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| PCAR > SEC Filings for PCAR > Form 10-Q on 1-Aug-2008 | All Recent SEC Filings |
1-Aug-2008
Quarterly Report
Second quarter 2008 total net sales and revenues increased to $4.11 billion compared to $3.72 billion in the second quarter of 2007. Second quarter 2008 net income was $313.5 million ($.86 per diluted share) compared to $298.3 million ($.79 per diluted share) in the second quarter of 2007. First half total net sales and revenues were $8.05 billion compared to $7.70 billion in the first half of 2007. First half net income was $605.8 million ($1.65 per diluted share) compared to $663.9 million ($1.77 per diluted share) in the year-earlier period.
Compared to 2007, second quarter and first half 2008 total net sales and revenues and income before income taxes were favorably affected by the translation of stronger foreign currencies, primarily the euro. The translation effect increased second quarter 2008 sales and revenues by $273.5 million and income before income taxes by $34.9 million compared to the second quarter of 2007. For the first half, the translation effect increased sales and revenues by $521.1 million and income before income taxes by $67.3 million compared to 2007.
Truck segment net sales and revenues increased to $3.78 billion in the second quarter of 2008 compared to $3.43 billion in the second quarter of 2007. For the first half of 2008, Truck segment net sales and revenues increased to $7.40 billion from $7.15 billion in 2007. Both the second quarter and year-to-date periods for 2008 reflect increased truck production in Europe, partially offset by lower truck production in the U.S. and Canada.
Truck segment income before income taxes increased to $364.7 million in the second quarter of 2008 from $337.5 million in the second quarter of 2007 primarily due to higher truck sales and margins in Europe, somewhat offset by higher research and development (R&D) spending and lower truck sales in the U.S. and Canada. Gross margins for the second quarter of 2008 improved to 15.3% from 15.1% in the second quarter of 2007. Gross margins for the first half of 2008 were 15.1% compared to 15.4% in the same period of 2007. During the first half of 2008, Truck segment income before income taxes was $696.3 million compared to $787.6 million in 2007, principally due to lower truck sales and margins in the U.S. and Canada and higher R&D spending, partially offset by higher truck sales and margins in Europe.
R&D spending increased to $90.7 million in the second quarter of 2008 from $58.2 million in the second quarter of 2007 and to $173.6 million for the first half of 2008 compared to $95.6 million in the first half of 2007 due to investments in new vehicle and engine development programs.
Truck retail sales in the U.S. and Canada during the three- and six-month periods ended June 30, 2008 were dampened by a dramatic increase in diesel prices coupled with declining housing starts and lower auto production. Customers continue to adjust their freight capacity due to the declining economy and the Company expects industry Class 8 retail sales to be in the range of 150,000-165,000 trucks in 2008. Truck demand in Europe, particularly in Central Europe, and other international markets continues to be strong. 2008 industry truck sales in Europe above 15 tonnes are expected to be at a record of 350,000-360,000 units.
Selling, general and administrative expense (SG&A) increased by $7.2 million and $13.2 million in the second quarter and first half of 2008, respectively, primarily due to the stronger euro. As a percentage of sales, SG&A decreased to 3.4% in 2008 from 3.5% in 2007 for the second quarter and was 3.4% in the first half of 2008 and 2007.
Financial Services segment revenues for the second quarter of 2008 increased to $330.5 million from $286.8 million in the second quarter of 2007. Revenues were $647.9 million in the first half of 2008, compared to $550.8 million in the first half of 2007. Second quarter Financial Services income before income taxes was $58.7 million compared to $68.9 in 2007 primarily due to a higher provision for credit losses, somewhat mitigated by higher finance margins due to portfolio growth. Credit losses rose to $23.0 million in the second quarter of 2008 from $4.7 million in the second quarter of 2007, primarily due to increased credit losses in the U.S. and Canada. Higher second quarter 2008 finance margin resulted from portfolio growth in Europe, Mexico and Australia. For the first half of 2008, Financial Services income before income taxes was $126.0 million compared to $134.5 million in the year-earlier period. Higher credit losses in the U.S. and Canada in 2008 were partially offset by higher finance margins due to portfolio growth outside the U.S. and Canada.
The slowing economy in the U.S. and Canada and higher fuel prices negatively affected truck operators and resulted in increased past due accounts and higher credit losses in the second quarter of 2008. Worldwide, Financial Services accounts 30+ days past due were 2.7% of portfolio balances as of June 30, 2008, compared to 2.2% as of March 31, 2008 and 1.3% at June 30, 2007.
The effective tax rate was 29.7% and 30.3% for the second quarter and first half of 2008 compared to 30.6% and 31.4% for the second quarter and first half of 2007. The lower effective tax rate in 2008 reflects a higher proportion of income from foreign operations.
During the first half of 2008, Truck and Other cash and marketable securities decreased by $310.9 million to $2.20 billion. Payments for dividends, capital investments and stock repurchases were partially offset by cash provided by operations of $753.6 million.
Cash provided by operations was $753.6 million in the first half of 2008 compared to $982.6 million in the same period of 2007, due to lower net income and higher working capital investments in 2008.
As of June 30, 2008, the Company had repurchased 5.62 million shares of its common shares for $262.5 million under its existing $300 million repurchase authorization. In July 2008, the Board of Directors approved the repurchase of an additional $300 million of PACCAR's outstanding common stock.
At June 30, 2008, PACCAR's European finance subsidiary, PACCAR Financial Europe (PFE), had €105.2 million available for issuance under a €1.2 billion medium term note program registered with the London Stock Exchange. In July 2008, PFE renewed and increased this program to €1.5 billion. The program is renewable annually.
The Company had line of credit arrangements of $3.39 billion, of which $3.34 billion was unused at the end of June 2008. Included in these arrangements are $3.0 billion of syndicated bank facilities, which were increased from $2.7 billion in June 2008. Of the $3.0 billion bank facilities, $2.0 billion matures in June 2009 and $1.0 billion matures in 2012. The Company intends to replace these credit facilities as they expire with facilities of similar amounts. These credit facilities are maintained primarily to provide backup liquidity for commercial paper borrowings and maturing medium term notes of the financial services companies.
During the first six months of 2008, PACCAR maintained its Standard & Poor's short- and long-term debt ratings of A-1+ and AA-, respectively. The Company believes its strong cash position and investment-grade credit ratings will continue to provide financial stability and access to public debt markets at competitive interest rates.
Other information on liquidity and capital resources as presented in the 2007 Annual Report to Stockholders continues to be relevant.
FORWARD-LOOKING STATEMENTS:
Certain information presented in this report contains forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties that may affect actual results. Risks and uncertainties include, but are not limited to: a significant decline in industry sales; competitive pressures; reduced market share; reduced availability of or higher prices for fuel; increased safety, emissions, or other regulations resulting in higher costs and/or sales restrictions; currency or commodity price fluctuations; lower used truck prices; insufficient or under-utilization of manufacturing capacity; supplier interruptions; insufficient supplier capacity or access to raw materials; labor disruptions; shortages of commercial truck drivers; increased warranty costs or litigation; or legislative and governmental regulations.
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