<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 June 30, 1997
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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (425) 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,
1997.
THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF PACCAR INC AND MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-Q AND IS,
THEREFORE, FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
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
1997 1996 1997 1996
- - -------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest and other income $ 44,637 $ 43,856 $ 89,039 $ 87,639
Rentals on operating leases 2,314 2,927 4,834 6,007
- - -------------------------------------------------------------------------------------------------------------
TOTAL FINANCE INCOME 46,951 46,783 93,873 93,646
Interest expense 25,246 24,559 49,854 49,234
Other borrowing expense 479 431 926 906
Depreciation expense related
to operating leases 1,762 2,374 3,768 4,848
- - -------------------------------------------------------------------------------------------------------------
TOTAL FINANCE EXPENSES 27,487 27,364 54,548 54,988
FINANCE MARGIN 19,464 19,419 39,325 38,658
Insurance premiums earned 1,371 1,373 2,766 2,705
Insurance claims and underwriting expenses 987 980 2,021 1,930
- - -------------------------------------------------------------------------------------------------------------
INSURANCE MARGIN 384 393 745 775
Selling general and
administrative expenses 6,087 5,936 12,081 12,030
Provision for losses on receivables 970 905 2,454 1,280
- - -------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 12,791 12,971 25,535 26,123
Federal and state income taxes 4,986 5,052 9,948 10,169
- - -------------------------------------------------------------------------------------------------------------
NET INCOME 7,805 7,919 15,587 15,954
Retained earnings at beginning of period 263,069 234,117 257,941 229,015
Cash dividends paid - - 2,654 2,933
- - -------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF PERIOD $ 270,874 $ 242,036 $ 270,874 $ 242,036
- - -------------------------------------------------------------------------------------------------------------
</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)
June 30 December 31
1997 1996*
- - -------------------------------------------------------------------------------
(Unaudited)
ASSETS
Cash $ 8,811 $ 13,154
Net finance and other receivables 2,065,856 2,095,961
Allowance for losses (35,650) (36,000)
- - -------------------------------------------------------------------------------
2,030,206 2,059,961
Equipment on operating leases, net of allowance
for depreciation of $18,226 (1996--$18,628) 28,662 35,016
Other assets 15,414 12,481
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TOTAL ASSETS $ 2,083,093 $ 2,120,612
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LIABILITIES
Accounts payable and accrued expenses $ 36,900 $ 56,092
Payable for finance receivables acquired 7,649 27,734
Commercial paper and other short-term borrowings 602,417 699,616
Medium-term notes 1,048,000 964,000
Income taxes-current and deferred 59,987 60,117
- - -------------------------------------------------------------------------------
TOTAL LIABILITIES 1,754,953 1,807,559
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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 11,766 9,612
Retained earnings 270,874 257,941
- - -------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 328,140 313,053
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 2,083,093 $ 2,120,612
- - -------------------------------------------------------------------------------
* The December 31, 1996 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)
Six Months Ended
June 30
1997 1996
- - -------------------------------------------------------------------------------
(Unaudited)
OPERATING ACTIVITIES:
Net income $ 15,587 $ 15,954
Items included in net income not affecting cash:
Provision for losses on receivables 2,454 1,280
Decrease in deferred taxes payable (3,139) (6,624)
Depreciation and amortization 6,144 7,031
Decrease in payables, income taxes and other liabilities (3,943) (1,411)
- - -------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,103 16,230
INVESTING ACTIVITIES:
Finance and other receivables acquired (547,054) (526,811)
Collections on finance and other receivables 503,403 440,186
Net decrease in wholesale receivables 32,101 58,035
Acquisition of equipment for operating leases (470) (2,322)
Proceeds from disposal of equipment 4,273 7,782
- - -------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (7,747) (23,130)
FINANCING ACTIVITIES:
Net (decrease) increase in commercial paper and
other short-term borrowings (97,199) 34,303
Proceeds from medium-term notes 305,000 217,000
Payments of medium-term notes (221,000) (243,000)
Additions to paid-in capital 2,155 1,719
Payment of cash dividend (2,655) (2,933)
- - -------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (13,699) 7,089
NET (DECREASE) INCREASE IN CASH (4,343) 189
CASH AT BEGINNING OF PERIOD 13,154 5,967
- - -------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 8,811 $ 6,156
- - -------------------------------------------------------------------------------
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
PACCAR Financial Corp.'s (the "Company") Annual Report on Form 10-K for the
year ended December 31, 1996.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1997 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, 1997 was 1.59 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. 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. The Company pays a dividend to PACCAR Inc for the paid-in
capital invested in the prior year. Cash dividends of $2.7 million and $2.9
million were paid to PACCAR Inc during the first half of 1997 and 1996,
respectively.
Occasionally, the Company borrows funds from PACCAR Inc and makes
market-rate, short-term loans to PACCAR Inc. At June 30, 1997 and 1996,
there were no outstanding loans between the Company and 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
The finance margin for the six months ended June 30, 1997 increased 1.7% to
$39.3 million compared to $38.7 million for the same period in 1996. The
increase in margin was due primarily to the rise in average receivables.
The provision for losses through June 30 increased from $1.3 million in 1996
to $2.5 million in 1997 primarily as a result of higher credit losses.
Accounts past due over 30 days for the Company increased to 2.6% at June 30,
1997 from 1.5% and 1.7% at June 30, 1996 and December 31, 1996, respectively.
Both the higher past due ratios and higher credit losses in 1997 reflected a
more difficult operating environment, particularly in the used truck market.
While credit losses have increased in 1997, losses as a ratio to receivables
outstanding remain low in comparison with historic trends. At June 30, 1997,
the allowance for losses was 1.71% of earning assets compared to 1.70% at
December 31, 1996 and 1.73% at June 30, 1996. The level of the allowance
reflects the risks inherent in the financing of commercial highway
transportation equipment. Second quarter and year-to-date 1997 selling,
general and administrative expenses increased 2.5% and .4%, respectively,
from comparable 1996 periods.
As a result of the foregoing factors, net income decreased 1.4% to $7.8
million in the second quarter of 1997 and decreased 2.3% to $15.6 million for
the six months ended June 30, 1997, compared to $7.9 million and $16.0
million in the same periods of 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1997, the Company funded its portfolio growth
primarily through the issuance of medium-term notes, which increased $84.0
million from December 1996. In 1996, the Company registered $1 billion of
senior debt securities under the Securities Act of 1933 for offering to the
public. As of June 30, 1997, $375 million of such securities was available
for issuance. Upon issuance of the remaining securities, the Company expects
to register additional senior debt securities for offering to the public.
In order 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 and volatility of interest rates.
As of June 30, 1997, the Company and PACCAR Inc together maintained unused
bank lines of credit of $475 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 1996 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 June 30, 1997.
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)
BY: /s/ T. R. Morton
---------------------------------
Date: August 8, 1997 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).
4.3 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).
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, 1997 and 1996.
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, 1997 and 1996.
8
<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 six-month periods ended June 30, 1997 and 1996.
27 Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c)
for the six-month period ended June 30, 1997.
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)
Six Months Ended
June 30
1997 1996
- - ---------------------------------------------------------------------
FIXED CHARGES
Interest expense $ 49,854 $ 49,234
Portion of rentals deemed interest 119 122
- - ---------------------------------------------------------------------
TOTAL FIXED CHARGES $ 49,973 $ 49,356
- - ---------------------------------------------------------------------
EARNINGS
Income before taxes $ 25,535 $ 26,123
Fixed charges 49,973 49,356
- - ---------------------------------------------------------------------
EARNINGS AS DEFINED $ 75,508 $ 75,479
- - ---------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.51X 1.53X
- - ---------------------------------------------------------------------
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)
Six Months Ended
June 30
1997 1996
- - ---------------------------------------------------------------------
FIXED CHARGES
Interest expense $ 49,854 $ 49,234
Facility and equipment rental 359 367
- - ---------------------------------------------------------------------
TOTAL FIXED CHARGES $ 50,213 $ 49,601
- - ---------------------------------------------------------------------
EARNINGS
Income before taxes $ 25,535 $ 26,123
Depreciation 3,906 4,943
- - ---------------------------------------------------------------------
29,441 31,066
Fixed charges 50,213 49,601
- - ---------------------------------------------------------------------
EARNINGS AS DEFINED $ 79,654 $ 80,667
- - ---------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.59X 1.63X
- - ---------------------------------------------------------------------
11
<PAGE>
EXHIBIT 12.3
PACCAR Inc
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PURSUANT TO SEC REPORTING REQUIREMENTS
(Thousands of Dollars)
Six Months Ended
June 30
1997 1996
- - ---------------------------------------------------------------------
FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries (1) $ 71,500 $ 65,121
Portion of rentals deemed interest 3,053 2,943
- - ---------------------------------------------------------------------
TOTAL FIXED CHARGES $ 74,553 $ 68,064
- - ---------------------------------------------------------------------
EARNINGS
Income before taxes-
PACCAR Inc and subsidiaries $ 199,485 $ 138,392
Fixed charges 74,553 68,064
- - ---------------------------------------------------------------------
EARNINGS AS DEFINED $ 274,038 $ 206,456
- - ---------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 3.68X 3.03X
- - ---------------------------------------------------------------------
(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 SIX MONTHS ENDED JUNE 30,
1997 AND 1996 AND FROM THE BALANCE SHEETS AT JUNE 30, 1997 AND DECEMBER 31, 1996
OF PACCAR FINANCIAL CORP. 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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,811
<SECURITIES> 0
<RECEIVABLES> 2,065,856
<ALLOWANCES> 35,650
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 46,888
<DEPRECIATION> 18,266
<TOTAL-ASSETS> 2,083,093
<CURRENT-LIABILITIES> 0
<BONDS> 1,048,000
0
31,000
<COMMON> 14,500
<OTHER-SE> 282,640
<TOTAL-LIABILITY-AND-EQUITY> 2,083,093
<SALES> 0
<TOTAL-REVENUES> 96,639
<CGS> 0
<TOTAL-COSTS> 56,569
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,454
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 25,535
<INCOME-TAX> 9,948
<INCOME-CONTINUING> 15,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,587
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
