<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 March 31, 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)
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
(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 April 30,
1994.
<PAGE> 2
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.
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<PAGE> 3
PACCAR Financial Corp.
BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993*
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 4,949 $ 5,554
Net receivables and direct financing leases 1,506,080 1,466,049
Allowance for losses (25,500) (24,000)
---------- ----------
1,480,580 1,442,049
Equipment on operating leases net of
allowance for depreciation (1994--$13,480;
1993--$15,246) 40,003 39,823
Other assets 7,820 6,454
---------- ----------
TOTAL ASSETS $1,533,352 $1,493,880
========== ==========
LIABILITIES
Accounts payable and accrued expenses $ 24,011 $ 29,733
Payable for loans and leases originated 15,022 20,905
Commercial paper 439,860 475,210
Bank loans 25,000 49,000
Term debt 728,100 624,100
Deferred income taxes 68,939 68,182
---------- ----------
TOTAL LIABILITIES 1,300,932 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 2,617 1,310
Retained earnings 184,303 179,940
---------- ----------
TOTAL STOCKHOLDER'S EQUITY 232,420 226,750
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $1,533,352 $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> 4
PACCAR Financial Corp.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
------------------------------------
(Unaudited)
<S> <C> <C>
Interest and finance charges $ 28,800 $ 24,371
Rentals on operating leases 2,947 3,465
-------- --------
GROSS INCOME 31,747 27,836
Interest expense 12,981 11,180
Other borrowing expense 361 317
Depreciation expense related to operating leases 2,387 2,702
Selling, general and administrative expenses 5,782 5,407
Provision for losses on receivables 942 1,116
-------- --------
INCOME BEFORE INCOME TAXES 9,294 7,114
Income taxes 3,621 2,651
-------- --------
NET INCOME 5,673 4,463
Retained earnings at beginning of period 179,940 162,937
Cash dividends declared (1,310) -
-------- --------
RETAINED EARNINGS AT END OF PERIOD $184,303 $167,400
======== ========
</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> 5
PACCAR Financial Corp.
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
-------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,673 $ 4,463
Items included in net income not affecting cash:
Provision for losses on receivables 942 1,116
Provision (benefit) for deferred taxes 757 (2,794)
Depreciation and amortization 2,563 2,914
Increase (decrease) in accounts payable,
accrued expenses and income taxes (7,832) 3,383
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,103 9,082
INVESTING ACTIVITIES:
Loans and financing leases originated (182,747) (148,666)
Collections on loans and financing leases 143,117 120,985
Net decrease (increase) in wholesale receivables 1,576 (13,442)
Acquisition of equipment for operating leases (4,959) (26)
Disposal of equipment 231 19
Decrease in amounts payable
for loans and leases originated (5,883) (10,734)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (48,665) (51,864)
FINANCING ACTIVITIES:
Net decrease in commercial paper (35,350) (13,847)
Net increase (decrease) in bank loans (24,000) 47,000
Proceeds from term debt 172,000 86,600
Payments of term debt (68,000) (79,900)
Additions to paid-in capital 1,307 -
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 45,957 39,853
--------- ---------
NET DECREASE IN CASH (605) (2,929)
BEGINNING CASH BALANCE 5,554 5,664
--------- ---------
ENDING CASH BALANCE $ 4,949 $ 2,735
========= =========
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE> 6
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
three-month period ended March 31, 1994, was 1.89 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.
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 materially
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 in September 1993 for this tax rate change.
Accordingly, the federal tax rate used for the quarter ended March 31, 1993
was 34% in comparison to 35% for the quarter ended March 31, 1994.
-6-
<PAGE> 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Pre-tax earnings increased to $9.3 million in 1994 from $7.1 million in 1993.
Gross income was higher in 1994 resulting from the growth in average net
receivables and equipment on operating leases, partially offset by lower yields
on the portfolio. Average net receivables and equipment on operating leases
grew $327 million (27%) to $1.5 billion from $1.2 billion in 1993. Interest
expense rose to $13.0 million from $11.2 million primarily attributable to the
increase in debt necessary to fund the growth in assets, which was partially
offset by lower average borrowing costs. Selling, general and administrative
expenses increased commensurate with the growth in receivables.
The 1994 provision for losses of $.9 million improved from $1.1 million in
1993. The provision for losses reflected net credit recoveries of $.6 million
in comparison to net credit losses of $1.1 million in the previous year. As a
ratio to total retail contracts and leases outstanding, retail contracts and
leases over 60 days past due were .4% at March 31, 1994, compared to .5% at
December 31, 1993 and 1.2% at March 31, 1993. While the low past due balances
and 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 $25.5
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 increased to $5.7 million in
1994 compared to $4.5 million in 1993.
Liquidity and Capital Resources
During 1994, net cash used by investing activities was $48.7 million as new
loans and lease contracts were added in excess of existing contracts
liquidated. The funds required to support the portfolio growth were provided
by net cash flows from operating activities of $2.1 million and from financing
activities of $46.0 million. The funds from financing activities continued to
be provided primarily by issuance of commercial paper, short-term bank debt 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 rate risk and 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 March 31, 1994, the Company and PACCAR Inc together maintained unused
bank lines of credit of $265 million which are largely used to support the
Company's commercial paper borrowings.
-7-
<PAGE> 8
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 March 31,
1994.
-8-
<PAGE> 9
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: May 12, 1994 BY: /s/ T.R. Morton
-------------------------
T. R. Morton
President
(Authorized Officer)
BY: /s/ B.J. Kimble
-------------------------
B. J. Kimble
Controller
(Chief Accounting Officer)
-9-
<PAGE> 10
PACCAR Financial Corp.
EXHIBIT INDEX
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 three-month
periods ended March 31, 1994 and 1993.
-10-
<PAGE> 11
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
three-month periods ended March 31, 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 three-month periods ended March 31, 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 three-month
periods ended March 31, 1994 and 1993.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
-11-
<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>
Three Months Ended
March 31
1994 1993
------------------
- - - ------------
<S> <C> <C>
FIXED CHARGES
Interest expense $12,981 $11,180
Portion of rentals deemed interest 56 50
------- -------
TOTAL FIXED CHARGES $13,037 $11,230
======= =======
EARNINGS
Income before taxes $ 9,294 $ 7,114
Fixed charges 13,037 11,230
------- -------
EARNINGS AS DEFINED $22,331 $18,344
======= =======
RATIO OF EARNINGS TO FIXED CHARGES 1.71X 1.63X
</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.
-12-
<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>
Three Months Ended
March 31
1994 1993
-----------------------
- - - ------------
<S> <C> <C>
FIXED CHARGES
Interest expense $12,981 $11,180
Facility and equipment rental 169 150
------- -------
TOTAL FIXED CHARGES $13,150 $11,330
======= =======
EARNINGS
Income before income taxes $ 9,294 $ 7,114
Depreciation 2,429 2,770
------- -------
11,723 9,884
Fixed charges 13,150 11,330
------- -------
EARNINGS AS DEFINED $24,873 $21,214
======= =======
RATIO OF EARNINGS TO FIXED CHARGES 1.89X 1.87X
</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>
Three Months Ended
March 31
1994 1993
------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries (1) $17,999 $16,042
Portion of rentals deemed interest 1,374 1,500
------- -------
TOTAL FIXED CHARGES $19,373 $17,542
======= =======
EARNINGS
Income before taxes -
PACCAR Inc and subsidiaries $69,076 $41,096
Fixed charges 19,373 17,542
------- -------
EARNINGS AS DEFINED $88,449 $58,638
======= =======
RATIO OF EARNINGS TO FIXED CHARGES 4.57X 3.34X
</TABLE>
(1) Exclusive of interest, if any, paid to PACCAR Inc.
-14-
<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>
Three Months Ended
March 31
1994 1993
--------------------------------------
<S> <C> <C>
Net credit losses (recoveries) $ (558) $ 1,116
Allowance for losses at end of period 25,500 21,840
Average net receivables and
equipment on operating leases 1,527,513 1,200,620
Period end net receivables and equipment on
operating leases 1,546,083 1,216,332
Period end gross retail contracts and leases
past due over 60 days 5,659 12,654
Period end gross retail contracts and lease
receivables (1) 1,312,241 1,031,776
Ratios:
Net credit losses (recoveries) to
average net receivables and
equipment on operating leases (2) (.15%) .38%
Allowance for losses to period end net
receivables and equipment on
operating leases 1.65% 1.80%
Period end gross retail contracts and leases
past due over 60 days to period end gross
retail contracts and lease receivables .43% 1.23%
- - - -------------
(1) Exclusive of Pledge Line receivables.
(2) Annualized.
</TABLE>
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