oct 2019 page 1 - paccar · 2019-11-05 · oct 2019 page 4 quality highest integrity operational...
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Oct 2019Page 1
Oct 2019Page 2
This presentation may contain statements that are forward looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. A summary of risks and uncertainties is described in more detail in our periodic reports filed with the Securities and Exchange Commission (SEC).
We undertake no duty to update or revise this presentation, whether as a result of new information, future events or otherwise. For the most recent financial, risk and other information about PACCAR, please see our SEC filings and most recent earnings release available on the Investor Relations page of www.paccar.com.
Disclosure Regarding Forward-Looking Statements
Oct 2019Page 3
Truck and
Other78%
Parts16%
Financial Svcs6%
PACCAR A Global Technology Company in Commercial Vehicles
Truck and Other$18.3B Revenues
Premium Quality Light, Medium and Heavy Commercial Vehicles, Diesel Engines and Powertrain Components
Aftermarket Parts $3.8B Revenues
Distribute Aftermarket Parts through Global Network of over 2,200 Dealerships
Financial Services $1.4B Revenues
Finance and leasing portfolio of 198,000 trucks and trailers, with assets of $14.4B
80 Years of Consecutive Profitability; Dividend Paid Every Year Since 19412018 Revenues $23.5B 2018 Net Income $2.2B 2018 Dividend Yield 4.7%
Oct 2019Page 4
Quality Highest Integrity
Operational Excellence
Conservative Financial
ManagementLong-Term Perspective
Our CulturePACCAR is a company with a great culture and a bright future. Our focus is on doing things in an ethical and disciplined manner. We make decisions utilizing conservative financial principles and common sense for the long-term benefit of our customers, employees and shareholders.
Oct 2019Page 5
PACCAR’s business segments include Commercial Vehicles, Powertrain, Aftermarket Parts, Financial Services and Information Technology. PACCAR’s premium brands Kenworth, Peterbilt and DAF are the premier light, medium and heavy duty commercial trucks in their markets. Other brands include PACCAR Powertrain, PACCAR Parts, PACCAR Financial, and PACCAR Leasing.
Oct 2019Page 6
Products
• PACCAR’s product investments deliver industry-leadingperformance and value to our customers
• Our products reflect our core brand values of quality, innovation and technology
6-16t Vocational >16t
Oct 2019Page 7
The integrated PACCAR Powertrain is the most advanced powertrain in the market. The PACCAR MX-13 and MX-11 engines are optimally matched to the advanced PACCAR 12-Speed automated transmission and the efficient 40K tandem drive axle to achieve exceptional performance and fuel economy.
The PACCAR MX-13 engine offers 510 hp and 1,850 lb.-ft. of torque and the PACCAR MX-11 engine features 430 hp and 1,650 lb.-ft. of torque. PACCAR designs MX engines to an industry-leading B10 life of one million miles. This means 90% of PACCAR MX-13 and MX-11 engines are expected to reach one million miles without the need for a major overhaul.
In addition to the PACCAR tandem drive axle, Kenworth and Peterbilt offer the PACCAR steer axle. DAF trucks include a range of lightweight and durable PACCAR front and rear axles.
Oct 2019Page 8
0
50
100
150
200
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Units (000s)
BrasilAustraliaMexicoCanadaUSEurope
PACCAR Truck ProductionOver 1.3 Million Trucks Produced 2009 - 2018
189.1
61.078.8
138.0 140.4 137.1 142.9154.7
140.9158.9
PACCAR produced a record 189,100 trucks in 2018
Oct 2019Page 9
0
5
10
15
20
25
0
5
10
15
20
25
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
$ Billions$ Billions Revenues
0.00.40.81.21.62.02.4
0.00.40.81.21.62.02.4
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
$ Billions$ Billions Net Income
PACCARExcellent Financial Performance Throughout the Business Cycle
CAGR = 6%
CAGR = 9%
• Reputation for superior operational excellence
• Increase in revenues and net income reflect growth in market share in North America and Europe, record aftermarket parts sales and growth in financial services
• Maintain profitability throughout the cycle due to strong cost control discipline and experienced management team
Oct 2019Page 10
-9%
-6%
-3%
0%
3%
6%
9%
12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
09 10 11 12 13 14 15 16 17 18PACCAR Volvo DaimlerVolkswagen Iveco Navistar
• PACCAR’s operating margin has been at the top of the industry since 2012, reflecting the premium value of our products and our leadership in operating efficiency.
• This is a testament to the outstanding performance of PACCAR’s employees.
Best-in-Class Operating EfficiencyCommercial Vehicle Segment Operating Margin
Oct 2019Page 11
0
4
8
12
16
20
24
0
4
8
12
16
20
24
09 10 11 12 13 14 15 16 17 18PACCAR Volvo Daimler Volkswagen CNH Navistar
Best-in-Class Operating EfficiencyInventory Turns
PACCAR’s inventory turns are the highest in the industry, a result of the PACCAR Production System, Lean Manufacturing and Six Sigma
Oct 2019Page 12
0%
4%
8%
12%
16%
0%
4%
8%
12%
16%
09 10 11 12 13 14 15 16 17 18PACCAR Volvo Daimler Volkswagen CNH Navistar
Best-in-Class Operating EfficiencySG&A % of Sales
PACCAR’s SG&A as a percentage of sales is much lower than its peer group, reflecting strong financial discipline
Oct 2019Page 13
0
2,400
4,800
7,200
9,600
12,000
0
40
80
120
160
200
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
$/TruckUnits (000s)
Trucks Net Income per Truck
Net Income per Truck• Net income per truck is
PACCAR’s net income divided by total truck unit sales.
• Truck sales not only generate profit from the sale, but also parts and finance profit. This illustrates the strength of PACCAR’s business model, providing the highest quality trucks, aftermarket support and financing.
• PACCAR achieved record net income per truck in 2018.
Oct 2019Page 14
0%5%
10%15%20%25%30%
2018
0%5%
10%15%20%25%30%
Average 2014 - 2018
Best-in-Class Return on Invested Capital
ROIC = NOPAT/(Equity + Manufacturing Debt + Postemployment Benefit Liabilities)
PACCAR’s high profitability, strong working capital management and prudent investments resulted in best in class return on invested capital of 25.6% in 2018, and an average of 21.8% over the last five years.
Oct 2019Page 15
• High ROI Capital Investments− ROIC 25.6% 2018
• Pay Regular Quarterly and Annual Dividend− Dividend paid every year since 1941− Total dividends paid approximately 50% of net income for many
years− Regular quarterly dividend 20-year annualized growth of 11%− Total 2018 dividends declared increased 41% (yoy)
• Opportunistic Share Buybacks− $500 Million authorized; $431 Million remaining as of 9/30/19
• Strategic M&A− Disciplined valuation and screening process− Clear path to value creation
• No Unfunded Pension Obligation
Capital Allocation Strategy
Oct 2019Page 16
0
300
600
900
1,200
1,500
0
300
600
900
1,200
1,500
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
$ Millions$ Millions
Dividends Stock Repurchased
Dividends Declared and Stock Repurchases
CAGR = 11%
Oct 2019Page 17
0%
1%
2%
3%
4%
5%
0%
1%
2%
3%
4%
5%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Average Dividend Yield = 3.1%
Excellent Dividend Yield
• PACCAR’s dividend yield, reflects the total quarterly + special dividends declared in the year, divided by the average stock price for the year
• PACCAR’s dividend yield has increased over the last 10 years, and averaged 3.1%
Oct 2019Page 18
Truck70%
Rail13%
Pipeline11%
Water6%
Trucking Moves the Economy70% of U.S. Freight is Moved by Truck
Trucking is the lifeblood of the economy. In the U.S., the economy depends on trucks to deliver ten billion tons of virtually every commodity consumed - 70% of all the freight transported annually. 35 million commercial trucks, including 3.7 million heavy-duty trucks, move that freight. The percentage of tonnage by mode is stable over time.
400
370
410
130
185
90
2013 2018Units in Thousands
>6t Truck Market 2013 – 2.7 Million2018 – 3.3 Million
1,325
North America
South AmericaAfrica &
Middle East
Europe
India
296
350295
Rest of Asia
Russia/CISChina
2722
Australia
300
300125
1,060
190195
225
PACCAR Truck Assembly
>6t Global Truck Market
Oct 2019Page 20
0 50 100 150 200 250 300Hualing
IsuzuIveco
DayunKamAZ
JianghuaiNavistar
HongyanHino
Ashok LeylandBeijing Foton
Tata MotorsPACCARShaanxi
VolkswagenSinotruk
VolvoDongfeng
FAWDaimler
Total Production 2018 = 2.4 Million
#8
• PACCAR competes globally with truck manufacturers from North America, Europe and Asia
• PACCAR was the 8th largest heavy-duty manufacturer in the world last year, 4th among the multinational competitors. (China had 4 of the top seven producers on record production in 2018)
>16t Truck Manufacturing2018 Production (Units 000s)
Oct 2019Page 21
0
50
100
150
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250
300
350
0
50
100
150
200
250
300
350
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Units (000s)Units (000s)
US & Canada Europe South America
>16t Truck Market Size Outlook
U.S. and Canada 310,000 – 320,000
Europe 310,000 – 320,000
S. America 95,000 – 105,000
2019 Market Forecast Estimate
U.S. and Canada 230,000 – 260,000
Europe 260,000 – 290,000
S. America 100,000 – 110,000
2020 Market Forecast Estimate
Oct 2019Page 22
Oct 2019Page 23
PACCAR Strategy
Premium Products and Services
Profitable Market Share Growth
Geographic Expansion
QualityQuality TechnologyTechnology InnovationInnovation
Bra
nd V
alue
sPr
ofita
ble
Gro
wth
Oct 2019Page 24
• Operating cash flow has averaged $2.5 billion for the last five years and has grown 8% annually over the last 20 years
• Strong operating cash flow enables PACCAR to invest in growth throughout the business cycle
• PACCAR has invested $6.6 billion in capital projects, innovative products and new technologies in the last decade
• Key investments:− International Truck of the Year 2018 DAF XF/CF trucks − PACCAR MX-13 and MX-11 engine factory in North
America− Kenworth and Peterbilt 2.1 meter wide cab program in
North America, South America, Australia− DAF Brasil factory− PACCAR Parts Distribution Centers
PACCARInvesting Throughout the Business Cycle
02004006008001,0001,200
0200400600800
1,0001,200
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
$ Millions$ MillionsCapital Investments and R&D Expenses
Capital R&D
0.00.51.01.52.02.53.0
0.00.51.01.52.02.53.0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
$ Billions$ BillionsOperating Cash Flow
Oct 2019Page 25
0
100
200
300
400
500
600
700
0
100
200
300
400
500
600
700
09 10 11 12 13 14 15 16 17 18
# of Engines (000s)
# of Engines (000s)
Cumulative PACCAR MX Engines Produced
DAF MX 13 KW/PB MX 13 MX 11
• The PACCAR MX-13 is the flagship of PACCAR’s engine line-up with 454,000 engines in operation in Europe and 188,000 engines in operation in North America and a growing presence in South America and Australia.
• Produced the 200,000th MX engine for North America in March 2019
• PACCAR expanded its engine program in 2013 with the introduction of the PACCAR MX-11 in Europe. The MX-11 was launched in North America in January 2016.
Cumulative PACCAR MX Engines Produced
PACCAR MX-1110.8 Liter
PACCAR MX-1312.9 Liter
Oct 2019Page 26
Emerging Truck Technology Trends
• Driver Environment
• Human Machine Interface
• Augmented Reality
Driver Assistance SystemsConnectivity Human Centered Design
• Road User Safety
• Driver Shortage
• Autonomous Trucks
• Vehicle Uptime
• Artificial Intelligence
• Advanced Fleet Management
PACCAR is deploying many emerging technologies to meet customer expectations and reduce operating costs
PACCAR Emerging Technology Programs
Alternative Powertrain Vehicles Connected Trucks
Platooning Autonomous Truck Development
Oct 2019Page 28
Alternative Powertrains
DAF XF/CF Parallel HybridElectric Range 20 Miles
DAF CF ElectricElectric Range 75 Miles
Peterbilt Electric RefuseElectric Range 80 Miles
Peterbilt Electric PortElectric Range 150 Miles
Medium Duty ElectricElectric Range 150 Miles
Kenworth Hydrogen PortRange 300 Miles
PACCAR has introduced several alternative powertrain trucks currently in field-testing with customers
Oct 2019Page 29
• PACCAR Innovation Center in Silicon Valley enhances PACCAR’s access to emerging technologies and talent from around the world.
• The Innovation Center collaborates with other PACCAR engineering teams to develop next generation technologies such as an SAE Level 4 autonomous truck
• The Innovation Center truck lab is equipped with the tools needed to integrate emerging technologies.
PACCAR Innovation Center, Sunnyvale, CA
Oct 2019Page 30
PACCAR Digital Services
Kenworth Embedded Engineering Center, Kirkland, WA Digital Technology Center, Eindhoven, NL
PACCAR has opened digital technology centers at Kenworth in Kirkland, WA, and at DAF in Eindhoven, the Netherlands.
The centers will accelerate embedded software development and connected vehicle solutions to benefit customers’ operating efficiency.
PACCAR Facility Investments
DAF Factory, Ponta Grossa, Brasil Dynacraft, McKinney, Texas
PACCAR Engine Factories Kenworth New Paint Facility, Chillicothe, OH
Oct 2019Page 32
PACCAR Parts Strategy
0
1,000
2,000
3,000
4,000
0
1,000
2,000
3,000
4,000
04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
$ Millions$ MillionsPACCAR Parts Sales
Engine Parts Sales Parts Sales
CAGR = 8%
PACCAR Parts achieved $3.8 billion in sales in 2018, a 15% increase over a year ago and a CAGR of 8% over the last 15 years
Growth Drivers:• Growing population of Kenworth, Peterbilt and
DAF trucks due to geographic expansion and market share growth
• Growing population of PACCAR engines due to North America introduction in 2010
• Best-in-class Distribution Network− 18 parts distribution centers and 2,200+ dealer
locations• Proprietary, PACCAR Genuine and TRP
branded parts enhance margins• Growing network of TRP stores Toronto Parts Distribution Center opened October 2018
Oct 2019Page 33
PACCAR Parts Distribution Centers and Dealers18 PDCs in 11 Countries; 2,200+ Dealer Locations
PACCAR Distribution Centers
KW, PB, DAF Dealers
Oct 2019Page 34
PACCAR Global Dealer Network• Independent dealer network of 2,200+ dealer
locations• Premium customer experience• Strong dealer profitability and expanded
opportunities from PACCAR engines and TRP stores
• Competitive flooring and retail financing provided by PACCAR Financial and PACCAR Leasing
Oct 2019Page 35
400
500
600
700
800
400
500
600
700
800
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Growth in Kenworth and Peterbilt Dealer LocationsU.S. and Canada
Locations Locations
PACCAR MX-13 Introduced in 2010
Dealer Investments of $1.4 Billion since 2010
70% Growth in Dealer Locations
Drives Long-Term PACCAR Parts Growth
Oct 2019Page 36
PACCAR Financial Services Strategy
• PACCAR Financial Services supports truck sales by providing financing and leasing services to PACCAR customers
• In 2018, PACCAR Financial financed 24% of all Kenworth, Peterbilt and DAF trucks
• Geographical diversification, disciplined credit underwriting, and rigorous portfolio management have enabled PACCAR Financial to earn excellent profits throughout the business cycle.
• Key strategies and investments:− Predictive data analytics for credit quality− Expanded used truck centers− Mobile finance and credit system− E-Contract and e-signature− Customer on-line portal
Total Assets 12/31/18 = $14.4 Billion
0
2
4
6
8
0
2
4
6
8
91 94 97 00 03 06 09 12 15 18
%% Low 30+ Days Past Due
U.S. & Canada$7.0 Billion
48% Europe$3.6 Billion
25%
Australia & Mexico$1.4 Billion
10%
PacLease$2.4 Billion
17%
Oct 2019Page 37
0%
5%
10%
15%
20%
25%
30%
0%
5%
10%
15%
20%
25%
30%
North America Australia Europe S. America
1998 2008 2018
• Since 1998, PACCAR’s above 16 tonne market share has increased in all home markets
• DAF achieved record 16.6% share in Europe in 2018
• Kenworth is the market leader in Australia • PACCAR’s investment in truck
manufacturing in Brasil supports PACCAR’s medium-term goal of 10% market share for Kenworth and DAF products in South America.
Long-Term Growth in PACCAR Heavy Duty Market Share
Oct 2019Page 38
0%
5%
10%
15%
20%
0%
5%
10%
15%
20%
U.S. and Canada Europe
1998 2008 2018
Long-Term Growth in PACCAR Medium Duty Market Share
• Since 1998, PACCAR’s medium duty market share has increased the U.S. and Canada and in Europe
• In the U.S. and Canada, Kenworth and Peterbilt had record share of 17.7% in 2018
• DAF achieved 9.0% share in Europe in 2018
Oct 2019Page 39
DAF Entered Market in 2013
36 Dealer Locations
Heavy Duty Trucks Sales of 2,300 in 2018
Market Share 6.7% in 2018
Local Assembly of PACCAR MX Engines Since 2016
Fenabrave Brand of the Year in 2016, 2017 & 2018
Introduced PACCAR Financial in 2019
On HighwayOff Highway
DAF Brasil
Oct 2019Page 40
Kenworth Began Producing Trucks in 1960
133 Dealer Locations
284,000 Units Built
Heavy Duty Trucks Sales of 8,900 in 2018
Heavy Duty Market Share of 34.7% in 2018
Kenworth Launched 2.1m Trucks in 2013
Introduced PACCAR MX‐13 Engine in 2013
PACCAR Mexico
Oct 2019Page 41
DAF Russia established in 2011
Heavy Duty Market – 62,000 Trucks in 2018
50 DAF, Kenworth and TRP Dealer Locations
Heavy Duty Trucks Sales of 2,700 in 2018
Market Share 4.2%; 10.1% of European Brands in 2018
DAF Russia
Oct 2019Page 42
• Started Production in 2006
• 17 Dealer Locations
• Introduced Medium Duty LF in 2013
• Delivered >6,000 units through 2018
• Trucks Sales of 1,000 in 2018
• Heavy Duty Market Share of 16.3% in 2018
DAF Taiwan
Oct 2019Page 43
Facilities
Ohio Environmental Protection Agency
Environmental Leadership
Kenworth – Chillicothe Awarded the 2018 Encouraging Environmental Excellence Award from the Ohio EPA
PACCAR Earns “A” for its Environmental Practices; Top 2% of over 6,000 Reporting Companies
CDP “A” Rating
88% of PACCAR Locations are “Zero Waste to Landfill”
88% of PACCAR Manufacturing Locations have Achieved ISO 14001 Certification
Kenworth –Renton King County Gold Award for 4th
Consecutive Year
Oct 2019Page 44
Third Quarter 2019 Earnings
Oct 2019Page 45
PACCAR Revenues and Profit
80 consecutive years of net profit
Dividends every year since 1941
3rd Quarter Nine Months($ in Millions) 2019 2018 2019 2018Revenues $6,367 $5,757 $19,483 $17,216
Net Income $608 $545 $1,857 $1,617Return on Revenues 9.5% 9.5% 9.5% 9.4%Diluted EPS $1.75 $1.55 $5.34 $4.59New Truck Deliveries (units) 49,300 47,800 153,100 138,700
Oct 2019Page 46
$5.76
$6.37
2018 2019
Sales and Revenues(Billions of Dollars)
• Sales and Revenues of $6.37 Billion • Deliveries of 49,300 Trucks• Excellent Net Income of $607.9 Million• After-tax Return on Revenues of 9.5%• PACCAR Parts Revenues of $1.0 Billion • PACCAR Parts Pretax Income of $207.4 Million, a
20.7% Pretax Return on Revenues• Financial Services Pre-Tax Income of $66.5 Million• R&D Expenses of $82.2 Million• Capital Investments of $196.0 Million
2019 Financial ResultsThird Quarter 2019 vs. Third Quarter 2018
$545
$608
2018 2019
Net Income(Millions of Dollars)
Oct 2019Page 47
25%
26%
27%
28%
25%
26%
27%
28%
13 14 15 16 17 18 9 Mo19
Parts
Excellent Truck and Parts Gross Margins
• Truck margins have increased due to new products and operating efficiencies
• Parts margins have benefited from investments and growing populations of PACCAR trucks and engines
Gross Margins
10%
11%
12%
13%
10%
11%
12%
13%
13 14 15 16 17 18 9 Mo19
Truck
12%13%14%15%16%
12%13%14%15%16%
13 14 15 16 17 18 9 Mo19
Total Manufacturing
Oct 2019Page 48
$4.43
$4.98
2018 2019
Sales(Billions of Dollars)
• Sales Increased 12%
• Pretax Profit Increased 23%
• Quarterly Deliveries of 49,300 Trucks, a 3%
Increase
• Price Realization of Approximately 3%
TruckThird Quarter 2019 vs. Third Quarter 2018
$391
$482
2018 2019
Segment Pretax Profit
(Millions of Dollars)
Oct 2019Page 49
$960$1,001
2018 2019
Sales(Millions of Dollars)
• Sales Increased 4%
• Pretax Profit Increased 10%
• Results Driven by Investments in Parts
Distribution Centers (PDCs); Increased Dealer
Locations, Including TRP Stores; and
increased PACCAR trucks and MX engines in
operation
• New PDCs in Las Vegas, NV, and Ponta
Grossa, Brasil will open in 2020
Aftermarket PartsThird Quarter 2019 vs. Third Quarter 2018
$189$207
2018 2019
Segment Pretax Profit
(Millions of Dollars)
Oct 2019Page 50
$340$363
2018 2019
Revenues(Millions of Dollars) • Revenues Increased 7%
• Pretax Profit Decreased 16%
• Increased Earning Assets
• Used Truck Centers to Open in Denton,
Texas, in 2019 and in Prague, Czech
Republic, 2020
• Portfolio of 205,000 Trucks and Trailers
• Record Total Assets of $15.61 Billion
Financial Services Third Quarter 2019 vs. Third Quarter 2018
$79
$67
2018 2019
Segment Pretax Profit
(Millions of Dollars)
Oct 2019Page 51
($ Millions)9/30/19
Cash & Securities $ 4,643Manufacturing Assets 7,510Financial Services Assets 15,615Total Assets $ 27,768
Manufacturing Debt $ -Manufacturing Liabilities 5,558Financial Services Liabilities 12,247Shareholders' Equity 9,963Total Liabilities & Equity $ 27,768
• Superb balance sheet
• $4.6 billion in cash and securities to support growth opportunities and investments in all phases of the cycle
• No manufacturing debt – a capital structure that has proven beneficial throughout the business cycle
• A+/A1 credit rating provides excellent access to the credit markets for PACCAR Financial Services
PACCAR IncA+/A1 Credit Ratings
Oct 2019Page 52
PACCAR Competitive AdvantagesExperienced Management Team
Highest Quality Products
Rigorous Cost Control
Innovative Technology
Global Aftermarket Parts Sales
Strongest Dealer Network
Profitable Financial Services
Excellent Supplier Partnerships
Oct 2019Page 53