10-KPeriod: FY2016

PACCAR INC Annual Report, Year Ended Dec 31, 2016

Filed February 21, 2017For Securities:PCAR

Summary

PACCAR Inc's 2016 10-K filing reveals a challenging year marked by a significant European Commission (EC) fine, which impacted net income. Despite a 9% decline in worldwide truck deliveries and a 2% drop in parts sales, PACCAR demonstrated resilience. Truck segment sales were down 14% year-over-year, primarily due to lower deliveries in the U.S. and Canada, though this was partially offset by a 11% increase in European truck sales. Financially, adjusted net income (excluding the EC charge) was $1.35 billion, a notable decrease from $1.60 billion in 2015, but highlighted the company's underlying operational strength. The company continued its commitment to R&D and capital investments, including significant upgrades to manufacturing facilities and a new DAF cab paint facility in Belgium. PACCAR maintained its strong market share in both North America and Europe, and its financial services segment continued to support truck sales, albeit with slightly lower pre-tax profit due to various market factors. The company provided an outlook for 2017, expecting truck industry retail sales in the U.S. and Canada to be between 190,000 to 220,000 units, and for Europe (over 16-tonne vehicles) to be between 260,000 to 290,000 units. PACCAR Parts sales were projected to grow slightly in North America and Europe. Management expressed confidence in the company's liquidity and financial stability, supported by strong credit ratings and access to capital markets.

Financial Highlights

34 data points
Beta

Revenue

$17.03B

Net Income

$521.70M

3.1% Net Margin

EPS (Diluted)

$0.99

Total Assets

$20.64B

Cash & Equivalents

$1.92B

Free Cash Flow

$1.93B

Financial Statements
Beta
Revenue$17.03B
Net Income$521.70M
EPS (Basic)$0.99
EPS (Diluted)$0.99
Shares Outstanding (Basic)527
Shares Outstanding (Diluted)528

Key Highlights

  • 12016 Net Income impacted by an $833 million EC charge, resulting in GAAP Net Income of $521.7 million ($1.48/share), compared to $1.60 billion ($4.51/share) in 2015. Adjusted Net Income (non-GAAP) was $1.35 billion ($3.85/share).
  • 2Worldwide truck deliveries decreased 9% to 140,900 units, with U.S. and Canada down 22% and Europe up 12%.
  • 3PACCAR maintained strong market share: 28.5% in U.S./Canada Class 8 (up from 27.4%), and 15.5% in European heavy-duty trucks (up from 14.6%).
  • 4Capital investments increased to $402.7 million, focused on new facilities (DAF cab paint, Peterbilt expansion) and technology.
  • 5Financial Services segment saw revenues increase slightly to $1.19 billion, but pre-tax profit decreased to $306.5 million from $362.6 million due to various factors including higher borrowing costs and lower results on returned lease assets.
  • 6The company continues to pay regular cash dividends and has an ongoing stock repurchase program.
  • 7Outlook for 2017 anticipates a decline in U.S. and Canadian truck sales but growth in European parts sales.

Frequently Asked Questions

PACCAR incurred a significant charge of $833 million in the first half of 2016 related to a settlement with the European Commission concerning competition rules. This charge significantly reduced reported net income for the year. Excluding this charge, adjusted net income was $1.35 billion, demonstrating the company's underlying profitability.

Worldwide truck deliveries decreased by 9% in 2016 compared to 2015. This decline was driven by a 22% drop in U.S. and Canada deliveries, although this was partially offset by a 12% increase in European truck deliveries. Despite the overall decrease in volume, PACCAR managed to increase its market share in key segments.

PACCAR anticipates that U.S. and Canada truck industry retail sales will be in the range of 190,000 to 220,000 units in 2017, down from 215,700 in 2016. In Europe, for vehicles over 16-tonne, registrations are expected to be between 260,000 and 290,000 units, compared to 302,500 in 2016.

The Financial Services segment saw a slight increase in revenues to $1.19 billion. However, pre-tax profit decreased to $306.5 million from $362.6 million in 2015. This decline was attributed to factors such as lower results on returned lease assets, higher borrowing rates, unfavorable currency translation effects, and an increased provision for losses on receivables, partially offset by higher average earning assets.