David M. Cote - Chairman and CEO David J. Anderson - SVP and CFO Elena Doom - VP, Investor Relations

Scott Davis - Barclays Capital Nigel Coe - Morgan Stanley Stephen Tusa - JPMorgan Howard Rubel - Jefferies & Co. Steven Winoker - Sanford C. Bernstein & Co. Jeff Sprague - Vertical Research Partners John Inch - Deutsche Bank

Good day ladies and gentlemen, and welcome to Honeywell’s Third Quarter 2013 Earnings Conference Call. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. (Operator Instructions) As a reminder, this conference call is being recorded. I’d now like to introduce your host for today’s conference, Elena Doom, Vice President of Investor Relations. Please go ahead.

Good morning. Thank you, Jack. Welcome to Honeywell’s third quarter 2013 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 at www.honeywell.com/investor. We ask that you keep in mind that today’s presentation contains 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 ask that you interpret them in that light. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other SEC filings. This morning we’ll review our financial results for the third quarter, share with you our outlook for the fourth and provide an initial framework for 2014 and finally will leave time for your questions. So with that, I’ll turn the call over to Dave Cote. David M. Cote: Thanks, Elena. Good morning, everyone. As I’m sure you’ve seen by now we had another good quarter benefiting from our diverse portfolio, our continued focus on new products and geographic expansion and our ability to effectively manage what continues to be an uncertain macro environment. If you normalize for tax, which is expected to be 26.5% on a full year basis again this year, we delivered another quarter of double-digit EPS growth with the results coming in at the high end of our guidance range. This is driven large part by strong sales conversion with segment margins expanding 90 basis points to 16.7%, higher than we anticipated reflecting favorable mix, a delay in closing Intermec and our continued focus on productivity. An important driver of the productivity we’ve seen this year continues to be the savings we’re seeing from previously funded restructuring actions. And Dave will provide greater update on that shortly. As you will see we’re being proactive about keeping that restructuring pipeline full, which we think is critical to supporting our continued margin growth in 2014 and beyond. However, while managing our cost is important, we’re also focused on supporting sales growth, investing in high ROI capacity, new products and technologies in high growth regions. That said, it wont comes any surprise that this continues to be a challenging macro environment. EPS and margin expansion were both strong, but that was in spite of lower than expected sales in the quarter, which was driven primarily by Intermec close timing and lower Defense & Space sales. Excluding Defense & Space sales were up 3% organically in the quarter. When it comes to Defense & Space, you’re all aware of the ongoing sequestration impacts and the recent government shutdown. We saw some shipment delays in the quarter and while we are expecting some level of recovery before the end of the year, we think the prudent approach is to conservatively adjust our aerospace sales outlook. The aero team is working hard to manage through the current defense challenges and we continue to expect a more muted decline in 2014. On the M&A front, the good news is Intermec is now officially closed. Even though it took a little longer than we would have liked, but now the real work can begin. We are really excited about the business which roughly doubles the size of our scanning and mobility portfolio, and the opportunity to merge Intermec’s expertise in innovative products and solutions in to our already great position in the highly attractive automatic identification and data collection space. In addition to strengthening our core business, Intermec will open up new opportunities with their global presence and channel strength, in addition to adjacencies in voice and RFID. This quarter is also a good reminder of the importance of a balanced portfolio, which helped offset some of the defense headwinds I have just mentioned. Some of our key short-cycle businesses, specifically energy, safety and security, as well as turbo had very strong quarters. While our long-cycle businesses maintain healthy backlogs, currently over 15.5 billion. Geographically, which is also an important part of the balance, we continue to see good growth in the U.S. in residential and turbo markets. We are encouraged by the pick-up in short-cycle order rates in Europe overall and continued growth in China following a slow start to the year. With just over two months left in the year, we are confident in our ability to deliver at the high end of the guidance we set for 2013 last December. As a reminder, we stuck by our earnings outlook all year, steadily raising the low end of our EPS guidance in prior quarters to reflect a year-to-date performance and we are doing it again. As a result of the continued strong execution we saw in the third quarter, we’re raising the low end of our guidance by a nickel, giving us a new EPS guidance range of 4.90 to 4.95, or up 9% to 11% for the year. Turning to 2014, I said this before, but there is nothing out there to suggest anything, but continued conservative planning is best. Despite what’s expected to be a continued slow growth environment, we’re confident organic growth will accelerate for Honeywell in 2014. We are in the process of completing our annual operating plans and overall the foundation is in place for another great year. Looking across the portfolio, we see positive order and win rates, providing sales tailwinds going into next year. The repositioning benefits I mentioned earlier will provide further leverage for growth and we expect to continue to benefit from the momentum in investments in our process initiatives and high growth region expansion. We are going to remain flexible and believe that our seed planting for the future, great positions and good industries, and strength of execution will set us up for another year of outperformance next year despite the uncertain and slow global growth environment. So with that, I’ll turn it over to Dave to walk you through more color commentary. Dave? David J. Anderson: Thanks, Dave and good morning everyone. And I appreciate your participation this morning. Let’s start out on slide number 4, I’m going to walk you through the summary of financial results for the third quarter. Sales of $9.6 billion, up approximately 3% on a reported basis, 1% on an organic basis and as Dave said and shown on the slide, up 3% organic if you exclude the impact of D&S in the quarter. The sales were below the low end of our original guidance of $9.8 billion, primarily due to several factors. I’ll take you through those. First, as we mentioned, we’re excited obviously to close the Intermec transaction, but it did take longer. And as a result, the sales were lower than guidance by almost 120 million. So clearly this is the biggest contributor to the change or that be compared to our guidance for the quarter. Defense & Space sales were down more than expected primarily due to supply chain constraints and also some shipment delays which we expect to recover over the next few quarters. That’s about $100 million and I’m going to take you through that detail as well. And finally, PMT sales were somewhat lower in the quarter due to formula pricing in resins and chemicals and we will touch on -- touch based on that when we go through PMT in a moment. Now despite the lower than expected sales, segment profit growth and margin expansion were obviously very strong. Segment profit increased 9% with segment margins expanding approximately 90 basis points to a new high of 16.7%. And importantly we had profit growth in margin expansion in all four businesses. So really a balanced contribution across the group. It’s also important to point out that with the delay in the Intermec close; it also reduced the estimated segment margin dilution that we had expected in the quarter from M&A. So we had about $20 million favorability as a result of the timing of the Intermec close and that’s also reflected in the ACS margin rate for the quarter. Below the line items were mostly as anticipated, however we funded all those $40 million of new repositioning actions including Intermec related projects with a net accrual of $22 million for the quarter. Reported EPS was $1.24 represents a 3% increase year-over-year. However on a reported basis, taxes were roughly in 8% headwind in the quarter. And additionally as you recall our guidance contemplated a 26.5% rate consistent with our expected full year rates, so if you normalize for that EPS would have been a $1.25, up 10% and at the top end of the previous guidance range. And finally free cash flow on a year-to-date basis prior to any NARCO Trust payments and Cash Pension Contributions were up year-over-year. So in total, another strong quarter giving us confidence going into the last three months of the year. Let’s now take a look go through -- a little more of the detail for each of the businesses, starting with Aerospace on slide 5. Now with the challenge in core for aerospace, down 2% in revenues below our guidance for the quarter as we mentioned, but all of that due to the D&S shortfall. However segment profit for aero was up 3%, with strong margin expansion of a 110 basis points. Let’s go through just some of the highlights. Commercial aero sales were up 3% in line with our expectations supported by double-digit sales increases of large commercial jet and continued healthy demand for mid to large business aircraft. Commercial aftermarket sales were up 5% in the quarter, driven by improving flight hour trends and ATR and robust RMU, the repairs, mods and upgrades, sales in BGA. Partially offset by lower spares demand in part due to the surplus inventory market, lower spares volumes in China and lower engine advance in utilization rates in business aviation. Now Defense & Space sales were down 11% in the quarter, well below our expectations. You recall our original guidance was a decline of approximately 6% that expected decline occurred really driven by aftermarket demand deferral as well as a program completion and program wind downs. What the additional variance in the quarter can be attributed really primarily to supply chain constraints which resulted in customer shipment delays. I would like to just take you through that a little more detail in the following slide. So you go to slide 6, starting with 2013 on the top half of the page, you can see the quarterly defense progression of sales on the right including the deeper sales declines in the second and third quarters. Again, we expect that sales will be down for defense in the quarter mid single digits driven by program ramp downs in lower defense spending. So half the decline was expected, but the other half was unexpected. Parts availability and supply chain constraints were primarily responsible for the lower than expected sales with a number of shipments being pushed out of the quarter. Going forward we don’t anticipate these issues repeating and as a result our expectation in the execution will improve and we will cover the sales over the next three to nine months or so. So when you layer on an increasing challenges of the recent government shutdown and the ongoing sequester, we now expect sales for D&S in 2013 to be down approximately 6% for the year. We’ve seen the biggest impact from the ongoing sequester in budget cuts reflected in lower government services business, which importantly is the lower margin business within the segment. Looking forward the good news is D&S backlog is down just 4%, its holding up relatively well compared to the sales decline and partially due to increased international wins. And under the current set of budget functions, we expect our initial framework for 2014 to remain intact with sales down for D&S low single digit 2014. So with that background on Aero, let's go to Slide 7 Automation and Control Solutions, ACS. Sales were up 4% in the quarter. Strong growth in the products businesses, a modest contribution to sales from Intermec which closed two weeks before the end of the quarter. And as a result, sales in the quarter from M&A were less than initially expected but again margins were better as a result of lower than expected dilution. Let's just go through couple of the details for ACS. First on a regional organic basis, sales in the Americas were up 4% driven by strength in residential end markets and improving trends in commercial retrofit, partially offset by weaker industrial products and weak commercial install in energy products in the U.S. Europe was approximately flat with growth in ESS driven partially or partially been offset by lower sales in building solutions. And China sales for ACS were up 8% with good growth in both ESS and in process solutions. Now looking at each of the businesses of ACS, ESS or Energy, Safety and Security, sales were up 5% organically with good performance in security, ECC and Life Safety as a result of the U.S. residential strength I mentioned earlier, the benefit of new product introductions and also geographic expansion. Process Solutions sales were flat in the quarter with continued good services growth partially offset by larger project completions and consistent with the slow orders environment we've seen over the last year and a half with some customer delays and some lower capital spending. However the good news is we saw nice uptick in project orders in the quarter, coupled with an impressive pipeline of additional projects and we're seeing the benefits of efficiency and productivity gains in HPS reflected in higher margin rates. Finally for BSD, for Building Solutions and Distribution, sales were up 1% organic driven by higher sales in our Americas security distribution business and building services partially offset by continued challenges in the U.S. energy retrofit market. Moving to segment margins, EPS was up 90 basis points to 15.3% in the quarter representing terrific sales conversion, much of it reflected in higher gross margins. Commercial excellence, operational improvements and strong productivity net of inflation and investments for growth all contributed to the performance. So now let's go to PMT, Performance Materials on Slide 8. You can see for PMT in the quarter, sales were 1.6 billion, up 10% down slightly though on an organic basis and below the guidance we set in July again driven mostly by formula pricing and Resins and Chemicals. However, PMT executed very well reflected in strong segment profit growth of 11% in the quarter. For UOP, sales were up 30% although roughly flat organically driven by the addition of Thomas Russell, increased licensing and gas processing sales reflecting continued strong refining, petrochemical and gas end markets. We did have as expected lower catalysts and service sales in the quarter, again in line with our expectations since we're lapping strong petrochem catalyst shipments last year. While services were lower, Petrobras fee primarily, we saw stronger licensing in UOP in the quarter. UOP's backlog also continues to be robust, up 18% organically with strong customer adoption of their new technologies as well as the benefit of investments that we're making in new capacity. Advanced Materials sales were down 1% versus the prior year, reflects continued challenging global market conditions for the Advanced Materials segment. However, operationally the plants of Advanced Materials performed well, Resins and Chemicals drove higher production volumes following planned outages earlier in the year and floorings resumed production at the Metropolis site in July following an approximately 12-month shutdown for structural upgrades. Segment margins were up 10 basis points primarily driven by the favorable impact of higher licensing and productivity in UOP partially offset by inflation and again continued investments for growth. In the fourth quarter, we'll have lapped to Thomas Russell acquisition, so we expect margins to be up year-over-year but lower sequentially and in line with the normal seasonal pattern for PMT. Now turning to Transportation Systems on Slide 9, TS saw continued improvement. Sales were up 5% organically in the quarter, driven by strong new launches, higher U.S. and China turbo gas penetration which more than offset slightly lower European light production and lower all highway sales in the U.S. We continue to expect slightly better sales performance in the fourth quarter against the backdrop of improving auto production with turbo unit shipments slightly higher than in the third quarter. Segment margins for TS were up almost 200 basis points to 14% with strong turbo material and operational productivity gains and volume leverage partially offset by unfavorable pricing. As expected, we saw a meaningful tailwind from the friction plant closure completed in June. So now speaking of restructuring, I'd like to take a moment to update you on the progress that we've made in 2013. Let's go to Slide #10. Starting on the left side of the chart entitled Restructuring Update. This is similar to a chart we showed you last quarter. You can see we've updated our restructuring balances to reflect third quarter activity. We've now successfully executed on roughly 130 million of outstanding projects and we've funded approximately $140 million of new projects, adding to the total projects in process for the year. Now as a reminder, the businesses as you know are constantly refining a pipeline of restructuring ideas, they can vary greatly in terms of scope, complexity and return. And while project approval represents a major milestone, the bottom line of course is the need to deliver the savings. We put a lot of efforts just on execution which really leads us then to the right-hand side of the page. If you take a longer term view of our restructuring track record, you can see the correlation to the sustainable improvement in our margin rates that we've delivered each year. And by maintaining a steady pipeline of projects, you see a steady improvement in those cumulative savings. So as Dave said, this is a key element of our playbook. So as restructuring helps fund the operational improvements we garner from our key process initiatives and also our integration plans. And importantly it's enabled us to consistently deliver on high expectations in this slow macro growth environment. So now let's just take a moment to align you on our second half framework and just give you an update on how that's playing out. On Slide 11 you'll recall this framework that we used last quarter. We highlighted some of the key factors today that would cause us to come in or above the midpoint of our guidance ranges. So what we've done here is track where each of those elements is performing and we've shown that in red. And coupled with our third quarter performance the framework aligns well through the right of the midpoint of the guidance that we provided. While some of these items like the euro are fairly straightforward, let's take a moment to just explain a couple of them or talk about a couple of them in a little more detail. The commercial aftermarket for Aerospace is tracking in line with utilization rates overall. With tougher ATR spare comps in the fourth quarter partially offset by continued strong RMUs. Now we've added Defense & Space here given the third quarter issues that we've discussed and the revised outlook that we've given you for D&S for the full year. ESS exited the third quarter with strong year-over-year growth and we're assuming continued good performance albeit with some pockets of tougher comps in the fourth quarter including ECC and the scanning and mobility businesses organically, just given the strength of those businesses in the fourth quarter of 2012. For PMT we've seen some further pricing pressures in Advanced Materials but we think those will be partially offset by improved production volumes in Resins and Chemicals as well as floorings. And finally EU light vehicle production was down slightly in the third and our expectations are for it to be roughly flat in the fourth quarter. So overall the market here is trending towards the high end of our expectations. So, taking these elements to account we’re confident in our raised full-year EPS outlook of $4.90 to $4.95 and we think we’re pretty balanced in that outlook. Let’s go to Slide 12 and just talk about the fourth quarter in a little more detail. We’re expecting sales to be in the range of $10.1 billion to $10.3 billion up 3% to 5% on an organic basis. Now recognizing this reflects a step up in our organic growth compared to what we’ve seen so far year-to-date, it's important to note that we’re really not counting on much from a macro perspective but clearly we’ll have easier comps in Aero, PMT as well as in TS. So, lets look at each of the businesses just a couple of highlights in terms of the revenue outlook for each of the businesses. Sales are expected for Aero to be up 2% to 3% with more muted declines in Defense & Space more than offset by commercial OE and aftermarket growth. We also expect margin rates in line with Aero’s third quarter levels. ACS sales are expected to be up 6% to 8% largely driven by the Intermec acquisition and mid single digit organic growth in ESS. We’re planning for sales in HPS and BSD to be approximately flat for reasons we’ve already discussed. And with the full quarter of Intermec we anticipate approximately a 100 basis points of dilution to ACS’s segment margin rates in the quarter. So their margins are expected to be down slightly on a year-over-year basis. PMT is expected to be up 8% to 10% on the top line. We’re expecting mid single digit organic growth in UOP, we’ll also lap as we said the Thomas Russell acquisition at the end of October. On the advance material side we’re expecting a return to organic growth driven primarily by increased production rates in R&C and also in floorings on a year-over-year basis. And for TS terrific organic growth with sales expected to be up 7% to 10% driven by new launches, continued turbo gas penetration and flat or slightly better EU light vehicle production rates on a year-over-year basis. Now we’re also expecting for TS that margins are going to be similar to third quarter levels which will benefit -- with the benefits of the ongoing operational improvement of friction materials that we referenced earlier. EPS for the quarter, for the fourth quarter we expect to be in the range of $1.17 to $1.22 assuming an approximate 32% tax rate in the quarter or a 3 % headwind from tax on a year-over-year basis. When you normalize for tax, using our full-year expected rate of 26.5% earnings are expected to be up 9% to 14% in the fourth quarter consistent with our year-to-date tend. Let’s now move to Slide 13 and just spend a minute before we shift our focus to next year to make sure we’re working off the same baseline for 2013. Again starting on the left Slide number 13 you can see roughly where we think we’re going to end up for sales at both the Honeywell level as well as each of our businesses and again excluding the impact of D&S we’ve seen solid organic sales growth from each of our businesses this year. In the middle we have segment margins which we’re expecting to be up roughly 60 basis points on a recorded basis or roughly 80 basis points if you exclude the M&A to approximately 16.2% for the year. And as a reminder this is above the low end of our 2014 long-term targets and in fact getting there a year early. Finally on the right side of Slide number 13, we have the updated EPS guidance of $4.90 to $4.95 and we’ve shown it in two ways. First on a recorded basis but also on a tax adjusted basis where we’ve normalized the quarters to 26.5% which is a reminder with our 2012 full-year rate as well as our expected full-year rate here in 2013. So, as you can see earnings in either case $4.90 to $4.95 reflect an impressive 9% to 11% year-over-year increase. It's also important to note that with the improvement in discount rates and higher returns on pension plan assets we currently expect our funded status for our U.S. plans to be near 100% assuming rates hold at our current levels through yearend, so another bit of good news. So well there’s still a lot of work to do obviously to ensure we deliver 2013. Our 2014 planning is coming together. We wanted to take a few minutes today just to walk you through the framework that we’ve been thinking about with known headwinds and tailwinds and the discussion of the macro environment on both slides 14 and 15. So, if we start with slide 14, this is our high level planning framework with known headwinds on the left and tailwinds on the right. Now I’m not going to go through each of these individually. I’ll actually think both is probably well understood and expected, but I do think it's important to highlight what we feel is a balanced framework both on a macro basis as well as operationally. So for example just to demonstrate that balance; what we’re expecting a continued sluggish global economy. We’re also going to benefit from a very strong pipeline of new product introductions. In our long cycle businesses well sequestration will be a drag on D&S next year UOP backlog provides a strong tailwind for growth. From a corporate perspective we expect higher pension income in 2014 driven by the higher asset returns that we’ve had this year as well as the Verizon discount rates, that’s going to provide capacity for further restructuring. And then the potential in the center of the page as you can see the potential for one time gains could also provide further capacity for repositioning actions. So again that’s the benefit we think of a balanced portfolio and a balanced framework. It allows us to continue to outperform even in a challenging macro environment, make the right decisions for each of our businesses over the long-term to maximize the value they provide for shareholders. So now let’s take a look at our summary views of 2014 for each of the four businesses on Slide 15. You can see we’ve laid out some of our key assumptions. In Aero on the commercial side we’re expecting aftermarket to be up in line with flight hours while OE growth is expected to slow modestly on top of a very robust 2013 base. As we mentioned in our defense update we’re expecting U.S. DOD budgets to be a down again next year, but importantly we’re benefiting from growth in the international markets where budgets are growing. For ACS we’re expecting the short cycle improvement we’ve seen here in the second half of 2013 to continue led by new product introductions, continued residential strength and also a modest pickup in non-residential segments. We are also expecting improvements in the global industrial market as the inventories are low in the short cycle businesses and customers are beginning to invest on the process automation side supported by the orders and code activity that we’re seeing this year. In PMT our strong backlog position at both UOP and advanced materials support a favorable outlook. We’ll be monitoring us at the global markets in advanced materials but we’ll benefit from higher production volumes in both R&C as well as in flooring products. And finally for transportation in 2014, which is whether obviously the macro challenges in Europe and other regions, TS is poised for growth assuming slightly better European light vehicle production, the acceleration of turbo penetration globally and of course new launches which will continue to drive growth with volume leverage and operational efficiencies delivering also strong sales conversion. So standing back again for our view of 2014, it clearly suggests we’ll see an acceleration of top line growth in 2014 setting us up for another good year. And as Dave mentioned we’re currently going through our annual planning process. We look forward to providing you more details regarding our outlook for 2014 during our December outlook call. So finally before we go to Q&A, let me just summarize what we’ve talked about on Slide 16. With the third quarter behind us we demonstrated once again that even in the phase of macro uncertainty and challenging external factors we can deliver on commitments. The balanced nature of the portfolio, the cultural transformation reflecting in our execution, the relentless drive to be better in everything we do has become the hallmark of Honeywell, and further evidence that our playbook is working. As we turn our attention to 2014 we’ve recognized there’s much uncertainty in the end markets, and probably as much as there was a year ago. However we are seeing signs of short cycle improvement and in some cases acceleration where our long-cycle businesses continue to build backlog. So regardless of the variability in the global macros, you can expect us doing what we always do. We're going to keep investing in our future, focus on both sales growth and margin expansion, delivering high ROI CapEx investments, bolt-on acquisitions, funding and healthy restructuring pipeline and introducing new products and innovations to the marketplace. These things take time but you've seen it for awhile and they're clearly evidenced in the performance that we're delivering. So with one more quarter in the books, let's go to Q&A.

Thanks, Dave. Zach, we'd now like to open up the call for our first question.

The floor is now open for questions. (Operator Instructions). Thank you. Our first question is coming from Scott Davis with Barclays. Please go ahead. Scott Davis - Barclays Capital: Hi. Good morning, guys, and Elena. David M. Cote: Hi, Scott. Scott Davis - Barclays Capital: These slides are great, Slide 11 in particular, I wish all our companies did that, so it's very helpful. So not a lot of questions on the businesses but one thing that isn't clear is that your cash balances build and I think you're going to be – you're up to around $5.5 billion of cash in the balance sheet and you didn't really want to buy stock at $65 and now you're at $85. So what can you do to ensure that we're not having this conversation in a year and you're $7.5 billion in cash in the balance sheet, Dave, not to put any pressure on you? David M. Cote: Well, it's the first time I've ever gotten this question, Scott, so I guess I have to think about it a little bit. The answer is still the same is there's a lot of opportunities out there, being it opportunistic with the cash in order to be able to really advance the future Honeywell is always the top of mind for us. And I can promise you I'm not going to blow it whatever it is and it's nice to have it there as a potential enhancer. And we're going to continue to be opportunistic on our share repurchase. You've seen us repurchase a bunch of shares this year. The M&A we've done I feel really good about and we're just going to keep doing that along with making sure that we pay a strong competitive dividend. Dave, anything you want to add? David J. Anderson: Probably just – maybe a couple numbers, Dave, to just add what you said. I mean we bought 10 million shares year-to-date. I'd say we're probably on track for $1 billion of share buyback for the full year. I think that's a reasonable number to anticipate. So it's fairly significant activity. David M. Cote: We'll continue to stay balanced in how we look at that, Scott. Scott Davis - Barclays Capital: Okay, fair enough. We'll move on to the next question. David M. Cote: Scott, I would also say it's nice to have a fully funded pension plan. Scott Davis - Barclays Capital: Yes. You've got a lot of good things going on, but anyways. Dave Anderson you mentioned in your closing comments the signs of short-cycle improvement. Can you give us a little granularity on that, maybe by geography or really what you're – more specifically what you're seeing? David J. Anderson: Sure. So maybe just talk a little bit about both, Scott, those sales and orders. For ESS we saw pretty good growth in both U.S., in Europe and in China in the quarter but we saw particularly good growth in their order patterns. So the short-cycle pattern we had 1% organic order growth in ACS and I'll talk about total ACS; 1% growth in the first quarter organic, 3% in the second quarter, 5% in third quarter. So really we are seeing that pattern and we've talked about this some that if you did have a need to covers, it's really coming about in our Life Safety business, in ECC, in the security business and to some degree it's getting a bill and mobility. That's a little bit lumpy because of some of our very, very large orders they've received in large shipments. So that's a very positive. You know the TS numbers, those look very good overall. So we see an accelerating pattern there and again, turbo penetration, global life vehicle production as well as obviously the benefit of launches. So we're going to see that trend continue. We see that as a very nice lift off, if you will, for 2014 and that's behind the competence in the statement that Dave and I both made with respect to an accelerating growth outlook for 2014. So we're very, very pleased at the underlying fundamentals, somewhat massed obviously when you look at the total on revenues in the third quarter. We talked about the guidance, et cetera, but really Intermec is the primary thing there and the second thing is D&S, but when you look at the underlying fundamentals, it's quite encouraging. Scott Davis - Barclays Capital: Okay. Just a clarification, Slide 12, where you said up 3% or 5% organic for 4Q, is that including Defense or excluding Defense? David J. Anderson: That includes. Scott Davis - Barclays Capital: Okay, good. All right, I'll pass it on. Thanks, guys.

We'll go next to Nigel Coe with Morgan Stanley. Please go ahead. Nigel Coe - Morgan Stanley: Thanks. Good morning, guys. David M. Cote: Hi, Nigel. Nigel Coe - Morgan Stanley: I agree with Scott, great detail on the slides. Just wanted to – just to clarify, Advanced Materials, Dave, you call that as accelerating production volumes in both floorings and also R&C and yet on the '14 framework, you call that as a headwind. So just wanted to dig into what you see for '14 within Advanced Materials? David J. Anderson: Well, I think what we mentioned there in terms of the framework really was the markets, the Advanced Materials market. We think those are going to continue to be somewhat challenged whereas I mean particularly we're talking there largely about the flooring markets as well as the Resins and Chemicals markets, Nigel. On the other hand, we see the benefit we think of improved production volumes in 2014 helping to offset that. So what we've really flagged here is we think that the macro environment for the business is going to continue to be challenging. Nigel Coe - Morgan Stanley: Understood. So you expect to gain [ph] share within that framework? David J. Anderson: I think we continue to perform pretty well we think in terms of our – getting our share of demand. We have as you know a pipeline of very exciting new products. The timing of those in terms of actual introduction is still TBD in terms of probably not a significant benefit in terms of 2014, but you're certainly going to see the benefit of that in 2015 as we transition particularly in floorings to the new molecule of products. Nigel Coe - Morgan Stanley: Okay, great. And coming back to Slide 14, it certainly appears that you got more tailwinds and headwinds into next year and the short-cycle acceleration ACS is really encouraging. Do you think '14 – I mean obviously you're going to give us more detail in December, but do you think '14 going to be in line with a sort of trend let's say 3% to 5% organic growth type range? David M. Cote: I'd say it's tough to put numbers on it. We're just going through the AOP planning but I don't think those are crazy numbers to think about. Nigel Coe - Morgan Stanley: Okay, great. And just finally the UOP backlog continues to grow $2.9 billion versus $2.7 billion. Just curious where are you seeing the project activity within UOP? And just the annuity question on currency, is there any benefit from the weaker dollar within that backlog number? David J. Anderson: I think the benefit on and we can come to the currency point in just a moment, but the backlog is really pretty broad based in terms of where we see it building. We have yet to… David M. Cote: Around the world. David J. Anderson: Around the world. We really have not seen. There is a lot as we've talked about, Nigel, this is true for both Process Solutions as well as UOP, but UOP would be the earlier and that if you will the written proposal cycle. We haven't seen a significant expansion yet related to U.S. GAAP but the proposed projects and the committing is in process. So the pipeline is very, very attractive there. But overall if you look at what we're seeing today in UOP and now beginning to see in Process Solutions I referenced the strength of the order rate in Process Solutions on the project side during the quarter is really pretty broad based. David, anything you would add to that regionally? David M. Cote: Yes, I'd say to Dave's point on the global expansion effort, we see it around the world and with oil at 100 bucks and the disparity in gas prices between the U.S. and the rest of the world, I think you're going to continue to see a lot of activity around the world especially as developed regions tend not to invest and emerging markets or high growth regions will. That dynamic looks pretty good for us everywhere. In terms of currency impact in the backlog, no, nothing… David J. Anderson: Nothing stands out. Nigel Coe - Morgan Stanley: Okay. Thanks, guys.

We'll go next to Steve Tusa with JPMorgan. Please go ahead. Stephen Tusa - JPMorgan: Hey, good morning. David M. Cote: Hey, Steve. Stephen Tusa - JPMorgan: So just looking at PMT here, we’re going to kind of finish the last after a dramatic run from a low single digit margin to now high teens. We are now kind of going to finish out three years here stuck in the kind of 18% to 19% range. It’s obviously good; its being growing, wouldn’t stuck maybe is a little bit too aggressive the term, but … David M. Cote: But you do where we were going. Stephen Tusa - JPMorgan: When -- what's the timing I know you got a lot of investment going on there, there is an acquisition that is diluted a bit, what is the timing of this being I think -- I had used the term hockey stick at some point to kind of the next, when is the next wave here of margin expansion? I mean we got to have to wait a couple of years or is that something that could come sooner than that? David M. Cote: We will go through that a lot more to our March Investor Day, but I would say for a high end specialty company business like PMT the prospects to be in at 19% margin that be in the ceiling is not something I would accept. So I feel pretty good about their ability to expand. Consistent with what we’ve said in the past, we’ve got a couple of key plans coming online towards the end of ’14, beginning of ’15 and that will have an impact because those are -- those plans are already full, we have to build them and the return to those can be really good. Stephen Tusa - JPMorgan: Right. So I guess just doing the math on that, I guess, that kind of accretion from that can be pretty quickly after those things come online or is there -- I’m not a chemical analyst, so I mean are there like start up issues that means the benefits lag, significantly from when those things come online? David M. Cote: Well, we will go through all of that on Investor Day, but I certainly wouldn’t anticipate start up issue. We are doing everything we can to make sure it doesn’t happen. Stephen Tusa - JPMorgan: Right. Okay. And then I guess just on the Dave Anderson on the pension tailwind for next year, can you maybe just give a little bit more color around the magnitude there and then, you bumped up the restructuring for next year I guess from 90 million to 125 million, is there any visibility on kind of what’s -- because some of this restructuring ideas is a little longer tail to it, does that mean kind of the benefits for ’15 are now kind of trending up a little bit? David J. Anderson: Yes, well I think so. I hope so. I mean that certainly was what we’ve been intend to do Steve is go through the redeployment of some tailwind that we have as a result of favorability as I mentioned on pension as well as hopefully other gains just continue this track record and I think its impressive and we like that chart showing that relationship between segment margin and what we built in terms pension benefit. With our repositioning benefit, with respect to pension I think we’re probably somewhere in the neighborhood of that $50 million in terms of year-over-year. I think it’s a good number right now for preliminary planning purposes that is if you just took current discount rates, current rates of return obviously Steve these numbers move around. But we think that’s reflective of the kind of capacity that we think we’re going to be able to have as a result of that. Stephen Tusa - JPMorgan: Right. You’ve got $50 million there, you’ve got $125 million bucks in restructuring, so you’re -- there aren’t too many, are there any major headwinds from a non-fundamental perspective lining up? It doesn’t seem like there is? David J. Anderson: From what Steve? Stephen Tusa - JPMorgan: You know headwinds, because these are tailwinds for next year 50 …? David J. Anderson: No, we don’t see for example though -- I don’t think any other below the line headwinds at currently that we would say again to keep saying this, but December as you know we provided fairly thorough full some review of our expectations and assumptions for the next year. So we will take you through that, but as of right now there is nothing that we see. Stephen Tusa - JPMorgan: Right. So that’s almost $0.20 of tailwinds of limited headwinds just right after that? David J. Anderson: Yes. You can take it that way. David M. Cote: Hey Steve, can I give you just a comment back on the PMT margins? Stephen Tusa - JPMorgan: Sure. David M. Cote: 2003 PMT segment margins 4.3, 2006 12.3, 2010 15.8 and mid point of guidance for this year 18.6. David J. Anderson: I’m sorry Dave, what was that again? David M. Cote: So anyway that’s just connecting the dots over that time period. Stephen Tusa - JPMorgan: Yes, I have the model in front of me. I can look at that. I’m not going to say congratulations. David M. Cote: Just wanted to make sure we’re on the same page. Stephen Tusa - JPMorgan: We are. Thanks. David J. Anderson: (Indiscernible). Stephen Tusa - JPMorgan: All right. I am going to throughout now. Thank you.

And we’ll go next to Howard Rubel with Jefferies. Please go ahead. Howard Rubel - Jefferies & Co.: Thank you very much. I can’t top that, but I’m going to go to the balance sheet and boring for a second. If you do net cash Mr. Anderson I believe you’ve actually used a couple of $100 million through the first three quarters of the year and you can see the growth in commercial papers up a bit. Now I’m sure some of this is due to timing, but some of this also is due to elimination of a lot of liabilities. So, if you step back for a moment as you work down all these off-balance sheet obligations and you kind of got a specialist well under control. How do you think about sort of what your risk profile is from a financial point of view? David J. Anderson: Well I think the backdrop is, it always has to be done I think Howard against the backdrop of the global economy and the U.S. economy and just this state if you will of financial markets which are obviously today still Dave I think that’s (indiscernible) uncertain periods now and I think … David M. Cote: Assuming is your question the economic outlook or is it kind of a solvency, liquidity type question? Howard Rubel - Jefferies & Co.: No, it's more what you want to think about in terms of leverage going forward because in some ways the obligations that have impeded your cash flow are being worked down and do you think -- I mean so we could think about a more normal leverage of -- level of leverage because these off balance sheet things like pension for example are really things of -- are very well managed today. And you can put a little more leverage to work or do you want to stay conservative as you’re kind of talking about with the risks in the financial markets? David J. Anderson: Well it's a good news story, because what's happening is -- well first of all again if I could just finish there quickly the backdrop is one of macro and we all know what that’s like. We’ve lived through that, we’ve lived through the … David M. Cote: We’re living through it. David J. Anderson: And are living through it. So I think that’s number one. So I think prudence is just number one. I think you just have to be very, very cautious in that respect. Number two, your point is very well taken, which is the strength of a company and the continued strong performance in execution is reflected in improved outlook in terms of our credit worthiness. Basically what we’re doing is we’re growing back into our AA2 rating, okay as a result of that and it's both again operation performance as well as the smart we think funding that we’ve done on the pension enabling that as well as managing other liabilities. So Howard what it gives us over the next two to three years is additional flexibility, and I think Dave is very clear in this in terms of what the actual deployment of that capacity and the cash is very much TBD. It gives us a lot of opportunity and if you look at our track record it's one of being we think very smart and very disciplined in how we deploy capital in balance. And we’re just going to continue to do that. But clearly we have more goodness coming through now which represents more upside to shareholders as a result. David M. Cote: Yeah. Howard Rubel - Jefferies & Co.: And then just to take that balance point and Dave talked about it early in his comments. How are you thinking about pushing of the various business units in terms of giving them capital for either new projects or for incremental product development. Have you changed sort of the hurdles Dave in any way with this uncertain environment? David M. Cote: Now I do, well first of all our hurdles have always been high, just because somebody can do a calculation that says [whack] is 9.3% now versus 10.1% a year ago; that’s really not relevant when you’re investing in 20% IRR projects and when we take a look at our internal investments whether it's R&D or CapEx we continue stay disciplined in how we invest and we continue to invest more because if the company does better well there’s just a lot more opportunities. The culture is getting better and better at being able to forward thinking and where those opportunities might be. It's better when it comes to actually executing on those and making sure they happen. So no, we never shorted the businesses. It's been part of our philosophy from the beginning about having a full pipeline of great ideas that diversify of opportunity and we're sticking to our knitting on that one. Howard Rubel - Jefferies & Co.: Thank you, gentlemen. David J. Anderson: Thank you, Howard.

We'll go next to Steven Winoker with Sanford Bernstein. Please go ahead. Steven Winoker - Sanford C. Bernstein & Co.: Thanks and good morning. David M. Cote: Hi. Steven Winoker - Sanford C. Bernstein & Co.: Hi. So I wouldn't ask this question if you guys hadn't joined the elite ranks of operational companies over time, but it goes back now to the supply chain comments you made for Defense & Space. Now of course that's in cap [ph] and you've often talked about that, but I'd like to get a better understanding of how you still managed to get surprised by your supply chain in the quarter relative to sort of tasks and contingencies and what really happened and how do you know that that won't happen again or at least from a visibility standpoint, how we improve the processes and what's really happened there? David M. Cote: I assume there's a left-handed compliment in there, Steve. Steven Winoker - Sanford C. Bernstein & Co.: The first part. David M. Cote: On the operating performance. Steven Winoker - Sanford C. Bernstein & Co.: Yes. David M. Cote: Yes, as you continue to push the envelope on getting better and better when it comes to improving supply chain, meaning less inventory overall while improving delivery, it's kind of that old Japanese analogy that as you lower the water level, which we have with inventory and aerospace, well there are rocks that get exposed. And sometimes the rock surprises you a bit. And in this case we did get surprised and it's one of those where I would say I wish we had done a better job with it and I know Tim would say that that we should have seen it coming but we didn't. So this is all fixable. The process is fixable. The sales are recoverable and it will happen and it's just another rock that we have to fix and it will happen. Steven Winoker - Sanford C. Bernstein & Co.: Okay. And then on the comps for the fourth quarter, you talked about them getting easier, that's true expect for I guess ACS which was plus 4% last year anyway organic. So a little more color excluding Intermec obviously for what's giving you confidence on the part of comps still showing the kind of growth you're talking about? David M. Cote: Well, it helps – I mean as you know we track short-cycle orders weekly down to very more business levels to get a sense for what's going on and we could see the orders.

I would… David J. Anderson: Sorry Elena. It's what I mentioned earlier and you may have the data again, but it's what I mentioned earlier, Steve, in terms of the progression of what we've seen in the organic short-cycle orders rates of ACS and particularly ESS, so that's really what gives us the indication of a stronger revenue, organic revenue growth outlook. Steven Winoker - Sanford C. Bernstein & Co.: And Europe specifically within all that? David M. Cote: That's been a lot better. We mentioned that on the call last time also that we started to see that and it continues in the quarter. David J. Anderson: Yes. I was going to say on the orders rate particularly.

And for Europe, I just [indiscernible] the TS decline in the fourth quarter of last year was 8% organic, right, so there's a big pickup in TS relative to Europe. There is a big pick up in UOP year-over-year – UOP in the fourth quarter of last year, so it was down 4% organic. We're anticipating rash [ph] returns and mid to high single digit in the fourth quarter. And then of course we talked about Defense & Space declines moderating at the end of our piece of it from a long-cycle perspective. Steven Winoker - Sanford C. Bernstein & Co.: That's really helpful. And then just last question on friction and the plant closure and the turnaround, I mean how far along would you say are you in the broader turnaround and how you think about that part of the portfolio? Any changes as it starts to put up better performance. David M. Cote: Well, the turnaround has been substantial because just the closing of that plant in France was a really nice headache to be done with, so there's a natural pickup from that. The investment in the new facilities is going great and we expect it to be a tailwind for us next year. Steven Winoker - Sanford C. Bernstein & Co.: Great, thanks a lot.

We'll go next to Jeff Sprague with Vertical Research. Please go ahead. Jeff Sprague - Vertical Research Partners: Thank you. Good morning, everyone. David M. Cote: Hi, Jeff. Jeff Sprague - Vertical Research Partners: Hi. I have a quick little cleanup question or two here. I think we may be discussed this once or twice on previous calls but I'm still a little perplexed by the weakness you're seeing in energy retrofit. The lighting companies are seeing strong activity. The Intermec company is seem to be seeing decent activity, so there's something going on with your mix of customer or something that would kind of explain that, the parent disconnect? David M. Cote: The U.S. is tended to slow down just because of well everything you've been reading about and concerns about budgets everywhere. If you take a look though at Building Solutions performance versus all our big peers in the same business, we've actually outperformed there. And so all in all, it's a good story relative to competition but we sure wouldn't mind if the sales were stronger. Jeff Sprague - Vertical Research Partners: All right. And Dave Anderson pointed out the ACS order acceleration kind of 1%, 3%, 5% kind of Q1, Q2, Q3, but was September okay? How did September act and is there any early read on October and [indiscernible]? David J. Anderson: Actually September for us was very good, so we actually exceeded that 5% in the September month, so it was a very, very strong finish that we saw. Jeff Sprague - Vertical Research Partners: Great. Thank you very much.

Zach, we have time for just one more question.

We'll take our last question from John Inch with Deutsche Bank. Please go ahead. John Inch - Deutsche Bank: Thank you. Bring up the rear here. You don't have to laugh. David M. Cote: It's saving the best for last, John. John Inch - Deutsche Bank: Thank you. Thank you. That deserves a compliment to you. That will come last too. Okay. Dave Anderson, were there accrual adjustments in any manner that benefited margins? I mean obviously we're very robust and just trying to think about this technically? David J. Anderson: Nothing… David M. Cote: We took restructuring charges. David J. Anderson: Yes, the repositioning charges which are below the line. But in terms of the segment margin numbers, John, nothing significant on a year-over-year basis, so there's nothing really that would have driven the comparables on a year-over-year basis third quarter 2012 to third quarter 2013. John Inch - Deutsche Bank: Then China in the emerging markets, Dave Cote, you called out sort of continuing China's strength. Some companies and other industries have sort of really seen slowing in emerging markets broadly defined in the quarter. Did you – could you give still a little bit more color on what your experience was? I mean it sounds like that didn't happen. I'm just curious if you saw the evidence of this that would collaborate that? David M. Cote: No, I'd say we're doing fine and what we refer to is high growth regions and I think that China is going to continue in the world and for us and I'd say it's our ability to just increase our reach in every one of these countries whether it's products or sale and distribution, just doing all those basics that cause you to establish foundation in a country. So yes, we're doing fine there. We'll continue to look for that as opportunity for us. Only 55% of our sales are outside the U.S. today and there's 75% of world GDP outside the U.S. and there's plenty of room left for us to grow there. John Inch - Deutsche Bank: I know September kind of fade that you saw… David M. Cote: I'm sorry. John Inch - Deutsche Bank: You didn't see any kind of fading in September with respect to your overseas end markets or…? David M. Cote: No. John Inch - Deutsche Bank: Just then lastly, you've put your planning framework the uncertainties surrounding nonresidential recovery. You guys do have a fair amount of exposure to those markets and [indiscernible] it sort of seems like recovery has been pushed up, but I'm curious because you operate in some interesting segments. What are you seeing with respect to nonresidential activity today in North America as it pertains to Honeywell and is there any evidence of some green shoots that could be sort of manifesting themselves next year? David M. Cote: Well, the way I describe it if we go all the way back to the recession and we talked about v-in, v-out [ph], slow-in, slow-out and nonresi was one of those slow-ins, so it's been a slow-out. And I think we mentioned on the call last time we've seen an increase in quote activity. I can't say that we've really seen a big spike in orders as a result of that yet, but I think that is one that's going to come. It's just difficult to predict what the timing of it will be. So I think all-in-all, it's just not certain yet when that's going to show up. We'll know a lot more in two or three months of course. John Inch - Deutsche Bank: Okay. Thank you. Congratulations David Cote on your margin performance. David M. Cote: Thank you, John. John Inch - Deutsche Bank: Quite impressive. David M. Cote: Thanks.

Well that obviously concludes the call for today. I wanted to thank you for your patience and also just turn the call back over to Dave Cote for your final remarks. David M. Cote: Thanks. You've come to expect from us consistently in our outperformance and we’re pleased of course to be able to do that again this quarter. The execution of our consistent strategy in that constant seed planting that we always talk about having a great portfolio to grow with continuously improving our internal processes and just further development of our performance culture, these are things that are going to continue to service well as we look to also outperform in the future. And I could promise you we are going to continue to invest around the world in seed planting to make sure we’ve that diversity of opportunity and it’s essential to our future success. So thanks for listening.

Thank you. This does conclude today’s teleconference. Please disconnect your lines at this time and have a wonderful day.