<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, 1996
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,
1996.
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
1996 1995
- - -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Interest and other income $ 43,783 $ 37,281
Rentals on operating leases 3,080 3,350
- - -------------------------------------------------------------------------------
TOTAL FINANCE INCOME 46,863 40,631
Interest expense 24,675 20,299
Other borrowing expense 475 401
Depreciation expense related to operating leases 2,474 2,626
- - -------------------------------------------------------------------------------
TOTAL FINANCE EXPENSES 27,624 23,326
FINANCE MARGIN 19,239 17,305
Insurance premiums earned 1,332 934
Insurance claims and underwriting expenses 950 785
- - -------------------------------------------------------------------------------
INSURANCE MARGIN 382 149
Selling, general and administrative expenses 6,094 6,047
Provision for losses on receivables 375 1,088
- - -------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 13,152 10,319
- - -------------------------------------------------------------------------------
Federal and state income taxes 5,117 4,151
- - -------------------------------------------------------------------------------
NET INCOME 8,035 6,168
- - -------------------------------------------------------------------------------
Retained earnings at beginning of period 229,015 203,809
Cash dividends paid (2,933) (2,715)
- - -------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF PERIOD $ 234,117 $ 207,262
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</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>
PACCAR Financial Corp.
BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31 December 31
1996 1995*
- - -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 5,954 $ 5,967
Net finance and other receivables 2,055,983 2,051,135
Allowance for losses (35,750) (35,790)
- - -------------------------------------------------------------------------------
2,020,233 2,015,345
- - -------------------------------------------------------------------------------
Equipment on operating leases, net of allowance
for depreciation of $20,741 (1995--$20,889) 36,852 40,905
Other assets 13,468 12,188
- - -------------------------------------------------------------------------------
TOTAL ASSETS $2,076,507 $2,074,405
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
LIABILITIES
Accounts payable and accrued expenses $ 25,624 $ 36,461
Payable for finance receivables acquired 9,674 34,504
Commercial paper and other short term borrowings 670,696 657,856
Medium-term notes 1,014,000 999,500
Income taxes-current & deferred 68,699 64,613
- - -------------------------------------------------------------------------------
TOTAL LIABILITIES 1,788,693 1,792,934
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- - -------------------------------------------------------------------------------
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 8,197 6,956
Retained earnings 234,117 229,015
- - -------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 287,814 281,471
- - -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 2,076,507 $ 2,074,405
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
*The December 31, 1995 Balance Sheet has been derived from audited financial
statements.
See notes to financial statements.
-3-
<PAGE>
PACCAR Financial Corp.
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1996 1995
- - -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 8,035 $ 6,168
Items included in net income not affecting cash:
Provision for losses on receivables 375 1,088
Decrease in deferred taxes payable (3,653) (2,649)
Depreciation and amortization 3,531 3,462
Increase (decrease) in payables, income taxes and other (6,164) 4,891
- - -------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,124 12,960
INVESTING ACTIVITIES:
Finance and other receivables acquired (281,918) (211,877)
Collections on finance and other receivables 227,488 190,651
Net decrease (increase) in wholesale receivables 22,259 (32,626)
Acquisition of equipment for operating leases - (3,411)
Disposal of equipment 4,388 3,354
- - -------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (27,783) (53,909)
FINANCING ACTIVITIES:
Net increase in commercial paper and
other short term borrowings 12,839 86,854
Decrease in advances payable to PACCAR Inc - (46,000)
Proceeds from medium-term notes 125,000 105,000
Payments of medium-term notes (110,500) (106,950)
Additions to paid in capital 1,240 1,543
Payment of cash dividend (2,933) (2,715)
- - -------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 25,646 37,732
- - -------------------------------------------------------------------------------
NET DECREASE IN CASH (13) (3,217)
CASH AT BEGINNING OF PERIOD 5,967 8,956
- - -------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 5,954 $ 5,739
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
-4-
<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, 1995.
Reclassifications: Certain prior year amounts have been reclassified to conform
to the 1996 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, 1996 was 1.63 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 $2.9 million and
$2.7 million were paid in the quarters ended March 31, 1996 and 1995,
respectively.
Occasionally, the Company borrows funds from PACCAR Inc and makes market-rate,
short term loans to PACCAR Inc. At March 31, 1996 and 1995, there were no
outstanding loans for the Company from or to PACCAR Inc.
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>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Pre-tax income for the first quarter of 1996 increased to $13.2 million from
$10.3 million for the first quarter of 1995. This growth resulted primarily
from a $1.9 million increase in the finance margin attributable to the growth in
receivables, partially offset by a decrease in the average margin rate earned on
those receivables. Average receivables in the first quarter of 1996 increased
17% to $2.1 billion compared to $1.8 billion for the same period a year ago.
The growth resulted from new business volume related to strong domestic heavy-
duty truck sales by PACCAR Inc during 1995. The average margin rate on those
receivables decreased due to rate competition in the truck lending market.
Ongoing expense controls helped keep the increase in selling, general and
administrative expenses under 1%. The provision for losses decreased $0.7
million to $0.4 million for the first quarter of 1996 compared to $1.1 million
for the first quarter of 1995. The lower 1996 provision resulted from continued
low loan losses. At March 31, 1996 the allowance for losses was 1.72% of
earning assets compared to 1.74% at March 31, 1995.
As a result of the foregoing factors, net income for the first quarter of 1996
improved to $8.0 million from $6.2 million for the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash from operations of $2.1 million, cash reserves of $0.1
million and net financing activities of $25.6 million to fund portfolio growth
of $27.8 million during the three months ended March 31, 1996. The funds from
financing activities continued to be provided primarily by the issuance of
commercial paper and medium-term notes.
To minimize 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, 1996, the Company and PACCAR Inc together maintained unused bank
lines of credit of $375 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 1995 Annual Report on Form 10-K continues to be relevant.
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, 1996.
-6-
<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 3, 1996 BY: /S/ T. R. Morton
-----------------------------------
T. R. Morton
President
(Authorized Officer)
BY: /S/ M. T. Barkley
-----------------------------------
M. T. Barkley
Controller
(Chief Accounting Officer)
-7-
<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 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).
4.5 Forms of Medium-Term Note, Series H (incorporated by reference to
Exhibits 4.3A and 4.3B to the Company's Registration Statement on Form S-
3 dated March 11, 1996, Registration Number 333-01623).
Form of Letter of Representation among the Company, Citibank, N.A. and
the Depository Trust Company, Series H (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-3 dated
March 11, 1996, Registration Number 333-01623).
-8-
<PAGE>
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, 1996 and 1995.
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, 1996 and 1995.
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, 1996 and 1995.
27 Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c) for
the three-month period ended March 31, 1996.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
-9-
<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
1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $ 24,675 $ 20,299
Portion of rentals deemed interest 59 63
- - ------------------------------------------------------------------------------
TOTAL FIXED CHARGES $ 24,734 $ 20,362
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
EARNINGS
Income before taxes $ 13,152 $ 10,319
Fixed charges 24,734 20,362
- - ------------------------------------------------------------------------------
EARNINGS AS DEFINED $ 37,886 $ 30,681
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.53X 1.51X
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
</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.
-10-
<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
1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense $ 24,675 $ 20,299
Facility and equipment rental 177 188
- - ------------------------------------------------------------------------------
TOTAL FIXED CHARGES $ 24,852 $ 20,487
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
EARNINGS
Income before income taxes $ 13,152 $ 10,319
Depreciation 2,522 2,692
- - ------------------------------------------------------------------------------
15,674 13,011
Fixed charges 24,852 20,487
- - ------------------------------------------------------------------------------
EARNINGS AS DEFINED $ 40,526 $ 33,498
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.63X 1.64X
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
</TABLE>
-11-
<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
1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C>
FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries (1) $ 32,809 $ 28,636
Portion of rentals deemed interest 1,471 1,432
- - ------------------------------------------------------------------------------
TOTAL FIXED CHARGES $ 34,280 $ 30,068
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
EARNINGS
Income before taxes -
PACCAR Inc and subsidiaries $ 55,891 $ 83,198
Fixed charges 34,280 30,068
- - ------------------------------------------------------------------------------
EARNINGS AS DEFINED $ 90,171 $ 113,266
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 2.63X 3.77X
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
</TABLE>
(1) Exclusive of interest, if any, paid to PACCAR Inc.
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED MARCH
31, 1996 AND 1995 AND FROM THE BALANCE SHEETS AT MARCH 31, 1996 AND DECEMBER
31, 1995 OF PACCAR FINANCIAL CORP. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,954
<SECURITIES> 0
<RECEIVABLES> 2,055,983
<ALLOWANCES> 35,750
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 57,593
<DEPRECIATION> 20,741
<TOTAL-ASSETS> 2,076,507
<CURRENT-LIABILITIES> 0
<BONDS> 1,014,000
0
31,000
<COMMON> 14,500
<OTHER-SE> 242,314
<TOTAL-LIABILITY-AND-EQUITY> 2,076,507
<SALES> 0
<TOTAL-REVENUES> 48,195
<CGS> 0
<TOTAL-COSTS> 28,574
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 375
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,152
<INCOME-TAX> 5,117
<INCOME-CONTINUING> 8,035
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,035
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
