PACCAR Inc. Earnings Call Nuggets: Margin Guidance, Europe
Mark Mahalo – Barclays Capital: It’s actually (Mark Mahalo) on for Andy today. Just a few quick questions, just firstly, could you just provide an update on your margin guidance for the year. I believe in the last call you said something along the lines of flat to potentially down growth in incremental margin and just as, on top of that, just the cadence that you expect in terms of margins for the year kind of 2Q through 4Q?
Mark C. Pigott – Chairman and CEO: I think the margins will be relatively stable is what we’re seeing in the markets really around the world. I guess that’s probably the forecast for the year.
Mark Mahalo – Barclays Capital: Then just kind of in terms of 2Q margin, in terms of the production cuts Chillicothe, is there any expectations for kind of a sequential decline in margin in 2Q versus 1Q and then heading out to 4Q kind of an uptick there, any type of guidance around that?
Mark C. Pigott – Chairman and CEO: Let me kind of break that into two parts, one, in terms of Chillicothe where we – the good news in the last year we’ve increased the employment of Chillicothe when we’ve was doubled it and we got a lot of wonderful employees there. We’ve had to make some adjustments. What probably wasn’t reported was the increase in the hiring and facilities in Mexico and Australia, so kind of looking at the bigger picture. We obviously hope that we can increase production at all facilities, but sometimes that’s not possible.
Mark Mahalo – Barclays Capital: That’s helpful Mark. Then just a follow-up, in terms of Europe, I believe European competitor recently was talking about European build rates remaining weak, and obviously you guys willing lower – or the upper end of your forecast seems to correspond to that, but just in terms of aftermarket opportunities, it seems like this competitor was saying that they’re holding up relatively well. Are you guys seeing or capturing that? Are you kind of expecting it to be better expected in the back half of the year in terms of European aftermarket opportunities?
Mark C. Pigott – Chairman and CEO: That is an excellent question. Let’s talk a little bit about aftermarket. Our parts group and all the aftermarket services are performing well and we continue to introduce a lot of exciting innovative programs, whether it’s selling parts and services for our products or for competitive brands; so that’s going well. As I mentioned in the prepared statements, we’re looking to expand our facilities in Eindhoven and in Madrid, so I think that bodes well for the future as we look to continue to grow. In terms of the truck side, you know, the market overall when you look at the greater than 16 ton over the last 10 years, this year it’ll be the third or fourth lowest; I guess I put it that way. It’s going to be a reasonable market, and we have made a minor adjustment to the upper end of our forecast range. The good news is that DAF just had a very successful truck show in Amsterdam at the RAI; introduced the Euro 6, and some of their new aerodynamic products market share is holding up well for DAF. So, the Eurozone is certainly in the paper for a lot of other things besides the truck market, and as that gets resolved and it may take time, I’m sure the truck market will improve. Our customers are in good shape. We meet with them on a regular basis. A lot of them came to the show in Amsterdam. There is freight-to-haul, but like any good business people, they want to make sure what’s going to happen in the next 12 to 24 months, so that needs to get resolved first. So, it’s going to be a reasonable year, it’s one of the lower years in the last 10 years, but DAF is doing very well in Europe.
Jamie Cook – Credit Suisse: A couple of questions first. Mark, just a clarification on your commentary about the margins, you said that you think they’ll be relatively stable. Can you talk about, I guess stable relative to last year; stable relative to the first quarter? And then, can you talk about – I mean you had originally guided to margins being flat to down last quarter. So, what surprised you on the upside? And then just my last question, how do you think the market reacts in Europe ahead of your 6? Do you think there is a potential for any pre-buy? And then I’ll get back in queue.
Mark C. Pigott – Chairman and CEO: Sure, a couple of good questions. Euro 6 takes effect January 1, ’14, so, we’re still about 19 months away; a number of our competitors and DAF now has shown their engines that will meet the Euro 6. Different countries are evaluating is there or is there not a benefit to having some sort of incentive program. I think it’s still early days. I mean you’re talking over a year and a half, so I think we’ll start to see if there’s going to be any sort of pre-buy that won’t really happen until next year, if it happens then. In terms of margins, Michael?
Michael T. Barkley – VP, Controller: Compared to last year, truck margins are up on a dollar basis, up 85% on 58% higher truck sales, and during the quarter we had slightly higher sales, which resulted in better operating leverage, which helped us achieve little bit higher margin percentage than what we had originally anticipated.
Jamie Cook – Credit Suisse: Yes, but I guess we (seldom) see an improvement really on the incremental margins. I mean do you expect incremental margins to be where we were in the first quarter and consistent with last year?
Michael T. Barkley – VP, Controller: Well the incremental margins we had 85% increase in truck margin on a 58% increase in truck sales, which is pretty good, and we also anticipate that during the course of the year with the truck sales being down slightly that there will be some softness in margins but it will be minor.
Mark C. Pigott – Chairman and CEO: Echoing Michael’s thought, it would be pretty stable to the first quarter and I think what we – you guys and we have been around for a long time. In the U.S. market this is still one of the lower markets and of course in Europe it’s the third lowest in the last 10 years. So if we can get back to the upper half in terms of market size, that tends to drive some margin improvement as people are more eager to purchase trucks and pricing isn’t as competitive. So unlike a few – well, I see similar to a few other industries, it’s being impacted by still uneven economic recovery. The good news is that we’ve got strong market share, we’re introducing a lot of new products, and I think Brazil is an exciting venture for PACCAR that has some opportunities for improved margins. If that seems to be the location or the region of the world where most of our competitors achieve their highest margins and certainly PACCAR is at the premium end of the scale, it could bode well, we’ll actually have to get our factory up and running and sell trucks there.