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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, 1999
Commission File No. 0-6394
PACCAR INC
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(Exact name of Registrant as specified in its charter)
DELAWARE 91-0351110
(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 (425) 468-7400
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 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 29, 2000:
Common Stock, $1 par value -- $2.98 billion
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The number of shares outstanding of the issuer's classes of common stock, as of
February 29, 2000:
Common Stock, $1 par value -- 77,600,944 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1999 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual stockholders meeting to be held
on April 25, 2000 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. Each of the divisions are
responsible for at least one of the Company's products. That responsibility
includes new product development, applications engineering, manufacturing and
marketing.
Outside the U.S., the Company manufactures and sells through wholly owned
subsidiary companies in the Netherlands, United Kingdom, Australia, Mexico, and
Canada. An export sales division generally is responsible for export sales.
The Netherlands subsidiary also has a manufacturing plant located in
Belgium, and uses foreign sales subsidiaries to handle export sales in the
European Community and Eastern Europe.
Product financing and leasing is offered through subsidiaries located in
North America, Australia, and the United Kingdom.
(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
44 and 45 of the Annual Report to Stockholders for the year ended December 31,
1999 and is incorporated herein by reference.
(c) Narrative Description of Business
The Company has two principal industry segments, (1) manufacture of light-,
medium- and heavy-duty trucks and related aftermarket distribution of parts and
(2) finance and leasing services provided to customers and dealers. The Company
competes in the truck parts aftermarket primarily through its dealer network.
The Company's finance and leasing activities are principally related to Company
products and associated equipment. Other manufactured products also include
industrial winches.
TRUCKS
The Company and its subsidiaries design and manufacture trucks which are
marketed under the Peterbilt, Kenworth, DAF and Foden nameplates in the
heavy-duty diesel category. These vehicles, which are built in five plants in
the United States, four in Europe and one each in Australia and Mexico, are used
worldwide for over-the-road and off-highway hauling of freight, petroleum,
wood products, construction and other materials. Commercial trucks and related
service parts comprise the largest segment of the Company's business, accounting
for 97% of total 1999 net sales.
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The Company competes in the North American Class 6/7 markets primarily with
conventional models. These medium-duty trucks are assembled at the Company's new
Ste. Therese, Quebec plant and at 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. The Company competes in the European medium
commercial vehicle market with a cab-over-engine truck manufactured in the
Netherlands. Leyland manufactures light commercial vehicles in the United
Kingdom for sale throughout Europe under the DAF nameplate. During 1999, DAF
continued its long-term design development under an agreement with Renault V.I.
for a new light-line product.
Trucks and related parts are sold to independent dealers for resale. 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 dealers. Trucks
manufactured in Australia, Mexico, the Netherlands and the United Kingdom are
marketed in their primary markets through independent dealers and a small number
of factory branches. Trucks manufactured in these countries for export beyond
their primary market area are marketed by DAF or PACCAR International.
The Company's trucks are essentially custom products and have a reputation
for high quality. For a majority of the Company'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 PACCAR and 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 1999. 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 distribution network. Parts are both
manufactured by the Company and purchased from various suppliers. Replacement
parts inventory levels are determined largely by anticipated customer demand and
the need for timely delivery.
There were four other principal competitors in the U.S. Class 8 truck market
in 1999. The Company's share of that market was approximately 21% of
registrations in 1999. There were seven other principal competitors in the
European medium and heavy commercial vehicle market in 1999, including parent
companies to three competitors of the Company in the United States. The
Company's subsidiary, DAF, had approximately a 10% share of the western Europe
heavy-truck market. 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.
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The Peterbilt, Kenworth, DAF and Foden nameplates 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 had a total production backlog of over $3 billion at the end of
1999. Within this backlog, orders scheduled for delivery within three months (90
days) are considered to be firm. The 90-day backlog approximated $1.9 billion at
December 31, 1999 compared with approximately $1.7 billion at year-end 1998.
Production of the year-end 1999 backlog is expected to be completed during 2000.
The number of persons employed by the Company in its truck business at
December 31, 1999 was approximately 19,500.
OTHER BUSINESSES
Other businesses of the Company accounted for 3% of total 1999 net sales.
This group included industrial winches and PACCAR Automotive Inc., a wholly
owned subsidiary. Winches are manufactured in two U.S. plants and are marketed
under the Braden, Carco, and Gearmatic nameplates. The markets for all of these
products are highly competitive and the Company competes with a number of well
established firms. PACCAR Automotive purchased and sold general automotive parts
and accessories through retail locations under the names of Grand Auto and Al's
Auto Supply. These locations were supplied from the subsidiary's distribution
warehouses. The company sold this subsidiary during the fourth quarter of 1999.
The Braden, Carco, and Gearmatic 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.
FINANCIAL SERVICES
In North America, Australia and the United Kingdom, the Company provides
financing principally for its manufactured trucks through six 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 truck and other transportation equipment sold principally
by its independent dealers. Customer contracts are secured by the products
financed.
PACCAR has a 49% equity ownership in DAF Financial Services in Europe. This
investment, which is recorded under the equity method, is not material.
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PACCAR Leasing Corporation (PLC), a wholly owned subsidiary, franchises
selected Company 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.
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 technical centers dedicated to product testing and
research and development activities. Additional product development activities
are conducted within each separate manufacturing division. Amounts spent on
research and development approximated $125 million in 1999, $119 million in 1998
and $84 million in 1997.
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.
EMPLOYEES
On December 31, 1999, the Company employed a total of approximately 21,000
persons.
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ITEM 2. PROPERTIES
The Company and its subsidiaries own and operate manufacturing plants in five
U.S. states, four locations in Europe, and one each in Australia, Canada and
Mexico. Several parts distribution centers, sales and service offices, and
finance and administrative offices are also operated in owned or leased premises
in these and other countries. DAF operates sales subsidiaries in owned or leased
premises in various countries throughout Europe. Facilities for product testing
and research and development are located in Skagit County, Washington and
Eindhoven, the Netherlands. 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. The Company's Canadian
plant, which was closed during 1996-1998, has been rebuilt. It reopened and
began production in August 1999. Most of the Company's manufacturing facilities
operated near their productive capacities for most of 1999.
Geographical locations of manufacturing plants within indicated industry
segments are as follows:
U.S. Canada Australia Mexico Europe
Trucks 5 1 1 1 4
Other 2 - - - -
Properties located in Auburn, Washington, Oakland and Torrance, California
and Odessa, Texas are being held for sale. These properties were originally
obtained principally as a result of business acquisitions in 1987 and 1988.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various lawsuits incidental
to the ordinary course of business. Management believes that the disposition of
such lawsuits will not materially affect the Company's consolidated financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S EQUITY AND RELATED STOCKHOLDER MATTERS
Common Stock Market Prices and Dividends on page 47 of the Annual Report to
Stockholders for the year ended December 31, 1999 are incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 46 of the Annual Report to Stockholders for
the year ended December 31, 1999 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 23 through 28 of the Annual Report to Stockholders for the
year ended December 31, 1999 is incorporated herein by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk on pages 48 and
49 of the Annual Report to Stockholders for the year ended December 31, 1999 is
incorporated herein by reference.
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, 1999 are incorporated herein by reference:
Consolidated Balance Sheets
-- December 31, 1999 and 1998
Consolidated Statements of Income
-- Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity
-- Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Comprehensive Income
-- Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows
-- Years Ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
-- December 31, 1999, 1998 and 1997
Quarterly Results (Unaudited) on page 47 of the Annual Report to Stockholders
for the years ended December 31, 1999 and 1998 are incorporated herein by
reference.
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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.
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, and business experience on
pages 4 and 5 of the proxy statement for the annual stockholders meeting of
April 25, 2000 is incorporated herein by reference.
Item 401(b) of Regulation S-K:
Executive Officers of the registrant as of February 25, 2000:
Present Position and Other Position(s)
Name and Age Held During Last Five Years
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Mark C. Pigott (46) Chairman and Chief Executive Officer; Vice Chairman
from January 1995 to December 1996; previously Executive Vice
President. Mr. Pigott is the son of Charles M. Pigott and nephew
of James C. Pigott, both directors of the Company.
David J. Hovind (59) President since 1992.
Michael A. Tembreull (53) Vice Chairman; Executive Vice President from January 1992 to January 1995.
Gary S. Moore (56) Senior Vice President, Vice President March 1997 to January 1999, Senior
Vice President September 1992 to February 1997.
Thomas E. Plimpton (50) Executive Vice President; Senior Vice President from June, 1996 to July,
1998; General Manager, Peterbilt Motors Company from January, 1992 to
May, 1996.
Patrick F. Flynn (44) Vice President, Chief Information Officer; Chief Information Officer from
October 1997 to January 1998; previously Vice President of Systems Development,
Fruit of the Loom, Inc.
G. Don Hatchel (55) Vice President and Controller since 1991.
G. Glen Morie (57) Vice President and General Counsel since 1984.
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 6 through 11 of the proxy statement for the annual stockholders meeting
of April 25, 2000 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock ownership information on pages 3 through 4 of the proxy statement for
the annual stockholders meeting of April 25, 2000 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 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Listing of financial statements
The following consolidated financial statements of PACCAR Inc and
subsidiaries, included in the Annual Report to Stockholders for the
year ended December 31, 1999 are incorporated by reference in Item 8:
Consolidated Balance Sheets
-- December 31, 1999 and 1998
Consolidated Statements of Income
-- Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity
-- Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Comprehensive Income
-- Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows
-- Years Ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
-- December 31, 1999, 1998 and 1997
(2) Listing of financial statement schedules
All schedules for which provision has been made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable or have
been otherwise disclosed and, therefore, have been omitted.
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(3) Listing of Exhibits (in order of assigned index numbers)
(3) Articles of incorporation and bylaws
(a) PACCAR Inc Certificate of Incorporation, as amended to April
29, 1997 (incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997).
(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 10, 1998 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 4.1 of the
Current Report on Form 8-K of PACCAR Inc dated
December 21, 1998).
(b) Indenture for Senior Debt Securities dated as of
December 1, 1983, and first Supplemental Indenture
dated as of June 19, 1989, 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. dated March 26, 1984,
File Number 0-12553 and Exhibit 4.2 to PACCAR
Financial Corp.'s registration statement on Form S-3
dated June 23, 1989, Registration No. 33-29434).
(c) 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).
(d) 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).
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(e) Forms of Medium-Term Note, Series I (incorporated by
reference to Exhibits 4.3A and 4.3B to PACCAR
Financial Corp.'s Registration Statement on Form S-3
dated September 10, 1998, Registration Number
333-63153).
Form of Letter of Representation among PACCAR
Financial Corp., Citibank, N.A. and the Depository
Trust Company, Series I (incorporated by reference to
Exhibit 4.5 to PACCAR Financial Corp.'s Registration
Statement on Form S-3 dated September 10, 1998,
Registration Number 333-63153).
(10) Material contracts
(a) PACCAR Inc Incentive Compensation Plan (incorporated by reference
to Exhibit (10)(a) of the Annual Report on Form 10-K for the year
ended December 31, 1980).
(b) PACCAR Inc Deferred Compensation Plan for Directors (incorporated
by reference to Exhibit (10)(b) of the Annual Report on Form 10-K
for the year ended December 31, 1980).
(c) Supplemental Retirement Plan (incorporated by reference to
Exhibit (10)(c) of the Annual Report on Form 10-K for the year
ended December 31, 1980).
(d) 1981 Long Term Incentive Plan (incorporated by reference to
Exhibit A of the 1982 Proxy Statement, dated March 25, 1982).
(e) Amendment to 1981 Long Term Incentive Plan (incorporated by
reference to Exhibit (10)(a) of the Quarterly Report on Form 10-Q
for the quarter ended March 31, 1991).
(f) PACCAR Inc 1991 Long-Term Incentive Plan (incorporated by
reference to Exhibit C of the 1997 Proxy Statement, dated March
20, 1997).
(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).
(h) PACCAR Inc Senior Executive Incentive Plan (incorporated by
reference to Exhibit D of the 1997 Proxy Statement, dated March
20, 1997).
(13) Annual report to security holders
Portions of the 1999 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
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(27) Financial Data Schedule
(a) For the 12 months ended December 31, 1999
(b) No reports on Form 8-K were filed for the three months ended December 31,
1999.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate section
of this report.
(d) Financial Statement Schedules
All schedules are omitted because the required matter or conditions are not
present or because the information required by the schedules is submitted
as part of the consolidated financial statements and notes thereto.
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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
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Registrant
Date: March 17, 2000 /s/ M. C. Pigott
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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
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/s/ M. A. TEMBREULL Director and Vice Chairman
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M. A. Tembreull (Principal Financial Officer)
/s/ G. D. Hatchel Vice President and Controller
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G. D. Hatchel (Principal Accounting Officer)
*/s/ C. M. Pigott Director and Chairman Emeritus
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C. M. Pigott
*/s/ D. J. Hovind Director and President
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D. J. Hovind
*/s/ H. A. Wagner Director and Audit Committee Member
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H. A. Wagner
*/s/ J. C. Pigott Director and Chairman of Audit
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J. C. Pigott Committee
*/s/ J. M. Fluke, Jr. Director and Audit Committee Member
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J. M. Fluke, Jr.
*/s/ D. K. Newbigging Director
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D. K. Newbigging
*/s/ G. Grinstein Director
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G. Grinstein
*/s/ W. G. Reed, Jr. Director and Audit Committee Member
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W. G. Reed, Jr.
*By /s/ M. C. Pigott
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M. C. Pigott
Attorney-in-Fact
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ANNUAL REPORT ON FORM 10-K
ITEM 14(c)
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1999
PACCAR INC AND SUBSIDIARIES
BELLEVUE, WASHINGTON