**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

 

**FORM 10-Q**

 

 
| **ý** | **Quarterly Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934** |
|------------|----------------------------------------------------------------------------------------------|

 

**For the quarterly period ended September 30, 2002**

 

**or**

 
| **o** | **Transition Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**For transition periodfrom                         to**

 

**Commission File No. 0-12553**

 

 

**PACCAR FINANCIAL CORP.**

(Exact name of registrant as specified in its charter)

 

 

| **Washington**                                                 |   | **91-6029712**                        |
|----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S.  Employer Identification No.) |

 

 

| **777 — 106th Ave. N.E., Bellevue, WA** |   | **98004**   |
|----------------------------------------------|--------|-------------|
| (Address  of principal executive offices)    |   | (Zip  code) |

 

 

**(425) 468-7100**

(Registrant’stelephone number, including area code)

 

Indicate by check mark whether theregistrant: (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days.   Yes ý  No  o

 

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

 

CommonStock, $100 par value—145,000 shares as of October 31, 2002

 

 

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.

 

 

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

**PART I—FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIALSTATEMENTS**

 

##### **Statements of Income(Unaudited)**

(Millions of Dollars)

 
| ** **                                          | ** ** | **Three  Months Ended  September 30** | ** ** | **Nine  Months Ended  September 30** | ** ** |
|-----------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
|                                                |       | **2002**                              |       | **2001**                             |       | **2002** |   | **2001** |   |
| **INTEREST  AND OTHER REVENUE**                     |       | **$**                                 | **71.0**   |                                 | $          | 82.4 | ** ** | **$** | **211.3** |   | $ | 258.4 |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| Interest and other borrowing expenses               |       | **29.0**                              |       | 41.6                                 | ** ** | **92.3** |   | 139.1 |   |
| Depreciation related to operating leases            |       | **4.0**                               |       | 3.1                                  | ** ** | **10.1** |   | 9.1 |   |
| Insurance claims and underwriting expenses          |       | **2.4**                               |       | 2.4                                  | ** ** | **8.4** |   | 7.6 |   |
| Vehicle operating expenses                          |       | **1.9**                               |       | 1.5                                  | ** ** | **5.3** |   | 4.2 |   |
| Selling general and administrative expenses         |       | **10.6**                              |       | 10.8                                 | ** ** | **31.7** |   | 31.7 |   |
| Provision for losses on receivables                 |       | **8.4**                               |       | 22.1                                 | ** ** | **36.4** |   | 59.3 |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| **TOTAL  EXPENSES**                                 |       | **56.3**                              |       | 81.5                                 | ** ** | **184.2** |   | 251.0 |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| **INCOME  BEFORE INCOME TAXES**                     |       | **14.7**                              |       | .9                                   | ** ** | **27.1** |   | 7.4 |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| Federal and state income taxes                      |       | **5.8**                               |       | .4                                   | ** ** | **10.7** |   | 3.1 |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| **INCOME  BEFORE ACCOUNTING CHANGE**                |       | **8.9**                               |       | .5                                   | ** ** | **16.4** |   | 4.3 |   |
| Cumulative effect of accounting change (net of tax) |       | **—**                            |       | —                               | ** ** | **—** |   | .4 |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| **NET INCOME**                                      |       | **8.9**                               |       | .5                                   | ** ** | **16.4** |   | 4.7 |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| **RETAINED  EARNINGS AT BEGINNING OF PERIOD**       |       | **406.2**                             |       | 398.3                                | ** ** | **409.7** |   | 394.1 |   |
| Cash dividends paid                                 |       | **—**                            |       | —                               | ** ** | **11.0** |   | — |   |
|                                                |       |                                  |       |                                 |       |   |   |   |   |
| **RETAINED EARNINGS AT END OF PERIOD**              |       | **$**                                 | **415.1**  |                                 | $          | 398.8 | ** ** | **$** | **415.1** |   | $ | 398.8 |   |

 

Earnings per share and dividends per share are not reported because theCompany is a wholly-owned subsidiary of PACCAR Financial Services Corporation.

 

See Notes to Financial Statements.

 

 

2

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

**BalanceSheets**

(Millions of Dollars)

 
|                                                                                                                                         | ** ** | **September  30  2002** | ** **  | **December  31  2001*** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|-------------|-------------------------|------------|
|                                                                                                                                         |       | **(Unaudited)**         |        |                    |       |
| **ASSETS:**                                                                                                                                  |       |                    |        |                    |       |
|                                                                                                                                         |       |                    |        |                    |       |
| Cash                                                                                                                                         |       | **$**                   | **14.7**    |                    | $          | 18.5 |   |
| Finance and other receivables, net of allowance for losses of $67.0  ($66.2 in 2001)                                                         |       | **3,159.7**             |        | 3,289.1                 |       |
| Loans to PACCAR Inc and affiliates                                                                                                           |       | **143.7**               |        | 163.2                   |       |
| Equipment on operating leases, net of allowance for depreciation of  $25.0 ($21.9 in 2001)                                                   |       | **86.3**                |        | 52.0                    |       |
| Equipment held for sale                                                                                                                      |       | **9.8**                 |        | 17.1                    |       |
| Other assets                                                                                                                                 |       | **22.4**                |        | 22.7                    |       |
|                                                                                                                                         |       |                    |        |                    |       |
| **TOTAL ASSETS**                                                                                                                             |       | **$**                   | **3,436.6** |                    | $          | 3,562.6 |   |
|                                                                                                                                         |       |                    |        |                    |       |
| **LIABILITIES:**                                                                                                                             |       |                    |        |                    |       |
|                                                                                                                                         |       |                    |        |                    |       |
| Accounts payable and accrued expenses                                                                                                        |       | **$**                   | **68.1**    |                    | $          | 55.8 |   |
| Payable for finance receivables acquired                                                                                                     |       | **48.9**                |        | 30.5                    |       |
| Derivative liability                                                                                                                         |       | **55.2**                |        | 52.0                    |       |
| Commercial paper                                                                                                                             |       | **1,243.8**             |        | 1,274.5                 |       |
| Medium-term notes and other borrowings                                                                                                       |       | **1,302.7**             |        | 1,465.6                 |       |
| Income taxes — current and deferred                                                                                                     |       | **178.4**               |        | 161.2                   |       |
|                                                                                                                                         |       |                    |        |                    |       |
| **TOTAL LIABILITIES**                                                                                                                        |       | **$**                   | **2,897.1** |                    | $          | 3,039.6 |   |
|                                                                                                                                         |       |                    |        |                    |       |
| **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 $100 per share  200,000 shares authorized, 145,000 shares issued and outstanding                                     |       | **14.5**                |        | 14.5                    |       |
| Paid-in capital                                                                                                                              |       | **112.5**               |        | 99.5                    |       |
| Retained earnings                                                                                                                            |       | **415.1**               |        | 409.7                   |       |
| Accumulated other comprehensive loss                                                                                                         |       | **(33.6**               | )           | (31.7                   | )          |
|                                                                                                                                         |       |                    |        |                    |       |
| **TOTAL STOCKHOLDER’S EQUITY**                                                                                                          |       | **539.5**               |        | 523.0                   |       |
|                                                                                                                                         |       |                    |        |                    |       |
| **TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY**                                                                                          |       | **$**                   | **3,436.6** |                    | $          | 3,562.6 |   |

 

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* The December 31, 2001 balance sheet has been derived from auditedfinancial statements.

 

See Notes to Financial Statements.

 

 

3

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

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

(Millions of Dollars)

 
| **Nine  Months Ended September 30**                              |   | **2002**    |       | **2001**   |   |
|------------------------------------------------------------------|--------|-------------|------------|------------|--------|
| **OPERATING ACTIVITIES:**                                        |   |        | ** ** |       |   |
|                                                             |   |        | ** ** |       |   |
| Net income                                                       |   | **$**       | **16.4**   | ** ** | $      | 4.7 |   |
| Items included in net income not affecting cash:                 |   |        | ** ** |       |   |
| Provision for losses on receivables                              |   | **36.4**    | ** ** | 59.3       |   |
| Deferred tax provision                                           |   | **(.3**     | **)**      | (1.3       | )      |
| Depreciation and amortization                                    |   | **14.9**    | ** ** | 13.3       |   |
| Increase (decrease) in payables and other                        |   | **31.7**    | ** ** | (19.9      | )      |
|                                                             |   |        | ** ** |       |   |
| **NET CASH PROVIDED BY OPERATING ACTIVITIES**                    |   | **99.1**    | ** ** | 56.1       |   |
|                                                             |   |        | ** ** |       |   |
| **INVESTING ACTIVITIES:**                                        |   |        | ** ** |       |   |
|                                                             |   |        | ** ** |       |   |
| Finance and other receivables originated                         |   | **(876.1**  | **)**      | (778.5     | )      |
| Collections on finance and other receivables                     |   | **1,054.5** | ** ** | 1,080.2    |   |
| Net (increase) decrease in wholesale receivables                 |   | **(62.5**   | **)**      | 153.2      |   |
| Net decrease in loans to PACCAR Inc and affiliates               |   | **19.5**    | ** ** | 3.2        |   |
| Acquisition of equipment                                         |   | **(52.8**   | **)**      | (13.2      | )      |
| Proceeds from disposal of equipment                              |   | **6.1**     | ** ** | 6.6        |   |
|                                                             |   |        | ** ** |       |   |
| **NET CASH PROVIDED BY INVESTING ACTIVITIES**                    |   | **88.7**    | ** ** | 451.1      |   |
|                                                             |   |        | ** ** |       |   |
| **FINANCING ACTIVITIES:**                                        |   |        | ** ** |       |   |
|                                                             |   |        | ** ** |       |   |
| Net decrease in commercial paper and other short-term borrowings |   | **(30.7**   | **)**      | (158.1     | )      |
| Proceeds from medium-term notes and other borrowings             |   | **645.0**   | ** ** | 50.0       |   |
| Payments of medium-term notes and other borrowings               |   | **(807.9**  | **)**      | (408.7     | )      |
| Dividends paid                                                   |   | **(11.0**   | **)**      | —     |   |
| Payment of advances from PACCAR Inc                              |   | **—**  | ** ** | (5.0       | )      |
| Capital contributions                                            |   | **13.0**    | ** ** | 13.3       |   |
|                                                             |   |        | ** ** |       |   |
| **NET CASH USED IN FINANCING ACTIVITIES**                        |   | **(191.6**  | **)**      | (508.5     | )      |
|                                                             |   |        | ** ** |       |   |
| **NET DECREASE IN CASH**                                         |   | **(3.8**    | **)**      | (.9        | )      |
|                                                             |   |        | ** ** |       |   |
| **CASH AT BEGINNING OF PERIOD**                                  |   | **18.5**    | ** ** | 12.6       |   |
|                                                             |   |        | ** ** |       |   |
| **CASH AT END OF PERIOD**                                        |   | **$**       | **14.7**   | ** ** | $      | 11.7 |   |

 

See Notes to Financial Statements.

 

 

4

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**FORM 10-Q**

**PACCAR FINANCIAL CORP.**

 

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

 

 

**NOTE A—Basis of Presentation**

 

The accompanying unaudited financial statementshave been prepared in accordance with the instructions to Form 10-Q and Article10 of Regulation S-X. Accordingly, they do not include all of the informationand footnotes required by generally accepted accounting principles for completefinancial statements. However, in the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. For further information, refer to thefinancial statements and footnotes included in PACCAR Financial Corp.’s (the“Company”) Annual Report on Form 10-K for the year ended December 31, 2001.

 

*DerivativeFinancial Instruments*: Effective January 1, 2001, the Companyadopted Financial Accounting Standard (FAS) No. 133, “Accounting for DerivativeInstruments and Hedging Activities.” The adoption of FAS 133 on January 1, 2001resulted in a cumulative increase to net income of $.4, net of related incometax effects of $.3, and a cumulative reduction to Other Comprehensive Income of$14.6 which was net of related income tax effects of $9.2 in the first quarterof 2001.

 

*Reclassifications*:Certain prior year amounts have been reclassified to conform to the 2002presentation.

 

 

**NOTE B—Transactions with PACCAR Inc and Affiliates**

 

The Company and PACCAR Inc (“PACCAR”) are partiesto a Support Agreement that obligates PACCAR to provide, when required,financial assistance to the Company to ensure that the Company maintains aratio of net earnings available for fixed charges to fixed charges (as defined)of at least 1.25 to 1 for any fiscal year. The Support Agreement also requiresPACCAR to own, directly or indirectly, all outstanding voting stock of theCompany. For the nine months ended September 30, 2002 the Company has met therequired ratio of earnings to fixed charges. The Company will determine theamount of PACCAR assistance, if any, at the end of the fiscal year. In order tomaintain the ratio of earnings to fixed charges in 2001, PACCAR providedearnings support by assuming $17.0 of the Company’s interest expense in thefourth quarter of 2001.

 

PACCAR Financial Services Corporation (“PFSC”)charges the 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’sor PACCAR’s cost. Management considers these charges reasonable and notsignificantly different from the costs that would be incurred if the Companywere on a stand-alone basis. PFSC recognizes certain of these administrativeservices as an additional investment in the Company. The Company records the investmentas paid-in capital. The Company may elect to pay a dividend to PFSC for thepaid-in capital invested in prior years.

 

A cash dividend in the amount of $11.0 wasdeclared and paid during the first nine months of 2002. There were no cashdividends declared or paid during the first nine months of 2001.

 

Periodically, the Company borrows funds fromPACCAR and makes loans to PACCAR. Loans outstanding to PACCAR were $38.6 and$20.3 at September 30, 2002 and December 31, 2001, respectively. There were noborrowings from PACCAR at September 30, 2002 or December 31, 2001.

 

 

5

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PACCAR has issued letters of credit as ofSeptember 30, 2002 in the amount of $6.1 on behalf of the Company to guaranteefunds for payment to insured franchisees and their customers for any futureinsurance losses.

 

The Company periodically loans funds to certainforeign finance and leasing affiliates of PACCAR. The foreign affiliatesoperate in the United Kingdom, the Netherlands, Mexico, Canada and Australia,and any resulting currency exposure is fully hedged. These various affiliateshave Support Agreements with PACCAR, similar to the Company’s SupportAgreement. The foreign affiliates provide financing and leasing of trucks andrelated equipment manufactured primarily by PACCAR and sold through PACCAR’sindependent dealer networks in Europe, Mexico, Canada and Australia. TheCompany will not make loans to the foreign affiliates in excess of theequivalent of $300.0 United States dollars, unless the amount in excess of suchlimit is guaranteed by PACCAR. The Company periodically reviews the fundingalternatives for theseaffiliates, andthis limit may be revised in the future. There was a total of $105.1 and$142.9 in loans outstanding to foreign affiliates operating in the UnitedKingdom, the Netherlands and Mexico at September 30, 2002 and December 31,2001, respectively.

 

 

**NOTE C—Preferred Stock**

 

The Company’s Articles of Incorporation providethat the 6% noncumulative, nonvoting preferred stock (100% owned by PFSC) isredeemable only at the option of the Company’s Board of Directors.

 

 

**NOTE D—  OtherComprehensive Income**

 

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

 
| ** **                                                      | ** ** | **Three  Months Ended  September 30** | ** ** | **Nine  Months Ended  September 30** | ** ** |
|-----------------------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
|                                                            |       | **2002**                              |       | **2001**                             |       | **2002** |   | **2001** |   |
| Net income                                                      |       | **$**                                 | **8.9**    |                                 | $          | .5 | ** ** | **$** | **16.4** |   | $ | 4.7 |   |
| Other comprehensive loss:                                       |       |                                  |       |                                 |       |   |   |   |   |
| Cumulative effect of accounting change for derivative contracts |       | **—**                            | ** ** | —                               |       | **—** |   | (14.6 | ) |
| Unrealized net loss on derivative contracts                     |       | **(7.8**                              | **)**      | (14.0                                | )          | **(1.9** | **)** | (24.9 | ) |
| Net other comprehensive loss                                    |       | **(7.8**                              | **)**      | (14.0                                | )          | **(1.9** | **)** | (39.5 | ) |
| Total comprehensive income (loss)                               |       | **$**                                 | **1.1**    | ** **                           | $          | (13.5 | ) | **$** | **14.5** | ** ** | $ | (34.8 | ) |

 

Accumulated other comprehensive loss of $33.6 and$31.7 at September 30, 2002 and December 31, 2001, respectively, is comprisedof the unrealized net loss on derivative contracts.

 

 

6

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**Item 2.****                      ****MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**(Millions ofDollars)

 

**Results ofOperations:**

 

The Company’s net incomeof $16.4 for the first nine months of 2002 was $11.7 higher than the first ninemonths of 2001. Interestand other revenue declined $47.1 or 18% to $211.3 over the same period due tolower average earning assets and interest rates. Average earning assetsdecreased 13% to $3,208 in the first nine months of 2002 compared to $3,705 inthe comparable period of 2001 as a result of lower new business volume in 2001and 2002 compared to prior years and early contract terminations due torepossessions. Interest and other borrowing expense decreased $46.8, or 34%, to$92.3 in the first nine months of 2002 from$139.1 in the first nine months of 2001 due to lower debt balances and interestrates. The provision for losses decreased 39% to $36.4 in the first nine monthsof 2002 from $59.3 in the first nine months of 2001 primarily due to lowercredit losses. Credit losses have improved due to fewer repossessions andhigher used truck prices resulting in a lower loss per repossession.

 

The Company’s net incomeof $8.9 for the third quarter 2002 was $8.4 higher than the third quarter of2001. Interest and otherrevenue declined $11.4 or 14% to $71.0 in the third quarter of 2002 due tolower earning assets and interest rates. Interest and other borrowing expensedecreased $12.6, or 30%, to $29.0 inthe third quarter of 2002 from $41.6 in the third quarter of 2001 due to lowerdebt balances and interest rates. The provision for losses decreased 62% to$8.4 in the third quarter of 2002 from $22.1 in the third quarter of 2001primarily due to lower credit losses.

 

 

7

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The following tablesummarizes the activity in the Company’s allowance for losses on receivablesand presents related ratios:

 

 

##### **Allowancefor Losses**

 
| ** **                                                                                                         | ** ** | **Nine  Months  Ended  September 30** | ** ** | **Year Ended  December 31** | ** ** | **Nine  Months  Ended  September 30** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-----------------------------|------------|---------------------------------------|------------|
|                                                                                                               |       | **2002**                              |       | **2001**                    |       | **2001**                              |       |
| Balance at beginning of period                                                                                     |       | **$**                                 | **66.2**   |                        | $          | 65.4                                  |       | $ | 65.4 |   |
| Provision for losses                                                                                               |       | **36.4**                              |       | 80.8                        |       | 59.3                                  |       |
| Credit losses net of recoveries                                                                                    |       | **(35.6**                             | **)**      | (80.0                       | )          | (58.6                                 | )          |
| Balance at end of period                                                                                           |       | **$**                                 | **67.0**   |                        | $          | 66.2                                  |       | $ | 66.1 |   |
| Ratios:                                                                                                            |       |                                  |       |                        |       |                                  |       |
|                                                                                                               |       |                                  |       |                        |       |                                  |       |
| Net losses to average net receivables andequipment on operating leases (annualizedfor September 30, 2002 and 2001) |       | **1.49**                              | %          | 2.20                        | %          | 2.11                                  | %          |
|                                                                                                               |       |                                  |       |                        |       |                                  |       |
| Allowance for losses to period-end netreceivables and equipment on operatingleases                                 |       | **2.07**                              | %          | 1.98                        | %          | 1.89                                  | %          |
|                                                                                                               |       |                                  |       |                        |       |                                  |       |
| Period-end retail receivables and leases pastdue (over 60 days) to period-end retailand lease receivables          |       | **1.97**                              | %          | 3.11                        | %          | 3.48                                  | %          |

 

The level of creditlosses in the future is dependent on various factors including, among otherthings, overall economic conditions, fuel prices and other operating costs forcustomers, freight volumes and used truck values.

 

**Funding andLiquidity:**

 

Since1983, the Company has registered debt securities under the Securities Act of1933 for offering to the public.  In2000, the Company filed a shelf registration statement under which $2,500.0 ofmedium-term notes could be issued as needed. As of September 30, 2002, $830.0of such securities were available for issuance.

 

TheCompany believes that it has sufficient financial capabilities to continuefunding receivables and servicing debt through internally generated funds,lines of credit, access to public and private debt markets, and other financialresources.  The decrease in netborrowings to $2,546.5 at September 30, 2002 from $2,740.1 at December 31, 2001is due to collections exceeding the origination of finance and otherreceivables.

 

 

8

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##### **SyndicatedCredit Facilities**

 
| ** **                                       | ** ** | **Nine  Months  Ended  September 30** | ** **  | **Year Ended  December 31** | ** ** |
|--------------------------------------------------|------------|---------------------------------------|-------------|-----------------------------|------------|
|                                             |       | **2002**                              |        | **2001**                    |       |
| Available for PACCAR and other PACCAR affiliates |       | **$**                                 | **1,275.0** |                        | $          | 1,825.0 |   |
| Available for use by the Company                 |       | **975.0**                             |        | 1,525.0                     |       |
|                                                  |            |                                       |             |                             |            |  |  |

 

The Companyparticipates with PACCAR and other PACCAR affiliates in syndicated creditfacilities of $1,275.0 at September 30, 2002 of which $975.0 is available foruse by the Company. In the third quarter 2002, the Company replaced a maturingcredit facility of $1,050.0 with a credit facility of $500.0 reflecting reducedrequirements.  The Company is liableonly for its own borrowings under these credit facilities. The credit facilitiesmature as follows, $500.0 and $775.0 in 2003 and 2004, respectively.  There were no borrowings under these creditfacilities in the nine months ended September 30, 2002 or the year endedDecember 31, 2001.

 

Other information on liquidity, sources of capital,and contractual cash commitments as presented in the Company’s 2001 AnnualReport on Form 10-K continues to be relevant.

 

 

**ForwardLooking Statements:**

 

Certain informationpresented in this Form 10-Q contains forward-looking statements made pursuantto the Private Securities Litigation Reform Act of 1995. These statements aresubject to risks and uncertainties that may affect actual results. The risksand uncertainties include, but are not limited to national and local economic,political and industry conditions; changes in the levels of new business volumedue to unit fluctuations in new PACCAR truck sales; changes in competitivefactors; changes affecting the profitability of truck owners and operators;price changes impacting equipment costs and residual values; changes in costsand availability of external funding sources; and legislation and governmentalregulation.

 

 

9

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**Item 3.****                      ****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Therehave been no material changes in the Company’s market risk during the ninemonths ended September 30, 2002.  Foradditional information, refer to Item 7a of the Company’s December 31, 2001Annual Report on Form 10-K.

**Item 4.****                      ****CONTROLSAND PROCEDURES**

Asof September 30, 2002, an evaluation was performed under the supervision andwith the participation of the Company’s management, including the principalexecutive officer and principal financial officer, of the effectiveness of thedesign and operation of the Company’s disclosure controls and procedures. Basedon that evaluation, Company’s management, including the principal executiveofficer and principal financial officer, concluded that the Company’sdisclosure controls and procedures were effective as of September 30, 2002.There have been no significant changes in the Company’s internal controls or inother factors that could significantly affect internal controls subsequent tothe date of the evaluation.

 

 

**PART II—OTHER INFORMATION**

 

For items 1, 2, 3, 4 and 5, there was noreportable information during the nine months ended September 30, 2002.

 

 

**Item 6.****                      ****EXHIBITS AND REPORTS ON FORM 8-K**

 

          (a)     Exhibits filed as part of this report arelisted in the accompanying Exhibit Index.

 

          (b)     Therewere no reports on Form 8-K for the quarter ended September 30, 2002.

 

 

 

10

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**SIGNATURES**

 

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|       | **PACCAR Financial Corp.** |
|------------|----------------------------|
|       |                       | (Registrant) |
|       |                       |   |
| Date  | November 8, 2002           |   | By | /s/ J. Michael Rankin |
|       |                       |   |
|       |                       | J. Michael Rankin |
|       |                       | Acting President |
|       |                       | (Authorized Officer) |
|       |                       |   |
|       | By                         | /s/ Barry E. Prather |
|       |                       |   |
|       |                       | Barry E. Prather |
|       |                       | Controller |
|       |                       | (Chief Accounting Officer) |
|            |                            |  |  |  |

 

 

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**CERTIFICATIONS**

I,Mark C. Pigott, Chairman, certify that:

 

1.                           Ihave reviewed this quarterly report on Form 10-Q of PACCAR Financial Corp.;

 

2.                           Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                           Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                           Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                    designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                   evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                    presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                           Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)                    allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                   anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.                           Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date   | November 8, 2002 |                          |   |   |
|--------|------------------|-------------------------------|--------|--------|
|   |             | /s/ Mark C. Pigott            |
|   |             | Mark C. Pigott                |
|   |             | Chairman                      |
|   |             | (Principal Executive Officer) |

 

 

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I,Michael A. Tembreull, Vice Chairman, certify that:

 

1.                           Ihave reviewed this quarterly report on Form 10-Q of PACCAR Financial Corp.;

 

2.                           Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                           Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                           Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)             evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                           Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)              allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.                           Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date   | November 8, 2002 |                          |   |   |
|--------|------------------|-------------------------------|--------|--------|
|   |             | /s/ Michael A. Tembreull      |
|   |             | Michael A. Tembreull          |
|   |             | Vice Chairman                 |
|   |             | (Principal Financial Officer) |

 

 

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| **EXHIBIT INDEX**                            |
|----------------------------------------------|
| 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). |
|                                         |   |   |
| 4.3                                          |   | 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, 2002 and 2001. |
|                                         |   |   |
|                                              |  |  |  |

 

 

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| 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, 2002 and 2001. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                            |
| 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, 2002 and 2001.               |
|   |   |                                                                                                                                                                                                            |
| 99.1   |   | Certification  pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section  1350).                                                                                                             |
|   |   |                                                                                                                                                                                                            |
| 99.2   |   | Certification  pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section  1350).                                                                                                             |

 

 

Other exhibits listed inItem 601 of Regulation S-K are not applicable.

 

 

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