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Ingersoll-Rand CEO Discusses Q2 Results - Earnings Call Transcript

Operating margin for the quarter was 12.4%, up 20 basis points versus prior year. If we exclude Hussmann and the property of sale gain from last year, margins in the second quarter were up 70 basis points from second quarter of 2011. Margins improved from pricing and productivity, partially offset by unfavorable mix, currency and higher restructuring and investment spending year-over-year as we discussed in the April earnings call.

We are particularly encouraged by the results of residential which were right on forecast and show the 150 basis points in margin improvement. Industrial posted a new record margin level of 17% with margin increases in all regions.

Climate increased margins 100 basis points on a comparable basis even in the face of challenging mix between HVAC and Thermo King. And finally, security delivered margins of 20% despite some heavy restructuring spend in the quarter continuing soft markets.

All of our business continue to realize positive pricing and in the second quarter, our pricing outpaced material inflation for the fifth consecutive quarter. Our focus on operational excellence, which includes pricing, lien sourcing, functional support and innovation, delivered excellent result in the quarter and enabled us to effectively navigate increasingly volatile global market conditions.

Please go to slide 4. (Inaudible) the midpoint of our guidance of $0.88 by $0.27, $0.12 would of that be for some operations with a $0.01 negative from the combination of price, which was slightly positive, and headwinds and volume, mix of foreign exchange.

Given the volatility in the markets and currency in the quarter, we were pleased with the performance. Productivity inflation were $0.08 better than expectation as the pipelines delivered productivity and we saw moderation of material and other inflation.

Other items such as legislative expense and share count that together came in $0.02 positive. Our underlying tax rate was a couple of points lower in the quarter and you will see that we're carrying that lower rate into the outlook for the balance of the year. That gives you a $0.03 benefit in Q2. That brings the operational EPS to an even dollar.

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