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

Thank you, Kyle. Good morning, and welcome to Honeywell's fourth quarter 2015 earnings conference call. With me here today are 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, www.honeywell.com/investor. Note that elements of this presentation contains 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 fourth quarter and full year 2015 and share with you our guidance for the first quarter and full year of 2016. Finally, 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: Good morning, everyone. As I'm sure you've seen by now, Honeywell delivered another excellent quarter, capping off a terrific year in a difficult environment. We delivered results at or above our guidance on segment margin earnings and cash flow. Earnings of $1.58 in the fourth quarter increased 10%, representing another quarter of double-digit earnings growth. We continue to drive margin expansion, up 140 basis points, excluding the impact of the fourth quarter 2014 Aerospace OEM incentives. And our free cash flow finished at $1.6 billion in the quarter, up 17% at a 127% conversion. For the full year, we increased sales 1% on a core organic basis while continuing our seed planting with investments in new products and technologies, high ROI CapEx and expansion of…

Thanks, Tom. Operator, please open the line for questions.

Thank you. The floor is now open for questions. And we will take our first question from Scott Davis from Barclays.

Hey. Good morning, guys. David M. Cote - Chairman & Chief Executive Officer: Hey, Scott. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Good morning, Scott.

Dave, you're not a bad CEO. We'll give you a nod. David M. Cote - Chairman & Chief Executive Officer: That's appreciated. It only took me 14 years to get it.

Well, I don't know if you're worth $25 million, but if you can throw a pitch 100 miles per hour, maybe. David M. Cote - Chairman & Chief Executive Officer: More. I'm worth more.

All right. Good. Well, can I answer your phones for you? Maybe I'd get a cut of that. But anyways, not much really to pick on, on the quarter. My biggest question really, the Elster deal looks – I mean, I think it was a really interesting transaction and the markets have gone maybe the direction that you probably wanted them to go the last couple of years. You've had dry powder, but things have been a little pricey. I mean, is there – are there other Elster-ish type deals out there that you are starting to see? I mean, where – you've always had some confidence in M&A, but a lot of the deals have been smaller. Are there bigger deals out there that are interesting, you feel like you're getting down into the right price? David M. Cote - Chairman & Chief Executive Officer: Well, there's always, it's going to sound like a repeat of an answer, but it is true. We always have a pretty full pipeline that we're working, and there's some bigger stuff, some smaller stuff and you just never know when they're going to hit. You just don't, and you've heard me say this before, but it's like working in a retail store. You open up at 10 O'clock and nobody shows up till 2:30, and then five people come in the door at the same time. It just works that way. For last year, a lot of that came together in a very good way, and we're hopeful that it can continue again this year, but it's not one of those things you can guarantee, because we are going to stay very disciplined. It's the same rigor that we've used in the past, we stick with and I think my old team would tell you that I paid personal attention to every single one of these things on a nonbinding basis, a binding basis, the integration reviews with as much vigor as I did 13 years ago.

Yeah. Makes sense. Moving more specifically, I think the one area that I've always struggled to model with you guys is PMT, and help us get a little bit more comfortable around UOP. I mean, if your core was down 10 and catalysts were strong, that implies the basic, what I'll call the consulting business and licensing business must've been down a lot. What's your confidence that that stuff comes back and catalysts don't normalize? Particularly, you've seen the GDP numbers out of the U.S. today. I mean, it's – you may have another tough year in front of us. I can't imagine catalyst growth can stay incredibly strong forever, so help us get a little bit more confidence around that because I think it's just impossible for us to know. David M. Cote - Chairman & Chief Executive Officer: Yeah. We'll talk more about this at Investor Day, but you can expect that the catalysts are going to continue to do well, and Tom provided you some of the data and can provide more color, but catalysts will continue to do well because there's still usage out there and there's still demand for refined product. That's not going away. And that's really where demand comes from for us on the catalyst side. You're also going to hear more about the Parex cycle and how that changes. It tends to go through cycles, and we'll be coming up on a new cycle for Parex as we get towards the end of this year and into next year. When it comes to new projects, yeah, you're right, there wasn't as much, as many new projects put on the board as they were in prior years, but we actually took a lot of those hits last year. So as we start looking…

Okay. That's helpful. Thank you, guys. Good luck. David M. Cote - Chairman & Chief Executive Officer: Thanks Scott. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Thanks.

And we'll take our next question from John Inch with Deutsche Bank.

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

David, it's nice to see a company report a quarter that isn't padded by 5% tax rates and below the line parlor tricks. David M. Cote - Chairman & Chief Executive Officer: Well, thank you. As you know, I've been advocating for a long time that doing well in operations should make a difference. Operating earnings matter.

Yeah. Tom, what was commercial vehicle on the light side if you exclude, I'm sorry, what was Turbo on the light side if you exclude commercial vehicle? What was the growth rate there? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: It was roughly mid-single digit growth.

So I guess my question is if you think of Turbo, right, and the penetration you guys just articulated getting to the 50%, you would think this business should be pretty well-positioned to start to put up I think once you get over the commercial vehicle headwinds and double-digit top line, if you look back over time, you've always had this very favorable penetration, right, on gasoline side. You haven't really ever realized that. I think you maybe did it a bit in 2013. But just could you talk to your confidence level or how we should be thinking about the run rate for Turbo kind of post commercial vehicle? Like, why can't this be a really high growth segment and driver of profit for Honeywell? David M. Cote - Chairman & Chief Executive Officer: Yeah. That's the whole point. You hit it exactly right. Go ahead, Tom, sorry. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Hey, John. You did say double-digit top line growth. I wouldn't – while I appreciate that sentiment, I wouldn't go quite that far. But it is a very strong, they do have very strong prospects. The position is very good, and our global presence, I mean, where we are versus where our customers are positions us very nicely and the business has – it's probably the best run supply chain that we have. So as long as the car market remains intact and there's orders, we're going to be on those platforms and no matter who the OEM is with our technology and with our ability to deliver. David M. Cote - Chairman & Chief Executive Officer: It's going to be very good growth. I can understand Tom's reticence of the double-digit, but I would say at the end of the day there are several phenomenon. One, the commercial market – both the commercial market decline and currency are masking the growth that we're getting in, say, PV side, both gas and diesel. That's going to continue, and when commercial goes the other way and you don't have an offset impact to currency, I think you're going to say it looks pretty darn good.

Yeah. I was literally taking your 40% win rate times the global auto sales times 50% delta, right, and then just sort of assuming currency and the commercial vehicle didn't factor in it. Let's put it this way. It's a pretty high growth number if you sort of point that out. Just as a follow-up, this merger between Johnson Controls and Tyco, JCI bought York, and you guys at the time pretty much downplayed the significance of why you would not follow in those footsteps. Does this merger, David, do you think give you an opportunity to take some market share here? David M. Cote - Chairman & Chief Executive Officer: I don't know about taking market share so much because we really don't compete with them all that much. There's maybe a couple of places that we do, but there's not – the biggest overlap is really just kind of the service side of this, the Honeywell Building Solutions.

Yeah. David M. Cote - Chairman & Chief Executive Officer: So because there's not a big overlap between us, I wouldn't say there's a big share opportunity there for us.

Okay. But what about then doing a bigger deal? Does that, I mean, are you still sort of wed to this notion that you've got to really have it – be able to be ring fenced and bolted on? Even though Elster I realize is bigger, but you know, I mean, a bigger deal so comparables, I guess, to the significance of JCI and Tyco? David M. Cote - Chairman & Chief Executive Officer: You mean, do I think I need to do something that's foreign?

I think the angle is in a – yeah, I think the angle is in a very slow growth world, which you've articulated many times. Those two companies have decided that it makes sense to get together to try and drive some cost synergy or whatever, right? So I'm wondering about your own thinking towards possibly or the prospects of maybe doing a bigger deal perhaps because of the macro and what you're seeing with respect to other industrial companies. That was the question. David M. Cote - Chairman & Chief Executive Officer: No. I don't feel compelled to do it because somebody else is. And I feel like we're big enough and we're going to perform very well on our own. That being said, as you know, many times I've said I'll never say never to doing something large even though it hasn't happened in 14 years, because you never know when that opportunity presents itself but, so I'm still open to it, I guess, but it's got to be a smart deal for own share owners, otherwise, we're going to do very well on our own. I don't feel like we need a lot of big help anywhere.

Got it. Thanks much.

We will take our next question from Joseph Ritchie from Goldman Sachs. Joseph Alfred Ritchie - Goldman Sachs & Co.: Thanks. Good morning, guys. David M. Cote - Chairman & Chief Executive Officer: Hey, Joe. Joseph Alfred Ritchie - Goldman Sachs & Co.: So, Dave, nice quarter. It's got to make you feel a little bit better about the Pats' loss last week. David M. Cote - Chairman & Chief Executive Officer: Oh, geez. Why'd you have to put it that way? Joseph Alfred Ritchie - Goldman Sachs & Co.: Sorry. I had to dig a little bit. Let me start on that – let me kind of start on a near-term question. Last year, I recall January getting off to a really slow start. It surprised you. It surprised us. I think it was down 8%. Maybe talk a little bit about just your quoting activity on the short cycle businesses over December/January, and how that's trending versus your expectations. David M. Cote - Chairman & Chief Executive Officer: Right now, I'd have to say it feels just fine. I know last year we got surprised the other way. This year we're not getting surprised. But it's three weeks, so who can tell how the whole thing's going to go? But it's – I would say we're not having to deal with the same kind of negative surprise we had last year. Joseph Alfred Ritchie - Goldman Sachs & Co.: Okay. All right. No, that's helpful. I guess maybe one of the things that we've been talking to investors a lot about recently with the Boeing results earlier this week was just the potentially weakening longer-term production schedule at Boeing. I'm just curious, does that change your long-term outlook at all on Commercial OE? Or how are you guys…

Yeah, Tom, if I could add, the other thing to point out, Joe, is that our gas processing business in 1Q of last year had just a fantastic quarter; so we also have a little bit of a comp issue just in 1Q, and that'll ease through the rest of the year. Joseph Alfred Ritchie - Goldman Sachs & Co.: Cool. Thanks, guys. Great quarter. David M. Cote - Chairman & Chief Executive Officer: Thanks.

And we'll take our next question from Howard Rubel with Jefferies.

Thank you very much. I want to also stay with Aerospace. I mean, the deliveries at Boeing are really more due to timing because they're building new planes for R&D. It has no demand impact. But you have a lot of STC opportunities and GX, which you've talked about, Dave, a little bit, and some international. Could you talk for a moment a little bit about some of these, where you are in terms of getting the customers to sign up for these processes, because it really is game-changing? David M. Cote - Chairman & Chief Executive Officer: Are you talking about on the connectivity GX side, that kind of thing?

Absolutely. And then, also, what you're doing still with COM DEV, and – if you can. I know it hasn't closed, but to the degree that that's possible, please. David M. Cote - Chairman & Chief Executive Officer: Yeah, I can't put any numbers on it at this point, but so far – and I think you'll get some of this at Investor Day – Tim's pretty excited about what he's seeing, the sign up rate and the speed with which they're able to acquire new customers here, because the value that Tim's able to add through is connectivity and the services, and now we're going to be able to expand that with Satcom1, Aviaso and COM DEV, along with the technologies we acquired with EMS. He's pretty pumped up about where he's going. So, so far, yeah, quite good.

And then, just a follow-up a little bit with the portfolio. I mean, international had a great year last year with some of the expansion. You've got sort of a lot of nice mid-engine – midsize capability engines, and we've seen what you've done in bizjets. Where else can you do some things in the international market? David M. Cote - Chairman & Chief Executive Officer: Well, a lot of places. And that's been one of, I guess, Tim's – one of Tim's big insights, as simple as it sounds, is 90% of life is showing up; and just Tim showing up in a lot of these places that we didn't in the past is making a hell of a difference. So that's going to continue around the world.

And then finally, Tom, you have these significant incentives. Are they pretty evenly spread throughout the year this year? Or is there one quarter we should be aware of as being a little bit lumpy? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah. No. They're pretty much throughout the year.

Thank you, gentleman. David M. Cote - Chairman & Chief Executive Officer: Thank you, Howard.

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

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

How's it going? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Quite well, actually. David M. Cote - Chairman & Chief Executive Officer: Pretty well, so far, it seems.

Yeah. It looks pretty good. David M. Cote - Chairman & Chief Executive Officer: Jeff, I'm a little – while you got to like the market reaction, I got to admit, I'm still a little surprised that, after 14 years, people are surprised by us doing what we say.

Yeah, I don't know why that is, Dave. You only have to hit me over the head once or twice and I get it. 14 times, I don't need. So, hey, the margin execution, as always, is stellar. What really surprised me a little bit were the ACS margins were better than I thought, again, maybe just my modeling error, but was there no kind of Elster purchase accounting noise or something that pressured the Q4 numbers? I thought with the late close maybe you'd have some inventory step-ups, something like that, in the quarter. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: No. I mean, we closed on December 27, and virtually very little commercial activity. So we did do whatever pro rata portion of the purchase accounting that was required, but it was de minimis.

Okay. Could you speak to how Elster actually performed in Q4, what the organic pro forma growth rate looked like and how you see it growing in 2016? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah. I mean, I can't speak to the details of Q4, but as we look forward in 2016, Jeff, it's at or better than what we've modeled in our TVA. I mean, the prospects on the metering side in particular as the rollouts continue to occur in outside of the U.S., across all three of the metering platforms are very exciting for us. So you can think about mid-single-digit growth there for us. And also, the gas combustion that's going into ECC is also holding up in terms of what our expectations were for 2016. So, so far so good. I mean, we're early days in the integration, so a lot more work to do, but it's consistent with what we had expected.

Well, it sounds like there could be a little bit more upside in that accretion plan for 2016 would be a fair assumption? David M. Cote - Chairman & Chief Executive Officer: I could tell you we're pushing all the acquisitions to do even better in 2016.

Right, as we'd expect. Thanks a lot. David M. Cote - Chairman & Chief Executive Officer: Thanks, Jeff.

We will take our next question from Steve Tusa with JPMorgan.

Hey, guys. Good morning. David M. Cote - Chairman & Chief Executive Officer: Hey, Steve. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Hey, Steve.

Listening to Danny Boy on the music pre-conference call, and hopefully that's not a commentary on your tenure there in the near-term. Hopefully you're going to be around for a little bit longer. These are decent results. David M. Cote - Chairman & Chief Executive Officer: (57:35) you didn't have to listen to Tom singing it.

There's been a lot of big numbers floating around out there on the capacity to do deals. I know you guys have said in your formal commentary from your Investor Day, it's, I don't know, something like $10 billion. I think you made a comment on Bloomberg that it was like $20 billion or something like that, $15 billion to $20 billion. Can you just clear the air on if something big came up, kind of how far, what do you think your capacity is from a ratings agency perspective? How far would you be willing to go as far as capital deployment, call it, over the next couple of years? What is that number? David M. Cote - Chairman & Chief Executive Officer: Well, as we tried to show in the Investor Day a couple of years ago, I used the $10 billion as just an example because I felt like in our previous five-year plan, we got no credit for what we could do there, even though I tried to talk about how much cash capability we had ahead of us. And if you recall, I said at the time in there that we had something like $20 billion to $30 billion in capacity over the next five years when you looked at cash generation and debt capacity as EBITDAR grew. I'd say that's still the case. We've only deployed about $6 billion, $8 billion out of the $30 billion or so we're going to generate and the capacity that we'll generate over that five-year period. But we still have a lot of room to grow. In terms of how big we'd be willing to go, I guess it would depend on how good the opportunity would be. If we have something that could generate great returns, and we think there's forgiveness in the numbers and the ability to execute, then yeah, I'd be willing to go larger. But by the same token, it's got to make sense, consistent with how we've talked about deals in the past.

Right. And it's good to see that Elster EBIT has held up and hasn't collapsed on you like some other deals. Just a comment or a question on UOP. These international wins that you guys are booking, I know you had talked about a pipeline of 12 or so at some stage of the game. What is kind of the number of opportunities out there? Because there's a view that everything in energy is basically going down a lot, but this seems like actually an area where a little pocket that actually is growing and has some opportunity. How many of these are out there to offset what's going on in clearly a more challenging domestic environment and gas processing? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah, we had a nice fourth quarter in orders on gas processing, Steve. There was a – one or two of mega projects that really contributed to the gas processing orders growth. There's a handful of things that we're pursuing internationally now. We don't really comment on the individual prospects, but I would say it's enough to keep the team busy. And we'd like it to be bigger, though. We'd like the pipeline to be bigger.

Right. But a couple of those are multiples of what the domestic stuff is, so it seems like that's a pretty good backfill for an energy environment where there's not much backfill elsewhere. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah. Very sizable opportunities.

Okay. Great. Thanks a lot, guys.

We will take our next question from Nigel Coe with Morgan Stanley. Nigel Coe - Morgan Stanley & Co. LLC: Thanks. Good morning. So I think what we're seeing here is HOS Gold really does feel like it's accelerating the productivity, but I know you're going to talk about that in March, so I'll leave that there. I just wanted to come back to the M&A pipeline and the $20 billion, $30 billion ambition to deploy capital. And I'm just wondering, with this environment, arguably more willing (01:01:22) sellers, PE is constrained by the high yield market. Do you think, or maybe are you more optimistic that you can do another Elster or maybe something larger over the next 12 months, given the backdrop what we're seeing right now? David M. Cote - Chairman & Chief Executive Officer: Well, let me just – since you brought up HOS Gold, I should add it's a lot more than just a productivity story. I would agree that HOS was that way because that was really focused on our factories and we brought that into the functions with functional transformation, but HOS Gold is much about the breakthrough goals and what that does to excite growth as it is a basic cost productivity. And I think you'll be quite encouraged with some of the stuff the guys are going to share, along the lines of something like three-quarters of our breakthrough goals involve software, the progress that we've made in breakthrough goals and how that's shown up. But HOS Gold is as much about growth as it is about productivity. In fact, I'd say probably even more so. When it comes to the acquisition side, I'll let Tom handle that one. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yeah,…

We will take our final question from Steven Winoker with Bernstein. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Thanks for fitting me in. And Dave, before you just hand Scott that job answering phones, make sure you conduct in-person interviews for all of us, okay? I think that can make a difference. David M. Cote - Chairman & Chief Executive Officer: All right, Steve. Appreciate it. I feel there's demand. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Listen. Cash flow, pretty darn impressive, 127% conversion. You guys talking about normalization on CapEx going forward, but this is a change from an external viewpoint of Honeywell in terms of the numbers we're seeing. So maybe give us a little more thought around not just the CapEx side but the rest of free cash flow and what's going on internally such that we should, over a longer period of time, be thinking closer to 100% free cash flow conversion as just part of the business model? David M. Cote - Chairman & Chief Executive Officer: Well, actually I don't think it's a change to the story we've been telling. It may be how it's been perceived. But as you know, before we embarked on this CapEx expansion, we were generally over 100%. We said we had the opportunity to invest about $1 billion here at 30% and 40% IRRs that, yeah, they don't show up right away, given the magnitude of the projects. But it does show up, and when it does, it's quite good. And we've always thought that made sense. And the focus on free cash flow conversion, I found a little interesting, because I felt like a number of investors thought that I should pass up 30% and 40% projects so that I…

I would now like to turn the conference back over to Dave Cote for any additional or closing remarks. David M. Cote - Chairman & Chief Executive Officer: Well, there's no doubt, it's a slow growth environment. That being said, whether it's slow growth or high growth, we believe your best bet is Honeywell because we do what we say. Our strong diverse portfolio and our ability to execute really does make a difference. Thanks, guys.

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