Good morning and thank you for holding. My name is Sherry and I will be your conference operator today. At this time I would like to welcome everyone to the fourth quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. (Operator Instructions) At this time, I’ll turn the call over to Mr. Albert Nahmad. You may begin your conference.

Good morning everyone. Welcome to our fourth quarter conference call. This is Albert Nahmad, President and CEO. With me is Barry Logan, Senior Vice President and Paul Johnson, Vice President. First let me read you the cautionary statement that we always do. This is a reminder that this conference call has forward-looking statements as defined by SEC laws and regulations and are made pursuant to the Safe Harbor provisions of those various laws. Ultimate results may differ materially from the forward-looking statements. As all of you know these are unprecedented economic times are just about all factors of the economic landscape have been impacted. Despite the challenges our company had its fourth best year in our sixth year history from operating results and our company’s financial position is the strongest that has been in our history. Wastco organization has done a good job managing to the opportunities. Available in our market as well as improving selling margins and lowering SG&A in response to a difficult revenue environment, we identified and implemented numerous profit enhancements activities in 2008, which produce earnings of $30 million. The Wastco management philosophy of local entrepreneurs managing business conditions within individual markets has certainly contributed to our performance. I’d like to repeat that because it’s really tells who we are and that is our philosophy of local entrepreneurs managing business conditions within individual markets. That’s what produces our constantly good results. A strong indicator of this success is our ability to expand a gross profit margin, which reached all time record for both the year and the quarter and that’s a remarkable accomplishment. We also lowered year-over-year SG&A by 6% on the same-store basis and during the fourth quarter dropped SG&A 10% over the same period last year. Sales reflect higher pricing as well as richer…

(Operator Instructions) Your first question comes from Matt Duncan – Stephens. Matt Duncan – Stephens:

Well, I think the long-term nature of our business shows you that our earnings primarily flow in the second and third quarter and that’s based on the replacement demand and if that is normal meaning that the temperatures are normal, I think we’ll be alright for the year. Matt Duncan – Stephens: Okay, so you think replacements would be up then for the year as long as temperatures were sort of a normal kind of year.

We experience in ’08 no decline in demand for replacement, so even if we seek that I think we’ll be alright. We are getting more efficient as I’ve indicated we took some $30 million out last year and we are already planning on adding more in ’09, so I believe with the usual normal replacement market we’ll be fine.

Now if I look at the present of unit sales that we are 14 SEER in higher, you toughed on that for the full year. Can you tell what it was there in the fourth quarter and how is that been trending here in the past few quarters.

Barry or Paul do you have that data.

Yes, almost 40%, 39% for the quarter versus 29 for the year. So 40% are certainly growth and that conversion from an inventory perspective will be largely in places we start replacement season and -- Matt Duncan – Stephens: Barry us that 410A or is that 14 seer and higher.

I am sorry 410A.

We don’t have good data now on what the 14 seer and above was for the quarter itself. I would estimate in fourth quarter wouldn’t be a true reflection of really what the demand is some such in loss. So on quarter for replacement anywhere but year-to-date for the entire year it came in at close to 20% for 14 SEER and above equipment. Matt Duncan – Stephens: Okay, I appreciate that Paul in then couple more things and I’ll jump in queue. First of all was there any impact of pricing in this quarter with copper prices having come down, are you guys seeing any changes in pricing.

Now we haven’t, bit lower prices do hurt us as we have inventory at the higher prices that’s we hadn’t impact of that during ’08, but we are pretty much out of that situation now and we will contribute to higher margins during ’09 we believe.

On the equipment side of our business certainly no impact, there is improve pricing in the fourth quarter for environment.

He was asking about steel and copper. Matt Duncan – Stephens: Okay and then two final things in the press release and then you guys mentioned on the call you are looking at additional cost cuts on top of the $30 to $40 million that program you did already announced. Can you put some bracts around what these additional cost cuts maybe in terms of dollars and what’s the timeframe in instituting those cuts and then one housekeeping items. What was the depreciation and amortization for the quarter and I will jump back in the queue thanks guys.

I think that the ’09 planning is just beginning now, we didn’t want to do it too earlier because we you wanted to experience some parts to first quarter and now that we would experience some of it, there is a serious planning that’s going on at the subsidiary level and we would not be able provide you the information to what the steps are taking to become more efficient because we won’t have it, but we will have it by the April meaning and we will quantify if for the year. Matt Duncan – Stephens: Okay and then Barry, depreciation and amortization in the fourth quarter was what?

One point seven-two-zero million dollars.

Your next question comes from Michael Cox - Piper Jaffray.

Good morning and thank you. My first question is on working capital, you have done an excellent job taking working capital out and driving cash flows. Where do you think you are and the opportunity there and do you still see working capitals as a source of funds in 2009?

Yes we do because I don't think we mixed that on inventory turns. You might want to contribute to that Paul.

Yes. We still have a long way to go on inventory turns with right around 4.1 to 4.2 turns on the subsidiary that we’re taking about, as well as we had to build up that Al indicated during the opening remarks on 410 inventories, but we are still holding 410 inventory of equipment plus our 202. So, it’s an incremental $20 million that we’ve been carrying there. So, as we get more efficient our companies are more efficient on the inventory side, I think there is still good upside on reducing the inventories without reducing the service levels that we provide our customers.

And we believe we can reach a minimum inventory turn to six [Inaudible] with also the foreign change. Once we six, we’ll then raise the bar even further.

Okay. At the AHR show, there was lot of commentary from manufactures about getting pushback on pricing, any discussions around manufactures ability to hold price though ‘09 with the lower commodity price environment and some of the weakness in demand?

Well, certainly there has been weakness in demand Michael and that’s certainly is not influenced pricing, pricing was up this year, last year and certainly in the quarter as well. I think it’s a pretty stable industry from that perspective and I don't this there is going to be a great deal of pushback or difficulty on pricing. Efficiency drives pricing as well we talk about it obviously not just to drive sales, but also to drive margin and because of the higher pricing and the higher margin is something that stabilizes our industry not just to Watsco’s numbers. So, the lower commodity of copper is just one component of what these thing cost steel, aluminum and everything else in the system I don’t think it has reacted us as wildly as copper has and that’s just a small component. So, I think it’s a pretty stable pricing environment for this year.

Your next question comes from Ian Zaffino – Oppenheimer. Ian Zaffino – Oppenheimer: Good morning. Thanks for taking my question. Just wanted to talk about the comment on the replacement sales, you mentioned they were flat. Is that on revenue standpoint or is that on volume, if you could get it down a bit more?

It is total revenues Ian, the units are down in single-digits, the pricing is low-single-digits to make it a slight year for replacement. Ian Zaffino – Oppenheimer: Okay and have you noticed any type of recession increase in some of the higher efficiency units, but have you seen any trend towards to the trade down to look for lower less expensive units or how should we think about that?

Lot’s of mix has been going on for a year and half or two years Ian, where in each of the manufacturers and each of our locations more importantly have a good, better, best offering and that makes mix change overtime over the last couple of years not just a recent event. So the industry is managing to that, the prospect of that well showing higher or great concentration of high-efficiency unit. So, it’s some offsetting environment going on for that opportunity. Well, it’s nothing that does stands out; it’s something that’s been a trend I would say over the last year or two.

Your next question comes from David Manthey - Robert W. Baird.

Could you tell me what percentage of your revenues were new residential construction in the fourth quarter and what percent do you expect that to be in the second and third quarter of ’09, approximately?

Certainly declining, right David. Go ahead, Barry.

Well the industry at this point, in terms of looking forward it is somewhere around 5 million, 5.5 million units I believe and would certainly be a good teat of that number and the housing has 515,000 units, which is one projection that I have seen. That gives you a ratio of our industry looking forward. Looking at the fourth quarter, it’s not something in quarter’s days, but my educated remark would be somewhere around 30% during the quarter, during the year. It’s something less than, obviously at this point because of the replacement season.

As you’re looking at the mix of our 410A versus R22, if you can clarify how you see that playing out as we move through 2009 both in terms of revenues and inventories? Did you say that you expect to be fully R410 by the end of 2009 or did you not say that?

No the mandate is at the end of 2009, the manufacturing of R22 product sort for residential uses must stop to federal mandate.

I’m just wondering how long you are going to carry this extra inventory and what point do you cross over completely. I thought 2009 was going to be the year where –

I agree with you, I think we should be out of R22 inventory by now, whatever might be there will certainly sell, there won’t be much.

Our company are selling out there R22 inventory. There are a few contractors however who were holding out and we are not going to stop selling them because R22 is still good refrigerant for them, but each one of our companies has developed plans to reduced their R22 inventory and phase it out by year end. All of these changes worked well for us as the Federal Government moves towards environmental controls that’s what this 410A is and moves towards high efficiency. That’s what the seer levels are moving to 14 and up. Those are great long-term opportunities for us, and regardless of what’s going on in the economy at this momentum it just mandates wonderful opportunities going forward because it all services when the public wants. High efficiency and more green products from the 410A; the refrigerant which doesn’t pollute the environment as much as R22 does.

Okay thanks and just more question in terms of some color on products. Could you talk about trends you are seeing in your Grandaire product line and then also if you talk about indoor air quality if that’s lost traction here in recession.

Barry I don’t now we want to say about Grandaire, that’s one of our own brands --

I’d rather Dave talk about the -- rather that pick on a specific brand or a specific product from your point of view. If you just stick to may comment before about the low end of the market, Grndaire’s position at the low end of the market along with other brands are we carry at that end. It’s very unique for us as distributor to have good, better, best at all the locations. Grandair feels that need in many of the markets that we have and as I said before the low end of the market has been a source of growth for us and it’s a good flexibly that we have with particular product line, we’ve added to it during 2008 as well in ACR locations that we added since last year.

That we don’t see any material change indoor air quality Davie, It has not taken off yet.

Your next question comes from Daniel Whang - B. Riley & Company Daniel Whang - B. Riley & Company: First question was, regarding the first quarter. We all know it’s still seasonally slow period for you, but could you perhaps comment on kind of sales trends that you have seen so far in the first half of this quarter.

We have the fourth quarter we reported now is 15% decline over the prior year and we’ve said earlier today in this conference call that the first quarter so far is even softer than that. Daniel Whang - B. Riley & Company: And you mentioned that obviously in the middle of your planning process for the year, probably get a better fell for that in a couple of months, but I’m sure its part of that process, your speaking closely with your OEM partners and could you provide kind of a thought on what they’re saying collectively or some of the data points that you’re seeing from them?

From what we understand, the housing not that, that matters that much to us expect in the four and first quarter. There is pessimism in new housing start, that’s what we hear from OEM, but something I hear much more than that they are all certainly are getting more efficient as we all are than what else I could add at the OEM level. I know about some of them hedging, not that you would know that as well. As far as I’m concerned every one of the OEMs that we do business with presently is certainly delivering on time and performing as we would like term to. Daniel Whang - B. Riley & Company: Okay, shift back to the 410A versus the R22 products. I think the relative pricing for those two product categories were equalizing and could you provide one more detail about the relative pricing now and perhaps margins for you?

Paul do you want to take a chance at that?

Yes, the pricing has comedown on the 410 or the R22 has gone up to 410 pricing, but basically the outdoor units have a very similar price now pretty much across the Board. The difference that makes the comparison difficult is with most of the OEMs now, anything 14 SEER and above is only 410A. We are not selling any R22 product in the higher efficiency profile. The second thing that makes unique is that when you change out 410 units, you positively have to change out the indoor unit also, because it’s a higher pressure system that you had with the R22. So, it’s hard to do a real apples-to-apples comparison overall, the bottom line is; one its efficiency; two, it’s a full system change out whereas some contractors could get away we’re changing out the outdoor unit only with an R22 product. So, its good news for as Al indicated in his opening remarks to system change out and it’s a higher efficiency change out.

It’s more revenue.

It really isn’t good Dan, to just make a line item comparison of our R22 product versus a 410 on a prices basis. Daniel Whang - B. Riley & Company: Okay, got it. Final question was regarding the overall store network and how that could shift this year. I know you’re always keeping a long-term outlook and continue to invest in the right areas, but could we expect any actions, closings, openings in your branch network or store network?

No, earlier as we’ve stated we had our strongest financial position ever in our sixth year of history and have excess cash and a very large credit line at a very low price. So, we are most eager to add to our network by making acquisitions and I remain optimistic that we’ll be able to do some of that this year, especially if the market, as it has been or even if it improves, I still think that given our position, we’ll be able to add to our network through acquisition.

Your next question comes from Keith Hughes - SunTrust.

Thank you. Your comments on the rebate, has the government defined exactly what energy efficiency is? What you have to buy in order to qualify for that tax?

16 SEER or higher.

Okay and that’s part of the stimulus goal that’s going to be signed today, is that correct?

Well, you probably know as much as we do, it’s just what is supposed to happen if it’s today, yes.

I read all 1000 pages of it, so.

Either way there’s another part of the government bill that we haven’t disclosed to you. If the weatherization to allocating $5 billion is to assist homeowners typically at a low income level, to weatherize their house with better insulation and we are a major supplier in insulation to the people and we’ll do that to people’s homes. So, while we seem to focus our comments on equipment, let’s not forget that the supplies in the non-equipment side of our business are also be stimulated by this new federal spending; because $5 billion just go a long way in helping people insulate their houses better and we’re a primary distributor of insulation.

I guess following up on that, on insulation and other non HVAC equipment products, you accounted it earlier with commodity cost coming down, the steel and copper products have come down, but I guess a question for Paul, are you saying sort of across the board in more commodity items; things that maybe or directly effected by copper and steel, but are effected by volumes in their industries, just across the board price falls at this point?

No we haven’t. In some of the commodities like refrigerants, which we do a substantial volume in; we’ve not seen any deterioration in pricing. A lot of the things like our tape business, our fabricated copper type products that are more highly fabricated, thermostat wire and that type thing; we really haven’t seen the price declines that we’ve seen with just raw copper tubing and sheet metal, flat steel and that type of product. So, I think the markets held pretty good on those items. The ones that hit the headlines, yes, we’ve seen continues declines, but copper seems like it’s stabilized right now in the $1.50 range which is good. Stability is really what we’re after on those products.

Yes, final question, the small players in the industry have to be under severe pressure, particularly given the trends in the fourth and the first quarter. You historically have not Greenfield a lot of the locations and there’s a lot of specific reasons for that, but as business is getting so bad and some of these distributors, maybe not even worth buying in some cases, would you consider a bigger Greenfield type strategy on locations and particularly joint geographic areas?

Well, that’s a good question. We do Greenfield from time-to-time, but my preference has always been to acquire branches that have already a customer base and who could use an injection of capital to increase the product offering. I think they still can’t do it, because they don’t have that money to do it. We buy product from over 600 manufacturers and we love to go into an existing branch with customers and begin to increase the offering, so that the contractor has a much higher service level. We also like adding to the investment by bringing on more sales people to cover the density with more confident and aggressive sales people. So, I think my purpose will always be to acquire a branch with customers and then capitalize that with more people and more products. At least to refer us we certainly have executed that policy real well.

Your next question comes from Holden Lewis - BB&T Capital Markets. Holden Lewis - BB&T Capital Markets: I was wondering if I can go into the mix question a little bit more, because it seems like you have some moving pieces here. I mean, specifically you talked about trading down within the mix a little bit, which is negative, but at the same time you talk about the relative growth of the 14 SEER mix, the 410A mix. I guess I’m kind of curious, when you look at the 2008 results; you had 60 basis points of improvement in gross margin. Was the mix to net positive all in, negative because of the trading down and to what extent did that impact gross margin for the year?

Well, I’m going to let Barry answer this, but obviously gross profit margin is been increasing all year long. So we had too many bad things coming on in our gross profit margins. Holden Lewis - BB&T Capital Markets: I guess pricing was obviously also a key, so I’m just trying to get a sense. Simply because we’re talking about similar mix issues impacting ’09, I’m just trying to get a sense of whether mix is positive in ’08? If it was primarily pricing, just to carry those analogies into ’09?

Well, Holden first when we talk about the pricing, we’re talking about our equipment business primarily and that’s above 45% of our business. So, when we say pricing is up, we’re really speaking to that side of our business. Pricing and margins are up on all of our businesses, in fact the non-equipment in our margins are behaving even better than the equipment margin. So, this is not a one dimensional conversation on good, better, best mix or efficiency, it’s across 600 different vendors, 600 different types of product lines and is across the board conversation in terms of what the subsidiaries accomplished in executing this. If I focus just on equipment, the pricing is up for the year with some measure of passing on price increases, a positive contribution from high efficiency, some pricing change because of the sales mix, but not enough to really move to the needle in the big picture. It’s really 600 stories in one; it’s not one particular product line or one particular product group. Holden Lewis - BB&T Capital Markets: Okay and if I sort of take that further into 2009, just thinking conceptually, I would guess that maybe the trading down issue is probably kind of where it’s going to be, so maybe that erosion does not continue. I would think that the mix benefits of 14 SEER plus and 410A would actually get better. So, maybe the mix component would actually be improved in ’09 over ’08, but the pricing fees which was a big deal and which was contributed in ’08, probably you’re not going to see fresh increase in your pricing. Is that sort of the right way to look at the moving pieces in the gross margin?

I think so and I think that’s a good analysis. Yes, and I would add to that; I mean we haven’t reported on our planning for ’09, but I don’t why the trend of higher increase in gross profit margins is not going to continue, which probably for all the researchers stating, plus our subsidiaries are always increasing their merchandising skills. Holden Lewis - BB&T Capital Markets: Then I guess secondly, with regards to the $8 million that you referenced, did you exit Q4 at sort of the $38 million annualized run rate. So that $8 million you’re going to recognize. You kind of saw that recognized in Q4 and then you’re going to recognize it in the first half of ’09, simply because you weren’t at that rate in Q1 and Q2 of ’08 or is that $8 million sort of part of the brand new initiatives that you’re envisioning?

Well actually, 2008 planned playing itself out over about five quarters. Now I wouldn’t call it an annualized rate and some of that we’ll push into the second quarters as well.

Okay, alright. So, that $8 million, basically you’re going to realize an incremental $8 million over the course of 2009?

That’s correct, over the first half.

Yes, we think the first half and then we expect no initiatives which would tell you more about it as we get finished with our planning process and report in the April timeframe. Holden Lewis - BB&T Capital Markets: Just for our modeling purposes, can you give some sense of order of magnitude? I don’t want get any specific numbers, but is it going to be similar to the one that you announced before or are you running lien enough that it probably would be unrealistic to think that you’d get another 35.

Yes, the way we work is that these things come from the subsidiaries who’d take it all the way down at the branch and whatever we would tell you at our level would be just guessing; I’d rather not do that. Holden Lewis - BB&T Capital Markets: Lastly, you typically give sort of the quarterly growth rates for HVAC equipment supply refrigeration and then sort of mix of each, are you able to provide that for the quarter?

On the equipment side its 14 equipment, non equipment is 14 and the commercial would be 15. Holden Lewis - BB&T Capital Markets: And what is the mix of each?

45% equipment and 55% non-equipment and refrigeration is 11%.

Thanks, my question has already been answered. Thanks.

At this time there are no further questions in queue.

Thanks very much for attending this conference call. We look forward to talk with you in April. Have a nice day.

This concludes today’s conference call. You may now disconnect and thank you for using the conferencing center.