01—Abstract
Summary
Summary of the 10-K filed February 29, 2012. Cited figures are marked; the original filing is the authoritative source.
PACCAR's fiscal 2011 was a sharp recovery year.
Consolidated net sales and revenues rose 59% to $16.36 billiona, the second-highest in company history, and net income more than doubled to $1,042.3 million ($2.86 per diluted share) from $457.6 million. The Truck segment drove the rebound: truck unit sales climbed 75% to 138,000, and Truck pretax income rose to $1,258.8 million from $501.0 million. Management attributes this to higher market demand in North America and Europe, a record 28.1% U.S./Canada Class 8 retail share, a record 15.5% share in Western/Central Europe, and strong aftermarket parts sales (up 17% to $2.58 billion).
Truck gross margin on trucks improved to 8.5% from 5.2%. The Financial Services segment (PACCAR Financial) also improved, with pretax income up 54% to $236.4 millionb and a pretax return on revenue of 23.0%, versus 15.9% in 2010. Lower credit losses (net charge-offs fell to $45.0 million from $83.3 million) and a sharply lower share of 30+ day past-due accounts (1.5% vs. 3.0%) supported that result.
New loan and lease volume grew 64%c, and the segment's finance market share on new PACCAR trucks rose to 31%. The outlook is constructive but measured. Management expects U.S./Canada industry retail sales of 210,000-240,000 units in 2012 (up from 197,000), while European above-15-tonne demand is expected to fall to 210,000-240,000 units from 244,000 amid the Eurozone sovereign debt crisis.
Capital spending is planned at $450d-550 million and R&D at $275-325 million, largely for a new DAF plant in Brazil. The company ended the year with $3.0 billion in cash and marketable securities, a $5.36 billion equity base, and a 2011 dividend of $1.30 per share including a $0.70 year-end extra.
02—Key points
Key Highlights
- Net income rose 128% to $1,042.3 million ($2.86 diluted EPS) from $457.6 million, with return on revenues of 6.4% versus 4.4%.
- Consolidated net sales and revenues grew 59% to $16.36 billion; truck unit deliveries rose 75% to 138,000.
- Truck segment pretax income jumped 151% to $1.26 billion, driven by higher volume, improved truck margins (8.5% vs. 5.2%), and record aftermarket parts sales.
- Financial Services pretax income increased 54% to $236.4 million, with credit quality improving sharply: 30+ day past-dues fell to 1.5% from 3.0% and net charge-offs fell to $45.0 million from $83.3 million.
- Record market share in key regions: 28.1% of U.S./Canada Class 8 retail sales and 15.5% of Western/Central European heavy-duty sales.
- Outlook calls for U.S./Canada retail demand of 210,000-240,000 units in 2012 but softer European demand, with capex of $450-550 million and a new DAF plant under construction in Brazil.
- Dividend policy and liquidity remain strong: $3.0 billion in cash and marketable securities, $5.36 billion of equity, A+/A1 credit ratings, and a new $300 million share repurchase authorization approved in December 2011 (only $29.9 million used by year-end).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 29, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $16.36B$10.29B | +58.9% |
| Interest Expense | $192.10M$230.20M | −16.6% |
| Net Income | $1.04B$457.60M | +127.8% |
| EPS (Basic) | $1.91$0.83 | +129.6% |
| EPS (Diluted) | $1.91$0.83 | +128.8% |
| Shares Outstanding (Basic) | 544.95M547.50M | −0.5% |
| Shares Outstanding (Diluted) | 546.60M549.30M | −0.5% |
05—Questions
Frequently Asked Questions
What drove PACCAR's large earnings increase in 2011?
The recovery in North American and European truck markets drove the increase. Truck unit sales rose 75% to 138,000, and higher average selling prices, better fixed-cost absorption, and record aftermarket parts sales lifted Truck segment pretax income to $1,258.8 million from $501.0 million. Lower Financial Services credit losses also contributed.
How is the Financial Services segment performing, and what are the credit risks?
Financial Services pretax income rose to $236.4 million, and its return on revenue improved to 23.0% from 15.9%. Credit quality improved markedly, with worldwide 30+ day past-dues falling to 1.5% from 3.0%. However, the filing notes that a single large U.S./Canada customer accounted for 0.8 percentage points of past-dues, and that the segment remains exposed to used truck price declines, economic downturns, and capital-market funding conditions.
What is the 2012 outlook?
Management expects U.S./Canada heavy-duty industry retail sales of 210,000-240,000 units, up from 197,000 in 2011, driven by fleet replacement. In Europe, above-15-tonne demand is expected to decline to 210,000-240,000 units from 244,000 due to the Eurozone debt crisis. Capital spending of $450-550 million and R&D of $275-325 million are planned, and Financial Services average earning assets are projected to grow.
What are the main risks flagged in the filing?
Key risks include cyclical truck demand tied to economic conditions, dependence on Cummins for engines (a loss of supply would materially affect results), commodity cost volatility (steel, copper, aluminum, petroleum), currency exchange exposure, potential credit rating downgrades that could raise funding costs, product recall and litigation exposure, and the ongoing EU and UK antitrust investigations into commercial vehicle manufacturers.
How is PACCAR returning capital to shareholders?
In 2011, PACCAR declared dividends of $1.30 per share ($0.12, $0.12, $0.18, and $0.18 in quarterly installments plus a $0.70 year-end extra), up from $0.69 in 2010. The company repurchased 9.2 million shares for $337.6 million under prior authorizations. A new $300 million buyback was approved in December 2011, of which only $29.9 million had been used by year-end.
06—Continue