01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
PACCAR Inc's fiscal 2009 10-K shows a sharp cyclical downturn.
Consolidated net sales and revenues fell 46% to $8.09 billiona from $14.97 billion in 2008, and net income dropped 89% to $111.9 million ($0.31 per diluted share) from $1.02 billion ($2.78). Results were supported by $41.5 million of after-tax curtailment gains on postretirement health care plans, which offset a $11.4 million charge from a retroactive Mexican tax law change. Excluding the Mexican tax effect, the effective tax rate was 29.5%.
Truck and Other pretax income collapsed to $68.1 millionb from $1.16 billion, with the truck segment's gross margin falling to 8.3% from 14.3% and truck gross margin turning negative (-0.9%). Truck unit deliveries fell 52% to 61,000, with Europe down 65% and U.S./Canada down 27%. Aftermarket parts were more resilient, declining 17% in revenue with a gross margin of 33.1%.
The Financial Services segment was pressured by smaller portfolios and rising credit stress. Its pretax income fell 61% to $84.6 millionc, new loan and lease volume dropped 43% to $1.91 billion, and 30+ day past-dues rose to 3.8% from 3.3%, with Mexico and Australia at 9.5% and Europe at 4.4%. Provisions for credit losses were roughly flat at $104.4 million.
Management guided that the financial services asset base will be comparable to 2009 in 2010, and that truck demand will remain weak, with U.S./Canada Class 8 sales of 110,000 to 140,000 units and European above-15-tonne sales of 150,000 to 180,000 units. Balance sheet and liquidity remain strong. Total cash and marketable securities were $2.13 billiond, and the company reported $3.35 billion of unused credit lines.
Net cash from operations was $1.37 billion, and the company cut its dividend and stopped share repurchases. Dividends declared were $0.54 per share for the year, versus $0.82 in 2008. The company holds an AA- credit rating and has a new Columbus, Mississippi engine plant, with PACCAR MX engines scheduled to begin assembly in mid-2010.
02—Key points
Key Highlights
- Revenue fell 46% to $8.09B and net income fell 89% to $111.9M ($0.31 diluted EPS), though the result includes a $41.5M after-tax curtailment gain on retiree health care plans
- Truck gross margin turned negative at -0.9% on 61,000 units (down 52%), and truck segment pretax income fell 98% to $25.9M
- Europe deliveries dropped 65% to 22,200 units, while DAF reached a record 14.8% share of the 15-tonne-and-above market
- Financial Services pretax income fell 61% to $84.6M, new loan and lease volume fell 43%, and 30+ day past-dues rose to 3.8% (9.5% in Mexico and Australia)
- Liquidity is strong: $2.13B in cash and marketable securities, $3.35B of unused credit lines, and an AA- credit rating
- Cash dividends declared fell to $0.54 per share from $0.82, and there were no share repurchases in 2009 after $230.6M in 2008
- 2010 outlook is cautious: U.S./Canada Class 8 sales of 110,000-140,000 units and European demand of 150,000-180,000 units, with R&D of $225-250M and capex of $175-200M
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $8.09B$14.97B | −46.0% |
| Interest Expense | $267.60M$327.10M | −18.2% |
| Net Income | $111.90M$1.02B | −89.0% |
| EPS (Basic) | $0.21$1.86 | −88.9% |
| EPS (Diluted) | $0.21$1.85 | −88.8% |
| Shares Outstanding (Basic) | 545.70M546.30M | −0.1% |
| Shares Outstanding (Diluted) | 547.35M548.85M | −0.3% |
05—Questions
Frequently Asked Questions
Why did PACCAR's earnings collapse in 2009?
Global recession sharply reduced truck demand. Deliveries fell 52% to 61,000 units, with Europe down 65%, and lower volume caused negative absorption of fixed costs. Truck gross margin fell to -0.9% from 10.1%. Parts sales fell less sharply but shifted toward lower-margin replacement parts. Pretax income from the truck segment fell 98% to $25.9 million.
Is PACCAR's balance sheet safe despite the downturn?
Liquidity is solid. The company held $2.13 billion in cash and marketable securities at year-end and had $3.35 billion of unused credit lines, and it generated $1.37 billion in operating cash flow. Most of its $6.8 billion in contractual cash commitments relate to Financial Services debt, which is expected to be funded from loan and lease collections and new commercial paper and medium-term note issuance. The company also holds an AA- credit rating.
What happened to PACCAR's dividend and share buybacks?
The company cut its dividend and stopped repurchasing shares. Dividends declared were $0.54 per share for 2009, down from $0.82 in 2008. Total dividend payments fell to $232.1 million from $629.2 million. There were no repurchases in 2009, compared with $230.6 million in 2008. About $8 million of the $300 million authorization from October 2007 remained unused, and the July 2008 $300 million authorization was never used.
What is the outlook for 2010?
Management expects weak conditions to continue. U.S. and Canada heavy-duty sales are forecast at 110,000-140,000 units, only slightly above 2009, and European above-15-tonne demand at 150,000-180,000 units. Financial Services assets are expected to be comparable to 2009 levels, with past-dues and repossessions projected to improve. The company also plans to begin producing PACCAR MX engines in Mississippi in mid-2010.
What were the one-time items affecting 2009 results?
Two items affected 2009 results. The first was a $66.0 million pretax curtailment gain from discontinuing retiree medical subsidies, which contributed $41.5 million after tax, or $0.11 per diluted share. The second was an $11.4 million charge ($0.03 per share) from the retroactive effect of a Mexican tax law change. The Mexican change raised the effective tax rate to 36.1%; excluding it, the rate was 29.5%.
06—Continue