PACCAR Inc.

Good morning and welcome to PACCAR's second quarter 2021 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, PACCAR'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 at paccar.com. I would now like to introduce Preston Fite.

Preston Fite Hello, everyone. It's good to be on the call with all of you. Harry Skiplers, Michael Barkley, and I will update you on our second quarter results and business highlights. First and foremost, I appreciate our outstanding employees around the world. for providing excellent trucks and transportation solutions to our customers. I'd also like to thank PACCAR's fantastic dealers and suppliers for their support. PACCAR achieved very good quarterly revenues and net income in the second quarter of 2021. PACCAR's results reflect quarterly sales and profit records at PACCAR Parts and PACCAR Financial Services. The economies and freight markets continue to be robust in all of PACCAR's geographic markets. and demand for PACCAR's premium trucks is strong. PACCAR's second quarter sales and financial services revenues were $5.8 billion, and second quarter net income was $493 million. PACCAR parts achieved record quarterly revenues of $1.2 billion and record pre-tax profits of $266 million. PACCAR Financial achieved record pre-tax income of $107 million, and I would just like to take a moment to recognize these wonderful achievements by our great team. So looking at product, 2021 is the biggest year of new truck introductions in PACCAR's history. The most recent truck introduction was in June when DOF launched the XF, XG, and XG+. These DOF trucks are game changing. DOF is the first manufacturer to utilize the new European regulations allowing for a longer cab. And the regulations enabled DOF's engineers to design an aerodynamically optimized truck that provides up to 10% greater fuel efficiency and an equal reduction in greenhouse gas emissions. Technology enhancements include a new powertrain, new digital mirrors, digital dash displays, and a full suite of advanced driver assistance systems. The new models provide drivers a new level of luxury and comfort, and there is great customer excitement for the new trucks. and this is being reflected in strong orders. Production start is in October. The next generation Peterbilt 579 and Kenworth T680 began production in May. These new trucks feature enhanced aerodynamics and powertrains that deliver up to 7% higher fuel efficiency, industry leading LED headlights, advanced driver assistance systems, and a state-of-the-art interior with a configurable digital display. So in addition to launching the new Class 8 trucks, this month Kenworth and Peterbilt began production of their new medium-duty truck lineup. These vehicles have an 8-inch wider cab, best-in-class visibility for enhanced safety, and a premium interior with configurable dash displays. The new medium-duty trucks feature the Packard 8-speed automatic transmission. And we're seeing excellent customer demand for these new Peterbilt and Kenworth vehicles. PACCAR's industry-leading zero-emissions battery electric trucks are now in production with 60 vehicles in customer operations in Europe and North America. And we've received orders for over 450 battery electric trucks and are working closely with our customers and our dealers as we move forward with these exciting zero-emissions product offerings. During the second quarter, PACCAR enhanced its autonomous truck development partnership with Aurora by becoming a minority investor in their planned public offering. The PACCAR-AURORA partnership continues to make progress in developing a Level 4 autonomous solution. Looking at the truck markets, US and Canada Class 8 industry retail sales are estimated to be in a range of 260,000 to 280,000 vehicles. Kenworth and Peterbilt market share was 29.4% in the first half. In Europe, truck industry registrations in the above 16-ton market are estimated to be in a range of 270,000 to 290,000 vehicles. and DOF's year-to-date market share is 15.7%. The South American above 16-ton market is projected to be in a range of 100 to 110,000 trucks, and DOF Brazil's above 16-ton market share through June was 5.7%. As has been discussed in recent months, industry truck production has been tempered by the undersupply of semiconductor chips. Kenworth, Peterbilt, and DOF had a good quarter and delivered 40,100 trucks with an additional 6,500 awaiting key components. While it's very dynamic, we currently anticipate supplier constraints improving towards the end of this year. PACCAR continues to advance its industry-leading environmental focus with our products and in our factories. PACCAR is committed to achieving science-based carbon reduction targets, and PACCAR continues to receive high rankings for its environmental leadership. These are really exciting times for PACCAR as we create our future, And Harry Skippers will now provide an update on Packard Parts, Packard Financial Services, and other business highlights. Thank you. Harry?