10-QPeriod: Q2 FY2017

PACCAR INC Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 4, 2017For Securities:PCAR

Summary

PACCAR Inc (PCAR) reported its second-quarter and first-half results for 2017, showing increased revenues driven by higher truck and parts sales. Net income for the second quarter was $373.0 million ($1.06 per diluted share), compared to $481.3 million ($1.37 per diluted share) in the prior year, which included a favorable adjustment for a European Commission charge. For the first six months, net income was $683.3 million ($1.94 per diluted share), a significant improvement from a net loss of $113.3 million in the same period of 2016, which was heavily impacted by the aforementioned European Commission charge. The Truck segment saw increased deliveries, particularly in the U.S. and Canada, and the Parts segment achieved record sales. However, the Financial Services segment experienced a decline in income before taxes due to lower results on returned lease assets and higher borrowing rates, alongside a decrease in new loan and lease volume. The company also highlighted ongoing investments in R&D and capital expenditures for future growth and efficiency.

Financial Highlights

32 data points
Beta

Revenue

$4.70B

Net Income

$373.00M

7.9% Net Margin

EPS (Diluted)

$0.71

Total Assets

$22.05B

Cash & Equivalents

$1.88B

Free Cash Flow

$479.10M

Financial Statements
Beta
Revenue$4.70B
Net Income$373.00M
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)527.70M
Shares Outstanding (Diluted)529.05M

Key Highlights

  • 1Worldwide net sales and revenues increased to $4.70 billion in Q2 2017 from $4.41 billion in Q2 2016.
  • 2Truck sales grew to $3.55 billion in Q2 2017 from $3.34 billion in Q2 2016, driven by higher deliveries in the U.S. and Canada.
  • 3Parts sales reached a record $823.1 million in Q2 2017, up from $756.4 million in Q2 2016.
  • 4Net income for Q2 2017 was $373.0 million ($1.06 per diluted share), a decrease from $481.3 million ($1.37 per diluted share) in Q2 2016, partly due to a favorable one-time adjustment in the prior year's quarter.
  • 5For the first six months of 2017, net income was $683.3 million ($1.94 per diluted share), a substantial increase from a net loss of $113.3 million ($-0.32 per diluted share) in the first six months of 2016.
  • 6Financial Services segment income before taxes decreased in both Q2 and the first six months of 2017 compared to 2016, attributed to lower results on returned lease assets and increased borrowing rates.
  • 7Company continues to invest in R&D and capital expenditures, with projected 2017 capital investments between $375-$425 million and R&D expenses between $250-$270 million.

Frequently Asked Questions

The primary driver for the year-over-year decrease in net income for the second quarter of 2017 was the favorable $109.6 million adjustment to the European Commission (EC) charge that was recorded in the second quarter of 2016. Excluding this one-time item, the underlying operational performance showed strength with record parts sales and higher truck deliveries.

The Truck segment revenue increased due to higher deliveries, especially in North America. The Parts segment achieved record sales, showing strong aftermarket demand. However, the Financial Services segment saw a decrease in income before taxes, primarily due to lower returns on leased assets and higher borrowing costs. The 'Other' segment, which includes the winch business and corporate expenses, also reported a loss, impacted by the absence of the prior year's favorable EC adjustment.

PACCAR anticipates that U.S. and Canada heavy-duty truck retail sales in 2017 will be in the range of 200,000 to 220,000 units, compared to 215,700 units in 2016. In Europe, registrations for vehicles over 16 tonnes are expected to be between 290,000 and 310,000 units, compared to 302,500 in 2016. South American heavy-duty truck sales are estimated between 55,000 and 60,000 units, versus 56,500 in 2016.

PACCAR Financial Services (PFS) aims to support the financing and leasing of PACCAR products. The company funds its activities through customer collections and capital market borrowings, including medium-term notes and commercial paper. Despite a decrease in segment income in Q2 2017, the company continues to manage its portfolio rigorously and maintain access to capital markets, supported by its investment-grade credit ratings.