Good day ladies and gentlemen and welcome to Honeywell’s Third Quarter 2015 Earnings Conference Call. At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions following the presentation [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Mark Macaluso, Vice President of Investor Relations.

Thanks, and good morning and welcome to Honeywell's third quarter 2015 earnings conference call. With me here today are Chairman and CEO, Dave Cote and Senior Vice President and CFO Tom Szlosek. As a reminder, this call and webcast including any non-GAAP reconciliations are available on our Web site at www.honeywell/investors. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our businesses as we see them today. Those elements can change and we ask 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 guidance for the fourth quarter and as well provide initial framework for 2016. Finally, as always, we’ll leave time for your questions at the end. So with that, I will turn the call over to Chairman and CEO, Dave Cote.

Good morning, everyone. As I am sure you seen by now, Honeywell delivered another quarter of double digit earnings growth highlighted by our strong execution across the portfolio. Reported EPS of $1.60 increased 10% normalized for tax reaching the high end of our guidance range for the quarter. Sales of 9.6 billion were up 1% on a core organic basis. We saw continued growth in our business jet engines and repair and overhaul activities in aerospace, and in our short cycle residential, commercial and industrial products businesses and ACS. In PMT demand for UOP catalyst and sources applications continued. We generated free cash flow of 1.4 billion in the third quarter with free cash flow conversion coming in above 100%, and we expect that to continue in the fourth quarter. While we always like more, our top line growth was respectable in this softening macro environment and our relentless focus on execution once again resulted in outstanding margin expansion and cash conversion while continuing to do the seed planting for a bright future. Our segment margin expanded 190 basis points to 19.3%. Each of our three segments delivered margin expansion above the guidance we communicated in July. HOS Gold and our key process initiatives continue to drive productivity benefits. And our previously funded restructuring actions will help us to continue improving our operations. We proactively funded over $60 million of new restructuring in the quarter, building on a healthy pipeline of new projects and we intend on keeping that pipeline full to support strong margin expansion next year and beyond. There continues to be a lot of exciting developments across the portfolio, so let me tell you about a couple of them. We announced the acquisition of Elster on July 28 for $5 billion. Elster is a leading provider of…

Thanks, Dave and good morning. I'm on slide which shows the third quarter results. Sales of 9.6 billion, were up 1% on a core organic basis as we’re able to overcome a sluggish macro environment. Growth was particularly noteworthy in BGA OE where engine shipments were strong in our ACS short cycle products businesses across residential, commercial and industrial end market, in UOP catalysts and in our Solstice suite of refrigerants. The growth in these areas helped us to mitigate the ongoing challenges we have discussed in the oil and gas, commercial vehicle and energy retrofit markets, which we served. On a reported basis, the sales decline in this quarter was again driven by foreign currency and lower pass-through pricing in resins and chemicals. Segment profit increased 5%, with segment margin expanding 190 basis points to 19.3%. As Dave mentioned, all three of our segments came in above the high end of the guidance we issued back in July. We continue to benefit from HOS Gold, our focus on commercial excellence, new product development, functional transformation and strong cost control across the portfolio, while maintaining our investments for growth. So really nice work for us each of the businesses in a relatively tough environment. Similar to the prior quarter items below segment profit was favorable on a year-over-year basis, as we had anticipated. Higher pension income was offset by additional restructuring, as Dave said we funded over 60 million of new restructuring projects this quarter. Building on our $300 million plus pipeline as of the end of the third quarter, which positions us well for continued margin expansion throughout the five year plan. On share account in addition to our normal repurchasing to offset current dilution. We accelerated our repurchase activity in the third quarter, given the market downturn in…

Heather if you could, please open the line for Q&A.

Certainly. The floor is now open for questions [Operator Instructions]. Our first question is coming from Scott Davis with Barclays.

It’s good to see a descent print in what’s been a pretty crappy tape overall, so…

Thank you.

So keeping the wheels on. But in that spirit, it’s interesting I mean you’ve done a lot of what you call seed planting already years, and your margins are exceptional, the core growth continues to be just a little shy of global GDP. I mean what do you really attribute the core growth, the lower core growth and the [bps] in margins. And what I mean is that, is the seed planting and such in the new products, is that more of a margin mix shift improving position and you’re willing to trade some volume for margins, or is it just a function really of the end markets you’re selling into?

I’d say it’s a combination of things Scott and I think we touched on most of them. One is it a slow growth environment overall. Within that we’ve been able to -- with the new product launches that we’ve done, those end up being margin enhancing launches. But as we also said back in the Investor Day a couple of years ago that we were really going to start to see the sales inflection as we got towards the end of ’16 and into ’17 as we got the planned expansions done, the aerospace launches occurred. So we pretty much expected it was going to work out this way. In the meantime, we had a lot of seed planting we've done on the process improvement side, which continues. There is just a lot of process improvement still available to us that’s going to allow us to continue to expand margins at the same time that we invest in R&D. So from an overall sales perspective, while I wish that macro environment cooperate a little more and more than we certainly it’s less than what we expected at the beginning of the year, we’re going to continue to deliver very well on that sales growth because we anticipated that it was going to be on the lower side for ’15 and some into ’16 but that the inflections would occur after that.

So Dave you’ve been doing this a long time and I mean we see at least -- those are spin around a while, see some similarities here in 2015 to 2001 and even 2007 early 2008. I mean how do you think about the weakness in emerging markets and the follow up and how that increases risk at least to the -- I mean that's called a recession risk that we could -- a small event could take us off the cliff. I mean how do you think about that and how do you plan for it?

At least from my perspective, it feels like markets really think there is a chance of a recession here. And I guess while there is always the chance if there were some un-forward terrorist events somewhere or something drastic like that, I really don’t see that. This feels a lot different than it did in 2001 or 2008 to me, just because after a great recession we’ve never really had a recovery. 2010 was the only real recovery year that we had. After that it’s really been the slow growth environment and I think that’s kind of what we can expect over the next 2 or 3 years in the just way we ought to think about things, so I don't see boom coming but by the same token I don't see a crash coming. And I really think that the ability to perform in that kind of slow-growth environment is what's going to differentiate companies and that's the way we're playing that's the way we're thinking about things. As you know we always tends to be conservative on sales and we're continue to do that specially in this kind of environment. Does that help us?

Yes, it does. I guess I went back and I read all the transcripts from 2008 and everybody held on, held on, and held on and some of the similar comments then all of a sudden it will spell off and I just -- you have to -- in our job at least you have to start scenario analysis planning here and it's feeling a little sloppy, that's all. I don't disagree with your assessment.

No, I can understand the transcripts but if you look at like debt position of the say just the American consumer back then versus today, very different, bank capability, bank reserve, they're very different than what we're dealing with today.

Yes, certainly on credit. Okay, I'll pass it on and I know you have lots of questions. Thanks guys.

We will take our next question from Jeffrey Sprague with Vertical Research Partners.

Guys I wonder if we can drill a little deeper into UOP and what you're actually expecting in Q4 in terms of kind of catalyst and other activity? And then just kind of triangulate it somewhere, where does that bring UOP for the year in terms of year-over-year change versus the prior year for the total year and really where I am going with that too then is thinking about your framework for ‘16 the reduction that you're looking for in activity is that actually an outright decline in UOP for ’16 and any other color there you could give us would be helpful?

Some overall comments and I'll turn it over to Tom. I'd say you're going to see at least three different phenomenon, I guess, one would be what happens on orders, what happens sales, what happens on catalysts. From an orders perspective that's been declining as you know and it's been a little lean here during this year and I would expect next year orders activity is going to pick up and we see that already as Tom mentioned on quotes activity. So we expect the backlog to start building again next year. I want to come to sales because of the lag from backlog to sales. We expect that sales will be down next year in UOP versus this year largely because of that backlog completion, the time it takes to build it back up again. The third phenomenon catalyst, we've seen that starting to pick up again which is a very good sign as you know and we also feel that there is this unrequited demand at this point for refinery reloads that refineries have been making a lot of money. So they have been wanted to ever shutdown to reload in the preferred dwindling yields to shutting down and getting the better productivity. In other words, we wanted to produce while the timing was in their and pricing was in their favor. And we see catalysts start to pick up when we expect that will continue through next year. You put all those together next year we expect sales to be down but orders backlog to start building up and this is just why we have a diversified portfolio, I would say diversity of opportunity for us to be able to manage that because it will come back and I have no doubt in a very good way. Tom, if you have…

Yes just to for a little more specific timing, definitely as Dave said, orders have been down particularly on the equipment and gas processing side. But with that said, there is a very strong pipeline for the fourth quarter and we kind of track the quotation activity in our salesforce.com applications and we are seeing a significant amount of inquiries and request for proposal and the like. And so we've got a very visibility to some what could be a strong fourth quarter, in terms of the backlog -- by the end of year sure it will be down year-over-year, but it's not going to be earth-shattering down, could be high single digits maybe slightly into double digits but that will be manageable. On the catalyst side, they're having a fantastic year and they had a fantastic orders quarter in the third quarter and it's going to lead to a really strong fourth quarter on the catalyst side. We'll probably be mid-to-high single digit growth on the catalyst for the full year and we hope to sustain that level of sales in 2016 on the catalyst offset, there is pressure that you will see a bit from the backlog I mention.

Jeff, I should add on the process control side, we actually expect sales will be up next year versus this year as we start to see the benefit of those megaprojects that we want.

And we'll take our next question from Joe Ritchie with Goldman Sachs.

Thanks. Good morning everyone. Maybe I'll follow-up on that last point on HPS because it seems like the growth in HPS clearly hasn’t been as some of your competitors and so if you can comment a little bit on the share opportunities there and what if anything you're seeing in terms of pricing pressure in that market?

Well. It's a kind of a tale of two cities on the short cycle side. We have seen the decline there that we've talked about. On the other side looking at these big projects the mega projects where we've always said that is really where our big market is and where we do a [projectedly] well because of the complexity and the numerous amount of input and output points that you have to maintain, we've always done well there and we've done really well over these last couple of years printing a lot of these big orders that are going to do very well for us and plan to see it through the future. We put all that together while this year has been a little tougher because of that short cycle impact and the tax at the mega projects still coming right away, that reverses next year and we start to see the benefit of that mega project kind of coming through.

Another thing I would add, Joe you asked about pricing in process solutions. Yes it is holding up well as you might expect with the discretionary cuts in our customers basis, you'd see some pressure there, but give the technology that we have really allows us to deliver some value that we are capturing pricing on. So it's holding up fairly well in that segment.

Okay. No it's helpful. And maybe kind of following up a little bit on Scott's comments from earlier and asking explicitly, we've been in inorganic growth, you call the [indiscernible] for the last few years and your margin expansion has been really impressive. And you've been able to kick out double-digit earnings growth, as you look into '16, I mean is there an opportunity for you guys to continue to do double-digit type growth in the environment that we're in today?

I want to say that certainly one of the things we're going to be looking at as we go through our AOP planning and as I probably mentioned in the past we started planning for 2016 in particular back in January of this year recognizing that the kind of macro environment, we were in and that it would require more advanced planning than a lot of companies do when it comes to how far out you look. And we're going to talk a lot more about that at the December call. But I fully expect that in a slow growth environment we're going to continue to expand margins in a way that people are going to like.

Will take our next question from Howard Rubel with Jefferies.

Thank you very much. You gave your China numbers were pretty good. Could you elaborate a little bit on that, I mean it's probably a tale of the multiple cities and products as to what worked, what didn’t and how are you seeing the environment?

Well, you're right. China is a bit of I think dichotomy at this stage because there is somethings that are still doing well and something's that aren’t doing so well and depending upon which company you talked to, you can end up on either side of that. We are one of the guys that are doing pretty well overall. I say we are seeing the oil and gas negative impact there just like we are around the rest of the world. But when we take a look at our Aero and Turbo business that’s doing fine and when we take look at ACS in particular that’s doing great, still doing double-digit and as you know it's been very good for the whole year and I'd say driven by a couple of things. One is the kind of seed planting that we've done in the past, that we've talked about, where we want to be the local guy and there have more mid-market product and that’s really helped us to be able to expand the markets that we serve and pulling together all of the ACS stuff into a single China operation has helped us a lot there also. But I think some of this a good chunk of it is just our increased competitiveness and the ability to go after mid-market. On the other side of it, we're still in the second point of it. We're still in a decent spot when you take a look at the overall needs for construction and retrofit, old buildings there is still a lot of upside there for us with ACS so I'd attributed it to. Tom I don't know if there is anything you want to add?

And then just as a follow-up on a little bit broader, a lot of the results were driven by productivity or HOS Gold or some things like that and this has been a terrific program for a long time. How do you modify it or change it so that people don’t become complaisant?

The other thing I would add is that all the new products that we had, that we introduce into the systems that have higher margin rates that what we have before because of the value was able to provide to the customer through either [Huey] or combing functions or been able to give them a better price with the better performance. That really does make a difference over time and just makes you much more competitive and a lot more profitable, so that impact is there in there also. In terms of keeping it fresh that's not that difficult I'd say for us to do and often times say the only thing that I ever worry about when it comes to Honeywell generally is that we lose our hunger. And I don't think that's going to happen, everybody still pretty hungry and wants to perform and we want that multiple premium that we think we deserve and we're going to keep doing everything we need to get it then I could promise everybody think in that way.

And we'll take our next question from Andrew Obin with Bank of America Merrill Lynch.

A question on BAC conversion, it has been slow for a while, what do you think it really takes for to pick up and what was the last time we saw that kind of phenomenon?

I think Andrew you're referring to the orders phenomenon and I talked about the backlog yes. I think it's interesting the mandates on the federal side by the President then pretty clear to the agencies and they have gone out and done all the outfield work. They have found the vendors they want to work with and they've held the competitions and right now they're in the state of needing to move close these out and actually get to the work implemented. And we're seeing some delays on that as a go through the budgeting process for next year, but I fully expect that is as they are preparing budgets which is on the federal side that this will be a practice they have to consider and incorporate.

And what was the last time we saw something that [ph]?

I don't recall -- that meeting everything is in.

This one kind of an unusual I have to say. We've got a little by it ourselves than it just shows there is a lot of pent up demand out there and I mean you're dealing with government, so they don't always move as quickly as any of might like, but that's all going to play in at some point here.

And then can I ask you, sorry.

I would say it's a good deal for them. This is one of those things where with no money out on from them, they end up saving money which oftentimes takes them some work to be able to understand and convince others, but once they do it generally gets there. So I am pretty confident the stuff’s going to convert, it's a question of timing.

And if you can give us a preview and I know you guys are going to have a sort of a call about this, but just in terms of five year plan if you look at revenues, it's no surprise I think that the revenues are running at the low end of the expectations. At the same time if I look at the margin performance it's just amazing, how should we think this framework growth versus margin in the longer term and do you need to adjust people's behavior inside the Company to sort of get more margin in a lower growth environment?

I am not worried about changing behaviors to get the margin rate performance because we're doing all that stuff now, so it's going to work out, that will work out fine. When it comes to how do we perform versus the five year plan, who knows what the economy does in ‘17 and ‘18 as I often times say the future has this odd way of unfolding differently than all of us predict and while I am predicting slow growth right now, there is a chance it could go the other way around. I don't see a recession; however, there is a chance that this could just become something a lot better. Put all that together and I would have to say the sales growth to your point that we estimated in the five year plan looks 40 at this point even with the inflexion that we're expecting. On the margin rate side still have high expectation there and as you recall in the Investor Day, one of the things we try to show was not just the 5-year plan but where we thought each business in the Company could get to. And when you look at that you’ve got pretty sure we had a chart in there a couple of years ago when we did this, when you look at that you see, jeez, there's still a lot of room to penetrate and we have higher margin rate peers in every single business that we're in and for the Company in total. And we're going to be able to continue to drive that and everybody in the Company is driving to those long-term numbers not just to achieving the 5-year plan.

And we'll take our final question from Gautum Khanna with Cowen.

I have two questions if you wouldn't mind. You mentioned the strong bid pipeline for the Thomas Russell [indiscernible] gas processing opportunities, I was just wondering if you were to book a couple of those in next few quarters, could there actually backfill the decline you are expecting at UOP next year or are these projects mostly for delivery beyond 2016 and then I had a quick one on the aftermarket as well.

I would say on the gas side, to the extent that we get those quarters, we can turn them pretty quickly. We’re going to stay concerned on what do we really expect when it comes to orders, we were encouraged that we got a couple of orders there in this past quarter versus none in the first six months of the year and we’re hopeful that we land a couple of more in the fourth quarter and early next year, but too early for us to commit on that. In terms of with that alone be not have decline in EOP sales next year, I’d say that’s unlikely. Most likely what we’re going to be dealing with is sales decline when it comes to EOP. But as you know catalysts are pretty good for us and we expect the catalyst to form well and that let’s say good mix to have.

And if you could talk a little bit more about the commercial and aerospace, ATR spares trends you mentioned some of the geographies were weak. Do you think there has been destocking going on in certain geographies this year? And can you also talk about provisioning this year and perhaps next year given the A350 ramp you sided on the OE side? And thanks.

Well, a couple of comments and then I’ll turn it over to Tom. Trying to understand exactly what is happening out there when it comes to spares is always worth you’ve probably heard me saying this before but it’s kind of an amorphous blob in terms of trying to understand what’s in there and what’s happening. So as a result of that another reason we tend to [technical difficulty] to stay pretty concerned in terms of what we expect. Overall though we’d expect continued spares growth next year it may show as in the repair and overhaul area rather than what we might define as spares. But overall, we’d expect growth to continue there and there has been some softness in China that we’ve talked about. The overall way to look at it I think the indicator that I always pay attention to is what’s happening on flight hours and as long as flight hours are growing, it means that there is going to be a demand and pull for spares and repairs of some kind and that’s the overall long term phenomena on that matters. How it plays out in the short-term is a little tougher to figure out. Tom?

I mean you pretty much said it Dave. The R&O work that we do does consume a lot of spares and that R&O business is growing very strongly. And so when you consider them in their totality I think it’s very healthy and it is in line with the flight hour growth. So that’s what we expect to continue, yes maybe there is some consolidation in airlines or different buying behaviors but overall we have kind of become accustomed to those and dealing with our approach. So I expect us to be continue to be in line with the flight hours.

And provisioning, do you expect any change there year-over-year?

I think year-over-year it should be fairly stable.

And what percentage of the ATR aftermarket today is provisioning if you could just remind us?

I don’t think we go into that generally. Nice try though [indiscernible].

That concludes today’s question-and-answer session. At this time, I’ll turn the floor back over to Dave Cote for any additional or closing remarks.

Thanks. We’re quite pleased with our continued ability to deliver double digit earnings growth even in this slow growth economy. And we recognize that kind of outperformance as what you have come to expect from us and we intend to continue outperforming. The growth programs that we have funded in every business and region will continue to deliver, and even more so in the future. That growth combined with continued process improvements from things like HOS functional transformation and GOE and the like will add to our capability to margin rates and we look forward to continuing to deliver for our investors. Thanks.

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