Mike DeWalt – Vice President of Caterpillar Inc. with responsibility for the Strategic Services Division Douglas R. Oberhelman – Chairman and Chief Executive Officer Bradley M. Halverson – Group President and Chief Financial Officer

Jerry D. Revich – Goldman Sachs & Co. Ted Grace – Susquehanna Financial Group LLP David Raso – ISI Group Eli S. Lustgarten – Longbow Securities Stephen Volkmann – Jefferies & Company Seth R. Weber – RBC Capital Markets, LLC Andrew Casey – Wells Fargo Securities Robert Wertheimer – Vertical Research Partners, LLC Andrew Kaplowitz – Barclays Capital, Inc. Ann P. Duignan – JPMorgan Securities, LLC

Good morning, ladies and gentlemen, and welcome to the Caterpillar Third Quarter 2013 Earnings Results. At this time, all lines have been placed on a listen-only mode, and we will open the floor for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host Mr. Mike DeWalt. Sir, the floor is yours.

Thank you, Kate, and good morning, everyone, and welcome to our earnings call. This is Mike DeWalt, Caterpillar’s Vice President of Strategic Services. On the call today, I’m pleased to have our Chairman and CEO, Doug Oberhelman; and Group President and CFO, Brad Halverson. Today’s 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 would like a copy of today’s call transcript, we’ll be posting it in the Investor sections of our Caterpillar.com website, and it will be in the section labeled Results Webcast. This morning, we’ll 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. The discussion of some of the factors that individually or in the aggregate, could make actual results differ materially from our projections, can be found in our cautionary statements under Item 1-A that’s Risk Factors of our Form 10-K filed with the SEC in February of this year, and also in today’s forward-looking statements language. We’ll start this morning with a review of the quarter, our outlook for 2013, and a preliminary look at our sales and revenues for 2014. For the third quarter, sales and revenues were $13.4 billion, and that’s a $3 billion, or 21% decline from the third quarter of 2012. The decline was principally a result of change of dealer inventories and lower end-user demand. The sales decline was mostly in our Resource Industries segment, which is principally mining, where sales were down 42% versus the third quarter of 2012. Sales in our Power Systems and Construction Industries segments were each down about 7% in the quarter and driven mostly by dealer inventory changes and in the case of construction currency impacts. End-user demand for both Power Systems and Construction Industries were relatively flat with last year. Now, the sales in our Resource Industries segment, which is mostly mining had behaved more like Construction and Power Systems, we’d certainly be having a different and more positive discussion today. But the reverse is also true, if Construction Industries and Power Systems were seeing similar conditions as mining, it would be a much more negative story in a way that’s the silver lining in the down year like 2013. It’s good that we have different businesses that are all behaving the same way at the same time. While Resource Industries sales are very low, sales in Power Systems, Construction Industries have been more stable. In fact, despite the drop in Resource Industries, which we expect sales to be down about 40% this year; you might be surprised that our outlook expects 2013 to be the third highest year for sales and revenues in our history. Profit in the quarter was $1.45, and that was down $1.09 from $2.54 in the third quarter of 2012. The decline in profit is primarily a result of the $3 billion drop in sales and absence of last year’s gain on the sale of our third-party logistics business. For the quarter, our decremental operating profit pull-through, and that’s a decline in operating profit as a percent of the decline in sales and revenues, was close to 30%, if we exclude last year’s gain from the logistics business. We think that’s pretty good, considering how much of the decline was from mining products, which have a relatively higher variable margin. We were able to do that because of the cost actions we’ve taken this year. Being cost-flexible in a downturn is a key element of the strategy and we’re executing. Volume-adjusted costs were down over $350 million in the quarter, and excluding inventory absorption impacts, it was more like $450 million. Year-to-date, we flexed our variable cost down with volume, and beyond that, we’ve taken out cost, again, excluding inventory absorption impacts by about $700 million, and that’s year-to-date. To achieve that, we’ve had numerous temporary plant shutdowns, a reduction of more than 13,000 of our global workforce since this time last year, we’ve had temporary layoff for thousands of salaried management employees, we’ve had reductions in program spending, substantially lower incentive pay, and we’ve implemented general austerity measures across the Company. In addition to lower cost, we’ve also cut CapEx, and through the first nine months of 2013, it’s down nearly 20%. Now, we’ve also continued to improve operational performance throughout the Company, but unfortunately much of that improvement is being overshadowed by the decline in mining sales. We’ve improved safety in our factories, we’ve improved product quality, and we’re seeing that in the metrics that we track, and that’s what we’re hearing from dealers and customers. For most of our major machine families and that includes mining overall, our sales of products to end customers are doing better than our machine competitors as a whole. We’ve also done a good job executing in China, and sales there are up about 20% year-to-date and almost 30% in the third quarter. Okay, that’s a quick summary of the quarter. I’m going to move on to the outlook for 2013. This morning we lowered the outlook for sales and revenues to about $55 billion. That’s a decline of about $2 billion from the midpoint of our previous outlook. We’re now expecting profit in 2013 to be about $5.50 a share, and that’s down from $6.50 at the middle of the previous sales outlook range. While sales in revenue expectations are lower across much of the company, the decline was most significant in mining and that’s in our Resource Industries segment. Mining has been difficult to forecast and that’s been the case all year. And I think it’s worth recapping what happens to the outlook over the course of 2013. And that story starts about mid-2012, when orders of new mining equipment began to drop substantially and they remained low through the remainder of 2012. By the time we got to the outlook that we provided in January of 2013, we’ve been seeing few mining orders and we understood from customers that they intended to reduce CapEx, because of that our outlook from last January included a drop in mining sales for 2013. Now that said, we were still seeing strong mining production levels from most commodities and we were expecting that mining companies will start ordering more as 2013 progress. Now to be clear, we were not expecting at that time a quick return to the higher order rates of early 2012, but we did expect some improvement later in 2013. By the time of our April outlook, orders had still not improved much, so we lowered expectations in our outlook for mining. We’ve reduced the sales and revenues outlook again when we released our second quarter results in July and that brings us to today. We’re still seeing strong mine production. In fact, some of the big mining companies are setting production records. But despite that, we’re still not receiving nearly as many orders as we expected and our outlook today is lowered as a result. With the outlook now is $55 billion, we expect the full year to be down almost $11 billion from 2012, and about $8 billion of that is Resource Industries. In terms of profit, we’ve reduced our outlook for 2013 by $1 a share. The most significant for the reason for the lower profit is sales volume. Price realization, currency impacts, product mix and cost absorption from lower inventory are also contributing. We did have a favorable tax item in the third quarter and that’s helped to offset some of the profit declines. With one quarter to go, our full-year outlook for 2013 is essentially an outlook for the fourth quarter. If you subtract nine months of actual from the full-year outlook, you’ll see that we’re expecting sales and revenues in the fourth quarter to be a few $100 million higher than the third quarter, but profit per share to be about 16% lower than the third quarter. The $0.16 profit drop is from the absence of the favorable tax item in the third quarter and higher costs in the fourth quarter. And that’s common in Caterpillar that costs are up in the fourth quarter. It’s usually a high seasonal quarter for us and the first quarter is usually the low seasonal quarter. Okay, that’s the outlook for 2013. Let’s turn to 2014, and we’ll start with economics. In general, we think 2014 could be a better year for global growth. However, we are concerned. We’ve been in a similar position over the past two years. When economic indicators began to look more positive, we forecast better global growth, that drove the expectations around key industries that are important to our business and we set our outlook. As it turned out, world economic growth was weaker than we expected. Today, while it looks like there is a good chance that the world economy could improve next year, there is still much risk and uncertainty. The direction of U.S. fiscal and monetary policy remains uncertain and the climate in Washington is divisive. Eurozone economies are far from healthy and China continues to transition for a more consumer-demand led economy. In addition, despite higher mine production around the world, new orders for mining equipment have remained low. As a result, we’re holding our preliminary outlook for 2014 sales and revenues flat with 2013 in a plus or minus 5% range. We’re expecting some growth in Construction Industries relatively flat sales in Power Systems and a decline in Resource Industries. Within the decline in Resource Industries, mining remains very cloudy and tough to forecast. The $8 billion decline that we’ve seen in 2013 has been largely from equipment sales. And that decline in equipment sales has been split between lower end-user demand and the impact of dealer inventory. Embedded in our outlook for down sales for Resource Industries in 2014 is more decline in end-user demand for mining equipment. Our outlook for 2014 in fact includes a greater percentage decline in end-user demand in 2014, than we’ve had so far in 2013. However, that’s partially offset by the impact of dealer inventory changes. Dealers have reduced mining inventory substantially in 2013. That means what we’ve sold to dealers this year is much less than what end customers have been buying from them. For 2014, we’re not expecting nearly the scale of dealer inventory reduction that we’ve seen this year, and that should help offset some of the decline in end-user demand. Mining orders have been weak since the middle of 2012, and we’d like to start seeing some uptick. We all know this is an industry that has a history of quickly and significantly changing course, both up and down, and we’ve seen it move dramatically in both directions over the past five years. That said, and despite prospects for improved economic growth in 2014 and the continuation of strong mine production around the world, we won’t be increasing our expectations for Resources Industries until mining orders improve. Now, one thing you won’t find in today’s release around our 2014 outlook is a profit expectation, and that’s normal for us. At this time of the year, we commonly provide a sales outlook which we’ve done but not profit, and that’s because we’re still working our plans for next year. It’s our usual practice to provide our first profit outlook with our year-end release in January and we certainly expect to do that. I’d like to finish today with a few comments on cash flow and the balance sheet, and then we can move on to the Q&A. Although it has been a challenging year for sales and profit, it had been a very good year for cash flow. In the third quarter, Machinery and Power System operating cash flow was $2.1 billion, and even if we stop today at the end of the third quarter, the nine-month mark for the year, those nine months would be our second best year for cash flow in history. And that’s enabled us to continue improving our balance sheet, in fact our Machinery and Power Systems debt-to-capital ratio currently stands at about 34% and we expect this kind of improve again in the fourth quarter. We’ve also returned cash to shareholders. We’ve repurchased $2 billion of CAT stock this year and we’ve raised the quarterly dividend by 15%. We had $1.7 billion remaining on our Board authorization to repurchase stock and that expires at the end of 2012. We’re not announcing additional stock repurchase today, but our priorities for the use of cash are unchanged. There are certainly many factors that could impact the future, but the strength of our balance sheet and cash flow are positive indicators of our potential to complete the authorization before it expires. Okay, with that let’s move to the Q&A.

Thank you. Ladies and gentlemen the floor is now open for questions. (Operator Instructions) Our first question today is coming from Jerry Revich. Please announce your affiliation; then pose your question. Jerry D. Revich – Goldman Sachs & Co.: Good morning it’s Goldman Sachs. Mike, can you say more about the magnitude of the additional cost rationalization efforts you’re considering that you outlined in Q&A item four, and just give us a sense on timing of the decision and the potential magnitude of savings if you can go out that far? Bradley M. Halverson: Yes, this is Brad Halverson. Let me give a shot at that. We talked and Mike talked about the fact that we missed the mining sales forecast this year, there’s no doubt about that, and that’s caused our forecast in sales to drop. But inside our walls, we’ve been planning for kind of a variety of items. So if you look at our mining group, they’ve been taking significant cost action during the year. And so, a lot of those actions have been, I would say, cyclical, and Mike talked to about our shutdowns and kind of our rolling layoffs, and some of the CapEx reductions and those things. And the fact is, we are proud of the results that we’re forecasting for the year, we’re looking at a decremental pull-through of around 30%, which was within our target range. And I would say had two significant headwinds, what would be over $1 billion kind of headwind in operating profit and that would be the mining mix and the peer cost absorb impact. So, to get back to your question, in terms of looking at further cost reductions, we are looking at structural cost reductions, cost reductions that we would take with us as volume would turn up. And the types of things that we would be looking at would be shifting production between facilities, rationalization of some product lines, looking at some of our smaller facilities in terms of rationalization, consolidations of functions, benchmark activities, span of control, those types of things. And we have a lot of those in consideration. We’re not kind of ready to talk about the magnitude of what that could be, but there’s clearly a lot of work going on in that area. Jerry D. Revich – Goldman Sachs & Co.: Okay. And Brad as you alluded to obviously a lot of adjustments this year to the lower production levels. I guess in the past we’ve seen your cost structure improve, as you’ve gotten to more even production levels and I’m wondering how should we think about the normalized cost structure today, compared to where we were starting the year. And I know you’re not going to talk about 2014, but just could you give us a rough sense of the type of tailwind we should be thinking about? Bradley M. Halverson: Yes, I think it’s always hard when you get into a discussion of 2014 where we’re not getting a profit outlook. But we have talked pretty consistently about our pull-through targets. I can’t say we’re going to hit them on the downside this year with huge headwinds, we’re still committed to a 25% operating pull-through, as business improves. That’s an environment that I think that we’d all like to see with our capacity and our cost structure will have in place in terms of ability to deliver that. But I would say that we are in our planning process now. That remains kind of our target. There are some things that we may not be able to control or cannot control like the R&D tax credit and those things which will be renewed or will not be renewed. But we are committed to that 25% pull-through number. Jerry D. Revich – Goldman Sachs & Co.: Thank you.

Thank you. Our next question today is coming from Ted Grace. Please announce your affiliation; then pose your question. Ted Grace – Susquehanna Financial Group LLP: Thank you. Hey, guys. I was hoping to follow-up on Jerry’s question. I know you highlighted kind of reduction in workforce by 13,000 year-on-year. Could you just; A, maybe start by telling how much of that, was that – from Brad’s comments was that all cyclical and not structural and was there any of that tied to any of the divestitures, whether it was logistics or some of the Bucyrus distribution sales?

: Ted Grace – Susquehanna Financial Group LLP: : Bradley M. Halverson: : So the question is, if our priorities change and the answer is no. We will continue to protect our credit rating. I would say that coming out of 2009 modeling our potential downside, would have us keep a slightly stronger balance sheet in terms of what could happen in our recession or contagion which clearly we are not calling for but we would probably hold a little stronger balance sheet and then really looks at our growth opportunities across to our segments that’s our second priority and we kind of have a pretty strong forecasting process and modeling for each of those two we’ll continue to fund our pension and benefit plans. We’ll continue to have a very sustainable dividend and then you get to the question of stock buyback and we thought given that equation and all that modeling that this year the $2 billion we did made sense and we still do have a $1.7 billion less. We are calling for a flat outlook. So I would say we would like to see how 2014 would materialize and what would be happening in 2014 before we would make a decision on that remaining $1.7 billion. : So the question is, if our priorities change and the answer is no. We will continue to protect our credit rating. I would say that coming out of 2009 modeling our potential downside, would have us keep a slightly stronger balance sheet in terms of what could happen in our recession or contagion which clearly we are not calling for but we would probably hold a little stronger balance sheet and then really looks at our growth opportunities across to our segments that’s our second priority and we kind of have a pretty strong forecasting process and modeling for each of those two we’ll continue to fund our pension and benefit plans. We’ll continue to have a very sustainable dividend and then you get to the question of stock buyback and we thought given that equation and all that modeling that this year the $2 billion we did made sense and we still do have a $1.7 billion less. We are calling for a flat outlook. So I would say we would like to see how 2014 would materialize and what would be happening in 2014 before we would make a decision on that remaining $1.7 billion. Ted Grace – Susquehanna Financial Group LLP: Okay. That’s great. Thank you very much. I will get back in queue.

Thank you. Our next question today is coming from David Raso. Please announce your affiliation and pose your question. David Raso – ISI Group: Hi, ISI Group. At the end of the day, people are trying to figure out on flat revenues can you grow earnings next year. So I know you don’t want to give an EPS guidance for 2014 yet. But can you at least take us through the puts and takes to think about the year-over-year change in clause mix incentive comp, share count, tax rate just to frame the discussion it’s obviously the guidance for this year I’d argue about $0.50 lower, the most of lower the most of buyer-seller expectations but even off that lower level if you’re guiding revenues flat what’s the reason to leave us all thanking earnings are up next year. So can you help us with us on the puts and takes? Douglas R. Oberhelman: Yeah David I really don’t want to get in to a discussion around profit next year, not because I wouldn’t have an opinion on each one of those items that you discussed but we haven’t really provided a profit outlook we don’t normally provide a profit outlook until January. We’re working on many of the things that you discussed right now as a part of our planning process. There will be things that are positive, there will be things that are negative. Now, Brad’s comment about our sort of operating level of incremental margin kind of stance, but in a year where we’re not forecasting any change in sales, I’m not sure incrementals are a great, great metric there’s just not enough sales change for it to probably be a very valid metric at this point. So I’m going to if you have another question, I will take it, but I think we’ll pass on, on talking about 2014 profit, because we just don’t have an outlook to talk from. David Raso – ISI Group: Well, how about on the sales, as it relates to dealer inventory we used to target $3.5 billion of dealer inventory reduction for the year I think roughly 75% of that in mining, can you update that target? Douglas R. Oberhelman: I think it’s by and large similar we’ve not changed that, we’re looking for another decline order magnitude, the size of the fourth quarter, I’m sorry the size of the third quarter again and the fourth quarter. So, yeah, we’ll have a pretty sizable inventory reduction this year. Next year if you look at our sales forecast, we’re thinking of inventory being more neutral maybe a slight further decline in Resource Industries, but maybe a slight increase in Construction, but neither of that dramatic on balance pretty neutral. So what you have is you have a tailwind, if you will, from dealer inventory and that would drive most of the improvement in Construction Industries that we talked about. But we’re looking at a further decline in end user demand for mining, and that’s essentially offsetting the inventory decline or actually for Resource Industries little more than inventory decline. David Raso – ISI Group: Okay. I appreciate it, thank you.

Thank you. Our next question today is coming from Eli Lustgarten. Please announce your affiliation; then pose your question. Eli S. Lustgarten – Longbow Securities: It’s Longbow Securities. There is two pieces, I do like if we can talk a bit more. One, the change in outlook in Power Systems, which was really talked about being flat and now is down 5% for the year would be the decline. If things been pushed out and you talk about some color with decline in order trends there. So maybe we can get some feel for next year? And then the big decline in profitability of Construction that occurred in the quarter. I guess that’s mostly from lack of production, inventory liquidation and if you could maybe give us a color behind what’s going on there as we look forward?

Yeah, you’re right. Well, I’ll start with Construction here. You’re right from a margin standpoint it was not a great quarter for Construction. Their operating was around 6%. If you look at what’s going on in construction, they’ve got a few days that right now are headwinds for them. One is actually product mix. Their sales aren’t down all that much. But if you look at what’s down and what’s up, you’d have some of their larger products in construction maybe as far up as a D8 tractor. That’s the largest bulldozer that they make and maybe some of the larger wheel loaders that are part of the construction business, but that are frequently used in mining applications. So at the very top end of Construction Industries, you’d have some products that I have a crossover into mining. That part of their business is down as you might expect from mining. The part is really picked up is really the small one, our BCP, Building Construction Products division. They’re actually up nicely this year. So you’ve got this negative mix right now that’s kind of weighing a little bit on Construction Industries. They’ve also taken some and delivered some sizable orders in Brazil directly to the Brazilian government. And in fact, it’s a large order. We delivered some in the second quarter and even more in the third quarter. And in fact, we’ve recently won some more business there. So that’s a good story on sales. The problem is it’s a very big order, and the pricing on it, I would just describe it as you would expect with a large order lean. Also, in Construction Industries, just from a competitive standpoint, it’s always a tough market out there with competitors, but you’ll notice price realization is negative in the quarter for Construction. A chunk of that is because of the large Brazilian deal and a chunk of that is just because it’s a very, very tough environment from a pricing standpoint. And I would say, particularly in Europe, it’s been tough. Over the course of the year, we have been reducing our inventory as well. We have PDC inventory and that’s been coming down all year long. And we’ve participated in selling that. So I think those things have been negative for Construction Industries and in the quarter. I think at some point in time here when the mix for them gets maybe a little bit more back than normal and there are no longer cutting inventory, there is good potential for margin to improve there. But at the moment, it’s kind of a tough environment for them. You asked a question on Power Systems. Eli Lustgarten – Longbow Securities: Power Systems related to change in forecast to down 5 from flat, what’s going on color wise, order wise we get some idea as we go through the rest of this year, into next year?

Yes, when we started the year, we thought it was going to be flattish. So I think if you kind of go back to January. Electric power is probably kind of a level below total Power Systems. If you look at power, petroleum, turbines, marine, rail, I think we’ve been probably more surprised with the downside on electric power than any of the other segments. It’s the weakest segment of the year. In fact if you look at the third quarter versus third quarter, it’s the most significant reason for the sales declines, so it’s off the most. Actually between the last outlook and this outlook kind of going from the midpoint of $57 million to the midpoint of $55 billion, Power Systems was fairly neutral into that, it didn’t really changed much. Eli S. Lustgarten – Longbow Securities: Okay, all right. Thank you.

You’re welcome.

Thank you. Our next question today is coming from Stephen Volkmann. Please announce your affiliation; then pose your question. Stephen Volkmann – Jefferies & Company: Hi, it’s Jefferies. And a lot of the questions have been answered I guess. But Mike, I think you were saying, if I’m reading this right that you think the Resource Industries business on the OE side will be down again next year. Is that also true on aftermarket?

No, I think – that’s actually a good question and I’m going to expand a little bit more on the specific question you asked. I think our view on that is probably flat next year. I would say if there is one thing in mining, I mean it’s been difficult to forecast overall. I’ve kind of went through that from a machine standpoint. I think another place where the actual has been a little bit more negative than we thought when we came into the year is actually on parts. It’s not down substantially, but in an environment where mine production is up or part sales even to be down a little bit is not what you would normally expect. We do think that mining customers are delaying some maintenance and repair. They’re working hard to improve for this year their results and we certainly understand that. We’re taking a lot of cost action that’s pretty short-term focus as well. But that kind of behavior can’t go on forever. So it’s probably increasing the likelihood that the further out you go, the needs for rebuild and repair are going to go up. So it has been a little bit of a negative this year. We’re thinking now it is probably flat for next year. Stephen Volkmann – Jefferies & Company: Great, and then can I just ask you in your forecast for the top line next year? What are you assuming for price?

Quite modest, we weren’t specific on that in the release. But I would say well less than 1%. Stephen Volkmann – Jefferies & Company: But positive?

But positive, yeah. Stephen Volkmann – Jefferies & Company: Thank you.

Thank you. Our next question today is coming from Seth Weber. Please announce your affiliation; then pose your question. Seth R. Weber – RBC Capital Markets, LLC: Hey, good morning it’s RBC. I just wanted to go back to the Resource category again. You mentioned that you’re not cutting back on capacity there. I mean, could you just explain to us your thought process? I mean, it seems like trends are going to be soft for the foreseeable future anyway. I know it’s an industry that can turn quickly, but you’ve added a lot of capacity. Can you just walk us through maybe why you’re not making any adjustments there yet?

Yes, I’ll use a couple of examples here Seth, just to kind of maybe highlight this. If you think about mining trucks, we make some in India, but for the most part we make most of our – essentially with very few exceptions all of the large mining trucks in Decatur, Illinois in one factory. The capacity that we’ve added for that over the past few years has been around reshaping the assembly process to do more like assembly lines rather than stall build there. And we’ve added capacity and component manufacture indicator. So if you think large mining truck, it’s already centered around one factory. And in terms of physical capacity, it doesn’t make any sense to close down an assembly line or get rid of machining equipment that you put in place. So I think just from a taking out physical capacity standpoint, there is just not a lot of scope to do that. I think secondly, we’re about 12 months away looking in the rearview mirror of maybe 15 months of record production. I mean, this is an industry that goes up quickly, it goes down quickly. What you need to be able to do is flex your costs, and that we’ve worked pretty hard to do. And we’ve done a pretty decent job of that in Resource Industries. I mean, if you look at them year-to-date for Resource Industries, their operating profit sort of incremental pull-through third to third on a substantial decline in sales was just over 30%, which considering that margin is very good. So they’ve worked a lot on taking out costs, but we’re going to need the physical capacity. It’s an industry that changes around quickly, and so there is just not much sense in taking out half of the factory let’s just say. Seth R. Weber – RBC Capital Markets, LLC: Okay. So maybe if I could just follow-up on Steve’s question on the after-market. Do you feel like – do you get any sense that you’re losing share to gray market or the producers are bringing stuff in any of the service work in-house, or you think it just, they’re kind of bringing off existing parts inventory?

Yes, that’s a good question. I mean you’re always concerned about competitors in that industry. And frankly it is a lot harder to figure out what your market share is about, because you don’t’ have the kind of unit reporting of what your competitors are doing. So it’s an educated guess, but it’s really tough to forecast market share there. What I think we’re seeing right now is, lot of new equipment was purchased over the last couple of years and where mining companies have a choice about the uptime and where they are pushing equipment hard, they would be tending to do that with the newer equipment that they have. And we do think they’re delaying some maintenance as well. So our general feeling around it is that it will come back. We’ve not seen any seismic shifts there. Our dealers are highly engaged with the service and support activity, as a customers they’re very good at it. They have significant rebuild program. So I think to some degree, it’s around mining companies working really hard right now to improve their operating results and a lot like we’re doing. Seth R. Weber – RBC Capital Markets, LLC: Right. Okay, thank you very much, Mike.

Thank you. Our next question today is coming from Andrew Casey. Please announce your affiliation; then pose your question. Andrew Casey – Wells Fargo Securities: Wells Fargo Securities, good morning everyone. Couple of questions; first, if we could go back to the Construction Industries comments. Mike, I think you talked about new Brazilian business contract that you won recently. Is that coming on with about the same margins as the one that the contract that you are finishing up? And then on the mix issue within Construction Industries, the BCP versus the large equipment, are you seeing any of the larger equipment sold into mining coming back on to the market in the form of used equipment?

On the first part of that with Brazil, the more recent orders that we’ve want are volume wise are less than what’s been flowing through. But I think the pricing would be – I’ve actually not seen it, but I would guess it is probably pretty similar. In terms of used equipment coming back on the market, I have not heard – I wouldn’t plan to know that as a firm, yes or no, but if you look at actual mine production. So let’s say, you’ve got some D8 tractors working in a small surface coal mine. Mining production has actually come up a bit. So it would surprise me that there would be a flood of that kind of equipment on the market. I think it’s more a case, where they’re working what they have and not buying new. But as I say that Andy, I don’t have any facts or data to back that up. Andrew Casey – Wells Fargo Securities: Okay. And then if I could sneak in actually a positive question. You realized about 50 basis points higher gross margin in Q3 than Q2…

Yeah. Andrew Casey – Wells Fargo Securities: Despite lower revenue and lower price realization, can you talk about the main drivers of that sequential improvement?

Yeah. It’s been all about cost. I mean we have been hard at work taking out costs. So that has been a piece of it. I would be remiss if I didn’t take a little bit of credit though for this tax item we had in the third quarter, and we did have a little bit less negative of a currency drag. But I think given decline in sales, second to third, you have to look at costs. We talked about being favorable year-over-year 350 in the third quarter, 450 without inventory absorption and year-to-date we’re about seven. So we got more than half of the year-to-date cost reduction actually in the third quarter. So that has been a big focus for us. A lot of the actions that we started putting in place in late spring, early summer have started to bear fruit. Douglas R. Oberhelman: Mike, let me just interject here. Doug Oberhelman, on two items. One is price in market share and the other one is cost. Picking up where Mike left off on cost for example. If you look at second quarter of 2013 quarter-to-quarter, same profit per share both quarters on $1 billion less of sales kind of Mike’s point. We have everybody here on a cost lockdown bench. As I mentioned in one of my quotes in the release, if you sort through the absorption factor of inventory and adjustment and everything, we really take it out $700 million, a lot of that is incentive pay, rolling layoff, et cetera. But there is a pretty good chunk in there. It’s starting on structural cost reduction, which we’ll see picking up as we go forward. But certainly that 30% decremental operating profit is one we watched, a little than I want. But when you factor in the mining mix, it’s sort of justified, but it’s something we will really concentrate on. As we see sales increase, at some point they will likely, we expect to get back that 25% or so range of incremental operating profit, so all hands on deck here on cost structure and more coming. Secondly on pricing, there was a question on pricing in 2014. We have really been on a strong effort here with our dealers to balance market share and price the last four years and we have seen our market share grow substantially on a global basis. And just as a reminder, inside China, while our China business is up overall, it’s up primarily because of increased market share and we’re in a nice position there going forward, a market. I think we have to be in if we’re going to be the global leader down in the road. With that we’ve said to our customers that we would expect to keep pricing in line with inflation or so. And so we’ve been able to do this through – gain market share through cost reduction and quality improvements, while getting some price and I’m just going to roll that in as a general statement to 2014. I would not expect a great price realization in 2014, we’re not going to budget that in. But at the same time, I’d anticipate and hope for more market shares gains. It might be modest, while we maintain some price. I think that’s the balance we’ve been on and up to maintain. Remember, every extra machine we put into field population drives a tremendous piece of aftermarket sales for us, which we really like. Andrew Casey – Wells Fargo Securities: Thank you.

Thank you. Our next question today is coming from Robert Wertheimer. Please announce your affiliation; then pose your question. Robert Wertheimer – Vertical Research Partners, LLC: It’s Vertical Research Partners, good morning. You’ve mentioned a lot on mining. One question I had is just you laid out last quarter of the potential in the market it was down somewhat for you to be up somewhat on the inventory swing, and the arithmetic made sense there. And obviously, you are forecasting down now and you’re saying that the retail will be worse. The underlying question really is, if you heard from mines and their sort of strategic planning in the walk they do with you, that’s not just a couple of weeks or a month or two forward reflecting current orders. But reflecting the next year that they sound that much more cautious, and the conversation is like that drive the outlook that mining could be down next year OE? Douglas R. Oberhelman: Yeah, I’ll take that, Doug again here Rob. I have had several personal meetings with our mining customer CEOs the last few weeks, month or so on this very question. And it strikes me that two things are going on, the bullishness in which they answer that question on existing mines. If you look at a couple of big announcements, even in last week of increased iron ore production or increased coal production, and in my discussions with these guys, it’s been pretty bullish in terms of what they see for existing mines in the scope of a very bearish situation for any expansion. Any expansion in the near-term is dead. It’s over. It’s not going to happen. But they are really focused on increasing productivity, getting a lot more mine production out with less resource. That’s one of the reasons I think we’ve seen fewer replacement sales and aftermarket sales frankly in the last few months. But they are all fairly optimistic on existing mine production also in the medium-term, because if you get back to what’s going to happen with the world economy, nobody knows, and I’m not going to forecast it here today, you know, as we took a pretty benign view of all that in our release this ,time because we don’t know. But they are feeling, I think for the most part that even one to three years out, the world will grow. China will not implode. It will continue to attract iron ore and some coal and they feel that they want to get that out of existing resources. At some point that plays right to our hand, just not right now. Robert Wertheimer – Vertical Research Partners, LLC: Great. Thank you, Doug. One unrelated follow-up I guess. Locomotives, I think you mentioned in the press release were down, we’re coming into a pre-buy year that was a bit of a surprise. Could you talk about why that might be down on a little mining mix? And then what’s your status on Tier-4 freight locomotives?

Okay. We’ll go back to the first part of that. This is – this should end up being an up year for locomotive sales, a pretty good year. And I think our view on next year is actually reasonably positive as well. Now that said, it’s not – in some ways it’s a little bit like turbine. It’s shipments on big orders from customers. They don’t go out necessarily smoothly month-by-month, month. So there was a small decline quarter-over-quarter, it had more to do actually with the pretty good third quarter last year. So I wouldn’t want to send any weird messages there, I mean I think it’s a case where our locomotive business is going to be up this year. We expect a decent year in 2014 as well. Douglas R. Oberhelman: Yes, I want to comment on that as well. We’re really happy with our rail division and our locomotive business. We’ve seen steady market share gains. We’ve seen a lot of cost reduction there. We’re really happy with that and have a lot more plans coming. With your question – regarding your question on Tier-4, I think in November, we will ship our first production locomotives powered by LNG. And we’ve been working on that all year. It’s a big effort we have, and it’s one way to address the Tier-4 situation coming up in a couple of years for rail. They will hit it – the first ones will hit the tracks in November and they’ve been through quite a bit of experimentation, and we’re optimistic on that. In terms of diesel power side, we have a lot of experience with diesel Tier-4 on our off-road business that spills over into locomotive, and while we’re a couple of years away, we’ll be using a lot of same technology and in good shape. But I’m really excited about the possibility of LNG power locomotives here in the near-term, particularly with the smart spread being so low at the moment. So I’m really happy with rail and locomotives. This will be I think a record year for them and next year ought to be continue on that as well. Robert Wertheimer – Vertical Research Partners, LLC: Thank you. Douglas R. Oberhelman: Thanks, Rob.

Thank you. Our next question today is coming from Andrew Kaplowitz. Please announce your affiliation then pose your question. Andrew Kaplowitz – Barclays Capital, Inc.: It’s Barclays. Good morning, guys.

Good morning, Andy. Andrew Kaplowitz – Barclays Capital, Inc.: Mike, can you just talk about your comments that you made earlier in the call about dealer inventory in construction that it could be up next year, maybe your visibility around that? And as part of that, is it possible to quantify your PDC inventory now versus maybe this time last year and the peak in that PDC inventory?

Yes, yes. I don’t – I’m actually glad you’re asking me to clarify that a little bit, because I just want to be clear, we’re not expecting construction inventory to be up a lot, we’re not looking for mining inventory to be down a lot. The reason for my comment was in a year that we’re not expecting a lot of dealer inventory change, that’s 2014, that’s not to say, there might not be a little shift up and a little shift down here and there by business. So I wasn’t trying to signal a big build or a big reduction. I’m just trying to say that it doesn’t mean that it’s going to be zero everywhere. So construction, I think whether or not and how much inventory is built next year will kind of depend upon how things are looking in the marketplace later in the year. So, as 2015 looking up, you know there is 2014 start slow and start building as you go through the year, and if that’s the case, then dealers may want to add some inventory later in the year. We’ll have to actually see how the year kind of shapes up and what 2015 is looking at when we get later in the year. So, I think the takeaway from today should be our expectation based on what we see today is probably not much changed. In terms of PDC inventory, we don’t quantify that directly separately, but I can tell you it’s less than half of the peak. So, it’s actually fairly, I would say, at a good level. Right now, I don’t – it will change seasonally. It will probably go up some in the fourth quarter, and maybe a little more in the first quarter as we kind of get ready for the spring selling season. What customers buy has a lot more variability in it than what we sell. So, dealers usually build some inventory in the first quarter. And probably late this year, first quarter next year, we probably build a little piece of the inventory ahead of the spring selling season. So, some shifts up and down would be normal based on seasonality, but it’s less than half what it was at the peak. Andrew Kaplowitz – Barclays Capital, Inc.: That’s helpful Mike. And Mike or Doug, maybe could you tell us do you think you will see any impact from the government shutdown, the uncertainty in Washington? And maybe just your sales guidance for 4Q, you are talking about a slight uptick in sales. Yet if we look at your sales trend throughout the year, 3Q was pretty low versus 2Q and your backlog is sequentially lower. So, where should we expect the sales pickup and why should we expect the sales pickup?

Yeah, I’d say you will see the sales pickup in Power Systems. That normally happens on turbines, rail. We usually have a little bit bigger fourth quarter. Douglas R. Oberhelman: I’ll handle the shutdown piece of your question a little bit. I would say there has been minimal impact on us so far. However, I’ve been with a number of small, medium-sized contractors the last two weeks from around the country, and that is the first or second question they ask because they’re feeling it. And for the most part, they’re fairly busy right now, but they are worried about where this goes. I would say that they probably – their answer wouldn’t be that they felt it, but they’re worried about feeling it in the future, and that’s frankly one of the reasons for our uncertain comments or our comments in here about uncertainty in political arena, because I don’t know what’s going to happen in the next 90 days. But if you look backwards, I’ve got to believe that the rancor in Washington, the dysfunction in Washington over the last three years has not helped grow the economy any faster than 2%, that’s probably not a real brilliant deduction. But I think if it would’ve been quieter out there, we wouldn’t – not have had that we’d probably had higher growth. So I look at it kind of just the opposite when I think about it. I’d like it to go away. I think we have higher growth, but I don’t think it’s going to go away, and I think it’s going to be with us for some time, and that’s just the atmosphere in which we have to operate. We’re working on everything within our four walls that we can do to make sure we’re operationally efficient, doing what we can do to lower cost because I don’t know what’s going to come from outside, maybe led by the politicians, maybe not. Andrew Kaplowitz – Barclays Capital, Inc.: Thanks guys, I appreciate it.

Thanks Andy.

Thank you. Our next question today is coming from Ann Duignan. Please announce your affiliation; then pose your question. Ann P. Duignan – JPMorgan Securities, LLC: Yes, JP Morgan, thanks. Doug, back to the points you made about focusing on cost and lowering costs. I mean we still missed the goal of 25% pull through, which you’ve been pretty adamant you were going to meet, and we missed it by a longshot this quarter. Should we take away from that that you’re just not moving fast enough or that you’re structurally disadvantaged going forward because of the high fixed cost in mining to Mike’s point earlier that most of the mining equipment comes out of one plant and therefore there isn’t really the opportunity to take as much structural cost out of the system as we need in this environment? Douglas R. Oberhelman: Yeah. And I’ll let Brad to just start on that and I’ll finish it up with a couple of observations. Bradley M. Halverson: Ann, we have talked about on the decremental side being in a range of 25% to 30%. And so we’re on the high-end of that. I think to extent we had a normal decline in volume, which spread across our segments. I believe we would be living to that today. The fact is we have a huge mix issue with the mining margins and the peer cost absorbed impact. I talked about them earlier, but they’ll be over $1 billion and over 10% impact on pull-through in and of itself. And so being at 30% decremental giving where the volume came from I would say would be within our expectations for what happened. Douglas R. Oberhelman: And I would say, let me – I’m sorry. Bradley M. Halverson: One thing that maybe we haven’t commented on enough is that, living within this 30% has been partly due to the strong performance of our Power Systems business. We had – even with sales down good margins in that business, and Cat Financial is having a great year. Their Financial Products profit will be up 25% year-to-date. Their portfolio is in great shape. Their past dues are well down from last year. And I think probably maybe more importantly than that the percent of the deals that they finance is up I would say a significant number. Douglas R. Oberhelman: Yeah. Bradley M. Halverson: So yeah, and we want to be at 25%, and I think that our cost structure that we’re working on is to make sure as we move forward even to the flat to as we would recover would be in that range.

Ann, this is Mike. I just want to make one other comment to you. If you’re pulling numbers straight off the face of the statements, you might be getting something a little worse than that. Remember, we had a gain last year. I think order of magnitude $270 million when we sold our logistics business, and when we’re talking about 30% we’re pulling that out, that’s not operational. Douglas R. Oberhelman: I’ll just finish the discussion on this with and Ann, you’ve heard me saying, I think everybody has. And I look at 25% incremental on the way up and 25% or 30% or so, 25% or so on the way down over the period. We’ve had some quarters on the way up where we at 25%, we had some where we were at 35%. And I’d say this is going to be the same thing on the way down. But generally that’s our expectation and all of our internal planning on cost structure is based on that. While it’s a little bit over now and I’d argue a little bit that we’re not within our range that I think we often close. Losing 11 billion off the top-line in a year is pretty tough to go through. And we’ve taken a lot of cost out of it to help that but it’s just happened pretty quick. But my expectation hasn’t changed, I will tell you that. Ann P. Duignan – JPMorgan Securities, LLC: I guess, my push back Doug, and I appreciate what you are saying that when your volume is down this much, it is hard to manage bottom line. But I guess I would push back and say, are you really moving quickly enough. And when can we expect to hear what’s next. When are we going to hear about all these things you are looking at? Douglas R. Oberhelman: Yeah, and I would say that again with what happens, I think we are moving very fast with what we can do. I would say you are going to hear more about the things that we are actively working on as we speak when we release in January would be my guess. Ann P. Duignan – JPMorgan Securities, LLC: Okay, so we won’t have to wait for CONEXPO, I guess, that’s what my fear was. Douglas R. Oberhelman: No, I thought – I mean, I don’t know. I can’t tell you for sure, but if you ask me what my estimate would be, I would say that we would be looking to do it in the release of January. Ann P. Duignan – JPMorgan Securities, LLC: Okay, I’ll leave it there, thanks very much. I appreciate it.

Okay. All right, we are at the top of the hour, I just wanted to thank everyone for being on the call today and we’ll be talking to you over the course of the next quarter.

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.