Elena Doom - Vice President, Investor Relations Dave Cote - Chairman and CEO Dave Anderson - Senior Vice President and CFO

Steven Winoker – Sanford Bernstein Scott Davis – Morgan Stanley John Inch – Merrill Lynch Jeff Sprague – Vertical Research Nigel Coe – Deutsche Bank Peter Arment – Broadpoint Howard Rubel – Jefferies Chris Glynn – Oppenheimer & Co.

(Operator Instructions) Welcome to the Honeywell First Quarter 2010 Conference Call. At this time I would like to turn conference over to Ms. Elena Doom.

Welcome to Honeywell’s First Quarter 2010 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. Please note that elements of this presentation contain forward looking statements that are based on our best view of the world and of our businesses as we see them today. Those elements can change, and we would ask that you interpret them in that light. This morning we will review our financial results for the first quarter as well as our expectations for the second quarter and for the remainder of 2010 and of course allow time for your questions. With that I’ll turn the call over to Dave Cote.

We had a great start to 2010 with better than expected improvement in many of our end markets, yielding EPS higher than the guidance provided last month. Sales are $7.8 billion up 3% at the high end of our previously guided range, reflecting stabilization across our businesses, selected growth with new products, geographic expansion, and overall improving conditions. We generated earnings per share of $0.50 including covering a $0.02 charge related to the elimination of the Medicare Part D subsidy. And excluding pension expense on more of an apple to apples basis our earnings were up 21% in the quarter. Our segment margin rate was 13.3% up 170 basis points from prior year reflecting margin expansion in three out of four businesses. This really reinforces the quality of our earnings performance and continued strong cost controls, while maintaining our growth investments for the future. Further reflecting earnings quality we generated almost $700 million of free cash flow, up 190% from prior year, primarily driven by higher segment profit, working capital improvement and slightly lower capital spending. Given the strength of our first quarter financial performance and improving end market conditions, we are raising our full year guidance. We now expect earnings in the range of $2.30 to $2.45 a share and when you exclude pension expense that reflects a 4% to 9% increase in earnings over the prior year. We are also raising our free cash flow estimate to $2.8 to $3.1 billion for the year up from $2.4 to $2.7 billion. There is clear evidence things are getting better and end markets are stabilized. We’re seeing orders growth across all of our businesses. Our early cycle businesses where we saw the biggest hit are also seeing the biggest improvement, namely turbo, sensing and control, gas detection and safety products. That said, we are continuing to take steps in all of our businesses to ensure we and our suppliers are prepared for the recovery. The growth we’ve seen in our end markets is being supplemented by the results of our seed planting initiatives. Our investments and focus in emerging regions are really paying off. Sales in Asia/Pacific are up strongly reflecting good growth in China in Transportation and ACS but also growth in Japan and Korea. We continue to build on our platforms for growth as evidenced by the number and caliber of wins in our process solutions business in the quarter. HVS was selected to control boiler operations and helped drive a 50% increase in production capacity for Thailand’s first super critical power plant. We were also awarded a significant $5 million commitment to supply instrumentation to a Korean ship building for their entire fleet. And R&G secured a $5 million contract from a Chinese gas pipeline distribution company to provide regulators for gas pressure reduction stations. Also important to note, as you know we’ve been working to win a major role on the C919 the single aisle commercial airliner in China. The commercial aircraft corporation of China, Comac recently announced Honeywell selection to provide our enhanced 131-9 APU bringing significant growth potential with an estimated lifetime value of over $7 billion on a very important platform. New product introductions continue to make a difference. For example, ACS introduced approximately 115 new products in the quarter including the Honeywell Zephyr the industry’s most accurate air flow sensor for medical and industrial applications. ECC and Life Safety continue to have terrific up take on their recent new product launches including two new fixed gas detectors suited for the mid to high end industrial and oil and gas segments that are selling exceptionally well and are offering important new approvals and protocols in the industry. Also in the quarter our Fluorine products business launched a new Innovate Pro program which features a new energy efficient foam insulation and sealant. The program is specifically designed to help renovators and contractors offer a broader range of energy efficient solutions to home and building owners. We continue to invest in our big process initiatives as well as other seed planting across the organization; to Honeywell operating system, velocity product development and functional transformation continue to be huge enablers for growth and productivity this year. With 80% of our manufacturing cost base now within HOS deployment we are expecting an acceleration in broad sight this year which is where we really start seeing transformational results. While the organization is showing tremendous momentum it is important to add that we will not sacrifice our performance and sustainability standards just to hit a targeted deployment rate. Go slow to go fast is still our watch word here. Lastly, we’re committed to driving productivity enhancements across the organization and remain focused on flawlessly executing the repositioning projects that we’ve initiated. This focus on fixed costs remains a priority for us. In summary, a strong start to the year, a better than expected quarter demonstrating our ability to execute both commercially and operationally and invest in future growth. With that let me turn it over to Dave.

Let me start on slide four and walk you through the summary of financials for the first quarter. As Dave mentioned, as you can see, we’re clearly seeing signs of improvement reflected in the better than anticipated performance for the quarter. Reported sales were up 3% to $7.8 billion including the favorable impact of foreign exchange and better than anticipated growth in several of our key short cycle businesses. We had obviously strong operating leverage growing our segment profit by 18%, margins increased 170 basis points to 13.3%. We saw further good margin performance from ACS which was up 200 basis points in the quarter, impressive year over year gains in both TS and SM they were up 1,000 and 300 basis points respectively. It’s kind of interesting to say 1,000 basis point improvement. These gains were partially offset by lower margins in Aero which was down 120 basis points in the quarter on lower revenues. Of course we’ll go into the segments in some detail in just a moment. Net income in the quarter declined only 3%. EPS declined 7% including the unfavorable impact of higher non-cash pension expense in the quarter. When you exclude the pension expense impact from both 2009 and 2010 first quarter’s the earnings were up an impressive 21% year over year. There’s a couple things worth pointing out, first as Dave said we had $13 million after tax charge for healthcare legislation, think of that as approximately $0.02 of headwind in the quarter. We also had $40 million of net repositioning actions in the quarter and also finally $37 million of one time OPEB curtailment gain resulting from a planned amendment where we eliminated a retiree subsidy as part of a new collected bargaining agreement. Effectively the OPEB curtailment benefit the $37 million and the repositioning expense of 40 really offset and the healthcare charge lives through. Therefore relative to our initial guidance the $0.50 of EPS reported in the quarter reflects a clear V and a much stronger quarter than anticipated driven by better than expected operating performance. Free cash flow was also strong, $673 million of free cash flow representing approximately three times improvement over the cash we delivered in the first quarter 2009. Looking at free cash flow conversion, if we stripped out the impact of the non-cash pension expense on net income a high quality earnings story that equates to 127% conversion of net income, again reinforcing the core process we have in place and the focus on generating strong cash. With that summary let’s turn to slide five just to take a few minutes on the update on our key market assumptions for 2010. While a number of the assumptions are unchanged from our initial review and guidance back in December we thought it’d be helpful to spend a minute updating you on where we are on each of these. I’d like to just take a moment first of all on Aerospace. Here the assumptions for 2010 have not changed and we’re still anticipating flat to slightly down revenues in the total segment in 2010. Although clearly we continue to see improved indicators for recovery. Consistent with that, orders are up in Aero strongly in the first quarter off the extremely low 2009 levels. BGA in Aero is seeing up tick in mechanical spares orders as well as a rebound in long cycle orders. While down slightly in the quarter the ATR spares order is showing sequential improvement. As we’ve said before we’re not counting on much recovery in ATR after market in ’10 which is reflected in our outlook for the full year. Moving down the chart and I’ll cover obviously Aero in more depth in a moment when we get to their operating results for the quarter and their outlook. Moving down the chart, turning to ACS and looking at the retrofit activity, as you know, the residential, commercial, and institutional infrastructure vertical account for most of the non-industrial business about two thirds of ACS. That remains a bright spot reflecting the continued growth in energy and regulation driven retrofit and good penetration of new products. As you can see, we’ve given a green arrow for that one. Looking just down to the industrial piece of ACS business, following down the chart, looking at the industrial ACS business in developed regions, which account for about 15% to 20% of the ACS portfolio we’re seeing clear signs of improvement in many of these short cycle businesses including testing and control, industrial gas detectors, industrial safety products. Industrial production rates are ramping up in every region of the world and we’re benefiting from that. While it’s still early, we’re encouraged by improving order rates. For example, just to give you some color, S&C orders were up 46% in the first quarter on a constant currency basis. On the process industrial side we’re not seeing conditions get marketably better or worse, industry capacity utilization remains below historic averages restraining capital investment, however we are expecting US capacity utilization to make gradual improvement throughout the year. We continue to see positives on the emerging markets which have been less impacted by the construction turmoil obviously in credit market issues. The consensus of industrial production growth in China and India continues to improve at 15.5% up and 11.6% up respectively. These trends are showing up in our order rates where we’re poised to deliver strong growth rates across ACS. I’ll share a little bit of that with you when we get into the ACS review in just a moment. Now looking at turbo the first half macro indicators look great for the business. We’re seeing better than expected European light vehicle production it’s up dramatically in the first half. However, the industry is expecting European production to increase only about 4% for the full year. Global production rates while looking good are the US and emerging regions production rates continue to be revised upward reflecting improved demands, so a nice green arrow there for Turbo. As you know, another indictor we track for Europe is European diesel penetration. First, as our previous estimates for ’10 we’re now expecting diesel to regain about two points, two full percentage points over the reduced 2009 levels. Of course, very importantly, in addition to the macros, turbo continues to benefit from a significant number of new platform launches during the year which will be well over 100. Finally on the chart, for UOP we continue to see good demand for products. UOP products and technologies across refining, petrochemical and natural gas markets and while US capacity rationalization in some of those markets is still in progress we should continue new investments in emerging regions. With that summary of key market assumptions let’s go to the first of the segments, Aero on slide number six. You can see here that Aero sales were down in the quarter about 9% reflecting improvement in the rate of change over the fourth quarter which was down 18% and importantly the sales of $2.5 billion reflect the high end of our first quarter guidance range that we said back in January. Segment profit for Aero declined 15%, margins were down 120 basis points, where lower sales volume really was the key driver of that, partially offset by volume related trail and labor cost reductions and also the benefits from prior repositioning actions. A little bit of color in terms of the sales performance by segment within Aero. Total commercial sales, that is the sum of ATR and Business Aviation, Air Transport and Business Aviation were down 17% in the quarter primarily driven by lower sales to OE with declines across both the ATR and BGA segments. Commercial OE sales were down 34% however it reflects stabilization from our fourth quarter levels. Air Transport & Region were down about 16% due to declining shipments mostly in the regional jet customers. Business OE sales were down 59% following the significant customer reschedules and delivery cancellations that occurred in 2009. However, it was an increase for BGA OE on a sequential basis. We expect to see continued sequential improvement in the Business Aviation OE segment throughout the year. Turning to the commercial aftermarket, commercial after market sales for Aero were down 3% in the quarter although also reflecting stabilization from fourth quarter levels. On the Air Transport and Regional side of the aftermarket those sales were down 4% but were flat on a sequential basis driven by lower spares as a result of higher parked aircraft and customer inventory initiatives despite a 4% increase in flying hours. Again we expect global flying hours to continue to improve this year, however, we don’t expect our after market sales to fully re-couple in line with utilization rates for flying hours until later this year. On the Business Aviation side, the Business Aviation after market sales were up 1% year over year reflecting higher mechanical sales in the quarter, driven by improving business jet utilization rate, offset by lower engine maintenance events. Looking at D&S, the Defense business within Aero, sales were flat in the quarter however up 2% when you exclude our commercial helicopter business which resides from a reporting standpoint within the Defense reporting structure. Growth in Defense is being driven in both US and foreign military OE sales including continued demand for T55 engines to power the Chinook heavy life helicopter which continues to see stronger sales and deployment around the world. In addition, we saw good growth in our government services business as we continue to provide logistics euphoric services to the military throughout the world. In summary, standing back from Aero, we’re seeing signs of stabilization in Aero in the commercial after market business, we’re seeing improving conditions in Business Jet and we continue to see good solid performance out of defense and space. The Aero team is executing well across all the businesses continuing to win attractive new business, as Dave said, including the impressive APU win on the Comac C919. Let’s go now to ACS, slide number seven. Reported sales for ACS were up 4% in the quarter down 1% if you exclude the benefit of foreign exchange. The biggest increases that we saw for ACS in the quarter were in Asia which was up 12% on a constant currency basis, partially offset by slower growth in the Americas and continued weakness in European markets. Segment margins were obviously a terrific story in the quarter for ACS up an impressive 200 basis points to 12.4% reflecting impact of continued cost controls that benefit from prior period repositioning actions as well as new product introductions. On the product side of ACS sales were up 5% in the quarter showing very good organic growth since the downturn began. We saw continued growth in Asia/Pacific with sales up 32% on a constant currency basis, strong growth in China up 42% in the quarter. There are clearly strong pockets of early cycle improvement most in the industrial channels as well as in the emerging regions supported by increases in manufacturing production and the favorable impact of increased safety regulations. As I said earlier, testing and control was very strong also scanning and mobility those were both up approximately 15% on a constant currency basis in the quarter. We also had good year over year growth in gas detection and personal protection equipment which were both up mid single digits. Environmental combustion controls ECC was also up in the quarter with good penetration of new product launches. On the Solutions business side the Solutions business were up 2% driven by favorable foreign exchange, growth in energy efficiency product and building solutions and also the favorable impact of the R&G acquisition in Process Solutions, partially offset by continued softness in refining projects globally. In the quarter, Solutions saw an impressive ramp up in orders, 8% up on a constant currency basis. Orders and process solutions came up sharply rebounded very well up approximately 20% reflecting clearly a snap back in demand for our latest field instrument in Solutions. Field instrument in Solutions had a terrific quarter. ACS segment profit as we said was up 24% in the quarter versus last year reflecting strong operating leverage, representing 200 basis point increase in margins to 12.4% due to indirect cost savings initiatives as well as the benefit of prior period repositioning. Another very good performance by the ACS team who continues to execute on commercial excellence initiatives, deliver a robust new product pipeline and continue to expand and perform in emerging regions and internationally. Let’s go now to slide eight and Transportation Systems. TS sales were up an impressive 33% in the quarter including 7% foreign exchange impact. Segment margins increased a full 10 points to 9.6%. By the way, when I report now and discuss Turbo with combined friction in turbo in terms of our consolidated data that we are reporting for that segment on a go forward basis. On a combined basis Turbo so further improvement in the right of change up 45% in the first quarter reflecting robust new product platform launches as well as the favorable macro trends that I referenced earlier. We saw continued sharp rebounds in passenger and commercial vehicle production in Europe as well as in Asia particularly in China and Korea. Europe diesel penetration, as I said, is also better than expected in the quarter it was up to 52% recovering almost all of the sharp decline that we experienced in 2009. We expect to continue to benefit from our high win rates on attractive new gas and diesel platforms and also increase production schedules in the second quarter. It’s important to note, however, that the industry’s forecasting, as I mentioned earlier, a slowdown in light vehicle production rates in Europe in the second half of this year, reflecting the full effect of higher government incentive programs, the scappage programs you recall from last year, and also assuming that sales and production rates are in full alignment. For CPG sales were up 6% reported including FX improvements in sales across each of our major brands within CPG and the passer impact of higher ethylene glycol pricing, all of which contributed to another good quarter for CPG including double digit margin performance. Overall for TS, again segment profit up $100 million in the quarter, taking their margins to 9.6% due to increased productivity, strong volume recovery in Turbo and of course the benefits from prior period restructuring. Let’s now look at SM on slide nine, Specialty Materials. Specialty Materials experienced a really good first quarter performance, sales up 8%, segment profit up 36% taking margins to 14.9%. It’s really a testament to the work Andreas and his team have done to drive both commercial and operational execution. As expected, sales at UOP were down 15% due to declining catalyst volumes. The projects business while still down in the quarter due to the timing of project launches in both the petrochemical and refining industries did show sequential improvement. Long cycle orders are improving in UOP and we’re expecting modest growth from the business in 2010. Catalyst sales which were down 26% in the quarter were favorably impacted by the timing of initial Parex catalyst load last year and as always there’ll be variability quarter to quarter in the catalyst shipment and the mix of licensing revenue in UOP which of course is difficult to predict. The Resins and Chemicals business of Specialty Materials was up 34% in the quarter benefiting from improved business conditions, demand for nylon in Asia and the favorable impact of higher pass through raw material pricing. In addition, we’re seeing significant sequential and year over year improvement in our electronic materials businesses which were up 60%, fluorine products which was up 20% in the quarter reflecting improved end market demand, again commercial effectiveness and further penetration with new products. In addition to the significant operational improvement we’ve seen in these businesses over the last two years, we continue to invest in a number of new environmentally friendly technologies that will begin to commercialize over the next year and half. Segment profit for SM was up $170 million in the quarter again margins up 300 basis points to 14.9% reflecting a higher sales volume, strong plant performance and continued cost discipline despite higher raw materials and lower UOP catalyst sales, it’s really impressive performance for Specialty Materials. Let’s now go to a preview, given that summary review of each of the segments, let’s go to slide 10 in our preview of the second quarter, the outlook for the second quarter. We’re planning, as you can see on the slide, for total sales in the second quarter as you can see in the take away in the bottom to be in the range of $7.8 to $8.1 billion that’s up 3% to 7% from prior year, reflecting good organic growth in fact positive organic growth in three of the four SBGs I’ll cover those highlights above, the SBG highlights in just a moment. We expect EPS to be in the range of $0.53 to $0.57 excluding pension EPS is forecast to be up 14% to 20% in the second quarter, clearly we’re looking at a continued strong momentum that we were showing in the first quarter continuing into the second quarter. Our first half is shaping up, obviously to be strong due to excellent cost controls, the repositioning benefits, the productivity both in materials and labor that we’re driving, as well as some small favorability from foreign exchange. Of course that’s a little bit of wild card at this stage but we feel we’ve appropriately balanced that in terms of our forecast and our outlook. We expect to continue to perform operationally in the second half and our EPS linearity is now back in line with pre-downturn historical levels. Think of that 45% first half up roughly 55% second half. However, we think that its important to point out that we’re facing tougher second half comps due mainly to the impact of labor inflation in foreign exchange, as you’ll recall the difficult actions that we undertook in the form of reduced work schedules and lower incentive compensation in 2009 that were heavily weighted for the back half of last year. In addition, we continue to be cautious on the revenue outlook for the second half of the year. We think it’s still too soon to assume the early cycle up tick from the first quarter will continue at the same pace for the remainder of the year. On the other hand, we’re generating obviously very good repositioning in benefit and productivity savings that will continue in the second half. For the second quarter, just the highlights, with that background and perspective the highlights then on each of the segments quickly. Aerospace sales we expect to be in the quarter, second quarter in the range of $2.5 to $2.6 billion still down on a year over year basis however flat to up slightly on a sequential basis, reflecting modest improvement in the current commercial activity. For ACS we expect sales in the range of $3.2 to $3.3 billion up approximately 6% to 10% over the prior year reflecting further short cycle general industrial improvement, new products penetration, the R&G acquisition, continued growth obviously in emerging regions, and of course strength and energy efficiency. For Transportation Systems, we see sales in the range of $900 million to $1 billion up strong double digits driven by continued growth in vehicle production and new launches in Turbo. Finally, in Specialty Materials we anticipate sales in the range of $1.1 to $1.2 billion up 5% to 14% primarily due to continued improvement in key end markets, the commercialization of new products favorably impact formula based pricing in resins and chemicals. UOP of course we expect continue to be stable delivering on project commitments and key catalyst loads for the quarter. In summary, we believe we’re set up for another nice quarter in the second quarter of this year. Let’s go now to slide 11, the 2010 financial guidance summary. On the top of slide 11 you can see that we’ve summarized the latest guidance and what’s changed since February denoted in the green arrows to the far left and at the bottom of the slide we’ve outlined a few of the positive levers on the right and some of the headwinds on the left that define the upper and lower end of our ranges. Let’s walk through some of the specifics. Starting with total sales and segment margins for Honeywell, we now see sales in the range of $31.5 to $32.3 billion for the year up slightly from our original guidance. Importantly, segment margin we expect to be in the range of 13.6% to 13.9% compared to our original estimate of 13.3% to 13.8%. Looking at the businesses we’ve reflected the better than anticipated first quarter performance and expected strong quarter performance into the outlook for both ACS and Transportation System, both their sales their segment margins. These are now estimated above the high end of their previously guided ranges. At this time we see no change to the Aerospace guidance that’s consistent with remarks I made earlier and it’s consistent with what we discussed in February. Specialty materials is on track as well against our February and our previous December guidance. That takes us to our revised EPS range for the year to $2.30 to $2.45 per share on a reported basis, $3.07 to $3.22 per share if you excluded the non-cash pension expense up 4% to 9% over 2009. Again what this reflects is a $0.10 increase on the low end of our guidance and a $0.05 increase on the high end again it’s really indicative of what we’re seeing in our businesses in the first half of the year. We’re also increasing, as Dave said, our free cash flow guidance for the year to $2.8 to $3.1 billion from the previous $2.4 to $2.7 billion. It reflects our higher earnings outlook as well as the positive impact of deferring a portion of the cash funding requirements for the NARCO524G trust and we’re assuming a split 50/50 in that funding between 2010 and 2011. Moving to the left side, on the bottom looking at some of the indicators and some of the factors that can influence the outcome in terms of range. Obviously a slower Aerospace recovery than we’ve assumed, that is muted by Aero and volume behavior and increases in parked aircraft, could put pressure on the Aero guidance range for the year. Further, the risk of supplier constraints and European travel disruptions could delay the potential for recovery in Aero. We’ll continue to monitor, of course, raw material prices and foreign exchange fluctuations in light of rising commodity prices as well as the strengthening dollar. We think we’re well covered relative to our major raw material exposures through both firm fixed price supply agreements as well as formula based pricing agreements with our customers. Also, our $1.35 Euro rate assumption seems at least reasonable at this time. Lastly on the right hand side, larger production and volume increases in the second half, along with further new product launches and emerging regions strength will continue to be positive contributor. Of course another lever of course is the additional indirect cost improvement and repositioning savings that could lead to higher end of our range. With that perspective on the updated and increased guidance let’s now just go to the last slide just for a few summary points before turning it back over to Elena for Q&A. Clearly we had a strong start, we’ve had a strong start to the year with the first quarter performance ahead of expectations, we saw notable rates of improvement as we said in revenue and transportation systems, in specialty materials, and in the ACS short cycle businesses. There’s clear evidence these are getting better and our sales conversion and our margin performance in the quarter have reinforced the significant structural cost take out that we’ve made and the strength of the productivity programs and volume leverage that we’re capable of delivering. We think it also demonstrates that we’re well positioned to capture opportunities in this early cycle recovery while continuing to win exciting new orders, grow in emerging regions and build on our backlog for long term growth. The second quarter and back half are shaping up nicely for good organic growth with continued short cycle improvement in a number of our end markets. The businesses are executing well, they’re poised to deliver strong operating leverage and margin performance throughout the year. Aerospace clearly very customer focused getting big new wins and growing share. While recovery timing is still uncertain we’re encouraged by the improving short and long cycle order trends in the business. ACS has attractive new products; it’s clearly leveraging its early cycle general industrial exposure as well as the longer cycle mega-trend of energy efficiency, safety and security. Transportation is already seeing a sharp up tick from the end of de-stocking as well as the benefit of share gains from winning a significant number of new platforms over the last few years. They will continue to benefit from favorable macro trend such as energy efficiency. Lastly, Specialty Materials is producing terrific results and is much better positioned today to protect and grow its bottom line in various economic cycles. The take away really is that we’re confident in our revised outlook for the year, taking into account all of the puts and the takes. As always we have levers in place to remain flexible should economic conditions prove more positive or negative. With that, Elena I’ll turn it over to you then for Q&A.

Can you please open the line for our first question?

(Operator Instructions) Your first question comes from Steven Winoker – Sanford Bernstein Steven Winoker – Sanford Bernstein: Glad to see the revised outlook and the confidence in the businesses. One thing I’m trying to understand is around the organic growth that you actually achieved this quarter. I think normally I get to see that. Can you break out for us by business unit the organic versus the quizitive part of the top line growth?

When you look at the organic growth for first quarter, Aero was down, this is on a foreign currency adjusted basis, and I don’t have the M&A data right in front of me but they’re pretty close, I’ll give you the approximates in terms of what that looks like. Foreign currency adjusted we were 9% in Aero, down 1.5% in ACS, up 26% in TS and up 7% in SM. We had very, very modest M&A impact in the quarter, very modest, I think it’s almost close to zero in terms of any M&A impact. Think about those as full organic numbers that I’m giving you. Steven Winoker – Sanford Bernstein: As you look at the M&A pipeline and think about how that plays into your capital allocation strategy given the environment we’ve heard also on a number of other calls. How are you thinking about that for the balance of 2010?

The M&A pipeline is pretty rich. I think what we’re seeing here in terms of the early indications not only a general economic recovery but clear opportunities in the M&A arena. I think it’s an exciting time.

I would add to that, as you know we’re very disciplined in what it is we’re willing to pay for things and following our acquisition process including integration after a year later and we’re not going to forget any of that. Steven Winoker – Sanford Bernstein: On restructuring CapEx, the $40 million of restructuring that was a bit higher than I was thinking you guys were starting to tail off a little bit on that. How are you thinking about that going forward and the timing of the benefits?

The repositioning was a little higher than we had originally guided. Obviously we had stronger than anticipated operating performance in the quarter, we also had favorability as I mentioned on the OPEB curtailment gain in the quarter. The other thing we saw is we saw another window of opportunity just to continue to improve our cost base and the upside in terms of volume leverage. Most of what we did in the quarter, which is consistent with our past repositioning actions, are going to result in average paybacks in the one cash paybacks and the one to two year timeframe. Very attractive in terms of operating income, there’ll be a little bit of lift from what we’ve done in the first quarter in the back half of this year not significant. It will benefit us in terms of 2011 and it’ll become meaningful again in 2012 incrementally. As part of that continuous improvement. I would say the guidance in terms of the full year, originally we guided to around $50 million of repositioning, we’d say now that’s around $50 to $100 million.

We’ve always said to the extent we had unusual or one time gains we would deploy them in a way that made the company better in the future. I’d say any company of our size, whoever says they’re completely done making it better I think they’re kind of missing the mark. We’re always going to see opportunity and we’re always going to look for ways to deploy those one time gains. Steven Winoker – Sanford Bernstein: On CapEx, the $70 million seems lower than I would have expected. Was there anything unusual there?

No, it’s really timing related. Think of it as our guidance for the full year remains in tact.

Your next question comes from Scott Davis – Morgan Stanley Scott Davis – Morgan Stanley: One of the things that happened this time in the last cycle is we started to get some FAA mandates for safety. I think it’s been quite some time since we’ve heard anything out of those guys. I know you generally tend to make a pretty good margin on those types of mandates. Is there any visibility on what is coming next or was that just once and done in the last cycle and not much here.

Visibility of course is always tougher there and I would never characterize it as that’s where we always make good margin because it depends on the product, how well we’ve deployed it, how technically advanced it is, a lot of considerations that go into it. There is some stuff that we think should be done and we actively work with them on resolving some of those issues and with the NTSB. It’s not always the fastest moving organization so we’ll continue working with them to try to get some of these things deployed. Scott Davis – Morgan Stanley: On UOP visibility, is there such a thing as keeping track of the potential for pent up demand on reloads, an average age of catalyst or any type of indicator that you guys keep that gives us an indication of when that business could return?

The business certainly tracks it to very low level by plant, by customer, approach in terms of that opportunity and pursues it from a marketing standpoint whether they’re the incumbent, supplier, or not. That’s something that represents an opportunity going forward. I think we’ve guided, we’ve appropriately conservatively for the first half of this year in terms of UOP catalyst reloads that they’re clearly either pent up, if you will, demand and opportunity. As you recall, we saw that phenomenon really as we saw the downturn in the global economy in oil prices and in refining margins. It’s there, we’re forecasting we think appropriately conservatively but clearly represents opportunity going forward, a little difficult to predict when it will be exactly right now.

It’ll probably develop differently by region of the world. In the US you could expect continued delay and it’ll stay pent up for a little longer. Outside the US, emerging regions, I think you’re going to see it happen there faster. Scott Davis – Morgan Stanley: On the C919 nice win with the APU. Does it mean you’re still in the running for the avionics or does the Chinese government want to split around the business to a wider variety of suppliers?

Both are true. They do want to get an international global flavor to the plane but by the same token there are still avionics and other mechanical systems outstanding that we are in the running for.

Your next question comes from John Inch – Merrill Lynch John Inch – Merrill Lynch: You have identified the supply chain as one of the top issues to track and manage for execution. Given what you’re seeing, what’s going on there? Are you still facing any kind of scarcity issues for say the electronic components or other things and how are you managing giving what’s obviously an early phase of an economic recovery?

You’re right on electronic components, there has been a scarcity there and the whole industry is working that one. Beyond that we’re just trying to get ahead in every business and it’s interesting when you look back at prior recoveries it’s often times suppliers who create an issue so it’s not like it’s a big surprise. We’re going to start working; we’ve already started working with those guys to start to sort some of this out. I think it’ll probably show up the most in Aerospace and that’s where we’ve been actually assigning people full time to just start working on this. John Inch – Merrill Lynch: Were any aspects of your revenue or results this quarter held back because of supply chain scarcity?

No, not really, not yet. John Inch – Merrill Lynch: What about airline de-stocking? I see the guide with respect to Aerospace, what’s your sense of channel de-stocking in that? Are we are a bottom and you’re waiting for an up tick? I’m curious, maybe this is a question for Dave Anderson, and how do you get comfortable with the timing of perspective after market rebound later in the second half. How do you look at the world and frame that timing?

It is accurate to say that the de-stocking has effectively run its course. We’re seeing now sequential stabilization in terms of the actual after market revenues, although it’s obviously not in line with the growth in flight hours or utilization as we talked about. We’re looking at modest sequential improvement in the second quarter so and usually on a seasonal basis we would actually see lesser volume in the second quarter compared to the first quarter in terms of our air transport after market, I’m speaking strictly now air transport. We see and anticipate a closer alignment, not full alignment but closer alignment in the second half of the year. Obviously some of the events, the volcanic ash, other issues TBD, frankly I think we’re still on path for slight improvement in the second half but we don’t anticipate and our guidance does not assume a full connectivity, linear relationship between utilization and after market demand or after market revenues until the very end of this year. We continue to remain cautious in terms of that variable and its impact in our outlook. That’s a good question in terms of what we’ve assumed and what’s inherent in our guidance. John Inch – Merrill Lynch: The timing of year end is that based on historical lag when during prior down cycle airlines de-stocked and then there was a two quarter phenomenon waiting for this?

That’s one of the items, studying historical recoveries and looking at those recoveries. Frankly they can become relatively rapid when they do begin to occur, when you chart the prior experience. We haven’t assumed that for this year but we have assumed what you would say coming out of a downturn and a fairly dramatic re-stocking stabilization and then a return close to, as I said, but not quite linear relationship between utilization and demand. What it really sets up for us is hopefully some potential upside for this year and clearly sets up a very attractive, in terms of comparison, 2011. John Inch – Merrill Lynch: Lastly, with Turbo accelerating do you guys have; I know you had taken restructuring in Turbo. How are you feeling about capacity and the ability to meet what could be a meaningful production ramp or required production ramp that could frankly go on for quite a while?

From your lips. We’re fully prepared, ready to go.

Your next question comes from Jeff Sprague – Vertical Research Jeff Sprague – Vertical Research: Another one real quick on C919, what is the remaining ship set value that you see yourself in play for, competitively whether you end up with it or not?

Ship set value isn’t as relevant for how we look at depth because some of the stuff that you look at has value over 20 years, some has value over five, think of it that way. Those aren’t exactly right but it’ll be however long the production run is. The real way to look at this stuff is lifetime. Lifetime we’re still involved in another $6 to $8 billion. Jeff Sprague – Vertical Research: APU was worth what; you said at the beginning, I missed it.

$7 plus billion. Jeff Sprague – Vertical Research: With cash flow looking stronger you’re still planning to contribute the same amount of equity into the pension this year or should we expect maybe cash instead?

Still plenty to do the equity. Jeff Sprague – Vertical Research: That’s a capital allocation question, another capital allocation question could be the only reason I could think to put friction in with turbo is CPG days are numbered. Give me an alternative reason that friction would be reported with turbo?

It’s from a reporting purpose and organizational standpoint.

And relevant customer base. They have the same customer base.

Move together and rather than breaking it out it’s easier for us from a reporting standpoint and we think the relevance is really lost in the process. Jeff Sprague – Vertical Research: Specialty material margins, very impressive given UOP was down in the quarter. Was there some kind of sweet non-recurring price cost dynamic there or something?

Not really, it’s really what I said, it’s really what Andreas and the team are doing to drive both, I call it commercial and operational execution but it’s really commercial excellence that the sales and marketing the new product introductions etc. combined with plants attain them, just basic operational performance and execution. It just shows you what we’ve done in terms of the cost base business but also the strength of their market positions and the strength of the technologies and we’re leveraging that. We continue to look at specialty materials as a strong performance through the rest of the year.

I’d say across all our businesses, we talked about this at our February analyst day but looking at OEF, this organization effectiveness more closely and I say comprehensively than we have in the past and that I think any other company does has really helped a lot in terms of understanding and controlling fixed costs so that you could really leverage sales increases.

Your next question comes from Nigel Coe – Deutsche Bank Nigel Coe – Deutsche Bank: I wanted to follow up on the margins, UOP down and resins up both of those are a negative margin swings, yet I think you’re still guiding 14.9% for the full year. Once these wash through why wouldn’t the margin go higher than 14.9%.

We’re happy with it going higher. On margin swings, or margin rates on businesses, variable margin in any chemical business is pretty high to the extent you can leverage volume it’s usually a nice result. Nigel Coe – Deutsche Bank: Looking at the 2Q I wanted to understand again the margins for 2Q. If we add back the $0.05 Medicare tax, $0.55 for first quarter basically flat with your mid point guidance yet revenues are going higher. I understand the TS is down but revenues for the other three businesses are going higher. Is there anything in the margin we need to think about 2Q?

No, I don’t think so, nothing that really stands out. Nigel Coe – Deutsche Bank: I noticed you picked up the CP by about a billion dollars this quarter. I know you have a debt repayment as well but is that a shift in your debt financing treasury?

No. Nigel Coe – Deutsche Bank: Do you plan to turn up the CP at some point?

It’s possible, there’s no near term plans to do it. Nigel Coe – Deutsche Bank: The process solutions order growth is 19%. Is that all organic?

Yes.

Your next question comes from Peter Arment – Broadpoint Peter Arment – Broadpoint: On Aerospace on OEM side we’re expecting obviously slower deliveries this year and I guess it’s never too early to already start talking about 2011. We’re seeing increasing wide body production and it looks like narrow body, particularly at Boeing is going to really increase double digits here probably starting in the second half of 2011. How do we think about that for you guys in terms of lead times and what do we expect to see on that initial demand for OEM turn, it seems like Aerospace is really going to be set up for a healthy recovery in both aftermarket and beginning to see that OEM as we get into the end of this year.

I would agree with you, there will be a good recovery in Aerospace. More likely to be the more rapid immediate affect will be whenever aftermarket really starts to take off. For the same reasons that it has in the past is inventory levels get driven so low that just demand catching up to actual usage levels represents a big increase and then you have flight hours on top of that and at some point some inventory re-stocking. Tough to know exactly when that takes off just because nobody really knows exactly how much inventory is out there and as parked aircraft go up how much can they really cannibalize. When it happens though it’ll happen in quite smartly. On the OEM side, I’m a believer in all of this stuff that you tend to come out the way you went in and I’d expect it to be a slower but steady increase over time. I wouldn’t predict on any of the air framers but I agree with you, that is going to happen because air travel just continues to increase and we think it’s going to continue to increase as a macro trend. Peter Arment – Broadpoint: On ACS any changes in the legislation backdrop are you seeing any momentum there on further pushing the initial adoption of your energy efficiency products?

You’re likely to see an energy bill get introduced sometime over the next week or two. What we’ve been advocating and we’re hopeful this will be reflected, it has to be a focus on both clean generation and on energy efficiency. Having a smart energy policy for the country is going to involve both and we’re hopeful that that’s what’ll get reflected in whatever legislation is promulgated.

Your next question comes from Howard Rubel – Jefferies Howard Rubel – Jefferies: You had great operating leverage in auto or in transportation on the order of 40%. I know it’s down a little bit from the prior quarter but is this sort of what you expect out of the organization for going forward on incremental sales?

I look to Alex for 1,000 basis points improvements in margins every quarter. We’ll continue to see good leverage there. They did a nice job reducing fixed costs during the downturn. They did a nice job of maintaining a good industrial base and a capability to respond. To the extent that the industry does grow and the decision’s just a first half phenomenon which we’re unclear on right now, they’ll be able to leverage pretty well, I think. Howard Rubel – Jefferies: As you go and talk to customers what sort of anecdotal evidence might you be able to give us or a couple of take aways that have really struck you in the last several months versus what you saw maybe three to six months ago?

It depends on which areas of the world that you’re going to. If you’re in developed markets; I’d say in the US it feels like most people are more bullish than they were six months ago. In Europe the business depression I think kind of continues in terms of how people think about how they’re coming out of it. In emerging regions it never really declined, they were always pretty bullish, still had big plans and I think through the refinery discussions the airline discussions, everybody was always pretty bullish there, that really hasn’t changed. Howard Rubel – Jefferies: You’re finding just opportunities to sell more things in places, that optimism has translated into your business plan or do you think there’s still a little bit more that can translate into the business plan?

I’m not sure I quite follow but I would say that there are business opportunities for us everywhere but it’s particularly encouraging in emerging regions because they’re just bringing the right attitude, the right momentum, the right interest, it’s actually quite encouraging going to those places. Howard Rubel – Jefferies: On late cycle products, whether it’s a little bit process or another markets, are there examples of where you really started to see a stabilization or there’s still declines that you’re fighting through? Commercial construction being the biggest example.

Clearly some of the commercial construction would continue to be some of the non-residential, some pockets of that continue to be a challenge. If you look at the order rates and the book to bill they’re all positive, they’re all up.

Your last question comes from Chris Glynn – Oppenheimer & Co. Chris Glynn – Oppenheimer & Co.: Wondering if you have an estimate of what your capacity utilization was in the quarter running currently versus the second half last year.

We don’t really track that all that much. I’d say in our Specialty Materials businesses we’ve had that, we’ve been running closer to capacity there but it’s not a stat that we really track across the board. Chris Glynn – Oppenheimer & Co.: Do you see any potential for the Eyjafjallajökull eruption to have a big impact on demand whether it’s because of airline finances or the lower utilization?

It’s one of those things that we did have some trepidation about as we were watching it but as you probably saw the press reports from yesterday we’re actually seeing traffic was booming as a result. I think this is one we’re going to have to wait and see.

The other thing I would add there is to the degree that the European airlines predominantly use this opportunity to perform some of the deferred maintenance, planes are grounded anyways so did that represent and opportunity. I think some of that has to wash out but some of that has to play out for us to really understand full impact but it’s still early.

I’m going to turn it over to Dave, if you have any final comments.

We’re off to a great start as you could see. We performed in the last recovery, we’ve performed in the recession, and we’re going to perform well in this recovery also consistent with what we were saying in February. It’s all for the same reason, it’s a constant relentless focus on making progress on our strategy every day, every quarter, every year. Our strategy for growth and our strategy for productivity both get included in this and we are truly just relentless about making sure we’re making progress every day. Unlike the last recession, we kept in investing this time; new products, new services, new geographies, our enablers, investment just kept flowing. We’re a better company, we’re building off a better base and I think you’re going to see us shine in this recovery.

We’d like to thank everyone for their participation. This does conclude today’s conference.