Dear Shareholders,
PACCAR is celebrating 117 years of success and delivered record revenues of $28.82 billion and record net income of $3.01 billion to its shareholders in 2022. The PACCAR team did an excellent job managing the improving global logistics landscape and the launch of many new truck models. This is the 84th consecutive year of earning a net profit — a notable record considering the cyclicality of the capital goods market.
PACCAR achieved very good financial results by continuing to focus on the premium segment of our industry. The company has enhanced its leadership in developing products and services that reflect the rapidly changing world with the development of e-commerce, zero emissions vehicles and autonomous trucks.
The company is a recognized environmental leader and is partnering with industry groups to reduce the effects of climate change. In addition to the production of the company’s battery-electric truck models, PACCAR continues to emphasize “zero waste to landfill,” solar power generation, water recycling and increasing the recyclable material content in its trucks.
PACCAR’s excellent year in 2022 is due to many positive factors, including the performance of the new Kenworth and Peterbilt heavy- and medium-duty vehicles and DAF’s award-winning XD, XF and XG product range that delivers operational excellence and luxury for its customers. These new truck models were complemented by the company’s strong business performance in every geographic region. PACCAR’s new trucks have redefined product quality and operating performance for our industry. PACCAR Parts and PACCAR Financial Services set profit records in 2022 by deploying innovative technologies that bundle services for our customers. PACCAR Parts delivered new sales programs to a growing population of connected PACCAR vehicles, built a new Parts Distribution Center and opened additional TRP stores. PACCAR Financial Services, including PacLease, had a record year, generating strong new and used truck business in all major markets. PACCAR’s Information Technology Division unveiled a range of programs to increase annual revenue streams generated from e-commerce and connected vehicle subscriptions. PACCAR benefits from its global diversification, industry leading independent dealer organizations and increased investments in all segments of the business.
PACCAR’s superb credit rating of A+/A1 results from consistent profitability, a strong balance sheet and excellent cash flow. Our shareholders have enjoyed very good returns, with annual dividend growth of 13.9% in the last five years including a $2.80 per share extra cash dividend paid in early 2023 (before the 50% stock dividend in 2023).
PACCAR is committed to a strong, diverse and inclusive culture and the company’s excellent financial results reflect its human centered philosophy. I would like to thank our employees for their commitment and dedication, their many ideas and suggestions to maintain the regular cadence in our daily operations and their personal outreach to local communities.
Mark C. Pigott
Executive Chairman
February 22, 2023
Dear Shareholders,
PACCAR had an outstanding year in 2022. The company’s revenues of $28.82 billion and net income of $3.01 billion were the highest in the company’s history. The after-tax return on revenue increased to 10.4%. PACCAR has earned an annual net income for 84 consecutive years. PACCAR’s financial results reflect the company’s industry leading trucks and powertrains, excellent aftermarket parts and financial services businesses and continued technology leadership.
I am very proud of PACCAR’s outstanding employees who provide our customers with the highest quality, most efficient and innovative trucks and transportation solutions in the industry.
PACCAR’s financial strength enabled the company to invest $846 million in capital projects and research and development to expand its range of trucks, enhance its manufacturing operations and grow its global aftermarket parts and financial services businesses.
In 2022, DAF expanded its new range of heavy-duty trucks in Europe with the introduction of the DAF XD, which was recognized as the “International Truck of the Year 2023.” This was the second year in a row that DAF has earned this prestigious award. Kenworth and Peterbilt successfully transitioned to the production of the new heavy- and medium-duty truck models, which provide excellent reliability and operating efficiency for their customers. PACCAR continues to develop industry leading advanced vehicle technologies in the areas of zero emissions, autonomous vehicles and connected services.
PACCAR Parts achieved record sales of $5.76 billion and record pre-tax profits of $1.45 billion. PACCAR’s A+/A1 credit rating supported PACCAR Financial Services’ record pre-tax profits of $588.9 million, including $6.22 billion of new loan and lease volume.
PACCAR’s strong financial performance generated an industry leading after-tax return on beginning stockholders’ equity of 26% in 2022. Year-end stockholders’ equity was a record $13.17 billion. PACCAR’s financial performance has enabled the company to declare $8.9 billion in dividends during the last ten years.
INVESTING FOR THE FUTURE — PACCAR’s consistently strong profits and balance sheet have allowed the company to invest $7.3 billion in capital projects and research and development over the last decade. These investments have supported the development of advanced new vehicle models, new manufacturing and distribution facilities and innovative technologies. PACCAR’s investments create transportation solutions that provide our customers with the highest levels of quality, safety and reliability, as well as the lowest total cost of operation.
In 2022, capital investments were $505 million and research and development expenses were $341 million. These investments enabled PACCAR’s truck factories to build zero emissions vehicles, supported global production capacity increases and implemented advanced technologies to enhance manufacturing efficiency, including the expanded use of automated guided vehicles.
PACCAR made excellent progress in the development of its proprietary autonomous vehicle platform and advanced its partnership with Aurora to commercialize autonomous vehicles. Peterbilt, Kenworth and DAF continued to enhance their industry leading connected services offerings that provide valuable vehicle performance data to our customers, while also providing PACCAR with an increasing stream of recurring revenue.
PACCAR is a leader in the development of battery-electric, hydrogen combustion and hydrogen fuel cell vehicles. Kenworth, Peterbilt and DAF delivered nearly 200 battery-electric trucks to customers in 2022 and have nine zero emissions vehicle models in production with a backlog of hundreds of customer units on order.
PACCAR’s three global embedded software development centers and global connected truck teams are providing proprietary, customer-focused solutions for all parts of the business.
CONTINUOUS IMPROVEMENT — Six Sigma, data analytics, machine learning, Industry 4.0 and lean process development are integrated into all business activities at PACCAR as well as at many of its suppliers, dealers and customers. These tools help to continuously enhance the creation of state-of-the-art new product designs, customer services and manufacturing processes. Thousands of PACCAR employees have been trained in the use of these tools and have delivered billions of dollars in savings in all areas of the company.
INFORMATION TECHNOLOGY — PACCAR’s Information Technology Division (ITD) is an industry leader in innovative digital technology solutions that enhance the quality of PACCAR business processes and products. These solutions provide secure, customized products for customers, dealers and suppliers. In 2022, PACCAR’s state-of-the-art connected services platform, PACCAR Connect, was installed in over 133,000 PACCAR vehicles. This configurable system consists of proprietary hardware and software that provide robust data security, over-the-air software updates and advanced fleet management tools. The innovative system enables customers to optimize vehicle performance and cost-effectively integrate their existing fleet management systems and applications. The ITD team maintains a rigorous focus on ensuring PACCAR’s leadership in vehicle and infrastructure cybersecurity.
TRUCKS — U.S. and Canadian Class 8 truck industry retail sales in 2022 were 283,500 units and the Mexican market totaled 25,800 units. European industry 16+ tonne truck registrations were 297,500 units. PACCAR delivered 185,900 trucks in 2022 as customers benefited from PACCAR’s new vehicles and good freight tonnage.
DAF’s European 16+ tonne market share increased to a record 17.3% compared to 15.9% in 2021, while Peterbilt and Kenworth’s Class 8 retail sales share in the U.S. and Canada increased to 29.8% compared to 29.2% a year earlier. These market share increases demonstrate the success of the industry leading new trucks recently introduced by DAF, Kenworth and Peterbilt.
Industry Class 6 and 7 truck retail sales in the U.S. and Canada were 88,300 units. The European 6 to 16-tonne market was 38,800 units. PACCAR’s market share in the U.S. and Canada medium-duty truck segment was 10.9%. DAF’s share of the European medium-duty truck market was 9.7%. PACCAR delivered 24,200 medium-duty trucks to its customers in 2022.
PACCAR Mexico achieved industry leading heavy-duty market share of 33.2%. PACCAR Mexico completed the introduction of the new Kenworth heavy- and medium-duty products and made capital investments to expand the production capacity of these new products. PACCAR Mexico received the “Heavy Vehicle Manufacturer of the Year” award, presented by the National Auto Parts Industry (INA), recognizing quality, innovation and sustainability.
DAF Brasil reported record sales and profits and record 16+ tonne market share of 6.9%, up from 5.7% in 2021. DAF Brasil’s Ponta Grossa assembly plant produced a record 7,600 trucks and delivered the 25,000th truck produced since DAF Brasil began operations in 2014.
PACCAR Australia achieved record sales, profits and production volume, with combined Kenworth and DAF heavy-duty market share of 24.4%. PACCAR Australia launched a major product update, the Kenworth K220, and implemented manufacturing investments to increase capacity and production efficiency.
A tremendous team effort by the company’s employees and dealer network contributed to industry leading truck, parts and other gross margins of 14.7%. New technology, process improvements, data analytics and partnership with suppliers enabled PACCAR to establish industry leading factory and distribution center safety and quality.
PACCAR’s innovation and manufacturing expertise continued to be recognized as the industry leader in 2022. The new DAF XD truck earned the prestigious “International Truck of the Year 2023” and the DAF XF truck earned the “Fleet Truck of The Year” award for the fourth consecutive year in the U.K. Kenworth and Peterbilt earned six “Manufacturing Leadership Awards” from the National Association of Manufacturers.
PACCAR PARTS — PACCAR Parts increased annual revenues by 17% to a record $5.76 billion and achieved record pre-tax profits of $1.45 billion. Dealers and customers benefited from innovative technology solutions, including e-commerce, managed dealer inventory and global fleet service programs that offer online purchasing, national pricing and centralized billing. PACCAR Parts is the primary source for aftermarket parts and services for PACCAR vehicles and also offers its TRP-branded parts for all makes of trucks, trailers and buses. PACCAR dealers expanded TRP aftermarket parts retail stores to 279 locations in 41 countries. Over seven million heavy-duty trucks operate in North America and Europe. This large vehicle parc, combined with more than 318,000 PACCAR MX engines installed in Peterbilt and Kenworth trucks in North America, creates excellent demand for parts and service and moderates the cyclicality of truck sales.
To further enhance its logistics performance for dealers, PACCAR Parts opened a new 260,000 square-foot Parts Distribution Center in Louisville, Kentucky.
FINANCIAL SERVICES — PACCAR Financial Services’ (PFS) conservative business approach, complemented by PACCAR’s superb credit rating of A+/A1, excellent business growth and strong dealer network, enabled PFS to achieve a pre-tax profit record of $588.9 million, 35% higher than the $437.6 million earned in 2021. PACCAR issued $3.05 billion in medium-term notes at attractive rates during the year. PFS has operations covering 26 countries on four continents. The global breadth of PFS and its rigorous credit application process support a portfolio of 217,000 trucks and trailers, with total assets of $17.18 billion. PACCAR Financial and PACCAR Leasing are the preferred funding sources for DAF, Peterbilt and Kenworth trucks in the markets where PFS operates. PFS opened a new retail used truck center in Madrid, Spain and now has thirteen strategically located centers around the world. PFS successfully sold over 11,300 premium DAF, Kenworth and Peterbilt used trucks in 2022.
PACCAR Leasing (PacLease) is one of the largest full-service truck rental and leasing operations in North America, Germany and Australia. PacLease placed over 7,300 new PACCAR vehicles in service. The PacLease fleet grew to over 40,000 vehicles at the end of 2022. PacLease supports the growth of PACCAR’s zero emissions vehicle sales by offering customers the opportunity to rent or lease battery-electric trucks and battery chargers.
ENVIRONMENTAL LEADERSHIP — PACCAR is a global environmental leader. PACCAR discloses its comprehensive sustainability program in the environmental report published by CDP, which evaluates and scores companies on how effectively they are addressing climate change and the environment. PACCAR earned the highest rating of an “A” score in 2022, which places it in the top 1.5% of the over 18,000 reporting companies from around the world. For the past eight years, PACCAR has earned an “A” or “A-” score. PACCAR is ranked in the top 8% of peer companies by the S&P Global Corporate Sustainability Assessment for its environmental, social and governance practices. PACCAR, in partnership with the Science Based Targets Initiative (SBTi), has committed to vehicle emissions reductions of 25% and 35% from internal operations by 2030 and is on schedule to meet those objectives. PACCAR’s manufacturing facilities have earned ISO 14001 environmental certification and continued to enhance their zero-waste-to-landfill programs during the year.
PACCAR is a leader in diversity and inclusion and PACCAR was again recognized as a top workplace for women by the Women in Trucking Association.
A LOOK AHEAD — PACCAR employees enable the company to distinguish itself as a global quality leader in trucks, technology, financial services and the aftermarket parts business. PACCAR’s strong internal processes, engineering capabilities and relationships with suppliers contribute to it generating excellent results in global markets.
Preston Feight
Chief Executive Officer
February 22, 2023
Read the original letter here.
