, as dramatic as it is, is consistent with our guidance and expectations for the quarter. Commercial after market sales were down 21% in total, although flight activity is improving with consecutive positive flight hour growth. We’re still seeing the declines year over year in the ATR business. In fact, the after market sales in ATR were down 21% in the quarter we continue to see airlines aggressively manage their inventories, defer maintenance events and also cannibalize parked aircraft for stares. Given the continuation of airline de-stocking coupled with the variety number of parked aircraft, lower initial provisioning of spares when new planes are delivered the combination of these we anticipate the trend to continue in the first half of ’10 with only slight improvement in the second half. Again, that’s a scene that’s consistent with what we talked to you about in December. B&G after market sales were down 23% it’s a slight improvement over the third quarter, in line with the positive trend sequentially we’re seeing and improving business jet utilization rates as well as our measurement of TFE or Turbo Fan Engine hours and maintenance reflecting stability at these new lower levels. For Defense and Space in Aero sales were flat for the year with higher sales of government services and original equipment for military platforms, partially offset by lower sales of commercial helicopter systems. Sales were down for D&S 4% in the quarter mainly driven by the expected ramp down of tank utilization as the focus shifts obviously to Afghanistan negatively impacting sales in the Tiger program. In addition, we saw some negative mix associated with T-55 engines on the Chinook helicopter and continued pressure on missile guidance systems, partially offset by growth in government services. On the other hand, the government services business was up 8% for the year and continues to provide logistic support services to military bases throughout the world and is very well positioned as we go forward. Overall for D&S we continue to expect stable to moderate growth for that segment of Aero in 2010. In summary, continued tough market conditions in the commercial Aerospace business, particularly in Business Jet OE where we’ll continue to see difficult comps in the first half of ’10 and also in large air transport after market. With that background on Aero let’s now turn to slide seven, ACS. Automation and Control Solutions for the year down 4% in 2009 for the quarter, down 12% organic excluding 5% positive currency and 3% acquisitions, with the biggest declines in the Americas and Europe, partially offset by growth in emerging regions. As Dave said, we saw good growth and nice performance in emerging regions in the fourth quarter and as we exited the year. Foreign exchange was a positive contributor for the first time this year for ACS, segment margins were also obviously a good story in the quarter up an impressive 130 basis points a 14.7% reflecting the impact of positive cost controls as well as the introduction of new products and the continued strong performance of ACS and its respective markets. While our products businesses were down 6% organically in the quarter there are pockets of stabilization emerging, namely in the industrial channel supported by increases in manufacturing production and the impact of favorably increased safety regulations. Sensing and control, scanning and mobility both saw good sequential growth building backlog and in winning new projects. For example, like the UPS order that you saw really in order to deploy nearly 100,000 mobile computers over the next few years replacing their entire worldwide fleet with Honeywell products. Our Life Safety and environmental combustion controls both down in the quarter are being impacted by softness in commercial construction, partially offset by new products focused on energy efficiency, home control and wireless fire and gas detection devices. Further, we’re also seeing a rapid rebound, as I mentioned, in China products. Sales were up 18% organically in the quarter. Our Solutions business in ACS, while down 6% organically continued to hold up well. Demand for energy efficiency as well as the integration of climate, fire and security controls for critical infrastructure continues to drive growth within building solutions. On the process solutions side service revenues continue to represent a solid base offsetting declines that we’re seeing related to spending delays in OpEx and CapEx primarily by US and European refiners. Orders in the fourth quarter in Solutions were flat organically driven by a number of large energy efficiency wins in the quarter, offset by order delays in process solutions, again particularly with US refiners. In the quarter, Building Solutions was awarded a $79 million renewable energy and building retrofit program with Eastern Illinois University in 2009. Energy orders for HBS totaled over $650 million reflecting a 45% increase over the prior year. Again, reflects the strength of our position with government and infrastructure projects both in the US and around the world. Our Service bank increased in both buildings and process solutions as we continue to benefit from our install base of over five million buildings and 10,000 industrial sights. ACS segment profit up 5% in the fourth quarter versus last year. We saw a 30 basis points increase in the margin to 14.7%, largely driven by productivity actions, also including a reduction in indirect spending and a favorable impact of prior period repositioning. It’s a great effort by ACS to continue to execute also in the quarter and for the full year on new product introductions, acquisition integrations, all of which contributed to their ability to hold segment profit dollars essentially flat on a 10% reduction in sales for the full year. Now let’s turn to Transportation Systems, slide number eight. For TS, sales were up 13% including the favorable 9% foreign currency benefit in the quarter, excluding the impact of foreign exchange sales were up 4% driven by volume increases primarily at Turbo. At Turbo we saw the rate of change dramatically improve from down 30% in the third quarter to up 22% in the fourth quarter with revenue up 18% sequentially gave sort of that snap back that you’re talking about. Reflecting share gains on a number of new platforms being launched in the fourth quarter, an increase of approximately 170,000 units for Turbo. We’re also seeing positive macro trends with an increase in European light vehicle production, a modest rebound in diesel penetration as well as a sharp recovery in commercial vehicle production in Asia. Honeywell, of course, is going to continue to benefit from our win rates on attractive new Turbo gas and diesel platforms in ’10. A good example of that is the recent launch on the Ford Eco Boost platforms for both the 3.5 liter as well as the upcoming 6.7 liter engines. In addition to the new platform wins we’ve had approximately $2 billion of new platform wins in 2009 and the favorable macro trends around energy efficiency and lower emissions give us confidence in the outlook for 2010 and of course for the long term prospects for this business. CPG within TS sales were down 2% reported but up slightly about 3% if you excluded the pass through impact of lower raw material pricing of ethylene glycol. As you know, EG is an influencer obviously on the top line of CPG performance. We continue to see a much improved business performance with CPG with double digit margins being delivered in 2009. Segment profit for TS was up $66 million in the quarter, taking segment margins to 7.4%. The high contribution margin obviously associated with the Turbo business being a key driver as well as the progress that the TS team has made on productivity and cost actions with fixed costs down approximately 15% in the fourth quarter. For the full year, sales for Transportation Systems were $3.4 billion down 27%. Segment margins were 4.6% down 420 basis points from prior year. Obviously that up tick in the fourth quarter is a good portender of things to come in TS. Specialty Materials, let’s go to slide number nine. As you can see, for the quarter, Specialty Materials grew segment profit 56% on a 5% decline in sales, expanding margins by 670 basis points to a record 17%. It’s a credit to the work that SM team has continued to do to aggressively manage costs but also invest in innovation and the renewed sales focus during the downturn. As expected, UOP sales were down in the quarter, they were actually down 13% due to continued deferrals of long cycle projects due to weakness in both CapEx spending and refining as well as petrochemical end markets. However, the backlog at UOP is stable, orders are improving, and we’re expecting modest growth as you’ll recall from our guidance that continues for 2010. Catalysts sales which were up 1% in the quarter benefited from the timing of catalysts reloads and as always it’ll always be variability quarter to quarter in catalysts shipments and the mix of licensing revenues in UOP which again will always be difficult to predict so a continued focus will always be on the full year guidance for this business. Resins & Chemicals were up 18% in the quarter benefiting from improved business conditions including demand for nylon in Asia which more than offset the impact of lower raw material price costs on pricing. In addition, we’re seeing sequential and year over year improvement in our electronic Materials business with many of our customers signaling improved conditions and inventory restocking actually occurring in that segment. Fluorine products, while down in the quarter, were starting to see end market stabilize. In addition to the significant operational improvement we’re seeing that business over the last two years we’ve continued to invest in a number of new environmentally friendly technologies that we’ll begin to commercialize over the next year and a half. As I mentioned earlier, the segment profit for SM was up to $175 million up $275 million in the quarter, margins were up 670 basis points to 17% on terrific cost controls including an 11% reduction in indirect spend in SM and also lower raw material costs. Despite lower volumes and the continued investment that SM makes for growth, again a very good quarter. Now let’s turn to slide 10 which gives us an update on our guidance for 2010. On the top of slide 10 we summarize the guidance that we shared with you last month and at the bottom of slide 10 we’ve outlined a few of the positive variances on the right and some of the less encouraging developments or variances on the left. These are just simply directional updates since our December 16th call. Overall we still expect to be in the range of our full year guidance that we communicated last month. Let me take you through some of the specifics, starting at the bottom of the page with pension. As you’ll recall from the December call our base case pension expense assumptions were for 12/31/09 plan return and discount rate of 20% and 5.5% respectively, yielding an expense for 2010 of $850 million. Actual returns came in at roughly 20% however we saw interest rates or discount rates improve slightly to 5.75%. This results in revised pension guidance for 2010 of approximately $820 million which includes an incremental $20 million of foreign plan expanse that we’ve factored in for 2010. Working our way down the remaining positive items on the right, the Turbo and ACS businesses continue to perform well as evidenced by their impressive margin improvement in the fourth quarter. New program launches, energy efficiency products and solutions, emerging market expansion, all of those continue to be positive contributors to both of these businesses and we’re increasingly confident in the full year outlook. We don’t have the same visibility at this time on the MARCO 524g Trust. Given it’s uncertainly we could see cash funding requirements slip into 2011 therefore having a positive impact on free cash flow for the year. On the left hand side, consistent with a tough performance we saw in Air Transport and Regional we anticipate that softness to continue through the first half of the year, further give the risk of continued program delays in Defense some things could shift to the right. Therefore we still expect a stable to modest D&S growth in 2010. Lastly, we’ll continue to monitor working capital performance in light of the very strong contribution that we saw from working capital in the quarter. There’s some individual puts and takes really more directional in nature at this time. Overall assumptions and the numbers that we’re continuing to provide as guidance are consistent with what we’ve communicated on December 16th. Before I take you through the first quarter outlook I’d like to just take a moment to review our repositioning and benefits assumptions to again remind you of those, that’s slide number 11. What we’ve shown you here is the repositioning for 2008-2010 in terms of total repositioning actions. Since ’08 we’ve funded over $600 million of gross repositioning together with our planning assumption of approximately $50 million of repositioning actions in ’10 we’re still anticipating significant incremental benefits in 2010. The actions were funded through operational performance and gains in the year which allowed us to fund census reductions of approximately 12,000. That said, emerging region census is flat so most of those reductions came out of our developed markets. As a reminder, these projects create a permanent reduction for us and stated another way, the costs are out, and they’re not coming back. The average payback for this repositioning is about a year and a half or 1.5 years. Therefore we’re anticipating over $300 million incremental savings associated with these actions. With that background in repositioning let’s go to slide 12 and do a first quarter preview. We’re planning for total sales in the first quarter to be in the range of $7.2 to $7.6 billion flat to down slightly from prior year on an organic growth decline of approximately 2%. We expect EPS to be in the range of $0.35 to $0.40 excluding pension EPS is forecast to be approximately flat to prior year, first quarter 2009. Given the progressively worsening conditions we saw early in ’09 we’re expecting comparison in the first half of ’10 to continue to be challenging year over year. While we’re seeing improvements in the overall rate of revenue decline and sequential stabilization the Air Transport and Regional after market, Business & General Aviation OE, and the long cycle commercial construction UOP will face continued year over year headwinds in the first half. On the other hand, Turbo chargers, ACS industrial products, and BGA after market are all positioned to grow off their low 2009 base. In addition, we’ll see incremental benefits from the repositioning actions that we funded in ’08 and ’09 those will layer in throughout the year. These benefits, in combination with easier second half year over year comp and stable end markets should drive a stronger half for Honeywell. When you look at the EPS guidance for the first quarter of $0.35 to $0.40 we’re on track to achieve about the same linearity that we saw last year, that is approximately a 40/60 split first half versus second half. We anticipate Aerospace sales to be in the range of $2.3 to $2.5 billion down 10% to 13% with continued softness in commercial Aerospace. Sales to Air Transport OE and BGA OE customers will continue to be down reflecting further sharp year over year declines at Business Jets due to reduced delivery schedules although the level of spend on our business troughed in the fourth quarter. The airlines after market we expect, as we’ve talked about, will continue to be weak, however, we anticipate current run rate levels to hold. Finally, for Aero we expect continued stability in Defense & Space. For ACS we expect sales in the first quarter to be in the range of $3.0 to $3.1 billion approximately flat to prior year, driven by the favorable impact of foreign exchange, the R&G acquisition and growth in both emerging region and energy efficiency in both products and building solutions, offset by some continued softness in commercial construction end market and the deferrals of long cycle projects due to the weakness in the refining segment in process solutions. At TS sales in the quarter are estimated to the in the range of $0.8 to $0.9 billion up double digits driven by new launches in Turbo and the favorable impact of foreign exchange. We expect CPG strong operational performance to continue in addition to similar benefits from productivity actions that we saw in 2009 across Transportation Systems. At SM for the quarter we anticipate sales in the range of $1.0 to $1.1 billion up slightly due to some inventory restocking and select end markets, commercialization of new products and channel recovery in key niche segments namely nylon and electronics, partially offset by lower catalysts shipments in UOP. In summary, we’re seeing some signs of improvement with stabilization across a number of our businesses and in line with our cautious outlook for the first quarter. Now let’s summarize before turning back to Q&A. As we said, as Dave stated in his opening comments, we’re clearly very pleased with the finish for 2009. Our performance underscores the organizations ability to respond to unprecedented economic headwinds and yet deliver on the financial commitments we set earlier in the year. We were able to reduce costs, hold margins, while sustaining growth investments. It reinforced that we’re a very different company today and one that is well positioned as the economy recovers. As usual, we employ reasonable judgment in our planning assumptions. Those of you who are familiar with it know that we take both a top down macro view of each of our end markets in our businesses and couple that with a detailed bottom up business review in the course of our planning process. While we’re certainly not immune to changes in the economy we’ve certainly proved our resilience. We’ll use that ability to weather the varying external conditions by remaining conservative in our top line assumptions while also preparing for economic recovery. Aerospace today of course is lean; customer focused, and has the stability of $5 billion plus defense business. ACS has attractive new products leveraged to the mega trends of energy efficiency and safety and security. Transportation is already seeing the positive impact of end of channel restocking as well as the share gains that it experienced winning a significant number of new platforms over the last few years. Lastly, Specialty Materials is a tough performer, much better positioned today to protect and grow its bottom line in various economic cycles. We have several levers in place that maintain our flexibility should economic conditions prove to be more positive or negative. Taking all of this into account we’re confident in our 2010 guidance. Lastly, we’re looking forward to our upcoming annual investor conference in New York City which will be held on Monday, February 22nd. You’re going to hear more from Dave about how we’re a different stronger company, with great positions in good industries, executing well on our five initiatives and the strength of One Honeywell culture. Our playbook for long term value creation that we intend to showcase our key growth drivers including our robust technology pipeline as well as expansion and growth in exciting and emerging markets. We’ll demonstrate how the results of these investments are showing up in technology wins, in share gains, in profitable growth, and fundamentally that our strategy is working and we’ll continue to deliver over the long term. With that Elena, let’s turn it over to you for Q&A.

We’ll take our first question.

(Operator Instructions) Your first question comes from Nigel Coe – Deutsche Bank Nigel Coe – Deutsche Bank: How do we interpret the 1Q guidance, if I look at the past you’ve typically done 20% of your earnings in the first quarter, I think the midpoint suggests 16% this time. Does it mean that you factored in a significant ramp up in the second half of the year and therefore a bit more risk the second half?

I wouldn’t interpret it that way. The quarter as we look at it in terms of layout for the full year is very consistent with the pattern of both recoveries that we’re seeing in certain businesses as well as I mentioned earlier the continued headwinds that we have in some of our other businesses, very, very much consistent with that. The other thing that really gives us confidence is the execution, the performance that we delivered in 2009 and the run rate, if you look sequentially in terms of the run rate performance of our businesses and our cost structure it really gives us I think additional confidence in 2010. I think the distribution in terms of that 40/60 is really its just a phenomenon related to what we experienced in ’09 which is playing out again this year which is differences between our short cycle and our later cycle businesses that’ll include that distribution.

On a percent of year basis too because I think its right in line.

It’s right in line. Another good point Dave just made is if you look at the EPS as a percent of full year its very, very much in line. Nigel Coe – Deutsche Bank: In the opening remarks it seems the ramp up is not a question of if but when. Is it fair to say that since the December call that maybe you’re more positive and you have a bit more confidence in the 2010 plan?

I would say going into any year we have a lot of confidence in our plan. Over the last eight years it worked seven times. Last year was the only time when we had confidence in our plan and got surprised by how bad things were. I would say I don’t expect this year to be a reprise of that I think we understand what’s going on now and I think we understand what recovery could look like. There are a lot of possibilities there but we are really going to make sure that we are prepared if things don’t recovery in a V shape. We’re also working to make sure we are prepared if it is V shaped because it’s tough to know, you can’t predict these things. I tend to believe generally steep in, steep out, slow in, slow out, I don’t think it’s an unreasonable way to look at it. We have some businesses that could snap back pretty quickly. Our biggest concern is making sure our supply base is prepared and that’s where we’re putting a lot of our attention. Overall I’d say I’d expect that on a macro basis that we’re planning thoughtfully and conservatively like we usually do and I expect this year will look more like the other seven then it did last year. Nigel Coe – Deutsche Bank: Defense & Space is always back end loaded, it sounds like from Dave Anderson’s remarks that it could be more so this year. Should we be preparing for a decline in the first half?

I think with Defense & Space what we saw obviously was a little bit of softness at the year end. Frankly from an overall standpoint not too much of a surprise. We think we take a prudent approach to D&S for 2010 with our stable to slightly up expectation. We would expect the first half to be flat to maybe up slightly to prior year. When you look at the two halves and the full year guidance there really isn’t too much difference.

Fourth quarter approach this year too.

Dave points out too there’s appropriations process a challenge for all of the industry in the fourth quarter 2010. That impacted us as well and that’ll continue to roll through and get sorted out over the course of 2010. I think flat to up slightly in the first half and flat to up slightly for the full year is a pretty good way to look at it.

Your next question comes from John Inch – Merrill Lynch John Inch – Merrill Lynch: The 40/60 split implies I think if you do $0.37 or $0.38 in the first quarter would imply a 45% ramp to get to $0.54 to $0.55 for the second quarter to get to the midpoint of your yearly guidance. My question actually is are you planning to front load a bunch of restructuring charges this year and if you could remind us what restructuring actions you are planning and how you see those playing out over the course of 2010?

I don’t think the ramp that you imply is actually required to get to the 40/60 so we can compare those numbers and math offline. In terms of repositioning, the repositioning guidance you’ll recall is in the range of about $50 million for 2010. Think of that as down $100 to $120 million from 2009 actual net repositioning. That will be part of, in terms of our math when you do the walk, that’s part of the positive contribution from repositioning in addition a $300 million in incremental benefit, operating income benefits, actions that we took in ’08 and ’09 that we’re still executing on. We’ve got a very, very full plate as Dave’s comment would suggest. In addition to those benefits also on a year over year basis the operating income benefits assumed in our guidance of lower spend in ’10 compared to ’09. John Inch – Merrill Lynch: If you take $2.30 as your guide for the year, 40% of that is $0.92 so if you back $0.375 from $0.92 that leaves you $0.55 for Q2 which is a 45% ramp. I want to ask you on your cash flow, why was you payables such a large number. Maybe just a little color around the payable and the cash and obviously if you expect that to be sustained.

We saw real lumpiness in the payables over the course of the year. Frankly it’s consistent with what we saw also towards the end of 2008 with the variability and the decline in revenues and our inventory reductions as well as the reduction in indirect spend and also CapEx. All of those contributed in the first part of the year to a significant decline in payables and therefore payables is actually a use of cash in the beginning of the year. What we saw is normalization patterns in terms of inventory levels again, indirect spend stabilizing at a much, much reduced level as well as CapEx all of which contributed interestingly enough to a rebound of payables in the fourth quarter. That variability or lumpiness in payables is something that’s really a reflection of the dynamics of the translating the economic environment back to Honeywell specifics in terms of operational actions that we took. There could be some influence or impact of that into the first quarter and the first half of 2010 thus the reference that we made when I went through the update on the guidance side, I think it was slide number 10 when I went through the reference for the 2010 cash flow what I referenced was the 2009 working capital performance at year end on one side a headwind in terms of an influencer and on the right side the uncertainty in terms of the timing of funding the MARCO 524g Trust on the other side. I think we’re balanced in terms of full year when we look at our $2.4 to $2.7 billion free cash flow guidance for ’10 but its obviously in the first part of the year will be influenced by any overhand of that very positive delivery of working capital in the fourth quarter.

Just in case your question was just a tangential way of asking if we made our cash flow by withholding payments to suppliers at the of the year, the answer is no. That’s one of the things that we steadfastly prohibit across the company as we work with our suppliers, we get the terms that we agree to, and we pay on the same schedule every month. The answer is no and we’re almost religious about making sure we don’t deviate from that. John Inch – Merrill Lynch: That wasn’t my angle, I was more interested in does this somehow reverse and create a headwind near term. Did you guys change your flight hour assumptions for the year? Perhaps remind us how you see flight hours playing out and how that dovetails into your after market business.

We still see flight hours positive, if fact we’ve seen positive trends in Air Transport global flight hours for the last three to four months. We’ve actually seen, also a very good point a ramp up in cargo. Think of the full year assumption of somewhere in the 2.5 to 3.5 up growth in global flying hours. What we’ve got is this disconnect between utilization measured in flight hours which historically has been a very good indicator of our after market business, commercial ATR after market business. We’ve got a disconnect now due to the “de-stocking” phenomenon driven by deferred maintenance given by cannibalization of spares and also driven by obviously the initial provisioning, the reduction in spares purchases as initial provisioning on new equipment on OE orders which we include that initial provisioning as part of our after market calculation in terms of how we capture after market.

Its one of the areas that concerns me the most on the snap back because the reduction to inventory, the cannibalization of planes has to have been significant. It’s the area that concerns me the most. John Inch – Merrill Lynch: You’re not assuming any kind of re-stock by the airlines to any degree this year are you as part of your guidance?

No, not even close. John Inch – Merrill Lynch: That’s theoretically some up side.

Yes.

Your next question comes from Scott Davis – Morgan Stanley Scott Davis – Morgan Stanley: I’m a little baffled too with the 1Q guidance and just to support John and Nigel their math is correct. You haven’t had a quarter where you’ve put 16% of the full year number up ever, as far as we have in our models. Is there something that you’re seeing in January in the numbers that lead you to be this conservative? We’re already a third through the quarter and that’s a pretty abysmal guidance number.

I think part of the confusion is that we’re talking about ex-pension when we think about that distribution of those numbers. When we look at the numbers on an ex-pension basis on a percent change you just don’t get to that kind of ramp up on a quarterly basis, that’s part of the challenge. It’s more in the neighborhood of about 17% to 18% change when you look at it on that basis. Scott Davis – Morgan Stanley: To answer my question, are you seeing anything in January that would lead you to be this conservative? I’m not going to fault you for being conservative there’s a lot of uncertainty out in the world right now. We are a third into the quarter and if you’ve seen a weak January I can understand the guide, if you haven’t then it gets to be pretty challenging.

We haven’t. Everything looks consistent with the linearity that we developed earlier and the guidance is consistent with that.

We think the linearity actually makes a lot of sense, ex-pension. Maybe it’s something that you guys will have to look at offline together. We actually think it’s quite supportive of what we’ve said. Scott Davis – Morgan Stanley: Can you guys talk about your book to bill? As you exited the year is there some sort of overall book to bill that you think about that calculate or by segment?

I think the best way to look at that is in the aggregate in terms of the backlog for our long cycle businesses. If you look at the backlog at 12/31/08 compared to the backlog at 12/31/09 the numbers are essentially the same its in the $11 billion range down a little bit I think down maybe around 2% in 2009 year end compared to 2008. The mix is a lot different as you would expect. You’ve got business jet OE way down obviously but you’ve got the build up as we talked about earlier in building solutions and energy efficiency and a number of other areas within the business. Overall the backlog, when you view the backlog as an indicator of health for total Honeywell, how we’re performing in this environment I’d say that that’s a positive indicator as we go into 2010. Scott Davis – Morgan Stanley: Does that mean book to bill greater than one as we enter 2010?

It varies so much by business. Book to bill is I think a difficult indicator just because the timing and the difference between when we book orders and when we actually bill across our various businesses. I tend to look more at the aggregate backlog as an overall indicator. When you look at book to bill you have to get down to very specific businesses.

Your next question comes from Shannon O'Callaghan – Barclays Capital Shannon O'Callaghan – Barclays Capital: I didn’t want to have to ask a pension question but you made me from all this discussion. To clarify on pension, is the pension expense in 2010, last year you had a curtailment gain, different things, is it lumpy through ’10 or is it linear? What’s your current thinking on ’11 obviously there’s a lot of variables?

Your question is, is pension lumpy through 2010? Shannon O'Callaghan – Barclays Capital: Yes.

It’s basically linear through the year. The one thing that always occurs with pension is the true up of the estimates on our foreign plans. That will influence it. Also anything that we may do in terms of restructuring actions where there is a defined benefit plan impact that we may have to recognize a curtailment or a windup or a partial windup in an individual quarter. You can get some lumpiness associated with true up of foreign plans expense and you can get some lumpiness when you think about the potential restructuring impacts, other than that really think about it as linear. Shannon O'Callaghan – Barclays Capital: It’s not higher in 1Q?

No. Shannon O'Callaghan – Barclays Capital: Based on where things shook out at the end of 2010 thinking on ’11 and ’12 big picture?

Tell me again. Shannon O'Callaghan – Barclays Capital: On ’11 and ’12 obviously discount rate swing has a big factor but based on the way you look at the plan what does it look like for ’11?

I would expect 2011 will be a headwind. Again, as you point out, so much of a function of your discount rate and your return on plan asset assumptions so there’s always swings there. Using our middle of the road existing rates and our assumed planned rate of return of about 9% on plan assets you could assume about another $200 million of pension expense in 2011 increase compared to 2010. 2012 the expectation is that will probably turn, in other words, we’ll probably go from headwind to slight tailwind. Depending upon assumptions then you basically get into potential significant ramp down of those numbers. Shannon O'Callaghan – Barclays Capital: That comment on ’11 assumes flat discount rate?

Yes. Shannon O'Callaghan – Barclays Capital: A 1% move would make up that $200 million.

That’s a good way to look at it.

The other point, I guess we’re forced to make though again is just a reminder that while the economics, if you look at our economics versus peers cash funding needs, level of under funding, that sort of thing its about the same versus all our peers. Our accounting is vastly different, it’s all non-cash but again we have a much more aggressive recognition of these non-cash losses. Shannon O'Callaghan – Barclays Capital: You mentioned that the real sequential improvement that you guys have shown in margin through the year when you then look at the exist rates you have in some of these businesses versus what you’re guiding to for 2010, ACS you’re guiding next year at 12.2% to 12.6%, SM is like 14.2% to 14.8%, far below 4Q run rates and really pretty modest even when you look at the annualized ’09 numbers. Can you remind us some of your thinking?

Clearly we saw in ACS a very strong finish to the year, you’ll recall as we talked about it their actions that ACS took in 2009, costs actions they took and other actions really drove that very, very strong performance. For 2010 the guidance we’ve given you is 12.2% to 12.6%, our expectation is that ACS is going to be able to perform at the higher end of that range. Hopefully we’ll see as that strength of the performance they’re going to continue to benefit from good performance on the cost side. Also as we mentioned, they’re seeing improvement in some of their short cycle businesses, industrial businesses for example in ACS. On the other hand they’re going to have headwind on non-res construction exposure and also probably on the process solutions side. I think it’s not unreasonable to think about ACS sustain to drive to the high end of that 2010 guidance that we’ve given you. Shannon O'Callaghan – Barclays Capital: SM too, UOP is supposed to up next year you’ve got a 17% exit rate. Dave Anderson : A lot of variability as we’ve talked about and as you know with UOP. We saw an improvement in catalysts shipments in the fourth quarter as we mentioned, we’re expecting overall mix to influence, and we communicated that to you. This mix between license equipment sales and catalyst sales for UOP is always a big influence in terms of their margin rate. We’ve assumed some unfavorable mix influence in terms of margins for UOP in 2010 and that floats through and influences our guidance that we’ve given you for total SM.

Your last question comes from Jeff Sprague – Citi Investment Research Jeff Sprague – Citi Investment Research: A little bit more on ACS, going back in my model even back to old Honeywell days 20 years ago I’ve never seen a 14.7% margin in ACS. In your opening pitch you gave a little bit of color but I’m wondering if you could elaborate a little bit more about what was going on with mix or price or restructuring realization in that quarter to drive that kind of number, and I guess a little bit to Shannon’s point then why don’t we get some, obviously we’ll get a seasonal drop as we progress into 2010 but why can’t we carry some of that strength over?

All the things that you mentioned are contributing to that and you saw them progressively getting better during the course of the year. They’ve been steadily working on everything over the last five or six years and everything is getting better, whether its their cost position, the positioning of their products, the growth in emerging markets, all of it really is coming together to generate that kind of performance. When we look at 2010, as Dave pointed out, we’re looking for this to be more towards the higher end of the range as we think they are going just a heck of a job. They’ll continue to invest, they still have to roll out or finish their ERP rollout but overall everything is working there.

For 2010 consistent with what we did in the overall Honeywell walk that ACS will experience what we call policy related labor headwinds, those are actions that we took in ’09 that will not repeat or certainly won’t repeat in full in 2010, we’ve assumed that for our planning guidance. That’s going to be a headwind for ACS but we expect that to be offset by benefits from prior period repositioning actions and other productivity. Basically, consistent with our guidance we would see that resulting in 2010 total year margins to be at the high end of that guidance range, as Dave said, flat with 2009. Jeff Sprague – Citi Investment Research: Perhaps a little more minor point but just curious on how to think about transportation and power. The year over year margins were great, sequentially you had a pretty nice revenue increase so almost $100 million, margins didn’t really improve sequentially. Anything to glean from that or what that means as we go into 2010?

For TS as we talked about, you’ve got really nice tailwind on the Turbo business driven not by the dynamics really of the European light vehicle market because we expect basically stable conditions in 2010, in other words, not growth so there isn’t a market driven headwind. There may be some positive associated with more favorable diesel penetration. The real story is around our new product launches really driving that top line. In terms of margin rate and conversion we would expect very nice performance improvement out of TS for 2010.

They’ve done a good job on their fixed costs.

They’ve done an excellent job on fixed costs. Jeff Sprague – Citi Investment Research: If I’m interpreting that so there’s maybe some initial launch cost but is there some maturation in those programs and platforms, the margins come up in those business separate and apart from just the normal leverage that you have on revenues?

There are always the new applications that you have to spend on. I’d say it’s really a simple case they’ve done a good job taking our fixed costs and we’re trying to be thoughtful on the volume side because who knows exactly what’s going to happen there. We think that the leverage in that business could be pretty darn good. Jeff Sprague – Citi Investment Research: Did you say your Business Jet OE volumes have already seen their low, you’ve already felt the full production downdraft, obviously you’ve got a couple more tough quarters, and you’re at your trough run rate now?

Yes.

Dave, any final comments?

If I go back to the beginning, when we first got here seven or eight years ago, we said at that time that we would be a strong performer and that we would demonstrate it in cash and earnings growth. As many of you may recall there were a lot of question marks at the time about whether we’d be able to do that. We delivered and as we started to get to the end of that recovery I think we had a lot of believers that we were a different company now and a performer. As the recession started to take hold or people started talking about those questions arose again but in a different way, along the lines of you crashed last time, lost money two years in a row, how can we believe that that’s not going to happen again. I think we were able to again prove decisively that we were not that same company. In a totally different environment, bad times, we were able to demonstrate that we were not that same company. We look at the last recession in the year 2000 we actually had about a 75% free cash flow conversion. In this recession we’ve got free cash flow conversion of around 150%, hugely different. Now we’re embarking or at the beginning of likely another recovery and what we’re going to say is we think that we have prepared well for it for all the same reasons that we were prepared for the recession, the reasons haven’t changed, its the seed planting to having great positions in good industries, the One Honeywell focus, our five initiatives, our strong acquisitions process, all those things that helped us in the previous good times, that helped us in the decline are also going to help us in the recovery. I guess it’s a long way of saying I think we’re a company you should bet on. What it comes is there are company you can trust out there, I think Honeywell is a pretty good bet for you.

Thank you for your participation today. I’ll be available all day for your questions.

That does conclude today’s conference. We appreciate everyone’s participation today.