10-QPeriod: Q3 FY2016

PACCAR INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 4, 2016For Securities:PCAR

Summary

PACCAR Inc (PCAR) reported a decrease in net sales and revenues for the third quarter and the first nine months of 2016 compared to the same periods in 2015. This decline was primarily attributed to lower truck volumes in North America, although this was partially offset by increased truck sales in Europe. The company also faced a significant non-recurring charge of $833.0 million related to a European Commission settlement, which substantially impacted net income for the nine-month period. Despite the revenue decline, PACCAR demonstrated strong operational performance in its Parts and Financial Services segments. The Parts segment saw a slight decrease in sales but maintained healthy margins, while the Financial Services segment reported stable revenues and managed its portfolio effectively. The company continues to invest in R&D and capital expenditures, focusing on new product development and manufacturing enhancements to drive future growth and efficiency.

Financial Highlights

33 data points
Beta

Revenue

$4.25B

Net Income

$346.20M

8.1% Net Margin

EPS (Diluted)

$0.65

Total Assets

$20.97B

Cash & Equivalents

$1.79B

Free Cash Flow

-$248.90M

Financial Statements
Beta
Revenue$4.25B
Net Income$346.20M
EPS (Basic)$0.66
EPS (Diluted)$0.65
Shares Outstanding (Basic)526.50M
Shares Outstanding (Diluted)527.70M

Key Highlights

  • 1Worldwide net sales and revenues decreased to $4.25 billion for Q3 2016 and $12.96 billion for the first nine months of 2016, compared to $4.85 billion and $14.76 billion in the prior year periods, respectively.
  • 2Net income for Q3 2016 was $346.2 million ($.98 per diluted share), down from $431.2 million ($1.21 per diluted share) in Q3 2015.
  • 3The first nine months of 2016 recorded a net income of $232.9 million ($.66 per diluted share), significantly impacted by an $833.0 million non-recurring European Commission charge.
  • 4Excluding the EC charge, adjusted net income for the first nine months of 2016 was $1.07 billion ($3.03 per diluted share), down from $1.26 billion ($3.53 per diluted share) in the prior year.
  • 5Truck segment income before taxes decreased by 27% in Q3 and 20% for the first nine months, reflecting lower delivery volumes, particularly in the U.S. and Canada.
  • 6Parts segment income before taxes saw a decrease of 5% in Q3 and 6% for the first nine months, primarily due to lower aftermarket demand in North America.
  • 7Financial Services segment income before taxes decreased by 24% in Q3 and 16% for the first nine months, impacted by lower lease asset results, higher borrowing rates, and increased provision for losses.

Frequently Asked Questions

The primary driver for the decrease in net sales and revenues was lower truck volumes, particularly in North America. This was partially offset by increased truck sales in Europe.

The European Commission charge of $833.0 million, recorded in the first nine months of 2016, significantly reduced the reported net income for that period. This charge is non-recurring and non-tax-deductible. Excluding this charge, the adjusted net income for the nine-month period shows a more representative view of the underlying operational performance.

The Financial Services segment showed a decrease in income before taxes, influenced by factors such as lower results on returned lease assets, higher borrowing rates, and an increased provision for losses on receivables. However, revenues remained relatively stable, with higher average earning assets partially offsetting currency translation effects and lower yields.

For 2017, PACCAR estimates U.S. and Canada Class 8 truck industry retail sales to be in the range of 200,000 to 230,000 units. In Europe, for the over 16-tonne truck market, sales are projected to be in the range of 260,000 to 290,000 units.