Diversified manufacturer Honeywell reported a 15% drop in third-quarter net income on sales of $7.7 billion. Still, earnings per diluted share of 80 cents were higher than expected, raised by a lower-than-expected tax expense in the quarter ended Sept. 30. Third-quarter net income of $608 million compared with $719 million in the same quarter one year ago. Sales were off 17% compared with the $9.3 billion earned in the third quarter of 2008. Sales suffered across all segments. Sales dropped by 16% in aerospace compared with a year ago, driven by lower volumes in commercial aerospace, and in automation and control solutions, sales were off 14%. Transportation systems took the biggest hit, with sales down by 24% compared with the year-ago period, and specialty materials sales were down 23%. Still, the company sounded an upbeat note. "Honeywell is positioning its businesses for long-term growth by continuing to invest in new products and services, geographic expansion, and key process initiatives," said Honeywell Chairman and Chief Executive Officer Dave Cote. "We executed well in the third quarter with sales on track and better-than-expected earnings and free cash flow performance. We're particularly pleased with our free cash flow performance year-to-date, which reflects our strong operating disciplines and working capital controls. These results reflect the impact of the growth investments and productivity actions we have taken in the midst of tough market conditions." Free cash flow was $1.022 billion compared with $556 million in the third-quarter of 2008, the company stated.