10-QPeriod: Q2 FY2020

PACCAR INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 3, 2020For Securities:PCAR

Summary

PACCAR Inc (PCAR) reported its second-quarter and first six months results for 2020, significantly impacted by the COVID-19 pandemic. The company experienced a substantial decline in net sales and revenues across all segments, with truck deliveries falling by 65% year-over-year in Q2 and 46% for the first six months. This resulted in a sharp decrease in net income, which fell to $147.7 million ($0.43 per diluted share) in Q2 2020 from $619.7 million ($1.78 per diluted share) in Q2 2019. For the first six months, net income was $507.1 million ($1.46 per diluted share) compared to $1.25 billion ($3.59 per diluted share) in the prior year. Despite the challenging environment, PACCAR demonstrated resilience. The Financial Services segment maintained relatively stable revenues, and the company saw an increase in its market share for heavy-duty trucks in the U.S. and Canada and medium-duty trucks in the U.S. The company also continued investing in long-term growth areas such as zero-emission vehicle technology and next-generation manufacturing. Management expects 2020 truck industry volumes to be significantly lower than 2019 across key markets, but the company's strong liquidity position and ongoing cost-saving measures are expected to support its financial stability.

Financial Highlights

29 data points
Beta

Revenue

$3.06B

Net Income

$147.70M

4.8% Net Margin

EPS (Diluted)

$0.29

Total Assets

$26.41B

Free Cash Flow

$799.10M

Financial Statements
Beta
Revenue$3.06B
Net Income$147.70M
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)519.60M
Shares Outstanding (Diluted)520.20M

Key Highlights

  • 1Significant decline in Q2 2020 net sales and revenues, down to $3.06 billion from $6.63 billion in Q2 2019, primarily due to a 65% decrease in truck deliveries.
  • 2Net income for Q2 2020 was $147.7 million ($0.43/share), a sharp decrease from $619.7 million ($1.78/share) in Q2 2019, reflecting the impact of COVID-19.
  • 3For the first six months of 2020, net sales were $8.22 billion, down from $13.12 billion in the prior year, with net income falling to $507.1 million ($1.46/share) from $1.25 billion ($3.59/share).
  • 4PACCAR increased its heavy-duty truck market share in the U.S. and Canada to 29.6% and medium-duty market share to 23.6% in the first six months of 2020, despite an overall market contraction.
  • 5The Financial Services segment revenues remained stable year-over-year for Q2 at $360.3 million, with an increase for the first six months to $744.0 million from $710.9 million, driven by higher used truck sales in Europe.
  • 6The company provided cautious outlooks for 2020, expecting significantly lower truck industry volumes in the U.S./Canada, Europe, and South America compared to 2019 due to the pandemic.
  • 7PACCAR maintained a strong liquidity position, with cash and marketable debt securities totaling $4.28 billion at June 30, 2020, though cash decreased due to dividend payments and financing activities.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted PACCAR's Q2 2020 results. The company experienced a substantial decrease in net sales and revenues, primarily driven by a sharp drop in truck deliveries due to temporary production suspensions and reduced market demand. This led to a significant decline in net income and earnings per share compared to the prior year.

PACCAR anticipates a challenging market for the remainder of 2020. The company projects significantly lower truck industry volumes in the U.S. and Canada, Europe, and South America compared to 2019, reflecting the ongoing economic uncertainty and impact of the pandemic. Future production volumes are dependent on market demand, supplier parts availability, and government directives.

The Financial Services segment has shown resilience. While new loan and lease volumes decreased due to lower truck sales, revenues remained relatively stable year-over-year for Q2 and increased for the first six months, partly due to higher used truck sales in Europe. However, income before taxes decreased due to lower used truck results, lower portfolio yields, and an increased provision for credit losses, reflecting the challenging economic environment.

PACCAR is actively managing its financial position through cost-saving measures, including lower capital investments and R&D expenses compared to the previous year in Q2. The company also maintains a strong liquidity position with substantial cash and marketable debt securities. While stock repurchases were temporarily suspended, the company continues to focus on long-term investments in technology like zero-emission vehicles.