PACCAR Achieves Strong Quarterly Revenues and Profits
Increased Truck Deliveries and Record Aftermarket Parts Revenues Drive Results
“PACCAR (Nasdaq:PCAR) achieved strong quarterly revenues and net income in the second quarter of 2017,” said Ron Armstrong, chief executive officer. “PACCAR’s financial results reflect increasing North American truck production and market share, strong European truck markets and higher global aftermarket parts sales. I am very proud of our 24,500 employees who have delivered outstanding products and services to our customers.”
Second quarter net sales and financial services revenues were $4.70 billion, compared to $4.41 billion in the second quarter of 2016. PACCAR earned net income of $373.0 million ($1.06 per diluted share) in the second quarter of this year compared to net income of $481.3 million ($1.37 per diluted share) in the same period last year. PACCAR earned adjusted net income (non-GAAP) of $371.7 million ($1.06 per diluted share) in the second quarter of 2016, excluding a favorable, non-recurring $109.6 million adjustment related to the European Commission (EC) settlement.
PACCAR reported net income of $683.3 million ($1.94 per diluted share) for the first six months of 2017. The company reported a net loss of $113.3 million ($.32 per diluted share) in the first six months of last year. PACCAR reported adjusted net income (non-GAAP) of $719.7 million ($2.05 per diluted share) in the first six months of 2016, excluding an $833.0 million non-recurring charge for the EC settlement. Net sales and financial services revenues for the first six months of 2017 were $8.94 billion compared to $8.71 billion last year.
Armstrong added, “PACCAR is a technology leader in the commercial vehicle industry and is investing in the next generation of automotive technologies. PACCAR’s investments include autonomous driving and truck platooning, truck connectivity, augmented reality (AR), and an integrated software platform. The company continues to introduce industry-leading technologies in our aftermarket parts and financial services businesses utilizing big data analytics for our dealers and customers.” Harrie Schippers, PACCAR executive vice president and chief financial officer, said, “PACCAR has added 1,200 new jobs in the U.S. this year to meet increased customer demand, complemented by over $125 million of capital and research and development.”
Financial Highlights – Second Quarter 2017
Highlights of PACCAR’s financial results for the second quarter of 2017 include:
Consolidated net sales and revenues of $4.70 billion.
Net income of $373.0 million.
Truck, Parts and Other gross margins of 14.6 percent.
Record PACCAR Parts revenues of $823.1 million.
Record PACCAR Parts pre-tax income of $152.4 million.
Financial Services pre-tax income of $63.0 million.
Manufacturing cash and marketable securities of $3.00 billion.
Quarterly cash generated from operations of $574.7 million.
Record stockholders’ equity of $7.50 billion.
Financial Highlights – First Half 2017Highlights of PACCAR’s financial results for the first six months of 2017 include:
Consolidated net sales and revenues of $8.94 billion.
Net income of $683.3 million.
PACCAR Parts pre-tax income of $304.1 million on revenues of $1.61 billion.
Financial Services pre-tax income of $120.3 million.
Cash generated from operations of $1.19 billion.
Medium-term note issuances of $950.5 million.
Bank credit facilities of $3.0 billion renewed.
Global Truck Markets
“We’ve raised our European above 16-tonne truck market estimate to a range of 290,000-310,000 vehicles this year due to continued economic and freight growth. The new 2017 DAF XF and CF trucks are enhancing our customers’ operating performance with up to seven percent fuel efficiency increases,” said Preston Feight, PACCAR vice president and DAF president. “DAF’s above 16-tonne truck orders are 10 percent higher in the first six months of 2017 compared to the same period last year.”
U.S. and Canada Class 8 truck industry orders increased 44 percent in the first six months of 2017 compared to the same period last year. Kenworth and Peterbilt achieved 31.7 percent share of U.S. and Canada Class 8 truck orders and 29.6 percent share of U.S. and Canada Class 8 truck retail sales in the first half of this year. “Kenworth and Peterbilt’s medium- and heavy-duty truck deliveries increased in the second quarter of 2017 by 25 percent compared to the first quarter of this year,” said Gary Moore, PACCAR executive vice president. “Class 8 truck industry retail sales for the U.S. and Canada are expected to be in a range of 200,000-220,000 vehicles in 2017. The truck market reflects the good economy and high levels of freight tonnage.”
PACCAR Parts Achieves Record Quarterly Revenues and Pre-Tax Profit
PACCAR Parts achieved record quarterly revenues of $823.1 million in the second quarter of 2017, nine percent higher than the $756.4 million achieved in the same period last year. Second quarter 2017 pre-tax profit was a record $152.4 million, 14 percent higher than the $133.4 million achieved in the second quarter of 2016. PACCAR Parts first half 2016 revenues were $1.61 billion, compared to $1.48 billion for the same period last year. PACCAR Parts achieved pre-tax profit of $304.1 million in the first six months of 2017, compared to $268.0 million earned in the first six months of 2016.
“PACCAR dealers have opened 96 TRP all-makes retail stores in 27 countries, which is driving incremental parts and services business in every market. PACCAR continues to add global parts distribution capacity to deliver industry-leading availability, and support the growth of PACCAR MX engine parts sales and the global fleet services program,” said David Danforth, PACCAR vice president and PACCAR Parts general manager. “PACCAR’s new $35 million 160,000 square-foot distribution center in Toronto, Canada is under construction and is expected to open in mid-2018.”
PACCAR Parts' Distribution Center in Toronto, Canada (Architectural Rendering)
PACCAR Launches Silicon Valley Innovation Center
PACCAR will open an advanced technology research and development center in Silicon Valley, California this year. The Center will coordinate next-generation product development and identify emerging technologies that will benefit future vehicle performance. Technology areas of focus will include advanced driver assistance systems (ADAS), artificial intelligence, vehicle connectivity and augmented reality. Darrin Siver, PACCAR senior vice president, noted, “PACCAR looks forward to expanding its partnerships with technology companies in Silicon Valley. PACCAR’s Innovation Center will include state-of-the-art laboratory and workshop facilities, and office space.”
Research and Development and Capital Investments
PACCAR’s excellent long-term profits, strong balance sheet, and intense focus on quality, technology and productivity have enabled the company to invest $6.2 billion in capital projects, innovative products and new technologies during the past decade. “Capital of $375-$425 million and R&D expenses of $250-$270 million are being invested this year in new product development, enhanced manufacturing facilities and aftermarket support programs,” said George West, PACCAR vice president.
PACCAR’s Dynacraft division will construct a new 130,000 square-foot manufacturing facility in McKinney, Texas in 2018. Dynacraft manufactures high-quality components and subassemblies, such as battery cables, doors and air conditioning modules for Kenworth and Peterbilt trucks. The Dynacraft facility will support Peterbilt’s operations in Denton, Texas and manufacture PACCAR’s 20,000 lb. front axle for installation in Kenworth and Peterbilt Class 8 vehicles in North America.
DAF began operation of its newly completed $110 million environmentally friendly cab paint facility in Westerlo, Belgium in June. The state-of-the-art robotic paint equipment has enhanced paint quality and increased cab production capacity by 50 percent. “The DAF cab paint facility is the most modern commercial vehicle paint facility in the world,” commented Harry Wolters, DAF director of operations. “This technology investment will support future increases in DAF’s European market share and geographic expansion, and demonstrates DAF’s technology leadership in the production of industry-leading vehicles.”
PACCAR Engine Factory Honored as 2017 Quality Plant of the Year
The PACCAR engine factory in Columbus, Mississippi has been honored by Quality Magazine as the 2017 Quality Plant of the Year. The factory earned the award for its implementation of best-in-class quality processes to produce industry-leading PACCAR MX-13 and MX-11 engines. Quality Magazine cited the PACCAR engine factory’s commitment to continuous improvement, employee engagement, Six Sigma, industry benchmarking and technology as key factors in the facility’s achievement.
“We are proud to be recognized for our quality PACCAR engines and optimized manufacturing processes,” said Lance Walters, PACCAR engine plant manager. “PACCAR continues to innovate through continuous improvement and a collaborative working environment.” The PACCAR engine factory has won several certifications and industry honors in prior years, including ISO/TS16949 certification for its quality management system and Frost & Sullivan Manufacturing Leadership awards for the last three consecutive years.
Financial Services Companies Achieve Good Results
PACCAR Financial Services (PFS) has a portfolio of 180,000 trucks and trailers, with total assets of $12.69 billion. PACCAR Leasing, a major full-service truck leasing company in North America and Europe with a fleet of 36,000 vehicles, is included in this segment. Second quarter PFS pre-tax income in 2017 was $63.0 million compared to $77.3 million earned in the second quarter last year. Second quarter 2017 revenues were $306.3 million compared to $297.4 million in the same quarter of 2016. For the first six months of 2017, PFS earned pre-tax income of $120.3 million compared to $157.6 million last year. First-half 2017 revenues were $608.5 million compared with $586.8 million for the same period a year ago. “PFS’ portfolio performed well during the second quarter of 2017,” said Bob Bengston, PACCAR senior vice president. “Industry used truck demand increased this quarter in the U.S. compared to the first quarter of 2017. Kenworth and Peterbilt vehicle resale values continue to command a 10-20 percent premium over competitors’ trucks.”
“PACCAR’s excellent balance sheet, complemented by its A+/A1 credit ratings, enables PFS to offer competitive retail financing to Kenworth, Peterbilt and DAF dealers and customers in 24 countries on four continents,” said Todd Hubbard, PACCAR vice president and PACCAR Financial Corp. president. “We have excellent access to the commercial paper and medium-term note markets, allowing PFS to profitably support the sale of PACCAR trucks.”
PACCAR is a global technology leader in the design, manufacture and customer support of high-quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. PACCAR also designs and manufactures advanced diesel engines, provides financial services and information technology, and distributes truck parts related to its principal business.
PACCAR will hold a conference call with securities analysts to discuss second quarter earnings on July 25, 2017, at 9:00 a.m. Pacific time. Interested parties may listen to the call by selecting “Q2 Earnings Webcast” at PACCAR’s homepage. The Webcast will be available on a recorded basis through August 1, 2017. PACCAR shares are listed on NASDAQ Global Select Market, symbol PCAR. Its homepage is www.paccar.com.
This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in PACCAR’s filings with the Securities and Exchange Commission.