PACCAR 2012 Annual Report Download - page 26

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OV E RVIE W:
PACCAR is a global technology company whose Truck segment includes the design and manufacture of high-
quality, light-, medium- and heavy-duty commercial trucks. In North America, trucks are sold under the Kenworth
and Peterbilt nameplates, in Europe, under the DAF nameplate and in Australia and South America, under the
Kenworth and DAF nameplates. The Parts segment includes the distribution of aftermarket parts for trucks and
related commercial vehicles. The Company’s Financial Services segment (PFS) derives its earnings primarily from
financing or leasing PACCAR products in North America, Europe and Australia. The Company’s Other business is
the manufacturing and marketing of industrial winches.
Consolidated net sales and revenues of $17.05 billion in 2012 were the highest in the Company’s history. The
increase from $16.36 billion in 2011 was mainly due to higher truck deliveries and record aftermarket parts sales.
Truck unit sales increased in 2012 to 140,400 units from 138,000 units in 2011, reflecting higher industry retail sales
in North America and record heavy truck market share in North America and Europe.
In 2012, PACCAR earned net income for the 74th consecutive year. Net income in 2012 was $1.11 billion ($3.12 per
diluted share) and was the fourth highest in the Company’s history. Net income in 2012 increased from $1.04 billion
($2.86 per diluted share) in 2011 due to higher Truck sales and record Financial Services segment results.
During 2012, the Company continued construction of a new 300,000 square-foot DAF assembly facility in Ponta
Grossa, Brasil. In late 2013, this world-class facility is expected to begin producing the DAF product range in Brasil
and contribute to sales growth in South America. In 2012, the Company launched the new Kenworth T680 and the
Peterbilt 579 at the Mid-America truck show and introduced the new DAF XF Euro 6 truck at the International
truck show in Hannover, Germany. These new trucks are powered by PACCAR MX-13 engines and are the result of
multi-year design and development programs. In 2012, the Company’s research and development expenses were
$279.3 million compared to $288.2 million in 2011.
A new parts distribution center (PDC) is being constructed in Eindhoven, the Netherlands and will be completed in
the first quarter of 2013. The PDC in Lancaster, Pennsylvania is being expanded and will be completed in the second
quarter of 2013. The Company has fifteen PDC’s strategically located to support customers in North America, Europe,
Australia and South America.
In 2012, PACCAR modified its management reporting which resulted in Truck and Parts being identified as separate
reportable segments in addition to Financial Services. To reflect the benefit the Parts segment receives from the
Truck segment, certain factory overhead, research and development, engineering and selling, general and
administrative expenses are allocated from the Truck segment to the Parts segment. Disclosures for the prior
periods have been adjusted to reflect the change in reportable segments.
The PACCAR Financial Services (PFS) group of companies has operations covering four continents and 23
countries. The global breadth of PFS and its rigorous credit application process support a portfolio of loans and
leases with total assets of $10.80 billion that earned a pretax profit of $307.8 million. PFS issued $2.16 billion in
medium-term notes during the year to pay off maturing debt and support portfolio growth.
Truck and Parts Outlook
Truck industry retail sales in the U.S. and Canada in 2013 are expected to be 210,000–240,000 units compared to
224,900 units in 2012 reflecting the ongoing replacement of the aging industry fleet and some improvement in the
economy. The 2013 truck industry registrations for over 16-tonne vehicles in Europe are expected to be 210,000–
250,000 units, compared to the 221,500 trucks in 2012 as some customers are expected to purchase Euro 5 vehicles
ahead of the introduction of the Euro 6 emission requirement in 2014 despite the challenging economic conditions
in Europe.
Parts industry aftermarket sales in 2013 in the U.S. and Canada are expected to modestly increase due to some
economic growth and aging truck fleet. Parts industry aftermarket sales in Europe in 2013 are expected to be
comparable to 2012, reflecting uncertain economic growth in the Eurozone.
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L y S I S O F F I N A N C I A L
C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S