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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 [No Fee Required]
For the fiscal year ended December 31, 1996
Commission File No. 0-6394
PACCAR INC
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(Exact name of Registrant as specified in its charter)
Delaware 91-0351110
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(State of incorporation) (I.R.S. Employer Identification No.)
777 - 106th Ave. N.E., Bellevue, Washington 98004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (206) 455-7400
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $12 par value
Preferred Stock Purchase Rights
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(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. [x]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1997:
Common Stock, $12 par value -- $2,300,042,588
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The number of shares outstanding of the issuer's classes of common stock, as of
February 28, 1997:
Common Stock, $12 par value -- 38,884,797 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1996 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual stockholders meeting to be held
on April 29, 1997 are incorporated by reference into Part III.
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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 United States, 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 trucks through wholly
owned foreign subsidiary companies in Canada, Australia, and Mexico, and, in the
United Kingdom, through a wholly owned U.S. subsidiary. An export sales division
generally is responsible for export sales.
Effective November 15, 1996 the Company purchased all outstanding shares of
DAF Trucks N.V. (DAF), a Netherlands corporation. In addition to its Netherlands
plant and headquarters, DAF manufactures cabs and axles at a plant located in
Belgium. DAF has wholly owned foreign sales subsidiaries located in the country
of export which generally handle export sales.
Product financing and leasing is offered through subsidiaries located in North
America, Australia, and the United Kingdom. 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 pages
38 and 39 of the Annual Report to Stockholders for the year ended December 31,
1996 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 distribution of 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.
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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). DAF designs and manufactures
heavy commercial vehicles under the DAF nameplate. These vehicles, which are
built in four plants in the United States, three in Europe and one each in
Australia, Canada, 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 87% of total
1996 revenues.
The Company competes in the North American Class 6/7 markets primarily with
conventional models. These medium-duty trucks are assembled at VILPAC, the
Company's Mexican subsidiary in Mexicali, Mexico. This line of business
represents a small, but increasing, percentage of the Company's North American
sales to date. In the Netherlands, DAF manufactures Class 6/7 cab-over-engine
trucks for sale throughout Europe. DAF is the exclusive distributor in Europe
for Class 4/5 cab-over-engine trucks manufactured by Leyland Trucks Ltd. in the
United Kingdom.
Trucks and related parts are sold to independent dealers for resale. The
Company's U.S. and Canadian independent dealer network consists of approximately
430 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 33 dealers. Trucks manufactured in Australia, Mexico, the Netherlands and the
United Kingdom are marketed domestically through independent dealers and factory
branches. Trucks manufactured in these countries for export are also marketed by
PACCAR International with the exception of DAF, which handles export sales
primarily through wholly owned foreign subsidiaries located generally in the
European Community and Eastern Europe.
The Company's trucks are essentially custom products and have a reputation for
high quality. For a majority of PACCAR's truck operations, 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. DAF, which is more vertically integrated, manufactures
its own engines and axles.
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 significant component. No significant shortages of materials or
components were experienced in 1996 and none are expected in 1997. 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 Company's parts divisions. Parts are both manufactured by
PACCAR and purchased from various suppliers. Replacement parts inventory levels
are determined largely by anticipated customer demand and the need for timely
delivery.
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There were six principal competitors in the U.S. Class 8 truck market in
1996. PACCAR's share of that market was approximately 21% of registrations in
1996. There were also six principal competitors in the European medium and heavy
commercial vehicle market in 1996, including parent companies to three
competitors of PACCAR in the United States. PACCAR's subsidiary, DAF, had a nine
percent overall market share in Western Europe. These markets are 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, DAF 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 1996 was $1.4 billion. This
compares with approximately $2 billion at year-end 1995. Production of the
year-end 1996 backlog is expected to be completed during 1997.
The number of persons employed by the Company in its truck business at
December 31, 1996 was approximately 13,000.
OTHER MANUFACTURED PRODUCTS
Other products manufactured by the Company account for 3% of total 1996
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 marketed under the Trico, Kobe, Unidraulic and
Oilmaster nameplates through the Company's wholly owned subsidiary, Trico. 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, Kobe, Unidraulic and Oilmaster 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 4% of total 1996 revenues, through 128 retail locations under
the names of Grand Auto and Al's Auto Supply. These locations are supplied from
the Company's distribution warehouses.
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FINANCE COMPANIES
In North America, Australia and the United Kingdom, the Company provides
financing principally for its manufactured trucks through five wholly owned
finance companies. These companies provide inventory financing for independent
dealers selling PACCAR products and retail and lease financing for new and used
Class 6, 7 and 8 trucks and other transportation equipment sold by its
independent dealers. Customer contracts are secured by the products financed.
LEASING COMPANIES
PACCAR Leasing Corporation (PLC), a wholly owned subsidiary, franchises
selected PACCAR truck dealers in North America 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. The subsidiary also operates
full service leasing operations primarily in Texas on its own behalf.
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.
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 $47 million in 1996, $37
million in 1995 and $35 million in 1994.
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 international, 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.
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EMPLOYEES
On December 31, 1996, the Company employed a total of approximately 17,000
persons.
ITEM 2. PROPERTIES
The Company and its subsidiaries own and operate manufacturing plants in five
U.S. states, three locations in Europe, and one each in Australia, Canada and
Mexico. 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. DAF operates sales subsidiaries in owned or leased
premises in various countries throughout Europe. 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. In March, 1996 the
Company announced that it would cease manufacturing operations at its Seattle
plant in April, 1996. This facility continues to be used for warehousing of
inventories. It is not included as a manufacturing plant in the table below.
PACCAR also announced the closure of its Canadian truck plant for economic
reasons. Subsequent to the closure, PACCAR was approached by Canadian government
and labor union officials regarding the possibility of reopening the plant.
Negotiations with these parties are currently underway. While the Company is
hopeful that final agreements will be signed in 1997, there is no assurance that
this will occur. The Canadian plant is shown as a truck manufacturing facility
in the accompanying table; however, no production occurred at the Canadian
location in 1996. The Company's remaining manufacturing facilities operated near
their productive capacities for most of 1996.
Geographical locations of manufacturing plants within indicated industry
segments are as follows:
U.S. Canada Australia Mexico Europe
Trucks 4 1 1 1 3
Other 4 - - - -
Properties located in Gardena, Torrance, and Huntington Park, California;
Bradford, Pennsylvania; Seattle, Washington and Surrey, British Columbia, Canada
are being held for sale. These properties were originally obtained principally
as a result of business acquisitions in 1987 and 1988.
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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 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Common Stock Market Prices and Dividends on page 40 of the Annual Report to
Stockholders for the year ended December 31, 1996 are incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 41 of the Annual Report to Stockholders for
the year ended December 31, 1996 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, 1996 is incorporated herein by reference.
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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, 1996 are incorporated herein by reference:
Consolidated Balance Sheets
-- December 31, 1996 and 1995
Consolidated Statements of Income
-- Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity
-- Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows
-- Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
-- December 31, 1996, 1995 and 1994
Quarterly Results (Unaudited) on page 41 of the Annual Report to Stockholders
for the years ended December 31, 1996 and 1995 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.
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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 29, 1997 is incorporated
herein by reference.
Item 401(b) of Regulation S-K:
Executive Officers of the registrant as of February 14, 1997:
Present Position and Other Position(s)
Name and Age Held During Last Five Years
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Mark C. Pigott (43) Chairman and Chief Executive Officer; Vice
Chairman from January 1995 to December 1996;
Executive Vice President from December 1993
to January 1995; previously Senior Vice
President. Mr. Pigott is the son of Charles
M. Pigott, a director of the Company, and
nephew of James C. Pigott, also a director of
the Company.
David J. Hovind (56) President; Executive Vice President from July
1987 to January 1992.
Michael A. Tembreull (50) Vice Chairman; Executive Vice President from
January 1992 to January 1995; previously
Senior Vice President.
Gary S. Moore (53) Senior Vice President; General Manager,
Kenworth Truck Company from March 1990 to
August 1992.
T. Ron Morton (50) Senior Vice President; President, PACCAR
Financial Corp. since August, 1988.
Thomas E. Plimpton (47) Senior Vice President; General Manager,
Peterbilt Motors Company from January, 1992
to May, 1996.
G. Don Hatchel (52) Vice President and Controller.
G. Glen Morie (54) Vice President and General Counsel.
Officers are elected annually but may be appointed or removed on interim dates.
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ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors and Executive Officers and Related Matters on pages
5 through 19 of the proxy statement for the annual stockholders meeting of
April 29, 1997 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock ownership information on pages 1 through 3 of the proxy statement for
the annual stockholders meeting of April 29, 1997 is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No transactions with management and others as defined by Item 404 of
Regulation S-K occurred in 1996.
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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)
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession:
(a) "Agreement for the Sale and Purchase of the Entire Issued
and Outstanding Share Capital of DAF Trucks N.V." (incorporated
by reference to Form 8-K/A, Amendment No. 1 to Current Report,
filed December 6, 1996).
(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 26, 1994
(incorporated by reference to the Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994).
(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).
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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).
(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).
(g) Forms of Medium-Term Note, Series H (incorporated by
reference to Exhibits 4.3A and 4.3B to PACCAR Financial Corp.'s
Registration Statement on Form S-3 dated March 11, 1996,
Registration Number 333-01623).
Form of Letter of Representation among PACCAR Financial Corp.,
Citibank, N.A. and the Depository Trust Company, Series H
(incorporated by reference to Exhibit 4.4 to PACCAR Financial
Corp.'s Registration Statement on Form S-3 dated March 11, 1996,
Registration Number 333-01623).
(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).
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(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
(incorporated by reference to Exhibit (10)(g) of the Annual
Report on Form 10-K for the year ended December 31, 1993).
(13) Annual report to security holders
Portions of the 1996 Annual Report to Shareholders have been
incorporated by reference and are filed herewith.
(21) Subsidiaries of the registrant
(23) Consent of independent auditors
(24) Power of attorney
Powers of attorney of certain directors
(27) Financial Data Schedule
(b) Reports on Form 8-K
The following reports on Form 8-K were filed in the fourth quarter of 1996:
(1) Current Report on Form 8-K was filed October 8, 1996 containing
PACCAR's press release announcing the Company's offer to acquire DAF
Trucks N.V.
(2) Current Report on Form 8-K related to the acquisition of DAF Trucks
N.V. was filed November 27, 1996. Amendment No. 1 was filed December
6, 1996.
(c) Exhibits
(d) Financial Statement Schedules -- The response to this portion of Item 14 is
submitted as a separate section of this report.
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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
Date: March 26, 1997 /s/ M. C. Pigott
--------------- ----------------------------------
M. C. 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 indicated.
SIGNATURE TITLE
- --------- -----
/s/ M. A. Tembreull Director and Vice Chairman
- --------------------- (Principal Financial Officer)
M. A. Tembreull
/s/ G. D. Hatchel Vice President and Controller
- --------------------- (Principal Accounting Officer)
G. D. Hatchel
*/s/ C. M. Pigott Director and Chairman Emeritus
- ---------------------
C. M. Pigott
*/s/ D. J. Hovind Director and President
- ---------------------
D. J. Hovind
*/s/ J. W. Pitts Director and Chairman of
- --------------------- Audit Committee
J. W. Pitts
*/s/ J. C. Pigott Director and Audit Committee Member
- ---------------------
J. C. Pigott
*/s/ J. M. Fluke, Jr. Director and Audit Committee Member
- ---------------------
J. M. Fluke, Jr.
*/s/ H. J. Haynes Director
- ---------------------
H. J. Haynes
*/s/ J. H. Wiborg Director
- ---------------------
J. H. Wiborg
*/s/ C. H. Hahn Director
- ---------------------
C. H. Hahn
*By /s/ M. C. Pigott
-----------------
M. C. Pigott
Attorney-in-Fact
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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, 1996
PACCAR INC AND SUBSIDIARIES
BELLEVUE, WASHINGTON
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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, 1996 are incorporated by reference in Item 8:
Consolidated Balance Sheets
-- December 31, 1996 and 1995
Consolidated Statements of Income
-- Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity
-- Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows
-- Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
-- December 31, 1996, 1995 and 1994
The following consolidated financial statement schedule of PACCAR Inc and
consolidated subsidiaries is included in Item 14(d):
Schedule II -- Allowances for Losses
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.
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PACCAR INC AND SUBSIDIARIES
SCHEDULE II - ALLOWANCES FOR LOSSES
(Millions of Dollars)
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Resulting Balance
Year Ended Beginning Costs and from (1) at End
December 31: of Period Expenses Acquisitions Deductions of Period
- ------------ ---------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
1996
(A)Manufacturing
and Parts $ 5.8 $ .5 $10.9 $ (2.5) $14.7
(B)Financial Services 56.8 5.2 (8.0) 54.0
---- --- ---- ----- ----
$62.6 $ 5.7 $10.9 $(10.5) $68.7
1995
(A)Manufacturing
and Parts $ 4.3 $ .1 $ 1.4 $ 5.8
(B)Financial Services 41.1 14.3 1.4 56.8
---- ---- ---- ----
$45.4 $14.4 $ 2.8 $62.6
1994
(A)Manufacturing
and Parts $ 2.2 $ 1.3 $ .8 $ 4.3
(B)Financial Services 32.9 4.0 4.2 41.1
---- ---- ---- ----
$35.1 $ 5.3 $ 5.0 $45.4
</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.
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21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(TABLES IN MILLIONS)
RESULTS OF OPERATIONS:
1996 1995 1994
- -----------------------------------------------------------------------------
Income Before Taxes:
Manufacturing
and Parts $ 214.5 $ 303.4 $ 255.1
Financial Services 68.3 53.3 57.5
Investment Income 28.4 27.7 24.1
Minority Interest
and Other 1.7 15.2 (16.6)
Income Taxes (111.9) (146.8) (115.6)
- -----------------------------------------------------------------------------
Net Income $ 201.0 $ 252.8 $ 204.5
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
OVERVIEW:
PACCAR acquired the European truck manufacturer DAF Trucks N.V. on November 15,
1996. While PACCAR's consolidated financial statements include the operations
and financial position of DAF from the date of acquisition, the impact of DAF on
1996 operating results is not material.
Net income in 1996 was $201.0 million, or $5.17 per share, on sales of $4.3
billion, compared to 1995 net income of $252.8 million, or $6.50 per share, on
sales of $4.6 billion. Sales and profitability in 1996 reflect lower Class 8
truck demand in the U.S. and Canada versus 1995 record market levels.
Manufacturing and Parts income before taxes decreased to $214.5 million in
1996 from the $303.4 million achieved in 1995 as the number of trucks sold by
PACCAR in the U.S. and Canada declined by 18% in 1996. In addition, in the first
quarter of 1996, PACCAR recognized an $18 million pretax charge for closure of
its Canadian plant and cessation of production at a plant in the Seattle area.
Manufacturing profits were also adversely impacted by weaker markets in the
United Kingdom and Australia. VILPAC, the Company's Mexican subsidiary, returned
to profitability in 1996 as the Mexican economy continued to improve throughout
the year.
Financial Services pretax income increased to $68.3 million in 1996 from
$53.3 million in 1995. The improvement resulted primarily from a larger overall
loan and lease portfolio and a significantly lower credit loss provision for
finance receivables in Mexico.
Investment income was $28.4 million in 1996 compared to $27.7 million in
1995. The increase resulted from slightly higher yields on comparable average
invested balances.
In 1994, minority interest and other represented the minority's share of
VILPAC earnings before taxes. In 1995, the amount primarily included the
minority's share of losses in VILPAC, and a gain from the favorable resolution
of litigation involving environmental cost reimbursements. There were no similar
gains in 1996, and VILPAC became a 100% owned subsidiary on August 31, 1995.
TRUCKS
PACCAR's consolidated results are most heavily influenced by the Truck segment.
Truck segment revenues accounted for approximately 87% of consolidated totals in
1996 and 89% in 1995 and 1994. New orders and backlogs for Class 8 trucks
declined in 1996 across the entire industry. The lower order rate, which has
continued into 1997, suggests the market will remain at more moderate demand
levels.
The Truck segment includes all of the Company's domestic and international
truck manufacturing and related aftermarket parts distribution operations.
1996 1995 1994
- -----------------------------------------------------------------------------
Truck revenues $4,020.7 $4,291.6 $4,029.1
- -----------------------------------------------------------------------------
Pretax Income $ 236.0 $ 321.1 $ 299.4
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1996 COMPARED TO 1995:
PACCAR's worldwide truck revenues declined 6% to $4.0 billion from the record
levels set in 1995. Income before taxes from truck operations was $236.0 million
compared to $321.1 million in 1995. The 27% decrease in pretax income was due to
PACCAR's 1996 worldwide truck unit sales volumes, which decreased approximately
16%, excluding DAF, from the 1995 record of over 54,000 units and the $18
million pretax plant closure charge. In 1996, the truck segment continued to
invest in new technology, incurring over $40 million in research and development
expense. Product introductions in 1996 included the new Kenworth T2000.
Lower sales volumes in the United States, Canada and the United Kingdom
were partially offset by the Company's newly acquired Netherlands subsidiary,
DAF Trucks N.V. In addition, Mexican operations experienced a significant
improvement in Class 8 truck sales volume in 1996.
<PAGE>
22
Class 8 truck registrations in the United States decreased approximately
11% in 1996 to 185,000 units. PACCAR was able to achieve a market share in
excess of 21% in 1996, slightly ahead of 1995.
PACCAR's international division, which exports trucks worldwide, also
increased revenues in 1996 and continues to expand its geographic coverage. A
Chinese joint venture formed in 1996 and the expanded product line resulting
from the DAF acquisition should support these expansion efforts.
In March 1996, the Company announced the closure of its Canadian truck
plant for economic reasons. The first quarter 1996 pretax charge of $18.0
million was provided primarily for closure of this facility. Subsequent to the
closure, PACCAR was approached by Canadian government and labor union officials
regarding the possibility of reopening the plant. Negotiations with these
parties are currently under way. While the Company is hopeful that a final
agreement will be signed in 1997, there is no assurance that this will occur. If
the agreements were to be finalized, certain reserves related to previously
provided closure and other associated costs could be reversed.
The percentage of 1996 consolidated truck revenues from PACCAR operations
outside the United States and Canada increased to 15% in 1996 from 7.5% in 1995.
The DAF acquisition and improvement in VILPAC sales accounted for the increase.
With a full year of DAF operations in 1997, this percentage will increase
substantially.
PACCAR's truck parts division experienced higher sales again in 1996. The
division added 26 dealer locations and continued to expand its selection of
maintenance and replacement products common to all makes of medium- and heavy-
duty trucks. Truck parts sales are not heavily influenced by changes in the
overall truck market business cycle.
1995 COMPARED TO 1994:
PACCAR's worldwide truck revenues increased 6.5% over 1994 levels to $4.3
billion and income before taxes from truck operations improved 7.2% to $321
million. PACCAR sold more than 54,000 trucks worldwide in 1995, breaking the
previous sales record. Higher sales volumes provided most of the $21.7 million
improvement in segment pretax income.
Class 8 truck registrations in the United States increased 9% in 1995 to
207,000 units. In spite of capacity constraints at PACCAR's factories in the
United States, the Company attained a market share of 21%, a slight decline from
the 22% market share achieved in 1994.
Revenues from export sales in 1995 through PACCAR's international division
were substantially improved over 1994.
The percentage of 1995 consolidated truck revenues from PACCAR operations
outside the United States and Canada declined to 7.5% from 14% in 1994.
Difficult economic conditions in Mexico impacted VILPAC operations, which
accounted for the majority of the decrease. Combined sales and earnings of the
Company's truck operations in Australia and the United Kingdom decreased
slightly from 1994.
PACCAR's truck parts division in 1995 attained higher sales in the United
States and Canada.
AUTO PARTS
The Auto Parts segment consists of the Company's retail auto parts operations,
located on the West Coast.
1996 1995 1994
- -----------------------------------------------------------------------------
Auto Parts revenues $184.6 $175.3 $172.1
- -----------------------------------------------------------------------------
Pretax Income $ 6.4 $ 5.5 $ 4.2
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
The Auto Parts segment grew revenues in both 1996 and 1995 by adding new
stores and achieving modest gains in same store sales. The addition of new
stores and better customer service has also resulted in steady growth in
profitability. Pretax income in 1996 increased for the fourth year in a row.
<PAGE>
23
OTHER PRODUCTS
PACCAR's other product lines include winches and oilfield equipment. Combined
revenues in 1996 were slightly lower than 1995, while 1995 increased over 1994
due to strong demand in the winch sector and to Trico's addition of a product
line in late 1994. Combined operating profits decreased in 1996 due largely to
lower margins from changes in product mix and stronger market competition. In
1995, profits increased over 1994 due to higher sales volumes.
FINANCIAL SERVICES
The Financial Services segment, including PACCAR Financial Corp., PACCAR Leasing
Corporation and the Company's finance subsidiaries in Australia, Canada, Mexico
and the United Kingdom, derives earnings primarily from financing the sale of
PACCAR products.
1996 1995 1994
- -----------------------------------------------------------------------------
Financial Services revenues $267.9 $257.5 $210.9
- -----------------------------------------------------------------------------
Pretax Income $ 68.3 $ 53.3 $ 57.5
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1996 COMPARED TO 1995:
The Company's Financial Services operations earned $68.3 million before tax in
1996, up $15.0 million or 28% compared to 1995. The increase in pretax earnings
reflected continued portfolio growth as well as lower loan loss provisions on
Mexican receivables.
PACCAR's finance and leasing operations maintained strong lending volume
despite lower heavy-duty truck sales. Improved market share and higher used
truck and trailer financing contributed to overall portfolio growth. Past due
accounts continued at low levels by historical standards and overall credit
quality remained strong. The provision for losses decreased in 1996 due to
relatively low credit losses and improved economic conditions in Mexico.
1995 COMPARED TO 1994:
The Company's Financial Services segment earned $53.3 million before taxes in
1995, down 7% from 1994 results. The decrease in pretax earnings reflected
higher loan loss provisions relating to adverse economic conditions in Mexico.
LIQUIDITY AND CAPITAL RESOURCES:
1996 1995 1994
- -----------------------------------------------------------------------------
Cash and cash equivalents $222.9 $184.0 $311.3
Marketable securities 304.9 437.3 241.7
- -----------------------------------------------------------------------------
$527.8 $621.3 $553.0
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
The Company's cash and marketable securities totaled $527.8 million at
December 31, 1996. The DAF acquisition (net of short-term financing and cash
held by DAF) utilized approximately $118 million in cash, which represented the
primary reason for the decrease in consolidated cash and marketable securities
of $93.5 million compared to December 31, 1995. In 1996, the Company generated
cash from operations of $358.3 million, up $60.0 million from 1995 to a level
more comparable to 1994. In 1995, reduced operations at the Mexican and Canadian
truck plants and a reduction in consolidated payables resulted in lower cash
from operations.
The Company's liquidity and earnings from investment of excess cash
continue to provide financial stability and strength.
MANUFACTURING AND PARTS
Cash for working capital, capital expenditures and research and development has
been provided by operations. Management expects this to continue.
Property, plant and equipment additions for 1996 totaled $109 million.
PACCAR's truck operations made significant investments in the expansion and
modernization of its facilities, state-of-the-art hardware and software to
continually improve the design and quality of its products and tooling to meet
the demands of an aggressive product development plan. Over the last five years
(1992 through 1996), the Company's worldwide capital spending, excluding the
Financial Services segment, totaled over
<PAGE>
24
$400 million. During the next several years, average spending for ongoing
capital additions and product development at PACCAR is expected to be higher due
to the inclusion of DAF. DAF's plants are relatively modern and efficient.
Cash generated in foreign operations is generally reinvested in those
operations. In 1995 and 1994, some excess cash was withdrawn in the form of
dividends from the Company's operations in Mexico, Canada and Australia.
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 1996, PACCAR Financial Corp. (PFC) filed a shelf registration under
which up to $1 billion of medium-term notes could be issued as needed. At the
end of 1996, $680 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 obtaining funds with interest rate characteristics
similar to the corresponding assets. As a part of this policy, the companies use
over-the-counter interest-rate contracts. The permitted type of interest-rate
contracts and transaction limits have been established by the Company's senior
management, who receive periodic reports on the amount of contracts outstanding.
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 ENVIRONMENTAL MATTERS:
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 $4 million in 1996, $7 million in 1995 and
$8 million in 1994 for costs related to environmental activities. The Company
does not anticipate that the effects on future operations or cash flows will 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 and other state-level agencies both in cleanup
studies and the determination of remedial action, as well as actual remediation
procedures.
The Company's estimated range of reasonably possible costs to complete
cleanup actions, where it is probable that the Company will incur such costs and
such amounts can be reasonably estimated, is between $35 million and $65
million. The Company has established a reserve to provide for estimated future
environmental cleanup costs.
The Company has been successful in recovering a portion of its
environmental remediation costs from insurers, but does not believe future
recoveries from insurance carriers will be significant.
While the timing and amount of the ultimate 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.
<PAGE>
25
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
(MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
MANUFACTURING AND PARTS:
REVENUES
Net sales $4,316.8 $4,572.5 $4,285.1
Other 15.0 18.2 9.1
- -----------------------------------------------------------------------------------------------------------------------------
4,331.8 4,590.7 4,294.2
COSTS AND EXPENSES
Cost of sales 3,737.3 3,950.7 3,693.0
Selling, general and administrative 375.8 334.6 343.5
Interest 4.2 2.0 2.6
- -----------------------------------------------------------------------------------------------------------------------------
4,117.3 4,287.3 4,039.1
- -----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING AND PARTS INCOME BEFORE INCOME TAXES 214.5 303.4 255.1
FINANCIAL SERVICES:
REVENUES 267.9 257.5 210.9
COSTS AND EXPENSES
Interest and other 147.6 143.5 106.8
Selling, general and administrative 46.8 46.4 42.6
Provision for losses on receivables 5.2 14.3 4.0
- -----------------------------------------------------------------------------------------------------------------------------
199.6 204.2 153.4
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES INCOME BEFORE INCOME TAXES 68.3 53.3 57.5
OTHER:
Investment income 28.4 27.7 24.1
Minority interest and other 1.7 15.2 (16.6)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME BEFORE INCOME TAXES 312.9 399.6 320.1
Income taxes 111.9 146.8 115.6
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 201.0 $ 252.8 $ 204.5
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net income per average common share outstanding $ 5.17 $ 6.50 $ 5.26
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 38.9 38.9 38.9
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
26
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31 1996 1995
- ------------------------------------------------------------------------------
(MILLIONS OF DOLLARS)
MANUFACTURING AND PARTS:
CURRENT ASSETS
Cash and cash equivalents $ 203.0 $ 172.0
Trade receivables, net of allowance for losses
(1996 - $14.7 and 1995 - $5.8) 560.5 227.7
Marketable securities 304.9 437.3
Inventories 406.5 239.5
Deferred taxes and other current assets 73.3 60.1
- ------------------------------------------------------------------------------
TOTAL MANUFACTURING AND PARTS CURRENT ASSETS 1,548.2 1,136.6
Deferred taxes, goodwill and other 196.3 87.3
Property, plant and equipment, net 732.6 422.3
- ------------------------------------------------------------------------------
TOTAL MANUFACTURING AND PARTS ASSETS 2,477.1 1,646.2
- ------------------------------------------------------------------------------
FINANCIAL SERVICES:
Cash and cash equivalents 19.9 12.0
Finance and other receivables,
net of allowance for losses
(1996 - $54.0 and 1995 - $56.8) 2,972.4 2,887.7
Less unearned interest (235.5) (224.4)
- ------------------------------------------------------------------------------
2,736.9 2,663.3
Equipment on operating leases, net 44.9 49.8
Other assets 20.0 19.2
- ------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES ASSETS 2,821.7 2,744.3
- ------------------------------------------------------------------------------
$5,298.8 $4,390.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
27
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31 1996 1995
- ------------------------------------------------------------------------------
(MILLIONS OF DOLLARS)
MANUFACTURING AND PARTS:
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 914.4 $ 559.1
Notes payable 347.4
Dividend payable 58.3 116.6
Income taxes and other 31.4 12.1
- ------------------------------------------------------------------------------
TOTAL MANUFACTURING AND PARTS CURRENT LIABILITIES 1,351.5 687.8
Long-term debt 32.9 10.7
Other, including deferred taxes 225.2 118.1
- ------------------------------------------------------------------------------
TOTAL MANUFACTURING AND PARTS LIABILITIES 1,609.6 816.6
- ------------------------------------------------------------------------------
FINANCIAL SERVICES:
Accounts payable and accrued expenses 85.1 70.1
Commercial paper and bank loans 982.0 952.4
Long-term debt 1,112.0 1,149.6
Deferred income taxes and other 152.1 150.6
- ------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES LIABILITIES 2,331.2 2,322.7
- ------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value - authorized 1.0 million
shares, none issued
Common stock, $12 par value - authorized 100.0 million
shares, 38.9 million shares issued and outstanding 466.4 466.3
Additional paid-in capital 219.0 218.7
Retained earnings 757.7 653.8
Currency translation and net unrealized investment gains
or losses (85.1) (87.6)
- ------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,358.0 1,251.2
- ------------------------------------------------------------------------------
$5,298.8 $4,390.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
28
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
(MILLIONS EXCEPT SHARE DATA)
<S> <C> <C> <C>
COMMON STOCK, $12 PAR VALUE:
Balance at beginning of year $ 466.3 $ 466.3 $ 466.3
Stock options exercised .1
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 466.4 $ 466.3 $ 466.3
- -----------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year $ 218.7 $ 218.2 $ 217.9
Other, including options exercised and tax benefit .3 .5 .3
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year $219.0 $218.7 $218.2
- -----------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance at beginning of year $653.8 $556.5 $468.6
Net income 201.0 252.8 204.5
Cash dividends declared (97.1) (155.5) (116.6)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year $757.7 $653.8 $556.5
- -----------------------------------------------------------------------------------------------------------------------------
NET UNREALIZED INVESTMENT GAINS (LOSSES):
Balance at beginning of year $2.2 $(1.5)
Net unrealized gains (losses) (1.6) 3.7 (1.5)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year $.6 $2.2 $(1.5)
- -----------------------------------------------------------------------------------------------------------------------------
CURRENCY TRANSLATION ADJUSTMENTS:
Balance at beginning of year $(89.8) $(65.0) $(45.3)
Current year translation gains (losses) 4.1 (24.8) (19.7)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year $(85.7) $(89.8) $(65.0)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $1,358.0 $1,251.2 $1,174.5
- -----------------------------------------------------------------------------------------------------------------------------
SHARES OF CAPITAL STOCK
COMMON STOCK ISSUED, $12 PAR VALUE:
Balance at beginning of year 38,862,359 38,859,281 38,856,574
Stock options exercised 8,919 3,078 2,707
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year 38,871,278 38,862,359 38,859,281
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
29
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 201.0 $ 252.8 $ 204.5
ITEMS INCLUDED IN NET INCOME NOT AFFECTING CASH:
Depreciation and amortization 81.1 73.5 63.2
Provision for losses on financial services receivables 5.2 14.3 4.0
Minority interest (1.8) 13.0
Deferred income tax provision (benefit) 1.0 (4.6) (16.7)
Other 3.3 5.9 17.1
CHANGE IN OPERATING ASSETS AND LIABILITIES:
(Increase) decrease in assets other than cash and equivalents:
Receivables (39.5) .5 (50.9)
Inventories 33.9 26.0 (68.2)
Other (10.6) (7.1) (7.6)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 86.6 (48.3) 190.1
Other (3.7) (12.9) 1.2
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 358.3 298.3 349.7
INVESTING ACTIVITIES:
Finance receivables originated (1,318.0) (1,319.8) (1,271.1)
Collections on finance receivables 1,164.5 990.5 851.9
Net decrease (increase) in wholesale receivables 63.3 (108.1) 21.7
Marketable securities purchased (2,036.5) (2,357.1) (1,533.2)
Marketable securities sales and maturities 2,183.3 2,167.0 1,523.7
Acquisition of DAF Trucks N.V., net of cash acquired (465.2)
Acquisition of affiliate, net of cash consolidated in 1994 (45.0) 44.3
Acquisition of property, plant and equipment (108.7) (81.5) (55.0)
Acquisition of equipment for operating leases (14.5) (12.2) (25.6)
Proceeds from asset disposals 43.7 47.5 27.9
Other (.4) (1.4) (16.1)
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (488.5) (720.1) (431.5)
FINANCING ACTIVITIES:
Cash dividends (155.5) (116.6) (74.5)
Net increase in notes payable 347.4
Net (decrease) increase in commercial paper and bank loans 22.5 269.8 (20.2)
Proceeds from long-term debt 427.2 535.2 543.8
Payments on long-term debt (469.7) (383.5) (260.0)
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 171.9 304.9 189.1
Effect of exchange rate changes on cash (2.8) (10.4) (19.2)
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 38.9 (127.3) 88.1
Cash and cash equivalents at beginning of year 184.0 311.3 223.2
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 222.9 $ 184.0 $ 311.3
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
A. SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION: PACCAR Inc (the Company or PACCAR) is a multinational company with
its largest operations in the United States, Canada and Europe. The Company's
Truck and Financial Services segments also have operations in Australia, Mexico
and the United Kingdom. The Auto Parts segment operates through retail sites
located in the western United States.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly owned domestic and foreign
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
CASH EQUIVALENTS AND MARKETABLE SECURITIES: Cash equivalents consist of
short-term liquid investments with a maturity at date of purchase of three
months or less. The Company's investments in cash equivalents and marketable
securities are classified as debt securities available-for-sale. These
investments are stated at fair value with any unrealized holding gains or
losses, net of tax, included as a component of stockholders' equity until
realized.
The cost of debt securities available-for-sale is adjusted for amortization
of premiums and accretion of discounts to maturity. Interest and dividend income
are included as a component of investment income. The cost of securities sold is
based on the specific identification method.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost of
all inventories in 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) or the weighted average method.
GOODWILL: Goodwill is amortized on a straight-line basis for periods
ranging from 25 to 27 years. At December 31, 1996 and 1995, goodwill amounted to
$131.4 and $24.4, net of accumulated amortization of $12.7 and $10.7,
respectively. Amortization of goodwill totaled $2.0 in 1996, $1.4 in 1995 and
$1.3 in 1994. See also Note B, Acquisition, for additional information regarding
goodwill.
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
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 or related costs, and such amounts can be reasonably estimated.
REVENUE RECOGNITION: Sales of trucks and related aftermarket parts are
recorded by the Company when products are shipped to dealers or customers.
Generally, interest income from finance receivables is recognized using the
interest method.
ESTIMATED CREDIT LOSSES: The provision for losses on net finance and other
receivables is charged to income in an amount sufficient to maintain the
allowance for losses at a level considered adequate to cover estimated credit
losses. Receivables are charged to this allowance when, in the judgment of
management, they are deemed uncollectible (usually upon repossession of the
collateral).
DERIVATIVE FINANCIAL INSTRUMENTS: The Company enters into agreements to
manage certain exposures to fluctuations in interest rates and foreign exchange.
It uses interest-rate contracts to better match the interest rate
characteristics of the Company's finance receivables with the borrowings used to
fund those receivables. Interest-rate contracts generally involve the exchange
of fixed and floating rate interest payments without the exchange of the
underlying principal. Net amounts paid or received are reflected as adjustments
to interest expense. It is the Company's intent to hold the contracts to
maturity.
PACCAR enters into foreign currency exchange contracts to hedge certain
U.S. dollar-denominated firm commitments. Gains and losses on these contracts
are deferred and included in the measurement of the related foreign currency
transaction when completed.
<PAGE>
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994
(CURRENCIES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
RESEARCH AND DEVELOPMENT: Research and development costs are expensed as
incurred. Amounts charged against income were $47 in 1996, $37 in 1995 and $35
in 1994.
NEW ACCOUNTING STANDARD: Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standard (SFAS) No. 123, ACCOUNTING FOR STOCK-
BASED COMPENSATION. As permitted under SFAS No. 123, the Company has continued
its current accounting for employee stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25. The Company does not have
significant stock-based awards or options outstanding. The effect of applying
SFAS 123 to PACCAR's stock-based awards on net income and earnings per share
is immaterial.
RECLASSIFICATIONS: Certain prior-year amounts have been reclassified to
conform to the 1996 presentation.
B. ACQUISITION
On November 15, 1996, PACCAR acquired all the outstanding shares of DAF Trucks
N.V. (DAF), a vertically integrated truck manufacturer that produces its own
engines and axles. Its core operations include development, production,
marketing and aftermarket parts sales for medium- and heavy-duty commercial
trucks. DAF has factories in the Netherlands and Belgium, and is the exclusive
distributor in Europe for light-duty trucks manufactured by Leyland in
the United Kingdom.
DAF was purchased for 900 Dutch guilders (NLG), or approximately $532.
PACCAR paid NLG 300 in cash and financed the remaining balance with two short-
term notes of NLG 300 each.
The acquisition was accounted for using the purchase method. Accordingly,
the assets and liabilities were recorded at their estimated fair values as of
the acquisition date. The resulting cost in excess of net assets acquired of
approximately $111 will be amortized on a straight-line basis over a 25-year
period. DAF's operating results have been included in the consolidated results
of operations since the date of acquisition.
The following presents PACCAR's unaudited consolidated results of
operations on a pro forma basis as though DAF had been acquired at the beginning
of the periods presented. The pro forma information is provided for information
purposes only. It is based on historical information and does not necessarily
reflect the actual results that would have occurred nor does it represent
results which may occur in the future.
(UNAUDITED)
FOR THE YEARS ENDED 1996 1995
- ------------------------------------------------------------------------------
Manufacturing Revenues $5,900.0 $6,400.0
Net Income 250.0 335.0
Net Income Per Share $ 6.43 $ 8.61
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
C. INVESTMENTS IN DEBT SECURITIES
All investments in debt securities were available-for-sale at December 31, 1996
and 1995. Amounts at December 31, 1996, are as follows:
AMORTIZED FAIR
COST VALUE
- ------------------------------------------------------------------------------
U.S. government securities $ 76.4 $ 76.3
Tax-exempt securities 218.3 219.2
Other debt securities 183.3 183.5
- ------------------------------------------------------------------------------
$478.0 $479.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Amounts at December 31, 1995, are as follows:
AMORTIZED FAIR
COST VALUE
- ------------------------------------------------------------------------------
U.S. government securities $174.6 $176.0
Tax-exempt securities 298.7 301.0
Other debt securities 129.0 129.0
- ------------------------------------------------------------------------------
$602.3 $606.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Fair value of investments in debt securities is included in cash and
equivalents and marketable securities as follows:
1996 1995
- ------------------------------------------------------------------------------
MANUFACTURING AND PARTS:
Cash and equivalents $168.5 $163.2
Marketable securities 304.9 437.3
FINANCIAL SERVICES:
Cash and equivalents 5.6 5.5
- ------------------------------------------------------------------------------
$479.0 $606.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The contractual maturities of debt securities at December 31, 1996, are as
follows:
AMORTIZED FAIR
MATURITIES IN: COST VALUE
- ------------------------------------------------------------------------------
One year or less $199.2 $199.3
One to five years 275.2 276.1
Five to ten years 3.6 3.6
- ------------------------------------------------------------------------------
$478.0 $479.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Gross realized gains and losses and unrealized holding gains and losses
were not significant for any of the years presented.
PACCAR INC AND SUBSIDIARIES
<PAGE>
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
D. INVENTORIES
1996 1995
- ------------------------------------------------------------------------------
Inventories at FIFO cost:
Finished products $303.9 $201.6
Work in process and raw materials 235.3 170.5
- ------------------------------------------------------------------------------
539.2 372.1
Less excess of FIFO cost over LIFO (132.7) (132.6)
- ------------------------------------------------------------------------------
$406.5 $239.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Inventories valued using the LIFO method comprised 56% and 83% of
consolidated inventories at FIFO or weighted average cost at December 31, 1996
and 1995, respectively.
E. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment include the following:
1996 1995
- ------------------------------------------------------------------------------
Land $ 57.0 $ 33.6
Buildings 456.0 323.0
Machinery and equipment 748.0 435.7
- ------------------------------------------------------------------------------
1,261.0 792.3
Less allowance for depreciation (528.4) (370.0)
- ------------------------------------------------------------------------------
$ 732.6 $ 422.3
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
F. FINANCE AND OTHER RECEIVABLES
The Company's finance and other receivables are as follows:
1996 1995
- ------------------------------------------------------------------------------
Retail notes and contracts $2,028.0 $1,912.2
Wholesale financing 177.8 240.3
Direct financing leases 802.9 774.2
Interest and other receivables 17.7 17.8
- ------------------------------------------------------------------------------
3,026.4 2,944.5
Less allowance for losses (54.0) (56.8)
- ------------------------------------------------------------------------------
2,972.4 2,887.7
Unearned interest:
Retail notes and contracts (130.2) (121.1)
Direct financing leases (105.3) (103.3)
- ------------------------------------------------------------------------------
(235.5) (224.4)
- ------------------------------------------------------------------------------
$2,736.9 $2,663.3
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Terms for substantially all finance and other receivables range up to 60
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, 1997, are $835.5, $569.6, $374.1, $192.3 and $56.5.
Estimated residual values included with direct financing leases amounted to
$46.7 in 1996 and $52.3 in 1995. Annual minimum lease payments due on direct
financing leases for the five years beginning January 1, 1997, are $230.8,
$193.9, $152.1, $102.7 and $76.7.
The allowance for losses on finance and other receivables is summarized as
follows:
1996 1995 1994
- ------------------------------------------------------------------------------
Balance at beginning of year $56.8 $41.1 $32.9
Provision for losses 5.2 14.3 4.0
Net (losses) recoveries (8.0) 1.4 4.2
- ------------------------------------------------------------------------------
Balance at end of year $54.0 $56.8 $41.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The Company's customers are principally concentrated in the transportation
industry. There are no significant concentrations of credit risk in terms of a
single customer or geographic region. Generally, financial services receivables
are collateralized by financed equipment.
G. 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
five years.
1996 1995
- ------------------------------------------------------------------------------
Trucks and other $ 69.2 $ 74.5
Less allowance for depreciation (24.3) (24.7)
- ------------------------------------------------------------------------------
$ 44.9 $ 49.8
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Original terms of operating leases generally range up to 45 months. Annual
minimum lease payments due on operating leases for each year beginning
January 1, 1997, are $9.8, $5.8, $3.1, $.8 and $.1.
<PAGE>
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
H. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses include the following:
MANUFACTURING AND PARTS:
1996 1995
- ------------------------------------------------------------------------------
Accounts payable $516.3 $293.3
Salaries and wages 118.8 82.3
Warranty and self-insurance reserves 149.9 100.5
Other 129.4 83.0
- ------------------------------------------------------------------------------
$914.4 $559.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FINANCIAL SERVICES:
Accounts payable $ 61.0 $ 47.0
Other 24.1 23.1
- ------------------------------------------------------------------------------
$ 85.1 $ 70.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
I. 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 for the five
years beginning January 1, 1997, are $16.5, $12.2, $9.1, $6.0 and $3.1 and $9.6
thereafter.
Minimum payments on leases have not been reduced by aggregate minimum
sublease rentals of $8.3 receivable under noncancelable subleases.
The Company has operating leases which, in addition to aggregate minimum
annual rentals, provide for additional rental payments based on sales and
certain expenses.
Total rental expenses under all leases for the three years ended December
31, 1996 were $15.8, $15.1 and $13.5, net of sublease rentals of $2.0, $1.7 and
$1.5, respectively.
J. BORROWINGS AND CREDIT ARRANGEMENTS
MANUFACTURING AND PARTS:
1996 1995
- ------------------------------------------------------------------------------
Short-term notes payable $347.4
- ------------------------------------------------------------------------------
Long-term debt, fixed rate 10.0% $ 26.1
Industrial revenue bonds, floating rate 8.9 $ 8.9
Capital lease obligations 4.1 2.2
Less current portion (6.2) (.4)
- ------------------------------------------------------------------------------
$ 32.9 $10.7
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The interest rate on the short-term notes payable is floating, based on the
Amsterdam Interbank Offered Rate (AIBOR), and was 3.2% at December 31, 1996.
These notes mature on May 15, 1997. While PACCAR has the intent and ability to
refinance all or a portion of these short-term notes on a longer-term basis, no
specific arrangements had been made as of February 14, 1997. Accordingly, this
borrowing was classified as a current liability at December 31, 1996. The
interest rate on the industrial revenue bonds is floating and was 3.1% at
December 31, 1996. Annual maturities for long-term debt including industrial
revenue bonds and capital leases for the five years beginning January 1, 1997,
are $6.2, $5.8, $5.7, $5.7 and $2.3, respectively.
FINANCIAL SERVICES:
EFFECTIVE
RATE 1996 1995
- ------------------------------------------------------------------------------
Commercial paper 5.5% $ 853.6 $ 847.6
Bank loans 6.1% 128.4 104.8
- ------------------------------------------------------------------------------
982.0 952.4
- ------------------------------------------------------------------------------
Long-term debt:
-Fixed rate 6.4% 981.4 1,026.7
-Floating rate 5.3% 130.6 122.9
- ------------------------------------------------------------------------------
1,112.0 1,149.6
- ------------------------------------------------------------------------------
$2,094.0 $2,102.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The effective rate is the weighted average rate as of December 31, 1996 and
includes the effects of interest-rate agreements.
Annual maturities of long-term debt for the five years beginning January 1,
1997, are $469.3, $336.1, $224.3, $79.1 and $3.2, respectively.
CONSOLIDATED:
Interest paid on consolidated borrowings was $133.3 in 1996, $116.0 in 1995 and
$76.9 in 1994.
The weighted average interest rate on consolidated short-term notes
payable, commercial paper and bank loans was 4.73%, 6.07% and 6.28% at
December 31, 1996, 1995 and 1994, respectively.
The Company has line of credit arrangements of $882.0 which are reviewed
annually for renewal. The unused portion of these credit lines was $803.6 at
December 31, 1996, 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.
<PAGE>
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
K.DERIVATIVE FINANCIAL INSTRUMENTS
INTEREST-RATE CONTRACTS: The Company enters into various interest-rate
contracts, including interest-rate swap, cap and forward-rate agreements. These
contracts are used to manage exposures to fluctuations in interest rates. At
December 31, 1996, the Company had 104 interest-rate contracts outstanding with
other financial institutions. The notional amount of these contracts totaled
$620, 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 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.
For interest-rate swaps only, the following table presents the notional
amounts, weighted average interest rates, and contractual maturities by type of
interest-rate swap at December 31, 1996.
FIXED TO FLOATING
YEAR FLOATING TO FIXED TOTAL
- ------------------------------------------------------------------------------
1997 $1.0 $391.0 $392.0
1998 1.0 180.0 181.0
1999 34.0 34.0
2000 12.0 12.0
2001 1.0 1.0
- ------------------------------------------------------------------------------
$2.0 $618.0 $620.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Weighted average pay rate: 3.1% 6.1%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Weighted average receive rate: 8.3% 5.5%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The weighted average pay rate approximates the Company's net cost of funds
rate after the effect of interest-rate swaps. The weighted average receive rate
offsets pay rates on associated debt obligations.
Floating to fixed rate swaps effectively convert an equivalent amount of
commercial paper and other variable rate debt to fixed rates. Fixed to floating
rate swaps effectively convert fixed rate debt to a money market index.
FOREIGN CURRENCY EXCHANGE CONTRACTS: PACCAR enters into foreign currency
exchange contracts to hedge certain firm commitments denominated in foreign
currencies. As a matter of policy, the Company does not engage in currency
speculation.
Foreign exchange contracts generally mature within six months. At
December 31, 1996 and 1995, PACCAR had net foreign exchange purchase contracts
outstanding amounting to $70 and $80 U.S. dollars, respectively. Approximately
one-half of the 1996 amount represented contracts related to Dutch guilders and
various European currencies. The remaining balance in 1996 and substantially all
of the 1995 balance represented contracts related to the U.S. and Canadian
dollars.
L. COMMITMENTS AND CONTINGENCIES
The Company is involved in various stages of investigations and cleanup actions
in different countries 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.
While neither the timing nor the amount of the ultimate costs associated
with future environmental cleanup can be determined, management does not expect
that those matters will have a material adverse effect on the Company's
consolidated financial position.
At December 31, 1996, PACCAR had standby letters of credit outstanding
totaling $39.4, which guarantee various insurance and financing activities.
The Company's Netherlands subsidiary has an agreement with its supplier of
light trucks to purchase a minimum yearly quantity. This agreement is effective
through the middle of 1999 and approximates $165 annually.
PACCAR is a defendant in various legal proceedings and, in addition, there
are various other contingent liabilities arising in the normal course of
business. After consultation with legal counsel, management does not anticipate
that disposition of these proceedings and contingent liabilities will have a
material effect on the consolidated financial statements.
M. RETIREMENT PLANS
PACCAR has several defined benefit pension plans, including union-negotiated and
multi-employer plans, which cover a majority of its employees. Benefits under
the plans are generally based on an employee's highest compensation levels and
total
<PAGE>
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
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 $14.8 in 1996, $16.8 in 1995 and $14.9 in
1994.
The following data relates to all plans of the Company except for certain
multi-employer union-negotiated and supplemental retirement plans.
WEIGHTED AVERAGE ASSUMPTIONS USED IN DETERMINING ACTUARIAL PRESENT VALUE OF PLAN
BENEFIT OBLIGATIONS:
1996 1995 1994
- ------------------------------------------------------------------------------
Discount rate 7.50% 7.50% 8.00%
Rate of increase in future compensation levels 4.75% 4.75% 5.75%
Assumed long-term rate of return on plan assets 8.00% 8.00% 8.00%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMPONENTS OF PENSION EXPENSE:
1996 1995 1994
- ------------------------------------------------------------------------------
Interest cost $ 21.2 $19.7 $ 18.2
Service cost 13.6 12.4 11.6
Return on assets (38.1) (48.9) (2.6)
Net amortization and deferrals 12.7 27.2 (17.7)
- ------------------------------------------------------------------------------
Net pension expense $ 9.4 $10.4 $ 9.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FUNDED STATUS AT DECEMBER 31:
1996 1995
- ------------------------------------------------------------------------------
Vested benefit obligation $256.3 $225.6
Accumulated benefit obligation 259.9 228.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Plan assets at fair value $342.4 $304.1
Projected benefit obligation 303.4 275.2
- ------------------------------------------------------------------------------
Excess of plan assets 39.0 28.9
Unrecognized net asset (4.7) (6.5)
Unrecognized net experience gain (44.4) (29.3)
Unrecognized prior service cost 11.1 12.6
- ------------------------------------------------------------------------------
Prepaid pension cost $ 1.0 $ 5.7
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The Company has unfunded supplemental retirement plans for employees whose
benefits under qualified salaried retirement plans are reduced because of
compensation deferral elections or limitations under federal tax laws. Pension
expense for these plans was $1.9 in 1996, $1.8 in 1995 and $1.6 in 1994. At
December 31, 1996, the projected benefit obligation for these plans was $12.7.
The accumulated benefit obligation of $11.2 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. The net unrecorded accumulated postretirement
benefit obligation (APBO) at adoption was $10.1, which is being recognized over
20 years.
The following data relates to unfunded postretirement medical and life
insurance plans.
COMPONENTS OF RETIREE EXPENSE:
1996 1995 1994
- ------------------------------------------------------------------------------
Interest cost $2.0 $1.7 $1.6
Service cost 1.7 1.0 .9
Amortization of transition obligation .7 .6 .6
- ------------------------------------------------------------------------------
Net retiree expense $4.4 $3.3 $3.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UNFUNDED STATUS AT DECEMBER 31:
1996 1995
- ------------------------------------------------------------------------------
Accumulated benefits:
Actives not eligible to retire $20.5 $16.4
Actives eligible to retire 5.0 4.6
Retirees 4.2 4.1
- ------------------------------------------------------------------------------
29.7 25.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Unrecognized net loss (6.1) (5.0)
Unrecognized transition obligation (7.0) (7.5)
- ------------------------------------------------------------------------------
Accrued postretirement benefits $16.6 $12.6
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
A discount rate of 7.5% 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, 1996, by approximately
$3.6 and the 1996 expense provision by approximately $.5.
The Company has certain defined contribution benefit plans whereby it
generally matches employee contributions of 2% to 5% of base wages. Expenses for
these plans were $12.3 in 1996, $11.5 in 1995, and $10.9 in 1994.
<PAGE>
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
N. INCOME TAXES
1996 1995 1994
- ------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES:
Domestic $271.5 $364.6 $250.3
Foreign 41.4 35.0 69.8
- ------------------------------------------------------------------------------
$312.9 $399.6 $320.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES:
Current provision:
Federal $ 90.8 $121.5 $ 92.6
Foreign 6.8 13.0 28.9
State 13.3 16.9 10.8
- ------------------------------------------------------------------------------
110.9 151.4 132.3
Deferred provision (benefit):
Federal and state (3.0) (6.4) (13.6)
Foreign 4.0 1.8 (3.1)
- ------------------------------------------------------------------------------
1.0 (4.6) (16.7)
- ------------------------------------------------------------------------------
$111.9 $146.8 $115.6
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
RECONCILIATION OF STATUTORY U.S. TAX TO ACTUAL PROVISION:
Statutory rate 35% 35% 35%
Statutory tax $109.5 $139.8 $112.0
Effect of:
State income taxes 8.4 12.8 10.8
Foreign tax rates (1.0) .3 (1.9)
FSC benefit (2.3) (2.0) (1.3)
Tax-exempt income (5.2) (6.3) (4.9)
Other 2.5 2.2 .9
- ------------------------------------------------------------------------------
$111.9 $146.8 $115.6
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMPONENTS OF DEFERRED TAX ASSETS (LIABILITIES):
AT DECEMBER 31: 1996 1995
- ------------------------------------------------------------------------------
ASSETS:
Provisions for accrued expenses $ 111.5 $ 100.1
Allowance for losses on receivables 20.6 20.1
Other 14.0 15.2
- ------------------------------------------------------------------------------
146.1 135.4
LIABILITIES:
Asset capitalization and depreciation (42.0) (29.7)
Financing and leasing activities (134.0) (129.8)
Other (38.0) (27.6)
- ------------------------------------------------------------------------------
(214.0) (187.1)
- ------------------------------------------------------------------------------
Net deferred tax liability $ (67.9) $ (51.7)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CLASSIFICATION OF DEFERRED TAX ASSETS AND LIABILITIES:
MANUFACTURING AND PARTS:
Deferred taxes and other current assets $ 57.4 $ 52.3
Deferred taxes, goodwill and other 2.5 9.7
Other, including deferred taxes (14.6)
FINANCIAL SERVICES:
Deferred income taxes and other (113.2) (113.7)
- ------------------------------------------------------------------------------
Net deferred tax liability $ (67.9) $ (51.7)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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 $160 at December 31, 1996. 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 the
available foreign tax credits would substantially offset any potential federal
tax liability.
Cash paid for income taxes was $121.3 in 1996, $149.1 in 1995 and $130.1 in
1994.
<PAGE>
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
O. 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 floating-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 analysis 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 analysis, 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 costs which would be incurred to terminate existing
agreements and enter into new agreements with similar notional amounts, maturity
dates and counterparties' credit standing at current market interest rates. The
fair value of foreign exchange contracts is the amount the Company would receive
or pay to terminate the contracts. This amount is calculated using quoted market
rates.
TRADE RECEIVABLES AND PAYABLES: Carrying amounts approximate 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:
CARRYING FAIR
1996 AMOUNT VALUE
- ------------------------------------------------------------------------------
MANUFACTURING AND PARTS:
Cash and equivalents $203.0 $203.0
Marketable securities 304.9 304.9
Short-term debt 347.4 347.4
Long-term debt 35.0 38.9
FINANCIAL SERVICES:
Cash and equivalents 19.9 19.9
Net receivables 2,053.8 2,037.0
Commercial paper and bank loans 982.0 982.0
Long-term debt 1,112.0 1,111.0
The Company's off-balance-sheet financial instruments, consisting of
interest-rate agreements, represented an additional liability of $2.9, if
recorded at fair value at December 31, 1996.
CARRYING FAIR
1995 AMOUNT VALUE
- ------------------------------------------------------------------------------
MANUFACTURING AND PARTS:
Cash and equivalents $ 172.0 $ 172.0
Marketable securities 437.3 437.3
Short-term debt .2 .2
Long-term debt 8.9 8.9
FINANCIAL SERVICES:
Cash and equivalents 12.0 12.0
Net receivables 2,006.0 2,019.3
Commercial paper and bank loans 952.4 952.4
Long-term debt 1,149.6 1,162.1
The Company's off-balance-sheet financial instruments, consisting of
interest-rate agreements, represented an additional liability of $3.6, if
recorded at fair value at December 31, 1995.
<PAGE>
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
P. FOREIGN OPERATIONS AND CURRENCY TRANSLATION
Except for Mexican operations, 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.
Beginning in 1996, inventories, cost of sales, property, plant and equipment,
and depreciation of the Company's Mexican subsidiary were translated at
historical rates. Mexican translation gains and losses are included in net
income.
Translation and transaction net gains increased net income by $1.2 in 1996,
$4.8 in 1995 and $3.7 in 1994. In both 1995 and 1994, the effect of the peso
devaluation on U.S. dollar-denominated accounts maintained by PACCAR's Mexican
subsidiary resulted in net exchange gains. Substantially all of the gains in
those years resulted from the impact of translating the balance sheet of the
Mexican subsidiary.
In August 1995, PACCAR purchased the remaining 45% interest in VILPAC S.A.
(VILPAC) for a total cost of $45.0 in cash. The Company used the purchase method
of accounting for the acquisition. Had the transaction occurred January 1, 1995,
the impact on PACCAR's consolidated net income would have been immaterial.
Q. 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 and 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.
R. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
PACCAR operates in three principal industries: Trucks, Auto Parts and Financial
Services.
The Truck segment is composed of the manufacture of trucks and the
distribution of related parts which are sold through a network of company-
appointed dealers. The Truck and Financial Services segments derive a large
proportion of their revenues and income before taxes from operations in the
United States, although with the DAF acquisition, Europe will become more
significant in the future.
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.
Goodwill arising from acquisitions and related amortization expense is
included in industry and geographic identifiable assets and income before taxes,
respectively, based on the industry and geographic area of the acquired
businesses.
Minority interest and other in 1995 included a pretax gain of $12.1 from
resolution of litigation involving environmental cost reimbursements. Minority
interest and other also included the minority's share of VILPAC losses in 1995
and profits in 1994.
<PAGE>
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996, 1995 AND 1994 (CURRENCIES IN MILLIONS)
INDUSTRY SEGMENT DATA 1996 1995 1994
- ------------------------------------------------------------------------------
Revenues:
Trucks $4,020.7 $4,291.6 $4,029.1
Auto Parts 184.6 175.3 172.1
Financial Services 267.9 257.5 210.9
Other Operating 126.5 123.8 93.0
- ------------------------------------------------------------------------------
$4,599.7 $4,848.2 $4,505.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Income before taxes:
Trucks $ 236.0 $ 321.1 $ 299.4
Auto Parts 6.4 5.5 4.2
Financial Services 68.3 53.3 57.5
Other Operating 12.3 13.1 4.3
Corporate expenses, net of other revenues (40.2) (36.3) (52.8)
Investment income 28.4 27.7 24.1
Minority interest and other 1.7 15.2 (16.6)
- ------------------------------------------------------------------------------
$ 312.9 $ 399.6 $ 320.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Depreciation and amortization:
Trucks $ 49.7 $ 40.9 $ 34.5
Auto Parts 5.3 5.2 5.1
Financial Services 17.1 17.7 15.2
Other 5.2 5.2 4.1
Corporate 3.8 4.5 4.3
- ------------------------------------------------------------------------------
$ 81.1 $ 73.5 $ 63.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Capital expenditures:
Trucks $ 89.5 $ 67.3 $ 39.3
Auto Parts 5.3 3.4 2.4
Financial Services 15.3 13.0 25.7
Other 2.3 5.0 11.2
Corporate 10.8 5.0 2.0
- ------------------------------------------------------------------------------
$ 123.2 $ 93.7 $ 80.6
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Identifiable assets:
Trucks $1,671.7 $ 753.5 $ 748.9
Auto Parts 95.9 94.4 94.5
Financial Services 2,821.7 2,744.3 2,365.5
Other 95.7 95.1 94.8
Manufacturing cash and marketable securities 507.9 609.3 531.6
Corporate 105.9 93.9 92.9
- ------------------------------------------------------------------------------
$5,298.8 $4,390.5 $3,928.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
GEOGRAPHIC AREA DATA 1996 1995 1994
- ------------------------------------------------------------------------------
Revenues:
United States $3,608.8 $4,108.8 $3,548.9
Other 990.9 739.4 956.2
- ------------------------------------------------------------------------------
$4,599.7 $4,848.2 $4,505.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Income before taxes:
United States $ 270.4 $ 352.5 $ 276.8
Other 52.6 40.5 88.6
Corporate expenses, net of other revenues (40.2) (36.3) (52.8)
Investment income 28.4 27.7 24.1
Minority interest and other 1.7 15.2 (16.6)
- ------------------------------------------------------------------------------
$ 312.9 $ 399.6 $ 320.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Identifiable assets:
United States $3,155.3 $3,069.7 $2,722.1
Europe 986.7 94.4 82.0
Other 543.0 523.2 499.6
Manufacturing cash and marketable securities 507.9 609.3 531.6
Corporate 105.9 93.9 92.9
- ------------------------------------------------------------------------------
$5,298.8 $4,390.5 $3,928.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Export revenues of U.S. companies $ 441.7 $ 263.0 $ 117.8
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PACCAR INC AND SUBSIDIARIES
<PAGE>
40
REPORT OF ERNST & YOUNG LLP, 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, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. 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, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Seattle, Washington
February 14, 1997
COMMON STOCK MARKET PRICES AND DIVIDENDS
Common stock of the Company is traded on the Nasdaq National Market under the
symbol PCAR. The table below reflects the range of trading prices as reported by
Nasdaq and cash dividends declared. There were 3,099 record holders of the
common stock at December 31, 1996.
<TABLE>
<CAPTION>
1996 CASH DIVIDENDS STOCK PRICE 1995 CASH DIVIDENDS STOCK PRICE
QUARTER DECLARED HIGH LOW QUARTER DECLARED HIGH LOW
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
First $.25 $53 1/2 $41 3/4 First $.25 $48 $40 3/4
Second .25 51 7/8 45 3/4 Second .25 51 1/2 41 3/4
Third .25 55 3/4 44 9/16 Third .25 54 5/8 46 1/4
Fourth .25 73 1/8 48 Fourth .25 51 3/4 39 1/4
Year-End Extra $1.50 Year-End Extra $3.00
- -----------------------------------------------------------------------------------------------------------------------------------
</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.
<PAGE>
41
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
FIRST SECOND THIRD FOURTH
- -----------------------------------------------------------------------------------------------------------------------------
(MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996
Net Sales $1,027.7 $1,033.9 $1,046.8 $1,208.4
Gross Profit 132.7 136.5 138.4 171.9
Financial Services Income Before Income Taxes 16.7 16.7 16.9 18.0
Net Income 35.7 51.7 51.1 62.5
Weighted Average Number of Common Shares Outstanding 38.9 38.9 38.9 38.9
Net Income Per Share $ .92 $ 1.33 $ 1.31 $ 1.61
- -----------------------------------------------------------------------------------------------------------------------------
1995
Net Sales $1,123.7 $1,205.3 $1,147.0 $1,096.5
Gross Profit 144.7 165.0 155.4 156.7
Financial Services Income Before Income Taxes 10.6 14.4 14.6 13.7
Net Income 54.3 65.1 68.3 65.1
Weighted Average Number of Common Shares Outstanding 38.9 38.9 38.9 38.9
Net Income Per Share $ 1.40 $ 1.67 $ 1.76 $ 1.67
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
First quarter 1996 net income includes an $11 after-tax charge for closure
of the Canadian plant and cessation of production at a plant in the Seattle
area. Fourth quarter sales, gross profit and net income include results of DAF
Trucks N.V. from November 15, 1996, the date of acquisition.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
(MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES $4,316.8 $4,572.5 $4,285.1 $3,378.9 $2,576.8
FINANCIAL SERVICES REVENUE 267.9 257.5 210.9 166.6 161.1
NET INCOME 201.0 252.8 204.5 142.2 65.2
TOTAL ASSETS:
Manufacturing and Parts 2,477.1 1,646.2 1,562.7 1,343.9 1,235.7
Financial Services 2,821.7 2,744.3 2,365.5 1,947.3 1,556.4
LONG-TERM DEBT:
Manufacturing and Parts 32.9 10.7 11.1 11.7 12.5
Financial Services 1,112.0 1,149.6 999.9 709.1 494.4
STOCKHOLDERS' EQUITY 1,358.0 1,251.2 1,174.5 1,107.5 1,038.4
PER COMMON SHARE:
Net Income $ 5.17 $ 6.50 $ 5.26 $ 3.66 $ 1.68
Cash Dividends Declared 2.50 4.00 3.00 1.74 1.13
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
PACCAR INC AND SUBISIDIARIES
<PAGE>
Exhibit 21
SUBSIDIARIES AND AFFILIATE OF THE REGISTRANT
State or
Country of Names Under Which
Name* Incorporation Subsidiaries Do Business
- -------------------------- ------------- ------------------------
PACCAR of Canada Ltd. Canada PACCAR of Canada Ltd.
Canadian Kenworth Co.
Peterbilt of Canada
PACCAR Parts 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. 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 Delaware PACCAR Sales North America
America, Inc.
PACCAR Automotive, Inc. Washington Grand Auto
Al's Auto Supply
DAF Trucks N.V. Netherlands DAF Trucks N.V.
* The names of some subsidiaries have been omitted. Considered in the
aggregate, omitted subsidiaries would not constitute a significant
subsidiary.
<PAGE>
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 14, 1997, included in the 1996 Annual
Report to Shareholders of PACCAR Inc.
Our audits also included the consolidated financial statement schedule of PACCAR
Inc listed in item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents 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 14, 1997,
with respect to the consolidated financial statements and schedule of PACCAR Inc
incorporated by reference in the Annual Report (Form 10-K) for the year ended
December 31, 1996.
/s/ Ernst & Young LLP
----------------------
ERNST & YOUNG LLP
Seattle, Washington
March 25, 1997
<PAGE>
Exhibit 24
POWER OF ATTORNEY
We, the undersigned directors of PACCAR Inc, a Delaware corporation, hereby
severally constitute and appoint M. C. Pigott, our true and lawful
attorney-in-fact, with full power to sign for us, and in our names in our
capacity as director, a Form 10-K on behalf of the Company for the year ending
December 31, 1996, 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 10th day of December 1996.
*/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/M. A. Tembreull
- ------------------------- ----------------------------------
H. J. Haynes M. A. Tembreull
Director, PACCAR Inc Director, PACCAR Inc
*/s/D. J. Hovind */s/James H. Wiborg
- ------------------------- ----------------------------------
D. J. Hovind J. H. Wiborg
Director, PACCAR Inc Director, PACCAR Inc
*/s/C. M. Pigott
- -------------------------
C. M. Pigott
Director, PACCAR Inc
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996,
1995, AND 1994, AND FROM THE CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1996
AND 1995 OF PACCAR INC AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 222,900
<SECURITIES> 304,900
<RECEIVABLES> 3,366,100
<ALLOWANCES> 68,700
<INVENTORY> 406,500
<CURRENT-ASSETS> 0
<PP&E> 1,330,200
<DEPRECIATION> 552,700
<TOTAL-ASSETS> 5,298,800
<CURRENT-LIABILITIES> 0
<BONDS> 1,144,900
0
0
<COMMON> 466,400
<OTHER-SE> 891,600
<TOTAL-LIABILITY-AND-EQUITY> 5,298,800
<SALES> 4,316,800
<TOTAL-REVENUES> 4,599,700
<CGS> 3,737,300
<TOTAL-COSTS> 3,884,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,700
<INTEREST-EXPENSE> 4,200
<INCOME-PRETAX> 312,900
<INCOME-TAX> 111,900
<INCOME-CONTINUING> 201,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201,000
<EPS-PRIMARY> 5.17
<EPS-DILUTED> 5.17
</TABLE>
