10-QPeriod: Q2 FY2016

PACCAR INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 3, 2016For Securities:PCAR

Summary

PACCAR Inc (PCAR) reported its Q2 2016 financial results, showing a mixed performance impacted by the European Commission (EC) investigation settlement. For the quarter, net income was $481.3 million ($1.37 per diluted share), a slight increase from $447.2 million ($1.26 per diluted share) in Q2 2015. However, the six-month period ending June 30, 2016, resulted in a net loss of $113.3 million ($-0.32 per diluted share), largely due to a significant non-recurring charge related to the EC investigation. Excluding this charge, adjusted net income for the first half of 2016 was $719.7 million ($2.05 per diluted share). Total net sales and revenues decreased year-over-year, driven by lower truck deliveries in the U.S. and Canada, though this was partially offset by an increase in European truck sales. The Parts segment experienced a slight revenue decline, primarily due to reduced demand in North America. The Financial Services segment saw revenue growth driven by higher average earning assets, despite lower yields. The company outlook suggests moderating U.S. truck sales but continued growth in Europe, with stable parts sales and Financial Services revenues.

Financial Highlights

33 data points
Beta

Revenue

$4.41B

Net Income

$481.30M

10.9% Net Margin

EPS (Diluted)

$0.91

Total Assets

$21.43B

Cash & Equivalents

$2.06B

Free Cash Flow

$778.90M

Financial Statements
Beta
Revenue$4.41B
Net Income$481.30M
EPS (Basic)$0.91
EPS (Diluted)$0.91
Shares Outstanding (Basic)526.35M
Shares Outstanding (Diluted)527.40M

Key Highlights

  • 1Net income for Q2 2016 was $481.3 million ($1.37/share), up from $447.2 million ($1.26/share) in Q2 2015.
  • 2Six-month period ended June 30, 2016, reported a net loss of $113.3 million ($-0.32/share) due to an $833.0 million EC charge.
  • 3Adjusted net income (non-GAAP) for the first half of 2016 was $719.7 million ($2.05/share), excluding the EC charge.
  • 4Total net sales and revenues decreased to $4.41 billion in Q2 2016 from $5.08 billion in Q2 2015.
  • 5Truck segment net sales decreased by 16% to $3.34 billion in Q2 2016, primarily due to lower U.S. and Canada deliveries, offset by higher European sales.
  • 6Financial Services revenues increased by 1% to $297.4 million in Q2 2016 due to higher average earning assets.
  • 7PACCAR expects U.S. and Canada truck industry retail sales in 2016 to be between 220,000-240,000 units, down from 278,400 in 2015.

Frequently Asked Questions

The European Commission (EC) investigation resulted in a significant non-recurring charge. In the first half of 2016, PACCAR recorded an $833.0 million charge related to an EC settlement. In the second quarter of 2016, a favorable adjustment of $109.6 million was recognized, reducing the impact on that quarter's results. Excluding this charge, adjusted net income provides a clearer view of ongoing operational performance.

Truck sales in the U.S. and Canada saw a notable decrease in Q2 2016 compared to Q2 2015, contributing to the overall decline in net sales. Conversely, truck sales in Europe showed an increase, partially offsetting the U.S. and Canada weakness. This regional divergence is a key factor influencing the company's top-line performance.

PACCAR projects a decline in U.S. and Canadian heavy-duty truck industry retail sales for 2016, estimating them to be between 220,000 to 240,000 units, down from 278,400 in 2015. In contrast, the European market for trucks over 16 tonnes is expected to grow, with registrations projected between 280,000 to 300,000 units, up from 269,100 in 2015.

The Financial Services segment reported an increase in revenues to $297.4 million in Q2 2016, up from $293.8 million in Q2 2015. This growth was primarily driven by higher average earning assets. However, income before taxes for the segment decreased due to lower yields and other factors. The segment's overall health is linked to the truck market's performance and credit quality of its loan and lease portfolio.