PACCAR Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This filing reports annual results; standalone fourth-quarter financial results are not clearly provided in the supplied text. PACCAR designs and manufactures Kenworth, Peterbilt and DAF trucks, distributes aftermarket parts, and provides truck financing and leasing.
Financial performance
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Net sales and revenues | $23.52 billion | $18.73 billion |
| Income before income taxes | $2.38 billion | $1.66 billion |
| Net income | $1.85 billion | $1.30 billion |
| Diluted EPS | $5.32 | $3.74 |
| After-tax return on revenues | 7.9% | 6.9% |
| Cash provided by operating activities | $2.19 billion | $2.99 billion |
| Cash and marketable securities at year-end | $4.99 billion | $4.97 billion |
- Truck: Revenue rose 28% to $16.80 billion; deliveries increased 22% to 162,700 units. Pretax income was $795.8 million, up 37%; pretax return on revenue improved to 4.7% from 4.4%. Gross margin rose to 7.8% from 7.5%.
- Parts: Revenue reached a record $4.94 billion, up 26%. Pretax income increased 38% to $1.10 billion; pretax return on revenue rose to 22.3% from 20.4%, and gross margin to 28.5% from 27.3%.
- Financial Services: Revenue increased 7% to $1.69 billion; pretax income nearly doubled to a record $437.6 million. Improvement reflected stronger used-truck results and lower credit-loss provisions.
- Cash flow and investment: Operating cash flow fell $800.5 million, mainly from inventory growth, lower receivable-related cash receipts and higher tax payments. Capital investments were $511.8 million versus $569.5 million; R&D expense rose to $324.1 million from $273.9 million.
- Debt and liquidity: Financial Services borrowings totaled $10.43 billion at year-end, down from $10.85 billion. PACCAR reported $3.60 billion in credit lines, of which $3.32 billion was unused, and investment-grade ratings of A+/A1. The filing identifies Financial Services as the principal borrower.
- Shareholder returns: Dividends declared were $2.84 per share, up from $1.98. Cash dividends paid were $708.0 million; share repurchases were $1.5 million.
Changes versus FY 2020
Revenue increased 26% and net income increased 43%, reflecting higher truck deliveries and parts demand across markets, improved Financial Services results, and favorable currency translation. Truck and Parts margins expanded despite higher material costs, labor costs and freight-related costs. Financial Services benefited from better used-truck values and a provision for receivable losses of $0.5 million, compared with $28.8 million in 2020. Operating cash flow declined, while year-end cash and marketable securities remained broadly stable.
Outlook, commentary and risks
- For 2022, management expected U.S. and Canada heavy-duty retail sales of 250,000–290,000 units; European registrations of 260,000–300,000; and South American registrations of 125,000–135,000. The semiconductor shortage was expected to continue affecting deliveries.
- PACCAR Parts sales were forecast to increase 6%–9% in 2022. Financial Services average earning assets were expected to be similar to 2021. Capital investment was projected at $425–$475 million and R&D at $350–$400 million.
- Key risks include semiconductor and other supplier constraints, inflation and commodity costs, cyclical truck demand, COVID-19-related disruption, competition, used-truck residual values, customer credit losses, interest and currency movements, cybersecurity, and environmental and product regulations.
- European Commission truck-cartel-related claims and lawsuits remain unresolved. The company could not reasonably estimate a loss range; an adverse outcome involving significant DAF sales could materially affect results and cash flows.
- Management reported effective disclosure controls and internal control over financial reporting. Ernst & Young issued unqualified audit opinions on the financial statements and internal controls. Product warranty estimation was identified as a critical audit matter; the year-end warranty liability was $344 million.
Important facts for investors to verify
- Whether semiconductor availability, production constraints and the reported $15.9 billion year-end truck backlog translated into 2022 deliveries and financial results.
- Whether truck and parts margins remained resilient as input, labor and logistics costs changed.
- Used-truck prices, lease residual values and related depreciation assumptions; management estimated that a sustained 10% decline in used-truck values would increase future depreciation expense.
- Credit quality and funding conditions at Financial Services, including past-due accounts, repossessions, credit losses and refinancing needs.
- Developments and potential financial exposure from the European Commission-related litigation, which the filing says cannot yet be reasonably estimated.