Paccar Inc. · NASDAQ:PCAR
Paccar — Q2 2019 Earnings Presentation
53 slides from Paccar's earnings presentation, July 2019
Slide 1: July 2019
July 2019 Page 1
Slide 2: Disclosure Regarding Forward-Looking Statements
Disclosure Regarding Forward-Looking Statements 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 a
Slide 3: PACCAR: A Global Technology Company in Commercial Vehicles
PACCAR A Global Technology Company in Commercial Vehicles 2018 Revenues $23.5B 2018 Net Income $2.2B 2018 Dividend Yield 4.7% 80 Years of Consecutive Profitability; Dividend Paid Every Year Since 1941 Truck and Other $18.3B Revenues Aftermarket Parts Premium Quality Light, Medium and $3.8B Revenues
Slide 4: Our Culture
Our Culture PACCAR 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. Conserva
Slide 5: PACCAR business segments and brands
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 Power
Slide 6: Products
Products 6-16t Vocational >16t • PACCAR’s product investments deliver industry-leading performance and value to our customers • Our products reflect our core brand values of quality, innovation and technology July 2019 Page 6
Slide 7: The integrated PACCAR Powertrain
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-1
Slide 8: PACCAR Truck Production
PACCAR Truck Production Over 1.3 Million Trucks Produced 2009 - 2018 PACCAR produced a record 189,100 trucks in 2018 Units (000s) 189.1 200 Brasil 154.7 158.9 138.0 140.4 142.9 140.9 Australia 137.1 Mexico 150 Canada US 78.8 100 Europe 61.0 50 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 July
Slide 9: Excellent Financial Performance Throughout the Business Cycle
PACCAR Excellent Financial Performance Throughout the Business Cycle $ Billions Revenues $ Billions 25 25 CAGR = 6% • Reputation for superior operational 20 20 15 15 excellence 10 10 5 5 • Increase in revenues and net income 0 0 reflect growth in market share in North 99 00 01 02 03 04 05 06 07 08 0
Slide 10: Best-in-Class Operating Efficiency
Best-in-Class Operating Efficiency Commercial Vehicle Segment Operating Margin • PACCAR’s operating margin 12% 12% has been at the top of the 9% 9% industry since 2012, reflecting the premium value of our 6% 6% products and our leadership in operating efficiency. 3% 3% 0% 0% • This is a testament to
Slide 11: Best-in-Class Operating Efficiency: Inventory Turns
Best-in-Class Operating Efficiency Inventory Turns PACCAR’s inventory turns are the highest in the industry, a result of the PACCAR Production System, Lean Manufacturing and Six Sigma 24 24 20 20 16 16 12 12 8 8 4 4 0 0 09 10 11 12 13 14 15 16 17 18 PACCAR Volvo Daimler Volkswagen CNH Navistar July
Slide 12: Best-in-Class Operating Efficiency: SG&A % of Sales
Best-in-Class Operating Efficiency SG&A % of Sales PACCAR’s SG&A as a percentage of sales is much lower than its peer group, reflecting strong financial discipline 16% 16% 12% 12% 8% 8% 4% 4% 0% 0% 09 10 11 12 13 14 15 16 17 18 PACCAR Volvo Daimler Volkswagen CNH Navistar July 2019 Page 12
Slide 13: Net Income per Truck
Net Income per Truck • Net income per truck is Units (000s) $/Truck PACCAR’s net income divided by 200 12,000 total truck unit sales. 160 9,600 • Truck sales not only generate profit from the sale, but also 120 7,200 parts and finance profit. This illustrates the strength of PACCAR’s business model,
Slide 14: Best-in-Class Return on Invested Capital
Best-in-Class Return on Invested Capital 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. 2018 Average 2014 - 2018 30% 30% 25% 25% 20% 20% 15
Slide 15: Capital Allocation Strategy
Capital Allocation Strategy • 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 2
Slide 16: Dividends Declared and Stock Repurchases
Dividends Declared and Stock Repurchases $ Millions CAGR = 11% $ Millions 1,500 1,500 1,200 1,200 900 900 600 600 300 300 0 0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Dividends Stock Repurchased July 2019 Page 16
Slide 17: Excellent Dividend Yield
Excellent Dividend Yield Average Dividend Yield = 3.1% • PACCAR’s dividend yield, 5% 5% reflects the total quarterly + special dividends declared 4% 4% in the year, divided by the average stock price for the year 3% 3% • PACCAR’s dividend yield 2% 2% has increased over the last 10 years, and average
Slide 18: Trucking Moves the Economy
Trucking Moves the Economy 70% 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 Rail the freight transported annually. 35 million 13% commercial trucks
Slide 19: >6t Global Truck Market
>6t Truck Market 2013 – 2.7 Million >6t Global Truck Market 2018 – 3.3 Million Europe China Russia/CIS 1,325 300 370 1,060 125 95 North America 410 300 Rest of Asia 350 295 296 India Africa & 400 South America Middle East 190 195 180 225 130 Australia 27 PACCAR Truck Assembly 2013 2018 22 Units in T
Slide 20: >16t Truck Manufacturing
>16t Truck Manufacturing 2018 Production (Units 000s) Daimler FAW • PACCAR competes globally with Dongfeng truck manufacturers from North Volvo Sinotruk America, Europe and Asia Volkswagen Shaanxi PACCAR #8 Tata Motors • PACCAR was the 8th largest Beijing Foton heavy-duty manufacturer in the Ashok L
Slide 21: >16t Truck Market Size Outlook
>16t Truck Market Size Outlook Units (000s) Units (000s) 350 350 300 300 2019 Market Forecast Estimate 250 250 U.S. and Canada 300,000 – 320,000 200 200 150 150 Europe 300,000 – 320,000 100 100 S. America 100,000 – 110,000 50 50 0 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 US & Ca
Slide 22: July 2019 Page 22
July 2019 Page 22
Slide 23: PACCAR Strategy: Profitable Growth
PACCAR Strategy Quality Technology Innovation Brand Values Premium Products and Services Profitable Growth Profitable Market Share Growth Geographic Expansion July 2019 Page 23
Slide 24: Investing Throughout the Business Cycle
PACCAR Investing Throughout the Business Cycle Operating Cash Flow • Operating cash flow has averaged $2.5 billion for the $ Billions $ Billions last five years and has grown 8% annually over the 3.0 3.0 2.5 2.5 last 20 years 2.0 2.0 • Strong operating cash flow enables PACCAR to 1.5 1.5 invest in g
Slide 25: Cumulative PACCAR MX Engines Produced
Cumulative PACCAR MX Engines Produced • The PACCAR MX-13 is the flagship of PACCAR’s # of Cumulative PACCAR MX Engines Produced # of engine line-up with 454,000 engines in operation in Engines Engines Europe and 188,000 engines in operation in North (000s) (000s) America and a growing presence in So
Slide 26: Emerging Truck Technology Trends
Emerging Truck Technology Trends PACCAR is deploying many emerging technologies to meet customer expectations and reduce operating costs Connectivity Human Centered Design Driver Assistance Systems • Vehicle Uptime • Driver Environment • Road User Safety • Artificial Intelligence • Human Machine Int
Slide 27: PACCAR Emerging Technology Programs
PACCAR Emerging Technology Programs Alternative Powertrain Vehicles Connected Trucks Platooning Autonomous Truck Development
Slide 28: Alternative Powertrains
Alternative Powertrains PACCAR has introduced several alternative powertrain trucks currently in field-testing with customers DAF XF/CF DAF CF Electric Kenworth Hydrogen Port Parallel Hybrid Electric Range 75 Miles Range 300 Miles Electric Range 20 Miles Peterbilt Electric Refuse Peterbilt Electric
Slide 29: PACCAR Innovation Center, Sunnyvale, CA
PACCAR Innovation Center, Sunnyvale, CA • 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 Lev
Slide 30: PACCAR Digital Services
PACCAR Digital Services PACCAR has opened a digital technology center in Eindhoven, the Netherlands, adjacent to the DAF campus. The center will accelerate embedded software development and connected vehicle solutions to benefit customers’ operating efficiency. July 2019 Page 30
Slide 31: PACCAR Facility Investments
PACCAR Facility Investments DAF Factory, Ponta Grossa, Brasil Dynacraft, McKinney, Texas PACCAR Engine Factories Kenworth New Paint Facility, Chillicothe, OH
Slide 32: PACCAR Parts Strategy
PACCAR Parts Strategy PACCAR Parts achieved $3.8 billion in sales in PACCAR Parts Sales $ Millions $ Millions 2018, a 15% increase over a year ago and a 4,000 CAGR = 8% 4,000 CAGR of 8% over the last 15 years 3,000 3,000 2,000 2,000 Growth Drivers: 1,000 1,000 • Growing population of Kenworth, Peter
Slide 33: PACCAR Parts Distribution Centers and Dealers
PACCAR Parts Distribution Centers and Dealers 18 PDCs in 11 Countries; 2,200+ Dealer Locations PACCAR Distribution Centers KW, PB, DAF Dealers July 2019 Page 33
Slide 34: PACCAR Global Dealer Network
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 J
Slide 35: Growth in Kenworth and Peterbilt Dealer Locations
Growth in Kenworth and Peterbilt Dealer Locations U.S. and Canada Locations Locations 800 PACCAR MX-13 Introduced in 2010 800 Dealer Investments of $1.4 Billion since 2010 700 700 70% Growth in Dealer Locations Drives Long-Term PACCAR Parts Growth 600 600 500 500 400 400 99 00 01 02 03 04 05 06 07 0
Slide 36: PACCAR Financial Services Strategy
PACCAR Financial Services Strategy Total Assets 12/31/18 = $14.4 Billion • PACCAR Financial Services supports truck sales by providing financing and leasing Australia & Mexico $1.4 Billion services to PACCAR customers 10% U.S. & Canada $7.0 Billion • In 2018, PACCAR Financial financed 24% of Europe
Slide 37: Long-Term Growth in PACCAR Heavy Duty Market Share
Long-Term Growth in PACCAR Heavy Duty Market Share 30% 30% • Since 1998, PACCAR’s above 16 tonne 25% 25% market share has increased in all home markets 20% 20% • DAF achieved record 16.6% share in Europe in 2018 15% 15% • Kenworth is the market leader in Australia • PACCAR’s investment in truck 10%
Slide 38: Long-Term Growth in PACCAR Medium Duty Market Share
Long-Term Growth in PACCAR Medium Duty Market Share 20% 20% • Since 1998, PACCAR’s medium duty market share has increased the U.S. 15% 15% and Canada and in Europe • In the U.S. and Canada, Kenworth and Peterbilt had record share of 17.7% in 10% 10% 2018 • DAF achieved 9.0% share in Europe in 2018 5
Slide 39: DAF Brasil
DAF Brasil DAF Entered Market in 2013 36 Dealer Locations Off Highway On Highway 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 July 2
Slide 40: PACCAR Mexico
PACCAR Mexico 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 July 2019 Page 40
Slide 41: DAF Russia
DAF Russia 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 July 2019 Page 41
Slide 42: DAF Taiwan
DAF Taiwan • 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 July 2019 Page 42
Slide 43: Environmental Leadership
Environmental Leadership CDP “A” Rating Ohio Environmental Protection Agency PACCAR Earns “A” for Kenworth – Chillicothe its Environmental Awarded the 2018 Practices; Top 2% of Encouraging Environmental over 6,000 Reporting Excellence Award from the Companies Ohio EPA Facilities 93% of PACCAR Kenwor
Slide 44: Second Quarter 2019 Earnings
Second Quarter 2019 Earnings July 2019 Page 44
Slide 45: PACCAR Revenues and Profit
PACCAR Revenues and Profit 80 consecutive years of net profit Dividends every year since 1941 2nd Quarter Six Months ($ in Millions) 2019 2018 2019 2018 Revenues $6,628 $5,805 $13,116 $11,459 Net Income $620 $560 $1,249 $1,072 Return on Revenues 9.3% 9.6% 9.5% 9.4% Diluted EPS $1.78 $1.59 $3.59 $3.0
Slide 46: 2019 Financial Results: Second Quarter 2019 vs. Second Quarter 2018
2019 Financial Results Second Quarter 2019 vs. Second Quarter 2018 Sales and Revenues Net Income (Billions of Dollars) (Millions of Dollars) $6.63 • Record Sales and Revenues of $6.63 Billion $620 $5.81 • Record Deliveries of 52,300 Trucks $560 • Excellent Net Income of $619.7 Million • After-tax Re
Slide 47: Gross Margins
Gross Margins Excellent Truck and Parts Gross Margins Total Manufacturing 16% 16% • Truck margins have increased due to new 15% 15% products and operating efficiencies 14% 14% • Parts margins have benefited from 13% 13% investments and growing populations of PACCAR trucks and engines 12% 12% 13 14 1
Slide 48: Truck: Second Quarter 2019 vs. Second Quarter 2018
Truck Second Quarter 2019 vs. Second Quarter 2018 Sales Segment (Billions of Dollars) Pretax Profit (Millions of Dollars) • Sales Increased 17% $5.21 $511 $4.47 $434 • Pretax Profit Increased 18% • Record Quarterly Deliveries of 52,300 Trucks, a 13% Increase • Price Realization of 2% 2018 2019 2018
Slide 49: Aftermarket Parts: Second Quarter 2019 vs. Second Quarter 2018
Aftermarket Parts Second Quarter 2019 vs. Second Quarter 2018 Sales Segment • Sales Increased 6% (Millions of Dollars) Pretax Profit (Millions of Dollars) • Pretax Profit Increased 8% $1,025 $968 $211 • Results Driven by Investments in Parts $195 Distribution Centers (PDCs); Increased Dealer Locatio
Slide 50: Financial Services: Second Quarter 2019 vs. Second Quarter 2018
Financial Services Second Quarter 2019 vs. Second Quarter 2018 Revenues Segment (Millions of Dollars) Pretax Profit • Revenues Increased 7% (Millions of Dollars) $361 $338 • Pretax Profit Growth of 11% $80 $72 • Increased Earning Assets • Opening Used Truck Centers in Prague, Czech Republic, and Den
Slide 51: PACCAR Inc: A+/A1 Credit Ratings
PACCAR Inc A+/A1 Credit Ratings ($ Millions) • Superb balance sheet 6/30/19 Cash & Securities $ 4,181 • $4.2 billion in cash and securities to Manufacturing Assets 7,577 support growth opportunities and investments in all phases of the cycle Financial Services Assets 15,410 Total Assets $ 27,168 • N
Slide 52: PACCAR Competitive Advantages
PACCAR Competitive Advantages Experienced Management Team Highest Quality Products Rigorous Cost Control Excellent Supplier Partnerships Innovative Technology Global Aftermarket Parts Sales Profitable Financial Services Strongest Dealer Network July 2019 Page 52
Slide 53: July 2019 Page 53
July 2019 Page 53