<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 June 30, 1995
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 July 31,
1995.
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
Item 1 Financial Statements
PACCAR Financial Corp.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest and finance charges $ 39,663 $ 31,064 $ 76,944 $ 59,804
Rentals on operating leases 3,281 3,105 6,631 6,052
Insurance premiums earned 1,032 674 1,966 1,266
-----------------------------------------------------------------------------------------------------------------
GROSS INCOME 43,976 34,843 85,541 67,122
-----------------------------------------------------------------------------------------------------------------
Interest expense 21,765 14,967 42,064 27,948
Other borrowing expense 358 428 759 789
Depreciation expense related
to operating leases 2,640 2,499 5,266 4,886
Insurance claims and underwriting expenses 1,033 468 1,818 1,000
Selling, general and
administrative expenses 5,850 5,666 11,897 11,448
Provision for losses 874 119 1,962 1,061
-----------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 32,520 24,147 63,766 47,132
-----------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 11,456 10,696 21,775 19,990
Income taxes 4,617 4,245 8,768 7,866
-----------------------------------------------------------------------------------------------------------------
NET INCOME 6,839 6,451 13,007 12,124
Retained earnings at beginning of period 207,262 184,303 203,809 179,940
Cash dividends paid - - (2,715) (1,310)
-----------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF PERIOD $214,101 $190,754 $214,101 $190,754
-----------------------------------------------------------------------------------------------------------------
</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.
-2-
<PAGE> 3
PACCAR Financial Corp.
BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994*
------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 5,542 $ 8,956
Net finance and other receivables 1,828,076 1,733,253
Allowance for losses (32,450) (29,900)
------------------------------------------------------------------------------------------------------
1,795,626 1,703,353
Equipment on operating leases net of allowance
for depreciation of $18,811 (1994--$15,351) 41,986 43,500
Other assets 11,046 14,960
------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,854,200 $1,770,769
------------------------------------------------------------------------------------------------------
LIABILITIES
Accounts payable and accrued expenses $ 37,407 $ 30,237
Payable for finance receivables acquired 15,469 39,817
Commercial paper 536,369 461,175
Other short-term borrowings 25,000 -
Advance payable to PACCAR Inc - 46,000
Term debt 909,350 870,300
Income taxes 64,921 69,907
------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,588,516 1,517,436
------------------------------------------------------------------------------------------------------
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 6,083 4,024
Retained earnings 214,101 203,809
------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 265,684 253,333
------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,854,200 $1,770,769
------------------------------------------------------------------------------------------------------
</TABLE>
*The December 31, 1994 Balance Sheet has been derived from audited financial
statements.
See Notes to Financial Statements.
-3-
<PAGE> 4
PACCAR Financial Corp.
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1995 1994
--------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 13,007 $ 12,124
Items included in net income not affecting cash:
Provision for losses 1,962 1,061
Decrease in deferred taxes payable (6,916) (5,666)
Depreciation and amortization 6,731 6,081
Increase (decrease) in payables,
income taxes and other 10,448 (4,017)
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,232 9,583
INVESTING ACTIVITIES:
Finance and other receivables acquired (472,582) (435,493)
Collections on finance and other receivables 382,505 320,037
Net decrease (increase) in wholesale receivables (26,724) 29,152
Acquisition of equipment for operating leases (4,795) (9,116)
Disposal of equipment 362 273
--------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (121,234) (95,147)
FINANCING ACTIVITIES:
Net increase (decrease) in commercial paper and
other short term borrowings 100,194 (121,737)
Net decrease in bank loans - (49,000)
Decrease in advances payable to PACCAR Inc (46,000) -
Proceeds from term debt 220,000 326,000
Payments of term debt (180,950) (71,500)
Additions to paid-in capital 2,059 1,712
Payment of cash dividend (2,715) (1,310)
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 92,588 84,165
--------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH (3,414) (1,399)
CASH AT BEGINNING OF PERIOD 8,956 5,554
--------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 5,542 $ 4,155
--------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
-4-
<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 included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1995 presentation.
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 (as defined) of the Company will
not fall below a level of 1.25 to 1 for a full fiscal year. The ratio for the
six-month period ended June 30, 1995 was 1.64 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 amount invested in the prior year. A cash dividend of $2.7 million
was declared and paid in the quarter ended March 31, 1995.
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.
-5-
<PAGE> 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Gross income was higher for the quarter and six months ended June 30, 1995,
compared to 1994, as a result of the growth in average net receivables and
equipment on operating leases as well as higher contract rates on receivables
and leases. Average net receivables and equipment on operating leases grew
$253.0 million, or 16%, to $1.8 billion for the first six months of 1995 from
$1.5 billion for the first half of 1994. Insurance revenue improved 53% and
55% for the quarter and six months ended June 30, 1995, respectively,
reflecting the growth of the Company's physical damage insurance program.
Interest expense increases of $6.8 million for the quarter ended June 30, 1995
and $14.2 million for the first half of 1995, compared to the corresponding
1994 periods, were the result of incurring additional debt to fund the growth
in assets and higher market interest rates. Insurance-related expenses rose at
a faster pace than related revenues primarily because of a higher concentration
of claims in the quarter ended June 30, 1995. Selling, general and
administrative expenses increased slightly.
The provisions for losses of $.9 million for the second quarter and $2.0
million for the first half of 1995 were higher than the comparable 1994 periods
by $.8 million and $.9 million, respectively. The Company used the higher
provisions to increase the allowance for losses from $29.9 million at December
31, 1994 to $32.5 million. Although management expects low credit losses to
continue in the near term, the larger allowance for losses reflects the growth
in the portfolio as well as the risks inherent in the financing of heavy duty
trucks. At June 30, 1995, the allowance for losses as a percentage of net
receivables and equipment on operating leases was 1.74% compared to 1.68% at
December 31, 1994.
As a result of the foregoing factors, net income for the second quarter
increased to $6.8 million in 1995 compared to $6.4 million in 1994. For the
six months ended June 30, 1995, net income increased to $13.0 million from
$12.1 million in the comparable 1994 period.
Liquidity and Capital Resources
In the first half of 1995, the Company used cash from operations of $25.2
million, cash reserves of $3.4 million and net financing activities of $92.6
million to fund portfolio growth of $121.2 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 or enter into interest rate contracts with
interest rate characteristics similar to the characteristics of its receivables
and leases. 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 June 30, 1995, the Company and PACCAR Inc together maintained unused bank
lines of credit of $300 million which are largely used to support the Company's
commercial paper borrowings.
Other information on liquidity and sources of capital as presented in the 1994
Annual Report on Form 10-K continues to be relevant.
-6-
<PAGE> 7
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 June 30, 1995.
-7-
<PAGE> 8
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: August 7, 1995 BY: /s/ T. R. Morton
-----------------------
T. R. Morton
President
(Authorized Officer)
BY: /s/ R. E. Ranheim
---------------------------------
R. E. Ranheim
Treasurer
(Principal Financial Officer)
-8-
<PAGE> 9
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 Annual Report
on 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 six-month periods
ended June 30, 1995 and 1994.
-9-
<PAGE> 10
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
six-month periods ended June 30, 1995 and 1994.
12.3 Statement re computation of ratio of earnings to fixed charges of PACCAR
Inc and subsidiaries pursuant to SEC reporting requirements for the
six-month periods ended June 30, 1995 and 1994.
12.4 Statement re computation of ratios for allowance for losses on
receivables and past due levels of the Company for the six-month periods
ended June 30, 1995 and 1994.
27 Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c) for
the six-month period ended June 30, 1995.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
-10-
<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>
Six Months Ended
June 30
1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $42,064 $27,948
Portion of rentals deemed interest 120 113
----------------------------------------------------------------------------------------------------------
TOTAL FIXED CHARGES $42,184 $28,061
----------------------------------------------------------------------------------------------------------
EARNINGS
Income before taxes $21,775 $19,990
Fixed charges 42,184 28,061
----------------------------------------------------------------------------------------------------------
EARNINGS AS DEFINED $63,959 $48,051
----------------------------------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.52X 1.71X
----------------------------------------------------------------------------------------------------------
</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.
-11-
<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>
Six Months Ended
June 30
1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $42,064 $27,948
Facility and equipment rental 360 339
----------------------------------------------------------------------------------------------------------
TOTAL FIXED CHARGES $42,424 $28,287
----------------------------------------------------------------------------------------------------------
EARNINGS
Income before income taxes $21,775 $19,990
Depreciation 5,391 4,976
----------------------------------------------------------------------------------------------------------
27,166 24,966
Fixed charges 42,424 28,287
----------------------------------------------------------------------------------------------------------
EARNINGS AS DEFINED $69,590 $53,253
----------------------------------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.64X 1.88X
----------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<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>
Six Months Ended
June 30
1995 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries(1) $ 59,079 $ 38,687
Portion of rentals deemed interest 2,863 2,747
---------------------------------------------------------------------------------------------------------
TOTAL FIXED CHARGES $ 61,942 $ 41,434
---------------------------------------------------------------------------------------------------------
EARNINGS
Income before taxes -
PACCAR Inc and subsidiaries $186,663 $146,910
Fixed charges 61,942 41,434
---------------------------------------------------------------------------------------------------------
EARNINGS AS DEFINED $248,605 $188,344
---------------------------------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 4.01X 4.55X
---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Exclusive of interest, if any, paid to PACCAR Inc.
-13-
<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>
Six Months Ended
June 30
1995 1994
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net credit losses (recoveries) $ (588) $ (789)
Allowance for losses at end of period 32,450 25,850
Average finance receivables and
equipment on operating leases 1,799,624 1,546,284
Period end finance receivables and equipment
on operating leases 1,870,062 1,593,192
Period end contracts and operating
lease receivables past due over 60 days 7,449 5,581
Period end contracts and
operating lease receivables 1,562,140 1,375,078
Ratios:
Net credit losses (recoveries) to
average finance receivables and
equipment on operating leases(1) (.07%) (.10%)
Allowance for losses to period end
finance receivables and equipment on
operating leases 1.74% 1.62%
Period end contracts and operating lease
receivables past due over 60 days to period
end contracts and operating lease receivables .48% .41%
</TABLE>
(1) Annualized.
-14-
<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> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,542
<SECURITIES> 0
<RECEIVABLES> 1,828,076
<ALLOWANCES> 32,450
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 60,797
<DEPRECIATION> 18,811
<TOTAL-ASSETS> 1,854,200
<CURRENT-LIABILITIES> 0
<BONDS> 909,350
<COMMON> 14,500
0
31,000
<OTHER-SE> 220,184
<TOTAL-LIABILITY-AND-EQUITY> 1,854,200
<SALES> 0
<TOTAL-REVENUES> 85,541
<CGS> 0
<TOTAL-COSTS> 49,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,962
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,775
<INCOME-TAX> 8,768
<INCOME-CONTINUING> 13,007
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,007
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
