Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
PCAR > SEC Filings for PCAR > Form 10-Q on 8-May-2013All Recent SEC Filings

Show all filings for PACCAR INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for PACCAR INC


8-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW:

PACCAR is a global technology company whose Truck segment includes the design and manufacture of high-quality, light-, medium- and heavy-duty commercial trucks. In North America, trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Australia and South America, under the Kenworth and DAF nameplates. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Company's Financial Services segment (PFS) derives its earnings primarily from financing or leasing PACCAR products in North America, Europe and Australia. The Company's Other business is the manufacturing and marketing of industrial winches.

Consolidated net sales and revenues were $3.92 billion in the first quarter of 2013 compared to $4.78 billion in same period in 2012 primarily due to lower truck deliveries in North America. Truck unit sales decreased in the first quarter of 2013 to 30,600 units from 39,800 units in the same period in 2012, reflecting lower industry retail sales in North America. Aftermarket parts sales in the first quarter of 2013 were $667.4 million compared to $680.4 million in the first quarter of 2012 due to lower sales in Europe.

Net income in the first quarter of 2013 was $236.1 million ($.67 per diluted share) a decrease from $327.3 million ($.91 per diluted share) in the first quarter of 2012 primarily due to lower pretax income in the Truck segment.

During March 2013, the Company announced the launch of the Kenworth T880 and Peterbilt Model 567 at the Mid-America Truck Show in Louisville, Kentucky. These new models expand PACCAR's construction, utility and refuse vehicle offerings in North America and complement the Kenworth T680 and Peterbilt Model 579 on-highway vehicles launched in 2012. All of these vehicles are lightweight and utilize a 2.1 meter-wide stamped aluminum cab.

In April 2013, the Company announced the launch of DAF LF and CF Euro 6 truck models and the PACCAR MX-11 Euro 6 engine at the Commercial Vehicle Show in Birmingham, the United Kingdom. The DAF LF has been designed for distribution and urban delivery and the CF designed for a wide range of applications, ranging from regional transportation to heavy construction. These DAF Euro 6 models have durable lightweight chassis, fuel-efficient drivelines, enhanced aerodynamic exteriors and spacious interiors.

The PACCAR MX-11 Euro 6 engine is a 10.8-liter engine with power outputs ranging from 290 to 440 horsepower and a torque range up to 1,500 lb.-ft. and adds to the broad range of PACCAR engines that have been developed and are available for DAF's Euro 6 vehicles. In the first quarter of 2013, the Company's research and development expenses (R&D) of $72.1 million were comparable to the $72.3 million in the first quarter of 2012 and focused on engine and other new vehicle development.

Truck and Parts Outlook

Truck industry retail sales in the U.S. and Canada in 2013 are expected to be 210,000-240,000 units compared to 224,900 units in 2012, reflecting the ongoing replacement of the aging industry fleet and some anticipated improvement in the economy.
The 2013 truck industry registrations for over 16-tonne vehicles in Europe are expected to be 210,000-235,000 units compared to 221,500 units in 2012 as some customers are expected to purchase Euro 5 vehicles ahead of the introduction of the Euro 6 emission requirement in 2014.

Parts industry aftermarket sales in 2013 in the U.S. and Canada are expected to modestly increase due to some economic growth and an aging truck fleet. Parts industry aftermarket sales in Europe in 2013 are expected to be comparable to 2012, reflecting uncertain economic growth in the Eurozone.

Capital investments in 2013 are expected to be $400 to $500 million, focused on the completion of the truck factory in Brasil and the development of new products and services worldwide. R&D in 2013 is expected to be $250 to $275 million, focused on comprehensive product development programs and enhanced manufacturing operating efficiency.

-28-


Table of Contents

PACCAR Inc - Form 10-Q

Financial Services Outlook

Based on the 2013 truck market outlook, average earning assets this year are expected to increase approximately 5-10% as new business financing from truck sales exceeds customer collections. Current levels of freight tonnage, freight rates and fleet utilization are contributing to customers' profitability and cash flow. If current freight transportation conditions decline due to weaker economic conditions, past due accounts, truck repossessions and credit losses would likely increase from the current low levels.

See the Forward Looking Statement section of Management's Discussion and Analysis for factors that may affect the Truck, Parts and Financial Services outlook.

RESULTS OF OPERATIONS:



        ($ in millions, except per share amounts)
        Three Months Ended March 31,                  2013           2012
        Net sales and revenues:
        Truck                                       $ 2,933.3      $ 3,794.4
        Parts                                           667.4          680.4
        Other                                            30.5           39.9

        Truck, Parts and Other                        3,631.2        4,514.7
        Financial Services                              293.1          261.4

                                                    $ 3,924.3      $ 4,776.1

        Income (loss) before taxes:
        Truck                                       $   165.0      $   300.3
        Parts                                            95.3          101.6
        Other                                            (9.7 )         (3.1 )

        Truck, Parts and Other                          250.6          398.8
        Financial Services                               80.1           71.3
        Investment income                                 6.5            8.9
        Income taxes                                   (101.1 )       (151.7 )

        Net income                                  $   236.1      $   327.3

        Diluted earnings per share                  $     .67      $     .91

        Return on Revenues                                6.0 %          6.9 %

The following provides an analysis of the results of operations for the Company's three reportable segments, Truck, Parts and Financial Services. Where possible, the Company has quantified the factors identified in the following discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance. Factors for which the Company is unable to specifically quantify the impact include market demand, fuel prices, freight tonnage and economic conditions affecting the Company's results of operations.

-29-


Table of Contents

                             PACCAR Inc - Form 10-Q



2013 Compared to 2012:

Truck

The Company's Truck segment accounted for 74.7% of revenues in the first quarter
of 2013 compared to 79.4% in the first quarter of 2012.



  ($ in millions)
  Three Months Ended March 31,                   2013           2012         % Change
  Truck net sales and revenues:
  U.S. and Canada                              $ 1,610.2      $ 2,376.4            (32 )
  Europe                                           851.4          822.0              4
  Mexico, South America, Australia and Other       471.7          596.0            (21 )

                                               $ 2,933.3      $ 3,794.4            (23 )

  Truck income before income taxes             $   165.0      $   300.3            (45 )

  Pre-tax return on revenues                         5.6 %          7.9 %

The Company's worldwide truck net sales and revenues in the first quarter of 2013 of $2.93 billion decreased from the first quarter of 2012 due to lower truck deliveries in the U.S. and Canada ($766.2 million) and Colombia ($190.8 million), partially offset by higher truck deliveries in Mexico and Australia. The decrease in Truck segment income before income taxes for the first quarter of 2013 reflects the lower truck unit deliveries as slower economic growth has led to reduced demand for new trucks.

The effect of foreign currencies on Truck income before income taxes in the first quarter of 2013 was not significant.

The Company's new truck deliveries are summarized below:

    ($ in millions)
    Three Months Ended March 31,                   2013         2012       % Change
    United States                                  12,700       19,300           (34 )
    Canada                                          2,700        3,600           (25 )

    U.S. and Canada                                15,400       22,900           (33 )
    Europe                                         10,600       11,000            (4 )
    Mexico, South America, Australia and Other      4,600        5,900           (22 )

    Total units                                    30,600       39,800           (23 )

The Company's U.S. and Canada heavy-duty truck retail market share was 26.6% in the first quarter of 2013 compared to 28.9% in the first quarter of 2012. Industry retail sales in the heavy-duty market in the U.S. and Canada decreased to 44,900 units in the first quarter of 2013 compared to 53,900 units in the first quarter of 2012. The medium-duty market was 16,200 units in the first quarter of 2013 compared to 18,300 units in the first quarter of 2012. The Company's medium-duty market share was 12.1% in the first quarter of 2013 compared to 13.4% in the first quarter of 2012.

The over 16-tonne truck market in Western and Central Europe was 48,400 units in the first quarter of 2013 compared to 57,700 units in the first quarter of 2012. The Company's market share was 15.9% in the first quarter of 2013 compared to 15.6% in the first quarter of 2012. DAF market share in the 6- to 16-tonne market in the first quarter of 2013 was 10.9%, compared to 11.4% in the first quarter of 2012. The 6- to 16-tonne market in the first quarter of 2013 was 11,900 units, compared to 14,000 units in the first quarter of 2012.

-30-


Table of Contents

                             PACCAR Inc - Form 10-Q



The major factors for the change in net sales and revenues, cost of sales and
revenues, and gross margin for the three months ended March 31, 2013 for the
Truck segment are as follows:



                                                        Net            Cost of          Gross
($ in millions)                                        Sales            Sales           Margin
Three Months Ended March 31, 2012                    $ 3,794.4        $ 3,385.1        $  409.3
Increase (decrease)
Truck delivery volume                                   (869.0 )         (730.9 )        (138.1 )
Average truck sales prices                               (10.8 )                          (10.8 )
Average per truck material, labor and other
direct costs                                                               10.4           (10.4 )
Factory overhead, warehouse and other indirect
costs                                                                     (18.3 )          18.3
Operating lease income and depreciation expense           20.6             19.8              .8
Currency translation                                      (1.9 )             .2            (2.1 )

Total decrease                                          (861.1 )         (718.8 )        (142.3 )

Three Months Ended March 31, 2013                    $ 2,933.3        $ 2,666.3        $  267.0

Truck delivery volume reflects lower truck deliveries in the U.S. and Canada and Colombia, partially offset by higher deliveries in Mexico and Australia. Average truck sales prices decreased sales by $10.8 million reflecting decreased price realization in Latin America.

Average truck cost increased $10.4 million primarily due to higher direct labor and other direct costs.

Factory overhead, warehouse and other indirect costs decreased $18.3 million primarily due to lower manufacturing supplies and maintenance ($9.9 million) and salaries and related costs ($7.0 million) resulting from lower production levels.

Operating lease income and depreciation expense increased due to a higher volume of operating leases.

Truck gross margin in the first quarter of 2013 of 9.1% decreased from 10.8% in the same period in 2012 primarily from lower truck volume as noted above.

Truck SG&A was $53.1 million in the first quarter of 2013 compared to $61.0 in the first quarter of 2012, reflecting lower salaries and related expenses. As a percentage of sales, SG&A was 1.8% in the first quarter of 2013 and 1.6% in the first quarter 2012 as the Company continued ongoing cost control.

Parts

The Company's Parts segment accounted for 17.0% of revenues in the first quarter
of 2013 compared to 14.2% in the first quarter of 2012, reflecting stable Parts
deliveries and the decrease in Truck segment deliveries.



    ($ in millions)
    Three Months Ended March 31,                  2013         2012         % Change
    Parts net sales and revenues:
    U.S. and Canada                              $ 382.7      $ 379.5               1
    Europe                                         200.0        216.5              (8 )
    Mexico, South America, Australia and Other      84.7         84.4

                                                 $ 667.4      $ 680.4              (2 )

    Parts income before income taxes             $  95.3      $ 101.6              (6 )

    Pre-tax return on revenues                      14.3 %       14.9 %

The Company's worldwide parts net sales and revenues decreased primarily due to lower market demand in Europe, partially offset by slightly higher market demand in the U.S. and Canada. The decrease in Parts segment income before taxes and pretax return on revenues was primarily due to lower gross margin ($6.1 million) as noted in the table below.

-31-


Table of Contents

PACCAR Inc - Form 10-Q

The effect of foreign currencies on Parts income before income taxes in the first quarter of 2013 was not significant.

The major factors for the change in net sales and revenues, cost of sales and revenues, and gross margin for the three months ended March 31, 2013 for the Parts segment are as follows:

                                                  Net        Cost of        Gross
       ($ in millions)                           Sales        Sales        Margin
       Three Months Ended March 31, 2012        $ 680.4      $  504.5      $ 175.9
       Increase (decrease)
       Aftermarket parts volume                   (13.2 )       (11.1 )       (2.1 )
       Average aftermarket parts sales prices        .2                         .2
       Average aftermarket parts direct costs                     2.1         (2.1 )
       Warehouse and other indirect costs                         1.8         (1.8 )
       Currency translation                                        .3          (.3 )

       Total decrease                             (13.0 )        (6.9 )       (6.1 )

       Three Months Ended March 31, 2013        $ 667.4      $  497.6      $ 169.8

Lower market demand in Europe, partially offset by higher market demand in the U.S. and Canada resulted in decreased aftermarket parts sales volume of $13.2 million and related cost of sales by $11.1 million.

Average aftermarket parts direct costs increased $2.1 million from higher material costs.

Warehouse and other indirect costs increased $1.8 million primarily due to higher costs from warehouse capacity expansion to support higher future sales volume.

Parts gross margins in the first quarter of 2013 of 25.4% decreased from 25.9% in the first quarter of 2012 due to the factors noted above.

Parts SG&A was $50.8 million in the first quarter of 2013 and $52.2 million in the first quarter of 2012. The lower SG&A reflects lower marketing expenses ($1.3 million). As a percentage of sales, SG&A was 7.6% in the first quarter of 2013 and 7.7% in the first quarter 2012.

-32-


Table of Contents

                             PACCAR Inc - Form 10-Q



Financial Services

The Company's Financial Services segment accounted for 7.5% of revenues in the
first quarter of 2013, an increase from 5.5% in the first quarter of 2012
primarily due to higher average earning assets and a decrease in Truck segment
unit deliveries.



     ($ in millions)
     Three Months Ended March 31,               2013          2012        % Change
     New loan and lease volume:
     U.S. and Canada                         $    476.8     $   551.7           (14 )
     Europe                                       191.3         223.3           (14 )
     Mexico and Australia                         193.9         155.1            25

                                             $    862.0     $   930.1            (7 )
     New loan and lease volume by product:
     Loans and finance leases                $    680.6     $   773.9           (12 )
     Equipment on operating leases                181.4         156.2            16

                                             $    862.0     $   930.1            (7 )
     New loan and lease unit volume:
     Loans and finance leases                     6,700         7,850           (15 )
     Equipment on operating leases                1,800         1,550            16

                                                  8,500         9,400           (10 )
     Average earning assets:
     U.S. and Canada                         $  6,188.0     $ 5,433.1            14
     Europe                                     2,372.1       2,308.2             3
     Mexico and Australia                       1,733.7       1,444.5            20

                                             $ 10,293.8     $ 9,185.8            12
     Average earning assets by product:
     Loans and finance leases                $  6,781.9     $ 5,952.5            14
     Dealer wholesale financing                 1,385.3       1,524.4            (9 )
     Equipment on lease and other               2,126.6       1,708.9            24

                                             $ 10,293.8     $ 9,185.8            12
     Revenue:
     U.S. and Canada                         $    160.8     $   136.5            18
     Europe                                        72.3          72.4
     Mexico and Australia                          60.0          52.5            14

                                             $    293.1     $   261.4            12
     Revenue by product:
     Loans and finance leases                $    101.2     $    95.0             7
     Dealer wholesale financing                    12.6          14.9           (15 )
     Equipment on lease and other                 179.3         151.5            18

                                             $    293.1     $   261.4            12

     Income before income taxes              $     80.1     $    71.3            12

In the first three months of 2013, new loan and lease volume decreased to $862.0 million from $930.1 million during the first quarter of 2012, reflecting a decrease in new PACCAR truck sales, partially offset by higher market share. PFS finance market share on new PACCAR trucks increased to 29.5% in the first quarter of 2013 from 25.9% in the first three months of 2012 primarily due to higher market share in the U.S. and Canada.

-33-


Table of Contents

PACCAR Inc - Form 10-Q

The increase in PFS revenues primarily resulted from higher average earning asset balances, partially offset by lower yields. PFS income before income taxes increased to $80.1 million in the first quarter of 2013 compared to $71.3 million in the first quarter of 2012 primarily due to higher average finance receivables as noted below.

The major factors for the change in interest and fees, interest and other borrowing expenses and finance margin for the three months ended March 31, 2013 are outlined in the table below:

                                         Interest and            Interest and Other            Finance
($ in millions)                              Fees                Borrowing Expenses            Margin
Three Months Ended March 31, 2012        $       109.9          $               39.7          $    70.2
Increase (decrease)
Average finance receivables                       11.2                                             11.2
Average debt balances                                                            5.0               (5.0 )
Yields                                            (7.1 )                                           (7.1 )
Borrowing rates                                                                 (5.7 )              5.7
Currency translation                               (.2 )                         (.1 )              (.1 )

Total increase (decrease)                          3.9                           (.8 )              4.7

Three Months Ended March 31, 2013        $       113.8          $               38.9          $    74.9

Average finance receivables increased $.7 billion from an increase in retail portfolio new business volume exceeding repayments, partially offset by a decrease in dealer wholesale financing, primarily in the U.S. and Canada.

Average debt balances increased $1.0 billion in the first quarter of 2013 and included increased medium-term note funding. The higher average debt balances reflect funding for the higher average earning asset portfolio, including loans, finance leases and equipment on operating leases.

Lower market rates resulted in lower portfolio yields (5.7% in 2013 and 6.1% in 2012) and lower borrowing rates (2.0% in 2013 and 2.4% in 2012).

The following table summarizes operating lease, rental and other income and depreciation and other expense:

            (in millions)
            Three Months Ended March 31,                2013        2012
            Operating lease revenues                   $ 157.4     $ 140.3
            Used truck sales and other                    21.9        11.2

            Operating lease, rental and other income   $ 179.3     $ 151.5


            Depreciation on operating lease            $ 101.3     $  86.4
            Vehicle operating expenses                    23.3        24.4
            Cost of used truck sales and other            19.5         8.0

            Depreciation and other expense             $ 144.1     $ 118.8

-34-


Table of Contents

                             PACCAR Inc - Form 10-Q



The major factors for the change in operating lease, rental and other income,
depreciation and other expense and lease margin for the three months ended
March 31, 2013 are outlined in the table below:



                                          Operating Lease,
                                             Rental and              Depreciation and
($ in millions)                             Other Income              Other Expense             Margin
Three Months Ended March 31, 2012        $            151.5         $            118.8          $  32.7
Increase (decrease)
Used truck sales and other                             10.6                       11.5              (.9 )
Gains on returned lease assets                                                     (.2 )             .2
Average operating lease assets                         12.6                       10.1              2.5
Revenue and cost per asset                              4.2                        3.6               .6
Currency translation                                     .4                         .3               .1

Total increase                                         27.8                       25.3              2.5

Three Months Ended March 31, 2013        $            179.3         $            144.1          $  35.2

Used truck sales and other revenues increased operating lease, rental and other income by $10.6 million and depreciation and other expense by $11.5 million, reflecting a higher number of used truck units sold and lower results on sales.

Average operating lease assets increased $417.7 million, which increased income by $12.6 million and related depreciation and other expense by $10.1 million, as a result of a higher volume of equipment placed in service from higher demand for leased vehicles.

Average revenue and cost per asset increased $4.2 million and $3.6 million, respectively, reflecting the higher demand for leased vehicles.

The following tables summarize the provision for losses on receivables and net charge-offs:

                                             Provision For
        ($ in millions)                        Losses on             Net
        Three Months Ended March 31, 2013     Receivables        Charge-Offs
        U.S. and Canada                     $           1.9     $         1.6
        Europe                                          3.1               1.5
        Mexico and Australia                            1.5                .4

                                            $           6.5     $         3.5


                                             Provision For
        ($ in millions)                        Losses on             Net
        Three Months Ended March 31, 2012     Receivables        Charge-Offs
        U.S. and Canada                     $           1.9     $         2.7
        Europe                                          3.2               2.1
        Mexico and Australia                            2.4               2.6

                                            $           7.5     $         7.4

The provision for losses on receivables for the first quarter of 2013 declined $1.0 million compared to same period in 2012 due to a lower provision in Mexico and Australia reflecting lower charge-offs and improved portfolio quality since March 2012.

The Company modifies loans and finance leases as a normal part of its Financial Services operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not

-35-

. . .

  Add PCAR to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for PCAR - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.