PACCAR Inc. (NASDAQ:PCAR) Q4 2015 Earnings Conference Call Transcript

Jan 29, 2016 • 12:00 pm ET

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PACCAR Inc. (NASDAQ:PCAR) Q4 2015 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good morning and welcome to PACCAR's fourth-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 objections, 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

Good morning. We would like to welcome those listening by phone and those on the webcast. 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, Vice President 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. Certain information presented today will be forward-looking statements and involve risks and uncertainties, including general, economic and competitive conditions that may affect expected results.

I would now like to introduce Ron Armstrong.

Executive
Ronald E. Armstrong

Thanks, Ken, and good morning. Thanks to PACCAR's 23,000 employees around the world, 2015 was an outstanding year for the Company with many records established. PACCAR achieved record revenues of $19.1 billion and record net income of $1.6 billion, an after-tax return on revenues of 8.4%. Net income increased 18% versus the prior year.

2015 was PACCAR's 77th consecutive year of earning a net income. These excellent results reflect the strongest North American heavy truck market since 2006 and the highest European heavy truck market since 2008. In addition PACCAR parts earned record pretax income and PACCAR financial services achieved another strong profit year. PACCAR celebrated several important milestones in our 110th anniversary year. These included the delivery of DAF's one millionth truck, the production of the 100,000th engine in our Mississippi engine factory and 35th anniversary celebrations at Peterbilt's Denton, Texas factory and at PACCAR Leasing.

During the year, PACCAR continued investing in premium quality products and services in our core markets and expanding our presence in emerging markets to provide the foundation for future growth. PACCAR's fourth quarter sales and financial services revenues were $4.4 billion and quarterly net income was $347 million, a strong 8.8% after-tax return on revenues.

During the quarter European truck deliveries increased, partially offsetting reduced North American truck deliveries. The strong contribution of all Company segments enables PACCAR to attain the highest operating margins in our industry.

PACCAR declared cash dividends of $2.30 per share last year, a 25% increase compared to 2014, and the highest total dividend in Company history. The regular quarterly dividend was raised by 9% during the year. PACCAR's total dividends in 2015 provided a yield of over 4%, which is in the top 100 companies in the S&P 500. During 2015, PACCAR repurchased 3.8 million shares of its stock for $202 million.

PACCAR delivered 35,400 trucks during the fourth quarter, in line with expectations. Vehicle deliveries and truck and other margins in the first quarter this year are projected to be comparable to the fourth quarter.

Peterbilt and