01—Abstract
Summary
Summary of the 10-K filed March 24, 1994. Cited figures are marked; the original filing is the authoritative source.
PACCAR Inc's 1993 10-K shows a company in a strong recovery year.
Net sales rose 31% to $3.38 billion and net income more than doubled to $142.2 milliona ($3.66 per share, versus $1.68 in 1992), driven mainly by a robust U.S. Class 8 truck market. Truck operations (Peterbilt, Kenworth, Foden) generated 88% of 1993 revenues pretax income of $194.0 million, while the Financial Services segment earned $40.2 million pretax, up 55%. Management expects heavy-duty truck demand to stay strong through the first half of 1994 and probably the second half, and the company began 1994 with backlog of $1.27 billion, up from $776 million a year earlier.
Balance sheet and capital position look solid for a cyclical manufacturer. Manufacturing cash and marketable securities totaled $458.9 millionb at year-end, and the current ratio declined to 1.7 from 1.9 as cash funded capital spending and a special year-end dividend. Dividends declared were $1.74 per share including a $0.86 year-end extra, and a 15% stock dividend was paid in early 1994.
Financial Services debt rose to roughly $1.4 billionc (commercial paper plus long-term debt), which is typical for a lender funding receivables but is the main leverage item to monitor. Key forward-looking items include the January 1994 increase in the Mexican affiliate VILPAC stake from 49% to 55%, which will move its results to full consolidation starting in 1994, and the completion of the new Renton, Washington truck plant. Management stated that the company's market share of U.S. Class 8 trucks was about 22% in 1993, and it reports no material exposure in the pending legal and environmental matters, with a $27 million environmental reserve already recorded.
02—Key points
Key Highlights
- Net sales of $3.38 billion, up 31% from 1992 and 56% from 1991, with net income of $142.2 million, up 118%
- Earnings per share of $3.66 (restated for the 15% stock dividend), versus $1.68 in 1992
- Truck segment pretax income of $194.0 million on $3.13 billion of revenue; trucks were 88% of total 1993 revenues
- Truck backlog at year-end 1993 of $1.268 billion, up from $776 million at year-end 1992, with production expected to be completed in 1994
- U.S. Class 8 market share of about 22% of registrations in 1993, versus 21% in 1992, on a U.S. Class 8 market of roughly 155,000 units (up from 125,000)
- Financial Services pretax income rose 55% to $40.2 million on record new business volume and lower loan loss provisions
- Cash and marketable securities of $458.9 million, with operating cash flow of $202 million and capital expenditures of $82 million; shareholder equity of $1.11 billion
03—Questions
Frequently Asked Questions
What drove PACCAR's strong 1993 earnings growth?
The primary driver was a strong U.S. Class 8 truck market, fueled by a vigorous replacement cycle, favorable interest rates, and modest freight tonnage gains. Better utilization of production capacity and modest price increases also improved gross margins, and the Financial Services segment contributed through portfolio growth and lower credit loss provisions.
Is the strong truck demand expected to continue into 1994?
Management indicated that heavy-duty truck sales should remain strong through the first half of 1994 and probably through the second half, though this depends on continued expansion of the U.S. economy. The year-end 1993 backlog of $1.27 billion, well above the prior year, supports near-term production.
How is PACCAR's balance sheet and liquidity position?
Manufacturing operations held $458.9 million in cash and marketable securities at year-end 1993 and generated $202 million in operating cash flow. The current ratio fell to 1.7 from 1.9, mainly due to capital spending and the accrued special year-end dividend. Financial Services relied on about $1.4 billion of commercial paper and long-term debt to fund receivables, which it manages through interest-rate swaps to match debt and asset rate characteristics.
What changes are coming in 1994 that could affect reported results?
In January 1994, PACCAR raised its ownership of the Mexican truck affiliate VILPAC, S.A. from 49% to 55%. Beginning in 1994, that affiliate will be consolidated rather than accounted for under the equity method, which will change how its revenues and results appear in the financial statements. Accounting standards FAS 112 and FAS 115 take effect in 1994 but are not expected to have a material impact.
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