Honeywell International Earnings Call Insights: Capital Investments and Aerospace Aftermarkets
Scott Davis – Barclays Capital: Good numbers obviously and thanks for not disappointing like some of the other large cap names have here. It makes our lives a little easier.
David M. Cote – Chairman and CEO: Scott, I just wanted to note that, we broke your paradigm about lackluster results today.
Scott Davis – Barclays Capital: Well, you did, but I still got another 24 that aren’t so great either.
David M. Cote – Chairman and CEO: As you might imagine I read that last night and said, I can’t wait to bring that one up tomorrow.
Scott Davis – Barclays Capital: The only thing I’m going to pick on then is just this kind of flattish free cash flow year-over-year and obviously you’re going to spend some capital. But that begs the question of given just how weak the overall macro is coming in, in the quarter and your outlook which I don’t think indicates much of a recovery from here. Why do you think you need to make substantial capital investments from here?
David M. Cote – Chairman and CEO: Well, if we take a look at where the increase is coming from, on the CapEx side. It’s really for orders that we already have in PMT, and this is growth that’s going to happen. We’ve got the new molecules. We’ve landed the new orders in UOP and we got to be able to ship the stuff, and it’s as simple as that and that’s where the increase is primarily coming from. This is a good thing, not a bad thing.
Scott Davis – Barclays Capital: Sure, but isn’t there a potential to have a decrease in some of the other areas, just given that you probably don’t need to spend much capital at all for flattish type growth?
David M. Cote – Chairman and CEO: Well, I’d say it’s flattish for this year. That’s the way we’re going to think about it, but when we’re making these kind of investments, we need to be looking further out than that, and I’d say, we’re pretty rigorous about how do we think about CapEx and where do we put the money, and any of the spending we’re doing, I’d say is more than judicious when it comes to the returns that we’re going to get from it. As I said, the big increase is really coming out of PMT, where we already have the orders in hand and we have to be able to support it.
Scott Davis – Barclays Capital: Then just as a follow-up, when you think about the amount of cash you have in Europe and other areas around the world, is there any flexibility in how you fund the NARCO trust? I also assume that, some of this CapEx you’re spending is going to be overseas money as well, the PMT, a fair amount of that is U.S. but anything that kind of gives you some flexibility on utilizing overseas cash instead of having to use your U.S. base?
David J. Anderson – SVP and CFO: Scott, this is Dave. We just continue to be smart in terms of our tax and treasury planning, in terms of managing our cash balances. Again, the guidance that we gave you at the beginning of the year, all of our communications in terms of both cash and coverage ratios and everything else assume this outflow. So we are just continuing to be smart on that and continue to be very smart in terms of as I said our tax and treasury planning.
Scott Davis – Barclays Capital: I guess my question is, can you use some of that European cash to fund NARCO or it just has to be U.S. dollars?
David J. Anderson – SVP and CFO: Well specifically those need to be U.S. dollars.
Peter Arment – Sterne, Agee & Leach: A question on the aerospace aftermarket, just in general. I know you’re not planning for a stronger second half, kind of pickup in the global economy but you are expecting an improvement on the commercial aftermarket. Is it – as we transition is it just easier comps or what kind of gives you confidence when you’re talking about what you’re seeing for airline inventory levels?
David M. Cote – Chairman and CEO: Well first of all we are not counting on much Peter. We are trying to do that as a Company and we have lowered our sale sites even further in just about every business saying we got to make sure that we plan conservatively. So we are really not counting on much.
David J. Anderson – SVP and CFO: Yes. I will just maybe piggyback on Dave’s comment, Peter, just add a little to it. We are looking at now up low to mid-single digits in the commercial aftermarket for 2013. We think that’s kind of a reasonable range, given the first quarter performance, and also just looking at the pattern of global flying hours and our pattern of sales for last year. So the comps as we said earlier and as you know become much easier in the second half. So I think that is a good way to think and to plan going forward. Some of the specifics on that, we’re continuing to see very good R&O on both BGA, as well as on the ATR side of it…
Elena Doom – VP, IR: And that’s really two-thirds…
David J. Anderson – SVP and CFO: Yeah, that’s really.
Elena Doom – VP, IR: In aftermarket.
David J. Anderson – SVP and CFO: That’s a very good point, Elena, that’s two-thirds of the makeup of the revenues of the aerospace aftermarket. So, we’re continuing to see that do relatively good, and also our anticipation for the spare side of BGA is pretty good.
Elena Doom – VP, IR: RMUs are continuing to be very strong.
David J. Anderson – SVP and CFO: RMUs are continuing to be very strong. So, I think there’s a lot of reasons why we think this low to mid-single digits, but that is tempered from where we started the year.
Peter Arment – Sterne, Agee & Leach: Just maybe, just speaking in generally about the regions, is it similar regionally around the globe. I mean it sounds like just in general from your report that Europe feels little less bad and Asia is a little softer is that consistent also like what you’re seeing ?
David J. Anderson – SVP and CFO: Yes.
A Closer Look: Honeywell International Earnings Cheat Sheet>>