Elena Doom - David M. Cote - Chairman and Chief Executive Officer David James Anderson - Chief Financial Officer and Senior Vice President

Scott R. Davis - Barclays Capital, Research Division Shannon O'Callaghan - Nomura Securities Co. Ltd., Research Division Jeffrey T. Sprague - Vertical Research Partners Inc. Peter J. Arment - Sterne Agee & Leach Inc., Research Division Deane M. Dray - Citigroup Inc, Research Division Nigel Coe - Morgan Stanley, Research Division Howard A. Rubel - Jefferies & Company, Inc., Research Division Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division Elana Hordon Wood - BofA Merrill Lynch, Research Division Unknown Analyst

Good day, ladies and gentlemen, and welcome to Honeywell's First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Elena Doom, Vice President, Investor Relations. Please go ahead.

Thank you, Stephanie. Good morning, and welcome to Honeywell's First Quarter 2012 Earnings Conference Call. Here with me today are Chairman and CEO, Dave Cote; and Senior Vice President and CFO, Dave Anderson. This call and this webcast, including any non-GAAP reconciliations, are available on our website at www.honeywell.com/investor. Note that elements of today's presentation do 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. We also identify the principal risks and uncertainties that affect our performance in our Form 10-K and other SEC filings. This morning, we will review our financial results for the first quarter of 2012, as well as share with you our outlook for the second quarter and updated full year 2012 and, of course, allow time for your questions. With that, I'll turn the call over to Dave Cote. David M. Cote: What a wonderful start to 2012. We had better-than-expected performance across a number of our different businesses, driving EPS above the top end of our guidance range, and it is great to start with such a nice burst of cabbage. Sales were strong at $9.3 billion, representing 7% reported growth, and that's on top of good growth last year. Organic growth of 6% was also strong. This performance in a more challenging macro environment underscores the value of the diversity of opportunity across our businesses, short- and long-cycle exposure, our products and services and geographies. As expected, our short-cycle businesses posted slower growth this quarter, particularly in Europe and, to a lesser extent, China. However, our long-cycle businesses, particularly Commercial Aerospace and UOP, overdrove expectations. We also saw terrific margin expansion in the quarter, with segment margins up 70 basis points to 15.2%, with strong sales conversion across the portfolio. As we highlighted in our March Investor Conference, we've made margin growth a bigger element of how we incentivize our people, so everyone's focused on it and interests are aligned. Given the strength of our first quarter financial performance, we are raising our full year guidance $0.05 on the high end and $0.10 on the low end. We now expect earnings to be in the range of $4.35 to $4.55 per share, up approximately 9% to 14% versus prior year on a continuing ops basis, meaning adjusting for the CPG divestiture. We think this represents a very strong outlook for the year. And while we recognize the macro uncertainties that remain ahead, we are confident in our ability to continue executing on growth and productivity opportunities. As part of that execution mainstay, our seed planting initiatives have paved the way for exciting new wins, including an exclusive agreement with Inmarsat, a global satellite service provider, to provide airlines and OEMs all of the onboard hardware needed to access Inmarsat's Internet connectivity service. Global online services for commercial, biz av and government customers will be available in 2014, and the contract is valued at an estimated $2.8 billion over the next few decades. We acquired EMS Technologies looking at the trends around aircraft connectivity. And so far, that's paid off really well. With a combination of their broad technology offering and our execution capabilities, we emerged the perfect partner to launch the Inmarsat global connectivity network. Our Aero team did just a great job. And in ACS, Building Solutions launched Attune, a suite of professional services that combines cloud-based tools and analytics to help owners and operators reduce energy bills by as much as 20%. And we're seeing terrific uptake. And in PMT, we continue to invest in high ROI projects, including, this quarter, the expansion of a UOP absorbent and catalyst facility, focused on the removal of radioactive material from liquids. These are currently being used in Japan in response to last year's nuclear disaster. The expansion also supports the production of a new absorbent and catalyst used by petrochemical producers and refiners. So in summary, we're off to a great start in 2012 despite the more challenging macro environment. And while our shorter-cycle businesses have seen an impact from the slowdowns in Europe and China, we're encouraged by the strength we're seeing in the U.S., other high-growth regions and long-cycle. New product introductions have also helped our shorter-cycle businesses grow faster than the markets served, which, coupled with accelerating growth in our longer-cycle businesses, is leading to top-tier organic growth. We're going to keep doing the things we consistently talk about, including seed planting for growth and focusing on our key process initiatives and continued strength of execution. In other words, staying hungry, smart, disciplined and flexible. So with that, I'll turn it over to Dave.

Thanks, Dave. Good morning, everyone. Thanks for joining us. As Dave said, it certainly feels good to report another strong quarter with sales of $9.3 billion, representing 6% organic growth in the quarter. Let's just go through some of the highlights on Slide 4. As you can see, we saw very strong performance from our longer-cycle businesses, including Aerospace and UOP, which more than offset slower growth in some of our short-cycle businesses. Regionally, we saw solid growth in the Americas, up 8% reported, 5% organically, as well as continued strong performance in our high-growth regions, which were up approximately 20% in the quarter. And as expected, Europe was slower, posting only 1% organic growth. And if you exclude Aerospace from that, Europe would have been down approximately 3% organically. So really in line with our expectations. China sales were up approximately 20%, driven by strong gains in both UOP and in Aerospace. Segment profit, $1.4 billion. It's up 12% versus the prior year, with segment margins, as Dave said, expanding an impressive 70 basis points to 15.2% in the quarter. This represents approximately 25% revenue conversion, reflecting tremendous productivity as well as giving us a clear path to achieving our full year margin targets. Below the line was largely as expected. The good news is we funded approximately $25 million in attractive repositioning projects, more than planned, and these will begin to deliver benefits beginning in 2012, the latter part of this year. Earnings per share at a $1.04, up 18% on a reported basis, 21% on a continuing ops basis. So the better-than-expected performance largely is a result of stronger sales conversion this quarter and obviously leveraging slightly better sales. Free cash flow came in at $300 million, which excludes approximately $250 million of pension contributions, cash pension contributions that we made in the quarter. Decreased customer advances; higher capital spending, particularly in PMT where we invest in capacity expansion and debottlenecking; were the primary drivers of the lower cash performance in the year. We remain confident in our full year free cash flow forecast for the year, which will approximately -- approximate about 100% of free cash flow conversion. So we remain confident in our ability to do that. Slide #5, Aerospace. Take some -- take a moment to go through the highlights of each of the businesses, starting with Aero. Aero sales grew 9% in the quarter, 8% organically to almost $3.0 billion. We saw continued strength in our commercial end markets, with Commercial OE and aftermarket strength accounting for most of the gains, while Defense and Space was down slightly. Now on the Commercial OE side, sales were up 22%, 18% organically if you exclude the EMS acquisition benefits. The increases were particularly strong in BGA. BGA OE up 41%, driven by strong demand in the mid to large cabin aircraft segment where Honeywell, as you know, has an outsized share of content. And on the ATR side, we saw the benefits of growth in both Boeing and Airbus deliveries resulting from the ongoing ramp in production rates. On the aftermarket, the commercial aftermarket, sales were up 16% in the quarter. Strong gains in both spares as well as R&O. Operators continue to depend on older aircraft to service the steady increases in passenger demand, and we're seeing those benefits. We've had 8 consecutive quarters now of double-digit spares growth, driven by continued increases in air traffic, uptake of selectables and also, safety and efficiency upgrades. But, of course, as a reminder, since we're now lapping spares and R&O levels above prior peak demand, we expect the aftermarket growth to moderate as the comps get tougher over the remainder of the year. Defense and Space sales were down 1% in the quarter, 3% -- approximately down 3% organically, driven primarily by lower service revenues as we lapped the prior year program completions and also some ramp downs, partially offset by growth in international defense. For the full year, we expect declines of approximately 5%, reflecting the current fiscal budgetary conditions and reprogramming expected to be felt more in the second half of the year. We'll talk about that more later when we talk about second half and full year guidance. Aerospace margins expanded 80 basis points in the quarter to 18.1%, largely driven by strong commercial aftermarket volume, partially offset by higher investments in the quarter in R&D. Let's go now to Slide 6 for the highlights for ACS for the quarter. ACS sales were up 4% reported, 3% organic, with the favorable impact of acquisitions more than offsetting foreign exchange headwinds. Top line performance was largely as expected in ACS, with acceleration in the long-cycle businesses more than offsetting headwinds in some of our short-cycle businesses. Now the expectation continues to be for slower organic growth in the first half for ACS compared to the second half. And again, we'll give you some more of that in a moment. But first, just a little bit more in the quarter. Energy, Safety and Security sales, ESS, while up on a reported basis, were down 1% organically, driven by lower ECC and S&C sales, partially offset by strong growth in Scanning & Mobility, as well as in Security. As expected, ECC sales were weak in all regions, driven by soft residential markets in Europe, in China, compounded by the weak HVAC markets in the U.S. that we've been planning for, especially in light of the mild winter. The good news here is we expect some modest improvement in ECC in the second half as we move out of the heating season, which has obviously been extraordinarily mild and affected everybody in the industry. Scanning & Mobility growth on the other hand was robust in ACS, particularly in the Americas as we've seen the benefit of channel gains and also strength in strategic accounts, supported by new product introductions. Security also saw notable growth in North America. Intrusion and total Americas sales for Security up approximately 10%. Process Solution sales were up 9% organically, with solid gains in all regions. The high-growth regions, including the Middle East and Asia, were standouts; while growth in the developed markets, more tempered. Process Solutions also contributed to ACS' overall margin expansion in the quarter. The Building Solutions & Distribution segment of ACS, or BSD, sales were up 5% organically, driven by strong Americas fire and security distribution sales, partially offset by slower growth in the European commercial retrofit projects. Just take a minute -- it's not on the slide, but just take a minute, talk a little bit more about the regional cut for ACS. Regarding Europe, we had anticipated short-cycle weakness in 2012. That's playing out. The first quarter outlook, where ACS business conditions were particularly challenging, and we anticipate only modest improvement in Europe in that segment in the second half. Regarding China, the Energy, Security and Safety sales got off to a slow start, ESS, with declines across most of the end markets, most notably ECC, as well as Scanning & Mobility, due to deceleration in infrastructure investments, soft commercial construction. And also, there, we had difficult year-over-year comps. However, there are signs of improvement, and we expect a resumption of growth within that segment within China in the second half of the year. And finally, on the Americas, as we said, very solid growth year-over-year, with increases in both orders and revenues. Scanning & Mobility led the way with over 20% growth, although security, sensors [ph] and control, Process Solutions and BSD all saw above-average growth in Americas in the first quarter. Looking at margins, ACS expanded margins 40 basis points to 13%, primarily driven by productivity improvements. Benefits from prior period positioning contributing to that, repositioning contributing, as well as disciplined cost controls within ACS. Those coupled with the acquisition-integration benefits, net of inflation, contributed to the margin expansion. Revenue conversion for the segment for ACS was 26%, and 32% if you exclude the impact of recent acquisitions, as well as foreign exchange headwinds. Let's go now to PMT, Slide #7. Performance Materials and Technologies continued their strong growth trends in the first quarter. Growth was up 19%, 12% organic, led by better-than-expected sales at UOP and also higher volumes in Resins and Chemicals. UOP results which, as you know, can be lumpy from quarter-to-quarter, led the way with outstanding growth, up 40%, supported by better-than-expected catalyst volumes and also licensing events. Further, we continued to see robust orders at UOP, where orders are up over 50% in the quarter, driven by continued strong demand in both refining and petrochemical segments, providing further foundation obviously for future growth. Now we anticipate a very strong first half for UOP, particularly given the expected timing of certain catalyst shipments and will transition to a more modest second half for that business. Advanced Materials sales were up 10% in the quarter on a reported basis, although roughly flat organically. Plan-to-execution was strong across the board. R&C benefited from higher volumes despite softer market conditions in Asia. Now weaker demand in Europe and Asia contributed to lower sales in specialty products as expected. Fluorine sales were impacted unfavorably by the negative year-over-year pricing due to overall supply conditions. And again, no surprise there. So kind of in summary, a great quarter for PMT. Margins up nearly 20% despite the headwinds and better-than-anticipated for the quarter. So better than we initially guided. And obviously, Andreas and the team just continued to do a great job executing on growth and profitability levels while also continuing to invest in the business. Let's finish then with the business segments on Slide 8 with Transportation Systems. In the quarter, TS sales increased 1% on an organic basis but declined 1% on a reported basis. And it represents solid performance driven by a significant number of new product launches in the face of challenging macro headwinds, with European light vehicle production down nearly 8% in the quarter and also very difficult aftermarket conditions in Europe. Turbo sales were up slightly on an organic basis, with new business launches, a favorable mix of platforms and increased Turbo penetration offsetting OE production declines, allowing us to outperform in this market. Regionally, Europe was up 2% organic in Turbo, with mixed performance across the board with a cross section of customers. North America saw a good growth. However, it was impacted by the mix of light trucks and also commercial vehicles in the quarter. So going forward, we're going to continue to see increased Turbo penetration as a growth driver in all of the segments and all classes of vehicles. Asia had strong growth, excluding China, which continues to be impacted by a weak commercial vehicles market, although we believe the worst of those declines are now behind us, and we're expecting to lap lower comps in the second half of the year. Of course, what's impressive here is that TS experienced on essentially flat revenues, margin expansion of 40 basis points, largely driven by productivity gains, including the benefits from prior period repositioning actions. So with that review of the segments, let's go to Slide 9 and let's discuss expectations for the second quarter. Summarizing sort of at the bottom first before going through each of the businesses, we're planning for total sales in the second quarter to be in the range of $9.4 billion to $9.6 billion, up 4% to 6% from the prior year, reflecting good organic growth. And EPS in the range of $1.09 to $1.13, up 9% to 13% on a continuing ops basis. Just a couple of points on each of the businesses. Aerospace sales in the second quarter are expected to be up 6% to 8%, driven by continued strength in the commercial businesses, partially offset by lower sales in Defense and Space. And again, as a reminder, we expect Commercial OE growth to continue to ramp, reflecting strong year-over-year gains, while the commercial aftermarket growth will begin to moderate due to tougher comps, although still outpacing flight hours. In ACS, for the quarter, for the second quarter, we're forecasting sales up 2% to 4%, reflecting stable growth in both Process Solutions and BSD and modest improvement in ESS as a result of stabilization in some of our short-cycle end markets. So considering these factors, in addition to the healthy long-cycle backlog conversion, we anticipate growth will accelerate through the second half of the year for ACS. And more about that in a few moments. For PMT, sales are estimated to be up 13% to 15%, driven by continued strength in UOP, the phenol plant acquisition and also moderate organic growth in Advanced Materials. Pricing is expected to remain a headwind overall for PMT in the second quarter, although we do see opportunities selectively in certain end markets. Transportation sales are forecasted to be down about 7% to 9%, largely driven by unfavorable impact of a weaker euro. Excluding foreign currency headwinds, we anticipate sales essentially flat for TS, against the backdrop of continued lower European light vehicle production, which is expected to be 9% -- down 9% in the second quarter. Now our outlook continues to assume European production down 8% for the year, which we recognize may be more on the conservative side relative to some of the other estimates that you'll see. However, we think we're -- what we're seeing to-date suggests that the challenging conditions there will continue throughout this year. So for Honeywell in total, second quarter sales again 4% to 6%, slightly less than the first quarter, up 4% to 6%. Another good quarter of revenue conversion and segment profit growth, driving earnings per share, our expectation, 9% to 13% up on a continuing ops basis. Let's now go to the full year guidance to give a little more color to the raise that Dave took us through in his introductory comments. Slide #10. As you can see from the table, we've revised our full year guidance, obviously reflecting the strength of our first quarter results, as well as what we believe is a balanced-er view at this stage for the remainder of 2012. We expect sales now to be in the range of $38 billion to $38.6 billion for the year with slightly better than originally planned sales conversion, driving segment margins slightly higher than original guidance. We're now expecting expanding margins from 60 to 80 basis points over 2011. It's clearly a testament to the quality of our earnings outlook and the ability of the organization to execute on key product -- key productivity levers and, Dave, obviously, a reflection, too, of the emphasis and the focus that we're putting on margin and margin expansion. And as Dave referenced earlier, we're also now expecting EPS in the range of $4.35 to $4.55, which reflects an increase of $0.10 to the low end, $0.05 to the high end of our previous guidance. So on a continuing ops basis, again adjusting for CPG, we see earnings up 9% to 14% for the year, which I think is solid performance, very solid performance against any comparative group. So now let's walk through some of the key planning. Just go to the bottom of the page on the planning assumptions. Some of the first half, second half dynamics at play. Starting with Aerospace. As we've said, second half sales are expected to moderate due to the tougher commercial aftermarket comps and the more outsized Defense and Space headwinds. Defense sales are planned down for the second half, somewhere in the range of 6% to 8% versus approximately 2% in the first half. Again, built up on detail based upon programmatic detail. In ACS, we're anticipating better organic growth from the short-cycle products businesses in the second half, with stabilized end market conditions as well as easier second half comps. The long-cycle businesses are expected to be more of the same. So good overall growth for ACS in the second half. As we've said for PMT, we're planning for overall slower organic growth in the second half against tough comps, driven by UOP which has experienced a strong -- very strong first quarter. And we expect again a strong quarter for UOP in the second quarter. So UOP is tracking ahead of our originally -- original planning framework, which is more skewed now to the first half. And in Advanced Materials, we've lapped the acquisition of the phenol plant, however, better organic growth is expected as a result of moderately improved end markets. Now the second half organic growth is expected to improve in Transportation Systems, driven by continued uptick of new launches, offsetting lower European light vehicle production, as well as what we anticipate to be continued weak, relatively weak commercial vehicle markets in China. So in summary, while uncertainties remain obviously in the global macro environment, we're bolstered by the continued strength of our execution, which is characterized by stronger sales conversion, productivity gains supporting that conversion and the seed planting that we continue to do successfully for our future. So finally, in summary, on Slide #7, before turning it back over to Elena for Q&A, we're encouraged obviously by the ongoing positive trend in Commercial Aerospace, both OE and aftermarket, with aftermarket growth sustaining well above flight hours. Industrial strength in high-growth regions continue to be the bright spots, with UOP and Aero fueling strong double-digit growth. Turbo is benefiting from their strong industry position and platform launches, roughly offsetting greater European light vehicle production declines. And our long-cycle businesses continue to deliver, offsetting a mixed short-cycle order book. We're continuing to execute on our strategies in sustaining growth investments and seed planting for the future. We're expecting continued good organic growth and strong sales conversion, with continued traction on Commercial and R&D effectiveness, all while controlling our fixed costs through OEF, as reflected in the terrific margin expansion we saw across the company in the first quarter. So to put it in perspective, we're targeting double-digit earnings growth in 2012 from continuing ops, underscoring the organization's ability to be a top-tier performer, with a balanced portfolio of short- and long-cycle businesses, delivering above-average growth and continued margin expansion. And we think this revised outlook reflects again a balanced view of the global economic environment, including where we see strength and where we see opportunities across the Honeywell portfolio. So with that, Elena, I'll turn it over to you for Q&A.

Thanks, Dave. So Stephanie, we now like to open up the line for our first question. [Operator Instructions]

[Operator Instructions] Our first question comes from Scott Davis from Barclays. Scott R. Davis - Barclays Capital, Research Division: Pretty straightforward quarter. One of the things you called out in ACS was weak Europe and weak China. And I guess my question is, is this sequentially weaker or just continues to be sluggish? David M. Cote: I would say, continues to be sluggish. We first saw Europe -- I think we were talking about this back in December. We started to see weakness there, and that weakness has continued and it's consistent with what we forecasted to the year. We said back then that we were going to assume Europe was in recession for the whole year. And unfortunately, I think we're going to be right. Fortunately, we planned for it. China is also, I'd say, pretty consistent with what we said, so I wouldn't say we're seeing anything consistently -- or any declamation there, Dave?

No. I think the only thing I would add is, Dave, that we did see -- as we exited the first quarter, we did see some strengthening in some of our ACS short-cycle businesses. David M. Cote: And strip.

And so too early to say that, that's a trend, but it's obviously encouraging, Scott. Just some additional color, it's obviously encouraging in light of what we think is still a very balanced -- appropriately prudent guidance. Scott R. Davis - Barclays Capital, Research Division: Yes. I mean, it's going to be in my follow-on really, is that when you think about the potential upside you have for the rest of the year, it seems like ACS is a bit of a wild card. I mean, do you think this is -- this quarter ends up being the low-water mark for organic growth? I mean, I know you're saying 2% to 4% for 2Q, but that seems pretty conservative.

We certainly hope so, Scott. David M. Cote: Straightforward is the best that we get from you? Scott R. Davis - Barclays Capital, Research Division: You're doing a great job. Stocks up 4%. What do you want. David M. Cote: Oh, thank you. So I got to beg for crying out loud.

Our next question comes from Shannon O'Callaghan from Nomura. Shannon O'Callaghan - Nomura Securities Co. Ltd., Research Division: Maybe first on the R&D in Aero, it was 100 basis points of pressure there. Could you give a little more color on -- was that kind of some opportunistic stuff? Or what are you going after there? And is that -- how should we think about, I guess, a run rate in terms of the R&D pressure there? David M. Cote: Well, the way I think about it is we're winning a lot. And just seeing the Inmarsat one, which is not one we would have forecasted 6 months ago, it's one the guys had started working on, we continue to win stuff. And I guess all I'd say is it's just one of those things that we're going to manage in the total context of Aero. We're sure going to find a way to support all those wins.

Yes, I'll just add, Shannon, to what Dave said. I mean, the good part of it obviously is it's driven -- as Dave said, it's driven by the success that we're having in the marketplace. The second thing is that, looking over the course of 2012, we expect for Aerospace, while up on the dollars, to be basically even with 2011 in terms of R&D percent. So maybe some pressure on that as the year progresses, but it's not something that -- I think it works itself way -- through over the course of the year. Shannon O'Callaghan - Nomura Securities Co. Ltd., Research Division: Okay. And then, I mean, on UOP, you pointed out the lumpiness which obviously we're all familiar with. But you have several quarters here in a row of some pretty monster numbers. I mean, can you maybe give a little more color on geographically and by sort of end market customer, the parts of that story that are not quarterly lumpiness and that are more of a continuing driver here? David M. Cote: Well, I’d say the reload side of it consist -- continues to -- what you think of as more ongoing, continues to get better. But there -- these guys are -- they're winning all around the world. There's no one thing that I would point to that, that's driving all of it. I suppose some of the Oleflex wins are -- we could point to. That's been just stellar. But all in all, they're winning across the board. Dave, anything...

Yes, I would just say that the queue is robust on the catalyst side of the business right now. And we're also going to have, in the first half this year, a very strong royalty revenues as well for UOP. Obviously, as we've guided, the growth percent is not going to be there the same way in the second half, Shannon, for UOP, just as a result of that very, very strong first half.

Our next question comes from Jeff Sprague from Vertical Research. Jeffrey T. Sprague - Vertical Research Partners Inc.: Just a couple of questions. Dave Anderson, I don't actually think you said the flight hour numbers in the quarter. If you did, I missed them. Could you let us know what those were and what you're expecting for the year?

Jeff, I think around 3.5 for ATR in the quarter. And we're expecting in that range, Jeff, in the 4% range for the full year. Stronger, by the way, on BGA. And as I talked about, BGA was strong not only on the OE side. It was also very strong on the -- or on the aftermarket side, I'm sorry. So good -- very good quarter for Commercial Aerospace, the aftermarket in total. Jeffrey T. Sprague - Vertical Research Partners Inc.: And is there a way on this Inmarsat deal for us to think about ship set value or some methodology like that to get our head around the opportunity? David M. Cote: I don't have that on my fingertips, Jeff. I don't if we normally would disclose that. But I can promise you it's a good one, and it is a nice bluebird. Jeffrey T. Sprague - Vertical Research Partners Inc.: Right. And then I just -- wondering on ACS, obviously there is going to be FX and M&A moving around all the time. But stripping that away, is something with the 3 handle on it, what we should kind of expect going forward? I think, historically, you said maybe it's closer to 25 or even low 20s. Is that number moving up to some of the things you talked about at your Investor Day, kind of work their way through the portfolio here?

Yes. So, Jeff, you're referencing revenue conversion for ACS? Jeffrey T. Sprague - Vertical Research Partners Inc.: Yes.

Yes. No, I think that the number that we talked about, the 20s, mid-20s is a very good target for ACS. Jeffrey T. Sprague - Vertical Research Partners Inc.: Okay. And then just one last thing. Can you update us on what you see for restructuring benefits rolling through in 2012 based on the actions in '11 and the few things you did here in the quarter?

Yes. Look, we'll look that up for you. The... David M. Cote: We still [indiscernible]?

We did. While we get that number, just tell you a little bit about the $25 million that we took in the quarter. We're probably going to see anywhere between $6 million and $7 million of operating income lift from that in addition this year and about $13 million in 2013. And we've got, what? About $129 million, $130 million of operating income from repositioning? Elena, what’s the number that you have?

Yes, it's in that range.

Our next question comes from Peter Arment from Sterne Agee. Peter J. Arment - Sterne Agee & Leach Inc., Research Division: Dave Anderson, I wonder if maybe you could just comment on the aftermarket, again on just commercial. Just trying to better understand it. When I think about your first quarter last year, you had 14% growth, and spares were up 28% and repair and overhaul was up 6%. And you look at what you did this year, you're beating that. You're at 16% in spares, continues to be strong in repair and overhaul. And I think the commentary was, last year, that eventually we'd see a recoupling up the flight hours. You mentioned 4% is kind of the assumption for the year. Are we seeing a bigger kind of restock here by airlines? Are we seeing higher provisioning? What is really driving this right now?

Well, I think there's a couple of things, Peter, that are working. I mean, first of all, as we've said, we're benefiting from the active fleets and, if you will, the mix of that active fleet in terms of some of the older aircraft that are being put into usage. We've got less parked aircraft, which is supporting it. So those 2 things are definitely at work. I think we're also seeing, for us, the benefit of selectables, which is supporting us. Higher penetration in terms of capture on those selectables with airlines, just doing a very, very good job of executing. Now that double-digit rate growth, as you said in terms of spares growth in the overall double-digit growth that we've seen on the Commercial Aftermarket, in the ATR aftermarket specifically, we expect that to -- good growth but obviously to subside and more in line, although still outpacing flight hours in the second half of the year. Peter J. Arment - Sterne Agee & Leach Inc., Research Division: Okay. No, that's helpful. I just wanted to understand. Seems like you're continuing to see outsize growth there. And then just as a follow-up, to stick within the rules, Dave Cote, can you maybe just give us a little highlight how you see the M&A pipeline going forward for 2012? David M. Cote: Well, first, the pipeline is always good. It's always a question of is it actionable, and can we actually -- if the pricing make sense, and can we make good sense of it? So I would say, the pipeline is always the same, and it'll be a question of how well does the pricing look, and can we make it happen. The nice thing about it is having a big full pipeline all the time means that we never have to overpay because we can be very confident that we've got other good stuff in line. And the more we can find things like EMS Technologies, you can be sure -- we're going to make sure we make them happen.

Our next question comes from Deane Dray from Citigroup. Deane M. Dray - Citigroup Inc, Research Division: The question in ACS, specifically the Security, Scanning, Mobility, Dave Anderson's commentary regarding the geographic differences between North America, up 10%, but then commentary that China is weaker. Now China weaker on the infrastructure side, but North America has not had a robust non-res construction cycle either. So what are the geographic dynamics at play there?

Deane, let me make sure I understand. You're referencing specifically what business there? Deane M. Dray - Citigroup Inc, Research Division: The Security, Scanning, Mobility.

Okay. Well, Elena, why don't you just give a little color on some of the regional data?

Sure. So, Deane, Security and HSM are obviously strong globally. But in the Americas, they've been particularly strong. We were -- we saw growth in the Security business in the double-digit -- low double-digit range in the first quarter organically, largely driven by North America Intrusion, which was up in the 15% to 20% range in the quarter. And Scanning & Mobility up in the mid-20s organically within the U.S. So very strong performance. The performance in China and in Europe, in particular, is a bit more muted. But within Security and Scanning & Mobility, actually down slightly organically in the quarter within those regions.

Some of that, though, is also timing-related. And you're going to see that, Deane. I mean, those are -- in terms of size of business, et cetera, you're going to see the kind of movement quarter-to-quarter. Deane M. Dray - Citigroup Inc, Research Division: So that was the growth and the products that we saw recently at the Security Industry Trade Show in Las Vegas. And for those businesses, you're seeing -- what was the North America organic growth?

North America organics in Security was roughly 10%, Deane.

Our next question comes from Nigel Coe from Morgan Stanley. Nigel Coe - Morgan Stanley, Research Division: First of all, Dave, could you maybe just clarify your comments on the ACS short-cycle trends. You mentioned an improvement towards the back end of 1Q. Was that a comment on China? Or was that a broader comment on the short-cycle portfolio?

It's really a broader comment, Nigel. It's just -- it's, I think, reflective of the fact that we've seen a little bit of a strengthening there, broadly as we exited the first quarter and clearly doesn't, as I said, doesn't cause us to believe that's a trend. But it's a positive sign. And there's a lot going on obviously to influence the outcome, both in terms of new product introductions. We've got some tremendous introductions weighted to the second half of the year, as well as just continue to grow in high-growth regions. So there's a number of things that we think will add to, hopefully, that trend line. Nigel Coe - Morgan Stanley, Research Division: And I don't want to be too nerdy but normally, we do see this kind of acceleration from February into March. So when you talk about a strengthening, are you saying that's in line with normal seasonality? Or maybe a bit better than that?

I would say it's a little better than that. But I don't want to read too much into that. But it is an encouraging sign, and I just mentioned it in light of the question made earlier of sequential growth. Nigel Coe - Morgan Stanley, Research Division: Okay, okay. And then just a follow-on in the free cash flow. The accrued liabilities line was a bit more of a negative. And I mean, than we normally see in 1Q? Could you just maybe comment on that, Dave?

It really has to do with customer advances. As much as anything that's deferred revenue, that's now being recognized in terms of sales in the quarter. Some of those associate with longer term. Most of that associated with longer-term contracts.

Our next question comes from Howard Rubel from Jefferies. Howard A. Rubel - Jefferies & Company, Inc., Research Division: First, Dave, to use your cabbage analogy a little bit. Occasionally, there's rabbits that come after you when you have a lot of cabbage. What are you sort of doing to make sure they don't ruin what you see come -- where do you -- where are you sort of taking some extra efforts? Obviously, restructuring was one, but are there some other things you're sort of asking your managers to do to be vigilant? David M. Cote: First, it’s investor rabbits that we're trying to attract, Howard. So I think this should give them a lot to focus on. And we're constantly focusing on what's next. It's one of the things that we do. That whole evolution concept that I was talking about at the Investor Conference, it's just how we think about the company. So some of the stuff, we're ready to talk about and you're seeing; some is in process and you're not seeing yet, and we're not talking about it. So I can promise you that, as I said in the beginning, we stay hungry. Howard A. Rubel - Jefferies & Company, Inc., Research Division: And then on that same note, I mean, I know I tend to focus on thinking about Process Solutions as being largely energy, but there are a lot of other businesses in there and we've continued to see FAA -- excuse me, FDA pressure on some customers to step up and do things in that market. Could you sort of address some of the other opportunities outside of energy in Process Solutions? David M. Cote: Well, I mean, the big places for us outside energy are pulp and paper, farmer and power. And we're doing pretty well in all of those. So I'm very bullish on what I think our Process Solutions business can do going forward. We've got some -- just terrific product there. Howard A. Rubel - Jefferies & Company, Inc., Research Division: Is there -- there's nothing -- I mean, I know there's always a lot of things in the pipeline. Is there anything you can sort of talk about in terms of new developments? David M. Cote: No. They're there, Howard, but I'm not ready to talk about them. Howard A. Rubel - Jefferies & Company, Inc., Research Division: I got it. David M. Cote: Anything else you don't want me to talk about? Howard A. Rubel - Jefferies & Company, Inc., Research Division: We've done well here. David M. Cote: Sorry, I wish I could be more forthcoming on some of this stuff, but I can only promise you we're not sitting on our hands back here. Howard A. Rubel - Jefferies & Company, Inc., Research Division: No, I recognize that. And the numbers show that.

Our next question comes from Steven Winoker from Sanford Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Two questions then. One, a little more detailed. On the Aerospace aftermarket side, are you seeing a difference in terms of the discretionary versus nondiscretionary parts growth? So is this sort of -- for example, mechanical versus the electrical side. Are you -- or is there not much difference now?

Well, I think on the ATR side, I think, again, it's really driven by the things that we talked about, Steve, earlier, which is just the aircraft utilization, the mix of that aircraft, the strong penetration that we have in terms of selectables. Obviously, we're getting a large mechanical benefit from that.

But I would say, the avionic side has been strong, too, with the RMU growth that we've seen over the last 4 or 5 quarters.

I'm going to cite that, for BGA particularly, is where we've seen that is the RMU growth. Elena correctly points out on the BGA side. We had actually stronger growth in BGA as a percent during the quarter. So that's done very well. The other thing is there's -- on the BGA side, there was deferral of maintenance that occurred. And what we're seeing now is a real demand into the system and pretty good visibility in terms of that demand. So we're quite encouraged by it. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: And that's across your different product platforms then?

It is. It is. And the other thing obviously is as you talk to operators and others, it's just the quality of the upgrades, particularly the cockpit upgrades that are offered by Honeywell and the significant appeal of those upgrades. So I hear that anecdotally all the time. I think there's just a lot of goodness there and, again, that's showing up in the numbers. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And then at a higher level, if we step back and talk about -- see the weakness in Europe again, and then just the question on emerging markets and whether they're decel-ing or increasing a little bit, the U.S. still insulated from that. But in your business, are you -- is there any thought that the U.S., should Europe not recover, that, at some point, this starts to impact your businesses in the U.S. or you feel like, you know what, we can continue at this kind of clip from share gain, et cetera in the U.S., regardless of what happens, well, within reason overseas? Are we insulated in North America? David M. Cote: I would say both things you said are true. The first one is there's -- it's a globally -- or I said there's 2 spaces there. Well, the first, we are a globally interconnected economy. So there's -- if Europe continues to drag even beyond next year because they just don't get the political will to do what they need to, then it definitely will have an impact in the U.S. We would argue that regardless of what the economic outlook is, we will outperform in that -- whatever the environment is because of the work that we've done to have the right products, right services. Everybody's staying hungry. A lot of the programs that we've launched over the last 10 years are really starting to come to fruition. We've got a lot of good stuff still coming. The pipeline is full for us on everything: new products, the geographies that we see, the services that we've been able to come up with. I still feel very good about our ability to outperform regardless of the environment.

The other thing, just, Steve, if I could just add, is it's obviously against the backdrop of a continued weak housing market and overall construction markets, which are obviously huge drivers both in terms of the economy, as well as we will be beneficiaries of them. So I think, Steve, as we see improvements there, I think we're going to see actually net upside. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: And, Dave, following that up, are you seeing any commercial -- improvement in commercial pricing on -- for example, HPS or... David M. Cote: Well, I think, in general, we do a pretty good job in pricing, as we've said before, Steve, in all our businesses. We really just try to do it on the basis of new products and the value that we're able to provide. So I would say we're still going to continue to do well there.

Our next question comes from John Inch from Bank of America. Elana Hordon Wood - BofA Merrill Lynch, Research Division: It's Elana on John's behalf. My first question is about the progression of EPS this year. So historically, the first quarter represents only about 20% to 21% of full year EPS. So if we extrapolate out to the full year, this gets us to over $5 of earnings. So in other words, why would this year be more front-end loaded than previous years? David M. Cote: From your lips, Elana. Elana Hordon Wood - BofA Merrill Lynch, Research Division: Conservatism or...

Let me take a shot at that, Elana, and it's a very, very good question, obviously something that we've spent a lot of time analyzing and studying here internally. The things that I think that we pointed out in the call. Number one is obviously the strength that we've experienced in the Commercial Aerospace aftermarket. Again, we're lapping 8 consecutive quarters of double-digit spares increases now. And so while we're still expecting the commercial aftermarket to grow ahead of utilization rates, as we've said, we're not going to see the 15% to 20% growth in the quarters that we saw in the last 4 quarters. We're going to see a weaker Defense and Space. That's just timing. Defense and Space down 2% to 3% in the first half, down 6% to 8% in the second half. I mean, that's just built in to get to the 5% which we continue to believe is the right kind of guidance for you for the full year. And we've talked a lot this morning about UOP, and we talked about catalyst volumes but also some licensing volumes. Those are going to be more normalized in the second half. In addition, you'll recall the Petrobras contract award, the FEED award, that front-end engineering design award, that's almost $100 million of less revenues second half UOP compared to first half. So there's a bunch of things. So as we roll off these first half positives, we will see some partial offsets by modest improvement. We think of short-cycle sales, we talked about that. But it's going to be more like -- if you look first half, second half, it's going to be more like a 48, 52 kind of year, we think, in 2012, in terms of the distribution of those earnings. Elana Hordon Wood - BofA Merrill Lynch, Research Division: Okay, that's helpful. And then I just wanted to circle back to your comments about Aerospace R&D investments this year being flat. When you talk about R&D, are you including launch cost in that bucket? Or would you characterize launch cost as having a different trajectory year-over-year?

Launch is excluded from what I just mentioned. And you'll recall launch is down significantly year-over-year because of the proactive work that we did in 2011. You recall 2011 second quarter in terms of the launch contribution, the larger launch contribution recognition. So the R&D -- and importantly, what I'm talking about is, dollar-wise, more spend driven by success in the marketplace. When you look at that as a percent of revenue given the growth that we're experiencing in Aerospace, we're talking about in line for the full year. Roughly in line for Aerospace. Elana Hordon Wood - BofA Merrill Lynch, Research Division: Okay. Can you give us a magnitude on the decline in launch cost year-over-year?

Launch is down about $80 million to $90 million year-over-year. Elana Hordon Wood - BofA Merrill Lynch, Research Division: Okay, that's helpful. And then I just wanted to ask you about pricing in the quarter, how much it contributed to top line growth? And also, what was the overall per total company price cost impact on margins?

Well, Elena, I'm going to let you feel the question on the price, Elena. I don't have that. Elana, I don't have that data right in front of me.

On pricing, net across the company, Elana, it was about 1.5% of the top line from a price cost headwind. We can spend some more time offline going through the business, but it was obviously net positive for the company in terms of margins.

Our next question comes from Laton Cana [ph].

You mentioned new wins, I think, in the context of Aerospace. And you mentioned the PPD, the launch contributions will be still down $80 million, $90 million. First, can you remind us of the Q2 dynamic again? Is that down like $70 million in launch? And what do you think it might be for 2013, given some of the pipeline wins you've had?

It's in -- it's about $80 million to $90 million of headwind in 2012. And obviously, we haven't disclosed or -- and it got enough for roll off obviously in the Inmarsat deal, and it's nearly -- there's obviously some new puts and takes to it. So I think that's -- we'll be forthcoming in terms of the outlook for 2013.

[indiscernible] tailwinds for second quarter. Less.

Open second quarter, yes.

But it's a pretty huge one for the second quarter, if I recall.

Yes, it's about $80 million.

Yes, it's about $80 million. From a bottom line standpoint, we offset that with a gain. So there was distribution difference in terms of the landscape. The launch was above the line segment profit, and the gain we had was below the line. But from a PDT or EPS standpoint, it was offset.

Okay, understood. And biz jet, you mentioned kind of OE strength in the quarter. We're hearing more noise about Hawker Beechcraft kind of potentially filing for bankruptcy. I mean, could you quantify -- I know it's not the biggest thing in the world, but what it might mean with respect to sales, earnings and, I guess, receivables risk?

Well, clearly, there's been a lot of -- a lot in the news. It's really difficult to say, really difficult to predict what the outcome is going to be there. From a standpoint of receivables for us, at this stage in terms of our net exposure, it's relatively small, relatively insignificant. And we've contemplated -- any risk that, that may pose to us, we've contemplated that in our forward guidance.

All right. Stephanie, I'd now like to turn the call over to Dave Cote for his final remarks. David M. Cote: Well, as you might imagine, we're really pleased with our start to the year. All the seed planting we've done over the years with that consistent strategy for growth, productivity and our enablers just continued to play out, and yet they have lots of runway. Our diversity of opportunity in businesses, products and geographies really is a terrific advantage. Because of all that, we expect and continue to outperform in the future. And even with all of that going for us, we are not resting. As I said earlier, you can expect us to stay hungry, smart, disciplined and flexible. And it's our intent to be your best investment. Thanks.

Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect and have a wonderful day.