PCAR - Earnings call transcript Q4 2017

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Operator

Good morning, and welcome to PACCAR's Fourth Quarter 2017 Earnings Conference Call. [Operator Instructions] Today's call is being recorded, and if anyone has an objection, they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. ahead. go please Hastings,

Ken Hastings

this would Officer; on welcome is the of President President joining PACCAR's We Executive Controller. Armstrong, phone Harrie and Michael Officer; Ken listening Barkley, and Director Schippers, me And Relations. those webcast. Chief Investor are like morning. Ron those Chief Financial to and by Hastings, morning and Good My Vice name Senior

listen-only line including mode. risks any prior information members ask of I participate like introduce conference in that on media and and would with will a As today to results. conditions that Ron the Certain involve presented affect be general calls, the and expected Armstrong. may now competitive we forward-looking economic uncertainties,

Ronald Armstrong

outstanding for XXXX an income million billion billion. tax employees from around Good includes company. to the and $X.XX the $XXX new morning. revenues Thanks the excellent net was XX,XXX the of year Net achieved a PACCAR's accomplishment record PACCAR for $XX.X law. benefit income world. onetime U.S. of

the $XXX law. We effective including an equipment share rate dividend per XXXX year has XXXX PACCAR an positive cash generate rate higher XX% at a XX,XXX was dividend rate be in earned net DAF earnings. the will fourth Brazil axles also North record delivered income front Peterbilt to Kenworth new share and since worldwide prestigious in reported Innovation new depreciation end. automated year market trucks the quarter retail record, a Brisbane, the for PACCAR many award. $X.XX truck Kenworth magazine. X.X% onetime consecutive quarterly trucks of U.S. year year quarterly PACCAR adjusted revenues net quarter, annual fourth and record last was was December. U.S. Valley. dividend quality yield including excellent year's PACCAR's $X.XX increased opened PACCAR's sales million year deliveries. market. its truck special XF Toronto. positive of and PACCAR a the international XXXX compared per the reflect a Class important DAF constructing year rear U.S. PDC paid factory for benefit duty Panama; will PACCAR $XXX billion every accelerated Quarterly of quarterly the new total million and from America. truck engine onetime record distribution a its the Mississippi share to and and PACCAR in Panama services The the and in achievements second new share and tax the dividend and Australia and PACCAR's a The in of Last in declared truck the market its earned adjusted of tax record PACCAR in plant results financial tax estimate machinery approximately Peterbilt and tax tax company's to Canada after-market transmission CF and quarter million. row. celebrated a and total Canada, XXth brand and centers of results parts was benefit. PACCAR billion, income launched and strong XX% European and of achieved XX.X%. opened highest in generating annual second PACCAR regular excluding onetime in is in XX% PACCAR heavy parts $X.X in year tax Excluding XXXX flow cash of $X.XX April the new history. the $XXX was the benefit, dividends X net declared of honored Silicon during customers. as XX% The income were prior the XXXX. than and corporate City, effective in Center third honor that PACCAR year

market law. the These be as parts We XXX,XXX units. and well U.S. market XXX,XXX be and And and to compared estimate GDP year. a on record expect million XXXX XXXX billion quarter Canada to looking The to above XXXX. of first the first PACCAR vehicles. margins assumptions, in the similar from XXX,XXX last and truck investment from basis U.S. parts market range to a current and XXXX, of at population that and outstanding distribution retail based truck in in heavy and XXX,XXX industrial growing resulting will XXX,XXX be XXXX industry anticipate a about as driven The greater In were to quarter Class of strong was growth, sales be we ton year units fourth we truck PACCAR our technology totaled $X.X we Canada U.S. results XXX,XXX year centers. generated to this by year X in of investments another truck will units and last quarter in pretax XX that revenues levels. tax of trucks points engines capital will profit $XXX European and robust new and year. market on range truck U.S. XX expect be production comparable a benefit full market volumes margins when higher

achieved record income quarter, pretax parts For $XXX quarterly of fourth revenues the million of $XXX record million. PACCAR and

services volume were industry and X% revenues used and year. PACCAR revenues from X% expect good income command a performance. truck over to quarter. We quarter fourth results Kenworth continuing continue portfolio the values increased pretax premium XX% during to was competitor's vehicles. grow XX% strong X truck to $XX million. resale The Peterbilt million this to in $XXX benefited the And parts sales financial Class U.S.

earned For the full PACCAR pretax income $XXX services of financial year million.

million range electric $XXX plans to development $XXX models, to advanced research $XXX to million PACCAR technologies, fuel PACCAR cell zero to in expenditures spending truck range of facility. of is $XXX million driver XXXX and capital a For increase to trains aerodynamic million. hydrogen and truck a distribution and new manufacturing and assistance expanded technologies in and investing integrated connectivity emission including power parts

As the company in services. to with and lead are you. questions. products the position be to year, answer we Thank your quality its begins pleased the an highest I'd industry XXXth excellent

Operator

comes Your from Volkmann first Instructions] [Operator with Jefferies. question Steve

line Your next is from Steven Fisher open. And your question UBS. with comes

open. Your line is

Steven Fisher

thinking Can and basis for on you components you course how give was XXXX? what the point And what the over gets and about maybe us gross that year-over-year of the contribution and quarter maybe the XX volume you're improvement revenue of margin currency margin?

Ronald Armstrong

effects the margins. and just Michael address I'll So but I'll -- let's the about talk currency let revenues talk about the

the and bit effect saw than of in the quarter will favorable that more that at the the to Europe is quarter. quarter mix production Peterbilt product -- unfavorable and first of now a and look expenses quarter mix and be we fewer and first bit higher days, because fourth had quarter first America, the just in the we sort fourth in a we As North the production have what in America is and of favorable in fourth holiday so have days the customer margins so and other quarter period in compared Kenworth North more

Michael Barkley

The income. about revenue to overall million million, additive effects and fourth $X were to pretax currency quarter for $XXX the

Steven Fisher

That was said? you foreign currency

Michael Barkley

Yes.

Steven Fisher

points I here; point? trucks for chain meet the you're tightest managing then, how increased and is about demand are it if up seeing it the able And wondered supply the at you where to wrap Is talk that the could this here?

Ronald Armstrong

our challenges forewarning suppliers, any we about we with currently with a particular suppliers closely do market in our our that always working ups, given lot in see. we As at so to wrap plans see the of demands this achieve point work very and we don't

Operator

Jefferies. Your next question comes Volkmann from Stephen with

line Your is open.

Stephen Volkmann

you're about quarter I and EBITDA margin? the margins make understand the Ron gross to wanted in year; for first talking are just or you when I sure full talking the

Ronald Armstrong

I'm margin. talking gross about

Stephen Volkmann

little well thinking a sort And that as will then there just think dollar you -- your flat little should a there? we about of bit what's being on more or SG&A; discussed terms in spend just

Ronald Armstrong

for what they in little will probably the pressure of rate XXXX. that's exchange fairly if XXXX, you at XXXX as a of with higher So look because indicative run rates bit exchange Year-to-date, quarter, will in fourth our rates. were be be probably of upward

Stephen Volkmann

then talked looks little electric you bit term or think train like rate? years? of over next Are the I how a a of going of to sort future should and five truck about amounts spend for sustainable increasingly of larger to more of spending have integration, all we of on sort kind CapEx some to drive of that; heavy to sort the And get three kind whatever about longer you this of this is ready and R&D kind kind

Ronald Armstrong

now for level a the foreseeable view so this probably This gas we sustainable. more level submissions, the greenhouse think on of horizon, -- for investing with say years. pretty I'd XXXX we're sustainable few the it's kind have I clear of is next is that;

Stephen Volkmann

have when sort you year an a market? of you for Do will targeted any have ready think vehicle you electric for the

Ronald Armstrong

companies economical We'll technologies demand that. in vehicles is as those zero obviously customers, definitely support product the have there We're to and investing we the have that's to and lot the in a will evolves at it when as are ready market. the customer the like become of emission point which world a

Operator

Your Revich Sachs. with next Goldman comes Jerry from question

is line open. Your

Jerry Revich

overhead over us performance if quarter I'm factory wondering year. you on can update in the the

wondering just support did cost rising how evolve quarter? had fourth for have and I'm that ramp the folks You the to production

Ronald Armstrong

very factory it's was I leverage it We our our got would rates. good normal, operations, very Yes, normal. operating so on reflected say billed

Jerry Revich

of in about how it we similar to Is factory or where growth think terms the as any of 'XX overhead ramp factory terms in 'XX? that cost in drag about ramp, thinking overhead we're as that in here evolve saw from drag And we 'XX? from does easier

Ronald Armstrong

I progression, build come and decrement I add else to so build factory so we will again, don't there. we very normal have very as see go down up to overhead rates incremental think normal, anything rates as all we'll or

Jerry Revich

for talk about strategy the you parts can few was year-over-year fourth the you? you about lagged you could in a pricing just can past turn cost inflation business, a on dynamic folks why the the in has the quarters; the for quarter -- terms there talk basis for And parts headwind of corner price

Ronald Armstrong

higher record teams -- think record that earned we incentive they is fact some have of I there achieved and great that reflected before; the great also the dealers levels programs haven't pricing, it's reflected that the and are so parts that we in because but sales incentives volume, profit. earned our PACCAR provides, the that's don't

Jerry Revich

cash? of don't how the And you prior of lastly, cash tax of impact target you're foreign tax sheets that thinking you your the terms way and unremitted under excess how the you now did in much thinking change to need about jurisdiction; balance levels on earnings new have in terms does structure; the any

Ronald Armstrong

Yes, we as we'll we'll do smarter how this a quarter benefit. favorable each much this year, but progress more about definitely progress progresses through we become see

So allocation we'll thinking we forward. be as about capital strategy our go

Operator

from with comes question BMO. Joel next Your Tiss

line is now Your open.

Joel Tiss

wondering you some like is -- it just back the can all what there have the of So there? in give or pretty optimized I'm XXXX; if is factors of us your just you else some much production held incremental things margins in something the

Ronald Armstrong

XXXX biggest No, item very Joel material In XXXX opposite. the favorable a we had nice the -- just single was cost was movements, just cost material movement.

the accrual the put forward. So rates, single new performing rates and be it initial costs see renewable And higher Products are market, we of as for that year-over-year so products some was as then we launched some in conservative. that launched lot they go went we'll we to directions item. probably a some so biggest excellently of benefit different so that our of in to and had have warranty elements those that just other we slightly products the

Joel Tiss

in up; And I sense of here, didn't what when give see share the it your us market can you release was? press a you're

Ronald Armstrong

the the full for quarter. in XX.X% XX.X% Yes, fourth year and

Joel Tiss

last, then product AMT someone and And product; rebrand a on from is buy PACCAR or the it? that else you it do just

Ronald Armstrong

actuals with It's rebranded our MX but I our customized engines. mesh to it and would is say Joel,

unique a it's for our vehicles. So configuration

Operator

from with next Bank comes of Your question Ross America. Gilardi

Your open. line is

Ross Gilardi

seeing you're was so translating if pricing what seeing new there, and pricing? Ron, and are huge I stock any truck recovery was all into curios with in just you better at it

Ronald Armstrong

stable thing and would that fairly and I truck pricing say half been is of same the I XXXX we the year stable. it's used have into -- second would new would stable, the say prices say the relatively I that for truck as start during

Ross Gilardi

[ph], the a due how FIMCO to was to mean XXXX And on any I got the out? you and thoughts run got would in you think weakness off of weaker in a we shake that for for -- partly early in off kind that start XXXX you earnings that do -- use QX -- what bump XXXX? there little get truck rate pricing. bit Should you new we kind consider a until of of this to

Ronald Armstrong

probably, average run -- an for last the rate, and by you that fairly indicative year, the pick divide Yes, full during year four, I year course by full that of plus a developments think if of minus or the that's year. divide probably

Ross Gilardi

start just to UK registrations market, the are been of the -- mean, know it's the soft, experiencing. then, UK state hard if really And have you that's indicative what of guys from like so I

absolute for see the tailing closed XXXX? as declines So a or out did in business your UK of the you UK year expectations off momentum and

Ronald Armstrong

market, a we're at teams the the they negotiating that market our be in the to through above for as so of the so with orders there for they UK did combined there ton levels. -- time row XXXX closely share customers do XX% year X the XXXX a we ton great a for were year similar that year -- market; will to and we and working and get the expect team by Our job great job, our XX -- XX you over second when finished look progresses

Operator

Your comes from next Crédit Cook Jamie with question Suisse.

is line open. Your

Jamie Cook

margin the on one, questions; Two for commentary XXXX.

are better You're up wondering or seeing? high margins as the said splitting as stronger, so And forecasts to just on continue truck industry for last your think 'XX; concerned the if but concerned industry cost, you. you I'm wouldn't takes the were from people quarter flat and end is what's talk market raise of essentially of the sort are about then maybe away changed; be of maybe question; operating just to strength versus hit tweaking we're material your you peak forecast, Thank here more continues that how that forecast what to 'XX sort retail margins? U.S. of given it XXXX your down sales the sales the just is leverage cycle just you getting share that it increasingly some my market we second higher why through you is be could if 'XX if -- that

Ronald Armstrong

with customers peak, about that whatever to needs it's to them were not are meet their we make demands closely whatever we're will of a the real we'll closely flex No, market working meet concerned strength working today, and obviously sure those those we and company. needs the our tomorrow we adjust with are be and to our

factors other year. things progress As margins, costs, we can think about there material days, is about a quarter margins, so impact the as we and good full see feel pretty develop first through year; the of that early we'll how we factors lot the XXXX it's for

Operator

question next comes Duignan Your JP Ann with from Morgan.

line Your open. is

Unidentified Analyst

XX% to capital net which of to talk just U.S. about you kind expect on would of changes Can And the changes currently impact dividend expect having you [indiscernible] your what in payout make is your strategy? allocation on any income?

Ronald Armstrong

particular the obviously dividend discuss radical as a during with XXXX don't board that will foresee capital our us No, see approach any in but in we matter making for I be discussion changes I practices. don't things allocation our change,

Operator

Your Citigroup. comes next with Tim question from [ph]

Your open. line is

Unidentified Analyst

an holding saw of some back I do think holding back and opportunity plus in Europe? in And approaching that, build back of standpoint, highs and both just back a years just changes terms a related with dissimilar comments the thinking the you U.S. to of we're the of in in of pricing somewhat the what I think Europe just -- couple assuming in terms I'm ownership So rates. bit here in guess you another I dynamics on industry but what you terms dynamic quarterly what comments Europe? I 'XX to potential circle in just just kind what maybe wanted earlier pricing; is in lesser to or more outlook year just from guess projected that your curious, X.X I'm some maybe and little you're we America are there. can guess about maybe here talk North do X

Ronald Armstrong

me [ph] ownership. clarify Tim for in about talked you you can potential Maybe What… what changes for

Unidentified Analyst

consolidation. Yes, just potential some

another You had of change if and potentially wondering ago just couple I'm of by there without America companies. overlay here years [indiscernible]. a ownership kind is some in naming similar Europe North obvious

Ronald Armstrong

maintain goes teams. our that's as consolidation Sure. important successor there sort that an this on relationships the industry is personal you predecessor is I for and to closely continuously transportation a know, very strong on lot and work with we mean and of us the try the companies and that's built in industry and relationships and

price just we our focus and profitable the we our As our we continue have share competitive great a earned all have a to and about that. and market closely to marketplace it's we of pricing, do the needs, think earn share trucks and believe in customer's that about and we're market -- work we'll premium market that's

So environment be opportunities or not the the will what will be. competitive dictate pricing

Operator

with question RBC Capital Seth comes next Your Weber Markets. from

Your line open. is

Seth Weber

in part first right business is could wanted starting I the about think way now engine to to the and the you there with MX rate, there to high single-digit is going about to the out again; I that growth this -- respect it to question. ask kick mid strength whether forward just mean my anything call is sales in it's

Ronald Armstrong

population upto and I teams would fleet to parts that in I be -- continue growth we're TRP those now the that in with parts, engines In around of globe, put year. stores of continuing and we're sure say capabilities combination the North focused on to higher MX TRP the that brand; certainly together to on have business are we build able business programs course the build but so it's elements the that America a hope things XXX think the truck billings, engine over to The services, increased the with during above populations now. all have this levels to we'd contribute industry those e-commerce

Seth Weber

one give just is -- think XQ; there the that us to then to color you any I could flat delivery is XQ And I help? sequentially, heard regional there

Ronald Armstrong

I will first Yes, America workday deliveries slightly first in of there the North think the deliveries European in quarter higher the just and quarter. be slightly lower adjustments because

Operator

comes from next Leiker question with Your Baird. David

is line open. Your

Unidentified Analyst

so I it booth, company at your show a [ph]. talk good enjoyed see to truck was a

Ronald Armstrong

what's that. Harrie, there. about comments was Harrie your

Harrie Schippers

hydrogen nice and the had positive show. we lot from a at autonomous Well, there, got the of who attraction, of lot feedback yes, trucks it our -- truck then everybody was

Unidentified Analyst

wanted So because higher to think actually new now. for into obviously PACCAR, I existing for several imports electric What vehicles at the the ask the it's challenges applications emission truck years about fleets? are of some zero getting existing platforms I in you've not had volume

Harrie Schippers

I trucks. a breakthrough think thing be battery for technology to needed trucks we commercial really for really is the in significant heavy major scale, electric

Ronald Armstrong

And has fuel divisions fuel -- some you there the to infrastructure but when think fuel truck when of our right. and cell, capabilities has of ready the trucks, with then with a all to we're about cell technology things that developed be cell be working to is our support hydrogen that on is developing lot that demand to suppliers

Unidentified Analyst

it in heavy are battery some application? technology, what limitations taking that packaging, density, aggressive obviously think application? that And lithium-ion battery breakthroughs duty is into is a about of when the very a is forecast heavy we energy duty is technology, in There thermal automotive for on it

Harrie Schippers

a operate, trucks because does. [ph] lot important the it's the applications that way the they heavy carries that and those things are car a a are truck For are more passenger than the truck like cost car. a much range duty three person, can for And than more important for heavy

Ronald Armstrong

the and truck. on And chassis on the the packaging

that to matter a of is lot market. that closer will there think I things So the technology gets as

Harrie Schippers

will trucks way the It smaller its applications years. it see for the and us coming make in will in

Unidentified Analyst

commanding room, And now, if this of you PACCAR overall? have five in value what crystal from of be your the ball sort might years

Ronald Armstrong

is ball now. right That bit dim little crystal

Operator

Your next Bank. Nicole with question comes DeBlase Deutsche from

open. is line Your

Nicole DeBlase

the truck last onto continue guys positive on guess that I X% did XQ? you segment, did quarter pricing;

Ronald Armstrong

that from getting or XX-K I the XX-Q. assume you're

Nicole DeBlase

the That was queue, from yes.

Ronald Armstrong

parse lot that little table a customer duty of in got medium that one, item. items I dynamics -- look just at so mix; -- there heavy it's to those impact total as bit a whether line line it's duty any into difficult mix, to so individual individual mix, is you've

Nicole DeBlase

And industry. in So seen with that have then, just you it's guess fourth really whole guys order we what should want on activity for respect I for strong guess. to internally been quarter, I so the

curious Just etcetera? sleepers with that interesting day you're to vehicles, respect anything so like versus versus cabs about vocational seeing mix,

Ronald Armstrong

would No, in a the really of the up that bit on maybe of cab been used the cabs used is higher some ago. they little we're months, had are and benefit demand of six what I probably think say side terms day segments. in demand months percentage all they compared growth, market seeing I that truck say bit in to nine the a where have a day

Operator

Your Fargo. Casey question with from next Wells comes Andy

is line open. Your

Andrew Casey

was was could whatever -- volume somebody it if gross Ron, bit embedded you well, gave performed was call bit the so, the I'm lower? in wondering a I'm was please it how up higher; little a margin ended being the expectation lower and growth, you wondering margin little if -- when that discuss QX QX versus

Ronald Armstrong

parts the on that and pay helped additional but and -- the quarter to overall at said what America margins. a really what impacts we was dampening again higher part had to, bit we is the we fourth higher fact exactly don't which terms fourth effect slightly customers fourth sold, we quarter that sales good remember about And but had volume in sold business a that and model on that record North incentives third was versus in bit as customer Europe some of and saw profitability. news the look of little a you period there the products incentives talked of quarter got deliveries spur the fact versus the we the that were I of mix quarter, a for

Andrew Casey

of if back that truck the the guess sales balances the growth higher potential the step shorter growth profit wondering that field increased it or margin versus population after-market could then driven in future? short-term I'm term; sport from kind has changed be margin by I in term company engine could And longer pretty how total a --

Ronald Armstrong

fundamentally some things I and margin leverage how go don't quarters, costs, way enhancement, think don't. that's think years, your there like is changed anything operating we about sometimes about they material

So similar still -- but have how think long-term and a we about operating I leverage perspective margins on we overtime. thought

Andrew Casey

you And right I new that during is could start pretty stable seeing now no could suggest you're pricing North if to XXXX? then, at know signals any suggested America; typical I'm forward wondering just the improve pricing of

Ronald Armstrong

As we sit fairly here today, is stable. pricing

Operator

next Raso Your ISI. with question from comes Evercore David

open. line is Your

David Raso

the just The are for margins a what's -- margin a you price your margins currency, when you XX.X. fourth I the feel get mean, cost for assumption that was incurred gross pull up XXXX? ago trying and to pull cost currency, quarter, was the the out price gross I'm a -- XX year

of this gross margins would XX% just the to America mix. only quarter deliveries positive that in even see a they be down a year ex-currency, so I thought XX; were fourth quarter, So North it's ago

how So and then what I'm the kind to for up are the and year fourth cost from level you next this expecting just the painful trying to maintain? of come was quarter digest; A) in price

Ronald Armstrong

differences and key I volume. before, are of between Europe mix in North terms as America the the mentioned So

David Raso

they the total, a year of I North And deliveries year-over-year; XX% only apologize, XX% were talking were I'm ago. year-over-year America

it's year-over-year plain but ex-currency cost all, issue, mix I'm that's to reconcile. is a just the was down, margins the So trying positive

Ronald Armstrong

get know cost fourth tend single you parts tell the sort as got using effects numbers in the quarter. what of how those and biggest into 'XX, don't challenging versus the the quarter beneficial can us incentives we 'XX, European All factor first getting you fourth you're two 'XX, year, impact I quarter with factors 'XX you're are look you bit the I and when have is to currency reverse as favorable biggest of look next American material just in of the that had movements you've those at North mix forward an and and of a into and sort those.

David Raso

misheard for give for And just profit. impact the be quarter, you early was I maybe thought to it revs the million and I did clear, $XXX for currency million you. $X us

So…

Ronald Armstrong

truck total And total company, total etcetera. that's for parts, profitability, revenues, finance, the

David Raso

But again, negative; 'XX to puts this after next just basis, understand year the the sure or just and on year, we cost takes. what's make is clear price negative it neutral a

Ronald Armstrong

Yes, point it neutrally. say about at probably thinking this we're

Operator

Your next question Mike comes the with [ph] from Seaport Global.

Unidentified Analyst

with to truck their on what time since pricing XXXX again, us good forward? done to PACCAR but go of pricing from sales, wanted and certainly used as a could dealers trying a the we come the And get I of rises that retention touch great new and the small XXXX high there side to for market on impact used [indiscernible] last kind -- that through down work bit? it's supply used as your if to inventories can keep value on we trading's you the truck give little the had has going color of more have brands solid that overtime course is risk side the the

Ronald Armstrong

think indicate to of in Angeles Chicago lot demand used area, here used that area that now We've in a we're used sit facility we reason done from I no for the that's a not no seeing reason we're as good trucks And of about we mean going to near-term. Los As indicate to trucks things continue the truck about another opening trucks, ability handle built Montana. just year, to center been open to a used just volumes new truck in that's we greater today. support our used

always lot trucks our distribution so years. of the of we've and abilities enhance our worked our a to enhance with used on very things obviously, continue to over capabilities we the the So last several we've closely dealers market; internal through done

Unidentified Analyst

store and quarter TRP how far how And do many you fill globally? parts; to then are what along during to the part can us to tell is secondly, just you open hoping on you're buildout

Ronald Armstrong

today. during year XXX continue XXX a DAF; don't market I sit over TRP we're Kenworth, to don't and how have over for just what we to add know demands locations here end as locations quarter, the I Peterbilt, dealer and is full population as meet add finished I of at we view we know develop. we'll they for many think as we

to all So just parts end advantage the support no distributing customers. there end game sight, or our it's can number to of areas that is we take continue in

Unidentified Analyst

that locations is stock growth it additional is XXXX? I understand parts there piece you've organic growth best for Can your growth? planned I coming planned start first -- for the X% for to of is with the in mean, or -- X% ;XX big got a parts here Are ups

Ronald Armstrong

I'd both. combination a it's say of

it's population think vehicles the of TRP it's the it's expansion. I and programs,

Operator

Your with Michael Stifel. question from comes next Baudendistel

Your open. line is

Michael Baudendistel

I X ask preliminary to sales big Class is share from a any trucks to was you decline where to in for there just wanted in vocational does if the XXXX, large XXXX; you it fleet? market I have mean shift expectations if from

Ronald Armstrong

Our teams increment they share company that years the have years combined have Peterbilt to worked share. a develop XX%, they've will and XX of ago, years able now XX with Kenworth the XX% started over and XX% been had very to hard -- and over they XX%. market the I When to the

as our develop our provide markets, the our grow view so to be to the for and our customers will XXXX and And the market, in is organically profitably well. focus primary value best best so continue that for trucks share our

Michael Baudendistel

terms be and about your that's portion the TRP TRP, of of ask add we to anything if larger parts a in wanted thinking I consists of there total mix also I on at business margins is a drag impact mean you And parts all? of should

Ronald Armstrong

being see the XX% sales and factor I of a XX% terms parts so it major in total percentage don't in in the -- to of margins. it's No, range it's

Operator

question next with Research. from Your [ph] comes Vertical Joe

is open. Your line

Unidentified Analyst

and First you kind that to rates, of where are volumes in midpoint some build or think -- this there is just question your still upward is building do kind expect move you expectations? you a of to that of on you currently build the XXXX in

Ronald Armstrong

taken the As and we have some so there. in is to America progressed Europe rate as long demand as support additional into North XXXX, both build demand maintain we'll have and increases, that we

Unidentified Analyst

talked be about there expectations for XX% of you this to particularly If on to higher There currently. looks that? margin versus shouldn't out anticipate that may where those in the about why on range forecasts kind gross it think market volumes, or some leverage initial well the 'XX think that? or XX% were yours, middle be are or we sort leverage the you there industry America ago And North then closer of quarter are the range. do gross of reasons turning margin how range, a it of about the you that expectations closer that mean we above with end like to Would operating

Ronald Armstrong

-- As is what factors year of I outcome earlier about see margin seeing just mentioned, develops. there a for we're to impact and feel rest the really good year of overall quarter, expecting opportunities, that have be there and we could how the lot that first the we'll

Operator

question from with Neil next Buckingham Your Research. Frohnapple comes

Your line is open.

Neil Frohnapple

this above And follow-up, year? ton get in trends higher Ron, can like XX prior the the you've outlook that as done give market granularity end? the lower regarding your conversely and of of the the for then order can drivers you a on for you What are us end DAF, for range quarters? share kind you the anything European the more in

Ronald Armstrong

they the DAF I compared think We XX%. Yes, at orders look have fourth been about up very or are strong. fourth for quarter second quarter, to

the terms going in in at the plans this freight of DAF strong won obviously on beginning trucks a is great quarter full customers so for activity proposition customers in value we some was or I of activity. year up of enter efficiency. the the we've five So X%, about of if operating has mentioned, a the with as and market, up X%, to the truck products four taken think you great year today's dependent Germany; freight quarter it's I this just upto in product, increase the bought be December haven't efficiency, the fuel activity the trucks those X% rate our to for and fourth improved the so year and double-digit so month look improvement provide build additional for it's years,

vehicles, cost. there a the advantage customers to new take operating So purchase of lower lot of for is reason

Neil Frohnapple

like guys America your that you have or XXXX years to versus close we the this few market industry a peak increased in support considering demand given continue enough ago? continues sounds of factories recent Ron, capacity And if increase on does today is levels higher PACCAR its in to North fact heavy for level in have outlook and rate; begin the the production this to as duty build it year already then daily just market to where share your

Ronald Armstrong

to we make we that do and investments. continue Yes, and the definitely monitor

and make paint completed of As capacity year monitor and XX% the in the basically by Europe factors we Europe last increased continue investments. you the operations [ph] know, those about facility paint which our West in to capacity we

to PDC our our activities So not we're with looking our but in their year, we're on Toronto to obviously the continue or look for capital and looking building that factories additional plans next as to at at the continue we're in distribution investments customers that for parts just we'll this year well, at truck support new side some up our time. parts

Operator

There the in Are remarks at additional other the there questions from are company? queue any time. this no

Ronald Armstrong

we'd thank to their operator. thank you, participation, Yes, like and for everyone

Operator

this Ladies participating. PACCAR's call. gentlemen, earnings concludes for you Thank and

now may disconnect. You

PACCAR (PCAR) 30 Jan 182017 Q4 Earnings call transcript