Net Income and Revenue
PACCAR net earnings were $113.1 million ($.31 per diluted share) for the
fourth quarter of 2008 compared to the $261.1 million ($.71 per diluted share)
earned in the fourth quarter of 2007. Fourth quarter net sales and
financial service revenues were $2.92 billion compared to $3.76 billion reported
for the comparable period in 2007. During the quarter, the company
generated $345.4 million in operating cash flow.
For the full-year 2008, consolidated net sales and financial service revenues
were $14.97 billion versus $15.22 billion in 2007. Net income earned in
2008 of $1.02 billion ($2.78 per diluted share) was 17 percent lower than the
$1.23 billion ($3.29 per diluted share) earned during 2007. Cash dividends
of $.82 per share were declared during 2008, including a special dividend of
$.10 per share. During the last decade, PACCAR’s regular dividends have
had an annualized increase of 19.8 percent per year. In 2008, PACCAR
distributed $859.7 million to shareholders in dividends and share
repurchases.
Global Truck Market Update
“Industry sales above 15 tonnes in Western and Central Europe were 330,000
units in 2008, the second best year ever,” said Aad Goudriaan, DAF
president. “DAF achieved an excellent market share in the above 15 tonne
market of 14.2 percent and has a medium-term goal of 20 percent market
share. DAF is the European leader in premium-quality products and achieved
record sales and production in 2008, delivering over 64,000 vehicles. The
very challenging 2009 market could range from 200,000-240,000 units,” noted
Goudriaan.
“Class 8 industry retail sales in the U.S. and Canada were 153,000 in 2008
compared to 176,000 in 2007 and reflected the recessionary economy, particularly
the slowdown in the housing and automotive sectors,” said Dan Sobic, PACCAR
executive vice president. “Industry retail sales in 2009 are expected to
be in the range of 130,000-170,000 vehicles, reflecting continued economic
weakness. PACCAR’s 2008 retail share of the U.S. and Canadian Class 8
market was 26 percent. Our customers are benefiting from lower fuel prices
and improved availability of drivers, even though freight tonnage is comparable
to 2000 levels.”
Bill Jackson, Peterbilt general manager, commented, “There is some good news
longer term about the industry. The average age of the North American
industry fleet is the highest in the last 15 years. Truck retail sales are
below the five-year average of 235,000 units because of the current
recession. In a normal cycle, many truck operators would replace their
vehicles in the next 12-24 months to maintain a competitive operating cost
structure. The truck industry is generating good parts and service
business due to the aging fleet and the industry is poised to rebound when the
general economy improves.”
Strong Dealer Performance Worldwide
An important element of PACCAR’s strength is the robust profitability of its
global dealer network, with over 1,900 locations. Kenworth, Peterbilt and
DAF dealers invested over $250 million in 2008 as they added more than 100 new
locations, installed state-of-the-art inventory management systems and enhanced
their customer support programs. Tom Plimpton, PACCAR vice chairman,
commented, “The industry leadership of PACCAR’s dealers benefits our customers
and the global transportation industry. With a record 1.5 million PACCAR
vehicles in operation, DAF, Kenworth and Peterbilt dealers have excellent parts
and service businesses, high-quality product ranges, and comprehensive finance
and leasing programs."
PACCAR Delivers Excellent Long-Term Shareholder Return
In the last ten years, PACCAR shareholder return has averaged 17.6 percent
per year versus the S&P 500 Index average return of a negative 1.4
percent. PACCAR’s shareholder return exceeds the S&P 500 return for
the previous three-, five-, ten- and twenty-year time periods. PACCAR’s
return on beginning shareholders’ equity (ROE) was 20.3 percent in 2008.
During 2008, PACCAR repurchased 5.05 million shares for $230.5 million.
In July 2008, PACCAR’s Board of Directors approved the repurchase of an
additional $300 million of the company’s common stock. No shares were
repurchased in the fourth quarter.
Operating Highlights – 2008
-
PACCAR delivered 125,900 vehicles worldwide.
-
Kenworth Trucks swept J.D. Power Class 8 Customer Satisfaction Studysm*
vehicle awards.
-
DAF Trucks won the U.K.’s Motor Transport award for “Fleet Truck of the
Year.”
-
PACCAR Winch and PacLease had record sales and profits.
-
PACCAR has implemented 9,700 Six Sigma projects since 1997.
-
PACCAR was honored as Washington State Philanthropic Company of the
Year.
Financial Highlights – Fourth Quarter 2008
-
Consolidated sales and revenues of $2.92 billion.
-
Net income of $113.1 million.
-
Cash provided by operations of $345.4 million.
-
Financial Services pretax income of $45.4 million.
-
Combined truck and other cash and marketable securities of $2.07 billion
at December 31, 2008.
Financial Highlights – Full Year 2008
-
Consolidated sales and revenues of $14.97 billion.
-
Net income of $1.02 billion.
-
Cash provided by operations of $1.30 billion.
-
Financial Services pretax income of $216.9 million.
-
An after-tax return on beginning equity of 20.3 percent.
-
Record capital investments of $463 million.
-
Record research and development expenses of $342 million.
-
Share repurchases of $230.5 million.
-
After-tax return on revenues of 6.8 percent.
-
Shareholders’ equity of $4.85 billion.
Environmental Leadership
“PACCAR is the industry leader in the development of environmentally friendly
technologies,” shared Bob Christensen, PACCAR senior vice president.
PACCAR will expand its presence in the growing market for liquefied natural gas
(LNG) trucks by beginning production of Kenworth Class 8 LNG vehicles in early
2009 under an agreement with Westport Innovations Inc. “The Kenworth
vehicles, coupled with Westport’s HPDI fuel system, will offer low greenhouse
gas emissions while delivering outstanding horsepower, torque and efficiency
comparable to a diesel engine,” added Christensen.
Other “green” environmental initiatives in 2008 include:
-
Peterbilt and Kenworth began production of their hybrid diesel-electric
medium-duty vehicles that can achieve up to 30 percent fuel-efficiency
improvement.
-
DAF introduced a series of Enhanced Environmentally friendly Vehicles
(EEV) with emission levels 50 percent lower than the stringent Euro 5
requirements.
-
PACCAR manufacturing plants in the U.K., Netherlands and Denton, Texas,
achieved “Zero Waste to Landfill” status.
Product, Facility and Technology Investments
“PACCAR increased its investments in product development, plant efficiency
and global customer service during 2008 in order to meet long term market
demand,” said Jim Cardillo, PACCAR president. “PACCAR invested a record
$805 million in capital projects and product research and development in
2008. During 2009, PACCAR will focus capital investment on projects that
will generate excellent customer benefits in the short and medium term.
Capital expenditures are being streamlined and are estimated to be $150-$200
million in 2009, while research and development expenses are expected to be
$200-$250 million.”
Major 2008 investments include:
- Construction of PACCAR’s new engine production building in Columbus,
Mississippi, was substantially completed in 2008. PACCAR’s premium
12.9-liter and 9.2-liter diesel engines for North America are planned to be
manufactured in the Netherlands prior to production startup in Columbus in
late 2010. Kenworth and Peterbilt trucks equipped with the PACCAR
engines have recorded over 40 million miles in customer field testing with
excellent results.
- Leyland Trucks expanded its manufacturing capacity by 20 percent and
completed its first year of integrated truck bodybuilding in its production
facility.
- PACCAR invested in state-of-the-art robotic cab paint facilities at its
Kenworth plant in Chillicothe, Ohio, and its Peterbilt plant in Denton, Texas,
to enhance product quality and increase productivity.
- A 260,000-square-foot parts distribution center (PDC) in Budapest,
Hungary, was opened in June 2008 and the San Luis Potosi PDC in Mexico was
expanded by 45,000 square feet.
Lower Commodity Prices Benefit Manufacturing Industries
“One of the positive benefits for all manufacturing industries worldwide is
the reduction of commodity prices, such as steel, oil, natural rubber, aluminum
and copper,” noted Tom Lundahl, PACCAR vice president purchasing. “The
average cost of these commodities has reduced by approximately one third
compared to the levels during the commodity price bubble in 2008, but should
further reduce to reach the normalized commodity cost trend of the last ten
years. We are working closely with our suppliers who are judiciously
managing their businesses through these difficult markets.”
Financial Services Companies Achieve Good Results in Difficult Markets
PACCAR Financial Services (PFS) has a portfolio of 166,000 trucks and
trailers, with total assets of $10.0 billion. PACCAR Leasing, a major
full-service truck leasing company in North America and Europe with a fleet of
over 32,000 vehicles, is included in this segment.
Fourth quarter pretax income was $45.4 million compared to the $76.2 million
earned in the fourth quarter last year. Fourth quarter revenues were
$292.2 million compared to $327.3 million in the same quarter of 2007. For
the full year, revenues increased to $1.26 billion from $1.19 billion for 2007
and pretax income was $216.9 million compared to $284.1 million a year
ago. During 2008, profit was impacted by the increased provision for
credit losses due to higher truck repossessions. The provision for credit
losses in the fourth quarter of 2008 was $26.9 million, down from the $34.2
million in the third quarter of 2008.
“PACCAR Financial Services profitably supports the sale of PACCAR trucks in
20 countries on three continents with a comprehensive portfolio of finance and
lease products,” said Ron Armstrong, PACCAR senior vice president.
“PACCAR’s strong balance sheet, complemented by its AA- credit rating, enables
PFS to offer competitive retail financing to Kenworth, Peterbilt and DAF dealers
and customers. Good margins, strong credit quality and excellent portfolio
management are providing solid earnings.” PACCAR Financial utilizes
funding programs such as commercial paper, complemented by the public
medium-term note market. PACCAR Financial recently issued $178.5 million
of two-year medium-term notes under its ongoing shelf registration.
Armstrong added, “Corporate liquidity availability is gradually recovering in
the United States, but is still uneven in other countries’ capital markets.”
PACCAR 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 and DAF nameplates. It also provides financial
services and information technology and distributes truck parts related to its
principal business. PACCAR shares are listed on the NASDAQ Global
Select Market, symbol PCAR, and its homepage is http://www.paccar.com/
PACCAR will hold a conference call with securities analysts to discuss fourth
quarter earnings on January 30, 2009, at 9:00 a.m. Pacific time.
Interested parties may listen to the call by selecting “Live Webcast” at
PACCAR’s homepage. The Webcast will be available on a recorded basis
through February 6, 2009.
This release contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act. These statements are based on
management’s current expectations and are subject to uncertainty and changes in
circumstances. Actual results may differ materially from those included in
these statements due to a variety of factors. More information about these
factors is contained in PACCAR’s filings with the Securities and Exchange
Commission.
* J.D. Power and Associates 2008 Heavy-Duty Truck Studysm. For
more information please go to http://www.jdpower.com/.