PACCAR Achieves Excellent Earnings for First Half and Second Quarter
25 July 2000
European Truck Market Strong, While U.S. and Canadian Truck Sales Slow
BELLEVUE, Wash. - PACCAR Inc posted excellent earnings and sales for the second quarter ended June 30, reported Mark C. Pigott, PACCAR chairman and chief executive officer.Net income was $131.1 million, or $1.71 per diluted share. That compared with $139.5 million, or $1.77 per diluted share, for the same period a year ago. Consolidated net sales were $2.0 billion, compared to $2.2 billion in the second quarter of 1999.
First-half net income increased to a record $286.0 million, or $3.69 per diluted share. That was an increase of 10 percent over 1999 first-half earnings of $259 million, or $3.29 per diluted share. Sales for the first six months were $4.2 billion.
"PACCAR's results benefited from its global balance as a very strong European truck market enabled the company to partially offset slowing North American truck demand and achieve excellent sales and profits," Pigott said. "PACCAR's profits were strong, with second quarter return on sales of 6.5 percent. PACCAR's focus on introducing new products, being a leader in technology and e-commerce, aggressive control of costs, Six Sigma's increasing contribution and numerous productivity improvements have enabled the company to maintain its record of generating profits for over 60 consecutive years. Looking ahead, third quarter financial results will include the impact of the traditional summer holiday factory closures at DAF, Leyland and Foden.
"In Europe, indications are that the 6-44 Ton truck market may equal or even exceed last year's record sales," Pigott said. "DAF Trucks raised production by 10 percent in the second quarter to meet customer demand. DAF is increasing market share in many of the European countries and its products have received excellent reviews in numerous industry publications.
"The U.S. and Canadian truck market, both Class 5-7 and Class 8, are being negatively impacted by slower freight growth, higher fuel prices and interest rates, increased insurance premiums and growing new and used truck inventory. Truck orders for the industry are currently lower by 30-40 percent compared to the previous year. On a positive note, truck production in Mexico remains strong as the country's economy grows," Pigott said.
David Hovind, PACCAR president, added, "Kenworth and Peterbilt have tailored their production levels to meet decreased market demand and to balance dealer inventories. Accordingly, our factories in the United States have scheduled shutdown days and reduced build rates. Kenworth and Peterbilt trucks remain the premium brands in the industry and have increased their respective value compared to competitive makes in the used truck market."
Medium-Duty Share Increases
PACCAR increased its share of the medium-duty truck market in the first half of 2000. Class 6 and 7 truck build rates increased over 20 percent during the second quarter at PACCAR's new $90 million manufacturing facility in Ste. Therese, Quebec. In addition, Kenworth and Peterbilt introduced new medium-duty cab-over-engine models, the Kenworth K300 and the Peterbilt 270, to the North American market.
"The medium-duty market offers a good opportunity for growth," said David Hovind. "PACCAR will produce over 15,000 medium-duty trucks worldwide this year. We are very pleased that the Peterbilt 330 won the J.D. Power customer satisfaction award as the best medium-duty conventional in the market. This honor really demonstrates the quality and performance our products deliver to customers."
PACCAR as Technology Leader
PACCAR expanded its e-commerce initiatives during the quarter. The company formed a strategic partnership with InfoMove to deliver personalized, real-time, location-specific traffic navigation to truck drivers operating PACCAR's commercial vehicles.
Earlier this year, PACCAR announced the formation of Truckxchange, a business-to-business (B2B) marketplace site for goods and services in the trucking industry. The site allows PACCAR customers, dealers and suppliers to purchase supplies faster and more competitively.
"PACCAR's focus on the implementation of technology into its products maximizes customer productivity and efficiency," said Tom Plimpton, PACCAR executive vice president. "It is apparent that many Internet companies have not achieved the financial results or market reach that is required for long term viability. PACCAR, however, has delivered profitable results consistently and established global brands that enable the company to incorporate e-commerce technology into our daily operating business systems."
PACCAR enhanced its position as a technology leader in the automotive industry. The company introduced a prototype Kenworth T2000 High-Tech Truck focused on enhancing technology and safety initiatives. Among the innovative features displayed in the truck are a night-vision system, an electronic navigation system, electronic braking, and driver's readiness monitor.
Finance and Leasing Operations Continue Their Growth
During the second quarter and first half of 2000, PACCAR's financial services segment continued its asset and earnings growth. Financial services revenue for the quarter increased by 32 percent to $117.5 million from $89.3 million in the same quarter in 1999, while pretax income increased to $19.2 million from $18.9 million in the second quarter of last year.
For the six-month period, revenue rose 30 percent to $226.0 million compared to $173.8 million for the same period a year ago. Pretax income increased 3 percent to $38.4 million from $37.2 million in 1999. Higher credit losses in the U.S. resulted in the lower earnings growth.
Lending volume continued at a record pace in the second quarter, which resulted in the strong asset growth. To support this asset growth in the U.S., PACCAR Financial Corp. recently completed a $1.5 billion bank syndication to provide liquidity to its commercial paper program. PACCAR Financial Services represents a portfolio of over 110,000 trucks and trailers with total assets of more than $5 billion. PACCAR Leasing is a major full-service truck leasing company in North America with a portfolio of over 13,000 vehicles.
"Our financial services and truck leasing operations are growing," said Michael A. Tembreull, PACCAR vice chairman. "We continue to expand those services to reach out to new customers through innovative programs such as the new "ExpressLease" program for the medium-duty market."
PACCAR Winch had lower earnings for the second quarter and first half compared with the same periods last year due to slower growth in its domestic crane and construction equipment markets.
Other PACCAR Achievements
| -- | PACCAR's aftermarket parts operations continued to expand with the opening of additional dealer locations. These operations benefited from the increased population of trucks placed into service over the past few years. |
| -- | PACCAR has trained 4,500 employees worldwide in Six Sigma techniques and has 600 projects underway to further improve process and product quality. The company is incorporating Six Sigma in engineering design processes and as part of its evaluation of suppliers for new products. |
| -- | PACCAR's North American Call Center, which opened in 1999 to offer roadside assistance to customers similar to DAF's successful International Truck Service in Europe, continued its growth in 2000. The Center, which operates 24 hours a day throughout the year, handles more than 400 calls per day from the U.S. and Canada. |
| -- | Kenworth Australia increased its market share leadership in the first half of 2000, with 18.3 percent of the market by the end of May, compared to 16.7 percent for 1999. |
| -- | The DAF 95XF was named Truck of the Year in Poland by Traker, a leading trucking trade publication. The DAF 95XF was also recognized as the most economical among six leading competitors' vehicles tested by the German magazine Trans Aktuell. |
| -- | Heavy Duty Trucking, a leading business publication serving the trucking industry, named Peterbilt's new aerodynamic Model 387 one of the most innovative products of 1999. |
PACCAR, an $8.6 billion company, is a global technology leader in the design, manufacture and customer support of high quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt, DAF and Foden nameplates. It also provides financial services and distributes truck parts related to its principal business. In addition, the Bellevue, Washington-based company manufactures industrial winches under the Braden, Gearmatic and Carco nameplates.
PACCAR Inc
SUMMARY INCOME STATEMENTS
(in millions(a))
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
Truck and Other:
Net sales $ 2,023.4 $ 2,181.2 $ 4,246.2 $ 4,249.8
Cost of sales 1,758.2 1,842.6 3,656.5 3,598.4
Selling, general
and administrative 101.6 141.5 212.0 290.6
Interest and
other, net (10.4) 5.7 (9.1) 8.6
Truck and Other
Income Before
Taxes 174.0 191.4 386.8 352.2
Financial Services:
Revenues 117.5 89.3 226.0 173.8
Costs and expenses 98.3 70.4 187.6 136.6
Financial Services
Income Before Taxes 19.2 18.9 38.4 37.2
Investment income 11.1 8.9 21.9 17.2
Total Income
Before Income
Taxes 204.3 219.2 447.1 406.6
Income Taxes 73.2 79.7 161.1 147.6
Net Income $ 131.1 $ 139.5 $ 286.0 $ 259.0
Net Income
Per Share:
Basic $ 1.72 $ 1.78 $ 3.71 $ 3.31
Diluted $ 1.71 $ 1.77 $ 3.69 $ 3.29
Weighted average
number of basic
shares outstanding 76.4 78.2 77.0 78.2
Dividends declared
per share $ .30 $ .20 $ .60 $ .40
(a) Except per share amounts.
PACCAR Inc
SUMMARY BALANCE SHEETS
(in millions of dollars)
June 30 December 31
2000 1999
ASSETS
Truck and Other:
Cash and marketable
securities $ 953.6 $ 1,042.2
Trade and other
receivables, net 576.1 570.2
Inventories 347.3 384.5
Property, plant
and equipment, net 859.2 875.3
Other assets 498.5 478.3
Financial Services
Assets 5,148.2 4,582.5
------- -------
$ 8,382.9 $ 7,933.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Truck and Other:
Accounts payable,
taxes and other $ 1,793.9 $ 1,734.1
Dividend payable -- 125.3
Term debt 203.2 252.3
Financial Services
Liabilities 4,158.7 3,710.7
STOCKHOLDERS' EQUITY 2,227.1 2,110.6
------- -------
$ 8,382.9 $ 7,933.0
