Caterpillar, Inc.

Good morning, ladies and gentlemen, and welcome to the Caterpillar 1Q 2018 Analyst Conference Call. At this time, all participants have been placed on the listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jennifer Driscoll. Ma'am, the floor is yours.

Thanks, Kate. Good morning, everyone, and welcome to the first quarter earnings call for Caterpillar. I'm Jennifer Driscoll from Investor Relations at Caterpillar. I'm pleased to have with me here in the room Jim Umpleby, Chairman of the Board and CEO, Andrew Bonfield, CFO, and Kyle Effley, Vice President of Global Finance Services Division. We've provided slides to accompany the presentation. You can find the slides, along with our earnings release and a glossary, on the Investor Relations section of the Caterpillar.com website under Quarterly Financial Results. Today we plan to make forward-looking statements which are subject to risks and uncertainties as well as assumptions that could cause our actual results to be different than the information discussed. For details on factors that individually or in aggregate could cause actual results to vary materially from our projections, please refer to our most recent SEC filings and forward-looking statements included in today's earnings release. As indicated earlier, we are not reporting adjusted profit per share in the first quarter as restructuring costs are expected to be lower this year. It's our intention to report adjusted profit per share in the fourth quarter of 2019 to exclude mark-to-market gain or loss for the remeasurement of pension and any other post-employment benefit plans and any other discrete items. Please keep in mind that today's call is copyrighted by the company. Any use of any portion of the call without our written approval is strictly prohibited. Before I turn the call over to Jim, let me remind you that we'll be webcasting an Investor Day presentation next week, May 2nd, from 1 p.m. to 3.30 p.m. Eastern Time. We intend to defer until then any questions about capital allocation or long-term targets. To access the webcast or the transcript, please visit caterpillar.com, click on Investors, and then Events and Presentations. And with that, I will now turn the call over to Jim.

Thank you, Jennifer. We're happy to have you with us at Caterpillar, and good morning to everyone on the call. As Jennifer mentioned, we hope to see many of you at our Investor Day next week in Clayton, North Carolina, where we will provide an update on our enterprise strategy, financial targets, and capital deployment plans. Turning to the first quarter highlights on slide three, I'd like to thank our global team for delivering another strong first quarter. Profit per share was a first quarter record of $3.25, rising 19%. This result included the contribution of 31 cents per share of a discrete tax benefit. Consolidated sales and revenues grew 5%. Resource industries led the way, driven by higher demand for equipment and services and favorable price realization. Growth from construction industries was fueled by higher end-user demand for construction equipment and price realization. Operating profit rose 5%. We benefited from favorable price realization, volume gains, and lower short-term incentive compensation expenses, which more than offset higher manufacturing costs, as well as investments in SG&A and R&D for future growth. Strong operating cash flow of $860 million allowed us to repurchase $750 million in company stock, in addition to paying the dividend as part of our continued commitment to shareholder returns. These strong first quarter results are a reflection of stronger demand and the benefit of executing our strategy for profitable growth by investing in services, expanding our offerings, and improving operational excellence. Growing services is a critical element of our strategy. Services allows us to provide additional customer value in a variety of ways, including reducing downtime and maximizing machine availability. Digital is an enabler of this strategy with connectivity at the foundations. Last year, we added about 250,000 new connected assets, bringing our total to about 850,000 assets connected worldwide. We look forward to sharing more on how we think about services during our upcoming Investor Day. Expanding our offerings enables us to grow our business and reflects our commitment to create greater customer value by providing solutions to meet diverse customer needs in different markets around the world. Some of our progress was on display earlier this month at Bauma, the construction industry's largest trade show, held in Munich, Germany, every three years. I was proud to walk the floor of the Caterpillar exhibit and engage with our dedicated employees and valued customers. Among the highlights were the next-generation hydraulic excavators with new semi-autonomous features, which give operators more information and insight than ever before. We also displayed the world's first high-drive electric-drive dozer, the D6XE. It offers up to 35% better fuel efficiency than its predecessor. We also showcased new hybrid technologies on three Perkins engines, as well as five new engines from its range of EU Stage 5 engines designed to meet new emission standards, increase productivity, and lower lifecycle costs. To complement these expanded offerings on the stand, Customers also learned about new services, including aftermarket products, customer service agreements, and our new CAT app, which allows customers to easily track critical machine operating data from the field. We continue to focus on enhancing operational excellence, including safety. Our safety goal is always zero incidents. We want all of our employees to return home safely every day. One of the metrics we track is the number of recordable injuries per 200,000 hours worked. So far this year, we are tracking 9% better than 2018, and we will not lose focus on this priority to prevent injuries and keep our people safe. Executing our strategy is allowing us to improve operating profit and free cash flow, which we define as operating cash flow less capital expenditures. During our investor day on May 2nd, we will discuss our expectations for operating margins and free cash flow. Now, turning to the 2019 outlook on slide 4, we continue to have confidence in the fundamentals of our diverse end markets and expectations for 2019 performance are unchanged. However, we adjusted our range of $11.75 to $12.75 by the amount of the discrete tax benefit we realized in the first quarter. That brings our 2019 outlook to $12.06 to $13.06 in profit per share. We continue to expect modest sales growth and continued cost discipline for full year 2019. Now let's walk through what we're seeing in the external environment. In construction industries, we continue to believe that a healthy U.S. economy, along with state and local funding for infrastructure development, will be a positive for us, partly offset by weakness in residential construction. We continue to expect demand to remain low in Latin America this year. In the Europe, Africa, and Middle East region, demand remains steady despite the political and economic uncertainties. In Asia Pacific, infrastructure activity remains strong. Within China, we continue to expect our sales to be flat with last year. For resource industries, we continue to expect most commodity prices to remain at investable levels. We are seeing mining companies become increasingly willing to invest in CapEx. While that is encouraging, Miners remain disappointed in their CAPEX deployment. We expect demand for heavy construction and quarry and aggregate equipment to remain strong. In energy and transportation, oil prices are recovering, but the volatility in oil prices and takeaway constraints in the Permian are impacting demand for well-servicing equipment in the first half of the year. Later in the year, U.S. pipeline constraints are expected to ease, and we anticipate an increase in demand. Gas compression should remain healthy. Demand for power generation equipment continues to be a positive. Finally, in transportation, we expect improvements in our rail business, including services. With that, I will turn the call over to Andrew for a closer look at our financials.