**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

| **ý****Quarterly Report  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**                                                                                                                                                                                                                                                                                        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                          |
| **For the quarterly period ended June 30, 2003**                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                          |
| **or**                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                          |
| **o****Transition Report  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                          |
| **For 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  incorporation or organization) |   | (I.R.S. Employer Identification No.) |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                          | **777 – 106th Ave. N.E., Bellevue, WA** |   | **98004** |   |
|                                                                                                                                                                                                                                                                                                                                                                                          | (Address of principal executive offices) |   | (Zip code) |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                          | **(425) 468-7100** |   |
|                                                                                                                                                                                                                                                                                                                                                                                          | (Registrant’s telephone number, including  area code) |   |
|                                                                                                                                                                                                                                                                                                                                                                                               |  |  |  |  |

 

Indicate by check mark whetherthe registrant: (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor 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  ý  No   o

 

Indicate by check mark whether the registrantis an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  ý

 

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of the latest practicable date:

 

Common Stock, $100 parvalue—145,000 shares as of July 31, 2003

 

THE REGISTRANT IS A WHOLLY-OWNEDINDIRECT SUBSIDIARY OF PACCAR INC AND MEETS THE CONDITIONS SET FORTH IN GENERALINSTRUCTIONS (H)(1)(A) AND (B) OF FORM 10-Q AND IS, THEREFORE, FILING THIS FORMWITH THE REDUCED DISCLOSURE FORMAT.

 

 

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

**INDEX**

 
| PART I.  FINANCIAL INFORMATION: |
|--------------------------------------|
|                                 |   |   |
|                                 | ITEM 1. | FINANCIAL STATEMENTS: |
|                                 |   |   |
|                                 | Statements of Income –  Three and Six Months Ended June 30, 2003 and 2002 (unaudited) |
|                                 |   |   |
|                                 | Balance Sheets –  June 30, 2003 (unaudited), and December 31, 2002 |
|                                 |   |   |
|                                 | Statements of Cash Flows –  Six Months Ended June 30, 2003 and 2002 (unaudited) |
|                                 |   |   |
|                                 | Notes to Financial  Statements (unaudited) |
|                                 |   |   |
|                                 | ITEM 2. | MANAGEMENT’S DISCUSSION AND  ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
|                                 |   |   |
|                                 | ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT  MARKET RISK |
|                                 |   |   |
|                                 | ITEM 4. | CONTROLS AND PROCEDURES |
|                                 |   |   |
| PART II. OTHER INFORMATION:          |
|                                 |   |   |
|                                 | ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K |
|                                 |   |   |
| SIGNATURE                            |
|                                 |
| INDEX TO EXHIBITS                    |
|                                      |  |  |  |

 

2

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**FORM 10-Q**

**PACCARFINANCIAL CORP.**

 

**PART I****–FINANCIALINFORMATION**

 

**ITEM 1****.  FINANCIAL STATEMENTS**

 

##### **Statements of Income**and Retained Earnings (Unaudited)

**(Millions of Dollars)**

 
|                                                        |   | **Three  Months Ended  June 30** | ** ** | **Six Months  Ended  June 30** | ** ** |
|-------------------------------------------------------------|--------|---------------------------------------|------------|-------------------------------------|------------|
|                                                        |   | **2003**                              |       | **2002**                            | ** ** | **2003** | ** ** | **2002** | ** ** |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| Interest and fee income                                     |   | **$**                                 | **51.2**   |                                | $          | 57.6 | ** ** | **$** | **103.5** |   | $ | 117.1 |   |
| Operating lease and rental income                           |   | **14.4**                              |       | 10.0                                | ** ** | **27.2** |   | 18.3 |   |
| Insurance premiums and other revenue                        |   | **5.4**                               |       | 4.8                                 | ** ** | **10.9** |   | 9.4 |   |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| **TOTAL INTEREST AND OTHER REVENUE**                        |   | **71.0**                              |       | 72.4                                | ** ** | **141.6** |   | 144.8 |   |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| Interest and other borrowing expenses                       |   | **22.5**                              |       | 30.4                                | ** ** | **46.3** |   | 63.3 |   |
| Depreciation and other operating lease and  rental expenses |   | **11.1**                              |       | 7.5                                 | ** ** | **21.0** |   | 14.0 |   |
| Insurance claims and underwriting expenses                  |   | **3.0**                               |       | 3.0                                 | ** ** | **6.2** |   | 6.0 |   |
| Selling general and administrative expenses                 |   | **10.2**                              |       | 10.5                                | ** ** | **20.8** |   | 21.1 |   |
| Provision for losses on receivables                         |   | **5.9**                               |       | 12.2                                | ** ** | **12.0** |   | 28.0 |   |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| **TOTAL EXPENSES**                                          |   | **52.7**                              |       | 63.6                                | ** ** | **106.3** |   | 132.4 |   |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| **INCOME BEFORE INCOME TAXES**                              |   | **18.3**                              |       | 8.8                                 | ** ** | **35.3** |   | 12.4 |   |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| Income  taxes                                               |   | **7.1**                               |       | 3.4                                 | ** ** | **13.7** |   | 4.9 |   |
|                                                        |   |                                  | ** ** |                                | ** ** |   | ** ** |   | ** ** |
| **NET INCOME**                                              |   | **11.2**                              |       | 5.4                                 | ** ** | **21.6** |   | 7.5 |   |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| **RETAINED EARNINGS AT BEGINNING OF PERIOD**                |   | **436.4**                             |       | 411.8                               | ** ** | **426.0** |   | 409.7 |   |
| Cash dividends paid                                         |   | **—**                            |       | 11.0                                | ** ** | **—** |   | 11.0 |   |
|                                                        |   |                                  |       |                                |       |   |   |   |   |
| **RETAINED EARNINGS  AT END OF PERIOD**                     |   | **$**                                 | **447.6**  |                                | $          | 406.2 | ** ** | **$** | **447.6** |   | $ | 406.2 |   |

 

Earnings per share and dividends per shareare not reported because the Company is a wholly-owned subsidiary of PACCARFinancial Services Corporation.

 

See Notes to Financial Statements.

 

3

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**FORM 10-Q**

**PACCARFINANCIAL CORP.**

 

**Balance Sheets**

**(Millions of Dollars)**
|                                                                                                                                           |   | **June 30  2003** | ** **  | **December 31  2002*** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-------------|-----------------------------|------------|
|                                                                                                                                           |   | **(Unaudited)**        |        |                        |       |
| **ASSETS**                                                                                                                                     |   |                   |        |                        |       |
|                                                                                                                                           |   |                   |        |                        |       |
| Cash                                                                                                                                           |   | **$**                  | **18.2**    |                        | $          | 9.9 |   |
| Finance and  other receivables, net of allowance for losses of $67.1 ($66.9 in 2002)                                                           |   | **3,011.0**            |        | 3,156.2                     |       |
| Loans to  PACCAR Inc and affiliates                                                                                                            |   | **313.5**              |        | 192.0                       |       |
| Equipment on  operating leases, net of depreciation of $34.6 ($26.8 in 2002)                                                                   |   | **152.2**              |        | 122.3                       |       |
| Equipment  held for sale                                                                                                                       |   | **8.7**                |        | 10.6                        |       |
| Other assets                                                                                                                                   |   | **21.4**               |        | 20.5                        |       |
|                                                                                                                                           |   |                   |        |                        |       |
| **TOTAL ASSETS**                                                                                                                               |   | **$**                  | **3,525.0** |                        | $          | 3,511.5 |   |
|                                                                                                                                           |   |                   |        |                        |       |
| **LIABILITIES**                                                                                                                                |   |                   |        |                        |       |
|                                                                                                                                           |   |                   |        |                        |       |
| Accounts  payable and accrued expenses                                                                                                         |   | **$**                  | **60.8**    |                        | $          | 63.7 |   |
| Payable to  dealers                                                                                                                            |   | **49.2**               |        | 50.5                        |       |
| Derivative  liability                                                                                                                          |   | **43.4**               |        | 52.2                        |       |
| Commercial  paper                                                                                                                              |   | **923.3**              |        | 1,120.6                     |       |
| Medium-term  notes and other borrowings                                                                                                        |   | **1,655.0**            |        | 1,484.0                     |       |
| Income taxes  – current and deferred                                                                                                      |   | **201.4**              |        | 184.6                       |       |
| **TOTAL LIABILITIES**                                                                                                                          |   | **2,933.1**            |        | 2,955.6                     |       |
|                                                                                                                                           |   |                   |        |                        |       |
| **STOCKHOLDER’S EQUITY**                                                                                                                  |   |                   | ** **  |                        | ** ** |
|                                                                                                                                           |   |                   |        |                        |       |
| Preferred  stock, par value $100 per share,  6% noncumulative and nonvoting, 450,000 shares authorized,  310,000 shares issued and outstanding |   | **31.0**               |        | 31.0                        |       |
| Common  stock, par value $100 per share,  200,000 shares authorized, 145,000 shares issued and outstanding                                     |   | **14.5**               |        | 14.5                        |       |
| Paid-in  capital                                                                                                                               |   | **124.7**              |        | 116.0                       |       |
| Retained  earnings                                                                                                                             |   | **447.6**              |        | 426.0                       |       |
| Accumulated  other comprehensive loss                                                                                                          |   | **(25.9**              | **)**       | (31.6                       | )          |
| **TOTAL STOCKHOLDER’S EQUITY**                                                                                                            |   | **591.9**              |        | 555.9                       |       |
| **TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY**                                                                                            |   | **$**                  | **3,525.0** |                        | $          | 3,511.5 |   |

 

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*The December 31, 2002balance sheet has been derived from the audited financial statements.

 

See Notes to Financial Statements.

 

4

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

##### **Statements of Cash Flows**(Unaudited)

**(Millions of Dollars)**

 
| **Six Months Ended June 30**                                            |   | **2003**   |       | **2002**   |       |
|------------------------------------------------------------------------------|--------|------------|------------|------------|------------|
|                                                                         |   |       | ** ** |       | ** ** |
| **OPERATING ACTIVITIES**                                                     |   |       | ** ** |       |       |
|                                                                         |   |       | ** ** |       |       |
| Net income                                                                   |   | **$**      | **21.6**   | ** ** | $          | 7.5 |   |
| Items  included in net income not affecting cash:                            |   |       | ** ** |       |       |
| Provision  for losses on receivables                                         |   | **12.0**   | ** ** | 28.0       |       |
| Provision  for deferred taxes                                                |   | **(12.0**  | **)**      | (1.1       | )          |
| Depreciation  and amortization                                               |   | **15.3**   | ** ** | 9.2        |       |
| Increase in  payables and other                                              |   | **19.5**   | ** ** | 24.7       |       |
|                                                                         |   |       | ** ** |       |       |
| **NET CASH PROVIDED BY OPERATING ACTIVITIES**                                |   | **56.4**   | ** ** | 68.3       |       |
|                                                                         |   |       | ** ** |       |       |
| **INVESTING ACTIVITIES**                                                     |   |       | ** ** |       |       |
|                                                                         |   |       | ** ** |       |       |
| Finance and  other receivables originated                                    |   | **(523.1** | **)**      | (518.9     | )          |
| Collections  on finance and other receivables                                |   | **670.6**  | ** ** | 690.0      |       |
| Net increase  in wholesale receivables                                       |   | **(11.3**  | **)**      | (45.7      | )          |
| Net  (increase) decrease in loans to PACCAR Inc and affiliates               |   | **(121.5** | **)**      | 43.8       |       |
| Acquisition  of equipment                                                    |   | **(45.1**  | **)**      | (30.4      | )          |
| Proceeds  from disposal of equipment                                         |   | **2.1**    | ** ** | 4.1        |       |
|                                                                         |   |       | ** ** |       |       |
| **NET CASH (USED IN) PROVIDED BY INVESTING  ACTIVITIES**                     |   | **(28.3**  | **)**      | 142.9      |       |
|                                                                         |   |       | ** ** |       |       |
| **FINANCING ACTIVITIES**                                                     |   |       | ** ** |       | ** ** |
|                                                                         |   |       | ** ** |       | ** ** |
| Net  (decrease) increase in commercial paper and other short-term borrowings |   | **(197.3** | **)**      | 38.8       |       |
| Proceeds  from medium-term notes and other borrowings                        |   | **430.0**  | ** ** | 495.0      |       |
| Payments of  medium-term notes and other borrowings                          |   | **(259.0** | **)**      | (750.7     | )          |
| Dividends  paid                                                              |   | **—** |       | (11.0      | )          |
| Payment of  advances from PACCAR Inc                                         |   | **(2.2**   | **)**      | **—** | ** ** |
| Capital  contributions                                                       |   | **8.7**    | ** ** | 9.1        |       |
|                                                                         |   |       | ** ** |       |       |
| **NET CASH USED IN FINANCING ACTIVITIES**                                    |   | **(19.8**  | **)**      | (218.8     | )          |
|                                                                         |   |       | ** ** |       |       |
| **NET INCREASE (DECREASE) IN CASH**                                          |   | **8.3**    | ** ** | (7.6       | )          |
|                                                                         |   |       | ** ** |       |       |
| **CASH AT BEGINNING OF PERIOD**                                              |   | **9.9**    | ** ** | 18.5       |       |
|                                                                         |   |       | ** ** |       |       |
| **CASH AT END OF PERIOD**                                                    |   | **$**      | **18.2**   | ** ** | $          | 10.9 |   |

 

See Notes to Financial Statements.

 

5

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| **Notes to Financial Statements** |   | **(Millions of Dollars)** |
|-----------------------------------|--------|---------------------------|

 

**NOTE A–Basis of Presentation**

 

The accompanying unaudited financialstatements have been prepared in accordance with the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements. However, in the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary fora fair presentation have been included. For further information, refer to thefinancial statements and footnotes included in PACCAR Financial Corp.’s (the“Company”) Annual Report on Form 10-K for the year ended December 31,2002.

 

*Reclassifications*: Certain prior year amountshave been reclassified to conform to the 2003 presentation.

 

**NOTEB–Transactions with PACCAR Inc and Affiliates**

 

The Company and PACCAR Inc (“PACCAR”) areparties to a Support Agreement that obligates PACCAR to provide, when required,financial assistance to the Company to ensure that the Company maintains aratio of net earnings available for fixed charges to fixed charges (as defined)of at least 1.25 to 1 for any fiscal year. The Support Agreement also requiresPACCAR to own, directly or indirectly, all outstanding voting stock of the Company.The required ratio for the six months ended June 30, 2003 and full year2002 was met without assistance. The Company determines the amount of PACCARassistance, if any, at the end of each fiscal year.

 

PACCAR Financial Services Corporation(“PFSC”) charges the Company for certain administrative services it providesand certain services the Company receives indirectly from PACCAR. The costs arecharged to the Company based upon the Company’s specific use of the services atPFSC’s or PACCAR’s cost. Management considers these charges reasonable and notsignificantly different from the costs that would be incurred if the Companywere on a stand-alone basis. PFSC recognizes certain of these administrativeservices as an additional investment in the Company. The Company records theinvestment as paid-in capital. There were no cash dividends declared or paidduring the first six months of 2003. A cash dividend in the amount of $11.0 wasdeclared and paid during the second quarter 2002.

 

Periodically, the Company borrows funds fromPACCAR and makes loans to PACCAR. Loans outstanding to PACCAR were $48.1 and$38.7 at June 30, 2003 and December 31, 2002, respectively. Loansoutstanding from PACCAR were $.7 and $2.9 at June 30, 2003 and December 31,2002, respectively.

 

PACCAR has issued letters of credit as ofJune 30, 2003 in the amount of $7.9 on behalf of the Company to guaranteefunds for payment to insured franchisees and their customers for any futureinsurance losses.

 

The Company periodically loans funds to certainforeign finance and leasing affiliates of PACCAR. These various affiliates haveSupport Agreements with PACCAR, similar to the Company’s Support Agreement. Theforeign affiliates operate in the United Kingdom, the Netherlands, Mexico,Canada and Australia, and any resulting currency exposure is fully hedged. Theforeign affiliates provide financing and leasing of trucks and relatedequipment manufactured primarily by PACCAR and sold through PACCAR’sindependent dealer networks in Europe, Mexico, Canada and Australia. TheCompany will not make loans to the foreign affiliates in excess of theequivalent of $300.0 United States dollars, unless the amount in excess of suchlimits is guaranteed by PACCAR. The Company periodically reviews the fundingalternatives for these affiliates, and these limits may be revised in thefuture. There was a total of $265.4 and $153.3 in loans outstanding to

 

6

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foreign affiliates operating in the UnitedKingdom, the Netherlands and Mexico at June 30, 2003 and December 31,2002, respectively.

 

**NOTEC–Preferred Stock**

 

The Company’s Articles of Incorporationprovide that the 6% noncumulative, nonvoting preferred stock (100% owned byPFSC) is redeemable only at the option of the Company’s Board of Directors.

 

**NOTED–Other Comprehensive Income**

 

The components of other comprehensive income, net of related tax, were asfollows:

 
|                                                |   | **Three  Months Ended  June 30** | ** ** | **Six Months  Ended  June 30** | ** ** |
|-----------------------------------------------------|--------|---------------------------------------|------------|-------------------------------------|------------|
|                                                |   | **2003**                              |       | **2002**                            | ** ** | **2003** | ** ** | **2002** | ** ** |
| Net income                                          |   | **$**                                 | **11.2**   |                                | $          | 5.4 | ** ** | **$** | **21.6** |   | $ | 7.5 |   |
| Other comprehensive income:                         |   |                                  |       |                                |       |   |   |   |   |
| Unrealized net gain (loss) on derivative  contracts |   | **.9**                                |       | (5.2                                | )          | **5.7** |   | 5.9 |   |
| Total comprehensive income                          |   | **$**                                 | **12.1**   |                                | $          | .2 | ** ** | **$** | **27.3** |   | $ | 13.4 |   |

 

Accumulated other comprehensive loss of $25.9and $31.6 at June 30, 2003 and December 31, 2002, respectively, iscomprised of the unrealized net loss on derivative contracts.

 

7

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| **Item 2****.** |   | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND** |
|-----------------|--------|---------------------------------------------------------------------------|
|            |   | **RESULTS OF OPERATIONS**(Millions  of Dollars)                           |

 

**Results of Operations:**

 

The Company’s net income of $11.2for the second quarter of 2003 was $5.8 higher than the second quarter of 2002.Net income of $21.6 for the first six months of 2003 increased $14.1 comparedto the first six months of 2002. The profit improvement was due to lower creditlosses resulting in a lower provision for losses and higher finance margins.The provision for losses decreased $6.3 to $5.9 in the second quarter of 2003and decreased by $16.0 to $12.0 in the first six months of 2003. Credit lossesimproved due to fewer repossessions and higher used truck prices resulting in alower loss per repossession.  Highermargins were earned on finance receivables and operating leases due tocompetitive market conditions and enhancements made to pricing and creditpractices. Interest income and expense in the second quarter and first half of2003 were lower due to lower market interest rates. Operating lease revenue andrelated depreciation have increased due to an increase in equipment onoperating leases.

 

The following table summarizes theactivity in the Company’s allowance for losses on receivables and relatedratios:

 

##### **Allowance forLosses**

 
|                                                                                                                                                    |   | **Six Months  Ended  June 30** | ** ** | **Year Ended  December 31** | ** ** | **Six Months  Ended  June 30** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|------------|----------------------------------|------------|-------------------------------------|------------|
|                                                                                                                                                    |   | **2003**                            |       | **2002**                         |       | **2002**                            |       |
| Balance at  beginning of period                                                                                                                         |   | **$**                               | **66.9**   |                             | $          | 66.2                                |       | $ | 66.2 |   |
|                                                                                                                                                    |   |                                |       |                             |       |                                |       |
| Provision  for losses                                                                                                                                   |   | **12.0**                            |       | 42.2                             |       | 28.0                                |       |
|                                                                                                                                                    |   |                                |       |                             |       |                                |       |
| Credit  losses net of recoveries                                                                                                                        |   | **(11.8**                           | **)**      | (41.5                            | )          | (27.4                               | )          |
|                                                                                                                                                    |   |                                |       |                             |       |                                |       |
| Balance at end  of period                                                                                                                               |   | **$**                               | **67.1**   |                             | $          | 66.9                                |       | $ | 66.8 |   |
|                                                                                                                                                    |   |                                |       |                             |       |                                |       |
| Ratios:                                                                                                                                                 |   |                                |       |                             |       |                                |       |
|                                                                                                                                                    |   |                                |       |                             |       |                                |       |
| Credit  losses net of recoveries to average net   receivables and equipment on operating  leases (annualized for June 30, 2003 and 2002) |   | **.75**                             | **%**      | 1.29                             | %          | 1.72                                | %          |
|                                                                                                                                                    |   |                                |       |                             |       |                                |       |
| Allowance for  losses to period-end net receivables and equipment on operating leases                                                                   |   | **2.13**                            | **%**      | 2.04                             | %          | 2.07                                | %          |
|                                                                                                                                                    |   |                                |       |                             |       |                                |       |
| Period-end  retail receivables and leases past due (over 60 days) to period-end  retail  receivables and leases                                    |   | **1.61**                            | **%**      | 1.91                             | %          | 2.30                                | %          |

 

The level of credit losses in thefuture is dependent on various factors including, among other things, overalleconomic conditions, fuel prices and other operating costs for customers,freight volumes and used truck values.

 

8

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**Funding and Liquidity:**

 

Since 1983, the Company has registered debtsecurities under the Securities Act of 1933 for offering to the public. In2000, the Company filed a shelf registration statement under which $2,500.0 ofmedium-term notes could be issued as needed. As of June 30, 2003, $200.0of such securities were available for issuance. The Company plans to file a newshelf registration statement prior to the end of 2003.

 

The Company believes that it has sufficientfinancial capabilities to continue funding receivables and servicing debtthrough internally generated funds, lines of credit, access to public andprivate debt markets, and other financial resources.

 

The Company participates with PACCAR andother PACCAR affiliates in syndicated credit facilities of $1,275.0 atJune 30, 2003 which areentirely available for use by the Company. These credit facilities are used toprovide backup liquidity for the Company’s short-term borrowings. InJuly 2003 the syndicated credit facilities were replaced with $1,500.0syndicated credit facilities of which $750.0 expires in 2004 and $750.0 expiresin 2006. The Company is liable only for its own borrowings under these creditfacilities. There were no borrowings under these credit facilities in the sixmonths ended June 30, 2003 andthe year ended December 31, 2002.

 

Other information on liquidity, sources ofcapital, and contractual cash commitments as presented in the Company’s 2002Annual Report on Form 10-K continues to be relevant.

 

**Forward Looking Statements:**

 

Certain information presented inthis Form 10-Q contains forward-looking statements made pursuant to the PrivateSecurities Litigation Reform Act of 1995. These statements are subject to risksand uncertainties that may affect actual results. The risks and uncertaintiesinclude, but are not limited to national and local economic, political andindustry conditions; changes in the levels of new business volume due to unitfluctuations in new PACCAR truck sales; changes in competitive factors; changesaffecting the profitability of truck owners and operators; price changesimpacting equipment costs and residual values; changes in costs andavailability of external funding sources; and legislation and governmentalregulation.

 

9

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**Item 3****.        QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

 

Therehave been no material changes in the Company’s market risk during the sixmonths ended June 30, 2003.  Foradditional information, refer to Item 7a of the Company’s December 31,2002 Annual Report on Form 10-K.

 

**Item 4****.        CONTROLS AND PROCEDURES**

 

An evaluation was performed under the supervision and with theparticipation of the Company’s management, including the principal executiveofficer and principal financial officer, of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined inrules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of1934, as amended) as of June 30, 2003. Based on that evaluation, theprincipal executive officer and principal financial officer of the Companyconcluded that the disclosure controls and procedures in place at the Companywere adequate to ensure that information required to be disclosed by theCompany, including its consolidated subsidiaries (the Company has nosubsidiaries), in reports that the Company files or submits under the ExchangeAct, is recorded, processed, summarized and reported on a timely basis inaccordance with applicable rules and regulations. There have been nosignificant changes in the Company’s internal controls over financial reportingthat occurred during the fiscal quarter covered by this quarterly report thathave materially affected, or are reasonably likely to materially affect, theCompany’s internal control over financial reporting.

 

**PART II****–OTHERINFORMATION**

 

For items 1, 2, 3, 4 and 5, there was noreportable information during the six months ended June 30, 2003.

 

**Item6.****                       EXHIBITSAND REPORTS ON FORM 8-K**

 

(a)       Exhibits filed as part ofthis report are listed in the accompanying Exhibit Index.

 

(b)       There were no reports onForm 8-K for the quarter ended June 30, 2003.

 

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

**SIGNATURES**

 

Pursuant to the requirements ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned thereunto duly authorized.

 

 
|   | **PACCAR Financial Corp.** |                                                     |
|--------|----------------------------|----------------------------------------------------------|
|   | (Registrant)          |                                                     |
|   |                       |                                                     |
|   |                       |                                                     |
| Date   | August 8, 2003        |                                                     | By | /s/ Timothy M. Henebry |   |
|   |                       | Timothy M. Henebry  President  (Authorized Officer)      |   |
|   |                       |                                                     |
|   |                       |                                                     |
|   | By                         | /s/ Barry E. Prather                                     |   |
|   |                       | Barry E. Prather  Controller  (Chief Accounting Officer) |   |
|        |                            |                                                          |  |  |  |

 

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**FORM 10-Q**

**PACCAR FINANCIALCORP.**

 

**EXHIBITINDEX**

 

Exhibit (in order of assignedindex numbers)

 
| 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-Q 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). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.4    |   | Forms of Medium-Term Note, Series I  (incorporated by reference to Exhibits 4.2A and 4.2B to the Company’s  Registration Statement on Form S-3 dated September 10, 1998,  Registration Number 333-63153).                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   | Form of Letter of Representation among the  Company, Citibank, N.A. and The Depository Trust Company, Series I  (incorporated by reference to Exhibit 4.3 to the Company’s Registration  Statement on Form S-3 dated September 10, 1998, Registration Number  333-63153).                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.5    |   | Forms of Medium-Term Note, Series J  (incorporated by reference to Exhibits 4.2A and 4.2B to the Company’s  Registration Statement on Form S-3 dated March 2, 2000, Registration  Number 333-31502).                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   | Form of Letter of Representation among the  Company, Citibank, N.A. and The Depository Trust Company, Series J (incorporated  by reference to Exhibit 4.3 to the Company’s Registration Statement on Form  S-3 dated March 2, 2000, Registration Number 333-31502).                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.1   |   | Support Agreement between the Company and  PACCAR 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, 2003 and 2002.                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 12.2   |   | Statement re: computation of ratio of  earnings to fixed charges of the Company pursuant to the Support Agreement  between the Company and PACCAR for the six-month periods ended June 30,  2003 and 2002.                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 12.3   |   | Statement re: computation of ratio of  earnings to fixed charges of PACCAR and subsidiaries pursuant to SEC  reporting requirements for the six-month periods ended June 30, 2003 and  2002.                                                                                                                                                                                                                                                               |

 

12

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| 31.1   |   | Rule 13a-14(a)/15d-14(a) Certification -  Certification of Principal Executive Officer.                                                              |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                 |
| 31.2   |   | Rule 13a-14(a)/15d-14(a) Certification -  Certification of Principal Financial Officer.                                                              |
|   |   |                                                                                                                                                 |
| 32.1   |   | Section 1350 Certifications - Certification  pursuant to rule 13a-14(b) and section 906 of the Sarbanes-Oxley Act of 2002  (18 U.S.C. section 1350). |

 

 

Other exhibitslisted in Item 601 of Regulation S-K are not applicable.

 

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