<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
Commission File No. 0-6394
PACCAR INC
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 91-0351110
- -------------------------------------- --------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
777 - 106th Ave. N.E., Bellevue, Washington 98004
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (206) 455-7400
--------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $12 par value
Preferred Stock Purchase Rights
- -------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 1994:
Common Stock, $12 par value -- $2.003 billion
---------------------------------------------
The number of shares outstanding of the issuer's classes of common stock, as of
March 1, 1994:
Common Stock, $12 par value -- 38,858,042 shares
------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1993 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual stockholders meeting to be held
on April 26, 1994 are incorporated by reference into Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
(a) General Development of Business
PACCAR Inc (the Company), incorporated under the laws of Delaware in
1971, is the successor to Pacific Car and Foundry Company which was
incorporated in Washington in 1924. The Company traces its predecessors to
Seattle Car Manufacturing Company formed in 1905.
In the U.S., the Company's manufacturing operations are conducted
through unincorporated manufacturing divisions and a wholly owned subsidiary.
Each of the divisions and the subsidiary are responsible for at least one of
the Company's products. That responsibility includes new product development,
applications engineering, manufacturing and marketing. Outside the U.S., the
Company manufactures and sells through wholly owned subsidiary companies in
Canada and Australia, through a United Kingdom branch of a wholly owned U.S.
subsidiary, and through an affiliate in Mexico. In January 1994, the Company
increased its ownership in the Mexican affiliate from 49% to 55%. An export
sales division generally is responsible for export sales. Product financing and
leasing is offered through U.S. and foreign finance subsidiaries. A U.S.
subsidiary is responsible for retail automotive parts sales.
(b) Financial Information About Industry Segments and Geographic Areas
Information about the Company's industry segments and geographic areas
in response to Items 101(b), (c)(1)(i), and (d) of Regulation S-K appears on
page 39 of the Annual Report to Stockholders for the year ended December 31,
1993 and is incorporated herein by reference.
(c) Narrative Description of Business
The Company has three principal industry segments, (1) manufacture of
heavy-duty trucks and related parts, (2) automotive parts sales and related
services, and (3) finance and leasing services provided to customers and
dealers. Manufactured products also include industrial winches and oilfield
equipment. The Company competes in the truck parts aftermarket primarily
through its dealer network. It sells general automotive parts and accessories
through retail outlets. The Company's finance and leasing activities are
principally related to Company products and associated equipment.
TRUCKS
The Company designs and manufactures trucks which are marketed under
the Peterbilt, Kenworth, and Foden nameplates in the Class 8 diesel category
(having a minimum gross vehicle weight of 33,000 pounds). These vehicles, which
are built in five plants in the U.S. and one each in Australia, Canada, the
United Kingdom and Mexico, are used worldwide for over-the-road and off-highway
heavy-duty hauling of freight, petroleum, wood products, construction and other
materials. Heavy-duty trucks and related service parts are the largest segment
of the Company's business, accounting for 88% of total 1993 revenues.
-2-
<PAGE> 3
The Company competes in the North American Class 6/7 markets with its
Mid-Ranger cab-over-engine vehicles. These medium-duty trucks are assembled at
PACCAR's factory in Quebec, Canada. This line of business represents a small
percentage of the Company's sales to date.
Trucks are sold to independent dealers for resale. The Company's U.S.
independent dealer network consists of 310 outlets. Trucks manufactured in the
U.S. for export are marketed by PACCAR International, a U.S. division. Those
sales are made through a worldwide network of 34 dealers. Trucks manufactured
in the United Kingdom, Australia, Canada, and Mexico are marketed domestically
through independent dealers and factory branches; trucks manufactured in these
countries for export are also marketed by PACCAR International.
The Company's trucks are essentially custom products and have a
reputation for high quality. Major components, such as engines, transmissions
and axles, as well as a substantial percentage of other components, are
purchased from component manufacturers pursuant to customer specifications.
Raw materials and other components used in the manufacture of trucks
are purchased from a number of suppliers. The Company is not limited to any
single source for any major component. No significant shortage of materials or
components was experienced in 1993 and none is expected in 1994. Manufacturing
inventory levels are based upon production schedules and orders are placed with
suppliers accordingly.
Replacement truck parts are sold and delivered to the Company's
independent dealers through the PACCAR Parts Division. Parts consist of
proprietary parts manufactured by PACCAR and finished parts purchased from
various suppliers. Replacement parts inventory levels are determined largely by
anticipated customer demand and the need for timely delivery.
There were six principal competitors in the U.S. Class 8 truck market
in 1993. PACCAR's share of that market was approximately 22% of registrations
in 1993. The market is highly competitive in price, quality and service, and
PACCAR is not dependent on any single customer for its sales. There are no
significant seasonal variations.
The Kenworth, Peterbilt and Foden trademarks and trade names are
recognized internationally and play an important role in the marketing of the
Company's truck products. The Company engages in a continuous program of
trademark and trade name protection in all marketing areas of the world.
Although the Company's truck products are subject to environmental
noise and emission controls, competing manufacturers are subject to the same
controls. The Company believes the cost of complying with noise and emission
controls will not be detrimental to its business.
The Company's truck sales backlog at year-end 1993 was estimated at
$1,268,000,000. This compares with $776,000,000 at year-end 1992. Production
of the year-end 1993 backlog is expected to be completed during 1994.
The number of persons employed by the Company in its truck business at
December 31, 1993 was approximately 8,000.
-3-
<PAGE> 4
OTHER MANUFACTURED PRODUCTS
Other products manufactured by the Company account for 2% of total
1993 revenues. This group includes industrial winches and oilfield extraction
pumps and service equipment. Winches are manufactured in two U.S. plants and
are marketed under the Braden, Carco, and Gearmatic nameplates. Oilfield
extraction pumps and service equipment are manufactured in three U.S. plants
and marketed under the Trico and Kobe nameplates. The markets for all of these
products are highly competitive and the Company competes with a number of well
established firms.
The Braden, Carco, Gearmatic, Trico, and Kobe trademarks and trade
names are recognized internationally and play an important role in the
marketing of those products. The Company has an ongoing program of trademark
and trade name protection in all relevant marketing areas.
AUTOMOTIVE PARTS
The Company purchases and sells general automotive parts and
accessories, which account for 5% of total 1993 revenues, through 120 retail
locations under the names of Grand Auto and Al's Auto Supply. These locations
are supplied from the Company's distribution warehouses.
FINANCE COMPANIES
The Company has five wholly owned finance companies which provide
financing principally for trucks manufactured by the Company in the U.S.,
Canada, the United Kingdom, and Australia. These companies provide lease
financing for independent dealers selling PACCAR products and retail and
inventory financing for new and used Class 6, 7 and 8 trucks regardless of make
or model. Installment contracts are secured by the products financed.
LEASING COMPANIES
PACCAR Leasing Corporation (PLC), a wholly owned subsidiary,
franchises selected PACCAR truck dealers to engage in full service truck
leasing under the PacLease trade name. PLC also leases equipment to and
provides managerial and sales support for its franchisees. Similar leasing
operations are conducted in Canada through a division of PACCAR of Canada Ltd.
and in the United Kingdom through a wholly owned subsidiary, PacLease Limited.
RAILEASE Inc, a wholly owned subsidiary, leases railcars to a railroad.
GENERAL INFORMATION
PATENTS
The Company owns numerous patents which relate to all product lines.
Although these patents are considered important to the overall conduct of the
Company's business, no patent or group of patents is considered essential to a
material part of the Company's business.
-4-
<PAGE> 5
RESEARCH AND DEVELOPMENT
The Company maintains a technical center where product testing and
research and development activities are conducted. Additional product
development activities are conducted within each separate manufacturing
division. Amounts spent on research and development were approximately $22
million in 1993, $21 million in 1992 and $22 million in 1991.
REGULATION
As a manufacturer of highway trucks, the Company is subject to the
National Traffic and Motor Vehicle Safety Act and Federal Motor Vehicle Safety
Standards promulgated by the National Highway Traffic Safety Administration.
The Company believes it is in compliance with the Act and applicable safety
standards.
Information regarding the effects that compliance with federal, state
and local provisions regulating the environment have on the Company's capital
and operating expenditures and the Company's involvement in environmental
cleanup activities is included in Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Company's Consolidated
Financial Statements incorporated by reference in Items 7 and 8, respectively.
EMPLOYEES
On December 31, 1993, the Company employed a total of 11,800 persons,
excluding employees of its Mexican affiliate.
-5-
<PAGE> 6
ITEM 2. PROPERTIES
The Company and its subsidiaries and affiliate own and operate
manufacturing plants in seven U.S. states, Canada, Australia, Mexico and the
United Kingdom including a new truck manufacturing facility in Renton,
Washington which was completed in 1993. Several parts distribution centers,
sales and service facilities and finance and administrative offices are also
operated in owned or leased premises in these five countries. A facility for
product testing and research and development is located in Skagit County,
Washington. Retail auto parts sales locations are primarily in leased premises
in five western states. The Company's corporate headquarters is located in
owned premises in Bellevue, Washington.
The Company considers substantially all of the properties used by its
businesses to be suitable for their intended purposes. Due to improved business
conditions in 1993 in the markets served by the Company's business segments,
many of the Company's manufacturing facilities operated at or near their
productive capacities.
Geographical locations of manufacturing plants within indicated
industry segments are as follows:
<TABLE>
<CAPTION>
United
U.S. Canada Australia Mexico Kingdom
<S> <C> <C> <C> <C> <C>
Trucks 5 1 1 1 1
Other 5 - - - -
</TABLE>
Properties located in Torrance, Signal Hill and Pomona, California;
Bartlesville, Oklahoma; Kansas City, Missouri; and Seattle, Washington are
being held for sale. These properties were originally obtained principally as a
result of business acquisitions in 1987 and 1988.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various lawsuits
incidental to the ordinary course of business. Management believes that the
disposition of such lawsuits will not materially affect the Company's
consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1993.
-6-
<PAGE> 7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Common stock of the Company is traded over the counter on the NASDAQ
National Market System under the symbol PCAR. The table below reflects the
range of trading prices as reported by NASDAQ and cash dividends declared. The
cash dividends declared and stock prices have been restated to give effect to
the 15% stock dividend declared December 14, 1993. There were 3,292 record
holders of the common stock at December 31, 1993.
<TABLE>
<CAPTION>
Cash Stock Price Cash Stock Price
1993 Dividends ----------------- 1992 Dividends ------------------
Quarter Declared High Low Quarter Declared High Low
- ------- --------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
First $.22 $56-3/4 $49-1/8 First $.22 $53-1/4 $41-1/2
Second .22 57-7/8 46-1/2 Second .22 54-3/4 44-3/4
Third .22 56-3/4 51-1/8 Third .22 50-7/8 43-1/4
Fourth .22 61-1/8 52-7/8 Fourth .22 52-1/8 43
Year-End Year-End
Extra .86 Extra .25
</TABLE>
The Company expects to continue paying regular cash dividends, although there
is no assurance as to future dividends because they are dependent upon future
earnings, capital requirements and financial conditions.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 41 of the Annual Report to
Stockholders for the year ended December 31, 1993 are incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 21 through 24 of the Annual Report to
Stockholders for the year ended December 31, 1993 is incorporated herein by
reference.
-7-
<PAGE> 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the registrant and
its subsidiaries, included in the Annual Report to Stockholders for the year
ended December 31, 1993 are incorporated herein by reference:
Consolidated Balance Sheets
-- December 31, 1993 and 1992
Consolidated Statements of Income
-- Years Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Stockholders' Equity
-- Years Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows
-- Years Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
-- December 31, 1993, 1992 and 1991
Quarterly Results (Unaudited) on page 41 of the Annual Report to Stockholders
for the year ended December 31, 1993 are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The registrant has not had any disagreements with its independent
auditors on accounting or financial disclosure matters.
-8-
<PAGE> 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 401(a), (d), (e) and Item 405 of Regulation S-K:
Identification of directors, family relationships, business experience
and compliance with Section 16(a) of the Exchange Act on pages 3 and 4 of the
proxy statement for the annual stockholders meeting of April 26, 1994 is
incorporated herein by reference.
Item 401(b) of Regulation S-K:
Executive Officers of the registrant as of February 1, 1994:
<TABLE>
<CAPTION>
Present Position and Other Position(s)
Name and Age Held During Last Five Years
- ------------ --------------------------------------
<S> <C>
Charles M. Pigott (64) Chairman and Chief Executive Officer; previously President.
Mr. Pigott is the father of Mark C. Pigott, also an executive
officer, and brother of James C. Pigott, a director of the Company.
David J. Hovind (53) President; Executive Vice President from July 1987 to January 1992.
William E. Boisvert (51) Executive Vice President; Senior Vice President and Chief Financial
Officer from August 1988 to April 1989.
Michael A. Tembreull (47) Executive Vice President; Senior Vice President from September 1990 to
January 1992; previously General Manager, Peterbilt Division.
Mark C. Pigott (39) Executive Vice President; Senior Vice President from January 1990
to December 1993; previously Vice President. Mr. Pigott is the son of
Charles M. Pigott, a director of the Company and also an executive
officer, and nephew of James C. Pigott, a director of the Company.
Gary S. Moore (50) Senior Vice President; General Manager, Kenworth Truck Company from
April 1990 to August 1992; Senior Assistant General Manager, Kenworth
Truck Company from January 1990 to March 1990; previously General
Manager, Wagner Mining Equipment Company.
</TABLE>
-9-
<PAGE> 10
<TABLE>
<CAPTION>
Present Position and Other Position(s)
Name and Age Held During Last Five Years
- ------------ --------------------------------------
<S> <C>
G. Don Hatchel (49) Vice President, Controller; Assistant Vice President and Controller
from June 1990 to January 1991; Operations Controller from July 1989
to June 1990; previously Controller, Peterbilt Division.
G. Glen Morie (51) Vice President, General Counsel and Secretary.
</TABLE>
Officers are elected annually but may be appointed or removed on interim dates.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors and Executive Officers and Related Matters
on pages 5 through 11 of the proxy statement for the annual stockholders
meeting of April 26, 1994 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock ownership information on pages 1 and 2 of the proxy statement
for the annual stockholders meeting of April 26, 1994 is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on page 4 of the proxy statement for the annual
stockholders meeting of April 26, 1994 is incorporated herein by reference.
-10-
<PAGE> 11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) - The response to this portion of Item 14 is
submitted as a separate section of this report.
(3) Listing of Exhibits (in order of assigned index numbers)
(3) Articles of incorporation and bylaws
(a) PACCAR Inc Certificate of Incorporation, as
amended to April 27, 1990 (incorporated by
reference to the Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).
(b) PACCAR Inc Bylaws, as amended to April 28,
1987 (incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1987).
(4) Instruments defining the rights of security
holders, including indentures
(a) Rights agreement dated as of
December 21, 1989 between PACCAR Inc
and First Chicago Trust Company of
New York setting forth the terms of
the Series A Junior Participating
Preferred Stock, no par value per
share (incorporated by reference to
Exhibit 1 of the Current Report on
Form 8-K of PACCAR Inc dated
December 27, 1989).
(b) Indenture for Senior Debt Securities
dated as of December 1, 1983 between
PACCAR Financial Corp. and Citibank,
N.A., Trustee (incorporated by
reference to Exhibit 4.1 of the
Annual Report on Form 10-K of PACCAR
Financial Corp. for the year ended
December 31, 1983).
(c) First Supplemental Indenture dated
as of June 19, 1989 between PACCAR
Financial Corp. and Citibank, N.A.,
Trustee (incorporated by reference
to Exhibit 4.2 to PACCAR Financial
Corp.'s registration statement on
Form S-3, Registration No.
33-29434).
(d) Forms of Medium-Term Note, Series E
(incorporated by reference to
Exhibits 4.3A, 4.3B and 4.3C to
PACCAR Financial Corp.'s
Registration Statement on Form S-3
dated June 23, 1989, Registration
Number 33-29434, and Forms of
Medium-Term Note, Series E,
incorporated by reference to Exhibit
4.3B.1 to PACCAR Financial Corp.'s
Current Report on Form 8-K, dated
December 19, 1991, under Commission
File Number 0-12553).
Letter of Representation among PACCAR
Financial Corp., Citibank, N.A. and
the Depository Trust Company, Series
E, dated July 6, 1989 (incorporated
by reference to Exhibit 4.3 of
PACCAR Financial Corp.'s Annual
Report on Form 10-K, dated March 29,
1990. File Number 0-12553).
-11-
<PAGE> 12
(e) Forms of Medium-Term Note, Series F
(incorporated by reference to
Exhibits 4.3A, 4.3B and 4.3C to
PACCAR Financial Corp.'s
Registration Statement on Form S-3
dated May 26, 1992, Registration
Number 33-48118).
Form of Letter of Representation among
PACCAR Financial Corp., Citibank,
N.A. and the Depository Trust
Company, Series F (incorporated by
reference to Exhibit 4.4 to PACCAR
Financial Corp.'s Registration
Statement on Form S-3 dated May 26,
1992, Registration Number 33-48118).
(f) Forms of Medium-Term Note, Series G
(incorporated by reference to
Exhibits 4.3A and 4.3B to PACCAR
Financial Corp.'s Registration
Statement on Form S-3 dated December
8, 1993, Registration Number 33-
51335).
Form of Letter of Representation among
PACCAR Financial Corp., Citibank,
N.A. and the Depository Trust
Company, Series G (incorporated by
reference to Exhibit 4.4 to PACCAR
Financial Corp.'s Registration
Statement on Form S-3 dated December
8, 1993, Registration Number
33-51335).
(10) Material contracts
(a) PACCAR Inc Incentive Compensation
Plan (incorporated by reference to
Exhibit (10)(a) of the Annual Report
on Form 10-K for the year ended
December 31, 1980).
(b) PACCAR Inc Deferred Compensation
Plan for Directors (incorporated by
reference to Exhibit (10)(b) of the
Annual Report on Form 10-K for the
year ended December 31, 1980).
(c) Supplemental Retirement Plan
(incorporated by reference to
Exhibit (10)(c) of the Annual Report
on Form 10-K for the year ended
December 31, 1980).
(d) 1981 Long Term Incentive Plan
(incorporated by reference to
Exhibit A of the 1982 Proxy
Statement, dated March 25, 1982).
(e) Amendment to 1981 Long Term
Incentive Plan (incorporated by
reference to Exhibit (10)(a) of the
Quarterly Report on Form 10-Q for
the quarter ended March 31, 1991).
(f) PACCAR Inc 1991 Long-Term Incentive
Plan (incorporated by reference to
Exhibit (10)(h) of the Quarterly
Report on Form 10-Q for the quarter
ended June 30, 1992).
(g) Amended and Restated Deferred
Incentive Compensation Plan.
(13) Annual report to security holders
Portions of the 1993 Annual Report to
Shareholders have been incorporated by
reference and are filed herewith.
(21) Subsidiaries of the registrant
-12-
<PAGE> 13
(23) Consent of independent auditors
(24) Power of attorney
Powers of attorney of certain directors
(b) No reports on Form 8-K were filed for the three months ended
December 31, 1993.
(c) Exhibits
(d) Financial Statement Schedules -- The response to this portion
of Item 14 is submitted as a separate section of this report.
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PACCAR Inc
-----------------------------------
Registrant
/s/ C. M. Pigott 3-24-94
-----------------------------------
C. M. Pigott, Director, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ W. E. Boisvert 3-24-94 /s/ G. D. Hatchel 3-24-94
- ------------------------------------- -------------------------------------
W. E. Boisvert G. D. Hatchel
Executive Vice President Vice President
(Principal Financial Officer) (Principal Accounting Officer)
*/s/ R. P. Cooley 3-24-94 */s/ J. C. Pigott 3-24-94
- ------------------------------------- --------------------------------------
R. P. Cooley J. C. Pigott
Director Director and Audit Committee Member
*/s/ J. M. Fluke, Jr. 3-24-94 */s/ J. W. Pitts 3-24-94
- ------------------------------------- --------------------------------------
J. M. Fluke, Jr. J. W. Pitts
Director and Audit Committee Member Director and Chairman of
Audit Committee
*/s/ H. J. Haynes 3-24-94 */s/ J. H. Wiborg 3-24-94
- ------------------------------------- --------------------------------------
H. J. Haynes J. H. Wiborg
Director Director
*/s/ D. J. Hovind 3-24-94 */s/ C. H. Hahn 3-24-94
- ------------------------------------- --------------------------------------
D. J. Hovind C. H. Hahn
Director Director
</TABLE>
* Pursuant to power of attorney
-14-
<PAGE> 15
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (2), (c) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1993
PACCAR INC AND SUBSIDIARIES
BELLEVUE, WASHINGTON
-15-
<PAGE> 16
FORM 10-K -- ITEM 14(A)(1) AND (2)
PACCAR INC AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of PACCAR Inc and subsidiaries,
included in the Annual Report to Stockholders for the year ended December 31,
1993 are incorporated by reference in Item 8:
Consolidated Balance Sheets
-- December 31, 1993 and 1992
Consolidated Statements of Income
-- Years Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Stockholders' Equity
-- Years Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows
-- Years Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
-- December 31, 1993, 1992 and 1991
The following consolidated financial statement schedules of PACCAR Inc and
consolidated subsidiaries are included in Item 14(d):
Schedule VIII -- Allowances for Losses
Schedule IX -- Short-Term Borrowings
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
-16-
<PAGE> 17
PACCAR INC AND SUBSIDIARIES
SCHEDULE VIII - ALLOWANCES FOR LOSSES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION> Additions
Balance at Charged to Balance
Year Ended Beginning Costs and at End
December 31: of Period Expenses Deductions(1) of Period
- ------------ ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
1993
(A) MANUFACTURING $ 3.0 $ $ .8 $ 2.2
(B) FINANCIAL SERVICES 30.9 9.2 7.2 32.9
----- ----- ----- -----
$33.9 $ 9.2 $ 8.0 $35.1
1992
(A) Manufacturing $ 3.0 $ .2 $ .2 $ 3.0
(B) Financial Services 31.4 13.8 14.3 30.9
----- ----- ----- -----
$34.4 $14.0 $14.5 $33.9
1991
(A) Manufacturing $ 3.8 $ .9 $ 1.7 $ 3.0
(B) Financial Services 28.2 30.2 27.0 31.4
----- ----- ----- -----
$32.0 $31.1 $28.7 $34.4
</TABLE>
(A) Allowance for losses deducted from trade receivables.
(B) Allowance for losses deducted from notes, contracts, and other
receivables.
(1) Uncollectible trade receivables, notes, contracts and other
receivables written off, net of recoveries.
PACCAR INC AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
End of Period
---------------------
Weighted Amount Outstanding Weighted Avg.
(A) Average During the Period Interest Rate
Year Ended Interest ------------------------ During the
December 31: Balance Rate Maximum Average(B) Period (C)
- ------------ ------- -------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1993 $697.7 3.71% $707.9 $604.1 3.66%
1992 $581.7 4.38% $600.9 $535.8 4.59%
1991 $571.1 6.04% $638.8 $506.7 7.17%
</TABLE>
(A) Short-term borrowings are comprised primarily of amounts owed by the
finance and leasing subsidiaries and represent commercial paper and
short-term notes with maturities of less than one year and bank lines
of credit which have no termination date but are reviewed annually for
renewal.
(B) The average amount outstanding during the period was computed by
dividing the total average monthly outstanding principal balances by
twelve.
(C) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average short-term
borrowings outstanding.
-17-
<PAGE> 1
EXHIBIT 10(g)
PACCAR INC
DEFERRED INCENTIVE COMPENSATION PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted by the Company on November 25, 1991, to
provide certain employees with an opportunity to defer payment of their bonuses
under the Company's year-end Incentive Compensation Program. The Plan is also
intended to establish a method of paying bonus awards that will assist the
Company in attracting and retaining employees of outstanding achievement and
ability.
SECTION 2. DEFINITIONS.
(a) "Beneficiary" means the person or persons designated
by the Executive or by the Plan to receive payment of the Executive's Cash
Account in the event of the death of the Executive.
(b) "Board" means the Board of Directors of the Company,
as constituted from time to time.
(c) "Bonus Award" means the amount of compensation
awarded by the Company to an Executive as a bonus under the Company's year-end
Incentive Compensation Program.
(d) "Cash Account" means the bookkeeping account
established pursuant to Section 6 on behalf of an Executive who elects to
participate in the Plan.
(e) "Cause" means (i) an act of embezzlement, fraud or
theft, (ii) the deliberate disregard of the rules of the Company or a
Subsidiary in such a manner as to cause material loss, damage or injury to or
otherwise endanger the property or employees of the Company or a Subsidiary,
(iii) any unauthorized disclosure of any of the secrets or confidential
information of the Company or a Subsidiary, (iv) any conduct which constitutes
unfair competition with the Company or a Subsidiary or (v) inducing any
customers of the Company or a Subsidiary to breach any contracts with the
Company or a Subsidiary.
-1-
<PAGE> 2
(f) "Company" means PACCAR Inc, a Delaware corporation.
(g) "Committee" means the Compensation Committee of the
Board.
(h) "Executive" means an employee of the Company or a
Subsidiary who is eligible to participate in the Plan under Section 4.
(i) "Incentive Compensation Program" refers to the
incentive plan for executives of PACCAR Inc and its eligible subsidiaries who
are in grades 41 and above.
(j) "Permanent and Total Disability" is as defined under
PACCAR's Long Term Disability Plan.
(k) "Plan" means this PACCAR Inc Deferred Incentive
Compensation Plan, as it may be amended from time to time.
(l) "Service" means employment with the Company or any
Subsidiary. A transfer among the Company and its Subsidiaries shall not be
considered a termination of Service.
(m) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if
each of the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
(n) "Year" means a calendar year.
SECTION 3. ADMINISTRATION.
The Committee shall have the authority to administer the Plan
in its sole discretion. To this end, the Committee is authorized to construe
and interpret the Plan, to promulgate, amend and rescind rules relating to the
implementation of the Plan and to make all other determinations necessary or
advisable for the administration of the Plan. Subject to the requirements of
applicable law, the Committee may designate persons other than members of the
Committee to carry out its responsibilities and may prescribe such conditions
and limitations as it may deem appropriate. Any determination, decision or
action of the Committee in connection with the construction, interpretation or
administration of the Plan shall be final, conclusive and binding upon all
persons participating in the Plan and any person validly claiming under or
through persons participating in the Plan.
SECTION 4. ELIGIBILITY.
An employee of the Company or of a Subsidiary shall be
eligible to participate in the Plan for a Year if he or she:
-2-
<PAGE> 3
(a) Is eligible to be considered for a bonus that will
have been earned in such Year under the Company's Incentive
Compensation Program; and
(b) Has attained age 40 on or before January 1 of such
Year.
SECTION 5. ELECTION TO PARTICIPATE IN PLAN.
An Executive may elect to participate in the Plan for a Year
by filing with the Committee, on or before December 15 of such Year, a written
election to defer his or her Bonus Award earned in such Year. The deferral
election should be considered irrevocable after December 15. The deferral
election shall apply solely to the Bonus Award, if any, to be earned in the
Year in which the election is filed and shall specify the amount or portion of
such Bonus Award that is subject to the election. The amount of the Bonus
Award earned in a given Year shall be determined by the Company in the
following year.
SECTION 6. ESTABLISHMENT OF CASH ACCOUNT.
In the event a Bonus Award is made to an Executive who has
filed a timely deferral election with respect to such Bonus Award, the Company
shall establish a Cash Account for the Executive. The Cash Account shall be
credited with an amount equal to that portion of the Bonus Award which is not
payable currently to the Executive because of the terms of the deferral
election. A Bonus Award shall be credited to the Executive's Cash Account as
of the January next following the Year in which such Bonus Award was earned. A
separate Cash Account shall be maintained for each Bonus Award deferred by an
Executive, except as the Company may otherwise determine.
SECTION 7. TREATMENT OF CASH ACCOUNT DURING DEFERRAL
PERIOD.
(a) Interest. Interest shall be credited on the balance
in each Cash Account, commencing with the date as of which any amount is
credited to the Cash Account and continuing up to the close of the calendar
quarter immediately preceding the date when the last payment from the Cash
Account is made. Such interest shall become a part of the Cash Account and
shall be paid at the same time or times as the principal balance of the Cash
Account. Such interest for each calendar quarter during the deferral period
shall be credited at a rate equal to the simple combined average of the monthly
Aa Industrial Bond yield average for the immediately preceding calendar
quarter, as reported in Moody's Bond Record. Such interest shall be compounded
quarterly.
(b) Statements. As soon as practicable after July 1 of
each Year (and after such other dates as the Company may determine), the
Company shall prepare and deliver to each participating Executive a written
statement showing the balance in his or her Cash Account as of the applicable
date.
-3-
<PAGE> 4
SECTION 8. FORM AND TIME OF PAYMENT OF CASH ACCOUNT.
Distribution of the deferred Bonus Award shall be made at such
time or times and in such form as the Committee shall determine in its sole
discretion. In order to assist the Committee in making such determinations,
the following procedures are established:
(a) Request of Form and Time of Payment. An Executive may
elect to receive distribution of the Cash Account at the time and in the manner
described in (i) and (ii) below. For payment to be made or commence prior to
leaving the Company, a Payment Election Form must be completed at the time the
Deferral Election is made. Otherwise, elections shall be made by filing the
prescribed form with the Committee not later than the earlier of (A) 30 days
after the Executive's termination of employment with the Company or (B)
December 1 of the year before the year in which distribution is to be made or
commence. Distribution will be made in accordance with the Executive's
election unless the Committee has disapproved the election or has determined
that the distribution shall be made at some other time.
(i) Form of Payment. Payment of a Cash Account shall be
made in cash, either in a lump sum or in annual installments
over a period not in excess of 15 years. The amount of any
installment to be paid from a Cash Account shall be determined
by dividing the balance remaining in such Cash Account by the
number of installments then remaining to be distributed.
(ii) Time of Payment. Payment of a Cash Account shall
occur or commence in any January, but not later than the first
January after the year in which Executive attains age 70 1/2.
In the event an Executive who elects installment payments is
reemployed by the Company, all installments will be suspended
until the Executive's service ends.
(b) Changing a Request. Any request that an approved method
of payment be changed, or any request subsequent to the deferral election for
distribution prior to termination is subject to approval by the Committee in
its sole and absolute discretion. Such request shall be in writing to the
Committee and shall set forth the reasons for the request.
(c) Failing to Request. In the event that an Executive fails
to make a timely election pursuant to Section 8 (a), distribution of the Cash
Account shall be made in full in the first January following sixty (60) days
after the Executive's termination of employment. In such case, the entire
account
-4-
<PAGE> 5
balance in effect as of the distribution date will be distributed to the
Executive.
(d) Committee Guidelines. From time to time, the Committee
may establish guidelines for its own use in determining what election made
pursuant to Section 8 (a) or (b) above shall be disapproved, but such
guidelines shall not in any way limit the Committee's sole discretion to
determine the terms and form of distribution of the recipient's Cash Account.
(e) Withholding Taxes. All payments under the Plan shall
be subject to reduction to reflect the withholding of applicable taxes.
SECTION 9. EFFECT OF DEATH OF EXECUTIVE.
(a) Distribution of Cash Account. Upon the death of a
participating Executive, the amount (if any) remaining in his or her Cash
Account shall be distributed to his or her Beneficiary. The distribution shall
be made at the time(s) and in the form specified in the election filed by the
Executive under Section 8, unless the Committee determines in its sole
discretion that payment shall be made at an earlier date or in a different
form. If the Executive did not file an election under Section 8 prior to his
or her death, then the distribution shall be made at the time(s) and in the
form determined by the Committee in its sole discretion. If a designated
Beneficiary dies before receiving payment of his or her entire share of the
Executive's Cash Account, then the remaining payments shall be made to such
Beneficiary's personal representative.
(b) Designation of Beneficiary. Upon commencement of
participation in the Plan, each Executive shall, by filing the prescribed form
with the Company, name a person or persons as the Beneficiary who will receive
any distribution payable under the Plan in the event of the Executive's death.
If the Executive has not named a Beneficiary or if none of the named
Beneficiaries survives the Executive, then the Executive's personal
representative shall be the Beneficiary. The Executive may change his or her
Beneficiary designation from time to time. Any designation of a Beneficiary
(or an amendment or revocation thereof) shall be effective only if it is made
in writing on the prescribed form and is received by the Company prior to the
Executive's death. Any other provision of this Subsection (b) notwithstanding,
in the case of a married Executive, any designation of a person other than his
or her spouse as primary Beneficiary shall be valid only if the spouse
consented to such designation in writing.
SECTION 10. FORFEITURE OF CASH ACCOUNTS.
All of an Executive's Cash Accounts shall be forfeited in the
event that his or her Service ends because of a discharge for Cause or in the
event that he or she, after his or her Service ended for any other reason,
fails or refuses to provide
-5-
<PAGE> 6
advice or counsel to the Company or a Subsidiary when reasonably requested to
do so. The Committee's good-faith determination of the existence of facts
justifying forfeiture shall be conclusive.
SECTION 11. INCOMPETENCE.
If, in the opinion of the Committee, any individual becomes
unable to handle properly any amount payable to such individual under the Plan,
then the Committee may make such arrangements for payment on such individual's
behalf as it determines will be beneficial to such individual, including
(without limitation) payment to such individual's guardian, conservator, spouse
or dependent.
SECTION 12. EXECUTIVES' RIGHTS UNSECURED.
The Plan is unfunded. The interest under the Plan of any
participating Executive, and such Executive's right to receive a distribution
of his or her Cash Account, shall be an unsecured claim against the general
assets of the Company. The Cash Accounts shall be bookkeeping entries only,
and no Executive shall have an interest in or claim against any specific asset
of the Company pursuant to the Plan.
SECTION 13. NONASSIGNABILITY OF INTERESTS.
The interest and property rights of any Executive under the
Plan shall not be subject to option nor be assignable either by voluntary or
involuntary assignment or by operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any act in
violation of this Section 13 shall be void.
SECTION 14. LIMITATION OF RIGHTS.
(a) No Right to Bonuses. Nothing in the Plan shall be
construed to give any Executive any right to be granted a Bonus Award.
(b) No Right to Employment. Neither the Plan nor the
deferral of any Bonus Award, nor any other action taken pursuant to the Plan,
shall constitute or be evidence of any agreement or understanding, express or
implied, that the Company or a Subsidiary will employ an Executive for any
period of time, in any position or at any particular rate of compensation.
SECTION 15. CLAIMS AND INQUIRIES.
(a) Application for Benefits. Applications for benefits
and inquiries concerning the Plan (or concerning present or future rights to
benefits under the Plan) shall be submitted to the Committee in writing. An
application for benefits shall be submitted on the prescribed form and shall be
signed by the Executive or, in the case of a benefit payable after his or her
death, by the Beneficiary.
-6-
<PAGE> 7
(b) Denial of Application. In the event that an
application for benefits is denied in whole or in part, the Committee shall
notify the applicant in writing of the denial and of the right to a review of
the denial. The written notice shall set forth, in a manner calculated to be
understood by the applicant, specific reasons for the denial, specific
references to the provisions of the Plan on which the denial is based, a
description of any information or material necessary for the applicant to
perfect the application, an explanation of why the material is necessary, and
an explanation of the review procedure under the Plan. The written notice
shall be given to the applicant within a reasonable period of time (not more
than 90 days) after the Committee received the application, unless special
circumstances require further time for processing and the applicant is advised
of the extension. In no event shall the notice be given more than 180 days
after the Committee received the application.
(c) Request for Review. An applicant whose application
for benefits was denied in whole or in part, or the applicant's duly authorized
representative, may appeal the denial by submitting to the Committee a request
for a review of the application within 90 days after receiving written notice
of the denial from the Committee. The Committee shall give the applicant or
his or her representative an opportunity to review pertinent materials, other
than legally privileged documents, in preparing the request for a review. The
request for a review shall be in writing and addressed to the Committee. The
request for a review shall set forth all of the grounds on which it is based,
all facts in support of the request, and any other matters that the applicant
deems pertinent. The Committee may require the applicant to submit such
additional facts, documents or other material as it may deem necessary or
appropriate in making its review.
(d) Decision on Review. The Committee shall act on each
request for an appeal within 60 days after receipt, unless special
circumstances require further time for processing and the applicant is advised
of the extension. In no event shall the decision on review be rendered more
than 120 days after the Committee received the request for a review. The
Committee shall give prompt written notice of its decision to the applicant.
In the event that the Committee confirms the denial of the application for
benefits in whole or in part, the notice shall set forth, in a manner
calculated to be understood by the applicant, the specific reasons for the
decision and specific references to the provisions of the Plan on which the
decision is based.
(e) Rules and Interpretations. The Committee shall adopt
such rules, procedures and interpretations of the Plan as it deems necessary or
appropriate in carrying out its responsibilities under this Section 15.
-7-
<PAGE> 8
(f) Exhaustion of Remedies. No legal action for benefits
under the Plan shall be brought unless and until the claimant (i) has submitted
a written application for benefits in accordance with Subsection (a) above,
(ii) has been notified by the Committee that the application is denied, (iii)
has filed a written request for a review of the application in accordance with
Subsection (c) above and (iv) has been notified in writing that the Committee
has affirmed the denial of the application; provided, however, that legal
action may be brought after the Committee has failed to take any action on the
claim within the time prescribed by Subsections (b) and (d) above,
respectively.
SECTION 16. AMENDMENT OR TERMINATION OF THE PLAN.
The Committee may amend, suspend or terminate the Plan at any
time. In the event of a termination of the Plan, the Cash Accounts of
participating Executives shall be paid at the time(s) and in the form
determined under Sections 8 and 9, unless the Committee prescribes an earlier
time or different form for the payment of such Cash Accounts.
SECTION 17. CHANGE OF CONTROL
In the event of a Change of Control of the Company, as defined
in the PACCAR Supplemental Retirement Plan dated March 17, 1990, each Executive
shall be entitled to the lump sum payment of his or her Cash Account. This
amount shall be paid within 30 days of the Change of Control.
SECTION 18. CHOICE OF LAW.
The validity, interpretation, construction and performance of
the Plan shall be governed by the Employee Retirement Income Security Act of
1974 and, to the extent they are not preempted, by the laws of the State of
Washington.
SECTION 19. EXECUTION.
To record the amendment and restatement of the Plan to read as
set forth herein, effective as of October 1, 1993. PACCAR Inc by its
Chairman, Compensation Committee, has executed this Plan on September 20, 1993.
PACCAR Inc
/s/ H. J. Haynes
By _______________________________
Chairman
Compensation Committee
-8-
<PAGE> 1
PACCAR Inc and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Tables in millions)
RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales $ 3,378.9 $ 2,576.8 $ 2,159.6
Income before
effect of
accounting change 142.2 65.2 39.8
Accounting change 15.4
--------- --------- ---------
Net Income $ 142.2 $ 65.2 $ 55.2
========= ========= =========
</TABLE>
OVERVIEW:
Net sales for the year were $3.4 billion, an increase of 31% over 1992, and 56%
over 1991. Net income grew to $142.2 million in 1993, a 118% improvement over
the prior year and a 158% increase compared to 1991. Net income for 1993 would
have been $3.5 million higher, or nine cents per share, had it not been for the
increase in the U.S. corporate tax rate. The Truck and Financial Services
segments provided most of the increase in net income. However, 1993 marked a
year of continued improvement for virtually all of the Company's operations.
In the United States, the primary basis of PACCAR's performance was a
strong Class 8 truck market. The strength of this market was attributable to a
vigorous replacement cycle, favorable interest rates and modest gains in
freight tonnage. Current indicators are that heavy-duty truck sales will
remain strong through the first half of 1994 and probably through the second
half, depending on continued expansion of the U.S. economy.
Gradually improving economies, expanded Company presence and more
aggressive marketing benefited PACCAR's operations outside the United States.
The Company expects further growth from its foreign operations as it continues
to look to new international markets for its products.
PACCAR's commitment to customer satisfaction, financial strength and
continuous improvement provides the foundation necessary to meet present and
future market opportunities.
TRUCKS
The Truck segment includes all of the Company's domestic and international
truck and truck parts operations.
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Truck revenues $ 3,130.9 $ 2,322.7 $ 1,891.2
--------- --------- ---------
Pretax Income $ 194.0 $ 77.9 $ 58.4
========= ========= =========
</TABLE>
1993 COMPARED TO 1992:
PACCAR's worldwide truck operations earned $194.0 million before tax in 1993 on
net sales of $3.1 billion. In 1992, the Company's truck operations generated
pretax income of $77.9 million on net sales of $2.3 billion. PACCAR and its
Mexican affiliate sold over 44,000 trucks worldwide, compared to 34,000 in
1992. In 1993, this segment provided 88% of consolidated revenues, compared to
84% in 1992.
In the United States, a larger overall market, combined with an increase
in the Company's market share, contributed to PACCAR's achievements in 1993.
Class 8 truck industry volumes in the United States grew from about 125,000
units in 1992 to approximately 155,000 units in 1993. PACCAR's share of the
U.S. market for Class 8 trucks approximated 22% of registrations in 1993,
compared to 21% in 1992.
Reduced unit costs arising from better utilization of production capacity
and modest increases in sales prices enhanced current year gross margins. In
1993, PACCAR operated its truck plants at near capacity, brought on-line a new
state-of-the-art production facility and relocated a major division
headquarters. Despite the sustained high level of production in 1993, the
Company begins 1994 with backlogs well above prior year levels.
Outside the United States, PACCAR's foreign truck operations increased
revenues and profits compared to 1992. Results improved significantly in
Canada, Australia and the United Kingdom. Partially offsetting these advances
were reduced equity earnings in the Company's Mexican affiliate, VILPAC, S.A.
The Mexican Class 8 truck market continued to decline in 1993 as a result of
the slower economy. VILPAC, S.A. retained the largest share of the country's
heavy-duty truck market, and Mexican operations continue to account for a
significant portion of PACCAR's foreign
21
<PAGE> 2
PACCAR Inc and Subsidiaries
profits. In January 1994, PACCAR acquired additional shares of VILPAC,
S.A., bringing its ownership interest to 55%. As a result, beginning in 1994
the Company will account for VILPAC, S.A. on the consolidated basis.
Revenues from U.S. export sales in 1993 through PACCAR International
Division were higher than in 1992. Operating margins were lower in 1993 due to
less demand for highly specialized vehicles.
PACCAR's truck parts revenues and profits increased again in 1993
primarily because of a better overall truck market and an increase in market
share. Sales of truck parts remain a steady base of profitability for the Truck
segment.
1992 COMPARED TO 1991:
In 1992, PACCAR's worldwide truck operations' net sales and income before tax
increased 23% and 33%, respectively, over 1991 levels. The improvement in 1992
resulted principally from an upturn in the truck replacement cycle which
boosted Class 8 sales volumes. In 1992, PACCAR and its Mexican affiliate sold
34,000 trucks worldwide, compared to 30,000 in 1991.
PACCAR's share of the U.S. market for Class 8 trucks was 21% of
registrations in 1992, compared to 22% in 1991. The decline in market share was
primarily attributable to competitive conditions in the marketplace and the
Company's unwillingness to pursue some low-margin business.
In 1992, results improved in Canada, Australia and the United Kingdom.
These advancements were offset by reduced equity earnings in VILPAC. A smaller
Class 8 truck market in Mexico was largely responsible for the decline in
earnings from the record levels achieved in 1991. In spite of this, Mexican
operations accounted for the major portion of foreign profits in 1992 and 1991.
AUTO PARTS
The Auto Parts segment consists of the Company's retail auto parts operations,
located on the West Coast.
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Auto Parts revenues $ 172.9 $ 174.4 $ 194.7
------- ------- -------
Pretax Income (Loss) $ 2.2 $ (4.6) $ (8.0)
======= ======= =======
</TABLE>
1993 COMPARED TO 1992:
Auto Parts segment sales totaled $172.9 million in 1993, compared to $174.4
million in 1992. Sales volume gains, due to modest increases in same store
sales and selected new store openings, partially offset the overall decline in
sales resulting from the closing of unprofitable stores and decline in total
number of stores.
Segment pretax earnings were $2.2 million in 1993, compared to a pretax
loss of $4.6 million in 1992. The segment attained profitability primarily as a
result of operating efficiencies, improved systems and better merchandising.
The Company expects this segment's performance will continue to benefit from
these actions.
1992 COMPARED TO 1991:
For the Auto Parts segment, 1992 sales fell below 1991 levels. Sales volumes
decreased in 1992, primarily because of restructuring actions taken to withdraw
from the wholesale auto parts market and to close the Los Angeles area retail
stores. Successful implementation of cost-reduction programs helped the
segment to significantly cut its operating losses in 1992 compared to 1991.
OTHER PRODUCTS
PACCAR's other product lines include winches and oilfield equipment. As a
group, revenue from these products decreased during the three-year period ended
in 1993 due to weakness in most of their markets. While combined pretax income
decreased in 1992 compared to 1991, results improved in 1993.
INVESTMENTS
Investment income remained relatively stable between 1993 and 1992. Because of
higher interest rates, 1991 investment income exceeded levels attained in
either 1992 or 1993.
22
<PAGE> 3
PACCAR Inc and Subsidiaries
FINANCIAL SERVICES
The Financial Services segment, including PACCAR Financial Corp., PACCAR
Leasing and the Company's finance subsidiaries in Canada, Australia and the
United Kingdom, derives earnings from financing the sale of PACCAR and other
products.
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Financial Services
revenues $ 162.6 $ 158.4 $ 179.2
------- ------- -------
Pretax Income $ 40.2 $ 26.0 $ 12.8
======= ======= =======
</TABLE>
1993 COMPARED TO 1992:
The Company's Financial Services operations earned $40.2 million before tax in
1993, up 55% compared to 1992. Pretax income improved primarily as a result of
growth in the portfolio, higher net finance margins and lower provisions for
loan losses.
In 1993, the Financial Services segment experienced record new business
volume due primarily to PACCAR's strong heavy-duty truck sales and this
segment's increased market share of such sales. The overall credit quality of
the loan and lease receivable portfolio improved in 1993 due to stronger
economic conditions and a continued focus on credit controls. The reserve for
credit losses increased in 1993, reflecting the growth in the portfolio.
1992 COMPARED TO 1991:
The Company's Financial Services segment earned $26.0 million before tax in
1992, more than double 1991 results. The increase in pretax earnings primarily
reflected improved credit controls and better interest margins.
LIQUIDITY AND CAPITAL RESOURCES:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Cash and equivalents $ 223.2 $ 250.4 $ 294.9
Marketable securities 235.7 214.3 201.4
------- ------- -------
$ 458.9 $ 464.7 $ 496.3
======= ======= =======
</TABLE>
During 1993, the Company generated cash from operations of $202 million, an
increase of over $50 million from a year ago. Total cash and marketable
securities amounted to $458.9 million at December 31, 1993. The Company's
liquidity and earnings from investment of excess cash continue to provide
financial stability and strength.
TRUCKS, AUTO PARTS AND OTHER
Cash for working capital, capital expenditures and research and development has
been provided by operations. Management expects this to continue.
Capital expenditures for 1993 totaled $82 million, of which a major
portion related to the completion of the new Kenworth manufacturing facility.
Over the last five years (1989 through 1993), the Company's worldwide capital
spending, excluding the Financial Services segment, totaled over $300 million.
During the next several years, the pace of spending for capital projects at
PACCAR is expected to continue at similar levels.
Year-end ratios of current assets to current liabilities were 1.7 for
1993, 1.9 for 1992 and 2.0 in 1991. The principal reasons for the decline in
the 1993 current ratio have been the utilization of cash for the funding of
capital expenditures and the accrual for the special year-end cash dividend.
Cash generated in foreign operations is generally reinvested in those
operations when there is potential for a favorable return on investment. During
the last three years, some excess cash has been withdrawn in the form of
dividends from the Company's operations in Mexico.
23
<PAGE> 4
PACCAR Inc and Subsidiaries
FINANCIAL SERVICES
The Financial Services companies rely heavily on funds borrowed in capital
markets as well as funds generated from collections on loans and leases.
Transactions with PACCAR, such as capital contributions and intercompany loans,
are an additional source of funds.
In 1993, PACCAR Financial Corp. completed the filing of a new shelf
registration under which up to $1 billion of medium-term notes can be issued as
needed. At the end of 1993, $980 million of this registration was still
available for issuance. To reduce exposure to fluctuations in interest rates,
the Financial Services companies pursue a policy of generally matching the
interest rate characteristics of their debt with their receivable portfolio. As
a part of this policy, the companies use interest-rate swaps and other hedging
instruments.
PACCAR believes its Financial Services companies have sufficient
financial capabilities to continue funding receivables and servicing debt
through internally generated funds, lines of credit and access to public and
private debt markets.
IMPACT OF RECENTLY ISSUED
ACCOUNTING RULES:
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," and No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," are effective beginning January 1, 1994. Adoption
of these standards will not have a material impact on the Company's financial
position or results of operations.
IMPACT OF ENVIRONMENTAL PROJECTS:
The Company, its competitors and industry in general are subject to various
federal, state and local requirements relating to the environment. The Company
believes its policies, practices and procedures are designed to prevent
unreasonable risk of environmental damage and that its handling, use and
disposal of hazardous or toxic substances have been in accordance with
environmental laws and regulations enacted at the time such use and disposal
occurred.
Expenditures were approximately $9 million in 1993, $10 million in 1992
and $12 million in 1991 for costs related to environmental activities. The
Company does not anticipate that the effects on future operations or cash flows
would be materially greater than recent experience.
The Company is involved in various stages of investigations and cleanup
actions related to environmental matters. In certain of these matters, the
Company has been designated as a Potentially Responsible Party by the U.S.
Environmental Protection Agency (EPA) or by a state-level environmental
agency. At certain of these sites the Company, together with other parties, is
participating with the EPA in cleanup studies and the determination of remedial
action.
The Company has provided for the estimated costs to complete cleanup
actions where it is probable that the Company will incur such costs and such
amounts can be reasonably estimated. At December 31, 1993, the reserve
established to provide for estimated future environmental cleanup costs was $27
million. The Company believes future recoveries from insurance carriers and
others could be significant; however, such potential recoveries do not
currently meet the criteria for recognition. While the timing and amount of the
ultimate net costs associated with environmental cleanup matters cannot be
determined, management does not expect that these matters will have a material
adverse effect on the Company's consolidated financial position.
24
<PAGE> 5
PACCAR Inc and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
(millions except per share data)
<S> <C> <C> <C>
MANUFACTURING:
Revenues
Net sales $ 3,378.9 $ 2,576.8 $ 2,159.6
Other 11.6 20.8 35.6
--------- --------- ---------
3,390.5 2,597.6 2,195.2
Costs and Expenses
Cost of sales 2,941.5 2,262.2 1,905.6
Selling, general and administrative 286.5 286.5 276.3
Interest 1.9 2.6 4.3
--------- --------- ---------
3,229.9 2,551.3 2,186.2
--------- --------- ---------
Manufacturing Income Before Income Taxes 160.6 46.3 9.0
FINANCIAL SERVICES:
Revenues 162.6 158.4 179.2
Costs and Expenses
Interest and other 77.7 84.0 106.4
Operating 35.5 34.6 29.8
Provision for losses on receivables 9.2 13.8 30.2
--------- --------- ---------
122.4 132.4 166.4
--------- --------- ---------
Financial Services Income Before Income Taxes 40.2 26.0 12.8
OTHER:
Investment income 17.9 18.0 25.3
Intercompany interest charged to Financial Services 1.1 1.3 1.3
--------- --------- ---------
Total Income Before Income Taxes 219.8 91.6 48.4
Income taxes 77.6 26.4 8.6
--------- --------- ---------
Income Before Cumulative Effect of Change in Accounting Method 142.2 65.2 39.8
Cumulative Effect of Change in Accounting Method 15.4
--------- --------- ---------
Net Income $ 142.2 $ 65.2 $ 55.2
========= ========= =========
Weighted average number of common shares outstanding 38.9 38.9 38.9
========= ========= =========
Per Share Data:
Income before cumulative effect of change in accounting method $ 3.66 $ 1.68 $ 1.02
Cumulative effect of change in accounting method .40
--------- --------- ---------
Net income $ 3.66 $ 1.68 $ 1.42
========= ========= =========
See notes to consolidated financial statements. 25
</TABLE>
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
December 31
<TABLE>
<CAPTION>
ASSETS 1993 1992
--------- ---------
(millions of dollars)
<S> <C> <C>
MANUFACTURING:
Current Assets
Cash and equivalents $ 206.2 $ 235.8
Trade receivables, net of allowance for losses
(1993 - $2.2 and 1992 - $3.0) 182.8 164.4
Marketable securities 235.7 214.3
Inventories 193.7 151.0
Deferred taxes and other current assets 57.0 49.2
--------- ---------
Total Manufacturing Current Assets 875.4 814.7
Investments and other 124.1 115.8
Property, plant and equipment, net 344.4 305.2
--------- ---------
Total Manufacturing Assets 1,343.9 1,235.7
--------- ---------
FINANCIAL SERVICES:
Cash and equivalents 17.0 14.6
Notes, contracts and other receivables,
net of allowance for losses (1993 - $32.9 and 1992 - $30.9) 2,024.6 1,625.1
Less unearned interest (155.9) (141.6)
--------- --------
1,868.7 1,483.5
Equipment on operating leases, net 47.9 45.6
Other assets 13.7 12.7
--------- ---------
Total Financial Services Assets 1,947.3 1,556.4
--------- ---------
$ 3,291.2 $ 2,792.1
26 ========== ==========
</TABLE>
<PAGE> 7
PACCAR Inc and Subsidiaries
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1993 1992
--------- ---------
(millions of dollars)
<S> <C> <C>
MANUFACTURING:
Current Liabilities
Accounts payable and accrued expenses $ 458.5 $ 403.8
Income taxes 21.3 2.5
Dividend payable 33.8 10.1
Other 2.0 3.6
--------- ---------
Total Manufacturing Current Liabilities 515.6 420.0
Long-term debt 11.7 12.5
Other 72.1 73.8
--------- ---------
Total Manufacturing Liabilities 599.4 506.3
--------- ---------
FINANCIAL SERVICES:
Accounts payable and accrued expenses 49.3 47.4
Commercial paper and bank loans 696.0 572.1
Deferred income taxes and other 129.9 133.5
Long-term debt 709.1 494.4
--------- ---------
Total Financial Services Liabilities 1,584.3 1,247.4
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, no par value - authorized 1,000,000 shares, none issued
Common stock, $12 par value - authorized 100,000,000 shares,
issued 38,856,574 shares 466.3 446.2
Additional paid-in capital 217.9 2.5
Retained earnings 468.6 741.2
Less treasury shares - at cost (110.4)
Foreign currency translation adjustment (45.3) (41.1)
--------- ---------
Total Stockholders' Equity 1,107.5 1,038.4
--------- ---------
$ 3,291.2 $ 2,792.1
========= =========
See notes to consolidated financial statements. 27
</TABLE>
<PAGE> 8
PACCAR Inc and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Number of Shares Millions of Dollars
----------------------- ---------------------------------------------------------------
Common Additional Treasury Foreign
Stock Treasury Common Paid-In Retained Stock Currency
Issued Stock Stock Capital Earnings At Cost Adjustment Total
---------- --------- ------ --------- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1990 37,167,848 3,360,455 $446.0 $ 2.0 $702.0 $(110.4) $(20.4) $1,019.2
Net income 55.2 55.2
Cash dividends
declared (37.2) (37.2)
Reissuance of
treasury stock (2,390) .1 .1
Stock options
exercised 12,538 .2 .4 .6
Foreign currency
translation
adjustment (5.6) (5.6)
---------- ---------- ------ ------ ------ ------- ------ --------
Balance,
December 31, 1991 37,180,386 3,358,065 446.2 2.5 720.0 (110.4) (26.0) 1,032.3
Net income 65.2 65.2
Cash dividends
declared (44.0) (44.0)
Foreign currency
translation
adjustment (15.1) (15.1)
---------- ---------- ------ ------ ------ ------- ------ --------
Balance,
December 31, 1992 37,180,386 3,358,065 446.2 2.5 741.2 (110.4) (41.1) 1,038.4
Net income 142.2 142.2
Cash dividends
declared (67.7) (67.7)
Purchase of
treasury stock 33,019 (1.2) (1.2)
Retirement of
treasury stock (3,391,084) (3,391,084) (40.7) (2.5) (68.4) 111.6
Foreign currency
translation
adjustment (4.2) (4.2)
Stock dividend
declared 5,067,272 60.8 217.9 (278.7)
---------- ---------- ------ ------ ------ ------- ------ --------
Balance,
December 31, 1993 38,856,574 -- $466.3 $217.9 $468.6 -- $(45.3) $1,107.5
========== ========== ====== ====== ====== ======= ====== ========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 9
PACCAR Inc and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(millions of dollars)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 142.2 $ 65.2 $ 55.2
Items included in net income not affecting cash:
Depreciation and amortization 56.7 52.3 55.3
Provision for losses on financial services receivables 9.2 13.8 30.2
Equity in net income of unconsolidated companies (8.1) (12.6) (23.0)
Deferred income tax benefit (9.4) (8.4) (4.9)
Cumulative effect of change in accounting method (15.4)
Other 1.7 .7 .9
Change in operating assets and liabilities:
(Increase) decrease in assets other than cash and equivalents:
Receivables (21.4) (27.9) 7.7
Inventories (44.7) (5.2) 39.5
Deferred taxes and other (4.6) 4.4 3.0
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 60.4 60.5 (15.3)
Income taxes 19.9 2.0 (1.5)
-------- ------- -------
Net Cash Provided by Operating Activities 201.9 144.8 131.7
INVESTING ACTIVITIES:
Loans and finance leases originated (1,059.0) (734.0) (548.4)
Collections on loans and finance leases 701.7 614.4 591.7
Net (increase) decrease in wholesale receivables (54.5) 23.3 46.5
Net change in marketable securities (21.4) (12.9) (52.9)
Purchase of property, plant and equipment (82.4) (81.5) (39.7)
Purchase of equipment for operating leases (26.9) (18.7) (11.6)
Proceeds from asset disposals 31.5 35.1 27.2
Other (15.5) (.3) 4.6
-------- ------- -------
Net Cash Provided by (Used in) Investing Activities (526.5) (174.6) 17.4
FINANCING ACTIVITIES:
Purchase of treasury shares (1.2)
Cash dividends (44.0) (37.2) (33.8)
Net increase in commercial paper and bank loans 118.2 23.0 4.3
Proceeds of long-term debt 390.7 295.7 188.6
Payments of long-term debt (167.6) (295.3) (342.7)
-------- ------- -------
Net Cash Provided by (Used in) Financing Activities 296.1 (13.8) (183.6)
Effect of exchange rate changes on cash 1.3 (.9) .1
-------- ------- -------
Net Decrease in Cash and Equivalents (27.2) (44.5) (34.4)
Cash and equivalents at beginning of year 250.4 294.9 329.3
-------- ------- -------
Cash and equivalents at end of year $ 223.2 $ 250.4 $ 294.9
======== ======= =======
29
</TABLE>
See notes to consolidated financial statements.
<PAGE> 10
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
A. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its domestic and foreign subsidiaries, all of which
are wholly owned. All significant intercompany accounts and transactions are
eliminated in consolidation.
Investments in VILPAC, S.A., a 49% owned Mexican affiliate, and Wood
Group ESP, Inc., a 21% owned U.S. investee, are stated at cost plus equity in
their undistributed net earnings, which represent the Company's equity in their
net assets.
Cash Equivalents: Cash equivalents consist of all short-term liquid
investments with a maturity at date of purchase of three months or less.
Marketable Securities: Marketable securities are recorded at cost plus
accrued interest which approximates market value.
Inventories: Inventories are stated at the lower of cost or market. Cost
of all inventories in the United Kingdom and the United States is determined
principally by the last-in, first-out (LIFO) method. Cost of all other
inventories is determined by the first-in, first-out (FIFO) method.
Goodwill: Goodwill is amortized on a straight-line basis for periods
ranging from 25 to 27 years. At December 31, 1993 and 1992, goodwill amounted
to $25.1 and $26.5 net of accumulated amortization of $8.0 and $6.7,
respectively. Amortization of goodwill totaled $1.3 in each of the years 1993
through 1991.
Property, Plant and Equipment: Property, plant and equipment are stated
at cost. Depreciation of plant and equipment is computed principally by the
straight-line method based upon the estimated useful lives of the various
classes of assets which range as follows:
Machinery and equipment 5-12 years
Buildings 30-40 years
Foreign Currency Translation: The Company conducts its foreign operations
primarily through wholly owned subsidiaries in Canada, Australia and the United
Kingdom, and through a 49% owned Mexican affiliate.
All foreign assets and liabilities are translated into U.S. dollars at
current exchange rates and all income statement amounts are translated at an
average of the month-end rates. Resulting gains and losses are deferred and
classified as a separate component of stockholders' equity.
Net translation and transaction losses included in net income were
immaterial for the three years ended December 31, 1993.
Environmental: Expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations and which do not contribute to current or
future revenue generation are expensed. Liabilities are recorded when it is
probable the Company will be obligated to pay amounts for environmental site
evaluation, remediation and related costs, and such amounts can be reasonably
estimated. Generally, the timing of these accruals coincides with the earlier
of completion of a feasibility study or the Company's commitment to a formal
plan of action.
Interest Income and Expense: Generally, income from net receivables and
direct financing leases is recognized using the interest (actuarial) method.
Intercompany interest income on cash advances to the financial services
companies is shown as a separate item in the income statement. The
corresponding interest expense is included as interest expense of the Financial
Services segment.
Interest-Rate Contracts: As part of its interest rate risk management
activities, PACCAR enters into interest-rate contracts which generally involve
the exchange of fixed- and floating-rate interest payment obligations without
the exchange of the underlying principal amounts. These contracts are used to
reduce the effect of interest rate fluctuations and to effectively change the
term of variable-rate debt to better match maturities of the Company's
receivables. Net amounts paid or received are reflected as adjustments to
interest expense.
Credit Losses: The provision for losses on notes, contracts and other
receivables is charged to income in an amount sufficient to maintain the
allowance for losses at a level considered adequate to cover anticipated
losses. Past due receivables are reviewed individually and charged to the
allowance when it has been determined that no recovery can reasonably be
expected, either through payment, liquidation of repossessed equipment or from
the proceeds of insurance.
Accounting Change: Effective January 1, 1993, the Company adopted
Financial Accounting Standard (FAS) No. 109, "Accounting for Income Taxes."
Adoption of
30
<PAGE> 11
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993,1992 and 1991 (millions of dollars)
this FAS did not have a material impact on the Company. See Note J
for further information.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1993 presentation.
B. INVENTORIES
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Inventories at FIFO cost:
Finished products $ 166.7 $ 150.0
Work in process and raw
materials 147.8 118.0
------- -------
314.5 268.0
Less excess of FIFO cost
over LIFO (120.8) (117.0)
------- -------
$ 193.7 $ 151.0
======= =======
</TABLE>
Inventories valued using the LIFO method comprised 85% and 84% of consolidated
inventories at FIFO cost at December 31, 1993 and 1992, respectively. Certain
inventory quantities were reduced, resulting in liquidations of LIFO inventory
quantities carried at the lower costs prevailing in prior years. The effects of
these liquidations increased net income approximately $.2 in 1993, $2.6 in 1992
and $6.1 in 1991.
C. NOTES, CONTRACTS AND OTHER
RECEIVABLES
The Company's notes, contracts and other receivables are as follows:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Retail notes and contracts $ 1,222.0 $ 853.0
Wholesale financing 150.0 96.2
Direct financing leases 669.5 693.3
Interest and other receivables 16.0 13.5
--------- ---------
2,057.5 1,656.0
Less allowance for losses (32.9) (30.9)
--------- ---------
2,024.6 1,625.1
Unearned interest:
Retail notes and contracts (76.7) (48.3)
Direct financing leases (79.2) (93.3)
--------- ---------
(155.9) (141.6)
--------- ---------
$ 1,868.7 $ 1,483.5
========= =========
</TABLE>
Terms for substantially all retail notes, contracts and direct financing
leases range up to 60 months. Wholesale financing receivables are generally due
within 12 months. Repayment experience indicates some receivables will be paid
prior to contracted maturity, while others will be extended or renewed.
Annual payments due on retail notes and contracts for the five years
beginning January 1, 1994, are $450.0, $354.5, $250.8, $127.3, $37.5 and $1.9
thereafter.
The Company's net investments in direct financing leases of
transportation equipment are as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Minimum lease payments
receivable $ 618.1 $ 651.0
Estimated residual value
of leased equipment 51.4 42.3
------- -------
669.5 693.3
Less unearned interest (79.2) (93.3)
------- -------
Net investment in direct
financing leases $ 590.3 $ 600.0
======= =======
</TABLE>
Annual minimum lease payments due on direct financing leases for the five
years beginning January 1, 1994, are $203.8, $165.4, $121.3, $74.3, $38.7 and
$14.6 thereafter.
The Company's customers are principally concentrated in the
transportation industry. Generally, financial services receivables are
collateralized by financed equipment.
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment include the following:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Land $ 22.7 $ 22.7
Buildings 293.6 280.3
Machinery and equipment 352.8 302.0
------- -------
669.1 605.0
Less allowance for depreciation (324.7) (299.8)
------- -------
$ 344.4 $ 305.2
======= =======
</TABLE>
31
<PAGE> 12
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
E. EQUIPMENT ON OPERATING LEASES
Equipment on operating leases is recorded at cost and is depreciated on the
straight-line basis to its estimated residual value. Estimated useful lives are
three to five years.
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Trucks and other $ 65.4 $ 64.4
Less allowance for depreciation (17.5) (18.8)
------ ------
$ 47.9 $ 45.6
====== ======
</TABLE>
Original terms of operating leases generally range up to 58 months.
Annual minimum lease payments due on operating leases for each year beginning
January 1, 1994, are $10.8, $7.9, $5.0, $1.2 and $.1 thereafter.
F. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses include the following:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Manufacturing:
Accounts payable $ 281.2 $ 235.9
Salaries and wages 57.5 48.2
Warranty and self-insurance
reserves 69.3 56.1
Other 50.5 63.6
------- -------
$ 458.5 $ 403.8
======= =======
Financial Services:
Accounts payable $ 36.7 $ 35.7
Salaries and wages .4 .3
Other 12.2 11.4
------- -------
$ 49.3 $ 47.4
======= =======
</TABLE>
G. UNCONSOLIDATED COMPANIES
A 49% owned affiliate, VILPAC, S.A., manufactures trucks in Mexico. A 21% owned
U.S. investee, Wood Group ESP, Inc., manufactures and services oilfield
equipment primarily in the United States. PACCAR's investments in these
unconsolidated companies are accounted for by the equity method. Summarized
financial information for these companies follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Current assets $ 156.4 $ 164.9 $ 133.9
Property, plant and
equipment and
other assets 29.8 26.1 14.2
Current liabilities 74.3 79.8 62.4
Noncurrent liabilities 2.0 9.9 13.8
Net sales 257.2 307.7 381.7
Cost of sales 210.2 247.7 289.6
PACCAR's share
of net assets $ 48.1 $ 43.5 $ 35.2
------- ------- -------
</TABLE>
PACCAR's share of unconsolidated companies net income is included in
other manufacturing revenues in the accompanying consolidated statements of
income.
In January 1994, the Company increased its ownership interest in VILPAC,
S.A. to 55%.
H. RETIREMENT PLANS
The Company has several defined benefit pension plans, including
union-negotiated and multi-employer plans, which cover substantially all
employees. Benefits under the plans are generally based on an employee's
highest compensation levels and total years of service. The Company's policy is
to fund its plans based on legal requirements, tax considerations, local
practices and investment opportunities.
Pension expense for all plans was $10.0 in 1993, $8.0 in 1992 and $7.2
in 1991.
The following data relates to all plans of the Company except for certain
union-negotiated and supplemental retirement plans. For all years presented,
the plan obligation discount rates and expected long-term rates of return on
assets were 8.0%, and the assumed annual rates of increase in future
compensation were 5.75%.
32
<PAGE> 13
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Funded status at
December 31:
Vested benefit
obligation $ 165.1 $ 150.3 $ 142.4
Accumulated
benefit
obligation 167.0 153.6 145.5
======= ======= =======
Plan assets at
fair value $ 248.2 $ 216.0 $ 209.5
Projected benefit
obligation 208.5 183.5 175.0
------- ------- -------
Excess of
plan assets 39.7 32.5 34.5
Unrecognized
net asset (15.2) (20.7) (17.1)
Unrecognized net
experience gain (30.5) (23.2) (26.5)
Unrecognized prior
service cost 8.3 9.8 9.5
------- ------- -------
Pension (liability)/
prepaid expense $ 2.3 $ (1.6) $ .4
======= ======= =======
Components of
pension expense:
Service cost $ 9.6 $ 8.1 $ 7.5
Interest cost 15.4 13.6 12.6
Return on assets (28.1) (12.8) (31.0)
Net amortization
and deferrals 8.4 (4.7) 14.6
------- ------- -------
Net pension
expense $ 5.3 $ 4.2 $ 3.7
======= ======= =======
</TABLE>
The Company has unfunded supplemental retirement plans for employees
whose benefits under principal salaried retirement plans are reduced because of
compensation deferral elections or limitations under federal tax laws. Pension
expense for these plans was $1.2 in 1993, $1.1 in 1992 and $1.0 in 1991. At
December 31, 1993, the projected benefit obligation for these plans was $8.3. A
corresponding accumulated benefit obligation of $7.2 has been recognized as a
liability in the balance sheet and is equal to the amount of vested benefits.
The Company has unfunded postretirement medical and life insurance plans
covering approximately one-half of all U.S. employees which reimburse retirees
for approximately 50% of their medical costs from retirement to age 65 and
provide a nominal death benefit. Effective January 1, 1992, the Company adopted
Financial Accounting Standard (FAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The net unrecorded accumulated
postretirement benefit obligation (APBO) at adoption was $10.1, which is being
recognized over 20 years.
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Components of
retiree expense:
Service cost $ .8 $ .7
Interest cost 1.2 1.1
Amortization of transition
obligation .5 .5
----- -----
Net retiree expense $ 2.5 $ 2.3
===== =====
</TABLE>
In 1991, the Company recognized net retiree expense of $2.4 prior to the
adoption of FAS No. 106.
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Unfunded status
at December 31:
Accumulated benefits:
Actives not eligible to retire $10.5 $ 8.9
Actives eligible to retire 2.8 2.6
Retirees 3.9 4.5
----- -----
$17.2 $16.0
Unrecognized net loss (1.1) (1.1)
Unrecognized transition
obligation (8.4) (8.9)
----- -----
Accrued postretirement
benefits $ 7.7 $ 6.0
</TABLE> ===== =====
A discount rate of 8% and a long-term medical inflation rate of 7% were
used in calculating the APBO. A 1% increase in the medical inflation rate
assumption would increase the APBO as of December 31, 1993, by approximately
$2.1 and the 1993 expense provision by approximately $.3.
33
<PAGE> 14
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions except per share data)
I. OTHER BENEFIT PLANS
The Company has a savings investment plan whereby it matches employee
contributions of 2% to 5% of base wages. Provisions for this plan and for
incentive compensation (for numerous key employees) and profit-sharing plans
were $17.7 in 1993, $15.3 in 1992 and $15.4 in 1991.
In 1992, the Company began a new long-term incentive compensation plan.
The plan provides for grants of cash, stock, stock rights and various types of
stock options to key employees. This plan, which replaced a similar plan that
expired in 1991, provides that stock options on approximately one million
common shares may be granted and that stock appreciation rights (SARs) may be
granted in tandem with all or any part of the options granted. SARs may be
exercised in lieu of related stock options. Stock options
may be granted with an exercise price not less than 85% of the market
value of common stock at the time of grant. All options granted prior to 1991
included a SAR; option grants beginning in 1991 did not. The plans contain
anti-dilution provisions. Consequently, the following option data has been
restated to reflect the Company's 15% stock dividend.
<TABLE>
<CAPTION>
Average
Number Price
------- -------
<S> <C> <C>
Outstanding at
December 31, 1990 102,564 $ 26.70
Granted 27,008 30.12
SARs exercised (8,384) 29.40
Stock options exercised (14,419) 18.83
Canceled (5,538) 31.54
------- -------
Outstanding at
December 31, 1991 101,231 28.13
Granted 25,450 43.20
SARs exercised (35,394) 23.26
Canceled (3,190) 32.96
------- -------
Outstanding at
December 31, 1992 88,097 34.26
Granted 24,109 46.64
SARs exercised (13,818) 31.35
Canceled (1,702) 44.65
------- -------
Outstanding at
December 31, 1993 96,686 $ 37.77
------- -------
Total Options Exercisable
at December 31, 1993 49,404 $ 30.95
======= =======
</TABLE>
Deferred compensation payable in shares of PACCAR common stock under
provisions of the long-term incentive compensation plan amounted to 56,255
shares at December 31, 1993.
The provisions for the cost of long-term incentive compensation plans
were $2.4 in 1993, $1.5 in 1992 and $2.8 in 1991.
J. INCOME TAXES
<TABLE>
<CAPTION>
1993 1992 1991
------- ------ ------
<S> <C> <C> <C>
Income before
income taxes:
Domestic $ 178.9 $ 73.2 $ 29.0
Foreign 40.9 18.4 19.4
------- ------ ------
$ 219.8 $ 91.6 $ 48.4
======= ====== ======
Provision for
income taxes:
Current provision:
Federal $ 66.5 $ 26.9 $ 11.8
Foreign 12.7 4.4 (.2)
State 7.8 3.5 1.9
------- ------ ------
87.0 34.8 13.5
Deferred provision
(benefit):
Federal and state (9.2) (6.9) (6.3)
Foreign (.2) (1.5) 1.4
------ ------ ------
(9.4) (8.4) (4.9)
------ ------ ------
$ 77.6 $ 26.4 $ 8.6
====== ====== ======
Reconciliation of
statutory U.S. tax
to actual provision:
Statutory rate 35% 34% 34%
Statutory tax $ 76.9 $ 31.1 $ 16.4
Effect of:
Rate increase on
deferred taxes 2.2
State income taxes 5.2 2.4 1.2
Equity method
earnings (2.9) (4.2) (7.2)
Foreign tax rates 1.3 1.6 1.7
FSC benefit (1.6) (1.5) (1.0)
Tax-exempt income (4.2) (4.2) (4.6)
Other .7 1.2 2.1
------ ------ ------
$ 77.6 $ 26.4 $ 8.6
====== ====== ======
</TABLE>
34
<PAGE> 15
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
<TABLE>
<CAPTION>
December 31, 1993
-----------------
<S> <C>
Components of deferred tax assets
(liabilities):
Assets:
Provisions for accrued expenses $ 66.2
Allowance for losses on receivables 11.7
Other 12.9
-------
90.8
Liabilities:
Asset capitalization and depreciation (23.6)
Financing and leasing activities (121.5)
Other (8.0)
-------
(153.1)
-------
Net deferred tax liability $ (62.3)
=======
Classification of deferred tax assets and
liabilities:
Manufacturing:
Deferred taxes and other current assets $ 39.5
Investments and other 4.4
Financial Services:
Deferred income taxes and other (106.2)
-------
Net deferred tax liability $ (62.3)
========
</TABLE>
The components of the Company's deferred tax assets and liabilities as of
December 31, 1992, computed in accordance with FAS No. 96, were comparable to
the assets and liabilities as of December 31, 1993, computed in accordance with
FAS No. 109.
In 1991, the Company adopted Financial Accounting Standard (FAS) No. 96,
"Accounting for Income Taxes." The most significant effect of adoption was to
reduce the rates at which deferred tax liabilities were previously recognized
on the balance sheet to the lower rate specified by current federal tax laws.
The cumulative effect of the accounting change relating to periods prior to
January 1, 1991, amounted to $15.4 and is included in 1991 net income. In 1993,
the Company adopted FAS No. 109, also entitled "Accounting for Income Taxes."
The cumulative effect of the change from FAS No. 96 and the effect on
continuing operations were immaterial.
United States income taxes are not provided on undistributed earnings of
the Company's foreign subsidiaries because of the intent to reinvest these
earnings. The amount of undistributed earnings, which are considered to be
indefinitely reinvested, is approximately $128.6 at December 31, 1993. While
the amount of any federal income taxes on these reinvested earnings, if
distributed in the future, is not presently determinable, it is anticipated
that such taxes would be reduced by utilization of tax credits and deductions.
With respect to the Company's Mexican affiliate, U.S. taxes were provided on
earnings expected to be distributed.
Cash paid for income taxes was $70.7 in 1993, $30.9 in 1992 and $19.4
in 1991.
35
<PAGE> 16
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
K. LONG-TERM DEBT
<TABLE>
<CAPTION>
Manufacturing: 1993 1992
------ ------
<S> <C> <C>
Industrial Revenue Bonds
- Variable rate $ 9.0 $ 9.0
Capital lease obligations 3.3 3.8
Mortgage notes
payable - 8.8% .3
Less current installments (.6) (.6)
------ ------
$ 11.7 $ 12.5
====== ======
</TABLE>
The interest rate on the industrial revenue bonds is variable and was 3.0% at
December 31, 1993.
Annual maturities including capital leases for the five years beginning
January 1, 1994, are $.6, $.5, $.5, $.4 and $.3, respectively.
<TABLE>
<CAPTION>
Financial Services: 1993 1992
------ ------
<S> <C> <C>
Medium-Term Notes
- 4.1% to 9.3% fixed $364.1 $230.5
- Variable rate 260.0 154.0
Notes payable to banks
- 4.8% to 15.4% 80.3 96.3
Notes payable to insurance
companies - 9.4% 1.0 8.9
Equipment trust
certificates - 14.5% 3.7 4.7
------ ------
$709.1 $494.4
====== ======
</TABLE>
Interest rates on the variable-rate medium-term notes are based on
various indices requested by the investors such as the LIBOR and prime rate.
These notes are generally matched with interest-rate swaps which convert the
effective rates to fixed rates or other floating-rate indices.
Annual maturities for the five years beginning January 1, 1994, are
$261.2, $228.0, $145.3, $64.6 and $10.0, respectively.
At December 31, 1993, there were no restrictions on distributions of
unremitted earnings by the financial services companies to the parent under
terms of the most restrictive loan agreement provisions.
The Company paid cash for interest of $63.9 in 1993, $74.7 in 1992 and
$102.3 in 1991.
The Company enters into various interest-rate contracts including
interest-rate swap, cap and forward-rate agreements. At December 31, 1993, the
Company had 68 interest-rate contracts outstanding with other financial
institutions. The notional amount of these contracts totaled $733.9, with
amounts expiring annually over the next five years. The notional amount is used
to measure the volume of these contracts and does not represent exposure to
credit loss. In the event of default by a counterparty, the risk in these
transactions is the cost of replacing the interest-rate contract at current
market rates. The Company continually monitors its positions and the credit
ratings of its counterparties. Management believes the risk of incurring
losses is remote, and that if incurred, such losses would be immaterial.
L. CREDIT ARRANGEMENTS
The Company has line of credit arrangements of $417.7 which are reviewed
annually for renewal. The unused portion of these credit lines was $389.8 at
December 31, 1993, of which the majority is maintained to support commercial
paper and other short-term borrowings of the financial services companies.
Compensating balances are not required on the lines and service fees are
immaterial.
M. COMMITMENTS AND CONTINGENCIES
The Company is involved in various stages of investigations and cleanup actions
related to environmental matters. In certain of these matters, the Company has
been designated as a Potentially Responsible Party by the U.S. Environmental
Protection Agency or by a state-level environmental agency. The Company has
provided for the estimated costs to investigate and complete cleanup actions
where it is probable that the Company will incur such costs in the future.
At December 31, 1993, the reserve established to provide for estimated
future environmental cleanup costs was $27.4. While neither the timing nor the
amount of the ultimate costs associated with environmental matters can be
determined, management does not expect that these matters will have a material
adverse effect on the Company's consolidated financial position.
At December 31, 1993, PACCAR had standby letters of credit outstanding
totaling $28.6, which guarantee various insurance and financing activities.
36
<PAGE> 17
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
N. LEASES
The Company leases most store locations for its automotive parts sales
operations and various other office space under operating leases. Leases expire
at various dates through the year 2018.
Annual minimum rental payments due under operating leases beginning
January 1, 1994, are $7.9, $7.2, $5.9, $3.8, $2.5 and $8.4 thereafter.
Minimum payments on leases have not been reduced by aggregate minimum
sublease rentals of $6.6 receivable under non-cancelable subleases.
The Company has operating leases which, in addition to minimum annual
rentals, provide for additional rental payments based on sales and certain
expenses.
Total rental expenses under all leases were:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Minimum rentals $13.6 $14.6 $15.6
Percentage rentals .6 .8 1.2
Sublease rentals (1.1) (.9) (.8)
----- ----- -----
Total rental expenses $13.1 $14.5 $16.0
===== ===== =====
</TABLE>
O. STOCKHOLDERS' EQUITY
Stockholder Rights Plan: The plan provides one right for each share of PACCAR
common stock outstanding. Rights generally become exercisable if a person
publicly announces the intention to acquire 10% or more of PACCAR's common
stock or if a person (Acquiror) acquires such amount of common stock. In all
cases, rights held by the Acquiror are not exercisable. When exercisable, each
right entitles the holder to purchase for one hundred fifty dollars from PACCAR
a fractional share of newly designated Series A Junior Participating Preferred
Stock. Each such fractional preferred share has dividend, liquidation and
voting rights which are no less than those for a share of common stock. Under
certain circumstances the rights may become exercisable for shares of PACCAR
common stock or common stock of the Acquiror having a market value equal to
twice the exercise price of the right. Also under certain circumstances, the
Board of Directors may exchange exercisable rights, in whole or in part, for
one share of PACCAR common stock per right. The rights, which expire in the
year 2000, may be redeemed at one cent per right, subject to certain
conditions. For this plan, 50,000 preferred shares are reserved for issuance.
No shares have been issued.
Stock Repurchases: Pursuant to an escrow agreement covering certain
liabilities in connection with the acquisition of Al's Auto Supply in 1987, the
Company received 33,019 shares of its own common stock on May 11, 1993. This
was accounted for as a treasury stock transaction in the amount of $1.2.
Other Capital Stock Changes: On December 14, 1993, the Board of Directors
declared a resolution to retire the 3,391,084 treasury shares of the Company's
common stock. In a subsequent resolution, the Board declared a 15% common stock
dividend payable on or before February 15, 1994, to stockholders of record on
January 10, 1994, with fractional shares to be paid in cash. This resulted in
the issuance of 5,067,272 additional shares and 1,123.3 fractional shares paid
in cash. For all years presented in this report, all share data has been
restated for the effect of the 15% dividend.
37
<PAGE> 18
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
P. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in determining
its fair value disclosures for financial instruments:
Cash and equivalents: The carrying amount reported in the balance sheet
approximates fair value.
Marketable securities: Marketable securities consist of debt
securities. Fair values are based on quoted market prices.
Financial Services net receivables: For variable-rate loans, including
wholesale financings that reprice frequently with no significant change in
credit risk, fair values are based on carrying values. For fixed-rate loans,
fair values are estimated using discounted cash flow analyses based on interest
rates currently being offered for loans with similar terms to borrowers of
similar credit quality. The carrying amount of accrued interest and other
receivables approximates its fair value. Direct financing lease receivables and
the related loss provisions are not included in net receivables.
Short- and long-term debt: The carrying amount of the Company's
commercial paper and short-term bank borrowings and floating-rate long-term
debt approximates its fair value. The fair value of the
Company's fixed-rate long-term debt is estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
Off-balance-sheet instruments: Fair values for the Company's
interest-rate contracts are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing.
The carrying amounts of trade payables and receivables approximate their
fair value and have been excluded from the accompanying table.
The carrying amounts and fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
Carrying Fair
1993 Amount Value
- ---- -------- --------
<S> <C> <C>
Manufacturing:
Cash and equivalents $ 206.2 $ 206.2
Marketable securities 235.7 238.5
Short-term debt 1.7 1.7
Long-term debt 9.0 9.0
Financial Services:
Cash and equivalents 17.0 17.0
Net receivables 1,321.8 1,332.6
Commercial paper and
bank loans 696.0 696.0
Long-term debt 709.1 713.7
</TABLE>
The Company's off-balance-sheet financial instruments, consisting
primarily of interest-rate agreements, represented an additional liability of
$3.7 if recorded at fair value at December 31, 1993.
<TABLE>
<CAPTION>
Carrying Fair
1992 Amount Value
- ---- -------- --------
<S> <C> <C>
Manufacturing:
Cash and equivalents $ 235.8 $ 235.8
Marketable securities 214.3 217.2
Short-term debt 1.3 1.3
Long-term debt 9.3 9.3
Financial Services:
Cash and equivalents 14.6 14.6
Net receivables 918.8 930.7
Commercial paper and
bank loans 580.4 580.4
Long-term debt 494.4 504.9
</TABLE>
The Company's off-balance-sheet financial instruments, consisting
primarily of interest-rate agreements, represented an additional liability of
$6.4 if recorded at fair value at December 31, 1992.
38
<PAGE> 19
PACCAR Inc and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991 (millions of dollars)
Q. GEOGRAPHIC AREA AND INDUSTRY SEGMENT DATA
PACCAR operates in three principal industries: Trucks, Auto Parts and
Financial Services. The Truck segment is composed of the manufacture of trucks
and related parts which are sold through a network of company-appointed
dealers. Auto Parts is composed of automotive parts sales and related services
sold through company-operated retail stores. The Financial Services segment is
composed of finance and leasing services provided to truck customers and
dealers. Sales among the industry segments and among geographic areas were
insignificant.
<TABLE>
<CAPTION>
Geographic Area Data 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Revenues:
United States $2,999.3 $2,337.4 $2,014.4
Canada 340.1 236.5 195.6
Other 213.7 182.1 164.4
-------- -------- --------
$3,553.1 $2,756.0 $2,374.4
======== ======== ========
Income before taxes:
United States $ 199.8 $ 80.9 $ 43.8
Canada 21.7 5.7 4.4
Other 24.0 20.7 25.2
Corporate expenses (44.7) (35.0) (51.6)
Investment income 17.9 18.0 25.3
Intercompany interest 1.1 1.3 1.3
-------- -------- --------
$ 219.8 $ 91.6 $ 48.4
======== ======== ========
Identifiable assets:
United States $2,341.2 $1,900.7 $1,767.7
Canada 197.0 181.3 206.5
Other 229.6 182.8 187.0
Cash and Marketable
Securities 441.9 450.1 481.0
Corporate 81.5 77.2 95.4
-------- -------- --------
$3,291.2 $2,792.1 $2,737.6
======== ======== ========
Export revenues of
U.S. companies $ 145.1 $ 148.9 $ 128.7
======== ======== ========
Industry Segment Data 1993 1992 1991
-------- -------- --------
Revenues:
Truck $3,130.9 $2,322.7 $1,891.2
Auto Parts 172.9 174.4 194.7
Financial Services 162.6 158.4 179.2
Other 86.7 100.5 109.3
-------- -------- --------
$3,553.1 $2,756.0 $2,374.4
======== ======== ========
Income before taxes:
Truck $ 194.0 $ 77.9 $ 58.4
Auto Parts 2.2 (4.6) (8.0)
Financial Services 40.2 26.0 12.8
Other 9.1 8.0 10.2
Corporate expenses (44.7) (35.0) (51.6)
Investment income 17.9 18.0 25.3
Intercompany interest 1.1 1.3 1.3
-------- -------- --------
$ 219.8 $ 91.6 $ 48.4
======== ======== ========
Depreciation and amortization:
Truck $ 27.7 $ 24.1 $ 24.9
Auto Parts 5.4 4.8 5.1
Financial Services 13.8 13.4 14.2
Other 3.7 4.4 5.2
Corporate 6.1 5.6 5.9
-------- -------- --------
$ 56.7 $ 52.3 $ 55.3
======== ======== ========
Capital expenditures:
Truck $ 72.8 $ 60.7 $ 29.2
Auto Parts 1.2 7.1 4.9
Financial Services 27.0 19.8 12.3
Other 2.7 3.0 3.6
Corporate 5.6 9.6 1.3
-------- -------- --------
$ 109.3 $ 100.2 $ 51.3
======== ======== ========
Identifiable assets:
Truck $ 647.8 $ 531.3 $ 450.4
Auto Parts 98.8 105.3 106.7
Financial Services 1,947.3 1,556.4 1,523.0
Other 73.9 71.8 81.1
Cash and Marketable
Securities 441.9 450.1 481.0
Corporate 81.5 77.2 95.4
-------- -------- --------
$3,291.2 $2,792.1 $2,737.6
======== ======== ========
</TABLE>
39
<PAGE> 20
PACCAR Inc and Subsidiaries
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors and Stockholders
PACCAR Inc
We have audited the accompanying consolidated balance sheets of PACCAR Inc and
subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PACCAR Inc and
subsidiaries at December 31, 1993 and 1992, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note J to the consolidated financial statements, in 1991
the Company changed its method of accounting for income taxes.
/s/ERNST & YOUNG
Seattle, Washington
February 4, 1994
40
<PAGE> 21
PACCAR Inc and Subsidiaries
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
First Second Third Fourth
------- -------- -------- -------
(millions except per share data)
<S> <C> <C> <C> <C>
1993
Net Sales $ 761.4 $ 838.0 $ 884.1 $ 895.4
Gross Profit 93.1 102.7 117.1 124.5
Financial Services Income Before Income Taxes 9.2 9.7 10.1 11.2
Net Income 27.4 32.8 36.5 45.5
Weighted Average Number of Common Shares Outstanding 38.9 38.9 38.9 38.9
Net Income Per Share $ .70 $ .85 $ .94 $ 1.17
------- -------- -------- -------
1992
Net Sales $ 588.7 $ 572.5 $ 683.6 $ 732.0
Gross Profit 65.0 69.8 80.5 99.4
Financial Services Income Before Income Taxes 3.8 5.9 7.5 8.8
Net Income 10.8 11.1 18.2 25.1
Weighted Average Number of Common Shares Outstanding 38.9 38.9 38.9 38.9
Net Income Per Share $ .28 $ .28 $ .47 $ .65
------- -------- -------- -------
</TABLE>
Weighted average shares and net income per share have been restated to give
effect to a 15% stock dividend declared in 1993. Fourth quarter 1992 net income
includes an after-tax charge of $6.6 for relocation of the Peterbilt Motors
divisional headquarters.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(millions except per share data)
<S> <C> <C> <C> <C> <C>
Net Sales $3,378.9 $2,576.8 $2,159.6 $2,587.4 $3,331.1
Financial Services Revenue 162.6 158.4 179.2 205.6 207.9
Net Income 142.2 65.2 55.2 63.7 241.9
Total Assets:
Manufacturing 1,343.9 1,235.7 1,214.6 1,234.5 1,344.0
Financial Services 1,947.3 1,556.4 1,523.0 1,671.7 1,723.2
Long-Term Debt:
Manufacturing 11.7 12.5 25.2 30.2 33.2
Financial Services 709.1 494.4 483.7 632.3 672.3
Stockholders' Equity 1,107.5 1,038.4 1,032.3 1,019.2 1,007.3
Per Common Share:
Net Income $ 3.66 $ 1.68 $ 1.42 $ 1.59 $ 6.00
Cash Dividends Declared 1.74 1.13 .96 .87 2.17
</TABLE>
All per share amounts have been restated to give effect to a 15% stock dividend
declared in 1993. Net income for 1991 includes a cumulative effect adjustment
for a change in the method of accounting for income taxes of $15.4 million
after-tax ($.40 per share). Net income for 1989 includes a $52.4 million
after-tax gain from sale of a division and a fleet of railcars.
41
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES AND AFFILIATE OF THE REGISTRANT
<TABLE>
<CAPTION>
State or
Country of Names Under Which
Name* Incorporation Subsidiaries Do Business
- ---------------------------- ------------- ------------------------
<S> <C> <C>
PACCAR of Canada Ltd. Canada PACCAR of Canada Ltd.
Canadian Kenworth Co.
Peterbilt of Canada
PACCAR Australia Pty. Ltd. Australia PACCAR Australia Pty. Ltd.
Kenworth Trucks
PACCAR U.K. Ltd. Delaware PACCAR U.K. Ltd.
Foden Trucks
VILPAC S.A. (Affiliate) Mexico VILPAC S.A.
Kenworth Mexicana S.A. de C.V.
KENPAR S.A. de C.V.
KENFABRICA, S.A. de C.V.
KENCOM, S.A. de C.V.
PACCAR Financial Corp. Washington PACCAR Financial Corp.
PACCAR Financial Services Ltd. Canada PACCAR Financial Services Ltd.
PACCAR Leasing Corporation Delaware PACCAR Leasing Corporation
PacLease
RAILEASE Inc Washington RAILEASE Inc
Trico Industries, Inc. California Trico Industries, Inc.
PACCAR Sales North America, Inc. Delaware PACCAR Sales North America
PACCAR Automotive, Inc. Washington Grand Auto
Al's Auto Supply
</TABLE>
* The names of some subsidiaries have been omitted. Considered in the
aggregate, omitted subsidiaries would not constitute a significant
subsidiary.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of PACCAR Inc of our report dated February 4, 1994, included in the 1993 Annual
Report to Shareholders of PACCAR Inc.
Our audits also included the consolidated financial statement schedules of
PACCAR Inc listed in item 14(a). These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 2-83673) pertaining to the 1981 Long-Term Incentive Plan and in
the Registration Statement (Form S-8 No. 33-47763) pertaining to the 1991
Long-Term Incentive Plan of PACCAR Inc of our report dated February 4, 1994,
with respect to the consolidated financial statements and schedules of PACCAR
Inc incorporated by reference in the Annual Report (Form 10-K) for the year
ended December 31, 1993.
/s/ERNST & YOUNG
Seattle, Washington
March 24, 1994
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned directors of PACCAR Inc, a Delaware corporation
(the "Company"), hereby severally constitute and appoint C. M. Pigott our true
and lawful attorney-in-fact, with full power to sign for us in our names and in
our capacity as director, the Company's Annual Report on Form 10-K for the year
ending December 31, 1993, to be filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, each of the undersigned has executed this power of
attorney as of this 14th day of December 1993.
/s/ R. P. Cooley /s/ D. J. Hovind
- -------------------------------- --------------------------------
R. P. Cooley D. J. Hovind
Director, PACCAR, Inc Director, PACCAR Inc
/s/ John M. Fluke, Jr. /s/ James C. Pigott
- -------------------------------- --------------------------------
J. M. Fluke, Jr. J. C. Pigott
Director, PACCAR Inc Director, PACCAR Inc
/s/ C. H. Hahn /s/ John W. Pitts
- -------------------------------- --------------------------------
C. H. Hahn J. W. Pitts
Director, PACCAR Inc Director, PACCAR Inc
/s/ H. J. Haynes /s/ James H. Wiborg
- -------------------------------- --------------------------------
H. J. Haynes J. H. Wiborg
Director, PACCAR Inc Director, PACCAR Inc