PCAR - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to PACCAR's First Quarter 2019 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. of Director PACCAR's Hastings, Investor Relations. Ken Mr. go please ahead. Hastings,

Ken Hastings

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

members will detail conference of participate and prior the we and and and calls, that affect is economic the mode. that any competitive in involve general, filed media with with our line risks may the uncertainties described As expected in Certain in ask on reports information SEC. be risks listen-only periodic A a results. including of more conditions presented uncertainties, today forward-looking summary

Ron paccar.com. page information now like additional, Investor the For Relations introduce see in please I would filings SEC Armstrong. of our to

Ron Armstrong

to years days PACCAR One distributions supplier In quarter, and on return to with dividend invested were of X%. of an the Preston quarter last $XXX Feight, XX%. results and build measure The North and Good revenues stockholders. delivered quarter average higher Financial quarter year. revenues. pricing the in will XX achieved XXX,XXX provide PACCAR strong future first are for net production America were a to the passionate million on very years and for $XXX last profits X% and the record another in years and best quarter was compared delivering a to outperform results operating PACCAR's return compared quarter. PACCAR of where dividends XXXX. I'm customers first and our over net per quarter XX% to our PACCAR reported in capital. of achieved key price the paid a first share. the XX% achieving quarter. annual and net is products first the $X.X quarter on was average cash and XX% of more PACCAR XX,XXX margins of highlights. net outstanding has the XXXX. repurchased dividend its reinvestment proud Services at industry's invested return Parts after-tax year last record first revenues delivered first Harrie PACCAR revenues gross PACCAR you excels peers capital an and a income of shareholders. in first last first performance. billion first services Truck at first year quarter I XX% $X.XX morning. strong first many XX% to and it an income for million. Revenues flow per its of income billion XX% truck to $X X.X% five during in and quarterly our growth an excellent and business shares was PACCAR continues excellent raised during XX% approximately employees the the it’s quarter and increased PACCAR's Schippers first on sales and quarter. income trucks was the in were who annual about higher pre-tax increase good of record of increase Truck were realization since year. Parts the the record compared update achieved during XX,XXX also quarter every for of Parts PACCAR fourth to quarterly due primarily has good has return

number record X% and job higher fantastic X% factories gross to Kenworth to highest due second Preston DAF operating management delivering supplier deliveries and Parts. in we're XX.X% than of and be in teams in the a first and a quarter will DAF the expecting industry. did achieving quarter other margins update and the quarter, to margins in trucks In Feight Parts to of Peterbilt, estimated of managing be provide are the second a the purchasing Our range Truck, increased to on an North production America. XX%. now PACCAR production and

Preston Feight

are Thanks, projected of moderate European heavy in a year registrations quarter. range XX.X% with XXX,XXX be should at in first a truck transport freight Ron. and achieved the record economies pace to XXXX. to in good market market share This DAF European of in the grow another trucks. year activity XXX,XXX

results. global a billion first first revenues $X time Parts level. reached and PACCAR to the the quarter record were Turning Parts for

strong in Ron centers. number of PACCAR other As trucks market was and technologies over very PACCAR for parts Parts. Ponta increased profit record Nevada. has truck Vegas, Las Grossa million. This operation. customer has consistent pretax To in greater resulting a a with $XXX one PACCAR its share distribution in this years, Parts mentioned, steadily quarterly two of is One and foundation PACCAR engines in investments parts focused and new in Brazil the created engine a combined in distribution capacity construction support has Parts growth, growth begun the and

Harrie for Kenworth, Schippers Services. update and to sales to full X% now Peterbilt year on grow will Financial PACCAR provide an We Part XXXX. expect the X%

Harrie Schippers

point U.S. A year growth full The and X.X% and year. of production the freight two predicts Preston. industrial consensus tonnage continue to XXXX. for economy -- this economists GDP Thanks grow

year provides growth X.X%. truck market. Freight GDP XXXX backdrop to healthy This a strong the quarter for was X.X% first the increased tonnage a in a compared First quarter, earlier.

same retail XXXX Class and industry last year. increased Canada XX%, the sales period X quarter truck compared U.S. to First

U.S. earlier. Canada year million the the first pretax over to income PACCAR of to was have backlog. X Financial truck an We units industry increase the $XX to midpoint and increased projection strong the of market Class compared in due quarter, XXX,XXX XX% a Services

to and values assets used Peterbilt X increased to we're and truck resale compared XXXX, to truck expenses period $XXX last XX% development. investing investments Services quarter increased performing the premium Financial PACCAR a Peterbilt new record million. R&D million well. Class while with facilities billion values $XXX million. and the $XXX were first for products command XX% competitors' again year. to in vehicles. to and revenues quarter same million Kenworth over $XX.X our First in the We're In Kenworth increasing powertrain to alternative to $XXX capital million expanded a $XXX increasing funding portfolio

are press electric questions. vehicle fuel recently release, we cell, in As to autonomous hybrid field technology as working Thank on hybrid that in and throughout answer pleased Kenworth Innovation as with the are well Silicon testing collaboration We'd Valley has introduced electric and vehicles DAF your Europe. also hydrogen Peterbilt the powertrains our you. and Center. undergoing mentioned be

Operator

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

Jerry Revich

Yes, hi, good everyone. morning

Ron Armstrong

Good morning, Jerry.

Jerry Revich

seeing I'm you of about out anymore are has would flush business. to wondering if what times? How book-to-bill -- share your is the hear lead booking the you are long just in where gain in terms there be Maybe helpful. color could European And set. trends that talk tracked about Nice opportunity year-to-date?

Ron Armstrong

our registrations our year to for the year we terms normal saw I'd we in forecast first in market a is as continue last indicates. quarter, full of good the for and year over have say that backlog up operations. as European were factory for you'll visibility this see in And the the Yes market

Jerry Revich

up picking comment Ron? support year-over-year share And market, and then are the you so, to orders your at the book, so gains that's share the healthy are in about levels of folks up order

Ron Armstrong

year -- down order Yes, bit is intake last quarter. first the a the was over very strong actual a

other our is seen order competitors. So down intake similar levels with European to we've

Jerry Revich

Okay. any get And the U.S. the situation how how is in later relative in folks business, for or from looking to are the then firm is request plan? earlier seen it? the whether production you plan in to queue seeing can you production you've And shifts talk I the production the Or see in you third the as any customers? backlog your in about North queue the quarter fluid guess America?

Ron Armstrong

I all firm. think it's very

backlog is very normal all of in is think I out firm. movement So and very and the just the trucks

Jerry Revich

And dynamic about? a you if on the able production to continue year-over-year on you year SG&A. an keep flat folks sales you Or for wondering period? moving Any growth, think ago SG&A to I'm flat folks standpoint, going can maintain Okay. really strong as in is comp any us from then were SG&A there pieces

Ron Armstrong

for you the know, rigorous for focused very cost something on as Jerry There cycle. part in ongoing but focus managing most just is the we're cost it's over benefit cycle. the that management some that entire movement, our the Well, and currency some managing quarter from our was on

Jerry Revich

Strong you. performance, Thank

Ron Armstrong

Thank you.

Operator

of comes next Tiss Joel line from question with Our BMO. the

Your line is open. now

Joel Tiss

it going guys? How is

Ron Armstrong

Joel. Good,

You?

Joel Tiss

in Hanging there.

gaining are share? just is just a keep you going? in for little big guys that out are And you room So there us and your is I lot parts. gaining more who keep illuminate Or share some parts, a wonder share dealers everybody of losing to opportunity such is there market for bit I in if can a there hearing market

Ron Armstrong

a that lot engine -- the the America. population business PACCAR just our share we've from engines, is of portion. comes in is gain as of a of engine and think where the a year percent our total so in This becoming MX I engines bigger North been ninth the

to and so a we And nice the or XXX so is the add-on. parts around group with cetera. business so that trailers, get customers more enables all-makes penetration buses, globe Plus the – that have engine now stores TRP et

the the think share drivers of two in are parts I So growth those key probably arena.

Joel Tiss

more the So pirates losing out? who are I guess the

Ron Armstrong

Excuse me?

Joel Tiss

guys are the The third-party, ones losing like pirates who out? are like non-OEM the

Ron Armstrong

could side know. it TRP would be OEs. that could the On I the it other -- don't WDs, be

Joel Tiss

you work out? margins handle fourth little been your the to And a structure last in we've just quarter a for a levels, also of decremental bit give working production of cost you us can talk couple can balance potential can about guys years you that have guys to on little what been hearing your how about and slowdown -- you sense Okay. and

Ron Armstrong

to firm. We produce into -- XXXX. production. said Yeah, we're business ahead continue trucks. The we're is demand, I the going as I on quoting mean to our full We're backlog

effectively the So we're structure because -- full and as that phases cost us our our manage prudently of we we we manage efficiently historically all quite we've structure -- with we We've exception. cycle. able cost -- no be earlier, manage our We'll ahead -- times and be mentioned all during for to that other factories this can with quite operations. will proven that and

Joel Tiss

one. just one last Thanks. And

about and Thank Sorry time. then the highlighted and looks I'm the it bit you market a market your next up like for you I see talk two there? year where is the you, Can share or what hog to little all done. Brazil, and

Ron Armstrong

first quarter. are Similar at of in year. the XXXX. year scale production. trucks quarter, Yeah, first from and our kind XXXX, last X,XXX similar this in be the basically In share We increase year X.X% so over we'll prior we're to we for the we in produced production doubled continuing a

So customers years. just we recognized for well-received -- been has three as industry the the product the been and as and all of of very last we've our a by brand whole year the the

great got have dealership support network trucks. the we We've So, representatives. good a to

our XXX,XXX And and continuing warehouse. to so, factory a that been our there. Parts improve Parts service opening positioning our be add a also we're as we're We've presence part in half we're truck of will expanding square-foot early and first XXXX. PDC probably to And using of going

that. grow to need we support that. So, And

is our Brazilian future the bright very operations. for So,

Joel Tiss

you. That’s awesome. Thank

Ron Armstrong

Thank you.

Operator

of comes Raso ISI. the question David line from next with Our Evercore

Your open. line now is

David Raso

but you quarter you you're second down. the have that? deliveries question, Quick implying X%, gross explain to up Can margins morning. help Good flat Hi.

Ron Armstrong

Yeah.

truck in are XX.X% range. the XX%, margins So, the

quarter truck margins were XX.X%. First the

So, come the of lot from truck will revenue a the incremental side.

in effect a Parts, trucks as that versus wading keep to quarter. similar of us will sort so, the And range first of

David Raso

R&D, just the Thank tweaked so you. -- the even and of and between also, up more May. for some technology say lower. percent capitalization is PACCAR. of long for understand little just this sales the be CapEx with is increase the maybe how there help people these have R&D R&D? us you the drivetrain but I all hold a actually But, the and of trying a you'll would think Can wondered, always little noticed I with a expenses you might new then some And explain a am so the in the a coming trying some question time it R&D, dollars might for help And that be people just bit divergence can meeting or forth, Okay. to low increase, CapEx to as

Ron Armstrong

what year, quicker Yeah. purely than The move as increase we've we CapEx our into gone has of teams is just things gotten forward the the anticipated. to ability

But we're quicker same. anticipated. Our we'd much going get pretty what plans actually to done to still things are the originally be able than

of our have years. part the year. needs We're development of for The R&D increase. well to for and feel we the about amount But probably products it's thought future prudently everything arena. spend manage our just is, support efforts product going out how changes, also we And this we good the a advanced R&D that's future powertrain positioned. capital do and So, for to need we're record greenhouse well doing to gas company

So, I side. feel what we're we're things both think capital the and about we good investing the doing really in R&D and that on

David Raso

I two. because figure coming with are out pressures people Well, potentially is year to some the think the volume on declines issue, the trying this important an next or in cost company

goes but CapEx we divergence of to able -- R&D? the the pull So forward, thus the not things were up, and

Ron Armstrong

gone The up. R&D has

David Raso

better change to No. little of caused year the had hasn't start up go – a the in the understand the increase R&D? the change, us help from the you a commensurate CapEx the but that Can

Ron Armstrong

Yeah and executed, just because than had ability get changed, what and anticipated. working the the we're the to on that plans hasn't at projects we done are projects quicker being those It's capital those originally which pace

recognition change was in capital-related those the of timing projects. of there It's incurring the just So, costs. no

David Raso

if R&D around guess years I the we earnings we But a has I resiliency. relatively is think continue Can lack idea a that more to -- the there's in is meeting. the new this the sure And stayed dive the couple next ability big can The thereof the discussion introductions. level. for costs CapEx-related into of at to do think I low May or

look little in to a going I'll So, May. to forward more detail

Ron Armstrong

Sure.

Okay.

David Raso

you appreciate Thank very it. I much.

Ron Armstrong

Thanks Yeah. David.

Operator

Fisher Our with next Steven question UBS. comes from of the line

line Your now open. is

Steven Fisher

morning. Good and Thanks

So Harrie…

Ron Armstrong

morning. Good

Steven Fisher

QX mentioned truck and lots inventories. used used keep both lots truck values How year the in year-over-year. QX XXXX Harrie, truck on compare later you're market own the Morning, are on levels likely do as trade-ins to on I up for curious and used what in? your that this expecting dealer coming am

Harrie Schippers

as good the in I premium Used The has good. pricing, they level were been end are inventories used truck think -- in We for trucks same for amount good especially trucks. year. North see really the almost of America last at demand

So...

Ron Armstrong

we're for to where supplement to our locations. Peterbilt factory vehicles And adding used we're new is our biggest going a seller We're residual trucks truck ability sell truck continue the our to values. continuing and and used fill out be used to excellent on located property Kenworth location further to the and we'll support those

Steven Fisher

oil assumptions how pipelines Okay. contributor of And frame a market and later have? then and I of might trucks But guys trends modest and really year capacity gas as know order just on some the very in you the expansion gas being curious oil earnings. you affect only might for this generally to

Ron Armstrong

of approved, this we in and big as backlog and pluses both business. said, things those that very Yes, firm. truck for year if America where gets expansion more program will be there's our is the there leader But pipeline be vocational for the is infrastructure capacity North if that importantly, would

Steven Fisher

much. Okay, great, thanks very

Ron Armstrong

Thank you.

Operator

Suisse. question next Jamie comes the line Our Cook Credit from of with

Your open. line now is

Jamie Cook

know Hi price good morning. quarter you talked in price X%. realization about I the of --

then into your my congratulations take I Thank views think about in you Preston. But over your -- of was Is understanding are as then second the on top XXXX, Preston your pretty any priorities? with good guess was you're which forecasts? any line based sort and with initial expectations? what what than remainder it conversations you. year? a just on Can I you they are having better the said customers, industry of very saying Ron for And last good. -- assumptions you And XXXX? that question, visibility And just

Ron Armstrong

Preston the let I'll then. or back with go first I start can

Preston Feight

No.

a I PACCAR been we great We're bringing with long We've think has that continue results, a strategy well. great that. performing place, plan team history. in to good exceptionally and

Ron Armstrong

a year, I on but see quarter. back cost, similar the we'll I increases when prior quarter pricing, what truck some offsets look we'll saw that the on similar same think back performance first you of to we in performance the of basis, in similar So I think think comparison year-over-year see the

Jamie Cook

saying to color relative And what on XXXX are are what just about saying? industry then your forecasts customers

Ron Armstrong

negotiations ongoing on delivery. customers Well, having we're about I an mean, XXXX with basis

So good, tight able be recognition market I the on and things is -- delivered economy the haul still that pretty good, think get there's people to for freight a that is there's demand need with still it's customers, timely basis. to a to discussions freight

we're conditions So of market the continuation preparing good XXXX. a into for

Harrie Schippers

building XX% seeing that decide in their the trucks years improvements the they gas the really we're ago today economy they equipment. keep when emissions, that our replacing them to than fuel greenhouse four have in deliver all with helps trucks And to up bought better customers and

Jamie Cook

back Okay, in thank you. queue. I’ll get

Ron Armstrong

Thank you.

Operator

from O'Dea Our comes Joe with next question the line of Vertical Research.

now is line open. Your

Joe O'Dea

morning. good Hi

to Can region, You Europe that Europe? the some bit a you of any continue this that Are well? little of share of progress effect where you seeing post there's just if and gains you're larger give bit as within a traction detail fleets the seeing within better little quarter. in in some with then, mix

Preston Feight

across the produced really Europe, UK Yes this nice strong take year. broad results Poland, that and has one. but it's excellent I'll having in performance exceptionally

the best seeing in worn them the performance being I DAF think that life out for we're our the recognize now. and trucks, have fleets that market, of we, the as with cycle best the operating customers, that's and cost

larger share That's what's we're this broadly to leading fleets growing some Europe. the strong throughout performance. with gaining of and So in Europe,

Joe O'Dea

as anything else. things to progress X both stage XXXX you toward the of catalyze share we share of for on know that But CapEx Phase opportunity contributing that's since in see making what kind see at the the engine you on gains launch to a related and penetration investment on the and don't now I kind front engine then, the plateaued whether gains? in really next the horizon you? the or to all potential triggering bit tied horizon, an And initial some the is on of investments that saw wondering the plants,

Ron Armstrong

in selling additional our engine and additional need the so with we're we Basically, need we produce, factories, that capacity the suppliers. we can capacity Yeah. every and our

customers. So is deliver can to so our focused, and next great to investment we that's those where engines the go plateaus

Joe O'Dea

Got it. Thank you.

Ron Armstrong

you. Thank

Operator

Frohnapple from Our next Neil question comes Buckingham with Research.

Your now line is open.

Neil Frohnapple

Thanks. Hi.

Just earlier of from couple questions. follow-ups a

recall to cut in of So was production first fourth of the PACCAR the decline the XXXX in ahead production. the Class industry if quarter XXXX I X in

You still pretty the sound but guys at through pace. chewing on fundamentals, backlog a industry obviously the positive the is quick

you're at, on early daily to rate to So whether this X what there rise you'll time fall Do start curious you Class and down orders looking be frame? more later helpful. any the year. the thoughts take in Just would summer, build need

Ron Armstrong

backlog's the said, I as firm -- full we're moving back The ahead.

So...

Neil Frohnapple

then, more are classes Okay. you of continuing And the lower of plans for guys the on What weight in momentum products some to Brazil. vehicles? build the are in launching region

Ron Armstrong

drawing our the just balancing expand business, We've process. we on entry that we'll into our enhance new all our market do to introducing continue like obviously certainly been continue That's well. to and Yeah. position in to board of we products our in and and as part around the the world markets as grow be market,

So our definitely that's roadmap. on yeah,

Neil Frohnapple

one, one then, last Okay. And Ron.

largely still year? that supplier constraints this they opportunity are behind are move completely So an as like is benefit we mean improved. the the to margins through point, or the sounds I it at

Ron Armstrong

better continue in what about performance the the was move year, with the quarters half build North We're -- with much quarter to and and our to We it's rest first second an very our year. for feel suppliers. going second third obviously to we so suppliers our the of in rates orchestrated to saw the expect closely in of continue work the we and good than quarter always effort in America, up to that this continue

Neil Frohnapple

Okay. Thank you.

Ron Armstrong

you. Thank

Operator

of Lynch. from line comes Gilardi America the of Ross question with next Our Bank Merrill

now open. is line Your

Ross Gilardi

guys. Thanks,

Ron Armstrong

morning. Good

Ross Gilardi

And alternative I morning. how they're in-sourcing leaning more What why? wondering more of are things can develop, you just outsourcing versus powertrain? Good and you on get as some evolving doing I are was towards in thoughts if in-house outsourcing? versus your

Ron Armstrong

Yeah.

I the time to respect think developing capabilities, closely lot and it's our multiple of technologies, working of capabilities. internal who taking variety their a new with with we're developing a paths are of terms a own in real suppliers exploratory

quite to survive these they the of be of they a progress understand we sort of know months, of to us have who in forward. to so what it's challenge us and without of XX will viability of best have respect subsidization? can we'll high the trucks I path our to some supporting economic those the and capability of a customers want is we choices, say powertrain avenues. next and next XX fleet XX figuring explore for to to mind sort And still the And days. long-term. initial As in we're lot over continue early for the define still the we'll months degree with can critical as way So our bit out have some their our I be for so XX to there's

Ross Gilardi

on about Ron you office? Silicon learning autonomous What out particularly What the there Valley development? are your

Ron Armstrong

-- being a lot office we was to that was was that A research clear it the made lot. done there decision of When that that area. first open was on

where team internal -- developing Silicon capabilities for our Valley really so in we're our autonomy. And that's

I We we're own to closely as want packages working those third-party they're working have develop And there and some great a said, our have vehicles. packages. with and into who with then really team our suppliers others to incorporate their

They're about teams and and so in smarter have and efforts quite about our office think very all And but in implementation. to on as Silicon here working our together things help paths Vernon up tech and well the have the we're there, possible Washington what's be all to Mount our and accomplish center in further multiple as has to Eindhoven. you successful working team Valley we Silicon helpful, well Valley technical been that

Ross Gilardi

you the five Brazil I geographically share that just so you that you XX% I success ground. a to first think years the get or China you're was you about that and on with when originally soon and which then gotten in in the to we be on mean those off one now seem India something for and had the path off lastly any And other relatively geographies you've Are and getting launched closer to Might investment about real years. doing making idea regions? hear like you've And market well that. it talked investment of

Ron Armstrong

way I goes think Well we're every by day nothing that the a the on day closer. there's horizon. But

to for continue of Pune, providing We for we hundreds in offices we Beijing, in software. office in offices from an with and those have valuable -- working sourcing we embedded have Shanghai, have suppliers India in engineering support areas technology, employees they're

So a going we lot provide and shareholders. a a that's on evaluate lot have where's the opportunity support what of we and OEM to discussions our of us with make of potential trips those to -- from the partners a return good both that component get lot teams side for side,

evaluate, continue and that's going we'll reasonable -- return. because provide make there. a just to there's it and sense It us situation a so is be And to us for large has a markets company to opportunity as they are

Ross Gilardi

you to of Okay, seeing guys great. in weeks. look couple a forward Thanks.

Ron Armstrong

you. Thank Okay.

Operator

Research. comes Rob the from Wertheimer line next Our Melius question with of

open. Your line now is

Rob Wertheimer

morning you. good to Hi,

Ron Armstrong

Rob. Good morning,

Rob Wertheimer

mix those of the discussed you follow-up success more the been gains? to willing and material both proprietary been quick a come a business still? gain? where engine you've the Is parts margins. in the I long if the Or you're a contributor don't on segment more parts that operational? mix to of has question. margin that improving run margin that's Just know But Has your revenues

Ron Armstrong

our impact we've we've -- Europe we've always outsized and margin some margins in growth in been so selling of that's think result performance parts total enhancement and North America time America the engine North of has have enjoyed engine sort so and as contributor. the our North America. a sales a seen of in the a for positive had own I there on Yes, margin operations quite those

Rob Wertheimer

I And there sales we the when had market of you. share still that then come the the versus through that gain America? flow lag North maturity have don't hope margin engine mix? gain seen some I Part full on from in Or Thank your know engine? come in you've

Ron Armstrong

we're our starting mean so where replacement engines and to benefits for and that phase into Yes, and the see you so to kinds the to starting as get mature of of I just to -- you're getting overhaul point engines get aftermarket we're the now of the activities more opportunity.

Rob Wertheimer

you. That’s helpful. Thank

Ron Armstrong

Thank you.

Operator

Our question Cleveland of Research. Uhlman next the from Adam comes line with

Your line is now open.

Adam Uhlman

the Good congrats morning, Preston. records. Ron everybody on And retirement, on congrats the and and all

Ron Armstrong

Yeah.

Adam Uhlman

a you're it for or have year? start the of centers the with to the the the were that bit, in projects CapEx year. step-up But forward? might Is First I pulled on this missed earlier facility call. in please? distribution exact landing what on could some paint this Or you expand

Ron Armstrong

say no projects the been just really we I projects planning along. all execution It's of I Yeah. the pulled guess, forward. that would -- nothing have There's

done originally just We have we shop. that what had Chillicothe than and paint for going moving new to PDCs, nice And able we get have faster the we anticipated. had projects a quicker those those are expansions, grand -- be factory groundbreaking we're to -- things

matter it's have purely spending the our So, the of just our plan. just always is spend. -- timing of Those been of a part

Adam Uhlman

Gotcha. with you in between could be Europe? to to And understand second us North out and rates plays up sequentially that quarter, expected the help America quarter Thank then, North America. be And X% again hear the X% build in how then, I minute I and you. third would for a increasing Did the right, mentioned that think builds you'd guess much? that ago by I how Thanks.

Ron Armstrong

Yeah.

the the And see see -- all is North much is production. what to America-driven. similar think pretty third a we'll that level probably think quarter production X% I we'd of X% in I

We DAF quarter. third have two-week summer in at the shutdown the

offset but should we'll -- part most reduction for America. it that by a production levels be production in North So see in Europe, in the

Adam Uhlman

Gotcha. then just Thanks. And Okay. a clarification.

mentioned looking have I orders the Could North about what in how tell you Europe. think that the And us were been like in much? orders America you year-over-year? by down

Ron Armstrong

are saw the open levels first And America for so for can -- orders DAF guess, the in backlog in just that for from backlog. in exist North quarter got year's really the order but really Yeah. that quarter strength build. intake. a we because The of reflective the built reduction XXXX Europe, we reduction I a are was in say normal They're -- again, filling more slots customers to of mostly -- it's first last I and up saw of few when of in orders the XXXX,

Adam Uhlman

Thanks.

Operator

with [Operator Scott Instructions] Our Wolfe next question Research. comes from Group line the of

is now Your open. line

Rob Salmon

guys. morning, Rob It's good Scott. on Hey, for

Ron Armstrong

Rob. Hi,

Rob Salmon

With up. -- you in that North follow-up the outlook a guys terms expecting ramp on to production are quick of America

guys some pricing into incremental very to the that we You incremental into margins I'm based look the ramps the on as thinking backing the good on second the as we first truck Should as production about in out you X% quarter talking generated roughly well? be similar quarter. guys margins were

Ron Armstrong

Yeah. of a mix, into I'd geography mix, similar. on weight say so the little depends there's mix, that. mean, bit lot it the that I the factors customer model

range similar a be. would in something So

Rob Salmon

of around that rate losses Is we guys expecting past low X.X% a couple on at as have revenue? very of looking had this we finance on you on good Or the receivables. quarters, based kind be run should forward? the your outlook And of the forward market side move look provisions to for

Ron Armstrong

enjoyed our mean, customers the of of because I the have performance. freight strength excellent Well, markets,

really work of our feel credit have teams lot a our intelligent Our to to there. capabilities about lot data and We underwriting. the really apply teams good of analytics credit done finance

The has portfolio of economy well. in the I made some portfolio is good, company's customers think continue -- as used improvement very long our they've and freight to We've growing. to the our as markets and is good are that available is capabilities will so the so great and, technology team seen trucks playing to that And the performance. perform all finance

Rob Salmon

makes me quarter remind -- pricing That And your of type the the saw? in volumes was sense. guys can you and that used you truck up

Ron Armstrong

of year. to X% to X% compared have last truck used volumes up I year. was it the Yes, quarter first the last don't

that quarter. guess sales so X,XXX somewhere used Peterbilt quarter, about XX,XXX sold we first in probably and the trucks would and X,XXX we're XXXX, X,XXX to used so For trucks the for range Kenworth, that's X,XXX a in DAF I

Rob Salmon

Thank you. the time. Appreciate

Ron Armstrong

bet. You

Operator

the Our Capital. next line RBC question of Weber Seth with comes from

is line Your now open.

Seth Weber

guys. morning, good Hey,

Ron Armstrong

Good morning.

Seth Weber

to -- be quick you business do thinking is my you Parts the I it's that year business would fair couple guess truck demand even new follow-ups. lower quick just about think question. a think -- I is of -- if being business next about could that mean, first Just again, up

Ron Armstrong

and throughout other That continuing and and business would we're our is add build the adding We're to TRP to new be Again, cycles. all programs to goal so continue have to markets our locations, to additional like additional that continue to surely technology dealer areas stores. place, Kenworth in the locations add Brazil continuing aim. Peterbilt additional in

Seth Weber

so year for a Okay, of kind you number next is think like single-digit to reasonable? mid low

Ron Armstrong

little Yes, it's probably bit a to early something. commit to

Seth Weber

rest the balance mean, or where incremental coming some are they kind so. I , Okay. questions. are just Fair pricing I mean then about talking the enough. costs of stay And back for companies and the down assuming going for the of input to are I input of year costs the margin you guess year? that

Just trying kind to frame of coming from... leverage operating

Ron Armstrong

is that input assumption think cost. pretty I steady our probably a

and the cost long-term are while of components agreements so movements et have blend it We into a purchased the under cost to most vehicles little takes our of cetera.

assumption environment. pretty much is our cost that's pretty think a stable I So

Seth Weber

had. I all very That’s much. you Okay. Thank

Ron Armstrong

you. Thank

Operator

next with question from of Faheem Our Sabeiha the comes Longbow Research. line

Your line is now open.

Faheem Sabeiha

on congrats And a great morning. quarter. Good Hi.

Ron Armstrong

Thank you.

Faheem Sabeiha

to capacity or it's laid that that in inability growth out year? you Is like the plans stall coming Day MX at engine opportunity sooner? question maybe share now -- Investor in the Just the exiting parts remaining a your where your It cycle could just last production on production. maybe seems some with accelerate there online

Ron Armstrong

we company has which that we've Yes, production year as a -- DAF that of obviously is -- DAF PACCAR last produced ever those produced and so and had truck one every record XX,XXX a engine. engines of every highest the

engines in those and as we we've into time we and the And Peterbilt place trucks penetration so Kenworth have committed on -- we'll quickly goes money of more to as get the -- capacity are as can. see

availability XXXX-ish of be most frame. having time in time full for think I implemented that frame will at the XXXX-XXXX being the

Faheem Sabeiha

price you're the when with over favorable to Class extent kind decline to at decline Seth's you of guess, look next offset say cost the X time and lower year? in today I question, the Okay. a volumes lower you at looming more premium margin that adding will do think production, And gross environment, level in costs maybe freight your

Ron Armstrong

that Yes, ahead many, down over at many all had when before adjust I we're those. cycles as -- I very managing do we've and we're proven adapt mentioned the demand for through trucks is things there and

that at that So point well we'll execute continue may very to happen. whatever

Faheem Sabeiha

Thanks. Okay.

Ron Armstrong

Thank you.

Operator

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

Ken Hastings

the operator. Yes, we'd everyone thank thank for to joining like and call you

Operator

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

You disconnect. may now

PACCAR (PCAR) 30 Apr 192019 Q1 Earnings call transcript