PCAR - Earnings call transcript Q1 2018

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Operator

Good morning, and welcome to PACCAR’s First Quarter 2018 Earnings Conference Call. All lines will be in a listen-only mode until the question-and-answer session. 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,

Ron Armstrong

higher results sales of PACCAR’s X.X% on first million, for were the Good and PACCAR achieved year. pre-tax Other after million. financial reported aftermarket and strong quarter $XXX XX% income $XXX return higher morning. global helped $X.XX net record PACCAR first of first net XXXX. XX.X% Truck, demand. profits truck compared was operating record Parts of billion quarter a Parts to achieved gross parts revenues PACCAR tax strong revenues were and excellent quarter services by quarterly was last first the and Revenues margins and XX% income quarter revenues. and

truck first our XX,XXX XX,XXX in second per the quarter. to robust demand First quarter Class delivered Due services quarter year compared more of PACCAR we DAF trucks margin exceeded who units first industry-leading and proprietary the quarter to to employees trucks year. deliver parts XX,XXX six for mix seasonal quarter month the our to the to the the increased orders in averaged industry is the during first this favorable in I’m months. and XX% same the compared a to per X% increased last a the worldwide. have in products benefited X% month proud period for X XX,XXX Canada from first above have and XX-tonne orders, customers orders aftermarket. very record U.S. customer last and of delivered units expect quarter.

raised dealers. margins quarter strong operating of be record of similar parts. XX% than and and at Parts Total distribution PACCAR many routine year. and PACCAR mid margins at PACCAR’s record to quarter of number revenues centers to driven by Canadian These We’ve of in achieving a investment was million Parts CF increased estimate steady Pre-tax quarterly was XX%. million, excellent around tonnage. the year freight U.S. the were demand, industry income new truck strong reflect forecast Class the of XX% is of levels to generated year. and first on European higher gross retail the PACCAR’s high offered will has a quarterly truck XXX,XXX Parts driving of the XX.X% Second as and as market seeing the will TRP are the Other XXX,XXX XX.X%. engines margins results and XXX,XXX business $XXX of share range market last products the been same XXX,XXX won pre-tax and registrations well units, growth than vehicles and the Year economy Customers services Parts increased in innovative of Truck, of will and truck first and be again Truck heavy reflecting International in for sales PACCAR fleets. are level. to expanding The maintenance gross of U.S. activity higher truck quarter. revenue this are in for DAF ago. X XF, by outlook. an a $XXX European the economic the The quarter PACCAR trucks XX% our XX-tonne freight our utilization demand Parts sales their transport operation, a above strong which range return growing to

$XXX sales PACCAR income parts was expect PACCAR Financial used sheet last well. positive capital research by increase and to truck we and over quarter year, expenditures trucks. pricing XX% of new including first to and the $XXX pre-tax technologies, hydrogen in year. PACCAR million first strong XX%. enabled financial systems connectivity. targeted competitors’ driver to new to integrated Services and for XX% $XX development than are demand higher years. the fuel Industry portfolio of The Company performed For have quarter These million, truck further its flow million, and for values, million trucks products invest $X which Kenworth by increased new a $XXX and cell advanced PACCAR’s to product the command five technologies fourth electric, first year, invest and enhance in near million last Peterbilt of facilities Financial expenses truck remarketing $XXX and the Angeles. XX% the quarter to remarketing PACCAR for premium opening cash truck compared to centers This assistance powertrains in trucks hybrid year. center XX% last residual balance continued models, Los to and billion

distribution to quality growth. to the industry realizing and pleased the and made conditions market questions. highest manufacturing Additional be is for benefits you. investments products enhance answer are Thank strong PACCAR your in services and the parts I’d also facilities. expand of investing delivering by being and future

Operator

from first question Jaffray. with comes Potter [Operator Instructions] Your Piper Alex

open. is line Your

Alex Potter

Yes. Thanks, guys.

ask question revenue the First, about I wanted in parts. to growth a

And could guess in TRP, the driving wondering give very You you bit the little strong mentioned that about year-over-year which I I well? Thanks. to contributing could, clarity also, also context, that that’s more if what’s was growth. if on but talk seasonality there extent as a just proprietary you parts.

Ron Armstrong

with across But facilities. engines, our has with our the activity expanded teams, impact. of product large all services, lots capabilities. great Sure. fleet The We’ve is we’ve Obviously, our lines. growth programs e-commerce really a our freight distribution got

together loyalty than of the the and can. build So, the to programs competition our really team PACCAR that faster job of customers the provide can because has some they of done a Parts more putting great parts efficiently

been So, And years. efforts real working seeing on the fruits the and the has initially of for the team’s these many now to put the we’re investments team forth.

look side, up the store XX% On on if sales TRP same year-over-year, TRP the we’re at you standalone about side. independent

Alex Potter

And that what the margin TRP did extent or bigger up have a to mix? impact smaller of being percentage ends

Ron Armstrong

average makes vehicles. down a pull for -- because It it’s all of would typically just probably the all parts the brands overall bit,

Alex Potter

as one towards of the I truck trending used the suppose And get back guess Okay. some Very thought last There prices good. we year. is lower question half used that eventually then start lower pricing. I truck on could

if that to the you agree or wondering, with see starting Just you’re being any that thing. of if

Ron Armstrong

positive a last on used the six I truck trending think, in the three pricing. again, months seen to we’ve

And so, just we’re seeing the opposite.

seeing We’re the positive trends.

Operator

Duignan Morgan. next comes JP Ann Your question with from

is line Your open.

Ann Duignan

around, afternoon question may be to you you’re My whatever. there morning speak Good first what or out if seeing segment. could by

seeing about up is and XX%. Class XXX% up We’re day about orders straight about is XXX%, sleeper X truck up cab

in Just you or curious what orders? mix of there segment by your guys application terms are backlog your seeing or

Ron Armstrong

Yes.

higher of the mix outperforming all we’re say increases think is there bit for sleeper of segment in on the I just a board. that’s little wouldn’t I those particular across segments because trucks. sort the demand probably any other, seeing highway

Ann Duignan

last the case? end of started year. Is into look to like Okay. And sleepers the that does the it accelerate

Ron Armstrong

Yes.

place fleets in the of the quarter, I on-highway think the more first early orders will year. part fourth their late of

the think I effects of So, timing just seeing orders. they the when we’re of place their

Ann Duignan

into this into demand do your pushback is risk you for year meet on or production capacity of year? enough next you And to any have extend those do backlog see envision back just maybe deliveries think having that of constrains? we XXXX, or capacity into And given do you year-to-date, expand there some

Ron Armstrong

And Well, good. we no demand indications is that lessening. is demand see

to customers’ So, the be and build that trucks to our we’re have going to we we can build able needs. support the capacity

Ann Duignan

just as strength then, demand? cost final there, the orders a environment follow-up. like quickly Could discuss versus And out and the given input in you power, just pricing what’s pricing and Okay.

Ron Armstrong

But, Yes. and being moderate time trend able also we’re realize the increase some continue long-term as that and for agreements part. truck marketplace We’ve increases moderate a over to costs, our the some But, seeing in that orders. most we’re costs we commodity see to to on again, prices, input particularly smooth upward. ability facilitate seen smaller

Ann Duignan

So, I am you that wouldn’t into expect raising is or the be or… negative mix this year it to

Ron Armstrong

No, point, I this we don’t -- at don’t that. see

Operator

Your Goldman next with Sachs. question from Revich comes Jerry

Your line is open.

Jerry Revich

first getting do of quarter. second I’m quarter, touch you margin expectations wondering if XQ. how quarter gross spoken you evolve about could And you of into to I’m I’m mix the wondering, the about from on a year. for talk a if the specifically. In have you that about wondering mix expect your you spoke the could in expectations vehicle business. tailwind second

Ron Armstrong

Yes.

an margins our to second So, in that’s mix XX% and being the will the gross talked mid we see in normal. of levels, all fleet increased But, customers second quarter. about very deliveries overall quarter we

expect strong so, mentioned. And another quarter as margin we we

Jerry Revich

the what higher just Okay. And quarter leg about first Can the over in balance levels a expectations talk overhead higher costs, the to into those are quarter. support trended the factory took the fourth production terms how of and in you of year? that

Ron Armstrong

see for our quarter. The seeing of costs of the that XX.X% the volume the as the overhead trended and higher expect we benefits with margin we’re We Yes. all leverage. other and factory exactly operating in

Jerry Revich

hit about of their in part compared in Anything keep And terms than threshold would Okay. think of we I expect. third this in to way otherwise year year last we dealers the sales, we played for the out? the think last your saw quarter, need year weaker to pricing as because mind rebates we that

Ron Armstrong

the XX% that the saw we results with great in increase. quarter first had You

are So, and dealers, expecting we our very doing well. dealers are

support the incentives providing we’re as so, those go. And for we

Jerry Revich

Okay.

So, we saw year? as as lumpy be last it won’t

Ron Armstrong

No.

Operator

Joel Your Tiss BMO. next comes question from with

is line Your open.

Joel Tiss

the about wonder the could what’s along and of to your for bit constrains I the on any chain just a little happening So, supplier just different you way parts. factories if kind talk

Ron Armstrong

Yes.

really suppliers truck with on our build purchasing our job Our coordinating have our materials divisions great a groups well of done plans. and teams,

in we quarter. our As mentioned, build planning increase we’re rates second to the

very it’s supply ability so, can in make the feel approach We take up with we we unless confident to deliver. a their don’t our to that. build base sure And execute that coordinated rates

closely we’re excellent And we them of But, always the terms very with support. as it’s so far, been do. in working so,

Joel Tiss

you or give maybe rates, feeling color any you? your or production for the commentary just the for the can to I’m any strong way the there kind ability us whatever is forecast. market just up industry, even the and cancellation around size about feels whole asking the XXXX, keeping then, not it -- of through And for

Ron Armstrong

to low, cancellation occasional have point. uncommon at pretty that’s are but the The reorder, very Sure. Joel, and rates this just cancellations

are economies in trending and in all The terms And America, so, demands of really Europe in it’s customer the positively. North strong.

reason foreseeable So, I for future. any be the good demand don’t see can’t why the

Operator

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

Your line open. is

Seth Weber

a think lower I go this I’m year the if me correct guys on just but the year. back mid second said much to wanted about you XX% last point to for second. quarter did you margin for the And wrong, And same I gross revenue.

am to just trying I’m just with So, increasing isn’t why revenue. margins year-over-year -- I understand trying -- the the higher I’m to

Ron Armstrong

said, lot, That’s quarter mix I -- like the we’re second in fleet that’s… -- of and deliveries we’ve got a higher

Harrie Schippers

[Indiscernible]

Ron Armstrong

Yes. That’s good point. a

great quarter, If And up just the second same at the true margin going we’re up the be it quarter. will as percent first of in trucks the the on the on trucks, plus -- trucks parts. isn’t incremental look is XX to on you mix in be as we’re and

So, the margin. overall dampening effect proportion as that of a

Seth Weber

-- talking quarter? fourth you’re That’s foreseeable sorry, or year-over-year I’m

Ron Armstrong

year-over-year. Yes. year-over-year, Yes,

Seth Weber

Right.

Okay.

the So, are it’s a trucks the more quickly, though mix is business parts growing issue. rapidly. Even growing

Ron Armstrong

Yes.

Seth Weber

Right.

called I on any and you at that of Okay. your how you’re doing the that That’s the you like that? market helpful. point? Brazil guess, then, that just can talk press feel around about investment is set Thanks. with out And release, this distribution is you And investment in there in up what kind color

Ron Armstrong

Yes.

distribution off in see of continue And increase application, So, our DAF And out great our region in we invest with to an is year production for a into the ago the capabilities should our and well expanded product truck to products late doing DAF we that and truck Andean well and The product years penetration the the that team highway for very And help at now Show that build distribution, Truck dealers distribution we’ve America. had entering their decades. the to of our received, models there the customers truck we job, of the course network America heavy for as is the and is last models introduced Andean application and Brazil. region as five we in of support Brazil, part South the in and presence introduced South business. line expand our in progress continues region Fenatran continue as a addition country. line

Operator

Baird. comes next David question from Your from

Your is open. line

Joe Vruwink

Hi. David. This is Joe Vruwink for

Ron Armstrong

morning, Joe. Good

Joe Vruwink

I miss in you quarter guide margins upside so gross exactly I think above profitability? and drove have But ago. might the this, I QX apologize. the What provided finished a

Ron Armstrong

Yes.

first the that parts customer quarter dealers in to purposes mix -- the with larger in we activity as business And a in we’ll terms and quarter. fleet, rate deliveries of stocking given more the think, favorable I parts for as quarter. proprietary fleets had well smaller see the second first to respect

Joe Vruwink

competitors gain, your particularly on to the gears, in seeing? such XX% performing are would are shift seems a be increase other Okay. for Any I maybe more some seeing that’s of some big order a decelerating DAF, Europe like orders at variance in That sense. of pretty activity. it wide DAF color why OEMs makes the what If can

Ron Armstrong

Well, Year, the I is CF/XF International key the X% got was of fuel a thoughts; thing mean, provides a few. better Harrie sure great I efficiency. few named will products. the a But, have I’m Truck a

And seeking to of is so, products And the offering. do anything customers add? great they’re think you I take DAF appreciate that. that to Harrie, the advantage

Harrie Schippers

see I only fleets customers, grown share, the in International not Year. echo end Ron. result market that. choosing And in are of first only in intake More share the order The quarter. that we’ve DAF for to can nicely the more registration, we it’s the that, Truck is that

Joe Vruwink

Europe, then, I think soften. UK. in I’m is great I ask bit And obviously a market to the to what know But, started in positioning UK convoluted The your calculation. about if of presence about has

to share this do of characterization. all-time lot imagine have you’re share of type individual in reaching Europe, market to a countries. Is record I of fair new So, that in a levels that

Ron Armstrong

a or at high record in near markets. levels Yes, lot of

the trucks recognized it’s yes, and are well performing Europe. well So, across

Operator

Your with Steve Volkmann next comes question from Jefferies.

Your line open. is

Steve Volkmann

we get backlog as the an bit pricing? stretches of as the I’m sort of what opportunity out seeing Ron, Is a you’re truck out? terms wondering, little there stretch backlog more in new here, to

Ron Armstrong

And Yes. It’s it’s definitely in typically, is it’s there business. supply and And an gains the demand moderate also yes, pricing opportunity. quarter. first

Steve Volkmann

in probably until length in or of sort think backlog, half the supposing maybe that wouldn’t up it of the really margins, better second would of your given again, maybe show the I’m year that terms numbers But, of timing? the we slightly or the seeing just how of

Ron Armstrong

Yes.

gradually year. it see as we you’ll through think, progress I progressed the

Steve Volkmann

How to look need at this the they impacted like. have year? if your view, it at Okay, longer what relative picture year of we’re we’ve you lots be thanks. do this having changes of time. is thoughts assumed might that I’m big a look been term? does ‘XX or And or kind then, of initial, just What’s any to had the to cycles down on reasonably curious, And have emission just because XXXX obviously cycle heavily flattish be by big you sort just have

Ron Armstrong

to for trucks signs of going demand. no lessening And in we’ve to We’re continue customers. build seen

So, as for we’ll assessment progresses, But a truck the year the is good good. XXXX. as be better that is long markets feel as get will the that economy our

Steve Volkmann

in already have slots do your of you spoken for? ‘XX, build And some

Ron Armstrong

fleet orders will larger is Customers sure. place there customers for multi-year. for -- Yes, often times

nice base if for line, been business So, booked yes, there a is of XXXX. will, you that’s

Operator

Andy Securities. Your next question with Wells comes from Casey Fargo

line open. is Your

Andy Casey

lot. a And doing? how guys are Thanks you

Ron Armstrong

Andy? you, Great. And

Andy Casey

doing fine. I’m Thanks.

Ron Armstrong

ended? snow Has the

Andy Casey

just that so. think how -- on But, just you margin the addressed currency impacted that performance? have help margin? incremental Fingers understand and the overall what impact I’m crossed. think you us wondering EBIT may don’t this. revenue I I could

Ron Armstrong

I’ll Yes. address that. Michael let

Michael Barkley

due compared Yes. million The appreciated to And million impact on income year the on about about dollar. is was positive. impact of currency $XXX mostly the $XX increase prior on revenues euro against that’s and the pre-tax to

Andy Casey

it. in share, the of and And versus That strong that price balancing discuss question ago. you. European back market kind explains are U.S. bit going how specifically the asked Can just obviously. of a market? quite orders up Your Steve you Thank Canadian Okay. approach some pricing then, to you

Ron Armstrong

I marketplace. And same day. the quoting it’s customers. mean is Well, every a everybody competitive it’s

you competition. on a continue we earn premium multiple And residual business. lower to so costs, for willing is obviously But, operating limit total to that. customers And pay have the to there to our values, relative buying a people but products higher are the for extra the

value the we products our we price and focus don’t so, on And compete of on necessarily.

Andy Casey

incremental Sure. to reason are in may than part Ron like more But, that year your immediacy you the you that wondering ability a seems to some say have first just them the have service offer question, to appear the additional that orders XXXX, I’m Does just capacity just limiting constraints opportunity competitors next It’s be since until as have orders of let’s it… or it waiting couple some is of that delivery. for could of satisfy specific. pricing for their

Ron Armstrong

moderate, to Yes. on it’s terms I margins. mean, be of going effect overall I the think Andy, in

Operator

Your from Fisher UBS. Steven next comes with question

Your line is open.

Steven Fisher

just your ask I wanted to you experience. warranty about

I the sure some running certain than that rates products. better I’m accrual MX-XX. not you’ve think, was if on been

Just margins? certain point reassess if accrual which you rate there come that and that’s could And is wondering so, if support at that a continued. in

Ron Armstrong

We rates reassess Yes. accrual quarter. every

so, and it’s team the closely by And his operating watched Michael folks. and

because you the really extra you’ll our to warranty is of of At that come any our little as on better. that down, experience expense transition rapidly models, warranty bit the going what’s products assessment in field. but the our best in point so, And new will days, time reflects early in are a provide

new and time. cetera ebbs the of flows see over new we model in et so, of models and maturity And

Steven Fisher

this half that a that for tailwind Is year? second be something could

Ron Armstrong

every quarter. evaluate We’ll it

every best reflecting along the way. quarter estimates our So, we’re

Steven Fisher

mentioned Okay. available And there pricing some you orders. with that modest smaller is

that So, of sure pricing I’m ask when in retail a enough might if But the that you’re not be see production those level do more there broad-based might thinking about guess, tight of you in it to production industry broadly? sales supportive think certain a pricing I’ll more that industry higher terms. improvement. I be is or

Ron Armstrong

environment. again, it’s competitive think, a I

opportunity you So, earn earn. share should to you think ability the balance with you that pricing always your

So, two those factors. it’s balancing an ongoing of

Steven Fisher

Others be than typically quarter? in you initially think the about it when do way that indication could for earlier So, you might an happen you’re pricing get Is fourth said, that this year. of would it? your perhaps you XXXX, thinking have

Ron Armstrong

Again, assessment daily is an pricing trending. of ongoing sort is how of market the

so, see year. just we’ll those And progress make we’ll as throughout -- calls we this

Operator

next Suisse. comes question from Jamie with Credit Your Cook

open. is line Your

Jamie Cook

I your run Good the alternative And know, required Hi. assumption In just given Is year? gross gave we what for of R&D, R&D your just in quick quarter. rate afternoon. was it, about case, I talk you’ve I second you new you NAV missed sort this guess, investment, the technologies? it about follow-ups. two raised did terms last, if then, margin the how should for again. think and

Ron Armstrong

Yes.

mid-XX% for that the is year rate end in for good yes, the And in think average pretty up terms will I first quarter a good a R&D, year the of what is probably proxy. level we I the the So, margins, for think think, for proxy being. run

engines, But, you mentioned The rest result including hybrid is as of focused first hydrogen of in models, $X $X on a movements. we as increase saw quarter it the fuel electric new new million -- and truck cell million vehicles. currency R&D about to

in truck... assistance So, fronts, advanced driver a the of investments we’re including autonomy assisted and making lot

Jamie Cook

question XXXX. -- towards was And beyond sorry comment that was my more

well, long beyond ‘XX right, that’s for just So, as term?

Ron Armstrong

Yes.

for good think rate. a Yes. run indicator I the that’s

Operator

with comes Morgan question Stanley. Yakavonis next Your from Courtney

line is open. Your

Courtney Yakavonis

Hi. Thanks, guys.

MX especially that what’s years that sales the seeing any about versus X update and be you quarter an backlog? to your guys, currently to aftermarket for that And on goals if then, your give what the just starting since any secondly might be long-term having And are difference out… curious from Just is your if us on you updated you’ve or we’re X if in the you for seeing we’re that. also impacts then can engines, penetration there guys in

Ron Armstrong

will continue it for the in and to as we in And since we So, XX% subsequent into definitely coming -- increase. more think would realize years, the we of population are I see demand yes, seventh in XX% started and to North to gas over continues love continue think And our of get now XXXX the of and engine years. engine will the the grow. the the benefits year And seeing customers regulations in here that to sales. into range. that as be and more the part to we of greenhouse we the production the we’re we engines benefits America And the develop

America its XXX,XXX DAF and think, I to in of course of all engine we’re close approaching engines MX has trucks. in North PACCAR

so, of yes, benefit introduction and we’re on the aftermarket definitely seeing size, engine the result as the part And a population. growing continuing

Courtney Yakavonis

Is any to that? way there quantify

Ron Armstrong

don’t year-on-year. Yes. the the growth exact for say average I the overall but would numbers, MX know probably is definitely I that engine above

Operator

Your Raso next from ISI. with question comes Evercore David

line open. is Your

David Raso

taking for But, the the trying the a not themselves. between history answer. to one it’s operator I’m my your understand you a not issue. cycle, add if sale Thanks where difference sure to going margins going all if in on owner can you’re I you’re fleet. Hi. I blatantly the given on But, know context mix little to but we’re to are think in state margin we question.

operating margin. I for it’s If quarter, it’s out not the currency XX% great. incremental you still pull say still mean, the

last a just the is We’re was mix way incrementals cycle It what back a thought, that that mix the other of mix. year’s the on is impact and kind fantastic of the different negative either with it really lean wasn’t or if through, people bit, having the like were trying think to than ‘XX, margins? not the longer

implications at bit us what the least a are little frame it mix and the can you So, for profitability?

Ron Armstrong

a you David, little disagree have I’d to bit. with just

our what in the we’re shareholders. I excellent providing to think of terms margins looking at are

quarter-to-quarter, goes whether selling we you’re at about of mix on fleet the in and customers a down mix, think mix a as large the up point time. depending And so,

flows sort And so, from and year-to-year. that’s quarter-to-quarter, ebbs of

And feel operating we -- results. we’re so, good the about

operating margins the the have industry. in best margins, We best

So, we we’re about feel I think, good at. where

David Raso

Okay. just with? we level revenues, to margins expectations, I should improvement. or you’re we these gross something said unit as a mean, not so viewed gross truck margin of higher these be to And that we as needed move are deliveries? these expect higher internally then, higher earlier, volumes margins, people’s comfortable set not lot materially We’re seeing someone

mean it’s and just the so understand, pushing in nearly but pop occur? think hoping proper Just quarter geographies, margins expecting to we maybe I maybe to the two fault investments I there for just future other keep street our cycles that the growth, back the well, can people out, going technology, move on or is

Ron Armstrong

I earlier, side growth relative side. is strong in to revenue we’ve about Well, the particularly truck the talked the think parts as on

at you and -- on faster time, incremental. the so, accelerating to XX% we’d that And on what XX% over And delivered of XX% trucks parts, can sort expect. and that’s we trucks XX% dampens are incrementals the

Operator

Your with Seaport next question Shlisky comes Global. from Michael

Your open. line is

Michael Shlisky

guys. Hey,

the So, success the any us year? for market the your end Are of give in year kind strong And more kind [indiscernible] of can here North duty medium far pretty this America. share been caused on or market? view so has there that model broader stories in you any

Ron Armstrong

XX,XXX of And over PACCAR duty deliveries think medium year was Well, medium on year year truck a market last will for year. record actually course, trucks. for a this we little be last bit duty the the than stronger side,

market And have base on an medium so, expanding our side. orders have customer conditions, strong the significant year had excellent growth an based come opportunity, the and in we duty we the good some We’ve on that have share in. some

the about And so, to in continue time. vehicle. vehicle enhancing excited we And over we’re that invest for that prospects

Michael Shlisky

of of also It’s from is of because Okay, up previous wanted the plus XX% SG&A, aware any rest I Is bit higher year? about year, great. about little the the should be top-line this to year. costs there or Jamie that structural we the R&D. higher increases secondly for ask asked just

Ron Armstrong

$X So, driven, fees. on increase SG&A higher slightly about was million that of professional currency

has cost recur related incentive The a of doesn’t rest grants year. long-term the first typically higher quarter bit the little for that to

increase. for So those key reasons are of the sort the

Michael Shlisky

So, year-over-year the a perhaps year be it up slightly for rest maybe to… increase of those the out, huge things you shouldn’t compared when but net

Ron Armstrong

Yes.

As we next I look say, slightly maybe few the probably it level. quarter quarters, would lower than forward be to would first

Operator

comes question Melius next with Wertheimer from Research. Rob Your

is line Your open.

Rob Wertheimer

on to quick the some a then one and a current picture orders had I bigger electrification.

on are orders, current want the delivery to the this months So, mean, you OEMs we’ve right seen take customers I do ones year, of your and now to strong sense truck recent I’m curious or seeing X and bit or have want in little really it X a duration that orders. pushing those they of longer or urgency a about quarters X now? to of have cycle happy the from just

Ron Armstrong

No.

I think, the urgency strong. is

or about into what their orders they in for orders that extend XXXX. for thought want when want they put the trucks think, -- maybe customers they’ve the this year I as deliveries. But,

our vehicles to -- fuel And economy current so, is looking trucks. they’re definitely get it’s The of the excellent.

operating advantage as get by so, new And well. buying truck they that

delivery. there So trucks the to I think wanting definitely, get definitely they’re

Rob Wertheimer

sense. makes Okay,

fast? and question, guys you it electrification. of in if I have five will and what the think we’ve announcements endure. real product you’re how years? And could solutions I and different markets different about you level actually about decision you the that have mean, you platforms Is how experiments some what making update or obviously an some on approach how think seen do days am where just and second continue suppliers, be platforms, give do in have XX you trialing working you on next with The that X on. years make different to decisions curious you’re you you think ideas do and really to out and investing in recent

Ron Armstrong

with electric, exploring are full fuel a we hydrogen hybrid. of So, different avenues lot cell,

probably diversified a evolvement field be still of up-charge where got is on side, support be we participate light program. And normal And The because the cell just the the segment typical in will trucks deliveries or viability that range. at issue a the the We’ve economic heavy really we we’ve the to trucks think are vehicles, got that electric urban will fuel as in, vehicle. is so, side, they can where tested. the greatest, and being duty the medium going truck part we the regional, the look expensive as electric diesel twice about the be as

subsidies won’t But, to going are large there as zones, wide-spread demand. that’s zero emission long be create there until as as in long certain regulations the maybe it’s some demand. in as So, dictate, vehicles feasible, and economically cities,

So, be that five could plus years.

Rob Wertheimer

applies that Perfect. obviously long duty but… I Class even five town in way out, mean the plus to hauls, long Xs, And medium the years and like

Ron Armstrong

all, for to the feasibility got applies economic again It to customer. has sense the because make

Operator

with Your Rob comes next Wolfe from Research. question Salmon

line open. is Your

Rob Salmon

You’ve the kind the up past earlier guess, give parts term on revenue of growth how question I few think parts? about us a revenue And you taken sense an engines. of piggybacking quarters. the longer outlook about we should MX Can in opportunity

Ron Armstrong

significant a annual that last deviation. with of averaged any Again, If average at you revenue engines, I over reason we’ll see think look an that parts a period. X% And the years growth team great see job. has our done development, it’s XX the the I don’t

distribution customers. programs be strategic in investments and the continue those together best make to delivery enhanced. The in availability have able be invest to centers continue has distribution on-time in team to for the new of technology capability, to continue put We parts our to

I to into as think, look so, And future. pace growth the I we think that of see we’ll continue

Rob Salmon

are sense the utilization, I’m Can you’ve needs? brought can kind in thinking that of to constraints shifts of you of where before hitting its you helpful. give go kind you That’s customer up potential your PACCAR obviously see of more production And rates factory us on of terms recently. number a about where

Ron Armstrong

teams go Well, said we the I on it’s have components got sure assembly very make our obviously but effort we’ve of able required job is And the -- that. to capacity with be to suppliers, that can great trucks. delivering beyond, to support that done that it’s well our have coordinated all a as before, a

works, that and doing So, we develop our to it cost it time, supply make and teams to effectively just has efficiently. with sure our over base worked as

Rob Salmon

thinking increase And flexibility going course. your where plan for answer, much the Of supplier how guess, with I build base XXXX? do have you from about is if further your to I’m

Ron Armstrong

find We to always truck. to a next able get be that way seem to incremental

what takes So, on can progression just I do. gradual It think time. a limit is there over don’t we

Rob Salmon

And kind kind course. fleets many of if customer in. I sized kind more trade, operator orders smaller you growth, owner of squeeze one a can net of i.e. guys your From Of are coming base, in with? without interact and of the in particularly the how medium fleet

Ron Armstrong

Yes. trade. The vast in a without majority would come

Operator

Gabelli next Mario comes Your GAMCO from with question Investors.

line open. Your is

Mario Gabelli

a surge thing eliminated. dealers Do light you preordering, mentioned but ability just to you the same I’m in together? February. out deduct kind happened two you can’t happens then, back And and fleet of off the figure the used XXX% equipment, orders to to write this that tie -- have of election write handle in what’s tick assume Thanks. November your to truck in equipment, with the after XXX% trying get regards in you then, XXX%. is it? may And But, going off used to at for what the I’m

Ron Armstrong

Yes.

goods equipment I new think, to for been is a by the the get one to and the in customers, seen other get costs things, how demand the factors freights, for positive demand demand by shippers I’m used of XXX% trucks largely deductibility for as the for pricing have or well of has some driven uptick freight for delivered. it’s we orders Obviously, tax And definitely the sure... both as the and you attribute trucks, used change the but used. economics, that

Mario Gabelli

And one. wants Navistar of and IVECO distribution -- these with will There discussions is to only be be one. Navistar merge going the any is some is that logical with in DAF, particular the let’s on any as start some comment Marchionne buying Volkswagen, result? you someone, the Navistar, at on, which taken player to easy they’ll changes a company public, has Thank their easy leaving retiring, for point. Volkswagen he now you. and

Ron Armstrong

No, that for… we’ve expected be to there

Mario Gabelli

I Listen I yes, call. was Sometime, a just know. rush on

says liberty. to Thanks seeing Rusty about to listen very Look I’ll life So, much. you what and forward again.

Ron Armstrong

Yes.

Operator

question with Your Steve comes last Volkmann Jefferies. from

Your open. is line

Steve Volkmann

about I how I these guys thanks. you days. thinking snuck are just cash in. one was curious Hey,

you know to if the billion. And have more post little $X.X I’m cash you prefer year-end, balance relative like into of at have it any or like sheet. on then, just But think just thoughts et the have guidelines repurchases, assuming you curious share put or cetera. any about changes have you dividend You flexibility I to do to tax kind you the how about that?

Ron Armstrong

stayed our balance relative XX% And it’s XX% some that��s quite in currently. at asset base, about to the it’s range time. where Yes. if to look I mean, over our at cash you

the at. pay quite repurchase the the And to additional opportunity where we’re law provides take look we’re will and some obviously, benefits evaluate always and that dividends. as shares So, do, they Board a with comfortable tax

ongoing an allocation at Board capital assessments; it’s meeting. that’s discussed the So,

Operator

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

Ron Armstrong

participating. to like operator. thank thank And We’d you, everyone for

Operator

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

You disconnect. may now

PACCAR (PCAR) 24 Apr 182018 Q1 Earnings call transcript