Good day, ladies and gentlemen, and welcome to Honeywell's 2014 Outlook Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Elena Doom, Vice President of Investor Relations.

Thank you, Zach, and good morning. Welcome to Honeywell's 2014 Outlook Conference Call. Here with me today is Senior Vice President and CFO, Dave Anderson; and Vice President of Corporate Finance, Tom Szlosek. Today's call and webcast, including any non-GAAP reconciliations, are available on our website at honeywell.com/investor. Note that elements of today's presentation do contain forward-looking statements that are based on our best view of the world and of our businesses as we see them today. Those elements can change and we ask that you would 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 expectations for the remainder of 2013 and discuss our 2014 planning, building on the framework we gave you back in October, and of course, allow time for your questions. With that, I'll turn the call over to Dave Anderson.

Thanks, Elena, and good morning, everyone. Thank you for participating in this morning's call. Let's begin on Slide 3. And here, we're confirming the fourth quarter, which is advancing as expected with about 2 weeks left in the year. Order rates continue positive in the short-cycle businesses, specifically Turbo, as well as the Energy, Safety and Security businesses of ACS. And our long-cycle businesses are maintaining their healthy backlogs. As a result, we're reaffirming our full year 2013 estimate for sales of $38.8 billion to $39 billion; and earnings per share of $4.90 to $4.95, up 9% to 11% on a pro forma basis and consistent with what we gave you back in October. And lastly, we're also expecting free cash flow of approximately $3.7 billion for the year. Of course, those numbers are prior to any NARCO-related cash outflows and any cash pension contributions. So 2013 is certainly shaping up as a good reminder of the importance of Honeywell's portfolio, the balance that we have, which is helping us offset some of the headwinds that we've experienced over the course of 2013, specifically in Defense and also in the Advanced Materials business of PMT. And the businesses, importantly, all executed very well this year, delivering margin expansion in every SBG in each business in 2013. Now the key -- some of the keys are obviously new products, geographic expansion, traction on process initiatives. All of these are contributing to growth in each of our end markets, enabling pricing power and delivering further margin expansion. Another important driver is, of course, the productivity we've seen this year, which continues to be partially benefited from previously funded restructuring or repositioning actions. We continue to be proactive about maintaining a robust pipeline of repositioning projects and we think this is critical to…

Thanks, Dave, and good morning, everybody. As you're probably all aware, 2014 will be the fifth year of the 5-year targets we issued in early 2010. And I'm on Page 14 (sic) [ 13 ] , which provides an update on where we stand on those targets. So starting on the left. You can see our expectations for sales based on the 2014 guidance. Our guidance for next year implies roughly 6% compound annual growth over the 5-year period. And while it looks like we're going to be just slightly shy of the low end of the target range for sales, when you consider the macro environment over that time frame, especially the unanticipated headwinds in Defense and in Europe, we think the performance against the target is pretty good. Moving to the right side of the chart. You can see our segment margin expansion versus the target of 16% to 18%, reflecting over 300 basis points of margin lift since 2009. Our guidance for 2014 puts us well into the middle of the 2014 target range. And as you know, we're expecting to be above the low end of that range a year early in 2013. So a very strong performance on segment margin targets. Taking a step back. This target achievement demonstrates a performance culture that penetrates deep into the organization. Back in 2010, the company received a lot of feedback as to the achievability of these metrics, predominantly on the margin side. And having been in the businesses during this time frame, having been in ACS during that time frame, I can attest to you we definitely felt the challenge. So delivering this level of margin expansion, especially in a lower-than-foreseen growth environment, underscores not only our commitment to these targets, but also the strength of execution…

Tom, thanks for taking us through it. I mean, it's worthwhile just to stand back and reflect on what we just went through in terms of the substance of the performance, the transparency of the review and our performance over that period, as well as the recap you just provided. So it's -- I mean, it's a great source of pride. And obviously, we've delivered terrific shareholder return during that same period. So really good. So Slide 15. Let's just go through the summary. 2013 was another very good year for Honeywell. It was a much more challenging environment than anybody anticipated in the beginning of the year, much more dynamic than anybody could have anticipated, but we're delivering again. And despite limited help from the macro environment, we're delivering at the high end of our commitments while also investing for the future. All the businesses are executing well. We're finishing the year strong with fourth quarter performance tracking to the guidance that we gave you in October. And as our attention turns to 2014, we feel we have a strong foundation for continued outperformance. We've got Great Positions in Good Industries. We're investing both organically and inorganically to grow faster than the markets we serve. And we'll stay the course on seed planting, as well as on our continuous improvement initiative. As a result, the restructuring pipeline remains full as the businesses continue to elevate new ideas. We're investing in R&D, in sales and marketing resources globally and these are well aligned to the new products and technologies that are coming to the market that will benefit 2014 and the future years. Our mantra is to continue to stay flexible, leverage the Honeywell playbook, make the smart choices that will allow us to deliver on our 2014 project while also setting us up for another 5 years of outperformance, which we'll speak to you about in March when we set our new targets for the 2014 to 2018 period. And so with that, Elena, let's go to Q&A.

Thanks, Dave. Zach, if you can now open our line, we'll take our first question.

[Operator Instructions] Our first question is coming from Steven Winoker with Sanford Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: So just one question. I was looking back at the same outlook a year ago. At the time, you were talking about an expectation for 40 to 60 basis points ex M&A of segment margin expansion. You've ended up delivering what looks like it's going to be 80 in that same time frame. And I'm trying to understand sort of where that's -- where you were surprised on that front that drove that in the context of the segment margin incrementals that you're talking about for this year, which, given all the restructuring benefits that you're mentioning, just seemed to me like there could be or should be maybe more coming through margin, maybe you're investing more on the operating expense side or maybe there's a pricing assumption. Just maybe help us understand that a little bit better.

So I think if I understand your question, let me start off. And then Tom and Elena, you guys add to this. I think, for 2013, what we saw is a more difficult macro environment, particularly as it unfolded. I mean, it was most pronounced, obviously, in Defense & Space and the Advanced Materials piece of PMT. And I think, globally, we did, as a company very smartly, is just leveraged the existing playbook. We enhanced the returns that we're able to achieve out of repositioning. We executed even stronger performance in both Functional Transformation and OEF. And there's an interrelatedness there, Steve, as you know, because of the labor cost component of FT, but we executed even better there. And frankly, I think in some respect, surprised ourselves at how well we could do despite the greater macro challenges and headwinds. And that's what's enabling us to deliver at the high end of the range. And Elena, you may want to add a little bit, just talk by segments. So that's sort of from an overall Honeywell standpoint.

Sure. I think the one business that really stands out relative to the guidance that we've set in December of last year, Steve, is really around the Aerospace margin rate. And I think the original guidance was for 50 to 70 basis points of expansion. And we're now looking at nearly 90 basis points of expansion. So they've had top line challenges, but they have more than overcome that on the cost side.

Right.

While still continuing to invest.

Right. Yes, yes. R&D is not separate. They would continue to invest in all the right initiatives.

Yes. And ACS, I'd say, probably comes in second in mind in terms of stronger margin expansion, partly due to the timing of the Intermec transaction and when that actually closed versus our initial assumption, Steve, but obviously delivered very strong margin expansion in 2013. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And so in the context of 2014 now, right, when you're looking at the segment margin expansion opportunity, the incremental $125 million of saves, what are the headwinds on this front that you're anticipating that's sort of keeping you from putting -- passing more margin through? Is it invest-- to what extent is it investment on the OpEx side? And you can maybe just give us some color there.

Well, first of all, I think the margin expansion is strong. So the starting point is we feel very good about the commitments that we're making in terms of this guide. So nothing to be shy about in terms of what we're stepping up to the plate in terms of what we're committing for 2014. 2014 represents a continued opportunity and focus for us in our growth initiatives. I mean, it's -- while we speak of productivity, the reality is, and you know that, Steve, there's a tremendous focus on investing and building our businesses and building top line momentum in light of what we think are more favorable macro conditions that are starting to be set up for the '14, '15 and '16 time period. So for us, investment in R&D, the new product, introduction and innovation process, sales and marketing. And also in high-growth region, we're formalizing. And I know you've seen and seen evidence of the strength of the footprints and the model that we're deploying for high growth region. You've spent time with Shane. You've spent time with our leadership team. We're now expanding that, the other key markets, other key regions, not just in a one-for-one basis, but selectively deploying business development -- marketing and business development, government relations and other support to really accelerate growth in those additional high-growth region opportunities. So that's also built into our numbers. So you're seeing very, very, we think, strong guidance in terms of margin for 2014 and that's coupled with a lot of investment that we're making for growth that's going to benefit -- continue to set the foundation for future growth for Honeywell. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And just, finally, if therefore, you are -- if you actually see margins expand internally more than you're expecting, similar to last year for whatever reasons, would -- you think -- are you more inclined to sort of take the additional and continue to reinvest that piece? Or would you be inclined to pass some of that through to the margin line?

I think we'd weigh that on a case-by-case basis. But I think, in general, we're going to look at smartly how we continue to reinvest in the business. But it's going to be case-by-case. I can't generalize because that's going to be really subject to situation-specific opportunities and needs.

And our next question comes from Jeff Sprague with Vertical Research.

Just a couple of quick ones. Dave, you mentioned relying on backlog, which is obviously quite significant in UOP and Process. Do you actually anticipate backlog depletion in 2014? Could you speak to maybe kind of what the long-cycle project an order outlook is currently?

So we saw a very nice backlog growth in UOP in 2013. It was a little bit diluted by -- on the reporting by Thomas Russell where orders weren't as strong, but we had almost 12% increase in the UOP backlog in 2013. We would anticipate continued very good orders in UOP in 2014. I don't have a specific 2014 backlog number. Do you, Elena?

I don't. But I think just inherently, implicit in our guidance, we have a lower organic growth assumption for UOP in 2014 that's below the increase that we've seen in backlog of this year. So I think backlog at the end of '14 is still going to be up year-over-year, Jeff, in UOP. And partially, we're a bit constrained in UOP growth this year as we're adding the incremental capacity on the catalyst side to fulfill the demand that we have.

And Tom, you may want to speak to Process Solutions where we're seeing great order rates and also just in terms of by virtue of our offering, the tech strength with our technology.

Yes, I think 2 things going there. The orders rate, as you alluded to, the orders rate were challenging in the first half, but picked up nicely in the third quarter and we're seeing some really good momentum in the fourth quarter as well. We think the technology platforms in HPS are on leading-edge and are giving us an advantage, particularly on the control side. And the other point is that the quality of the backlog continues to improve. As we -- as the market has tempered a bit for us, but we've looked hard at the type of businesses that we're taking. And when you look at HPS and look at their backlog, you definitely see an improvement in the gross margin that underlies the businesses in that backlog.

I would anticipate there, I think, the -- Tom, just reading into your comments, of anticipated growth in the backlog at HPS as well.

Yes, it picks up a little bit in 2014.

Yes.

And then just secondly and I'll move on. Just Dave, can you give us just a little more color on where your headset is on capital deployment? You announced a $5 billion repo, right? You're planning on base cases. You offset the creek [ph]. Should we expect, though, if M&A doesn't materialize in 2014, that we would see more share repurchases? And how does the M&A pipeline look?

So we'll be flexible on that. I think you stated it well. I think we'll be flexible on that as conditions warrant. I would say in M&A, it's always challenging. We set a pretty high bar. We have, we think, really advanced the capability execution of the organization around M&A. That being said, it's never easy. And connecting all of the dots and actually going from pipeline to, through due diligence, to actual negotiations and close, it's -- there's always a lot of challenges in that entire process. But we will -- we're going to continue to be very active. I think $1 billion as a play folder for M&A in 2014 is not unreasonable, Jeff, given the quality of the pipeline, given all that we've got going on globally. That, combined with the $1 billion that I mentioned in terms of -- roughly in terms of share buyback, we're going to be spending over $1.4 billion. So we'll put $1.4 billion, $1.5 billion in terms of dividend in 2014. You get to a point where 85% to 90% of the cash is really being consumed, both with CapEx, which as I mentioned to you, will be in the range of $1.2 billion next year. So between growing and investing the business both inorganically and organically, returning high value to shareholders through both the share buyback, as well as through the dividend and we're committed obviously to continue to focus on the dividend, I think that really is the model you should look at and it's worked well for us historically. I mean, the numbers that -- what we've demonstrated since 2002 in terms of cash redeployment is very impressive. And we'll continue to monitor and evaluate incremental share buyback in light of the M&A pipeline and M&A activity.

And we'll go next to Nigel Coe with Morgan Stanley.

Great. So just taking a step back from 2014, back to 4Q. Any -- it sounds like overall 4Q's tracking in line. But any sort of major puts and takes that you want to highlight versus the detailed parts back in October for 4Q?

Sure. Nigel, of course, the organic growth assumption is for 3% to 4% in the fourth quarter. It's revised slightly from the 3% to 5% estimates that we talked about in October, primarily due to Aerospace tracking closer to the low end of that guide. PMT, primarily UOP-driven. And Transportation Systems are tracking slightly above towards the high end of the guidance that we provided in October. And ACS is also near the high end of the range on sales. And of course, the margin rates are continuing to be in the range that we've provided.

Okay, that's really helpful. And then turning to CapEx for '14, Dave. You highlighted it's picking up meaningfully. Can you just maybe give us some color in terms of the programs you're putting in place? We've seen the refrigerant capacity expansion. But where else are we seeing that expansion? And what kind of ROIs are we seeing? You said good ROIs. But what sort of ROI and paybacks have we seen on this investment?

Well, about 1/2 of that incremental CapEx, the increased 2014 over '13, about 1/2 of that, Nigel, will go to PMT. And the significant percentage of that is going to be within UOP, and if you will, catalyst-related and really building out the capacity to meet the demand referenced earlier in terms of the backlog discussion that we had about UOP. When you look overall at the -- across a spectrum of projects in our CapEx, we're looking at very attractive internal rates of returns from 25% to 45% with the clustering around the 30% kind of range in terms of the anticipated internal rates of return. So very, very good projects and ones that you're going to see benefit the company in terms of its growth trajectory and its profit -- the continued profit growth and margin expansion is going to benefit us in this '15, '16, '17, '18 time frame. So again, it's a long-term view with very attractive returns.

Okay, great. And just a final one before I pass it on. The repositioning for 2014, you mentioned intention to offset the good news on pension with repositioning. Is that over and above what we're doing in 2013? Or was that just the $100 million repositioning in placeholder for '14?

It's -- think of it as $100 million as a placeholder for 2014. And the way to think about 2013 in terms of our repositioning is most of that repositioning -- the preponderance of that positioning has been funded with gains. You recall the OPEB gains, for example, that we had this year. So the preponderance of 2014 -- 2013 has been funded with gains. What we've done very deliberately from a planning standpoint, so when you think about building your models, is the improvement in pension income on a year-over-year basis. It significantly does not live through in terms of P&L or EPS benefit. So what we've done is offset the net of pension goodness with some OPEB headwind because we don't have the anticipation of gains in OPEB in 2014 like we had in '13. So you look at those in combination. It's a accommodation of that impact in '13 versus -- or '14 over '13 that's being offset with incremental repo for 2014.

And we'll go next to Steve Tusa with JPMorgan. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Sorry, just -- I think you just talked about the restructuring. If you already went into it, that's okay. But I guess you talked about the savings of at least $125 million this year. I mean, was that -- is there upside to that number? Or is it kind of too late in the game to load the barrel for this year? And I guess, what's the potential for further costs this year and any gains that -- at what point would you think about doing more restructuring? Or is it the economic environment's stable enough where you're kind of just going to let the businesses run here?

Yes, it's a good question. I mean, obviously, we're going to be -- continue to be focused on both generating gains and smartly redeploying those gains. At this time of the year, and Steve, you sort of alluded to it in your question, is going to be limited 2014 benefit of anything that we did in the remainder of 2013. However, it would support, obviously, 2015, 2016. So anything that we do in that regard will be looking at how do we continue the momentum in terms of the out year momentum and we'll obviously appraise you of any of that activity when we release fourth quarter earnings in late January. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And then what specifically are you assuming for European auto production? I think you talked about global auto production, but I guess, Europe light vehicle?

Yes. Where -- our assumption, Steve, for 2014 European light vehicle production is low single digit in the, call it, 2% growth range.

Our next question comes from Howard Rubel with Jefferies.

I want to go back to sort of a dumb assumption that you have, if I can call it that, is the EUR 1.30 and I don't mean it in a pejorative way. What I meant is that it just seems that, that's off by quite a bit, Dave. And I know you've talked about other currencies being a little bit different. But could you help us understand how you arrived at that? And what sort of bans you thought in terms of that?

Well, I think it's obviously an important assumption. And again, we'd like to be very transparent both in terms of the planning and the actuals to give you real visibility in terms of the organic numbers and the actual growth rates. For us, it's -- currency is one of the most difficult things. The fact is you're always going to be off one way or the other. But what we want to do is we want to be balanced in our forecast. And for us, the expectation of some Fed tapering, of the likely continued strength in the U.S. economy and all the indicators supporting to just a continued resilience, not exuberance, but resilience and expansion in the U.S. economy. A good example of that, we talked about on the phone today, was the growth that's anticipated -- continued growth in industrial production and measured in terms of capital spending, overall U.S. capital spending, for 2014. So in light of that and in light of the relative outperformance, in light of what we think in terms of likely Fed actions, we think being balanced at about 1.30 as a base number for the euro-dollar relationship is a pretty good starting point. That being said, if we -- if it turns out to be EUR 1.35, we'll have another $250 million or so in terms of revenue, all else held constant, and let's call it about $35 million of op. So that would be good news if we're being too aggressive. And if it's 1.25, you can just subtract that $250 million and subtract the $35 million. So I think it's important thing to be thoughtful about. The fact is you're never going to be right. But we want to be thoughtful about it. We want to be transparent in terms and the way it interrelates with our forecast.

I think that is tremendously helpful. That's exactly the color I was hoping to hear from you and that's tremendously helpful. And then just the other question is can you help a little bit with your R&D profile? Obviously, Aerospace takes a big chunk of it and I would also suspect that you're continuing to invest in PMT in a meaningful way. Would you...

Yes, I'm going to ask Elena to elaborate a little bit on what I'm going to say. But Howard, as you know, R&D, technology, innovation and the whole process of driving innovation is just becoming increasingly important to Honeywell. And again, we think it represents big opportunity, continued upside for us. In terms of the spend, it's across each of the businesses. We view every one of our businesses, all of our core businesses, as really being technology differentiators and see that as just critical. We continue to maintain the momentum and the margin expansion that we're able to achieve. Elena, do you want to talk a little bit just in terms of any insight by business?

Yes, I just want to add that, I think, as contemplated in the 2014 outlook, one of the things that may be a little bit more surprising is the increase in RD&E investment in ACS. It's probably the biggest year-over-year increase that we have in our segments, obviously, to support a very robust and technology and new product pipeline, but I think bodes well for incremental sales and organic growth in the years to come.

And also the addition of Intermec.

Yes.

RAE Systems. What you're seeing now is the flow-through to, to your point, Elena, what you're seeing is the flow-through to of some of these very high-caliber M&A in terms of the R&D spend and the R&D firepower, which is, as you know, one of the sort of unspoken synergies is we don't really count those sales, new product development synergies in terms of our map, our acquisition map. That's really the most significant upside that we have in those acquisitions.

So really you're seeing the seeds of this will accelerate some sales growth maybe later in '14, but clearly in '15 and beyond, David?

Absolutely, absolutely. We're really committed to that and enthusiastic about that.

And our next question comes from Andrew Obin with Bank of America.

Yes, just a couple of questions. First, you talked about very high ROIs on internal projects. And I'm just wondering how are you guys thinking strategically between the spread on investing in M&A longer term and investing internally, as I said, given really high returns that you get internally? Should we expect a higher internal rate beyond '14? I know we're not talking about beyond '14, but I was just struck by your comment there.

No, I think the -- we don't believe view those as necessarily, Andrew, as trade-offs. As we've discussed, it's really what meets our return criteria, what generates shareholder value. M&A is the most, from those economics, is among the most challenging of all the activities, obviously, because of just the way the efficient M&A market works. So -- but we're very, very prudent in that regard, very disciplined in that regard. But the fact of the matter is we want to do it all. We want to do the smart CapEx and we want to do the smart M&A. And we have the resources, the managerial resources and the financial resources to do it. We're going to be very prudent in all of that. But the fact is that's all part of building and growing our businesses.

And just a follow-up question on price cost dynamic. You touched on PMT. You talked about early cyclical businesses. And I apologize if I have missed it, but how do the rest of the businesses look in price cost dynamic into 2014?

Yes, I just want to -- I want to go back on PMT for a moment because they do have approximately a 200 basis point headwind on price cost dynamic. It's reflected in their margin rates and the guidance that we've included there for 2014. The other businesses, the Aerospace and ACS, that's obviously a positive contributor to the margin rate, Andrew, wherein TS, the price environment is one in which they obviously have a lot of material productivity but they look to offset the negative price environment that they have in 2014.

And ACS?

ACS is positive, yes.

Positive, yes. Positive.

And we'll go next to Deane Dray with Citi Research.

I was hoping to get more clarity on your positive comment about the business jet environment. Is this more volume growth across the market? Or is this contributions from some of the new platforms?

Well, I think what we're seeing is we're seeing growth in that mid- to large-cabin segment of the market, Deane. We've shown in our industry drivers that, as you know, as a continued positive. And then, in turn, if Honeywell's penetration in that segment, which, as you know, has been very, I think, very, not only strategically smart in terms of allocating our focus in terms of our business, building and business development and technology focus, but it's also played out very well in the marketplace. So I think it's been the smart thing to do. And the other thing we talked about was the growth in RMUs, the retrofits, modifications and upgrades. That's been a key contributor in our BGA aftermarket growth in 2013. That's going to continue at a lesser rate as we're lapping a very big year in 2013. But we are going to see a further increase in RMU sales in 2014. So it's both the OE and then the RMUs. And the RMUs are big beneficiaries that's being driven by the product development and technology advancements that we're making. While we talk about it as -- account for it as aftermarket, the fact of the matter is, is really that new innovation, the innovations and new technology that are really generating that growth.

And just last question related to business jets. So you're seeing a difference or are there differences in your assumptions on production rates on the higher end of the business jet aircraft where you have more content?

Oh, definitely. I mean, that's where we're seeing the positive growth and positive development.

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

$4 billion of free cash. So you do $1.5 billion of dividend, $1 billion of acquisition, what, like $0.5 billion of share repurchase. Where does the rest go? And the context of my question is you had $5.5 billion of cash and equivalents, Dave, on balance sheet of the third quarter. It's sort of like -- this is at an all-time kind of high for Honeywell. You don't really need that much cash to run the company. So it's a little bit of a circular reference back to capital deployment, like are you just -- are you building this for a rainy day? A bigger deal like there's -- it clearly doesn't help shareholders having all that cash sit there. I'm just curious what your thoughts are.

Yes, sure. Well, there's a certain amount -- obviously, there's a certain amount of that cash and the flexibility that comes with it and the liquidity that's very, very important to have and we're all reminded of the experiences of '08 and '09 and '10 to -- that's not that far back in terms of history to recognize the importance of it. The reality is, and we've talked about this, the geography, the cash is [indiscernible] and the tax, our anachronistic tax code, is unfavorable to us. And so that's the reality. So when we look at the best economics for the use of that cash and, if you will, the after-tax deployment of that cash, some of that cash is just going to continue to build. That's the nature of the beast. But what we're going to do in terms of our cash generation, as I mentioned earlier, cash from operations, we're going to very smart, very disciplined. If you look at our track record, roughly half of that cash from operations has been returned to shareholders. And by the way, that's net of cash proceeds from option exercises. On a gross basis, it's overlapped, It approaches more like 65% has been returned to shareholders. And the other half, most of it -- of the other half has been in building the business, both organic and inorganic growth. CapEx over the time period, I think, was $9 billion. And then M&A is strong, M&A net of divestitures of roughly equal amount. So that's what we're going to continue to do at Honeywell. And when you look at our capital metrics, when you look at the things that are important to the rating agencies, we're rolling back into our A/A2 ratings. Those ratings, we think, are very important. We think that's part of maintaining both our relatively low cost of capital, the significant flexibility we have and we think the necessary liquidity. We -- in an ideal world, we wouldn't have the cash built because we wouldn't have the friction associated with the geography and the cash. But that's not the world we're in.

No, I understand. Can I ask you, Dave, just sort of a detailed question on CapEx. I think it's Page 12 you say $1.2 billion is going to be up 30%. But if you go back 1 year ago, you were targeting $1.2 billion. And I thought that even in the summer you had reiterated the $1.2 billion. So what -- I mean, you got presumably $100 million or $200 million from Dassault investments alone. Sort of what's really kind of happening year? Did you just not get projects done that's built into 2014? And the other sort of aspect of the context is if you really are building the CapEx that would support kind of a capital investment cycle improving in the United States, which kind of backs into the green shoots that everyone's seeing right now. So I'm just -- more color there would be great.

Sure. Well, a couple of things. I think, first of all, in terms of the underspend in 2013, really a variety of items. And we did have some delay in some projects.

In Solstice.

In Solstice, which market timing, that moved to the right, which is very understandable, the smart thing to do. We had a lower growth economic environment. We've gotten better. HOS has been a key contributor to producing more with less. We've seen footprint reduction opportunities as a result of HOS. So it's a combination of those things. I think the good news is, number one, we're very disciplined in terms of CapEx. It's got to -- we have to see the whites of the eyes of the market demand. We really have to see the whites of the eyes of the economic return characteristics to really commit. And I think the second thing it really suggests is that there is, to your point, we believe now a pretty strong likelihood of that type of increase in 2014, which is consistent with the economic indicators and the economic forecast in terms of CapEx growth. Overall, industrial production growth and CapEx growth. And we're seeing signs of that around us. We're seeing signs of that in terms of the bid and proposal activity in our long-cycle businesses, in the increased order rates and the backlogs that we referenced earlier.

Right. But it's not really up 30% if you make these adjustments, right, on a pro forma?

No.

Like if you could just sort of that's what you mean?

No, some of that is really unique when you look at, John, and we talked about this earlier. You know this well. Some of that is really specific to UOP.

No, I absolutely get it.

So it's Honeywell specific in that regard, but it's against the backdrop. I just provided that macro indicator. This is against the backdrop of a bit more favorable macro environment.

Understood. Just one more. The U.S. is set to realize the benefit of literally tens of billions of LNG and petrochem infrastructure investments over the next sort of 3-ish plus years. Do you believe that's already -- I mean, your sort of PMT mid-single-digit guidance. On the surface, wouldn't seem to reflect much of any of that. Yet we know that PMT, UOP, and I guess sort of at the middling point, ACS, right, should have pretty significant exposure to that build-out. I mean, are you -- is that in your guide? Or is that sort of on the come? or is it because it's a little more -- that's something that proportionately begins to hit just based on the nature of your products, say, in '15 versus '14?

It's a little later on in that strap horizon. And it's really related to what's happening overall in the, if you will, the gas development markets. Exploration is robust. But the actual production and distribution have remained to be really built out. Those investments are forthcoming. They will occur, but it'll be lumpy initially, but it will occur. Two key drivers are going to be the investment again and the infrastructure, particularly the distribution infrastructure, both from wellhead to point of usage. And also the second point will be export licenses. So once we see that occur, I mean, demand is really -- and terminals are being built, we're going to see the growth. It's going to happen, John. It's a favorable macro for Honeywell. It is -- you're exactly right. It's a very good question. It's really not reflected in our numbers yet. But it will occur and it's going to be another significant positive for us. Andreas will speak more to that at March Investor Day.

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

So my first question is really around ACS growth. And specifically, if I take a look at organic growth for the year, it looks like you're guiding for '14 at approximately 2% to 3% and yet we're seeing short-cycle momentum in ESS. I think you said HPS was going to grow at approximately mid-single digits and you still expect growth out of BSD. And so it seems like the guidance is a bit conservative. And so hopefully, you can just comment on that.

Yes, Joe, the -- you're absolutely right in terms of the outlook, the ESS exiting the year at sort of mid-single-digit organic growth rate, consistent with the outlook for 2014. There is, obviously, some puts and takes. But accelerated growth in ECC, life, safety and S&C, the Sensing and Control business, will return to good growth in 2014 having had some negative in 2013. In Process Solutions, we're anticipating that organic growth there goes from slightly positive in 2013 to, again, something in the low to mid-single-digit range for organic growth. And then in Building Solutions & Distribution where it's been a bit of a tale of 2 cities. The Building Solutions portion of that does return to positive growth in 2014. Think about that being a low single-digit-type guide. And then we had good growth actually in the Americas Distribution business in 2013. We're expecting that growth to moderate slightly in 2014, but still be a contributor in the mid-single-digit growth range. So on the whole, organic growth in 2013 for ACS going from, call it, roughly 2% at the midpoint to something more positive than that in the mid-single digit range for ACS overall.

Great, that's helpful color, Elena. And I guess, as it relates to ESS, specifically, I think you guys called out a 5% organic growth number in 3Q. Has the momentum continued or stayed at that level throughout 4Q? Or if any of the trends either potentially improved? Because as I take a look at your construction spend outlook for next year, it seems to be getting better. That's a market that's tied to that. So perhaps any commentary that will be great.

I would say, Joe, the ESS has moderated a little bit in the fourth quarter, but nothing appreciably down from the 5% you saw in the third quarter and kind of consistent with the -- those exit rates that Dave showed you earlier for the short-cycle businesses.

Okay, that's helpful, Tom. And then one last question on the margins. ACS has been phenomenal growing the margins this year. You've averaged about 1.5% to 2% organic growth and yet the margins were up roughly 100 basis points. Taking a look at your organic growth or organic margin guidance for next year, it's 70 to 100 and yet you're expecting better growth. And so is there any reason not to believe that, given improving volume leverage, that margins should be better? Or were there some onetime items that potentially helped margins this year?

Yes, I'm not aware of any onetime benefits to the margin rate, Joe, for this year. I think, as we talked about, there is, obviously, a reinvestment in the businesses in terms of sales and marketing resources and R&D as well, which is contemplated in our -- nearly in that 40% to 50% organic conversion rate that we're contemplating for ACS for 2014.

Okay. But no onetime items. And R&D was stepped up this year as well. And so potentially then, you've got a relative conservative guide there as well if organic growth steps up? Is it fair to think of it that way?

Yes, I mean, based on the current organic growth rates, I mean, the R&D as a percentage of revenue for ACS is fairly stable.

And this does conclude today's conference. You may now disconnect, and have a wonderful day.