Good day, ladies and gentlemen, and welcome to the 2011 Cummins Earnings Conference Call. My name is Alicia, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Dean Cantrell, Director of Investor Relations. Please proceed sir.

Thank you, Alicia. Welcome, everyone, to our teleconference today to discuss Cummins' results for the first quarter of 2011. Participating with me today are Chairman and Chief Executive Officer, Tim Solso; our President and Chief Operating Officer, Tom Linebarger; and our Chief Financial Officer, Pat Ward. We will all be available for your questions at the end of the teleconference. This teleconference will include certain forward-looking information. Any forward-looking statement involves risk and uncertainty. The company's future results may be affected by changes in general economic conditions and by the actions of customers and competitors. Actual outcomes may differ materially from what is expressed in any forward-looking statement. A more complete disclosure about our forward-looking statements begins on Page 3 of our 2010 Form 10-K, and it applies to this teleconference. During the course of this call, we will be discussing certain non-GAAP financial measures, and we refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website at www.cummins.com under the heading of Investors and Media. With those formalities out of the way, we'll begin our remarks with our Chairman and Chief Executive Officer, Tim Solso.

Good morning. I'm going to start today by offering an overview of our first quarter results. I will then share a few thoughts on how the company is positioned to take advantage of our long-term opportunities. Tom will discuss our ability to meet the growth in demand we expect to see this year in all our markets. Pat will then conclude with a detailed look at our performance in the first quarter and share our updated guidance for 2011. As you know, there are some debate over the strength and sustainability of the global economic recovery. We have a good perspective on the strength of the global markets, and we are seeing significant growth in demand for our products and services in nearly every geographic market we serve. In fact, we now expect our sales in 2011 to be almost 30% higher than in 2010 compared to our initial forecast of around 20%. Our first quarter performance was very good. Sales of $3.9 billion represent the third highest quarterly sales in the company's history behind only our record performance last quarter and the second quarter of 2008 at the height of the last economic cycle. Our profitability as a percentage of sales represents solid performance and continuing improvement. Earnings before interest and taxes were 13.8% of sales in the first quarter. These earnings are higher than the fourth quarter of 2010 and the best quarterly performance ever at Cummins. All 4 of our business segments reported improved EBIT percentage from the fourth quarter. The Engine and Components segments also earned record EBIT in the first quarter both in terms of total dollars and as a percent of sales. Our first quarter results reflect continued strong growth in key international markets especially China, India and Brazil. Consolidated sales in China grew…

Thanks, Tim. I want to start this morning by echoing Tim's comments on our terrific first quarter results. Sales were significantly higher than the first quarter of 2010 and held up well compared to our record results in the fourth quarter, despite the typical seasonality in our first quarter volumes. Our gross margin of 24.8% in the first quarter was a full percentage point better than the fourth quarter and its highest level more than 10 years. Similarly, EBIT margins of 13.8% exceeded the fourth quarter and were a modern record for the company. We'll share our updated guidance for this year in a few minutes. But I did want to say that our performance in the first quarter, especially in terms of profitability, was stronger than we had expected and has improved our outlook for the rest of the year. For Cummins, the recovery appears to have arrived, and the growth opportunities that we began preparing for during the downturn are clearly in front of us. We are now focused squarely on making the most of these significant short- and long-term growth opportunities. For 2011, that means being ready to meet large demand increases in many of our markets, including in the United States where we are already starting to see the recovery in the commercial truck and bus markets. Both our heavy-duty and midrange engines are performing well. Reliability is the best we've delivered in any recent launch, and the few economy improvement that we predicted are being realized by our customers. Cummins share of the 2011 purchases by the big U.S. trucking fleets remains very high. We expect to receive nearly 60% share of the medium-duty orders and 40% share of the heavy-duty orders from the top 200 fleet customers. Significant orders include Warner, U.S. Express, Stevens…

Thank you, Tom, and good morning, everyone. First quarter revenues were $3.9 billion, an increase of 56% from a year ago, reflecting strong growth across all regions and all 4 business segments. U.S. sales, which represented 39% of our first quarter revenues were up 70% from a year ago as a result of stronger demand from our on-highway markets. International sales increased by 48% from a year ago with significant growth in China, India, Brazil and Europe through increased demand in the construction, mining, power generation and truck markets. Compared to the fourth quarter of 2010, sales were down 7%. However, as we commented in our previous call, the first quarter was shorter than the fourth quarter of last year by 2 weeks, so the actual weekly run rate of revenue improved across all 4 businesses. Gross margins improved to 24.8% of sales with stronger volumes, good operating leverage and some pricing improvements offsetting the expected cost increases from warranty and material costs. Selling, admin and research and development costs were up $91 million from last year as we ramped up spending in some critical areas most notably in our investment in research and development, which increased by 40%. Joint venture income of $96 million was 26% higher than a year ago with continuing growth ranging from joint ventures in China, India, as well as through our North American distributors. Earnings before interest and tax were $532 million, doubled the amount we reported last year and reached 13.8% of sales. Compared to a record fourth quarter performance and despite the lower revenues this quarter, EBIT was virtually flat and increased as a percent of sales. Earnings per share in the first quarter were $1.75 compared to $0.75 from a year ago. Now moving on to the operating segments, let me…

Thank you, Pat. [Operator Instructions] Alicia, we're now ready for our first question.

[Operator Instructions] Your first question comes from the line of Jerry Revich from Goldman Sachs.

Tom, can you say more about the drivers of the sequential margin improvement in Components, perhaps comment by product line? And also, can you talk about what specific parts of the supply chain you're monitoring closely across your business at this point?

Okay. Well, let me talk about the supply chain. I'll let Pat say a little bit more about the margins in Components. In the supply chain, essentially for every 1 of our major products that we've identified who are the key suppliers in terms of especially those operations, which take longer time to build up adequate capacity. So there's a lead time to build up capacity and there's an investment to make. And so each of our purchasing groups, each have a list of the suppliers. And as I mentioned about a little over a year ago, we then said we want each of them to go and start having frequent communication with those the suppliers. Where necessary, we made commitments or investments, and we have then follow-ups, regular follow-ups with them to make sure we're adding capacity at the right rate. Lately, we've been spending a fair bit of time in the high horsepower arena making sure some of our key component suppliers can keep up. That's been an area that, as you probably noticed in our business, has ramped up very quickly and so we're making sure we have adequate capacity. But those same lists and those same activities go across the Components businesses, while there's key suppliers in Fuel Systems and turbochargers and emission solutions in exactly the same way. I made the comment I did about Japan because we set up a separate task force just for that because there, we're dealing with mostly, well really almost all Tier 2 and Tier 3 suppliers. So these are suppliers that we normally don't have a direct relationship with in terms of making sure they have capacity. But now we are taking that process back a tier to make sure that, that's also true.

So, Jerry, on the question on Components I think there's 2 factors there. First of all, clearly the increased volume and more content that we're putting on engines now has been a driver for the increased profit from the segment. But more significantly, I think given the comments we've had in the last 2 calls where we expressed a little bit of disappointment with profitability of the Components segment, you'll recall they did 8% profit in Q3, they did 9% in Q4. I think part of that was around productivity in a couple of the businesses, notably the Travel business and the Filtration business. And we said that by the end of the year, we expected to be through those issues and we are. So that's why I think you see the Components margin spike up to 11% as quick as what it has.

And, Pat, do you feel comfortable with no productivity issues as you ramp up about the Emission Solutions part of the business?

I feel very confident that the Emission Solutions business will do very well as we ramp up the volume.

Okay. And lastly on your EPA 2010 product lineup, can you talk about where your cash warranty payments are running today relative to your accrual rates or if you can comment on that directionally, if you don't feel comfortable showing specific numbers, that would be helpful. Thanks, Pat.

You'll see some more in the 10-Q when we file it but payments are running below the actual rates just now. 1 of the areas that we are seeing an improvement compared to 3 months ago is a full year forecast for warranty. We expect to be closer to 3.2% I think we said it was to be closer to 3.6% for the full year. So recognizes the confidence that we have that the new products are performing well, performing better than before we have anticipated, and I think that will be realizing the margin in the quarters to come.

And, Jerry, I think it's worth noting I mentioned the reliability of our launch being the best we've had. And I think that's what you're seeing in those numbers. We're not done yet. It's early an update. We make sure we keep focus on this. We don't count our chickens yet. But our returns so far in terms of how we've seen the numbers come in and what kind of issues we're facing look really good. So we're feeling very good about it. And of course, that helps our warranty payment but more importantly, it helps our customers. They see our product is performing better in the field. Reliability really matters to them. We think it's going to help our volumes and market share as well as warranty. So it's a really good situation for us to from the 2010 launch point of view. We feel very good about it.

Thank you.

Your next question comes from the line of Jamie Cook from Credit Suisse. Jamie Cook - Crédit Suisse AG: Quick question, of course, I have to ask the question on guidance. This quarter you put up a 13.8% margin, you're guiding to 14% for the year. I guess I struggle with the number. Was there anything unusual in Q1 that helped you? Or are there any sort of headwinds in the back half of the year that I don't appreciate? Because I'm just thinking, when I look at your volumes in the back half of the year whether it's heavy-duty, medium-duty truck, even components, I would think your volumes should be accelerating based on just what you said about shipments last quarter. So can you help me on that? And then, Pat, how do we think about the elimination line for 2011? Because I'm just trying to square your guidance by, your margin guidance by segment with the margin guidance for the total company.

Well, let me take that 1 Jamie and then Tom can jump in if he wants to. I think there are certainly no unusual items in the first quarter. It was a very clean quarter from the results perspective. As we said before and as I said in my earlier remarks, we do expect warranty rates to increase as we go through the year and ship more 2010 product. That's probably the most significant factor in looking at the 14% guidance for the full year versus 13.8% in Q1. Most of that will impact the Engine business more than any of the other 3 segments. With regards to the eliminations in terms of guidance for that, I expect that inventory will continue to grow as we go through the year. And therefore, the eliminations from a sales perspective we can run around 20%. And from our profit an EBIT perspective, I'd expect elimination you see in Q1. I wouldn't expect that run rate for the full year. I would expect it to be negative but still down from the first quarter number. Jamie Cook - Crédit Suisse AG: Great, yes. Thank you. I'll get back in queue. I wonder if Tom have anything to add.

Yes. So, Jamie, I don't really have much to add. I think Pat's got it right. We don't see anything particularly negative going the rest of the year. We're looking at increasing volumes, which accrues the margin. We are having seeing some slight negative to material cost. I think we've said about 0.3% hit as material cost continue to rise. Again, we're offsetting that in the Power Gen business with price. But we're not getting -- so that's just kind of keeping us even for the year. We're not really gaining much on price during the year. So we kind of forecasted with the warranty increasing and a slight headwind on commodity costs, some increase in margin based on the volume. But maybe again, some slight negative in terms of incremental margin, but not much. It's still a good incremental margin. We're still feeling pretty good about that forecast. James Corridore - S&P Equity Research: All right. Thanks. I'll get back in queue.

Your next question comes from the line of Tim Denoyer from Wolfe Trahan.

A quick question on North American market share. You gave some pretty impressive numbers with the 60% of medium duty and 40% of heavy duty with the top 200 fleet. There's certainly a lot of talk about shipping down 13 liter, but a lot of truckers seem to be very loyal. Is there any change to your overall guidance in terms of you've talked about sort of a low 30s percent in terms of the overall heavy duty? And I think it's 50% in medium?

Yes, Tim. We have talked about being 50% or possibly even better this year in medium duty in North America. And with regards to the heavy-duty Class 8 Group II, and after we've talked about a 36% market share for the full year. So those are consistent, I think, to what we talked about last quarter. We did take our market outlook up for the Class 8 Group II and all that particular market share, our market numbers are included in the presentation that's out there. So we are now seeing a 211,000 unit market on Class 8 Group II for NAFTA.

Got you. Thanks. And then on Power Gen, can you give a sense of the backlog there and any potential capacity constraints? Any benefit in that segment relative to Japan?

Yes. So backlogs are not they're pretty middle for us, pretty normal for us now. We're not in a significant backlog situation. But we're not where we were a couple of years ago either, too, where there's normal -- our backlogs were emptied out because its demand was falling. So we're in a position of increasing demand rather than decreasing, but backlogs are kind of that normal sort of lead time levels now in most markets. There was some extended lead times on large generators sets for a period of time. We've worked most of those down to pretty normal levels again as a result of increases in capacity. So we're feeling pretty good about that. You asked also about Japan and what I'd say about Japan is there are increased opportunities. We are actively trying to help our, obviously, our suppliers and partners with any kind of emergency power we can provide. And we're, of course, generally providing power in the market. There are very strict rules in Japan that are unique to that country. So 1 of the challenges for us and other providers of power or standby power there is you have to change your equipment or modify your equipment to meet Japanese standards. There are -- so that just takes a bit more time but we are doing that. And we have several partners we're working with on that. And we are providing -- we do see that as a potential improvement in our forecast in the rest of the year.

Okay. Great. And just overall, what is an average lead time just, I mean, can you give me a rough estimate worldwide is it 3, 6 months?

Yes, for which products? For the large ones or small ones?

Both.

So I'd say on the small ones, you might typically run something like it depends on the region but say anywhere from 4 weeks to 10 weeks, and on the large ones you might run anywhere from 10 to 16 depends on kind of which product. And again, they have been out in previous cycles where they're really sold out you'll go to 6 months or longer for a large 1. And that's why I said when we're back in our kind of 16 weeks or less kind of number is when we start to feel like we're now right at what the market demand is. Because most people since they're usually part of a construction project of some kind there's some sort of lead time, which is within the lead time of all the other things they have to do. And therefore, it isn't really the critical task.

Got it. If I can sneak 1 more in. What's your opinion on solid-state SCR for long-term Emission Solutions?

We are actually, we think it's a technology that may have promise. It's a technology that we've evaluated. We spent significant effort reviewing it. We actually have met the providers and talked with them technically about the opportunities there. At this stage, it's too costly and not ready to be used in the market. Again, there may be promise to it especially in applications where finding SCR or refilling SCR's difficult or challenging. You could imagine in a case where you're maybe far from road transport or something and therefore, it's hard to keep our store. Or a situation where it's not SCR is not widely available for whatever set of reasons. But right now, it's an interesting technology that's just not ready or not cost effective.

Great. Thank you very much.

Your next question comes from the line of Robert Wertheimer from Morgan Stanley.

I guess just a couple questions. Just out of curiosity the high horsepower, are you anticipating that there could be a capacity crunch either for the industry or for you guys later in the year? I mean, with mining trucks booming and then electric power's been pretty good, I think in oil and gas maybe headed back up. You guys benefited from that last cycle. Are you able to say how much room you have for the upside? And out of curiosity on new platform, what exactly that's targeting?

Yes. I mean high horsepower has already been capacity constrained in this up cycle already for the industry, I mean. It's already been an issue. As I mentioned lead times went out for a while. So we're now getting our lead times back into where we want them to be, and that just tells you that since we're just now doing it, its tight right -- there's no question about it. We're working hard and a lot of it is in the supply base, which is why I mentioned the efforts we've been putting in there to make sure we have enough supplier capacity to make sure we can meet customer requirements, and I do believe that in the industry, those providers who are more -- ramp up more quickly, complete lead times at reasonable levels, will do better from a market share point of view than those that get stuck from a capacity point of view. So I guess my feeling is if markets continue on their certain trend, it will stay tight. And we're going to work really hard to make sure we're the 1 that has good lead times, as well as best products and best quality. So I think it's going to be tight for some time.

And what enabled you to bring your lead times in because I didn't fully follow. Was it supplier side than it was factory optimization or capacity you added?

Exactly. We're doing both as you've guessed. But in this period, the biggest issue was getting suppliers ramped up as opposed to assembly capacity.

That's perfect. And the new high horsepower platform, is that a particular -- I don't know if you can give the horsepower range or if that's out yet or not, I didn't remember it. And then what end market if 1 in particular it's targeting?

Yes, we have not yet released information on its actual power range. We've said it's higher than our current products. We are definitely targeting power gen and large industrial markets. So you probably know those markets we serve today -- oil and gas, marine, et cetera. We'll be targeting those markets. So same end markets as we provide today and just larger power range. And expect natural gas and diesel kind of as we're doing with most of our product line today.

That was my follow-up. Thank you very much. That's perfect.

Your next question comes from the line of David Raso from ISI Group.

Turning to look at to '12 a little bit. I mean, right now at least near term it's not a question of demand, it's a question of supply. So when you think about your capacity '12 versus '11, with all the things in motion, obviously [indiscernible] you mentioned now came off a couple of weeks ago. The investment store are still ongoing in China. But when you add it all up, and I know it's hard to generalize across Power Gen and a variety of business segments, but how are you thinking about your capacity addition full year '12 versus '11?

That will be greater.

Yes, very much.

Obviously, the Power Gen -- that is a significant step up in capacity. The Tata, pretty material obviously, the China on the smaller leader so I mean is it...

You just haven't added it up, Dave. I totally get your question and not to be glib, we are definitely seeing an increase, and we're trying to think through as I mentioned in my remarks several years ahead to make sure we've got a capacity ramp up plan across each of our businesses and regions to meet the demand. And then of course, since we do a lot of intercompany supply, a lot of it is making sure that we're aligned between our companies on how much capacity we need. So the turbocharger plant has to be aligned with the Engine plants that it serves and with the generator set plant that it's serving. So that kind of alignment in addition to trying to make sure we're hitting the end market right is what we are targeting. We have a process by which we lay out our future capacity requirements for 5 years. Of course, as you guessed the year or 2 out is a lot better than beyond that, but we look at it long run that way anyway and we line up all those. We do that process every year in June with an update in September before we put together, start put together our plan. So we'll do that for several years out here in June, and we'll be able to look for 2012 and beyond. We did that last year, of course, so we had a view about what we needed to add in 2012. I just can't say based on all the adjustments we've made what the percentage increase would be 2012 or 2011 yet.

I can ask in a different way. I mean, it sounds like you're very confident in how you're planning your CapEx demands going to be there. Can we try to think through the individual line items?

Yes.

Where are the areas from suppliers you spoken to, from machine tooling, whatever it may be. When I look out to '12 and you have a bullish view on '12 demand. Where are the end markets, your business segments where you're most constrained to add as much capacity for '12 as you like?

I don't think there's any that we feel we're constrained.

Yes.

Okay. So it's under of your control how much capacity you'd like to add and your suppliers can provide it for you?

Yes, I would just say from a historical standpoint, our capacity planning is much more thorough and robust right now. And the attitude in the past has been to have the capacity when we saw the demand we put the capacity in, and so we would have spikes where we were on allocation or on long lead times. And the approach now and has been really for the last year is to put in that capacity ahead of demand, and so we don't have those spikes that we've talked about and therefore, I think we have much better control. As Tom said, usually in the past we would look at our manufacturing capacity. Now we're looking to the supply chain all the way in the Tier 2 and Tier 3 suppliers.

Last quick 1, more on near term. On Distribution, the margin degradation that you have guided the full year to from the first quarter, when I think of how significant JV income is to Distribution business and most of that Distribution JV income is domestic. And I think about it as Power Gen, obviously parts and Filtration products and so forth for truck. It wouldn't seem to be a business that would feel much margin degradation that the rest of the year. Maybe I don't appreciate how the warranties flow through the distributors, but can you help us understand why the margins [indiscernible]...

It's simple, David. Business is good through the year. What we're expecting is because we think the whole goods section of business is going to grow, that's the Power Gen part and the Engine business. That from a mix point of view, we get a deterioration of margin. It's still great business so margin dollars and all that stuff looks great. It's just that if you look at the percentage EBIT, parts make a higher margin percentage than the whole goods do. So we just get a mix decrease. We just have quite a bit a pretty high mix of parts in the first quarter, and we think it will just be a little bit higher whole goods as we go the rest of the year.

Understood. Helpful. Thank you very much.

Your next question comes on the line of Henry Kirn from UBS.

It's Eric Crawford on for Henry. Getting back to your margin profile, it was just touched upon by a couple of different people. But you took up your Power Gen and your Distribution revenue guidance but maintained the EBIT margin outlook. So was just wondering if you could give a little more color on how you expect the mix in Distribution that you just touched on and price cost in Power Gen, how you expect those to trend throughout the year.

I'll start and then Tom can jump in. The Distribution did well. We are going to see a mix driven towards the whole good part of the business away from the aftermarket parts and service, which will dampen down the EBIT margins. At the same time, we're also going to continue to ramp up our investments in Distribution to make sure we'll grow a good platform around the world to support customers. So you should expect to see higher SCR spending Distribution as we go forward through the rest of the year than what you've seen in the first quarter. With regards to Power Gen, Power Gen first quarter was 11.2% of sales. We've given guidance in the range of 11% to 12%, so I would expect power gen if you just take the midpoint that would suggest they would be a little bit better as we go through the year and see more volumes come through. We do expect pricing to be a little bit better than material costs for the segment as we go through the year. But not significantly. I think pricing look at maybe in a range of 1.5% and material cost slightly below that.

But sorry, so the pricing will be a little bit better towards the end of the year?

Yes, we will have more pricing in Power Gen as we go through the year.

Excellent. And if I could another, you highlighted growth from Tata Cummins in India and was wondering if you could talk about the opportunity from that business in 2011 and beyond.

Yes. So Tata Cummins, that joint venture is the primary supplier now to Tata trucks for their on-highway, on-road truck trucks that serve the Indian market. So we started that joint venture many, many years ago it started with a relatively low share. We're now running at shares between 70% and 80% of the Tata trucks we'll have 1 of our engines in there. And so what our primary driver of growth out of that joint venture has been and will be that the Indian truck market, which is expanding significantly as they add roads and infrastructure across the country. So that's the primary driver that this year looks good, the outlook is good and the long-term outlook is also very, very good as road infrastructure gets built. In addition, though we are now because we are limited on capacity for a while. As we increase capacity, we also have the opportunity to use that joint venture as a source for engines that we can supply elsewhere in the world and other markets both on-highway and off-highway. It's a very competitive cost and very good quality engine and so we're going to start, Cummins is going to start taking Engines out in joint venture to use in other markets too which will again, allow us to grow more generally as a company.

That's helpful. Thanks very much.

Your next question comes from the line of Andrew Casey from Wells Fargo Securities.

A lot has been asked. Just a couple of detailed points, if I could. I'm sorry if I missed it, but could you remind me what the warranty accrual cost was in the quarter?

2.9% of sales.

Thanks. And then for China, still going very strong in a lot of your businesses. Do you have any updated outlook maybe, and if you have said it already, I apologize, for what you expect for the year?

We haven't talked about it. We still expect overall growth in our China markets and as really our outlook hasn't changed a lot from a broad point of view, meaning that we still see while some of the end markets may be flat to slightly up, slightly down our growth is going to continue because we are adding new, we have new markets that we're going into and we're getting share in a few spots. But that's the broad. So that hasn't really changed. If you get a little bit more focused now, you may have heard the truck market, many people expect the second half to be weaker than the first half. So our first quarter was actually quite good, maybe even a little better than we thought. But there's some sentiment that it will decrease, and there's end user or end market inventory in the truck part [ph] -- that dealers are holding more truck inventory now than they've held historically, which is why people are wondering about that. It remains to be seen, right? So we've been worried about that for some time, and it still continues to grow. So we just don't know about that part, but there's some I think reasonable likelihood that the market will be weaker in the second half than the first half. That will still probably put it at about equal year-over-year or maybe slightly down or slightly up just as we originally anticipated. Construction markets have been consistently strong. We, in fact, we expected some drop off after last year given how strong construction markets were last year. But they absolutely boomed, continue to boom in the first quarter and we see them continuing at least through the first half of the year. And then we'll keep our eyes open, but nothing on the horizon that says they're going to stop insignificantly at this stage.

Thanks a lot, Tom.

Your next question comes from the line of Ann Duignan from JPMorgan.

Dan [ph] for Ann, JPMorgan. Just had a quick question. Most of my questions have been answered, but around your off-highway industrial Engine segment -- performed very well, and I think at Slide 10 it says you guys won a share in the oil and gas end market. And I was hoping you could provide more color there and is that sustainable? Thanks.

Sorry, I'm just getting over a cold. The oil and gas market, not only do we think it's sustainable. We kind of think we're just starting in oil and gas. So we are definitely seeing that as an end market that Cummins is going to continue to expand in and we are putting significant effort in doing so. We are obviously far from the largest player in that market so although we are expanding, there are others who are much, much larger than we are. But we are, especially in Well Servicing, we have a good position that we are using to expand into other segments of the business. What I'd say most is the market's growing. There may be some small share gains here and there, but the biggest benefit to us has been that the market is growing and we are growing the number of relationships we have. And our product line is expanding so we have more to offer. Those are the biggest changes in the market and those are continuing.

Okay. Thanks, guys.

Your next question comes from the line of Joel Tiss from Buckingham Research Group.

Can you give us a sense of what's changed so dramatically in your emerging markets business to allow all that capacity? Because you guys are crying at the beginning of the year, you're out of capacity, you don't have much and now looking at 25% and 30% growth.

I think at the start of the year, Joel, we said we expected India to grow around 25% and now we're seeing 30%; and China to grow 20% and now we're seeing 25% or 26%. So we did always think that the emerging markets would grow in 2011, we're just growing a little bit faster than what we thought 3 months ago.

Yes, I think context-wise, Joel, of the ones that I've listed in my remarks at the capacity increases -- the ones in the emerging markets were on those were unchanged from our original plan. So some of the ones we've had to speed up like, for example, the Charleston Turbo plant, some of the Power Gen stuff has been driven less by those emerging markets than they have by other markets. So I think while we are expanding some things faster than we planned, those big emerging market ones -- the Tata Cummins and the Dongfeng Cummins were exact on the docket. They're exactly the same projects we had in place when we talked to you about our guidance for the year.

Okay. And structurally, can you give us a sense of what's changing in your Engine business? When you gave us your long-term margins way back they were 10%. Now you're hitting new highs. Is it pricing? Is it the capacity that you're adding that's more efficient? Can you just give us a little flavor for what's shifting under the covers?

So I think that's a question better answered in our Investor Day when we get a chance to look long-term perspective because we gave your comment, I think is about structure is the 1 that take some historical and future perspective to answer properly. There's no question that our outlook today is stronger than our outlook was then, and part of it was just understanding some of the changes that have happened and trying to figure out what's going to happen with those in the future. So I think it's a question better answered with that kind of a long-term perspective. Obviously, though we are as you've said, feeling like our outlook is stronger.

Okay, thank you.

Your next question comes from the line of Ben Elias from Sterne Agee. Ben Elias - Sterne Agee & Leach Inc.: Thanks. Just a couple of follow-up questions. You did mention that your second quarter heavy-duty truck production would be up about 35% versus first quarter, is that correct?

Yes, in Jamestown. Ben Elias - Sterne Agee & Leach Inc.: Okay. In Jamestown. But the company on average, you're averaging about $330 million to $350 million. Would that be accurate? Are you close to 4Q '09 levels and when do you think you're going to be above that $400 million a day run rate?

So Ben, are you asking more specifically to the heavy-duty business or all Engine? Ben Elias - Sterne Agee & Leach Inc.: The heavy-duty first.

Yes. We're looking at, Ben, about Q4. Versus Q4 '09, yes, Q2 '11 would look like it would be at a higher per day build rate. Ben Elias - Sterne Agee & Leach Inc.: So it would be above $400 million then?

Yes. Ben Elias - Sterne Agee & Leach Inc.: Okay. Second question I was wondering if you could update us similar to sort of what Andy was looking for update us on production rates in China at least at your facilities, the ramp up at Foton? What’s in the sequential change or where you think you are on that light duty side?

When you're a number in Foton our we were delayed about a year off our original plant. We set a target this year for volumes, and I think we'll be close. Whether we'll make it all the way or not, I'm not sure. But we were close to our target volume this year. We're still struggling hard in the light-duty segment. This is the minivan and that segment to get our Engine, which is newer, better technology and increase the uptake and the end market in China. So it's still work for us to be done. We are obviously making some progress because volumes are increasing, but we'd like to be making more. So I think our challenge remains to work with our partner Foton to build demand for higher quality, more reliable, more durable product in that low end segment. In the high end segments, the move is sort of ongoing and going fast. In a low end segments, it still a tougher sloug [ph]. So I think we'll hit our volumes it still a tough, tough deal that's probably still work in front of us.

And just to add to that, Ben, we do expect to grow volumes in all engine joint ventures in China in 2011, so just adding onto Tom's remarks. Ben Elias - Sterne Agee & Leach Inc.: And Foton was about 16,000 or 17,000 last year and you're looking at about 50,000 this year.

That's correct. Ben Elias - Sterne Agee & Leach Inc.: And last question. Have you found a home for your light-duty diesel Engine in the U.S.?

No. The answer is we have not found a final workable plan. As we mentioned before the updates not much new to say that we have several customers who are interested and committed to going forward. And we need to find another large 1 or another a combination of customers that puts the project into the enough of a good financial results that we go ahead and go forward. So we're kind of still on that position. We're having active discussions which are positive and have good potential outcomes, but not closed yet. Ben Elias - Sterne Agee & Leach Inc.: Okay. Thanks a lot.

Yes.

Thank you, everyone. I think that's all the time we have for questions today. Both myself and Mark Smith will be available after the call. If you have any questions, feel free to give us a call in at the IR line of (812) 377-3121. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.