PACCAR(PCAR) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents PACCAR Inc.'s unaudited consolidated financial statements, including a retrospective accounting change from LIFO to FIFO for U.S. inventories Consolidated Statements of Comprehensive Income Net income significantly increased for both three and six months ended June 30, 2022, driven by higher net sales and revenues in the Truck, Parts and Other segment Consolidated Statements of Comprehensive Income (Unaudited) | (In Millions, Except Per Share) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales and revenues | $6,786.2 | $5,387.6 | $12,892.6 | $10,801.1 | | Total Income Before Income Taxes | $922.1 | $640.3 | $1,693.5 | $1,248.6 | | Net Income | $720.4 | $495.5 | $1,320.9 | $966.3 | | Diluted Net Income Per Share | $2.07 | $1.42 | $3.79 | $2.77 | Consolidated Balance Sheets Total assets increased to $30,588.7 million and stockholders' equity grew to $12,518.0 million as of June 30, 2022, driven by asset growth in both segments Consolidated Balance Sheet Highlights (Unaudited) | (In Millions) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $30,588.7 | $29,509.4 | | Total Truck, Parts and Other Assets | $14,547.8 | $14,090.5 | | Total Financial Services Assets | $16,040.9 | $15,418.9 | | Total Liabilities | $18,070.7 | $17,915.4 | | Total Stockholders' Equity | $12,518.0 | $11,594.0 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $1,097.5 million for the six months ended June 30, 2022, primarily due to higher net income Condensed Consolidated Statements of Cash Flows (Unaudited) | (In Millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,097.5 | $867.7 | | Net Cash Used in Investing Activities | ($879.0) | ($666.7) | | Net Cash Used in Financing Activities | ($346.0) | ($651.5) | | Net Decrease in Cash and Cash Equivalents | ($197.0) | ($469.8) | | Cash and cash equivalents at end of period | $3,231.3 | $3,069.8 | Notes to Consolidated Financial Statements Key notes detail the retrospective change from LIFO to FIFO for U.S. inventories, revenue disaggregation, segment performance, and legal contingencies from a European Commission investigation - In Q1 2022, the company changed its accounting method for U.S. inventories from LIFO to FIFO to better match costs with revenues and improve comparability. This change increased Retained Earnings by $143.3 million as of January 1, 2021, and has been retrospectively applied to all presented periods[19] - The company is a defendant in various European lawsuits following a 2016 European Commission (EC) settlement. The final outcome and potential range of loss from these claims are highly uncertain and cannot be reasonably estimated at this time[128][129] Truck, Parts and Other Revenues by Source (Six Months Ended June 30) | (In Millions) | 2022 | 2021 | | :--- | :--- | :--- | | Truck Sales | $9,611.3 | $7,995.4 | | Parts Sales | $2,742.6 | $2,302.0 | | Other Revenues | $538.7 | $503.7 | | Total | $12,892.6 | $10,801.1 | Segment Income Before Taxes (Six Months Ended June 30) | (In Millions) | 2022 | 2021 | | :--- | :--- | :--- | | Truck | $698.8 | $526.5 | | Parts | $693.5 | $518.4 | | Financial Services | $291.4 | $182.9 | | Other | $6.9 | $10.9 | | Investment Income | $2.9 | $9.9 | | Total | $1,693.5 | $1,248.6 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses record Q2 and H1 2022 financial performance driven by Truck and Parts segments, addressing semiconductor shortages, Russia/Belarus sales suspension, and positive 2022 outlook Overview and Outlook The company achieved higher net sales and income in Q2 and H1 2022, maintaining a positive 2022 outlook despite semiconductor shortages and suspended sales to Russia and Belarus Financial Highlights - Q2 2022 vs Q2 2021 | Metric (in millions, except EPS) | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Worldwide Net Sales & Revenues | $7,160 | $5,840 | | Net Income | $720.4 | $495.5 | | Diluted EPS | $2.07 | $1.42 | - The company has suspended truck and parts sales to Russia and Belarus in accordance with international sanctions. In 2021, 2,500 trucks were sold into these markets. The conflict has not had a significant impact on operations to date[137] - The industry-wide undersupply of semiconductor chips and component parts has affected the company and is expected to continue impacting deliveries in 2022[139] 2022 Outlook | Category | Outlook | | :--- | :--- | | U.S. & Canada Truck Industry Sales | 260,000 - 290,000 units | | Europe Truck Industry Registrations | 270,000 - 300,000 units | | PACCAR Parts Sales Growth | 13% - 16% increase vs 2021 | | Capital Investments | $425 - $475 million | | R&D Expenses | $330 - $350 million | Results of Operations Operational results improved in H1 2022, with Truck revenue up 20% to $10.03 billion and Parts revenue up 19% to $2.82 billion, while Financial Services pre-tax income surged 59% Truck Deliveries (Units) | Region | Six Months 2022 | Six Months 2021 | % Change | | :--- | :--- | :--- | :--- | | U.S. and Canada | 45,100 | 45,600 | (1)% | | Europe | 31,500 | 25,500 | 24% | | Other | 13,300 | 11,200 | 19% | | Total Units | 89,900 | 82,300 | 9% | Segment Pre-Tax Income (Six Months Ended June 30) | Segment (in millions) | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Truck | $698.8 | $526.5 | 33% | | Parts | $693.5 | $518.4 | 34% | | Financial Services | $291.4 | $182.9 | 59% | Liquidity and Capital Resources The company maintained strong liquidity with $4.79 billion in cash and marketable securities, and $1.10 billion net cash from operations for H1 2022 - Total cash and marketable securities stood at $4.79 billion at June 30, 2022, a slight decrease from $4.99 billion at year-end 2021[198] - The company has committed bank facilities of $3.00 billion, maintained primarily for backup liquidity for commercial paper borrowings[202] - As of June 30, 2022, $390.0 million remains authorized for repurchase under the company's $500.0 million stock buyback program approved in 2018[203][224] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material changes in market risk occurred during the first six months of 2022, with further details available in the 2021 Annual Report on Form 10-K - There were no material changes in the Company's market risk during the first six months of 2022[216] ITEM 4. CONTROLS AND PROCEDURES Disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[217] - No changes in internal controls over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[218] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company faces ongoing European legal proceedings stemming from a 2016 EC settlement, with potential material impact but an unestimable range of loss - The company faces ongoing claims and lawsuits in Europe following a 2016 EC settlement. The final disposition and potential financial impact are highly uncertain and cannot be reasonably estimated at this time[128][129][222] ITEM 1A. RISK FACTORS No material changes to risk factors except for a new one related to the Ukraine conflict, leading to suspended sales to Russia and Belarus with uncertain future impacts - A new risk factor has been identified concerning the conflict in Ukraine. The company has suspended sales to Russia and Belarus, and the potential future impact on business depends on the conflict's development and its effect on European and global economic conditions[223] [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=57&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) No stock repurchases occurred in Q2 2022 under the $500.0 million program, with $110.0 million of shares repurchased to date and $390.0 million remaining - No stock repurchases were made during the second quarter of 2022. As of June 30, 2022, the company has repurchased $110.0 million of shares under its $500.0 million authorization, with $390.0 million remaining[224] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, material contracts, and officer certifications