10-QPeriod: Q1 FY2010

PACCAR INC Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 5, 2010For Securities:PCAR

Summary

PACCAR Inc's first quarter 2010 results show a significant recovery from the prior year, with net income more than doubling to $68.3 million ($0.19 per diluted share) from $26.3 million ($0.07 per diluted share) in Q1 2009. This improvement was driven by a 15% increase in net sales and revenues for the Truck and Other segment, reaching $1.98 billion, primarily due to higher truck unit sales in North America and increased parts sales globally. The company experienced a beneficial "pre-buy" effect in the U.S. as customers prepared for new EPA 2010 engine emission standards. The Financial Services segment saw a slight decrease in revenues to $246.4 million from $255.8 million, but its income before taxes rose substantially to $28.1 million from $15.3 million. This was attributed to lower interest expenses from hedging activities and reduced provision for losses on receivables, reflecting improved credit quality and a declining asset base. Overall, the company demonstrates a positive earnings trend and a healthier financial position compared to the previous year, signaling a recovery in its core markets.

Financial Highlights

30 data points
Beta

Revenue

$2.23B

Net Income

$68.30M

3.1% Net Margin

EPS (Diluted)

$0.13

Total Assets

$13.99B

Cash & Equivalents

$1.85B

Free Cash Flow

$259.30M

Financial Statements
Beta
Revenue$2.23B
Net Income$68.30M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)546.90M
Shares Outstanding (Diluted)548.55M

Key Highlights

  • 1Net income surged by 159% year-over-year to $68.3 million ($0.19 per diluted share) in Q1 2010, up from $26.3 million ($0.07 per diluted share) in Q1 2009.
  • 2Total net sales and revenues increased by 12% to $2.23 billion, driven by a 15% rise in the Truck and Other segment's revenue to $1.98 billion.
  • 3The Truck segment benefited from a 13% increase in total unit deliveries, including a significant 24% jump in U.S. and Canada, partly due to EPA 2010 emission standard "pre-buy" activity.
  • 4Financial Services segment income before taxes increased by 84% to $28.1 million, despite a 4% dip in revenue, due to lower borrowing costs and reduced credit loss provisions.
  • 5The provision for losses on receivables for the Financial Services segment decreased by 13.2% to $21.7 million, indicating improving credit quality and lower charge-offs.
  • 6Cash provided by operating activities saw a substantial increase to $285.4 million, up from $90.8 million in the prior year, primarily due to higher net income and lower pension contributions.
  • 7The company's effective tax rate was 28.9% in Q1 2010, which included a $11.3 million benefit from a favorable tax settlement.

Frequently Asked Questions

The primary driver was a significant recovery in the Truck and Other segment, which saw a 15% increase in net sales and revenues to $1.98 billion. This was fueled by higher truck unit sales, particularly in North America due to a 'pre-buy' ahead of new EPA emission standards, and increased global parts sales.

While Financial Services segment revenues declined slightly by 4% to $246.4 million, income before taxes increased substantially by 84% to $28.1 million. This improvement was due to lower interest and borrowing expenses, partly from effective hedging, and a reduced provision for losses on receivables, indicating better credit performance and lower asset base.

The company anticipates heavy-duty truck sales in the U.S. and Canada to be in the range of 110,000 to 140,000 units, a slight increase from 2009. This outlook reflects some economic growth and an aging truck fleet, though challenging economic conditions in Europe are expected to persist, with the market size for above 15-tonne vehicles likely to be in line with 2009.

Total cash and marketable debt securities decreased slightly to $2.10 billion as of March 31, 2010. Cash provided by operations significantly increased to $285.4 million, offsetting cash used in financing activities. The company maintains substantial unused credit lines and expects to fund its operations, capital expenditures, and R&D primarily from operating cash flow.