Good day, ladies and gentlemen, and welcome to the Honeywell's Second Quarter 2016 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. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mark Macaluso, Vice President of Investor Relations. Please go ahead.

Thanks, Tracy. Good morning, and welcome to Honeywell's Second Quarter 2016 Earnings Conference Call. With me here today, as always, our Chairman and CEO, Dave Cote; and Senior Vice President and Chief Financial Officer, Tom Szlosek. This call and webcast, including any non-GAAP reconciliations, are available on our website at www.honeywell.com/investor. 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 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 second quarter and share with you our guidance for the third quarter and full year 2016 and as always we'll leave time for your questions at the end. So with that, I'll turn the call over to Chairman and CEO, Dave Cote. David M. Cote - Chairman & Chief Executive Officer: Morning, everyone. As I'm sure you've seen by now, Honeywell delivered another quarter of double-digit earnings growth capping off a strong first half of the year in a challenging global economy. Earnings per share of $1.66 increased 10% coming in at the high end of our guidance range. Sales of $10 billion were up 2% on a reported basis and down 2% on a core organic basis, in line with our guidance for the quarter. We saw good growth in Commercial Aviation Aftermarket and Transportation Systems in our residential, commercial and China businesses within ACS and in Process Solutions and Fluorine Products in PMT. Segment margin expanded 10 basis points to 18.5%. On an operational basis, this was 110 basis points of improvement as we continue our focus…

Thanks, Tracy. Tracy, if you could please now open the line for questioning?

Thank you. We'll go first to Scott Davis with Barclays.

Hi. Good morning, guys. David M. Cote - Chairman & Chief Executive Officer: Hey, Scott. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Hey, Scott. David M. Cote - Chairman & Chief Executive Officer: I hope you don't mind. We just got the EMTs in here for Tom.

I was going to say maybe a shot of whiskey might help out a little bit. Or if Cote would give you day off once in a while, you might actually be able to stay healthy. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Scott, yes. David M. Cote - Chairman & Chief Executive Officer: You can put the brakes on me.

Anyways. Dave, I love it when management teams use words like strong 2Q with a negative 2% core growth rate, so I'm going to call you out a little bit. The only time we've seen negative core growth at Honeywell, Dave, is when we've actually been in a recession. So like, what's different? What's going on out there that gives you the confidence that we're not walking into an even tougher back half of the year? Because the first half of this year has been pretty tough, and some of your peers reported pretty tough numbers, too, it's just not just you guys. But I mean negative core growth is something we don't normally see in an expansionary time period, right? So I guess I'm asking a general question on what you think about the world. David M. Cote - Chairman & Chief Executive Officer: Yeah, I don't think we've ever referred to this environment as being expansionary. And the way I would describe the overall performance and why we say strong: if you take a look at the cash we generated, if you take a look at the operational margin rate improvement, 110 basis points which is consistent with what we were doing last year. It's just all the stuff to the right of the chart was moving in the right direction. This year it's not. If you take a look at the EPS growth, we've been able to deliver on that. And the chart Tom showed that said about $0.15 or $0.16 of the total $0.14 increase or $0.15 increase came from operations. That's pretty strong operational performance. Now you could say, okay, it is 2% negative core organic. That's true. It's also consistent with what we had forecasted, was our guidance range, so it's not like it…

Yeah, no, I get it. If you go back to your guidance two quarters ago, negative 2% would've been off the table but yes, I think you've performed about as good as you can do with that kind of a growth environment. I'm not busting your chops on that. Just lastly, UOP catalyst coming back, returning the back half of the year and my understanding is it's always been a very high margin business. Is your guidance a little bit conservative on the back half PMT based on that? David M. Cote - Chairman & Chief Executive Officer: We'll never say it was conservative, we'll say that we think it's what we're going to achieve. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah, I mean as you can...

But you've got a tailwind there that's pretty material I would imagine, right? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah, you appreciate the lumpiness we've had that comes with being in that business. But we have very good visibility to the second half ramp, Scott. In fact, when you look at the third quarter, more than three quarters of the catalyst sales that we foresee are in backlog and ready to go. And in the fourth quarter, we're near the same position that we've been in the past in terms of the percentage of backlog that we have. So there's little bit more wood to chop for the fourth quarter but we have good line of sight and good visibility and yes there is a step up but the team is confident in being able to execute on it.

Got it. Okay. Good luck, guys. Thank you. David M. Cote - Chairman & Chief Executive Officer: Thank, Scott.

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

Hi, guys. Good morning. David M. Cote - Chairman & Chief Executive Officer: Hi, guy.

Just a question on Aerospace. There's a headline that American Airlines is deferring their 22 A350s and if you looked at the press, at the local press in Arizona, it sort of was writing about big layoffs and furloughs in your Aerospace business back in May. And I understand that a lot of the stuff is temporary, but can you just talk more about the Aerospace cycle, why such big sort of unusual furloughs in the Aerospace business? Are you worried about the direction of the commercial aerospace cycle? Just connect the dots for us. Thank you. David M. Cote - Chairman & Chief Executive Officer: Yeah. On the volume side, ATR actually feels fine. The biz jet industry is struggling a little bit and we expect that will continue. That will be offset by all the new platforms we've been on. When you look at the layoffs and furloughs that you're referencing, a lot of that is being driven by just better and better efficiency within our Aerospace business. Tim has been doing a remarkable job of just making all our processes work better. Whether it's how we engineer, how we manufacture, how we run our staff functions, it's really just being driven by doing a better job, overall, which is a good sign. That certainly puts us in a much better position to grow.

And just to follow up on Defense and Space, international orders, international is supposed to be a big area of growth, you talk about deferrals. How much visibility to have into 2017 and 2018 on these delays? Thank you. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah, I mean, the backlogs are holding up and as far as Defense and Space goes, the challenges for us were more in I'd say the commercial helicopter market. And a lot of the other defense companies that have commercial helicopter business, separate those out. We've got ours right in the Defense segment. And with the number of used aircraft available, as well as the declines in the drilling activity, you've seen a reduction in spare parts and services and that's impacting our portfolio there. Your guess is as good as ours in terms of where oil prices are going and when the volumes will turn. But we feel pretty confident that we're at or close to a bottom in UOP and we expect that to kind of prevail through the rest of our portfolio as well. So we expect to see this improve. The technology that we have in commercial helos is outstanding, top-notch, and we serve all the big helicopter manufacturers and have very strong aftermarket business as well. So it should turn for us, Andrew.

Thank you. And I'll echo Scott's remarks on good performance in tough markets. Thank you. David M. Cote - Chairman & Chief Executive Officer: Thank you. Appreciate it, Andrew.

And we'll go next to Steve Tusa with JPMorgan.

Hey, guys. Good morning. David M. Cote - Chairman & Chief Executive Officer: Hey, Steve.

Can you just talk about the moving parts with a little more detail on ACS in the second half? Maybe just give us a little bit of color. It looks like obviously pretty back-end loaded type of a trajectory, and I guess there's some acquisition snap-back in there, maybe just give us some color there? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah, I mean, when you look at the third quarter for ACS, we're calling flat to up 1% fourth quarter in that same region, down 1% to flat. So it's a little bit more conservative actually than what we've seen quarter-to-date. We had a very strong first quarter, as you remember, Steve, up I think 5% or 6%; a little more modest in the second quarter. So I think we've actually built the second half fairly conservatively in ACS. We'll get some improvement in S&PS, particularly in the fourth quarter to help us get that growth rate.

And what are the margins in the acquisitions going to do specifically? I know you guys were – they were very low-single digits in the – you know, the big bucket of deals, they were very low-single digits in kind of the first half here. What do you expect out of those in the second half? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah, I mean, you saw the dilution in the margin rate overall for ACS. It was on order of 50 basis points to 70 basis points. That will moderate as we get into the third quarter and fourth quarter. So overall, it'll be a margin improvement for us. And by the time we get to the fourth quarter, we'll have very strong 100 basis points improvement in ACS on an organic basis.

Okay. And then one last question just on the, you know, Dave, you talked about at the Investor Day the 4% to 5% or whatever it was, revenue guidance for next year. How does that stand today? How do you feel about that today after reducing your expectation for the second half? David M. Cote - Chairman & Chief Executive Officer: Well, the conditions that generate a 4% to 5% increase are still there. We'll see what the numbers actually look like as we get on further through the year, but all the basics are still there. When you take a look at Aerospace, it's still a case where you don't have this big increase in incentives that hurt you on the growth side year-to-year. The biz jet applications, even in tougher market still help you. UOP does bottom out this year. Some of the CapEx expansions that we were talking about in PMT are still there for us next year or are still there for us next year when we look at Fluorines in particular and what we've been able to achieve with some of the acquisitions. When you look at ACS, we still expect that to be a good performer for us again next year, although, of course, split into two pieces. So the conditions are all still there. What the macro environment looks like, as we get into that year, I guess we'll have to assess as it moves on. But all the conditions that we talked about are still present.

Okay. Thanks a lot. David M. Cote - Chairman & Chief Executive Officer: You're welcome.

And we'll go next to Nigel Coe with Morgan Stanley. Nigel Coe - Morgan Stanley & Co. LLC: Thanks. Good morning. David M. Cote - Chairman & Chief Executive Officer: Hey, Nigel. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Hey, Nigel. Nigel Coe - Morgan Stanley & Co. LLC: I hope, Tom, you've recovered from your seizure. So I just wanted... David M. Cote - Chairman & Chief Executive Officer: His EMT has got him on the machine. He's doing fine now. Nigel Coe - Morgan Stanley & Co. LLC: Oh, that's what I can hear in the background. Okay, good. Just obviously the trends in the UOP backlog have been really encouraging. I think you mentioned 10% growth in the backlog year-over-year. You're obviously calling for an inflection in the second half on catalysts. I'm just wondering, how much of that backlog right now speaks to 2017? And does it allow you to make any adjustments about 2017? I hear the comments about UOP troughing this year, but I'm just wondering if the backlog speaks to 2017 in any – in some way? David M. Cote - Chairman & Chief Executive Officer: Yeah, go ahead, Tom. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah, to me, the visibility is stronger, obviously, Nigel, in the – for the second half of the year. But in terms of our planning for 2017, we certainly are expecting significant improvement overall in UOP, on the equipment side as well as in catalysts. I mean, remember, we were down 35% in the first quarter and something like 17%, 18% this quarter. That's going to start to improve in the second half with that building of the backlog. The team is very confident in terms of both…

And we'll go next to Steven Winoker with Bernstein. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Thanks, and good morning, all. David M. Cote - Chairman & Chief Executive Officer: Hey, Steve. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Hey, Dave. That Intelligrated acquisition is great, but thinking about the $25 billion or so you talked about in M&A, should we expect more like that now? And how are you looking at the pipeline? What are your thoughts on M&A playing out from here? David M. Cote - Chairman & Chief Executive Officer: Well, the story doesn't really change from anything we've said in the past, Steve, that, yeah, we've got a lot of money to deploy and that gives us a lot of flexibility. And you've seen us do it in different ways, M&A, repurchases when we thought it made sense. And the M&A pipeline still looks really good. We have at least 100 companies we're looking at in any one point in time, from small ones to big ones. Tough to predict when they're going to become available or when we can do something, and it's not like it comes in a steady dose. Sometimes you get three or four right away. Sometimes you go a year and a half or two years with not much of anything. I can just promise you, it's top of mind for all of us, and we've got a pretty strong, good effort working on it to constantly look for stuff that will make sense and generate good returns for our share owners. We're still – money is not burning a hole in our pocket. It never will. It's important for us to be smart about how we deploy that money. In the meantime, we're going…

And we'll go next to John Inch with Deutsche Bank.

Thank you. Good morning, everyone. David M. Cote - Chairman & Chief Executive Officer: Hey, John.

Morning. So, hey, Tom, in the third-quarter, fourth-quarter as part of your third-quarter walk, I know in the first quarter you had some extra selling days and I realize you're not like a daily sales type of company, but if those come out of the fourth quarter, does that have any sort of discernible bearing I guess on growth in the quarter or anything else? David M. Cote - Chairman & Chief Executive Officer: Yeah, I would say it's reflected in the full-year guidance that we've given. We've fully contemplated those factors, John.

Okay. So there's nothing discernible. I didn't think there would be but I just wanted to double check. David, I want to pick up on Steve Winoker's question. You had an incredible run and I guess many of us sort of thought that you would be sticking around a little bit longer. And so now you're sort of doing a big ACS restructuring which I understand the logic, it all seems pretty positive. What are sort of the implications of perhaps you leaving or stepping aside a little bit sooner? Is it that there's lot of say growth initiatives the company has been looking to do and that you've sort of decided that maybe Darius should be assuming this on his own or perhaps there's M&A implications? I'm just curious, it's almost a personal question if there's something you could share with us. David M. Cote - Chairman & Chief Executive Officer: Yeah, you mean like am I running out of gas, so I need a younger guy to be able to keep the energy level of the company up?

I didn't mean it that way. We're all running out of gas but I didn't mean it that way. It's more the implication of strategic initiatives for the corporation and next steps and all that sort of stuff. David M. Cote - Chairman & Chief Executive Officer: No, you shouldn't be reading any big implications into any of this. This is just a case where I am 64. At some point investors start to look at and say, hey, we like you Dave but like what's next here and how do we make sure this continues. We've got a really good guy in Darius and he's ready now. There's no reason to wait. And better off, like Belichick, I guess, would say is better to leave a year, two early than a year, two late, and I think it's important to get the timing right. We agree on the initiatives that we want for the company. We both agree on the need to outperform, and how do we do that. I think if you were to talk to Darius, he'd talk about the need for HOS Gold and the breakthrough initiatives, the need to develop our software capability even further. What we're doing in high-growth regions ends up continuing to be important. All that being said, all this stuff is going to evolve. It's never a case – I've never felt that way where a strategy was permanently correct. Rather you needed to keep adjusting. You needed to keep evolving, whether you are a person, a company, a country, you've got to keep evolving, and we've done a lot of evolving over 15 years. And I think you can expect Darius to keep it evolving for the next 15.

Appreciate the comments, Dave. Thanks very much. David M. Cote - Chairman & Chief Executive Officer: Happy to help.

And we'll go next to Howard Rubel with Jefferies.

Thank you very much. I have two questions. Dave, you've done a nice job over time in ACS with doing a lot of product line extensions, or what I'll call business extensions. How do you think about – I mean I know with this separation of the two companies – how do you think about where you go from here with the opportunities? David M. Cote - Chairman & Chief Executive Officer: Oh, I think both are going to be extremely good, and you take a look at what's possible in the homes and buildings sector, especially with our installed base, and the increasing need for software-capable products and services. It's quite entrancing with what can happen there, and having a more intense focus on it, I think is going to be very good for us. On the commercial and industrial side with John Waldron, we're going to see the exact same thing, and the push that we've made with Intelligrated is going to help greatly there. The warehouse space we feel is going to be tremendous for a long time to come, especially with the development of the e-economy. And that's going to play very well for us, especially as you look at what we do with barcode scanning and how that fits. I'm really quite entranced with what can happen there.

All right. You bring a little bit of – I guess you've said it before. It's sort of the power of a big company, but the challenge of being an entrepreneurial one at the same time. David M. Cote - Chairman & Chief Executive Officer: Right. And that's exactly the point of HOS Gold and what we're trying to do, and you combine that with the breakthrough goals that Darius has been a big supporter of and I think has improved significantly just in the three months that he's been doing this – puts us in a really good position. There is a lot of good growth to come out of the two businesses.

To turn to Aerospace and growth for a moment, you have a fairly substantial connectivity initiative, and also there's a fairly significant change in the avionics market with the demand for ADS-B. Could you first for a moment talk about the progress you've made with the connectivity initiative? And then again, it looks like the pent-up demand for ADS-B remains, and at some point how are you going to convert that into satisfying it? David M. Cote - Chairman & Chief Executive Officer: Yeah, on the connectivity side, things are going very well there, and this really is a far superior product. The thing that's been going on right now is, while it exists, every airframer needs to get it certified so that it can be put on the aircraft. Demand is very good. We just need to be able to get the certifications done with the airframers so that we can get it out there. I'm pretty well-convinced that when consumers actually start to feel the difference between existing services and what we're able to provide with a JetWave, we're going to be quite impressed, and it's going to get to a point where consumers ask for it. And it's going to be a differentiating item for airlines, for their consumers. Interestingly, some of the surveys that have been done show that on a three-hour flight or less, passengers prefer a strong Wi-Fi to access to a bathroom, quite significant when you look at it that way. And we're really hot on what this connectivity initiative is going to be able to do for us. And on ADS-B, it's typical with any mandate is that it seems to all be backend-loaded as customers wait. And we'll be prepared for it.

Thank you very much. David M. Cote - Chairman & Chief Executive Officer: You're welcome.

And we'll go next to Joe Ritchie with Goldman Sachs. Joe Ritchie - Goldman Sachs & Co.: Thanks. Good morning, guys. David M. Cote - Chairman & Chief Executive Officer: Hey, Joe. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Hey, Joe.

Hey, Joe. Joe Ritchie - Goldman Sachs & Co.: Yeah, and I think I'll shoot with the – and go for the bathroom instead of the Wi-Fi. But... Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Suit yourself. Joe Ritchie - Goldman Sachs & Co.: Yeah, maybe... David M. Cote - Chairman & Chief Executive Officer: Just don't sit next to somebody who chose Wi-Fi. Joe Ritchie - Goldman Sachs & Co.: Exactly. Maybe just a broader question, Dave. We've been spoiled for so long the quarters, you guys have just continued to beat on the segment EBIT line. And recently, really the last couple of quarters you've just been digesting a lot, whether it's UTX, the leadership transition, M&A. Yeah, how do you respond to maybe some of the concerns that are out there right now that perhaps like you – management capacity has been strapped; the focus hasn't been as rigid as it had been historically. Maybe some thoughts around that would be helpful. David M. Cote - Chairman & Chief Executive Officer: Yeah, I think this is one where you've got to look at the record. And just – I mean for simplicity, just compare last year to this year. Sales growth was tough last year, also. It was a difficult environment last year. And we kept breaking out the margin rate improvement chart to show, here's the operational stuff and here's all the other stuff that just goes on top of it, and focus on the operational piece because the rest of the stuff can disappear. Well, this year it's just gone the other way. The operational improvement is still pretty darn good and consistent with last year. And if you look over on the right-hand side, in this continued slow-growth environment, just…

That concludes today's question-and-answer session. At this time, I would like to turn the conference back to Mr. Dave Cote for any additional or closing remarks. David M. Cote - Chairman & Chief Executive Officer: In a difficult environment, we continue to outperform for our investors. That's not going to change. The fundamentals for us remain as good as you saw in this quarter with our performance and our confidence in again raising our guidance for the year, this time to 8% to 10% growth. Rest assured we're going to continue to deliver. And we hope you all get to enjoy a great summer. Thanks.

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