Good morning, ladies and gentlemen, and welcome to the Caterpillar 1Q 2017 Results Conference Call. At this time all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Amy Campbell. Ma'am, the floor is yours.

Thank you very much, Kate. Good morning and welcome, everyone, to our First Quarter Earnings Call. I'm Amy Campbell, Caterpillar's Director of Investor Relations. And on the call today, I'm pleased to have our CEO, Jim Umpleby; our Group President and CFO, Brad Halverson; and our Vice President of Finance Services, Joe Creed. Remember this call is copyrighted by Caterpillar, Inc., and any use, recording, or transmission of any portion of the call without the express written consent of Caterpillar is strictly prohibited. If you'd like a copy of today's call transcript, we will be posting it in the Investors section of our caterpillar.com website. It will be in the section labeled Results Webcast. This morning we will be discussing forward-looking information that involves risks, 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 could make actual results differ materially from our projection can be found in our cautionary statements under Item 1A, risk factors, of our Form 10-K, filed with the SEC in February of 2017. And it's also in our forward-looking statements language that was included in today's financial release. In addition, there is a reconciliation of non-GAAP measures that can be found in this morning's release, and it is also posted at caterpillar.com/earnings. We're going to start the call this morning with a few words from Jim, and then Brad will walk us through first quarter results and our revised outlook. And then we will turn it back to Kate to begin the Q&A portion of the call. Jim?

Think you, Amy. Before I talk about our quarterly results, I'll spend a few minutes talking about my perspective since becoming Caterpillar's CEO on January 1. It's a privilege to lead this iconic company and this strong leadership team, and I'm confident we are well-positioned for the future. As you know, generally weak economic conditions and commodity price volatility have made the last few years challenging and have significantly impacted the industries we serve. We've responded to these challenges with a thoughtful approach to restructuring and strategies to improve our market competitiveness. Our product quality has improved. We're continuing to invest in R&D and expanded our digital offerings to help our customers be more efficient and productive. We've made progress implementing lean manufacturing and have strengthened our dealer network, which provides us with an unrivaled competitive advantage. We are focused on controlling costs and maintaining the cost flexibility necessary to invest in products and services to drive future growth and shareholder value. The goal of our entire leadership team is to return Caterpillar to profitable growth. Given the industries we serve, we will always be subject to cycles. But our goal – through focusing on profitable growth, a disciplined resource allocation methodology, and a more flexible and competitive cost structure – is to sustain profitability through the cycle. Before I turn it over to Brad to talk about the quarter in detail, I'd like to congratulate our team on a great start to the year. Quarterly sales and revenues were up for the first time since 2015. The difficult but necessary decisions we've made since the downturn have resulted in outstanding operational performance. Profit per share, excluding restructuring, is twice what it was a year ago. There are encouraging signs and promising quotation activity in many of the markets we serve. And retail sales to users have turned positive for both Machines and Energy & Transportation for the first time in several years. However, there is still a great deal of geopolitical and market uncertainty, along with economic volatility around the world that continues to present risks. Now I'll turn it over to Brad to through walk through the results and the outlook in detail.

Well, good morning, and thanks, Jim. If you have the slide deck in front of you, I'd ask if you could please turn to page 4, slide 4, and we'll start with our first quarter results. 2017 has started off very well and exceeded our expectations for the quarter. Sales and revenues increased about $400 million or about 4% on the first quarter of 2016 to $9.8 billion in the first quarter of this year. This is the first time in 10 quarters that sales and revenues were higher than the prior year, although sales are coming off a very low base. Resource Industries had the largest increase, followed by Energy & Transportation and Construction Industries. In the quarter we announced our decision to close the Gosselies, Belgium, and Aurora, Illinois, facilities. Total restructuring costs were $752 million in the quarter, $591 million more than the first quarter of 2016. As a result, profit per share was down $0.14 from $0.46 to $0.32 in the first quarter 2017. On a 4% increase in sales and revenues, profit per share excluding restructuring doubled from a year ago from $0.64 in the first quarter 2016 to $1.28 this quarter. The increase was driven by higher sales, favorable mix, improved price, and lower costs. As you know we've been working hard on lowering our cost structure, right-sizing our footprint, and allocating resources directly to the highest profit opportunities. All these actions were key in delivering a very strong quarter. Let's turn to slide 5, and we'll look at first quarter operating profit. First quarter operating profit was $417 million, as compared with $494 million in 2016. As I already mentioned, restructuring costs were up $591 million. Excluding restructuring costs, operating profit was up $514 million. Positive changes to operating profit came from several…

Thanks, Brad. My first quarter as CEO has certainly been eventful. We had great first quarter results, announced the relocation of our headquarters to the Chicago area, the closure of our Gosselies, Belgium, facility and the relocation of manufacturing out of Aurora, Illinois. We've also ratified a new six-year contract with the UAW. Each of these are significant actions. Taken together, they will strengthen our company and create long-term value for our shareholders. Also I want to provide an update related to the search warrant executed at three Peoria area facilities in March. At Caterpillar, we take very seriously our obligation to follow the law. And we are committed to maintaining our long tradition of pursuing the highest ethical standards in conducting our business. If we find something that violates our values and our code of conduct, we will take appropriate action. At this time we have nothing more to report. Caterpillar has retained former U.S. Attorney General William Barr currently of counsel to the firm of Kirkland & Ellis to take a fresh look, get all the facts, and help bring these matters to proper resolutions. We are continuing to cooperate with the government investigation. Amy?

Thanks, Jim. And now we will turn it back to Kate to open the phone lines for questions.

Thank you. Our first question today is coming from Joseph O´Dea. Your line is live.

Hi. Good morning. First question just on the guide and what you're looking at for margin in the rest of the year. I think you talked to a number of headwinds, but if you could just talk maybe a little bit more specifically about some of the details, whether or not price you see continuing as a tailwind? Or if you have visibility into that reversing to some headwinds? What you see on the mix front? And anything else with material costs that are on the horizon? Just so we get some comfort with the implied step down in the margins.

Sure, Joe. And I think you have to look at it kind of two different ways. If you look at the new outlook that was provided this morning and compare it against the outlook from January, really broadly speaking the only two changes are those that Brad talked about, higher sales volume of about $2 billion, which will generate higher variable margin, offset by about $200 million more in short-term incentive compensation expense. In the original outlook we communicated that we expected material costs to be favorable about 1% for the full year. While we expect that number to come down some, we still do expect some positive, maybe closer to zero, but still some positive material costs for the full year. Our outlook for price has not changed really very much at all since the original outlook. And our period costs assumption, excluding that short-term incentive compensation expense, is also, broadly speaking, about the same. So versus the outlook that we provided back in January, it's really just higher volume minus the higher incentive compensation expense. If you look at what's changing from the first quarter to the rest of the year, there's a couple of things to keep in mind. We had very favorable mix in the first quarter. About half of the sales volume mix impact was from mix. And we don't expect to see that kind of favorable mix impact as we go forward. We do expect pressure on price and material costs in the back half of the year, especially around steel. But even though we expect them to be favorable versus last year, we don't expect them to be as favorable as we saw in the first quarter. And there was some period costs. Timing of spend, traditionally the first quarter is a low quarter for period cost spending, so some of our projects and initiatives that we have planned for the year did not pick up to their full spend rates in the first quarter. That would also increase as the year progresses. But I think if you take it all in, and we're committed to incremental profit pull-throughs (26:08) for the full year, and the outlook reflects almost 50% operating profit pull through, well ahead of our 25% to 30% commitment and goal.

That's really helpful. And then just one more on mining. And I think it looked like in the quarter actually, the benefit of some sell in to dealers that was better than what you saw in kind of the pull through demand. But you also commented on expecting significantly higher volumes I think in mining truck shipments this year. I believe you've talked about large mining truck shipment volumes in the kind of 70, 80 units last year. Can you give any kind of frame for exactly what kind of volumes you're anticipating in 2017?

Yeah. So if you look at Resource Industries dealer inventory, it really broadly stayed about flat quarter over quarter. And so since we've been on kind of 16 sequential quarters of taking dealer inventory down, that was a positive to sales. But dealer inventory did remain – it was actually up just slightly in the quarter. As you mentioned, Joe, we probably sold about 70 to 80 trucks or so last year. It was probably closer to 70. We do expect shipments for large mining trucks to increase significantly. Most of those will be in the back half of the year. Several of those are going to large customers in less price-favorable regions, I guess you could say. But we have good demand. I think even if we double the number of truck sales – and I think that's certainly very doable this year – it would still be the second lowest year for large mining truck sales. So we're still at very low levels, even in 2017, with what will probably be some pretty significant increases in our total shipments versus last year.

Got it. Thanks very much.

Thank you. Our next question today is coming from Jamie Cook. Your line is live. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Hi. Good morning, and congrats on a nice quarter. Jim, not a bad way to start off as CEO. I guess back to Resource, Amy or Brad, I'm just trying to understand what's implied in your guidance for research margins in 2017, given where we started the year at a 9.5% margin. I think that was better than what anyone would've hoped. Or did the margins get eaten away by selling to less profitable regions? I'm just trying to understand that. And then I guess – or was there anything unusual I guess in the first quarter that the 9.5% sort of isn't sustainable? And then I guess the second question I have is just sort of how you're handling the cyclical upturn. When I talk to your dealers, a lot of them are complaining about lead times and that lead times are extended. So I'm wondering if when I think about your sales forecast, is any of the upside constrained by your inability to ramp? Or could you just talk about how you're thinking about ramping production in your supply base? Thanks.

Sure, Jamie. If you look at Resource Industries margins, like I said we were very pleased with the margins that Resource Industries put up this quarter, $158 million in operating profit. If you kind of revert back to the fourth quarter call and Mike's discussion, we expected Resource Industries to lose a little money but be close to breakeven. And so it really had a great quarter. We don't expect this quarter to repeat, either in terms of operating margin dollars or operating margin percent. But moving forward for the rest of the year we would expect Resource Industries to either break even or do a little better through the rest of the quarters remaining this year. Jamie L. Cook - Credit Suisse Securities (USA) LLC: But is there a particular reason for the step down? Like I understand you're saying it's not...

Sure. Yeah. So Resource Industries, as we talked about, that mix number was about equally spread across the three primary segments. We wouldn't expect that favorable mix to continue. There will also be, like in the other segments, some material cost pressure. And we do expect some sales for some mining equipment into some regions of the world that maybe aren't as price advantaged as other parts of the globe. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. And then just sort of lead times or how much your sales forecast is being constrained by you guys not be able to ramp quickly enough?

Sure. I think there are probably two areas. Maybe I'll step back a little bit. If you look at Construction Industries, with a significant increase in orders for BCP [Building Construction Products] product in the fourth quarter and first quarter, several of those products have been moved to managed distribution. And with the announcement that we were considering the closure of both Gosselies and Aurora, we also put all medium wheel loaders on managed distribution at the beginning of the year. In both cases that was to make sure that we got shipments to where they needed to go and to discourage some panic ordering or some unnecessary ordering to make sure we managed that. But we don't expect either of those actions to impact or drive a loss in sales situation. If you look at China, I would say that for Construction Industries, while we continue to grow market share there and we're very pleased with how the year is shaping up so far, I'd say if demand continues at these levels (31:37), we're continuing to keep an eye on China and make sure that we can continue to meet the higher demand in that region. But the other notable comment, and I've seen a lot of it being discussed out there, is for our large 3600 reciprocating engine. We have seen lead times for those extend out. And we're bringing the production back to our Lafayette, Indiana, facility. But we wouldn't expect that to result in any lost sales either. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. Thank you. I'll get back in queue.

Thank you. Our next question today is coming from David Raso. Your line is live.

Hi. Good morning. Given your comments about the supply chain is not an issue at the moment, or loss of sales from any production ramp that you feel you can do, I'm just trying to reconcile really simply the sales guide. The rest of the year sales growth is implied at only 2%. But the backlog is up 13%, the implied orders are up twice as much as that. The revenues were already up 4% in the first quarter. So can you just help us square – do you see something that would suggest growth has to slow from what you've been seeing of late? Because even if I just annualize the first quarter, for example, in CI or even RI, you're already at or above the high end of your range for those segments. So if you could just help us better understand the sales guide?

David, if we go back and revisit some of the positive sentiments but also some of the negative, or risks that are out there in the outlook, we wanted to be thoughtful and mindful that there's still a lot of uncertainty in the world. And there's still the potential for volatility both in commodity prices and oil prices. And so even (33:26) if you walk through a few of those, first of all we would expect – we're seeing a lot of demand for overhauls and rebuilds of both mining equipment and oil and gas well servicing fleets. We would expect that demand to taper off. Or I don't know if we would expect that, but it could taper off as the year goes on and all of those units get overhauled and repaired. We also – we do need to watch the volatility. It's possible that too much supply comes back online in North America, which would drive some additional volatility in oil prices when it comes to commodity prices. While the demand and supply seems to be in better balance, there still is some persistently high inventories for several commodities, which could put some pressure on commodity prices. If you look at North America order rates, as Brad mentioned and you mentioned, have been very strong. Certainly, there are some good fundamentals to support that that Brad talked through, pipeline. A lot of states have passed infrastructure bills. But we believe some of that has to do with business optimism. And we need to see that business optimism continue through at least the second quarter I think before we get more comfortable and confident about what the back half of the year will look like.

Just to be clear, I mean those are all very valid and potential concerns. But these aren't things you're necessarily seeing in your current order books or trends. Is that correct? I mean all those points are valid.

Yeah.

But I mean I'm just making sure nothing there sounded like we are seeing in the second half the rebuilds. Because if anything, the lead times are getting longer out of Lafayette. Right? So I'm just trying to – some of the comments you made, I just want to make sure those aren't trends you're seeing in your orders. It's just – understandably it's April and things could change from a macro level. But from a micro level, are there any particular concerns? Because even the last nine months of last year, the dealers took out $1.9 billion of inventory. The year-over-year swing on inventory I assume the next nine months is a positive. Could you maybe help us with how you view dealer inventory the next nine months?

So if you look at dealer inventory, and we didn't include that in the Q&A. I think it's really going to shape up to what we expect 2018 to be. And it's really too early to make a forecast for 2018. Embedded in the outlook is a slight decrease in dealer inventory, certainly quite a bit less than what the $1.9 billion or $1.7 billion for the full year that we saw in 2016. I think back to your earlier question, we have seen I'd say the pace of order activity slow a little bit. But it is still doing better than a year ago as we said in April.

Okay. The reason I asked is the dealer inventory swing, if you even just get – you took out $1.9 billion the last nine months of last year. Say you take out only $650 million, that $1.25 billion of improved year-over-year dealer inventory, the rest of the year would give you almost 5% revenue growth. So it seems like your sales guide is not even a dealer inventory swing. So that's why I was just trying to make sure I understand what's in it. And it just sounds like...

Yeah.

And completely fair, just a little more of a potential macro concern that could materialize.

Yeah.

Okay.

Yes. I think if you looked at any one of those assumptions in isolation, I think you could conclude that there's some upside. And I think that makes sense and we would agree with that. But as we sit here in April, there still is a lot of uncertainty, there still is the volatility. We're only three months through the full year. We need to see order rates continue at the levels we saw in the first quarter in order to get more comfortable about the rest of the year. But we are I think very pleased with our ability to raise the outlook by $2 billion here one quarter into the year.

No, that's fair. I appreciate it. Thank you for the time.

Thank you. Our next question today is coming from Ann Duignan. Your line is live.

Hi. Good morning, guys.

Good morning, Ann.

Morning. Just to take a step back. And again you're talking about products being on managed distribution. And yet at the same time we're looking at stubbornly high days on hand at Caterpillar of 123 days. Can you help us reconcile just why your own inventories remain so high? Is that just seasonal? Should we expect a significant improvement as we go through the year? Or are we going to see write-downs of inventories as we go forward? Just trying to reconcile that.

Yeah. So I think dealer inventory, we have taken production up at several of our facilities, a few that we talked about, Lafayette, Indiana as well as in China. We are having to build inventory in Gosselies and in Aurora and in our component plant across – in order to manage through the closure and consolidation of several of our facilities. So that is driving some dealer – or some dealer, excuse me – some of our inventory up here in the first quarter. I think where inventory lands for the full year will have a lot to do with what 2018 looks like. We do at this point I would say expect CAT inventory to remain broadly about flat for the full year. Certainly continue – and both Brad and Jim mentioned this, continue to be focused on lean, driving an increase in inventory turns. Certainly have no expectations that there would be any write downs in inventory of any significance for the remainder of the year.

Okay. I appreciate the color. And I do appreciate when you're closing large facilities, you have to build up inventory. And then switching gears. I mean you mentioned a few times demand for reciprocating engines, strong in the oil and gas midstream. You didn't mention Solar at all on the turbine side. Can you talk about what's going on with Solar? And how the backlog looks there year to date and so far?

Sure. So Solar, I think in the outlook – the original outlook from the last quarter, we shared that we expect Solar to be about flat 2017 versus 2016. That remains our expectation. We have a really good backlog to support the outlook for the year. The backlog for Solar was up slightly in the quarter as we continue to take orders moving out into 2018. And so I'd say Solar is kind of continuing as we expected on about flat sales for the year versus last year.

Okay. I'll leave it there and get back in line. Thank you.

Thanks, Ann.

Thank you. Our next question today is coming from Stephen Volkmann. Your line is live.

Hi. Good morning, Amy and gentlemen.

Good morning, Steve.

Morning.

Morning, Steve.

I'm wondering, you gave a little bit of color, which was quite helpful, on sort of the trajectory of the Resource Industry margins as we go through the next three quarters. I'm wondering if you might be willing to do that with the other two segments? Because obviously margins in both of those other two segments also were I think higher than most people were looking for. So should we expect some deflation there as well? And if so, why?

Yeah, I'd say the reasons for the second through fourth quarter operating margin percentages to be lower on Resource Industries are pretty consistent across the other two primary segments as well. As Brad mentioned, Construction Industries had a great quarter for operating margin percent. We would expect for the full year, which would weight in the first quarter operating margin for Construction Industries, to be just up slightly versus 2016 with pressure in the back half of the year from less favorable mix, pressure on price and material costs, and some period cost spend, timing that didn't occur in the first quarter. For Energy & Transportation, which also had I'd say a very good quarter for operating margin percent versus a year ago, versus first quarter of 2016, I mean it's just slightly better than the full year for 2016, the first quarter of 2016 for Energy & Transportation. It was the lowest quarter by several hundred basis points versus the other three quarters in 2016. We would expect Energy & Transportation operating margin to be about flat for the full year versus 2016.

Okay. That's helpful. Would you be willing to sort of ballpark how much in terms of period costs that the first quarter was below normal?

Well, what I would say is for – as we revert back to the outlook that we provided in the fourth quarter 2016, we expected period costs to be about $450 million to $500 million. I think in the 10-K, we communicated $450 million lower for the year, excluding the higher short-term incentive comp and wage increases for the full year. And that assumption, with the exception of short-term incentive comp being up $200 million, hasn't changed with this outlook very significantly.

Okay. Great. That's helpful. Thanks.

Thank you. Our next question today is coming from Adam Uhlman. Your line is live.

Hi. Good morning. It's Cleveland Research. I guess to start, the strong performance in the quarter seems to have been driven by part sales. And directionally, that should've helped the price realization I'm thinking as well. So I'm wondering if you could just dimension overall how much the parts business grew in total? And what your outlook is for the full year?

Yeah. I think it's certainly more complicated than that. Aftermarket parts were up. That primarily impacted Resource Energies (sic) [Resource Industries] and Energy & Transportation, as mining equipment was coming in and well servicing units were coming in for overhaul and rebuild. I think you have to take into account Construction Industries price was quite favorable as well. And Construction Industries didn't see really a significant increase in their aftermarket part sales. So if we look at aftermarket part sales, we would expect that to be a little heavier in the first quarter and in the first half as that mining equipment and the oil – the well servicing fleets for oil and gas in North America kind of are coming in as we speak to be overhauled and repaired. But that work may decline as the year goes on and there's less units that need overhaul.

Okay. And then secondly, could you speak to the restructuring savings that you expect to get out of Gosselies and Aurora? And the cadence of those savings? Are we capturing very much in 2017? And what should we expect for 2018 and beyond?

Sure. I think we haven't changed the period cost guide for the full year in this new outlook. We wouldn't expect to see – I mean – sorry. Here, we wouldn't expect to see any cost improvements from the Aurora and Gosselies decisions in 2017. In fact, we would likely see some inefficiencies as we take production down in those plants in the back half of the year, which kind of is something that we're keeping an eye on. The Aurora – the move and the relocation of production out of Aurora to the other two U.S. facilities, that work kind of wraps up in the 2018 timeframe. So we shouldn't see benefits for that until after 2018. And we do expect the Gosselies, Belgium, facility to start ramping down towards the end of this year. But we also wouldn't expect mature year benefits for Gosselies until 2019 and beyond as well.

And how big are those savings?

We're not disclosing those savings in particular. What I would say is they were included in our original September 2015 announcement – or they were being contemplated in a part of that broader commitment of $1.5 billion of total cost savings for restructuring. We delivered that through 2016. We expect about $500 million more – or $450 million more of period cost reduction from restructuring and cost reduction actions this year, which would bring us to about $2 billion in total. And it's really – we're not going to comment at this time on 2018.

Okay. Thank you.

Thank you. Our next question today is coming from Steven Fisher. Your line is live.

Great. Thanks very much. Just how did the increase in the aftermarket in Resource Industries play out in the quarter? Was the demand pickup from a broad swath of customers and a small part of their fleet, or a small number of customers and a large part of their fleet getting reinvestment? Or was it some combination of both? Just trying to understand the sustainability of that trend.

Sure. I think if you look at the increase in aftermarket parts sales for Resource Industries, it was broad across all four regions. We're seeing good activity in iron ore and coal in Australia. Good activity for copper in Latin America. We are seeing a lot of machines get put back to work around coal in North America. And the CIS region is doing very well for gold mining. And there would be some other positive stories among those. But those are the ones on the top of my head. So it is broad-based from a higher aftermarket parts perspective. And if you look at kind of order rates that were driving the increase in the backlog for Resource Industries, I'd also say that those are fairly broad-based as well.

Okay. And then just want to ask the revenue guidance question from the other direction. Because clearly there's been a lot of volatility in the stock price related to revenue guidance changes over the last couple of years. So just want to ask, what is giving the confidence to raise the revenue guidance by the $2 billion so early on in the year? And I know you mentioned obviously the backlog and quoting activity. And slide 10 had a lot of number of puts and takes there. But what would you say are giving you that confidence, the most amount of confidence? And what are the most important things that have to go right to at least hit that $2 billion before we talk about more upside?

Yeah. I think one thing I would say is you have to step back and look at the revenue increase versus 2016. So the sales and revenues increase is up just 3%. It's not a significant increase versus 2016. And so while we certainly are pleased and excited that we're able to raise the outlook this morning, it's not a significant raise versus last year. So we still are remaining cautious. Certainly still many, many of our end markets are at very depressed levels. I think from a perspective of what we need to see to – one, I would say, as you mentioned, and it's in the release, what gave us the confidence to raise the outlook was a very strong quarter, very strong order rate, and an increase in the backlog that should be fairly sustainable. What we continue to keep an eye on is business optimism in North America. And do we continue to see order rates stay at higher levels than we incurred in 2016? We do want to watch the volatility of oil and other commodity prices. And there's still tremendous geopolitical uncertainty around the world that we're keeping our eye on. And want to make sure I think before we would take another step that we're comfortable about sustainability of the order rates versus what we saw in the first quarter.

Thank you very much.

Thank you. Our next question today is coming from Robert Wertheimer. Your line is live.

Thank you. A question on resources mining. Would you be able to characterize the increase in parts sales? Was it more big rebuild and sort of scheduled maintenance than people coming in and doing big projects? Or was it more a flow in consumables, maybe a restocking to dealers and restocking to mines, et cetera? Just a little bit curious on the mix on that.

Yeah. I don't have that breakdown, Rob. Kind of more it would just be anecdotally what I've heard the business teams share. Certainly we believe that a lot of it has to do with overhaul and rebuild of mining equipment. We do believe that there may have been some restocking of dealer shelves in the first quarter. And certainly if you look at the hours of utilization of the mining equipment versus where it was at its depth, kind of middle of last year, mining equipment is being used quite a bit more extensively. And I think that you can conclude from that that it's driving consumables of filters and fluids and other things like that as well. So I think it's pretty broad-based across all three of those categories.

Thank you. And if I could ask a second. I mean Construction, CAT has spent a number of years sort of improving its competitive position relative to peers through limited pricing. And I think has successfully done that. I mean do you have any thoughts on what you think your sustainable margin is? Whether this quarter is starting to be more a reflection as you normalize your pricing versus competition what Construction can do? Or just thoughts on normal?

Sure. As you could expect, I'm not going to give you a guide kind of on normal operating margin for Construction Industries. As I said a little earlier, we do expect a small improvement, a slight improvement in operating margins for the full year for Construction Industries versus a year ago. And that's going to be on significantly higher incentive compensation expense. So I think it continues to reflect the great work that that team has done and their focus around OPACC or operating profit after capital charge. The pricing environment for Construction Industries, especially in North America, is very competitive right now. We are looking at that. I'd say it's across numerous competitors, not just with transaction pricing but also with financing deals. That's certainly a risk that we have in the back half of the year that we continue to keep our eye on and make sure that we're meeting our market position goals.

Thank you.

Thank you. Our next question today is coming from Andrew Casey. Your line is live.

Thanks. Good morning, everybody.

Good morning.

Morning, Andy.

Question on the outlook. If I take the implied $3.75 midpoint, subtract the really good Q1 from that, it applies about a $0.30 earnings decline for the last three quarters of the year compared to last year. And then if I take the 50% pull-through expectation for this year, kind of implies flat Machines and E&T operating profit for the last three quarters. Could you help us understand the factors, if I'm doing the math right, below the operating profit line that are driving this $0.30 headwind?

Yeah. So there's a couple things. The tax rate is a little bit higher. I think it's about 28% now in the outlook versus 25% I believe for 2016. We do have a slightly higher assumption for shares. And then there are several things that happened in the other income and expense line, some hedging gains or losses that we don't put in the outlook as well as some income – or interest income, excuse me, and a couple other small things that are all occurring kind of below that operating profit line. That'll net you out to that reconciliation you're trying to do, Andy.

Okay. I'll follow up off line. Thank you.

Thank you. Our next question today is coming from Jerry Revich. Your line is live. Jerry Revich - Goldman Sachs & Co.: Hi. Good morning, everyone.

Good morning, Jerry.

Morning. Jerry Revich - Goldman Sachs & Co.: I'm wondering if you folks can talk about – now that you're closer to completing the manufacturing footprint restructuring program, can you update us on your next set of strategic priorities? Jim, I appreciate it's only a quarter in. But I'm wondering if you could just outline for us the next areas that you folks are focusing on? And how you're thinking about the business over the next cycle?

Yeah. And, Jerry, we have a group of senior executives that we pull together to really lay out our strategy moving forward. I mean call it a strategic planning committee. Something that Caterpillar CEOs typically do when they come into office. And so we're working our way through that. It's too early for us to talk about that. But certainly at the analyst meeting we're having later in the year, we'll lay those out. Jerry Revich - Goldman Sachs & Co.: Okay. I guess on the shorter term front, you folks have rolled out the general contractor grade product lines across your developed market, construction equipment product lines. And I'm wondering if there are any other strategic priorities that are near term that you folks can talk about outside of what's planned for later this year?

I think certainly – and there's certainly a lot of them. But one that comes quickly to mind, Jerry, would be our focus on digital, making sure that we have the best services and solution to meet our customers' needs and help them be successful and make more money using our products than our competitors'. So all of the advancements, a lot of them on display at ConExpo, is a huge area of focus for us right now. We believe we have the largest industrial connected fleet in the world of about 0.5 billion connected assets. And we continue to expect to grow that this year. And so I think that's one area of many, as well as continued focus on new product development. And then I'd say lastly, using the operating execution model to make sure we're very deliberate about where we put our resources to make sure they're being put around projects and investments that'll drive the highest shareholder value. Jerry Revich - Goldman Sachs & Co.: Okay. And, Amy, in Resources you spoke about a substantial production ramp for new equipment. I'm wondering if you can put that into context for us I guess. From some of your competitors, we're seeing book to bill, depending on the product line, but in the 1.5 range. And I'm wondering as you folks plan your production, are you folks maintaining or gaining share? Or are you down a little bit? Can you just give us some flavor relative to statistics we see from your primary competitors?

Yeah. And I think the number I gave was specifically around large mining trucks, which was one of the more depressed from its peak volume and off – and probably one of the most off of what we would consider kind of mid-cycle volume levels than some of our other mining equipment. I think if you look at book to bill, we don't – as you know we don't disclose that information specifically. But I would say we don't believe that we're losing any market share. We are seeing very healthy order rates, good sporadic. I mean a year ago there was almost no ordering activity going on in Resource Industries. So we are coming off of a very low base. But we are seeing sporadic orders and good demand for mining equipment. Jerry Revich - Goldman Sachs & Co.: Okay. Thank you.

And I think with that, well, that'll be the last question. So, Kate?

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.