Good day and welcome everyone to Ingersoll-Rand Third Quarter 2008 Earnings Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like the turn the call over to the Bruce Fisher, Vice President of Strategy and Investor Relations. Please go ahead, sir.

Thank you Cecelia. And good morning everyone. Welcome to our third quarter 2008 conference call. We released earnings this morning and the release is also posted on our website. I'd like to cover the usual housekeeping items before we begin. This morning, concurrent with our normal phone-in conference call, we will be broadcasting the call through our public website. There you will also find the slide presentation for the call. To participate by the web go to our website www.ingersollrand.com, click on the yellow icon on the homepage of the website. Both the call and the presentation will be archived on our website and will be available tomorrow morning beginning at 10:00 AM. Now please go to slide 2. Before we begin I would like to remind everyone that there will be a forward-looking discussion this morning, which is subject to our Safe Harbor statement. Please refer to our 2007 Form 10-K and our quarterly Form 10-Q which detail factors that may influence results. Now, I would like to introduce the participants for this morning's call. We have Herb Henkel, our Chairman, President and CEO, Steve Shawley, our Senior Vice President and CFO and Joe Fimbianti our Director of Investor Relations. We will start with a formal presentation from Herb Henkel and Steve Shawley followed by question-and-answer period. Herb will start with an overview. So, if you would please go slide 3 and Herb, get started.

Thank you, Bruce. Good morning everyone thanks to everyone who dialed into this morning's call. Today we reported third quarter EPS from continuing operations of $0.99 per share which is consistent with our revised expectations. Revenues for the quarter were below our original forecast from July for both the historic Ingersoll-Rand businesses as well as Trane. Our margins were also negatively impacted by the lower volumes, higher than expected material inflation and unfavorable product mix. For the quarter, reported revenues increased by 93% and by 2% on the performer basis including Trane. Our growth rates declined considerably compared to prior quarters. EPS from continuing operations was $0.99 excluding about $0.27 per share from one-time items. This was below our original forecast for $1.5 to $1.10 and we met the revised EPS expectations we gave you last week at $0.98 to $1. Steve is going to over with the additional details later in this presentation. During the quarter we began the integration of Trane in the earnest, and we begun realizing the available cost synergies. I'll cover more on Trane acquisition later in my presentation. Plus I'll give some additional details on the restructuring activities well underway. Finally, we revised our full year EPS forecast to $3.35 to $3.55 per share due to slowing end markets and added uncertainty related to restrain credit availability for our customers. Now I'd like to turn it over to Steve who will take you through the third quarter details.

Thanks Herb. This morning we going to provided additional pro-forma information to supplement the GAAP reporting data. So you can get a clear view of our performance in the third quarter and understand our guidance for full year. Please go to slide number 4. This slide gives a quick summary of revenue and operating margin for the third quarter. As you see on the upper right revenues were $4.3 billion up 93% including Trane on a pro-forma basis revenues increased by about 2% and were flat excluding the positive impact of currency. Reported operating margins were 8.1% compared with 12.3% last year adjusted for the one-time Trane acquisition cost incurred in the quarter. Operating margins were 10.9%. These one-time costs are detailed in the box on the lower left and are primarily related to the backlog and inventory step-up and end process R&D. I'll come back to the topic of margins and operating leverage in greater detail later in my presentation. Please go to slide number 5. I will go to the slide entitled third quarter revenue and growth. You can see the components of our sales gain in the upper right corner. Organic revenues declined in the quarter by 1% and our foreign exchange added about 2%. Looking at the upper left, three of our operating segments had modest revenue gains in the quarter but security was slightly down. Trane revenue growth is shown as part of the Air Conditioning Systems and Services or what we call ACSS segment. Revenue change portrayed in the ACSS part is on pro-forma basis. The momentum we have seen in key end markets for most of the year slower the substantially in August and September. Total sales on a pro-forma bases were up 2% that reflected contraction in North American equipment markets and…

Thanks, Steve. Please go to slide number 18. I'll review our progress on the integration synergies discuss restructuring actions we're initiating and give you our outlook for the fourth quarter. The third quarter marked the first full quarter that Trane Ingersoll-Rand was combined company. And we delivered $30 million of cost synergies. These savings came from reducing headcount and implementing the first wave of indirect material savings programs. We are on track to achieve our 2008 full year savings of $75 million and we expect to gain about $200 million in synergies by 2009 and $300 million by 2010. Any benefits from revenue synergies would be in addition to the $300 million of cost synergies. Growth in cost synergies will be driven by accelerated implementation of lean Six Sigma and productivity initiatives. Ingersoll-Rand business operating system that's been developed over the last several years will be our platform to driving continuous improvement across the enterprise. Our goal is to accelerate our annual productivity increases from the historical 2.5% to 3% range to 4% and even higher. The savings for '09 will again be primarily related to corporate items and direct and indirect purchase cost. We should also enjoy growing revenue benefits from growth synergies. The additional benefits trends relate to about $0.30 per share of incremental EPS in 2009. Now please go to slide number 19. We've also accelerated productivity improvement and cost reduction actions for remainder of 2008 to deal with the slowing end market demand. In addition to these activities we're initiating corporate wide restructuring actions that streamline our worldwide manufacturing footprint in general and administrative cost base. The total cost for these programs is expected to be approximately $110 million. Activities will include plant closures and product movements. We expect the majority of these costs to be…

[Operator Instructions]. And our first question comes from Andrew Obin of Merrill Lynch.

Yes, good morning.

Good morning, Andrew.

Its most of your comment I know over the past couple quarters you had a slide with a lot of macro data and well I appreciate the uncertainty that you guys face, so a super useful slide as an analyst. Just to understand your frame work it's just a comment. Looking at slide 5 as I look at organic growth in Asia-Pacific and USA am I correct to assume that Asia-Pacific slowed from 19% organic growth last quarter to negative 1 and USA went positive 14 to 2, is that the right read?

It is and taking a look at that the, its kind of a lumpy thing, most of it driven by the fact that the our marine container shipments were off in the quarter simply because of timing of orders and we count as there is China sales, so that's effecting it to some degree. And also we have structural issue because of change in supply point for some of security equipment coming out of the JV in Fu Sheng, so I wouldn't say it's anything to be panic over relative to our market progression, it's just kind of lumpy order issue with primarily marine container.

And so how much of this if you could quantify of that plus 19 to minus 1 how much of it with marine container?

The marine container was down... the marine container alone Andy was down 23% in the quarter.

Okay.

So I would say that's probably on weighted basis about 60% of the delta in China.

Okay. And this China expects most of the decline in Asia-Pacific?

yes

Okay. The second question is how I should be thinking about inflation productivity and pricing going forward because there are the some of the things at least that you have some control, so looking at productivity. It seems that productivity has declined a little bit versus previous quarter. Are we calculating it differently or what should be I thinking in calculating for fourth quarter and going in to '09?

What we are just really seeing Andrew, in terms of entities the fact that we have a reduction in the volume and that debt is negatively impacting our ability to realize synergies that is why you see us putting in restructuring program. What we talk about is, we are talking about significant reduction in head counts that had been added on with anticipation of continued revenue growth with revenues now actually slowing down. But we find ourselves in terms of entities not being able to absorb the cost structure and having to go and actually reduce head count in those areas, that's really what you are seeing. When we put to restructuring back into place, we then think at that level that we're currently seeing, we'll be able to run most of 3% productivity going into 2009.

Thank you, I appreciate. And pricing has improved, should I continue to see improvement in the fourth quarter or is that something that sort of subject to the economic uncertainty there?

I think, if you look at the thing is that the entire pricing fees that we were looking at is, we were running somewhere in about two somewhat percent range as we were half way through the year and we are now continuing to see in terms of our net price realization is being north of 2%. So I think it continues to be year-over-year comparison continue to be about the same.

I appreciate it, thank you very much.

We'll go next to Terry Darling at Goldman Sachs.

Thanks... I'm wondering if you could step us through the cash flow statement in the third quarter a little bit. Can you tell us what total depreciation for the company was. Cash flow from operations CapEx take us through the free cash flow profile?

We also just for your information, we tried to add some data sheets to the release. And hope you had a chance to look at the release but we have about 3 data sheets in the back with cover off on and the depreciation and amortization, I'm glad to take you through that. If you look at Ingersoll-Rand fees I referred to in a comments that's the $56.3 million of CapEx, okay and if you take a look at total the CapEx expenditure is for the quarter $35 million for Trane so about $91 million almost $92 million for the quarter okay.

Okay.

Depreciation if you add Trane for the numbers that I gave you for I give both pieces the total depreciation or the combined company was $63 million in the quarter and amortization was $48.3 now a lot of that I think $41 million and $48.3 comes from the purchase accounting revaluation and then amortization of the balance sheet going forward.

Okay. And change in working capital?

See here and look that one up.

Or just total cash flow from operations whatever is easier for you?

Just a second, this is a bit of round number but $400 million is close enough?

Okay. so free cash of roughly little over $300 million and looks like you paid down about $440 million of debt in the quarter and I think the slide suggested $600 million in the fourth quarter which based on your guidance, I think requires a pretty substantial generation of cash from working capital. Is that the way that the map should look there?

And that's a little because it look like what's happening our top-line. We'll be collecting a lot of receivables in the fourth quarter and that's very consistent with even past seasonal profiles of cash flow.

Okay and cash on the balance sheet at the end of quarter. Can you give us, at the end of the third quarter?

Yeah about 740. Okay and well I could characterize that, we have about $400 million of that trapped and various entities around the world, like one other things we're looking at it, in terms of helping us the liquidity issues is looking at some opportunities to free up some of that cash. So, we're shooting to try to take that cash balance on average down to about $500 million.

And If I can just squeeze in one more, if we go to page, slide 9, I trying to understand the tax rate, the various moving pieces and components of the tax adjustments relative to the reported tax number. And if we look at slide 9, maybe, just you're not passed arithmetic here but 10.9% operating margin and $4.3 billion of sales, I think its $470 million less the $88 million from interest expense interest and others, $382 or plus or minus or $1 million or so. We have $39 million which would be a 10% rate get to 343 divided by 324 shares out as 106 so I've got to be missing something because I think I need more like a 16% tax rate to get $0.99, so we either want to address it that way or just take us through the bridge from the $26.3 million of income tax reported to whatever the absolute dollar tax number you need to get $0.99 that would be super helpful?

Well. Again as I said there are several pieces for the tax rate, the biggest there was a discrete credit in the quarter of almost $16 million. So if you take a look at that-that's included in the tax rate okay I'm sorry the ongoing rate is higher than the what on the sheet because what we have is a blended rate including the discrete piece which was a net of $16 million.

Okay. The 20 some odd percent plus the 16 gets you to 10 is that what you are saying?

Right. Ongoing tax rate we expect this is about 20.6 for the year and of course we had squeeze that into the third quarter, because when we saw a drop in the U.S. income that's and that's what lowered our rate for the year and most of that benefit [ph] in the third quarter

Okay thanks.

If you look at that there is another maybe 8 to 10 associated with catch-up so the total debt was about 22 I would say

Okay I will follow up off line and thanks.

[Operator Instructions] And we'll take a next question from Mark Koznarek, with Cleveland Research

Hi good morning.

Hi Mark.

Question here on the Trane business I was pretty surprised with these slowdown in the commercial orders to 4% because last second quarter pro-forma they were 15% for the full period and I had delivered the impression that this business had a pretty modest degree of cyclicality. And that seems like a pretty sharp slowdown. So is there a scenario where this business on the commercial side can go negative for a period of time. I know there has been restatements and things like that of historic financials. So I'm just looking for some commentary about the cyclicality or the various parts of the business to what we might expect going forward as it is.

Well I'll Mark a couple of points. First of all yes, orders were higher in the second quarter, but they were very low in the first quarter. So that's why we've seen a sort of up and down pattern that has more to do I think with the concerns around the credit markets and anything else. And that's influencing when customers place orders. So that's why you get this up and down pattern. Second part of your question in terms the cyclicality of the business. Again if you go back and look at the last downturn which was 2001 to 2003, we did see negative sales growth in the Americas on equipment although the rest of the World continued to grow and our service business continued to grow at high single digit rates. So if you want to just crank in which you think is going to happen in these markets. I think you would get to a point where you would see a repeat of the pattern that we saw in the last downturn which was sales growing modestly.

Okay. And then on climate control, could you discuss the severity of the expected 4Q down draft in revenues and whether that downward momentum is likely to continue for a period of time into 2009?

If you look at, what's happening in the climate well the U.S. markets have been falling off for last two years. That information started declining in 2007 and continued throughout '08 to the point where if you take a look at what's happening as that's information is now looking at about 28,500 units for the year. Based on our order patterns we are seeing out there that's followed by a little bit high. So our information where we basing upward guess is all about 28,000 units. And that's the progression downward another 18% to 19% this year over the last year. It's slowing in the second half, we definitely seeing low rates of order coming from the U.S. markets and just continuation of what we have been saying for last years. The news that we've got is really coming out of Europe and we're seeing Europe markets starting to turn down over the last few months. I think if you look at what's going on in Europe with the credit crunch transport business is only highly leveraged, there is a lot of leasing companies resolved in that market. So for the first time in a number of years we're seeing a downturn there, this all happening pretty much in the fourth quarter. I think the new thing in the climate control it's showing up in the fourth quarter, I was in transport as we're starting to see some slide in the projections of store builds again it's credit crunch related, we see customers that are delaying projects, pushing projects out, this is affecting the stationary fees the Houston fees. And the fourth quarter is always a seasonally strong quarter for Houston so when that stop products to go out that an impact. So what's going there in which I think the new news is in fact European transport market has roughly that return and we're seeing some credit related activity going on stationary.

Go from up 5% this quarter to a negative Europe would be a pretty sharp negative and then North America continuing its decline. It sounds like at least the first two of those probably continues at the 2009 for a period?

As par some of these closer flat in the fourth quarter so I would say there is that's pretty good my mistake it's not 28,500 it's 26,500 projected for this year sorry about that.

Okay.

And we are basing our forecast on about 26,000.

So I think the biggest difference I see Mark from when we were together in July is that when we were at that point so I am talking we're talking about Western Europe slowing down we saw it sort of getting was going to be relatively flat and what actually has transpired since then it's actually now gone into the negative category, I mean that to me I think it's the biggest change in what we've seen since that. The U.S. candidly continues to be on that downward slope that we have got under and that was for next year run between 24,000 to 26,000 all the over I'm going to place. But, yeah, we don't see that in terms being abort they turn around the next quarter.

Okay great, thank you.

We will go next to Robert Wertheimer of Morgan Stanley.

Hi, good morning everybody. I guess and I want to apologize for this in advance. I have questions on the differences between the one timers. So you expected $0.11 in the quarter and you had $0.27 until the full year, I think you expected 31, you had 69. I assume some of the full year differences the restructuring actions for Q4, but could you explain what the difference was in the quarter and then confirm that full year does have the cost to restructuring industries in and out?

First of all the moderate increase in the one-time costs projection and mainly due to the fact with evaluations are coming in and the step-ups were just higher, okay. That's flat-out the reason for. The restructuring is not in these numbers, okay. The restructuring costs is going to start to incur in the fourth quarter, Robert [ph].

Okay, so finally understand what you said to mean like the evaluations you placed on the actual assets you bought were lower and therefore the intangibles were higher is what that means?

Well the fact that it's not the intangibles, it's the step-up associated with inventory backlog, our R&D okay, mainly inventory and backlogs, is just that when we put the forecast together for the quarter, we were estimating what those step-ups were and throughout the quarter when we finalize the actual valuations they come out to be much higher. Of course we have to write them down in the turnover.

Okay. I'll think about that for a second and then you said that the restructuring the cost for the restructuring that you're going to do that's going to benefit the new stuff that's going to benefit '09 and '10. Is that in the one-time items for 4Q I know?

Well we break it out in the communications. We have said that we expect 4Q one-time is to be about $0.09 in the impact of restructured to be about $0.18 to $0.19.

Okay and if I can ask you real question. When you look at these new restructuring actions, I guess this is for Herb, did you I mean did you cut capacity or you're cutting things you're impacting future growth or there was found more facts in some other businesses and--

Well let me describe this. I think what happened in term is that we had when we put the plans together for 2008, we expected a growth scenario. And unfortunately as the second half of 2008 unfolds its not there. And so what we had is, we had laid in extra capacity and extra people doing work that we at this point in time find that we do not really have in terms of the work to do. So we're up actually going to be looking at reducing several thousand people as a result of that going in and really going in redoing our manufacturing footprint. We actually have already announced on it, a consolidation in an area where we make compressors and putting it into one points to sort of two. So really was a stronger growth expectation that has now had to be dealt with as of not realized.

Thanks, I'll stop there. Thanks.

We'll go next to Nigel Coe of Deutsche Bank.

Hey, good morning. I think you mentioned that Trane synergies were about $30 million during the quarter, I think just kind of guidance to where we see this coming to corporate items though?

Yes, those that you're seeing at that level on it Nigel all the ones have would be related to the corporate and shared enterprise services center.

Okay, great.

And the next wave that you now see shelling up in the fourth quarter obviously those continue plus you got an expanding, getting into what we said is non-material that the other kind of stuff and then I think by the first quarter what we're looking at is that we'll be actually then getting into the direct materials expanded addition to those categories.

Okay, great. And then within ACSS, should I say Trane. Could you just remind us from the margin next within there in terms of residential, commercial equipment service and the point is that service continues to grow with this kind of rates for next two or three quarters. What impact does that have on the margin mix?

Well I think, it's really a question of function of what happens with the equipment sales. If equipment sales decline you have de-leverage on that because we make a fairly good margin on that next large piece of equipment. Now you can offset that with an increase in margin because of service and those margins run around 15% incremental on large equipment, you probably decrementing at 30% rate.

Okay. And then just one more if I can, security margins were up very nice -- can you just talk about how to spend below those margins that I'd like to be the increasing volume pressures in our business?

Yes, I think were looking at their Nigel saying is that which you reflecting now is the cost structure that the businesses that's put into place. And we see that as being sustainable going forward or we have obviously finally caught up on some of the price stuff that we had that lacking and lagging in the past. And we're now seeing the productivity in the investments going up. We continue to see strength in the commercial side which is a very, very profitable type business. So we're optimistic about that being able to sustained a kind of levels going forward.

Okay and that last one. Could you maybe give some color on what you're expecting from margins by segments from the 4Q?

I would say that I don't seems to be put the details or stuff that's out there but I think if I look at in term on it if the margins we were looking at the last year and I'd be very disappointed if they wanted to be very, very comfortable to those kind of things there. Let me discuss there in my debt of general but let me give you more specific as I look in my charge here.

If you look at -- we expect about that is 10.5% fourth quarter and impact of the significant margins associated with and the trailer business will be seeing drop-off. That's technologies actually expect to the fourth quarter margins that were up there, Nigel. I think that's more because of the fact that there were some one-time activity last year. So we're quite comfortable third quarter to fourth quarter as you look the serial go forward it's like the security to be about little less than 19% probably 18.6, 18.7 range again because what we're getting there is flow-through of price and quite frankly a little bit of improvement in some of the commodities mainly zinc that used there. And the three margins, they're going to stay on 4% to 5% as reported okay and of course we got to get through all the adjustments that we talked about. I don't see the Trane margins staying as reported basis some between 4% and 5%.

Okay. Thanks a lot.

We'll go next to Jeff Hammond of KeyBanc Capital Markets.

Hi, good morning guys.

Good morning, Jeff.

Just back to back to the Trane margins in the fourth quarter. Can you give us what apples-to-apples 4Q maybe extra items would be versus 4Q '07 last year I just want to understand the level of decrement that your planning for I guess in the fourth quarter?

There are two ways to go number one is that if I compare to the performance of 2007. Is that where you like to go?

Yes, yes.

If you look at 2007 and if I look at it overall, you're saying is that we were talking like in commercial last year fourth quarter was somewhere between 8.5% and 9% if I remember them the right. We see that drop in that's probably somewhere more into the mid seven type range as we continue to see material inflation being not completely offset by productivity. That's about a margin in the half point that was there. The biggest degradation really that we're looking at is over in the residential side. I look at the fourth quarter numbers last year was slightly above 7% type number and then we look at this year is going to be somewhere closer and probably into 4% to 5% type percent range. The biggest impact there continues to be -- we have material inflations but we hope to have this thing called a LIFO and a mark-to-market good news is we do hedging bad news is that materials and move around. So I'm looking at stuff like almost the $9 million of non-operating types of an OI hit until that impacts our margins. So that's outside of it. What Steve went over before is that you also get back into the inventory write-ups from the backlog which are going to give us another almost $40 million impact by the time it get done. But overall its saying is when you sort to get back, what we manage and so on. I think we continue to go make sure that we improve on productivity which is obviously what the restructuring is all about. We got to make sure in terms on it that were able to go into take advantage of the stock pricing that we now starting to see show us in the marketplace for the coppers in the world and make sure while that goes into our costs structure we don't get this back on price.

And then residential, why didn't you realize any price in the quarter I think you put there is some price increases and it sound it like.

To be about a little less than 2%. I just didn't put that in. Overall the number was somewhere almost 2% that was there but again as I guess that was relatively a small member compared to somebody else who thinks that we had on that $9 million from non operating return.

Okay, just final question on the balance sheet. I mean you've got your credit or your bridge coming do in June, have you had discussion with your lenders about refinancing that and what's kind of the dialogue then, any kind of concerns there?

The answer is yes, we've had dialogue and no there is not large concerns. We're watching credit markets like everybody else. Again we believe that we have capacity in form of paper other ways to address this. And [indiscernible] back to the markets when the time is right, they were not talking about massive amounts of new funding that we would need. So I know comfortable on this kinds of surroundings but we at least not go backs to the wall.

Hey Jeff this is Bruce. Can you go back to the residential thing for just a minute because you're expressing some concern about price item. That remind mix, improved mixing in contributive 4 points of growth for us. So where some companies may have realized more price because they were selling the same product for a slightly higher value we actually upgraded to people to a better part of our mix. And if you look at the overall market we say the market was down 8%, our volume was down around 8%, our sales were only down 4% however because we're able to get better mix. So we are performing the market in that regard.

Yes just did say no pricing and that was relative to a significant price increase?

Right but again you've got also to consider that we didn't get price on our fear I'm making that's example obviously because we saw somebody at.

Okay thanks guys.

And we'll go next to Steve Tusa of JP Morgan.

Hi, good morning.

Good morning Steve.

I have just a question for you on Trane and I guess if we get in dynamics of next year. What is your outlook non-res construction. It seems like the McGraw Hill numbers have been out there. They're talking about down and I don't know your assumption is for new housing, it's probably down again. So is services really the key of that business growing next year given the fourth quarter is kind of flattish and I know it's not seasonally that important but can you just talk about how do you see that point up next year?

Yes, Steve, I think it's fair to say that we're not looking for any stellar performance that in the United States next year in terms of equipment. You've seen the... data and so one could imagine its negative next year. If you look outside the United States you can make your own assumptions about what you think equipment going to do there. Its been growing nicely perhaps it start to flatten out next year and than you look at our service business which has been growing low teens in the last downturn which again was 2001 to 2003 our services business grew high single-digit. Not as high as our traditional and typical sales growth but certainly good sales growth. I'd also point out that, it is now larger than our U.S. equipment business. It's roughly $2.6 billion sales this year our service business that is. So it has big impact on what our sales growth is in Trane business now.

So service is really the key?

It's the key for sure.

Yeah okay and than one another question... I haven't covered your stock obviously for very long but I'm reading in past transcripts there was... there was some kind of high level commentary on the bridge Q 2009 and understanding this is unbelievably dynamic environment where is a limited visibility from many. Can you refresh any of that commentary around kind of the mass around 2009?

I would say to what we are at this point of time very, very, very detailed reviewing what we think the revenue thing look like and it varies on with on a done a day-by-day basis, so I'm really not prepared today to give you sort of what I think the total revenue then the looks like as we looking and working towards doing that, for we look at the analyst day in December. But when I look at the things that we do have code deals for one I said is that whatever the top line is going to be, we know that in addition to that activity level on it we have a significant restructuring program we just talked about. We also have synergy from the acquisition that we talked about $0.30. And then lately I think is that as we look and are putting together our cost structure for next year, clearly if I look at this for instance 2008 our average for Copper which we buy over €100 million of each year our average cost there is 350. If I remember looking at the numbers last night, it was somewhere along the buck 60 something or rather. So if you allow to around it that's a buck 90 multiplied by a $100 million and if I can go and get that locked in you transaction going to see there is some really, really big numbers Aluminum, about for us, let's think on the same and lead and zinc on the same. So I would get myself very quickly to seeing hundreds of million okay there, if I'm able to go lock that in that's obviously the task that we have at hand right now, I'm glad we didn't lock two weeks ago when it was 260 because now it's the challenges over the next couple of weeks making sure that what we will do is lock in place a cost structure that will help us to go exceed whatever the number is, but the top number is the one that we really struggling with the most and trying to get a good firm [ph] and I think its going to take us till December day to do that, all I want you to hear in term saying is that how we as a company whatever that is wind up having significant and upsides coming from restructuring from our synergies and from what we think is our cost structure. And we also think that what the restructuring would be able to renew, what we're really going after which is productivity which runs in the 4% range.

And you think your price is going to hold in the phase of these raw materials declines.

I think if I look and saying is that, it's like the gasoline prices. Oil that is 75 bucks or less to 94 for a gallon of gas. I think in terms of saying is that in terms of going that way because candidly difficult [indiscernible] on time and frankly we never really fully realized the total cost of the material in our price increases anyway. So I'm not so optimistic about being able to go get incremental big price increase to the next year. I think that will be foolish to comment on that but I am much more optimistic about the fact that we'll be able to retain our current pricing in spite of seeing in terms of hopefully reduction on the cost base.

Okay. And one last quick one Bruce. Could you just remind us how much of your commercial equipment business is unitary and how much is bought?

Not happened [ph].

Okay, perfect. Thanks a lot guys.

Thank you

And we'll go next to Andy Casey of Wachovia Securities.

Good morning everybody.

Good morning

Hi

Question on your Q4 outlook slide. On the negative four from ForEx but what is base. I know you deal on a lot of different currencies if you could choose Europe or rather what would vintage be. Is it October 14 or end of last quarter?

Yes, but when we did the math on this Andy as we really talking about something which was into 14 to 144 type range. And to this is why we said kind of interesting when you look at this revenue type numbers so if just take we running to slide nine if then took and I think what do they, 126, 128 something out there. If you looked that 126th type number, that would impact our revenues by about a 115 million and our operating income by about 17 million. So that's the kind of sensitivities that we would still have [indiscernible] there as well as downside.

Thank you. And then if I could turn back I think, you may have answered it but I missed in response to I think that was Mark [indiscernible] question, within climate control, transport refrigeration, what sort of did year-over-year decline of your European divisions telling you to expect in Q4?

Several pieces that in Q4 yeah, which is probably happy with the European transport businesses excluding containers that about by 1% to the bridge balance?

That will include the bridge pay down.

Okay so I guess the way to look at it is all the pay down will predominantly be the bridge I assume so maybe what use of CP or?

We have a new slide here, we showed the maturity of the term debt and we have about $220 million term debt just fairly a small amount for 09, in addition to the bridge, take care of.

Right I guess the way I was looking at it was you have 950 on the bridge and you are going to pay-down 800 just wondering the incremental difference is that you going to be maybe you use more CP or ?

That's what I want to......What the cost is of one availability to the other.

And numbers recently guys were doing when they were going out to get the bonds they were quite sporting in terms of there interest rates.

Okay so we went it all that out obviously looking the markets every day but again the terms what we need when I'll talk about massive amounts.

Great, okay. Thank you.

Sure.

We'll go next to Shannon O'Callaghan of Barclays Capital.

Good morning guys.

Good morning.

Just a question on the Trane margins, I mean previously thought under prior Trane management that there is a bunch of margin improvement opportunity in this business and even if you adjust for the amortization in this $9 million another one time unusual things you're talking about next quarter. We're still at I don't know 6.5% or 7% margins which is lower than they typically were, is there and how much of the restructuring you're about to do is going towards there and is there anything structural going on there? Do you think that there is a opportunity it actually improve Trane margin or near term will it going to pressure?

Let me that... first of all the answer to the where we are spending a lot of restructuring, is yes, okay, it's lion's share is in the Trane businesses and that's overhead areas it's also factory footprint areas and geographic components relocations okay all the above, so we think there is significant opportunities to adjust the cost based through the restructuring, also if I had to take a look at the in this characterized what's happening with the Trane business. They are probably that most hard hit by inflation that we've seen in the non-ferrous metals. And so is there opportunity, yes because if you look through the situation of non ferrous metal a lot of that benefit for '09 and we hope it's a benefit we'll we show up in the Trane numbers. The other thing about what's happening at Trane if you look at realization of gross productivity we think transaction is significant upside room for driving old fashioned productivity if you look at track record this one on it. So lot of restructuring focus is in the Trane businesses. That's overhead areas it's also factory footprint areas and geographic components relocations I think all the above. So we think there is significant opportunities to the cost base through the restructuring. Also fair to take a look at the in this characterized what's happening with the Trane business. Probably the most part hit by inflation that we've seen in the non ferrous metals. And as opportunity yes because if you look it's truly situation of non-ferrous metals, a lot of that benefit for '09 and focus have been hit we'll show up in the Trane numbers. I think what's happening at Trane if you look at the utilization of gross productivity we think there is significant upside room for driving just [indiscernible] productivity if you look at the [indiscernible]. Lot of restructuring focus on non-ferrous impact will be positive.

Okay. And then just one on the fourth quarter guidance. Pro-forma revenue it was flat current this quarter. Next quarter you say that currency kind of flattish so the pro-forma guidance were flat looks like pretty much similar on organic basis the way we have here. Given the uncertainty that doesn't seem really that conservative but you have this wide 27 range. And there is a reason your revenue guidance is fairly tightening the margin, you're in perfect margin guidance with the EPS range is so much wider.

I think if you look at kind of what's happening, we're loosing the mix impact of the markets were down and was heavy. In fact if you take a look at the fourth quarter and you roll up the numbers you look at the leverage on the fourth quarter. When we precisely started talking about what we have to do restructure to cost base, because of trying to see continuation deterioration on key markets like European transport and like some of our businesses producing significant margins. And back to the previous comment about fixing the Trane margins. That's what you get. So that would produce a fairly tight, I am sorry fairly tighter top line versus the operating income.

Okay. Thanks.

And we'll go next to [indiscernible].

Good morning. I just wanted a follow up on, something Bruce said, had planned too earlier. So you planned that the service business in Trane grew 9% in the last revenues, 9% in last downturn. Was that 9% in North America as well. Was it much lower in North America and much stronger elsewhere?

Dan, as I recall it was as said single digit so it was approaching 9% or wasn't quite nine. And remember back in or you probably would know but back then our service business was 80% to 90% U.S. So it was a U.S. business for our intensive purposes back there. Its still focus in the U.S. Its probably 75% to 80% U.S. today but growing faster outside the U.S.

So I mean clearing investors concerns of that. You could have commercial construction in the U.S. Europe and Japan negative and in other emerging market much lower than probably what's previously expected?

New construction I would agree with you. For replacement I not so sure I would agree.

Do you think that even in the scenario where you have the major developed market all go negative. You still see Trane revenues being significantly out driven by replacement service and then weakness and new.

Well I mean you can do the math. If you assume that 30% of our commercial business in Europe and U.S. is, 30% is new construction related 70% is replacement you can do weighted average on what you think those growth rates to the declining rates are going to be and you can crank in what do you think it's going to happen with service. So our equipment business is about $3.6 billion business globally. Our commercial service business is about at $2.5 million.

And I think if you look at the U.S. with the new housing starts being at less then $1 million and yet overall done that with the replacement that we're adding on our total revenue for the year is 4% on the equipment side. I think that again to shows in terms I think the fact is that you got a large installed base that is more than 10 to 20 years old. That's going to be to be replaced.

Great. And just a follow up on what Herb just said into residential business. We did see a difference in the replacement market for residential. People were clearly differing replacing their residential units this year you can't defer that forever. They will have to be replaced so in essence building of the kind of demand for replacement down the road.

Alright. Thank you.

And we will go next to Steve [indiscernible] Asset Management.

Yes a point of clarification with respect your bridge facility. Do you have any availability to borrow under that or is it availability goes down dollar for dollar as you pay at all?

It's pretty much dollar for dollar. It started I think in $1 billion, we use the money from return operating we did back in August to pay it down. So we started it like the 2.9 range so it will disappear as we pay it down.

$3 million in credit facilities as referred in your press release there is strictly either facilities excluding Bridge?

Right, no bigger bank lines.

And can you talk about the maturity profile of your commercial paper and what kind of pricing you're paying?

Yes, we know and probably know what I call the two week, when the market was A2P2 company that's above what we get these day's and now its expensive we're paying over 6% probably purchase 6.5% or when we go into the markets, that's why we're very interested in getting a pay down as fast as we can.

Is there any scenario where you would seize using this CP low and draw down in your bank line, it's properly that?

I didn't even think about that. You know I don't see that, okay. Obviously if everything is going on I but our policy we're in financing position here is that going on with the bank line is sort of last resort.

Okay thank you.

Operator we'll take one more question please.

Okay our final question comes from Mardy Pollock of NWQ Investment Management.

Hi just a few word again on train, I know a lots a questions on this but looking through the adjustments for the acquisition you know step up and all that. If what I was looking at next year and you know the sensible looking through the seasonal week, there's any way in the fourth quarter. You know what kind of margins would be considered you know targeted margins without the center. What end would the Synergies include in for next year, I realize you know you can't obviously call it revenue light but the historical margins we trying to have been certainly was low point of 9% or so, how we going to violate to that number in next year significantly?

Well, question now, that's we're working right now on our annual operating plans of putting those together, well it lot more to say about 2009 on December 4th.

Okay, well let me just close by thanking all of you for joining us and staying orders for with almost America in session. There will be an instant replay of today's conference call available at approximately 1:00 PM today, and will be available through October 31st. and if you've further questions please by I mean to call Joe or my self. And that concludes our call and I want to thank you all again for participating. Thanks.

Again that does conclude today's conference ladies and gentlemen. We appreciate your participation and you may disconnect at anytime. Have a good day. .