10-QPeriod: Q3 FY2020

PACCAR INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 2, 2020For Securities:PCAR

Summary

PACCAR Inc (PCAR) reported its third quarter and nine-month results for the period ending September 30, 2020. The company experienced a significant downturn in its Truck segment, with net sales and revenues decreasing by 30% in the third quarter and 40% in the first nine months, largely due to the impact of the COVID-19 pandemic on global demand and production suspensions. Despite these challenges, the Parts segment showed resilience with slight revenue growth in the third quarter, while Financial Services revenue increased due to higher used truck sales in Europe, though portfolio yields were lower. Net income for the nine months ended September 30, 2020, was $892.6 million ($2.57 per diluted share), a substantial decrease from $1.86 billion ($5.34 per diluted share) in the same period of 2019. This decline was primarily driven by lower operating results in the Truck segment. The company maintained a solid liquidity position, with $3.34 billion in cash and cash equivalents and $1.19 billion in marketable debt securities at the end of the third quarter. PACCAR continues to invest in future growth, including zero-emission truck technologies, and has provided updated outlooks for 2020 and 2021, anticipating a recovery in industry sales.

Financial Highlights

29 data points
Beta

Revenue

$4.94B

Net Income

$385.50M

7.8% Net Margin

EPS (Diluted)

$0.74

Total Assets

$27.23B

Free Cash Flow

$717.70M

Financial Statements
Beta
Revenue$4.94B
Net Income$385.50M
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)520.20M
Shares Outstanding (Diluted)521.40M

Key Highlights

  • 1Net sales and revenues for the nine months ended September 30, 2020, decreased by 32% to $13.16 billion from $19.48 billion in the prior year period, primarily due to lower truck revenues.
  • 2Net income for the nine months ended September 30, 2020, significantly decreased to $892.6 million ($2.57 per diluted share) from $1.86 billion ($5.34 per diluted share) in the same period of 2019, mainly due to reduced truck operating results.
  • 3The Truck segment experienced a substantial decline, with net sales and revenues down 30% year-over-year for the third quarter and 40% for the first nine months, attributed to lower truck deliveries impacted by the COVID-19 pandemic.
  • 4The Parts segment demonstrated resilience, with third-quarter net sales and revenues increasing by 2% year-over-year to $1.02 billion, though nine-month sales decreased by 6%.
  • 5Financial Services revenues increased by 10% in the third quarter and 6% for the nine months, driven by higher used truck sales in Europe, partially offset by lower portfolio yields due to reduced market interest rates.
  • 6PACCAR maintained a strong liquidity position, with cash and cash equivalents and marketable debt securities totaling $4.54 billion as of September 30, 2020.
  • 7The company anticipates industry retail sales in the U.S. and Canada for 2020 to be between 190,000 to 210,000 units, with projections for 2021 ranging from 210,000 to 250,000 units, indicating a projected recovery.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted PACCAR's financial results, primarily in the Truck segment. Truck and engine production was suspended worldwide starting in late March 2020, with a gradual resumption in May. This led to reduced truck deliveries, lower aftermarket parts sales, and an increased provision for losses on Financial Services receivables. While production rates in the third quarter had almost returned to pre-pandemic levels, the overall impact resulted in lower net sales and net income compared to the prior year.

For the U.S. and Canada, PACCAR expects industry retail sales in 2020 to be between 190,000 to 210,000 units, with a projected range of 210,000 to 250,000 units for 2021. In Europe, for trucks over 16 tonnes, registrations in 2020 are expected to be between 210,000 to 230,000 units, with 2021 projections in the range of 230,000 to 270,000 units. These forecasts assume no significant impacts from a resurgence of the COVID-19 pandemic.

PACCAR Financial Services (PFS) continued to provide financing and leasing services during the pandemic. While the overall portfolio yields were lower due to reduced market interest rates, PFS revenues increased due to higher used truck sales in Europe. The company experienced an increase in modifications for fleet customers requesting payment relief, particularly for 'Insignificant delays' related to COVID-19. Past-due accounts remained at low levels, but PACCAR acknowledged that continued economic weakness could lead to higher past dues, increased provisions for credit losses, and lower used truck values. The company monitors credit quality closely and has a rigorous credit application process.

PACCAR expects capital investments to be between $570 to $600 million for 2020 and projects $575 to $625 million for 2021. Research and development expenses are expected to be $270 to $280 million in 2020 and are projected to increase to $330 to $360 million in 2021. These investments are focused on long-term growth in areas such as aerodynamic truck models, diesel and zero-emission powertrain technologies, advanced driver assistance systems, connected vehicle services, and next-generation manufacturing capabilities.