PACCAR Inc.

Good morning and welcome to Packard's second quarter 2020 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, Packard's Director of Investor Relations. Mr. Hastings, please go ahead.

Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACR's Director of Investor Relations. And joining me this morning are Preston Fite, Chief Executive Officer, Harry Skippers, President and Chief Financial Officer, and Michael Barkley, Senior Vice President and Controller. As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties, including general economic and competitive conditions that may affect expected results. For additional information, please see our SEC filings and the investor relations page of paccar.com. I would now like to introduce Preston Feith. Well, good morning.

Harry Skippers, Michael Barkley, and I will update you on our second quarter results and business highlights. First and foremost, I appreciate and I'm thankful for our outstanding employees who during this dynamic time have kept their highest priority on health and safety. PACCAR employees have kept this focus while delivering excellent production and distribution performance in support of our customers' businesses. PACCAR achieved good quarterly revenues and net income in the second quarter of 2020. PACCAR's results reflect limited truck production and aftermarket sales early in the quarter that was associated with COVID-19. Global demand and production and aftermarket sales steadily strengthened throughout the quarter. PACCAR's second quarter sales and financial services revenues were $3.1 billion and second quarter net income was $148 million. PACCAR delivered 18,100 trucks during the second quarter. Packer Parts achieved quarterly revenues of $824 million and pre-tax profits of $152 million. Truck, parts, and other gross margins were 9.6%. Packer Financial achieved pre-tax income of $56 million. The U.S. and Canada Class 8 truck market is rebounding. Class 8 truck industry orders in June were 28% higher than June last year. Customers realized the benefits of low fuel costs and in many sectors experienced increased freight volumes and improved pricing as the quarter progressed. We estimate Class 8 industry retail sales in the US and Canada to be in a range of 160,000 to 190,000 trucks this year. Kenworth and Peterbilt market shares at 29.6% year-to-date, half a point higher than the first half of last year. In Europe, Monthly orders for DOF trucks also increased as the quarter progressed. European truck industry registrations in the above 16 ton market are estimated to be in a range of 190,000 to 220,000 vehicles. DOF year-to-date share is 15.8%. The South American above 16 ton market is projected to be in a range of 60,000 to 80,000 trucks in 2020. In the Brazilian above 40-ton segment, where DOF competes, DOF market share through June increased to a record 9.1%, up 3 percentage points from last year. In all regions, our market estimates assume that economies continue to gradually reopen, but could be revised if there are returns to lockdown conditions. We're excited about Kenworth, Peterbilt, and DOF's leadership in zero-emissions powertrain programs. To date, we have deployed over 60 battery electric, hybrid, and hydrogen-powered trucks. DOF, Peterbilt, and Kenworth have battery electric vehicles operating in North America and in Europe. These vehicles are placed with customers in local and regional delivery, refuse collection, and port applications. We expect that these customer segments will be the first to adopt battery electric technology because they typically operate in the city and return home every day for recharging. PACCAR is simultaneously developing hydrogen fuel cell powered vehicles and has built 10 Kenworth T680s for customers in the Port of Los Angeles. In the longer term, hydrogen could be promising for long haul applications due to its high energy density and its relatively fast refueling times. PACCAR will begin production of battery electric trucks next year. Volumes are expected to grow gradually as the cost of batteries decreases Charging infrastructure is expanded, and regulations drive customer adoption of these technologies. PACCAR is a leader in zero emissions vehicles. Harry Skippers will now provide an update on PACCAR parts, PACCAR financial services, and other business highlights.