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EX-32.(A) - EX-32.(A) - PACCAR FINANCIAL CORPck0000731288-ex32a_8.htm
EX-31.(B) - EX-31.(B) - PACCAR FINANCIAL CORPck0000731288-ex31b_10.htm
EX-31.(A) - EX-31.(A) - PACCAR FINANCIAL CORPck0000731288-ex31a_6.htm
EX-12.(B) - EX-12.(B) - PACCAR FINANCIAL CORPck0000731288-ex12b_9.htm
EX-12.(A) - EX-12.(A) - PACCAR FINANCIAL CORPck0000731288-ex12a_7.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended March 31, 2018

Commission File No. 001-11677

 

PACCAR FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

 

Washington

91-6029712

(State of incorporation)

(I.R.S. Employer

Identification No.)

 

 

777 – 106th Ave. N.E., Bellevue, Washington

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) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

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

Common Stock, $100 par value—145,000 shares as of April 30, 2018

THE REGISTRANT IS A WHOLLY OWNED SUBSIDIARY OF 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 THE REDUCED DISCLOSURE FORMAT.

 

 

 


PACCAR FINANCIAL CORP. - FORM 10-Q

 

INDEX

 

 

 

- 2 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

STATEMENTS OF COMPREHENSIVE INCOME AND RETAINED EARNINGS (Unaudited)

(Millions of Dollars)

 

 

 

Three Months Ended

 

 

 

March 31

 

 

 

2018

 

 

2017

 

Interest and fee income

 

$

61.3

 

 

$

57.7

 

Operating lease and rental revenues

 

 

101.5

 

 

 

92.7

 

Used truck sales and other revenues

 

 

7.7

 

 

 

15.7

 

 

 

 

 

 

 

 

 

 

TOTAL INTEREST AND OTHER REVENUES

 

 

170.5

 

 

 

166.1

 

 

 

 

 

 

 

 

 

 

Interest and other borrowing costs

 

 

28.9

 

 

 

23.4

 

Depreciation and other rental expenses

 

 

93.2

 

 

 

91.7

 

Cost of used truck sales and other expenses

 

 

6.8

 

 

 

15.0

 

Selling, general and administrative expenses

 

 

13.8

 

 

 

13.0

 

Provision for losses on receivables

 

 

1.2

 

 

 

3.0

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSES

 

 

143.9

 

 

 

146.1

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

26.6

 

 

 

20.0

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

6.2

 

 

 

7.5

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

20.4

 

 

$

12.5

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

$

22.9

 

 

$

13.1

 

 

 

 

 

 

 

 

 

 

RETAINED EARNINGS AT BEGINNING OF PERIOD

 

$

1,396.1

 

 

$

1,004.9

 

 

 

 

 

 

 

 

 

 

RETAINED EARNINGS AT END OF PERIOD

 

$

1,416.5

 

 

$

1,017.4

 

 

Earnings per share and dividends per share are not reported because the Company is a wholly owned subsidiary of PACCAR Inc.

See Notes to Financial Statements.

 

- 3 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

BALANCE SHEETS

(Millions of Dollars)

 

 

 

March 31

 

 

December 31

 

 

 

2018

 

 

2017*

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash

 

$

28.6

 

 

$

62.7

 

Finance and other receivables, net of allowance for credit losses

   (2018 - $58.2 and 2017 - $58.4)

 

 

5,432.9

 

 

 

5,254.2

 

Due from PACCAR and affiliates

 

 

1,167.5

 

 

 

1,236.3

 

Equipment on operating leases, net of accumulated depreciation

   (2018 - $655.0 and 2017 - $630.6)

 

 

1,542.1

 

 

 

1,592.6

 

Other assets

 

 

226.6

 

 

 

206.8

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

8,397.7

 

 

$

8,352.6

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other

 

$

331.6

 

 

$

288.4

 

Due to PACCAR and affiliates

 

 

53.4

 

 

 

20.2

 

Commercial paper

 

 

1,504.7

 

 

 

1,437.8

 

Medium-term notes

 

 

4,332.9

 

 

 

4,433.4

 

Deferred taxes and other liabilities

 

 

576.1

 

 

 

602.5

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

6,798.7

 

 

 

6,782.3

 

 

 

 

 

 

 

 

 

 

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

 

Additional paid-in capital

 

 

132.6

 

 

 

126.8

 

Retained earnings

 

 

1,416.5

 

 

 

1,396.1

 

Accumulated other comprehensive income

 

 

4.4

 

 

 

1.9

 

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDER'S EQUITY

 

 

1,599.0

 

 

 

1,570.3

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY

 

$

8,397.7

 

 

$

8,352.6

 

 

*

The December 31, 2017 balance sheet has been derived from audited financial statements.

 

See Notes to Financial Statements.

 

 

- 4 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

STATEMENTS OF CASH FLOWS (Unaudited)

(Millions of Dollars)

 

 

 

Three Months Ended

 

 

 

March 31

 

 

 

2018

 

 

2017

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

20.4

 

 

$

12.5

 

Items included in net income not affecting cash:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

88.1

 

 

 

87.2

 

Provision for losses on receivables

 

 

1.2

 

 

 

3.0

 

Deferred taxes

 

 

(26.9

)

 

 

(7.5

)

Administrative fees for services from PACCAR

 

 

5.8

 

 

 

3.2

 

Change in tax-related balances with PACCAR

 

 

150.8

 

 

 

21.5

 

Increase in payables and other

 

 

36.8

 

 

 

15.5

 

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

276.2

 

 

 

135.4

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Finance and other receivables originated

 

 

(474.2

)

 

 

(281.7

)

Collections on finance and other receivables

 

 

392.0

 

 

 

390.0

 

Net increase in wholesale receivables

 

 

(105.8

)

 

 

(19.9

)

Loans to PACCAR and affiliates

 

 

(91.0

)

 

 

(25.0

)

Collections on loans from PACCAR and affiliates

 

 

73.0

 

 

 

101.0

 

Net (increase) decrease in other receivables and leases to PACCAR and affiliates

 

 

(34.6

)

 

 

20.7

 

Acquisition of equipment for operating leases, primarily from PACCAR

 

 

(69.2

)

 

 

(94.3

)

Proceeds from disposal of equipment

 

 

62.1

 

 

 

49.8

 

Other

 

 

(28.9

)

 

 

(17.9

)

 

 

 

 

 

 

 

 

 

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

 

 

(276.6

)

 

 

122.7

 

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net increase (decrease) in short-term commercial paper

 

 

67.6

 

 

 

(172.9

)

Proceeds from medium-term notes and other commercial paper

 

 

398.7

 

 

 

398.9

 

Payments of medium-term notes and other commercial paper

 

 

(500.0

)

 

 

(500.0

)

 

 

 

 

 

 

 

 

 

NET CASH USED IN FINANCING ACTIVITIES

 

 

(33.7

)

 

 

(274.0

)

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH

 

 

(34.1

)

 

 

(15.9

)

 

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

 

 

62.7

 

 

 

46.6

 

 

 

 

 

 

 

 

 

 

CASH AT END OF PERIOD

 

$

28.6

 

 

$

30.7

 

 

See Notes to Financial Statements.

 

 

 

- 5 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

Notes to Financial Statements (Unaudited)

(Millions of Dollars)

 

NOTE A – Basis of Presentation

PACCAR Financial Corp. (the “Company”) is a wholly owned subsidiary of PACCAR Inc (“PACCAR”). The Company primarily provides financing of PACCAR manufactured trucks and related equipment sold by authorized dealers. The Company also finances dealer inventories of transportation equipment and franchises Kenworth and Peterbilt dealerships to engage in full-service and finance leasing. The operations of the Company are fundamentally affected by its relationship with PACCAR.

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

New Accounting Pronouncements:

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendment requires a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for the difference between the historical corporate income tax rate and the newly enacted income tax rate resulting from the Tax Act. This ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company does not expect adoption of the new standard to have a material impact on the Company’s financial statements. The Company expects to early adopt this ASU in the fourth quarter of 2018.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendment in this ASU requires entities having financial assets measured at amortized cost to estimate credit reserves under an expected credit loss model rather than the current incurred loss model. Under this new model, expected credit losses will be based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability. The ASU is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted, but not earlier than annual and interim periods beginning after December 15, 2018. This amendment should be applied on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact on its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which amends the existing accounting standards for leases. Under the new lease standard, lessees will recognize a right-of-use asset and a lease liability for virtually all leases (other than short-term leases). Lessor accounting is largely unchanged. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. This ASU requires leases to be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact on its financial statements.


 

- 6 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

Notes to Financial Statements (Unaudited)

(Millions of Dollars)

 

In addition to adopting the ASU discussed above, the Company adopted the following standards effective January 1, 2018, which did not have a material impact on the Company’s financial statements.

 

STANDARD

 

DESCRIPTION

2014-09*

 

Revenue from Contracts with Customers

2016-01*

 

Financial Instruments - Overall (Subtopic 825-10):  Recognition and Measurement

 

 

of Financial Assets and Financial Liabilities

2016-15*

 

Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts

 

 

and Cash Payments

2017-12**

 

Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting

 

 

for Hedging Activities

 

*

The Company adopted on the effective date of January 1, 2018.

**

The Company early adopted in 2018.

 


 

- 7 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

Notes to Financial Statements (Unaudited)

(Millions of Dollars)

 

NOTE B – Finance and Other Receivables

The Company’s finance and other receivables include the following:

 

 

 

March 31

 

 

December 31

 

 

 

2018

 

 

2017

 

Retail loans

 

$

3,025.7

 

 

$

2,908.3

 

Retail direct financing leases

 

 

1,480.3

 

 

 

1,536.5

 

Dealer wholesale financing

 

 

1,019.6

 

 

 

913.8

 

Dealer master notes

 

 

19.7

 

 

 

18.3

 

Operating lease receivables and other

 

 

74.6

 

 

 

71.2

 

Unearned interest on finance leases

 

 

(128.8

)

 

 

(135.5

)

 

 

 

5,491.1

 

 

 

5,312.6

 

 

 

 

 

 

 

 

 

 

Less allowance for credit losses:

 

 

 

 

 

 

 

 

Loans and leases

 

 

(53.8

)

 

 

(54.8

)

Dealer wholesale financing

 

 

(2.6

)

 

 

(2.4

)

Operating lease receivables and other

 

 

(1.8

)

 

 

(1.2

)

 

 

$

5,432.9

 

 

$

5,254.2

 

 

Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at March 31, 2018 or December 31, 2017. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms.

Allowance for Credit Losses

The Company continuously monitors the payment performance of its finance receivables. For large retail finance customers and dealers with wholesale financing, the Company regularly reviews their financial statements and makes site visits and phone contact as appropriate. If the Company becomes aware of circumstances that could cause those customers or dealers to face financial difficulty, whether or not they are past due, the customers are placed on a watch list.

The Company modifies loans and finance leases in the normal course of its operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant delays are modifications extending terms up to three months for customers experiencing some short-term financial stress but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification.

When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms. When the Company modifies loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings (TDR). The Company does not typically grant credit modifications for customers that do not meet minimum underwriting standards since the Company normally repossesses the financed equipment in these circumstances. When such modifications do occur, they are considered TDRs.

On average, modifications extended contractual terms by approximately three months in both 2018 and 2017, and did not have a significant effect on the weighted average term or interest rate of the total portfolio at March 31, 2018 or December 31, 2017.

The Company has developed a systematic methodology for determining the allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail loans and direct finance leases, net of unearned interest. The wholesale segment consists of truck inventory financing loans to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables,

 

- 8 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

Notes to Financial Statements (Unaudited)

(Millions of Dollars)

 

and the Company requires periodic reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and, in many cases, obtains guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest, generally over 36 to 60 months, and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves.

The Company individually evaluates certain finance receivables for impairment. Finance receivables that are evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered probable the Company will be unable to collect all contractual interest and principal payments as scheduled. In addition, all retail loans and leases which have been classified as TDRs and all customer accounts over 90 days past due are considered impaired. Generally, impaired accounts are on non-accrual status. Impaired accounts classified as TDRs which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments.

Impaired receivables are generally considered collateral dependent. Large balance retail and all wholesale impaired receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s recorded investment, no reserve is recorded. Small balance impaired receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.

The Company evaluates finance receivables that are not individually impaired on a collective basis and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past due account data and current market conditions. Information used includes assumptions regarding the likelihood of collecting current and past due accounts, repossession rates, the recovery rate on the underlying collateral based on used truck values and other pledged collateral or recourse.

The Company has developed a range of loss estimates for its portfolio based on historical experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is determined as probable based on current market conditions and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. After determining the appropriate level of the allowance for credit losses, a provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent in the portfolio.

In determining the fair value of the collateral, the Company uses a pricing matrix and categorizes the fair value as Level 2 in the hierarchy of fair value measurement. The pricing matrix is reviewed quarterly and updated as appropriate. The pricing matrix considers the make, model and year of the equipment as well as recent sales prices of comparable equipment sold individually, which is the lowest unit of account, through wholesale channels to the Company’s dealers (principal market). The fair value of the collateral also considers the overall condition of the equipment.

Accounts are charged off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible, which generally occurs upon repossession of the collateral. Typically the timing between the repossession and charge-off is not significant. In cases where repossession is delayed (e.g., for legal proceedings), the Company records a partial charge-off. The charge-off is determined by comparing the fair value of the collateral, less cost to sell, to the recorded investment.

For the following credit quality disclosures, finance receivables are classified into two portfolio segments, wholesale and retail. The retail portfolio is further segmented into dealer retail and customer retail. The dealer wholesale segment consists of truck inventory financing to PACCAR dealers. The dealer retail segment consists of loans and leases to participating dealers and franchises that use the proceeds to fund customers’ acquisition of commercial vehicles and related equipment. The customer retail segment consists of loans and leases directly to customers for the acquisition of commercial vehicles and related equipment. Customer retail receivables are further segregated between fleet and owner/operator classes. The fleet class consists of retail accounts of customers operating more than five trucks. All other customer retail accounts are considered owner/operator. These two classes have similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk.

 

- 9 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

Notes to Financial Statements (Unaudited)

(Millions of Dollars)

 

The allowance for credit losses is summarized as follows:

 

 

 

2018

 

 

 

Dealer

 

 

Customer

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

 

Retail

 

 

Retail

 

 

Other*

 

 

Total

 

Balance at January 1

 

$

2.4

 

 

$

7.9

 

 

$

46.9

 

 

$

1.2

 

 

$

58.4

 

Provision for losses

 

 

.2

 

 

 

 

 

 

 

.4

 

 

 

.6

 

 

 

1.2

 

Charge-offs

 

 

 

 

 

 

 

 

 

 

(2.0

)

 

 

 

 

 

 

(2.0

)

Recoveries

 

 

 

 

 

 

 

 

 

 

.6

 

 

 

 

 

 

 

.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31

 

$

2.6

 

 

$

7.9

 

 

$

45.9

 

 

$

1.8

 

 

$

58.2

 

 

 

 

2017

 

 

 

Dealer

 

 

Customer

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

 

Retail

 

 

Retail

 

 

Other*

 

 

Total

 

Balance at January 1

 

$

2.0

 

 

$

8.5

 

 

$

47.8

 

 

$

1.1

 

 

$

59.4

 

(Benefit) provision for losses

 

 

 

 

 

 

(.3

)

 

 

3.3

 

 

 

 

 

 

 

3.0

 

Charge-offs

 

 

 

 

 

 

 

 

 

 

(4.6

)

 

 

 

 

 

 

(4.6

)

Recoveries

 

 

 

 

 

 

 

 

 

 

.5

 

 

 

 

 

 

 

.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31

 

$

2.0

 

 

$

8.2

 

 

$

47.0

 

 

$

1.1

 

 

$

58.3

 

 

*

Operating lease and other trade receivables

Information regarding finance receivables evaluated and the associated allowances determined individually and collectively is as follows:

 

 

 

Dealer

 

 

Customer

 

 

 

 

 

At March 31, 2018

 

Wholesale

 

 

Retail

 

 

Retail

 

 

Total

 

Recorded investment for impaired finance receivables evaluated

   individually

 

 

 

 

 

 

 

 

 

$

28.1

 

 

$

28.1

 

Allowance for impaired finance receivables determined

   individually

 

 

 

 

 

 

 

 

 

$

3.5

 

 

$

3.5

 

Recorded investment for finance receivables evaluated collectively

 

$

1,019.6

 

 

$

1,174.1

 

 

$

3,194.7

 

 

$

5,388.4

 

Allowance for finance receivables determined collectively

 

$

2.6

 

 

$

7.9

 

 

$

42.4

 

 

$

52.9

 

 

 

 

Dealer

 

 

Customer

 

 

 

 

 

At December 31, 2017

 

Wholesale

 

 

Retail

 

 

Retail

 

 

Total

 

Recorded investment for impaired finance receivables evaluated

   individually

 

 

 

 

 

 

 

 

 

$

29.2

 

 

$

29.2

 

Allowance for impaired finance receivables determined individually

 

 

 

 

 

 

 

 

 

$

3.5

 

 

$

3.5

 

Recorded investment for finance receivables evaluated collectively

 

$

913.8

 

 

$

1,156.3

 

 

$

3,142.1

 

 

$

5,212.2

 

Allowance for finance receivables determined collectively

 

$

2.4

 

 

$

7.9

 

 

$

43.4

 

 

$

53.7

 

 

The recorded investment for finance receivables that are on non-accrual status is as follows:

 

 

 

March 31

 

 

December 31

 

 

 

2018

 

 

2017

 

Fleet

 

$

25.7

 

 

$

28.2

 

Owner/operator

 

 

2.4

 

 

 

1.0

 

 

 

 

 

 

 

 

 

 

 

 

$

28.1

 

 

$

29.2

 

 

 

- 10 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

Notes to Financial Statements (Unaudited)

(Millions of Dollars)

 

Impaired Loans

Impaired loans are summarized below. The impaired loans with a specific reserve represent the unpaid principal balance. The recorded investment of impaired loans as of March 31, 2018 and December 31, 2017 was not significantly different than the unpaid principal balance.

 

 

 

Dealer

 

Customer Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner/

 

 

 

 

 

At March 31, 2018

 

Wholesale

 

Retail

 

Fleet

 

 

Operator

 

 

Total

 

Impaired loans with a specific reserve

 

 

 

 

 

$

9.7

 

 

$

2.1

 

 

$

11.8

 

Associated allowance

 

 

 

 

 

 

(2.3

)

 

 

(.5

)

 

 

(2.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net carrying amount of impaired loans with a specific reserve

 

 

 

 

 

 

7.4

 

 

 

1.6

 

 

 

9.0

 

Impaired loans with no specific reserve

 

 

 

 

 

 

11.6

 

 

 

.2

 

 

 

11.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net carrying amount of impaired loans

 

 

 

 

 

$

19.0

 

 

$

1.8

 

 

$

20.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average recorded investment for impaired loans*

 

 

 

 

 

$

21.7

 

 

$

1.4

 

 

$

23.1

 

 

*

Represents the average during the 12 months ended March 31, 2018

 

 

 

Dealer

 

Customer Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner/

 

 

 

 

 

At December 31, 2017

 

Wholesale

 

Retail

 

Fleet

 

 

Operator

 

 

Total

 

Impaired loans with a specific reserve

 

 

 

 

 

$

10.7

 

 

$

.8

 

 

$

11.5

 

Associated allowance

 

 

 

 

 

 

(2.3

)

 

 

(.2

)

 

 

(2.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net carrying amount of impaired loans with a specific reserve

 

 

 

 

 

 

8.4

 

 

 

.6

 

 

 

9.0

 

Impaired loans with no specific reserve

 

 

 

 

 

 

12.5

 

 

 

.2

 

 

 

12.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net carrying amount of impaired loans

 

 

 

 

 

$

20.9

 

 

$

.8

 

 

$

21.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average recorded investment for impaired loans*

 

 

 

 

 

$

17.9

 

 

$

1.7

 

 

$

19.6

 

 

*

Represents the average during the 12 months ended March 31, 2017

 

During the period the loans above were considered impaired, interest income recognized on a cash basis was as follows:

 

 

 

Three Months Ended

 

 

 

March 31

 

 

 

2018

 

 

2017

 

Fleet

 

$

.3

 

 

$

.3

 

Owner/operator

 

 

 

 

 

 

 

 

 

 

$

.3

 

 

$

.3

 

 

Credit Quality

The Company's customers are principally concentrated in the transportation industry in the United States. The Company’s portfolio assets are diversified over a large number of customers and dealers with no single customer or dealer balance representing over 10% of the total portfolio assets as of March 31, 2018 or December 31, 2017. The Company retains as collateral a security interest in the related equipment.

At the inception of each contract, the Company considers the credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value ratios and other internal metrics. On an ongoing basis, the Company monitors credit quality based on past due status and collection experience as there is a meaningful correlation between the past due status of customers and the risk of loss.

 

- 11 -


PACCAR FINANCIAL CORP. - FORM 10-Q

 

Notes to Financial Statements (Unaudited)

(Millions of Dollars)

 

The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in accordance with the contractual terms and are not considered high-risk. Watch accounts include accounts 31 to 90 days past due and large accounts that are performing but are considered to be high-risk. Watch accounts are not impaired. At-risk accounts are accounts that are impaired, including TDRs, accounts over 90 days past due and other accounts on non-accrual status.

The tables below summarize the Company’s finance receivables by credit quality indicator and portfolio class.

 

 

 

Dealer

 

 

Customer Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner/

 

 

 

 

 

At March 31, 2018

 

Wholesale

 

 

Retail

 

 

Fleet

 

 

Operator

 

 

Total

 

Performing

 

$

1,018.9

 

 

$

1,174.1

 

 

$

2,705.4

 

 

$

439.5

 

 

$

5,337.9

 

Watch

 

 

.7

 

 

 

 

 

 

 

49.2

 

 

 

.6

 

 

 

50.5

 

At-risk

 

 

 

 

 

 

 

 

 

 

25.7

 

 

 

2.4

 

 

 

28.1

 

 

 

$

1,019.6

 

 

$

1,174.1

 

 

$

2,780.3

 

 

$

442.5

 

 

$

5,416.5

 

 

 

 

Dealer

 

 

Customer Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner/

 

 

 

 

 

At December 31, 2017

 

Wholesale

 

 

Retail

 

 

Fleet

 

 

Operator

 

 

Total

 

Performing

 

$

913.8

 

 

$

1,156.3

 

 

$

2,663.1

 

 

$

427.9

 

 

$

5,161.1

 

Watch

 

 

 

 

 

 

 

 

 

 

50.5

 

 

 

.6

 

 

 

51.1

 

At-risk

 

 

 

 

 

 

 

 

 

 

28.2

 

 

 

1.0

 

 

 

29.2

 

 

 

$

913.8

 

 

$

1,156.3

 

 

$

2,741.8

 

 

$

429.5

 

 

$

5,241.4

 

 

The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the Company considers the entire contractual account balance past due when any installment is over 30 days past due. Substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

 

 

 

Dealer

 

 

Customer Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner/

 

 

 

 

 

At March 31, 2018

 

Wholesale

 

 

Retail

 

 

Fleet

 

 

Operator

 

 

Total

 

Current and up to 30 days past due

 

$

1,019.6

 

 

$

1,174.1

 

 

$