Good morning, ladies and gentlemen, and welcome to the Caterpillar First Quarter 2008 Earnings Results. (Operator Instructions) It is now my pleasure to turn the floor over to your host, the Director of Investor Relations Mike DeWalt. Sir, the floor is yours.

Thank you very much, and good morning, everyone, and welcome to Caterpillar’s First Quarter Earnings Conference Call. I’m Mike DeWalt, the Director of Investor Relations, and I’m very pleased to have our Chairman and CEO Jim Owens with us today, Group President Ed Rapp, our CFO Dave Burritt. We’ll all try to answer your questions today. Now this call is copyrighted by Caterpillar Inc. and any use, recording, or transmission of any portion of the call without the expressed written consent of Caterpillar is strictly prohibited. If you’d like a copy of today’s call transcript, you can go to the SEC filings area of the Investor Section of our Cat.com website or to the SEC’s website where it will be filed as an 8-K. In addition, certain information relating to projections of our results that will be discussing today is forward-looking and involves risks, uncertainties, and assumptions that could cause actual results to differ materially from the forward-looking information. A discussion of some of the factors that either individually or in the aggregate, we believe could make our actual results differ materially from our projections discussed here can be found in the Cautionary Statements under Item 1A Business Factors of our Form 10-K filed with the SEC on February 22nd. Earlier this morning, we reported results for the First Quarter of 2008, and the headlines of the release were pretty positive, particularly given the current economic environment. There were two points from the headline in our release this morning that I think are worth reiterating as we start today. Those two points are: Sales and revenues and profit per share were both first quarter records and both were up 18% from the first quarter last year. 2) This was the best first quarter ever for our financial products business. We…

Our first question today is coming from Jamie Cook. Please announce your affiliation, then pose your question. Jamie Cook – Credit Suisse Securities : Hi. Good morning and congratulations on a nice first quarter. I guess, Mike, just my first question: Could you just sort of give us an update? Last quarter, you guys were nice enough to provide sort of more granularity on your operating costs. What exactly now are you assuming for pricing and for material costs because that should be a headwind as well as I think before you assumed variable manufacturing costs to be about flat. If you could just through those line items for us.

Yeah Jamie. Material costs, just to kind of it a little bit of background before I look forward-looking, material costs were up about 1% in the first quarter or about $60 million. The remaining $110 were other costs besides material and manufacturing. Our outlook for material costs is up a bit from our original outlook, but not anything that you would, not massively. I mean we had the $60 million increase in the first quarter. It’s probably going to go up from there as we progressed through the year, particularly in the second half. But we should offset it with price increases that we took.

That is one of the uncertainties in the outlook. This is Jim Owens. I think the… We’re certainly watching very carefully what’s going on with global steel prices. One of the things we’re working very hard on is working with our global supply base and trying to work with our product teams to work on material cost reduction opportunities and some of these will offset some of the commodity driven inflation that we’re seeing in our material costs. So this is something we’re keeping a close handle on and partly the reason we took some of the mid year that we’ve announced on price. Jamie Cook – Credit Suisse Securities : Would you view this as the biggest risk to your earnings guidance?

I think it’s the reason we have the range we have. Jamie Cook – Credit Suisse Securities : Then I guess, Jim, just because you are on the line, I guess my follow-up question: If you look, I mean you reaffirmed your 2010 outlook of $8 to $10 per share, I guess over the longer term the thing that concerns me is North America appears weaker than we thought. While overseas is very strong, North American margins are generally higher. If the higher recovery takes longer to materialize, how do you achieve your peak margins and are you assuming any improvement in your international margins, or are you assuming the gap should narrow between international margins and overseas to achieve your peak 2010 target?

Well I’m very pleased to say the margins in our overseas sales have improved significantly over the last three/four years anyway. We’ve been working very hard on that and we’ve got substantial improvement. I would look for them to continue to improve. The other thing I would point is: Yes, North America is down; it’s down very sharply. At the retail level kind of peak the trough it’s probably off on the order of 44% already kind of on a sliding basis since it peaked in ’06. But we would see the United States sort of be coming back. Housing’s going to overcorrect on the downside. As we move out into ’09 and ’10 and with the economic stimulus, both fiscal monetary policy, and stabilization of credit markets, I would think the United States, as long as we don’t do anything silly on the policy side and we keep ourselves open and engaged in trading in the world market, I think we’ll see a nice economic recovery in the United States out there in the ‘09/’10 timeframe. Jamie Cook – Credit Suisse Securities : But are you assuming North America, ’08 is still the bottom of the North American machinery cycle?

I think it will continue down to another three to six months and then we’ll find a bottom and then start moving up from there.

Thanks, Jamie. Jamie Cook – Credit Suisse Securities : Thanks.

Thank you. Our next question today is coming from Terry Darling. Please announce your affiliation and then pose your question. Terry Darling – Goldman Sachs: Goldman Sachs. Wondering if you could elaborate a bit on the negative mix effect from machines? Is that a mix of product, mix of geography, or a bit of both?

Well there’s actually a little bit of both, but quite a bit of it was product. I’ll put it in three big buckets. As you can imagine, a company like us with massive variety of products and services trying to summarize into sound bites that capture it can be tough, but I’ll put it into three big buckets for you here. One is: If you think about aftermarket parts, it’s generally a pretty good, we get pretty good margins on those sales and they tend not to increase; or when you have a negative situation, decrease at the same rate as new machine sales or new engine sales. What we have in the first quarter is we had actually new machine and engine sales increasing at a faster rate than the aftermarket business and so that was a bit of a negative mix on the machinery line. Second thing is: Although we didn’t have major acquisitions last year, we did have a couple of small acquisitions; one that we talked about quite a bit was Shandong Engineering Machinery. That’s in this first quarter. It wasn’t in the first quarter a year ago, and the margins on that product are… The company overall is profitable, but the margin rate, particularly at a gross margin level, is dramatically below the rest of the Company; and so that had a negative impact on the machine margin rate. The third thing is, and this is a little bit counterintuitive: Our large machine business increased nicely, its capacity constrained at the moment, but it actually increased at a lower rate then the rest of the new machine business. Last year in the first quarter we were a bit constrained on shipments, particularly with backhoe loaders. We had a production quality issue and we weren’t shipping. This quarter we certainly are, so what we saw is small machines actually increase faster than large machines in this quarter because of that. Another point and this brings in a little bit of geography, even if you look product-by-product and geography-by-geography, we had a bit of a small negative impact related to that as well. Terry Darling – Goldman Sachs: Mike, when you look at the year-over-year degradation and margins for machines, 270 basis points above the rate of deterioration last year, it sounds like you’re looking for that to improve as we move forward.

Yeah, I think if you look at, and I’m probably preempting another question that’s going to come, and after this, Terry, we’ll move on. If we look at our overall machine margins, and I’m sure that is a big question mark for a number of people waiting to ask a question, so I’ll just hit right now, our machine operating profit was done and our margin rate for machines was down. If we go through the reasons for that, this is one of the items, this negative impact of sales mix of one of the items. In addition to that, most of our cost increase in the quarter, whether it be SG&A and R&D or whether it be manufacturing costs, the vast majority of it, order magnitude 90%, was in the machinery business, not the engine business. Cost for the engine business were pretty flat quarter-to-quarter. So most of our cost increase was in machines, but only 101 of our 261 million increase in price was in machines. So we did have a negative relationship for machines between price and cost and a very positive relationship price-to-cost on engines. In addition to that, the bulk of our unfavorable impact on operating profit from currency found its way to machines. There was a little bit of that in engines, but the vast majority of it was in machines. So to summarize, the engine margin issue is mix; it’s the relationship between our cost increase and our price increase, which was the price increase was subdued for machines certainly, and sales mix. Terry Darling – Goldman Sachs: Thank you.

Thank you. Our next question this morning is coming from Eli Lustgarten. Please announce your affiliation and then pose your question. . Eli Lustgarten – Longbow Research: Longbow Securities. Good morning.

I saw you on TV this morning. Eli Lustgarten – Longbow Research: Thank you. Just a quick question following up: You talk about the big step up in margins in engines, which was very impressive for the quarter, and whether or not how sustainable is that, and tied to that you did have positive cost price in the first quarter. I assume from your comments that likely that will stay positive cost price at least for the next couple of quarters given probably the delayed impact of the 5% price increase.

Yeah, engine margins in the quarter were fantastic. I don’t how else describe it. We had a good solid price realization. Remember big engines are in significant demand. There’s a long backlog. The customers in those areas are getting a lot of price on their work and we’ve been able to pass some price into those markets. So pricing for engines overall has been very good. They did an exceptionally good job of holding costs in line in the quarter. I do want to come back to kind of the forward-looking view. We didn’t actually announce a 5% price increase. We said, “It would range based on models and territories somewhere between zero and five.” I guarantee you; the impact is going to be dramatically less 5%. Now if we look at the cost price relationship going forward, we had a fairly balanced view in our original outlook. We said price would be up around 2%. We said cost would be up 2 to 2.5., and that gives us a pretty even balance between the two in our outlook. I don’t think we’ve done anything here in this outlook that’s changed that. So I would say, on balance as we go through the year, it certainly could vary quarter-by-quarter, but in balance our outlook looks for cost and price to be pretty similar for the year. Eli Lustgarten – Longbow Research: One quick follow-up, with the inventory being built in North America, normal seasonally, but demand falling off that quickly, are we looking at lower North American production in the second quarter than we normally have in the seasonal list? I mean are we going to pay back some because demand and user demand was that weak?

Two points: One, production in North America is significantly driven by things that we ship outside. Thankfully we are in a situation where we have free and fair trade, and we are a big net exporter and a lot of what we’re producing here in North America is for exports. So I don’t see having a major impact on production in North America at all.

I’ll just chip in on that, Jim Owens again. Our exports were up 27% in the first quarter. We’re working very hard with our marketing companies and U.S. dealers to be sure that we continue to manage for higher inventory turns, dealer inventory turns, and we do not let any (inaudible) inventory build up because we have an opportunity to export that product where we have end use customer demand. We don’t want it sitting in inventory.

Eli, this is Ed Rapp. I mean that’s even spilling over to the small end of the line where even on backhoes and skid steers, we’re benefiting from the strong emerging markets demand shipping a lot of that product into Latin America, as an example, that relieve some of the capacity constraints we have in Brazil. Eli Lustgarten – Longbow Research: All right, thank you.

Thanks.

Our next question today is coming from Ann Duignan. Please announce your affiliation, and then pose your question. Ann Duignan – Bear Stearns: Hi. Good morning. Bear Stearns.

Morning, Ann. Ann Duignan – Bear Stearns: Can I go back to your explanation on your machine margins? I was a little surprised that you said that most of the increase in SG&A and R&D is in machines. I thought coming into the year that the reason for the increase, particularly in R&D, was engine emissions, so I’m a little surprised that… Is that yet to come then on the engine side we should expect R&D spend to go up?

What we said for R&D is that we were spending on Tier 4, which includes… I mean there’s some, certainly some, there’s engine work for Tier 4, but a lot of machine work and other component work related to Tier 4 as well. Ann Duignan – Bear Stearns: So we shouldn’t expect a huge increase in R&D spend in engines as we go forward, is that…

Well we didn’t breakdown our expectation for R&D in the outlook between machines and engines. We don’t actually do our outlook that way, our external outlook anyway. What we said was that we expected R&D to be up 15% to 20% this year, and we’ve certainly not changed our view of that. Ann Duignan – Bear Stearns: Then of course that leads me to my follow-up question which is: Can you elaborate on your explanation that it’s taking you longer than you anticipated to develop a truck engine strategy?

Ann, Jim Owens again. Not really much to elaborate on there. We continue to work on our strategy, and this is kind of a post 2010 thing. I mean we’re in the truck engine business. We’ve got a tremendous service business associated with that also, and we’re going to stay in the truck engine obviously. But with the vertical integration going on in the industry, we’re thinking about our strategy sort of in the post 2010 timeframe. As soon as we have something to announce with clarity on that, we will do so. It’s taken a little longer than we would’ve liked to get to a final conclusion; but as soon as we have something to announce, we’ll announce it. There’s really not much more we can say about it today.

Thanks, Ann.

Thank you. Our next question today is coming from David Raso. Please announce your affiliation and pose your question. David Raso – Citigroup Investment Research: My questions on the sales growth: Given your 18% sales growth in the first quarter, the full year guidance, even if I use the high end of the range, it implies the rest of your growth slows to 7.8%, mid point sub 5%. Can you elaborate why, especially (inaudible) through currency help, why would the growth rates slow so dramatically?

That’s a very good point, David. I think the real answer there is we had quite a bit of growth through the rest of the year last year. I mean our first quarter last year was 10 billion and that related to our last year full year which ended up 45. So relative to last year, we had a lot of growth after the first quarter last year. Remember truck engines in particular were very depressed last year. So I think we had more significant growth in the last three quarters of last year. So it’s not that we don’t expect growth; it’s just that coming off of higher comps, it’ll be tougher to make up this kind of difference. Also, I think we are somewhat concerned about what you see in the economy out there. We had a great first quarter, no doubt about it, but I think to some degree, it’s still early in the year. We’re at the end of the first quarter and we certainly want to see how it plays out.

David, I think it’d be fair to say, if the currencies… If the dollar stays as weak as it is and there’s a reasonable probability we might be towards the high end of that range. Right now the range seems appropriate. David Raso – Citigroup Investment Research: I think it was a little light but… On the issue of price versus cost, it appears in the channel that you’re price protecting customer invoice orders through the price increase beyond the July 1. Now that’s going to the dealer inventory, rental fleet you’re now pricing protecting. Can you give us some color on what percent of the shipments you think in the third quarter and really ideally second half that are going to be price protected? Also the idea, as truck engines get a little better, that’s usually a bit of drag on your engine margin? I’m just trying to think through margins for the rest of the year.

Yeah, I think the way to think about the price is it’ll be a nice increase. It’ll be enough to offset or maybe even slightly more than offset material costs increases. It’s probably not going to happen or start really flowing through results until, certainly not until the third quarter, and the fourth quarter will certainly be more than the third quarter. What percentage of the orders are price protected, David, I don’t know. But I don’t… I think most of the impact is going to be in the fourth quarter and in the third quarter. David Raso – Citigroup Investment Research: I’ll hop off. But one thing if you could explain, I’ve never seen your truck engines be up so strongly or so different than the retail sales. The first two months of the year you saw retail sales for trucks down significantly, but you just reported North American truck up 18%. If you can elaborate on that, I’ll hop off. Thank you very much.

Well two things about that. One, when we’re reporting our sales and our quarterly release includes all the service related revenues related to that business. It’s not just sale of new engines. When we post up the retail statistics monthly, that’s just new engines and new machines, so it doesn’t include the service related piece of it, which particularly for truck engines is a pretty decent chunk. David Raso – Citigroup Investment Research: Right, I mean the retails were reported as down 60 the first two months of the year and you just reported up 18. There must’ve been a something a little bit abnormal in the service business. I know there’s some Brazil and so forth, but that’s a huge (inaudible).

The other abnormal factor was there a very significant pre buy of engines that went into truck production. So we sold the engines in the fourth quarter of ’06, first quarter of ’07 we virtually didn’t sell any. Those engines that we sold in the fourth quarter of ’06 went into truck production in the first quarter of ’07. This year we actually shipped engines in the first quarter of ’08. So it was up from a terribly anemic level in the first quarter of ’07 so that… I think it’s the inventory; the work in process inventory of the truck manufacturers’ swing is what explains it.

David, one more point I think and this is actually probably the biggest point is the three month average that’s on our website is December, January, and February. December ’06 was a monster month. So I think when you look at the three month rolling average that’s January through March, which will get posted up a little bit later today, you’ll see a different picture as December drops off and March comes on. David Raso – Citigroup Investment Research: That explains it. Thank you so much.

Thank you. Our next question today is coming from Andrew Casey. Please announce your affiliation, and then pose your question. Andrew Casey – Wachovia: Wachovia. Good morning, everybody. Just a question on machinery, the operating margin performance, I’m not going to belabor it too much, but it kind of was flattish sequentially. Do you think it’s possible to get that back to double digits this year or is it more of a future state?

I guess almost anything is possible. I mean we do have price increases built into the rest of the year, but right now it’s below 10%; it’s in the mid eights. I think certainly for the full year, it would be tough to get above 10. Andrew Casey – Wachovia: Then within the engines business, you had a commentary in the release about a 21% decline in electric power in North America.

North America, yes. Andrew Casey – Wachovia: Was that market driven or was that a decision to reallocate some of the higher horsepower engines elsewhere?

Yeah, it’s actually really a little bit of both. You’ll find that throughout the world, sales of petroleum were up very nicely and so there’s… Again, we’re supply constrained on big engines and I think in the first quarter a little more went to petroleum than electric power. But that said there is a link in terms of demand between commercial construction and electric power. In the United States as commercial construction comes off, we would expect some weaker demand for the small and mid size, in particular electric power. Andrew Casey – Wachovia: Thank you very much.

You bet.

Thank you. Our next question today is coming from Alex Blanton. Please announce your affiliation and then pose your question. Alexander Blanton – Ingalls & Snyder: It’s Ingalls & Snyder. I’m going to go back a similar question; similar to what David Raso asked only gear it to the earnings per share. Your first quarter is typically well below the other quarters in EPS, but if I analyze the first quarter now I get $5.80, which is only $0.10 below the midpoint of your range which you haven’t increased even though you had a big surprise, positive surprise in the first quarter. So could you comment on that, why haven’t you adjusted the range EPS up a little bit?

Good question, Alex, and I think your comment that the first quarter is usually a lower quarter in terms of profitability for the full year is true. It usually is a little bit less than the average, and that was the case last year as well. But I’ll go back to the point that you made before, if you annualize the first quarter it was around the midpoint of our guidance or pretty close to the midpoint of our guidance. It’s still early in the year. The material cost situation is a little bit fluid at this point. We’ve just announced a price increase. I think at this time of the year and the first quarter, it’s probably a little bit too early to make any changes to full year guidance. I think we need a little more time to pass to see how things are actually going to play out. Economically in the world, it’s a probably as diverse as we’ve seen it in terms of our business. There’s significant growth outside the U.S., significant weakness inside the U.S. I think the answer to your question really is its too early in the year to change the outlook. Alexander Blanton – Ingalls & Snyder: The follow-up question relates to what you referred to as pull-through, but I think you’d agree that its incremental margin is what we usually talk about, incremental margin on sales. I adjusted the first quarter gross margin line for currency and came up with about just under 18%. Then I adjusted for mix based on what you told us earlier in the call and it came out to 24%, excluding the mix effect that you gave us. But still that is, you said that’s what one would have expected I think is what you said, but really it isn’t. In the past, when you’ve been filling up capacity, you have usually achieved 30% to 35% or even more, sometimes as much as 40% incremental margins on sales increases like this. Now at CONEXPO I asked that was it true that the poor incremental margins that you have been experiencing for the past year, if that was the result of capital expenditures being very high and expanding capacity to meet future demands through 2010 or 2012 that you have talked about growing at very good rates for the next few years. That would raise your costs and hurt your incremental margins as you expand that capacity. Now is that what occurred in the first quarter? You really haven’t addressed that. You’ve talked about costs of materials being up and so on and offset by price, but you haven’t really talked about the cost of expansion and how that is hurting your incremental margins at this point.

You know this will be a long discussion, Alex, that we could probably take off line maybe later today as well. But in general our margins overall, there’s one thing if you’re talking are your margin rates at a level where you think they should be long-term. Another question is: How do they change from the first quarter of last year. We’re kind of mixing up both answers here. But I think to your point, the fact that we’re close to capacity, the fact that over the last few years we’ve had cost increases that have been at or right at the same level of price increases, part of that being driven by the need to increase capacity, part of that the impact of the pushing the supply chain in some areas kind of to the limits and having ongoing disruption. There’s a whole myriad of reasons why I think margins on an absolute basis are not where we would want them to be. Geographic mix is certainly one of those. In terms of quarter-over-quarter, we did okay on the price versus cost. Our quarter-over-quarter issue I think more than anything was currency impacts and sales mix. We can pick this up maybe later, Alex, if you’d like to delve into it more. Alexander Blanton – Ingalls & Snyder: Well quarter-over-quarter you weren’t that bad; it was year-over-year that was the problem.

Alex, I think it sort of feels like you’ve got a point there to me. I mean we have substantially increased our investment in capacity expansion and modernization and actually cap ex that will help us take costs down going forward. But it does take a certain cost structure to effectively deploy that capital, get up and operating. Of course, our depreciation is going up in the wake of some higher cap ex that we’ve had the last two years. So I think directionally I think your question is correct in that we are, we’re driving some costs there that will be very beneficial to us long-term, but we’re in this game for the long-term. We’ve got three new factories under construction as we speak in China.

Jim, we’re starting to see some of the benefits on the engine side with the Lafayette expansion started a couple years ago, some of that capacity’s coming online and that was one of the things that drove the improved numbers with engines.

That’s true. It’s going to steadily come to us with that coupled with the process improvements we’re making. As we mentioned in the release, we’re still seeing particularly on the machine side, disruptions in the supply chain that we’re very committed to shipping as delivered product quality at the highest level. So we find these things, we’re working to be sure we get them corrected and fixed before they get into customers’ hands and there’s some disruption there as we’re running at the edge of capacity of for most of our core and large machines, but I think we’re doing the right thing for the long-term here. Alexander Blanton – Ingalls & Snyder: Thank you.

Next question.

Our next question today is coming from Mark Koznarek. Please announce your affiliation and then pose your question. Mark Koznarek – Cleveland Research Company : Hi. It’s Cleveland Research. Good morning. I’m wondering if you could talk more specifically about the change in the outlook in North America for non-residential construction, what were you think about before and what’s the current outlook?

I think our view of construction overall continues to weaken. If you look at the dealer retail sales for the first couple of months of the year and actually what’s going to be posted up here a little bit for March, they continued to weaken. We see our sales to housing a bit weaker than we thought. We see sales to non-residential a bit weaker than we thought. I don’t know that it’s significantly inconsistent with our overall view. It’s not a dramatic decline from where we’ve been, but modestly lower.

We never had the bubble in non-residential construction that we had in housing and certainly most of the country there’s not a big overbuild or excess capacity. But it is tailing off and it has been. It went off faster than we thought in ’07 and it’s steadily tailed off and I think the current credit market conditions in the U.S. are taking it down further in line with the recessionary expectations that we have for the U.S. economy this year. Mark Koznarek – Cleveland Research Company : Then let me ask a question about currency, how much of an impact of currency is in the 5% to 10% revenue outlook? Presumably it’s a larger number than it would’ve been 90 days ago with the change in currency relationships. With that change and the fact that you guys disclosed that you’ve lost $0.11 here to currency, is that something we should expect to continue each quarter if the currency relationships stay the way there are right now?

Well it’s fairly complex question, Mark, and I’ll do my best. We do have a Q&A on currency in the release that might help a little bit. But in our original outlook, we did expect that currency was going to be a slight negative this year and in our revised outlook that we came out with today actually what we said in the back is we thought the price increase that we were putting in place would be about offsetting the impact of higher material costs and slightly more negative year-on-year view of currency. The piece of currency that’s in other income and expense really doesn’t have much to do with what happened in the prior year. It’s whether or not you had a net change during the quarter. So the piece that was down in other income is likely not to, well I shouldn’t say likely, depends on what rates do for the rest of the year. But if rates don’t move much further from where they are now for the rest of the year, that should be a much more neutral impact. In fact, I think in the last half of last year it was negative. So if it’s neutral, at least down there, that would be a quarter-over-quarter positive. We’ll have to see how rates come out. For the impact on operating profit, again, we don’t try and forecast exchange rates. Heck, we have a tough enough time figuring out how to forecast machine sales. At today’s rates, we are weaker than our original outlook, and we’re weaker than last year, so probably a continued negative impact for the piece of our results that are related to translating non-U.S. sales and non-U.S. costs. That said, we do export in dollars to territories where the competition is dollar-based even if it’s not in the U.S., places like the Middle East and much of Latin America and some of Asia. The weaker is actually helping a bit on a competitive standpoint in those areas, and I think one of the reasons that particularly outside North America we were able to do a mid year price increase is in some of those regions. So on balance, I think the weaker dollar is helping us in terms of our ability to pass through that mid year price increase. But on a straight translation basis probably be a little bit more negative. I hope that wasn’t too convolutive of an answer. Mark Koznarek – Cleveland Research Company : The impact on the top line, Mike.

Impact on the top line will probably be a little bit positive. Mark Koznarek – Cleveland Research Company : A little bit more positive than 90 days ago?

Yeah.

Thank you. Our next question today is coming from Robert McCarthy. Please announce your affiliation, and then pose your question. Robert McCarthy, Jr. – Robert W. Baird: It’s Robert W. Baird & Company. Morning, gentlemen.

Morning, Rob. Robert McCarthy, Jr. – Robert W. Baird: If your unchanged top line outlook for the full year now incorporates better price realization and a little bit more favorable currency translation than previously, that implies that you’re overall outlook for volume has declined a little bit. Your outlook for North America has come down. Your outlook for international has gone up. Is your outlook for volume internationally gone up or the increases in your forecast there strictly a function of the price and currency changes that you were just talking about?

Well a couple of things. One, price and currency are both an impact. Two, remember for a lot of our products, right now we’re capacity constraint. So as North America declines, it gives us the opportunity to actually sell more, provide more of the output in some of these, and outside North America. In fact, our exports in the first quarter were up pretty dramatically. So some of it is volume, some of it can be price, and some of it is currency as well. I think, and I don’t want to overly dwell on this one point, but I think it’s fair statement to say that overall, as Jim said a little while ago, I think we’re probably more confident, certainly about where the top line is going to end up this year. But it’s still we’re here at the end of the first quarter in what is kind of an unprecedented time in history with North America so weak and the rest of the world so strong. It’s just a little too early I think to change the outlook, and currencies fluctuate. Who knows where they’ll be 90 days from now? Robert McCarthy, Jr. – Robert W. Baird: That’s appropriate. So in other words, it’s probably not appropriate for me to assume any significant change in expected volume but rather that your outlook has improved slightly, mostly as a result of price in currency for the top line?

For the top line. Robert McCarthy, Jr. – Robert W. Baird: Then just for clarification purposes, you talked, Mike, about the offsetting strength in the services businesses in North America and how they helped stabilize the top line there. Can we infer from that you meant to tell us that you registered year-to-year increases in Logistics, Freeman, and the Real Services business?

No, what I was really trying to say when I mentioned that is, and it kind of goes back to an earlier comment I think when David asked about truck engine sales. If you look at what we post up on the website as retail statistics, it’s only new machine and engine sales. It’s not, it doesn’t include the rest of the service related piece of the business. So I was just trying to highlight that when you look at what happened with dealer sales to users in North America, you’ll get a much more negative number than if you look at our sales; and there are a couple of impacts. One is that those retail sale numbers that we post up monthly don’t include all these service related businesses at all. Secondly then I highlighted the dealer inventory build in the first quarter.

There’s also… Progress Rail is up; Financial Products is up; Cat Logistics is up; Solar is up, parts in the U.S. down but substantially less than retail sales. Robert McCarthy, Jr. – Robert W. Baird: Thanks for the clarification.

Next question.

Thank you. Our next question today is coming from Barry Bannister. Please announce your affiliation, then pose your question. Barry Bannister – Stifel, Nicolaus & Company.: Hi. Barry Bannister, Stifel, Nicolaus. One of my questions earlier was answered, so as my follow-up, I’m concerned that since engines tend to be sold at spot, you’re getting the full benefit of oil and gas and EPG, but minerals are also pretty strong; and I don’t think Cat is monetizing the full conditions in the mining equipment business. So I’m concerned that maybe you have some global mining agreements or lack of pricing flexibility in the face of steel and tire issues that’s restraining your margins in that segment. Can you talk about your mining equipment margins versus the cycle of the last decade, which was very strong as well, where I think you got better margins?

Let me address global mining sort of in the middle of all that, Barry. But first I’ll say, engines at spot, I think if what you mean there is we, outside of truck, we don’t have just a few big customers that are locking in an agreement for a long period of time, and outside of truck that’s true. But let’s just talk about mining in our pricing and partnership agreements with the global companies. They are very favorable agreements for us. They do a ton of positive things for Caterpillar. We have an exceptionally good view in to what’s going on in the marketplace. They have provisions for aftermarket content. They protect us and the customer on pricing. But I think it does lag the pricing piece of it does lag. Many of them have built into the agreement pricing escalators that are different, but they’re based on other marketplace indicators. So if the point is our machine prices aren’t rising anything like commodity prices, I think that’s probably true, but on balance we really like these agreements. They drive strong corporation. They help on volume and production planning. They give us a very tight relationship with the customer and I think have actually improved our aftermarket with them as well.

Even on the engine side, most of our large engines, for example, are sold with some pretty lead time commitments. The price increases that we’re seeing coming through the market now, we announced an extended period of time ago. But if you’re building up a ship and you buy the engines from us and we make the commitment on the ship dates and price, we honor that. So there’s not instant flexibility even with large engines that are going to customers how buy relatively small numbers. Robert McCarthy, Jr. – Robert W. Baird: I know that it’s granular and it reaches back to a distant memory of the last cycle, but you would be saying that the margins on large mining trucks, where Cat has always enjoyed a strong share, are less this cycle due to the invention of the GMAs than it was in the prior cycle?

I don’t have the margins for the prior cycle or 98 or 97 in front of me, but I think on balance we like where we are with mining overall. I don’t think even in a prior cycle we would’ve passed through giant price increases to these customers. So I think on balance we’re pretty happy with where we are.

I think the operating efficiencies is the area that prior we have opportunities to improve our margins there and that’s because we are literally operating at above capacity levels to try to meet customer demands and doing a lot of expediting to try to meet their needs at some margin erosion due to the higher cost associated with that. We’re investing simultaneously put capacity in, working very hard with key suppliers that are unique to this large product and we’re just working right at the bleeding edge and we have been for a couple years and demand keeps getting stronger. So some of the new investments that we’re making I think will give us significant improvements in operating efficiency, enhance our product, and improve our margin as we move out with mining industry. But I don’t think it’s a pricing issue.

I think we have time for one more question before we’re at the top of the hour.

Next question is coming from Daniel Dowd. Please announce your affiliation, then pose your question. Daniel Dowd – Sanford Bernstein Research: Hi. Bernstein. Actually I just want to follow-up on the revenue side of this again. So the way you characterize this is weaker North America, developed markets generally, Western Europe and Japan. You’re seeing weakening; you see continued frankly pretty extraordinary strength in emerging markets. The way you aggregate your geographies, Europe, Africa, Middle East, for instance, effectively smooches together really big emerging markets like CIS, Middle East, parts of Africa tied to mining with a highly developed market. So if investors believe that Western Europe is slowing, how big a deal should that really be for the group you call EMEA?

I’ll just sort of give you an order of magnitude ballpark here. Western Europe would be order of magnitude, and it varies quarter-by-quarter, but somewhere in the ballpark of half of EMEA. But I’ll tell you, most of the growth or much of the growth in EMEA has driven by CIS, Africa, and the Middle East. The point is to your question, we are supply constrained in the region for essentially all of our core and large equipment. So to the extent that Western Europe now is going to be slower than we expect this year, that supply will go more to the Middle East, Southern (inaudible) of Africa and the Eastern Europe CIS region. We don’t expect any significant change in the total. I mean it’s shifting within the region, but within EMEA the total that we will supply is going to be about the same as we currently see the outlook. Daniel Dowd – Sanford Bernstein Research: So what we’re really saying is a slowdown in Western Europe, at least in 2008 if it doesn’t turn into a big recession, likely actually still means that you continue to grow in that region without as if almost there wasn’t slowing.

Well and again I think that goes back to the point that I made earlier and Jim made, for a lot of products we’re selling as much as we can produce. Thank you very much, everybody, for joining us on our call today. I’ll talk to many of you over the coming weeks.