**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

**ý****Quarterly Report Pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934**

 

**For the quarterly period endedSeptember 30, 2003**

 

**or**

 

**o****Transition Report Pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934**

 

**For transition period from                               to                                **

 

**CommissionFile 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 whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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 markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange 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 par value—145,000 shares as ofOctober 31, 2003

 

THE REGISTRANT IS A WHOLLY-OWNED INDIRECT SUBSIDIARYOF PACCAR INC AND MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS(H)(1)(A) AND (B) OF FORM 10-Q AND IS, THEREFORE, FILING THIS FORM WITH THEREDUCED DISCLOSURE FORMAT.

 

 

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

**INDEX**

 
| PART I.  FINANCIAL INFORMATION:                                                                                       |                                                                                        |
|----------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|                                                                                                                       |                                                                                        |   |
| ITEM 1.                                                                                                                    | FINANCIAL STATEMENTS:                                                                       |   |
|                                                                                                                       |                                                                                        |   |
| Statements  of Income and Retained Earnings—Three  and Nine Months Ended September 30, 2003 and 2002 (unaudited) |
|                                                                                                                       |                                                                                        |
| Balance Sheets —  September 30, 2003 (unaudited), and December 31, 2002                                     |
|                                                                                                                       |                                                                                        |   |
| Statements of Cash  Flows —  Nine Months Ended September 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                                                            |
|                                                                                                                       |                                                                                        |   |
| SIGNATURES                                                                                                                 |                                                                                        |
|                                                                                                                       |                                                                                        |   |
| INDEX TO EXHIBITS                                                                                                          |

 

2

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

**PART I–FINANCIAL INFORMATION**

 

**ITEM1.  FINANCIAL STATEMENTS**

 

##### **Statements ofIncome and Retained Earnings (Unaudited)**

(Millions of Dollars)

 
|                                                        |   | **Three  Months Ended  September 30** |       | **Nine  Months Ended  September 30** |       |
|-------------------------------------------------------------|--------|--------------------------------------------|------------|-------------------------------------------|------------|
|                                                        |   | **2003**                                   |       | **2002**                                  | ** ** | **2003** | ** ** | **2002** | ** ** |
|                                                        |   |                                       |       |                                      |       |   |   |   |   |
| Interest  and fee income                                    |   | **$**                                      | **49.9**   |                                      | $          | 57.8 | ** ** | **$** | **153.4** |   | $ | 174.9 |   |
| Operating  lease and rental income                          |   | **15.9**                                   |       | 10.7                                      | ** ** | **43.1** |   | 29.0 |   |
| Insurance  premiums and other revenue                       |   | **5.4**                                    |       | 4.9                                       | ** ** | **16.3** |   | 14.3 |   |
| **TOTAL  INTEREST AND OTHER REVENUE**                       |   | **71.2**                                   |       | 73.4                                      | ** ** | **212.8** |   | 218.2 |   |
|                                                        |   |                                       |       |                                      |       |   |   |   |   |
| Interest  and other borrowing expenses                      |   | **19.6**                                   |       | 29.0                                      | ** ** | **65.9** |   | 92.3 |   |
| Depreciation  and other operating lease and rental expenses |   | **12.4**                                   |       | 8.3                                       | ** ** | **33.4** |   | 22.3 |   |
| Insurance  claims and underwriting expenses                 |   | **2.8**                                    |       | 2.4                                       | ** ** | **9.0** |   | 8.4 |   |
| Selling  general and administrative expenses                |   | **11.1**                                   |       | 10.6                                      | ** ** | **31.9** |   | 31.7 |   |
| Provision  for losses on receivables                        |   | **4.9**                                    |       | 8.4                                       | ** ** | **16.9** |   | 36.4 |   |
| **TOTAL  EXPENSES**                                         |   | **50.8**                                   |       | 58.7                                      | ** ** | **157.1** |   | 191.1 |   |
|                                                        |   |                                       |       |                                      |       |   |   |   |   |
| **INCOME  BEFORE INCOME TAXES**                             |   | **20.4**                                   |       | 14.7                                      | ** ** | **55.7** |   | 27.1 |   |
|                                                        |   |                                       |       |                                      |       |   |   |   |   |
| Income taxes                                                |   | **7.9**                                    |       | 5.8                                       | ** ** | **21.6** |   | 10.7 |   |
|                                                        |   |                                       | ** ** |                                      | ** ** |   | ** ** |   | ** ** |
| **NET INCOME**                                              |   | **12.5**                                   |       | 8.9                                       | ** ** | **34.1** |   | 16.4 |   |
|                                                        |   |                                       |       |                                      |       |   |   |   |   |
| **RETAINED  EARNINGS AT BEGINNING OF PERIOD**               |   | **447.6**                                  |       | 406.2                                     | ** ** | **426.0** |   | 409.7 |   |
| Cash dividends paid                                         |   | **—**                                 |       | —                                    | ** ** | **—** |   | 11.0 |   |
|                                                        |   |                                       |       |                                      |       |   |   |   |   |
| **RETAINED EARNINGS AT END OF PERIOD**                      |   | **$**                                      | **460.1**  |                                      | $          | 415.1 | ** ** | **$** | **460.1** |   | $ | 415.1 |   |

 

Earnings per share anddividends per share are not reported because the Company is a wholly-ownedsubsidiary of PACCAR Financial Services Corporation.

 

See Notes to FinancialStatements.

 

3

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**FORM 10-Q**

**PACCARFINANCIAL CORP.**

 

**BalanceSheets**

(Millionsof Dollars)

** **
|                                                                                                                                          |   | **September 30  2003** | ** **  | **December 31  2002*** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-------------|-----------------------------|------------|
|                                                                                                                                          |   | **(Unaudited)**             | ** **  |                        | ** ** |
| **ASSETS**                                                                                                                                    |   |                        |        |                        |       |
|                                                                                                                                          |   |                        |        |                        |       |
| Cash                                                                                                                                          |   | **$**                       | **17.7**    |                        | $          | 9.9 |   |
| Finance and other receivables, net of allowance for  losses of $67.2 ($66.9 in 2002)                                                          |   | **2,959.2**                 |        | 3,156.2                     |       |
| Loans to PACCAR Inc and affiliates                                                                                                            |   | **264.9**                   |        | 192.0                       |       |
| Equipment on operating leases, net of depreciation  of $39.1 ($26.8 in 2002)                                                                  |   | **155.5**                   |        | 122.3                       |       |
| Equipment held for sale                                                                                                                       |   | **7.4**                     |        | 10.6                        |       |
| Other assets                                                                                                                                  |   | **20.3**                    |        | 20.5                        |       |
| **TOTAL  ASSETS**                                                                                                                             |   | **$**                       | **3,425.0** |                        | $          | 3,511.5 |   |
|                                                                                                                                          |   |                        |        |                        |       |
| **LIABILITIES**                                                                                                                               |   |                        |        |                        |       |
|                                                                                                                                          |   |                        |        |                        |       |
| Accounts payable and accrued expenses                                                                                                         |   | **$**                       | **61.7**    |                        | $          | 63.7 |   |
| Payable to dealers                                                                                                                            |   | **48.9**                    |        | 50.5                        |       |
| Derivative liability                                                                                                                          |   | **32.8**                    |        | 52.2                        |       |
| Commercial paper                                                                                                                              |   | **688.4**                   |        | 1,120.6                     |       |
| Medium-term notes and other borrowings                                                                                                        |   | **1,785.0**                 |        | 1,484.0                     |       |
| Income taxes – current and deferred                                                                                                      |   | **193.9**                   |        | 184.6                       |       |
| **TOTAL  LIABILITIES**                                                                                                                        |   | **2,810.7**                 |        | 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 $100 per share, 200,000  shares authorized, 145,000 shares issued and outstanding                                     |   | **14.5**                    |        | 14.5                        |       |
| Paid-in capital                                                                                                                               |   | **127.9**                   |        | 116.0                       |       |
| Retained earnings                                                                                                                             |   | **460.1**                   |        | 426.0                       |       |
| Accumulated other comprehensive loss                                                                                                          |   | **(19.2**                   | **)**       | (31.6                       | )          |
| **TOTAL  STOCKHOLDER’S EQUITY**                                                                                                          |   | **614.3**                   |        | 555.9                       |       |
| **TOTAL  LIABILITIES AND STOCKHOLDER’S EQUITY**                                                                                          |   | **$**                       | **3,425.0** |                        | $          | 3,511.5 |   |

 

----

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

 

See Notes to FinancialStatements.

 

4

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**FORM 10-Q**

**PACCARFINANCIAL CORP.**

 

**Statementsof Cash Flows (Unaudited)**

(Millionsof Dollars)

 
| **Nine Months Ended September 30**                           |   | **2003**    | ** ** | **2002**   | ** ** |
|-------------------------------------------------------------------|--------|-------------|------------|------------|------------|
| **OPERATING  ACTIVITIES**                                         |   |        | ** ** |       |       |
|                                                              |   |        | ** ** |       |       |
| Net income                                                        |   | **$**       | **34.1**   | ** ** | $          | 16.4 |   |
| Items included in net income not affecting cash:                  |   |        | ** ** |       |       |
| Depreciation and amortization                                     |   | **24.4**    | ** ** | 14.9       |       |
| Provision for losses on receivables                               |   | **16.9**    | ** ** | 36.4       |       |
| Provision (benefit) for deferred taxes                            |   | **(16.3**   | **)**      | (.3        | )          |
| Increase in payables and other                                    |   | **13.7**    | ** ** | 31.7       |       |
| **NET  CASH PROVIDED BY OPERATING ACTIVITIES**                    |   | **72.8**    | ** ** | 99.1       |       |
|                                                              |   |        | ** ** |       |       |
| **INVESTING  ACTIVITIES**                                         |   |        | ** ** |       |       |
|                                                              |   |        | ** ** |       |       |
| Finance and other receivables originated                          |   | **(852.6**  | **)**      | (876.1     | )          |
| Collections on finance and other receivables                      |   | **1,014.2** | ** ** | 1,054.5    |       |
| Net decrease (increase) in wholesale receivables                  |   | **21.8**    | ** ** | (62.5      | )          |
| Net (increase) decrease in loans to PACCAR Inc and  affiliates    |   | **(72.9**   | **)**      | 19.5       |       |
| Acquisition of equipment                                          |   | **(59.0**   | **)**      | (52.8      | )          |
| Proceeds from disposal of equipment                               |   | **4.4**     | ** ** | 6.1        |       |
| **NET  CASH PROVIDED BY INVESTING ACTIVITIES**                    |   | **55.9**    | ** ** | 88.7       |       |
|                                                              |   |        | ** ** |       |       |
| **FINANCING  ACTIVITIES**                                         |   |        | ** ** |       |       |
|                                                              |   |        | ** ** |       |       |
| Net decrease in commercial paper and other  short-term borrowings |   | **(432.2**  | **)**      | (30.7      | )          |
| Proceeds from medium-term notes and other borrowings              |   | **560.0**   | ** ** | 645.0      |       |
| Payments of medium-term notes and other borrowings                |   | **(259.0**  | **)**      | (807.9     | )          |
| Dividends paid                                                    |   | —      | ** ** | (11.0      | )          |
| Payment of advances from PACCAR Inc                               |   | **(1.6**    | **)**      | **—** | ** ** |
| Capital contributions                                             |   | **11.9**    | ** ** | 13.0       |       |
| **NET  CASH USED IN FINANCING ACTIVITIES**                        |   | **(120.9**  | **)**      | (191.6     | )          |
|                                                              |   |        | ** ** |       |       |
| **NET  INCREASE (DECREASE) IN CASH**                              |   | **7.8**     | ** ** | (3.8       | )          |
|                                                              |   |        | ** ** |       |       |
| CASH AT BEGINNING OF PERIOD                                       |   | **9.9**     | ** ** | 18.5       |       |
| CASH AT END OF PERIOD                                             |   | **$**       | **17.7**   | ** ** | $          | 14.7 |   |

 

See Notes to FinancialStatements.

 

5

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**FORM10-Q**

**PACCARFINANCIAL CORP.**

** **

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

** **

**NOTE A–Basis of Presentation**

 

The accompanyingunaudited financial statements have been prepared in accordance with theinstructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,they do not include all of the information and footnotes required by generallyaccepted accounting principles for complete financial statements. However, inthe opinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included. Forfurther information, refer to the financial statements and footnotes includedin PACCAR Financial Corp.’s (the “Company”) Annual Report on Form 10-K for theyear ended December 31, 2002.

 

*Consolidation:*In January 2003, the FinancialAccounting Standards Board issued Interpretation No. 46 (FIN 46), *Consolidation of Variable Interest Entities*,*an interpretation of Accounting ResearchBulletin No. 51*. FIN 46 requires consolidation of existingnoncontrolled entities if the entity is unable to finance its operationswithout additional support from the Company, or where the other investors donot have exposure to the significant risks and rewards of ownership. Under FIN46, this type of noncontrolled entity would be considered to be a VariableInterest Entity (VIE) and subject to the new consolidation criteria. Beginningin the third quarter of 2003, FIN 46 requires the consolidation of VIEs inwhich the Company absorbs a majority of the entity’s expected losses, receivesa majority of the entity’s expected residual returns, or both, as a result ofownership, contractual or other financial interests in the entity.  Certain provisions of FIN 46 were deferredfor adoption until the fourth quarter of 2003 under provisions of the recentlyissued FASB staff position 46-6.

 

TheCompany adopted the required provisions of FIN 46 in the third quarter. Therewas no significant impact from the adoption on the Company’s result ofoperations or financial position. The Company does not expect any significantimpact from the adoption of the deferred provisions of FIN 46 in the fourthquarter.

 

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

 

**NOTE B–Transactions with PACCAR Incand Affiliates**

 

The Company and PACCARInc (“PACCAR”) are parties to a Support Agreement that obligates PACCAR toprovide, when required, financial assistance to the Company to ensure that theCompany maintains a ratio of net earnings available for fixed charges to fixedcharges (as defined) of at least 1.25 to 1 for any fiscal year. The SupportAgreement also requires PACCAR to own, directly or indirectly, all outstandingvoting stock of the Company. The required ratio for the nine months endedSeptember 30, 2003 and full year 2002 was met without assistance. TheCompany determines the amount of PACCAR assistance, if any, at the end of eachfiscal year.

 

PACCAR Financial ServicesCorporation (“PFSC”) charges the Company for certain administrative services itprovides and certain services the Company receives indirectly from PACCAR. Thecosts are charged to the Company based upon the Company’s specific use of the servicesat PFSC’s or PACCAR’s cost. Management considers these charges reasonable andnot significantly different from the costs that would be incurred if theCompany were on a stand-alone basis. PFSC recognizes certain of theseadministrative services as an additional investment in the Company. The Companyrecords the investment as paid-in capital. There were no cash dividendsdeclared or paid during the first nine months of 2003. A cash dividend in theamount of $11.0 was declared and paid during the second quarter 2002.

 

6

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Periodically, the Companyborrows funds from PACCAR and makes loans to PACCAR. Loans outstanding toPACCAR were $51.2 at September 30, 2003 and $38.7 at December 31,2002. Loans outstanding from PACCAR were $1.3 at September 30, 2003 and$2.9 at December 31, 2002.

 

PACCAR has issued lettersof credit as of September 30, 2003 in the amount of $7.9 on behalf of theCompany to guarantee funds for payment to insured franchisees and their customersfor any future insurance losses.

 

The Company periodicallyloans funds to certain foreign finance and leasing affiliates of PACCAR. Thesevarious affiliates have Support Agreements with PACCAR, similar to theCompany’s Support Agreement. The foreign affiliates operate in the UnitedKingdom, the Netherlands, Mexico, Canada and Australia, and any resultingcurrency exposure is fully hedged. The foreign affiliates provide financing andleasing of trucks and related equipment manufactured primarily by PACCAR andsold through PACCAR’s independent dealer networks in Europe, Mexico, Canada andAustralia. The Company will not make loans to the foreign affiliates in excessof the equivalent of $300.0 United States dollars, unless the amount in excessof such limits is guaranteed by PACCAR. The Company periodically reviews thefunding alternatives for these affiliates, and these limits may be revised inthe future. There was a total of $213.7 in loans outstanding to foreignaffiliates operating in the United Kingdom and the Netherlands atSeptember 30, 2003.  There was atotal of $153.3 in loans outstanding to foreign affiliates operating in theUnited Kingdom, Mexico and the Netherlands at December 31, 2002.

 

**NOTE C— Stockholder’s Equity**

 

**Preferred Stock**

The Company’s Articles ofIncorporation provide that the 6% noncumulative, nonvoting preferred stock(100% owned by PFSC) is redeemable only at the option of the Company’s Board ofDirectors.

 

**ComprehensiveIncome**

The components of comprehensive income, net of related tax,were as follows:

 
|                                                |   | **Three  Months Ended  September 30** |     | **Nine  Months Ended  September 30** |       |
|-----------------------------------------------------|--------|--------------------------------------------|----------|-------------------------------------------|------------|
|                                                |   | **2003**                                   |     | **2002**                                  | ** ** | **2003** | ** ** | **2002** | ** ** |
|                                                |   |                                       |     |                                      |       |   |   |   |   |
| Net  income                                         |   | **$**                                      | **12.5** |                                      | $          | 8.9 |   | **$** | **34.1** |   | $ | 16.4 |   |
| Other  comprehensive income (loss):                 |   |                                       |     |                                      |       |   |   |   |   |
| Unrealized  net gain (loss) on derivative contracts |   | **6.7**                                    |     | (7.8                                      | )          | **12.4** |   | (1.9 | ) |
| Total  comprehensive income                         |   | **$**                                      | **19.2** |                                      | $          | 1.1 | ** ** | **$** | **46.5** |   | $ | 14.5 |   |

 

The accumulated othercomprehensive loss of $19.2 at September 30, 2003 and $31.6 atDecember 31, 2002, is comprised of the unrealized net loss on derivativecontracts.

 

7

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**ITEM 2.****  MANAGEMENT’S DISCUSSION ANDANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION**(Millions ofDollars)

 

**RESULTS OF OPERATIONS:**

 

The Company’s net income of $12.5for the third quarter of 2003 was $3.6 higher than the third quarter of 2002.Net income of $34.1 for the first nine months of 2003 increased $17.7 comparedto the first nine months of 2002. The profit improvement resulted from both alower provision for losses and higher finance margins. The provision for lossesdecreased $3.5 to $4.9 in the third quarter of 2003 and decreased by $19.5 to$16.9 in the first nine months of 2003. Credit losses improved due to fewerrepossessions and a lower loss per repossession resulting from higher usedtruck prices.  Higher margins wereearned on finance receivables and operating leases due to more favorable marketconditions and enhancements made to pricing and credit practices. Interestincome and expense in the third quarter and first nine months of 2003 werelower primarily 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 for Losses**

##### ** **

|                                                                                                                                              |   | **Nine  Months Ended  September 30** |       | **Year Ended  December 31** |       | **Nine  Months Ended  September 30** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|------------|----------------------------------|------------|-------------------------------------------|------------|
|                                                                                                                                              |   | **2003**                                  |       | **2002**                         | ** ** | **2002**                                  | ** ** |
| Balance at beginning of period                                                                                                                    |   | **$**                                     | **66.9**   |                             | $          | 66.2                                      |       | $ | 66.2 |   |
|                                                                                                                                              |   |                                      |       |                             |       |                                      |       |
| Provision for losses                                                                                                                              |   | **16.9**                                  |       | 42.2                             |       | 36.4                                      |       |
|                                                                                                                                              |   |                                      |       |                             |       |                                      |       |
| Credit losses, net of recoveries                                                                                                                  |   | **(16.6**                                 | **)**      | (41.5                            | )          | (35.6                                     | )          |
|                                                                                                                                              |   |                                      |       |                             |       |                                      |       |
| Balance at end of period                                                                                                                          |   | **$**                                     | **67.2**   |                             | $          | 66.9                                      |       | $ | 67.0 |   |
| **Ratios:**                                                                                                                                       |   |                                      | ** ** |                             | ** ** |                                      | ** ** |
|                                                                                                                                              |   |                                      |       |                             |       |                                      |       |
| Credit losses, net of recoveries to average net  receivables and equipment on operating leases (annualized for  September 30, 2003 and 2002) |   | **.71**                                   | **%**      | 1.29                             | %          | 1.49                                      | %          |
|                                                                                                                                              |   |                                      |       |                             |       |                                      |       |
| Allowance for losses to period-end net receivables  and equipment on operating leases                                                             |   | **2.16**                                  | **%**      | 2.04                             | %          | 2.07                                      | %          |
|                                                                                                                                              |   |                                      |       |                             |       |                                      |       |
| Period-end retail receivables and leases past due  (over 60 days) to period-end retail receivables and leases                                     |   | **1.29**                                  | **%**      | 1.91                             | %          | 1.97                                      | %          |

 

The level of credit losses in thefuture is dependent on various factors including, but not limited to, 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 debt securitiesunder the Securities Act of 1933 for offering to the public. In 2000, theCompany filed a shelf registration statement under which $2,500.0 ofmedium-term notes could be issued as needed. This shelf registration was fully utilized as of October 20, 2003. TheCompany plans to file a new shelf registration statement within the next threemonths.

 

TheCompany participates with PACCAR and other PACCAR affiliates in syndicatedcredit facilities of $1,500.0 at September 30, 2003 of which $750.0 expires in July, 2004 and $750.0expires in July, 2006. These credit facilities are entirely available for useby the Company and are used to provide backup liquidity for the Company’sshort-term borrowings. The Company is liable only for its own borrowings underthese credit facilities. There were no borrowings under these credit facilitiesin the nine months ended September 30, 2003 and the year ended December 31, 2002.

 

The Company believes thatit has sufficient financial capabilities to continue funding receivables andservicing debt through internally generated funds, lines of credit, access topublic and private debt markets, and other financial resources.

 

Otherinformation on liquidity, sources of capital, and contractual cash commitmentsas presented in the Company’s 2002 Annual Report on Form 10-K continues to berelevant.

 

**FORWARD LOOKING STATEMENTS:**

 

Certain information presented in this report containsforward-looking statements made pursuant to the Private Securities LitigationReform Act of 1995, which are subject to risks and uncertainties that mayaffect actual results. Risks and uncertainties include, but are not limited to:changes in the levels of new business volume due to unit fluctuations in newPACCAR truck sales; changes in competitive factors; changes affecting theprofitability of truck owners and operators; price changes impacting equipmentcosts and residual values; changes in costs and availability of externalfunding sources; and legislation and governmental regulation.

 

9

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**ITEM 3****.****  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

There have been no material changesin the Company’s market risk during the nine months ended September 30,2003.  For additional information, referto Item 7a of the Company’s December 31, 2002 Annual Report on Form 10-K.

 

**ITEM 4****.****  CONTROLSAND PROCEDURES**

 

Anevaluation was performed under the supervision and with the participation ofthe Company’s management, including the principal executive officer andprincipal financial officer, of the effectiveness of the design and operationof the Company’s disclosure controls and procedures (as defined in rules13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934,as amended) as of September 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–OTHER INFORMATION**

 

For Items 1, 2, 3, 4 and5, there was no reportable information during the nine months endedSeptember 30, 2003.

 

**Item 6****.****                       EXHIBITSAND REPORTS ON FORM 8-K**

 

(a)                 Exhibitsfiled as part of this report are listed in the accompanying Exhibit Index.

 

(b)                Therewere no reports on Form 8-K for the quarter ended September 30, 2003.

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
|   | **PACCAR Financial Corp.** |
|--------|----------------------------|
|   |                       | (Registrant) |
|   |                       |   |
|   |                       |   |
| Date   | November 7,  2003     |   | By | /s/ Timothy M.  Henebry |
|   |                       | Timothy M.  Henebry |
|   |                       | President |
|   |                       | (Authorized  Officer) |
|   |                       |   |
|   |                       |   |
|   | By                         | /s/ Brice J.  Poplawski |
|   |                       | Brice J.  Poplawski  Controller  (Chief Accounting Officer) |
|        |                            |  |  |  |

 

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**EXHIBITINDEX**

 
| Exhibit (in  order of assigned index 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). |
|                                          |   |   |
| 4.5                                           |   | 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, 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 nine-month  periods ended September 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 nine-month periods ended  September 30, 2003 and 2002. |
|                                          |   |   |
| 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 exhibits listed in Item 601 of Regulation S-K are not applicable.

 

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