PACCAR Inc.

Good morning, and welcome to Packer's first quarter 2021 earnings conference call. All lines will be in the 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, Packer'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 Fite.

Good morning. Harry Skippers, Michael Barkley, and I will update you on our very good first quarter results and business highlights. First, my sincere appreciation to PACCAR's employees around the world. for their dedication, hard work, and upbeat spirit. Throughout the past year's challenges, they have delivered outstanding trucks and services that provide essential goods to our communities. Now, as the world moves forward, we have many reasons to be optimistic. In the first quarter, PACCAR achieved very good revenues and net income. PACCAR's first quarter sales and financial services revenues increased 13% to $5.85 billion. And first quarter net income increased 31% to $470 million. Packard Parts increased its first quarter revenues to a record $1.16 billion. And parts pre-tax profits were a record $251 million, 17% higher than the same period last year. Truck and parts gross margins increased from 12.6% to 13.4% in the first quarter. And Packard Financial had a great quarter. delivering excellent portfolio performance and achieving pre-tax income of $76 million. PACCAR is having a tremendous year of new product introductions. In February, Peterbilt and Kenworth launched beautiful new heavy-duty truck models. The new Peterbilt Model 579 and next-generation Kenworth T680 feature enhanced aerodynamics and powertrains that deliver up to 7% higher fuel efficiency. They feature new LED headlights, new advanced driver assistance systems, and a state-of-the-art interior with a 15-inch configurable digital display. Truck owners and drivers will appreciate these and many other features in these great new trucks. In April, Kenworth and Peterbilt introduced a new medium-duty truck lineup. These vehicles have an 8-inch wider cab, lower cab heights, which makes it easier to get into and out of the truck, best-in-class visibility for enhanced safety, and a new premium interior with configurable dash displays. The new medium-duty trucks feature PACCAR's PX7 and PX9 engines and the new PACCAR 8-speed automatic transmission. In April, DOF began producing CF electric trucks, and Peterbilt and Kenworth expect to deliver their first production battery electric vehicles in the coming months. PACCAR has strategic partnerships with two electric vehicle battery providers, CATL and Romeo Power. These two excellent partners provide our customers with the right technology choice for their applications. As the U.S. economy recovers, GDP and industrial production are each projected to expand 6.3% this year. Consumer spending, the housing market, and the automotive sectors have strengthened. Good freight tonnage, high truck utilization, and a shortage of drivers has created strong demand for PACCAR's premium trucks. The 2021 market size will be tempered by the industry-wide undersupply of semiconductors, and we estimate the U.S. and Canada Class VIII market to be in the range of 260,000 to 290,000 trucks. The U.K. and European economies are also expected to grow strongly. Economists project U.K. GDP to increase 4.8% and European GDP to increase 4.2%. The 2021 European truck market is expected to increase to a range of 260,000 to 290,000 trucks. Harry Skippers will now provide an update on Packard Parks, Packard Financial Services, and other business highlights.