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PACCAR INC Annual Report, Year Ended Dec 31, 2006

Filing Date
Filed February 26, 2007
Period End
December 31, 2006
Security
PCAR
In the record · 2016–202610-K1110-Q328-K87

PCAR filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 87 current reports (8-K) between 2016 and 2026.

  1. FY2017 annual report10-K · Feb ’18Feb ’18
  2. Leadership change8-K · Apr ’21Apr ’21
  3. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed February 26, 2007. Cited figures are marked; the original filing is the authoritative source.

PACCAR Inc's 2006 results were a record year across the board.

Consolidated revenues rose 17% to $16.45 billiona, and net income climbed 32% to $1.496 billion, or $5.95 per diluted share, up from $4.37 in 2005. Return on revenues reached a record 9.1% versus 8.1% a year earlier. The Truck and Other segment, which generated 93% of revenues, benefited from record deliveries of 166,800 trucks worldwide (up 12%), a 25.3% U.S./Canada Class 8 market share, and parts revenue of $1.94 billion (up 15%).

Gross margin improved to 14.7%, and SG&A fell to a record-low 3.0% of revenues. The Financial Services segment (PACCAR Financial) also grew strongly, with revenues up 25% to $950.8 millionb and pre-tax income up 24% to $247.4 million. Credit quality remained excellent, with net charge-offs of $13.9 million and 30+ day delinquencies steady at 1.2%.

Investors should note the outlook: management forecasts U.S. and Canadian heavy-duty retail demand to fall 30% to 40% in 2007 to 200,000–230,000 units, driven partly by a pull-forward of orders ahead of the January 2007 EPA engine-emissions changes. Western Europe, by contrast, is expected to remain strong at 250,000–270,000 units, and the company is investing in new capacity, including a $400 millionc engine plant in the Southeast U.S. Balance-sheet strength is a clear positive. Cash and marketable securities totaled $2.67 billion, Truck and Other debt was minimal at $20.2 million, and the company held an AA- credit rating.

The Board approved an additional $300 milliond share buyback, and dividends were $2.77 per share for 2006 including a year-end extra of $2.00. The principal risks are the expected U.S. truck downturn, cyclical demand, currency and interest-rate exposure, and the financial-services credit cycle.

02—Key points

Key Highlights

  1. Record 2006 results: revenues up 17% to $16.45 billion and net income up 32% to $1.496 billion ($5.95 diluted EPS).
  2. Record truck deliveries of 166,800 units globally, with U.S./Canada deliveries of 95,500 (up 15%) and a Class 8 market share of 25.3%.
  3. Aftermarket parts revenue reached $1.94 billion (up 15%), and SG&A fell to a record-low 3.0% of Truck and Other revenues.
  4. Financial Services pre-tax income rose 24% to $247.4 million, with charge-offs falling to $13.9 million and delinquencies stable at 1.2%.
  5. Outlook is weak for North America: U.S./Canada heavy-duty demand is forecast to fall 30–40% in 2007 to 200,000–230,000 units, while Western Europe remains strong.
  6. Strong balance sheet: $2.67 billion in cash and marketable securities, minimal Truck and Other debt of $20.2 million, AA- credit rating, and a new $300 million buyback authorization.

03—Questions

Frequently Asked Questions

  1. Why did PACCAR's earnings jump so sharply in 2006?

    Earnings rose on strong global truck demand, higher production rates, growing aftermarket parts sales, and improved truck margins. Net income increased 32% to $1.496 billion. The effective tax rate also fell to 31.2% from 32.5%, helped by a favorable tax settlement and higher tax-exempt U.S. investment income.

  2. What is the outlook for North American truck demand in 2007?

    Management forecasts U.S. and Canadian heavy-duty demand to decline 30% to 40% in 2007, to 200,000–230,000 units. Part of the decline reflects buyers pulling orders forward into 2006 ahead of the January 1, 2007 EPA engine-emissions requirements, which raise engine costs. European demand is expected to remain strong, at 250,000–270,000 registrations.

  3. How safe is PACCAR's balance sheet and financing position?

    The Truck and Other business carries very little debt ($20.2 million) and held $2.67 billion in cash and marketable securities. Financial Services debt is larger, at about $7.26 billion, but it is funded mainly by its finance receivables and is backed by $2.17 billion of unused credit lines. The company holds an AA- investment-grade credit rating.

  4. How is PACCAR returning capital to shareholders?

    In 2006 PACCAR paid $530.4 million in cash dividends and repurchased $312 million of stock. The Board added a $300 million buyback in December 2006. It also paid a 50% stock dividend in August 2006, and 2006 dividends declared totaled $2.77 per share, including a $2.00 year-end extra.

  5. What are the main risks flagged in the filing?

    Key risks include cyclical truck demand that can swing more than GDP, competition in financing from banks and finance companies, and credit risk in the financial services portfolio if customers default and collateral values fall. The company also faces currency and interest-rate exposure from its international operations, plus political instability, fuel shortages, and terrorism.

04—Continue

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