<PAGE>
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, 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 April 30,
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>
PACCAR Financial Corp.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
- -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Interest and finance charges $ 37,281 $ 28,740
Rentals on operating leases 3,350 2,947
Insurance Premiums Earned 934 592
- --------------------------------------------------------------------------------
GROSS INCOME 41,565 32,279
- --------------------------------------------------------------------------------
Interest expense 20,299 12,981
Other borrowing expense 401 361
Depreciation expense related to operating leases 2,626 2,387
Insurance claims and underwriting expenses 785 532
Selling, general and administrative expenses 6,047 5,782
Provision For Losses On Receivables 1,088 942
- --------------------------------------------------------------------------------
TOTAL EXPENSES 31,246 22,985
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 10,319 9,294
Income Taxes 4,151 3,621
- --------------------------------------------------------------------------------
NET INCOME 6,168 5,673
Retained earnings at beginning of period 203,809 179,940
Cash Dividends Paid (2,715) (1,310)
- --------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF PERIOD $ 207,262 $ 184,303
- --------------------------------------------------------------------------------
</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.
<PAGE>
PACCAR Financial Corp.
BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31 December 31
1995 1994*
- -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 5,739 $ 8,956
Net finance and other receivables 1,762,885 1,733,253
Allowance For Losses (31,300) (29,900)
- -------------------------------------------------------------------------------
1,731,585 1,703,353
Equipment on operating leases net of allowance
for depreciation of $16,769 (1994--$15,351) 43,598 43,500
Other Assets 11,509 14,960
- -------------------------------------------------------------------------------
TOTAL ASSETS $1,792,431 $1,770,769
- -------------------------------------------------------------------------------
LIABILITIES
Accounts payable and accrued expenses $ 33,418 $ 30,237
Payable for finance receivables acquired 17,045 39,817
Commercial paper 548,030 461,175
Advance payable to PACCAR Inc - 46,000
Term debt 868,350 870,300
Deferred Income Taxes 67,258 69,907
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 1,534,101 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 5,568 4,024
Retained Earnings 207,262 203,809
- -------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 258,330 253,333
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,792,431 $1,770,769
- -------------------------------------------------------------------------------
<FN>
*The December 31, 1994 Balance Sheet has been derived from audited financial
statements.
</TABLE>
See Notes to Financial Statements.
<PAGE>
PACCAR Financial Corp.
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
- -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,168 $ 5,673
Items included in net income not affecting cash:
Provision for losses on receivables 1,088 942
Increase (decrease) in deferred taxes (2,649) 757
Depreciation and amortization 2,914 2,563
Increase (decrease) in payables,
Income taxes and other 7,441 (6,525)
- -------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,962 3,410
INVESTING ACTIVITIES:
Finance and other receivables acquired (213,879) (188,630)
Collections on finance and other receivables 193,698 143,117
Net decrease (increase) in wholesale receivables (32,626) 1,576
Acquisition of equipment for operating leases (3,411) (4,959)
Disposal of equipment 307 231
- -------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (55,911) (48,665)
FINANCING ACTIVITIES:
Net increase (decrease) in commercial paper 86,854 (35,350)
Net decrease in bank loans - (24,000)
Decrease in advances payable to PACCAR Inc (46,000) -
Proceeds from term debt 105,000 172,000
Payments of term debt (106,950) (68,000)
Additions to paid-in capital 1,543 1,310
Payment of cash dividend (2,715) (1,310)
- -------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 37,732 44,650
- -------------------------------------------------------------------------------
NET DECREASE IN CASH (3,217) (605)
CASH AT BEGINNING OF PERIOD 8,956 5,554
- -------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 5,739 $ 4,949
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
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
three-month period ended March 31, 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.
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Pre-tax earnings for the quarter ending March 31, 1995 increased to $10.3
million from $9.3 million for the quarter ending March 31, 1994. Gross income
was higher in 1995 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 $243
million (16%) to $1.8 billion in 1995 from $1.5 billion at March 31, 1994.
Insurance income increased reflecting the growth of the Company's physical
damage insurance program. Interest expense rose to $20.3 million from $13.0
million primarily attributable to an increase in market interest rates and an
increase in debt incurred to fund the growth in the assets. Selling, general
and administrative expenses increased commensurate with the growth in
receivables.
The first quarter 1995 provision for losses of $1.1 million increased 15% from
$.9 million in the first quarter of 1994. The provision for credit losses
reflected a decline in net credit recoveries to $.3 million in 1995 in
comparison to net credit recoveries of $.6 million in the previous year.
Although the low credit losses are expected to continue for the near term, the
allowance for losses was increased to 1.73% of receivables and equipment on
operating leases to reflect growth in the portfolio and the risks inherent in
the financing of heavy duty trucks. Accordingly, the allowance for credit
losses was raised to $31.3 million at March 31, 1995 from $29.9 million at
December 31, 1994.
As a result of the foregoing factors, net income for the first quarter of 1995
increased to $6.2 million compared to $5.7 million for the first quarter of
1994.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1995, net cash used to fund portfolio growth
was $55.9 million. The cash required to fund the growth was primarily provided
by operating activities of $15.0 million and from financing activities of $37.7
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 March 31, 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.
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, 1995.
<PAGE>
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 9, 1995 BY: /S/ T. R. Morton
----------------------------
T. R. Morton
President
(Authorized Officer)
BY: /S/ B. J. Kimble
----------------------------
B. J. Kimble
Controller
(Chief Accounting Officer)
<PAGE>
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, 1995 and 1994.
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, 1995 and 1994.
<PAGE>
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, 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 three-month periods ended March
31, 1995 and 1994.
27 Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c) for
the three-month period ended March 31, 1995.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
<PAGE>
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
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $20,299 $12,981
Portion of rentals deemed interest 63 56
- --------------------------------------------------------------------------------
TOTAL FIXED CHARGES $20,362 $13,037
- --------------------------------------------------------------------------------
EARNINGS
Income before taxes $10,319 $ 9,294
Fixed charges 20,362 13,037
- --------------------------------------------------------------------------------
EARNINGS AS DEFINED $30,681 $22,331
- --------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.51X 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.
<PAGE>
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
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $20,299 $12,981
Facility and equipment rental 188 169
- --------------------------------------------------------------------------------
TOTAL FIXED CHARGES $20,487 $13,150
- --------------------------------------------------------------------------------
EARNINGS
Income before income taxes $10,319 $ 9,294
Depreciation 2,692 2,429
- --------------------------------------------------------------------------------
13,011 11,723
Fixed charges 20,487 13,150
- --------------------------------------------------------------------------------
EARNINGS AS DEFINED $33,498 $24,873
- --------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.64X 1.89X
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
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
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries (1) $ 28,636 $ 17,999
Portion of rentals deemed interest 1,432 1,374
- --------------------------------------------------------------------------------
TOTAL FIXED CHARGES $ 30,068 $ 19,373
- --------------------------------------------------------------------------------
EARNINGS
Income before taxes -
PACCAR Inc and subsidiaries $ 83,198 $ 67,978
Fixed charges 30,068 19,373
- --------------------------------------------------------------------------------
EARNINGS AS DEFINED $113,266 $ 87,351
- --------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 3.77X 4.51X
- --------------------------------------------------------------------------------
<FN>
(1) Exclusive of interest, if any, paid to PACCAR Inc.
</TABLE>
<PAGE>
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
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Net credit losses (recoveries) $ (312) $ (558)
Allowance for losses at end of period 31,300 25,500
Average finance receivables and
equipment on operating leases 1,770,832 1,527,513
Period end finance receivables and equipment
on operating leases 1,806,483 1,546,083
Period end contracts and operating
lease receivables past due over 60 days 5,674 5,659
Period end contracts and
operating lease receivables 1,513,515 1,280,293
Ratios:
Net credit losses (recoveries) to
average finance receivables and
equipment on operating leases (1) (.07%) (.15%)
Allowance for losses to period end
finance receivables and equipment on
operating leases 1.73% 1.65%
Period end contracts and operating lease
receivables past due over 60 days to period
end contracts and operating lease receivables .37% .44%
<FN>
(1) Annualized.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,739
<SECURITIES> 0
<RECEIVABLES> 1,762,885
<ALLOWANCES> 31,300
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 60,367
<DEPRECIATION> 16,769
<TOTAL-ASSETS> 1,792,431
<CURRENT-LIABILITIES> 0
<BONDS> 868,350
<COMMON> 14,500
0
31,000
<OTHER-SE> 212,830
<TOTAL-LIABILITY-AND-EQUITY> 1,792,431
<SALES> 0
<TOTAL-REVENUES> 41,565
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,111
<LOSS-PROVISION> 1,088
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,319
<INCOME-TAX> 4,151
<INCOME-CONTINUING> 6,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,168
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
