PACCAR Sales and Earnings Surge to Record Levels
20 July 1999
PACCAR Sales and Earnings Surge to Record Levels
BELLEVUE, Wash.--July 20, 1999--PACCAR Inc achieved record sales and earnings for the second quarter and first half of 1999, according to Mark C. Pigott, chairman and chief executive officer. Second quarter consolidated net sales climbed 18 percent to a record $2.2 billion compared to sales of $1.8 billion in the second quarter of 1998. Net income for the quarter surged to $139.5 million ($1.77 per diluted share), an increase of 33 percent compared with $104.9 million ($1.33 per diluted share) earned during the same quarter a year ago. This is the tenth quarter in a row in which operating profits exceeded the comparable quarter a year earlier.First-half 1999 sales and earnings also reached all-time highs. Sales for the first six months were $4.2 billion, an increase of 18 percent from the $3.6 billion recorded last year. Net income of $259.0 million ($3.29 per diluted share) for the first half of 1999 exceeded 1998 first-half earnings of $205.3 million ($2.61 per diluted share) by 26 percent.
"These outstanding results -- the best in PACCAR's 94-year history -- were generated as a result of strong demand for our industry-leading quality products, ongoing efficiency gains at all PACCAR facilities and great truck markets in North America and Europe. A ten-month industry backlog and good incoming order rate provide a platform for future growth. We are achieving market share gains in the Class 6,7 and 8 markets as our build rates have increased 65 percent in the last 24 months. We will be raising production again at selected factories to meet additional demand for Kenworth and Peterbilt products. Third quarter financial results will include the impact of the traditional summer holiday factory closures at DAF, Leyland and Foden," said Pigott.
PACCAR's acquisition of DAF Trucks in late 1996 and the subsequent purchase of Leyland Trucks in June of last year were important factors in PACCAR's continued strong financial results. In fact, PACCAR is 88th on Forbes magazine's current list of companies ranked according to size of revenue earned outside the United States. In 1998, PACCAR generated revenues of over $3 billion in Europe, Canada, Mexico and Australia.
"Our goal is to provide excellent returns to our shareholders by being a global leader in the markets we serve. Important financial measures, such as return on sales (ROS) and return on equity (ROE) provide a strong indication of the company's superior results. Second quarter results produced a 6.4 percent ROS and improved upon the 27.8 percent ROE achieved in 1998. These financial figures place PACCAR in the top echelon of the global automotive industry for cars and commercial vehicles. As a result of the great efforts by all our employees around the world, PACCAR has generated a profit every year since 1939. Our net income growth rate during the 1990s has been approximately ten percent compounded annually as customers continue to realize the value that our products provide in satisfying their transportation requirements," Pigott said.
"One of the key growth opportunities for PACCAR is the Class 4-7 market in North America. The scheduled opening of the new 400,000-square-foot Ste. Therese, Canada, factory in September will provide a world-class facility capable of producing 20,000 medium-duty trucks annually. This $80 million investment and the ongoing development of new products, such as the Peterbilt 270 and the Kenworth K300, will enable PACCAR to meet our customers' increasing demand for high-quality medium-duty products," explained Tom Plimpton, executive vice president.
"The new factory, which has been under construction for 12 months, utilizes the latest in production technology, such as supplier logistics partnerships, modern manufacturing processes and updated ERP systems. Our dealers are excited at the prospect of offering their customers the same extensive depth and breadth of medium-duty product that they do in their industry-leading Class 8 products, such as the Kenworth T2000 and the Peterbilt 379," he added.
David Hovind, president, commented that, "PACCAR has invested over $300 million in the past five years to enhance the process capability of our manufacturing facilities. Improvements such as state-of-the-art waterborne paint systems have been installed, complemented by new robotic cab assembly manufacturing cells that are contributing to two of our main manufacturing goals: to extend our position as the recognized global quality leader in our industry and to continue to maintain the competitive advantage of being the low-cost manufacturer. In confirmation of our manufacturing investments, PACCAR recently won the prestigious CASA/SME industry LEAD (Leadership and Excellence in the Application and Development of Integrated Manufacturing) award for 1999. This award recognizes PACCAR's enterprise-wide manufacturing initiatives as being 'innovative and leading edge.'"
"In addition to these investments, there has been a vigorous company-wide implementation of Six Sigma, modeled after the successful programs instituted by General Electric and Allied Signal. The program is currently active on nearly 300 projects and is a critical tool for improving business processes, reducing costs and generating profits," added Hovind.
PACCAR's financial services segment continued its significant asset growth and had record earnings during the second quarter and first half of 1999. Financial services represents a portfolio of 90,000 trucks and trailers and assets of approximately $4 billion. PACCAR Leasing is the seventh largest full-service truck leasing company in North America, with a portfolio of 12,000 vehicles.
Michael Tembreull, vice chairman, indicated, "PACCAR's superb reputation for quality products combined with our truck finance expertise provides an outstanding combination for Kenworth, Peterbilt, DAF and Foden customers. PACCAR Financial Services continues to be the preferred finance source for PACCAR products worldwide, with excellent growth opportunities, especially in Europe."
In other product areas, winch sales and profits for the quarter and first half were slightly lower compared to the prior year. Auto parts operating results decreased despite higher sales due to expenses related to new store openings.
PACCAR, an $8 billion company, is a leader in the design, development and manufacture 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 and sells general automotive parts and accessories through its retail outlets.
PACCAR shares are traded on the NASDAQ Exchange, symbol PCAR, and its homepage can be found at www.paccar.com.
PACCAR Inc
SUMMARY INCOME STATEMENTS
(in millions of dollars)(a)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
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Truck and Other Net Sales $2,181.2 $1,849.4 $4,249.8 $3,601.7
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Financial Services Revenues $ 89.3 $ 77.4 $ 173.8 $ 150.5
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Income Before Taxes:
Truck and Other $ 193.9 $ 138.5 $ 354.5 $ 267.0
Financial Services 18.9 17.3 37.2 34.3
Investment Income 8.9 7.9 17.2 14.7
Other, Net (2.5) .5 (2.3) 5.3
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Total Income Before Income
Taxes 219.2 164.2 406.6 321.3
Income Taxes 79.7 59.3 147.6 116.0
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Net Income $ 139.5 $ 104.9 $ 259.0 $ 205.3
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Net Income Per Share:
Basic $ 1.78 $ 1.34 $ 3.31 $ 2.63
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Diluted $ 1.77 $ 1.33 $ 3.29 $ 2.61
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(a) Except per-share amounts.