PACCAR INC Quarterly Report for Q3 Ended Sep 30, 2008

Summary

PACCAR Inc's (PCAR) third quarter 2008 filing reveals a mixed financial performance amid a challenging economic environment. While total net sales and revenues saw an increase of 6.5% to $4.0 billion compared to the prior year's third quarter, net income slightly declined to $299.0 million from $302.3 million. This dip in profitability was primarily driven by a significant increase in the provision for credit losses within the Financial Services segment, which rose to $34.2 million from $9.4 million year-over-year, reflecting a slowing worldwide economy and high fuel prices impacting truck operators. Despite these headwinds, the Truck segment demonstrated resilience with a 6.6% increase in net sales and revenues to $3.64 billion, benefiting from higher truck production in Europe and robust parts sales, although this was partially offset by lower North American truck production. The company also highlighted increased investment in research and development, particularly for engine development and new vehicle programs, which is expected to position PACCAR for future growth. Management anticipates continued financial results to be lower in the fourth quarter of 2008 and into 2009 due to economic uncertainty in Europe and a slowdown in customer demand.

Key Highlights

• 1Net income for the third quarter of 2008 was $299.0 million ($0.82 per diluted share), a slight decrease from $302.3 million ($0.81 per diluted share) in the same period of 2007.
• 2Total net sales and revenues increased to $4.0 billion in Q3 2008 from $3.76 billion in Q3 2007, driven by growth in both the Truck and Financial Services segments.
• 3The Truck segment saw net sales and revenues rise to $3.64 billion, boosted by higher European production and parts sales, though North American sales declined.
• 4Financial Services segment income before taxes decreased significantly to $45.5 million from $73.4 million, primarily due to a more than threefold increase in the provision for credit losses to $34.2 million.
• 5Research and development expenses increased substantially, with Q3 2008 R&D at $88.1 million compared to $67.8 million in Q3 2007, reflecting investments in engine development and new vehicle programs.
• 6PACCAR's liquidity remains strong, with $3.36 billion in unused line of credit arrangements, and its U.S. finance subsidiary gaining access to the Federal Reserve's Commercial Paper Funding Facility.
• 7The company repurchased $7.7 million of its common stock in September 2008 under an authorized plan, and a new $300 million repurchase plan was approved in July 2008.

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