Good day, ladies and gentlemen and welcome to the third quarter 2008 Modine Manufacturing Company conference call. My name is Carmen and I’ll be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of this conference. {Operator Instructions} Now I’d like to turn the call over to your host for today’s call, Ms. Susan Fisher, Director of Investor Relations and Corporation Communications. Please proceed, Ms. Fisher.

Thank you, operator, and welcome, everyone to Modine Manufacturing Company’s third quarter fiscal 2008 earnings call. Joining me on today’s call are Modine President and Chief Executive Officer David Rayburn and Modine’s Executive Vice President and Chief Financial Officer, Brad Richardson. Our format for today’s call will include approximately 20 minutes of prepared remarks followed by a Q&A session at the end. Before we begin I would like to remind everyone that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on Modine’s current expectations and the company’s actual results, performance, or achievements may differ materially from those expressed or implied in these statements based on the risk factors that are outlined in the company’s filings with the SEC. So without delay I’d like to turn this call over to Dave Rayburn. Dave.

Good morning and thanks Susan. Brad will be reviewing the financial details of the quarter, quantification of the additional restructuring actions and earnings guidance but first I would like to discuss our business strategy which is evolving and the key messages from today’s release. Our business strategy is focused on thermal management and heat transfer and technology is a key element of our strategy. As we’re demonstrating in our engine products group, our exciting new technology for power train cooling called Origami which I’ll discuss later and continued progress with our fuel cell group are just three terrific examples of technology differentiation. Diversification model continues to be a strength. We are diversified in our products, our markets, our customers. Our largest customer is only 11% of our total sales, and geographic diversification, and that is certainly changing as we move more rapidly into Asia. We’ve had a small plant [inaudible] for many years and that has served us very well. Certainly having a competitive cost base will drive profitable growth. As we’ve dicussed on past calls and today we have a number of strategic actions in process to support this strategy. Our strategy has to evolve in order to be able to meet the global challenges that we have in an ever-changing business environment. An example of strategy change is a small plant philosophy. We’re going to manage scale. As a result of lean activities, robust quality systems, and product standardization, we’re able to now leverage up our plants to a larger size called managed scale and thus have better fixed cost absorption. But these facilities will still have the strong attributes of our small plant philosophies of good, strong employee relations focused on specific operations and processes, and very visual factories. But our strategy will continue to evolve. So…

Thank you very much, Dave, and good morning to everyone. Let me, before I get started, is just recognize that the announcement that we had on December 13th where we identified the potential impairments as well as the potential for additional restructuring and we certainly recognize with that announcement that that was clearly a destabilizing event for the investors. It was though something we had to do as our obligation to you as the investors as we see things in our business of being full in our disclosure. We believe with Dave’s comments, the release today, as well as the agenda that’s laid out here is that we’re focused on providing greater clarity as to the issues and our response to address the underlying business performance which is primarily related to our North American OE business and our Asia business. The agenda laid out here in front of you will provide an update of the third quarter financials, action plans to address business performance, an update on our financing activities, earnings guidance, and finally a summary. If I can turn to the next slide here titled “Third Quarter Highlights” it does provide the highlights of our third quarter fiscal 2008 results. I would note that the results are from continuing operations and therefore exclude the electronics cooling business which is in the final stages of being divested. Key themes for the quarter include an overall increase in sales of $37.2 million or 8% as Modine continues to benefit from broad geographic diversification with strong sales outside of North America and within our commercial products group offset by the sizable 22% decline in the North American OE business due to significantly lower truck build rates. The gross margin as a percent of sales declined to 15.5% from 17% reflecting a mixed…

(Operator Instructions) We’ll wait one moment while questions compile. The first question comes from the line of Andrew DeAngelis from Keybanc Capital Markets. Please proceed.

Good morning guys. First of all I just wanted to dig in on your expectations relative to North America, relative to the change that’s occurred. Could you talk about the mix of the inefficiencies that are currently occurring and the changes in the external environment that has prompted the changes in your expectations going forward for that segment?

Let me talk about the operating side and then I’m sure Brad will have some additional color. From an operating side and certainly as I mentioned we had a lessons learned in regards to the consolidation work that we went through. Some of it has gone very well, some of it candidly had some frustrations with it. Coupled with that we’ve had a number of new product launches and as I mentioned that management team was really stretched very, very heavily and so that’s why we are taking the actions to put incremental resources both from an internal reprioritization as well as bringing The Highland Group in. So I have a lot of confidence in the execution of these plans based on what we’ve learned and some of it was very positive but also some things that we’ve learned that was not so positive. Brad, any further color on that?

Yeah, Andrew, and I think it’s clear to point out here that we do see continued growth from where we are in the North American business as the truck market recovers and also because of some of the engine programs that Dave mentioned in his prepared remarks, but as we look at the overall growth rates to what we had previously thought, again the growth rates have come down. In addition I think there are some what I would call... You specifically asked about the mix issues and certainly with some of the automotive business that we have here in North America. It is not as profitable as we had expected so our overall margin expectations for the business have also come down and finally as it relates to the margins and overall revenue in the North American business, some of our business is moving to other Modine facilities, in particular in South America, which does impact obviously the value of the Original Equipment - North America segment that is offset obviously by enhanced value in our South American business.

Okay maybe just a couple of follow ups there based on our response. Can you maybe first speak to the progression of the inefficiencies that you experienced within the quarter? Are they getting better as we exited the quarter and maybe a little bit more recent update into January?

Yeah the primary issues that we have right now that we’re experiencing is actually related to product I would say. We’re probably in a 75% of our variances today are related to some product launches that we’d gone through and we have very aggressive activity in addressing those issues, which are solvable, but you do have to go through a product validation process with the customers when you make process changes. I am pleased that those variances from the product launches have been well insulated form the customer and that’s very important, that our relationships continue to be very strong with the customers that those programs are involved in. We are winding down the last two plants of the first four. It is critical, on one of them that we get some product up and running which has been validated or is being validated at two of our facilities and I think we have a very focused activity on that and good leadership on that.

Are we at a high water mark in terms of the product launches in terms of the North American region?

No, I think we’ve turned the corner on it and it’s getting to where that light at the end of the tunnel is certainly light.

I guess just moving on to the actions that you announced this morning. Obviously the extent of the time involved running up to 24 months kind of brings you clearly into the next prebuy that we expect to occur in ’09. How do you guys kind of think about the impact that the restructuring activities will have kind of in the out year as --

I can’t at this point get specific on the plants that are going to be impacted as we work through our finalization activities and deal with our employees and unions but I would say that most of the activity would not be influenced by the ramp up of the heavy truck.

But clearly that will create some pressure internally as you guys I would expect ramp volumes ahead of that.

Absolutely, Andrew, that’s why I think it’s a very important structural change that we’ve made is that we do not want to take the focus off of the everyday operating. Any further launches that we have in this period that those will actually be two separate management teams that will be reporting to Jim Rossi who is responsible for the region and I can’t underestimate or reinforce the value that The Highland Group is bringing to us in regards to thinking things through in a very disciplined manner.

Okay. Could you guys maybe speak a little bit more in depth in terms of the strength that you guys clearly experienced in Europe this quarter. I meant, the 28% incremental obviously being pretty notable there in terms of maybe product mix and just general demand trends?

I’ll comment and then I’m sure Brad will have some additional comments. We have a strong management team in Europe. We do have some very strong programs in multiple segments. The truck market is very strong there. I would say a large part of their performance is as a result of what we’ve done over the last couple of years in that region in regards to bringing programs on responsibly with what’s called an AP-QP process, et cetera. I would be remiss to say life is wonderful and there’s no problems in Europe. Every one of our regions has, you can’t enjoy the sunshine and not look deep into the organization in regards to what are the issues that need to be addressed and despite their very strong performance, it is time that we deal with the [tubing] facility as that is manufacturing product that is very old technology, copper, brass, and some high labor content product that needs to be made in other regions. So it’s very important for us as we look at our business, as we look at every one of them in the detail to ensure that we’re not being mislead by maybe a volume ride or other success that we have in the short term.

Andrew, I’d just add again, it’s mentioned kind of in the prepared remarks, the heavy duty market as Dave mentioned continues to be very, very strong but the automotive business that we have also continues to be strong. We have had some program launches in particular in the area of new condenser program that we’re bringing online that has contributed to growth. As we, kind of forward-looking as we start to look to 2009, clearly we’ve been quite open about the continued strength that we see in the business and in particular with the next round of emission law changes that are coming. The opportunity that the company has to significantly increase it’s penetration or market share in the Europe medium and heavy duty truck market and that obviously, our confidence in that continues to grow as we continue to secure new business and that underpins the overall 4% to 6% growth that we’re talking about here today.

And the new facility that we have that’s coming on this next fiscal year in Hungary which is our second facility in the northeast corner of Hungary will help support that growth that we are going to secure incremental penetration in that commercial vehicle market.

Have we had any other announcements in terms of incremental penetration there in terms of product wins on the heavy side?

You know we haven’t, Andrew, it’s really, there will be some things as we go forward here. Given that we’ve been in this period here, what I call quiet period post our December period as we have not had any as you know any significant material press releases but again we will announce as we go and the opportunities do underpin again the 4% to 6% growth target.

Andrew, the Origami technology that I mentioned that we’re very pleased with which we’ll see in a launch and then the ’09, 2010 time period, that’ll actually be initially manufactured for the European market place and as I said we have a number of specific development programs going on with targeted customers.

And then just one lat one for me before I get back in queue. In terms of a tax rate, Brad, both over the short term I know you said it’s going to be elevated here over the next year, and then over the long term, what you expect the rate would be.

I think clearly Andrew the heavy restructuring that we’re going to have in the North American business is going to result in continued kind of losses if you will, book losses, on our US tax jurisdiction. This program, as you pointed out earlier, is an 18 to 24 month period so I think over the next 18 to 24 months until we can get the restructuring and all the costs associated with that behind us we’re going to have a very, very high tax rate and so I would say once you get beyond kind of the 2011 time frame then you’ll see the company return to more of the kind of 30% tax rate that we had been enjoying.

Okay but I guess up to 2011 it’s somewhere north of 30% and you have no quantification there?

I think it would be meaningful to be north of 30% and Andrew as you know what’s happened this year, if you exclude the deferred tax valuation is our losses and our US tax jurisdiction and the benefit that’s realized from that has approximated the expense that we’ve had on our earnings outside of North America so we’ve enjoyed effectively a very, very low effective tax rate with the deferred tax valuation that we have been recognizing effectively gets reserved and so as we go forward we’ll have no benefit from the losses herein North America but we will be paying taxes obviously in the foreign jurisdictions so that mathematically will give us a very, very high effective tax rate over the next couple of years.

Understand. Thanks a lot guys.

The next question comes from the line of David Leiker from Robert W. Baird. Please proceed. Analyst for David Leiker - Robert W. Baird & Co., Inc. : Good morning. This is Keith. If we look at kind of fiscal Q4 versus Q3, was there anything in Europe other than seasonality that’s going to change versus those two quarters? The guidance seems to imply either North America gets a lot worse sequentially or Europe does.

Keith, the Europe profitability and I think you’ve heard us say this before is our businesses for the most part outside of North America are recorded on a one month lag basis meaning that the third quarter of our fiscal year has September, October, and November results. Then as we get into the fourth quarter for our foreign locations you’ve got December, January, and February. Well as you know December in Europe as well as other locations, but December in Europe has significant shut down period for holidays so what you see is the company typically the fourth quarter is a very low profit quarter because of the shutdowns from our highly profitable European business coupled with the shoulder period for our commercial products business where the heating business is ramping down and the air conditioning is just tin the ramp up stage so those factors that cause the company to go into this loss position not too dissimilar to what we saw in the previous years’ fourth quarter. Analyst for David Leiker - Robert W. Baird & Co., Inc. : Okay, thanks and then if we look at North America it seems like production levels and the heavy trucks, medium duty trucks are going to be roughly flat quarter-over-quarter. Is there anything other than some of these inefficiencies that go away in the fourth quarter?

No. Analyst for David Leiker - Robert W. Baird & Co., Inc. : Okay, thank you.

The next question comes from the line of Gordon Bergren from Industrial Land Holding. Please proceed.

Hi, I’d like to inquire about the dividend. Right now it’s at $0.70. Does that look secure in the near term?

Let me just give you a little background on the dividend. Our stated long term pay out ratio 35% to 45% of our net income and clearly the last couple years and with what we’ve announced here today is we’ll be substantially above that. We do look at our dividends though, not on just a short term basis, we look at it on a long term view of how we expect the company to perform. You will have noted that the Board did declare a dividend on January 16th and every May the Board looks at the long term view of the business and looks at the earnings potential of the business and assesses the overall dividend level so it will be at that time that we will re-evaluate the dividend. I would say this, that again it’s looked at over a long term, long period of time and it also, we believe as we’ve said before, is that dividends are an important component of our total shareholder return so that’s all we can say at this point.

All right. That was my only question. Thank you very much.

The next question comes from the line of Andrew DeAngelis - Keybanc Capital Markets. Please proceed.

Hey guys. Just wanted to follow up on your kind of preliminary fiscal ’09 expectation of 240,000 units in the North American heavy market. It looks like right here you’re looking for 228,000 over calendar year ’08. Actually seems a bit conservative, I guess could you maybe talk to what’s driving that assumption and maybe how it lays out over the calendar year?

We had actually had our fiscal, our calendar number of up 240,000 and brought that down not too long ago to the 228,000. Actually for the last three months the order rates have been pretty strong, over 20,000 units I believe in the [class 8] side. We actually have seen a few line rate increases at some of our customers but their visibility is not that long, what we call line sequencing is relatively short and actually we’ve had a couple of shutdowns, customers with little notice, so I think there is pent up demand in regards to the used equipment inventory is down. The new vehicles are performing well but ton miles are down, so that forward or softening of the economy is certainly out there and so I would say at this point our assumption is responsible but we’re going to monitor that very, very closely.

Okay, that’s helpful. Thanks.

Well with that I think we’ll wrap it up. We did spend considerable amount of time in our presentation portion of the call and as Brad said our intent was to provide more clarity in regards to what is going on in the business, the areas that we feel positive about and the areas that we are addressing and hopefully that increased clarity today will help you all in understanding Modine. So I look forward to our year end call. We have a lot of work to do. We know what we need to do and we have the right team to do it. So with that, thank you.

Thank you very much.

This concludes your presentation for today, ladies and gentlemen. You may now disconnect. Have a wonderful week.