PACCAR Inc (NASDAQ:PCAR) Q1 2021 Earnings Conference Call April 27, 2021 11:00 AM ET Company Participants Ken Hastings – Director-Investor Relations Preston Feight – Chief Executive Officer Harrie Schippers – President and Chief Financial Officer Conference Call Participants Steven Fisher – UBS Jerry Revich – Goldman Sachs Ann Duignan – JPMorgan David Raso – Evercore ISI Nicole DeBlase – Deutsche Bank Joel Tiss – BMO Robert Wertheimer – Melius Research Jamie Cook – Credit Suisse Chad Dillard – Bernstein Ros ...

Part I [Business](index=3&type=section&id=ITEM%201.%20BUSINESS) PACCAR is a global company operating in three main segments: Truck, Parts, and Financial Services, with its largest segment, Truck, accounting for 70% of 2020 revenues - PACCAR operates through three principal industry segments: **Truck Segment** (70% of 2020 total net sales and revenues), **Parts Segment** (21% of 2020 revenues), and **Financial Services Segment** (8% of 2020 revenues and 56% of total assets)[13](index=13&type=chunk)[15](index=15&type=chunk)[28](index=28&type=chunk) - As of December 31, 2020, the company had approximately **26,000 employees**, with about **38%** located in the U.S[47](index=47&type=chunk) Segment Revenue Contribution | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Truck Segment Revenue %** | 70% | 78% | - | | **Parts Segment Revenue %** | 21% | 16% | - | | **Financial Services Revenue %** | 8% | 6% | - | | **Industrial Winch Sales %** | <1% | <1% | <1% | - The company's truck production backlog was **$7.6 billion** at the end of 2020, with **$4.6 billion** considered firm (scheduled for delivery within 90 days)[25](index=25&type=chunk) [Risk Factors](index=9&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company identifies significant risks that could negatively impact its financial condition, including market variability, production costs, and financial services risks - **Business and Industry Risks:** The commercial vehicle market is highly sensitive to economic conditions, and the company faces variability in material costs and component shortages, including the ongoing semiconductor supply shortage[52](index=52&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - **Political, Regulatory, and Economic Risks:** The COVID-19 pandemic, the U.K.'s exit from the EU, and the transition away from LIBOR introduce uncertainties, with approximately **10%** of the company's 2020 worldwide truck production located in the U.K[63](index=63&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - **Other Significant Risks:** The company is exposed to information technology system disruptions, security breaches, product recalls, lawsuits, and extensive trade and environmental regulations[60](index=60&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Unresolved Staff Comments](index=11&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that there are no unresolved staff comments from the SEC - None[76](index=76&type=chunk) [Properties](index=12&type=section&id=ITEM%202.%20PROPERTIES) PACCAR owns and operates manufacturing plants and parts distribution centers across the U.S., Canada, Europe, Australia, Mexico, and Brasil Facility Locations | Facility Type | U.S | Canada | Australia | Mexico | Europe | Central/So. America | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Truck Plants** | 4 | 1 | 1 | 1 | 3 | 1 | | **Parts Centers** | 6 | 2 | 2 | 1 | 5 | 2 | | **Other (Winch)** | 2 | — | — | — | — | — | [Legal Proceedings](index=12&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Information regarding the company's legal proceedings is incorporated by reference from Note L, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements - Refer to Note L – "Commitments and Contingencies" in the Notes to Consolidated Financial Statements (Part II, Item 8) for discussion on litigation matters[79](index=79&type=chunk) [Mine Safety Disclosures](index=12&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[80](index=80&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=13&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) PACCAR's common stock (PCAR) is traded on the Nasdaq Stock Market, with total dividends of **$1.98 per share** declared in 2020 2020 Dividend and Stock Price Data | Quarter | 2020 Dividends Declared | 2020 Stock Price High | 2020 Stock Price Low | | :--- | :--- | :--- | :--- | | First | $0.32 | $79.66 | $49.11 | | Second | $0.32 | $79.48 | $58.21 | | Third | $0.32 | $91.30 | $74.00 | | Fourth | $0.32 | $0.32 | $82.85 | | Year-End Extra | $0.70 | - | - | | **Total** | **$1.98** | - | - | - On December 4, 2018, the Board approved a **$500.0 million** stock repurchase plan, with **$110.0 million** of shares repurchased as of December 31, 2020, and no repurchases in Q4 2020[91](index=91&type=chunk) - The company's cumulative total stockholder return for the five years ending December 31, 2020, was **118.07%**, lagging the Peer Group Index's **202.22%** but outperforming the S&P 500 Index's **103.04%**[90](index=90&type=chunk)[91](index=91&type=chunk) [Selected Financial Data](index=15&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents a five-year summary of key financial data, showing a significant decrease in 2020 revenues and net income compared to 2019 Key Financial Data | (in millions, except per share data) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Total Revenues** | $18,728.5 | $25,599.7 | $23,495.7 | | **Net Income** | $1,298.4 | $2,387.9 | $2,195.1 | | **Diluted Net Income Per Share** | $3.74 | $6.87 | $6.24 | | **Cash Dividends Declared Per Share** | $1.98 | $3.58 | $3.09 | | **Total Assets** | $28,260.0 | $28,361.1 | $25,482.4 | | **Stockholders' Equity** | $10,390.0 | $9,706.1 | $8,592.9 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=16&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) PACCAR's 2020 financial results were significantly impacted by the COVID-19 pandemic, leading to a **27%** decrease in revenues and a **46%** drop in net income, while the company pursued strategic initiatives for autonomous and zero-emissions vehicles [Overview and Outlook](index=16&type=section&id=7.1%20Overview%20and%20Outlook) The COVID-19 pandemic significantly impacted 2020 results, causing production suspensions and reduced demand, while the company advanced autonomous and zero-emissions vehicle development 2020 Financial Highlights vs. 2019 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net Sales & Revenues | $18.73 billion | $25.60 billion | | Net Income | $1.30 billion | $2.39 billion | | Diluted EPS | $3.74 | $6.87 | | Capital Investments | $569.5 million | $743.9 million | | R&D Expenses | $273.9 million | $326.6 million | - PACCAR signed a strategic agreement with Aurora to develop autonomous Peterbilt 579 and Kenworth T680 trucks, with deliveries expected in the next several years[98](index=98&type=chunk) - The company is developing zero-emissions vehicles, including fuel cell electric and battery electric trucks, with over **60** currently in customer testing and production of a few hundred units anticipated for 2021[99](index=99&type=chunk) 2021 Outlook | Metric | 2021 Projection | | :--- | :--- | | U.S. & Canada Truck Sales | 250,000 - 280,000 units | | Europe Truck Sales (>16t) | 250,000 - 280,000 units | | Parts Sales Growth | 7-9% increase from 2020 | | Capital Investments | $575 - $625 million | | R&D Expenses | $350 - $375 million | [Results of Operations](index=18&type=section&id=7.2%20Results%20of%20Operations) In 2020, total revenues decreased **27%** to **$18.73 billion**, and income before taxes fell **46%** to **$1.66 billion** compared to 2019, primarily due to a **69%** drop in Truck segment income Income Before Income Taxes by Segment (2020 vs. 2019) | Segment (in millions) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Truck | $581.4 | $1,904.9 | (69)% | | Parts | $799.3 | $830.8 | (4)% | | Financial Services | $223.1 | $298.9 | (25)% | | **Total Income Before Taxes** | **$1,657.9** | **$3,099.2** | **(46)%** | Truck Deliveries by Region (2020 vs. 2019) | Region | 2020 Units | 2019 Units | % Change | | :--- | :--- | :--- | :--- | | U.S. and Canada | 73,300 | 117,200 | (37)% | | Europe | 42,900 | 59,900 | (28)% | | Other | 17,100 | 21,700 | (21)% | | **Total Units** | **133,300** | **198,800** | **(33)%** | - Truck segment gross margin decreased to **7.5%** in 2020 from **12.1%** in 2019, primarily due to lower sales volume, higher product support costs, and inefficiencies related to the COVID-19 pandemic[119](index=119&type=chunk)[120](index=120&type=chunk) - Financial Services' provision for losses on receivables increased to **$28.8 million** in 2020 from **$15.4 million** in 2019, driven by portfolio growth and challenging economic conditions from the pandemic[135](index=135&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=7.3%20Liquidity%20and%20Capital%20Resources) PACCAR maintained a strong liquidity position, ending 2020 with **$5.0 billion** in cash and marketable securities, and increased net cash from operating activities to **$3.0 billion** Cash and Marketable Securities | (in millions) | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,539.6 | $4,175.1 | | Marketable debt securities | $1,429.0 | $1,162.1 | | **Total** | **$4,968.6** | **$5,337.2** | Summary of Cash Flows (in millions) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,987.2 | $2,860.3 | | Net cash used in investing activities | ($1,875.8) | ($2,207.4) | | Net cash (used in) provided by financing activities | ($1,808.5) | $83.4 | - The company has line of credit arrangements totaling **$3.52 billion**, of which **$3.29 billion** were unused at December 31, 2020, including **$3.00 billion** of committed bank facilities[152](index=152&type=chunk) [Critical Accounting Policies](index=29&type=section&id=7.4%20Critical%20Accounting%20Policies) Management identifies several accounting policies as critical due to their reliance on sensitive estimates and judgments, including operating leases, allowance for credit losses, and product warranty reserves - **Operating Leases:** A hypothetical **10%** decrease in used truck values worldwide would result in approximately **$80.7 million** in additional depreciation expense in 2021[174](index=174&type=chunk) - **Allowance for Credit Losses:** A hypothetical **100 basis point** increase in 30+ days past due accounts (from **0.5%** to **1.5%**) would likely increase the estimate of credit losses by a range of **$2 million** to **$36 million**[180](index=180&type=chunk) - **Product Warranty:** A hypothetical **0.2%** increase in warranty expense as a percentage of Truck, Parts and Other net sales would have increased 2020 warranty expense by approximately **$34 million**[181](index=181&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) PACCAR is exposed to market risks from fluctuations in interest rates and foreign currency exchange rates, which it mitigates using derivative contracts - **Interest-Rate Risk:** A hypothetical **100 basis point** increase in interest rates would result in a net fair value gain of **$5.9 million** on the company's portfolio of interest-rate sensitive instruments as of year-end 2020[184](index=184&type=chunk) - **Currency Risk:** A **10%** unfavorable change in foreign currency exchange rates would lead to a potential loss in fair value of **$155.2 million** for foreign currency exchange contracts, largely offset by gains in the value of the underlying hedged items[184](index=184&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section contains the audited consolidated financial statements for the fiscal year ended December 31, 2020, including the Statements of Income, Comprehensive Income, Balance Sheets, Cash Flows, and Stockholders' Equity, along with accompanying Notes and independent auditor reports [Consolidated Financial Statements](index=32&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail PACCAR's financial performance and position, reporting **$1.30 billion** in net income on **$18.73 billion** in revenues for 2020 Key Financial Statement Data (2020) | Metric (in millions) | Amount | | :--- | :--- | | **Income Statement:** | | | Total Revenues | $18,728.5 | | Net Income | $1,298.4 | | **Balance Sheet (Year-End):** | | | Total Assets | $28,260.0 | | Total Liabilities | $17,870.0 | | Total Stockholders' Equity | $10,390.0 | | **Cash Flow Statement:** | | | Net Cash from Operating Activities | $2,987.2 | [Notes to Consolidated Financial Statements](index=38&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosure on PACCAR's accounting policies, segment information, financial instruments, debt, and other commitments, including the adoption of the new credit loss standard and specifics on borrowings - **Adoption of New Credit Loss Standard (ASU 2016-13):** The company adopted the new standard on January 1, 2020, resulting in a cumulative-effect adjustment that decreased retained earnings by **$4.6 million**[249](index=249&type=chunk)[250](index=250&type=chunk) - **Financial Services Receivables:** Total finance and other receivables were **$11.82 billion** at year-end 2020, with an allowance for credit losses of **$127.0 million**, and **99.5%** of the retail loan and lease portfolio was current or less than 30 days past due[261](index=261&type=chunk)[140](index=140&type=chunk) - **Borrowings:** Total Financial Services borrowings were **$10.85 billion** at year-end 2020, primarily consisting of commercial paper (**$3.11 billion**) and term notes (**$7.51 billion**)[287](index=287&type=chunk) - **Legal Contingencies:** Following a 2016 European Commission settlement, the company faces claims and lawsuits in various European jurisdictions alleging EC-related claims, with no reasonably estimable range of loss[302](index=302&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=77&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports that it has had no disagreements with its independent auditors, Ernst & Young LLP, on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure - The registrant has not had any disagreements with its independent auditors on accounting or financial disclosure matters[404](index=404&type=chunk) [Controls and Procedures](index=77&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020, with no material changes in Q4 2020 - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report (December 31, 2020)[405](index=405&type=chunk) - Management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2020, based on the COSO 2013 framework[383](index=383&type=chunk) - There were no changes in internal controls over financial reporting during Q4 2020 that materially affected, or are reasonably likely to materially affect, these controls[407](index=407&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=78&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, corporate governance, and the audit committee is incorporated by reference from the company's proxy statement for the annual stockholders' meeting on April 27, 2021 - Information regarding directors, the audit committee, and audit committee financial experts is incorporated by reference from the proxy statement for the April 27, 2021 annual stockholders meeting[411](index=411&type=chunk)[414](index=414&type=chunk) - Information about the Company's executive officers is included in Part I, Item 1 of this Form 10-K[411](index=411&type=chunk) [Executive Compensation](index=78&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) All information related to executive compensation, including compensation of directors and executive officers and the Compensation Committee Report, is incorporated by reference from the company's proxy statement - The required information is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[414](index=414&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=78&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding the security ownership of certain beneficial owners, directors, and executive officers is incorporated by reference from the company's proxy statement, while equity compensation plan details are in Part II, Item 5 - Stock ownership information is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[414](index=414&type=chunk) - Information regarding equity compensation plans is provided in Item 5 of this Form 10‑K[415](index=415&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=79&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The company reports no related party transactions in 2020, and information concerning director independence is incorporated by reference from the proxy statement - No transactions with management and others as defined by Item 404 of Regulation S‑K occurred in 2020[416](index=416&type=chunk) - Information concerning director independence is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[416](index=416&type=chunk) [Principal Accounting Fees and Services](index=79&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding the fees paid to and services provided by the company's principal independent auditor, Ernst & Young LLP, is incorporated by reference from the proxy statement - Principal accounting fees and services information is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[417](index=417&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=80&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, schedules, and exhibits filed as part of the 10-K report, with financial statements included in Item 8 and a detailed index of all exhibits provided - Lists the consolidated financial statements of PACCAR Inc included in Item 8[419](index=419&type=chunk) - States that all financial statement schedules are omitted because they are not applicable or the information is included in the financial statements and notes[419](index=419&type=chunk) - Provides a detailed index of all exhibits filed with the report, such as governance documents, debt instruments, material contracts, and required certifications[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk)

PACC4R Disclosure Regarding Forward-Looking Statements This presentation may contain statements that are forward looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. A summary of risks and uncertainties is described in more detail in our periodic reports filed with the Securities and Exchange Commission (SEC). We undertake no duty to update or revise this presentation, whether as a result ...

PACC4IR | Disclosure Regarding Forward-Looking Statements This presentation may contain statements that are forward looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. A summary of risks and uncertainties is described in more detail in our periodic reports filed with the Securities and Exchange Commission (SEC). We undertake no duty to update or revise this presentation, whether as a res ...

PACCAR, Inc. (NASDAQ:PCAR) Q3 2020 Earnings Conference Call October 20, 2020 12:00 PM ET Company Participants Ken Hastings - Director, IR Preston Feight - CEO Harrie Schippers - President & CFO Michael Barkley - SVP & Controller Conference Call Participants Nicole DeBlase - Deutsche Bank Andy Casey - Wells Fargo Securities Stephen Volkmann - Jefferies Ross Gilardi - Bank of America Jamie Cook - Credit Suisse Ann Duignan - J.P. Morgan Jerry Revich - Goldman Sachs David Raso - Evercore ISI Joel Tiss - BMO Ste ...

Financial Data and Key Metrics Changes - PACCAR reported second quarter sales and financial services revenues of $3.1 billion, with net income of $148 million [8] - Gross margins for Truck, Parts, and Other were 9.6% [8] - PACCAR Financial achieved pretax income of $56 million, an increase from $48 million in the first quarter [17] Business Line Data and Key Metrics Changes - PACCAR delivered 18,100 trucks during the second quarter [8] - PACCAR Parts achieved quarterly revenues of $824 million and pretax profits of $152 million, with parts demand recovering in June [8][16] - Used truck results remained stable quarter-on-quarter, with Kenworth and Peterbilt resale values commanding a 10% to 15% premium over competitors [18][19] Market Data and Key Metrics Changes - Class 8 truck industry orders in the U.S. and Canada increased by 28% in June compared to the previous year, with estimated retail sales for the year projected between 160,000 to 190,000 trucks [9] - DAF's market share in Europe was reported at 15.8% year-to-date, with European truck industry registrations estimated between 190,000 to 220,000 vehicles [10] - In Brazil, DAF's market share in the above 40-tonne segment increased to a record 9.1%, up 3 percentage points from last year [11] Company Strategy and Development Direction - PACCAR is focusing on zero emissions powertrain programs, with over 60 battery electric, hybrid, and hydrogen-powered trucks deployed [12] - The company plans to begin production of battery electric trucks next year, with gradual volume growth expected as battery costs decrease [13] - PACCAR is developing hydrogen fuel cell vehicles, with a long-term view of their potential for long-haul applications [13] Management's Comments on Operating Environment and Future Outlook - Management noted a rebound in the U.S. and Canada Class 8 truck market, with strong freight volumes and improved pricing [9] - The company expects increased production in the third quarter, with gross margins estimated to be in the range of 12% to 13% [21] - Management expressed confidence in the recovery of parts sales and overall market conditions, with a focus on maintaining strong operating cash flow [15][20] Other Important Information - PACCAR has a strong balance sheet with $4.2 billion in cash and marketable securities, no manufacturing debt, and an A+/A1 credit rating [15] - The company opened two new parts distribution centers in Brazil and Las Vegas to enhance parts distribution capacity [16] Q&A Session Summary Question: Expectations for production increase by region - Management indicated that production is expected to increase in the third quarter due to a strong freight market and good customer profitability [24][25] Question: Parts sales improvement cadence - Parts sales in June were approximately 6% below June 2019, but showed significant improvement throughout the quarter [28] Question: Order trends in Europe - Management confirmed that order intake in Europe also increased throughout the quarter, with good visibility for production [34] Question: Market share in Europe and hydrogen strategy - DAF's market share is strong, and PACCAR has a three-pronged strategy for zero emissions vehicles, focusing on technology, distribution, and flexible manufacturing [39][40] Question: Used truck pricing and performance - Used truck prices were stable, with PACCAR's trucks commanding a premium, and the company is expanding its used truck centers [96][121] Question: Supply chain performance - Suppliers are performing well, and the supply chain is close to full production and delivery rates [97] Question: Truck gross margins and production outlook - Management indicated that gross margins are expected to improve in the third quarter, with production ramping up significantly [87][90]

PACCAR, Inc. (NASDAQ:PCAR) Q1 2020 Results Conference Call April 21, 2020 11:00 AM ET Company Participants | --- | --- | |-----------------------------------------|-------| | | | | Ken Hastings - Director, IR | | | Preston Feight - CEO | | | Harrie Schippers - President and CFO | | | Michael Barkley - SVP and Controller | | | Conference Call Participants | | | Stephen Volkmann - Jefferies | | | Andy Casey - Wells Fargo Securities | | | Jerry Revich - Goldman Sachs | | | Tim Thein - Citigroup | | | Ann Duign ...

PACCAR Inc. (NASDAQ:PCAR) Q4 2019 Earnings Conference Call January 28, 2020 12:00 PM ET Company Participants | --- | |----------------------------------------------------------------------| | | | | | Ken Hastings - Director of IR | | Preston Feight - CEO | | Harrie Schippers - President & CFO | | Michael Barkley - SVP & Controller | | Conference Call Participants | | Timothy Thein - Citigroup | | Stephen Volkmann - Jefferies | | Andrew Casey - Wells Fargo Securities Ross Gilardi - Bank of America | | Jamie ...

Financial Data and Key Metrics Changes - PACCAR achieved sales and financial services revenues of $6.4 billion in Q3 2019, with a net income of $608 million, reflecting an 11% increase compared to the same quarter last year [7] - The after-tax return on revenues was strong at 9.5%, with gross margins for trucks, parts, and other at 14.9% for both the third quarter and year-to-date [7] - Year-to-date dividends declared were $0.96 per share, a 19% increase compared to the same period last year [10] Business Line Data and Key Metrics Changes - PACCAR delivered 49,300 trucks in Q3 2019, down from 52,200 in Q2 2019, attributed to fewer billing days in Europe due to DAF's summer shutdown [8] - The PACCAR Parts business generated quarterly revenues of $1 billion, with pre-tax income of $207 million, a 10% increase year-over-year [19] - PACCAR Financial Services reported a pre-tax income of $67 million, with a record portfolio of $15.6 billion [22] Market Data and Key Metrics Changes - The U.S. economy is growing at 2.3% with strong consumer spending and freight tonnage growth of 4.2% year-to-date [16] - The U.S. and Canadian Class 8 industry retail sales are estimated to be in the range of 310,000 to 320,000 trucks for 2019, with expectations for 2020 to be between 230,000 to 260,000 trucks [17] - The European above 16-tonne truck market is forecasted to be between 310,000 to 320,000 units for 2019, with a decline expected in 2020 [15] Company Strategy and Development Direction - PACCAR is focused on innovative truck models and technologies, including electric powertrains and autonomous trucks, with new software R&D centers opened in the U.S. and Europe [11][12] - The company plans to continue investments in capital expenditures and R&D, with 2020 capital spending expected to be between $625 million to $675 million [23] - PACCAR aims to enhance its truck, powertrains, and transportation solutions through ongoing investments [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for trucks despite a potential decline in production, citing strong economic fundamentals in the U.S. and Canada [48] - The company anticipates a normalization in the market with a healthy backlog, adjusting production rates as necessary [44][91] - Management acknowledged challenges in the used truck market, with prices declining but PACCAR trucks maintaining a premium value [41][130] Other Important Information - PACCAR's gross margins are expected to remain in the range of 14% to 14.5% for Q4 2019, with pricing pressures anticipated [9][73] - The company has opened nearly 200 TRP retail stores globally since 2013, enhancing its aftermarket service capabilities [20] Q&A Session Summary Question: Production levels for 2020 - Management indicated that inventory levels are healthy, with 2.4 months of inventory retail sales, and adjustments have been made to backlog and build rates for 2020 [26][27] Question: Parts margins and growth - Management expects parts revenue to grow by 4% to 6% in 2020, with margins likely comparable to 2019 [28][29] Question: Financial Services performance - The portfolio in Financial Services is performing well with low past dues, and the only headwind noted was in the used truck market [37] Question: Used truck market trends - Management confirmed that used truck prices have declined by 10% to 15%, but PACCAR trucks still command a premium [41][130] Question: European market outlook - Management noted that the U.K. market has performed well, and PACCAR maintains a strong market share in Europe [53][57] Question: Gross margins in downturn scenarios - Management emphasized a focus on operational efficiency and cost control, suggesting that gross margins could remain solid even in a downturn [72][75]

PACCAR Inc (NASDAQ:PCAR) Q2 2019 Results Earnings Conference Call July 23, 2019 12:00 PM ET Company Participants Ken Hastings - Director of Investor Relations Preston Feight - Chief Executive Officer Harrie Schippers - President and Chief Financial Officer Michael Barkley - Senior Vice President and Controller Conference Call Participants Stephen Volkmann - Jefferies Andrew Casey - Wells Fargo Securities Joel Tiss - BMO Jerry Revich - Goldman Sachs Ann Duignan - JPMorgan David Leiker - Baird Steven Fisher - ...