PACCAR Inc.

Good morning and welcome to PACCAR's fourth 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 press 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 PACR.com. I would now like to introduce Preston Fite.

Hey, good morning. Harry Skippers, Michael Barkley, and I will update you on a very good fourth quarter and full year 2021 results, as well as other business highlights. First, I really appreciate our outstanding PACCAR employees. They deliver the highest quality trucks and transportation solutions to our customers and focus on the safety and health of each other. They are truly an impressive team. In 2021, PACCAR achieved annual revenues of $23.5 billion and very good net income of $1.85 billion. PACCAR's financial performance benefited from record results in our parts and financial services divisions. PACCAR has achieved 83 consecutive years of net income and has paid a dividend every year since 1941. In 2021, PACCAR declared dividends of $2.84 a share. Packard's fourth quarter revenues were $6.7 billion, and fourth quarter net income increased from the prior year by 26% to $511 million. Packard Parts achieved record fourth quarter revenues of $1.3 billion and record pre-tax profits of $306 million, which was a 38% increase compared to the same period last year. Packard delivered 47,600 trucks during the fourth quarter. 45% higher than the third quarter. This included delivering 7,000 trucks that were awaiting components. In the first quarter of 2022, deliveries are forecast to be in the range of 41,000 to 45,000, a number that is limited by the global supply of semiconductors. In 2021, US and Canadian Class 8 truck retail sales were 250,000 units. In 2022, the U.S. economy and industrial production are projected to expand by about 4%. The 2022 U.S. and Canadian Class A truck market deliveries are forecast to increase to a range of 250,000 to 290,000 vehicles as the global supply chain gradually improves throughout the year. European above 16-ton truck registrations were 278,000 units in 2021. In 2022, European economies are projected to continue growing and we expect the above 16 ton truck registrations to be in a range of 260 to 300 000 trucks in 2021 the South American above 16 ton truck industry registrations were 127 000 and in 2022 the South American market is expected to be in the range of 125 to 135 000. the growing global economies robust freight activity and strong customer demand for Doff, Peterbilt, and Kenworth trucks has resulted in a substantial order backlog in all markets. Truck and parts gross margins were 11.4% in the fourth quarter, reflecting higher labor and materials costs associated with the completion of offline trucks and the resulting increased mix of trucks versus parts. We estimate first quarter truck and parts gross margins to increase and be in the range of 13% to 13.5% as we ramp up production of our new products and realize production efficiencies. In 2021, PACCAR introduced exciting new heavy and medium duty Kenworth, Peterbilt, and Doff trucks, which are proving to be very successful in the market. PACCAR also delivered many important technology and innovation milestones, such as a strategic partnership to develop and sell autonomous trucks, production of zero emissions vehicles, and we launched PACCAR's proprietary global connected service offerings. The new DOF lineup, launched in 2021, earned the prestigious International Truck of the Year Award, and the innovative DOF XF Hydrogen Internal Combustion Technology Vehicle won the Truck Innovation Award. Kenworth and Peterbilt earned five Manufacturing Leadership Awards from the National Association of Manufacturers. and DOF Brazil was awarded the Truck Brand of the Year for the fourth time. Last year, PACCAR was again recognized as a global leader in environmental practices by the reporting firm CDP. PACCAR achieved an Elite A rating, which places the company in the top 200 of over 13,000 reporting companies. In 2021, PACCAR was recognized as a top place for women to work by the Women in Trucking Organization for the fourth consecutive year. The truck market is strong and demand is high for Packard's excellent new trucks and transportation solutions. We look forward to 2022 being a very good year. Harry Skippers will now provide an update on Packard Parts, Packard Financial Services, and other business highlights. Harry?