PACCAR Inc. (NASDAQ:PCAR) Q1 2015 Earnings Conference Call Transcript

Apr 21, 2015 • 11:00 am ET

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PACCAR Inc. (NASDAQ:PCAR) Q1 2015 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good morning and welcome to PACCAR's First Quarter 2015 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 any objection, they should disconnect at this time.

I would now like to introduce Mr. Ken Hastings, PACCAR's Director of IR. Mr. Hastings, please go ahead.

Executive
Ken Hastings

My name is Ken Hastings, PACCAR's Director of IR. And joining me this morning are Ron Armstrong, CEO; Bob Christensen, President and CFO; and Michael Barkley, VP, Controller.

As with prior conference calls, if there are members of the media on the line, we ask that they participate in a listen-only mode. (Forward-Looking Cautionary Statements)

I would now like to introduce Ron Armstrong.

Executive
Ronald Armstrong

PACCAR reported excellent revenues and net income for the first quarter of 2015. PACCAR's first quarter sales and financial services revenues were $4.8 billion and quarterly net income was 378 million and after tax return on revenues of 7.8%.

Net income increased 38% compared to the results generated in the first quarter last year. I'm very proud of our 23,000 employees who have delivered industry leading products and services to our customers worldwide.

The first quarter marked another major milestone for PACCAR with DAF celebrating its 1 millionth truck delivery. I'm very proud of the thousands of DAF and Leyland employees over the years who contributed to this achievement. PACCAR delivered 38,300 trucks during the first quarter, a 20% increase versus the first quarter last year, slightly ahead of our expectations. The improvement reflects increased truck deliveries in the U.S. and Canada due to a good economy, record freight demand and expansion of fleet capacity. Deliveries in Europe were 10% higher than last year's first quarter.

Looking ahead, we expect to increase truck deliveries in the second quarter by 5% to 7% compared to the first quarter reflecting higher production rates for medium and heavy duty trucks in North America and Europe. Second quarter gross margins are projected to be slightly higher than the first quarter reflecting the benefits of increased production levels and improved operating efficiencies.

Europe's economic outlook has been helped recently by the European Central Bank's quantitative easing program and lower oil prices. GDP growth expectations for this year are 2.6% in the UK which is PACCAR's strongest market in the region, and 1.3% on the continent. Freight transport activity on German highways in March was up 4% over last year and at the highest first quarter level since the German toll system was launched in 2007. We have raised our forecast for Europe's greater than 16-tonne market to a range of 220,000 units to 250,000 units reflecting a rebound in orders and the brighter economic outlook.

Year-to-date, DAF has achieved a 15.5% share of the heavy truck market. I want to comment on the effects of the translation had on our revenues during the first quarter of this year. Looking at truck and other revenue, revenues were impacted by $232 million. Looking at parts, parts