Paccar Inc. · NASDAQ:PCAR
Paccar — Q4 2020 Earnings Presentation
50 slides from Paccar's earnings presentation, January 2021
Slide 1: January 2021
January 2021 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 2020 Revenues $18.7B 2020 Net Income $1.30B 2020 Avg Dividend Yield 2.5% 82 Years of Consecutive Profitability; Dividend Paid Every Year Since 1941 Truck and Other $13.2B Revenues Aftermarket Parts Premium Quality Light, Medium and $3.9B Reve
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 January 2021 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 1.5 Million Trucks Produced 2011 - 2020 PACCAR produced 133,300 trucks in 2020 Units 198.8 (000s) 189.1 200 Brasil 154.7 158.9 138.0 140.4 142.9 140.9 Australia 137.1 133.3 Mexico 150 Canada US 100 Europe 50 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 January 202
Slide 9: Excellent Financial Performance Throughout the Business Cycle
PACCAR Excellent Financial Performance Throughout the Business Cycle $ Billions Revenues $ Billions • Reputation for superior operational 28 28 excellence and premium-quality 24 24 20 20 products and services 16 16 12 12 8 8 • Long-term growth in revenues and net 4 4 income reflect increased market
Slide 10: Strong Liquidity
Strong Liquidity PACCAR maintains a strong liquidity position to manage through all phases of the business cycle $ Billions PACCAR Liquidity Reserve $ Billions • Strong cash & marketable securities 10 10 position: $5.0 billion as of Dec 31, 2020 8 8 • No manufacturing debt 6 6 • Excellent liquidity
Slide 11: Best-in-Class Operating Efficiency: Operating Margin
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 12: 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 11 12 13 14 15 16 17 18 19 20 PACCAR Volvo Daimler Traton CNH Navistar January 2
Slide 13: 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% 11 12 13 14 15 16 17 18 19 20 PACCAR Volvo Daimler Traton CNH Navistar January 2021 Page 13
Slide 14: Net Income per Truck
Net Income per Truck • Net income per truck is Truck Units $/Truck PACCAR’s net income divided by (000s) total truck unit sales. 200 14,000 175 12,250 • Truck sales not only generate 150 10,500 profit from the sale, but also 125 8,750 parts and finance profit. This illustrates the strength of 100 7,
Slide 15: Capital Allocation Strategy
Capital Allocation Strategy • High ROI Capital Investments • 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 10-year annualized growth of 13% • Share Buybacks − $500 Mil
Slide 16: Dividends Declared and Stock Repurchases
Dividends Declared and Stock Repurchases $ Millions CAGR = 8% $ Millions 1,500 1,500 1,200 1,200 900 900 600 600 300 300 0 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Dividends Stock Repurchased January 2021 Page 16
Slide 17: Excellent Dividend Yield
Excellent Dividend Yield Average Dividend Yield = 3.5% • PACCAR’s dividend yield, 6% 6% reflects the total quarterly + special dividends declared 5% 5% in the year, divided by the average stock price for the 4% 4% year 3% 3% • PACCAR’s dividend yield has averaged 3.5% over the 2% 2% last ten years 1
Slide 18: Trucking Moves the Economy
Trucking Moves the Economy 74% 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 - 74% of all the freight transported in 2020. 36.9 million commercial trucks, includ
Slide 19: >6t Global Truck Market
>6t Truck Market 2015 – 2.4 Million >6t Global Truck Market 2000000 China 2020 – 3.0 Million 1,750 Europe Russia/CIS 1500000 320 270 60 90 1000000 750 500000 North America 385 310 0 Rest of Asia 300 299 210 India Africa & South America Middle East 260 120 185 115 125 125 Australia PACCAR Truck Assem
Slide 20: >16t Truck Market Size
>16t Truck Market Size Units (000s) Units (000s) 350 350 300 300 2021 Market Forecast Estimate 250 250 U.S. and Canada 250,000 – 280,000 200 200 Europe 250,000 – 280,000 150 150 S. America 100,000 – 110,000 100 100 50 50 0 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 US & Canada
Slide 21: January 2021 Page 21
January 2021 Page 21
Slide 22: PACCAR Strategy: Profitable Growth
PACCAR Strategy Quality Technology Innovation Brand Values Premium Products and Services Profitable Growth Profitable Market Share Growth Geographic Expansion January 2021 Page 22
Slide 23: Investing Throughout the Business Cycle
PACCAR Investing Throughout the Business Cycle Operating Cash Flow • Operating cash flow has averaged $2.8 billion for the $ Billions $ Billions last five years and has grown 9% 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 24: 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 over 530,000 engines produced in Engines Engines Europe and over 240,000 engines installed in North (000s) (000s) America and a growing presence in
Slide 25: Zero Emission Trucks – Production Begins in Q2 2021
Zero Emission Trucks – Production Begins in Q2 2021 Peterbilt 220 EV Peterbilt 579EV Peterbilt 520 EV Kenworth 270E Kenworth T680E DAF CF Electric January 2021 Page 25
Slide 26: Battery Charging Solutions
Battery Charging Solutions • PACCAR Parts has introduced new electric vehicle charging stations to support the global launch of electric vehicles • Compatible with Kenworth, Peterbilt and DAF electric trucks and other brands • Charging power from 20 kW up to 350 kW • PACCAR is collaborating with Fai
Slide 27: Zero Emission Kenworth & Peterbilt Conquer Pikes Peak
Zero Emission Kenworth & Peterbilt Conquer Pikes Peak • October 16, 2020, Kenworth’s T680 hydrogen fuel cell & Peterbilt’s 579EV battery electric truck became the first Class 8 Zero Emissions vehicles to summit Pikes Peak in Colorado. • Both vehicles made the 14.2 mile Pikes Peak climb with superb a
Slide 28: Autonomous Trucks
Autonomous Trucks • In January 2021, PACCAR and Aurora formed a global strategic partnership to develop autonomous Peterbilt 579 and Kenworth T680 trucks • PACCAR’s autonomous vehicle platform will be integrated with the Aurora self- driving technologies • PACCAR customers will benefit from the auto
Slide 29: Connected Services
Connected Services Enhancing connected service for over 400,000 Kenworth, Peterbilt, and DAF trucks January 2021 Page 29
Slide 30: 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 autonomous
Slide 31: PACCAR Global Embedded Services
PACCAR Global Embedded Services PACCAR has three embedded service technology centers located at Kenworth in Kirkland, WA, at DAF in Eindhoven, the Netherlands; and in Pune, India. The centers will accelerate embedded software development and connected vehicle solutions to benefit customers’ operatin
Slide 32: PACCAR Facility Investments
PACCAR Facility Investments DAF Factory, Ponta Grossa, Brasil Dynacraft, McKinney, Texas PACCAR Engine Factories Kenworth New Cab Paint Facility, Chillicothe, OH
Slide 33: PACCAR Parts Strategy
PACCAR Parts Strategy PACCAR Parts achieved $3.91 billion in sales in PACCAR Parts Sales $ Millions 2020. PACCAR Parts has achieved a sales $ Millions 5,000 CAGR = 6% 5,000 CAGR of 6% over the last 15 years. 4,000 4,000 3,000 3,000 Long-Term Growth Drivers: 2,000 2,000 • Growing population of Kenwor
Slide 34: 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 January 2021 Page 34
Slide 35: 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 36: Growth in Kenworth and Peterbilt Dealer Locations
Growth in Kenworth and Peterbilt Dealer Locations U.S. and Canada Locations Locations 900 900 PACCAR MX-13 Introduced in 2010 800 Dealer Investments of $1.9 Billion since 2010 800 70% Growth in Dealer Locations 700 700 Drives Long-Term PACCAR Parts Growth 600 600 500 500 400 400 01 02 03 04 05 06 07
Slide 37: PACCAR Financial Services Strategy
PACCAR Financial Services Strategy Total Assets 12/31/20 = $15.8 Billion • PACCAR Financial Services supports truck sales by providing financing and leasing Australia, Mexico & Brasil $1.6 Billion services to PACCAR customers 10% U.S. & Canada $7.5 Billion • In 2020, PACCAR Financial financed 28% of
Slide 38: Long-Term Growth in PACCAR Heavy Duty Market Share
Long-Term Growth in PACCAR Heavy Duty Market Share 32% 32% • Since 2000, PACCAR’s above 16 tonne 28% 28% market share has increased in North America, Europe and South America 24% 24% • Kenworth is the market leader in Australia 20% 20% • PACCAR’s investment in truck 16% 16% manufacturing in Brasil s
Slide 39: Long-Term Growth in PACCAR Medium Duty Market Share
Long-Term Growth in PACCAR Medium Duty Market Share 25% 25% • Since 2000, PACCAR’s medium duty 20% 20% market share has increased the U.S. and Canada and in Europe 15% 15% • In the U.S. and Canada, Kenworth and Peterbilt achieved a record share of 22.6% in 2020 10% 10% • DAF share increased to 9.5%
Slide 40: Environmental Leadership
Environmental Leadership CDP “A” Rating Facilities PACCAR Achieved an “A‐ ” rating for its Environmental Practices; Over 90% of PACCAR Top 15% of over 9,500 Manufacturing Locations Reporting Companies have Achieved ISO 14001 Certification Science Based Targets PACCAR announced that it will establish
Slide 41: Fourth Quarter 2020 Earnings
Fourth Quarter 2020 Earnings January 2021 Page 41
Slide 42: PACCAR Revenues and Profit
PACCAR Revenues and Profit 82 consecutive years of net profit Dividends every year since 1941 4th Quarter Full Year ($ in Millions) 2020 2019 2020 2019 Revenues $5,569 $6,117 $18,729 $25,600 Net Income $406 $531 $1,298 $2,388 Return on Revenues 7.3% 8.7% 6.9% 9.3% Diluted EPS $1.17 $1.53 $3.74 $6.87
Slide 43: 2020 Financial Results: Fourth Quarter 2020 vs. Fourth Quarter 2019
2020 Financial Results Fourth Quarter 2020 vs. Fourth Quarter 2019 Sales and Revenues Net Income (Billions of Dollars) (Millions of Dollars) • Sales and Revenues of $5.57 Billion $6.12 $5.57 • Net Income of $405.8 Million $531 • After-tax Return on Revenues of 7.3% $406 • PACCAR Parts Revenues of $1
Slide 44: Historical Annual Gross Margins
Historical Annual Gross Margins • Truck margins increased through 2019 due to new products and operating efficiencies Total Manufacturing 15% 15% • Truck margins in 2020 affected by lower production volumes and global pandemic 14% 14% • Parts margins have benefited from distribution 13% 13% and tech
Slide 45: Truck: Fourth Quarter 2020 vs. Fourth Quarter 2019
Truck Fourth Quarter 2020 vs. Fourth Quarter 2019 Sales Segment (Billions of Dollars) Pretax Profit $4.69 (Millions of Dollars) • Sales decreased 14% $4.04 $396 • Pretax operating profit of $234.4 million • Fourth quarter 2020 deliveries of 40,800 trucks compared to 45,700 trucks in the $234 same pe
Slide 46: Aftermarket Parts: Fourth Quarter 2020 vs. Fourth Quarter 2019
Aftermarket Parts Fourth Quarter 2020 vs. Fourth Quarter 2019 Sales Segment (Millions of Dollars) Pretax Profit (Millions of Dollars) $1,074 • Record 4th quarter sales of $1.07 billion, an $994 $223 increase of 8% $205 • Pretax profit increased 8% to $223 million • Fourth quarter parts sales and pro
Slide 47: Financial Services Balance Sheet & Fourth Quarter Profit
Financial Services Balance Sheet & Fourth Quarter Profit $ Millions Segment Pretax Profit (Millions of Dollars) 12/31/2020 Finance & Other Receivables $11,821 $68 $64 Equipment on Operating Leases 3,163 Other Assets 816 Total Financial Services Assets $15,800 Commercial Paper & Bank Loans $3,344 201
Slide 48: PACCAR Inc
PACCAR Inc A+/A1 Credit Ratings ($ Millions) • Superb balance sheet 12/31/20 Mfg Cash & Securities $ 4,834 • $4.8 billion in manufacturing cash and securities to support growth Other Manufacturing Assets 7,651 opportunities and investments in all Financial Services Assets 15,800 phases of the cycle
Slide 49: 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 January 2021 Page 49
Slide 50: January 2021 Page 50
January 2021 Page 50