PACCAR Achieves Second Best Year in Company History; Results Impacted by Challenging Market in North America
BELLEVUE, Wash.--Feb. 6, 2001--PACCAR's financial results in 2000 were good, although lower than 1999, due to a significant decline in the North American heavy-duty truck market in the second half of the year. The European truck market was at record levels, which contributed to the overall solid performance, according to Mark C. Pigott, PACCAR chairman and chief executive officer. PACCAR achieved its second-best yearly financial results in its 96-year history and, for the second year in a row, produced over 100,000 trucks worldwide.Consolidated net sales and financial services revenues for 2000 were $7.9 billion, a decrease of 12 percent from 1999's record of $9.0 billion. Net income of $441.8 million ($5.73 per share diluted) for the year was 24 percent lower versus 1999 earnings of $583.6 million ($7.41 per share diluted).
Fourth quarter revenues declined 28 percent to $1.7 billion compared to $2.3 billion in the fourth quarter of 1999. Net income for the quarter of $62.7 million ($.82 per share diluted) compared with net income of $179.9 million ($2.28 per share diluted) earned during the same quarter a year ago. Results for the fourth quarter 1999 included a $17.5 million after-tax gain from the sale of the company's retail automotive parts business.
Fourth quarter and full-year 2000 net income included a $6.3 million non-cash charge related to an investment in PNV, a truck-related e-commerce company. PACCAR's equity investments in other e-commerce ventures are minimal. Offsetting this charge were favorable fourth quarter expense adjustments related to lower production volumes.
PACCAR's key financial measures -- return on equity (ROE) and return on sales (ROS) -- were among the strongest in the automotive industry in 2000. Return on beginning shareholder equity was 20.9 percent in 2000 compared to 32.1 percent achieved in 1999. The company's 2000 after-tax ROS was 5.9 percent versus 6.5 percent a year ago. The comparisons exclude the gain from the sale of the company's automotive parts group in 1999.
PACCAR paid a $76.4 million ($1.00 per share) extra cash dividend on January 5, 2001. The company has increased its regular quarterly dividend 140 percent in the last five years. Pigott said that, "PACCAR repurchased 2.4 million shares of its stock last year. These actions emphasize the critical importance placed on delivering excellent shareholder returns."
Global Truck Market Update
"PACCAR's geographic diversification was key to our solid results in 2000. The cyclical truck market experienced last year in North America was the most challenging for the industry since 1990/91," Pigott commented. "As the general economy slowed, it resulted in reduced freight tonnage. In addition, the transportation industry experienced dramatic cost increases in the form of higher fuel prices, insurance premiums and interest rates. Increased fleet operating costs, compounded by a glut of used trucks, reduced industry new truck orders by 42 percent compared to 1999. The good news is that Kenworth and Peterbilt increased their combined market share as their product quality, industry-leading residual values and superior operating performance enhanced their premium image. The European truck market was strong and DAF and Leyland increased production levels throughout the year to meet higher demand for their quality products. DAF launched several new exciting products in the last several months, which will contribute to its growth in the marketplace."
Pigott added, "PACCAR has taken appropriate steps to reduce production rates at its U.S. and Canadian facilities as well as aggressively reduce costs throughout the company. Resumption of industry growth is not expected until new and used truck inventories are absorbed in the market. PACCAR's U.S. and Canadian Class 8 production in first quarter 2001 could be more than 20 percent lower than in fourth quarter 2000. Margins are under increased pressure as lower demand is experienced industry-wide. It is encouraging to note that PACCAR's investments in new product designs, facility enhancements and innovative information technology programs strongly position the company when truck markets recover."
PACCAR achieved the following significant milestones in 2000:
| -- | Continued to implement a vigorous company-wide Six Sigma program, which is currently active on 560 projects aimed at improving business processes, reducing costs and improving quality. The Six Sigma program generated over $25 million in operating profit in 2000. |
| -- | Expanded the company's presence in the medium-duty truck market. David Hovind, president, said, "Last year, PACCAR delivered 5,900 medium-duty trucks in North America -- our best medium-duty truck year. Production and market share both increased. In Europe, DAF had another great year. They delivered nearly 10,000 medium-duty trucks to the European market in 2000." |
| -- | DAF introduced two new vehicle ranges, the CF Series and LF Series. These premium vehicles set the industry standard for reliability, serviceability and low operating costs. The CF Series complements the DAF 95XF model, recognized as the International Truck of the Year in 1998. The LF is targeted at the 6.2-18 tonne market and is powered by the new PACCAR Euro 3 engine. |
| -- | The Information Technology (IT) Division launched new initiatives in customer services, including on-line finance and credit programs, and developed technology in areas such as XML data retrieval, wireless solutions and driver GPS navigational systems. "PACCAR's IT developments position the company as a technology leader in the automotive industry by focusing on systems and applications that can readily be transferred into customer-enhanced products, additional service offerings and state-of-the-art design and manufacturing processes," explained Tom Plimpton, executive vice president. |
| -- | Parts operations delivered a record $1 billion of aftermarket parts to 1,700 dealer locations worldwide. The company's 13 distribution centers shipped 8.5 million line items and achieved over 99 percent accuracy. The innovative Managed Dealer Inventory (MDI) system, which utilizes software technology to determine parts replenishment, was installed at more than 150 dealer locations worldwide. The industry-leading Customer Call Center responded to over 300,000 queries, on an annualized basis, to set the standard for after-sales support in the industry. |
PACCAR achieved outstanding industry recognition during the year for its excellent performance in manufacturing, product quality and information technology. PACCAR was honored with the following awards:
-- Leyland Trucks' facility was honored as "Britain's Best
Engineering Factory" in the prestigious Management Today
Factory of the Year Awards, organized in conjunction with the
Cranfield School of Management. The DAF 45 model, manufactured
at Leyland, was recognized as the "Urban Distribution Vehicle
of the Year" at the annual Motor Transport industry awards.
-- J.D. Power and Associates'(a) 2000 Survey ranked the Kenworth
T300 as No. 1 in customer satisfaction for the North American
medium-duty conventional market. This honor provides a strong
endorsement of Kenworth's quality reputation and reinforced
its goal of substantially increasing its Class 6/7 market
share. This is the second year in a row that a PACCAR product
earned the No. 1 rating in this category.
-- PACCAR was recognized as one of the top 50 web-enabled
companies in Business Week magazine for the company's
implementation and comprehensive use of information technology
(IT) resources. Specific technologies deployed by PACCAR were
initiatives in automated data retrieval, web-based design
software and distributed systems management.
-- The Kenworth Renton facility was honored by Fortune magazine
as one of "America's Elite Factories". The Kenworth plant,
built in 1993, is a world class facility that combines modern
assembly techniques with a progressive workplace environment.
-- PACCAR was selected by Industry Week magazine as one of the
top "100 Best-Managed Companies" in the world based on
financial performance, commitment to innovation and management
practices.
Financial Services Achieves Asset Growth
PACCAR's Financial Services segment continued its asset growth, but experienced lower earnings for the fourth quarter and year compared to 1999. Financial Services represent a portfolio of over 100,000 trucks and trailers with total assets of over $5 billion. PACCAR Leasing is a major full-service truck leasing company in North America, with a portfolio of over 13,500 vehicles.
Fourth quarter revenues grew by 24 percent to $128.1 million from $103.7 million in the same quarter in 1999 while pretax income eased by 15 percent to $17.6 million. For the year, revenues increased 29 percent to $482.4 million from $372.8 million and pretax income was two percent lower at $76.4 million compared to $77.8 million in 1999. Mike Tembreull, vice chairman, stated, "A turbulent truck market generated increased vehicle repossessions, transport company bankruptcies and higher credit losses. PACCAR Financial's conservative approach to the business enabled the company to maintain reasonable results in a difficult market."
PACCAR Winch, the largest diversified winch manufacturer in the world, had moderately lower earnings for the fourth quarter and the year compared with the same periods last year, as sales were impacted by lower demand in domestic and overseas markets.
PACCAR, a $7.9 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 winches under the Braden, Gearmatic and Carco nameplates.
PACCAR shares are traded on the Nasdaq Stock Market, symbol PCAR, and its homepage can be found at www.paccar.com.
(a) J.D. Power and Associates 2000 Medium Duty Truck Customer
Satisfaction Study. Medium Duty defined as Gross Vehicle Weight
Class 5, 6 or 7 truck. www.jdpower.com
PACCAR Inc
SUMMARY INCOME STATEMENTS
(in millions(1))
Three Months Ended Full Year Ended
December 31 December 31
------------------- -------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Truck and Other:
Net sales $1,543.8 $2,223.6 $7,437.0 $8,648.2
Cost of sales 1,378.7 1,860.3 6,497.3 7,282.4
Selling, general and
administrative 90.6 139.5 395.3 582.5
Interest and other, net (.5) .4 (9.4) 9.1
--------- --------- --------- ---------
Truck and Other Income
Before Taxes 75.0 223.4 553.8 774.2
--------- --------- --------- ---------
Financial Services:
Revenues 128.1 103.7 482.4 372.8
Costs and Expenses 110.5 83.0 406.0 295.0
--------- --------- --------- ---------
Financial Services Income
Before Taxes 17.6 20.7 76.4 77.8
--------- --------- --------- ---------
Gain on Sale of Subsidiary 33.2(b) 33.2(b)
Investment Income 1.2(a) 11.5 34.9(a) 38.0
--------- --------- --------- ---------
Total Income Before Income
Taxes 93.8 288.8 665.1 923.2
Income Taxes 31.1 108.9 223.3 339.6
--------- --------- --------- ---------
Net Income $ 62.7 $ 179.9 $ 441.8 $ 583.6
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Net Income Per Share:
Basic $ .82 $ 2.30 $ 5.76 $ 7.46
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Diluted $ .82 $ 2.28 $ 5.73 $ 7.41
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Weighted average number of
Basic shares outstanding 76.2 78.3 76.7 78.2
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Dividends declared per share $ 1.30 $ 1.80 $ 2.20 $ 2.40
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(1) Except per share amounts.
(a) Includes $10 million ($6.3 million after-tax) to write down an
equity investment in PNV, a truck related e-commerce company.
(b) $17.5 million after-tax.
PACCAR Inc
CONDENSED BALANCE SHEETS
(in millions of dollars)
December 31
----------------------------
2000 1999
---------- ---------
ASSETS
Truck and Other:
Cash and marketable securities $ 909.7 $ 1,042.2
Trade and other receivables, net 530.8 570.2
Inventories 303.1 384.5
Property, plant and equipment, net 882.6 875.3
Other assets 530.5 478.3
Financial Services Assets 5,114.2 4,582.5
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$ 8,270.9 $ 7,933.0
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LIABILITIES AND STOCKHOLDERS' EQUITY
Truck and Other:
Accounts payable, taxes and other $ 1,634.9 $ 1,734.1
Dividend payable 76.4 125.3
Term debt 193.8 252.3
Financial Services Liabilities 4,116.7 3,710.7
STOCKHOLDERS' EQUITY 2,249.1 2,110.6
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$ 8,270.9 $ 7,933.0
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