<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, 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 October 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 Nine Months Ended
September 30 September 30
1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest and finance charges $ 41,470 $ 33,324 $118,414 $ 93,128
Rentals on operating leases 3,188 3,079 9,819 9,131
Insurance premiums earned 1,123 742 3,089 2,008
- -----------------------------------------------------------------------------------------------------------------------
GROSS INCOME 45,781 37,145 131,322 104,267
- -----------------------------------------------------------------------------------------------------------------------
Interest expense 23,055 16,449 65,119 44,397
Other borrowing expense 378 320 1,137 1,109
Depreciation expense related
to operating leases 2,562 2,496 7,828 7,382
Insurance claims and underwriting expenses 969 603 2,787 1,603
Selling, general and
administrative expenses 5,559 5,502 17,456 16,950
Provision for losses 1,178 187 3,140 1,248
- ----------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 33,701 25,557 97,467 72,689
- ----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 12,080 11,588 33,855 31,578
Federal and state income taxes 4,859 4,721 13,627 12,587
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME 7,221 6,867 20,228 18,991
Retained earnings at beginning of period 214,101 190,754 203,809 179,940
Cash dividends paid - - (2,715) (1,310)
- ----------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF PERIOD $221,322 $197,621 $221,322 $197,621
- ----------------------------------------------------------------------------------------------------------------------
</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>
September 30 December 31
1995 1994*
- --------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 6,739 $ 8,956
Net finance and other receivables 1,961,172 1,733,253
Allowance for losses (34,105) (29,900)
- --------------------------------------------------------------------------------------------------------------------------------
1,927,067 1,703,353
Equipment on operating leases net of allowance
for depreciation of $19,632 (1994--$15,351) 39,377 43,500
Other assets 14,043 14,960
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,987,226 $1,770,769
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Accounts payable and accrued expenses $ 27,345 $ 30,237
Payable for finance receivables acquired 17,696 39,817
Commercial paper 612,948 461,175
Other short-term borrowings 25,000 -
Advance payable to PACCAR Inc - 46,000
Term debt 966,850 870,300
Income taxes 64,051 69,907
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,713,890 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 6,514 4,024
Retained earnings 221,322 203,809
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 273,336 253,333
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,987,226 $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>
Nine Months Ended
September 30
1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 20,228 $ 18,991
Items included in net income not affecting cash:
Provision for losses 3,140 1,248
Decrease in deferred taxes payable (7,818) (7,512)
Depreciation and amortization 10,114 9,209
Decrease in payables, income taxes and other (408) (10,003)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,256 11,933
INVESTING ACTIVITIES:
Finance and other receivables acquired (757,923) (690,562)
Collections on finance and other receivables 585,153 500,757
Net decrease (increase) in wholesale receivables (76,629) 36,270
Acquisition of equipment for operating leases (5,600) (11,441)
Disposal of equipment 428 560
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (254,571) (164,416)
FINANCING ACTIVITIES:
Net increase (decrease) in commercial paper and
other short term borrowings 176,773 (76,255)
Net decrease in bank loans - (49,000)
Decrease in advances payable to PACCAR Inc (46,000) -
Proceeds from term debt 373,000 407,000
Payments of term debt (276,450) (128,000)
Additions to paid-in capital 2,490 2,187
Payment of cash dividend (2,715) (1,310)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 227,098 154,622
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (2,217) 2,139
CASH AT BEGINNING OF PERIOD 8,956 5,554
- --------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 6,739 $ 7,693
- --------------------------------------------------------------------------------------------------------------------------------
</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
nine-month period ended September 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. Cash dividends of $2.7 million
and $1.3 million were paid in the quarters ended March 31, 1995 and June 30,
1994, respectively.
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 rose $8.6 million (23%) and $27.1 million (26%) for the quarter
and nine months ended September 30, 1995, respectively, compared to the same
periods during 1994. Continued high levels of new business volume related to
the strong domestic heavy-duty truck sales by PACCAR Inc resulted in growth in
the Company's average net finance receivables from $1.5 billion to $1.8 billion
for the nine months ended September 30, 1995 compared to the similar 1994
period. The higher average net finance receivables together with an increase
in the contract rates on those receivables contributed most of the improvement
in gross income. Gross income also benefited from an increase in earned
premiums from the Company's physical damage insurance program.
Interest expense increased $6.6 million and $20.7 million for the quarter and
year-to-date periods ended September 30, 1995, respectively, compared to the
corresponding 1994 periods. Expanded debt levels used to fund asset growth and
higher market interest rates caused the interest expense increases.
Insurance-related expenses (primarily claims costs) also rose commensurate with
physical damage program revenues. Ongoing expense control helped selling,
general and administrative expenses to grow only 1% and 3% for the quarter and
year-to-date periods ended September 30, 1995, respectively, compared to the
corresponding 1994 periods.
As compared to 1994, the provision for losses increased $1 million in the third
quarter of 1995 and $1.9 million for the first nine months of 1995. The larger
provisions resulted primarily from continued portfolio growth in 1995. The
allowance for losses as a percentage of net receivables and equipment on
operating leases was 1.71% at September 30, 1995, which was up slightly from
the December 31, 1994 level of 1.68%.
As a result of the foregoing factors, net income for the third quarter
increased to $7.2 million in 1995 compared to $6.9 million in 1994. Net income
for the nine months ended September 30, 1995 increased to $20.2 million from
$19.0 million a year earlier.
Liquidity and Capital Resources
The Company used cash from operations of $25.3 million, cash reserves of $2.2
million and net financing activities of $227.1 million to fund portfolio growth
of $254.6 million during the nine months ended September 30, 1995. The funds
from financing activities continued to be provided primarily by the issuance of
commercial paper and medium-term notes.
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 September 30, 1995, the Company and PACCAR Inc together maintained unused
bank lines of credit of $330 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
Company's 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 September 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: November 3, 1995 BY: /S/ T. R. Morton
---------------------------
T. R. Morton
President
(Authorized Officer)
BY: /S/ M. T. Barkley
---------------------------
M. T. Barkley
Controller
(Chief Accounting 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 nine-month
periods ended September 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
nine-month periods ended September 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 nine-month periods ended September 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 nine-month
periods ended September 30, 1995 and 1994.
27 Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c)
for the nine-month period ended September 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>
Nine Months Ended
September 30
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $65,119 $44,397
Portion of rentals deemed interest 179 170
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED CHARGES $65,298 $44,567
- ----------------------------------------------------------------------------------------------------------------------------
EARNINGS
Income before taxes $33,855 $31,578
Fixed charges 65,298 44,567
- ----------------------------------------------------------------------------------------------------------------------------
EARNINGS AS DEFINED $99,153 $76,145
- ----------------------------------------------------------------------------------------------------------------------------
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>
Nine Months Ended
September 30
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $ 65,119 $44,397
Facility and equipment rental 536 509
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED CHARGES $ 65,655 $44,906
- ----------------------------------------------------------------------------------------------------------------------------
EARNINGS
Income before income taxes $ 33,855 $31,578
Depreciation 8,002 7,522
- ----------------------------------------------------------------------------------------------------------------------------
41,857 39,100
Fixed charges 65,655 44,906
- ----------------------------------------------------------------------------------------------------------------------------
EARNINGS AS DEFINED $107,512 $84,006
- ----------------------------------------------------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.64X 1.87X
- ----------------------------------------------------------------------------------------------------------------------------
</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>
Nine Months Ended
September 30
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries (1) $ 90,393 $ 62,001
Portion of rentals deemed interest 4,295 4,121
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED CHARGES $ 94,688 $ 66,122
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS
Income before taxes -
PACCAR Inc and subsidiaries $295,655 $230,205
Fixed charges 94,688 66,122
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS AS DEFINED $390,343 $296,327
- ---------------------------------------------------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 4.12X 4.48X
- ---------------------------------------------------------------------------------------------------------------------------
</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>
Nine Months Ended
September 30
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net credit losses (recoveries) $ (1,065) $ (2,012)
Allowance for losses at end of period 34,105 27,260
Average finance receivables and
equipment on operating leases 1,838,338 1,571,868
Period end finance receivables and equipment
on operating leases 1,989,987 1,661,010
Period end gross contracts and operating
lease receivables past due over 60 days 6,475 4,451
Period end gross contracts and
operating lease receivables 1,628,042 1,420,219
Ratios:
Net credit losses (recoveries) to
average finance receivables and
equipment on operating leases (1) (.08%) (.17%)
Allowance for losses to period end
finance receivables and equipment on
operating leases 1.71% 1.64%
Period end gross contracts and operating lease
receivables past due over 60 days to period
end gross contracts and operating lease receivables .40% .31%
</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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,739
<SECURITIES> 0
<RECEIVABLES> 1,961,172
<ALLOWANCES> 34,105
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 59,009
<DEPRECIATION> 19,632
<TOTAL-ASSETS> 1,987,226
<CURRENT-LIABILITIES> 0
<BONDS> 966,850
<COMMON> 0
31,000
14,500
<OTHER-SE> 227,836
<TOTAL-LIABILITY-AND-EQUITY> 1,987,226
<SALES> 0
<TOTAL-REVENUES> 131,322
<CGS> 0
<TOTAL-COSTS> 76,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,140
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33,855
<INCOME-TAX> 13,627
<INCOME-CONTINUING> 20,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,228
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
