The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under Part II, Item 1A-Risk Factors in this Quarterly Report on Form 10-Q and under Part I, Item 1A - Risk Factors in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Quarterly Report.

Overview

Organizational

Ingersoll-Rand Company Limited (IR-Limited), a Bermuda company, and its consolidated subsidiaries (we, our, the Company) is a diversified, global company that provides products, services and solutions to enhance the quality and comfort of air in homes and buildings, transport and protect food and perishables, secure homes and commercial properties, and increase industrial productivity and efficiency. Our business segments consist of Air Conditioning Systems and Services, Climate Control Technologies, Industrial Technologies and Security Technologies, each with strong brands and leading positions within their respective markets. We generate revenue and cash primarily through the design, manufacture, sale and service of a diverse portfolio of industrial and commercial products that include well-recognized, premium brand names such as Club Car®, Hussmann®, Ingersoll-Rand®, Schlage ®, Thermo King® and Trane®.

We are dedicated to inspiring progress for our customers, shareholders, employees and communities by achieving:

• Dramatic Growth, by focusing on innovative solutions for our customers;

• Operational Excellence, by pursuing continuous improvement in all of our operations; and

• Dual Citizenship, by bringing together the talents of all Ingersoll Rand people to leverage the capabilities of our global enterprise.

To achieve these goals and to become a more diversified company with strong growth prospects, we transformed our enterprise portfolio by divesting cyclical, low-growth and asset-intensive businesses. In addition, our acquisition strategy has helped deliver more consistent revenue and earnings performance across all phases of the economic cycle. Aside from our portfolio transformation, we continue to focus on increasing our recurring revenue stream, which includes revenues from parts, service, used equipment and rentals. We also intend to continuously improve the efficiencies, capabilities, products and services of our high-potential businesses.

Reorganization

On March 5, 2009, our board of directors approved a reorganization of the Company from Bermuda to Ireland (the Reorganization). The first step in this proposed reorganization was the establishment of IR-Limited's tax residency in Ireland, which occurred in March 2009. To complete the reorganization, IR-Limited shareholders will be asked to vote in favor of the reorganization at a special meeting of the shareholders on June 3, 2009. If all applicable conditions are satisfied, including approval by IR-Limited's shareholders and the Supreme Court of Bermuda, it is expected that Ingersoll-Rand plc, an Irish incorporated company (IR-Ireland), will replace IR-Limited as the Company's ultimate parent by means of a court-approved arrangement. We expect the incorporation in Ireland will take place within two to four weeks of the date that the shareholders approve the reorganization.

Trends and Economic Events

We are a global corporation with worldwide operations. As a global business, our operations are affected by worldwide, regional and industry-specific economic factors, as well as political factors, wherever we operate or do business. Our geographic and industry diversity, as well as the diversity of our product sales and services, has helped limit the impact of any one industry or the economy of any single country on our consolidated operating results.

The recent extreme volatility and disruption of financial markets in the United States, Europe and Asia have contributed to weakening worldwide economic conditions. In addition, the uncertainty related to the cost and availability of credit has further depressed the overall business climate. As a result, we have seen weaker demand for many of our products and services during the second half of 2008 continue into the first three months of 2009.

Despite the increasingly challenging economic environment, we continue to execute our business strategy. The divestiture of both Compact Equipment and the Road Development business unit in 2007, in addition to the acquisition of Trane in 2008, has enabled us to become more balanced across the products we offer. In addition, our current enterprise-wide restructuring actions, initiated in the fourth quarter of 2008, are designed to streamline the footprint of our manufacturing facilities and reduce our general and administrative cost base.

Given the broad range of products manufactured and geographic markets served, management uses a variety of factors to predict the outlook for the Company. We monitor key competitors and customers in order to gauge relative performance and the outlook for the future. In addition, our order rates are indicative of future revenue and thus a key measure of anticipated performance. In those industry segments where we are a capital equipment provider, revenues depend on the capital expenditure budgets and spending patterns of our customers, who may delay or accelerate purchases in reaction to changes in their businesses and in the economy.

For 2009, we expect current market conditions to negatively affect our financial results. Declining markets in North America and Western Europe partially offset by slight to moderate growth in the developing economies of China and Latin America will have a negative impact. In addition, with approximately 37% of our revenues generated outside of the U.S., the recent appreciation of the U.S. dollar against most major currencies could negatively impact our 2009 revenue.

Despite the current economic turmoil, we have a solid foundation of global brands and leading market shares in all of our major product lines. In addition, our growing geographic and industry diversity coupled with our large installed product base provides growth opportunities within our service, parts and replacement revenue streams.

Recent Developments

April Debt Issuance

We recently completed a comprehensive financing program that significantly enhanced our liquidity and debt profile. Actions taken include the issuance of $1.0 billion in long-term debt (Senior Notes and Senior Exchangeable Notes) in April 2009 and the replacement of our Trane accounts receivable purchase program in March 2009 with a new accounts receivable purchase program that now encompasses originators from all four of our business segments. The proceeds from our debt issuance were used to repay the $950.0 million outstanding under our senior unsecured bridge loan facility. The new accounts receivable purchase program is expected to be a source of an additional $200 million in liquidity.

Restructuring Actions

In order to build a strong business foundation for the future by dealing with the current and expected future slowing end market demand, we implemented productivity actions in 2008. In addition, in the fourth quarter of 2008, we initiated enterprise-wide restructuring actions in order to streamline both our manufacturing footprint and our general and administrative cost base. Projected costs will approximate $120 million, $70.7 million of which occurred in the fourth quarter of 2008 and $10.9 of which occurred in the first quarter of 2009. Together, these combined actions are expected to generate approximately $160 million and $200 million of annual pretax savings in 2009 and 2010, respectively.

Acquisitions

At the close of business on June 5, 2008 (the Acquisition Date), we completed our acquisition of 100% of the outstanding common shares of Trane Inc. (Trane). Trane, previously named American Standard Companies Inc., provides systems and services that enhance the quality and comfort of the air in homes and buildings around the world. Trane's systems and services have leading positions in premium commercial, residential, institutional and industrial markets, a reputation for reliability, high quality and product innovation and a powerful distribution network.

We paid a combination of (i) 0.23 of an IR-Limited Class A common share and
(ii) $36.50 in cash, without interest, for each outstanding share of Trane common stock. The total cost of the acquisition was approximately $9.6 billion, including change in control payments and direct costs of the transaction. We financed the cash portion of the acquisition with a combination of cash on hand, commercial paper and a 364-day senior unsecured bridge loan facility.

The components of the purchase price were as follows:

In billions
Cash consideration                                                            $ 7.3
Stock consideration (Issuance of 45.4 million IR-Limited Class A common
shares)                                                                         2.0
Estimated fair value of Trane stock options converted to 7.4 million
IR-Limited stock options                                                        0.2
Transaction costs                                                               0.1

Total                                                                         $ 9.6

As a result of the acquisition, the results of the operations of Trane have been included in the statement of financial position at March 31, 2009 and December 31, 2008. No amounts have been included for the three months ended March 31, 2008. For further details on the acquisition of Trane, see Note 3 in the notes to condensed consolidated financial statements.

Divestitures

On November 30, 2007, we completed the sale of our Bobcat, Utility Equipment and Attachments business units (collectively, Compact Equipment) to Doosan Infracore for cash proceeds of approximately $4.9 billion, subject to post-closing purchase price adjustments. Compact Equipment manufactured and sold compact equipment including skid-steer loaders, compact track loaders, mini-excavators and telescopic tool handlers; portable air compressors, generators, light towers; general-purpose light construction equipment; and attachments. We are currently in the process of resolving the final purchase price adjustments with Doosan Infracore.

On April 30, 2007, we completed the sale of our Road Development business unit to AB Volvo (publ) for cash proceeds of approximately $1.3 billion. The Road Development business unit manufactured and sold asphalt paving equipment, compaction equipment, milling machines and construction-related material handling equipment.

Results of Operations - Three Months Ended March 31, 2009 and 2008



                                                          For the three months ended March 31,
                                                                   % of                          % of
In millions, except per share amounts               2009         revenues         2008         revenues
Net revenues                                     $  2,932.9                    $  2,163.3
Cost of goods sold                                 (2,206.4 )        75.2 %      (1,540.9 )        71.2 %
Selling and administrative expenses                  (676.6 )        23.1 %        (375.4 )        17.4 %

Operating income                                       49.9           1.7 %         247.0          11.4 %
Interest expense                                      (67.4 )                       (27.5 )
Other, net                                             12.5                          43.2

Earnings (loss) before income taxes                    (5.0 )                       262.7
Benefit (provision) for income taxes                  (10.5 )                       (47.2 )

Continuing operations                                 (15.5 )                       215.5
Discontinued operations, net of tax                    (6.3 )                       (30.1 )

Net earnings (loss)                                   (21.8 )                       185.4
Less: Net earnings attributable to
noncontrolling interests                               (4.9 )                        (3.8 )

Net earnings (loss) attributable to
Ingersoll-Rand Company Limited                   $    (26.7 )                  $    181.6
Diluted net earnings (loss) per common share
attributable to
Ingersoll-Rand Company Limited common
shareholders:
Continuing operations                            $    (0.06 )                  $     0.77
Discontinued operations                               (0.02 )                       (0.11 )

Net earnings (loss)                              $    (0.08 )                  $     0.66

The discussions that follow describe the significant factors contributing to the changes in our results of operations for the periods presented.

Net Revenues

Net revenues for the first quarter of 2009 increased by 35.6%, or $769.6
million, compared with 2008, which primarily resulted from the following:



                         Volume/product mix        -25.5 %
                         Pricing                     1.6 %
                         Currency exchange rates    -5.3 %
                         Acquisitions               64.8 %

                         Total                      35.6 %

The acquisition of Trane increased revenues $1,399.7 million in the first quarter of 2009. However, we experienced substantial volume declines compared to the first quarter of 2008 primarily associated with weak demand in many of our major end markets. In addition, negative currency impacts were partially offset by modest price improvements.

Cost of Goods Sold

Cost of goods sold in the first quarter of 2009 increased by $665.5 million, or 43.2% compared to the same period in 2008. The primary driver of the increase was related to the acquisition of Trane. As a result, cost of goods sold as a percentage of revenue increased to 75.2% from 71.2%. In addition, cost of goods sold included $3.3 million of restructuring costs, which added 0.1% point increase to cost of goods sold as a percentage of revenue. Productivity actions, expense reduction and improved pricing helped to mitigate the impact of the continued global weakness in our major end markets.

Selling and Administrative Expenses

Selling and administrative expense in the first quarter of 2009 increased by $301.2 million, or 80.2% compared to the same period in 2008. The primary driver of the increase was related to the acquisition of Trane which added $336.4 million to selling and administrative expense. As a result, selling and administrative expense as a percentage of revenue increased to 23.1% from 17.4%. In addition, selling and administrative expense included $7.6 million of restructuring costs, which added 0.3% point increase to selling and administrative expense as a percentage of revenue. Productivity actions and expense reduction partially offset the dramatic decline in volume.

Operating Margin

Operating margin for the first quarter of 2009 decreased to 1.7% from 11.4% for the same period of 2008 as a result of weak demand in many major end markets. The primary drivers of the decrease related to lower volumes and an unfavorable currency impact as well as lower margins in the acquired Trane business. Restructuring costs of $10.9 million had a 0.4% point impact on first quarter 2009 operating margins. Productivity actions, expense reduction and improved pricing helped to mitigate the impact of the continued global weakness in our major end markets.

Interest Expense

Interest expense for the first quarter of 2009 increased $39.9 million compared with the same period of 2008, primarily related to higher average debt balances used to fund the acquisition of Trane.

Other, Net

The components of Other, net for the three months ended March 31 are as follows:



                 In millions                         2009     2008
                 Interest income                    $  4.3   $ 45.6
                 Exchange gain (loss)                  1.4     (1.6 )
                 Earnings from equity investments      1.4       -
                 Other                                 5.4     (0.8 )

                 Other, net                         $ 12.5   $ 43.2

For the three months ended March 31, 2009, Other, net decreased by $30.7 million compared with the same period of 2008. The decrease was primarily a result of lower interest income generated by a significant reduction of average cash balances subsequent to the acquisition of Trane in June 2008.

Provision for Income Taxes

Our first quarter 2009 tax provision was $10.5 million, which included $11.4 million of discrete tax items primarily associated with FASB Interpretation No. 48 (FIN 48) and other tax adjustments. We project an annual effective rate for 2009 to be approximately 20%. The effective tax rate for the three months ended March 31, 2008 was approximately 18%.

Review of Business Segments

We classify our businesses into four reportable segments based on industry and market focus: Air Conditioning Systems and Services, Climate Control Technologies, Industrial Technologies and Security Technologies. The segment discussions that follow describe the significant factors contributing to the changes in results for each segment included in continuing operations.

Air Conditioning Systems and Services

Our Air Conditioning Systems and Services segment provides heating, ventilation and air conditioning (HVAC) systems that enhance the quality and comfort of the air in homes and buildings around the world. It offers customers a broad range of energy-efficient HVAC systems, dehumidifying and air cleaning products, service and parts support, advanced building controls as well as financing solutions under the Trane and American Standard Heating and Air Conditioning brands. These brands have leading positions in commercial, residential, institutional and industrial markets.

                                                 Three months
                                                ended March 31,
                  Dollar amounts in millions         2009
                  Net revenues                 $         1,399.7
                  Operating income (loss)                  (14.3 )
                  Operating margin                          -1.0 %

Revenues for the three months ended March 31, 2009 were $1,399.7 million, and were negatively impacted by the significant reductions in the businesses major end markets.

Operating loss for the three months ended March 31, 2009 was $14.3 million, which includes $39.1 million of purchase accounting costs primarily related to the amortization of certain intangible assets with finite lives that were fair valued at the Acquisition Date.

Global commercial revenues decreased as a result of sharply lower activity in non-residential construction markets. In addition, global revenues for parts, services and solutions were impacted by the deferral of repair service and some contracting projects. Residential results were impacted by continued weakness in the U.S. housing market.

Climate Control Technologies

Our Climate Control Technologies segment provides equipment and services to manage controlled-temperature environments for food and other perishables throughout the world. Encompassing the transport and stationary refrigeration markets, this segment offers customers a broad range of products and solutions such as refrigerated display merchandisers, beverage coolers, auxiliary power units, walk-in storage coolers and freezers and transport temperature control units. This segment includes the market leading brands of Hussmann and Thermo King.

                                             Three months ended March 31,
            Dollar amounts in millions     2009           2008       % change
            Net revenues                 $   503.3       $ 798.4        -37.0 %
            Operating income                   2.9          80.1        -96.4 %
            Operating margin                   0.6 %        10.0 %

Net revenues for the first quarter of 2009 decreased by 37.0%, or $295.1 million, compared with the same period of 2008, as a result of continued global weakness in the segments major end markets. The primary drivers of the decline were a sharp reduction in volume (31%) as well as an unfavorable currency impact (6%). These costs were partially offset by improved pricing (1%).

Operating income decreased by 96.4% or $77.2 million in the first quarter of 2009 compared with the same period of 2008. The decrease lowered operating margins to 0.6% from 10.0%. Lower volumes ($89 million) and an unfavorable currency impact ($17 million) were partially offset by improved pricing ($5 million), accelerated productivity actions ($40 million) and other cost control measures.

The decrease in segment revenues primarily resulted from the ongoing decline in the worldwide trucking industry and sharp declines in supermarket capital expenditures. The transport business saw revenues decline in all geographic areas due to weak truck and trailer markets and declining freight rates. In addition, aftermarket activity and bus and sea-going container revenues were impacted by the slowdown in end market activity. The stationary refrigeration business experienced lower volumes in display cases as well as in the installation business. However, operational improvements and productivity gains within the segment helped to mitigate the decrease in volume. Market share gains at major national supermarket customers and in the truck and trailer sector also helped to offset some of the slow end market activity.

Industrial Technologies

Our Industrial Technologies segment provides products, services and solutions that enhance energy efficiency, productivity and operations. It offers our global customers a diverse and innovative range of products including compressed air systems, tools, pumps, fluid handling systems, golf and utility vehicles in addition to environmentally friendly micro turbines. This segment includes the Club Car and Ingersoll Rand market leading brands.

                                             Three months ended March 31,
            Dollar amounts in millions     2009           2008       % change
            Net revenues                 $   537.6       $ 743.4        -27.7 %
            Operating income                  17.2          97.6        -82.4 %
            Operating margin                   3.2 %        13.1 %

Net revenues for the first quarter of 2009 decreased by 27.7%, or $205.8 million, compared with the same period of 2008, as a result of continued global weakness in the segments major end markets. The primary drivers of the decline were a sharp reduction in volume (24%) as well as an unfavorable currency impact (5%). These costs were partially offset by improved pricing (1%).

Operating income decreased by 82.4%, or $80.4, million in the first quarter of 2009 compared with the same period of 2008. This decreased operating margins to 3.2% from 13.1%. During the three months ended March 31, 2009, we recorded $8.8 million of restructuring charges associated with employee termination benefits and other costs associated with announced restructuring plans. These costs had a 1.6 point impact on operating margins. Lower volumes and product mix ($74 million), an unfavorable currency impact ($13 million) were partially offset by accelerated productivity actions ($24 million) and other cost control measures.

Revenues in the Air and Productivity business declined in all geographic areas. The decrease in the U.S. was a result of volume declines in major industrial, process and fluid handling end markets as well as lower aftermarket results. Non-U.S. revenues were also impacted by volume declines in industrial activity. Club Car revenues sharply decreased in all geographic areas due to weakening economic fundamentals in key golf, hospitality and recreation markets. In addition, the decline was impacted by customers deferring golf car replacement by extending their leases. Productivity and strong cost control measures throughout the segment helped to mitigate the volume declines and negative currency impacts.

Security Technologies

Our Security Technologies segment is a leading global provider of products and services that make environments safe, secure and productive. The segment's market-leading solutions include electronic and biometric access control systems and software, locks and locksets, door closers, exit devices, steel doors and frames, portable security devices, decorative hardware, cabinet hardware as well as time, attendance and personnel scheduling systems. These products serve a wide range of markets including the commercial construction and residential housing market, healthcare, retail, maritime and transport industries as well as educational and governmental facilities. This segment includes the CISA, LCN, Schlage and Von Duprin brands.

                                             Three months ended March 31,
            Dollar amounts in millions     2009           2008       % change
            Net revenues                 $   492.3       $ 621.5        -20.8 %
            Operating income                  76.3         105.0        -27.3 %
            Operating margin                  15.5 %        16.9 %

Net revenues for the first quarter of 2009 decreased by 20.8%, or $129.2 million, compared with the same period of 2008, as a result of the recent decline in worldwide commercial and residential construction markets. The primary drivers of the decline were a sharp reduction in volume (20%) as well as an unfavorable currency impact (5%). These costs were partially offset by . . .