Good day ladies and gentlemen, and welcome to the Ingersoll-Rand Third Quarter 2015 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to Janet Pfeffer. Ma'am, you may begin.

Thank you, Tricia. Good morning and welcome to Ingersoll-Rand's third quarter 2015 conference call. We released earnings at 6:30 this morning, and the release is posted on our web site. We'll be broadcasting, in addition to this call through our web site at ingersollrand.com, where you'll also find the slide presentation that we'll be using. If you would, please go to slide 2, our Safe Harbor statement. Statements made on today's call that are not historic facts are considered forward-looking and are made pursuant to the Safe Harbor provisions of Federal Securities laws. Please see our SEC filings for a description of some of the factors that may cause actual results to vary from anticipated. This release also includes non-GAAP measures, which are explained in the financial tables which were attached to our news release this morning. With that, let me turn it over to Mike Lamach, Chairman and CEO; and Sue Carter, Senior Vice President and CFO. Mike?

Great. Thanks Janet. Good morning everyone and thank you for joining us today. In the third quarter, we exceeded our EPS forecast, improved operating performance and delivered profitable growth through solid execution, that more than offset headwinds from the global economic environment. Our operating income and operating margin percent were both all time records. Particularly good performance in the face of a slowdown in the industrial segment, and in the Asian and Latin American regions. Our team responded well to the challenges. We were able to over deliver on our commitments, despite lower than forecasted revenues. Adjusted earnings per share were $1.21, that's up 10% versus the third quarter of 2014. That compares to our guidance range of $1.15 to $1.19, so adjusted EPS for the quarter was $0.04 better [ph] than our guidance midpoint. Revenues were approximately $50 million lower than the midpoint of our guidance forecast. About half of that from more unfavorable FX and about half from lower volume. That translates to a couple of cents headwinds versus our earnings guidance. The tax rate was also a little higher, and that was another $0.02 of headwind. These headwinds were more than compensated for by higher productivity and lower spending, as well as a slightly lower share count driving the $0.04 earnings outperformance. Organic revenue growth was 6%, led by strength in the U.S. and European transport and commercial HVAC businesses, as well as residential HVAC. Europe and the Middle East, excluding currency remain strong. Ex-currency, Latin America was down low single digits, with strong results in Mexico, partially offset weakness in Brazil. Excluding currency in Asia, revenues were down 3%, reflecting continued weakness in China and emerging markets. Climate organic growth was 8%. Industrial markets were weaker in the quarter, organic revenue and industrial was down 2%. As you will see when I get to the forecast, we adjust our fourth quarter down slightly to reflect slower industrial markets and currency. Organic orders in the third quarter were up 1%, impacted by tough comparisons in transport against record orders in 2014, as well as a slowdown in industrial. Commercial HVAC bookings, excluding foreign exchange were up low single digits and were up mid-single digits in North America. Adjusted operating margins increased one full percentage point, a stronger productivity and pricing combined with deflation, more than offset negative currency, investments and other inflation. We repurchased about 4 million shares in the quarter, and have completed our announced 250 million of share repurchase in early October. And I will turn it over to Sue, and then I will come back to take you through the fourth quarter outlook.

Thanks Mike. Let's go to slide 4 please; orders for the third quarter of 2015 were down 2% on a reported basis, and up 3% excluding currencies, on an organic basis which excludes both currency and acquisitions, orders were up 1%. Climate orders were up 3% excluding currency. Commercial HVAC bookings were up low single digits, and residential HVAC bookings were up mid-teens. Transport orders were down, primarily due to difficult comparisons with record 2014 bookings in North American transport and in marine. Organic orders for industrial were down 4%. Organic orders decreased by mid-single digits in air and industrial products, and improved by low single digits in Club Car. Please go to slide 5; just a look at the revenue trends by segment and region. The top half of the chart shows revenue change for each segment. For the total company, third quarter revenues were up 3% versus last year on a reported basis, and up 6% on an organic basis, which excludes both foreign exchange and acquisitions. Climate revenues increased 8% on an organic basis. Industrial revenues were down 2% organically. I will give more color on each segment in just a few slides. The bottom chart shows revenue change on a geographic basis, as reported and organic. Organic revenues were up 7% in the Americas, up 10% in Europe, Middle East and Africa, both led by strong HVAC and transport performance, and Asia was down 3%. Let's go to slide 6 please; this chart shows the change in operating margin from third quarter 2014, of 13% to third quarter of 2015, which was 13.6% on a reported basis and 14% on an adjusted basis. Volume, mix and foreign exchange collectively were a 20 basis point headwind to operating margin versus prior year. Within that, about 40 points…

Great. Thanks Sue and please go to slide 10; North American institutional markets continued the recovery in the third quarter. There is no change to our revenue forecast there. We also continue to see growth in commercial and industrial buildings and retrofit. We still expect mid to high single digit growth for 2015 in North America and commercial HVAC markets. The regional standards change in residential HVAC is going as planned. We expect motor bearing unit shipments for the year to be flat, up low single digits in 2015, reflecting the [indiscernible] that occurred in the back part of 2014. To [Indiscernible] North American climate segment markets, we expect North American transport market to be up double digits in 2015, reflecting good trends in trailer, truck and APUs for most of the year. North American industrial markets have remained fairly weak. Gulf markets are expected to be up low-single digits. We expect Latin American, Asian, European and Middle East HVAC equipment markets in the aggregate to be up low to mid single digits at constant currency, from flat to down, after considering currency. Within those regions, Europe and the Middle East have been relatively strong for us, excluding currency. Asia has slowed since July, and we now expect Asian markets to be down for the year. We expect European transport markets to be down, including FX, but up at constant currency. Industrial markets in Europe and the Middle East, Latin America and Asia are more challenging, and we expect these markets to be down for the full year. Aggregating those market backdrops, we expect our reported revenues for full year 2015 to be up about 3% versus 2014. Our prior range was 4% to 5%. So in total, we are reducing the back half revenue forecast by about $140 million.…

[Operator Instructions]. Our first question comes from the line of Nigel Coe with Morgan Stanley. Your line is now open.

Good morning.

Good morning Nigel.

Good morning.

So let me start off with the change amendments for the industrial segment. Congratulations to Todd and Keith in their new roles. I am just wondering, what if anything changes in terms of the [indiscernible] for industrial tech, and to [indiscernible] the question Mike, is that -- the margins, the trickle of investor retention [ph] and I am just wondering, is that a recognition, given all the background that perhaps there should be a sharp focus on productivity and cost containment there?

Well looking at the opportunities, Nigel, and we are dead committed to the 70% and 90% operating margins that we have communicated in the past. We want to accelerate that as quickly as possible, and for the segment to achieve that, we have got to achieve that [indiscernible] that business, first and foremost. So the effort here would be certainly on all of the growth and operational excellence activities in the company. We see great opportunity in the value stream work, and reaccelerating that. So its really -- I think, a tribute to Todd's leadership, but also to a commitment to being on-track and getting ourselves on track for that business.

Okay. Fair enough. And just a quick follow-on there, Mike. The 50 bips of price cost benefit this quarter, consistent with commentary, but I think probably a little bit better than certainly what we expected. As that continues to get better, as the hedges start to roll off on the copper and aluminum, or is this a pretty good run rate from here?

Nigel, let's think about the cost or the price and material from a longer term perspective. So what we would have is a -- we'd have a total average spread between direct material inflation and price of about 20 to 30 basis points for the year. What we said when we talked in July, was that in the second half of 2015, we would see wider spreads, because the material deflation was really kicking in, which is exactly what we saw in that 60 bips spread. But in general, we are still targeting about 30 percentage points of spread for the year, then as we look at, going forward, we'd hang on to that goal of having a positive spread of 20 to 30 basis points. So I don't think that edge moves up forward, at least in the near term, that 2016 commodities are going to increase. We have got about 50% of our copper for 2016 locked in. However, I think its more realistic to think about the overall spread being 20 to 30 basis points, rather than a 60 basis point spread being a normal. I don't think that works [ph].

Okay, great. Thanks a lot.

I think Nigel, more than we though really, but we kind of thought 50, it was 60. So its pretty close to the number that we had thought.

Okay. Thanks.

Thank you. And our next question comes from the line of Jeffrey Sprague with Vertical Research. Your line is now open.

Thank you. Good morning guys and ladies. Just quickly on Cameron and just the M&A impact. Just wanted to check my math, it sounds like you've actually held your Cameron forecast? If I am assuming a 3% acquisition contribution, that would imply about $380 million in revenues and back out [indiscernible], it was like 340-ish for Cameron. It sounds like no change there, but then Mike, you also made a comment about de-risking Cameron a little bit. So can you just reconcile that or am I missing something in that math?

Jeff, great question. Let me walk through. So I talked about the fact that we reduced the back half for you in total for the company by $140 million. $50 million of that would have happened in Q3, so $90 million relating to Q4. Also [indiscernible], there was regular change to the climate, really the top $30 million, leaving $60 million in the industrial businesses. We think about the Cameron piece of large machines, and we took a $20 million to $25 million view of risk on that, saying that, we know of some instances and perhaps will know some more delays for oftentimes customer acceptance or readiness on those sides. So think about $20 million, $25 million being associated with big machines. The balance of that could be split 50-50 between all of what the short cycle replenishment is in industrial and FX again. So if you look at sort of the Cameron piece of this, on the large machine exposure, 20-25, and then if you look at just short cycle of recovery, some of that would be plant there, for both Ingersoll-Rand legacy and Cameron, it would be the normal smaller plant there. We are not seeing the order rates returning there, we are seeing some slowdown of capital spending from industrial customers in Q3 and Q4, and so there is a bit of that in there as well.

Okay. And then, just shifting gears on TK, orders down on tough comps, but the comps are going to stay tough, right, in North America, in particular in trailer. How do you see things playing out? Should we still be thinking about double digit type decline or more in trailer in North America in 2016?

So Jeff, let me give that a shot. So you're right, as we look at the order rates for North America for trailer in the third quarter, they declined. Again, we expected that, we talked about some of those orders being roughly at peak in the second quarter, and it really is a tough compare to 2014. So when we look at the fourth quarter, so first I will take fourth quarter, we expect the trailer orders again to show negative year-over-year comparisons, again, based on really strong 2014, actually record order levels last year. So what we are looking at is, the tough comparisons on TK in total, orders for the third quarter and overseas markets were actually down, and ex-currency were roughly flat. But you also asked a question about 2016. So if we look at what's out there in terms of ACT data. So we are not telling you about your forecast. So we are looking at ACT data. We still are seeing forecast for that to come down in the ranges of probably some of those double digits. But we are closely assessing the markets, especially in trailer and in looking at the record volume. So not really a precise answer, but the tough comps are really the big part of the story, and in 2016, ACT doesn't see much change from the prior outlooks.

Jeff, if you took that kind of 15% kind of the -- sort of the market for North American trailer. I recognize, it’s a little bit less than 25% of our business. We are probably going to see pretty good markets in Europe and Middle East. We are seeing probably good markets for marines, rail, bus and for our air, refrigeration businesses that we talked about a scenario last time that, a 10% to 15% decline in North American trailer, is something that we think we could still grow margins, in the TK business, and potentially, actually grow the top line. But that's not to be concluded until we finalize the plan.

Thank you.

Thank you. And our next question comes from the line of Steven Winoker with Bernstein. Your line is now open.

Thanks and good morning all. Just to clarify that answer for Jeff. On the Cameron deal, you had originally promised $0.8 to $0.10 of gross accretion for 2015. So bottom line like, where is that -- what number it looks like you are going to achieve this year on that?

So cash accretion so at about $0.08 -- maybe a little bit better, but about $0.08.

Okay, great. And then on the restocking impact in resi and destocking across industrial. What are you seeing -- what kind of impact do you think that's having on the business?

Well residential is lumpy. You know Steve, it's hard for a quarter-to-quarter compare with all that's happened with the change in [indiscernible] regulations. Our global residential business was up mid-teens, but our North American residential bookings were up high teens. I wouldn't put a lot of stock into the booking numbers, and some of the anomalies from quarter-to-quarter. The industrial restocking, is just more of an indication of slowing industrial markets, and as a fact that companies like ours are probably pulling in a bit on CapEx and we see our service businesses growing. So one thing you see in a typically mild pull back in your commercial-industrial phase, is that service business should grow. And our service business grew mid-single digits and mid single digits in industrial, which is a pretty good performance.

Okay. And then just following up your point about 30 basis points ongoing prices versus raws, and if I think about same growth rate maybe next year as this year for the overall business, if that were to be the case. Do you think you can hold these kinds of mid-40s organic incrementals?

I think if we look at really more along the lines of what we have said longer term, which is -- we are comfortable with looking at incrementals that are -- and our gross margin levels, as opposed to trying to project what happens to all of those. And I understand the comment on deflation and the productivity that we have had, but I think there is going to be some other areas that are going to have even tougher comps in 2016 going forward. So I think, the price spread of 20 to 30 bips and our incremental leverage being at gross margin levels, have probably got a longer term weight of just thinking about the business.

Okay. Thank you.

Thank you. And our next question comes from the line of Deane Dray with RBC Capital Markets. Your line is now open.

Thank you. Good morning everyone. I was hoping Sue could clarify the comment on expectations for -- did you say inventory increasing in the fourth quarter, and its impact on your free cash flow conversion?

Right. So I am hoping that our inventory does not increase in the fourth quarter. What I meant, and hopefully what I said is, right now, our inventory levels are higher than what we would have seen a year ago. Part of that is, because of the build-up of the air compressor inventory for Q4 shipment. Part of that is the pre-build for the ERP go-live and some other impacts from -- actually the revenue decreasing. But what I expect to see in the fourth quarter, is I expect to see the inventory come down, but the comment is that I don't really expect it to get back to the previous levels, or year ago levels at the end of 2015. So we will continue to work all of that off, it doesn't mean it's an issue, it just means its going to be slightly heavier. And what we have done, to answer your question, on a free cash flow basis, is that we did -- our original range was $950 million to $1 billion, we said roughly $950 million at this point in time, and what we are doing from a free cash flow perspective, is that everything that you might expect us to do, which is, we are overdriving performance on receivables. We are looking at all the things that make sense, in terms of being tight on all the other elements of free cash flow to make up for the fact that we have got a little more inventory than what we had a year ago. So I don't think any of this is an issue. I think our free cash flow, being at 98% and sort of projected net income is running in line with where we'd like it to be. So I don't think it’s a problem, I think its just going to be a little higher than it was a year ago.

Sue, I appreciate the clarity. And Mike, I was hoping you could comment on the European strength in climate. Did that surprise you at all? How much is fix a factor there, and it looks like you could be getting some share gains?

Well it is surprising us for a couple of years in terms of just the success I think we have had. But as I said in the past, we have got an excellent team, bringing new business and a lot of new products and services being launched into the marketplace. So continued good performance there.

Thank you.

Thank you. And our next question comes from the line of Julian Mitchell, with Credit Suisse. Your line is now open.

Thank you. Just a question on industrial. I think you're guiding for Q4 organically to be down about the same degree in revenues as Q3, so maybe down about 2% year-on-year. But the orders progression has got worse, Q3 versus Q2 and the organic sales hurdle is higher in Q4. So maybe just confirm is that's really the case, and maybe talk a little bit about how you are seeing industrial demand trending kind of within the quarter and in the last couple of months, specifically?

The [indiscernible] Julian that we have really is in China, which really runs a pretty wide range of worst case, best case. And so, we are taking something out of a more conservative range in China at this point, and that's really the wildcard. The balance of it really is just sort of the book in turn that we know of and conservative views now on restocking into some of the stock businesses.

And I would say Julian, you are right. When we talked in July, we have seen some short cycle markets recover in June. Some, but its not all certainly, and that reacceleration didn't continue in the third quarter, as we had anticipated, and we did lower our industrial growth outlook for the second half from plus 2% to minus 2%. So you are absolutely right.

Got it. I guess, you are not expecting the decline to get worse in Q4, even though you have a tougher comp in industrial?

We had a little bit of a surprise favorability in bookings in Latin America in the compressor business, a bit of a surprise. And again, we think, we have taken a conservative view and China team has a roadmap on some larger orders that could close. But I think we have got this tackled with the 90 million in the back half, 60 million of it really being attributed to -- I am sorry, the fourth quarter, $90 million for the company, $60 million in industrial. We think we have got it covered here with what we know today.

Thanks. And then just a quick follow-up on Trane in Asia. I think obviously, the trends, even back in July, were pretty unsteady in China. Maybe just talk a little bit about how you have seen the order intake in the backlog moving there?

So let's just kind of talk about china in general. So obviously, economic growth rate, significantly below the historic rates, with the government attempting to rebalance the economy and all of those different pieces. Some of that is not smooth, some of it is lumpy and so some of the comparisons get a little bit volatile, if you just go from quarter-to-quarter. But if we look at HVAC bookings in China for the quarter, they were actually up low single digits versus last year. And for the quarter, HVAC revenues in China -- for the fourth quarter, the HVAC revenues in China are expected to be down low single digits, and part of that is applied systems and the growth there being more than offset by lower unitary revenues and currency. And so, there is a lot of different pieces that are moving around. If we just look at non-residential construction markets start in the fourth quarter last year, some of that continued into the second half of 2015. Some of the areas of strength or verticals, where we do see some growth would be data centers, healthcare, and mix development opportunity.

Good news there Julian, was the fourth quarter positive bookings and HVAC in China.

Great. Thank you.

Thank you. And our next question comes from the line of Shannon O'Callaghan with UBS. Your line is now open.

Good morning.

Hey Shannon.

Mike, so just on the -- to clarify the leverage point in the fourth quarter. I think you said corporate going down $15 million to $60 million. Is there some other maybe offset below the line and other income or anything that we should be aware of? It just seems like, I end up a little high, if corporate goes down $15 million?

Well so when you think about the fourth quarter leverage and the different pieces, in the spot where you are going to look at and what's happening, if organic growth is going to be in the range of 2% to 3%, so you have got $75 million to $80 million of revenue. If you have got productivity and direct material inflation, we are still continuing to get price, and if those are the primary drivers of productivity in the fourth quarter, and you have lower corporate. To your point, the math does work out to be in the 75% to 80% range for the fourth quarter.

Shannon, another way to look at it, $75 million of revenue at the midpoint, $40 million NOI on that, take $15 million off that for corporate, now you are talking about nearly $25 million on $75 million. You have got 33% leverage and look at the price deflation spread, look at the productivity of our other inflation spread, and its really a doable number.

Okay. And there is nothing -- I know your other line moves around, there is nothing different going on there. It has been bouncing all over the place, something I had to model, [indiscernible] currency, but do you have anything moving significantly down the other line?

No. So the fourth quarter should be relatively flat. So not really a lot of movement there that we are looking at.

Just on the commercial HVAC bookings, up mid-single digits in the Americas, do you have sort of the North America split of that? I think you used to give, and is there any parts of North America you see getting better or worse?

Applied is trending, as we said, applied, mid single, its sort of the institutional piece of that large unitary that applied to institutional is -- in fact, the larger unitary is doing really well. The open backlog [ph] sort of matches what the booking trends looks like, which gives us some sense that -- to think about open quote [ph] got predating bookings by three to six months. The rates stay fairly consistent going into 2016. So I think that its shaping up like the though, which is this mid-single digit institutional recovery that should last a few years. That state is still quite a bit more aggressive, and that you are showing institutional put in place 2016 versus 2015, 14%, starts at 10%. But I think as you all know, historically been fairly high, it comes down throughout the year.

Okay. Great. Thanks a lot.

Thank you. And our next question comes from the line of Steve Tusa with JP Morgan. Your line is now open.

Hey guys. Thanks for taking the question. Just following up on Shannon's question. Can you just kind of give us the approximate margins? There are some rounding dynamics here, and you guys got some squiggly lines next to the numbers annually, and so I am just having a little bit of trouble again getting kind of low enough for the fourth quarter. Can you just give us more rough approximation of what the 4Q is for the segments? Margin-wise?

So if we are looking at the total year for industrial being in the range of 13% or roughly 14%. So you are right, we have got a little bit of a squiggle in there. What that would imply for the fourth quarter on industrial, is margins in sort of the 15.5-ish type of range. And part of that gets driven by the compressor shipments in the fourth quarter, as well as continued productivity and lower inflationary type environment.

Okay. And then for climate, I think we are backing it into something around 13.5%? Is that about right?

So climate, with the sort of 13 that we are looking at for the full year, would be -- if you backed into a -- that climate midpoint would be just a smidge under the 13 range for the fourth quarter?

Okay. Then that makes more sense. And last question, just on the resi dynamics, what will mix contribute this year? I don't think you guys had great mix in the second quarter, like maybe some others did? There maybe different timing dynamics around how much 14-SEER you are now selling? How much of that 14-SEER transition is booked this year, and then how much is kind of still yet to come for next year?

We have some negative mix, Steve, in the year with 14-SEER, which works itself out this year. But we think that generally 14 is accretive [ph] to 13 and we are seeing really good margin expansion in the res business. So in spite of the mix down of 14 for us, good absorption, good expansion, and work itself through in 2015.

And then for 2016, is there still some benefit to come in [ph]?

I think there is better -- I don't think have got the issue of mixing down in 2016. I mean, there could be a quarter, four or five months that -- you have to take with -- these dynamics of the change this year, in terms of stocking 13-SEER. For the most part, I think we should be having a pretty clean year, next year, in terms of mix.

Okay, great. Thanks.

Thank you.

Thank you. Our next question comes from the line of Robert McCarthy with Stifel. Your line is now open.

Good morning everyone. I guess the first question I would have, is just, taking into account some of the comments around state of the U.S. non-resi and the limited visibility on the industrial side. I mean, how do you think about directionally about 2016 in terms of EPS growth, and what can you provide in addition, maybe for CapEx or -- you have provided some incremental margins. So what can you provide about 2016, how we should be thinking about it?

I mean, first of all, remember, we will do it from February, so I will give just some general sense of where things are going. But before I do that, step back for a minute and we look at 75% of the companies being in the climate segment. Of that, really 60% of the company is HVAC and more than 60% of that is in North America. So you have got, really 40% of the company, with pretty strong growth dynamics going into 2016. I think HVAC in Europe, Eastern Europe, even potentially the Middle East will be growth organically for us, probably not the same rate of course as North America. But you have got that growing. So in essence, a large part of the business is growing for us. When you think about industrial; I think that Asia, Latin America, continue to be a bit of a struggle and maybe some currency headwind coming at us. But net-net, we see that even with low growth next year, we will expand margins nicely. I am not going to give you an EPS number today, but we certainly feel like there is an opportunity with the pockets we are seeing at growth in 2015 [indiscernible].

Okay. And then just one follow-up; in terms of just capital allocation and then just reinvestment in the business, given the prevailing environment. Certain change or nuance of the margin in terms of M&A or other forms of capital redeployment or internal reinvestment?

No. When we look at it, we expect to continue the balance capital allocation that we have got. We have investment in our businesses. We can expect continue having a strong dividend payout. So in the 30% to 35% range, we will continue to, at a minimum, offset dilution with share repurchase activities. And then, the remainder of it, we will basically continue to toggle between value accretive M&A and additional share repurchase and just evaluate what makes the most sense at any given point in time. Now, you had also asked about CapEx, and so generally speaking, our CapEx is usually in the range of about $250 million, which is roughly equal to depreciation, and we don't expect that to change going forward either.

The CapEx and investments are a number, that Robert, we can work with during the -- depending on what we see in terms of the environment. There is some flexibility for us to spend less, if we need to -- to help us on the EPS commitments that we will make.

Thanks for your time.

Thank you. And our next question comes from the line of Josh Pokrzywinski with Buckingham Research. Your line is now open.

Hi good morning.

Hey Josh.

Just a couple of questions, first on Cameron; obviously backlog is typically weighted to the fourth quarter, but can you give us maybe an indication on how order trends and visibility or coverage into next year looks, maybe versus what normal seasonality should look like? They are obviously [indiscernible] to the year yet, but just kind of any color on orders would be helpful?

Sure Josh. One of the interesting things about the history and what happened in that engineered compressor business, is that not only are shipments back half loaded, but generally, orders in the launch engineered compressors are also back half loaded. So we are seeing real time, what's happening in the different places in the market. So let me give you a little color on what I think we are seeing, and how that translates into what we see for 2016. So in general, you are going to look at this space being negatively impacted by all of the oil and gas majors are going to put [ph] in capital, 20% to 30%. There is industry consolidation. EPC activity is slowed, and so when you think about projects, there is probably, in general, fewer projects. Same number of competitors, which means that you need to be really sharp, you need to be really focused, and really work at the orders. Now, having said that, if I break down the different pieces of the business. So on processed gas, which is roughly a quarter of the business; there is still some growth from the natural gas side of things, and LNG. There are some Middle East project delays. However, you have got petrochemical doing okay. Power-gen, particularly in Europe being an area where, there are some projects and things that we can look at, and so, when we think about the processed gas, one of the things that you can start to think about, is on the chemical side or petrochemicals, is the lower gas price, give you a lower feedstock price and that could change some of those dynamics. I don't know. But its still a tough environment, as I said fewer projects and some things happening. Engineer, air, so another…

Synergy-wise too Josh, we are really on track with -- as an example, just sort of the plant there, the rent synergies and the cost synergies, and if anything over the last few months, we have gotten a sort of even more conviction around the opportunity for the engineering, supply chain and manufacturing synergies that could exist in the business. So I think that we will continue to make the business accretive and in 2016, we will make sure that if we got the weakness. [Indiscernible] who is talking about, that we have got a response to keep the margins at or better than when they were this year. And we got a roadmap to do that.

And I think the bottom line of all of that is, its still a great business and its still a great product for us. And like I said, in spite of all of the things that I said about the market, its accretive in 2015, and we are getting the synergies. So more to come on this one.

That's great detail. And if I could just ask a follow-up on TK, I have heard that some of the trailer guys have opened up the order books, maybe a month or so early than they normally would for the following year. Is that something you guys have seen, and is any of the strength in North America this quarter, and maybe a month or so [indiscernible] had from what you might normally have seasonally?

Well, clearly [indiscernible] which customers opened up their order books and whose customers they are. So you could take the top 10 customers, they are going to order at different points in time. But I would say that, in the third quarter, you had some customers that open up their order books, and we have seen the same thing happen in the past, where there is a little bit of an anomaly between who is ordering. So we are -- whose order and who is left to order, and I don't think you're seeing a lot of dynamic shift in that. But you will see differences in book rates and revenue rates depending on when that occurs. Some of these guys will buy 1,000 to 2,000 to 3,000 units, and so it makes a difference when you are looking at 6,000 to 8,000 unit month, which we is what we have been saying the last few months.

Got you. All right. Appreciate. Thank you.

Thank you. And our next question comes from the line of Andrew Obin with Bank of America Merrill Lynch. Your line is now open.

Yeah, good morning guys.

Good morning Andrew.

Nice quarter in this doom and gloom environment. Just a question; there was some debate inside the company about how to look at the value stream process, and at the Analyst Day, you have indicated that you are reassessing your approach, because you have sort of touched a lot of low hanging fruit. And then, we seemed to have had a pause in execution last quarter and this quarter operating leverage just seemed to have come through very nicely. Can you describe to us what internal operating changes you have been implementing over the past six months to address this next level of operating improvement.

Yeah, a lot Andrew. I am not sure I will cover it here, it would be a great discussion that we could have when we get together for our review this spring, in general. But we have used this product growth team as a basis to expand the effort across the company. We have continued to now touch really all of the business with the value streams. Sourcing has become, I think, mature across the company. We have got really good productivity last three quarters, really in general. If you look past Q2 and kind of look at the last three quarters, we are seeing productivity accelerate. Its never really that linear. I know we'd all like for it to be, but its not. We have projects and ideas that, at a certain point in time, kick in a quarter, and those make a difference. Higher volumes would make even a more positive difference of course. So we are doing this all with actually quite sort of low volumes than some of our businesses. So we are excited, as volumes do return, we'd see even better productivity and the change that we have made. And so, look, I think that we haven't really changed the operating system in five years, we have just really looked across as product growth teams, and now have touched most or all the companies in one way shape or form.

And just a follow-up question, I apologize if you have answered it already. But can you comment on cadence of industrial orders throughout the quarter?

Cadence throughout the quarter, there really weren't any sort of high spots in the quarter to say. They were choppy, they were just sort of low in the entire quarter. We had pretty good growth in our fleet management business, obviously which was a highlight for us. It was kind of a double digit grower there, it's a good sign. But material handling, which is really our only oil exposed business, significant declines of 50% in bookings in that business from prior year. So inside industrial, when you move the compressor business out of the way and you look at some of the smaller businesses, there are some high and low points, that generally speaking, pretty explainable if you look at material handling as a good example of that.

Terrific. Thank you very much.

Thank you. And our next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is now open.

Thanks and good morning.

Hi Joe.

So a quick clarification. Mike, you mentioned earlier the dodge [ph] data on the institutional side, and your expectations for next year. But there is not a lot of noise in the data, especially on the commercial side. I am just curious, what if anything you're seeing and what you're making of that noise on the unitary side of your business?

Well, I think that the large unitary business continues to do well, because, there is also a lot of large unitary that's split into more of the institutional environment. So that continues. Actually the commercial activity has been fairly strong. If you split up commercial-industrial, industrial has probably been just a little bit weaker in North America. But not a bad environment frankly at all for us. So we continue to think it’s a pretty good North American market, for both institutional and industrial. But in terms of strength going forward, its really institutional than commercial, and then industrial HVAC kind of trending in that direction.

Okay. That's helpful. And maybe following up on that, how do you think about mix then, as you head into next year? Clearly, we talked a little bit about some North America headwinds on TK. But some of the mix headwinds on resi sits aside. How are you guys thinking about mix? Particularly, in light of the climate margin target of 13% to 14% for 2016?

Well I mean, on track in a nutshell, Joe. I mean, TK still gives us really good volumes from a profitability perspective, working with pretty high volumes across the board. Even though the year-over-year decrease in the market will be there, we have got plenty of gas left there and grow parts of the business that we didn't have last time around. So we feel pretty good about being able to hold their head up on the TK business. As you look at a climate, great expansion in margins, in the res business. I have said before, I will say again, mid-teens, mid-teens plus EBITDA. The commercial business, particularly in Europe is doing well, and we are hitting some critical mass there, and I think we will begin to contribute more to that margins across the business. And then in general, North America just does a really good job in terms of share and consistent margin expansion there. So feel pretty good about that. The wildcards are really Latin America and Asia for us, as it relates to HVAC businesses. And here, we talk about pricing in China, but its not sort of an environment that's impossible, its just more difficult for us. So we are persevering in China, and again, we feel good at least about the quarter, bookings going in the right direction. We'd love to see next couple of quarters, look the same way before we feel more constructive about China -- about Asia in general.

Okay, thanks. I will get back in queue.

Thank you. And I would now like to turn the call back to Janet Pfeffer, for any closing remarks.

Thank you, everyone. Joe and I will be around if you have any follow-up questions, and have a good day.