Oct 2019 Page 1 Disclosure Regarding Forward-Looking Statements - - PowerPoint PPT Presentation

Oct 2019 Page 1

Oct 2019 Page 2

This presentation may contain statements that are forward

• looking. These statements are based on current expectations and

assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. A summary of risks and uncertainties is described in more detail in our periodic reports filed with the Securities and Exchange Commission (SEC). We undertake no duty to update or revise this presentation, whether as a result of new information, future events or otherwise. For the most recent financial, risk and other information about PACCAR, please see

• ur SEC filings and most recent earnings release available on the

Investor Relations page of www.paccar.com.

Disclosure Regarding Forward-Looking Statements

Oct 2019 Page 3

Truck and Other 78% Parts 16% Financial Svcs 6%

PACCAR A Global Technology Company in Commercial Vehicles

Truck and Other $18.3B Revenues Premium Quality Light, Medium and Heavy Commercial Vehicles, Diesel Engines and Powertrain Components Aftermarket Parts $3.8B Revenues Distribute Aftermarket Parts through Global Network of over 2,200 Dealerships Financial Services $1.4B Revenues Finance and leasing portfolio of 198,000 trucks and trailers, with assets of $14.4B

80 Years of Consecutive Profitability; Dividend Paid Every Year Since 1941 2018 Revenues $23.5B 2018 Net Income $2.2B 2018 Dividend Yield 4.7%

Oct 2019 Page 4

Quality Highest Integrity Operational Excellence Conservative Financial Management Long-Term Perspective

Our Culture

PACCAR is a company with a great culture and a bright future. Our focus is on doing things in an ethical and disciplined manner. We make decisions utilizing conservative financial principles and common sense for the long-term benefit of our customers, employees and shareholders.

Oct 2019 Page 5

PACCAR’s business segments include Commercial Vehicles, Powertrain, Aftermarket Parts, Financial Services and Information Technology. PACCAR’s premium brands Kenworth, Peterbilt and DAF are the premier light, medium and heavy duty commercial trucks in their markets. Other brands include PACCAR Powertrain, PACCAR Parts, PACCAR Financial, and PACCAR Leasing.

Oct 2019 Page 6

Products

• PACCAR’s product

investments deliver industry-leading performance and value to our customers

• Our products reflect
• ur core brand

values of quality, innovation and technology

6-16t Vocational >16t

Oct 2019 Page 7

The integrated PACCAR Powertrain is the most advanced powertrain in the market. The PACCAR MX-13 and MX-11 engines are optimally matched to the advanced PACCAR 12-Speed automated transmission and the efficient 40K tandem drive axle to achieve exceptional performance and fuel economy. The PACCAR MX-13 engine offers 510 hp and 1,850 lb.-ft. of torque and the PACCAR MX-11 engine features 430 hp and 1,650 lb.-ft. of torque. PACCAR designs MX engines to an industry-leading B10 life of

• ne million miles. This means 90% of PACCAR MX-

13 and MX-11 engines are expected to reach one million miles without the need for a major overhaul. In addition to the PACCAR tandem drive axle, Kenworth and Peterbilt offer the PACCAR steer axle. DAF trucks include a range of lightweight and durable PACCAR front and rear axles.

Oct 2019 Page 8

50 100 150 200 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Units (000s) Brasil Australia Mexico Canada US Europe

PACCAR Truck Production Over 1.3 Million Trucks Produced 2009 - 2018

189.1 61.0 78.8 138.0 140.4 137.1 142.9 154.7 140.9 158.9

PACCAR produced a record 189,100 trucks in 2018

Oct 2019 Page 9 5 10 15 20 25 5 10 15 20 25 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

$ Billions $ Billions

Revenues

0.0 0.4 0.8 1.2 1.6 2.0 2.4 0.0 0.4 0.8 1.2 1.6 2.0 2.4 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

$ Billions $ Billions

Net Income

PACCAR

Excellent Financial Performance Throughout the Business Cycle

CAGR = 6% CAGR = 9%

• Reputation for superior operational

excellence

• Increase in revenues and net income

reflect growth in market share in North America and Europe, record aftermarket parts sales and growth in financial services

• Maintain profitability throughout the

cycle due to strong cost control discipline and experienced management team

Oct 2019 Page 10

• 9%
• 6%
• 3%

0% 3% 6% 9% 12%

• 9%
• 6%
• 3%

0% 3% 6% 9% 12% 09 10 11 12 13 14 15 16 17 18 PACCAR Volvo Daimler Volkswagen Iveco Navistar

• PACCAR’s operating margin

has been at the top of the industry since 2012, reflecting the premium value of our products and our leadership in operating efficiency.

• This is a testament to the
• utstanding performance of

PACCAR’s employees.

Best-in-Class Operating Efficiency

Commercial Vehicle Segment Operating Margin

Oct 2019 Page 11

4 8 12 16 20 24 4 8 12 16 20 24 09 10 11 12 13 14 15 16 17 18 PACCAR Volvo Daimler Volkswagen CNH Navistar

Best-in-Class Operating Efficiency

Inventory Turns

PACCAR’s inventory turns are the highest in the industry, a result of the PACCAR Production System, Lean Manufacturing and Six Sigma

Oct 2019 Page 12

0% 4% 8% 12% 16% 0% 4% 8% 12% 16% 09 10 11 12 13 14 15 16 17 18 PACCAR Volvo Daimler Volkswagen CNH Navistar

Best-in-Class Operating Efficiency

SG&A % of Sales

PACCAR’s SG&A as a percentage of sales is much lower than its peer group, reflecting strong financial discipline

Oct 2019 Page 13

2,400 4,800 7,200 9,600 12,000 40 80 120 160 200 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 $/Truck Units (000s) Trucks Net Income per Truck

Net Income per Truck

• Net income per truck is

PACCAR’s net income divided by total truck unit sales.

• Truck sales not only generate

profit from the sale, but also parts and finance profit. This illustrates the strength of PACCAR’s business model, providing the highest quality trucks, aftermarket support and financing.

• PACCAR achieved record net

income per truck in 2018.

Oct 2019 Page 14

0% 5% 10% 15% 20% 25% 30%

2018

0% 5% 10% 15% 20% 25% 30%

Average 2014 - 2018

Best-in-Class Return on Invested Capital

ROIC = NOPAT/(Equity + Manufacturing Debt + Postemployment Benefit Liabilities)

PACCAR’s high profitability, strong working capital management and prudent investments resulted in best in class return on invested capital of 25.6% in 2018, and an average of 21.8% over the last five years.

Oct 2019 Page 15

• High ROI Capital Investments

− ROIC 25.6% 2018

• Pay Regular Quarterly and Annual Dividend

− Dividend paid every year since 1941 − Total dividends paid approximately 50% of net income for many years − Regular quarterly dividend 20-year annualized growth of 11% − Total 2018 dividends declared increased 41% (yoy)

• Opportunistic Share Buybacks

− $500 Million authorized; $431 Million remaining as of 9/30/19

• Strategic M&A

− Disciplined valuation and screening process − Clear path to value creation

• No Unfunded Pension Obligation

Capital Allocation Strategy

Oct 2019 Page 16

300 600 900 1,200 1,500 300 600 900 1,200 1,500 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 $ Millions $ Millions Dividends Stock Repurchased

Dividends Declared and Stock Repurchases

CAGR = 11%

Oct 2019 Page 17

0% 1% 2% 3% 4% 5% 0% 1% 2% 3% 4% 5% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Average Dividend Yield = 3.1%

Excellent Dividend Yield

• PACCAR’s dividend yield,

reflects the total quarterly + special dividends declared in the year, divided by the average stock price for the year

• PACCAR’s dividend yield

has increased over the last 10 years, and averaged 3.1%

Oct 2019 Page 18

Truck 70% Rail 13% Pipeline 11% Water 6%

Trucking Moves the Economy

70% of U.S. Freight is Moved by Truck

Trucking is the lifeblood of the economy. In the U.S., the economy depends on trucks to deliver ten billion tons of virtually every commodity consumed - 70% of all the freight transported annually. 35 million commercial trucks, including 3.7 million heavy-duty trucks, move that freight. The percentage of tonnage by mode is stable

• ver time.

400 370 410 130 185 90

2013 2018

Units in Thousands >6t Truck Market 2013 – 2.7 Million 2018 – 3.3 Million

1,325

North America South America Africa & Middle East Europe India

350 295

Rest of Asia Russia/CIS China

27 22

Australia

300 300 125 1,060 190 195 225

PACCAR Truck Assembly

>6t Global Truck Market

Oct 2019 Page 20

50 100 150 200 250 300 Hualing Isuzu Iveco Dayun KamAZ Jianghuai Navistar Hongyan Hino Ashok Leyland Beijing Foton Tata Motors PACCAR Shaanxi Volkswagen Sinotruk Volvo Dongfeng FAW Daimler

Total Production 2018 = 2.4 Million

#8

• PACCAR competes globally with

truck manufacturers from North America, Europe and Asia

• PACCAR was the 8th largest

heavy-duty manufacturer in the world last year, 4th among the multinational competitors. (China had 4 of the top seven producers

• n record production in 2018)

>16t Truck Manufacturing

2018 Production (Units 000s)

Oct 2019 Page 21

50 100 150 200 250 300 350 50 100 150 200 250 300 350 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Units (000s) Units (000s) US & Canada Europe South America

>16t Truck Market Size Outlook

U.S. and Canada 310,000 – 320,000 Europe 310,000 – 320,000

• S. America

95,000 – 105,000

2019 Market Forecast Estimate

U.S. and Canada 230,000 – 260,000 Europe 260,000 – 290,000

• S. America

100,000 – 110,000

2020 Market Forecast Estimate

Oct 2019 Page 22

Oct 2019 Page 23

PACCAR Strategy

Premium Products and Services Profitable Market Share Growth Geographic Expansion Quality Quality Technology Technology Innovation Innovation

Brand Values Profitable Growth

Oct 2019 Page 24

• Operating cash flow has averaged $2.5 billion for the

last five years and has grown 8% annually over the last 20 years

• Strong operating cash flow enables PACCAR to

invest in growth throughout the business cycle

• PACCAR has invested $6.6 billion in capital projects,

innovative products and new technologies in the last decade

• Key investments:

− International Truck of the Year 2018 DAF XF/CF trucks − PACCAR MX-13 and MX-11 engine factory in North America − Kenworth and Peterbilt 2.1 meter wide cab program in North America, South America, Australia − DAF Brasil factory − PACCAR Parts Distribution Centers

PACCAR

Investing Throughout the Business Cycle

200 400 600 800 1,000 1,200 200 400 600 800 1,000 1,200 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 $ Millions $ Millions

Capital Investments and R&D Expenses

Capital R&D 0.0 0.5 1.0 1.5 2.0 2.5 3.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

$ Billions $ Billions

Operating Cash Flow

Oct 2019 Page 25

100 200 300 400 500 600 700 100 200 300 400 500 600 700 09 10 11 12 13 14 15 16 17 18 # of Engines (000s) # of Engines (000s) Cumulative PACCAR MX Engines Produced DAF MX 13 KW/PB MX 13 MX 11

• The PACCAR MX-13 is the flagship of PACCAR’s

engine line-up with 454,000 engines in operation in Europe and 188,000 engines in operation in North America and a growing presence in South America and Australia.

• Produced the 200,000th MX engine for North

America in March 2019

• PACCAR expanded its engine program in 2013

with the introduction of the PACCAR MX-11 in

• Europe. The MX-11 was launched in North

America in January 2016.

Cumulative PACCAR MX Engines Produced

PACCAR MX-11 10.8 Liter PACCAR MX-13 12.9 Liter

Oct 2019 Page 26

Emerging Truck Technology Trends

• Driver Environment
• Human Machine Interface
• Augmented Reality

Driver Assistance Systems Connectivity Human Centered Design

• Road User Safety
• Driver Shortage
• Autonomous Trucks
• Vehicle Uptime
• Artificial Intelligence
• Advanced Fleet Management

PACCAR is deploying many emerging technologies to meet customer expectations and reduce operating costs

PACCAR Emerging Technology Programs

Alternative Powertrain Vehicles Connected Trucks Platooning Autonomous Truck Development

Oct 2019 Page 28

Alternative Powertrains

DAF XF/CF Parallel Hybrid

Electric Range 20 Miles

DAF CF Electric

Electric Range 75 Miles

Peterbilt Electric Refuse

Electric Range 80 Miles

Peterbilt Electric Port

Electric Range 150 Miles

Medium Duty Electric

Electric Range 150 Miles

Kenworth Hydrogen Port

Range 300 Miles

PACCAR has introduced several alternative powertrain trucks currently in field-testing with customers

Oct 2019 Page 29

• PACCAR Innovation Center in Silicon

Valley enhances PACCAR’s access to emerging technologies and talent from around the world.

• The Innovation Center collaborates with
• ther PACCAR engineering teams to

develop next generation technologies such as an SAE Level 4 autonomous truck

• The Innovation Center truck lab is

equipped with the tools needed to integrate emerging technologies.

PACCAR Innovation Center, Sunnyvale, CA

Oct 2019 Page 30

PACCAR Digital Services

Kenworth Embedded Engineering Center, Kirkland, WA Digital Technology Center, Eindhoven, NL

PACCAR has opened digital technology centers at Kenworth in Kirkland, WA, and at DAF in Eindhoven, the Netherlands. The centers will accelerate embedded software development and connected vehicle solutions to benefit customers’ operating efficiency.

PACCAR Facility Investments

DAF Factory, Ponta Grossa, Brasil Dynacraft, McKinney, Texas PACCAR Engine Factories Kenworth New Paint Facility, Chillicothe, OH

Oct 2019 Page 32

PACCAR Parts Strategy

1,000 2,000 3,000 4,000 1,000 2,000 3,000 4,000 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 $ Millions $ Millions

PACCAR Parts Sales

Engine Parts Sales Parts Sales CAGR = 8%

PACCAR Parts achieved $3.8 billion in sales in 2018, a 15% increase over a year ago and a CAGR of 8% over the last 15 years Growth Drivers:

• Growing population of Kenworth, Peterbilt and

DAF trucks due to geographic expansion and market share growth

• Growing population of PACCAR engines due

to North America introduction in 2010

• Best-in-class Distribution Network

− 18 parts distribution centers and 2,200+ dealer locations

• Proprietary, PACCAR Genuine and TRP

branded parts enhance margins

• Growing network of TRP stores

Toronto Parts Distribution Center opened October 2018

Oct 2019 Page 33

PACCAR Parts Distribution Centers and Dealers

18 PDCs in 11 Countries; 2,200+ Dealer Locations

PACCAR Distribution Centers KW, PB, DAF Dealers

Oct 2019 Page 34

PACCAR Global Dealer Network

• Independent dealer network of 2,200+ dealer

locations

• Premium customer experience
• Strong dealer profitability and expanded
• pportunities from PACCAR engines and TRP

stores

• Competitive flooring and retail financing provided

by PACCAR Financial and PACCAR Leasing

Oct 2019 Page 35

400 500 600 700 800 400 500 600 700 800 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Growth in Kenworth and Peterbilt Dealer Locations

U.S. and Canada

Locations Locations

PACCAR MX-13 Introduced in 2010 Dealer Investments of $1.4 Billion since 2010 70% Growth in Dealer Locations Drives Long-Term PACCAR Parts Growth

Oct 2019 Page 36

PACCAR Financial Services Strategy

• PACCAR Financial Services supports truck

sales by providing financing and leasing services to PACCAR customers

• In 2018, PACCAR Financial financed 24% of

all Kenworth, Peterbilt and DAF trucks

• Geographical diversification, disciplined credit

underwriting, and rigorous portfolio management have enabled PACCAR Financial to earn excellent profits throughout the business cycle.

• Key strategies and investments:

− Predictive data analytics for credit quality − Expanded used truck centers − Mobile finance and credit system − E-Contract and e-signature − Customer on-line portal

Total Assets 12/31/18 = $14.4 Billion

2 4 6 8 2 4 6 8 91 94 97 00 03 06 09 12 15 18 % %

Low 30+ Days Past Due

U.S. & Canada $7.0 Billion 48% Europe $3.6 Billion 25% Australia & Mexico $1.4 Billion 10% PacLease $2.4 Billion 17%

Oct 2019 Page 37

0% 5% 10% 15% 20% 25% 30% 0% 5% 10% 15% 20% 25% 30%

North America Australia Europe

• S. America

1998 2008 2018

• Since 1998, PACCAR’s above 16 tonne

market share has increased in all home markets

• DAF achieved record 16.6% share in

Europe in 2018

• Kenworth is the market leader in Australia
• PACCAR’s investment in truck

manufacturing in Brasil supports PACCAR’s medium-term goal of 10% market share for Kenworth and DAF products in South America.

Long-Term Growth in PACCAR Heavy Duty Market Share

Oct 2019 Page 38

0% 5% 10% 15% 20% 0% 5% 10% 15% 20% U.S. and Canada Europe 1998 2008 2018

Long-Term Growth in PACCAR Medium Duty Market Share

• Since 1998, PACCAR’s medium duty

market share has increased the U.S. and Canada and in Europe

• In the U.S. and Canada, Kenworth and

Peterbilt had record share of 17.7% in 2018

• DAF achieved 9.0% share in Europe in

2018

Oct 2019 Page 39

 DAF Entered Market in 2013  36 Dealer Locations  Heavy Duty Trucks Sales of 2,300 in 2018  Market Share 6.7% in 2018  Local Assembly of PACCAR MX Engines Since 2016  Fenabrave Brand of the Year in 2016, 2017 & 2018  Introduced PACCAR Financial in 2019

On Highway Off Highway

DAF Brasil

Oct 2019 Page 40

 Kenworth Began Producing Trucks in 1960  133 Dealer Locations  284,000 Units Built  Heavy Duty Trucks Sales of 8,900 in 2018  Heavy Duty Market Share of 34.7% in 2018  Kenworth Launched 2.1m Trucks in 2013  Introduced PACCAR MX‐13 Engine in 2013

PACCAR Mexico

Oct 2019 Page 41

 DAF Russia established in 2011  Heavy Duty Market – 62,000 Trucks in 2018  50 DAF, Kenworth and TRP Dealer Locations  Heavy Duty Trucks Sales of 2,700 in 2018  Market Share 4.2%; 10.1% of European Brands in 2018

DAF Russia

Oct 2019 Page 42

• Started Production in 2006
• 17 Dealer Locations
• Introduced Medium Duty LF in 2013
• Delivered >6,000 units through 2018
• Trucks Sales of 1,000 in 2018
• Heavy Duty Market Share of 16.3% in 2018

DAF Taiwan

Oct 2019 Page 43

Facilities Ohio Environmental Protection Agency

Environmental Leadership

Kenworth – Chillicothe Awarded the 2018 Encouraging Environmental Excellence Award from the Ohio EPA PACCAR Earns “A” for its Environmental Practices; Top 2% of

• ver 6,000 Reporting

Companies CDP “A” Rating 88% of PACCAR Locations are “Zero Waste to Landfill” 88% of PACCAR Manufacturing Locations have Achieved ISO 14001 Certification Kenworth – Renton King County Gold Award for 4th Consecutive Year

Oct 2019 Page 44

Third Quarter 2019 Earnings

Oct 2019 Page 45

PACCAR Revenues and Profit

80 consecutive years of net profit Dividends every year since 1941

3rd Quarter Nine Months ($ in Millions) 2019 2018 2019 2018 Revenues $6,367 $5,757 $19,483 $17,216 Net Income $608 $545 $1,857 $1,617 Return on Revenues 9.5% 9.5% 9.5% 9.4% Diluted EPS $1.75 $1.55 $5.34 $4.59 New Truck Deliveries (units) 49,300 47,800 153,100 138,700

Oct 2019 Page 46 $5.76 $6.37 2018 2019

Sales and Revenues (Billions of Dollars)

• Sales and Revenues of $6.37 Billion
• Deliveries of 49,300 Trucks
• Excellent Net Income of $607.9 Million
• After-tax Return on Revenues of 9.5%
• PACCAR Parts Revenues of $1.0 Billion
• PACCAR Parts Pretax Income of $207.4 Million, a

20.7% Pretax Return on Revenues

• Financial Services Pre-Tax Income of $66.5 Million
• R&D Expenses of $82.2 Million
• Capital Investments of $196.0 Million

2019 Financial Results Third Quarter 2019 vs. Third Quarter 2018

$545 $608 2018 2019

Net Income (Millions of Dollars)

Oct 2019 Page 47

25% 26% 27% 28% 25% 26% 27% 28% 13 14 15 16 17 18 9 Mo 19

Parts

Excellent Truck and Parts Gross Margins

• Truck margins have increased due to new

products and operating efficiencies

• Parts margins have benefited from

investments and growing populations of PACCAR trucks and engines

Gross Margins

10% 11% 12% 13% 10% 11% 12% 13% 13 14 15 16 17 18 9 Mo 19

Truck

12% 13% 14% 15% 16% 12% 13% 14% 15% 16% 13 14 15 16 17 18 9 Mo 19

Total Manufacturing

Oct 2019 Page 48 $4.43 $4.98 2018 2019

Sales (Billions of Dollars)

• Sales Increased 12%
• Pretax Profit Increased 23%
• Quarterly Deliveries of 49,300 Trucks, a 3%

Increase

• Price Realization of Approximately 3%

Truck Third Quarter 2019 vs. Third Quarter 2018

$391 $482 2018 2019

Segment Pretax Profit (Millions of Dollars)

Oct 2019 Page 49 $960 $1,001 2018 2019

Sales (Millions of Dollars)

• Sales Increased 4%
• Pretax Profit Increased 10%
• Results Driven by Investments in Parts

Distribution Centers (PDCs); Increased Dealer Locations, Including TRP Stores; and increased PACCAR trucks and MX engines in

• peration
• New PDCs in Las Vegas, NV, and Ponta

Grossa, Brasil will open in 2020

Aftermarket Parts Third Quarter 2019 vs. Third Quarter 2018

$189 $207 2018 2019

Segment Pretax Profit (Millions of Dollars)

Oct 2019 Page 50 $340 $363 2018 2019

Revenues (Millions of Dollars)

• Revenues Increased 7%
• Pretax Profit Decreased 16%
• Increased Earning Assets
• Used Truck Centers to Open in Denton,

Texas, in 2019 and in Prague, Czech Republic, 2020

• Portfolio of 205,000 Trucks and Trailers
• Record Total Assets of $15.61 Billion

Financial Services Third Quarter 2019 vs. Third Quarter 2018

$79 $67 2018 2019

Segment Pretax Profit (Millions of Dollars)

Oct 2019 Page 51

($ Millions)

9/30/19 Cash & Securities $ 4,643 Manufacturing Assets 7,510 Financial Services Assets 15,615 Total Assets $ 27,768 Manufacturing Debt $ - Manufacturing Liabilities 5,558 Financial Services Liabilities 12,247 Shareholders' Equity 9,963 Total Liabilities & Equity $ 27,768

• Superb balance sheet
• $4.6 billion in cash and securities to

support growth opportunities and investments in all phases of the cycle

• No manufacturing debt – a capital

structure that has proven beneficial throughout the business cycle

• A+/A1 credit rating provides excellent

access to the credit markets for PACCAR Financial Services

PACCAR Inc

A+/A1 Credit Ratings

Oct 2019 Page 52

PACCAR Competitive Advantages

Experienced Management Team Highest Quality Products Rigorous Cost Control Innovative Technology Global Aftermarket Parts Sales Strongest Dealer Network Profitable Financial Services Excellent Supplier Partnerships

Oct 2019 Page 53