- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 September 30, 1996 / / 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 ------------------------------------------------------------------------- (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) (206) 455-7400 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (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, $12 par value--38,862,359 shares as of October 18, 1996 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
FORM 10-Q PACCAR Inc AND SUBSIDIARIES INDEX Page ---- PART I. FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS: Consolidated Statements of Income -- Three and Nine Months Ended September 30, 1996 and 1995.................................................. 3 Condensed Consolidated Balance Sheets -- September 30, 1996, and December 31, 1995................. 4 Condensed Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 1996 and 1995.............. 6 Notes to Consolidated Financial Statements...................... 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION......................... 8 PART II. OTHER INFORMATION: ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................. 10 SIGNATURE................................................................. 11 INDEX TO EXHIBITS......................................................... 12 -2-
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 data) - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30 September 30 - ----------------------------------------------------------------------------------------------- 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> MANUFACTURING AND PARTS: Revenues Net sales $1,046.8 $1,147.0 $3,108.4 $3,476.0 Other 1.4 1.2 6.2 8.7 - ----------------------------------------------------------------------------------------------- 1,048.2 1,148.2 3,114.6 3,484.7 Costs and Expenses Cost of sales 908.4 991.6 2,700.8 3,011.0 Selling, general and administrative 83.6 82.4 265.3 251.2 Interest .6 .5 1.7 1.4 - ----------------------------------------------------------------------------------------------- 992.6 1,074.5 2,967.8 3,263.6 - ----------------------------------------------------------------------------------------------- Manufacturing and Parts Income Before Income Taxes 55.6 73.7 146.8 221.1 FINANCIAL SERVICES: Revenues 66.8 65.1 200.3 188.2 Costs and Expenses Interest and other 36.9 36.4 110.9 105.5 Selling, general and administrative 11.8 11.3 35.2 33.5 Provision for losses on receivables 1.2 2.8 3.9 9.6 - ----------------------------------------------------------------------------------------------- 49.9 50.5 150.0 148.6 - ----------------------------------------------------------------------------------------------- Financial Services Income Before Income Taxes 16.9 14.6 50.3 39.6 OTHER: Investment income 7.8 7.1 20.9 20.1 Other .5 13.6 1.2 14.9 - ----------------------------------------------------------------------------------------------- Total Income Before Income Taxes 80.8 109.0 219.2 295.7 Income taxes 29.7 40.7 80.7 108.0 - ----------------------------------------------------------------------------------------------- Net Income $ 51.1 $ 68.3 $ 138.5 $ 187.7 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 38.9 38.9 38.9 38.9 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Per Share Data: Net income $ 1.31 $ 1.76 $ 3.56 $ 4.83 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Dividends declared $ .25 $ .25 $ .75 $ .75 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- </TABLE> See Notes to Consolidated Financial Statements. -3-
FORM 10-Q PACCAR Inc AND SUBSIDIARIES <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------ Condensed Consolidated Balance Sheets September 30 December 31 ASSETS (In Millions) 1996 1995* - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ <S> <C> <C> MANUFACTURING AND PARTS: (Unaudited) Current Assets Cash and equivalents $ 110.4 $ 172.0 Trade receivables, net 266.7 227.7 Marketable securities 500.6 437.3 Inventories 217.9 239.5 Deferred taxes and other current assets 62.2 60.1 - ------------------------------------------------------------------------------------------ Total Manufacturing and Parts Current Assets 1,157.8 1,136.6 Deferred Taxes, Goodwill and Other 80.9 87.3 Property, Plant and Equipment, Net 466.1 422.3 - ------------------------------------------------------------------------------------------ Total Manufacturing and Parts Assets 1,704.8 1,646.2 - ------------------------------------------------------------------------------------------ FINANCIAL SERVICES: Cash and equivalents 22.1 12.0 Finance and other receivables, net of allowance for losses 2,876.7 2,887.7 Less unearned interest (226.4) (224.4) - ------------------------------------------------------------------------------------------ 2,650.3 2,663.3 Equipment on operating leases, net 42.3 49.8 Other assets 20.6 19.2 - ------------------------------------------------------------------------------------------ Total Financial Services Assets 2,735.3 2,744.3 - ------------------------------------------------------------------------------------------ $4,440.1 $4,390.5 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ </TABLE> -4-
FORM 10-Q PACCAR Inc AND SUBSIDIARIES <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------ September 30 December 31 LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995* - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ <S> <C> <C> MANUFACTURING AND PARTS: (Unaudited) Current Liabilities Accounts payable and accrued expenses $ 650.8 $ 559.1 Income taxes 18.7 11.6 Dividend payable 116.6 Other .5 .5 - ------------------------------------------------------------------------------------------ Total Manufacturing and Parts Current Liabilities 670.0 687.8 Long-Term Debt 12.6 10.7 Other 130.9 118.1 - ------------------------------------------------------------------------------------------ Total Manufacturing and Parts Liabilities 813.5 816.6 - ------------------------------------------------------------------------------------------ FINANCIAL SERVICES: Accounts payable and accrued expenses 35.6 70.1 Commercial paper and bank loans 977.0 952.4 Long-term debt 1,107.9 1,149.6 Deferred income taxes and other 143.9 150.6 - ------------------------------------------------------------------------------------------ Total Financial Services Liabilities 2,264.4 2,322.7 - ------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY Preferred stock, no par value: Authorized 1.0 million shares, none issued Common stock, $12 par value: Authorized 100.0 million shares, issued 38.9 million shares 466.3 466.3 Additional paid-in capital 218.7 218.7 Retained earnings 763.2 653.8 Currency translation and net unrealized investment adjustments (86.0) (87.6) - ------------------------------------------------------------------------------------------ Total Stockholders' Equity 1,362.2 1,251.2 - ------------------------------------------------------------------------------------------ $4,440.1 $4,390.5 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ </TABLE> * The December 31, 1995, condensed consolidated balance sheet has been derived from audited financial statements. See Notes to Consolidated Financial Statements. -5-
FORM 10-Q PACCAR Inc AND SUBSIDIARIES - -------------------------------------------------------------------------------- Condensed Consolidated Statements of Cash Flows (Unaudited) (Millions of Dollars) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Nine Months Ended September 30 - -------------------------------------------------------------------------------- 1996 1995 - -------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $240.3 $196.9 INVESTING ACTIVITIES: Finance receivables originated (931.8) (936.7) Collections on finance receivables 850.0 715.3 Net decrease (increase) in wholesale receivables 79.9 (81.8) Marketable securities purchased (1,735.3) (1,556.7) Marketable securities sales and maturities 1,668.2 1,396.8 Acquisition of additional interest in affiliate (45.0) Acquisition of property, plant and equipment (75.9) (53.4) Acquisition of equipment for operating leases (5.6) (7.4) Proceeds from asset disposals 29.4 27.0 Other (1.0) (.2) - -------------------------------------------------------------------------------- Net Cash Used in Investing Activities (122.1) (542.1) FINANCING ACTIVITIES: Cash dividends (145.7) (106.8) Net increase in commercial paper and bank loans 20.2 227.2 Proceeds of long-term debt 348.9 421.2 Payment of long-term debt (393.3) (314.0) - -------------------------------------------------------------------------------- Net Cash (Used in) Provided by Financing Activities (169.9) 227.6 Effect of exchange rate changes on cash .2 (9.6) - -------------------------------------------------------------------------------- Net Decrease in Cash and Equivalents (51.5) (127.2) Cash and equivalents at beginning of period 184.0 311.3 - -------------------------------------------------------------------------------- Cash and equivalents at end of period $132.5 $184.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. -6-
FORM 10-Q PACCAR Inc AND SUBSIDIARIES - -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements (Millions of Dollars) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE A--Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and 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. 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, 1995. RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform to the 1996 presentation. NOTE B--Inventories - -------------------------------------------------------------------------------- September 30 December 31 1996 1995 - -------------------------------------------------------------------------------- Inventories at FIFO cost: (Unaudited) Finished products $206.1 $201.6 Work in process and raw materials 148.6 170.5 - -------------------------------------------------------------------------------- 354.7 372.1 Less excess of FIFO cost over LIFO (136.8) (132.6) - -------------------------------------------------------------------------------- $217.9 $239.5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Under the LIFO method of accounting (used for approximately 80% of September 30, 1996, 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 1996 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-
FORM 10-Q PACCAR Inc AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS: Net sales for the third quarter and first nine months of $1.0 billion and $3.1 billion reflected decreases of 9% and 11%, respectively, compared to year-earlier amounts. Net income of $51.1 million in the third quarter was 25% lower than the $68.3 million recorded in the prior year. Earnings in the prior year for the third quarter and first nine months included a $7.5 million after-tax gain from favorable litigation settlements. In 1996, net income for the first nine months amounted to $138.5 million, which was 26% below the $187.7 million earned last year. Earnings in 1996 included the impact of $11 million in after-tax costs ($18 million pretax) to eliminate excess truck production capacity. These costs were recognized in the first quarter and included as a component of manufacturing selling, general and administrative expense. Manufacturing and Parts income before income taxes decreased 25% for the quarter and 34% for the first nine months compared to corresponding amounts in 1995. Profitability was impacted by an industry-wide downturn which has reduced demand for heavy-duty and medium-duty trucks in most of the markets PACCAR serves. In response to this, the Company further reduced U.S. build rates at the beginning of the fourth quarter. Outside the United States and Canada, PACCAR has truck operations in Mexico, Australia and the United Kingdom. Sales and profits in Mexico reflected steady improvement for both the quarter and first nine months. While third quarter results in Australia compared favorably to the year-earlier quarter, both Australian and United Kingdom operations for the first nine months remained below comparable 1995 levels. As recently announced, PACCAR has made an offer to purchase all the shares of DAF Trucks, N.V., a Netherlands corporation, for NLG 933 million (approximately $543 million). In 1995, DAF had net sales of approximately $1.7 billion and net profits of approximately $95 million. DAF has continued to increase its market share in the European Community and has an 8.8% share of the overall truck market and a 9% share of the heavy-duty truck market. PACCAR's other product areas include auto parts, winches and oilfield equipment. The auto parts segment results showed improved profitability on moderately higher sales for both the quarter and first nine months. Combined results for winch and oilfield operations in the third quarter were similar to year-earlier amounts, but year- to-date sales and profits remained below 1995. -8-
FORM 10-Q PACCAR Inc AND SUBSIDIARIES Financial Services segment pretax income grew 16% and 27% for the quarter and first nine months, respectively. The favorable results were attributable primarily to the larger overall portfolios established during last year's record truck sales. While net loan and lease portfolios at September 30, 1996, were at levels similar to December 31, 1995, balances exceeded September 30, 1995, by over $100 million. Also, the Mexican finance subsidiary required significantly lower credit loss provisions this year. LIQUIDITY AND CAPITAL RESOURCES: PACCAR's ratio of manufacturing current assets to current liabilities at September 30, 1996, increased to 1.73 compared to 1.65 at December 31, 1995. In the first nine months of 1996, the Company used cash from operations to invest in additional marketable securities, pay the special year-end and regular quarterly cash dividends, and to reduce Financial Services net short and long term debt. Additionally, PACCAR used approximately $50 million of cash reserves to fund net capital additions. The increase in cash from operations compared to 1995 was attributable to changes in components of working capital. Also, in 1995, the Company's investing activities reflected a $45 million use of cash due to the acquisition of the remaining minority interest in VILPAC, S.A., PACCAR's Mexican truck manufacturing subsidiary. If accepted by the Shareholders of DAF, PACCAR expects the acquisition will close by the end of 1996. Management intends to use a combination of cash and debt to complete the transaction. Other information on liquidity and sources of capital as presented in the 1995 Annual Report to Stockholders continues to be relevant. -9-
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 September 30, 1996. Reportable information in response to Item 4 was previously reported in the Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. 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 September 30, 1996. -10-
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 November 7, 1996 By /s/ G. D. Hatchel -------------------------- ----------------------------- G. D. Hatchel Vice President and Controller (Authorized Officer and Chief Accounting Officer) -11-
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 27, 1990 (incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1990). (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 E (incorporated by reference to Exhibits 4.3A, 4.3B and 4.3C to PACCAR Financial Corp.'s Registration Statement on Form S-3 dated June 23, 1989, Registration Number 33-29434, and Forms of Medium-Term Note, Series E, incorporated by reference to Exhibit 4.3B.1 to PACCAR Financial Corp.'s Current Report on Form 8-K, dated December 19, 1991, under Commission File Number 0- 12553). Letter of Representation among PACCAR Financial Corp., Citibank, N.A., and the Depository Trust Company, Series E, dated July 6, 1989 (incorporated by reference to Exhibit 4.3 of PACCAR Financial Corp.'s Annual Report on Form 10-K, dated March 29, 1990, File Number 0- 12553). (e) 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). -12-
FORM 10-Q PACCAR Inc AND SUBSIDIARIES INDEX TO EXHIBITS EXHIBIT (IN ORDER OF ASSIGNED INDEX NUMBERS) (f) 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). (g) 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 (10)(h) of the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992). (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). 27 Financial Data Schedule -13-