Welcome to the Trane Inc. first quarter 2008 earnings conference call. (Operator Instructions) I would like to turn the call over to the Vice President of Strategic Planning and Investor Relations, R. Bruce Fisher.

Welcome to Trane’s conference call to discuss our first quarter results and full year forecast. With us this morning, as is our custom, are Fred Poses, our Chairman and Chief Executive Officer; and Peter D’Aloia, our Chief Financial Officer. Pete will review our first quarter performance and our outlook for the second quarter. Fred will then share his perspective and our outlook for the 2008 full year. We’ll then open the lines for your questions. Charts to follow the comments we’ll make this morning are posted on our website, and the charts are under the heading Trane’s First Quarter 2008 Results. As shown on Chart No. 2 that’s posted on the website, certain forward-looking statements I will make today are based on management’s good-faith expectations and belief concerning future developments. Actual results may differ materially from these expectations as a result of many factors, relevant examples of which are set forth in the company’s 2007 Annual Report on Form 10-K and in the Management’s Discussion and Analysis section of the company’s quarterly reports on Form 10-Q and 2007 Annual Report to Shareholders. These remarks also contain certain non-GAAP financial measures, as that term is defined by the SEC. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure are included in reconciliation charts which are attached with the charts that we’ll discuss this morning. So with that I would like to ask Pete to start us off with his comments. G. Peter D’Aloia: You will notice that the earnings release we issued this morning is oriented to GAAP results. The comments I’ll make and the charts that follow along with them contain both GAAP and adjusted numbers, since we believe that you will gain a fuller understanding of our underlying business performance by adjusting for FX, streamlining, tax…

If you turn to Page 9, it talks about our growth and the sales in the markets that we play in. To put it in perspective, we started the year expecting that our sales growth would be 5% to 6% for the total company. Let me take you through this page, starting on the top with our commercial equipment. And by the way, these are excluding foreign exchange. When we entered the year, we knew that the commercial equipment market in the Americas would be less robust than 2007. You can see in 2007 some 17%. We thought we were relatively conservative at 6%. I would say we’d probably take that down a little bit now to 3% to 4%. I think that’s colored a little bit by the first two months of the year and maybe not fully colored by the second two months, March and April, where our growth is 10%. But I’m not sure the sustainability of it, so we took it down to about half what we thought it was in the beginning of the year, which was really in some senses a third of what it was in 2007. We need to continue to work on price. As Pete said, we got some price in the first quarter. This is price that we’ve gotten previous to the recent run-up of commodities. By the way, in this plan and in our outlook we have assumed no further price increases above what we had in place going into the year. My own judgment is if commodities stay where they are, and I’m talking about a whole range of commodities, copper, aluminum, steel and other things, the industry would want and probably deserves another price increase. But that’s not built into our estimate, although the higher materials prices…

(Operator Instructions) Your first question comes from Nigel Coe - Deutsche Bank.

The EBIT delta,, so commodities are up $60 million versus the plan. Revs are down $17 mil so let’s call that $50 million of EBIT. So looks like EBIT’s $75 million negative from those two factors. It’s down $15 million in guidance. Just want to understand how much of that offset is coming from cost containment measures and how much is coming from the contingency.

I think it’s a combination of the two. We started the year with a reasonable amount of contingency because we knew there was concern about the residential market. I’m not sure we understood completely the concern about the commercial market. So we did reduce our contingency, which helped us cover that gap. We do have slightly higher prices than we had in the plan to help us offset that gap. And we do have cost containment to help us. You take those all together, and we reduced our EBIT by $15 million, and we still have a reasonable amount of contingency, not the amount of contingency we ended the year with. But I also think we have a much better understanding of what the year is going to look like at this point than when we entered the year.

I think you had $75 million entering the year in contingency.

That’s right. We have about a third of that left.

And your hedging and forward agreements on copper, steel, and aluminum, could you give us some color on that?

Yes. We’re un-hedged. And the color on that would be, when we entered the year, we knew we had the opportunity to hedge or not hedge. We were concerned that if the market got weak, we thought that commodities may weaken also, and therefore we didn’t want to get stuck, as I would say, with high price commodities in a declining market. As it turned out, that probably wasn’t the smartest thing in the world. On the second part of it, historically when commodities go up, generally this industry has the ability, although somewhat at a lag, to move prices. And my own personal belief is that the story hasn’t been told there on what’s going to happen in the second half of the year on pricing, although in this estimate we have built nothing in for pricing.

Your next question comes from Shannon O’Callaghan - Lehman Brothers. Shannon O’Callaghan: Can you talk a little bit about your expectations for the rest of the year in terms of the margin dynamics in commercial and residential? How much do you expect margins to continue to compress in residential? And if the Americas piece of commercial’s softening here, what are you looking for on margins on the commercial side?

Well, I don’t know if we have the exact margins, but I think the way I think of it is, Shannon, that the second half of residential is a lot easier comparison for two fundamental reasons. One, we don’t have the difficulty in the volume comparison compared to second half of 2007 with our outlook in 2008. In addition if you recall in the second half of 2007, we had a reasonable amount of warranty costs associated primarily with our recall of CleanEffects, and we had a reasonable amount of costs related to taking down our inventory as we tried to chase down the market and inventory. So I think for the second half of the year, our margins may be modestly down in residential, but not in the comparison to the margin erosion in the first half, which I’ll bet was probably in the range of 4% in the first quarter. Commercial, we have reasonable amount of growth, we have reasonable amount of containment, and I think it’s got a little price there in commercial. If there’s a margin erosion it would probably be more around the impact of commodities, and it would be probably relatively modest. G. Peter D’Aloia: We’re getting nice margins for commercial, and that’s going to continue to help. And the depression in margins in the first half, we’re not likely to see in the second half for residential. Shannon O’Callaghan: Can you just talk a little more about this order dynamic so far through the year? Obviously you’re saying things picked up, but you’ve still taken the guidance down a good chunk for the commercial equipment piece. What are you seeing in terms of the recent pick up? Obviously, it seems reasonable to be cautious, but why do you think it picked up after a tough January-February?

Well, I think the comparisons were particularly tough in the first quarter, where if I remember our sales orders were up 31%. And so the comparisons were particularly tough. I also think that a lot of this, and I’m not exactly sure, you get in the credit situation where people are not sure whether they can get projects funded or not; there’s pause here. I don’t know if it’s permanent or not, and I think we don’t know. So I did say that the last two months as far as order pace has been encouraging. There is some vitality out there. But maybe we just thought, given the tone of the economy, that we’d be better off being a little conservative on our U.S. growth. But a better picture certainly in the second quarter, and if order pace continues at 10% we’d probably be a little more optimistic about the year as far that’s concerned.

Your next question comes from Scott Graham - Bear Stearns.

I know that you’re not baking more pricing than what you already have into the guidance, but realistically I think that there are some, I think, expectations out there that given that commodities prices are rising that there’s probably some more in-channel expectation for people like you to increase prices. Could you give us an idea of what specifically the pricing components to your sales looks like right now versus what further increases that you’re contemplating, both res and com?

I don’t want to speculate on pricing going forward. I told you that our estimate does not include any price increases. In the first quarter, our pricing was probably better by a little over 2%. That over time will diminish a little bit because you’re talking about a 12-month comparison. But I do agree with you, Scott, that I think this industry since 2004 has been able to increase prices to offset the commodities and given that these commodities are widespread. I talk about everyone buys copper, everyone buys aluminum, everyone buys steel, and everyone’s impacted by energy. We’ll get a better sense in the second quarter of where pricing is going to be in the second half of the year. By the way, it would be in the second half of the year. It wouldn’t have much of an impact on the second quarter.

Does the impact of the merger with Ingersoll have anything to do with your not announcing pricing policies yet?

No. it’s not a question of announcing or not announcing pricing policies. It’s just our sensing of the market and where it is, and understanding where these commodities are, and we’ll see what we get. We announced a price increase for residential. We’ll see how that does. We didn’t build it in here, but we’ll see how it does. By the way, we think that everyone makes a unit out of steel, aluminum, and copper.

Your next question comes from Ed Wheeler - Buckingham Research.

On the commodity price questions, the $60 million headwind just seems a little less, just anecdotally, based on the kinds of increases in the futures markets in commodities. Relative, because you gave great guidance on all this going back a few years ago. And, is that a function, do you have some contracts baked in maybe? And if so, is there an ‘09 headwind that we need to have in mind if we just looked at today’s prices?

Clearly we have steel contracts, but those steel contracts are flexing with steel. So we’re not locked in on steel. We didn’t hedge aluminum, we didn’t hedge copper, and we didn’t hedge other energies. To use copper as a surrogate for the rest of this stuff, when we entered the year, we thought copper would be in the range of $3.50. By the way, you can go back three or four months and copper was $2.90 to $3. So we just used that it’s going to be in the range of $ 3.90 to $4, I don’t know, and that’s what we did. So I’m convinced, Ted, that if commodities stay where they are, copper at $3.90 to $4, aluminum at $1.35, steel going up dramatically, that I’m comfortable that the “$60 million” is real and is enough.

And ‘09 would basically be a wash if we stayed where we are?

Well, I think fundamentally it would be a little, we were slightly lower in the first quarter. There’s a little lag on it, as we see in it the second quarter, but ‘09 would be the same run rate fundamentally as the second half of the year.

You talked about proposing and bidding pipelines, so to speak, or your forward look at the activity levels, and you’re a little cautious I think on the sustainability of this 10% for the last two months’ orders. That’s giving us a read on what you see in those pipeline-ish indications. Is that correct?

Well, I think the more months that we can put 10% behind us; the better we’ll feel. We’re really talking the Americas; we’re really talking about the United States. And I think there’s a lot of uncertainty out there. And I think there are projects out there. I was talking to one general contractor about three weeks ago, and he says there’s a pause in funding. And if there’s a pause in funding, there may be a pause in initiation of these projects.

But these conversations that your folks are having do not really show that slowdown yet?

Well, our order pace is our order pace. There is work out there, probably not at the pace of 2007, but nor did we expect it to be at the pace of 2007. But I think there’s work out there. The other thing I would point out, that we are a lot driven by replacement and renovation, even in commercial, some 60% of what we do. And I think energy prices ought to bode well for those kinds of projects, and that is helping us also offset what may be a certain uncertainty about new construction in commercial.

And you talked in I think the comments again about bidding conversations for future relationships and business, that you track this on the service product line.

Well, we track it. We watch it both on service and equipment. I think Pete’s comment was in some senses there’s a lot of vitality in service, and we can see that vitality at a high level continuing.

Your last question comes from Jeff Hammond - KeyBanc Capital.

The commercial shipments in the first quarter were a little bit lighter just given how strong the backlog had been. Is that just timing of shipments, or was there more to that?

I think it’s not a timing of shipments, particularly. I think it’s a tough comparison versus the first quarter of last year, Jeff. In the first quarter, I think our light commercial was flat this quarter, off something that was up 31% light commercial in the first quarter of last year. So we’ve got some tough comparisons even in commercial. So, I don’t think we’d say that the world has stopped in commercial in the U.S. at all. And remember, I come back and as I said to Ted, I think there’s a lot of replacement out there, and we’ll see how it goes. And by the way it’s picked up in the last two months. So I don’t know. I’d say we’ve got a realistic outlook and we’ll stick with it.

Pete, you mentioned the sub-vertical trends in the first quarter. Can you tie that into orders? And is there anything definitive one way or the other where some sub-verticals are proving much more resilient and some are maybe declining more surprisingly? G. Peter D’Aloia: Jeff, I think it’s hard to say. I think some of it has to do with where our strengths might lie, too, so it’s a little difficult to really draw any conclusions from that.

You announced a price increase in res of I think 4% to 6%. Is any of that incorporated into the guidance?

I think we’ve been conservative about pricing, and that isn’t incorporated into the guidance.

Have you announced anything in terms of follow on commercial increases?

We haven’t announced anything yet.

And that will conclude our question-and-answer session.

Our closing remarks are, we have a good business, we continue to work at it and either we or someone else will see you next quarter. Thank you.