**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM10-Q**

 

**ý****Quarterly Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**For the quarterly period ended September30, 2001**

 

**or**

 

**o****Transition Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

** **

**For transition period from _____________to _____________**

 

**Commission File No. 0-12553**

 

 

**PACCAR FINANCIAL CORP.**

(Exact name ofregistrant as specified in its charter)

 

 

| **Washington**                                             |   | **91-6029712**                        |
|------------------------------------------------------------|--------|---------------------------------------|
| (State  or other jurisdiction of                           |   | (I.R.S.  Employer Identification No.) |
| incorporation or  organization)                            |   |                                  |
|                                                       |   |                                  |
|                                                       |   |                                  |
|                                                       |   |                                  |
| **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 whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.   Yes ý  No  o

 

Indicatethe number of shares outstanding of each of the issuer's classes of commonstock, as of the latest practicable date:

 

CommonStock, $100 par value—145,000 shares as of October 31, 2001

 

 

THEREGISTRANT IS A WHOLLY-OWNED INDIRECT SUBSIDIARY OF PACCAR INC AND MEETS THECONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H)(1)(A) AND (B) OF FORM 10-Q ANDIS, THEREFORE, FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

 

 

**FORM10-Q**

**PACCARFINANCIAL CORP.**

 

**PART I--FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIAL STATEMENTS**
|   |
|--------|

##### **Statementsof Income (Unaudited)**

| (Millions  of Dollars) |
|------------------------|

 

 
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|--------|-----------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|-----------|------------|----------|------------|
|   |                                                |       | **Three Months Ended  September 30** |       | **Nine Months Ended  September 30** |       |
|   |                                                |       | **2001**                             | ** ** | **2000**                            | ** ** | **2001**  | ** ** | **2000** | ** ** |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | **INTEREST AND OTHER REVENUE**                      | ** ** | **$**                                | **82.4**   |                                | $          | 97.0      | ** ** | **$**    | **258.4**  |   | $ | 271.9 |   |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | Interest  and other borrowing expense               | ** ** | **41.4**                             |       | 56.4                                | ** ** | **138.4** |       | 153.5    |       |
|   | Depreciation  related to operating leases           | ** ** | **3.1**                              |       | 2.4                                 | ** ** | **9.1**   |       | 6.6      |       |
|   | Insurance  claims and underwriting expense          | ** ** | **2.4**                              |       | 2.2                                 | ** ** | **7.6**   |       | 6.7      |       |
|   | Vehicle  operating expenses                         | ** ** | **1.5**                              |       | 1.5                                 |       | **4.2**   |       | 4.3      |       |
|   | Selling  general and administrative expenses        |       | **11.0**                             |       | 11.2                                |       | **32.4**  |       | 33.5     |       |
|   | Provision  for losses on receivables                |       | **22.1**                             |       | 9.8                                 | ** ** | **59.3**  |       | 24.2     |       |
|   | **TOTAL EXPENSES**                                  | ** ** | **81.5**                             |       | 83.5                                | ** ** | **251.0** |       | 228.8    |       |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | **INCOME BEFORE INCOME TAXES**                      | ** ** | **.9**                               |       | 13.5                                | ** ** | **7.4**   |       | 43.1     |       |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | Federal  and state income taxes                     | ** ** | **.4**                               |       | 5.2                                 | ** ** | **3.1**   |       | 16.7     |       |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | **NET INCOME  BEFORE  ACCOUNTING CHANGE**      | ** ** | **.5**                               |       | 8.3                                 | ** ** | **4.3**   |       | 26.4     |       |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | Cumulative effect of Accounting Change (net of tax) |       | **-**                                |       | -                                   | ** ** | **.4**    |       | -        |       |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | **NET INCOME**                                      | ** ** | **.5**                               |       | 8.3                                 | ** ** | **4.7**   |       | 26.4     |       |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | **RETAINED EARNINGS AT BEGINNING OF PERIOD**        | ** ** | **398.3**                            |       | 379.2                               | ** ** | **394.1** |       | 361.1    |       |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |
|   | **RETAINED EARNINGS AT END OF PERIOD**              | ** ** | **$**                                | **398.8**  |                                | $          | 387.5     | ** ** | **$**    | **398.8**  |   | $ | 387.5 |   |
|   |                                                |       |                                 |       |                                |       |      |       |     |       |

 

Earningsper share and dividends per share are not reported because the Company is awholly owned subsidiary of PACCAR Financial Services Corporation.

 

SeeNotes to Financial Statements.

 
|                                                                                                               |   |                  |        |                 |       |
|--------------------------------------------------------------------------------------------------------------------|--------|-----------------------|-------------|----------------------|------------|
| **Balance Sheets**                                                                                                 |   | **September 30** |        | **December 31** |       |
| (Millions of Dollars)                                                                                              |   | **2001**              |        | **2000**             |       |
|                                                                                                               |   | **(Unaudited)**       | ** **  |                 | ** ** |
| **ASSETS:**                                                                                                        |   |                  |        |                 |       |
|                                                                                                               |   |                  |        |                 |       |
| Cash                                                                                                               |   | **$**                 | **11.7**    |                 | $          | 12.6 |   |
| Finance and other receivables, net of  allowance for losses of $66.1 ($65.4 in 2000)                               |   | **3,455.2**           |        | 3,960.5              |       |
| Loans to affiliate                                                                                                 |   | **41.9**              |        | 53.3                 |       |
| Equipment on operating leases, net of  allowance for depreciation of $20.7 ($19.7 in 2000)                         |   | **52.1**              |        | 56.5                 |       |
| Equipment held for sale                                                                                            |   | **10.0**              |        | 16.7                 |       |
| Other assets                                                                                                       |   | **22.0**              |        | 19.8                 |       |
| **TOTAL ASSETS**                                                                                                   |   | **$**                 | **3,592.9** |                 | $          | 4,119.4 |   |
|                                                                                                               |   |                  |        |                 |       |
| **LIABILITIES:**                                                                                                   |   |                  |        |                 |       |
|                                                                                                               |   |                  |        |                 |       |
| Accounts payable and accrued expenses                                                                              |   | **$**                 | **122.7**   |                 | $          | 80.0 |   |
| Payable for finance receivables acquired                                                                           |   | **24.5**              |        | 34.6                 |       |
| Advances from PACCAR Inc                                                                                           |   | **-**                 |        | 5.0                  |       |
| Borrowings                                                                                                         |   | **2,795.6**           |        | 3,311.8              |       |
| Income taxes - current and deferred                                                                                |   | **149.4**             |        | 165.8                |       |
| **TOTAL LIABILITIES**                                                                                              |   | **3,092.2**           |        | 3,597.2              |       |
|                                                                                                               |   |                  |        |                 |       |
|                                                                                                               |   |                  |        |                 |       |
| **STOCKHOLDER'S EQUITY:**                                                                                          |   |                  |        |                 |       |
|                                                                                                               |   |                  |        |                 |       |
| Preferred stock, $100 par value, 6%  noncumulative and nonvoting, authorized 450,000 shares, 310,000 shares issued |   | **31.0**              |        | 31.0                 |       |
| Common stock, $100 par value, authorized  200,000 shares, 145,000 shares issued                                    |   | **14.5**              |        | 14.5                 |       |
| Additional paid-in capital                                                                                         |   | **95.9**              |        | 82.6                 |       |
| Retained earnings                                                                                                  |   | **398.8**             |        | 394.1                |       |
| Accumulated other comprehensive loss                                                                               |   | **(39.5**             | )           | -                    |       |
| **TOTAL STOCKHOLDER'S EQUITY**                                                                                     |   | **500.7**             |        | 522.2                |       |
| **TOTAL LIABILITIES AND  STOCKHOLDER'S EQUITY**                                                                    |   | **$**                 | **3,592.9** |                 | $          | 4,119.4 |   |

 

 

SeeNotes to Financial Statements.

 

 

 

 
|   |
|--------|

##### **Statementsof Cash Flows (Unaudited)**

| (Millions  of Dollars) |
|------------------------|

 

 
| **Nine Months Ended September  30**                                          |   | **2001**    |       | **2000** |       |
|------------------------------------------------------------------------------|--------|-------------|------------|----------|------------|
|                                                                         |   |        |       |     |       |
| **OPERATING ACTIVITIES:**                                                    |   |        |       |     |       |
|                                                                         |   |        |       |     |       |
| Net income                                                                   |   | **$**       | **4.7**    |     | $          | 26.4 |   |
| Items included in net income not affecting  cash:                            |   |        |       |     |       |
| Provision for losses on receivables                                          |   | **59.3**    | ** ** | 24.2     |       |
| Deferred tax provision                                                       |   | **(1.3**    | **)**      | 9.7      |       |
| Depreciation and amortization                                                |   | **13.3**    | ** ** | 11.0     |       |
| Decrease in payables and other                                               |   | **(19.9**   | **)**      | (20.9    | )          |
| **Net Cash Provided By  Operating Activities**                               |   | **56.1**    |       | 50.4     |       |
|                                                                         |   |        |       |     |       |
| **INVESTING ACTIVITIES:**                                                    |   |        |       |     |       |
|                                                                         |   |        |       |     |       |
| Finance and other receivables originated                                     |   | **(778.5**  | **)**      | (1,496.1 | )          |
| Collections on finance and other receivables                                 |   | **1,092.8** | ** ** | 996.5    |       |
| Net decrease in wholesale receivables                                        |   | **153.2**   | ** ** | 10.9     |       |
| Acquisition of equipment on operating lease                                  |   | **(11.6**   | **)**      | (18.8    | )          |
| Proceeds from disposal of equipment                                          |   | **8.6**     |       | 4.6      |       |
| Other                                                                        |   | **(1.6**    | **)**      | (.8      | )          |
| **Net Cash Provided By (Used  In) Investing Activities**                     |   | **462.9**   |       | (503.7   | )          |
|                                                                         |   |        |       |     |       |
| **FINANCING ACTIVITIES:**                                                    |   |        | ** ** |     | ** ** |
|                                                                         |   |        |       |     |       |
| Net (decrease) increase in commercial paper  and other short-term borrowings |   | **(158.1**  | **)**      | 76.3     |       |
| Proceeds from medium-term notes                                              |   | **50.0**    |       | 795.0    |       |
| Payments of medium-term notes                                                |   | **(408.7**  | **)**      | (408.9   | )          |
| Net advances to PACCAR Inc                                                   |   | **(16.4**   | **)**      | (18.1    | )          |
| Capital contributions                                                        |   | **13.3**    | ** ** | 14.3     |       |
| **Net Cash (Used In) Provided  By Financing Activities**                     |   | **(519.9**  | **)**      | 458.6    |       |
|                                                                         |   |        |       |     |       |
| **Net (Decrease) Increase in  Cash**                                         |   | **(.9**     | **)**      | 5.3      |       |
|                                                                         |   |        |       |     |       |
| Cash at beginning of period                                                  |   | **12.6**    |       | 6.5      |       |
|                                                                         |   |        |       |     |       |
| Cash at end of period                                                        |   | **$**       | **11.7**   |     | $          | 11.8 |   |

 

 

SeeNotes to Financial Statements.

 

##### ** **

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

** **

 

**NOTE A—Basis of Presentation**

 

The accompanying unaudited financial statements have beenprepared in accordance with the instructions to Form 10-Q and Article 10 ofRegulation S-X. Accordingly, they do not include all of the information andfootnotes required by generally accepted accounting principles for completefinancial statements. In the opinion of management, all adjustments (consistingof normal recurring accruals) considered necessary for a fair presentation havebeen included. Operating results for the three-and nine-month periods endedSeptember 30, 2001, are not necessarily indicative of the results that may beexpected for the year ending December 31, 2001. For further information, referto the financial statements and footnotes included in PACCAR Financial Corp.'s(the "Company") Annual Report on Form 10-K for the year endedDecember 31, 2000.

 

*Derivative Financial Instruments*: On January1, 2001, the Company adopted Statement of Financial Accounting Standard (SFAS)No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS133 establishes accounting and reporting standards for derivative instruments,hedging activities and related exposures. SFAS 133 requires that allderivatives be recognized as either assets or liabilities at fair value. TheCompany does not enter into derivative contracts for trading purposes.Derivatives are used only to hedge the volatility arising from movements ininterest and foreign currency rates. Gains or losses resulting from changes inthe values of the derivatives are accounted for depending on the use of thederivative and whether it qualifies for hedge accounting.

 

Theadoption of SFAS 133 on January 1, 2001 resulted in a cumulative increase tonet income of $.4, net of related income tax effects of $.3, and a cumulativereduction to Other Comprehensive Income (“OCI”) income of $14.6, net of relatedincome tax effects of $9.2. Hedge ineffectiveness for the three and nine monthsended September 30, 2001 was immaterial and no fair value hedges or cash flowhedges were derecognized or terminated during the period. For the three andnine months ended September 30, 2001, $2.1 and $2.8, respectively, ofunrealized net costs net of tax were realized and reclassified from OCI. Thefair value of interest rate contracts is recorded as “Other assets” or“Accounts payable and accrued expenses” in the accompanying balance sheet.

 

*Reclassifications*: Certain prior year amounts have been reclassified toconform to the 2001 presentation.

 

*Estimates: *Theprovision for losses on finance and other receivables is charged to income inan amount sufficient to maintain the allowance for losses at a level consideredadequate to cover estimated losses. Receivables are charged to this allowancewhen, in the judgment of management, they are deemed uncollectible. Withrespect to certain retail contracts acquired from dealers, the dealer retainsliability, up to specified limits, for the credit loss on the sale of arepossessed vehicle. The amount and collectibility of dealer recourseprovisions have been considered in establishing the allowance for losses onreceivables. Beginning with the second quarter 2001, when determining theadequacy of the allowance, based on historical analysis of past credit losses,the Company revised its estimate of the collectibility of any amounts owedafter applying any applicable proceeds of the sales of collateral. The impactof this change in estimate was to reduce the amount charged off during thethree and nine months ended September 30, 2001 by $.9 and $2.2, respectively.

 

During the second quarter  2001, based on historical analysis, the Company also revised itsestimates of the collectibility of late charges assessed on customers’accounts. The effect of this change was to increase Interest and Other Revenuefor the three and nine months ended September 30, 2001 by $1.0 and $2.0,respectively.

 

**NOTE B—Stockholder’s Equity**

 

**Comprehensive Income (Unaudited)**

Thecomponents of other comprehensive income, net of related tax, were as follows:

 
|                                                             |   | **Three months ended September 30** |      | **Nine months ended September 30** |       |
|------------------------------------------------------------------|--------|-------------------------------------|-----------|------------------------------------|------------|
|                                                             |   | **2001**                            |      | **2000**                           |       | **2001** |   | **2000** |   |
| Net income                                                       |   | **$**                               | **.5**    |                               | $          | 8.3 | ** ** | **$** | **4.7** |   | $ | 26.4 |   |
| Other comprehensive income (loss):                               |   |                                |      |                               |       |   |   |   |   |
| Cumulative effect of accounting change for  derivative contracts |   | **-**                               |      | -                                  | ** ** | **(14.6** | **)** | - |   |
| Unrealized net loss on derivative contracts                      |   | **(14.0**                           | **)**     | -                                  | ** ** | **(24.9** | **)** | - |   |
| Net other comprehensive income (loss)                            |   | **(14.0**                           | **)**     | -                                  | ** ** | **(39.5** | **)** | - |   |
| Total comprehensive income (loss)                                |   | **$**                               | **(13.5** | **)**                              | $          | 8.3 | ** ** | **$** | **(34.8** | **)** | $ | 26.4 |   |

 

 

**NOTE C—Transactions with PACCAR Inc andAffiliates**

 

The Company and PACCAR Inc (“PACCAR”) are parties to a Support Agreement which obligatesPACCAR to provide, when required, financial assistance to the Company to assurethat the Company maintains a ratio of earnings to fixed charges (as defined) ofat least 1.25 to 1 at the end of any fiscal year. For the first nine months of2001, the Company has not maintained the specified ratio of earnings to fixedcharges. The Company will determine the amount of any necessary PACCARassistance at the end of the fiscal year.

 

PACCAR Financial Services Corporation (“PFSC”) chargesthe Company for certain administrative services it provides and certainservices the Company receives indirectly from PACCAR. These costs are chargedto the Company based upon the Company's specific use of the services at PFSC’sand 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. In lieu of current year payment, PFSC recognizescertain of these administrative services as an additional investment in theCompany. The Company records the investment as paid-in capital. The Company mayelect to pay a dividend to PFSC for the paid-in capital invested in prioryears. No cash dividends were declared or paid to PFSC during the first ninemonths of 2001 or the fiscal year 2000.

 

Periodically, the Company borrows funds from PACCAR andmakes loans to PACCAR. Loans outstanding to PACCAR were $17.9 at September 30,2001 and $9.6 at December 31, 2000. These loans are included in “Finance andother receivables” on the accompanying balance sheet.

 

PACCAR has issued letters of credit in the amount of $4.9on behalf of the Company to guarantee funds for payment to insured franchiseesand their customers for any future insurance losses.

 

The Company periodically loans funds to certain foreignfinance and leasing affiliates of PACCAR. These various affiliates have SupportAgreements with PACCAR, similar to the Company’s Support Agreement. The foreignaffiliates operate in the United Kingdom, Netherlands, Mexico, Canada, andAustralia, and any resulting currency exposure is fully hedged. The foreignaffiliates provide financing and leasing of trucks and related equipment manufacturedprimarily by PACCAR and sold through PACCAR’s independent dealer networks inEurope, Mexico, Canada and Australia. The Company will not make loans to theforeign affiliates in excess of the equivalent of $300 United States dollars,unless the amount in excess of such limits is guaranteed by PACCAR. The Companyperiodically reviews the funding alternatives for theseaffiliates, and these limits may be revisedin the future. There was a total of $41.9 and $53.3 in loans outstandingto a foreign affiliate operating in the United Kingdom at September 30, 2001and December 31, 2000, respectively, and no loans outstanding to other foreignaffiliates for either period.

 

**NOTE D—Preferred Stock**

 

The Company's Articles of Incorporation provide that the6% noncumulative, nonvoting preferred stock (100% owned by PFSC) is redeemableonly at the option of the Company's Board of Directors.

 

 
| **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 $4.7 for the first nine months of 2001 was 82% lower than its net  income of $26.4 for the first nine months of 2000. Interest and other revenue  decreased 5% to $258.4 during the first nine months of 2001 from $271.9 for  the first nine months of 2000 due to a decline in average receivables.  Average receivables declined 6% to $3,705 during the first nine months of  2001 compared to $3,924 during the comparable period in 2000. Interest and  other borrowing expense decreased 10% to $138.4 during the first nine months  of 2001 from $153.5 for the first nine months of 2000, due to lower debt  balances and interest rates. Depreciation related  to operating leases increased 38% to $9.1 during the first nine months of  2001, compared to $6.6 for the same period in 2000 primarily due to growth in  the average operating lease portfolio. The  provision for losses increased 145% to $59.3 in the first nine months of 2001  compared to $24.2 in the comparable period in 2000 due to credit losses.  Credit losses increased 210% to $58.6 for the first nine months of 2001 from  $18.9 during the same period in 2000. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        | For the third quarter  2001, the Company’s net income declined 94% to $.5 from $8.3 for the three  months ended September 30, 2000. This was due to a higher provision for  losses and lower interest and other revenue partially offset by lower  interest and other borrowing expense. For the quarter ended September 30,  2001 interest and other revenue declined 15% to $82.4 which was offset by  lower interest and other borrowing expense which declined 27% to $41.4. The  provision for losses increased 126% to $22.1 in the third quarter 2001 from  $9.8 in the third quarter 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 
|   |                                                                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------|
|   | The following table  summarizes the activity in the Company's allowance for losses on receivables  and presents related ratios: |

 
|   |   |   |   |   |   |   |   |   |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|

##### **Allowance for Losses(Unaudited)**

| (Millions  of Dollars) |
|------------------------|

 

 
|                                                                                                                  |       | **Nine Months Ended** |     | **Year Ended**  |   | **Nine Months Ended** |       |
|-----------------------------------------------------------------------------------------------------------------------|------------|-----------------------|----------|-----------------|--------|-----------------------|------------|
|                                                                                                                  |       | **September 30**      |     | **December 31** |   | **September 30**      |       |
|                                                                                                                  |       | **2001**              |     | **2000**        |   | **2000**              |       |
| Balance at beginning of period                                                                                        | ** ** | **$**                 | **65.4** | ** **      | **$**  | 60.7                  | ** ** | **$** | 60.7 | ** ** |
| Provision for losses                                                                                                  | ** ** | **59.3**              |     | 36.4            |   | 24.2                  |       |
| Net losses                                                                                                            |       | **(58.6**             | **)**    | (31.7           | )      | (18.9                 | )          |
| Balance at end of period                                                                                              | ** ** | **$**                 | **66.1** |            | $      | 65.4                  |       | $ | 66.0 |   |
|                                                                                                                  |       |                  |     |            |   |                  |       |
| Ratios:                                                                                                               |       |                  |     |            |   |                  |       |
| Net losses to average net receivables and equipment on  operating leases (annualized for September 30, 2001 and 2000) |       | **2.11**              | %        | .80             | %      | .64                   | %          |
|                                                                                                                  |       |                  |     |            |   |                  |       |
| Allowance for losses to period-end netcontracts and equipment on operating  leases                                    | ** ** | **1.89**              | %        | 1.63            | %      | 1.61                  | %          |
|                                                                                                                  |       |                  |     |            |   |                  |       |
| Period-end retail contracts and leases past due (over  60 days to period-end retail contracts and lease receivables)  |       | **3.48**              | %        | 3.35            | %      | 2.06                  | %          |
|                                                                                                                       |            |                       |          |                 |        |                       |            |  |  |  |  |  |  |

 
|   | The Company continues  to experience significantly higher levels of past dues and repossessions due  to high fuel costs, lower freight tonnage and a slowing economy that have  reduced operating margins for many truck operators. The increase in the  number of repossessions and a higher loss per repossession, due to declining  used truck prices, are the primary factors resulting in the increased credit  losses. Management expects these trends to continue in 2001 and 2002, which  could result in continued high credit losses, until economic conditions  improve for truck operators. The level of the allowance for losses reflects  the risks inherent in the financing of commercial highway transportation  equipment. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | **Liquidity and Capital  Resources:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | For the nine months ended September 30,  2001, the Company continued to obtain funds primarily from borrowings in the  capital markets and collections on loans and leases and to a lesser extent,  equity contributions from PFSC. The decrease in borrowings from $3,311.8 at  December 31, 2000 to $2,795.6 on September 30, 2001 is due to lower new  lending volume and a decrease in wholesale receivables. New lending volume  decreased 48% to $790 in the nine months ending September 30, 2001 from  $1,515 during the same period in 2000 due to lower PACCAR truck sales.                                                                                                                                                        |

 
|         | Since 1983, the Company has registered  senior debt securities under the Securities Act of 1933 for offering to the  public. At September 30, 2001, there were $1,850 of such securities available  for issuance.                                                                                                                                                                                                                                                                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         | During the third  quarter of 2001, the Company participated with PACCAR and other PACCAR  affiliates in a new $1,825 syndicated bank line of credit facility, a portion  of which matures in three years. Under the new facility, $1,525 is available  for use by the Company. As of September 30, 2001 the Company maintained total  unused bank lines of credit of $1,525. These credit facilities are used to  provide liquidity for the Company’s commercial paper program. The Company is  liable only for its own borrowings under this credit facility. |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         | Other information on  liquidity and sources of capital as presented in the Company's 2000 Annual  Report on Form 10-K continues to be relevant.                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Item  3.** | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         | There have been no  material changes in the Company’s market risk during the nine months ended  September 30, 2001.  For additional  information, refer to Item 7a of the Company’s December 31, 2000 Annual  Report on Form 10-K.                                                                                                                                                                                                                                                                                                                   |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Item  6.** | **EXHIBITS  AND REPORTS ON FORM 8-K**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (a)          | Exhibits filed as part  of this report are listed in the accompanying Exhibit Index.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (b)          | There were no reports  on Form 8-K for the quarter ended September 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

**SIGNATURES**

 

 

Pursuant to the requirements of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.

 

 
|   |             |   |   | **PACCAR Financial Corp.** |
|--------|------------------|--------|--------|----------------------------|
|   |             |   |   | (Registrant)               |
|   |             |   |   |                       |
| Date   | November 9, 2001 |   | By     | /s/ Andrew J. Wold         |
|   |             |   |   |                       |
|   |             |   |   | Andrew J. Wold             |
|   |             |   |   | President                  |
|   |             |   |   | (Authorized Officer)       |
|   |             |   |   |                       |
|   |             |   | By     | /s/ Barry E. Prather       |
|   |             |   |   |                       |
|   |             |   |   | Barry E. Prather           |
|   |             |   |   | Controller                 |
|   |             |   |   | (Chief Accounting Officer) |

 

 

 

**EXHIBIT INDEX**

 

Exhibit (in order of assigned index numbers)

 
| 2      |   | Plan of Merger of PACCAR Leasing Corporation, a  Delaware Corporation, and PACCAR Financial Corp., a Washington Corporation  effective May 1, 2000 (incorporated by reference to Exhibit 2 to the  Company's Quarterly Report on Form 10-Q dated August 11, 2000, File Number  0-12553).                                                                                                                                         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 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). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.3    |   | 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).                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 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 nine-month  periods ended September 30, 2001 and 2000.                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 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 nine-month periods ended September 30, 2001 and 2000.                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 12.3   |   | Statement re computation of ratio of earnings to fixed  charges of PACCAR and subsidiaries pursuant to SEC reporting requirements for  the nine-month periods ended September 30, 2001 and 2000.                                                                                                                                                                                                                                 |

 

Other exhibits listed in Item 601 of Regulation S-K arenot applicable.