5 Revealing Quotes From PACCAR Inc.’s CEO

Image source: PACCAR

Europe: fueling PACCAR’s growth#1

The quote

“PACCAR’s forecast for Europe’s greater than 16-tonne market is a range of 260,000-290,000 units, reflecting strong demand and a steady economic outlook. Europe’s GDP growth expectations for this year are 2% in the UK, which is DAF’s largest market, and 1.5% on the continent.”

Ron Armstrong, CEO

Things you need to knowEurope was PACCAR’s strongest market in Q1, with its truck deliveries climbing 34% year

over year.Europe accounted for 30% of PACCAR’s total revenues in Q1. Between January and April, PACCAR’s DAF brand achieved record market share of 16.6%

in the heavy-duty European truck market. PACCAR has upgraded its industry sales outlook for Europe.

Engines business has taken off#2

The quote

“[W]e are earning a strong return off the investment that we have made and will continue to make additional investments as the engine penetration grows in North America.”

Ron Armstrong

Vertical integration: a smart move

KW/PB = Kenworth/Peterbilt. Source: PACCAR’s Q1 earnings presentation.

Things you need to knowPACCAR’s own engines powered 46% of its trucks in Q1, up from 42% in Q4 2015.

Engine penetration target: 50% in the short-to-medium term.80%-85% in the long term. PACCAR will no longer need to source engines from Cummins.

PACCAR is ramping up production at its engines facility in Columbus, Mississippi.

Market share on the rise#3

The quote

“Peterbilt and Kenworth’s combined retail sales market share of the U.S. and Canadian market is 26% year to date. Our share of net orders so far this year is strong at 37% as customers appreciate the benefits of Kenworth and Peterbilt’s reliable and fuel-efficient trucks and industry leading resale values.”

Ron Armstrong

Things you need to knowPACCAR’s share of the U.S./Canadian heavy-

duty truck market: 26% year to date versus 27.5% in 2015.

PACCAR’s net order share in the market: 37% year to date, thanks to strong demand for its trucks.

PACCAR expects to end 2016 with “slightly” higher market share despite lower sales.

PACCAR’s hot-selling truck models

• Peterbilt 579• Peterbilt 567• Kenworth T680• Kenworth T880

Peterbilt 579 and 567, and Kenworth T680 and T880 trucks. Image source: PACCAR.

Rapidly growing parts business#4

The quote

“PACCAR parts’ quarterly pre-tax income was $135 million, an excellent return on revenue of 18.7%. These results were driven by good fleet utilization, a growing number of PACCAR trucks and engines in operation, and the many innovative products and services offered by PACCAR parts and our dealers.”

Ron Armstrong

Strong growth over the years

Source: PACCAR’s Q1 earnings presentation.

Things you need to know Parts contributed roughly

17% to PACCAR’s revenues and 25% to its adjusted income before taxes in Q1.

In April, PACCAR opened a new 160,000 square-foot parts distribution center in Renton, Washington.

Image source: PACCAR

Cash flows growing rapidly#5

The quote

“PACCAR’s strong balance sheet and positive cash flow have enabled the company to invest $3.3 billion in new products and facilities in the last five years.”

Ron Armstrong

Investing in the future

Source: PACCAR’s Q1 earnings presentation.

Ongoing projects

Source: PACCAR’s Q1 earnings presentation.

Solid financials supporting growthSpending guidance for 2016: $325 million-$375

million in capital expenditures and $240 million-$260 million in R&D.

2015 actual spending: $308.4 million in capex and $239.8 million in R&D.

Free cash flow: $1.1 billion against net income worth $631 million during the past twelve months.

Cash and cash equivalents: $1.8 billion as of March 31, 2016.

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