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Covers_cvo223 2.23.05 2:08 AM Page 1 2004 ANNUAL REPORT Covers_cvo223 2.23.05 12:58 AM Page 2 STATEMENT OF COMPANY BUSINESS STOCKHOLDERS’ INFORMATION As a diversified,multinational multinational technology company,technology PACCAR company,manufactures PACCAR manufactures heavy-duty, heavy- duty,on- and on- off-road and off-road Class Class 8 trucks 8 trucks sold around sold around the world the world under under the Kenworth, the Kenworth, Corporate Offices Stock Transfer Braden, Carco, DAF, PACCAR Building and Dividend Dynacraft, Foden, Peterbilt, DAF and Foden nameplates. The company competes in the North American 777 106th Avenue N.E. Dispersing Agent Gearmatic, Kenworth, Bellevue, Washington Wells Fargo Bank Leyland, PACCAR, 98004 Minnesota, N.A. PacLease and Peterbilt Class 6-7 market with its medium-duty models assembled in North America and Shareowner Services are trademarks owned Mailing Address P.O. Box 64854 by PACCAR Inc and sold under the Peterbilt and Kenworth nameplates. In addition, DAF manufactures P.O. Box 1518 St. Paul, Minnesota its subsidiaries. Bellevue, Washington 55164-0854 98009 800.468.9716 Independent Auditors Class 6-7 trucks in the Netherlands and Belgium for sale throughout Europe, the www.wellsfargo.com/ Ernst & Young LLP Telephone shareownerservices Seattle, Washington Middle East and Africa and distributes Class 4-7 trucks in Europe manufactured 425.468.7400 PACCAR’s transfer agent SEC Form 10-K Facsimile maintains the company’s PACCAR’s annual report by Leyland Trucks (UK). • PACCAR manufactures and markets industrial winches 425.468.8216 shareholder records, issues to the Securities and stock certificates and Exchange Commission under the Braden, Gearmatic and Carco nameplates and competes in the truck Homepage distributes dividends and will be furnished to http://www.paccar.com IRS Form 1099. Requests stockholders on request concerning these matters to the Corporate parts aftermarket through its dealer network. • Finance and Leasing subsidiaries should be directed to Secretary, PACCAR Inc, Wells Fargo. P.O. Box 1518, Bellevue, facilitate the sale of PACCAR products in many countries worldwide. Significant Washington 98009. It is Online Delivery of also available online at Annual Report and Proxy www.paccar.com/ company assets are employed in financial services activiactivities.ties. • PACCAR Statement financials.asp, under PACCAR’s 2004 Annual SEC Filings. maintains exceptionally high standards of quality for all of its products: they are Report and the 2005 Proxy Statement are available on Annual Stockholders’ PACCAR’s Web site at www. Meeting well-engineered,are well-engineered, are highlyare highly customized customized for specificfor specific applications applications and and sell sell in the in the paccar.com/financials.asp April 26, 2005, 10:30 a.m. Meydenbauer Center premium segments of their markets, where they have a reputation for superior Registered stockholders 11100 N.E. Sixth Street can sign up to receive Bellevue, Washington future proxy statements 98004 performance and pride of ownership. and annual reports in electronic format, instead An Equal Opportunity of receiving paper Employer documents, by visiting CONTENTS www.econsent.com/pcar/ CONTENTS Financial Highlights Stockholders who hold PACCAR stock in street This report was printed Message to Shareholders name may inquire of their on recycled paper. Financial Highlights PACCARReport Operations of Independent Registered Public bank or broker about the availability of electronic Message to Shareholders FinancialAccounting Charts Firm on the Company’s delivery of annual meeting documents. PACCAR Operations Management’sConsolidated Discussion Financial and Statements Analysis Financial Charts ConsolidatedReport ofStatements Independent of Income Registered Public Management’s Discussion and Analysis ConsolidatedAccounting Balance Firm Sheets on the Company’s Consolidated Statements of Income ConsolidatedInternal Statements Controls of Cash Flows Consolidated Balance Sheets ConsolidatedSelected Statements Financial Dataof Stockholders’ Equity Consolidated Statements of Cash Flows ConsolidatedCommon Statements Stock Market of Comprehensive Prices and Dividends Income Consolidated Statements Notes Quarterlyto Consolidated Results Financial Statements of Stockholders’ Equity Auditor’sMa rkReportet Risks and Derivative Instruments Consolidated Statements Selected Officers Financial and DataDirectors of Comprehensive Income Quarterly Divisions Results and Subsidiaries Notes to Consolidated Financial Statements Common Stock Market Prices and Dividends Management’s Report on Internal Control Market Risks and Derivative Instruments Over Financial Reporting Officers and Directors Divisions and Subsidiaries 01-22_Narratives_cvo225 3.1.05 12:28 AM Page 1 FINANCIAL HIGHLIGHTS 2004 2003 (millions except per share data) Truck and Other Net Sales and Revenues $10,833.7 $ 7,721.1 Financial Services Revenues 562.6 473.8 Total Revenues 11,396.3 8,194.9 Net Income 906.8 526.5 Total Assets: Truck and Other 5,247.9 4,334.2 Financial Services 6,980.1 5,605.4 Truck and Other Long-Term Debt 27.8 33.7 Financial Services Debt 4,788.6 3,786.1 Stockholders’ Equity 3,762.4 3,246.4 Per Common Share: Net Income: Basic $ 5.19 $ 3.01 Diluted 5.16 2.99 Cash Dividends Declared 2.75 1.37 REVENUES NET INCOME STOCKHOLDERS’ EQUITY billions of dollars billions of dollars billions of dollars 12.5 1.0 4.0 35% 10.0 0.8 3.2 28% 7.5 0.6 2.4 21% 5.0 0.4 1.6 14% 2.5 0.2 0.8 7% 0.0 0.0 0.0 0% 95 96 97 98 99 00 01 02 03 04 95 96 97 98 99 00 01 02 03 04 95 96 97 98 99 00 01 02 03 04 Return on Equity (percent) PACCAR Inc and Subsidiaries 01-22_Narratives_cvo225 2/25/05 6:48 AM Page 2 TO OUR SHAREHOLDERS PACCAR had a record year in 2004 due to its superior vehicle quality, growth in its primary truck markets and strong results from aftermarket parts and financial services. PACCAR increased its share to record levels in the European and North American heavy-duty truck markets. Medium-duty truck share was strong in both markets. Customers benefited from PACCAR’s ongoing investments in technology, which enhanced manufacturing efficiency, extensive support programs and new product development. PACCAR delivered a record 124,000 trucks and sold more than $1.4 billion of aftermarket parts and services during the year. Net income of $906.8 million was the highest earnings in the company’s 99-year history, and revenues of $11.4 billion were 39 percent higher than in the previous year. Dividends of $2.75 per share were declared during the year, including a special dividend of $2.00. PACCAR declared a 50 percent stock dividend, effective February 2004, and increased its regular quarterly dividend, effective March 2004. The North American truck market in 2004 grew 39 performance for commercial vehicle manufacturers percent from the previous year, as a stronger economy worldwide. After-tax return on beginning shareholder generated increased freight tonnage and transport equity (ROE) was 27.9 percent in 2004, compared to companies increased their fleet sizes. The Class 8 truck 20.2 percent in 2003. The company’s 2004 after-tax market in North America, including Mexico, was return on sales (ROS) was a record 8.4 percent, 248,000 vehicles, compared to 178,000 last year. The compared to 6.8 percent a year earlier. Sales and profits European heavy truck market in 2004 was 239,000 were driven by record truck and parts deliveries and vehicles, compared to 218,000 in 2003, as the euro zone origination of new finance contracts for over 42,000 economy improved slightly. units. Results were also positively impacted by the Truck competitors experienced improved results weakness of the U.S. dollar versus the euro and other due to the stronger market, though their high operating foreign currencies. PACCAR shareholder equity more costs, including the burden of expensive and than tripled over the last decade, to $3.76 billion, as a underfunded pension plans and post-retirement result of strong earnings. PACCAR’s total shareholder health-care programs, continue to negatively impact return in 2004 was 47 percent and has again exceeded their performance. There was limited activity in terms the Standard & Poor’s 500 Index return for the previous of joint ventures, design collaboration and mergers in one-, five- and ten-year periods. the industry. INVESTING FOR THE FUTURE —PACCAR’s record PACCAR continued to set the standard for financial profits, excellent balance sheet, and intense focus on 01-22_Narratives_cvo225 2/25/05 6:48 AM Page 3 quality, technology and cost control have enabled the software and hardware that will enhance the quality company to consistently invest in its products and and efficiency of all operations throughout the processes during all phases of the business cycle. company, including the seamless integration of Productivity, efficiency and capacity improvements suppliers, dealers and customers into its interactive continue to be implemented in all manufacturing and operating metrics. parts facilities. Many of PACCAR’s facilities established One of the major successes that ITD achieved during new production records during the year in terms of the year was the implementation of PACCAR’s new quality metrics, inventory turns and assembly hours. industry-leading purchasing system. The sophisticated PACCAR is recognized as one of the leading logistic platform links engineering, purchasing and technology companies in the world, and innovation suppliers into a cohesive information loop and provides continues to be a cornerstone of PACCAR’s success. real-time data to production and materials personnel. PACCAR has integrated new technology to profitably Other major accomplishments include increased support its own business, as well as its dealers and activities at the Electronic Dealerships in Renton and customers. Ninety-seven new dealer locations were Eindhoven. Over 8,800 dealers, customers, suppliers opened worldwide, and more are planned to enhance and employees have experienced the interactive PACCAR’s distribution network in Europe and demonstration modules showing the application of North America.

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