Honeywell International 2009 Guidance Call Transcript

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Honeywell International (NYSE:HON) 2009 Guidance Call December 15, 2008 8:00 AM ET


Murray Grainger - Vice President Investor Relations

Dave Anderson - Senior Vice President and CFO


Jeff Sprague – Citi

Shannon O'Callaghan – Barclays Capital

Nicole Parent – Credit Suisse

Scott Davis – Morgan Stanley

Howard Rubel – Jefferies & Company

John Inch – Merrill Lynch

Nigel Coe – Deutsche Bank

[Steven Winiker] – Sanford Bernstein


(Operator Instructions) Welcome to Honeywell’s 2009 Outlook Conference Call. For opening remarks and introductions I’d like to turn the conference over to Mr. Murray Grainger, Vice President of Investor Relations.

Murray Grainger

Welcome to Honeywell’s 2009 Outlook Conference Call. As usual for this December call I’m joined by Senior Vice President and CFO, Dave Anderson.

This call and webcast including any non-GAAP reconciliations are available on our website Note that elements of this presentation contain forward looking statements that are based on our best view of the world and of our businesses as we see them today. Those items can change, and we would ask that you interpret them in that light. This morning we will update you on 2008 then discuss our outlook for 2009 and of course allow time for your questions.

With that I’ll turn the call over to Dave Anderson.

Dave Anderson

Let’s start out on slide three entitled 2008 Highlights. Just to give some perspective on the year as we just start to wrap it up. As you can see, despite tougher economic conditions particularly in the second half of the year Honeywell continues to outperform wining multi-year contracts across all of our business as well as winning in the marketplace with attractive new products.

At Aerospace alone we won over $40 billion of new business in ’08 including approximately $30 billion of new applications for the HTF 7500 Engine which offers our customers industry leading reliability and also energy efficiency. At ACS we secured almost $400 million of new building efficiency platforms globally and through our unique enterprise buildings integrator platform we’re helping our customers meet leadership and energy and environmental design certification requirements driving millions of dollars in energy savings every year.

ACS also continues to build on its leadership position in homes, buildings and industrial applications of wireless with new home comfort, security and gas protection products all released in ’08. With an installed base of over 30 million sensors supported by 300 patents in the wireless market ACS is not only further penetrating its existing markets but its creating new opportunities for growth globally.

At Turbo the team continues to win new platforms despite the current turmoil in the automotive sector during ’08. Honeywell secured business wins for Turbo charges on 100 new applications representing up to $4 billion in life cycle and revenue. Just to give you some perspective those wins are on engines ranging from diesel to gas to hybrid include on highway and off highway platforms in Europe, North and South America, India, China, Japan and Korea.

The long term outlook for this business remains strong with Turbo technology addressing critical market trends and regional and country mandates of reducing Co2 emissions and increasing fuel efficiency.

We’re particularly encouraged by President Elect Obama’s plans for increased spending on infrastructure and energy efficiency and believe that both ACS and Turbo are well positioned on this front.

Finally, in ’08 UOP continued its legacy of innovation with new Hydrocracking process that allows refiners to yield 5% more diesel and gasoline from heavy crude and with growing energy demand UOP is creating tremendous value for its customers by helping them to convert residual oil to heavy end of the barrel to usable fuel.

We continue to build long term value through portfolio management and effective capital deployment. In ’08 we acquired Norcross and Metrologic which gave us scale in the attractive adjacencies of personal protection equipment and automatic identification data collection. We also divested our Aerospace consumable solutions business for $1 billion at an attractive point in the Aerospace cycle.

We repurchased $1.4 billion of shares paid $800 million in dividends and just announced our fifth consecutive annual dividend rate increase of 10%. Over the past three years we’ve made significant actions to prepare for a slower growth environment. Since ’06 we’ve funded almost $700 million of repositioning actions primarily through operational out performance. These actions yield significant benefits and help to support our outlook for ’09 and beyond.

Finally, we continue to drive benefits from our key initiatives including the Honeywell operating system or HOS, Functional Transformation, FT, Velocity Product Development, VPD. At ACS alone more than 400 new products were launched in 2008 from 300 in 2007. At Aerospace Rob Gillette and his team have been able to cut cycle times, development costs in half using the VPD tool kit. The contribution for VPD are becoming significant and will provide further support as we enter a period of slower end market growth.

Let’s now turn to slide four just for the highlights a financial summary for 2008. Again, ’08 has been a very good year for Honeywell in an increasingly tough economic environment. We’re expecting 6% reported sales growth and over 100% free cash flow conversion.

When we last spoke to you in October we provided ’08 guidance, we called out some of the items we were watching particularly the bigger items including the headwinds of foreign exchange, the Euro trading below our fourth quarter average estimate of $1.35. We’ve also seen incremental softness in some of our shorter cycle businesses primarily our passenger vehicle Turbo business which continues to be challenged by sharply lower OE production rates in Europe and our Resins and Chemicals business which has seen lower pricing and demand for key commodities such as ammonium sulfate.

Despite these headwinds of FX and some of the lower volumes in some of our shorter cycle businesses we expect to deliver approximately 20% growth for the year inclusive of almost $400 million or $0.40 of repositioning actions that we’ve taken during the year. Our current expectation is to deliver EPS at the low end of our ’08 guidance range an impressive result and clearly enabled by the proactive actions we’ve been taking.

On that note let’s turn to some further detail, let’s go to slide five, let me just take you through our restructuring actions over the last three years and the savings expectations for these actions. As you can see on slide five we’ve got both costs and projected savings for all restructuring actions that we’ve taken since 2006. The blue bars represent the charges that we’ve incurred which as a reminder are always included in our earnings numbers. We took $102 million in ’06, $191 million in ’07, and almost $400 million year to date in 2008 including approximately $220 million in the third quarter.

The green bars represent the savings as a result of these actions. Approximately $85 million in 2007, $150 million in ’08 and over $500 million projected in 2009. We’re clearly seeing the cumulative benefits of our proactive restructuring program and we’ll continue to fund attractive projects, again through operational performance in 2009.

It’s important to remind you and there’s a block in red here on this slide, that our EPS growth of 31% in 2006, 25% in 2007 and approximately 20% in 2008, are inclusive of these restructuring actions. We believe that the restructuring should be treated as a continuing item, not as a one time action that is excluded from EPS. We feel that Honeywell continues to stand out in the transparency that we provide on this front and is reflected in the numbers that we report.

Let’s now turn to the macro assumptions on slide six and transition now to our 2009 guidance. On a macro level we’re expecting global GDP to be in the range of 1% for 2009 with negative growth in the US and Europe and slower growth in the emerging markets such as China and India.

With respect to foreign exchange we expect continued strength of the US dollar versus major currencies and are planning for Euro and British Pound rates of $1.25 which by the way compares to $1.47 in 2008 average and $1.45 for the Pound versus $1.90 average for 2008, so $1.25 for the Euro, $1.45 for the Pound in ’09 slightly lower than current levels but obviously significantly below the 2008 averages for each of those currencies.

For commodities we’ve seen a year of dramatic swings in prices with current levels sharply below their 2007 and 2008 peaks. For example, two of our larges raw material inputs, nickel and natural gas are now down more than 80% and 55% respectively from their peaks. We expect lower material costs to be a tailwind to our segment margin performance in ’09 and along with our productivity benefits which we’ll detail in a few minutes and the repositioning actions which we outlined earlier.

In this slower growth environment lower volumes will be a headwind to margins as will foreign exchange however we see a clear path to margin expansion for the year that we’ll take you through. One item of note, however, will be the challenge of earnings and cash linearity during the year. We, and of course others, will clearly be facing weaker comps in the first half of ’09 versus some anticipated improvement in the second half of the year.

Finally, we expect free cash flow to be strong for Honeywell in ’09 with greater than 100% conversion driven by continued progress in working capital representing another year of high quality earnings.

With that let’s go to slide seven entitled Key Market Assumptions. Here what we’ve done is we’ve summarized the bottom up assumptions that we’re making in our key markets for ’09 and for comparison purposes we’ve also included the sales growth rates of our businesses as we exit the fourth quarter. What we really are comparing here under the HON 4Q08E column is really what we’re seeing in our businesses then the key drivers for our major markets. Then on the right hand side what we’re forecasting or using as assumptions for the major markets that we’re serving.

Starting out with Aerospace and the Air Transport & Regional business which represent just under 40% of our Aerospace revenues. We expect flight hours, which as you know are closely correlated to our after market business at ATR to decline by about approximately 2% versus 2008. This is in line with the expected exit rate that we’re seeing and in terms of global flight hours in the fourth quarter this year.

The announced capacity reductions in ’09 will be more than offset we believe by new aircraft in the fleet coming off warranty and in particular 737 NG and also A320 which will provide a positive product content mix for our business.

In the Aerospace business we expect OE deliveries at Air Transport to grow between 0% and 5% as Boeing and Airbus continue to satisfy demand for new aircraft around the world we expect orders to decline, however, in ’09 but the backlog remain robust at approximately 7,000 aircraft supporting positive delivery growth.

Our 2008 exit rate for Air Transport OE reflects primarily the impact of the Boeing strike and their slower than anticipated ramp up to full production in the fourth quarter. I think if we exclude the Boeing strike impact we’re actually up 10% in terms of OE revenues in the fourth quarter.

On the Business & General Aviation side which represents approximately 20% of our Aerospace sales we expect declines in the Honeywell engine flight hours of TFE engines to be in the range of 10% to 15%. As a reminder, Honeywell has over 60,000 engines in the field across a wide range of aircraft platforms so we use TFE flight hours as an indicator of mechanical after market growth. Unlike Global Flying hours where we’ve got a readily available data point, we really don’t have that in BGA and this we simply use as an indicator.

Over the past quarter we’ve seen double digit declines in TFE hours still primarily in the smaller and older aircraft platforms, however, this has begun to spread to larger aircraft also.

A couple of other data points in the subject of Business Aviation, Business Aviation activity has now turned also negative in Europe and also we’ve seen an increase in used jet inventories and those are also signals obviously that we’re tracking that give us additional caution for ’09.

OE deliveries in the Business & General Aviation segment we expect to be up 0% to 5% reflecting OE production cuts and also backlog cancellation risk. We expect ’09 to represent the peak of OE deliveries and are forecasting declines in ’10 which will negatively impact our OE business starting in the second half of ’09. We’ve built this into our thinking and we’re forecasting sales to be flat to down for BGA OE in 2009 as a result. Our expectations for sales growth in this segment for the fourth quarter ’08 however remain solid at approximately 15% growth.

In the Defense and Space business which is about 40% of Aero sales we expect growth to be in the range of 3% in line with the base US Defense budget growth. We’re well positioned in this segment as you know with our logistics and resent businesses and we expect continued growth in ’09.

Turning now to ACS, moving down the page, in developed regions starting with US and EU Housing which were not expecting to recover in ’09. As you know our exposure to new residential construction in the US and EU is small at the total HON level in terms of measured in revenues its about 2% of our total sales. We do expect to see continued softness within combustion and security distribution businesses offset by new product introduction particularly in the home comfort segment.

We anticipate a downturn in the US and EU in the new non-residential construction markets which represent about 5% of total Honeywell sales as credit market weakness spills over into 2009. However, the strong backlog we have in this business driven primarily by energy efficiency projects at our building solutions business also supported by our business mix. You’ll recall the significance of both government and healthcare to our business and the large installed base will support organic growth in 2009.

We expect retrofit activity in ACS which represents about 2/3 of ACS’s revenues to remain relatively stable for ’09 and in line with our 2008 exit rates. Finally, with respect to this segment, we expect the regulatory environment in the US and around the world to continue to drive organic growth particularly in our well positioned life safety businesses.

On the industrial side of ACS we remain cautious on discretionary CapEx and OpEx; however, we believe that the long cycle CapEx projects and the critical high ROI process optimization investments will remain solid through 2009.

Turning to the ACS businesses in emerging regions we expect new construction trends to moderate in ’09 as credit concerns, lower GDP rates will impact build activity. However, on the other hand we expect to grow faster than the markets in which we serve in these emerging regions. The investments that we’ve made in places like India, the Middle East and China will continue to pay off for the company albeit at a slower rate than we saw in 2008.

For the Turbo business we’re expecting another challenging year in 2009. Despite new platform launches during the year and EU production levels which we expect to be down 10% to 20%, diesel penetration we expect to be down approximately a point and platform mix we expect to be unfavorable with a four point shift to smaller engines. All of these, the lower EU production levels, the diesel penetration, the platform mix will be headwinds for us in ’09.

As discussed earlier we’re seeing strong near term headwinds in this business and expect 4Q sales to be down as much as 45% including the impact of foreign currency.

Finally, in UOP we’re exiting 2008 with a record backlog. However, we expect sales growth to decline in ’09 with catalyst reloads being deferred due to weaker end market demand. We continue to see long term demand for UOP products and technologies across both the refining, petrochemical and natural gas markets. However, we’re cautious in the short term as volatility and energy prices create uncertainty in demand and OpEx spending at our customers.

With that introduction let’s go to slide number eight for the overview of our 2009 financial guidance. We anticipate sales to be down in the range on a reported basis 4% to 8% to $33.6 to $35.3 billion, down 4% to up 1% on an organic constant currency basis. We expect segment margins to expand 0 to 50 basis points driven by productivity actions which I’m going to take you through in a few minutes and we see segment profit of $4.4 to $4.8 billion.

This coupled with slightly high below the line expenses and higher share count due to pension funding are the key drivers of the company’s earnings per share which we expect to be down in the range of 6% to 15% to a range of $3.20 to $3.55. We expect to continue to make great progress in operating cash flow and free cash flow. We anticipate free cash flow despite the lower earnings forecast to be greater than 100% conversion of net income. We’re assuming flat CapEx year over year, however, we continue to work this number as we enter 2009.

I’d like to now take you through some of the variables that can influence ’09 plus or minus. You can see we’ve outlined there itemized five outcomes on the left that would cause our earnings to closer to the low end of the range. Those on the right would cause earnings to be at the higher end of the range. We feel that our range is broad enough to incorporate these outcomes.

Global growth is certainly a factor we’ve looked at from both a top down as well as a bottom up perspective in our planning. We currently expect global growth to be approximately as I said 1% in ’09, obviously lower or higher global growth would have an impact on the reported results. The mix of business is important as well. We’ve planned for ’09 with detailed assumptions around growth for Aerospace OE and After Market as well as ACS Products and Solutions. As you know, the mix can change and that could impact the results.

More or less, inflation and offsetting productivity that we’ve built into our planning could also impact results as well as the pension discount rate, asset returns and our foreign currency assumptions. Again, foreign currency we’re planning the $1.25 well below this years average of $1.47 and below the current spot rate of about $1.34. Of course, material differences from that rate can have an impact on the reported results.

In conclusion, we felt we’ve built a plan for ’09 just as we have in prior years that frame the relevant range for this year particularly that frame the uncertainty in the markets that we have. We feel good about our ability to execute to this plan and over the next two slides I want to take just a few minutes and take you through the build up of the numbers by business so that we can ground you on the assumptions for sales and profitability.

Let’s start on slide number nine, Aerospace. We expect sales at Aero in ’09 to be in the range of $12.2 to $12.7 billion, flat to down 4% on a reported basis, up 1% organically at the mid point of the range.

By the way, let me just introduce on Aero the format that we’re using for each of the business segments you can see the latest outlook in terms of range outlook for ’09 and that growth compared to ’08 in percentage terms and basis points of margin at the top left. We’ve got a sales walk that shows you the walk from our expected revenues for ’08 down to the mid point of our expected range for 2009 and then the major drivers by segment of the business.

For Aerospace segment margin should increase from 20 to 60 basis points to 18.6% to 19% despite the negative mix from lower after market sales. Aero Productivity will offset net inflation and lower volumes and we expect company funded R&D to remain essentially flat with 2008 levels. Remember, Aerospace, put this in perspective, continues to benefit from the repositioning actions that we set into motion a number of years ago.

If you’ll recall we’ve reorganized the business in a more customer focused franchise with scale across its engineering and marketing functions and a lean cost structure that is lower today on both a dollar and percent sales basis than it was five years ago. The Aero team has continued to build out its leadership position winning over $40 billion of new programs in ’08. We’re confident they’ll continue to deliver despite tougher conditions in 2009.

Let’s turn now to slide 10 and go through the highlights for ACS using that same format. You can see for ’09 we expect sales of ACS from $13 to $13.5 billion down 4% to 7% reported but at the mid point flat on an organic basis, again, an organic constant currency basis. Organic growth in our solutions businesses will be offset by organic declines in products and foreign currency will more than offset the contribution in ACS of acquisitions.

We expect segment profit of approximately $1.5 to $1.6 billion driving segment margin in the range of 11.4% to 11.8% up 10 to 50 basis points from 2008. New products at ECC will continue to drive faster than market rates and increased buyer and safety regulations will contribute to life safety in ’09. Building and Process solutions both enter 2009 with solid backlogs.

Demand for energy efficiency as well as the integration of climate, fire and security controls for critical infrastructure will continue to drive growth at Building Solutions. At Process Solutions oil and gas production, particularly upstream as well as distribution projects will continue to be solid as critical CapEx and higher ROI projects such as energy efficiency and optimization upgrades will continue to be executed.

We expect softness on the other hand in heavy crude and oil applications as well as with independent downstream refiners who will see pressure on margins due to low current oil prices. Also challenged in ’09 will be the sense and control business with their exposure to global transportation in industrial markets. Security will continue to experience challenge. We anticipate an organic declines in consumer discretionary products primarily within our distribution business in the US and Europe.

Again, however, we expect ACS overall global and diversified portfolio to be far more resilient in ’09 than in previous down cycles. Just to put that into perspective, ACS today is a transformed portfolio with leading channel branded technology positions across its businesses. The emphasis that Roger Fraden and the ACS team have place on new product development as well as their focus on attractive end markets such as energy efficiency, safety and security should allow ACS to grow share in this environment.

Further, ACS will continue to execute on repositioning and ERP implementation projects that will deliver productivity savings in ’09 and beyond. With that highlight of ACS let’s now turn to Transportation Systems on slide 11.

As I said earlier, 2009 not surprisingly is going to be another challenging year across the board for TS. We expect sales between $3.6 and $4.0 billion in the segment, down 18% versus ’08 and segment profit to be in the range of $0.2 to $0.3 billion driving segment margin of between 6.9% and 7.9%. We anticipate organic declines across each of the Transportation businesses with OE declines as I said in both Passenger Vehicle and Commercial segments and Consumer Preference shifts driving softness in the automotive after market businesses.

We anticipate diesel penetration to continue to decline in Europe. Platform mix is going to be a headwind certainly in early ’09. However, the launch of key new Turbo platforms across both our Passenger and Commercial segments will help us to offset these declines and particularly benefits in the second half of the year.

Overall, a challenging period ahead for TS, however, macro trends of energy efficiency and emissions as well as a robust backlog of attractive new Turbo platforms still give us confidence in the long term prospects of this business.

Let’s go to the final segment then, Specialty Materials on slide number 12. For ’09 we expect sales and SM to be between $4.7 and $5.1 billion down 3% to down 11% versus 2008. Segment profit we expect to be between $0.6 and $0.7 billion driving segment margin of between 13.5% and 13.9%. As I mentioned earlier UOP enters 2009 with a very strong backlog, however, we expect declines in catalyst reloads as their end markets for those reloads slows. Catalysts represent, just to put that into perspective, about 50% of UOP total business and roughly half of those sales are associated with reloads.

The balance of course associated with initial supply for new units. We expect the new units supply will likely be maintained as this is scheduled as the last half in completing major projects which are too mature to be at risk for cancellation or deferral at this stage. The remaining 50% of UOP, the process technology or the projects businesses we refer to it, remains solid with confirmed backlog and a gas and hydrogen business which continues to experience good growth.

The other SM businesses such as Resins and Chemicals will be challenged in ’09 due to sharp declines in pricing which impacts, as you know the top line due to the formula pricing agreements in that business and also we’re experiencing and anticipate in terms of worldwide demand for commodities such as caprolactam and ammonium sulfate fertilizer.

However, SM is much much better protected from fluctuations in commodity pricing due to the formula pricing agreements and the significant transformation that’s taken place in the SM portfolio compared to the make up of the business in prior down turns. If you’ll recall since 2003 we’ve divested 12 businesses worth approximately $1.7 billion of commodity revenues, primarily nylon and industrial wax. We’ve acquired UOP which has been a fantastic addition to the portfolio.

Today, SM has strong positions in the segments we serve; however, pricing volatility will be a challenge for the top line due to formula pricing. Overall soft demand will impact capacity utilization in our facilities which could dampen segment profit growth in the short term.

With that review of the business segments let’s go to slide 13 which details the components of our organic sales outlook. We wanted to give you this chart; I think it gives you a little more perspective and insight into how we built the plans for ’09. The bars represent the contribution, the mid point of the contribution of each of our businesses in organic constant currency dollars to our growth in 2009.

As you can see, businesses such as Defense & Space, Building and Process Solutions that have solid backlogs are important contributors while the shorter cycle businesses and SM and Transportation Systems are expected obviously to contribute lower organic growth in ’09. We think we’ve adequately captured the risk in each of our businesses with this build up and we’ve embedded realistic assumptions in terms of our top line guidance for the year.

Turning to slide 14 which outlines the sales and segment profit walks that make up the plan, for sales you can see the walk there on the top left of the slide primarily year over year going from ’08 to ’09 being impacted by foreign exchange approximately $1.8 billion of negative impact with a contribution of net acquisitions and divestitures adding about $0.1 billion, more than offset by decline that we anticipate in terms of organic growth using the build up that we just went through on slide 13, that negative organic growth being $0.6 billion or 2%.

The segment profit walk shows you the corresponding declines in volume and FX partially offset by net productivity. Slide 15 shows you those productivity actions and these are the major actions that we wanted to highlight and that we’ve assumed in our 2009 plan. All of these projects have details behind them and are built up through our businesses in terms of their AOP or operating plan reviews.

Functional Transformation will be a significant contributor to the bottom line. We’re targeting functional costs at 5.3% of sales an improvement of 20 basis points over last year and just to put that into perspective you’ll recall in 2004 functional costs were over 8% of sales. ERP is a big driver of functional efficiency we expect 60% of our sales to be on SAP by the end of next year. In addition, we also expect to continue to drive efficiencies in the supply base as well as to continue to consolidate our rooftop globally.

With the Honeywell Operating System or HOS starts seeing critical mass with 40 sites reaching our bronze certification level which is more than four times the number at the bronze level today. Bronze Certification is a big step in HOS with sites not attaining that status until they reach at least 95% in deliveries to customer request, 15% improvement in inventory, 25% reduction in defects and improvement also in safety rates. This is making a big difference with our customers and the results are showing up in both working capital and conversion at the site level.

We’ve talked to you about repositioning showed earlier the cumulative benefit that we’re experiencing from repositioning and what those savings will be in 2009. These projects are already underway and on track to deliver.

With that background on the components on sales and profit guidance let’s now turn to the below the line items on slide 16 entitled Other Planning Assumptions. Starting with Pension expense which we expect to be in the range of $130 million for 2009, this assumes as you can see on the right hand side in the matrix that we’ve shown you there, asset base case asset returns of negative 33% for ’08 and a discount rate of 7.5% at the end of this year which of course is the formula for the development of the projected expense for 2009.

As you know, there’s a high degree of uncertainty around both these metrics in the current markets. We’ll update you as we are able to lock in these variables when we report our fourth quarter and full year ’08 results in January. At current returns we would expect to exit ’08 at approximately 80% funded and importantly are not required to make mandatory contributions in 2009.

However, we plan to make proactive contributions to the US Fund in the form of Honeywell shares. We feel at the current price the stock contribution provides the plan with tremendous potential return and also provides Honeywell with a degree of financial flexibility just an enhanced degree of financial flexibility for 2009. Our base case assumes that approximately 40 million shares would be contributed over the next five quarters starting with the fourth quarter ’08 resulting in an average diluted share count for ’09 in the range of 755 to 760 million shares.

As we discussed at the end of the third quarter we intend to further strengthen our balance sheet by reducing debt levels using free cash flow during the course of the year. We believe that a strong balance sheet supported by strong free cash flow generation will be key assets in a difficult 2009 environment.

OPEB expense just to go to the second variable there shown on the left hand side of slide 16, OPEB we expect to be in the range of $120 million slightly below our estimate for 2008 of $135 million.

Environmental, Asbestos and Repositioning we expect Environmental expense to be about $150 million, reflecting benefits in the actions we took in the third quarter and around $50 million below the 2008 run rate. We expect Net Asbestos expense to be in the range of $150 million slightly above our current year estimate of $120 million. Our initial estimate for Repositioning and Other is approximately $40 million compared to almost $400 million of actions this year.

In aggregate these quote below the line items for ’09 are expected to be about $590 million for the year versus $620 million in ’08 excluding the consumable solutions gain impacts. With regard to cash commitments not shown on the slide but just to give you some highlights there we expect net asbestos to be in the range of $150 to $200 million, environmental to be in the range of $300 million and repositioning cash requirements are expected to be approximately $250 million in 2009.

With that let me summarize it before turning it over to Q&A for Murray and I. Overall we’re clearly planning, as you can see, and hopefully its become very evident as we’ve gone through this, for a tough economic environment in ’09 with negative growth in the US and Europe and moderating growth in the key emerging regions. We are, however, entering this tough environment as the new Honeywell.

The company’s portfolio is stronger, we have an Aerospace segment that is leaner, more customer focused, and we’ve got a stable $5 billion plus Defense business within Aerospace. The ACS segment has been dramatically transformed and aligned with macro trends and is delivering attractive new products to the marketplace. We’ve got a Special Materials portfolio, as I took you through that is really 180 degrees from what we had in the last downturn, much better positioned to protect its bottom line than in previous cycles.

Honeywell today is much more geographically diverse; we’ve got approximately 50% of our sales today outside the US versus less than 40% in 2001. We have processes and initiatives like HOS, FT and VPD that are in place to drive significant productivity as well as innovation. We’re entering 2009 with a tailwind from approximately $700 million of proactive repositioning actions that we’ve taken since 2006.

The new Honeywell is a strong free cash flow generator which should provide additional flexibility as we enter 2009. We have a management team that has a track record of delivering consistent results. Our guidance for ’09 is built upon what we believe are achievable top line targets with aggressive cost management actions. As always, the planning process has been very rigorous and includes detailed top down assessments and scenario analysis followed by detailed bottom up plans including contingencies across all of our businesses.

The team is focused on delivering in this much more challenging environment. We look forward to updating you on our progress and what we’re seeing in our businesses during ’09. With that Murray and I are both available for the Q&A.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Jeff Sprague – Citi

Jeff Sprague – Citi

Could you share with us your thoughts on capital allocation looking into ’09? Obviously you and others have kind have been in hunker down mode, paying down debt, holding share repurchase, how do we think about that as we move into ’09 and does the fact that you’re using equity in the pension plan color your view on repurchase in ’09?

Dave Anderson

A little more color on what we discussed at the end of third quarter. As we said at that time, we would anticipate reducing our Commercial Paper balance by about $800 million over the course of the fourth quarter and we’re on track to do that. That would bring the CP balance down to approximately $1.4 to $1.5 billion at year end. We think that’s a smart thing to do in this environment.

One of the things we’ve emphasized obviously is the strength of our balance sheet and our credit rating. Those are dear to us and I think particularly important and it’s played out as being very important in this environment.

With respect to the capital allocation, our priority is going to be on maintaining our credit ratios, number one, number two, as we just announced the 10% increase in the dividend which is our fifth consecutive 10% annual increase. Number three, the financial flexibility I think from the share contribution to the pension plan is going to be important although this is proactive no mandatory funding required gives us additional flexibility in an environment where frankly we think that there will be assets that will be available that will be attractive.

I think at this time it’s difficult to really know what is an attractive property but I think as time unfolds and as the economy, the downturn begins to stabilize, I think we’ll see properties that will be available. We’re clearly looking at this also as an opportunity where we want to be prepared on the acquisition front. We would see that as really the priorities that we see for 2009 in terms of capital allocation.

Jeff Sprague – Citi

Getting underneath that a little bit if you could give us a little bit more color on free cash flow solidly above net earnings but CapEx is not down and I think some of the below the line cash calls like on restructuring are similar. Is it working capital or taxes or what are you working on to drive the cash flow in ’09?

Dave Anderson

We’re clearly depending upon delivery of improved working capital turns in ’09. We’ll also, as I said, we’ll revisit that CapEx assumption that’s something that really is on the to do list that we’re working through with the businesses as we speak. We’ll have more details on that at the first of the year. Right now when you look at our build up of our assumptions on a year over year basis obviously working capital is a key contributor in terms of our free cash flow.

Jeff Sprague – Citi

Should we expect flight hours to roughly parallel your after market revenues or is there inventory issues or other things we need to think about that could add some additional pressure there.

Dave Anderson

There is some potential for some inventory issues and specifically what we experienced in prior downturns as you know is some change in airline behavior where they’ve gone to lower inventory levels to manage their own operations. What we’ve built into our guidance for Aerospace and what’s assumed in our guidance for Aerospace is actually a little bit lower in terms of the anticipated revenues compared to those flight hours for ’09.


Your next question comes from Shannon O'Callaghan – Barclays Capital

Shannon O'Callaghan – Barclays Capital

Looking a little further out to put this margin into ’09 reflects obviously would have been significantly better in a more normal world. Can you talk about how you think you’re tracking to your longer term margin goals for Honeywell? You set out this pretty big number a few years ago and the cycle has interrupted things here. There are some pretty strong underlying margin improvement going on, can you talk about how you’re tracking and how far along you think you are.

Dave Anderson

Clearly we’ve had more net investment particularly in our ACS business we’ve had some softness obviously that’s affected Transportation System margins in the second half of this year. We’ve also seen the impacts of the calendar year distribution of UOP’s profitability is affected SM margin rate as well as when most recently some of the downturn that we’ve experienced in the Resins and Chemicals business.

So, 2008 we didn’t achieve the kind of margin rate expansion rate that we would have originally forecast. Part of that is due to our own decisions. Part of that is driven by the macro economic environment that we’re in. If you look at the playbook the things that are driving margin and profitability going forward those are all absolutely in tact and on track.

We feel good about that, in fact, for 2009 the numbers that we’ve provided to you in terms of the guidance that we provided to you in terms of the margin rate expansion at the mid point of our guidance we feel good about, really driven by, as I said, net productivity actions.

In this environment where we think we can really capitalize on the cost actions and repositioning that we’ve taken over the last three years the improved product portfolios that we have the investments that we’ve made to expand our market positions globally, all of those are really in place and we think are going to support the margin expansion that we’ll experience in 2009.

From that standpoint we’re on track. The macro factors, the macro influences are clearly a headwind to us, foreign exchange from a margin rate standpoint in fact is not that significant of a headwind to us as you know because that $1.8 billion of FX headwind actually converts at just at or slightly above our average OI rate. That’s in the numbers, that’s in the math as well.

Overall I think we feel good about the playbook and we think that it positions us very well for 2009 as well as beyond in terms of continuing to grow profitability and continuing to grow margins

Shannon O'Callaghan – Barclays Capital

On Environmental and Asbestos these $150 million numbers as we look further out what are the dynamics should we expect them to remain steady beyond ’09 or are there dynamics that could drive them lower?

Dave Anderson

Specifically on Environmental, I’ll let Murray comment on some of the other below the line items. On Environmental as we’ve said the pull forward and recognition that we’re able to do in the 2008 third quarter is really a big enabler for us, we’re able in a sense through the work we’ve done with outside parties and the agreements that we’ve been able to achieve and reach to recognize those expenses on an accelerated basis giving us about $50 million of benefit in 2009.

We see that benefit continuing in 2010 and 2011 then increasing beyond that timeframe to probably in the range of $75 to $100 million of benefit as we exit the five year planned timeframe. In the ’12, ’13 timeframe we should see even more benefit from the actions that we’re able to take in the third quarter of ’08.

Murray Grainger

Those two items I think we would expect to be declining balance over time in aggregate.


Your next question comes from Nicole Parent – Credit Suisse

Nicole Parent – Credit Suisse

With respect to the Boeing strike there seems to be a lot of finger pointing out there as their delivery schedule gets pushed out. Could you update us on your role and are there still any challenges with the software integration?

Murray Grainger

Our role in the call is the flight controls as you know. We have been on track with our plans and we expect to be in line with Boeing’s new schedule. We are an important piece of their project but we are on track with their integration, our testing and everything else.

Nicole Parent – Credit Suisse

With respect to the stimulus plan there’s not numbers out there so I guess could you maybe quantify what you’re assumptions are or would you characterize is as up side when you think about ACS?

Dave Anderson

It’s really for us really up side. As you know there really hasn’t been beyond the guidance of the broad framework for the president elect’s objectives for energy efficiency. There really hasn’t been yet specifics. We anticipate that there could be a release of the proposal to capital hill this week and we could get some more color.

Obviously when you think about national building efficiency goals, the federal efficiency standards, reducing federal energy consumption, the weatherizing one million homes annually and then improving the fuel efficiencies of the nations cars, trucks and SUVs, this is music to our ears and plays very well to the strength, particularly of the ACS and TS portfolio and product offerings of Honeywell.

We’re looking forward to getting the details of that and working with the new administration.

Nicole Parent – Credit Suisse

On Specialty Materials I think you sighted a 5% core decline and you also mentioned confirmed backlog could you talk a little bit about if you’re seeing deferrals and maybe compare and contrast that with cancellations and how much of the core decline that you’re forecasting there is price degradation?

Dave Anderson

Specifically what we said is the anticipation of deferrals or delays in catalyst reloads we also said that we would anticipate that for formula pricing that we would have negative impact. We would see that in the range of between $100 and $200 million of negative pricing impacting formula based pricing, impacting simply the reported financials for SM in 2009 compared to 2008.

Murray Grainger

On the project cancellations and deferrals question, as you know in the refining, petrochemical oil and gas segment there are always announcements and there are always deferrals and cancellations as part of those announcements as a normal course of business. As far as specifically 2009 is concerned we have somewhere in the 10 or so projects that have been identified that have been either deferred or cancelled.

It’s a very, very small number from a revenue perspective for us well within the range of accuracy that plan to build up on. We feel that we adequately captured that in our plan and that we’re really going through line by line from a backlog perspective and really understand which projects are at risk versus which ones are solid there. We think we captured that in our plan for 2009.


Your next question comes from Scott Davis – Morgan Stanley

Scott Davis – Morgan Stanley

When you think about stress testing your assumptions for next year what role did price play into it? My point being that clearly your commodities are coming down, at what point do your customers start demanding greater price discounts or in businesses let’s say auto for example which are particularly weak and your customers are going to know that you’ve got excess capacity out there, at what juncture do they go after the jugular and try to extract a little better pricing?

Dave Anderson

Clearly it varies very much by business. To build on the point about Transportation Systems we feel like we’ve got the customer at the jugular on an ongoing basis clearly heightened in the intensity of that is heightened in this environment but the assumption is we’ll have net net pricing concessions in that segment in 2009. That’s no different than prior periods. I’m not going to go through the details of that obviously but in terms of directionally that’s consistent with the past and if anything pressure there intensified in this environment.

We talked about in response to Nicole’s question when we talked about the pricing assumption in the Resins and Chemicals business the formula, the price based sales of R&C and the range of decline that we’re anticipating there just driven by lower commodity costs. It varies when you look at the ACS and the Aero portfolios.

In some cases pricing actions for 2009 have already been taken in 2008. The assumptions that we’ve used we think are appropriately conservative, they’re based upon by business by business analysis, what’s been completed in ’08, what remains in 2009. The macro and customer and marketplace environment that exists, but it’s the same kind of discipline that we’ve used in the past.

Broadly speaking, as you know, we’ve benefited from improvements that we’ve made just in terms of our analytics, the databases that we have, market segmentation, new product introductions, all of those things have really enabled us to improve in that area. It’s a very, very detailed part of our planning process.

Scott Davis – Morgan Stanley

When you think about inventories, it’s pretty common at this point in the cycle for customers to be de-stocking to a greater extent than what’s considered normal. A few other companies in the last couple weeks have talked about that. Where do you guys think you’re at in that process really meaning in the businesses that you have like ACS for example where you’re selling through some in distribution and where inventories can be adjusted pretty quickly, what inning do you think you are in in this inventory adjustment that’s probably going to be occurring out there the next few months?

Dave Anderson

I think we’re going to see continued pressure and pressure for real time performance deliveries. We saw and we shared this with you in the third quarter we saw some phenomenon of that de-stocking occur in the trade channel of ECC in the third quarter but we also saw a snap back as well. We would expect we’re going to see some of that phenomenon throughout our businesses. ACS has done a particularly good job in their SIOP process of sales inventory and operations planning process and has steadily improved in terms of their inventory turns.

In 2008 we anticipate 0.3 turn’s improvement out of ACS. They’re just doing very well. I would say that they’ve done a very good job and are in a position to continue to do very good job of reading their end markets, anticipating that from an ordering and from a productions from a raw material component and ordering standpoint and from a production standpoint. They’ll be impacted like everybody else by short term interruptions in terms of their customer demands.

Overall, if you look at the track record of what we’re doing, what we’re experiencing in the fourth quarter and use that as an indication of what we’re going to be able to deliver in 2009 on working capital performance we feel good about that.


Your next question comes from Howard Rubel – Jefferies & Company

Howard Rubel – Jefferies & Company

Where do you plan to have headcount end the year in ’08 then in ’09?

Dave Anderson

We see census overall in 2008 as relatively even with 2007. It’s really a function of the continued work that we do to improve sales productivity at the same time that we add companies we add census through acquisitions. As you’ll recall we talked about some of those acquisitions earlier that we made over the course of the year. We also just continue to work on improvements in productivity.

Census driven productivity has been one of the main features of our earnings growth that we together with our top line growth as been one of the main elements and main contributors to the earnings growth of the company over the last four to five years. We would expect that’s going to continue to be the case in 2009.

The repositioning actions that we announced that we took in the third quarter were distributed between census related and severance related actions and facilities related, we had a little more facilities related in the third quarter as a percent of the total than we would do in our typical quarterly restructuring. Census productivity will continue to be a big part of what we continue drive.

Howard Rubel – Jefferies & Company

For your repositioning actions for ’09 you put in a placeholder of $40 million and that’s clearly a judgment call as to how you might want to adjust that as the year goes on. Could you give us a sense of what you’re thinking in terms of suppose you end up at the high end of the range and things look better for ’10 would you serve to use that as an opportunity to do something to make ’10 even better. I realize we haven’t even finished ’08 yet but could you address that little bit?

Dave Anderson

Absolutely, we would do that. That’s been our MO is to really invest back in the business through proactive repositioning and to balance and make sure that we’re achieving current period guidance and commitments while also strengthening the ongoing outlook, and the run rate for the business going forward. We would plan to do the same thing in 2009 to benefit 2010 and 2011.


Your next question comes from John Inch – Merrill Lynch

John Inch – Merrill Lynch

There’s been an awful lot of speculation that your Energy business, I guess by that we mean UOP and Process Solutions are effectively going to fall off a cliff with the collapse in the price of oil. You sort of forecast the blend of flattish. Let’s assume energy prices really don’t change much going through do these business, are you just working off backlogs and then as you get toward the end of ’09 into ’10 there is a seriously steep drop off or could you just perhaps remind us again whether the puts and takes that perhaps hold your energy related businesses at the run rate in ’09.

Dave Anderson

I’m going to give you an overall summary and then Murray can fill in with a few details. Clearly in the near term, as we said, we’re the beneficiary of the high ROI projects that we’re participating in in the refining and with the large vertically integrated petroleum companies, state owned, the nationally owned companies as well as to some degree late cycle in petrochemical. We’re beneficiaries of that despite the relatively low now compared to 2008 highs relatively low oil prices.

We’re going to benefit from that we think on an ongoing basis. We think that that’s going to continue for a period of time and we think fundamentally that there is still a demand ultimately once the economy begins to stabilize and recover that there is demand/supply imbalance and that will come back. In the near term as we said we’re going to be affected at the margin by such things as deferrals or delays in catalyst reloads as customers are pinched particularly refineries and stand alone refineries are pinched by their current market conditions.

We feel that the underlying strength of those markets will continue to be there. What we have in terms of the breadth of our product offering and positioning you’ll recall the growth that’s taking place in UOP as we’ve expanded beyond our traditional business base. For example, the expansion into natural gas and the importance of gas now to the UOP portfolio. That’s going to be with us.

Murray Grainger

If we tick through the chain of oil and gas and some of these comments were related to HPS some of them relate to UOP but we continue to see strong trends on the production of the upstream side of the oil and gas house. There’s very long term demand dynamics there and as wells run dry at a rate around 5% a year so there’s a natural update there that you need to keep up with demand.

On the distribution side of oil and gas we continue to be extracting oil and then having to export that to places where we need it most around the world. The distribution side of the house is still looks strong. If you are an integrated refiner with up stream presence as well you still have a lot of cash and those projects typically are three to five years in length. We typically in HPS come in towards the latter end of that and so we still have a long lead time of projects that we’re working on.

Where we would see softness and where we have anticipated that in our plan would be on things like the oil stands and heavy crude projects where the price of oil today is probably below the break even or the marginal cost of production of those items. If you’re just a down stream refiner stand alone you’re clearly under margin pressure as well due to where oil is.

There are still a lot of trends around alternative fuels, clean energy are driving our businesses. Overall I think that there’s a blend of things that we think are positive in the medium and long term and there are some things that will see some pressure I think we’ve captured that in our plan. I think we feel good about the way that we’ve built it up with good realistic assumptions about where the market is going to go.

John Inch – Merrill Lynch

How big is heavy in down stream in the mix of blend of UOP in process?

Murray Grainger

It’s a small piece. Heavy crude and oil stands are still a very, very small piece of the overall up stream pie. At UOP it’s in the tens of millions of dollars and at HPS it’s probably a little bit more than that. Again, we’ve captured that in our guidance.

John Inch – Merrill Lynch

Shift to more of a broader view of Honeywell overall, I think the down 10% in earnings at your mid point is going to surprise positively a lot of people. You guys have talked a little bit about the disconnect between Honeywell today and your valuation versus historically. If you take some of those historicals at the low end and you back into what the market is telling you the market is effectively saying you could be on a pathway to earn $2.00 per share at the trough which we’re all assuming is 2010.

That would imply really substantial degradation of project trajectory through the balance of this next year into 2010. Do you guys foresee any kind of a scenario based on all the puts and takes the lower base that you’re building up the Honeywell operating system functional transformation any kind of a scenario where that makes sense?

Dave Anderson

We don’t at all. It’s very difficult for me to envision the set of circumstances the set of market conditions and circumstances that would drive that kind of performance. That’s all it could be. As we’ve taken you through and hopefully this has been helpful today, the highlights of the bottom up build of our 2009 guidance as you can see we’ve really worked to stress test each of those key variables and can compare those against some pretty challenging end market conditions that we’re experiencing and others are experiencing as we exit 2008.

It’s a time of greater uncertainty than I think any of us have ever experienced or lived through so we’ve made every effort to really ensure that we’re looking at things to address that uncertainty to be sufficiently conservative etc. I do not envision that kind of outcome that you said is implied in terms of our current market valuation.


Your next question comes from Nigel Coe – Deutsche Bank

Nigel Coe – Deutsche Bank

On slide 14 when you go through the revenue and segment income waterfall ’08 to ’09 you’re looking for $0.6 million organic revenue decline. On that organic decline you’re got a $0.5 million segment income impact. Its looks like you’re budgeting for some pretty high detrimental can you maybe comment on that.

Dave Anderson

That really goes back to what we talked about which is the assumption that we’re going to see pretty significant contribution margin or fall through in some pretty high profit businesses as a result of the volume declines. A good example of that would be Transportation Systems with the Turbo business as you know with very high contribution margin business.

Another item that’s impacting that relationship is the SM Specialty Materials formula pricing, basically you’ve got a one for one there. That $100 to $200 million that I mentioned in terms of formula price reduction year over year is a one for one in terms of the revenue rate and the operating income fall through. It’s the combination of high contribution margin business fall off and the formula pricing assumption that we’ve used.

Nigel Coe – Deutsche Bank

The problems in the supply chain or the diffusion chain is sort of the big black box for a lot of industrials right now. Can you go through how you’re at risk assessment and your levels of comfort at this stage right now?

Dave Anderson

It’s sort of a day by day thing. Our procurement folks and our ISC leaders our Integrated Supply Chain leaders are just very, very mindful of the strength and continuity in terms of our supply base. They’re actively monitoring that situation or actively working with our supply base to ensure uninterrupted supply. I think everybody is faced with that same challenge in terms of the murkiness and uncertainty of the outlook.

At this time we feel pretty good, we’ve done a nice job, the team, the ISC and procurement teams have done a nice job over the last few years of really strengthening our supplier relationships wherever practical, diversifying those. We’ve done a nice job in that diversification not just in numbers but in quality and also in terms of geography.

We’ve expanded our supply base for example into emerging regions etc. which is I think going to be a net positive for us. It’s something that right now we’re monitoring, we see it certainly an item to flag. We don’t see that as something that’s going to materially affect the company.

Nigel Coe – Deutsche Bank

On the Functional Transformation you talked of 5.3% of sales in 2009 where did FT come out in 2008 and do you still think somewhere in the 2% to 3% range longer term is the right number?

Dave Anderson

It’s about 5.5% for 2008 and I think 20 to 30 to 40 basis points of improvement per year makes a lot of sense for us to continue to strive for. The key thing is we’ve talked to you about is the, I mentioned in my remarks is the implementation of ERP. ERP is a huge enabler of the SAP, implementation is a huge enabler for FT and for the IT function, for HR, for finance, those are going to be a huge positive for us as we go through ’09, ’10, ’11.

We’re going to continue to see that kind of performance improvement on a year over year basis. We’ll be able to drive that irrespective of the economy. That’s something that we’re going to be able to deliver. By the way, thanks for the question because its really points to again the our view the pro-activeness the fact that we launched the Functional Transformation or FT journey back in 2004 and thank goodness because its really providing a nice foundation of year over year improvement to support earnings.


Your last question comes from [Steven Winiker] – Sanford Bernstein

[Steven Winiker] – Sanford Bernstein

Non restructuring cost actions like FT etc. what kind of things are going on inside the SCG’s and SCU’s to really accelerate costs and focus on taking costs out wherever possible in the short term given the environment you’ve described. In terms of also feet on the street and are you hiring elsewhere to make up for some of the cost actions, what kinds of things are going on on the ground?

Dave Anderson

It really varies by business but in general relative to the later part of your question in general you would suspect we’ve got major actions that have been underway to really protect 2008 and 2009. That’s why we’ve been able to today with confidence give you guidance that we’re within our earnings range for the full year of 2008 despite much more difficult foreign currency headwinds and much more difficult end market conditions in some of our fast cycle businesses. Those things are in place and they’re going to continue to be in place in terms of cost actions.

In terms of what we’re doing differently in the playbook regarding FT I would say it’s the things that are the subsitive platform items. It’s leveraging again, ERP and digitization, automating activities wherever possible. It’s moving to centers of excellence we’re doing that as you know rapidly in both the HR function and the finance function of the company. It’s taking advantage of wherever possible low cost region for activities in terms of where activities are performed.

Those are some of the big things that are in the playbook and those projects as you know from your own experience don’t come about as the result of a 90 day kind of effort. These things have been underway and in the works literally for years, laying the groundwork very detailed project level for example in finance we have over 200 projects that will contribute to our performance improvement in 2009 relative to 2008.

Those projects have really come about as a result of the assimilation of a lot of activity at the lowest level in the organization the lowest business unit level of the organization driven by overall SPG and corporate leadership to achieve it.

[Steven Winiker] – Sanford Bernstein

On VPD as we look forward to ’09 in which SPG, particularly in the SBU level should we be looking for major very significant product intros this year, without divulging too much detail can you give us a better sense for where the big excitement is going to be and what we should follow?

Murray Grainger

As we are at Honeywell, we’re a very, very diverse portfolio so there’s no one product that’s going to particularly move the needle. I think that you get critical mass in a place like ACS where up from 300 in 2007, 400 in ’08 we’ll be above that in ’09.

There are really some revolutionary products that are really creating high organic growth for us things like wireless in the home, wireless thermostats, new features and products around our process solutions portfolio, new gas detection features at ACS. There’s a laundry list of literally 100’s of products that are going to be released and so it’s a piece by piece build up but it’s a very diversified effort and we think we’ll gain in that in 2009.

[Steven Winiker] – Sanford Bernstein

You don’t see slowing that down or doing anything different because of the environment or speeding it up in some way this year?

Murray Grainger

No, absolutely not. We think that investment in new products is key to the long term value of Honeywell and I don’t think that it would be smart for us to slow down the momentum that we’ve built on the new product side because we see it gives us great benefit on the top line also, it gives us opportunities for better value on the bottom line as you’re releasing your products to the market. This is something that I think is a core piece of Honeywell’s long term value story and I think its something that we’ll continue to do.

[Steven Winiker] – Sanford Bernstein

R&D levels should maintain as a result?

Murray Grainger

R&D levels will be relatively maintained. Our focus here has been getting more productivity out of every R&D dollar that we spend. Being much more focused on what projects we engage in versus ones that we do not making sure that our processes are integrated from the sales and marketing team through the production team value component engineering on a lot of the R&D projects building up our presence in emerging regions where we get more productivity per dollar spent. It’s really more about productivity through the R&D system for every dollar spent is the way we think about it.

Thank you everyone for joining the call and I look forward to your follow up questions during the day.


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