“PACCAR reported excellent annual revenues and profitability in 2017. PACCAR achieved its 79th consecutive year of net income,” said Ron Armstrong, chief executive officer. “PACCAR’s financial results reflect the company’s premium-quality products and services, record heavy-duty truck market share in the U.S. and Canada, record aftermarket parts results and a strong European truck market. I am very proud of our 25,000 employees who have delivered outstanding products and services to our customers.”
PACCAR’s profitability and strong cash flow have enabled the company to invest in its core markets and expand its presence in emerging markets. “PACCAR is well-positioned for long-term growth with ongoing investments in new truck models, integrated PACCAR powertrains, enhanced aerodynamic truck designs, advanced driver assistance and truck connectivity technologies, and expanded manufacturing and parts distribution facilities,” added Armstrong.
Excellent Revenue and Net Income
PACCAR achieved record quarterly net sales and financial service revenues of $5.45 billion in the fourth quarter 2017 compared to $4.07 billion for the same period in 2016. PACCAR earned $589.2 million ($1.67 per diluted share) for the fourth quarter of 2017, including $173.4 million of net tax benefits resulting from recent changes to U.S. tax law. The one-time net tax benefits include a reduction of net deferred tax liabilities of $304.0 million, partially offset by a tax on accumulated foreign earnings of $130.6 million. Excluding the one-time tax benefits, PACCAR reported adjusted net income (non-GAAP)1 of $415.8 million ($1.18 per diluted share). The company earned $288.8 million ($.82 per diluted share) in the fourth quarter of 2016.
PACCAR achieved record revenues of $19.46 billion in 2017, a 14 percent increase compared to revenues of $17.03 billion in 2016. PACCAR earned $1.68 billion ($4.75 per diluted share) in 2017, including the $173.4 million one-time tax benefit. Excluding the one-time tax benefit, PACCAR earned adjusted net income (non-GAAP)1 of $1.50 billion ($4.26 per diluted share). The company reported annual net income of $521.7 million ($1.48 per diluted share) in 2016, including an $833.0 million non-recurring charge for a European Commission (EC) settlement. Excluding the charge, PACCAR reported adjusted net income (non-GAAP) of $1.35 billion ($3.85 per diluted share) in 2016.
United States Tax Reform Benefit
“The enacted tax legislation will generate positive cash flow for PACCAR as well as benefit the transportation industry in the United States,” said Harrie Schippers, president and chief financial officer. “The revised corporate tax rate, comparable to other leading OECD countries’ tax rates, and accelerated machinery and equipment depreciation, will likely stimulate increased capital investment in the United States.” PACCAR estimates that its 2018 effective global tax rate will be 23 to 25 percent, compared to approximately 31 percent prior to the new tax law.
PACCAR declared cash dividends of $2.19 per share during 2017, including a special dividend of $1.20 per share paid in January 2018. This compares to cash dividends of $1.56 per share declared in 2016. PACCAR’s dividend yield was an excellent 3.1 percent as of December 31, 2017. The company has paid a dividend every year since 1941.
Business Highlights – 2017
Financial Highlights – Fourth Quarter 2017
Highlights of PACCAR’s financial results during the fourth quarter of 2017 include:
Financial Highlights – Full Year 2017
Highlights of PACCAR’s financial results during 2017 include:
Global Truck Markets
Class 8 truck industry retail sales in the U.S. and Canada were 218,000 units in 2017, compared to 216,000 vehicles sold in 2016. “Truck demand is increasing due to good economic growth, increased consumer spending, and strong commercial and residential construction, which has resulted in record freight tonnage and high fleet capacity utilization. U.S. and Canada Class 8 truck industry retail sales are expected to increase to a range of 235,000-265,000 trucks in 2018,” said Gary Moore, PACCAR executive vice president. “Kenworth and Peterbilt achieved record Class 8 retail market share of 30.7 percent in the U.S. and Canada in 2017, compared to 28.5 percent in 2016. Customers benefited from Kenworth and Peterbilt vehicles’ outstanding fuel efficiency and reliability.”
“The European economies have grown steadily for four consecutive years, leading to strong transport activity and truck demand,” said Preston Feight, DAF president. “DAF trucks deliver premium quality, low operating costs and superior driver comfort for our customers.” European truck industry sales above 16-tonnes were a robust 306,000 trucks in 2017. It is estimated that European truck industry sales in the above 16-tonne market in 2018 will be another excellent year in the range of 290,000-320,000 trucks.
PACCAR achieved excellent 2017 truck production and market share in Australia, Mexico, Taiwan and Brasil, delivering 17,600 trucks in these markets and surrounding regions. “DAF Brasil was honored in 2017 by Fenabrave, Brasil’s industry dealer association, as the most desired truck brand in Brasil for the second consecutive year,” said Marco Davila, PACCAR vice president.
DAF XF and CF Trucks Earn “International Truck of the Year 2018” Award
The new DAF XF and CF trucks earned the “International Truck of the Year 2018” award, as judged by an independent jury of leading transportation journalists from 23 European countries.
The award is presented to a new truck or model range that has made the largest contribution to road transportation efficiency based on several criteria, including technological innovation, driver comfort, safety, fuel efficiency, environmental leadership and low total cost of ownership. The new DAF XF and CF trucks deliver seven percent greater fuel efficiency and feature enhanced PACCAR MX-13 and MX-11 engines. Customers’ vehicles can carry up to 220 lbs. of additional payload due to lighter-weight powertrain components and exhaust systems.
“Earning the Truck of the Year award reflects DAF’s industry-leading quality and transportation solutions that enhance customers’ operational efficiency,” commented Ron Borsboom, DAF chief engineer. “It is a wonderful recognition for DAF’s employees, dealers and suppliers.”
Peterbilt Celebrates 1,000,000th Truck Delivery
Peterbilt produced its 1,000,000th truck in January. The truck was a Peterbilt Model 567 Heritage, customized to celebrate this milestone. “Peterbilt is the industry leader in product quality and customer value,” said Kyle Quinn, PACCAR senior vice president and Peterbilt general manager. “Peterbilt’s 78-year quality legacy bridges customers from owner-operators to large fleets – each of them benefits from Peterbilt’s premium quality, advanced technology, high residual value and low total cost of ownership.”
PACCAR Parts Achieves Record Results
PACCAR’s aftermarket parts business achieved record fourth quarter pre-tax income of $157.2 million, 14 percent higher than the $137.5 million earned in the fourth quarter of 2016. Fourth quarter 2017 revenues were a record $877.2 million, compared to $765.0 million reported in the fourth quarter of 2016. Annual revenues were $3.33 billion, 11 percent higher than the $3.01 billion in revenues in 2016. David Danforth, PACCAR vice president and PACCAR Parts general manager, noted, “PACCAR Parts’ business growth has been driven by investments in distribution and technology, initiatives such as the TRP all-makes parts stores and a growing population of Kenworth, Peterbilt and DAF trucks, powered by PACCAR engines.”
PACCAR Parts’ 18 Distribution Centers (PDCs) support over 2,100 DAF, Kenworth and Peterbilt dealer locations to deliver industry-leading customer service. PACCAR opened new distribution centers in Brisbane, Australia and Panama City, Panama in 2017, to enhance parts availability for customers in those markets. PACCAR will open a new 160,000 square-foot distribution center in Toronto, Canada in 2018.
Increased Investments in Products, Technologies and Aftermarket Support
PACCAR’s consistent long-term profits, strong balance sheet, and intense focus on quality, technology and productivity have enabled the company to invest $6.1 billion in new and expanded facilities, innovative products and new technologies during the past decade. Capital of $433.1 million and research and development expenses of $264.7 million in 2017 were invested in new vehicles and technologies, enhanced manufacturing and parts distribution facilities and innovative aftermarket support programs. George West, PACCAR vice president, said, “We are increasing our capital and research and development investments in 2018. Capital expenditures are projected to be $425-$475 million and research and development expenses are estimated to be $280-$310 million. PACCAR is investing for long-term growth in new truck models, integrated powertrains including zero emission electrification and hydrogen fuel cell technologies, enhanced aerodynamic truck designs, advanced driver assistance systems and truck connectivity, and expanded manufacturing and parts distribution facilities.”
PACCAR participated in the CES 2018 show in Las Vegas, Nevada this month, exhibiting an autonomous Peterbilt Model 579, a zero emission, hydrogen fuel cell Kenworth T680, and a PACCAR Parts delivery drone.
Financial Services Companies Achieve Good Annual Results
PACCAR Financial Services (PFS) has a portfolio of 188,000 trucks and trailers, with total assets of $13.20 billion. PacLease, a major full-service truck leasing company in North America and Europe with a fleet of over 38,000 vehicles, is included in this segment. PFS achieved fourth quarter 2017 pretax income of $72.5 million compared to $77.9 million earned in the fourth quarter of 2016. Fourth quarter 2017 revenues were $332.2 million compared to $303.7 million in the same quarter of 2016. PFS earned $264.0 million of pretax profit in 2017 compared to $306.5 million in 2016, and revenues were $1.27 billion in 2017 compared to $1.19 billion in 2016.
“PFS’ excellent portfolio performance contributed to good results in 2017,” said Bob Bengston, PACCAR senior vice president. “Industry demand for used trucks in the U.S. is strong. Kenworth and Peterbilt truck resale values continue to command a 10-20 percent premium over competitors’ trucks.”
“PACCAR’s strong balance sheet, complemented by its A+/A1 credit ratings, enables PFS to offer competitive retail financing to Kenworth, Peterbilt and DAF dealers and customers in 24 countries on four continents,” said Todd Hubbard, PACCAR Financial Corp. president. PACCAR Financial Services has excellent access to the debt markets, issuing $1.63 billion in three-, four- and five-year term notes during 2017.
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. PACCAR also designs and manufactures advanced diesel engines, provides financial services and information technology, and distributes truck parts related to its principal business.
PACCAR will hold a conference call with securities analysts to discuss fourth quarter earnings on January 30, 2018, at 9:00 a.m. Pacific time. Interested parties may listen to the call by selecting “Q4 Earnings Webcast” at PACCAR’s homepage. The webcast will be available on a recorded basis through February 6, 2018. PACCAR shares are traded on the Nasdaq Global Select Market, symbol PCAR. Its homepage is www.paccar.com
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