Elena Doom - Vice President of Investor Relations David Cote - Chairman of the Board, Chief Executive Officer David Anderson - Chief Financial Officer, Senior Vice President

Scott Davis - Barclays Steven Winoker - Sanford Bernstein Steve Tusa - JPMorgan Jeff Sprague - Vertical Research Howard Rubel - Jefferies John Inch - Deutsche Bank

Good day, ladies and gentlemen, and welcome to Honeywell's fourth 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 would now like to introduce your host for today's conference, Elena Doom, Vice President of Investor Relations.

Thank you, Zack. Welcome to Honeywell's fourth 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 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 do 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 fourth quarter and full year 2013, as well as share with you our guidance for the fourth and full year 2014. Finally as always, we will leave time for your questions. With that, I will turn the call over to Dave Cote.

Thanks, Elena. Good morning, everyone. As I am sure you have seen by now, Honeywell delivered another good quarter capping off a terrific 2013. We are benefiting from our diverse portfolio and that continued focus on new products and geographic expansion plus our ability to effectively manage and what continues to be slow growth macro environment. The importance of a balanced portfolio was evident last year as it helped us to offset some of the headwinds we faced in Defense and Space and Advanced Materials over the course of the year. Most importantly, the businesses, all executed very well, delivering margin expansion in every business last year As for the fourth quarter, it's very encouraging to see sales growth 8%, up 5% organically, with organic growth better than expected across all four businesses. We continue to drive margin expansion, up 50 basis points year-over-year, for an impressive 70 basis points when you exclude M&A, and we delivered pro forma earnings per share with all of $1.24, $0.02 above the high-end of our range, so we are starting this year with positive momentum struck by order rates continue to get better and there were pockets of acceleration in the commercial aftermarket ESS, Advanced Materials and Turbo, all suggesting a modest improvement in end market conditions overall. We are also seeing order momentum out of our long-cycle businesses, building on the robust backlog has positioned us well heading into this year, with ACS solutions orders up strong double digits, and our defense backlog up about 20% year-over-year due to strong international wins. We are also increasingly confident in our outlook because of the smart gain deployment actions we took in the fourth quarter. As you saw from our press release, we are able to proactively fund restructuring and other actions fully deploying the $195 million pre-tax or $0.16 EPS gain from the sale of B/E Aerospace shares in the fourth quarter. You will recall, we received about 6 million shares prior to the Consumable Solutions business sale in 2008, and we sold 2.6 million of those shares in that fourth quarter. We also sold an incremental 1.5 million shares in this first quarter, and that will yield about a $0.10 gain that we will similarly deploy with repositioning and other actions. So in total, a pretax gain of approximately $300 million; $200 million in the fourth quarter and $100 million in the first quarter with some more remaining in the bank. Restructuring benefits have been an important driver of our productivity engine, as it will continue to drive benefits in 2014 and beyond. Dave will take you through some of the details in a moment, but the projects funded in the fourth quarter alone are estimated to yield about $50 million of benefits in 2015, with a full run rate savings of over $100 million. We are being proactive about keeping that pipeline full, and as such, we are planning to fund additional projects in the first quarter with the gain that we will have from those B/E share sales. We think these actions position us well for further margin expansion over the next five years. In the fourth quarter, we took the opportunity to accelerate a $50 million charge related to environmental matters at Lake Onondaga in upstate, New York. Minimizing future environmental headwinds from this site by proactively seeking agreements for the completion of both dredging and capping activities based on our ability to complete the dredging portion a year early and reducing the overall cost of the project. We think this sets us up very well over the coming five years as we will begin to show moderation in ongoing environmental charges in the out years. We also offset the loss on sale of Friction Materials due to deployment of that B/E share gain. As you saw earlier this month, we agreed to sell Friction Materials, which we expect to close sometime in the second half of the year. We think this transaction will help our Turbo business focus on their differentiated technologies and long-term growth outlook. While we think it's prudent to remain cautious on the overall macro environment, we are also increasingly confident in our 2014 outlook based on the momentum we saw in the fourth quarter. So for the year, more of what you have come to expect, strong sales conversion and double-digit earnings growth and strong cash flow. We are going to continue to remain flexible, and while managing our cost is important, we are also focused on supporting sales growth and investing in high ROI capacity in PMT, new products and technologies, and growth regions. Our strong backlog in new product pipeline are setting us up for a multi-year cycle of outperformance. For example, Honeywell's Wi-Fi Smart Thermostat with voice control won the Envisioneering Innovation & Design Award for 2014 at the International Consumer Electronics Show. This latest connected home innovation employs new voice technology allowing people to simply saw, “hello thermostat”, to activate and control their home's temperature, and I’ve got to say it is pretty cool. I have got it in my own house, and it's pretty neat because if nobody else is listening, at least your thermostat does what you ask it to. And as everyone at Honeywell knows, I am extremely optimistic about where we can take our proprietary cloud-based voice control solutions. We are focused on providing a more productive and enhanced customer experience and our guys keep getting better and smarter with a bunch of new stuff in the pipeline. You can expect to see lots of cool innovations at the March Investor Day, where each of the businesses will highlight a number of new products and roadmaps for future growth and productivity. We are focused on delivering 2014, but we will also be issuing new five-year targets through 2018 that we think will continue to differentiate Honeywell. Our seed planting for the future, great positions in good industries, our strength of execution and the power of One Honeywell will allow us to deliver on those targets and it continues to outperform again. So with that, I will turn it over to Dave.

Thanks, Dave. Good morning, everybody. Thanks for participating in this morning's call. Let me start on slide number 4, the 4Q13 results. As you can see from the numbers, we delivered at or above guidance on every metric in the quarter. Sales came in at $10.4 billion, above the high-end of our guidance range. They grew an impressive 8% on a reported basis, 5% on an organic basis. The strength we saw at the year-end was broad-based, as Dave said, with better than expected results really across each of the segments. We will take you through those details in just a moment. On a regional basis, organic sales were up 5% in the U.S., up 4% in Europe and we had organic growth of 13% in the fourth quarter in China. Segment profit growth and margin expansion were both strong. Segment profit increased 12%, margins expanded 50 basis points to 16.1%, and if you exclude M&A which of course was largely the impact of Intermec, segment margins expanded 70 basis points with growth in all four of the businesses. Productivity continues to be a key driver, of course, offsetting inflation and also offsetting the continued investments that we make for growth. When you move below the line, which we are going to detail further on the next slide, you will see that our gain from the B/E share was fully deployed through higher restructuring, environmental charges, as well as the recognized loss on the sale of Friction. Pro forma earnings per share, which excludes the impact of the fourth quarter mark-to-market adjustment, was $1.24, an increase of 13% on a year-over-year basis. Now, the fourth quarter reported EPS was $1.19, up $0.32 from last year which you will recall included roughly last year a $1 billion pretax mark-to-market. This year, in the U.S., we ended up with no MTM adjustment as the potential gain which would have occurred was offset by the proactive adoption of the latest pension mortality tables, specifically the latest 2013 BB projection scale for those technical pension experts out there. So, what remained was an adjustment in our international plans, primarily due to lower interest rates in Germany or about $50 million pretax or $0.05 earnings per share. In the U.S., we ended the year with a discount rate of 4.89%, a return on assets of 23.1%, which contributed to 100% funded status globally in our pension plans at year-end. Now, for the full year 2014, we are now expecting about $130 million pension income lift in 2014, compared to 2013, based on those better than expected return on assets. We expect this lift to generally be offset with higher OPEB and repositioning expenses over the course of the year, so that's the same as we guided when we spoke to you in December. Finally, free cash flow in the quarter of $1.4 billion, represented 142% free cash flow conversion and brought the full year conversion to just under 100%. So with that, let's go to the one-time gains and deployment. Slide number five gives you a little bit more detailed view of the deployment of the B/E share gain. As you can see and as we’ve said, that $0.16 per share gain from the sale of 2.6 million shares in the fourth quarter equals the amount recognized for restructuring actions, corrective environmental remedies, and the sale of Friction. Restructuring represented about half of the gain deployment, and building on some of the themes you have heard from us before and you will hear more about it in March, at our Investor Day, these restructuring actions really support our future performance. On average, the projects included in the fourth quarter have a little longer paybacks than our historic average, but still very good ROIs that provide a modest tailwind for 2014 earnings, really again supporting the confidence that we have in our guidance range, but that benefit will roughly double to approximately $50 million of PBT or EBIT in 2015, with further benefits in 2016 as we realize run rate savings from these actions of approximately $110 million per year. Next, you can see the incremental environmental charge. Dave referenced earlier. I am not going to into detail in this. Again, it's the proactive agreement that we sought on the ongoing Lake Onondaga remediation. We are now likely to complete as he said, dredging activities of year earlier. As a result, we got better visibility on the cost profile going forward and that supports the production and cost efficiencies that leads to moderation in our out year expenses over the next five years. Finally, the recently announced sale of Friction Materials to Federal-Mogul, which results in a $0.04 loss in the quarter, the transaction is expected to close as we said in the second half of the year and until then, of course, the Friction business will remain part of our full-year 2014 outlook. Finally, based on the roughly 1.5 million B/E shares we sold in the first quarter, so quarter to-date, we expect an additional $0.10 per share gain that we intend to deploy further to restructuring and other actions similar to what we have in the fourth quarter. Overall these actions, again, will help position the company very well for future earnings growth. Let's go next to Slide 6, and talk a little bit about the full-year results 2013. Sales up 4%, 2% organic to $39.1 billion, of course the reported sales reflect the favorable impact of acquisitions, primarily Thomas Russell, Intermec and also Rae Systems. Segment profit for the year, up 8%, double the growth in sales demonstrating again impressive conversion translating to 70 basis points of margin expansion to 16.3%, really terrific, terrific performance continuing that track record at Honeywell. All of this resulted in pro forma earnings per share of $4.97, up 11% over 2012. Again, another year of double-digit growth. You recall, we set the bar high for 2013, and we delivered again above the high end of the range. Again, our reported EPS for the year reflects a $0.05 mark-to-market adjustment related to international plans as I discussed with you earlier. Finally for the full year, free cash flow at $3.8 billion was slightly above our guidance, driven by the strong finish to the year, despite an increase in CapEx in 2013, and a lot of that of course going to the initial stages of capacity expansion for PMT, and more about that later as we talk about 2014. Now let's go through the highlights for the fourth quarter and the full year for each of the segments starting with Slide 7 Aerospace. Sales growth turned positive as you can see for Aero in the quarter, up 3% organic at the high-end of our guidance range. I would like to take a minute just before we get into each of the components of Aero, just to walk you through some one-time items that netted within the quarter within the Aero segment. Aero recognized a significant IP litigation settlement which resulted in a royalty gain in the fourth quarter of $63 million pretax. We have line of sight to the timing of this in the quarter and we proactively insured timing was aligned with roughly $68 million of BGA OE payments. Both of these items impacted sales and segment profit. They were contemplated when we give our outlook for aerospace in December, so they net and literally have no or de minimis impact in terms of the reported numbers in terms of the segment profit and segment margin numbers for Aero in the quarter. With that background, turning to the commercial businesses. Commercial OE sales were flat in the quarter, however up 12% if you exclude the impact of the OE payments that I mentioned earlier. We saw the continued benefit of higher OE build rates in large air transport and strong sales to high value business jet platforms. That would include Gulfstream and Dassault, which both had good double-digit numbers. Commercial aftermarket sales were up 5% in the quarter supported by favorable flight hour trends both in ATR and also robust repairs, modifications and upgrades or RMU sales in BGA partially offset by fewer engine maintenance events in the quarter. Notable in the quarter was the improvement in ATR spare which we expect to continue in terms of a run rate in 2014. Now in defense and space. Sales were up 2% but down 3% excluding the royalty gain in the quarter that I mentioned earlier. Defense continues to be impacted by planned program ramp downs and delays in the U.S., partially offset by growth in the international markets. However on the positive side, as Dave referenced, the backlog for defense was up significantly in 2013. So a positive sign as we look forward to the next five years. Ensuring the segment profit, note that the higher royalties in defense and space were offset, again, by the BGA OE payments. Aerospace margins expanded 50 basis points to 20.5% through the really good performance primarily due to productivity net of inflation and partially offset by investments for growth. Now Tim is going to talk more about this in March at the Investor Day but the investments we are making in quality pursuits are resulting in big platform wins and growth for the future. Let's turn now to ACS on slide eight, automation and control. ACS sales were up 10% in the quarter, up 4% organic. They finished the year very strong with continued acceleration in the products businesses combined with strong orders in the solutions businesses. Let's just go through a little bit of color for the major components of ACS. For ESS, for energy safety and security, the sales were up 18% reported, 5% organic, good growth in security, life safety and ECC as a result of the U.S. residential and retail chain strength, I mentioned earlier and that's been a theme obviously, new product introductions and also continued good geographic expansion at ACS. Process solutions sales were up 1% in the quarter, organic, with continued good services growth more than offsetting large project completions. However organic orders in the quarter were double-digit driving further backlog expansion at HPS and a robust project pipeline ahead. As we saw throughout 2013, HPS had strong sales conversion as a result of higher margin backlog and the benefits of prior period repositioning actions. And finally for the building solutions and distribution business, BSD. Sales were up 4% organic driven by higher sales in our America Security Distribution business. While process solutions, BSD order rates grew double-digits in the quarter, primarily driven by a large energy win. Moving to the margins, ACS was down, as expected 20 basis points to 15.3% in the quarter, again consistent with our planning assumption, primarily driven by the dilutive impact of Intermec acquisition and also the investments that ACS is making for growth partially offset by productivity net of inflation as well as ongoing repositioning benefits. Now let's go to slide number nine, look at Performance Materials and Technologies, PMT. You can see sales for PMT were $1.7 billion in the quarter, up 12% reported, up 9% organic and above the high-end of our guidance range, driven primarily by strong results both, in UOP as well as in flooring products. This was also reflected the terrific segment profit growth, up 30% in the quarter for PMT. Just a couple of the details starting with UOP, sales were up 24%, up 17% organic, driven by the addition of Thomas Russell and increased catalyst and gas processing sales, again, reflecting continued strong refining, petrochemical and gas end markets. The advanced materials sales were up 4% versus the prior year, reflecting improved production volumes in Resins and Chemicals as well as foreign products resuming production in Metropolis. Margins for PMT were up 210 basis points, primarily due to the strong volumes, but also productivity, again, partially offset by continued investments for growth. Obviously, another good year for PMT, strengthened UOP more than offsetting the challenging year that we had in Advanced Materials. Of course, again a reminder, we are investing in new capacity in UOP, and also transition our existing footprint to support new technologies in Advanced Materials. Then just a couple highlights on Transportation Systems on Slide 10, a strong finish for TS. Sales growth accelerated up 15% organically in the fourth quarter, driven by new launches and also higher global Turbo gas penetration. Over the course of year, we have seen Europe stabilize with modest improvement as we exited the year with high EU light vehicle production up about 3% in the fourth quarter versus a very challenging fourth quarter 2012, you would recall when sales were down 8% organically. We also benefited from an uptick in China commercial vehicle demand, driven partially by Euro 3 pre-buy activity in anticipation of the new emissions standards in 2014. Segment margins for TS expanded 250 basis points to 13.6%, primarily due to the strong material productivity and also volume leverage in Turbo. Now let's turn to Slide 11, give you just an update and, again, a preview of 2014. We continue to expect sales in the $40.3 billion to $40.7 billion range for the full year, up 3% to 4% reported and approximately 3% organic. Again, this range is still predicated on a euro rate of roughly 1.30 at the high-end of the range closer to 1.35. We also continue to expect segment margin expansion 30 basis points to 60 basis points up, or 50 basis points to 80 basis points, excluding M&A. Now, embedded in that guidance includes roughly 25 million of additional repositioning benefits spread across the portfolio in 2014 from the actions that we took in the fourth quarter 2013, those that we just reviewed with you. We are increasingly confident as Dave said our EPS framework of 5.35 to $5.55, representing 8% to 12% growth over 2013. The full year growth linearity remains in line with our prior year results and the range also continues to be based on a full year tax rate of 26.5%. Now we are expecting $3.8 billion to $4 billion of free cash flow, up low to mid-single digits, reflecting approximately $300 million of increased capital spending in 2014 compared to 2013. Now, before we turn to the first quarter on the next slide, I just want to take a couple of minutes and talk about some of the bullet points on the bottom of this slide, talk about some of the key planning assumptions for the year. As you can see, we are expecting roughly flat margins to start the year, driven by two things, the acquisition dilution associated with the Intermec acquisition and also low or high net margin Parex petrochemical catalyst shipments, in UOP, in the first quarter 2014 versus the very record shipments, the tremendous record shipments that we had and we enjoyed in the first quarter of '13. As we discussed earlier, we will have about $0.10 gain reflecting the B/E shares sold in the first quarter which will be deployed for restructuring and other actions, so no net income or EPS impact anticipated from those actions. And as a result and as a reminder, although we announced a divestiture of friction materials, it remains in our full year sales and margin outlook for now and we will update you accordingly upon the close of the transaction but no significant impact to full year 2014 earnings guidance. So with that background on the full-year, let's talk about the first quarter, little more details on the guide that I just referenced. This is on slide 12, we are expecting sales to be in the range of $9.6 billion to $9.8 billion, up 3% to 5% reported or 2% to 4% on an organic basis. Segment margins are expected to be ex-M&A, up in the range of 20 to 40 basis points. Let's look now at just highlights of each of the businesses, starting with Aero for the first quarter. We are expecting sales for Aero to be flat to slightly down with mid-single-digit growth in commercial offset by mid-single digit decline in defense. On the commercial OE we expect lower regional sales to be a drag on the ATR OE in Q1 as well as for the year offset by healthy demand for mid to large cabin business aircraft in the BGA OE. On the aftermarket are expecting ATR spares growth to be ahead of flight hours in the first quarter and the continued positive stories in terms of BGA RMUs to benefit the quarter as well as the full-year. As for margins, we expect a slight decline year-over-year in the first quarter for Aero primarily due to higher initial OE shipments due to new platform wins and higher mechanical OE sales in the quarter. Aero margins are expected to pick up pace over the remainder of the year. For the first quarter, ACS sales are expected to be up 6% to 8%, 2% to 4% organically with low single digit organic growth across each of the three businesses. Now the macro environment is obviously looking moderately better as we start 2014 for ACS and we continue to see residential strength as well as modest improvement in the non-resi markets. On the strong growths we saw at the end of 2013 for ACS, both in the short and the long cycle, gives us obviously increasing confidence. And due to the acquisition dilution, the ACS margin rate in the first quarter is expected to be flattish with margins again improving over the course the year driven by good growth as well as productivity. PMT is expecting sales in the first quarter to be up 4% to 6% building on a terrific first quarter 2013 as well as obviously the strong performance we had in 2011 and '12 with PMT. We are expecting another quarter of sales growth in UOP but as a reference the mix of shipments for UOP in the quarter will result in a headwind for the margin rate for PMT. The advanced materials are expecting flattish sales primarily driven by unfavorable price raw spreads in R&C and lower R-22 pricing in floorings which is why our new Solstice product suite is so important as it ramps up over the coming years. Now, as you know, PMT is also continuing to run at full capacity levels at many of its plant and will start to benefit from increased capacity in 2015 but particularly pickup in 2016 on that front. In transportation systems, expecting more the same, with sales in the first quarter up 5% to 7% driven by new platform launches, continued Turbo gas and diesel penetration and also increased European light vehicle production rates on a year-over-year basis. We expect TS margins to be up approximately 250 basis points, primarily from volume leverage in Turbo as well as productivity gains. EPS for Honeywell first quarter, we expect to be in the range of $1.23 to $1 27, up 6% to 10% year-over-year when you normalize for the effective tax rate using our full year expected rate of 26.5% and again consistent with our normal EPS linearity profile. So now let's move to slide 13 and just summarize before turning it back over to Elena for Q&A. So obviously 2013 is behind us. We have demonstrated once again we can deliver on our commitments, despite limited help from a macro environment. It's a big reminder of the value of the diversified and balanced portfolio, the strength of the positioning of that portfolio as well as the strength of the Honeywell playbook. We set, we met high expectations, particularly as it relates to margin expansion and earnings growth. All of the businesses as Dave said, executed well with margins expanding in every business in 2013. We achieved this while maintaining our focus in investment for the future, doing the smart things that are going to deliver value for years to come. As we said before, we are planning for more of the same in 2014, modest top line growth, but strong margin expansion. We feel more confident in our outlook based on the signs of stability and the pockets of improvement in both, the number of short and long cycle businesses, but nothing as Dave said, again at this time suggest anything less than conservative planning is prudent. The playbook is working. Our operating initiatives are having many landings in terms of results they are yielding, setting up discernible multi-year tailwind. Seed planting and repositioning benefits has become a hallmark of our execution story, we are investing in more profitable growth as well as asset efficiency. As you can see now, we have significant restructuring savings in the bank for 2015. In summary, we are excited about what the year 2014 entails. We knew that the finish line of the last five-year plan set back in 2010, we have got a lot of momentum across the portfolio leading up to our March 5 Investor Day. We will be updating you there on our framework for 2014, unveiling our new five-year targets out for 2018, and also providing roadmaps by business on how each SPG president plans to drive for more profitable growth through more innovation and execution. With that summary, Elena, let's go over to you for Q&A.

Great. Zack, if you can open the line? We will take our first question?

The floor is now opened for questions. (Operator Instructions) Thank you. Our first question comes from Scott Davis with Barclays. Please go ahead. Scott Davis - Barclays: Guys, one of the numbers that you gave China up, 13%, I think that's the best quarter you had China and gosh, I think it's been quite a while. I mean what, can you give us some granularity? I don't think many of your competitors are going to see anything close to that, so what's working for you in China and what's the visibility? I mean, is there a turn there in the businesses you are selling into or is this more a short-term?

Things feel pretty good for us in China, Scott. We did pretty well. If you take a look at the total year and the fourth quarter, and when we take a look at our short cycle order rates, they are also looking pretty robust and it's pretty much across the board, across all the businesses, and I really think it has a lot to do with the focus we have on becoming the Chinese competitor. This makes us a lot more local in everything we do and I think that's an economy that's going to continue to grow and grow for a long time, and we have just been working very hard at positioning ourselves there to be successful. Scott Davis - Barclays: I guess the natural follow-up to that is just that is this more of Honeywell specific or do you think that you are seeing actual turn in the overall industrial macro in China?

I guess, I would break it into the two pieces. I am not sure always how reliable all those statistics are when you see industrial production and that kind of thing out of China, so whether it's really good or really bad on the statistics. I think some of that was a bit of a grain of salt. Overall though, I would say we still see it growing, and within that we are growing better, so I think it's a combination of the two. Scott Davis - Barclays: Fair enough. Then, you guys just talked a little bit about Turbo. It's always been a great business, and you have grown above market, I think something in the neighborhood of, call it, 7% or something over production vehicle numbers, but we will hit an inflection point here where you can outgrow those historic levels, just because the CAFÉ standards and such globally are all picking up to such aggressive numbers pretty quickly, can we start to think about Turbo as being a higher growth than 7% plus, you know, global SAAR or is this what you saw in the quarter more of a short-term temporary?

I am not sure what number I would put on the overall growth, Scott, but I would say as we said in last year's investor presentation, there is explosive growth possible in our Turbo business for a number of reasons. One is exactly what you said about the increasing standards around the world. The second is that a Turbo is one of the easiest, least, technologically difficult things for any OEM to do in order to achieve those standards. There is a lot of more complex stuff they can do, but Turbo, they are pretty well known, pretty well understood. I think that penetration rate is going to continue and we are uniquely advantaged within that space because we have a jet engine business, and that jet engine business allow just stuff like Material Science, Airflow Handling to be shared with the Turbocharger, because the Turbo is really just a small jet engine. So again I would say, it's the combination of the two. That market is going to continue to grow very well, but we will also grow very well within that market because of our capability. Scott Davis - Barclays: That's fair enough. Okay, I will pass it off. Congrats on a good year, guys.

Thanks.

Thank you.

We will go next to Steven Winoker with Sanford Bernstein. Please go ahead. Steven Winoker - Sanford Bernstein: Thanks. Good morning, Dave, Dave and Elena. Nice close to 2013.

Thank you. Steven Winoker - Sanford Bernstein: Let me start with just the growth investments that you referenced in most of the business units. Can you give us any kind of - excluding the repositioning to see operating expense impact maybe in total or some sense for sizing how big they were this quarter?

I guess, I’ve got it off the top of my head. It's a decent size number.

If you look at it across the business, and here we are really talking about, Steve, obviously we are talking about growth investments and so you have to keep up that the investments part of that in quote, because it’s really P&L but it's really building for the future. So, it's a combination of R&D new product. The whole new product process, introduction process, CapEx, and the flow through of depreciation related to that CapEx, it's the expansion, feet on the street in terms of high growth region as well as just as you know, just the over continued investment we are making in terms of sales and marketing capabilities and engineering capabilities. It's about 50 basis points. Steven Winoker - Sanford Bernstein: Okay.

When you think about the total of that. Steven Winoker - Sanford Bernstein: Okay, that's helpful, and I suppose in March we will get more detail not just anecdotes around traction, I mean as you mentioned, you have been making these investments for years now on a relative performance versus direct competitors and peers. I think that would be helpful because it is often something we hear about. The second one is on the repositioning projects themselves, maybe give us a little sense for where you are directing us? I think it's no longer FrictionMaterials. Where is it going and what kind of things are you are you doing? Is it Intermec? Is it M&A oriented or where investors often wonder, is this the end of it for Honeywell from a repositioning standpoint, maybe give us a little flavor for what you are finding?

First I would say, if you noticed that it’s really spread across the businesses where we have done a lot of this. And the nice thing I like about it is, we still see lots of opportunity to be able to improve our operations. As you know, our margin rates are still lower than our, say high margin rate peers, and that's all upside for us as we continue to make the company more efficient. So the restructuring is pretty much spread amongst the businesses.

I think Dave just to add to that, and Steve, we talked about this. You are aware of this. I mean, the whole ideation, if you will, the development of projects and the pipeline of projects is something that we take very, very seriously, and it's something that's not a stop/start. This is a continual good process in terms of really looking for those opportunities to really set a new bar, if you will, in terms of the performance of the businesses. The other thing is, it's really consistent with, and we talked about, just a continued expansion and the growth of the global footprint of the company, really realizing the opportunity that exists in terms of the GDP, the GDP growth globally. So all of that functional transformation. It's amazing the things that we continue to do in terms of really a rethinking our model for support, both the service levels and the quality levels and the cost levels in FT. Just this past year I was working with Dave on the functions, it's amazing, the amount of things that you could consider to be still sort of breakthrough. Those all represent repositioning opportunities. We view that very, very positively, we are obviously strategic in our thinking and then very good we think in terms of execution by actually delivering on those results. We take that very seriously as well in terms of the ongoing tracking and management of these projects. It's something you ought to count on from us. Steven Winoker - Sanford Bernstein: Right. In light of the volume growth that we are starting to talk about, I assume your capacity utilization levels are low enough at this point that there is not a lot of CapEx coming other than what we just talked about for UOP and specific projects on that front.

Yes. It's largely a PMT issue to your point, not much of an issue in the other businesses. Steven Winoker - Sanford Bernstein: Okay. Great, and I will pass it on. thanks.

Okay.

We will go next to Steve Tusa with JPMorgan. Please go ahead. Steve Tusa - JPMorgan: Good morning. Maybe you program (Inaudible) say great quarter, so we are going to have to say it at every conference call here.

I don't mind. Steve Tusa - JPMorgan: On the fluorine side, you mentioned the incremental headwinds in the first quarter. I mean, it's a not a huge part of your business and I think pricing has stabilized there. In fact, I think one of your main competitors talked about raising price earlier this year. Maybe could you talk about, with the volatility and price there, or even though it's small, what kind of impact it's had on you in the last year and what kind of impact you think it's that's going to have and maybe qualify it in the first quarter and then am I right in kind of viewing the second half as there's a much easier kind of price comp on fluorine or does it get worse from here?

I obviously don't want to comment on anything anybody else is saying about it. I would say though that we did degradation in the course of last year, largely because non-patent related product and this is a game where you got to be able to have really unique stuff and that's the advantage we have. Once we are able to start producing that and introducing it, then we will be in that much better a shape. I don't know that we have actually set quarter-by-quarter how much it affects us, but we did feel and in fact last year I don't expect to see a huge decrement again this year.

Just to add to, Dave, to what you have said, and we referenced a meaningful headwind for us in the first quarter and it's measureable in terms of impact, so that is something that's going to moderate in terms of headwind in the first quarter. It happened to be paired timing-wise with also the headwind that we got out of UOP in terms of Parex shipments when we really had for the first quarter, where we really had just a rollout you recall first quarter 2013 By the way, that first quarter 2013, as I referenced when I went through my remarks, was also on top of a very strong first quarter '11 and in the first quarter '12. In 2014, we have a little bit of sort of the confluence of events with both, UOP fall into little bit in Resins and Chemicals and it is related to the phenomena, Steve, that you mentioned and then basically that moderates then over the course of 2014. Steve Tusa - JPMorgan: Is it a r22 or a 410a issue?

It's largely r22. Steve Tusa - JPMorgan: Okay, so this is really the volatility. I mean, you had a spike in the price, so that should normalize. Is it about like (Inaudible) third of the year-over-year comp to down 150 in margins?

In terms of headwind that we are going to have from PMT in the first quarter, due to phenomena I just mentioned. By the way, the other headwind we have as I talked about was ACS, which is well known in terms of the acquisition, in terms of margin rate. I am just talking margin rate. It's, say, about a third of the of impact in terms of the PMT phenomena. Steve Tusa - JPMorgan: Okay. That's great, and one last question before the March meeting here. I mean, you guys are kind of putting up the low double-digit, low-teens growth. I mean, you are kind managing a pretty well to that number. It seems like you guys are a little more optimistic on the economy, which would suggest that maybe at the end of the day that 12% to 13% consisting EPS growth is not really be that much of a standout outperformance. I mean, at what point do you kind of look out in a better economy see peers growing maybe 15% plus and think about maybe doing something a little more to get that growth rate up or do we still have kind of the mentality that look it is going to click away and do, we think, over a five-year period and above average type of growth rate? Is there any discussion as to that high level approach to the business model?

Well, I would say, Steve, there is always obviously a big difference between actual and forecast. And when you are trying to forecast out for five years, its one thing to just put a really bullish economic scenario behind it, it is another to say, okay we want to make sure that we can do whatever it is that we say that we are going to do. I would rely though that, if we take a look at how we done on actual, historically we have always done very well when it came to actual, especially worse is our forecast. If we say, okay we have got plan to grow a certain percent over the next five years and the economy is significantly better than what we expected, that certainly won't be holding ourselves to that as a maximum, rather we are going to continue to be focused on how do we outperform our peers every quarter, every year, just like we have in the past. So I wouldn't get too hung up on a forecast that how bullish is the macro forecast for the economy. I am certainly hopeful that it ends up better than what I tend to think it is going to be but it is showing signs of some life now. I don't know that we are going to see a really robust economy over the next five years but you just don't know. No matter what happens, it will be our intent to outperform on the actual. Steve Tusa - JPMorgan: Okay. Thanks a lot.

You are welcome.

We will go next to Jeff Sprague with Vertical Research. Please go ahead. Jeff Sprague - Vertical Research: Thank you. Good morning, everyone.

Hi, Jeff. Jeff Sprague - Vertical Research: Hi, Dave. One way to get at that question is that it kind of looks like the cabbage path is really slowing up.

Well, we have done a lot of seed planting. There is a lot cabbage to be picked up. I agree with you. Jeff Sprague - Vertical Research: So, I mean, obviously you are not going to announce deals here today or anything but how active is the M&A pipeline and where is your head on share repurchase? Obviously you have got the $5 billion authorization you put out there. Its not clear that you are going to really aggressively move against that though.

Well, I think hacking back to the comment Dave just made on restructuring and how we keep a pretty full pipeline. We do the same thing when it comes to M&A, looking at what's available, what's possible, how do we continue to do what we call our milk runs, and just calling on companies and heard me liken it to being at a retail business where you sit there and from 10:00 to 2:00, nobody shows up and then at 2:00 for some reason seven people come it at the same time and you wonder why it wasn't spread out during the day. Well. the same thing happens with M&A deals. Sometimes they come in a bunch like they did nine, ten months ago and sometimes you go a year-and-half without much happening. So its tough to predict. So if you are focused on making smart deals like we continue to do, then it is probably going to keep coming in bunches, because I never say, okay, we have got to deploy $2 billion a year or anything like that. I want to make sure that we continue to say, stay smart about this. That being said, there is just a whole lot of opportunity for us when it comes to M&A. It's a big world out there and we look at the possibilities for great positions in good industries, building off the portfolio we have. There's still a lot of good stuff out there. So we are going to continue looking. When it comes to repurchases, I want that in our quiver as the things that we could be doing. We are going to continue to at least hold share count flat. Its my intent to do that. So. I want to make sure that we are a little more opportunistic when it comes to it. I am always fearful of falling into that 80% that buys at the wrong time and I would like make sure that we fall into the 20% that looks like, wow, that was a really smart thing to do. I think timing does make a difference there and we will continue to think about it that way. So I still see a lot of M&A potential and I think we have proven over the years that we are reasonably good at it.

Okay, another thing to add. If you just look at 2013 and this is another, I think, kudos for the company, you look at 2013, we had $1.1 billion in terms of share buyback. Te had roughly the same number in terms of M&A. Dividend, we paid out $1.4 billion rounds. $1.375 billion roughly, $1.4 billion. This is very strong performance and I think if you look at the track record of Honeywell, what we have been able to deliver, not only operationally but in terms of, as Dave said, smart capital deployment. Smart deals we thought. If you go back to 2005 Nomar transaction, the UOP transaction, go forward in terms of what we have done in terms of building on a position in gas detection, our safety products business. The growth now and AIDC Scanning and Mobility. These are all very, very smart adds that lend themselves to further both, organic and inorganic growth. Thomas Russell add to UOP. As Dave said, the pipeline is rich. There is always the distance between the cup and the lip. In M&A, it's very tough to move from concept to actually close, but what we have done has been very successful and the track record is well balanced in our capital deployment. 50% of our cash over the last 10 years deployed to build the business into CapEx or M&A, 50% back to shareholders either in the form of dividend or share buyback, so we are just going to continue to be smart about it. We think that disciplined approach pays out over time together with the operating discipline and the operating performance.

Jeff, I like everything that Dave just said with one exception I might modify and correct his pronunciation of the word smart. Jeff Sprague - Vertical Research: Interesting.

I think I would learn that through for all these years. Jeff Sprague - Vertical Research: Smart in China.

Thanks, Jeff. Jeff Sprague - Vertical Research: Dave, I also just asked that question on the context of situation what it looks like you maybe could be net cash by the end of the year. You are going out a new five-year target right, I doubt if you are modeling the recession. Perhaps, you are, but if you are going to grow earnings 10%, 12%, 13% in next five years, that's going to be a (Inaudible).

Jeff, I am well aware of the cash that we have on the balance sheet. Jeff Sprague - Vertical Research: Then just finally, Dave Anderson, said each asking you would lay out target for more profitable growth, so currently is you are going to project higher (Inaudible) are there any particular areas that actually standout as being on target form the margin standpoint?

I think, Dave, really it's across.

Yes. We see upside, maybe it should be one of the businesses, Jeff.

The pattern of that, Jeff, will vary just as the pattern varies by quarter in 2014, vary by business, by year based up on their individual growth outlooks, if you will to make up the long cycle short cycle, all of those factors are going to influence, but when you look at the overall five-year numbers as Dave said, we think are very positive for all the businesses.

By the way, Jeff, just a compliment for you, we were really amused by your phrase. A pretty typical street forecasting, well done. Jeff Sprague - Vertical Research: Yes. It's 23% every year, right? Have a good day. Talk to you later.

Nice. Thank you.

We will go to Howard Rubel with Jefferies. Please go ahead. Howard Rubel - Jefferies: Good morning. Thank you very much. A couple of things. One is, on Thomas Russell. It looks like the numbers were sequentially about the same and how is it doing? Can you kind of provide an update for us, please?

On Thomas Russell? It's doing well.

I would say between their capability and ours, extremely complimentary in market, technology and sales outreach and even manufacturing, so quite good. Howard Rubel - Jefferies: Year-over-year or you are still lacking high, what I would call a 10%, 30% growth rate?

I don't that we disclose it.

No. I think, you can comment though. It's not that level hard. Howard Rubel - Jefferies: You can see part of it below the line, Dave, so that's why -

Fully integrated in (Inaudible)… Howard Rubel - Jefferies: All right. I will leave that.

You are correct. It's doing well. Howard Rubel - Jefferies: Then in terms of Aerospace, new products, I think that there has been a number of them in terms of synthetic vision and in terms of some other things in term of integrating the cockpit. Mike, you talked about them and sort of what's your finding as you (Inaudible)?

I am not sure what you are looking for specifically there, Howard, but yes. We do have a pile of new products coming out of the Aero business, some of which they have talked about, some of which they haven't and so far so good, things are going well. Howard Rubel - Jefferies: And one of course is all the connectivity things that you have got, (inaudible), maybe you can provide an update on some of that. That's where I was going, though.

Okay. Well, you can expect us to talk more about that on Investor Day, because you are correct. We think that's the place that we excel and we see continuing to increase. Howard Rubel - Jefferies: Oaky. Thank you very much.

You are welcome, Howard.

We have time for one more question.

We will take our last question from John Inch with Deutsche Bank. Please go ahead. John Inch - Deutsche Bank: Thank you. Good morning, everyone.

Hi, John. John Inch - Deutsche Bank: Commercial aftermarket, just wondering what the trend and cadence of the business is. You had pretty robust results and from competitors and chatter about some inventory restock and you guys are going to be rolling into, you actually have these in your compares this quarters. You seem to have easier compares on the segment. As the course of the year unfolds, why don't you talk to the compares towards what is the cadence of that business.

I assume you are talking about Aero, John? John Inch - Deutsche Bank: Yes, I am sorry, commercial aerospace aftermarket.

We think that's something that starts to get a little bit better this year than it was last year overall.

Specifically, John, to put some perspective on it, we had something shifting, numbers. If you look back at the fourth quarter of 2012. We did start to see the impact of aircraft dismantling and asset pooling and that really pulled down in the developed economies, their spare sales. For example, U.S. spares in the fourth quarter of 2012 were down over 20%. Obviously this is partially offset by what we talked about a year ago, a bit of a pull-forward in buying behavior out of China. So in the fourth quarter of 2012, our China spares were up over 40%. So now, if we fast forward to 2013, in the fourth quarter we did see a return of more normal buying behavior across almost all of the geographies but in particular, you see the U.S. rebounding nicely, up over 20%, while China spare sales increased sequentially, though they are still facing that difficult comp and I think about 10% within the quarter. So moving forward to 2014, we do expect the ATR aftermarket there to grow in the first quarter in excess of flight hours as a result of the easier comp and obviously more normal buying behavior. John Inch - Deutsche Bank: And that obviously pertains to prospectively better margins in the second as the year unfolds, if I am reading that right.

I think that's fine.

Okay.

And maybe a way to summarize all of that is to say that the guidance is the same which is, we are looking at mid single digit growth in the commercial aftermarket for aerospace in 2014.

For the year. John Inch - Deutsche Bank: Can I ask you about transportation. I think European light vehicle in the first quarter was down in terms of production, down double-digit. Why is the number, I realize it's a little bit of currency headwind, but given the strength of transportation in the fourth quarter, the momentum you seem to have, why is your guide still where it is? Why 3% to 5%? Why isn't it up a little bit higher for '14?

You are talking about TS in total? John Inch - Deutsche Bank: Yes. Correct.

I guess, it's the moderating effect of friction plus there is, let's say, a conservatism on our part when it comes to what's going to happen in Europe. So we think its bottomed at this point and that's why we are starting to see increases as new launches more than offset the slight declines but its just more a case of just wanting to not get too far off on this one.

Currency also has a big impact there, but the assumption that we make, when using, as you recall, John, we are using a 1.30 Euro to Dollars. So that has a little bit of a headwind effect to TS. It's largely non-U.S., today, business. So that does have an influence as well. John Inch - Deutsche Bank: Well, is there any sort of rate to your assumption that perhaps maybe the rebound you are seeing light vehicle consumption in Europe is perhaps little bit short-term duration or is there something else? I am just trying to, is this anything more than conservatism, I guess is what I am going after?

Well, John, I would point out that, in the fourth quarter, we did see very strong buying behavior in China. Dave referenced this in his opening comments. So there is some free buy ahead of some potential regulation changes on emission that certainly bode very well for the TS sales in China in the quarter. So we are not anticipating that that will repeat. John Inch - Deutsche Bank: Okay.

And I am also hopeful that its conservatism on our part. John Inch - Deutsche Bank: I get it. I am just making sure there is nothing else in the mix that has (inaudible).

There is nothing bad. John Inch - Deutsche Bank: Just one more quick one then. It's a little bit of back to the M&A question. Dave Anderson had set a $1 billion placeholder for this year, and you kind it kind of make sense as a placeholder. I just want to know, Dave Cote, how are you thinking about perhaps the prospects given the strength of your balance sheet toward - if the opportunity came along doing say a mid-year deal in ACS or something that could sort of build up the success of Intermec and some of these other deals have done or do you really sort of see '14 at this juncture still kind of a pretty much a bolt-on year?

John, I would go back to what I said earlier. It's tough to know. We look at small stuff, we look at the bigger stuff and you just never know when something is all of a sudden become actionable and I don't want to ever commit certain amount every year, because it's not necessarily the way deals come in, but I could tell you we are very interested in M&A, because I think we have proven we are good at it. Where, it's focused on doing a good job with it today as we were 10 years ago, because it's not an area where we ever want to make a mistake, so who knows? I would just say that I have a predilection for doing M&A, because I think we are good at it and it's a way for us to really add value. John Inch - Deutsche Bank: I understand, but, Dave, would you prefer to do a bigger deal if the opportunity arose because of the success you have had or do you think the smaller bolt-on framework is really still the playbook we should think about?

I guess it depends on how we define bigger deal, because I am not favoring one or the other. At the end of the day, I just want to do good deals and I would rather do 10 $200 million really good deals than to do a $2 billion average deal. By the same token, if there is a $2 billion, really good deal. I am certainly not going to sit here going well, that's too big. I don't want to do that, so it's got to be on a case-by-case basis. The thing I can promise you is, no matter how this ends up evolving or developing, I will be able to make a strong case to you on why we can make good money on this focused on cost synergies, not counting on sales synergies and it will be a great position in a good industry. John Inch - Deutsche Bank: Thanks very much. See you in March.

All right, Dave. Do you have any final comments?

Of course. We certainly like what we have accomplished, and not just in this quarter, of course. While that does feel good, what feels even better is what we can see coming as we continue to outperform. I got to say it's been very fulfilling to complete our first five-year plan with panache even in a weaker than expected macro economy. That being said, as I say a lot and my team has heard me say a lot, yesterday's press clippings wrap today's fish. We intend to continue outperforming for a long time and the seed planting that we have done for several years now puts us in a great position to make that happen. We continue to look forward and we look forward to sharing our next five-year plan with you at our March Investor Day. Thanks for listening.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time. Have a wonderful day.