Good day ladies and gentlemen, and welcome to Honeywell's Fourth Quarter Earnings Conference Call. [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.

Thank you Sean, good morning and welcome to Honeywell's fourth quarter 2016 earnings conference call. With me here today are Chairman and CEO Dave Cote, President and Chief Operating Officer, Darius Adamczyk, and Senior Vice President and CFO Tom Szlosek. This call and webcast, including any non-GAAP reconciliations, are available on our website at www.Honeywell.com/investor. As a reminder, 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 principle risks and uncertainties that affect our performance on our Form 10-K and other SEC filings. This morning we will review our financial results for the fourth quarter and full year 2016 and share our guidance for the first quarter of 2017. As always, we will leave ample time for your questions at the end. So with that, I'll turn the call over to Dave Cote.

Good morning, everyone. While we finished 2016 with a strong fourth quarter delivering earnings per share of $1.74 and that’s up 14% year-over-year. The quality of earnings was strong driven by double digit growth in our European sources portfolios within Performance, Materials and Technologies as well as continued strength in Transportation systems and the Home and Building Technologies distribution business. We also funded more than $30 million in new restructuring projects and absorbed more than $115 million in Aerospace OEM incentives. We finished the year by exceeding the segment margin and free cash flow estimates that we provided during December. Segment margins for the fourth quarter expanded by 90 basis points excluding M&A, mostly due to productivity and benefits from the significant restructuring actions we executed throughout the year. Free cash flow for the quarter was $1.7 billion with 126% conversion driven by improved working capital. For the full year earnings of $660 increased 8% year-over-year operationally, our segment margins improved by 80 basis points for the year. In 2016, we also completed several significant portfolio actions that will deliver attractive future returns for our shareowners. The spinoff of our resins and chemicals business not only reduces the cyclicality and improved the margin profile of our performance materials and technologies business but it also created nearly 800 million in showing the value. And at today's AdvanSix stock price that value is $1.1trillion. We’ve sold our aerospace government services business and reinvested $175 million of the proceeds into earnings enhancing restructuring projects. We split the former automation and control solutions business into two new more nimble reporting segments that will deliver better growth, speed and productivity. In 2016, we also funded more than $250 million in restructuring projects that will provide a significant tailwind this year and beyond. We also deployed…

Thanks, Dave. I’m on slide four. Earnings per share of $1.74 for the quarter increased 14% from 2015 as Dave indicated and now this excludes the charges for debt refinancing and pension mark-to-market we talked about in our guidance and also from 2015 it excludes the divestitures that we did in 2016. To reemphasize Dave’s point, the double digit increase was achieved even while absorbing the impact of $48 million in incremental year-over-year OEM incentives. The fourth quarter reported earnings per share were $1.34, the lower amount reflects that $0.12 for that debt refinancing as well as the pension mark-to-market of approximately $0.28 a share driven by lower discount rates in U.K. Germany and the U.S. The 2015 pension mark-to-market charge was about $0.05 a share. Segment profit for the quarter was $1.9 billion and we expanded segment margin by 20 basis points and 19%. Now that’s 90 basis points at 19.7% excluding the first year dilutive impacts from M&A. Productivity and restructuring benefits along with higher catalyst and Solstice volumes were the key drivers of our margin expansion partially offset by the higher aerospace OEM incentives I just mentioned. Sales of $10 billion were flat on a reported basis and declined by 1% on a core organic basis. In PMT we delivered double digit core organic sales growth in UOP and in Solstice. In addition, our transportation systems and home and buildings distribution businesses continue to grow nicely. However, we did see declines in Defense & Space and business in general aviation similar to what others are seeing and we had unanticipated supply chain delays within our safety and productivity solutions business at the end of December which modestly diluted our performance in SPS. Free cash flow in the quarter $1.7 billion, up 8% with conversion of 126% largely…

Dave, Darius and Tom are here to answer your question. So, Shavonne, if you could, let’s open up the lines for Q&A.

Thank you. We will take our first question from Scott Davis from Barclays. Please go ahead. Your line is open.

Hi. Good morning, guys.

Hey, Scott.

Dave, this is your last conference call?

It is. This is the last one, and I can promise you I’m really going to miss it.

Okay.

That wasn’t a joke. I was serious.

It’s good for everybody, right. You will be missed, but I’m sure Darius will do a great job.

I am confident.

Anyway, well, we know where you live, if he doesn't do a good job, let's put it that way.

What you do now?

But guys I have a nit-picky question, this JetWave thing, is this -- it sounds interesting for sure, and you've talked about it for the last couple of years, it's not brand new, but is this more of a just new platforms or can you do a rip and replace and get rid of some of the existing slow WiFi that out there with GoGo?

You can absolutely retrofit, And that’s one of the comments that I had made, because we’re in that process and I think as consumers start to see what’s possible when you’re using this JetWave service, they’re going to be demanding it. I mean, it really is seller. I was on the plane, I wanted to test this stuff myself, my guy – given all the guys a hard time by going faster. So I started live streaming the show. It worked perfectly. I got a phone call through the iPad while I was watching the show, answered the phone, almost, in fact I noticed no latency in the call at all. And then when I ended the call, the show resumed exactly where I left off. It was quite impressive.

I’d add, Scott that we have over 1000 aircraft that are committed to JetWave. We got over 20 airlines wins to-date. It’s a selectable on the airbus we’ve been certified on the platforms that we mentioned earlier. We are working with Boeing to get certified as we said. So it looks pretty good. The growth is very strong double digits for us in 2017.

So what’s – how does the profitability on this stuff work, I mean, I assume this is some sort of monthly charge, but when do you start making money on something like JetWave, is it a couple of years of investment then it really starts to kick in or on day one are you shipping out units that are profitable?

Yes. We make money now.

Is that a monthly charge, Dave, or is it – how does it work?

It’s going to vary on some of that depending on the segment, so I don’t know if we’ve shared all that on the business model, but it will vary between large planes and biz jets.

But to be clear Scott, I mean, there is a significant amount of equipments that goes along with it, which is sell and install model for us, so that is also helping the growth and creates that profitability for us immediately.

This is a good one.

Okay, good. That’s all I asked. Good luck guys. Thanks.

Scott?

Yes.

Before you go I will always remember that you were our first supporter back in those dark days when I first started here, so that’s not something I’ll forget and I’ve been obviously pleased that we could prove you correct for the 15 years, but thank you for that.

You’re quite welcome. I was pretty –I got lucky, that’s all. But not the one, [ex guys].

It was a bold move at this time and I appreciate it.

Okay. Thank you.

And we will take our question from Steve Tusa from JPMorgan. Please go ahead. Your line is open.

Hi. Good morning.

Hey, Steve.

First of all, congrats to Scott for getting the call right early, it was a good one, and so, congratulations to him. First question what TV show were you watching?

It was the American. I don’t know if you’ve see it. I’m only in the first season, so don’t tell me anything.

Glad to see you’re still working out hard out there.

I got to test the system. You don’t want me fly in the plane?

I can picture Darius in the same jet just doing something different on his iPad. So just a question on tax, can you maybe just talk about what the dynamics are around, how if repatriation come through border adjustments, just give us some color on your kind of net export position, if the Brady bill does goes through I'm sure you guys have done some analysis, what should we expect?

We’re a net exporter, so on balance it would benefit us from a tax standpoint. When it comes to repatriation, it depends on what the final deal is. If there is really high tax that’s put on in, well, that makes it a lot less interesting. So, we’ll have to judge it when we see it.

And again how much – if it was a very low rate on repatriation, I mean would you be able to do something pretty quickly?

Sure.

Okay.

There’s going to be some latency between when some things enacted and there is some work that we have to do on earnings and profits, but it’s nothing that’s…

It won’t take years.

No, not at all.

Right. Okay. And then just kind of an annual run rate on Intelligrated, just kind of back of the envelope I’m getting something for this year kind of close to, you’ve given us the eight months contribution, getting something close to that a 1 billion, is that around the right number and what was the annual revenue that its finished out in 2016 for Intelligrated?

Yes. It’s a little bit less than that, I mean around 900 what we’ve called the annual run rate, but it is growing at that 20% flip, so you can see that you could get pretty quickly the numbers you mentioned, Steve.

Okay. So, the 900 is kind of where it’s growing today in first 2016?

That’s an annual rate.

Okay. And the margin there was relatively low this quarter, I think it was kind of low single digits. How do you kind of see that margin, I know it’s not going to be one of your best margin businesses here in the near term, but what’s kind of the trajectory of getting that to at least to double-digit range, I know it’s a growth story. I’m just curious to when the contribution really kicks up?

Yes. As you can appreciate the first year is always a tough one for M&A particularly one of that size. So that’s why we’ve reference those lower margin rates. But when those first year charges goes away as well as when the synergies kick in, we’ll be low double digit kind of a margin rate. The interesting thing though is that the installed base that we’ve build really gives us a platform for other offering particularly on the software side, and that's one of the main reason we bought the business is to be in the supply chain and distribution arena from a technology perspective, that’s going to help that margin rate as well.

Okay, great. And then one last quick one, Dave and Darius at the March Investor Meeting I think Dave you’re still going to be around for that one, how prominent of a role will Darius play as far as presentation and what should we expect to hear in March from Darius?

Well, they made room for my walker so I should be just fine. Darius?

I think we just kind of laid out in the finalization of laying out the agenda, but you should expect me to do the majority of the presentation that Dave normally does, obviously Dave will have a role at the beginning of the conference, but the expectation should be that I’ll be leading most of the presentations that Dave led in the past.

Okay. Well, then I’ll save the congratulations in farewell for them. Thanks a lot.

Thanks, Steve.

And we will take our next question from Steven Winoker from Bernstein. Please go ahead. Your line is open.

Hey. Thanks and good morning. I’m glad everyone in such good spirits.

But I kind of tell you, Steve, I really enjoyed your headline this morning. It’s always nice to wrap up on a good quarter.

You’re the best Dave. I can always count on you. Listen, I want to go back to the meetings that we had in December when you and Darius has talked about, you have used the word, animal spirits a lot and maybe the best describer of what you were seeing globally with your customer base. Could you maybe you know, it’s been a month or so since then month and half. How has that changed?

I would say, it’s changed become more positive. I’ve really been impress to see that improvement in animal spirits, small company CEOs, big company CEOs, a small banks that I’ve talked to, really quite surprising, so the animal spirits are real, there is no doubt about it. And hopefully if we can just get a few specs here with some actual actions that could be enough to really start turn the herd. I don’t think it takes us to crazy levels, the GDP growth and if it did that would be a problem. But I think we are going to see an improvement here, not ready to bid on it, we’re going to continue to plan for a slow growth global economy, but it still feels more positive than it has in a while coming off of worst recession since the great depression.

Okay.

Just to maybe add one other comments about, I certainly would agree with Dave’s commentary regard what we’re seeing, maybe the one offset to that and I think our clarity sooner rather than later would be particular helpful would be on lot of a discussions and that’s really what they are at the moment. Our discussions around the trade policies as they relate to both Mexico, China and some of the other trade partners that we have, so I think in our view that sooner that gets cleared up and resolved I actually think there could be a further uptick.

Great. You guys talked in your main comments about your prepared comments that safety and productivity and some of the issues there, but a little more color would be helpful on the supply chain especially in terms of these things – those issues are reversing, you expect this thing to get back to normal or is some sense of timing around a little bit more color would be helpful there?

Sure. It’s really goes around some of the issues were primarily around some of our voice and product lines especially it was due to a supplier issue due to a transition. We do expect those issues to be cleared up in Q1 and right now we’re seeing a recovery plan that’s in placed. So it did impact us. Think about an impact in their tens of millions of dollars, hundreds, but nevertheless it had a meaningful impact by Q4, we expect the whole recovery in Q1.

Okay. And just if I could, Solstice, the big backlog, how do you see that, I think you said, $3 billion, how do you see that playing, or how do you see that sequencing out over the next few years?

We see it obviously accelerating this year and continue next year as particularly with all the European new cars having Solstice in them or competitive offering, and then the further acceleration in the U.S. So we continue to seek tailwinds for that product as we move forward and continue to expect that double digit growth rate both in 2017 as well we head into 2018 and beyond.

Okay. And sorry, just quickly on Steve’s question and you said, your net exporter on tax, you guys report $5.5 billion I think on gross export, so there been some guesses out there. Could you just put a final point on the size of the import just to give folks some idea of the order of magnitude here in the delta?

I don’t think that’s something we report today. So I’d just say, it’s a goodly amount, I’m not worried.

Okay. All right. I’ll leave it there. Thanks.

We will take our next question from Jeffrey Sprague from Vertical Research Partners. Please go ahead. Your line is open.

Thank you. Good morning, everyone.

Hey, Jeff.

Hey, Dave, feeling a little nostalgic, this is last call. We’ll see in March, but good work, congrats.

Well, thanks. And I was going to wait till the end of the call, but you were , while you took some convincing you were also an early supporter and I’ll not forget that either.

All right. Well, you put it up, that’s great. By the way I was guessing you might have been watching celebrity apprentice to try to get a read on who the next President could be?

I think they already had that argument, six or seven years ago, so I think you still got to be a citizen, I mean, born here.

Just a couple of questions, can you – perhaps to Tom, but just put a final point on anything we should know on the timing of [aero] incentive quarterly in 2017, you just kind of avoid any confusion or surprises to the extent that you do have visibility on timing?

Yes. The way I characterise it, Jeff, overall it’s a modest tailwind for the year. But the first half will be different than second half. In the first half it’s actually headwind as we talk about for the first quarter. That does moderate in the second half, into result that overall modest impact year-over-year. I’m talking less than 50 million or so.

Okay. And then I’m sorry if I missed it in the kind of the preamble, but also just a final point on commercial aero aftermarket if you could, large OE versus business jet and how flight hours track for you in the quarter?

Yes. We expect in 2017 to be on aftermarket side to be largely aligned flight hours on the air transport side and that shows up in both the spares as well as repair overhaul businesses. I would say that there is a somewhat of a shift into the newer platforms that we talk about with the extensive build-ups on both air transport and business jet side. And that changes the install base, the character of the installed base. It freshens it. It has more units under warranty. So particularly on the business jet side that can have a timing impact while you still under warranty in some of the new platform. So, we’ll also on the business jet I hopefully track the flight hours, but you could see some little bit of a softness as a result of that fact that I explain.

But the actual performance in Q4, Tom?

Actual performance overall on the business jet side was low single digit for both the spares and the [RO].

And then finally, just I would imagine the pension funding took a nice repair here at the end of the year and was in pretty good shape anyhow, but is pension funding kind off the table for you guys in the foreseeable future?

Yes. I would say that we continue to have obligations on international side. We have a number of plans. As I mentioned Germany and the UK, bigger one and there is modest contribution require there, but for the big U.S. plan it’s in pretty good shape. We see no funding requirement for the foreseeable future.

Right. Thank you.

Thanks, Jeff.

And our next question comes from Howard Rubel from Jefferies. Please go ahead. Your line is open.

Thank you very much. Good morning gentlemen.

Howard, how you’re doing?

I’m all right, Dave. You’ve always watch headcount and you’ve always been conservative in your forecast and there’s a little bit have to in your numbers. Have of you gone back to the business units and make sure that there are some real confidence in that, I mean sometimes you have short cycle businesses and some there’s obviously backlog, but what have you done to test your managers?

Well, I’ll let, turn the bulk of the question over to Darius, but what you mean by have-to?

Well, the second half of the year is where you expect a bit more of the performance than in the first half.

Okay. Well, aero incentives play into that as Tom mentioned and just comparisons.

Yes, exactly, and I mean.

So, it not, it’s not like its ramp up or anything like that you have you got to have you got to believe in, it’s not that bigger deal actually, but Darius has spend a lot of time on 2017 plan with the businesses, so I’ll turn it over to Darius.

I think as always we plan and invest cautiously, so I think we certainly play in some investments particularly in the front end of the business in terms of sales and marketing and R&D, but we’re certainly not going to spend all of that in the first quarter, because sometimes you can certainly get ahead of yourselves and we’re going to be monitoring to see the growth is coming in and whether or not we can afford to make those investments and that going to phased throughout the years with triggers that will align with the kind of growth that we’re seeing. So this is not a situation we got to kind of spend the full investment budgets in Q1 and then hoping that things happen, it just not the way you operate and won’t now either.

No, I understand. But what are you doing in terms of head count for the year? Are you planning a modest increase, or are you planning on keeping that relatively stable?

All-in-all given the restructuring activities that we have plan, we think those going to be stable.

We are definitely adding on the commercial side, I mean, its across the portfolio in aerospace, PMT and other place, we are adding headcount both in developed regions as well as high growth regions.

And just to add and I think you’re going to also see a mix change because particularly in former ACS organization, but really throughout we took our couple of layers of management to increase organizational speed and decrease bureaucracy and we took some of that money that we saved and reinvested it back, particularly in sales forces.

And then one last question sort of talking about expansion in general and sort of two parts to it. One is you fixed a big chunk of your debt going forward, is the reason you still have the amount of CP outstanding, you are anticipating some benefit from cash that you can repatriate. And how are you thinking about deals for the year? I know it's always Dave reminds us every time, it’s all about timing and that’s not predictable, but within the context can you talk about possibly some of the areas you’d like to enhance?

Well, first, I’ll turn it over to Tom. But right now CP is cheap, and we’re well covered without credit lines. So it just makes sense to use it that way and we do. And you’re correct, you foretold the answer on acquisitions, depends on what becomes available and is it a price that we’re willing to pay. And Darius is not New Hampshire cheap, but he is cheap, so he’s going to be, I don’t know what adjectives he wants to put on it, but you’re not going to see it diminishing in the discipline here.

Yes. I would echo what Dave said on the debt that’s outstanding. Dave use the word cheap, I would say, CP is actually profitable and I just kind of leave it at that, but we do have an extra amount of cash on the balance because of that and we’re trying to maintain the flexibility to expand opportunities come as Dave said, it’s a good time to be taking advantage of that.

Thank you.

Howard, so I think just reinforce what Dave said, certainly it’s going to be cheap, probably the word I would use is selective and really do our -- we always have done real diligence around what is that end market look like. What are its growth prospects? What’s the competitive environment? What it’s going evolved to? What are the disrupted technologies? We’re going to be spending what we have and we’re going to be spending even more time in those elements to make sure that these are M&A strategy continues to be highly accurate, highly predictable and more in line with our financial objectives.

And Howard, I suppose that before you go, I should add, I’ll always have great memories of going to Red Sox games with you. But I’ll also remember that you blew me off at a meeting at TRW and I just want to make sure I publicly stated it.

Yes, but there was a cheesecake that was made up in homage for that, if you remember?

So I forget it, I’ve going to be public of it not just private any more.

You’re very kind.

Yes.

And we’ll take our next question from Joe Ritchie from Goldman Sachs. Please go ahead. Your line is open.

Thanks. Good morning, guys, and Dave you will be missed.

Thank you.

I guess, my first question, in listening to Darius, it was interesting to hear that there's some thought, as things kind of shake out, that you guys could benefit once policies are set. Clearly, you're in an export position, but I guess, I’m wondering Dave or Darius, how concerned are you guys about trade wars? Clearly, China's been a big growth engine for you. And then also secondly, there's been a lot of tweets around defense pricing, having to come down. And so what -- how do you guys feel, your position there as well? Ann then also secondly, there’s been a lot of suites around defense pricing having to come down and how do you guys feel your position there as well?

So, from -- to eco what that Darius said earlier, yes, you have to be worried about a trade war. If it gets to that point, it’s not going to be bad just for trade, but it’s going to be bad economically, it’s kind of tough to be in economic island now especially if you are the number economy in the world. So it depends on how all that gets handled. And yes, of course it’s a concern for us. On the defense side most of our stuff, you heard me say this is in the past, but defense is more of sales channel for us, it’s very little that we do where it just a single product solely for defense, it tends to just be another channel for us. So a lot of our stuff is already just done on a commercial pricing basis and I think that’s kind of mitigates any potential impact for us.

Got it. Go ahead Darius.

Just to add to that, I think obviously lot of the discussion and I would put it very much there from a discussion and kind of back and forth. It’s a obvious concern, because I think any of trade disputes particular as it relates to Mexico and China which are large key trading partners could be a detriment not just to Honeywell, but to the broader economy. But firstly I remain optimistic and I think that this is going to get resolved in a manner which is constructive for all parties involved and right now we don’t have anything definitive anyway other than pure speculation, so we do remain optimistic that it will evolve that way.

And Joe, just to add to Dave’s point on the defense side, many of our positions are not directly with the government. We are working with primes, and we’re not a prime. And so, they are good at negotiating with us. And we commercial ranges with them as Dave said. And for the platforms that are getting all the attention recently, I mean we’re very well aware what’s going on. I mean we’ve been on ongoing even well before this of commitments around cost with primes that we serve is our primary customer. So don’t want to dismiss their concerns, but it’s something we’re accustomed towards an environment that we operate in for years and we expect to continue.

Got it. No, that's good to hear. And I guess, maybe as my follow-on question, it was nice to see the cash flow come through this quarter, and fully recognize that 2017 appears to be a little bit of a transition year on the cash flow. Maybe kind of talk us through again, kind of what's driving the kind of two point difference between your cash flow growth and earnings growth in 2017? And then, what's kind of the framework to think about 2018 and beyond for cash flow?

Yes, I mean, it’s been interesting year for us as far as cash is been concern, I mean we’re clearly had some headwinds in the markets that we serve and the conversion, the first couple of quarters was not what we want it. But in the third and particular in the fourth quarter with the continued focus particular on working capital we’re able to get that conversion that you saw, that was north of 100%. Overall for the year 86%, we think that will improve as we head in the 2017, that’s going to come from better working capital performances, it’s not just in our supply chain and inventories but we have opportunities in receivables and in payable, so we’re working all of those areas as well the CapEx that we’ve talked about and it begins to moderate in 2017 and that moderation accelerates into 2018, so if we go from 1.1 billion which is that reinvestment ratio we talked about over 150%, we moderate that down to 110 or 104 or 105 2018 that gives us a nice boost as well to the free cash flow. So that should enable the conversion to continue to improve from 2017 into 2018.

Okay, great. Thanks guys.

We would take our next question from Nigel Coe from Morgan Stanley. Please go ahead. Your line is open.

Thanks. Good morning, everyone, and thanks for going along on the call. So Dave, just would love any thoughts you have on the pickup we saw in December. I mean, we've seen this pick up across the board. Obviously, the pro business [Indiscernible] we're hearing from DC is encouraging, but the quickness of the turn up has been surprising. So I'm just wondering, do you think it's just the absence of uncertainties that we have regarding the presidential election, Brexit, et cetera, et cetera? Do you think it's oil and gas, I mean, what do you think has caused all of this pick up?

Well, I do think and I’ve said this for several years that I don’t economist also really understand what happens after a severe financial recession, it was true that 30s and it was true of this one, and hit overall confidence was just really, really strong, really hard, and when you have the whole herds thinking about slow global growth and that’s just the way it is and that’s just the way it’s going to work, well, it becomes self-reinforcing because we all act that way. If you take the look at the conditions for recovery, it actually pretty good for while, they were been talking for number of years about how good consumer balance sheets were in the U.S. You look at capacity utilization, it’s in good shape, unemployment down 4.5 or so percent, you can argue under employment, but still employment in good shape, our bank balance sheet in the best condition, they’ve ever been, most companies balance sheets really good shape, and I really think it just need to spark. And the election assuming that we – the right things gets follow through and we don’t end up with some unintended consequences provide that sparks and I’m really encourage by what I’m seeing. Now it’s got to turn into something, but right now the feelings are better than I’ve seen them in long time and that could be enough to get the herd moving in the direction of saying, I’d better not miss this moment as oppose to just hunker down and keep waiting it out. And that’s another simple short explanation but I think that’s probably the case overall.

Fair enough. I appreciate the color. And then, just to turn back to SPS. Obviously, it's been a challenging 2016 as per the plan. But obviously, we haven't had perfect transparency on this business in the past, large projects and inventory channel headwinds, and some of the obviously, the supply initiative you called out. Are these part and parcel of -- is this the nature of the beast, or was 2016 just a -- sort of a perfect storm of bad events? I mean, any sense on that you can give us?

Yes. I think this more review 2015 or 2016 as much more been anomaly, that kind of status quo. I think we enough -- a confluence of events which were all kind of came together on time. Number one is obviously we talked lot about the USPS contract and that conversion. Number two is, we had that channel inventory issue that have to work its way through. Three is and this was more timing related than anything else. There was a shortage of larger deals that are notable, because of this business goes through distribution and some of it goes direct and those direct deals were few and far between not just for us but really lot of competitors as well. And then four is I think we personally I think we’re improving channel programs et cetera, so we do expect this business to very much return to its performance that its enjoyed for many, many years and use 2016 as anomaly.

Okay. And then the channel inventories, so they level now where it comes sell out?

I think most of that has been resolved, with one exception, but I would say, 70%, 80% of the challenge is behind us.

Right. And then just finally for Tom, he called out in the PR that interest expense, 8% below 2016 level. I mean, obviously I can do the math, but it implies that interest expense closer to $300 million for 2017, a bit below what we had? That is the right number?

Yes, its sound about right, yes.

Right. Thanks, Dave.

Our next question comes from Andrew Kaplowitz from Citi. Please go ahead. Your line is open

Good morning, guys.

Hey, Andy.

So some of your business tech customers have continued to cut production through 2014, you obviously didn't change your 2017 guidance in aero. So my question is, how much visibility have you had to these production cuts? And when you think about your overall negative 2% to 1% organic forecast for 2017 aero, do you have a decent contingency for more business [Indiscernible] already in your guidance, and is some stabilization in U.S. defense or commercial helo is something you were expecting, or maybe could represent a tailwind to your guidance?

Yes. I’ll first start with the business jet. We for sure have the production schedules for the platforms that we’re on with the large OEM. We’ve actually been more conservative and we’re -- had taken a conservative approach in the second half, when we’re putting together the 2017 plan. So some of the cuts that actually you’re referring to, we most likely had contemplated in the guide that we gave you. So we’re not – I don’t think we’re going to be caught off guard necessarily by what you’re now seeing, hearing and reading. On the commercial helo, that’s a space as you know is heavily dependent on oil and gas, and perhaps the declines over 2016 were just reflective of what was going on in the market. I think we are going to still see some tepid conditions. I don’t foresee growth for 2017 that we view it, consider very significant at all, but as the sentiment starts to improve in oil and gas is we articulated in the prepared comments we do hope that that will turn into some benefits. And you are already seeing some of the OEMs report on the helo side some modest improvement. So, hopefully that’s a sign of things to come, we haven’t built much of it into our plan is the way to think about it.

Okay. That's helpful Tom. We know that you've had more -- you will have more difficult comparisons as the year goes on in PMT, especially late in the year. But Solstice, you continue to ramp. You told us what the UOP backlog is its good, up 5%. [Indiscernible] just really remains steady, I would surmise that UOP should continue to be solid or improve, so why would sales growth drop from the 3% to 5% you're guiding to in 1Q, as you go through the rest of the year? Again is it just you need to be conservative, it's pretty a short cycle business, is that sort of the way to think about it?

No, I think we’ll take it quarter by quarter. We are seeing as we said a pretty strong backlog in UOP. And hopefully the orders that materialize in the quarter will contribute to that further growth. We are not trying to signal any sudden demise between first quarter and the rest of the year for that business.

All right, thanks a lot.

Thanks Andy.

And we’ll take our next question from John Inch from Deutsche Bank. Please go ahead your line is open.

Thanks, good morning everyone. Dave, why don’t you ahead you left that GE appliances job. You’d be working the Chinese otherwise.

Well for a variety of reasons I’m not sorry. I’d also say John you were – while we took a little longer to convince you were also an early supporter, so thank you.

You're right. I wasn't that far behind, David. But you're right, I'm -- it takes me a little longer to kind of get moving in the morning. Trying to figure out how to top that trade wars question. Maybe I should ask you what you think of asteroids, but I'll leave that one for Darius. Hey safety was down 5% on the core. And the reason I ask this 3M's personal safety business is actually really good, and that company actually called out some selective pricing actions to try and stimulate some volume. Are you seeing anything competitively in that dynamic other than just the market? That's my first question.

I don’t think so John. Maybe I would say the growth rate that you mentioned in the mid single digit decline was largely the result of the supply chain and the challenges that we had and I think we would have been in line with the market otherwise and as Darius said January that gives us a nice boost for January and we get those issues behind us.

Yes, that’s fine. Just big picture, you guys are obviously not a beta company which makes you an investable company but if economy continues to percolate and lets’ just hypothetically say your share is lag, what are your thoughts about really starting to leverage up the balance sheet and by your stock if you know the market is not willing to comply at least in the short run?

Certainly that’s been something that we contemplated, we talked about our approach which you know the foundation is to keep the share count flat with through buybacks and to opportunistically go after further buybacks as the market conditions look attractive in the fourth quarter. We did about 2 million shares of buyback which is more than we normally would and what I would say is that we are going to continue on that approach. I mean we do have a little bit of a restrictor in terms of where our cash is located. That most of the cash is overseas so we can’t just take 9 billion of our overseas cash and put it in the buybacks, I mean its’ just not practical. Should circumstances change around the new administration and tax quality and so forth we’d obviously take a look at it, but right now our existing approach is to keep that share count flat and look for opportunities for displacement of the market to accelerate where we are...

Yes, and I think overall John the approach will be similar to what’s been. So we are going to be opportunistic in terms of both buybacks and if the tax environment does change and that transaction to bring that cash from overseas becomes a bit more frictionless you know we are going to review that and we are going to review it primarily two different things. We are already committed to growing our dividends at a rate which is faster than EPS so we said that, you know about our CapEx profile which is going to be elevated this year and then start tapering off. So basically it comes down to an investment in either buybacks or M&A. And a lot of that has to do timing and marketing conditions and what we see and what’s available. But that’s kind of our rough framework and just how to think about the trade offs.

Yes it makes sense. I mean Darius obviously there is a lot of perspective that part of your mandate is going to be to try and move Honeywell’s growth higher which you probably can’t do even do some of it organically, but it’s going to require some M&A and some of the software deals, it would be greater than Intelligrated but [Indiscernible] pricing especially the market up demand you have a bias in the short run just given the run is it – let’s assume that cash was frictionless you didn’t have these repatriation issues, would you be preferring deals over share of purchase right now or is it unclear?

It’s really not that clear because it all depends what deals are out there and what kind of pricing. So it’s hard to say I’m definitely going to prefer one over the other. And I think in terms of yes, I mean I certainly hope to enhance our growth rate through some of the portfolio work that we have been doing and we’ll continue to do.

But I will also there is a flip to the other side of the coin here which is I think we got to continue to maintain our discipline around what we pay and branded some of the higher growth assets usually we hire higher multiples but I think we can – if we do our homework right and look real hard and I think an example of that, I think there is still an opportunity to buy assets by companies at attractive pricing.

[Indiscernible]

I don’t quite buy the premise John. Our organic growth is...

A lot of that self helps here that we are doing around our usually launched commercial excellence, our [VPD] efforts which we are spending a lot of time as a company. So I think it really is a combination between what I call self help and continued work on our portfolio like we’ve done over the last, especially over the last 18 months.

Yes, makes sense. We’ll see you in March. Thank you. Appreciate it.

Thanks John.

And our next question is from Andrew Obin from Bank of America Merrill Lynch. Please go ahead, your line is open.

Good morning.

Hi, Andy.

So Dave congratulations and thank and Darius look forward to hosting the call going forward. So question on top line and margin. It seems that top line was impacted a little by the effects and you have taken up margin relative to December 14. Looking at the index, looking at the currency index, it seems pretty flat from a month ago, so just wondering what particular currency is driving it and the second just looking at high margin guidance by segment, how much of it is just effects and is there any self help built in to this I mentioned versus a month ago?

Yes, Andrew when you go back to our guidance I mean we were pretty clear on the FX assumptions that we used for 2017. Our normal process is to update the FX rates at the end of the year. And so, when we do that, you end up with the impact mostly due to – if we had used for example one ten is our planning rate for the year. We changed that to 105 and that has an impact. The bottom line though is that the organic growth rates do not change, we’re still calling 1% to 3% EPS still stays the same at that 6% to 10% growth and the cash conversion remains the same. So it’s a matter of just picking the number and finalizing it as is our normal process.

And on the margin question?

Yes I mean the change in the margin is solely due to lower sales in the same segment profit dollars, because as you know -- of course keeps our segment margin protected.

And then a question on China, they had a big stimulus last spring you guys if your trip this summer you did a very good job sort of highlighting the fact that there is a lot more growth in China then those people – thinking at the same time. We are sort of starting to see it in the numbers. Given that the party Congress is in the fall, how much juice do you think there is in this growth beyond 2017 and how concerned are you guys as to sort of growth decelerating into the second half of 2017 in China?

Well it’s kind of tough to predict exactly what’s going to happen to China economically to your point especially with their I guess homed elections coming up. But I think overall we are still long term believers in China, so whether they have a lower growth here than what they have had in the past. At the end of the day our prospects there are still extremely good and you look at all the businesses we are in, our opportunities to gain share, to get the tier 3 and tier 4 cities still just tremendous. So I don’t see it having that huge an impact on our performance.

And if I can just squeeze one more, just some color on HBS you touched on it but can you provide just a little bit more color on region, which are positive and which are negative?

I don’t have that on my finger tips, it’s probably good follow up question for Mark on the call later or you can talk to him later.

Thanks a lot.

Thanks, Andy.

That will conclude today’s Q&A session. I would now like to turn the call back to Mr. Dave Cote for any additional or closing remarks.