PACCAR Sales and Earnings Climb to Record Levels
1 February 2000
PACCAR Sales and Earnings Climb to Record Levels
BELLEVUE, Wash.--Feb. 1, 2000--PACCAR's 1999 sales and earnings reached all-time records due to improved margins, excellent production efficiency, and strong truck demand in Europe and North America, according to Mark C. Pigott, PACCAR chairman and chief executive officer.Consolidated net sales for 1999 were $8.6 billion, an increase of 14 percent from the $7.6 billion recorded a year ago. Net income of $583.6 million ($7.41 per share diluted) for the year surged 40 percent compared to 1998 earnings of $416.8 million ($5.30 per share diluted).
Fourth quarter consolidated net sales grew 5 percent to $2.2 billion compared to $2.1 billion in the fourth quarter of 1998. Net income for the quarter of $179.9 million ($2.28 per share diluted) jumped 57 percent compared with net income of $114.9 million ($1.46 per share diluted) earned during the same quarter a year ago. Results for the fourth quarter 1999 include a $17.5 million after-tax gain from the sale of the company's retail automotive parts business.
PACCAR's key performance measures -- return on equity and return on sales were outstanding in 1999. Return on shareholder equity rose strongly to 32.1 percent in 1999 from the 27.8 percent achieved in 1998. The company's 1999 return on sales increased to 6.5 percent from 5.5 percent a year ago. Truck and other gross margins increased to a robust 15.8 percent from 15.1 percent in 1998. The comparisons exclude the gain from the sale of the company's retail automotive parts group.
Dividend Increase
PACCAR increased its regular dividend by 50 percent in December as it raised the quarterly payment from 20 cents to 30 cents per share effective March 3, 2000. PACCAR also paid $125 million ($1.60 per share) in the form of an extra cash dividend on January 5, 2000. PACCAR has increased its regular quarterly dividend 140 percent in the last five years. Pigott commented that, "PACCAR plans to repurchase two million shares of its stock this year. This action emphasizes the critical importance placed on delivering excellent shareholder returns."
High Production Worldwide
Pigott stated that, "The capital investments made during the last decade, such as production capacity enhancements, many new product introductions and the implementation of a comprehensive information technology and e-commerce framework throughout the company, have generated outstanding results. By any measure, 1999 was a banner year for PACCAR. Production was at an all-time high, with PACCAR delivering a record 108,000 trucks in 1999, compared with 93,800 the year before. Perhaps most gratifying was PACCAR's success in enhancing its industry-leading quality reputation as confirmed by winning a J.D. Power customer satisfaction award. PACCAR improved its operating efficiency and accelerated its efforts at delivering shareholder value as the company strengthened its service capabilities worldwide.
"North American industry truck orders have declined in recent months. Even if the widely forecasted 10 to 15 percent reduction in new truck orders and registrations occurs this year -- it should still be a good year for the industry. The European truck market remains strong and DAF is increasing its production to meet growing demand for its quality products. PACCAR's great financial results, increased investments in technology, coupled with strong market share and a balanced geographic portfolio, provide an excellent foundation for a very bright future."
PACCAR achieved the following significant milestones in 1999:
-- Implemented a vigorous company-wide Six Sigma program, which is active currently on 500 projects aimed at improving business processes, reducing costs and improving quality. The Six Sigma program provided over $10 million to operating profit in 1999 and should increase its contribution in 2000.
-- Opened a new, world-class, $90 million manufacturing facility in Ste. Therese, Canada, in September. David Hovind, president, said, "We are ramping up production of our mid-range truck line. Last year, we delivered over 5,000 medium-duty trucks in North America -- our best medium-duty truck year. In Europe, Leyland had a great year. They produced and delivered over 8,000 medium-duty trucks to the European market in 1999."
-- Expanded its medium-duty product line in North America with the introduction of the Peterbilt Model 270 and the Kenworth K300. Both are Class 5-7 cab-over-engine (COE) trucks based on the highly successful DAF 45/55 Series.
-- Began production of Peterbilt's new Class 8 Model 387, a premium on-highway aerodynamic truck that sets industry standards for reliability, serviceability and low operating costs. The Model 387 complements the Peterbilt Model 379, recognized as the truck with the highest resale value in North America.
-- Formed two new divisions, Paccar.com and e-Paccar, as part of the company's e-commerce strategy aimed at directing investments in customer services, including on-line finance and insurance programs as well as developing technology in areas such as XML data retrieval, wireless solutions and driver internet productivity enhancements. "PACCAR's e-commerce and internet investments are focused 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.
-- Delivered a record $1 billion of aftermarket parts to 1,700 dealer locations worldwide. PACCAR Parts' 13 advanced-technology distribution centers shipped 8.5 million line items and achieved 99.7 percent accuracy. The innovative Managed Dealer Inventory (MDI) system, which combines software technology and forecasting with backend delivery equal to leading internet enterprises, enables distributors to operate more efficiently.
-- Confirmed its commitment to advanced engine technology when DAF became the first manufacturer in Europe to develop and install its own diesel engines that meet stringent Euro 3 emissions specifications two years before the legislation is effective.
-- Announced that it would begin manufacturing Foden trucks at its Leyland assembly plant in Lancashire, England, beginning in 2000. The Leyland facility is described by many as one of Europe's most efficient truck assembly plants. "The increased production will result in higher quality, efficiency improvements, and lower unit costs. This significant manufacturing consolidation will reinforce PACCAR's number one market share in the UK," said Mike Tembreull, vice chairman.
-- Completed the sale of its retail auto parts business for $143.2 million to CSK Auto, Inc. on October 1, 1999. The $17.5 million after-tax gain on the transaction is included in fourth quarter 1999 results.
Industry Recognition
PACCAR achieved unprecedented industry recognition during the year for its outstanding performance in manufacturing, product quality and information technology. PACCAR was honored with the following awards:
-- The prestigious Leadership and Excellence in the Application and Development of Integrated Manufacturing (LEAD) award from the Society of Manufacturing Engineers (SME) for "innovative and leading- edge manufacturing techniques." This award recognized PACCAR's implementation of computer and automated robotics systems in the assembly of the Kenworth T2000 and the Peterbilt 387 at its Chillicothe, Ohio, and Denton, Texas, facilities.
-- J.D. Power & Associates 1999 Survey ranked the Peterbilt Model 330 as #1 in customer satisfaction for the medium-duty conventional market. This honor provided a strong endorsement of Peterbilt's quality reputation and reinforced its goal of substantially increasing its Class 6/7 market share.
-- PACCAR was recognized as #1 in PC Week magazine's Fast-Track 500 listing for the company's implementation and comprehensive use of information technology (IT) resources. Specific technologies deployed by PACCAR were company-wide initiatives in business-to-business (B2B) e-commerce, enterprise resources planning (ERP), virtual private networks (VPNs), data warehousing, web-based collaboration software and specialized intranet applications.
Financial Services Continues Strong Growth
PACCAR's financial services segment continued its significant asset growth and had higher earnings for the quarter and year than year-earlier periods. Financial services represent a portfolio of over 90,000 trucks and trailers with total assets of over $4 billion. PACCAR Leasing is a major full-service truck leasing company in North America, with a portfolio of over 12,000 vehicles.
Fourth quarter revenues grew by 22 percent to $103.7 million from $85.2 million in the same quarter in 1998 while pretax income grew by 103 percent to $20.7 million. For the year, revenues increased to $372.8 million from $317.1 million and pretax income grew by 25 percent to $77.8 million. Fourth quarter 1998 results included a $7.5 million one-time charge for capitalized systems development cost.
PACCAR Winch, the largest industrial winch manufacturer in the world, had moderately lower earnings for the fourth quarter and the year compared with the same periods last year.
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 aftermarket parts related to its principal business. In addition, the Bellevue, Washington-based company manufactures industrial winches under the Braden, Gearmatic and Carco nameplates.
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, except per-share amounts)
Three Months Ended Full Year Ended
December 31, December 31,
1999 1998 1999 1998
Truck and Other:
Net sales $ 2,223.6 $ 2,118.7 $ 8,648.2 $ 7,577.7
Cost of sales 1,860.3 1,792.0 7,282.4 6,431.0
Selling, general and
administrative 139.5 161.5 582.5 580.3
Interest 4.3 3.4 14.4 13.0
Truck and Other Income
Before Taxes 219.5 161.8 768.9 553.4
Financial Services:
Revenues 103.7 85.2 372.8 317.1
Costs and Expenses 83.0 75.0 295.0 254.9
Financial Services Income
Before Taxes 20.7 10.2 77.8 62.2
Gain on Sale of
Subsidiary 33.2 33.2
Investment Income 11.5 9.6 38.0 33.3
Other, net 3.9 (1.7) 5.3 4.2
Total Income Before
Income Taxes 288.8 179.9 923.2 653.1
Income Taxes 108.9 65.0 339.6 236.3
Net Income $ 179.9(a) $ 114.9 $ 583.6(a) $ 416.8
Net Income Per Share:
Basic $ 2.30 $ 1.47 $ 7.46 $ 5.34
Diluted $ 2.28 $ 1.46 $ 7.41 $ 5.30
Weighted average number of
basic shares
outstanding 78.3 78.1 78.2 78.1
Dividends declared
per share $ 1.80 $ 1.75 $ 2.40 $ 2.20
(a) Includes $17.5 million after-tax gain on sale of subsidiary.
PACCAR Inc
CONDENSED BALANCE SHEETS
(in millions of dollars)
December 31,
1999 1998
ASSETS
Truck and Other:
Cash and marketable securities $ 1,042.2 $ 815.1
Trade and other receivables, net 570.2 606.0
Inventories 384.5 511.1
Property, plant and equipment, net 875.3 827.7
Other assets 478.3 399.7
Financial Services Assets 4,582.5 3,635.2
$ 7,933.0 $ 6,794.8
LIABILITIES AND STOCKHOLDERS' EQUITY
Truck and Other:
Accounts payable, taxes and other $ 1,734.1 $ 1,686.7
Dividend payable 125.3 125.0
Term debt 252.3 248.1
Financial Services Liabilities 3,710.7 2,970.8
STOCKHOLDERS' EQUITY 2,110.6 1,764.2
$ 7,933.0 $ 6,794.8