10-KPeriod: FY2010

PACCAR INC Annual Report, Year Ended Dec 31, 2010

Filed March 1, 2011For Securities:PCAR

Summary

PACCAR Inc's 2010 annual report highlights a company with a strong market position in the design, manufacture, and distribution of heavy-duty trucks, with its Kenworth, Peterbilt, and DAF brands. The truck segment, comprising nearly 90% of net sales, showed resilience, with a growing backlog of $3.5 billion by year-end 2010, up from $1.1 billion in 2009, indicating a recovery in demand following the economic downturn. The company also operates a significant financial services segment, providing financing and leasing for its products, which is crucial for supporting truck sales and generating additional revenue, though it faces competitive pressures and credit risks. Overall, PACCAR appears to be navigating the post-recession economic landscape effectively, with a focus on quality and customer specifications for its custom-built trucks. The company's financial services arm plays a vital role in its ecosystem, though careful management of credit risk and funding costs is essential. Investors can look to PACCAR's market share, truck sales volume, aftermarket parts performance, and the health of its financial services segment as key indicators of future performance, with the growing backlog signaling a positive outlook for 2011.

Financial Highlights

34 data points
Beta

Revenue

$10.29B

Net Income

$457.60M

4.4% Net Margin

EPS (Diluted)

$0.83

Total Assets

$14.23B

Cash & Equivalents

$2.04B

Free Cash Flow

$1.38B

Financial Statements
Beta
Revenue$10.29B
Interest Expense$230.20M
Net Income$457.60M
EPS (Basic)$0.83
EPS (Diluted)$0.83
Shares Outstanding (Basic)547.50M
Shares Outstanding (Diluted)549.30M

Key Highlights

  • 1PACCAR's truck business (Kenworth, Peterbilt, DAF) is the primary revenue driver, accounting for 89.7% of net sales in 2010.
  • 2The company experienced a significant increase in its truck production backlog, rising to $3.5 billion by year-end 2010 from $1.1 billion in 2009, indicating strong demand recovery.
  • 3The Financial Services segment provides crucial financing and leasing for PACCAR products, supporting dealer and customer sales.
  • 4PACCAR maintains a competitive position with substantial market shares in North America (24.1% of Class 8 retail sales) and Europe (15.2% of Western/Central European heavy-duty market).
  • 5Aftermarket parts sales represented a significant portion of revenue (21.3% in 2010), demonstrating a valuable recurring revenue stream.
  • 6The company proactively manages market risks, including currency and interest rate fluctuations, and operational risks through long-term supply agreements and a conservative underwriting approach in financial services.
  • 7Despite facing ongoing investigations by the EU Competition Commission and the UK Office of Fair Trading regarding pricing practices, PACCAR believes these will not materially affect its business.

Frequently Asked Questions

PACCAR operates primarily in two segments: (1) the design, manufacture, and distribution of light-, medium-, and heavy-duty trucks and related aftermarket parts under brands like Kenworth, Peterbilt, and DAF; and (2) finance and leasing products and services offered to customers and dealers, mainly related to PACCAR's products.

The report indicates that truck sales and margins are cyclical and tied to economic activity. While the 2010 report reflects the company navigating the post-recession environment, a key positive indicator is the substantial increase in the truck production backlog ($3.5 billion at year-end 2010), suggesting a strong recovery in demand and a positive outlook for 2011.

PACCAR identifies several key risks, including the variability of commercial truck market demand, intense competition in the Financial Services industry, credit risk within its finance segment, liquidity risk, currency and interest rate fluctuations, and broader geopolitical and economic risks associated with its global operations.

PACCAR sources components from numerous suppliers, with material costs comprising over 85% of the cost of new trucks and parts. The company utilizes long-term supply agreements to mitigate the variability of purchased material costs and closely controls Selling, General, and Administrative (SG&A) expenses. For its DAF subsidiary, it has a higher degree of vertical integration, manufacturing its own engines and axles.