<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 June 30, 1999
/ / 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
- --------------------------------------- ----------
(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--78,297,808 shares as of July 30, 1999
===============================================================================
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX Page
- ------------------------------------------------------------------------------- ----
<S> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Statements of Income --
Three and Six Months Ended June 30, 1999 and 1998 (unaudited)....... 3
Consolidated Balance Sheets --
June 30, 1999 (unaudited), and December 31, 1998.................... 4
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1999 and 1998 (unaudited)................. 6
Notes to Consolidated Financial Statements.............................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.................................. 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......... 14
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................... 15
SIGNATURE ............................................................... 16
INDEX TO EXHIBITS............................................................... 17
</TABLE>
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<PAGE>
FORM 10-Q
PACCAR INC AND SUBSIDIARIES
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------------
Consolidated Statements of Income (Unaudited)
(Millions Except Per Share Amounts)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- ----------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRUCK AND OTHER:
Net sales $ 2,181.2 $ 1,849.4 $ 4,249.8 $ 3,601.7
Costs and Expenses
Cost of sales 1,842.6 1,568.3 3,598.4 3,056.7
Selling, general and administrative 141.5 139.2 290.6 271.6
Interest 3.2 3.4 6.3 6.4
- ----------------------------------------------------------------------------------------------------------
1,987.3 1,710.9 3,895.3 3,334.7
- ----------------------------------------------------------------------------------------------------------
Truck and Other Income
Before Income Taxes 193.9 138.5 354.5 267.0
FINANCIAL SERVICES:
Revenues 89.3 77.4 173.8 150.5
Costs and Expenses
Interest and other 51.6 42.0 99.1 81.9
Selling, general and administrative 14.2 14.6 29.9 28.4
Provision for losses on receivables 4.6 3.5 7.6 5.9
- ----------------------------------------------------------------------------------------------------------
70.4 60.1 136.6 116.2
- ----------------------------------------------------------------------------------------------------------
Financial Services Income
Before Income Taxes 18.9 17.3 37.2 34.3
OTHER:
Investment income 8.9 7.9 17.2 14.7
Other, net (2.5) .5 (2.3) 5.3
- ----------------------------------------------------------------------------------------------------------
Total Income Before Income Taxes 219.2 164.2 406.6 321.3
Income taxes 79.7 59.3 147.6 116.0
- ----------------------------------------------------------------------------------------------------------
Net Income $ 139.5 $ 104.9 $ 259.0 $ 205.3
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Net Income Per Share:
Basic $ 1.78 $ 1.34 $ 3.31 $ 2.63
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Diluted $ 1.77 $ 1.33 $ 3.29 $ 2.61
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Weighted average number of
common shares outstanding 78.2 78.1 78.2 78.1
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Dividends declared and paid per share $ .20 $ .15 $ .40 $ .30
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Consolidated Balance Sheets June 30 December 31
ASSETS (Millions of Dollars) 1999 1998*
- --------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
TRUCK AND OTHER:
Current Assets
Cash and cash equivalents $ 434.7 $ 410.3
Trade and other receivables, net of allowance for losses 712.2 645.6
Marketable securities 417.6 404.8
Inventories 441.6 511.1
Deferred taxes and other current assets 104.6 98.2
- --------------------------------------------------------------------------------------------
Total Truck and Other Current Assets 2,110.7 2,070.0
Deferred taxes, goodwill and other 264.6 261.9
Property, plant and equipment, net 858.6 827.7
- --------------------------------------------------------------------------------------------
Total Truck and Other Assets 3,233.9 3,159.6
- --------------------------------------------------------------------------------------------
FINANCIAL SERVICES:
Cash and cash equivalents 14.9 22.1
Finance and other receivables, net of allowance for losses 4,176.5 3,790.4
Less unearned interest (283.1) (267.4)
- --------------------------------------------------------------------------------------------
3,893.4 3,523.0
Equipment on operating leases, net 72.4 65.3
Other assets 29.9 24.8
- --------------------------------------------------------------------------------------------
Total Financial Services Assets 4,010.6 3,635.2
- --------------------------------------------------------------------------------------------
$7,244.5 $6,794.8
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
June 30 December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998*
- --------------------------------------------------------------------------------------------
<S> <C> <C>
TRUCK AND OTHER: (Unaudited)
Current Liabilities
Accounts payable and accrued expenses $1,385.7 $1,293.9
Current portion of long-term debt and notes payable 55.7 43.8
Dividend payable 125.0
Income taxes and other 95.1 56.4
- --------------------------------------------------------------------------------------------
Total Truck and Other Current Liabilities 1,536.5 1,519.1
Long-term debt 183.2 204.3
Other, including deferred taxes 328.9 336.4
- --------------------------------------------------------------------------------------------
Total Truck and Other Liabilities 2,048.6 2,059.8
- --------------------------------------------------------------------------------------------
FINANCIAL SERVICES:
Accounts payable and accrued expenses 46.5 83.6
Commercial paper and bank loans 1,747.7 1,617.8
Long-term debt 1,274.6 1,106.9
Deferred income taxes and other 165.6 162.5
- --------------------------------------------------------------------------------------------
Total Financial Services Liabilities 3,234.4 2,970.8
- --------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value:
authorized, 1.0 million shares, none issued
Common stock, $1 par value: authorized 200.0 million
shares, 78.3 million shares issued and outstanding 78.3 78.1
Additional paid-in capital 625.7 620.2
Retained earnings 1,413.0 1,185.7
Currency translation and
net unrealized investment gains or (losses) (155.5) (119.8)
- --------------------------------------------------------------------------------------------
Total Stockholders' Equity 1,961.5 1,764.2
- --------------------------------------------------------------------------------------------
$7,244.5 $6,794.8
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
* The December 31, 1998 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>
- ---------------------------------------------------------------------------------------------
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Millions of Dollars)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Six Months Ended June 30 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 424.5 $ 302.8
INVESTING ACTIVITIES:
Finance receivables originated (1,131.8) (876.3)
Collections on finance receivables 822.2 618.7
Net increase in wholesale receivables (59.1) (12.9)
Marketable securities purchased (509.3) (439.5)
Marketable securities maturities and sales 491.5 461.6
Acquisition of businesses, net of cash acquired (75.2)
Acquisition of property, plant and equipment (124.5) (68.2)
Acquisition of equipment for operating leases (18.3) (10.4)
Proceeds from asset disposals 31.1 10.6
Other (28.1) (36.0)
- ---------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (526.3) (427.6)
FINANCING ACTIVITIES:
Cash dividends paid (156.6) (140.2)
Stock option transactions 3.8 6.4
Net increase in notes payable, commercial paper and
bank loans 86.7 340.2
Proceeds of long-term debt 433.7 305.1
Payment of long-term debt (220.4) (439.4)
- ---------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 147.2 72.1
Effect of exchange rate changes on cash (28.2) (3.6)
- ---------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Equivalents 17.2 (56.3)
Cash and cash equivalents at beginning of period 432.4 337.9
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 449.6 $ 281.6
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
-6-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements (In millions, except share amounts)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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- and
six-month periods ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. 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, 1998.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1999 presentation.
<TABLE>
<CAPTION>
NOTE B--Inventories
- --------------------------------------------------------------------------------
June 30 December 31
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Inventories at FIFO cost: (Unaudited)
Finished products $ 311.6 $ 328.2
Work in process and raw materials 260.2 308.2
- --------------------------------------------------------------------------------
571.8 636.4
Less excess of FIFO cost over LIFO (130.2) (125.3)
- --------------------------------------------------------------------------------
$ 441.6 $ 511.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Under the LIFO method of accounting (used for approximately 59% of June 30,
1999, 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
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements (In millions, except share amounts)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE C--Stockholders' Equity
Stock Option Exercises
On January 1, 1999, approximately 550,000 stock options previously granted to
PACCAR employees became exercisable. For the six months ended June 30, 1999,
PACCAR issued an additional 157,000 common shares as a result of employee stock
option exercises.
Diluted Earnings Per Share
The following table shows the additional shares added to basic shares
outstanding to calculate diluted earnings per share. These amounts represent
primarily the dilutive effect of stock options outstanding.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Three Months Ended Six months Ended
June 30 June 30
- ---------------------------------------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additional shares 566,000 649,000 544,000 676,000
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comprehensive Income
The components of comprehensive income, net of any related tax, were as follows:
- ------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- ------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $139.5 $104.9 $259.0 $205.3
Foreign currency translation adjustments (8.4) (1.7) (33.4) (9.0)
Net unrealized losses on securities (2.4) (.1) (2.3) (.1)
- ------------------------------------------------------------------------------------------------------
Total comprehensive income $128.7 $103.1 $223.3 $196.2
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss was comprised of the following:
- --------------------------------------------------------------------------------------------
June 30 December 31
1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated foreign currency translation adjustments $(155.2) $(121.8)
Net unrealized (losses) gains on securities (.3) 2.0
- --------------------------------------------------------------------------------------------
Net accumulated other comprehensive loss $(155.5) $(119.8)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</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
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE D--Segment Information
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales
Trucks $2,104.5 $1,778.6 $4,103.3 $3,458.9
All other 76.7 70.8 146.5 142.8
- -------------------------------------------------------------------------------------------------------------------------
2,181.2 1,849.4 4,249.8 3,601.7
Financial Services revenues 89.3 77.4 173.8 150.5
- -------------------------------------------------------------------------------------------------------------------------
$2,270.5 $1,926.8 $4,423.6 $3,752.2
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Truck operating profit $ 186.0 $ 132.8 $ 346.7 $ 249.0
All other 11.1 9.1 14.1 24.4
Interest expense (3.2) (3.4) (6.3) (6.4)
- -------------------------------------------------------------------------------------------------------------------------
193.9 138.5 354.5 267.0
Financial Services income before taxes 18.9 17.3 37.2 34.3
Investment income 8.9 7.9 17.2 14.7
Other, net (2.5) .5 (2.3) 5.3
- -------------------------------------------------------------------------------------------------------------------------
$ 219.2 $ 164.2 $ 406.6 $ 321.3
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<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 achieved record sales and net income for both the second
quarter and the first half of 1999. Second quarter net income
increased 33% to $139.5 million compared to $104.9 million in the
second quarter of 1998. These earnings grew primarily as a result
of an 18% increase in sales to $2.2 billion from $1.8 billion in
the second quarter of 1998. First half net income improved 26% to
$259.0 million from the $205.3 million earned in the first half of
1998 due primarily to an 18% improvement in sales.
Higher Truck segment net sales in 1999 are primarily attributable
to operations in the United States. The truck market in the United
States remained strong with a ten-month industry backlog. Second
quarter Truck segment operating profit of $186.0 million grew 40%
over year-earlier levels. For the first half of 1999, Truck segment
operating profit of $346.7 million showed a 39% improvement
compared to 1998. These increases resulted from higher truck
volumes, improved margins and production efficiencies at most truck
plants.
In Europe, truck demand has declined slightly and the Company has
reduced its truck production in that market. The traditional summer
holiday factory closures are scheduled to occur during the third
quarter. This is expected to impact the overall trend in quarterly
operating results for DAF, Leyland and Foden, the Company's three
European truck makers. In Canada, the Company's truck plant in Ste.
Therese is expected to commence production in the third quarter.
PACCAR's other product areas, Winch and Auto Parts, are included in
the caption "All other" as presented in Note D of the accompanying
consolidated financial statements. Winch sales and profits for the
quarter and first half were slightly lower compared to the prior
year. Auto parts sales for the second quarter and first half
improved. However, expenses related to new store openings lowered
first half 1999 results below the prior year amount.
In the Financial Services segment, consolidated net loan and lease
portfolios grew to $3.9 billion at the end of June 1999. Additional
income generated from portfolio growth was partially offset by
increases to the loan loss provision consistent with the larger
portfolio. Also, average margin rates on finance receivables
declined slightly due to highly competitive interest rate markets
in the United States and Canada for new truck financing. As a
result, Financial Services revenues increased 15% and income before
income taxes improved approximately 9% for both the second quarter
and first half of 1999 compared to 1998.
-10-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES:
PACCAR's ratio of Truck and Other current assets to current
liabilities at June 30, 1999 of 1.37 remained comparable to the
1.36 at December 31, 1998.
The increase in 1999 net cash provided by operating activities
resulted from a combination of higher net income and changes in
components of working capital. In the first half of 1999, PACCAR
used cash from operating activities to pay the special year-end and
regular quarterly cash dividends, to make net capital additions, to
fund financial services lending activities in excess of outside
borrowings and to purchase additional investments in marketable
securities. The effect of exchange rate changes on cash is due
primarily to the strength of the United States dollar relative to
the Euro.
Capital additions in 1999 included expenditures for the Company's
truck plant at Ste. Therese Canada. The Ste. Therese construction
is being funded with external borrowings. Higher capital spending
in 1999 also reflects continued investments in new product and
systems development.
In 1998, PACCAR's largest financial services subsidiary, PACCAR
Financial Corp. registered $1 billion of senior debt securities
under the Securities Act of 1933 for offering to the public. At the
end of June 1999, $420 million of such securities remained
available for issuance.
Other information on liquidity and capital resources as presented
in the 1998 Annual Report to Stockholders continues to be relevant.
YEAR 2000 STATUS:
GENERAL
The Company established a formal Year 2000 project in 1996 to
manage PACCAR's global compliance effort. The scope of the project
includes the compliance of (1) mainframe computer systems, (2) PC
and LAN systems, (3) embedded systems (including both the Company's
internal machinery and equipment and the Company's products), and
(4) significant third parties. A steering committee comprised of
senior management monitors progress and addresses compliance
issues. Management of the Company believes it has an effective
program in place to resolve the Year 2000 issue in a timely manner.
-11-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
STATUS OF THE COMPANY'S YEAR 2000 COMPLIANCE
The Company has completed the evaluation of all computer systems
and applications used by the Company and its subsidiaries. PACCAR
has prioritized the non-compliant systems and expects to complete
modifications to all significant systems before problems related to
the Year 2000 occur. Outside specialists have been retained to
assist in this process to the extent considered necessary.
Mainframe computer systems compliance efforts, PC and LAN systems,
and embedded manufacturing systems are all approximately 98%
complete. The Company has verified that there are no Year 2000
issues with the portion of its products manufactured by the
Company, and it has received confirmation from most major suppliers
that there are no Year 2000 issues with their components as used in
the Company's products. The Company is continuing to contact the
remaining suppliers about compliance of their components. Year 2000
compliance work is being successfully completed along with other
systems development projects.
SIGNIFICANT THIRD PARTIES
Some of the Company's Year 2000 compliance efforts are dependent on
the release of new versions of software by the software developers.
With few exceptions, all upgrades have been received and installed.
The remaining upgrades are not significant, and the Company has
viable contingency plans.
PACCAR has contacted all business critical suppliers to assess
their Year 2000 efforts. The Company has received assurances from
many suppliers and has taken actions with respect to other
suppliers to ensure that business with PACCAR will continue without
Year 2000 impacts. Monitoring and testing will continue through the
remainder of 1999 with contingency actions where necessary. PACCAR
has also assessed the Year 2000 programs of all independent
dealers. All dealers are aware of the Year 2000 actions they must
take, and the Company continues to track their progress toward
completion.
The Company also depends on banks and other financial institutions
to support its cash management activities and to fund the lending
activity of its financial services companies with the issuance of
commercial paper and public debt. The Company has sent letters and
has received responses indicating that banks and other financial
institutions, with which it has relationships, already are or will
be compliant by the Year 2000.
To date, the Company is not aware of any significant third party,
including software developers, suppliers, dealers, banks and
others, with a Year 2000 issue that would materially impact the
Company's results of operations, liquidity or capital resources.
-12-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
YEAR 2000 COSTS
The total cost to complete these projects is expected to
approximate $26 million, of which $20 million has been incurred
through June 30, 1999. The remaining costs cover final testing and
contingency planning, efforts to verify compliance of dealers and
suppliers, and a contingency reserve. The Company has and expects
to continue to fund the cost of these projects from operations. All
project costs are being expensed.
YEAR 2000 RISKS
The Company has completed virtually all modification phases of its
Year 2000 program. PACCAR is conducting integrated tests of all
systems and is using independent verification of critical systems
to provide increased assurance that all Year 2000 problems have
been resolved. However, the Company has no means of ensuring that
significant third parties will be fully prepared for the Year 2000.
In the event the Company or one or more significant third parties
fail to become completely Year 2000 compliant, the most reasonably
likely worst case scenario for the Company is that manufacturing
operations could be temporarily impacted. Production at one or more
of the Company's plants could be interrupted for a period of time,
which in turn could result in lost sales and profits. Selling,
general and administrative expense for the Company would likely
increase to the extent that automated functions would need to be
performed manually.
The most reasonably likely worst case scenario for the Company's
financial services companies, if some of their systems are not Year
2000 compliant, is that information and reports would contain
inaccuracies that would reduce the efficiency of payment processing
and would result in increased administrative costs and generally
reduce customer service. If a significant failure of banking
systems or systems of other entities that are key to the public
debt markets occurred due to Year 2000 issues, the financial
services companies' ability to access various credit and money
markets and to process payments could be adversely affected.
The cumulative effect of these potential outcomes is unknown, but
could have a material effect on consolidated financial condition,
results of operations and liquidity.
CONTINGENCY PLANS
While every effort has been made to avoid Year 2000 system
problems, PACCAR is preparing Year 2000 business contingency plans
for all operations. These plans include automated or manual steps
as necessary to continue business as usual and special staff
scheduling for December 1999 and January 2000.
-13-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's market risk
during the six months ended June 30, 1999. For additional
information, refer to Item 7a as presented in the 1998 Annual
Report to Stockholders.
-14-
<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 June 30, 1999
Reportable information in response to Item 4 was previously reported in the
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. 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
June 30, 1999.
-15-
<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 August 5, 1999 By /s/ G. D. Hatchel
------------------------- -------------------------------
G. D. Hatchel
Vice President and Controller
(Authorized Officer and
Chief Accounting Officer)
-16-
<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 10, 1998 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 4.1 of the Current
Report on Form 8-K of PACCAR Inc dated December 21, 1998).
(b) Indenture for Senior Debt Securities dated as of December 1, 1983,
and first Supplemental Indenture dated as of June 19, 1989, 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. dated March 26, 1984, File Number 0-12553
and Exhibit 4.2 to PACCAR Financial Corp.'s registration statement
on Form S-3 dated June 23, 1989, Registration No. 33-29434).
(c) 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).
(d) 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).
-17-
<PAGE>
FORM 10-Q
PACCAR Inc AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT (IN ORDER OF ASSIGNED INDEX NUMBERS)
(e) Forms of Medium-Term Note, Series I (incorporated by reference to
Exhibits 4.3A and 4.3B to PACCAR Financial Corp.'s Registration
Statement on Form S-3 dated September 10, 1998, Registration Number
333-63153).
Form of Letter of Representation among PACCAR Financial Corp.,
Citibank, N.A. and the Depository Trust Company, Series I
(incorporated by reference to Exhibit 4.5 to PACCAR Financial
Corp.'s Registration Statement on Form S-3 dated September 10,
1998, Registration Number 333-63153).
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
(a) For the six months ended June 30, 1999
The following restated schedule is submitted for certain
reclassifications as reflected in the Consolidated Statements of
Income for the three and six months ended June 30, 1999.
(b) For the six months ended June 30, 1998 - restated.
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
1998, AND THE CONSOLIDATED BALANCE SHEETS, JUNE 30, 1999, AND DECEMBER 31, 1998,
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 449,600
<SECURITIES> 417,600
<RECEIVABLES> 4,605,600
<ALLOWANCES> 0
<INVENTORY> 441,600
<CURRENT-ASSETS> 0
<PP&E> 858,600
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,244,500
<CURRENT-LIABILITIES> 0
<BONDS> 1,457,800
0
0
<COMMON> 78,300
<OTHER-SE> 1,883,200
<TOTAL-LIABILITY-AND-EQUITY> 7,244,500
<SALES> 4,249,800
<TOTAL-REVENUES> 4,423,600
<CGS> 3,598,400
<TOTAL-COSTS> 3,697,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,600
<INTEREST-EXPENSE> 6,300
<INCOME-PRETAX> 406,600
<INCOME-TAX> 147,600
<INCOME-CONTINUING> 259,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 259,000
<EPS-BASIC> 3.31
<EPS-DILUTED> 3.29
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1997, AND THE CONSOLIDATED BALANCE SHEETS, JUNE 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 281,600
<SECURITIES> 360,100
<RECEIVABLES> 3,817,600
<ALLOWANCES> 0
<INVENTORY> 460,200
<CURRENT-ASSETS> 0
<PP&E> 745,100
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,024,500
<CURRENT-LIABILITIES> 0
<BONDS> 1,185,100
0
0
<COMMON> 78,100
<OTHER-SE> 1,602,900
<TOTAL-LIABILITY-AND-EQUITY> 6,024,500
<SALES> 3,601,700
<TOTAL-REVENUES> 3,752,200
<CGS> 3,056,700
<TOTAL-COSTS> 3,138,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,900
<INTEREST-EXPENSE> 6,400
<INCOME-PRETAX> 321,300
<INCOME-TAX> 116,000
<INCOME-CONTINUING> 205,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 205,300
<EPS-BASIC> 2.63
<EPS-DILUTED> 2.61
</TABLE>
