<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark one) [X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1994
OR
[ ] 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. 0-12553
PACCAR Financial Corp.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Washington 91-6029712
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
777 - 106th Avenue N.E., Bellevue, WA 98004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 462-4100
</TABLE>
(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 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: 145,000 shares at October 31,
1994.
THE REGISTRANT IS A WHOLLY OWNED SUBSIDIARY OF PACCAR INC AND MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND
IS, THEREFORE, FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE> 2
PACCAR Financial Corp.
BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30 December 31
1994 1993*
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 7,693 $ 5,554
Finance receivables 1,621,167 1,466,049
Allowance for losses (27,260) (24,000)
---------- ----------
1,593,907 1,442,049
Equipment on operating leases net of allowance
for depreciation of $15,422 (1993--$15,246) 39,843 39,823
Other assets 7,639 6,454
---------- ----------
TOTAL ASSETS $1,649,082 $1,493,880
========== ==========
LIABILITIES
Accounts payable and accrued expenses $ 19,314 $ 25,832
Payable for finance receivables acquired 16,452 20,905
Commercial paper 398,956 475,210
Bank loans - 49,000
Term debt 903,100 624,100
Deferred income taxes 64,642 72,083
---------- ----------
TOTAL LIABILITIES 1,402,464 1,267,130
STOCKHOLDER'S EQUITY
Preferred stock, par value $100 per share
6% noncumulative and nonvoting
450,000 shares authorized,
310,000 shares issued and outstanding 31,000 31,000
Common stock, par value $100 per share
200,000 shares authorized,
145,000 shares issued and outstanding 14,500 14,500
Paid in capital 3,497 1,310
Retained earnings 197,621 179,940
---------- ----------
TOTAL STOCKHOLDER'S EQUITY 246,618 226,750
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,649,082 $1,493,880
========== ==========
</TABLE>
*The December 31, 1993 Balance Sheet has been derived from audited financial
statements.
See Notes to Financial Statements.
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<PAGE> 3
PACCAR Financial Corp.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
---------------------- ----------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest and finance charges $ 33,463 $ 26,145 $ 93,533 $ 75,232
Rentals on operating leases 3,079 3,241 9,131 10,132
-------- -------- -------- --------
GROSS INCOME 36,542 29,386 102,664 85,364
Interest expense 16,449 11,433 44,397 33,615
Other borrowing expense 320 318 1,109 933
Depreciation expense related
to operating leases 2,496 2,609 7,382 8,000
Selling, general and
administrative expenses 5,502 5,521 16,950 16,486
Provision for losses on receivables 187 1,998 1,248 4,325
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 11,588 7,507 31,578 22,005
Income taxes 4,721 4,812 12,587 10,217
-------- -------- -------- --------
NET INCOME 6,867 2,695 18,991 11,788
Retained earnings at beginning of period 190,754 172,030 178,630 162,937
-------- -------- -------- --------
RETAINED EARNINGS AT END OF PERIOD $197,621 $174,725 $197,621 $174,725
======== ======== ======== ========
</TABLE>
Earnings per share and dividends per share are not reported because the Company
is a wholly owned subsidiary of PACCAR Inc.
See Notes to Financial Statements.
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<PAGE> 4
PACCAR Financial Corp.
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1994 1993
----------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 18,991 $ 11,788
Items included in net income not affecting cash:
Provision for losses on receivables 1,248 4,325
Decrease in deferred taxes (7,512) (5,689)
Depreciation and amortization 8,168 8,620
Decrease in payables,
income taxes and other (7,121) (622)
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 13,774 18,422
INVESTING ACTIVITIES:
Finance receivables acquired (690,562) (584,290)
Collections on finance receivables 498,916 392,046
Net decrease (increase) in wholesale receivables 36,270 (35,356)
Acquisition of equipment for operating leases (11,441) (9,152)
Disposal of equipment 560 1,414
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (166,257) (235,338)
FINANCING ACTIVITIES:
Net increase (decrease) in commercial paper (76,255) 15,232
Net increase (decrease) in bank loans (49,000) 15,000
Proceeds from term debt 407,000 305,600
Payments of term debt (128,000) (119,900)
Additions to paid-in capital 2,187 651
Payment of cash dividend (1,310) -
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 154,622 216,583
--------- ---------
NET INCREASE (DECREASE) IN CASH 2,139 (333)
BEGINNING CASH BALANCE 5,554 5,664
--------- ---------
ENDING CASH BALANCE $ 7,693 $ 5,331
========= =========
</TABLE>
See Notes to Financial Statements.
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<PAGE> 5
PACCAR Financial Corp.
NOTES TO FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited 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. However, 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
financial statements and footnotes of the Company as of December 31, 1993
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
NOTE B--TRANSACTIONS WITH PACCAR INC
The Company has a Support Agreement with PACCAR Inc which requires, among other
provisions, that PACCAR Inc provide financial assistance as necessary to assure
that the ratio of earnings to fixed charges of the Company will not fall below
a level of 1.25 to 1 for a full fiscal year. The ratio (as defined) for the
nine-month period ended September 30, 1994, was 1.87 to 1 (see Exhibit 12.2).
PACCAR Inc charges the Company for certain administrative services it provides.
These costs are charged to the Company based upon the Company's specific use of
the services and PACCAR Inc's cost. Management considers these charges
reasonable and not significantly different from the costs that would be
incurred if the Company were on a stand-alone basis. Beginning July 1993, in
lieu of payment, PACCAR Inc recognizes certain of these administrative services
as an additional investment in the Company. The Company records the investment
as paid-in capital. Annually, the Company intends to pay a dividend to PACCAR
Inc for the paid-in capital invested in the prior year. A cash dividend of
$1.3 million was declared in the quarter ended March 31, 1994 and paid during
the quarter ended June 30, 1994.
NOTE C--PREFERRED STOCK
The Company's Articles of Incorporation provide that the 6% noncumulative,
nonvoting preferred stock (100% owned by PACCAR Inc) is redeemable only at the
option of the Company's Board of Directors.
NOTE D--ACCOUNTING CHANGE
Effective January 1, 1993, the Company adopted Financial Accounting Standards
Board (FAS) Statement No. 109, Accounting for Income Taxes, which supersedes
and amends FAS No. 96 which the Company adopted in 1991. The principal change
made by FAS No. 109 is to revise the criteria for recognition and measurement
of deferred tax assets. Adoption of Statement No. 109 did not impact the
Company's earnings or financial position.
NOTE E--TAX LEGISLATION
New U.S. tax legislation enacted in August 1993 increased the corporate tax
rate from 34% to 35% retroactive to January 1, 1993. The Company implemented a
year-to-date tax adjustment to its deferred tax liabilities in September 1993
for this tax rate change. This deferred tax adjustment increased the third
quarter tax provision in September 1993 by $2.3 million.
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<PAGE> 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Pretax earnings for the quarter ended September 30, 1994 improved to $11.6
million from $7.5 million for the same period in 1993. For the nine months
ended September 30, 1994, pretax earnings increased 44% to $31.6 million from
$22.0 million in the comparable 1993 period. The improvements for the third
quarter and the first nine months of 1994 were primarily due to growth in
finance receivables, partially offset by lower portfolio yields and higher cost
of funds. Selling, general and administrative expenses increased slightly,
consistent with the growth in receivables.
The provision for losses of $.2 million for the third quarter and $1.2 million
for the first nine months of 1994 was lower than the comparable 1993 periods.
In 1994, the Company experienced net credit recoveries of $1.2 million for the
third quarter and $2.0 million for the first nine months in comparison to net
credit losses of $1.2 million and $3.5 million, respectively, for the third
quarter and first nine months of 1993. Although the low credit losses are
expected to continue for the near term, the allowance for credit losses was
increased from $24.0 million at December 31, 1993 to $27.3 million to reflect
the growth in the portfolio and risks inherent in the financing of heavy duty
trucks.
As a result of the foregoing factors, net income for the third quarter
increased to $6.9 million in 1994 compared to $2.7 million in 1993. Net income
for the nine months ended September 30, 1994 increased to $19.0 million from
$11.8 million in the comparable 1993 period.
Liquidity and Capital Resources
During the first nine months of 1994, net cash used to fund portfolio growth
was $166.3 million. The cash required to fund the growth was primarily
provided by operating activities of $13.8 million and from financing activities
of $154.6 million. The funds from financing activities continued to be
provided primarily by the issuance of both commercial paper and medium-term
notes.
In order to minimize its exposure to fluctuations in interest rates, the
Company seeks to borrow funds with interest rate characteristics similar to the
characteristics of its receivables and leases. The Company also reduces its
interest cost by entering into interest rate contracts. Other considerations
which affect the Company's funding operations include the amount of fixed and
variable rate receivables, the maturity schedule of existing debt, the
availability of desired debt maturities and the level of interest rates.
As of September 30, 1994, the Company and PACCAR Inc together maintained unused
bank lines of credit of $255 million which are largely used to support the
Company's commercial paper borrowings.
PART II--OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits filed as part of this report are listed in the accompanying
Exhibit Index.
(b) There were no reports on Form 8-K for the quarter ended September 30,
1994.
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<PAGE> 7
PACCAR Financial Corp.
SIGNATURES
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 Financial Corp.
(Registrant)
Date: November 1, 1994 BY: /S/ T. R. MORTON
----------------------------
T. R. Morton
President
(Authorized Officer)
BY: /S/ B. J. KIMBLE
----------------------------
B. J. Kimble
Controller
(Chief Accounting Officer)
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<PAGE> 8
PACCAR Financial Corp.
EXHIBIT INDEX
<TABLE>
<S> <C>
3.1 Restated Articles of Incorporation of the Company, as amended (incorporated by reference to
Exhibit 3.1 to the Company's Form 10-K dated March 26, 1985. Amendment incorporated by
reference to Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q dated August 13,
1985, File Number 0-12553).
3.2 By-Laws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form 10 dated October 20, 1983, File Number 0-12553).
4.1 Indenture for Senior Debt Securities dated as of December 1, 1983 and first Supplemental
Indenture dated as of June 19, 1989 between the Company and Citibank, N.A. (incorporated by
reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K dated March 26, 1984,
File Number 0-12553 and Exhibit 4.2 to the Company's Registration Statement on Form S-3
dated June 23, 1989, Registration Number 33-29434).
4.2 Forms of Medium-Term Note, Series E (incorporated by reference to Exhibits 4.3A, 4.3B and
4.3C to the Company'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 the Company's Current Report on Form 8-K dated December 19, 1991, under
Commission File Number 0-12553).
Letter of Representation among the Company, Citibank, N.A. and the Depository Trust Company,
Series E, dated July 6, 1989 (incorporated by reference to Exhibit 4.3 of the Company's
Annual Report on Form 10-K dated March 29, 1990, File Number 0-12553).
4.3 Forms of Medium-Term Note, Series F (incorporated by reference to Exhibits 4.3A, 4.3B and
4.3C to the Company's Registration Statement on Form S-3 dated May 26, 1992, Registration
Number 33-48118).
Form of Letter of Representation among the Company, Citibank, N.A. and the Depository Trust
Company, Series F (incorporated by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-3 dated May 26, 1992, Registration Number 33-48118).
4.4 Forms of Medium-Term Note, Series G (incorporated by reference to Exhibits 4.3A and 4.3B
to the Company's Registration Statement on Form S-3 dated December 8, 1993, Registration
Number 33-51335).
Form of Letter of Representation among the Company, Citibank, N.A. and the Depository Trust
Company, Series G (incorporated by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-3 dated December 8, 1993, Registration Number 33-51335).
10.1 Support Agreement between the Company and PACCAR Inc dated as of June 19, 1989
(incorporated by reference to Exhibit 28.1 to the Company's Registration Statement on
Form S-3 dated June 23, 1989, Registration Number 33-29434).
12.1 Statement re computation of ratio of earnings to fixed charges of the Company pursuant to
SEC reporting requirements for the nine-month periods ended September 30, 1994 and 1993.
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C>
12.2 Statement re computation of ratio of earnings to fixed charges of the Company pursuant to
the Support Agreement with PACCAR Inc for the nine-month periods ended September 30, 1994
and 1993.
12.3 Statement re computation of ratio of earnings to fixed charges of PACCAR Inc and
subsidiaries pursuant to SEC reporting requirements for the nine-month periods ended
September 30, 1994 and 1993.
12.4 Statement re computation of ratios for allowance for losses on receivables and past due
levels of the Company for the nine-month periods ended September 30, 1994 and 1993.
27 Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c) for the nine-month
period ended September 30, 1994.
</TABLE>
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
-9-
<PAGE> 1
EXHIBIT 12.1
PACCAR Financial Corp.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PURSUANT TO SEC REPORTING REQUIREMENTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1994 1993
--------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $44,397 $33,615
Portion of rentals deemed interest 170 161
------- -------
TOTAL FIXED CHARGES $44,567 $33,776
======= =======
EARNINGS
Income before taxes $31,578 $22,005
Fixed charges 44,567 33,776
------- -------
EARNINGS AS DEFINED $76,145 $55,781
======= =======
RATIO OF EARNINGS TO FIXED CHARGES 1.71X 1.65X
</TABLE>
The method of computing the ratio of earnings to fixed charges shown above
complies with SEC reporting requirements but differs from the method called for
in the Support Agreement between the Company and PACCAR Inc. See Exhibit 12.2.
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<PAGE> 1
EXHIBIT 12.2
PACCAR Financial Corp.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PURSUANT TO THE SUPPORT AGREEMENT
BETWEEN THE COMPANY AND PACCAR INC
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1994 1993
------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $44,397 $33,615
Facility and equipment rental 509 484
------- -------
TOTAL FIXED CHARGES $44,906 $34,099
======= =======
EARNINGS
Income before income taxes $31,578 $22,005
Depreciation 7,522 8,206
------- -------
39,100 30,211
Fixed charges 44,906 34,099
------- -------
EARNINGS AS DEFINED $84,006 $64,310
======= =======
RATIO OF EARNINGS TO FIXED CHARGES 1.87X 1.89X
</TABLE>
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<PAGE> 1
EXHIBIT 12.3
PACCAR Inc
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PURSUANT TO SEC REPORTING REQUIREMENTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1994 1993
-------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries (1) $ 62,001 $ 47,323
Portion of rentals deemed interest 4,121 4,501
-------- --------
TOTAL FIXED CHARGES $ 66,122 $ 51,824
======== ========
EARNINGS
Income before taxes -
PACCAR Inc and subsidiaries $230,205 $150,764
Fixed charges 66,122 51,824
-------- --------
EARNINGS AS DEFINED $296,327 $202,588
======== ========
RATIO OF EARNINGS TO FIXED CHARGES 4.48X 3.91X
</TABLE>
(1) Exclusive of interest, if any, paid to PACCAR Inc.
-12-
<PAGE> 1
EXHIBIT 12.4
PACCAR Financial Corp.
COMPUTATION OF RATIOS FOR ALLOWANCE FOR LOSSES
ON RECEIVABLES AND PAST DUE LEVELS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1994 1993
--------------------------------
<S> <C> <C>
Net credit losses (recoveries) $ (2,012) $ 3,505
Allowance for losses at end of period 27,260 22,660
Average finance receivables and
equipment on operating leases 1,571,868 1,269,899
Period end finance receivables and equipment
on operating leases 1,661,010 1,398,223
Period end gross retail contracts and operating
lease receivables past due over 60 days (1) 4,451 6,714
Period end gross retail contracts and operating
lease receivables (1) 1,433,668 1,173,086
Ratios:
Net credit losses (recoveries) to
average finance receivables and
equipment on operating leases (2) (.17%) .37%
Allowance for losses to period end
finance receivables and equipment on
operating leases 1.64% 1.62%
Period end gross retail contracts and operating
lease receivables past due over 60 days to period end
gross retail contracts and operating lease receivables .31% .57%
</TABLE>
(1) Retail contracts are exclusive of Pledge Line receivables. Operating
lease receivables are the future miniumum rental payments on equipment
under operating leases.
(2) Annualized.
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheets, Statements of Income and Retained Earnings and Statements of
Cash Flows and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JUL-1-1994
<PERIOD-END> SEP-30-1994
<CASH> 7,693
<SECURITIES> 0
<RECEIVABLES> 1,621,167
<ALLOWANCES> 27,260
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 55,265
<DEPRECIATION> 15,422
<TOTAL-ASSETS> 1,649,082
<CURRENT-LIABILITIES> 35,765
<BONDS> 1,302,056
<COMMON> 14,500
0
31,000
<OTHER-SE> 201,118
<TOTAL-LIABILITY-AND-EQUITY> 1,649,082
<SALES> 0
<TOTAL-REVENUES> 102,664
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,332
<LOSS-PROVISION> 1,248
<INTEREST-EXPENSE> 45,506
<INCOME-PRETAX> 31,578
<INCOME-TAX> 12,587
<INCOME-CONTINUING> 18,991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,991
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
