Good morning, ladies and gentlemen. And welcome to the Caterpillar Second Quarter 2015 Results Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Mike DeWalt. Sir, the floor is yours.

Thank you, Anthony. And good morning, everyone, and welcome to our second quarter earnings call. I'm Mike DeWalt, Caterpillar's Vice President of Financial Services. On the call today I'm pleased to have our Chairman and CEO Doug Oberhelman and Group President and CFO Brad Halverson. Now this call is copyrighted by Caterpillar, Inc. 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, we'll be posting it in the investor section of our caterpillar.com website. And it will be in the section labeled Results Webcast. This morning we'll be discussing forward-looking information, and that involves risks, uncertainties and assumptions that could cause our actual results to differ materially from the forward-looking information. A discussion of some of those factors that either individually or in the aggregate could make actual results differ materially from our projections, that can be found in our cautionary statements under Item 1A, that's Risk Factors of our Form 10-K filed with the SEC in February of this year, and also in the forward-looking statements language in today's release. In addition, there's a reconciliation of non-GAAP measures that can be found in our financial release today, and that's also been posted at our caterpillar.com website. Okay. Let's get started. This morning we'll be reviewing our results for the second quarter and our outlook for 2015. For the quarter, sales and revenues were $12.3 billion and profit per share was $1.16, and that was $1.27 excluding restructuring costs. Both of those numbers were about as about what we expected. No big surprises. In fact, from a macro standpoint, much of what we were expecting when 2015 started seems to be playing out. We expected that mining would continue…

Thank you. Ladies and gentlemen, the floor is now open for questions. Our first question is coming from Jamie Cook. Please announce your affiliation and pose your question. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Hi. Good morning. Thanks for the time on the questions. I guess a couple questions. Just more broadly, can you guys talk about I guess, Mike, when you're thinking about the second half of the year, can you talk about oil and gas, the decline that we saw in the second quarter relative to what you expect in the second half? And then what is implied in your profitability in the second half of the year with regard to oil and gas? I feel like before you said it would be more in the reciprocating engine side and you still expected Solar and the Marine business to be up. Has that mix changed at all?

Yeah, I would say in general what we said before about the resi business for drilling and well servicing, that's where the brunt of the decline is going to be felt. And we had a pretty sizable backlog of that coming into the year, and that's actually helped sales in the first half. So we're going to see more of the decline in that reset business in the second half. And that goes back to my comment on sales mix in the second half. So that will likely be a bit more negative. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): And then, I'm sorry, your visibility specifically on Solar right now, and I'm assuming Solar is still good relative?

Yeah, I'd say everything that we've said about Solar this year and holding up and a backlog is still the case. I'm going to try not to get too far ahead of ourselves into a discussion about 2016. We don't have an outlook in front of us for 2016. And that's not trying to avoid that question, it's just we commonly do that with our October third quarter release, kind of give a preview of what we think for the next year. That said, if you do look at backlogs and what's happened, you don't see Solar falling apart. It's marching along reasonably well so far this year. I wouldn't say there's anything that I've seen that I would consider to be alarming, if that helps. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. And then I guess just, can I ask a second question? Just, I guess broadly, Doug, on mining we've seen a lot of the mining data points continue to deteriorate, what you're hearing from your customers as well as your competition. I guess, Doug, what would you need to see to change your longer-term view on mining and to take sort of a more aggressive restructuring within Caterpillar? And as we think about, I know you're spending this year for the long-term. Do you feel like the brunt of the spend in mining in terms of new products and R&D, does that go away in 2015 so 2016 has less of a headwind? Thanks. And I'll get back in queue. Douglas R. Oberhelman - Chairman & Chief Executive Officer: Around mining, most of the restructuring we have taken to date has been aimed at mining. A number of facilities have been downsized, closed and have been announced to do so this year and…

Okay, next question please.

Our next question's from Joel Tiss. Please announce your affiliation and pose your question.

Sorry, I was on mute. Bank of Montreal. How's it going, guys?

Good, Joel. What's up?

I was just in Asia and there's this whole, I guess it's a little old, but I'm old, too. But I'm a little behind the curve probably, but they're talking about expanding, like giving countries money to help expand their infrastructure, and dragging a lot of the Chinese overcapacity and the Chinese suppliers with them. And so not stopping at the Chinese border, going all the way, Africa, Eastern Europe, former Soviet republics. So as long as Doug is here, I just wondered if you could talk a little bit about, does China bring you guys along with them because you are a local Chinese supplier as they go to these different regions? Or are you already there and can effectively compete with them? Like how does this play out over the next decade? Douglas R. Oberhelman - Chairman & Chief Executive Officer: Hi, Joel. I think you're referring primarily to the Asian Infrastructure Bank, AIIB, which was announced a year or so ago. It's been funded now and run by the Chinese. It's a somewhat similar bank to the several regional banks that are around, whether it's Latin America or Asia, or to some degree World Bank. They are focusing certainly around Asian infrastructure. We are there. Our business model works very well. I think a significant piece of this is aimed at the Silk Road, the new Silk, one belt, one road project. It's probably a 50-year project going forward. My expectation would be that we're a local Chinese company. Our dealers service products throughout that region and when it comes down to it and they build infrastructure, complete those kinds of things funded by that AIIB that the best supplier's going to win the construction equipment just like anything else. Now will there be bias in another direction? Probably, as we see today that we do pretty well in China. So my expectation is that that's China trying to take its investments even more broadly than they have been doing. We've done pretty well with that around the world so far, and that would be my expectation going forward. Having said that, a bit political. It would be nice to see the United States involved with that. We've not been. A lot of the European countries have joined in, and most Asians have joined in to aim at areas that need a lot of development. And that I hope is in our future. But again, a little bit off the subject but is I think pertinent to the answer.

Thanks, Joel.

I can't do a quick follow up? Okay. Fine. Thank you.

Yeah, go ahead.

I just wondered if, Mike, this isn't giving away 2016 guidance, but can you share with us what the energy book-to-bill has been in those two different, in the recip engines and in Solar?

Well, definitely for recip engines, the backlog has been going down. That's probably no surprise. I mean, we haven't got a lot of new orders for oil and gas over the last six months as the oil price has declined and investment is beginning to dry up. So our backlog has definitely come down for the recip side, not so much for Solar.

Okay. Thank you

Next question.

Our next question is from Joe O'Dea. Please announce your affiliation and pose your question.

Good morning. It's Vertical Research. First question just on mining, and in the press release talking about both equipment and aftermarket being down. I think for a little while now aftermarket has been trending more flat. And so just looking for any context around those aftermarket trends in the quarter, whether this is the beginning of another chapter of declines given commodity movement over the last six months, or if those decline rates are actually pretty small?

Yeah, good question, Joe. And I wish honestly we had a crystal ball where I could give you a very crisp answer for that. I think I'll refer back to Doug's comment a bit ago around customers delaying maintenance intervals and repair intervals. And that's going to in our view, that's going to catch up. I know that's a little bit of a broken record and we've been saying that. But fundamentally, the more they run this equipment, and the longer those repair and maintenance intervals go, the more pressure there's going to be. I don't think anything fundamentally has changed. They still need to repair and maintain vehicles, but I think they're pushing it a little harder right now.

Perfect. Thank you. And then maybe just as a follow up on the power gen side. North America and Asia-Pac both flat in the quarter. I think this is on the heels of actually several years of seeing weakness in power gen. So really just asking your confidence in finding any sort of bottom and any visibility you have into improving demand in power gen?

Yeah, I think for power gen, and I'll just make my comment sort of an around the world comment here. It's very dependent or reasonably tied to global GDP. We've not seen much improvement generally. We've got a pretty flattish world economy. If you think about electric power and a lot of it is backup power. When you build a new school, when you build a new shopping mall, you build a new factory, you need backup power and until you have maybe an improvement in construction around the world, you're probably not going to see much of a big improvement in electric power. Now that said, it was the least unfavorable in the quarter of the sectors under Energy & Transportation. And a lot of the decline was actually currency in Europe. So it's been from a demand standpoint I think more flattish than some of the others.

Great. Thanks very much.

Next question please. Hello?

Our next question is coming from Jerry Revich. Please announce your affiliation and pose your question. Jerry D. Revich - Goldman Sachs & Co.: Good morning, it's Goldman Sachs. You folks have spent a lot of time on supplier development. Can you just give us an update on how much more room you have to reduce material costs beyond raw material deflation? So obviously, steel costs coming down will help you folks in the back half of the year and maybe you could also touch on what kind of steel price you're assuming in the guidance over the balance of the year. Thanks.

Yeah, Jerry, good question. If you look at our results over the past actually about three years, we've gotten pretty decent what we call material cost reduction. That's really been a combination of a couple of things. We have had commodity declines over the last few years, but we've actually as a company, throughout the company done a pretty good job on not just commodity-related price reductions, but actually cost-reducing components in our products. And we've got pretty good cost reduction doing that. So that's a lot of work between suppliers, purchasing, our engineering group to take costs beyond inflation and commodities out of the product. That continues this year. I think our expectation is there's still quite a bit of room to go there. That's always an ongoing effort. Above and beyond that, it does rely a little bit on what's going on with commodities, but I think there's still a lot of room to run there. Douglas R. Oberhelman - Chairman & Chief Executive Officer: I would just add here a little bit. We reorganized our procurement, our logistics and our lean manufacturing group a while back and we are really seeing the benefits of that. As Mike said, we've seen lower material costs several years, but at rates that have been unheard of around here prior to that. The operating margins, the pull-through numbers we've seen even in this down period of sales, we've never experienced before in the past either. And I would give this group and the fact that our operating units are embracing that all of the credit because we're seeing our built-in quality numbers and our quality metrics measured by defects per unit also drop through the floor. So all of this is really helping us at a time when we need that…

Thanks. Quick follow up? Jerry D. Revich - Goldman Sachs & Co.: Yeah, just on the pricing side. You folks got better pricing and resource this quarter. And, Doug, over the course of your leadership, you've delivered pretty well on the PIN (31:40) side. I'm wondering how much room do you have to deliver modest price increases even as material costs are flat to down. Do you think you have room there over the next couple of years because of how much the premium has come in versus the competitor set? Douglas R. Oberhelman - Chairman & Chief Executive Officer: I really don't see much change coming the next couple of years there, unless we see some inflationary pressure. The entire industry has more than enough capacity. We've got a strong dollar to contend with with many of our big key competitors. I'm quite happy with the fact we've been able to more or less beat, or meet anyway, retail CPI around the world in price realization the last few years. The cost reduction at this point, at one point we talked about cost reduction efficiency, putting into market share, which we have been doing. I'd like to think we could continue that. Our market position over the last few years has trended up nicely and is even the last year up a bit in a very tough environment. I'd like to see that continue. So, I don't know, I think we continue to see more of the same where we've been in terms of price realization. Jerry D. Revich - Goldman Sachs & Co.: Thank you.

Thanks, Jerry.

Our next question is coming from David Raso. Please announce your affiliation, then pose your question.

Hey, good morning. The conversation on the stock is going to increasingly shift toward the set-up into 2016. So I know you're not giving 2016 guidance, but can you help us a bit with where you see margins exiting 2015, in particular E&T? I mean, the margins have been stellar there, basically 18%, haven't really taken much of a hit. So I'm just curious, how do you see those margins as well as CI exiting 2015?

David, this is Mike. Let me start with that. There are some headwinds in the second half of this year. And, again, I'm not going to get into next year, but I'll talk about a couple. One is inventory absorption impacts, negative. This year we're going to end up with a pretty healthy, by the time we get to the end of the year we think, a reasonably healthy inventory reduction for CAT inventory. And if you think about it, our sales this year versus last year are down from about $55 billion in our outlook down to about $49 billion. And so there's inventory coming out. Now, without getting too far ahead and talking about next year, I'll just say if I look at what the analyst consensus is right now for next year – it's not our forecast, but collectively you guys have our sales about roughly flat with that next year. And if that were the case, the degree of inventory coming out, which is going to be pretty heavily weighted to the second half of this year, that would be less of a drag. So I think the second half of this year is going to have some negatives in it related to that. Also there's a lot of first half/second half differences, some that are seasonal. Just for example, we tend to build dealer inventory in the first half of the year as we're preparing for the summer selling season, particularly for construction. And then dealers tend to use inventory in the second half of the year and we tend to under-sell demand. And that will be the case we think again this year. We expect dealer inventories to come down. So there are some built-in headwinds in the second half of the year. So…

Well, I guess not even 2016 but, Mike, I was asking directly if you could at least quantify a little bit the margins exiting the year in E&T and CI. Are you willing to at least say you expect double-digit margins in both CI and E&T both 3Q and 4Q? We're just trying to get a feel for the run rate to set up into 2016.

Well, I mean certainly based on where E&T is right now, there's no doubt my mind they'll be certainly double digits over the course of the second half, and I believe that too for Construction.

Okay. And then lastly on the backlog. Obviously it's down 23% year-over-year. It's down 15% since the start of the year. How should we think of the backlog expectations the rest of the year, given they at least historically show some relationship to how you guide sales? Are we expecting the backlog to improve the rest of the year, or still a drawdown?

I think it probably depends upon the business that we're in, because they all have some seasonality to them. For example in Construction, we tend to get a lot of orders in late in the year and very early in the year. We develop a bigger backlog. Kind of again, it's a little bit like dealer inventory. Dealers are preparing for getting equipment lined up for the selling season. So that will likely happen I would think again. So I mean without again getting too specific, I would suspect if the seasonal patterns hold that in the second half we'd probably build a little bit of backlog in construction. In mining, the whole book-to-bill has been slightly negative. I mean it's getting to a point where there's not a lot of draw down coming, and I think we should probably be coming to the point where that's not very significant one way or the other. Until we get a recovery, that would be great. And then in E&T, you talked about the backlog coming down this year. And that goes back to the point that I made a little bit ago. We started the year with a pretty healthy backlog of recip engines for oil and gas and that's worked down throughout the year. There might be a little bit more of that to come out. But I can tell you, order rates for the first half of the year have been extremely lean. So I hope that helps.

Well I guess in aggregate then, is the CI uptick seasonally expected to be large enough to offset the E&T drawdown, I guess is the end of the day question.

Yeah, honestly I don't know what the backlog forecast is. That isn't something we cover. And if I did, I probably wouldn't. I mean we've never disclosed a forecast for that and I probably wouldn't start. But to be honest with you, I don't know. I would be surprised if the change – I would personally be surprised given everything I know if the change was very much one way or the other over the course of the second half.

All right. I appreciate it. Thank you very much.

Our next question is coming from Ted Grace. Please announce your affiliation then pose your question.

You said that the total revenue guidance is down a $1 billion to $49 billion and it's mostly FX. Is there any mix shift we should just be cognizant of between Construction, Resources and E&T and kind of the expectations for the year?

Yeah, I think what I would tell you is that probably a disproportionate share of the currency impact is construction. Mining tends to be in a lot of the world a pretty dollar-denominated business. Oil and gas kind of tends to be as well, not entirely. So it's not 100% is Construction, but it's probably disproportionately Construction. So earlier in the year, we had thought Construction would be down kind of 5% to 10%. It'll probably be closer to the top end of that. But outside of that, I think no big shifts in what we thought was going to happen. I said this kind of in my opening comments. We've actually been I think pretty good at predicting what's going to happen this year, I think certainly on the top line and by and large on the bottom line as well.

Agreed. So I mean I think everyone's cognizant of how tough the macro is. One of the key kind of tenets of CAT's business model is market share. I was wondering if you could just talk about in the context of challenging markets, how you feel CAT's executing against the other competitors, and specifically maybe in North America construction if you're comfortable talking about that, EMEA construction and then whatever you might feel comfortable talking about within engines.

Yeah, I think generally I would say we've done pretty good on share. It's been a fairly consistent march up year after year for about I think the last four years. It's not always every product every quarter. But it's a good generic comment to make. We've done well over that time period in North America. We've got a couple things I would say are really helping us with share. We have excellent Tier 4 products. I mean, we are the fuel economy leader at Tier 4. We're promoting the heck out of that. Quality of the Tier 4 products has been very good. Customers like them. So that's helped us a lot and Tier 4 is, and the European equivalent is, essentially in those developed markets and that's very much a comment around North America. And we've done a pretty decent job. We've also as Doug mentioned earlier kept price increases pretty modest and that's helped. And we've been able to do that because we have taken a lot of cost out and we've essentially reinvested that in market share and have done I think a pretty decent job. Douglas R. Oberhelman - Chairman & Chief Executive Officer: I just would like to add here on our Tier 4 final product, this is another big year for that. We're over halfway through final here and in Europe and in all of our models, we've seen an increase in fuel economy. We've seen a drop in defects per unit and those two things going into the marketplace have really helped us offset aggressive competitors, both because the dollar and because of capacity. I really am happy with where our product stands today. Particularly given our past history and some of these things we're going to introduce, a lot of new products at once, but we're in really good shape with this going forward, and I think the built-in quality, the lean metrics around what we measure now and the way in which we manage our factories and design are coming through nicely, and we see that. And that's been a big help to us in a tough cycle here.

Last thing I'll ask and I'll get back in queue. In terms of what you're seeing on the pricing front from a competitive dynamic, particularly North America, is it staying rational? Are you seeing any kind of shifts in that regard? And that'll be the last thing I ask.

I don't have anything in particular that's dramatically different, no.

Okay. Thanks. Best of luck this quarter, guys.

Okay. Ted, thanks.

Our next question is coming from Henry Kirn. Please announce your affiliation and pose your question.

Hi. Good morning. It's SocGen.

Hey. Good morning, Henry. Welcome back.

Thank you. It's good to be back. You mentioned in the press release accelerated focus on emerging technologies. Could you talk a little about the expectations for the level of investment required to maybe at a high level the required returns profile and the bigger picture goals there?

What we're really referring to is the ongoing number of investments around connected machines to our factories, to our engineers, to our suppliers, to their owners and to their dealers. We've had a number of announcements around that. I expect to have a number more of those. The revolution is happening around big data and data analytics and we're right in the middle of it, with the idea being to connect every single one of our machines and hopefully those that aren't our machines and our customers with us in a very efficient way to raise their productivity. And I think you'll see continued emphasis on that. I would expect the returns actually on those to be very attractive as we go. It's a process because we're starting from – not starting from scratch because we had a lot of that internally, but developing that externally, we're taking advantage of a lot of that investment that's occurred outside of our industry and is known there. So really optimistic about it, early days and I think we'll really change our customers' and our dealers' world over the next decade. So this is really the beginning of that basis.

Thank you. And then now that the Greek situation is at least temporarily resolved, can you talk about what your folks on the ground there are seeing? And if there were green shoots, how would you expect that to begin to show up in the order book?

I would say in Greece, we have such a small position there. It's such a small market. Even in the good days, it wouldn't ring any bells around here. I think the bigger issue with Greece is the amount of uncertainty it drives in EAME and beyond, that is specifically in South Europe. Having that tone down and calm down out of the headlines every single day may help. I think it depends on what the European Central Bank does and the individual governments going forward to have some kind of recovery in their economies. I would point out our retail numbers yesterday, while down in EAME, after the United States were the best. It's still a down market, but we're not seeing total catastrophe there like we saw two, three, four years ago. I would say stability is probably in the not too distant future. I don't know when growth will return, but it will. So I think the Greece thing is one of those that needs to get behind us all in order to reestablish some kind of stability in the political environment over there, which will lead then to some kind of economic stability and hopefully growth in the not too distant future.

Thank you very much.

Okay. Next question?

Our next question is coming from Ann Duignan. Please announce your affiliation and pose your question.

Yeah, hi. Good morning. JPMorgan. My first question is just around the backlog being down 23% at this point. Mike, how feasible is it in any way, shape or form that revenues could be up next year?

It all depends on what happens in the economy. In many of our businesses we don't commonly have much of a backlog. The entire aftermarket business, Construction is a pretty short lead-time business. So I think whether sales are up or not next year isn't necessarily driven by what's in the backlog today. It will be more a case of where are commodity prices as we start to exit the year, and that will be based on where's the global economy going. So I don't think right now I would draw a direct link between the backlog and the sales forecast. A lot could change in the next six months, good or bad. I'm not trying to sugarcoat it. I'm just saying that sales next year are going to be dependent a lot on what happens in the global economy. We're on the edge right now of what's needed for growth. We have a pretty decent correlation, particularly in the U.S., when GDP is above 2.5%, we tend to grow. When it's about 2.5% or below, and it varies by degree, we don't. So I think a decent recovery in the economy would help a lot. I know that's a simplistic answer, but it's the truth.

Well, I mean, I think that's fair. And then my follow-up question would be, Doug, again with backlog being down 23%, I was a little surprised that R&D was flat year-over-year and SG&A only down 3%. What would it take for you to have to seriously look at those two line items and say, you know what, we're going to have to cut some of these projects that we're working on or some deeper cuts than just shutting manufacturing plants? Douglas R. Oberhelman - Chairman & Chief Executive Officer: Ann, we started the year in December, January hoping to actually increase our R&D 2015 over 2014. We have not done that. In fact, we took that back to flat, as you alluded to, as well as CapEx. We are constantly monitoring the market long term. You've heard me say many times in the past we have not had the availability when markets turn up and we lose market share. We're paranoid about market share around here. It's what drives us and drives our dealers. I would say to see a major reduction, and I'm not going to define that, we'd have to see some kind of a cataclysm downwards in our top line. And we see that, we'll react as we have in the past and shown we can do that. So that would be the catalyst. If we see something really nasty coming or happening, we'd probably go right at. Not probably, we will go right after it.

Okay. And would you consider not repurchasing shares in the same environment, or is the share repurchase a done deal?

Well, the share repurchase that we talked about this morning, Ann, is what we expect to do for the third quarter. I mean, we've not really talked or placed any kind of forecasts or estimates or anything in the market around what we would do after that, but I certainly wouldn't describe the third quarter as a done deal per se, but it's absolutely what we intend to do. Douglas R. Oberhelman - Chairman & Chief Executive Officer: What drives the buyback, it drives our capital allocation, everything else, is really a strong balance sheet. And with the balance sheet today at 33%, 34% debt-to-cap with almost $8 billion in cash, taking $1.5 billion off in the third quarter still leaves us in a great position going forward if we saw a cataclysm or if we don't. And that's really how we look at it because we absolutely have to have that strong balance sheet to get us through growth times and times we're not growing, like we have. We've never been positioned at a time like this with that strong of a balance sheet, which allows us to return some of that to shareholders. Now, we go down in the top line further, we'll have to assess where we are with our capital structure and everything else and all that would play into it. We'd probably revise it to some degree. We've got plenty of room and plenty of years in our $10 billion authorization with $4 billion to go to get that done or not and we assess that all the time. Bradley M. Halverson - Chief Financial Officer & Group President: Ann, this is Brad. I'll just make a comment. We're trying to act very consistent within our business model. You know, we've talked about going back to 2012 when our sales were down $16 billion, $17 billion. What we've wanted to do over this timeframe is to grow our market share, to improve our quality. We've had very little price action relative to that, so the quality of our earnings is to deliver 25% decremental to 30% decremental numbers balancing all of these things in terms of what we can do. With the work we've been able to do in our variable margin, we're going to be right around 25% for that period. We're well below 25% to 30% decremental in the first half of the year. And so because of that, we're very happy to be able to fund our R&D programs and to be in a position of strength, to have those when the market does turns around. As Doug mentioned, we've got close to $8 billion of cash. Our debt-to-cap is low. We don't have huge CapEx needs at this point in time. And we're going to fund R&D at close to the levels of 2012 which was a record year. And we'll do all that and still have a very strong balance sheet heading into next year.

And I appreciate that all in the backdrop of a global macro environment that's very hard to call right now.

Yeah, yeah. Absolutely.

Yeah, okay. I'll get back in line. Thank you. I appreciate your time.

Our next question is from Vishal Shah. Please announce your affiliation and pose your question.

Yeah, thanks. Deutsche Bank. Can you talk about your inventory levels? What do you think the right sized inventory levels would be and how does the reduction impact by different segments?

Now, Vishal, are you talking about our inventory or dealer inventory?

I would say your inventory levels. I think you said that you're going to reduce inventory levels in the back half of the year. What is the run rate you expect at the end of the year and where the reduction comes from?

Yes. So I think if you look at our business, we, a bit like dealers, sometimes tend to build some inventory at the beginning of the year as we're ramping up production for the selling season. And then when we get particularly in the fourth quarter, we have a tendency to sell more than we produce and inventory comes down. So I think a part of what you're going to see in the fourth quarter is just a little bit of a seasonal pattern for us. That happened last year as well. We had a pretty sizable inventory reduction in the second half. I think if you just look at our inventory levels broadly, CAT inventory, we're working on lean. We'd like kind of year in and year out to take them down for efficiency. It would be nice if we had enough increase in volume that it caused inventory to go up from a volume standpoint, but all else being equal, we're working hard to improve inventory turns and be more efficient. So I guess all else being equal, I would like to see it continue to come down a little bit as we improve processes. But, and I'll make a comment on dealer inventory too. It wasn't asked directly, but I think most of what we're seeing in over the course of this year first half, second half, it would be more reduction in the second half. But again, I think there is some seasonality in dealer inventory that way. It'll likely start to build again in the first quarter for the selling season. And I don't think dealer inventories overall are out of line or problematic or anything of the case like that. So I think reasonably speaking, most of the dealer inventory reduction that was because there was too much per se, happened in 2013 and 2014.

With that, we are at the top of the hour, and I just want to thank everybody for joining us today. We'll sign off and talk to you again next quarter.

Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your phones line at this time. And have a wonderful day. Thank you for your participation.