<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to ___________
Commission File No. 0-6394
PACCAR Inc
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(Exact name of Registrant as specified in its charter)
Delaware 91-0351110
- ---------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
777 - 106th Ave. N.E., Bellevue, WA 98004
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(Address of principal executive offices) (Zip Code)
(425) 468-7400
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $1 par value--78,105,429 shares as of April 30, 1998
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<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Statements of Income --
Three Months Ended March 31, 1998 and 1997. . . . . . . . . . . . 3
Consolidated Balance Sheets --
March 31, 1998, and December 31, 1997 . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1998 and 1997. . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION:
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . 11
SIGNATURE. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 12
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-2-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
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Consolidated Statements of Income (Unaudited)
(Millions Except per Share Amounts)
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Three Months Ended March 31 1998 1997
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<S> <C> <C>
MANUFACTURING AND PARTS:
Revenues
Net sales $1,746.4 $1,443.4
Other 5.9 1.4
- ------------------------------------------------------------------------------------------------
1,752.3 1,444.8
Costs and Expenses
Cost of sales 1,478.4 1,255.0
Selling, general and administrative 140.9 123.5
Interest 4.5 4.1
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1,623.8 1,382.6
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Manufacturing and Parts Income Before Income Taxes 128.5 62.2
FINANCIAL SERVICES:
Revenues 73.1 68.1
Costs and Expenses
Interest and other 39.9 36.5
Selling, general and administrative 13.8 12.8
Provision for losses on receivables 2.4 1.7
- ------------------------------------------------------------------------------------------------
56.1 51.0
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Financial Services Income Before Income Taxes 17.0 17.1
OTHER:
Investment income 6.8 5.1
Other, net 4.8 4.3
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Total Income Before Income Taxes 157.1 88.7
Income taxes 56.7 30.8
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Net Income $ 100.4 $ 57.9
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Net Income Per Share:
Basic $ 1.29 $ .74
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Diluted 1.28 .74
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Weighted average number of common shares outstanding 78.0 77.8
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Dividends declared per share $ .15 $ .125
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</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
<TABLE>
<CAPTION>
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Consolidated Balance Sheets March 31 December 31
ASSETS (Millions of Dollars) 1998 1997*
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MANUFACTURING AND PARTS: (Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 277.9 $ 318.6
Trade and other receivables, net of allowance for losses 691.7 600.3
Marketable securities 330.9 357.0
Inventories 430.4 393.5
Deferred taxes and other current assets 78.8 86.7
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Total Manufacturing and Parts Current Assets 1,809.7 1,756.1
Deferred taxes, goodwill and other 180.4 183.5
Property, plant and equipment, net 666.4 665.9
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Total Manufacturing and Parts Assets 2,656.5 2,605.5
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FINANCIAL SERVICES:
Cash and cash equivalents 15.2 19.3
Finance and other receivables, net of allowance for losses 3,226.8 3,131.0
Less unearned interest (236.3) (237.1)
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2,990.5 2,893.9
Equipment on operating leases, net 55.0 55.8
Other assets 30.5 24.9
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Total Financial Services Assets 3,091.2 2,993.9
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$5,747.7 $5,599.4
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</TABLE>
-4-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
<TABLE>
<CAPTION>
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March 31 December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997*
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MANUFACTURING AND PARTS: (Unaudited)
<S> <C> <C>
Current Liabilities
Accounts payable and accrued expenses $1,163.9 $1,037.6
Current portion of long-term debt 14.6 15.0
Dividend payable 116.7
Income taxes and other 65.2 44.5
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Total Manufacturing and Parts Current Liabilities 1,243.7 1,213.8
Long-term debt 209.4 236.6
Other, including deferred taxes 214.2 226.1
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Total Manufacturing and Parts Liabilities 1,667.3 1,676.5
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FINANCIAL SERVICES:
Accounts payable and accrued expenses 34.8 85.8
Commercial paper and bank loans 1,216.2 1,086.7
Long-term debt 1,091.2 1,097.7
Deferred income taxes and other 149.2 154.9
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Total Financial Services Liabilities 2,491.4 2,425.1
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STOCKHOLDERS' EQUITY
Preferred stock, no par value:
Authorized 1.0 million shares, none issued
Common stock, $1 par value: Authorized 200.0 million
shares, 78.1 million shares issued and outstanding 78.1 77.8
Additional paid-in capital 619.4 609.9
Retained earnings 1,029.5 940.8
Currency translation and
net unrealized investment gains or (losses) (138.0) (130.7)
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Total Stockholders' Equity 1,589.0 1,497.8
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$5,747.7 $5,599.4
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</TABLE>
* The December 31, 1997 consolidated balance sheet has been derived from
audited financial statements.
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
<TABLE>
<CAPTION>
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Condensed Consolidated Statements of Cash Flows (Unaudited)
(Millions of Dollars)
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Three Months Ended March 31 1998 1997
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<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 89.4 $ 24.9
INVESTING ACTIVITIES:
Finance receivables originated (366.5) (309.8)
Collections on finance receivables 285.7 295.1
Net (increase) decrease in wholesale receivables (24.2) 11.9
Marketable securities purchased (193.2) (397.9)
Marketable securities sales and maturities 219.3 408.1
Acquisition of property, plant, and equipment (28.3) (15.3)
Acquisition of equipment for operating leases (5.0) (1.1)
Proceeds from asset disposals 11.1 8.7
Other (3.6) (.5)
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Net Cash Used in Investing Activities (104.7) (.8)
FINANCING ACTIVITIES:
Cash dividends paid (128.5) (68.0)
Stock option transactions 9.8 .9
Net increase in notes payable, commercial paper
and bank loans 119.5 21.6
Proceeds of long-term debt 126.3 120.2
Payments of long-term debt (153.6) (124.1)
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Net Cash Used in Financing Activities (26.5) (49.4)
Effect of exchange rate changes on cash (3.0) (6.9)
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Net Decrease in Cash and Equivalents (44.8) (32.2)
Cash and equivalents at beginning of period 337.9 222.9
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Cash and equivalents at end of period $293.1 $190.7
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</TABLE>
See Notes to Consolidated Financial Statements.
-6-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
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Notes to Consolidated Financial Statements (Millions of Dollars)
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NOTE A--Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes included in the Company's annual report on
Form 10-K for the year ended December 31, 1997.
Reclassifications: Certain prior year amounts have been reclassified to conform
to the 1998 presentation.
NOTE B--Inventories
<TABLE>
<CAPTION>
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March 31 December 31
1998 1997
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<S> <C> <C>
Inventories at FIFO cost: (Unaudited)
Finished products $309.5 $274.7
Work in process and raw materials 247.0 244.9
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556.5 519.6
Less excess of FIFO cost over LIFO (126.1) (126.1)
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$430.4 $393.5
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</TABLE>
Under the LIFO method of accounting (used for approximately 52% of March 31,
1998 inventories), an actual valuation can be made only at the end of each year
based on year-end inventory levels and costs. Accordingly, interim valuations
are based on management's estimates of those year-end amounts. Based on present
estimates of year-end inventory levels, no significant liquidations of LIFO
inventory quantities are expected. Because inventory levels and costs are
subject to many forces beyond management's control, the present estimates are
subject to the final year-end LIFO inventory valuation.
-7-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
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Notes to Consolidated Financial Statements (In Millions, Except Share Amounts)
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NOTE C--Stockholders' Equity
Stock Option Exercises
On January 1, 1998, approximately 533,000 stock options previously granted to
PACCAR employees became exercisable. For the three months ended March 31, 1998,
PACCAR issued an additional 276,897 common shares as a result of employee stock
option exercises.
Diluted Earnings Per Share
The dilutive effect of stock options as indicated below was added to basic
shares outstanding for purposes of calculating diluted earnings per share:
<TABLE>
<CAPTION>
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Three Months Ended March 31 1998 1997
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<S> <C> <C>
Dilutive effect of stock options 464,870 488,092
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</TABLE>
Comprehensive Income
As of January 1, 1998, PACCAR adopted Statement of Financial Accounting Standard
No. 130 (SFAS No. 130), "Reporting Comprehensive Income". SFAS No. 130 requires
unrealized gains or losses on the Company's available-for-sale securities and
foreign currency translation adjustments, which, prior to adoption, were
reported separately in stockholders' equity, to be included in other
comprehensive income. The new statement had no impact on PACCAR's net income or
stockholders' equity.
The components of comprehensive income, net of any related tax, are as follows:
<TABLE>
<CAPTION>
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Three Months Ended March 31 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 100.4 $ 57.9
Net unrealized losses on securities (.9)
Foreign currency translation adjustments (7.3) (21.2)
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Total comprehensive income $ 93.1 $ 35.8
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</TABLE>
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss was comprised of the following:
<TABLE>
<CAPTION>
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March 31 December 31
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated foreign currency translation adjustments $(138.9) $(131.6)
Net unrealized gains on securities .9 .9
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Net accumulated other comprehensive loss $(138.0) $(130.7)
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</TABLE>
Net accumulated other comprehensive loss is reported in the accompanying
consolidated financial statements as "Currency translation and net unrealized
investment gains or (losses)".
-8-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
PACCAR recorded significantly higher sales and net income in the first
quarter of 1998 compared to year-earlier levels. Consolidated net
sales grew 21% to $1.7 billion compared to $1.4 billion in the first
quarter of 1997. Net income increased to $100.4 million from the $57.9
million earned in 1997, a 73% improvement.
Higher sales in 1998 resulted from strong market demand for trucks in
North America and Europe. As a result of the higher sales, improved
margins and increased production efficiencies, manufacturing and parts
segment income before taxes more than doubled from $62.2 million to
$128.5 million.
Truck market conditions and backlogs remained strong worldwide for
PACCAR. In North America, PACCAR's primary market, backlogs are nine
months, consistent with industry trends.
On May 4, 1998, approximately 1200 production employees at the
Company's Peterbilt plant in Madison, Tennessee implemented a work
stoppage after the bargaining unit contract expired on May 1. The
Company is evaluating alternative production plans.
PACCAR's other product areas which include auto parts and winches
reflected improved sales and income in the first quarter of 1998
versus the first three months of 1997.
The Company's financial services revenues increased compared to the
year-earlier quarter, reflecting continued growth in the loan and
lease portfolios. Higher revenues however, were partially offset by
higher loss provisions consistent with the larger portfolio. Selling,
general and administrative expense also increased due to greater
staffing and other labor-related costs. The average margin rates on
finance receivables declined due to continued heavy rate competition
encountered by PACCAR's largest finance subsidiaries in the United
States and Canada. As a result, the Financial Services segment earned
$17.0 million income before income taxes in the first quarter of 1998,
just below the $17.1 million earned in the first quarter of 1997.
-9-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES:
PACCAR's ratio of manufacturing current assets to current liabilities
at March 31, 1998 of 1.46 remained comparable to the 1.45 at December
31, 1997.
During the first quarter of 1998 the Company used cash from
operations, proceeds from net marketable securities sales and
maturities, and cash reserves for purposes of payment of the special
year-end and regular first quarter dividends, for capital additions,
net of proceeds from asset disposals, and for reduction of principal
on the DAF acquisition debt. Portfolio growth of the finance companies
was funded primarily by the proceeds from additional short-term debt.
In 1996, PACCAR's largest financial services subsidiary, PACCAR
Financial Corp. (PFC), registered $1 billion of senior debt securities
under the Securities Act of 1933 for offering to the public. At the
end of March 1998, $150 million of such securities remained available
for issuance. PFC expects to register additional senior debt
securities for offering to the public by June 30, 1998, prior to final
issuance of the remaining available securities under the current
registration.
As previously announced, PACCAR has entered into an agreement to
purchase Leyland Trucks Limited, a leading truck manufacturer in the
United Kingdom. The transaction is expected to be completed in May
1998 and is subject to government approval. While the purchase price
was not disclosed, this transaction will not result in the use of a
material amount of the Company's capital resources. PACCAR expects to
finance the acquisition through the use of cash reserves combined with
additional borrowings.
Other information on liquidity and sources of capital as presented in
the 1997 Annual Report to Stockholders continues to be relevant.
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<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
PART II--OTHER INFORMATION
For Items 1, 2, 3 and 5, there was no reportable information for any of the
three months ended March 31, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders was held on April 28, 1998.
(b) The following persons were elected to serve as directors:
CLASS III - TERM EXPIRING IN 2001
---------------------------------
Dr. Carl H. Hahn
Charles M. Pigott
John W. Pitts
Other persons whose term of office as a director continued after the
meeting:
CLASS II - TERM EXPIRING IN 2000
--------------------------------
William G. Reed
James C. Pigott
Mark C. Pigott
CLASS I - TERM EXPIRING IN 1999
-------------------------------
John M. Fluke, Jr.
David J. Hovind
Michael A. Tembreull
Gerald Grinstein
(c) Directors were elected with the following vote:
<TABLE>
<CAPTION>
Shares
Voted Shares
"For" "Withheld" Nonvotes
------ ---------- --------
<S> <C> <C> <C>
Dr. Carl H. Hahn 72,937,657 685,096 0
Charles M. Pigott 72,960,642 662,111 0
John W. Pitts 72,938,758 683,995 0
</TABLE>
(d) None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Any exhibits filed herewith are listed in the accompanying index to
exhibits.
(b) No reports on Form 8-K have been filed for the quarter ended March 31,
1998.
-11-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACCAR Inc
-----------------------------
(Registrant)
Date May 8, 1998 By /s/ G. D. Hatchel
-------------------------- -----------------------------
G. D. Hatchel
Vice President and Controller
(Authorized Officer and
Chief Accounting Officer)
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<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT (IN ORDER OF ASSIGNED INDEX NUMBERS)
3 Articles of incorporation and bylaws:
(a) PACCAR Inc Certificate of Incorporation, as amended to April 29, 1997
(incorporated by reference to the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997).
(b) PACCAR Inc Bylaws, as amended to April 26, 1994 (incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994).
4 Instruments defining the rights of security holders, including indentures:
(a) Rights agreement dated as of December 21, 1989 between PACCAR Inc and
First Chicago Trust Company of New York setting forth the terms of the
Series A Junior Participating Preferred Stock, no par value per share
(incorporated by reference to Exhibit 1 of the Current Report on Form
8-K of PACCAR Inc, dated December 27, 1989).
(b) Indenture for Senior Debt Securities dated as of December 1, 1983
between PACCAR Financial Corp. and Citibank, N.A., Trustee
(incorporated by reference to Exhibit 4.1 of the Annual Report on Form
10-K of PACCAR Financial Corp. for the year ended December 31, 1983).
(c) First Supplemental Indenture dated as of June 19, 1989 between PACCAR
Financial Corp. and Citibank, N.A., Trustee (incorporated by reference
to Exhibit 4.2 to PACCAR Financial Corp.'s registration statement on
Form S-3, Registration No. 33-29434).
(d) Forms of Medium-Term Note, Series F (incorporated by reference to
Exhibits 4.3A, 4.3B and 4.3C to PACCAR Financial Corp.'s Registration
Statement on Form S-3, dated May 26, 1992, Registration Number
33-48118).
Form of Letter of Representation among PACCAR Financial Corp.,
Citibank, N.A., and the Depository Trust Company, Series F
(incorporated by reference to Exhibit 4.4 to PACCAR Financial Corp.'s
Registration Statement on Form S-3, dated May 26, 1992, Registration
Number 33-48118).
(e) Forms of Medium-Term Note, Series G (incorporated by reference to
Exhibits 4.3A and 4.3B to PACCAR Financial Corp.'s Registration
Statement on Form S-3, dated December 8, 1993, Registration Number
33-51335).
Form of Letter of Representation among PACCAR Financial Corp.,
Citibank, N.A., and the Depository Trust Company, Series G
(incorporated by reference to Exhibit 4.4 to PACCAR Financial Corp.'s
Registration Statement on Form S-3, dated December 8, 1993,
Registration Number 33-51335).
-13-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT (IN ORDER OF ASSIGNED INDEX NUMBERS)
(f) Forms of Medium-Term Note, Series H (incorporated by reference to
Exhibits 4.3A and 4.3B to PACCAR Financial Corp.'s Registration
Statement on Form S-3 dated March 11, 1996, Registration Number
333-01623).
Form of Letter of Representation among PACCAR Financial Corp.,
Citibank, N.A. and the Depository Trust Company, Series H
(incorporated by reference to Exhibit 4.4 to PACCAR Financial Corp.'s
Registration Statement on Form S-3 dated March 11, 1996, Registration
Number 333-01623).
10 Material contracts
(a) PACCAR Inc Incentive Compensation Plan (incorporated by reference to
Exhibit (10)(a) of the Annual Report on Form 10-K for the year ended
December 31, 1980).
(b) PACCAR Inc Deferred Compensation Plan for Directors (incorporated by
reference to Exhibit (10)(b) of the Annual Report on Form 10-K for the
year ended December 31, 1980).
(c) Supplemental Retirement Plan (incorporated by reference to Exhibit
(10)(c) of the Annual Report on Form 10-K for the year ended December
31, 1980).
(d) 1981 Long Term Incentive Plan (incorporated by reference to Exhibit A
of the 1982 Proxy Statement, dated March 25, 1982).
(e) Amendment to 1981 Long Term Incentive Plan (incorporated by reference
to Exhibit (10)(a) of the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1991).
(f) PACCAR Inc 1991 Long-Term Incentive Plan (incorporated by reference to
Exhibit C of the 1997 Proxy Statement, dated March 20, 1997).
(g) Amended and Restated Deferred Incentive Compensation Plan
(incorporated by reference to Exhibit (10)(g) of the Annual Report on
Form 10-K for the year ended December 31, 1993).
(h) PACCAR Inc Senior Executive Incentive Plan (incorporated by reference
to Exhibit D of the 1997 Proxy Statement, dated March 20, 1997).
27 Financial Data Schedule
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements of income for the three months ended March 31, 1998 and
1997, and the consolidated balance sheets, March 31, 1998, and December 31,
1997, of PACCAR Inc and Subsidiaries and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 293,100
<SECURITIES> 330,900
<RECEIVABLES> 3,682,200
<ALLOWANCES> 0
<INVENTORY> 430,400
<CURRENT-ASSETS> 0
<PP&E> 666,400
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,747,700
<CURRENT-LIABILITIES> 0
<BONDS> 1,300,600
0
0
<COMMON> 78,100
<OTHER-SE> 1,510,900
<TOTAL-LIABILITY-AND-EQUITY> 5,747,700
<SALES> 1,746,400
<TOTAL-REVENUES> 1,825,400
<CGS> 1,478,400
<TOTAL-COSTS> 1,518,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,400
<INTEREST-EXPENSE> 4,500
<INCOME-PRETAX> 157,100
<INCOME-TAX> 56,700
<INCOME-CONTINUING> 100,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,400
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.28
</TABLE>
