Good morning, ladies and gentlemen and welcome to the Caterpillar Third Quarter 2014 Earnings Results Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. Now I’d like to turn the floor over to your host, Mike DeWalt. Sir, the floor is yours.

Hey, good morning everyone and we’re very happy to have you with us this morning for our third quarter earnings call. I'm Mike DeWalt, Caterpillar's Vice President of Strategic Services. And on the call today, I'm pleased to have our Chairman and CEO, Doug Oberhelman; and Group President and CFO, Brad Halverson. Remember this call is copyrighted by Caterpillar Inc. and any use, recording or transmission of any portion of the call without the expressed written consent of Caterpillar is strictly prohibited. If you'd like a copy of todays call transcript, we will be posting it in the Investors section of our caterpillar.com Web site, and it'll be in the section labeled Results Webcast. Now this morning for sure we'll be discussing forward-looking information that involves risks and uncertainties and assumptions that could cause our actual results to differ materially from the forward-looking information. A discussion of some of the factors that either individually or in the aggregate we believe could make actual results differ materially from our projections that can be found in the cautionary statements under Item 1A, Risk Factors of our Form 10-K filed with the SEC in February of 2014 and our 10-Q filed with the SEC in August of 2014. And it’s also in the forward-looking statements language contained in this morning’s financial release. In addition, a reconciliation of non-GAAP measures can be found in our financial release this morning and again that’s been posted on our Web site at caterpillar.com. So let’s get started. I’ll be covering three things this morning; our third quarter results, the increase in our profit outlook for 2014 and our preliminary outlook for 2015 sales and revenues. Now before I get into the quarter though I thought it might be helpful to summarize just a couple of themes from…

Thank you very much; ladies and gentlemen the floor is now open for questions. (Operator Instructions) Thank you very much, we’ll take our first question from Ted Grace, please announce your affiliation and post your question.

Mike, I know you said that you didn't want to give too much on -- or really any guidance on profitability, but could you speak to at least --?

But you’re going to ask anyway right?

Well, no, what I was going to say, as a starting point, could you frame out at least across the three segments how you're thinking about each in the context of sales being flat to up slightly? Where would you have the most optimism, the most caution and maybe start there?

Yes, I think in the scheme of things our view around each of the segments is much like the total I don’t think we don’t see big swings up or down really in any of the segment. I mean it’s always as you know looking out that far is tough to always be exact but or ever be exact I guess but by and large we don’t see a lot of change going forward in any of the three segments.

Okay. And the second thing I was hoping to ask either you or Doug is one of the big initiatives you've talked a lot about is making the Company a lot more nimble and kind of reactive to the demand environment that gets served to the Company, something that's outside your control. Can you just speak to the progress you've made in 2014 and how you think that sets you up for 2015 and to the degree you can talk about specific metrics whether it's cycle times or philosophy that would be great?

That actually used to be a quite long answer delving into operations I think, what I’ll do is kind of summarize it for you a little bit. One of the key metrics that we’ve that kind of measures the success or failure of that is the incremental operating profit pull through. We have had target of around 25% and we’ve taken the actions needed to be flexible enough to achieve that. But embedded in that there are lean helps if you would improve cycle times that helps were down that path but I think the ultimate measure of this is when either profit goes up or goes down do we have the flexibility that take cost out going down and I think we’ve shown that we do.

Well, just to add that Mike it’s Doug here and I agree with that completely. In terms of really lean manufacturing lean six sigma standard work it’s -- I think we’re still early in the process here. We probably got about a third of our sales where manufacturing anyway covered to some with where we want to be in our first wave of lean really deeply manufacturing in every one of those cases whether it’s a medium wheel loader line in Aurora, Illinois. Wheeled excavators in Grenoble, France and I can go on, certain solar is a good example of that too, we’ve seen really tremendous improvements in quality in throughput, in inventory, in almost all metrics and we’re encouraged. But there is a lot more work to do and as I said to you all many times, we really expect to see big chunks of this coming in ’14 and ’15 I think we saw some of that, some of year-to-date numbers we certainly have seen it in the quality of margins in the third quarter but in my mind we still got plenty of work to do on that. I also said earlier today that, in a way flat production really gives us time -- production output gives us time to get to work on this, when things are booming it’s hard to work on efficiency because we’re trying to satisfy the market in ‘13 when the bottom fell out in mining we’re cutting cost at every moment and we really can’t think about how we want to organize a manufacturing line. Well, since mid ‘12 or so certainly the ‘13 and ‘14 in construction and in energy and transportation that team has been doing that and shows in the margins. Mining will be next, the mining recoveries will really I think prove what we can do with that because a lot of that work is being done now too. So I think we’ve seen a down payment on it, but in my mind there is more to come.

Thank you very much. We’ll take our next question from Eli Lustgarten. Please announce your affiliation then pose your question.

Can we first talk a little bit about the fourth quarter as we look out I mean you’re sort of giving us guidance of about a little over $14 billion and while I recognize there is about $0.15, $0.16 from lower taxes and foreign currency in this quarter, your guidance, your midpoint of guidance, $1.47 or so for the numbers, can you give us a bridge why the fourth quarter will be -- with higher volume will be somewhat weaker profitability because you’ve been pretty stable and production pretty stable in profitability for the year? Hello?

Thank you very much ladies and gentlemen, please remain on the line. We’re going to get this up reconnected, one moment. Okay, gentlemen we are live.

Eli, could you ask it again we’ve got cut-off, it was not --

I was wondering if I did something wrong or not. Okay, the first question very quickly, on the fourth quarter, you’re guiding to a little bit over $14 billion. You’ve been very stable in production, very stable in profits almost for the year. You’re guiding us to lower numbers in the fourth quarter on profitability and I know there is like $0.16 of lower taxes and benefits and some currency in the quarter. Can you give us a bridge of what you’re expecting in the fourth quarter it’s different to drop the profitability to under $1.50 from the $1.60 that you have been doing?

Yes, you’re right. With our fourth quarter outlook or our full year outlook it’s not too hard to turn that into a forecast for the quarter and we do expect profit to be down a little bit in the fourth quarter. A couple of things that you mentioned we had currency gains in the quarter and there are lot of things that we think we can do a decent job of forecast and exchange rate is not one of them. So we’re not forecasting changes in exchange rates from here. So there is no continuation of the gain. We had favorable tax item in the quarter that goes away as well. So those are two positives that we’re in the third quarter that won’t be in the fourth quarter. We typically have seasonally higher cost in the fourth quarter. We’re wrapping up the year and discretionary spending tends to rise a bit, so that all happens essentially by almost every year but I can remember since I have been at the company. So we’ve got that worked in. One other item probably I know is we expect a little bit of negative mix in the fourth quarter. We’ll have couple of a big electric power sale that we think will be completed in the fourth quarter at quite a bit lower margins than the total. So I think I would say mix seasonal cost and absence of the couple of the favorable items from the third quarter that pretty much bridges that I think.

Okay. And can we talk about the construction industries segment I mean you warned us in the second quarter about lower emerging market business taking $1 billion out of production. But we're hearing strong things, particularly in the US. In the quarter, we have emissions coming next year, so the dealers are saying that they're having trouble even getting inventory out of Caterpillar for some of the demands that they would want. Can you give us some insight of what you expect for the Construction Industries in the fourth quarter, and particularly as you go into next year because that should be one of your better quarters, particularly North America.

I’ll try to answer your question but I’m going to try to answer another one that you kind of touched on but didn’t actually ask directly and that’s on inventories.

: Yes.

Sometimes I think there is confusion around dealer inventories. Since we sell through dealers, we frequently talk about changes in dealer inventory that kind of help give a complete picture of what’s going on. But just because inventories go up or down doesn’t mean that they’re – themselves that doesn’t mean that it’s well managed or poorly managed. There are lot of seasonal impacts that go on during the year in construction for example, we had a sizable increase in the first quarter in inventory and that kind of builds up for the spring and summer selling season and that it gets worked on for the rest of the year. That happened in the third quarter last year that happened in the third quarter this year, fourth quarter of that usually tends to happen as well. Dealers tend to sell a little more than we ship them. So, that occurred in the third quarter than it probably occur again next quarter. In terms of construction, it’s a mix bag around the world. We tend that we live in the U.S. and we get influence by what we hear in the U.S. a lot and it’s been actually pretty positive, it’s been quite a bright spot although, I wouldn’t make the pitch that allow us better that doesn’t mean it’s great. We are I guess 7 to 8 years now past where the peak was and that was ‘06 and ’07. So, we still have a ways to go to get to where we would think it’s really good but it has been better. Other parts of the world it’s a little bit of a different story. China has been week, our share there has been pretty good and rising but that doesn’t offset a weaker industry. Europe has been flat to slightly up for us which I think is a surprise to a lot of people but again you kind of have to think back to where it’s come from and how low it got. My comment about U.S. not being back to peak goes even more so for Europe, there is a lot of room for Europe I think to improve; they can ever get economic growth kicked back in there. So, that’s a little bit of a rundown to the world.

Hi Eli, it’s Doug. I want to talk about the Tier 4 that you eluded to also and there is – we’re in the throes of 2014-15 by the end of ’15 virtually all construction equipment will have been, will be Tier 4 final compliant. And as we go through that were about halfway done maybe a little bit more than that right now in terms of individual models. That has as we phase out of Tier 4 interim and phase into Tier 4 final and again it’s depending on horsepower size or kilowatt class that has doubled kind of the degree of difficulty in some of those assembly lines certainly around implementation. And we’re seeing some of that availability go out you mentioned you heard that from dealers. I do too. I would expect that to continue for a little bit more but all of our product managers are all over it and I suspect by time we’re done with Tier 4 final by the end of next year not before this will work its way through as well. We’re really happy by the way with our Tier 4 final machines that are out there, a lot of them are running up a lot of hours and doing very very well in the marketplace. So, I assume as we work through this is kind of bubble of introductions I think we’ll like what we see but it’s a bit of challenge right now, you’re right.

Thank you very much, we’ll take our next question from Andrew Casey, please announce your affiliation and post your question.

A couple of questions. First on E&T margin performance, Q3 obviously very strong at 20.1%. You talked about volume helping the quarter and then a negative mix going forward into Q4 because of the electric power contract. I'm just trying to understand how to handicap the impact of presumably lower US locomotive sales in 2015 on mix. Was there a positive mix in Q3 or was it all due to volume?

Well, there are several questions wrapped in there if we take locomotives specifically no doubt next year is going to be lower but that would if you just looking at locomotives that would actually be up positive for mix the margin of locomotive would be not the same as the segment average. So no, I don’t think that would not have a negative mix impact next year. In fact, big sales of that in the fourth quarter would likely have would be another reason that fourth quarter mix might be a little weaker. I think it’s probably a good time to kind of take that whole rail sector and kind of frame a bit how it could impact next year. Our view at least at this point is that certainly locomotive sales will be down, but remember our rail sector that industry, our business there has more than just new locomotives. We have a very large service business and then we have a pretty sizable parts business for locomotives and we have a healthy international business that we expect to be up actually next year. So overall our view is that rail will have a negative but probably less than 2% impact on energy and transportation next year, hope that helps.

It does, Mike. Thank you. And then if I could ask another question within E&T. There has been a lot of concern about some recent changes in commodity prices as it relates to oil. Could you kind of comment on maybe what percent of revenue is exposed to upstream production for oil and nat gas and then is there any point at which oil prices may start to impact demand? Thanks.

Yes, that’s a good question Andy I know that’s certainly been on everyone’s mind with what’s happened to oil prices over the last two weeks. And certainly lower oil prices on a particular help they’re about where they were right now couple of years ago and our business didn’t fall apart two years ago in oil and gas. So while it’s not a big positive we don’t think it’s going to be a significant negative as well, at least not where it’s at now. You asked a question about how low would oil prices have to go and that’s always kind of the sliding question it will depend a lot on where they were how long they stay, it’s a very difficult question to answer. I can’t say that we’re at now kind of where we have been over the last, not last year but a couple of years ago we were down at this level and again it wasn’t all that negative. Remember the majority of our oil and gas business is gas compression and oil and gas production transformation. So production is a big driver in our business. Also particularly for our turbine business, it tends to be pretty long term. The kind of projects that our customers are doing are big many of them multibillion dollar projects that go several years, most of those big oil companies they understand that there are short-term fluctuations in price and those big investment projects that they have in-flight which would effectively be in our backlog at the moment. They generally don’t change those based on short-term fluctuation. So all in all I would say we like to see a little higher oil price but kind of where is at now we don’t see it having a big negative impact. One other just minor point maybe around that and that is the dividend that could play through potentially in other parts of the business. When oil prices are down there is usually a pretty direct consumer impact of that purchasing gasoline and lower price of oil leads to a lower pump price which puts a little more money in everybody’s pocket. So maybe that would be helpful for the economy overall.

I just want to add here its Doug here again. We are obviously watching oil and gas prices very closely. We are talking to, trying to stay close to our customers on this and what they’re saying and I think you’re seeing their quarterly announcements come out and generally the feedback we’ve been getting that say 80 to 90 somewhere in there on a sustain basis. Certainly we’ll take that really educated top half of it but there is plenty of room for reinvestment like Mike said it’s still where it was a couple of years ago. I think you see low 70s on a sustain basis, there would be a chill cross the market and I’d say gas coming down below three substantially on a sustain basis may do that as well. The other wildcard here that we’re really anxious about and looking forward to is Mexico opening and that the oil and gas industry there is about to go over carefully that will. They’ve passed laws down there; they’ve made changes in the industry. That’s going to go at almost any oil or gas price. So there is so many moving parts on this all over the world that is just hard to predict, but U.S. mid-80s we think is on a sustainable level we can all live with.

Thank you very much. We’ll take our next question from Ann Duignan. Please announce your affiliation then pose your question.

Good morning. I think just following up on that theme, one of the things that Komatsu has said recently and not to quote a competitor, but I’d be interested in your comments on it, is that a lot of their construction equipment is being supported by domestic oil and gas also. Can you talk about that a little bit, Doug and then what indirect impact might that have if oil prices were to fall to the low 70s?

Yes, sure and I think that’s right we do see we’ve seen everything from pad preparation to road building around all the shale zones in the country and that has impacted to some degree our construction equipment I don’t think it’s probably going to move the needle, I don’t think it’s material but it would certainly impact at a little bit in our case. Again we get down to low 70s a lot of best we’re going to change on a lot of things and there is no doubt that would be impacted to some degree I would agree with that.

So in your view, Doug, and most of the increase in construction equipment plans you're seeing now in the U.S. are pure resi and non-resi construction-driven?

I would say yes, it’s across the table I mean across the board yes, yes.

Okay.

Certainly, the fracing site preparation has been a help but boy we’re seeing kind of across the board steady growth lower than we like but steady growth in the other businesses as well for construction equipment.

Okay, thank you. Just a clarification on your outlook for 2015. You said in the US you were hopeful that we would get a Highway Bill. Is that included in your outlook or would that be upside to your outlook?

I don’t know if I said I was hopeful but I said it could be upside but there is a possibility and it depends on a lot things in congress. I think in terms of India, we’re definitely going to see infrastructure spending increase at a significant rate. We mentioned Turkey in the right up I’m also optimistic in Brazil although there is election there at this weekend but both candidates, both parties are talking about reflecting the economy and Brazil is always used infrastructure as a way to do that. In our case, we could see some kind of either a steady extension of what we’re doing or a bit up as congress prices stimulate the economy or do what they do but I wouldn’t say I’m hopeful but it could happen I put it that way.

Yes, and I made the comment a few minutes ago and I think there’ve been a lot of elections this year I mean one of the U.S. is coming out so, hopefully we’ll have a window where the government can work together to make some progress before the next election.

In a lame-duck session indeed.

No I don’t think it would happen in the lame-duck although anything can happen but I would say it’s more going into post-election in 2015 as maybe there is some consensus to try to get after job creation, grow the economy faster that could push on some element of tax reform a little bit and infrastructure, those would be the two things that have an outside chance of something happening but bigger than right now but I’m not going to call it is going to happen.

Back to your regional point and we’re not counting on a big upswing as a result of that, no.

Thank you very much, we’ll take our next question from Seth Weber, please announce your affiliation and pose your question.

Mike, it sounds like you bumped up your restructuring cost expense a little bit this year to $450 million from $400 million. And it sounds like that's targeted at the mining, the Resource business. Can you give us any color on the incremental details or where you're stepping up the spending there?

Yes, actually I won’t point anyone thing, we start the year by paying $400 million to $500 million and some of the projects we understood very specifically some were being studied and that was the reason we had a range in other words – that we might do some of that we might not do. Last quarter, our estimate was closer to 400 so we kind of revised it down a little bit, that estimate right now is closer to 450 so there are a couple of more things that we’re doing, none of them are material, none of them would we want to fall out separately but the only thing we’ve talked about separately that individually is pretty material is the European restructuring we did in construction. So again, we started out the year saying 400 to 500 and I think we’re going to basically come in there.

But just to clarify the vast majority of that is not resource industries or mining -- and around the construction equipment business. In fact, resource industries restructuring in 2014 of the 450s one of the smaller pieces.

Okay, thanks for that clarification. And then just on the performance of the business, I think you called out the mining -- the aftermarket parts sales were down. Could you talk about any color on the aftermarket order activity in the Resource business?

For us sales and orders are pretty much the same thing, we turn around parts orders usually and about 24 hours so there is no significant backlog there. So one is about the same as the other. For the company overall, part sales were positive and I think seem to be starting to build some momentum and that’s a good thing. Mining is still I would say weak and really not much change one way or the other.

Did you see any pickup sequentially in orders, aftermarket orders?

No, we did not.

Thank you very much. We’ll take our next question from Stephen Volkmann. Please announce your affiliation then pose your question.

And I’d actually like to go back. Doug, you were just talking about the restructuring that was mostly done in construction. And I guess I was under the impression certainly that the first half of 2014, construction margins were probably over earning a little bit. You guys built a fair amount of inventory I think. And so I guess I had assumed that those numbers were sort of not something I should think about as we move forward and yet there is a fair amount of restructuring going on here. I guess I’m just having trouble trying to parse out how much of the restructuring has sort of permanently improved those construction margins and how much you had temporary things going on in 2014?

I’ll answer that, this is Mike. So we’re talking about construction here.

Yes.

So in 2014 I think, this is maybe an odd way to say it but I think construction is a little bit and this is probably not the right choice or words but more back to normal. If you go back to starting in late ‘12 and throughout much of ‘13 in construction we were reducing inventory both ours and dealers and that had negative impacts on production, it was made price realization tougher. So I think 2013 was very tough year for construction because of that. So, and I think this year if you look at dealer inventory changes I mean there have been changes by quarter, but by in large they’re likely to end the year about where they started. Production levels are kind of matching demand in other words and have been pretty stable. So that the point that Doug made earlier that’s really help efficiency and we don’t have kind of the downward changes if you will. And in fact, you see part of that there are price realization this quarter versus a year ago. I think in terms of the restructuring charges there is a little bit of benefit in this year again much of it is around restructuring our Belgium facility and some of the benefits are in this year and more will be added in next year a bit and then after. So I think there is more to come in terms of restructuring benefits for construction.

Okay, great. That’s helpful. And then can you just update us, Mike I thought I remember you were going to try to reduce inventories in construction, maybe it was more broad than that, but something like 800 million this quarter and in Q4 and it looks like maybe you didn’t quite get there. Can you just talk about how you feel about all that?

Yes, again this goes back. What we’re talking about here is dealer inventory last quarter we said we thought that dealer inventory was going to come down somewhere around 800 million and this quarter dealer inventory went down 600 million. I would call that given your ability to forecast that all the moving parts of that side actually pretty good I think it’s directionally what we thought it was going to be but I think the fourth quarter is probably going to be directionally what we thought it would be. And it’s a couple of things part of it seasonality, construction adds to inventory. If you think about the Northern Hemisphere where you’re in winter not a lot of activity going on then and so we tend to produce more and dealers tend to stock up. You can kind of smooth load things a little bit better and then it gets old throughout the rest of the year. That’s pretty common that’s happen this year. We’ve had absolute reductions that I wouldn’t call seasonal in mining and that has continued although the reductions are little bit maybe less than they were a year ago, that dealer inventory is coming down and it’s at a pretty low level right now. If I look at dealer inventory overall, I would say it’s in pretty borrowing the seasonal changes that occur. And I would it’s in pretty good shape. We do not have a dealer inventory problem for say.

Okay. I appreciate it.

Thank you very much. We’ll take our next question from David Raso. Please announce your affiliation then pose your question.

The question is on oil and gas, the order book. Can you give us some feel for where the order book is year-over-year and how far does it extend into 2015? And also how are you extrapolating that order book when you lay out your 2015 sales guidance?

Yes, okay, David. So I would say overall and this is one of the industries where we actually do have a little bit better visibility than say construction where relative to sales that order book is usually a little less. It turns over quicker. I’d say it’s pretty healthy and in fact if you look at solar it’s not it’s actually roughly where it was a year ago it’s not changed much during the year, if you look at the rest of energy and transportation in the reciprocating engine piece of it, it’s up we had a nice increase in the third quarter and I’d say it’s pretty healthy levels. When we forecast next year we don’t just look at the backlog and forecast forward, it’s more like we’re out there trying to figure out what we think will actually happen in terms of sales then we use the backlog as maybe kind of a reality check to see if that makes sense. So, I would say for energy and transportation, we still have a pretty good backlog.

And to be clear though, oil and gas within E&T was my questions. So can I take that reciprocating comment as similar to what you have in oil and gas, up on recip and flat on solar?

So what I would – I gave you a solar because that’s mostly oil and gas. The recip -- factories we build engines they get sold into different application. So, the data that I see around backlog is around product not end market necessarily. So, but I would tell you I think anecdotally a lot of the strength has actually been oil and gas.

Okay. And then lastly, on the puts and takes for 2015, I know we're not giving an earnings guidance, but just trying to think of the moving parts, things we've said in the past. Do they still stand for restructuring savings for next year? Any carryover or incremental benefits from repo, the short-term incentive comp? I know you bumped it up to $1.3 billion today for this year. Just trying to think about those puts and takes and maybe a comment on pension. Just something to frame the puts and takes for the 2015 earnings model.

David, this is Brad Halverson, I’ll take a shot at this without giving you guidance for 2015 but try to tell you how we think about it internally. We remain very committed to our flow through target and operating profit of 25% and the way up and 25 to 30 in the way down. We’ve demonstrated that, demonstrated it as well this year with our proxy bidding up year-to-date with sales being down and that’s driving focus across all of the units in terms of restructuring, lean I would say also improve [Technical Difficulty] .

David, we lost the line again we’re not sure why, I’m not sure how far we --.

Brad, if you can hear me, I basically -- you started to talk about a little bit beyond the comment of incremental is 25% on the way up, 25% to 30% on the way down and just how the segments (multiple speakers).

Yes, I was just trying to give you a flavor of how we’re looking at it without giving guidance and if I repeat something we’ll just do that since we’re starting over here but yes, we talked a little bit about being nimble earlier somebody made the comment, we feel that internally and we think it’s driving kind of our flexible cost structure is driving our delivery around incremental and decrementals again we’re happy that profit is up with sales actually being down on a year-to-date basis. And so it’s driving a lean initiative, it’s driving the restructuring efforts division by division and its driving I would say pretty strong supplier collaboration as we look to improve our margins and so if we look out to next year we have targets across each of our segments for incremental and decremental margins. If we were to get some sales growth next year as we said sales could be flat upside assuming we get some sales growth. We remain committed to that 25% incremental pull through. I think the other question here color about pension and we wouldn’t see much of a change in pension year-over-year in terms of our pension cost.

Obviously flat sales or sales don't move up or down much, incrementals are a little less telling. It's a law of small numbers. So I think what we are just trying to figure out -- we used to speak of restructuring savings over time being $400 million to $500 million with -- a lot of the savings after 2015 would be significant, but even 2014 I think we used to speak of maybe a couple hundred million of savings, trying to think what that number could be in savings for next year, again, trying to think through the repo. And we can all make our own projections around sales, but we're just trying to think of non-volume sensitive items.

Yes, I think in terms of kind of giving more guidance again. If you look at this year and you look at our original outlook again we’ve been certainly surprised with some operational items particularly our margin and we’ve also been helped in last quarter by currency but I think clearly at an operational basis we’re really happy with where our margins are relative to flat sales and we see them, moving forward we see to be absolutely committed to the 25% growth which we think is a pretty good number.

All right. I appreciate the non-answer.

We’re not trying to be tricky on profit we just didn’t make a profit outlook and we trying to really hard to give all the pieces that make a profit outlook for next year that doesn’t mean that it’s terrible that doesn’t mean it’s great, it just means that we didn’t get an outlook.

But can you at least -- the one thing though, the restructuring savings that we used to speak to 400 million to 500 million by exiting ‘15, how much of those savings do you think you will have captured in ‘14 and at least some concept of ‘15 just on that one item?

I suspect we’ll talk more about that in January. We have savings in ‘14 and we’ll certainly have more in ‘15.

Thank you very much. We’ll take our next question from Steven Fisher. Please announce your affiliation then pose your question.

Can you guys talk about how the rental channel is influencing your construction sales in 2014 and how do you see that in 2015? And I guess how is demand in construction outside the rental channel?

Well that’s a good question. Actually rental has been affecting the business I would say increasingly for I don’t know 10, 15 years. And particularly when times are more uncertain customers have the tendency to rent more. Remember we tend to not sell through rental houses we sell the CAT dealers who are in the rental business. And we’ve had particularly in the U.S. we’ve had positive sales through the rental channel and positive sales through the end user owner channel I don’t think there is anything out there that is driving a big structural change that impacted ‘14 or that will drive a big directional change in ‘15. But I think it is true that as customers get more and more focused on asset utilization, the rental channel can be more attractive. That’s why we’re big time in the rental business. It’s a key element of the across the table initiative I mean it’s a definite part of the channel here to say.

Okay, so both channels sound like they are up this year, is that right?

Yes. Well the North America.

Right, sure. And then, Mike, you mentioned a lot of room for growth in European construction. How do you feel about the visibility of European construction right now? Is your base case for next year that that’s maybe flat?

Yes, when you look at construction and I kind of touched on this a little bit ago. There are two parts of the business, parts for example where we have little to no backlog because we get an order we ship, we get an order we ship it. So it’s not the kind of thing that lands to a lot of visibility based on a backlog. Then construction is a little bit like that to generally when our customer or a dealer orders kind of on average they get it in a few months. So the backlog isn’t quite like it would be for maybe a big turbine or a big mining truck. So, again I would say construction we forecast based on what we think is going to happen economically where the market is relative to replacements, we look at where dealer inventory and we’re taking a lot of factors, backlog and short-term visibility don’t play into construction or part sales that all as much as they do in some of the other parts. So I guess bottom line, it was a long-winded answer to say within construction it’s normal not to have a lot of concrete visibility to a backlog. Steven Fisher – UBS: So the baseline probably would be about flat is your expectation for next year in Europe?

I think that’s the case for all of our -- I mean this is worldwide comment but for all of our segments. We said flat to slightly up next year and we don’t see either energy or transportation, construction or resource industries being kind of far from that. It looks pretty flat up a little for much of the business.

All right. We are at top of the hour so we’ll sign-off. Thank you very much for joining us on the conference call today. We’ll talk to you next quarter.