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PACCAR INC Annual Report, Year Ended Dec 31, 2005

Filing Date
Filed February 27, 2006
Period End
December 31, 2005
Security
PCAR
In the record · 2016–202610-K1110-Q328-K87

PCAR filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 87 current reports (8-K) between 2016 and 2026.

  1. FY2017 annual report10-K · Feb ’18Feb ’18
  2. Leadership change8-K · Apr ’21Apr ’21
  3. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed February 27, 2006. Cited figures are marked; the original filing is the authoritative source.

PACCAR Inc (PCAR) delivered record results for fiscal 2005, with revenue up 23% to $14.06 billiona and net income up 25% to $1.13 billion ($6.56 per diluted share).

The Truck and Other segment drove most of the growth: U.S. and Canada Class 8 demand and a strong European market pushed total truck deliveries to a record 148,500 units (up roughly 20% from 124,100 in 2004). Truck segment gross margin improved to 14.5% from 14.3%, and SG&A fell to a record-low 3.2% of revenue. Aftermarket parts revenue rose 15% to $1.68 billionb.

Results were partly offset by a one-time $64.0 millionc ($0.37 per share) tax charge tied to repatriating $1.5 billion of foreign earnings under the American Jobs Creation Act. Excluding that charge, the effective tax rate was 32.5%, versus 33.7% in 2004. Financial Services grew steadily, with revenues up 35% to $759.0 million and pre-tax income up 19% to a record $199.9 million.

Average earning assets rose to $7.39 billiond, and net charge-offs remained low at 0.26% of average earning assets. The segment carries most of the company's leverage: consolidated debt in Financial Services totaled about $6.2 billion, while Truck and Other debt was only about $29 million. Liquidity is strong, with $2.29 billion in cash and marketable securities and an AA- credit rating.

The company also began a 5 million share buyback in December 2005 and repurchased $367 million of stock during the year. Looking ahead, management forecasts U.S. and Canada heavy-duty demand to rise about 5% in 2006 (290,000 to 310,000 units), while European registrations are expected to be flat at 245,000 to 265,000 units. Both markets face new emissions standards (Euro 4 in October 2006 and EPA 2007 in the U.S.), which may pull forward truck purchases into 2006 and raise end-user vehicle costs afterward.

The 90-day firm backlog was $2.5 billion at year-end 2005, down slightly from $2.6 billion, with the full $5.0 billion total backlog expected to be substantially completed during 2006. Key risks include the cyclical nature of truck demand, competition in financial services, credit and residual value exposure, and currency and interest rate fluctuations.

02—Key points

Key Highlights

  1. Record 2005 revenue of $14.06 billion (up 23%) and record net income of $1.13 billion (up 25%), with diluted EPS of $6.56 versus $5.16 in 2004.
  2. Record 148,500 truck deliveries in 2005 (up about 20%), led by 82,800 in U.S. and Canada and 52,200 in Europe.
  3. Truck segment gross margin rose to 14.5% from 14.3%, and SG&A fell to a record-low 3.2% of revenue, reflecting operating efficiencies and Six Sigma initiatives.
  4. Aftermarket parts revenue grew 15% to $1.68 billion, supporting a growing truck population and stronger dealer integration.
  5. Financial Services pre-tax income rose 19% to a record $199.9 million, with net charge-offs of only 0.26% of average earning assets.
  6. A one-time $64.0 million tax charge ($0.37 per share) related to repatriating $1.5 billion of foreign earnings reduced 2005 net income.
  7. Balance sheet remains strong: $2.29 billion in cash and marketable securities, an AA- rating, and a 5 million share buyback authorized in December 2005.

03—Questions

Frequently Asked Questions

  1. What drove PACCAR's record 2005 results?

    Strong global demand for trucks, which lifted truck deliveries to a record 148,500 units. Higher production rates, growing aftermarket parts sales, improved margins, and cost control all contributed. Truck and Other pre-tax income rose to $1.52 billion from $1.14 billion in 2004.

  2. How much did the one-time tax charge affect earnings?

    The company recorded a $64.0 million charge ($0.37 per diluted share) to repatriate $1.5 billion of foreign earnings under the American Jobs Creation Act. Excluding this charge, the effective tax rate was 32.5%, and the return on revenues would have been 8.5% instead of the reported 8.1%.

  3. What is the outlook for truck demand in 2006?

    Management expects U.S. and Canada heavy-duty demand to rise about 5%, to 290,000 to 310,000 units, and European heavy-duty registrations to be roughly flat at 245,000 to 265,000 units. New emissions standards may pull forward purchases into 2006 and raise vehicle costs afterward.

  4. How risky is the Financial Services segment?

    The segment is the company's main source of leverage, with about $6.2 billion of debt funding roughly $8.4 billion in assets. Credit quality is currently sound, with 30+ day delinquencies at 1.2% and net charge-offs at 0.26% of average earning assets. Key risks include credit losses, residual value exposure on used trucks, rising funding costs, and competition from banks.

  5. What is PACCAR doing with its excess cash?

    In 2005 the company paid $496.9 million in dividends, invested $300.4 million in capital expenditures, and repurchased $367.2 million of stock. In December 2005 it also authorized a buyback of up to 5 million shares, and the first 503,000 shares were bought at an average of $69.74.

04—Continue

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