Honeywell International Earnings Call Nuggets: Pension Numbers, The Macro Picture
Steven Winoker – Sanford Bernstein: Just maybe one detailed question and then I’d like to back up for higher level one. On the detailed side, just how you’re thinking, what’s your visibility into pension for the fourth quarter and how you’re thinking about that these days?
David J. Anderson – SVP and CFO: Well, I think on the pension side we’re looking at numbers right now Steve, mid 80s in terms of a funded percent status. That means we’re going to be in a pretty healthy mode going into 2013. So, on the contribution side, we’ve just planned to play that by year. There is no determined amount or required amount of funding in 2013, so we’ll play that by year. From a mark-to-market standpoint, we’re going to have some mark-to-market expense undoubtedly at least in terms of where rates are right now, but the fact of the matter is and you’ve heard us say before, but the reality is we’re going to have a rate tailwind at some point. So, we’re going to play that smartly, continue to look at that as something that we’re going to manage very, very carefully, but frankly, we feel very good about the position that were overall regarding the funded status and the funding requirements for pension.
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Steven Winoker – Sanford Bernstein: Just backing up Dave, you talk about starting to hit critical mass in the businesses and we’re seeing continued cost control and margin expansion and I’m sure that pricing dynamics are baked into that too, but as you sort of look at the quarter in the face of all of these headwinds and you talk a little bit about what you mean by critical mass here and how it affects the margins side of the business a little bit and in light of the current environment and other dynamic, how your thinking is evolving or continuing to evolve on the margin expansion side you know from kind of peak-to-peak perspective?
David M. Cote – Chairman and CEO: On the – what we mean by critical mass is – I mean you’ve heard me use this phrase a lot, ‘go slow to go fast’, so when it came to HOS we wanted to make sure we got it right and it was more important to get it right so that it was sustainable for a long period of time. So, in the beginning it was kind of slow as you know and it took us time to build that up and in the beginning actually cost us something, eventually got to neutral, then started to provide some benefit. Now it’s time to see the benefits really come through because when you start getting to 70% of our manufacturing sites at bronze or better, you really start to see some big benefits from it as we’ve said before. When it comes to margin expansion, you know we’ve always said that that was going to happen. We put out a five year plan and we felt pretty confident about being able to do that given all the seed planting that we’ve done not just on the cost side, but on the growth side also to help mitigate some of the growth headwinds that we see. So between the kind of growth plan that we’ve done and the seed planting that we’ve done on the cost side with the process initiatives, that’s what’s allowing us to be able to drive these kind of margin rates on slower sales growth and still be investing in the R&D and the CapEx that we need to keep growing. So we actually feel pretty good about that and I’m sure you recognize they are making a change to the growth plan the way we did to focus on margins was timely given that we expected we were going to be seeing something like this economically and we wanted to provide that assurance externally that we did understand and we were willing to put our compensation on the line to deliver it. So we feel pretty good about it.
Steven Winoker – Sanford Bernstein: Just the pricing dynamics a little bit more sort of near-term what you’re seeing out there?
David M. Cote – Chairman and CEO: From a pricing perspective it is still okay. As you know we are not a – you are never going to see a 7% price increase from us unless its driven by a rise like in R&C, but by and large we still expect that it should work out just fine for us.
The Macro Picture
Scott Davis – Barclays Capital: Dave Cote in your opening remarks you seemed a little bit more optimistic about the macro picture and the demand picture then maybe some of your peers in some of the other calls we have had the last week or so. I mean what are you seeing out there that some gives you some confidence that China is in fact kind of making a turn and that U.S. isn’t getting worse here? When you cited short cycle businesses can you be more specific I guess?
David M. Cote – Chairman and CEO: Well I’d guess divide that into two pieces. On the macro side I don’t believe there is a recession coming but I do believe that there is a slow growth environment most likely to occur just because the world democracies are in gridlock over debt whether it’s Japan, India, the EU, the U.S. were in gridlock, and I do believe there is the potential in the U.S. and maybe even the world for a good economic recovery. If government would actually do their jobs here and resolve the fiscal cliff and the debt, by the same token, there is a potential disaster if they handle it poorly. All that being said, we’re going to look it as if it’s just more or the same and you can’t count on these guys doing what they need to, and we need to think about it in terms of RA, what’s the kind of conservative way to play in this. So, we’re going to plan conservative macros like we normally do, but overall, I still believe global GDP grows next year. When it comes to China, in particular, we grew again in China and we saw it both on the short-cycle and the long-cycle more driven by long cycle. At the end of the day, I think we have to factor in this leadership transition that’s going to occur and as you know there is two offices one in October and the other transition is in the first quarter sometime, and I see, in my view, China is making the right kinds of decisions and they recognized what they need do to not make the changes that are economically required. So, I don’t think it’s smart to bid against them on this and we’ve done a lot on kind of thinking about how to manage through that. So, that’s on a global macro side and say kind of Honeywell micro side, all the growth initiatives, the seed planting that we’ve been doing for years because you don’t just turn this on three months, is what causes me to feel that even in a tough global macro environment, we can do pretty well. So, we’re not counting on booming sales growth next year, but we do believe that there will be growth for us even in that tough environment.
Scott Davis – Barclays Capital: Can we move back to cash reinvestment and I think most would agree that Thomas Russell deal looks pretty interesting. I mean you talked about having a pipeline but now real rush to do anything or not. I think the words you used was nothing was needed per se nice to have not needed to have or something but I mean on this trajectory, you’re going to be sitting on a fair amount of cash at the end of the year on your balance sheet. I mean at what point do you say hey, the markets has not given us enough credit here for execution and we’re going to start binding our own stock or getting a little bit more aggressive with some of that cash?
David M. Cote – Chairman and CEO: Hopefully you will impressed with the consistency of my answer over the last few years, but we’re still going to play that on a kind of an opportunistic basis. I don’t have a number in mind that says okay, this is way too much cash, we need to do something. I also think on uncertain times it certainly doesn’t hurt to have cash. I prefer to have it than not. We’re going to continue to focus on how do we pay a good competitive dividend as you know and that’s important and it’s an important return to shareowners and when it comes to acquisitions and repurchases, we’re going to continue to look at both to the extent we can do Thomas Russell type acquisitions and that is a real value adder for the Company and I think you’d want us doing that. So, I don’t have a particular number in mind. Dave, I don’t think there is anything…
David J. Anderson – SVP and CFO: No, I think that’s very well said.
A Closer Look: Honeywell Earnings Cheat Sheet>>