PACCAR(US:PCAR)2021-05-03 20:06PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The company presents its unaudited consolidated financial statements for the three months ended March 31, 2021 and 2020 Consolidated Statements of Comprehensive Income PACCAR reported significant growth in net sales, revenues, and net income for Q1 2021 compared to the prior year Q1 2021 vs Q1 2020 Performance | Metric | Q1 2021 (Millions) | Q1 2020 (Millions) | | :--- | :--- | :--- | | Total Net Sales and Revenues | $5,845.5 | $5,161.7 | | Truck, Parts and Other Revenues | $5,413.5 | $4,778.0 | | Financial Services Revenues | $432.0 | $383.7 | | Total Income Before Income Taxes | $607.3 | $462.2 | | Net Income | $470.1 | $359.4 | | Diluted EPS | $1.35 | $1.03 | Consolidated Balance Sheets Total assets and stockholders' equity increased slightly as of March 31, 2021, compared to year-end 2020 Balance Sheet Summary (Millions) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $28,503.4 | $28,260.0 | | Cash and cash equivalents | $3,320.0 | $3,539.6 | | Inventories, net | $1,465.4 | $1,221.9 | | Finance and other receivables, net | $11,739.6 | $11,820.7 | | Total Liabilities | $17,785.7 | $17,870.0 | | Commercial paper and bank loans | $3,042.9 | $3,344.4 | | Term notes | $7,521.8 | $7,508.9 | | Total Stockholders' Equity | $10,717.7 | $10,390.0 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased while cash used in investing and financing activities decreased in Q1 2021 Cash Flow Summary (Millions) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $536.9 | $425.9 | | Net Cash Used in Investing Activities | ($215.7) | ($379.8) | | Net Cash Used in Financing Activities | ($508.3) | ($833.7) | | Net Decrease in Cash and Cash Equivalents | ($219.6) | ($852.0) | Notes to Consolidated Financial Statements This section provides detailed disclosures on revenue recognition, segment performance, and credit loss allowances Truck, Parts and Other Revenue Breakdown (Millions) | Revenue Source | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Truck Sales | $4,045.0 | $3,583.6 | | Parts Sales | $1,125.9 | $970.0 | | Total Truck, Parts and Other | $5,413.5 | $4,778.0 | Allowance for Credit Losses Activity (Millions) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Balance at January 1 | $127.0 | $118.6 | | Provision for losses | $3.7 | $17.0 | | Charge-offs | ($4.0) | ($10.7) | | Recoveries | $1.5 | $1.5 | | Balance at March 31 | $126.8 | $121.1 | - The effective tax rate for Q1 2021 was 22.6%, slightly up from 22.2% in Q1 2020, primarily due to a change in the geographic mix of income86 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2021 financial performance, operational achievements, and challenges like the semiconductor shortage Overview and Outlook The company reports strong Q1 results despite a semiconductor shortage and provides a positive outlook for 2021 - The global semiconductor undersupply, along with other supply chain issues, reduced the company's truck deliveries by about 3,000 units in Q1 2021134135 - PACCAR Parts sales are expected to increase by 15-18% in 2021 compared to 2020 levels136 - Capital investments for 2021 are projected to be $575-$625 million, with R&D expenses expected to be $350-$375 million138 2021 Industry Truck Sales/Registrations Outlook | Region | 2021 Outlook (Units) | 2020 Actual (Units) | | :--- | :--- | :--- | | U.S. and Canada | 260,000 - 290,000 | 216,500 | | Europe (>16-tonne) | 260,000 - 290,000 | 230,400 | | South America (Heavy-duty) | 100,000 - 110,000 | 93,000 | Results of Operations This section details strong revenue growth across the Truck, Parts, and Financial Services segments in Q1 2021 - The company's heavy-duty truck retail market share in the U.S. and Canada was 28.4% in Q1 2021, down from 30.4% in Q1 2020144 - Parts segment pre-tax return on revenues was strong at 21.7% in Q1 2021, slightly up from 21.5% in Q1 2020, driven by higher sales volume151152 - The provision for losses on receivables in the Financial Services segment decreased significantly to $3.7 million in Q1 2021 from $17.0 million in Q1 2020165 Worldwide Truck Deliveries (Units) | Region | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | U.S. and Canada | 23,000 | 22,200 | 4% | | Europe | 13,700 | 11,600 | 18% | | Other | 5,500 | 4,600 | 20% | | Total | 42,200 | 38,400 | 10% | Liquidity and Capital Resources The company maintained a strong liquidity position with substantial cash reserves and unused credit facilities - Total cash and marketable debt securities stood at $4.74 billion at the end of Q1 2021, a decrease of $227.5 million from year-end 2020177 - The company has line of credit arrangements totaling $3.60 billion, with $3.24 billion unused as of March 31, 2021, providing ample backup liquidity181 - No shares were repurchased under the company's common stock repurchase plan in Q1 2021; $390.0 million remains authorized under the current program85182 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk during the first three months of 2021 - There were no material changes in the Company's market risk during the three months ended March 31, 2021194 Controls and Procedures Management concluded that the company's disclosure controls and internal financial reporting controls were effective - 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 period195 - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls196 PART II. OTHER INFORMATION Legal Proceedings The company faces ongoing lawsuits in Europe related to a 2016 European Commission settlement - Following a 2016 settlement with the European Commission (EC), PACCAR and its DAF subsidiaries are defendants in various claims and lawsuits in Europe124 - Management cannot reasonably estimate a range of loss, if any, due to the early stage of these legal proceedings124 Risk Factors The company highlights the ongoing semiconductor shortage as a key updated risk factor impacting truck deliveries - The company updated its risk factors to specifically address the automotive industry's undersupply of semiconductors, which reduced truck deliveries by approximately 3,000 units in Q1 2021201 - The supply chain disruption from the semiconductor shortage is anticipated to continue reducing deliveries in the second quarter201 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities and no share repurchases during Q1 2021 - The company made no repurchases under its $500.0 million stock buyback plan during the first quarter of 2021202 Exhibits This section provides an index of all exhibits filed with the Form 10-Q