10-QPeriod: Q1 FY2018

PACCAR INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 4, 2018For Securities:PCAR

Summary

PACCAR Inc reported strong first-quarter 2018 results, with net sales and revenues reaching a record $5.65 billion, a significant increase from $4.24 billion in the prior year's quarter. This growth was driven by record truck and parts sales, reflecting higher deliveries and increased demand across key markets, supported by favorable currency translation effects. Net income surged to $512.1 million, or $1.45 per diluted share, up from $310.3 million, or $0.88 per diluted share, year-over-year. This substantial improvement was also aided by a lower effective tax rate due to recent U.S. federal tax legislation. The company's Truck segment saw a notable increase in deliveries and revenue, benefiting from robust demand in the U.S., Canada, and Europe. The Parts segment also delivered record performance, indicating sustained aftermarket demand. PACCAR's Financial Services segment contributed positively with increased revenues and income, driven by higher earning assets and favorable currency effects. Looking ahead, PACCAR anticipates continued strong truck industry retail sales in North America and Europe for 2018, with positive growth projected for PACCAR Parts sales.

Financial Highlights

32 data points
Beta

Revenue

$5.65B

Net Income

$512.10M

9.1% Net Margin

EPS (Diluted)

$0.97

Total Assets

$23.78B

Cash & Equivalents

$2.50B

Free Cash Flow

$426.90M

Financial Statements
Beta
Revenue$5.65B
Net Income$512.10M
EPS (Basic)$0.97
EPS (Diluted)$0.97
Shares Outstanding (Basic)529
Shares Outstanding (Diluted)530

Key Highlights

  • 1Record quarterly net sales and revenues of $5.65 billion, up 33% year-over-year.
  • 2Net income increased significantly to $512.1 million ($1.45 per diluted share) from $310.3 million ($0.88 per diluted share) in Q1 2017.
  • 3Truck segment revenue increased by 39% to $4.35 billion due to higher deliveries and favorable currency impacts.
  • 4Parts segment revenue reached a record $939.9 million, up 19% year-over-year, driven by strong aftermarket demand.
  • 5Financial Services revenue grew 10% to $332.2 million, supported by increased earning assets and currency translation effects.
  • 6Effective tax rate decreased to 23.5% in Q1 2018 from 30.8% in Q1 2017 due to U.S. tax reform.
  • 7Capital investments were $66.8 million and R&D expenses were $76.0 million for the quarter.

Frequently Asked Questions

PACCAR's net income significantly increased in the first quarter of 2018 primarily due to record truck and parts sales volumes, improved profitability in its Financial Services segment, and favorable currency translation effects. Additionally, the lower effective tax rate resulting from the U.S. federal tax legislation enacted in late 2017 contributed substantially to the net income growth.

PACCAR adopted the new revenue recognition standard (ASU 2014-09) on January 1, 2018. The most significant impact was on truck sales in Europe with residual value guarantees (RVGs), which were previously accounted for as operating leases. Under the new standard, revenue recognition for certain RVG contracts changed, leading to an increase in other current assets and a decrease in equipment on operating leases, as well as adjustments to deferred revenue and retained earnings. The adoption resulted in a net increase in retained earnings of $17.1 million and an increase in net income of $3.3 million for the quarter.

PACCAR projects continued strength in the truck market. For 2018, U.S. and Canada heavy-duty truck retail sales are expected to be between 265,000 to 285,000 units. In Europe, registrations for over 16-tonne vehicles are anticipated to be between 300,000 to 320,000 units. PACCAR Parts sales are forecast to grow by 10-12% compared to 2017.

PACCAR's Financial Services segment manages its portfolio through rigorous credit application processes and continuous monitoring of payment performance. The company diversifies its portfolio across a large number of customers and dealers, with no single customer representing over 5% of total portfolio assets. While the company expects continued good portfolio performance, it acknowledges risks such as potential increases in past due accounts, repossessions, and credit losses if economic conditions decline, impacting customer profitability and cash flow.