Paccar

2 0 0 6   a n n u a l   r e p o r t

S T A T E M E N T   O F   C O M P A N Y   B U S I N E S S

S T O C K H O L D E R S ’

  I N F O R M A T I O N

PACCAR  is  a  global  technology  company  that  manufactures  Class  8  commercial 

vehicles  sold  around  the  world  under  the  Kenworth,  Peterbilt  and  DAF  nameplates. 

The  company  competes  in  the  North  American  Class  6-7  market  with  its  medium-

duty  models  assembled  in  North  America  and  sold  under  the  Peterbilt  and  Kenworth 

nameplates.  The  company  also  manufactures  Class  4-7  trucks  in  the  United     

Kingdom  for  sale  throughout  Europe,  the  Middle  East,  Asia  and  Africa  under  the 

DAF  nameplate.  PACCAR  distributes  aftermarket  truck  parts  to  its  dealers  through 

a  worldwide  network  of  Parts  Distribution  Centers.  Finance  and  Leasing 

subsidiaries  facilitate  the  sale  of  PACCAR  products  in  many  countries  worldwide. 

Significant  company  assets  are  employed  in  financial  services  activities.  PACCAR 

manufactures  and  markets  industrial  winches  under  the  Braden,  Gearmatic  and 

Carco  nameplates.  PACCAR  maintains  exceptionally  high  standards  of  quality  for 

all  of  its  products:  they  are  well  engineered,  are  highly  customized  for  specific 

applications  and  sell  in  the  premium  segments  of  their  markets,  where  they  have  a 

reputation  for  superior  performance  and  pride  of  ownership.

CONTENTS

 1 
Financial Highlights
2  Message to Shareholders
6 
PACCAR Operations
22  Financial Charts
23  Stockholder Return Performance Graph
24  Management’s Discussion and Analysis
31  Consolidated Statements of Income
32  Consolidated Balance Sheets
34  Consolidated Statements of Cash Flows
35  Consolidated Statements 
of Stockholders’ Equity
36  Consolidated Statements 
of Comprehensive Income

36  Notes to Consolidated Financial Statements

50  Management’s Report on Internal Control 

Over Financial Reporting

50  Report of Independent Registered Public 
Accounting Firm on the Company’s 

Consolidated Financial Statements
51  Report of Independent Registered Public 
Accounting Firm on the Company’s 

Internal Controls

Selected Financial Data

52 
52  Common Stock Market Prices and Dividends
53  Quarterly Results
54  Market Risks and Derivative Instruments
55  Officers and Directors
56  Divisions and Subsidiaries

Corporate Offices
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington
98004

Mailing Address
P.O. Box 1518
Bellevue, Washington
98009

Telephone
425.468.7400

Facsimile
425.468.8216

Homepage
http://www.paccar.com

Stock Transfer 
and Dividend 
Dispersing Agent
Wells Fargo Bank 
Minnesota, N.A.
Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 
55164-0854
800.468.9716
www.wellsfargo.com/
shareownerservices

PACCAR’s transfer agent 
maintains the company’s 
shareholder records, issues 
stock certificates and 
distributes dividends and 
IRS Form 1099. Requests 
concerning these matters 
should be directed to 
Wells Fargo.

Online Delivery of 
Annual Report and Proxy 
Statement
PACCAR’s 2006 Annual 
Report and the 2007 Proxy 
Statement are available 
on PACCAR’s Web site at 
www.paccar.com/investors/
investor_resources.asp 

Registered stockholders 
can sign up to receive future 
proxy statements and annual 
reports in electronic format, 
instead of receiving paper 
documents, by visiting 
www.econsent.com/pcar/   

Stockholders who hold 
PACCAR stock in street 
name may inquire of their 
bank or broker about the 
availability of electronic 
delivery of annual 
meeting documents. 

Braden, Carco, ComfortClass, 
DAF, Foden, Gearmatic, 
Kenmex, Kenworth, 
Kenworth Clean Power, 
Leyland, PACCAR, PacLease, 
PacTrac, Peterbilt, TRP, 
Ultracab, and Unibilt 
are trademarks owned 
by PACCAR Inc and its 
subsidiaries. 

Independent Auditors
Ernst & Young LLP
Seattle, Washington

SEC Form 10-K
PACCAR’s annual report 
to the Securities and 
Exchange Commission 
will be furnished to 
stockholders on request 
to the Corporate 
Secretary, PACCAR Inc, 
P.O. Box 1518, Bellevue, 
Washington 98009. It is 
also available online at 
www.paccar.com/investors/
investor_resources.asp, 
under SEC Filings.

Annual Stockholders’
Meeting
April 24, 2007, 10:30 a.m. 
Meydenbauer Center
11100 N.E. Sixth Street
Bellevue, Washington
98004

An Equal Opportunity 
Employer

This report was printed
on recycled paper.

 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F I N A N C I A L   H I G H L I G H T S

Truck and Other Net Sales and Revenues 

$15,503.3 

$13,298.4

2006 

2005

(millions except per share data)

1

Financial Services Revenues 

Total Revenues 

Net Income 

Total Assets:

  Truck and Other 

Financial Services 

Truck and Other Long-Term Debt 

Financial Services Debt 

Stockholders’ Equity 

Per Common Share:

  Net Income:

  Basic 

  Diluted 

  Cash Dividends Declared 

950.8 

16,454.1 

1,496.0 

6,296.2 

9,811.2 

20.2 

7,259.8 

4,456.2 

759.0

14,057.4

1,133.2

5,359.5

8,355.9

20.2

6,226.1

3,901.1

$       5.98 

$
$ 

5.95 

2.77 

4.40

4.37

1.91

R E V E N U E S

billions of dollars

N E T   I N C O M E

billions of dollars

S T O C K H O L D E R S ’   E Q U I T Y

billions of dollars

17.5

14.0

10.5

7.0

3.5

0.0

1.5

1.2

5

4

0.9

 3

0.6

0.3

0.0

2

1

0

40%

32%

24%

16%

8%

0% 

97

98

99

00

01

02

03

04

05

06

97

98

99

00

01

02

03

04

05

06

97

98

99

00

01

02

03

04

05

06

         Return on Equity (percent)

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
T O   O U R   S H A R E H O L D E R S

PACCAR had a record year in 2006 due to its global diversification, strong 

2

markets, superior product quality, technology-led process efficiency and excellent 

results from aftermarket parts and financial services.  PACCAR set new market share 

records in North America and Europe.  Customers benefited from PACCAR’s ongoing 

investments, which enhanced manufacturing capability, developed new aftermarket 

support programs and accelerated product development.  PACCAR delivered a record 

166,800 trucks and sold nearly $2 billion of aftermarket parts. PACCAR Financial 

Services generated $4.2 billion of new loan and lease volume.

Net income of $1.496 billion was the highest in the company’s 101-year history, 

and revenues of $16.45 billion were 17 percent higher than in the previous year.  

PACCAR issued a 50 percent stock dividend during the year and declared cash 

dividends of $2.77 per share, including a special dividend of $2.00.  Cash dividends 

have increased 640 percent in the last 10 years.

The North American truck market grew 13 percent in 

on revenues was 9.1 percent, a new company record.  

2006 from the previous year, as a strong economy and 

Profits were driven by strong truck and parts sales and 

the higher cost of 2007 EPA emission-compliant engines 

margins and new finance contracts for over 60,000 

caused transport companies to “pull forward” their vehicle 

units.  PACCAR shareholder equity tripled over the last 

purchases.  The Class 8 truck market in North America, 

decade, to $4.46 billion, as a result of excellent earnings.  

including Mexico, was 348,000 vehicles, compared to 

PACCAR has paid over $2.4 billion in dividends in the 

307,000 in the prior year.  The European heavy truck 

past 10 years.  PACCAR’s average annual total shareholder 

market in 2006 was a record 268,000 vehicles, compared 

return was 25.4 percent over the last decade, versus 

to 258,000 in 2005, due to strengthening economic 

8.4 percent for the Standard & Poor’s 500 Index.

growth in the Eurozone.

INVESTING  FOR  THE  FUTURE — PACCAR’s record 

  Competitors experienced improved results due to the 

profits, sparkling balance sheet, and intense focus on 

stronger market.  There was some consternation amongst 

quality, technology and productivity enhancements have 

the competitors as unsuccessful mergers and acquisitions 

enabled the company to consistently invest in products 

distracted their market focus.

and processes during all phases of the business cycle.  

  PACCAR continued to set the standard for financial 

Productivity, efficiency and capacity improvements 

performance for capital goods companies worldwide.  

continue to be implemented in all manufacturing and 

After-tax return on beginning shareholder equity (ROE) 

parts facilities.  Many of PACCAR’s facilities established 

improved to 38.3 percent in 2006, compared to 30.1 

new production records during the year in terms of 

percent in 2005.  The company’s 2006 after-tax return 

quality metrics, inventory turns and assembly hours.  

 
 
PACCAR is recognized as one of the leading technology 

employees are an important competitive asset for the 

companies in the world, and innovation continues to 

company.   PACCAR’s use of information technology is 

be a cornerstone of its success.  PACCAR has integrated 

centered on developing and integrating software and 

new technology to profitably support its own business, 

hardware that will enhance the quality and efficiency of 

3

as well as its dealers, customers and suppliers.  Eighty-

all operations throughout the company, including the 

two new dealer locations were opened worldwide, and 

seamless integration of suppliers, dealers and customers.

more are planned to enhance PACCAR’s global 

In 2006, ITD provided innovative advancements in GPS 

distribution network. 

systems, new manufacturing software, infrastructure 

  Capital investments exceeded $300 million in 2006.  

capacity upgrades and installation of over 3,000 new 

Major capital projects during the year included 

personal computers.  Other major accomplishments 

completion of a $74 million truck assembly facility at 

include increased activities at the Electronic Dealerships 

PACCAR Mexico, construction of a distribution center 

in Renton and Eindhoven.  Over 15,000 dealers, 

in Oklahoma City, and the introduction of the new 

customers, suppliers and employees have experienced 

PACCAR PX-6 and PX-8 engines.  Kenworth will complete 

the interactive demonstration modules showing the 

a 30 percent capacity expansion at its Chillicothe, Ohio, 

automated finance applications, sales and service kiosks, 

facility in 2007.  PACCAR announced the construction 

tablet PCs and Radio Frequency Identification (RFID).  

of a $400 million engine facility in the Southeast United 

New features include an electronic leasing and finance 

States that will be in operation in 2009. 

office and an electronic service analyst.

  PACCAR is judiciously examining business 

TRUCKS — U.S. and Canadian Class 8 retail sales in 

opportunities in Asia, with the primary focus being 

2006 were 322,000 units, and the Mexican market 

China and India.  The company has sold transportation 

totaled 26,000.  Western Europe heavy truck sales were 

equipment in Asia since 1908.  The rapidly developing 

268,000 units.

highway systems in China and India will increase 

  PACCAR’s Class 8 retail sales in the U.S. and Canada 

intra-country trade, resulting in demand for reliable 

achieved a market share record of 25.3 percent in 2006 

high-quality commercial vehicles.  PACCAR will open 

compared to 23.1 percent last year.  DAF’s 15+ tonne 

a purchasing and component sales office in Shanghai 

truck market share in Europe increased to a record 14.5 

in 2007.

percent.  Industry Class 6 and 7 truck registrations in the 

SIX  SIGMA — Six Sigma is integrated into all business 

U.S. and Canada numbered 107,000 units, a 3 percent 

activities at PACCAR and has been adopted at 150 of 

increase from the previous year.  In Europe, the 6- to 

the company’s suppliers and many of the company’s 

15-tonne market was 77,000 units, the same as 2005.  

dealers.  Its statistical methodology is critical in the 

PACCAR’s North American and European market shares 

development of new product designs, customer service 

in the medium-duty truck segment were excellent, as 

and manufacturing processes.  In addition, “High Impact 

the company delivered a record 27,000 medium-duty 

Kaizen Events” (HIKE) leverage Six Sigma methods with 

trucks and tractors in 2006.

production flow improvement concepts.  The HIKE 

  The capital goods and financial services industries 

projects conducted in 2006 were instrumental in 

were robust in 2006, even with the negative cost effect 

delivering improved performance across the company.  

of high commodity prices, especially steel and oil.  

Almost 10,000 employees have been trained in Six 

PACCAR’s excellent long-term supplier partnerships 

Sigma and 6,000 projects have been implemented since 

enabled increased production and profits to be realized, 

its inception.  Six Sigma, in conjunction with Supplier 

facilitated by the tremendous team effort of the company’s 

Quality and Development, has been instrumental in 

purchasing, materials and production personnel.

delivering improved logistic performance and quality 

  PACCAR’s product quality continued to be recognized 

components by the company’s suppliers.

as the leader in the industry in 2006.  Kenworth, Peterbilt 

INFORMATION  TECHNOLOGY — PACCAR’s 

and DAF earned industry awards as quality leaders in 

Information Technology Division (ITD) and its 700 

the Class 6, 7 and 8 markets.

  Other North American PACCAR truck plant 

around the world.  Over five million heavy-duty trucks 

accomplishments include the completion of the company’s 

are operating in North America and Europe, and the 

state-of-the-art Kenworth Mexico facility, installation of 

average age of these vehicles is estimated to be over six 

4

robotic cab paint systems in all factories and the 

years.  This vehicle parc creates an excellent platform for 

attainment of record production levels at most plants.

future parts and service business, as well as moderating 

  Almost 50 percent of PACCAR’s business is generated 

the cyclicality of truck sales.

outside the United States, and the company is realizing 

  PACCAR Parts continues to lead the industry with 

excellent synergies globally in product development, sales 

technology that offers competitive advantages at PACCAR 

and finance activities, purchasing and manufacturing.  

dealerships.  Managed Dealer Inventory (MDI) is now 

DAF Trucks achieved record truck production, sales and 

installed at over 900 PACCAR dealers worldwide.  MDI 

profits, while increasing its market share for the seventh 

utilizes proprietary software technology to determine 

consecutive year.  DAF was named the International 

dealership parts replenishment schedules.  Significant 

Truck of the Year 2007 for its new XF105 and the 

investments were also made in PACCAR’s Call Center 

PACCAR MX engine.  DAF is the only OEM to earn the 

technology to improve the customer experience with 

award three times during the last ten years.

24-hour/365-day-a-year roadside assistance.  PACCAR 

  Leyland Trucks is the United Kingdom’s leading truck 

Parts enhanced its Connect program, a software solution 

manufacturer.  The Foden brand was retired in mid-2006.  

for customer fleet-maintenance management.  The 

The last Foden vehicle is in the British Commercial Vehicle 

program is a Web-based application providing fleets 

Museum and is a memorable treasure commemorating 

the tools to reduce their vehicle operating costs.

Foden’s 150 years of industry leadership.

FINANCIAL  SERVICES — The PACCAR Financial 

  PACCAR Mexico (KENMEX) had another record 

Services (PFS) group of companies has operations 

profit year as the Mexican economy grew and truck 

covering three continents and 17 countries.  The global 

fleets were renewed.  KENMEX recorded gains in plant 

breadth of PFS, as well as its industry-leading funding 

efficiencies as production reached an all-time high.  

structure and responsive credit application processes, 

KENMEX officially dedicated its world-class production 

enabled the portfolio to grow to more than 158,300 trucks 

facility and 80,000-square-foot fabrication center.

and trailers, with total assets exceeding $9.8 billion.  

  PACCAR Australia achieved excellent profit, sales 

  PACCAR Financial Corp.’s (PFC) conservative 

and market share in 2006, supported by the third-

business approach, coupled with PACCAR’s excellent S&P 

highest production level in the company’s history.  The 

credit rating of AA- and complemented by the strength 

introduction of new Kenworth models and expansion of 

of the dealer network, enabled PFC to earn a record 

the DAF product range in Australia combined for a 21.7 

profit in 2006.  PFC recorded increased finance volume 

percent heavy-duty market share in 2006.  Aftermarket 

in 2006 by offering a comprehensive array of finance, 

parts sales delivered another year of record performance.

lease and insurance products.  PFC enhanced its credit-

  PACCAR International exports trucks and parts to 

analysis program, Online Transportation Information 

over 100 countries and had a record year due to strong 

System (OTIS), by extending the system to Canadian 

sales in Latin America and South Africa.  A highlight 

customers and dealers.  PFC is the preferred funding 

was a license agreement with Formosa Plastics Group in 

source in North America for Peterbilt and Kenworth 

Taiwan to assemble DAF vehicles.

trucks, financing 21.9 percent of dealer sales in 2006.

AFTERMARKET  CUSTOMER  SERVICES — PACCAR 

  PACCAR Financial Europe (PFE) completed its fifth 

Parts had an outstanding year in 2006 as it earned its 

year of operations and increased profits as it served 

14th consecutive year of record profits.  With sales of 

DAF dealers in 13 Western European countries.  PFE 

nearly $2.0 billion, PACCAR Parts is the primary source 

provides wholesale and retail financing for DAF dealers 

for aftermarket parts for PACCAR products, and supplies 

and customers, and it finances almost 20 percent of 

parts for other truck brands to PACCAR’s dealer networks 

DAF’s vehicle sales.

  PACCAR Leasing (PacLease) earned its 13th 

  Other fundamental elements contributing to the 

consecutive year of record operating profits and placed 

exciting prospects of this vibrant, dynamic company 

in service over 6,900 vehicles in 2006, a new record.  

are geographic diversification, with almost 50 percent 

The PacLease fleet grew to 28,500 vehicles as 21 percent 

of revenues generated outside the U.S., modern 

5

of the North American Class 6-8 market chose full-

manufacturing and parts-distribution facilities, leading-

service leasing to satisfy their equipment needs.  PacLease 

edge and innovative information technology, conservative 

substantially strengthened its market presence in 2006, 

and comprehensive financial services, enthusiastic 

increasing the network to 281 outlets, and represents 

employees and the best distribution networks in 

one of the largest full-service truck rental and leasing 

the industry.

operations in North America.

  PACCAR and its employees are firmly committed to 

ENVIRONMENTAL  LEADERSHIP — PACCAR is a global 

strong, quality growth.  The embedded principles of 

environmental leader.  In the last decade, the company has 

integrity, quality and consistency of purpose continue 

eliminated 59 percent of its factory dunnage (34,000 tons 

to define the course in PACCAR’s daily operations.  

per year) by providing returnable containers, installation 

PACCAR has successfully evolved as a leader in several 

of new logistic software and capital investment in 

industries since its founding in 1905.  The proven 

suppliers’ manufacturing operations.  PACCAR ISO 

business strategy — delivering technologically advanced, 

14001 certification is complete for Europe.  DAF, 

premium products and an extensive array of tailored 

Peterbilt and Kenworth vehicles are manufactured with 

aftermarket customer services utilizing an independent 

environmentally friendly materials so that 80 percent of 

global distribution channel — enables PACCAR to 

the truck, by weight, is recyclable.  PACCAR is developing 

pragmatically approach growth opportunities, such as 

hybrid-electric vehicles, as well as proprietary technology 

Asia and financial services, with a long-term focus.  The 

to eliminate the need for customers’ vehicle engines to 

strength of the business foundation provides a platform 

idle at night.  Van pools, car pools and bus passes are 

to examine growth opportunities in complementary 

utilized by 30 percent of PACCAR employees in their 

business segments worldwide.  PACCAR is enhancing 

local communities.

its stellar reputation as a leading technology company 

A  LOOK  AHEAD — PACCAR delivered the best results 

in the capital goods and finance businesses.

in its 101-year history in 2006.  PACCAR’s 22,000 

employees enabled the company to distinguish itself as a 

global leader in the technology, capital goods, financial 

services and aftermarket parts businesses.  Superior 

product quality, technological innovation and balanced 

global diversification are three key operating characteristics 

that define PACCAR’s business philosophy.  The company 

continues to take aggressive steps to manage production 

rates and operating costs, consistent with its goal of 

achieving profitable market share growth.

  A significant milestone in 2006 was the National Medal 

of Technology presentation at the White House.  The 

recognition of 25 years of industry leadership provides 

a springboard for dramatically increased investment 

throughout PACCAR for the next decade.  PACCAR’s 

M A R K   C .   P I G O T T

excellent balance sheet ensures that the company is well 

positioned to continually invest in all facets of its 

business, strengthening its competitive advantage.

Chairman  and  Chief  Executive  Officer

Februar y  16,  2007

F I N A N C I A L   C H A R T S

D A F   T R U C K S

DAF surged to new sales, profit and production records in 2006, reinforcing its reputation 

as Europe’s leading commercial vehicle manufacturer in quality, innovation, customer 

7

support and profitability.  DAF further strengthened its competitive position with strong 

market share gains in the over-15-tonne and 6- to 15-tonne segments.

  The flagship XF105 earned the International Truck of the Year 2007 award — the third time in the last 

10 years DAF has earned that distinction.  This prestigious award reflects rigorous analysis by road-transport 

journalists from 19 European countries.  The XF105 also garnered the “Truck of the Year 2006” award in Poland.  

DAF’s outstanding achievements reflect the success of its new highly efficient, innovative products and 

comprehensive customer support network.

  New LF and CF series vehicles were also unveiled, featuring enhanced interiors and aerodynamic exteriors.  

One of the most important new enhancements for all models is DAF’s Selective Catalytic Reduction (SCR) 

Technology, which achieves industry-leading emission compliance.

  DAF introduced a new light-duty diesel-electric hybrid vehicle, the Model LE, targeted for production in 2008 

for selected urban applications.  Key components of the truck 

include a lithium ion battery pack, a sophisticated electric 

motor generator and a PACCAR 4.5-liter diesel engine.

  DAF also launched its newly developed PACCAR 9.2-liter 

PR Engine with the Enhanced Environmentally friendly 

Vehicles (EEV) specification for use in buses.  The engine 

achieves 50 percent lower emission levels than those 

stipulated by stringent Euro 5 regulations effective in 2009.

  To enhance customer business capability, DAF announced its Telematics and Infotainment System, an 

industry-leading solution for in-cab data communications and fleet management.  A Lane Departure Warning 

System, now available as an option, enhances safety by providing the driver with an audible signal if the vehicle 

strays too far into an adjacent lane.

  DAF is completing construction of a 76,000-square-foot engine test and research facility in Eindhoven.  The 

20 test cells in the sophisticated development center will be the most technologically advanced in Europe and 

will be instrumental in the design of new PACCAR engines for global use.

  DAF received a manufacturing excellence honor in 2006 — Lloyd’s Quality Award — from Lloyd’s Register 

Quality Assurance, a leading certification agency.  This award complimented the company’s progressive assembly 

philosophy and quality standards.

  DAF expanded its extensive distribution network of over 1,000 dealer and service points, adding a record 53 

new outlets in 2006 — including a state-of-the-art company-owned dealership in Frankfurt, Germany. DAF is 

one of the fastest growing brands in many countries in central Europe.

DAF’s widely acclaimed XF105 — International Truck of the Year 2007 — combines an 

aerodynamic exterior with best-of-class standards in ergonomics, productivity and comfort.   

Superior product quality has propelled DAF to record profit, sales and market share.

P E T E R B I L T   M O T O R S   C O M P A N Y

Peterbilt set new sales, production and profit records during 2006.  Peterbilt earned J.D. 

Power and Associates’ Award for Highest in Customer Satisfaction among Conventional 

9

Medium-Duty Trucks* for the fifth time in eight years.

In the most significant new-product introduction in the company’s 68-year history, Peterbilt unveiled a full 

range of new medium- and heavy-duty vehicles.  The $100 million investment strengthens Peterbilt’s offering in 

all major market segments — aerodynamic, traditional, vocational and medium-duty trucks.  Each new model 

achieves new standards for quality, innovation, low operating cost and industry-leading fuel efficiency.

Peterbilt offers four aerodynamically styled truck models, the industry’s broadest range in a market that 

accounts for over 70 percent of on-highway Class 8 vehicles in operation.  The Model 387, Peterbilt’s premium 

aerodynamic vehicle, introduced a day cab version — ideal for tanker and regional-haul applications where 

maneuverability and optimized weight distribution are important in addition to fuel economy.

  The new aerodynamic Model 384, which can be configured as a day 

cab or with a full range of detachable Peterbilt Unibilt sleepers, 

features exceptional maneuverability and visibility for vocational 

and urban operations.  The chassis is lightweight, supporting 

weight-sensitive applications with higher payload potential.

   The new Model 388 and Model 389 provide improved 

operating performance for customers who prefer traditionally 

styled trucks.  The new vehicles include aerodynamic design features 

such as a contoured sun visor, bumper, side fairings and headlamps that together improve aerodynamic efficiency 

by up to 30 percent.  Forward visibility has been dramatically improved with the introduction of an advanced 

complex reflector lighting system.

Peterbilt’s vocational lineup has been enhanced with the introduction of new Models 365 and 367.  Advanced 

chassis designs improve weight distribution and maneuverability as well as ride and handling characteristics.

  Three new medium-duty vehicles were introduced during 2006 — the Peterbilt Model 220, Model 330 and 

Model 340.  These trucks join the Model 335 to cover the full range of Class 6 and 7 vehicle applications.  The 

cabover Model 220 is based on the award-winning DAF LF design and is ideally suited for urban pickup and 

delivery applications where maneuverability is critical to operating performance.

  All medium-duty models feature PACCAR PX-6 and PX-8 engines exclusively, providing customers with 

enhanced performance, serviceability and fuel efficiency.

Peterbilt continues to make significant investments in its manufacturing facilities, including a new training 

center, which will ensure products and customer services of the highest quality.  The Peterbilt dealer network 

reached a record level with 233 locations throughout the U.S. and Canada. 

Peterbilt represents the pinnacle of “classic” styling in conventional trucks.  This Model 389, with 

a 70” Unibilt Ultracab sleeper, fuel-efficiency package and new headlamps, updates the traditional 

vehicle profile with exciting design changes that greatly enhance aerodynamic efficiency.

*  “Highest in Customer Satisfaction among Conventional Medium-Duty Trucks” J.D. Power and Associates 2006 Medium Duty Truck Customer Satisfaction StudySM. www.jdpower.com

 
 
 
 
F I N A N C I A L   C H A R T S

K E N W O R T H   T R U C K   C O M P A N Y

Kenworth earned three 2006 J.D. Power and Associates Awards for Highest in Customer 

Satisfaction  among  Class  8  truck  owners  in  the  Over  The  Road,  Pickup  and  Delivery, 

11

and Dealer Service Segments — for the second consecutive year.*  “The World’s Best” 

commitment  to  high  quality  and  innovative  product  development  delivered  record 

profits, sales and production.

  Kenworth’s record sales of Class 8 vehicles and outstanding Class 6/7 product deliveries were due to strong 

customer demand for the superior quality, operating efficiency and driver satisfaction inherent throughout its 

product line.  Innovative capital investments in plant capacity and efficiency 

allowed Kenworth to reach record production and enhanced Kenworth’s reputation 

as a technology leader in the trucking industry.

  The new T660 reaffirms Kenworth’s legacy as the leading manufacturer of 

America’s most aerodynamic commercial vehicle, a category that Kenworth 

invented decades ago.  In addition to its contemporary styling and enhanced fuel 

economy, the T660 offers an advanced forward lighting system with 40 percent 

more down-the-road visibility, multiplexed electronic instrumentation, GPS 

navigation and a world-class automotive-quality cab interior.  

  Kenworth’s medium-duty trucks feature the fuel-efficient PACCAR PX-6 and 

PX-8 medium-duty engines.  Kenworth added to its medium-duty range in 2006.  

A new T300 Class 6 conventional vehicle allows customers to expand their pool 

of drivers for non-CDL products.  Kenworth also unveiled its K360 COE Class 7 

model, based on the successful DAF LF.  This medium-duty truck features a sleek 

aerodynamic exterior, easy-access cab, and best-in-class maneuverability and visibility.

  The introduction of the environmentally friendly Kenworth Clean Power system provides significant fuel cost 

savings — an estimated 1,850 gallons annually for the average fleet truck — and reduces emissions by 10 percent.  

The factory-installed climate-control system provides heating and cooling, plus 110-volt “hotel load” power, for 

10 hours without operating the engine.

  Kenworth and Pendleton Woolen Mills combined to offer the ultimate in interior comfort and styling for 

owner-operators and top fleet drivers.  Kenworth’s T660 and W900 Pendleton Limited Edition models were 

unveiled, incorporating rich leather trim, wood grain and distinctive wool fabric accents.

  Kenworth began construction of a 30 percent expansion of its assembly plant in Chillicothe, Ohio, which will 

add 105,000 square feet to the facility.  Quality magazine selected the facility as “Plant of the Year” in the large 

plant category.

  The strong Kenworth dealer network operates 286 locations in the U.S. and Canada.

Kenworth’s new T660 sets a new standard for aerodynamic design and fuel-optimizing capability.   

Everything down to the smallest detail — including mirrors and flush-mounted headlights — was 

exhaustively refined to ensure improved performance for customers’ businesses.

*  “Highest in Customer Satisfaction with Heavy-Duty Truck Dealer Service, Two Years in a Row,” “Highest in Customer Satisfaction among Pickup & Delivery Segment Class 8 
Trucks, Two Years in a Row” and “Highest in Customer Satisfaction among Over the Road Segment Class 8 Trucks, Two Years in a Row.”  J.D. Power and Associates 2006 
Heavy Duty Truck Customer Satisfaction StudySM. www.jdpower.com

P A C C A R   A U S T R A L I A

PACCAR Australia dominated the heavy-duty truck market again in 2006.  The Kenworth 

12

brand defines custom-built quality and superior reliability — valued characteristics in 

one of the world’s toughest operating environments.

  The leading producer of commercial vehicles on the continent, PACCAR Australia continued to lead in the 

high-horsepower segment with 43 percent market share in 2006.  The successor to the legendary Kenworth K104 

— a virtual icon for the country’s challenging “B-Doubles” application — was introduced during 2006.  The 

new Model K104B features improved cab access, LED step lights for safe nighttime entry, enhanced visibility, 

luxurious and ergonomic interior upgrades, additional personal storage capacity and aerodynamic refinements.

PACCAR Australia added an 8 x 4 variant to its popular aerodynamic Kenworth T404S conventional product 

lineup.  Offering higher carrying capacities in the 450-horsepower segment, the 8 x 4 option maximizes payload 

— and profitability — for interurban line-haul operators.  

Production capacity at the Bayswater manufacturing plant increased 35 percent in 2006 due to the addition 

of a new 65,000-square-foot facility that contains warehousing, fabrication, R&D and financial services.

The Kenworth T404SAR provides Australian customers with a rugged, reliable chassis that can tackle the toughest 

applications and haul up to a half tonne more payload per trip than competitive trucks.

 
 
P A C C A R   M E X I C O

PACCAR  Mexico  (KENMEX)  achieved  record  sales,  profits  and  production  levels  in  2006 

— capturing more than 53 percent of heavy-duty tractor sales.  Kenworth’s superior product 

13

quality combined with extensive aftermarket support contributed to this excellent result.

  KENMEX celebrated the opening of a new $74 million Mexicali plant, which increased production capacity 

by 50 percent.  The plant features state-of-the-art cab paint robotics, advanced production-line logistics and 

sophisticated information systems.  A new 80,000-square-foot fabrication center incorporates integrated 

machining cells and automated transfer lines.

For 47 years, Kenworth has set the standard for excellence in Mexico’s trucking industry, reinforced this year 

by the introduction of its new leading-edge aerodynamic model, the T660.  The truck features outstanding fuel 

economy, enhanced forward lighting and a world-class interior.

  KENMEX unveiled a new Kenworth T300 Class 6 vehicle equipped with air brakes for pickup and delivery and 

specialized applications that benefit from the truck’s exceptional maneuverability, visibility and ergonomic design.  

The T300 complements the KW45 and KW55 medium-duty cabover for use in metropolitan delivery applications.

  KENMEX increased the country’s most extensive parts and service network to 112 locations nationwide.

The Kenworth W900 symbolizes heavy-duty trucking in Mexico.  Customers cite the superior quality of products, dealers, 

financial services and aftermarket support as reasons for their unwavering commitment to the brand.

 
L E Y L A N D   T R U C K S

Leyland,  the  United  Kingdom’s  leading  truck  manufacturer,  delivered  a  record  17,200 

14

vehicles  to  customers  in  Europe  and  North  America  in  2006.    Leyland  reinforced  its 

innovative manufacturing success with the introduction of on-line van body building. 

In its world-class manufacturing facility, Leyland produces a highly complex mix of DAF vehicles for delivery 

throughout the world.  Recognized as one of the most efficient truck plants in the industry, Leyland is renowned 

for its extraordinary quality — one of the reasons DAF is the fastest-growing commercial vehicle OEM in Europe.

  The implementation last year of a new robotic chassis paint facility — a first in the commercial vehicle 

industry — has enhanced capacity and finish quality.  The system employs patent-pending PACCAR-developed 

software to manage the wide variety of truck configurations.  In addition, Leyland introduced a new state-of-the-

art Advanced Planning and Scheduling system to further boost efficiency.

Leyland began production of a unique in-house-designed van body for DAF LF vehicles.  The body-builder 

initiative establishes new industry quality thresholds and improves the delivery schedule for complete vehicles.

Leyland produced the final Foden chassis in 2006, retiring the revered 150-year-old brand.  The truck, a Foden 

A3-8R, is the centerpiece of the Foden exhibit at the British Commercial Vehicle Museum in Leyland, England.

Leyland streamlined delivery schedules for customers of DAF LF vehicles by launching a van body build program.  High-quality 

proprietary-design van bodies are constructed and installed in the Leyland factory.

 
 
 
P A C C A R   I N T E R N A T I O N A L

PACCAR  International,  a  leader  in  delivering  Kenworth,  Peterbilt  and  DAF  trucks  to 

customers  worldwide,  posted  record  sales  and  profits  during  2006.    A  buoyant  global 

15

economy increased demand for premium-quality PACCAR vehicles.

  Worldwide demand for PACCAR’s custom-built transportation solutions remained strong in 2006.  High crude 

oil prices created substantial demand for off-highway products to support oilfield exploration, drilling and servicing 

segments.  On-highway vehicle sales to Latin America and Asia, fueled by healthy economies, remained strong.

  Kenworth and Peterbilt products have been an integral asset in oilfields around the world for decades, hauling 

prodigious loads long distances over difficult terrain under severe climatic conditions.  The Kenworth 963 model 

was redesigned to incorporate new electronic engines, an updated cab, a new hood for improved visibility, and 

superior air-conditioning and vehicle cooling systems — vital in desert conditions where temperatures exceed 

120 degrees F.

PACCAR International licensed Formosa Plastics Group in Taiwan to assemble DAF CF trucks.  Customers 

in over 100 countries benefit from the durability and reliability of PACCAR trucks and on-time delivery of parts 

and services.

PACCAR International facilitates truck sales worldwide, utilizing PACCAR’s extensive manufacturing resources 

to build and deliver high-quality transportation solutions — such as this DAF CF, assembled in Taiwan. 

 
A F T E R M A R K E T   T R U C K   P A R T S

PACCAR Parts celebrated 14 consecutive years of record sales and profits in 2006 as a 

16

result  of  a  strong  dealer  network,  advanced  information  technology  applications  and 

excellent customer service.

PACCAR Parts business has tripled since 1996, shipping 14.3 million order lines in 2006, due to an increased 

population of PACCAR vehicles and strong demand for comprehensive PACCAR-branded aftermarket product 

lines.  To support a growing network of dealers and customers, PACCAR Parts is constructing two new state-

of-the-art parts distribution centers (PDCs).  A 260,000-square-foot distribution center will open in 2007 in 

Oklahoma City, and construction will begin during 2007 on a PDC in Budapest, Hungary — expanding the 

network to 13 strategically located PDCs worldwide.

Parts availability and extensive product offerings across PACCAR’s dealer network are supported by the industry-

leading Managed Dealer Inventory (MDI) system — an automated electronic parts-replenishment program.  

In an industry first, PACCAR Parts introduced customer loyalty cards — the Kenworth Privileges card and 

Peterbilt Preferred card.  The card replaces coupon books and provides owner-operators, fleets and service 

facilities with an electronic medium to access quality brand-name parts 24/7.

PACCAR Parts employs industry-leading technologies to strengthen its competitive advantage throughout its distribution system.  Its 

global aftermarket operation supplies 1,800 Kenworth, Peterbilt and DAF dealer locations with parts for 6- to 50-tonne commercial vehicles.

 
 
 
P A C C A R   W I N C H

PACCAR Winch Division is the premium full-line producer of industrial winches in the 

world.    Robust  global  commodity  demand  in  2006  provided  the  foundation  for  the 

17

division to set new records in sales, profits and market share.  

PACCAR Winch’s broad product line of Braden recovery winches, hoists and drives, Gearmatic planetary hoists 

and Carco tractor winches deliver superior quality and performance to customers worldwide.  Double-digit sales 

growth was achieved in every major segment in 2006.

  The Winch Division strengthened its leadership in the oilfield industry during 2006, introducing its innovative 

Pipelayer Winch System.  The proprietary winch design replaces complicated mechanical winches with more 

reliable tandem-mounted hydraulically driven winches.

  The division also successfully launched its Electronic Maintenance Module (EMM) in 2006.  An industry first, 

this innovative system tracks winch duty cycles, enabling customers to schedule preventative maintenance based 

on actual — instead of estimated — usage.

PACCAR Winch also broadened its family of hydraulically driven tractor winches, including the H200 for 

500-horsepower crawler tractors used in demanding phosphate mining applications.

PACCAR Winch Division’s Braden, Carco and Gearmatic nameplates — known for engineering excellence and dependability in 

challenging environments — have established themselves in market-leading positions in a multitude of industries.

 
 
P A C C A R   F I N A N C I A L   S E R V I C E S

PACCAR Financial Services Companies (PFS), which support the sale of PACCAR trucks 

18

worldwide, achieved record income in 2006.  PFS portfolios are comprised of more than 

158,300 trucks and trailers, with total assets surpassing $9.8 billion.

PACCAR Financial Corp. (PFC), the preferred source of financing for Kenworth and Peterbilt trucks in 

North America, established new records for finance volume and profitability in 2006.  Superior customer service, 

streamlined credit processing, and a breadth of new innovative finance and insurance products heightened demand 

for PFC in every market segment.  In addition, PFC implemented a new state-of-the-art collection system that 

utilizes the latest in technology, which enables PFC to increase collection efficiencies and systemically monitor a 

growing portfolio.

PACCAR Financial Europe (PFE) celebrated its fifth anniversary during 2006 with profitable growth to over 

$2.0 billion in assets, record profit and expanded service to DAF dealers and customers in 13 countries.  PFE is 

the market leader in providing financing solutions for DAF customers and dealers in Europe.

PACCAR Financial subsidiaries in Mexico and Australia enhanced their dealer and customer-service capabilities 

to further build on the leading position of the PACCAR brands in those countries.

PACCAR Financial employs state-of-the-art information technology, such as innovative three-screen clusters, 

to accelerate the process of credit application, purchasing and financing Kenworth, Peterbilt and DAF 

trucks worldwide.

 
 
 
P A C C A R   L E A S I N G   C O M P A N Y

PACCAR Leasing achieved its 13th consecutive year of record profits in 2006 — delivering 

a  record  number  of  new  Kenworth  and  Peterbilt  trucks.    The  PacLease  fleet  contains 

19

over 28,500 units, including 2,000 leased vehicles serving Mexico.

  The market for full-service leasing and outsourced fleet services is a significant segment of the transportation 

industry, consuming more than 21 percent of all Class 6, 7 and 8 vehicles produced.  PacLease is one of the 

fastest-growing and most innovative truck-leasing networks in North America.  Growth in 2006 resulted from a 

focus on both local and national fleet business served by an expanding franchise network.

PACCAR Leasing launched PacTrac this year, a telematics solution designed to help customers reduce operating 

costs, improve asset utilization and enhance their logistics capability.  The onboard wireless computing and 

communications system provides real-time diagnostic, GPS location and performance data to fleet managers.

PACCAR Leasing provides a competitive advantage by offering only premium-quality PACCAR trucks, which 

have exceptional residual value and superior fuel efficiency.  In addition, locally owned and highly responsive 

franchise dealers deliver custom transportation solutions that meet customers’ unique needs.  During 2006, 

PacLease strengthened its market presence by increasing its network to 281 North American outlets.

PACCAR Leasing continues to expand its fleet and penetration of the medium-duty market with an increasing number of 

premium-quality Class 6-7 trucks, such as this popular Kenworth T300.

 
 
P A C C A R   T E C H N I C A L   C E N T E R S

PACCAR’s world-class Technical Centers leverage advanced simulation technologies to 

20

dramatically  accelerate  product  development  and  ensure  that  PACCAR  continues  to 

provide the highest-quality products in the industry. 

PACCAR Technical Centers are world-class facilities with state-of-the-art product test and validation 

capabilities. The U.S. Technical Center concluded three years of rigorous development and testing of 2007 diesel 

engine emission systems.  The comprehensive process resulted in significant new technologies for engine cooling, 

electrical systems and exhaust aftertreatment.  One hundred trucks were field tested over 13 million miles.  The 

Technical Center was also instrumental in the development of the new ComfortClass and Kenworth Clean Power 

auxiliary power systems, advanced multiplexed electronics and industry-leading ergonomically refined interiors 

for Kenworth and Peterbilt.

PACCAR’s European center was at the forefront in the development and validation of the new DAF truck 

models, interior and exterior updates, and a complete range of fuel-efficient PACCAR engines.  A new state-of-

the-art engine lab is currently under construction in Eindhoven.  When complete, the facility will feature 20 new 

test cells equipped with the latest technologies and will generate up to 20 percent of the total energy needed at 

DAF’s Eindhoven factory.

PACCAR’s Technical Centers are leading the way in development of hybrid-powered PACCAR trucks — targeting an ambitious goal 

of 30 percent improvement in medium-duty vehicle fuel efficiency in 2008. This DAF LE Hybrid Truck utilizes an advanced diesel/electric 

drive system.

 
 
I N F O R M A T I O N   T E C H N O L O G Y   D I V I S I O N

PACCAR’s Information Technology Division (ITD) is an industry leader in the innovative 

application of software and hardware technology. ITD provides PACCAR a competitive 

21

advantage in R&D, sales, manufacturing, financial services and aftermarket support.

PACCAR ITD earned recognition as one of the most innovative technology organizations in the world, 

receiving honors from InformationWeek and Computerworld magazines during 2006.  ITD partners with world-

class suppliers to pioneer emerging hardware and software tools that accelerate innovation throughout PACCAR.  

Six Sigma methods are used to identify high-value opportunities where breakthrough technologies can be 

applied to enhance processes, products and profits.

In 2006, ITD implemented a sophisticated manufacturing system at DAF’s facility in Westerlo, Belgium. 

World-class software provides real-time access to assembly and quality-control information, instantly available 

through touch panels and tablet PCs.  Industry-leading telematics products were launched in over 5,000 Kenworth, 

Peterbilt and DAF vehicles to reduce fleet operating costs and improve their competitive advantage.  PACCAR 

dealers use ITD-developed state-of-the-art tools such as wireless truck connections that automatically diagnose 

and update electronic components, enhancing customer support and improving their asset utilization.

One of the most innovative technology organizations in the world, PACCAR ITD partners with leading-edge hardware and software 

manufacturers to continually fine-tune the Company’s competitiveness.  Its award-winning Global Operations Support Center provides 

24/7 monitoring of PACCAR systems worldwide.

 
 
F I N A N C I A L   C H A R T S
F I N A N C I A L   C H A R T S

22

EARNINGS  &  DIVIDENDS  PER  SHARE

U.S.  AND  CANADA  CLASS  8  TRUCK  MARKET  SHARE

dollars

6.00

325

retail sales

4.80

260

3.60

195

2.40

130

1.20

0.00

65

0

50%

40%

30%

20%

10%

0% 

97

98

99

00

01

02

03

04

05

06

97

98

99

00

01

02

03

04

05

06

■  Diluted Earnings per Share

■  Dividends per Share

■  Total U.S. and Canada Class 8 Units 
excluding PACCAR (in thousands)

■  PACCAR Units (in thousands)

  PACCAR Market Share (percent)

T O TA L   A S S E T S

billions of dollars

GEOGRAPHIC  REVENUE

billions of dollars

17.5

14.0

10.5

7.0

3.5

0.0

17.5

14.0

10.5

7.0

3.5

0.0

97

98

99

00

01

02

03

04

05

06

97

98

99

00

01

02

03

04

05

06

■  Truck and Other

■  Financial Services

■  United States

■  Outside U.S.

 
S T O C K H O L D E R   R E T U R N   P E R F O R M A N C E   G R A P H

The following line graph compares the yearly percentage change in the cumulative total stockholder return on the 
Company’s common stock to the cumulative total return of the Standard & Poor’s Composite 500 Stock Index and 
the return of an industry peer group of companies identified in the graph (the Peer Group Index) for the last five 
fiscal years ending December 31, 2006. Standard & Poor’s has calculated a return for each company in the Peer 
Group Index weighted according to its respective capitalization at the beginning of each period with dividends 
reinvested on a monthly basis. Management believes that the identified companies and methodology used in the 
graph for the Peer Group Index provides a better comparison than other indices available. The Peer Group Index 
consists of ArvinMeritor, Inc., Caterpillar Inc., Cummins, Inc., Dana Corp., Deere & Co., Eaton Corp., Ingersoll-
Rand Co. Ltd., Navistar International Corp., and Oshkosh Truck Corp. The comparison assumes that $100 was 
invested December 31, 2001 in the Company’s common stock and in the stated indices and assumes reinvestment 
of dividends.

23

400

300

200

100

0
2001

PACCAR Inc

S&P 500 Index
Peer Group Index

2002

2003

2004

2005

PACCAR Inc

S&P 500 Index

Peer Group Index

2001

 100.00

 100.00

 100.00

2002

 109.04

  77.90

  96.09

2003

 206.66

 100.25

 158.07

2004

 304.05

  111.15

 189.88

2005

 272.37

 116.61

 196.95

400

300

200

100

0
2006

2006

 400.45

 135.03

 224.46

PACCAR Inc and Subsidiaries

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A L Y S I S   O F   F I N A N C I A L 
C O N D I T I O N   A N D   R E S U L T S   O F   O P E R A T I O N S

(tables in millions, except truck unit and per share data)

24

R E S U LT S   O F   O P E R AT I O N S :

2006 

2005 

2004

Net sales and revenues:
  Truck and 
  Other 

  Financial Services  

Income before taxes:
  Truck and 
  Other 
  Financial 
  Services  
Investment 
  income 
Income taxes 
Net Income 
Diluted Earnings
  Per Share 

$15,503.3 
950.8 
$16,454.1 

$13,298.4  $10,833.7
562.6
$14,057.4  $11,396.3

759.0 

$  1,846.6 

$  1,516.8 

$  1,139.9

247.4 

199.9 

168.4

81.3 
(679.3) 
$  1,496.0 

56.9 
(640.4) 
$ 1,133.2 

59.9
(461.4)
$  906.8

$ 

5.95 

$ 

4.37 

$ 

3.44

Overview:
PACCAR is a global technology company whose 
principal businesses include the design, manufacture 
and distribution of high-quality, light-, medium- and 
heavy-duty commercial trucks and related aftermarket 
parts and the financing and leasing of its trucks and 
related equipment. The Company also manufactures 
and markets industrial winches.
  Consolidated net sales and revenue increased 17% 
to a record $16.45 billion from $14.06 billion in 2005 
due to strong global demand for the Company’s high-
quality trucks, aftermarket parts and financial services. 
Financial Services revenues increased 25% to $950.8 
million in 2006.
  PACCAR achieved record net income in 2006 of 
$1,496.0 million ($5.95 per diluted share), which was 
an increase of 32% over 2005 net income of $1,133.2 
million ($4.37 per diluted share). Excellent results 
were achieved in the Truck and Other businesses due 
to revenue growth, increased margins and ongoing 
cost control. Financial Services income before taxes 
increased 24% to a record $247.4 million compared 
to $199.9 million in 2005 as a result of strong asset 
growth, low credit losses and stable finance margins. 

  Selling, general and administrative (SG&A) expense 
for Truck and Other increased to $457.3 million in 2006 
compared to $429.9 million in 2005. SG&A increased 
to support expanded sales and higher production levels. 
However, as a percent of revenues, SG&A expense 
decreased to a record low of 3.0% in 2006 from 3.2% 
in 2005 as the Company continued to implement Six 
Sigma initiatives and process improvements in all 
facets of the business.

Investment income of $81.3 million in 2006 
increased from $56.9 million in 2005. Investment 
income was higher in 2006 due to higher average 
cash and marketable debt security balances and 
higher interest rates compared to 2005.
  The 2006 effective income tax rate was 31.2% com-
pared to 32.5% in 2005 (excluding the $64.0 million 
tax on the 2005 repatriation of $1.5 billion of foreign 
earnings). The lower 2006 effective income tax rate 
reflects the impact of a favorable tax settlement and 
higher tax-exempt investment income in the U.S.
  The Company’s return on revenues was a record 
9.1% compared to 8.1% in 2005.

Truck
PACCAR’s truck segment, which includes the 
manufacture and distribution of trucks and related 
aftermarket parts, accounted for 93% of revenues in 
2006 and 94% of revenues in 2005 and 2004. In North 
America, trucks are sold under the Kenworth and 
Peterbilt nameplates and, in Europe, under the DAF 
nameplate.

Truck net sales
  and revenues  
Truck income 
  before taxes 

2006 

2005 

2004

$15,367.3 

$13,196.1  $10,762.3

$  1,848.8 

$  1,520.2 

$  1,145.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company achieved record new truck deliveries in 
every major market during 2006 as summarized below:

United States 
Canada 
U.S. and Canada 
Europe 
Mexico, Australia
  and other 
Total units 

2006 

82,600 
12,900 
95,500 
55,900 

2005 

71,900 
10,900 
82,800 
52,200 

2004

59,200
9,100
68,300
45,300

15,400 
166,800 

13,500 
148,500 

10,500
124,100

2006 Compared to 2005:
PACCAR’s worldwide truck sales and revenues increased 
16% to $15.37 billion in 2006 due to high demand for 
the Company’s trucks and related aftermarket parts in 
all major markets.
  Truck income before taxes was $1.85 billion 
compared to $1.52 billion in 2005. The increase from 
the prior year was due to higher production rates, 
growing aftermarket part sales and improved truck 
margins. The impact of exchange rate movements was 
not significant to either revenues or profit in 2006. 
In the U.S. and Canada, Peterbilt and Kenworth 
delivered a record 95,500 medium and heavy trucks 
during 2006, an increase of 15% over 2005. The 
increased deliveries reflect overall market growth and 
increased market share. The Class 8 market increased 
12% to a record 322,500 units in 2006 from 287,500 
in 2005. The market benefited partially from vehicle 
sales “pulled forward” prior to the January 1, 2007 
implementation of new higher cost EPA emission 
compliant engines in the United States. PACCAR’s 
market share increased to 25.3% in 2006 from 23.1% 
in 2005. The total medium-duty market increased 3% 
to 107,000 units.

In Europe, DAF trucks delivered a record 55,900 
units during 2006, an increase of 7% over 2005. The 
15 tonne and above truck market improved to 268,500 
units, a 4% increase from 2005 levels. DAF increased 
its share of the 15 tonne and above market for the 
seventh year in a row, growing to 14.5% in 2006 from 
13.7% in 2005. DAF market share in the 6 to 15 tonne 
market also increased. Truck and parts sales in Europe 
represented 28% of PACCAR’s total truck segment net 
sales and revenues in 2006 compared to 31% in 2005.
  Truck unit deliveries in Mexico, Australia and other 
countries outside the Company’s primary markets 
increased 14%. Deliveries outside the primary markets 
to customers in Africa, Asia and South America are 
sold through PACCAR International, the Company’s 
international sales division. Combined truck and parts 
sales in these markets accounted for 10% of total truck 

25

segment sales and 9% of truck segment profit in 2006.
  PACCAR’s worldwide aftermarket parts revenues 
were $1.94 billion, an increase of 15% compared to 
$1.68 billion in 2005. Parts operations benefited from 
a growing truck population and the continued integra-
tion of PACCAR technology with dealer business 
systems to provide competitive sales programs to 
more customers.
  Truck segment gross margin as a percentage of 
net sales and revenues improved to 14.7% in 2006 
from 14.5% in 2005 as a result of improved operating 
efficiencies and strong demand for the Company’s 
products. Higher material costs from suppliers, 
including the impacts of higher crude oil, copper, steel, 
aluminum and other commodities have generally been 
reflected in higher costs and sales prices for new trucks.

2005 Compared to 2004:
PACCAR’s worldwide truck sales and revenues 
increased $2.43 billion to $13.20 billion in 2005 due 
to higher demand for the Company’s trucks and 
related aftermarket parts around the world. 
  Truck income before taxes was $1.52 billion 
compared to $1.14 billion in 2004. The increase from 
the prior year is due to higher production rates, 
growing aftermarket part sales and improved truck 
margins.
  Peterbilt and Kenworth delivered 82,800 medium 
and heavy trucks in the U.S. and Canada during 2005, 
an increase of 21% from 2004. Industry retail sales 
of new Class 8 trucks in the U.S. and Canada were 
287,500 units in 2005 up 23% from 233,000 in 2004. 
The medium-duty market increased 7% to 103,200 
units.

In Europe, new truck deliveries increased 15% to 
52,200 units. The 15 tonne and above truck market 
improved to 259,000 units, a 9% increase from 2004 
levels. Truck and parts sales in Europe represented 
31% of PACCAR’s total truck segment net sales and 
revenues in 2005, compared to 34% in 2004.
  Truck unit deliveries in Mexico, Australia and other 
countries increased 29%, primarily due to a larger 
market in Mexico. Combined results in these countries 
were 10% of total truck segment sales and 11% of 
truck segment profit in 2005.
  PACCAR’s worldwide aftermarket parts revenues of 
$1.68 billion in 2005 increased from 2004 due to a 
growing truck population and improved business 
system integration with dealers.

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
2005 Compared to 2004:
PFS revenues increased 35% to $759.0 million due to 
higher asset levels in the Company’s primary operating 
markets. New business volume was $3.73 billion, up 
20% on higher truck sales levels and strong market 
share.

Income before taxes increased 19% to $199.9 million 

from $168.4 million in 2004. This improvement was 
primarily due to higher finance gross profit, partly 
offset by a higher provision for losses. The increase in 
finance margins was due to the 24% increase in assets 
and higher interest rates, offset partly by a higher cost 
of funds. The higher provision for losses resulted from 
the growth in the asset base.

Financial Services Outlook
The outlook for the Financial Services segment is 
principally dependent on the generation of new 
business volume and the related spread between the 
asset yields and the borrowing costs on new business, 
as well as the level of credit losses experienced. Asset 
growth is expected to be modest in the U.S. and 
Canada as new business volume will approximate 
asset repayments. Asset growth is likely in Europe, 
consistent with the anticipated strong truck market. 
The segment continues to be exposed to the risk that 
economic weakness, as well as higher interest rates and 
fuel and insurance costs, could exert pressure on the 
profit margins of truck operators and result in higher 
past-due accounts and repossessions. 

Other Business

Included in Truck and Other is the Company’s 

winch manufacturing business. Sales from this 
business represent less than 1% of net sales for 2006, 
2005 and 2004.

26

Truck Outlook
Demand for heavy-duty trucks in the U.S. and Canada 
is currently forecast to decline 30% to 40% in 2007, with 
industry retail sales expected to be 200,000–230,000 
trucks. Western European heavy-duty registrations for 
2007 are projected to remain strong at 250,000–270,000 
units. Demand for the Company’s products in Mexico, 
Australia and international markets is expected to 
remain strong.

Financial Services
The Financial Services segment, which includes wholly 
owned subsidiaries in North America, Europe and 
Australia, derives its earnings primarily from financing 
or leasing PACCAR products. Over the last ten years, 
the asset portfolio and income before taxes have 
grown at a compound annual growth rate of 14%.

2006 

2005 

2004

Financial Services:
  Average earning 

  assets 
  Revenues 

Income before 
  taxes  

$8,746.0 
950.8 

$7,389.0 
759.0 

$5,945.0
562.6

247.4 

199.9 

168.4

2006 Compared to 2005:
PACCAR Financial Services (PFS) revenues increased 
25% to $950.8 million due to higher earning assets 
worldwide and higher interest rates. New business 
volume was a record $4.24 billion, up 14% from 2005 
on higher truck sales levels and solid market share. 
PFS provided loan and lease financing for over 25% of 
PACCAR new trucks delivered in 2006.

Income before taxes increased 24% to a record 
$247.4 million from $199.9 million in 2005. This 
improvement was primarily due to higher finance 
gross profit and lower credit losses, partly offset by an 
increase in selling, general and administrative expenses 
to support business growth. The increase in finance 
gross profit was due to higher asset levels and higher 
interest rates, offset partly by a higher cost of funds. 
Net portfolio charge-offs were $13.9 million compared 
to $19.3 million in 2005. At December 31, 2006, the 
earning asset portfolio quality was excellent with the 
percentage of accounts 30+ days past-due at 1.2%, the 
same percentage as the end of 2005. 
  During the year, PFS expanded its financing opera-
tions into Hungary and the Czech Republic and now 
operates in 17 countries worldwide.

 
 
 
 
 
 
 
 
 
27

  Expenditures for property, plant and equipment in 
2006 totaled $312 million compared to $299 million in 
2005. Major capital projects included the completion 
of the new $74 million truck and fabrication facilities 
in Mexico and a parts distribution facility in 
Oklahoma, substantial completion of a 30 percent 
expansion to the Kenworth truck factory in Ohio and 
the beginning of construction of a new engine test 
facility at DAF in the Netherlands. In addition, the 
Company made significant investments related to new 
product introductions for 2007 in the areas of vehicle 
styling, telematics, engine technology and light-weight 
materials to improve product quality, fuel economy 
and increase customer satisfaction. Over the last ten 
years, the Company’s combined investments in world-
wide capital projects and research and development 
totaled $2.83 billion.
  Spending for capital investments and research and 
development in 2007 is expected to increase from 2006 
levels. PACCAR is investing in key product development 
areas, including onboard energy management systems 
for Class 8 and medium-duty vehicles and diesel-
electric hybrid technology to deliver improved fuel 
economy in medium-duty vehicles. In mid 2007, the 
Company will begin construction of a $400 million, 
400,000 square-foot engine manufacturing facility and 
technology center in the Southeast United States which 
is expected to be completed in 2009. In addition, the 
Company will construct a new parts distribution 
center in Hungary to serve the growing Central and 
Eastern European markets.

L I Q U I D I T Y   A N D   C A P I TA L   R E S O U R C E S :

Cash and cash 
equivalents 
Marketable debt 
securities 

2006 

2005 

2004

$1,852.5 

$1,698.9 

$1,614.7

821.7 
$2,674.2 

591.4 
$2,290.3 

604.8
$2,219.5

The Company’s total cash and marketable debt securi-
ties increased $383.9 million in 2006. Cash provided 
by operations of $1,852.7 million was used primarily to 
pay dividends of $530.4 million, make capital additions 
totaling $312.0 million and repurchase PACCAR stock 
for $312.0 million. Cash required to originate new loans 
and leases was funded by repayments of existing loans 
and leases as well as Financial Services borrowings.
  The Company has line of credit arrangements of 
$2.24 billion. The unused portion of these credit lines 
was $2.17 billion at December 31, 2006 and is primarily 
maintained to provide backup liquidity for commercial 
paper borrowings of the financial services companies. 
Included in these arrangements is a $2.0 billion bank 
facility, of which $1.0 billion matures in 2007 and 
$1.0 billion matures in 2010. The Company’s strong
liquidity position and AA- investment grade credit 
rating continue to provide financial stability and 
access to capital markets at competitive interest rates. 
In December 2006, PACCAR’s Board of Directors 
approved the repurchase of an additional $300 million 
of the Company’s common stock.

Truck and Other
The Company provides funding for working capital, 
capital expenditures, research and development, 
dividends, stock repurchases and other business 
initiatives and commitments primarily from cash 
provided by operations. Management expects this 
method of funding to continue in the future.
  Long-term debt and commercial paper totaled 
$20.2 million as of December 31, 2006. 

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
28

Financial Services
The Company funds its financial services activities 
primarily from collections on existing finance receivables 
and borrow ings in the capital markets. An additional 
source of funds is loans from other PACCAR companies.
  The primary sources of borrowings in the capital 
market are commercial paper and medium-term notes 
issued in the public markets and, to a lesser extent, 
bank loans. The majority of the medium-term notes 
are issued by PACCAR’s largest financial services 
subsidiary, PACCAR Financial Corp. (PFC). PFC 
filed a shelf registration under the Securities Act of 
1933 in November 2006. The registration expires in 
2009 and does not limit the principal amount of debt 
securities that may be issued during the period.

In September 2006, PACCAR’s European finance 
subsidiary, PACCAR Financial Europe, renewed the 
registration of a €1 billion medium-term note pro-
gram with the London Stock Exchange. On December 
31, 2006, €289 million remained available for issuance. 
This program is renewable annually through the filing 
of a new prospectus. 
  To reduce exposure to fluctuations in interest rates, 
the Financial Services companies pursue a policy of 
structuring borrowings with interest-rate characteristics 
similar to the assets being funded. As part of this 
policy, the companies use interest-rate contracts. 
The permitted types of interest-rate contracts and 
transaction limits have been established by the 
Company’s senior management, who receive periodic 
reports on the contracts outstanding.
  PACCAR believes its Financial Services companies 
will be able to continue funding receivables, servicing 
debt and paying dividends through internally generated 
funds, lines of credit and access to public and private 
debt markets.

Commitments 
The following summarizes the Company’s contractual 
cash commitments at December 31, 2006:

Maturity
Within  More than
One Year  One Year 
$2,642.2 
$4,637.8 
49.4 
29.1 
125.8 
181.2 
$2,817.4 
$4,848.1 

Total
$7,280.0
78.5
307.0
$7,665.5

Borrowings 
Operating leases 
Other obligations 
Total  

  At the end of 2006, the Company had $7.70 billion 
of cash commitments, including $4.85 billion maturing 
within one year. Of the total cash commitments, $7.26 
billion were related to the Financial Services segment. 
As described in Note K of the consolidated financial 
statements, borrowings consist primarily of term debt 
and commercial paper issued by the Financial Services 
segment. The Company expects to fund its maturing 
Financial Services debt obligations principally from 
funds provided by collections from customers on loans 
and lease contracts, as well as from the proceeds of 
commercial paper and medium-term note borrowings. 
Other obligations include deferred cash compensation 
and the Company’s contractual commitment to 
acquire future production inventory.
  The Company’s other commitments include the 
following at December 31, 2006:

Commitment Expiration
Within  More than
One Year 
One Year 
$ 16.7 
$ 17.7 

280.3 

Total
$ 34.4

280.3

23.0 

30.1 

53.1

96.6 
$417.6 

188.5 
$235.3 

285.1
$652.9

Letters of credit 
Loan and lease
  commitments 
Equipment 
  acquisition 
  commitments 
Residual value
  guarantees 
Total  

  Loan and lease commitments are for funding new 
retail loan and lease contracts. Equipment acquisition 
commitments require the Company, under specified 
circumstances, to purchase equipment. Residual value 
guarantees represent the Company’s commitment to 
acquire trucks at a guaran teed value if the customer 
decides to return the truck at a specified date in 
the future.

 
 
 
 
 
 
 
 
 
 
 
 
I M PA C T   O F   E N V I R O N M E N TA L   M AT T E R S :
The Company, its competitors and industry in general 
are subject to various domestic and foreign requirements 
relating to the environment. The Company believes 
its policies, practices and procedures are designed to 
prevent unreasonable risk of environmental damage 
and that its handling, use and disposal of hazardous 
or toxic substances have been in accordance with 
environmental laws and regulations enacted at the 
time such use and disposal occurred. Expenditures 
related to environmental activities in 2006, 2005 and 
2004 were immaterial.
  The Company is involved in various stages of 
investi gations and cleanup actions in different countries 
related to environmental matters. In certain of these 
matters, the Company has been designated as a 
“potentially responsible party” by domestic and foreign 
environmental agencies. The Company has provided 
an accrual for the estimated costs to investigate and 
complete cleanup actions where it is probable that 
the Company will incur such costs in the future. 
Management expects that these matters will not have 
a significant effect on the Company’s consolidated 
cash flow, liquidity or financial condition.

29

C R I T I C A L   A C C O U N T I N G   P O L I C I E S :
In the preparation of the Company’s financial state-
ments, in accordance with U.S. generally accepted 
accounting principles, management uses estimates and 
makes judgments and assumptions that affect asset 
and liability values and the amounts reported as 
income and expense during the periods presented. 
The following are accounting policies which, in the 
opinion of manage ment, are particularly sensitive 
and which, if actual results are different, may have a 
material impact on the financial statements. 

Operating Leases
The accounting for trucks sold pursuant to agreements 
accounted for as operating leases is discussed in Notes 
A and G of the consolidated financial statements. In 
deter mining its estimate of the residual value of such 
vehicles, the Company considers the length of the lease 
term, the truck model, the expected usage of the truck 
and anticipated market demand. If the sales price of 
the trucks at the end of the term of the agreement 
differs significantly from the Company’s estimate, a 
gain or loss will result. The Company believes its 
residual-setting policies are appropriate; how ever, 
future market conditions, changes in government 
regulations and other factors outside the Company’s 
control can impact the ultimate sales price of trucks 
returned under these contracts. Residual values are 
reviewed regularly and adjusted if market conditions 
warrant.

Allowance for Credit Losses
The Company determines the allowance for credit 
losses on financial services receivables based on a 
combination of historical information and current 
market conditions. This determination is dependent 
on estimates, including assumptions regarding the 
likelihood of collecting current and past-due accounts, 
repossession rates and the recovery rate on the under-
lying collateral based on used truck values and other 
pledged collateral or recourse. The Company believes 
its reserve-setting policies adequately take into account 
the known risks inherent in the financial services 
portfolio. If there are significant variations in the 
actual results from those estimates, the provision for 
credit losses and operating earnings may be materially 
impacted.

PACCAR Inc and Subsidiaries

 
F O RWA R D - L O O K I N G   S TAT E M E N T S :
Certain information presented in this report contains 
forward-looking statements made pursuant to the 
Private Securities Litigation Reform Act of 1995, which 
are subject to risks and uncertainties that may affect 
actual results. Risks and uncertainties include, but are 
not limited to: a significant decline in industry sales; 
competitive pressures; reduced market share; reduced 
availability of or higher prices for fuel; increased safety, 
emissions, or other regulations re sulting in higher 
costs and/or sales restrictions; currency or commodity 
price fluctuations; lower used truck prices; insufficient 
or under-utilization of manufacturing capacity; sup-
plier interruptions; insufficient supplier capacity or 
access to raw materials; labor disruptions; shortages of 
commercial truck drivers; increased warranty costs or 
litigation; or legislative and governmental regulations. 

30

Product Warranty
The expenses related to product warranty are estimated 
and recorded at the time products are sold based on 
historical and current data and reasonable expectations 
for the future regarding the frequency and cost of 
warranty claims. Management believes that the 
warranty reserve is appropriate and takes actions to 
minimize warranty costs through quality-improvement 
programs; however, actual claims incurred could 
materially differ from the estimated amounts and 
require adjustments to the reserve.

Pension and Other Postretirement Benefits
The Company’s accounting for employee pension 
and other postretirement benefit costs and obligations 
is governed by the pronouncements of the Financial 
Accounting Standards Board. Management determines 
appropriate assumptions about the future to be used 
by actuaries to estimate net costs and liabilities. These 
assumptions include discount rates, long-term rates of 
return on plan assets, health care cost trends, inflation 
rates, retirement rates, mortality rates and other factors. 
Management bases these assumptions on historical 
results, the current environment and reasonable 
expectations of future events. 
  The discount rate for each plan is based on market 
interest rates of high-quality corporate bonds with 
a maturity profile that matches the timing of the 
projected benefit payments of the plans. Changes in 
the discount rate affect the valuation of the plan 
benefits obligation and funded status of the plans.
  The long-term rate of return on plan assets is based 
on projected returns for each asset class and relative 
weighting of those asset classes in the plans.
  Actual results that differ from these assumptions 
are accumulated and amortized into expense over 
future periods. While management believes that 
the assumptions used are appropriate, significant 
differences in actual experience or significant changes 
in assumptions would affect pension and other 
postretirement benefit costs and obligations and the 
balance sheet funded status of the plans.

C O N S O L I D A T E D   S T A T E M E N T S   O F   I N C O M E

Year  Ended  December  31 

TRUCK  AND  OTHER:

Net sales and revenues 

Cost of sales and revenues 
Selling, general and administrative 
Interest and other (income) expense, net 

Truck and Other Income Before Income Taxes 

FINANCIAL  SERVICES:

Revenues  

Interest and other 
Selling, general and administrative 
Provision for losses on receivables 

Financial Services Income Before Income Taxes 

Investment income 
Total Income Before Income Taxes  
Income taxes 
Net Income 

Net Income Per Share

Basic   
Diluted 

Weighted average number of common shares outstanding

Basic   
Diluted 
See notes to consolidated financial statements.

2006 

 2005 

2004

31

 (millions except per share data)

 $15,503.3 

 $13,298.4 

$ 10,833.7

  13,199.7 
457.3 
(.3) 
  13,656.7 
  1,846.6 

  11,340.5 
429.9 
11.2 
  11,781.6 
  1,516.8 

  9,268.6
390.4
34.8
  9,693.8 
  1,139.9

950.8 

573.7 
95.9 
33.8 
703.4 
247.4 

759.0 

433.8 
84.9 
40.4 
559.1 
199.9 

562.6

296.1
80.0
18.1
394.2
168.4

81.3 
  2,175.3 
679.3 
 $  1,496.0 

56.9 
  1,773.6 
640.4 
$  1,133.2  

59.9
  1,368.2
461.4
$  906.8

$       5.98 
$       5.95 

$ 
$ 

4.40 
4.37 

$ 
$ 

3.46
3.44

250.1 
251.4 

257.6 
259.2 

261.8
263.6

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D A T E D   B A L A N C E   S H E E T S

32

A S S E T S

December  31 

TRUCK  AND  OTHER:

Current Assets
Cash and cash equivalents 
Trade and other receivables, net  
Marketable debt securities 
Inventories 
Deferred taxes and other current assets 
Total Truck and Other Current Assets 

Equipment on operating leases, net 
Property, plant and equipment, net 
Other noncurrent assets 
Total Truck and Other Assets 

FINANCIAL  SERVICES:

Cash and cash equivalents 
Finance and other receivables, net 
Equipment on operating leases, net 
Other assets 
Total Financial Services Assets 

2006 

2005

(millions of dollars)

$  1,806.3 
665.0 
821.7 
693.7 
212.8 
  4,199.5 

418.2 
  1,347.2 
331.3 
  6,296.2 

$  1,624.4
582.2
591.4
495.5
214.9
  3,508.4

361.0
  1,143.0
347.1
  5,359.5

46.2 
  8,542.7 
  1,033.1 
189.2 
  9,811.2 
$16,107.4 

74.5
  7,262.5
845.9
173.0
  8,355.9
 $13,715.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
L I A B I L I T I E S   A N D   S T O C K H O L D E R S ’   E Q U I T Y

33 

December  31 

TRUCK  AND  OTHER: 

Current Liabilities
Accounts payable and accrued expenses 
Current portion of long-term debt and commercial paper 
Dividend payable 
Total Truck and Other Current Liabilities 
Long-term debt and commercial paper 
Residual value guarantees and deferred revenues 
Deferred taxes and other liabilities 
Total Truck and Other Liabilities 

FINANCIAL  SERVICES:

Accounts payable, accrued expenses and other 
Commercial paper and bank loans 
Term debt 
Deferred taxes and other liabilities 
Total Financial Services Liabilities 

S T O C K H O L D E R S ’   E Q U I T Y

Preferred stock, no par value – authorized 1.0 million shares, none issued
Common stock, $1 par value – authorized 400.0 million shares;

issued 248.5 million and 169.4 million shares 

Additional paid-in capital 
Treasury stock – at cost 
Retained earnings 
Accumulated other comprehensive income 
Total Stockholders’ Equity 

See notes to consolidated financial statements.

2006 

2005

(millions of dollars)

  $ 2,240.5 

497.0 
  2,737.5 
20.2 
477.5 
383.7 
  3,618.9 

243.2 
  4,222.6 
  3,037.2 
529.3 
  8,032.3 

$  1,834.9
8.6
338.7
  2,182.2
20.2
410.4
344.0
  2,956.8

168.9
  3,568.6
  2,657.5
462.5
  6,857.5

248.5 
27.5 
(2.1) 
  4,026.1 
156.2 
  4,456.2 
$16,107.4 

169.4
140.6
(35.1)
  3,471.5
154.7
  3,901.1
 $13,715.4

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D A T E D   S T A T E M E N T S   O F   C A S H   F L O W S

34

Year  Ended  December  31 

OPERATING  ACTIVITIES: 

Net income 
Items included in net income not affecting cash:
  Depreciation and amortization:

  Property, plant and equipment 
  Equipment on operating leases and other 

  Provision for losses on financial services receivables 
  Other, net 
Change in operating assets and liabilities:

(Increase) decrease in assets other than cash and equivalents:
  Receivables:

Trade and other 

  Wholesale receivables on new trucks 

Sales-type finance leases and dealer direct loans on 
  new trucks 

Inventories 
  Other, net 
Increase (decrease) in liabilities:
  Accounts payable and accrued expenses 
  Residual value guarantees and deferred revenues 
  Other, net 

Net Cash Provided by Operating Activities 

INVESTING  ACTIVITIES:

Retail loans and direct financing leases originated 
Collections on retail loans and direct financing leases 
Net (increase) decrease in wholesale receivables on used equipment 
Marketable securities purchases 
Marketable securities sales and maturities 
Acquisition of property, plant and equipment 
Acquisition of equipment for operating leases 
Proceeds from asset disposals 
Other, net 
Net Cash Used in Investing Activities 

FINANCING  ACTIVITIES:

Cash dividends paid 
Purchase of treasury stock 
Stock option transactions 
Net increase in commercial paper and bank loans 
Proceeds from long-term debt 
Payments on long-term debt 
Net Cash Provided by Financing Activities 
Effect of exchange rate changes on cash 
Net Increase in Cash and Cash Equivalents 
Cash and cash equivalents at beginning of year 
Cash and cash equivalents at end of year 
See notes to consolidated financial statements.

2006 

2005 

2004

(millions of dollars)

  $ 1,496.0 

$ 1,133.2  

$  906.8

163.4 
271.2 
33.8 
61.2 

(80.5) 
(64.6) 

(232.4) 
(168.5) 
(2.2) 

423.3 
72.9 
(120.9) 
  1,852.7 

  (3,318.5) 
  2,543.8 
(27.5) 
  (1,458.2) 
  1,225.4 
(312.0) 
(642.3) 
162.2 
1.0 
  (1,826.1) 

(530.4) 
(312.0) 
37.7 
576.0 
  2,222.6 
  (1,951.4) 
42.5 
84.5 
153.6 
  1,698.9 
  $ 1,852.5 

133.3 
236.8 
40.4 
(19.8) 

(80.1) 
(398.9) 

(194.3) 
(30.1) 
(37.5) 

147.1 
45.5 
11.2 
986.8 

  (2,946.4) 
  2,202.5 
(15.5) 
  (1,172.4) 
  1,135.1 
(300.4) 
(548.1) 
96.1 
46.5 
  (1,502.6) 

(496.9) 
(367.2) 
11.9 
  1,148.4 
  1,016.9 
(592.1) 
721.0 
(121.0) 
84.2 
  1,614.7 
$  1,698.9 

122.0
193.0
18.1
19.4

(53.0)
(298.4)

(164.0)
(142.1)
(30.2)

409.7
(69.5)
(20.8)
891.0

  (2,333.1)
  1,816.0
7.1
(876.3)
710.5
(231.9)
(401.6)
103.2

  (1,206.1)

(270.9)
(107.7)
15.7
148.2
  1,588.6
(857.6)
516.3
66.5
267.7
  1,347.0
$  1,614.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D A T E D   S T A T E M E N T S   O F   S T O C K H O L D E R S ’   E Q U I T Y

December  31 

COMMON  STOCK,  $1  PAR  VALUE:

Balance at beginning of year 
Treasury stock retirement 
50% stock dividend 
Stock options exercised and other stock compensation 
Balance at end of year 

ADDITIONAL  PAID-IN  CAPITAL:

Balance at beginning of year 
Treasury stock retirement 
Stock options and tax benefit 
Other stock compensation 
Balance at end of year 

TREASURY  STOCK,  AT  COST:

Balance at beginning of year 
Purchases  
Retirements 
Balance at end of year 

RETAINED  EARNINGS:

Balance at beginning of year 
Net income 
Cash dividends declared on common stock,
  per share: 2006-$2.77; 2005-$1.91; 2004-$1.83 
Treasury stock retirement 
50% stock dividend 
Balance at end of year 

ACCUMULATED  OTHER  COMPREHENSIVE  INCOME  (LOSS):

Balance at beginning of year 
FAS 158 accounting change, net of $87.5 tax effect 
Other comprehensive income (loss) 
Balance at end of year 
Total Stockholders’ Equity 
See notes to consolidated financial statements. 

2006 

2005 

2004

35

 (millions of dollars except per share data)

  $   169.4 
(5.0) 
83.1 
1.0 
248.5 

140.6 
(160.8) 
42.6 
5.1 
27.5 

(35.1)
(301.5) 
334.5 
(2.1) 

$  173.9 
(5.0) 

$  175.1
(2.0)

.5 
169.4 

450.5 
(338.4) 
27.0 
1.5 
140.6 

(378.5) 
343.4 
(35.1)

.8
173.9

524.2
(105.7)
25.6
6.4
450.5

(107.7)
107.7

  3,471.5 
  1,496.0 

  2,826.9 
  1,133.2 

  2,399.2
906.8

(689.6) 
(168.7)
(83.1)
  4,026.1 

    154.7 
(160.2)
161.7 
156.2 
$  4,456.2 

(488.6) 

(479.1)

  3,471.5 

  2,826.9 

  311.1 

147.9

(156.4) 
154.7 
$  3,901.1 

163.2
311.1
$  3,762.4

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D A T E D   S T A T E M E N T S   O F   C O M P R E H E N S I V E   I N C O M E

36

Year  Ended  December  31 

Net income 
Other comprehensive income (loss):
  Unrealized (losses) gains on derivative contracts

  Gains (losses) arising during the period 
    Tax effect 
  Reclassification adjustment 
    Tax effect 

  Unrealized losses on investments

  Net holding loss 
    Tax effect 
  Reclassification adjustment 
    Tax effect 

  Minimum pension liability adjustment 

  Tax effect 

Foreign currency translation gains (losses) 

Net other comprehensive income (loss) 
Comprehensive Income 
See notes to consolidated financial statements.

2006 

2005 

2004  

(millions of dollars)

 $1,496.0 

   $1,133.2 

 $  906.8

13.1 
(4.7) 
(17.4) 
5.9 
(3.1) 

(.6) 
.3 

(.3) 
26.0 
(9.8) 
16.2 
148.9 
161.7 
$1,657.7 

28.5 
(10.5) 
9.6 
(2.8) 
24.8 

(1.6) 
.6 
(.5) 
.2 
(1.3) 
(20.2) 
7.9 
(12.3) 
(167.6) 
(156.4) 
  $  976.8 

(11.9)
3.8
31.4
(12.3)
11.0

(1.2)
.4
(13.6)
5.2
(9.2)
(8.0)
2.7
(5.3)
166.7
163.2
 $1,070.0

N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

A .   S I G N I F I C A N T   A C C O U N T I N G   P O L I C I E S

Description of Operations: PACCAR Inc (the Company 
or PACCAR) is a multinational company operating in 
two segments: (1) the manufacture and distribution of 
light-, medium- and heavy-duty commercial trucks and 
related aftermarket parts and (2) finance and leasing 
products and services provided to customers and dealers. 
PACCAR’s sales and revenues are derived primarily 
from North America and Europe. The Company also 
operates in Australia and sells trucks and parts outside 
its primary markets to customers in Asia, Africa and 
South America.
  Principles of Consolidation: The consolidated financial 
statements include the accounts of the Company and 
its wholly owned domestic and foreign subsidiaries. 
All significant intercompany accounts and transactions 
are eliminated in consolidation. 
  Use of Estimates: The preparation of financial 
statements in conformity with accounting principles 
generally accepted in the United States requires 
management to make estimates and assumptions 
that affect the amounts reported in the financial 
statements and accompanying notes. Actual results 
could differ from those estimates.

  Cash and Cash Equivalents: Cash equivalents 
consist of liquid investments with a maturity at date 
of purchase of three months or less. 
  Long-lived Assets, Goodwill and Other Intangible 
Assets: The Company evaluates the carrying value of 
long-lived assets (including property and equipment, 
goodwill and other intangible assets) when events and 
circumstances warrant such a review. Goodwill is also 
tested for impairment on an annual basis. There were 
no impairment charges during the three years ended 
December 31, 2006.
  Revenue Recognition: Substantially all sales and 
revenues of trucks and related aftermarket parts are 
recorded by the Company when products are shipped 
to dealers or customers, except for certain truck ship-
ments that are subject to a residual value guarantee to 
the customer. Revenues related to these shipments are 
recognized on a straight-line basis over the guarantee 
period (see Note G). At the time certain truck and 
parts sales to a dealer are recognized, the Company 
records an estimate of the future sales incentive costs 
related to such sales. The estimate is based on historical 
data and announced incentive programs.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions  except  per  share  amounts)

Interest income from finance and other receivables 
is recognized using the interest method. Certain loan 
origination costs are deferred and amortized to interest 
income. For operating leases, rental revenue is recog-
nized on a straight-line basis over the lease term. 
Recog nition of interest income and rental revenue 
is suspended when management determines that 
collection is not probable (generally after 90 days past 
the contractual due date). Recognition is resumed if 
the receivable becomes contractually current and the 
collection of amounts is again considered probable.
  Foreign Currency Translation: For most of PACCAR’s 
foreign subsidiaries, the local currency is the functional 
currency. All assets and liabilities are translated at 
year-end exchange rates and all income statement 
amounts are translated at the weighted average rates 
for the period. Translation adjustments are record ed 
in accumulated other compre hensive income (loss), 
a component of stockholders’ equity.
  During 2005, the Company entered into forward 
currency contracts to hedge its net investment in 
foreign subsidiaries. The gain, net of tax effects, of 
$45.3 on the hedges was recorded as an adjustment 
to the foreign currency translation component of 
other comprehensive income.
  PACCAR uses the U.S. dollar as the functional 
currency for its Mexican subsidiaries. Accordingly, 
inventories, cost of sales, property, plant and equipment, 
and depreciation are remeasured at historical rates. 
Resulting gains and losses are included in net income.
  Research and Development: Research and develop-
ment costs are expensed as incurred and included as 
a component of cost of sales in the accompanying 
consoli dated statements of income. Amounts charged 
against income were $150.6 in 2006, $117.8 in 2005 
and $103.2 in 2004.
  Earnings per Share: Diluted earnings per share are 
based on the weighted average number of basic shares 
outstanding during the year, adjusted for the dilutive 
effects of stock-based compensation awards under the 
treasury stock method.
  Stock-Based Compensation: Effective January 1, 2003, 
PACCAR elected to recognize compensation expense 
on all new employee stock option awards over the 
vesting period, generally three years, pursuant to 
FASB Statement No. 123, Accounting for Stock-Based 

Compensation. Stock-based compensation expense, 
net of tax, was $6.9 in 2006 and $4.8 in 2005. Had 
compensation expense been recognized for options 
granted prior to 2003, net income and earnings per 
share for 2004 would have been adjusted to the pro 
forma amounts shown below:

37

Net income, as reported 
Add: Stock-based compensation included
in net income, net of related tax effects  
Deduct: Fair value of stock compensation,
  net of tax 
Pro forma net income 

$ 906.8

  2.8

  (4.0)
$ 905.6

  The adoption of FASB Statement No. 123(R), 
Share-Based Payment (FAS 123(R)) on January 1, 
2006 had an immaterial effect on the consolidated 
financial statements. 
  Realized tax benefits for 2006 of $15.3 related to the 
excess of deductible amounts over compensation costs 
recognized have been classified as a financing cash 
flow, in accordance with FAS 123(R).
  As of December 31, 2006, there was $7.4 of 
unamortized compensation cost related to unvested 
stock option awards, which is expected to be recognized 
over a remaining weighted-average vesting period 
of 1.5 years. Unamortized compensation cost at 
December 31, 2006 related to unvested restricted stock 
awards was $1.7, which is expected to be recognized 
over a remain ing weighted-average vesting period of 
1.3 years. 
  The estimated fair value of stock options granted 
during 2006, 2005 and 2004 was $11.94, $14.17 and 
$12.58 per share. These amounts were determined 
using the Black-Scholes-Merton option-pricing model, 
which values options based on the stock price at the 
grant date and the following assumptions:

Risk-free interest rate  
Expected volatility 
Expected dividend yield  
Expected term  

2006 
4.44% 
34% 
4.0% 
5 years 

2005 
3.73% 
39% 
3.2% 
5 years 

2004
3.11%
45%
3.0%
5 years

  See Note Q for a description of PACCAR’s stock 
compensation plans.

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

38

December  31,  2006,  2005  and  2004  (currencies  in  millions)

  New Accounting Pronouncements: In September 
2006, the FASB issued Statement No. 158, Employers’ 
Accounting for Defined Benefit Pension and Other 
Postretirement Plans—an amendment of FASB 
Statements No. 87, 88, 106 and 132(R) (FAS 158). 
FAS 158 requires an employer to recognize the funded 
status of each of its defined benefit postretirement 
plans as an asset or liability and to recognize changes 
in the funded status as a component of comprehensive 
income. Upon adoption at December 31, 2006, total 
assets were reduced by $114.7, total liabilities were 
increased by $45.5 and stockholders’ equity was 
reduced by $160.2, net of tax.

In July 2006, the FASB issued Interpretation No. 48, 

Accounting for Uncertainty in Income Taxes (FIN 48). 
FIN 48 is an interpretation of Statement No. 109, 
Accounting for Income Taxes, that clarifies the criteria 
for recogni tion of income tax benefits and becomes 
effective January 1, 2007. The Company does not expect 
this pronouncement to have a significant effect on its 
consolidated results of operations or financial position.
  Reclassifications: Certain prior-year amounts have 
been reclassified to conform to the 2006 presentation.

B .  

I N V E S T M E N T S   I N   M A R K E TA B L E   S E C U R I T I E S

The Company’s investments in marketable securities 
are classified as available-for-sale. These investments 
are stated at fair value with any unrealized holding 
gains or losses, net of tax, included as a component 
of accumulated other comprehensive income until 
realized. Gross realized and unrealized gains and losses 
on marketable debt securities were not significant for 
any of the three years ended December 31, 2006.
  The cost of debt securities available-for-sale is 
adjusted for amortization of premiums and accretion 
of discounts to maturity. Amortization of premiums, 
accretion of discounts, interest and dividend income 
and realized gains and losses are included in investment 
income. The cost of securities sold is based on the 
specific identification method.

  Marketable debt securities consisted of the following 
at December 31:

2006 

U.S. tax-exempt securities  
U.S. government securities 
Other debt securities 

2005 

U.S. tax-exempt securities  
U.S. government securities 

amortized 
cost 

$ 752.3 
  59.4 
  12.2 
$ 823.9 

amortized 
cost 

$ 553.6 
  39.3 
$ 592.9 

fair
value

$ 750.9
  58.5
  12.3
$ 821.7

fair
value

$ 552.7
  38.7
$ 591.4

  The contractual maturities of debt securities at 
December 31, 2006, were as follows:

Maturities: 
Within one year 
One to five years 
Five to ten years 
10 or more years 

amortized 
cost 

$ 230.5 
 465.1 
.9 
 127.4 
$ 823.9 

fair
value

$ 230.4
 463.0
.9
 127.4
$ 821.7

  Marketable debt securities include $128.4 of variable 
rate demand obligations (VRDOs). VRDOs are debt 
instruments with long-term scheduled maturities which 
have interest rates that periodically reset through an 
auction process.
  The Company had no investments in marketable 
equity securities at either December 31, 2006 or 2005. 
Gross realized gains on marketable equity securities 
were $14.1 for the year ended December 31, 2004.

C .   I N V E N T O R I E S

Inventories include the following:

At December 31, 
Finished products 
Work in process and raw
 materials 

Less LIFO reserve 

2006 
$ 365.4 

2005
$ 299.3

 472.1 
 837.5 
(143.8) 
$ 693.7 

 330.1
 629.4
(133.9)
$ 495.5

Inventories are stated at the lower of cost or market. 
Cost of inventories in the United States is determined 
principally by the last-in, first-out (LIFO) method. 
Cost of all other inventories is determined principally 
by the first-in, first-out (FIFO) method. Inventories 
valued using the LIFO method comprised 53% and 
49% of consolidated inventories before deducting the 
LIFO reserve at December 31, 2006 and 2005.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

D .   F I N A N C E   A N D   O T H E R   R E C E I VA B L E S

E .   A L L O WA N C E   F O R   L O S S E S

39

Finance and other receivables are as follows:

At December 31, 
Loans 
Retail direct financing leases  
Sales-type finance leases 
Dealer wholesale financing 
Interest and other receivables 
Unearned interest:
  Finance leases 

Less allowance for losses   

2006 

2005
$ 4,226.7  $ 3,642.3
2,322.1 
1,881.8
909.2 
701.2
1,562.6 
1,402.8
112.1 
86.6

(421.0)   
8,711.7 
(169.0)   

(307.0)
  7,407.7
(145.2)
$ 8,542.7  $ 7,262.5

  The majority of the Company’s customers are located 
in the United States, which represented 58% of total 
receivables at December 31, 2006 and December 31, 
2005. Terms for substantially all finance and other 
receivables range up to 60 months. Repayment experi-
ence indicates that some receivables will be paid prior 
to contract maturity, while others will be extended or 
renewed.

Included in Loans are dealer direct loans on the sale 

of new trucks of $50.9 and $29.6 as of December 31, 
2006 and 2005.
  The effects of sales-type leases, dealer direct loans 
and wholesale financing of new trucks are shown in 
the consolidated statements of cash flows as operating 
activities since they finance the sale of company 
inventory. 
  Annual payments due on loans beginning January 1, 
2007, are $1,614.2, $1,093.6, $852.0, $533.6, $246.6 and 
$37.1 thereafter.
  Annual minimum lease payments due on finance 
leases beginning January 1, 2007, are $874.0, $750.4, 
$647.0, $437.0, $239.1 and $110.1 thereafter. Estimated 
residual values included with finance leases amounted 
to $173.7 in 2006 and $134.4 in 2005.

The provision for losses on finance, trade and other 
re ceivables is charged to income in an amount suffi-
cient to maintain the allowance for losses at a level 
considered adequate to cover estimated credit losses. 
Receivables are charged to this allowance when, in the 
judgment of management, they are deemed uncollectible 
(generally upon repossession of the collateral). 
  The allowance for losses on Truck and Other and 
Financial Services receivables is summarized as follows:
financial
services

truck 
and other 

Balance, December 31, 2003 
Provision for losses 
Net losses 
Currency translation 
Balance, December 31, 2004 
Provision for losses 
Net losses 
Currency translation 
Balance, December 31, 2005 
Provision for losses 
Net losses 
Currency translation 
Balance, December 31, 2006 

$  14.9 
  (2.2) 
  (1.0) 
  1.0 
  12.7 
.3 
(.5) 
  (1.6) 
  10.9 
.3 
  (6.0) 
.5 
$  5.7 

$ 119.2
  18.1
 (12.2)
  2.3
 127.4
  40.4
 (19.3)
  (3.3)
 145.2
  33.8
 (13.9)
  3.9
$ 169.0

  The Company’s customers are principally concen-
trated in the transportation industry in North America 
and Europe. There are no significant concentrations 
of credit risk in terms of a single customer. Generally, 
Truck and Other and Financial Services receivables are 
collateralized by the related equipment and parts.

F.   P R O P E RT Y,   P L A N T   A N D   E Q U I P M E N T

Property, plant and equipment include the following:

At December 31, 
Land 
Buildings 
Machinery and equipment 

Less allowance for
  depreciation 

2006 

2005
$  142.5  $  123.6
 633.3
 1,569.7
2,326.6

 731.3 
 1,838.0 
2,711.8 

(1,364.6) 
(1,183.6)
$ 1,347.2  $ 1,143.0

  Property, plant and equipment are stated at cost. 
Depreciation is computed principally by the straight-
line method based upon the estimated useful lives of 
the various classes of assets, which range as follows:

Buildings 
Machinery and equipment 

30-40 years
5-12 years

PACCAR Inc and Subsidiaries

 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
  
  
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

40

G .   E Q U I P M E N T   O N   O P E R AT I N G   L E A S E S

H .   A C C O U N T S   PAYA B L E   A N D   A C C R U E D   E X P E N S E S

The Company leases equipment under operating 
leases to customers in the financial services segment. 
In addition, in the truck segment, equipment sold 
to customers in Europe subject to a residual value 
guarantee (RVG) is accounted for as operating leases. 
Equipment is recorded at cost and is depreciated on 
the straight-line basis to the lower of the estimated 
residual value or guarantee value. Lease and guarantee 
periods generally range from three to seven years. 
Estimated useful lives of the equipment range from 
five to ten years. The Company reviews residual values 
of equip ment on operating leases periodically to 
determine that recorded amounts are appropriate.

Truck and Other:
  Equipment on operating leases is as follows:

At December 31, 
Equipment on lease 
Less allowance for depreciation 

2006 
$ 589.7 
(171.5) 
$ 418.2 

2005
$ 493.4
(132.4)
$ 361.0

  When the equipment is sold subject to an RVG, the 
full sales price is received from the customer. A liability 
is established for the residual value obligation with the 
remainder of the proceeds recorded as deferred lease 
revenue. These amounts are summarized below: 

At December 31, 
Deferred lease revenues 
Residual value guarantee   

2006 
$ 192.4 
 285.1 
$ 477.5 

2005
$ 163.4
 247.0
$ 410.4

  The deferred lease revenue is amortized on a 
straight-line basis over the RVG contract period. 
At December 31, 2006, the annual amortization of
deferred revenue beginning January 1, 2007, is $82.2, 
$54.7, $33.3, $15.9, $5.4 and $.9 there after. Annual 
maturities of the residual value guarantees beginning 
January 1, 2007, are $96.5, $71.2, $61.1, $36.7, $16.7 
and $2.9 thereafter.

Financial Services:
  Equipment on operating leases is as follows:

At December 31, 
Transportation equipment 
Less allowance for depreciation 

2006 

2005
$ 1,397.1  $ 1,130.7
(284.8)
$ 1,033.1  $  845.9

(364.0) 

  Annual minimum lease payments due on operating 
leases beginning January 1, 2007, are $253.2, $182.5, 
$113.5, $52.1, $17.2 and $3.3 thereafter.

Accounts payable and accrued expenses include the 
following:

At December 31, 
Truck and Other:
Accounts payable 
Salaries and wages 
Product support reserves   
Other 

2006 

2005

$ 1,211.6  $  983.2
 137.2
 253.3
 461.2
$ 2,240.5  $ 1,834.9

 155.7 
 305.1 
 568.1 

I .   P R O D U C T   S U P P O RT   R E S E RV E S

Product support reserves include warranty reserves 
related to new products sales, as well as reserves 
related to optional extended warranties and repair 
and maintenance (R&M) contracts. The Company 
generally offers one-year warranties covering most 
of its vehicles and related aftermarket parts. Specific 
terms and conditions vary depending on the product 
and the country of sale. Optional extended warranty 
and R&M contracts can be purchased for periods which 
generally range up to five years. Warranty expenses 
and reserves are estimated and recorded at the time 
products or contracts are sold based on historical 
data regarding the source, frequency and cost of 
claims. PACCAR periodically assesses the adequacy 
of its recorded liabilities and adjusts the reserves 
as appropriate to reflect actual experience.
  Changes in warranty and R&M reserves are 
summarized as follows:

At December 31, 
Beginning balance 
Cost accruals and 

revenue deferrals 

Payments and 

revenue recognized 
Currency translation 

2006 

2005
$  391.5  $  376.3

 302.4 

 289.2

  (271.0) 
  35.4 

  (240.5)
 (33.5)
$  458.3  $  391.5

  Warranty and R&M reserves are included in the 
accompanying consolidated balance sheets as follows:

At December 31, 
Truck and Other:
Accounts payable and accrued

expenses 

Deferred taxes and other

liabilities 

Financial Services:
Deferred taxes and other

liabilities 

2006 

2005

$  305.1  $  253.3

  64.8 

  66.9

  88.4 

  71.3
$  458.3  $  391.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

J .   L E A S E S

Consolidated:

41

Interest paid on consolidated borrowings was 
$281.6, $204.0 and $134.4 in 2006, 2005 and 2004.
  The weighted average interest rate on consolidated 
commercial paper and bank loans was 4.8%, 4.0% 
and 3.4% at December 31, 2006, 2005 and 2004.
  The primary sources of borrowings are commercial 
paper and medium-term notes issued in the public 
markets. The medium-term notes are issued by PACCAR 
Financial Corp. (PFC) and PACCAR Financial Europe 
(PFE). PFC filed a shelf registration under the Securities 
Act of 1933 in November 2006. The registration expires 
in 2009 and the Company has authorized $5,000 
available for issuance during the three year registration 
period. At December 31, 2006, $4,700 of debt remained 
available for issuance under this program. In September 
2006, PFE renewed the registration of a €1,000 
medium-term note program with the London Stock 
Exchange. On December 31, 2006, €289 of debt 
remained available for issuance under this program.
  The Company has line of credit arrangements of 
$2,236.9. Included in these arrangements is a $2,000 
bank facility, of which $1,000 matures in 2007 and 
$1,000 matures in 2010. The unused portion of these 
credit lines was $2,166.0 at December 31, 2006, of 
which the majority is maintained to provide backup 
liquidity for commercial paper borrowings. Compen-
sating balances are not required on the lines, and 
service fees are immaterial. 

The Company leases certain facilities, computer equip-
ment and aircraft under operating leases. Leases expire 
at various dates through the year 2019.
  Annual minimum rent payments under non-
cancelable operating leases having initial or remaining 
terms in excess of one year at January 1, 2007, are 
$29.1, $18.1, $10.8, $7.6, $3.7 and $9.2 thereafter.
  Total rental expenses under all leases amounted 
to $41.4, $42.3 and $34.3 for 2006, 2005 and 2004.

K .   B O R R O W I N G S   A N D   C R E D I T   A R R A N G E M E N T S

Borrowings include the following at December 31:

Truck and Other:
  Noninterest bearing notes 
  Commercial paper 

  Less current portion 

2006 

2005

$ 

20.2  $ 

  20.2 

$ 

20.2  $ 

20.2
 8.6
  28.8
  (8.6)
20.2

  Long-term debt of $20.2 matures in 2011.

     effective

        rate   

2006 

         2005

Financial Services:
Commercial paper 
Bank loans 

Term debt:

Fixed rate 
Floating rate 

  4.8%  $ 4,200.6  $ 3,566.3
2.3
  6.6% 
$ 4,222.6  $ 3,568.6

22.0 

  9.5%  $ 
  4.5% 

48.3  $  127.3
 2,988.9 
 2,530.2
$ 3,037.2  $ 2,657.5

  The effective rate is the weighted average rate as of 
December 31, 2006, and includes the effects of inter-
est-rate agreements.
  Annual maturities of term debt beginning January 1, 
2007, are $415.2, $709.1, $1,911.9, and $1.0. Maturities 
for 2008 include $300.0 of floating rate exten dible notes, 
which were issued in 2005 and 2006. The extendible 
notes have an initial maturity of 13 months, which can 
be extended at the investor’s option to a final maturity 
of five years. 

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

42

L .   E M P L O Y E E   B E N E F I T   P L A N S

2006 

2005

PACCAR has several defined benefit pension plans, 
which cover a majority of its employees.
  The Company evaluates its actuarial assumptions 
on an annual basis and considers changes based upon 
market conditions and other factors.
  The Company funds its pensions in accordance with 
applicable employee benefit and tax laws. The Company 
contributed $149.7 to its pension plans in 2006 and 
$63.7 in 2005. The Company expects to contribute in 
the range of $50.0 to $90.0 to its pension plans in 
2007, of which $14.8 is estimated to satisfy minimum 
funding require ments. Annual benefits expected to be 
paid beginning January 1, 2007, are $37.2, $41.8, 
$45.5, $49.3, $54.5, and for the five years thereafter, a 
total of $343.7.
  Plan assets are invested in a diversified mix of 
equity and debt securities through professional invest-
ment managers with the objective to achieve targeted 
risk adjusted returns and maintain liquidity sufficient 
to fund current benefit payments. Allocation of plan 
assets may change over time based upon investment 
manager determination of the relative attractiveness 
of equity and debt securities. The Company periodi-
cally assesses allocation of plan assets by investment 
type and evaluates external sources of information 
regarding the long-term historical returns and 
expected future returns for each investment type.
  The following information details the allocation of 
plan assets by investment type:

Target 

 Actual

 2006 

2005

Plan assets allocation as of December 31:
Equity securities 
Debt securities 
Total 

55 - 70%  
30 - 45%  

63.9%
36.1

67.3% 
32.7 
100.0%  100.0%

  The following additional data relate to all pension 
plans of the Company, except for certain multi-employer 
and foreign-insured plans:

At December 31, 
Weighted Average Assumptions:
Discount rate 
Rate of increase in future
compensation levels 
Assumed long-term rate of
return on plan assets 

2006 

2005

5.7% 

  5.5%

4.2% 

  4.2%

7.4% 

  7.4%

$ 1,044.6  $  935.2
  40.8
  52.8
 (29.4)
  61.0

Change in Projected Benefit Obligation:
Benefit obligation at January 1  
Service cost 
Interest cost 
Benefits paid 
Actuarial loss  
Plan amendments 
Currency translation 
Participant contributions   
Projected benefit obligation at 
  December 31 

  50.5 
  60.8 
 (37.5) 
  30.5 
  9.7 
  30.4 
  4.4 

$ 1,193.4  $ 1,044.6

 (19.7)
  3.9

Change in Plan Assets: 
Fair value of plan assets at 

January 1 

Employer contributions 
Actual return on plan assets 
Benefits paid  
Currency translation 
Participant contributions   
Fair value of plan assets at 
  December 31 
Funded Status at December 31  

$  973.7  $  880.3
  63.7
  75.4
 (29.4)
 (20.2)
  3.9

 149.7 
 120.3 
 (37.5) 
  31.5 
  4.4 

  1,242.1 
$ 

48.7  $ 

 973.7
(70.9)

Amounts Recorded in Balance Sheet:
$ 
Other noncurrent assets 
Other noncurrent liabilities 
Accumulated other 

94.5  $  166.8
 (30.9)

 (45.8) 

comprehensive loss 

$  146.8  $ 

20.8

  As described more fully in Note A, FAS 158 changed 
the balance sheet accounting for defined benefit plans 
for 2006 on a prospective basis. Under FAS 158, the 
funded status of each defined benefit plan is recorded 
as an asset or a liability. The December 31, 2005 
balance sheet assets and liabilities include the effects 
of unrecognized actuarial losses, prior service cost 
and net initial obligations and these items are now 
included in accumulated other comprehensive income, 
net of tax. In addition, minimum pension liabilities 
and intangible assets related to defined benefit plans 
are no longer recognized.

Included in accumulated other comprehensive 
income at December 31, 2006, was $129.4 of unrecog-
nized actuarial loss, $15.9 of unrecognized prior 
service cost and $1.5 of unrecognized net initial 
obligation.
  Of the December 31, 2006 amounts in accumulated 
other comprehensive income, $5.1 of unrecognized 
actuarial loss and $2.7 of unrecognized prior service 
cost is expected to be amortized into net pension 
expense in 2007.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

  The projected benefit obligation includes $41.2 
and $38.6 at December 31, 2006 and 2005 related 
to an unfunded supplemental plan. The accumulated 
benefit obligations for this same plan were $30.5 and 
$27.9 at December 31, 2006 and 2005.
  The accumulated benefit obligation for all pension 
plans of the Company, except for certain multi-employer 
and foreign-insured plans, was $1,035.4 at December 31, 
2006, and $904.9 at December 31, 2005.

2006 
Year Ended December 31, 
Components of Pension Expense:
$  50.5 
Service cost 
Interest on projected
  60.8 
  benefit obligation  
Expected return on assets   (76.7) 
Amortization of prior

2005 

2004

$  40.8 

$  32.2

  52.8 
 (64.1) 

  48.5
 (59.5)

service costs  
Recognized actuarial 

loss  
Other 
Net pension expense 

3.6 

  3.6 

  3.4

  12.7 
.1 
$  51.0 

  9.2 
.1 
$  42.4 

  3.8
.2
$  28.6

  Pension expense for multi-employer and foreign-
insured plans was $32.0, $29.0 and $24.9 in 2006, 
2005 and 2004. 
  The Company has certain defined contribution 
benefit plans whereby it generally matches employee 
contributions of 2% to 5% of base wages. The majority 
of participants in these plans are non-union employees 
located in the United States. Expenses for these plans 
were $22.1, $20.6 and $18.5 in 2006, 2005 and 2004.
  The Company also provides coverage of approxi-
mately 50% of medical costs for the majority of its 
U.S. employees from retirement until age 65 as well 
as a death benefit.
  The following data relate to unfunded postretire-
ment medical and life insurance plans:

2006 

Year Ended December 31, 
Components of Retiree Expense:
Service cost 
Interest cost 
Recognized actuarial loss   
Recognized prior service

 $  5.4 
4.8 
1.4 

2005 

2004

$  3.6 
  4.2 
  1.5 

$  2.6
  3.7
.7

cost 

Recognized net initial 
  obligation 
Net retiree expense 

.1 

.2 

.1

.5 
$  12.2 

.4 
$  9.9 

.5
$  7.6

43

  The discount rate used for calculating the accumu-
lated plan benefits was 5.9% for 2006 and 5.6% for 
2005. In 2006 the assumed long-term medical inflation 
rate was 11% declining to 6% over five years. In 2005 
the rate assumption was 12% declining to 6% over six 
years. Annual benefits expected to be paid beginning 
January 1, 2007, are $3.2, $3.9, $4.9, $6.0, $7.3 and for 
the five years thereafter, a total of $47.0.
  Assumed health care cost trends have an effect on 
the amounts reported for the postretirement health care 
plans. A one-percentage-point change in assumed health 
care cost trend rates would have the following effects:

1% 

1%

increase  decrease

Effect on annual total of 
service and interest 
cost components 
Effect on accumulated
  postretirement benefit
  obligation 

$  1.2 

  $  (1.4)

$  9.7 

$  (8.4)

2006 

2005

Change in Projected Benefit Obligation:
Benefit obligation at January 1  
Service cost 
Interest cost 
Benefits paid 
Actuarial loss 
Projected benefit obligation 
  at December 31 

$  76.7 
  5.4 
  4.8 
  (2.2) 
  7.7 

$  92.4 

$  69.3
  3.6
  4.2
  (1.4)
  1.0

$  76.7

Unfunded Status at December 31 

$ (92.4) 

$ (76.7)

Amounts Recorded in Balance Sheet:
Other noncurrent liabilities 
Accumulated other 

$ (92.4) 

$ (53.5)

comprehensive income  

$  18.0

  The December 31, 2005 balance sheet assets and 
liabilities include the effects of unrecognized actuarial 
losses, prior service cost and net initial obligations 
and these items are now included in accumulated 
other comprehensive income, net of tax.

Included in accumulated other comprehensive 
income at December 31, 2006, was $16.2 of unrecog-
nized actuarial loss, $.3 of unrecognized prior service 
cost and $1.5 of unrecognized net initial obligation.
  Of the December 31, 2006 amounts in accumulated 
other comprehensive income, $.7 of unrecognized 
actuarial loss and $.3 of unrecognized net initial 
obligation is expected to be amortized into net retiree 
expense in 2007.

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

44

M .   I N C O M E   TA X E S

Year Ended December 31, 
Income Before Income Taxes:
Domestic 
Foreign 

2006 

2005 

2004

$ 1,149.3  $  960.3 
$  643.5
  1,026.0 
  724.7
  813.3 
$ 2,175.3  $ 1,773.6  $ 1,368.2

Provision for Income Taxes:
Current provision:
  Federal 
  State 
  Foreign 

$  280.4  $  394.7  $  139.9
  22.1
 251.4
 413.4

  39.6 
  292.4 
  612.4 

  41.9 
 257.7 
 694.3 

Deferred provision (benefit):
  Federal 
  State 
  Foreign 

  49.6 
4.7 
  12.6 
66.9 

  64.7
  6.7
 (23.4)
48.0
$  679.3  $  640.4  $  461.4

 (35.7) 
 .4 
 (18.6) 
  (53.9) 

  35% 

  35% 

  35%
$  761.4  $  620.8  $  478.9

Reconciliation of Statutory U.S. Federal Tax to Actual 
Provision:
Statutory rate  
Statutory tax 
Effect of:
  State income taxes 
  Repatriated earnings 
  Foreign income taxes 
  Other, net 

  27.3 
  (10.0) 
  (48.8) 
  (50.6) 

  27.5 
  64.0
 (45.3) 
 (26.6) 

 (25.7)
 (10.5)
$  679.3  $  640.4  $  461.4

  18.7

  A provision of $64.0 for the repatriation of foreign 
earnings was recorded as current income tax expense 
during 2005. In 2006, a benefit of $10.0 was recorded 
from the final calculation of taxes related to the 2005 
repatriation of foreign earnings.
  United States income taxes are not provided on 
the undistributed earnings of the Company’s foreign 
subsidiaries that are considered to be indefinitely 
reinvested. At December 31, 2006, the amount of 
undistributed earnings which are considered to be 
indefinitely reinvested is $1,918.7. U.S. income taxes 
were provided for the $610.2 not indefinitely rein-
vested.
  During 2005, the Company generated $50.0 in U.S. 
foreign tax credit carryforwards. The Company did 
not expect to utilize these credits, and recorded a 
full valuation allowance in 2005. During 2006, the 
Company utilized a portion of these credits and has 
$36.4 available at December 31, 2006. These credits are 
expected to be utilized in the future and the remaining 
valuation allowance was reversed in 2006.

  At December 31, 2006, the Company’s net tax 
operating loss carryforwards were $227.1. Substantially 
all of the loss carryforwards are in foreign subsidiaries 
and carry forward indefinitely, subject to certain limita-
tions under applicable laws. The future tax benefits 
of net operating loss carryforwards are evaluated on 
a regular basis, including a review of historical and 
projected future operating results.

At December 31 
Components of Deferred Tax Assets (Liabilities):
Assets:
  Provisions for accrued 

2006 

2005

  expenses 

  Net operating loss
  carryforwards 

  Allowance for losses on

  receivables 

  U.S. foreign tax credit

  carryforward 
  Foreign product

  development costs 

  Postretirement benefit plans  
  Other 

  Valuation allowance 

Liabilities:
  Financial Services 

  leasing depreciation 

  Depreciation and amortization 
  Postretirement benefit plans  
  Other 

Net deferred tax liability 

$  245.9 

$  232.3

  67.2 

  64.5

  55.8 

  50.8

  36.4 

  50.0

  40.5 
  90.1 
  57.8 
 593.7 
 (45.1) 
 548.6 

  41.1

  71.7
 510.4
 (95.5)
 414.9

(390.3)    (343.9)
 (89.4) 
 (91.5)
 (68.6) 
 (56.2)
 (122.0) 
 (68.2)
(670.3) 
  (559.8)
$ (121.7)  $ (144.9)

At December 31 
Classification of Deferred Tax Assets (Liabilities):
Truck and Other:
  Deferred taxes and 

2006 

2005

  other current assets 
  Other noncurrent assets 
  Deferred taxes and
  other liabilities 
Financial Services:
  Other assets 
  Deferred taxes and
  other liabilities 

Net deferred tax liability 

$  133.5 
  96.4 

$  132.4
  43.6

 (15.6) 

 (22.1)

  29.3 

  27.8

(365.3) 

 (326.6)
$ (121.7)  $ (144.9)

  Cash paid for income taxes was $611.5, $722.0 and 
$418.7 in 2006, 2005 and 2004.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

N .   FA I R   VA L U E S   O F   F I N A N C I A L   I N S T R U M E N T S

O .   C O M M I T M E N T S   A N D   C O N T I N G E N C I E S

45

The Company used the following methods and 
assumptions to determine the fair values of its 
financial instruments:
  Cash and Cash Equivalents: Carrying amounts 
approximate fair value.
  Marketable Securities: Amounts are carried at fair 
value, based on quoted market prices (see Note B).
  Financial Services Net Receivables: For floating-
rate loans, wholesale financings, and interest and other 
receivables, fair values approximate carrying values. 
For fixed-rate loans, fair values are estimated using 
discounted cash flow analysis based on current rates 
for comparable loans. Finance lease receivables and 
related loss provisions approximate fair value and have 
been excluded from the accompanying table.
  Derivative Instruments: Derivative instruments, 
including interest rate contracts and foreign currency 
exchange contracts, are carried at fair value. Fair values 
are based on quoted market prices or pricing models 
using current market rates and represent the amounts 
that the Company would receive or pay to terminate 
the contracts.
  Short- and Long-term Debt: The carrying amounts 
of commercial paper and short-term bank borrowings 
and floating-rate, long-term debt approximate fair 
value. The fair value of fixed-rate, long-term debt is 
estimated using discounted cash flow analysis, based on 
current interest rates for similar types and maturities 
of debt.
  Trade Receivables and Payables: Carrying amounts 
approximate fair value.
  Balance sheet captions which include financial 
instruments that are not carried at approximate fair 
value are as follows at December 31:

2006 
Truck and Other:
Long-term debt 

Financial Services:
Net receivables 
Term debt 

2005
Truck and Other:
Long-term debt 

Financial Services:
Net receivables 
Term debt 

carrying 
amount 

fair
value

$ 

20.2 

$ 

16.8

 5,672.9 
 3,037.2 

 5,580.8
 3,038.2

$ 

28.8 

$ 

26.8

 4,954.5 
 2,657.5 

 4,909.4
 2,657.3

The Company is involved in various stages of inves-
tigations and cleanup actions in different countries 
related to environmental matters. In certain of these 
matters, the Company has been designated as a 
“poten tially responsible party” by domestic and foreign 
en vironmental agencies. The Company has an accrual 
to provide for the estimated costs to investigate and 
complete cleanup actions where it is probable that the 
Company will incur such costs in the future. Expendi-
tures related to environmental activities in 2006, 2005 
and 2004 were not significant.
  While the timing and amount of the ultimate costs 
associated with future environmental cleanup cannot 
be determined, management expects that these matters 
will not have a significant effect on the Company’s 
consoli dated financial position.
  At December 31, 2006, PACCAR had standby letters 
of credit of $34.4, which guarantee various insurance 
and financing activities. The Company is committed, 
under specific circumstances, to purchase equipment 
at a cost of $23.0 in 2007 and $30.1 in 2008. At 
December 31, 2006, PACCAR’s financial services 
companies, in the normal course of business, had 
outstanding commit ments to fund new loan and lease 
transactions amounting to $280.3. The commitments 
generally expire in 90 days. The Company had other 
commitments, primarily to purchase production 
inventory, amounting to $181.2 in 2007 and $125.8 
thereafter.  
  PACCAR is a defendant in various legal proceedings 
and, in addition, there are various other contingent 
lia bilities arising in the normal course of business. 
After consultation with legal counsel, management does 
not anticipate that disposition of these proceedings 
and contingent liabilities will have a material effect on 
the consolidated financial statements.

PACCAR Inc and Subsidiaries

 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

  Derivative assets are included in the consolidated 
balance sheets in Truck and Other “Deferred taxes 
and other current assets” and Financial Services “Other 
assets.” Derivative liabilities are included in Truck and 
Other “Accounts payable and accrued expenses” and 
“Deferred taxes and other liabilities” and in Financial 
Services “Accounts payable, accrued expenses and 
other.”
  Substantially all of the Company’s interest-rate 
contracts and all of its foreign currency exchange 
contracts have been designated as cash flow hedges. 
The Company uses regression and the change in 
variable cash flows method to assess and measure 
effectiveness of interest-rate contracts. For foreign 
currency exchange contracts, the Company performs 
quarterly assessments to ensure that key terms 
continue to match. Gains or losses on the effective 
portion of derivatives designated and qualifying as 
cash flow hedges that arise from changes in fair value 
are initially reported in other comprehensive income. 
Gains or losses on the ineffective portion of cash 
flow hedges are recognized currently in earnings and 
were immaterial for each of the three years ended 
December 31, 2006. 
  Amounts in accumulated other comprehensive 
income are reclassified into net income in the same 
period in which the hedged transaction affects earnings. 
Net realized gains and losses from foreign exchange 
contracts are recognized as an adjustment to cost of 
sales or to financial services interest expense, consistent 
with the hedged transaction. Net realized gains and 
losses from interest-rate contracts are recognized as 
an adjustment to interest expense. Of the accumulated 
net gain included in other comprehen sive income as 
of December 31, 2006, $9.4, net of taxes, is expected 
to be reclassified to interest expense or cost of sales in 
2007. The fixed interest earned on finance receivables 
will offset the amount recognized in interest expense, 
resulting in a stable interest margin consistent with 
the Company’s interest-rate risk management strategy.

December  31,  2006,  2005  and  2004  (currencies  in  millions)

46

P.   D E R I VAT I V E   F I N A N C I A L   I N S T R U M E N T S

Derivative financial instruments are used as hedges to 
manage exposures to fluctuations in interest rates and 
foreign currency exchange rates. PACCAR’s policies 
prohibit the use of derivatives for speculation or 
trading. The Company documents its hedge objectives, 
proce dures and accounting treatment at the inception 
of and during the term of each hedge. Exposure limits 
and minimum credit ratings are used to minimize the 
risks of counterparty default, and the Company had 
no material exposures to default at December 31, 2006.
Interest-Rate Contracts: The Company enters into 
various interest-rate contracts, including interest-rate 
and basis swaps and cap agreements. Interest-rate 
contracts generally involve the exchange of fixed and 
floating rate interest payments. These contracts are 
used to manage exposures to fluctuations in interest 
rates. Net amounts paid or received are reflected as 
adjustments to interest expense. At December 31, 
2006, the Company had 510 interest-rate contracts 
outstanding. The notional amount of these contracts 
totaled $4,790.4, with amounts expiring annually over 
the next six years. The notional amount is used to 
measure the volume of these contracts and does not 
represent exposure to credit loss. In the event of default 
by a counterparty, the risk in these transactions is the 
cost of replacing the interest-rate contract at current 
market rates. The total fair value of all interest-rate 
con tracts amounted to an asset of $36.0 and a liability 
of $17.3 at December 31, 2006. Fair values at 
December 31, 2005 amounted to an asset of $38.0 
and a liability of $9.7.
  Notional maturities for all interest-rate contracts for 
the six years beginning January 1, 2007, are $1,348.9, 
$1,418.8, $1,353.8, $493.1, $150.9 and $24.9. The 
majority of these contracts are floating to fixed swaps 
that effectively convert an equivalent amount of 
commercial paper and other variable rate debt to 
fixed rates. Cross currency interest-rate swaps are also 
used to hedge foreign currency exposure in addition 
to modifying the interest-rate characteristics of debt. 
  Foreign Currency Exchange Contracts: PACCAR 
enters into foreign currency exchange contracts to 
hedge certain anticipated transactions and borrowings 
denominated in foreign currencies, particularly the 
Canadian dollar, the euro, the British pound and the 
Mexican peso. Foreign exchange contracts mature 
within one year. PACCAR had net foreign exchange 
purchase contracts outstanding amounting to $279.3 
and $321.1 U.S. dollars at December 31, 2006 and 2005, 
respective ly. The net fair value of these foreign exchange 
contracts was an asset of $2.0 and a liability of $.5 at 
December 31, 2006. Fair values at December 31, 2005 
amounted to an asset of $1.8 and a liability of $2.5. 

 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions  except  per  share  amounts)

  The following table summarizes information about 
stock options outstanding at December 31, 2006: 

47

range of 
  exercise prices 
Exercisable: 
$10.85-12.37   
  15.30-15.94 
  18.80-20.93 

Not Exercisable:
37.97 
  48.17-48.34 

number 
of shares 

remaining 
contractual 
life in years 

average
exercise
price*

486,300 
715,800 
1,097,400 
2,299,500 

579,600 
1,228,900 
1,808,500 
4,108,000 

2.0 
3.0 
5.6 

7.0 
8.6 
8.1 
5.8 

$11.80
15.62
19.97
16.89

37.97
48.26
44.96
$29.25

*Weighted Average

  See Note A for information regarding estimated fair 
values and option pricing assumptions.

  Diluted Earnings Per Share: The following table 
shows the additional shares added to weighted average 
basic shares outstanding to calculate diluted earnings 
per share. These amounts primarily represent the 
dilutive effect of stock options.

At December 31: 

2006 

2005 

2004

Additional shares  

1,376,200  1,655,300  1,782,900

  Antidilutive options amounted to 632,000 in 2006, 
604,700 in 2005 and 642,500 in 2004.

Q .   S T O C K   C O M P E N S AT I O N   P L A N S

PACCAR has certain plans under which officers and key 
employees may be granted options to purchase shares 
of the Company’s authorized but unissued common 
stock. Officers and non-employee directors may be 
granted restricted shares of the Company’s common 
stock. The maximum number of shares of the 
Company’s common stock authorized for issuance 
under these plans is 31.1 million. As of December 31, 
2006, the maximum number of shares available for 
future grants under these plans is 13.6 million. 
Options currently outstanding under these plans were 
granted with exercise prices equal to the fair market 
value of the Company’s common stock at the date 
of grant. Options expire no later than 10 years from 
the grant date and generally vest within three years. 
Stock option activity is as follows:

Outstanding at 12/31/03   
  Granted  
  Exercised 
  Cancelled 
Outstanding at 12/31/04   
  Granted  
  Exercised 
  Cancelled 
Outstanding at 12/31/05   
  Granted  
  Exercised 
  Cancelled 
Outstanding at 12/31/06 

number 
of shares 

  5,835,400   
686,400   
 (1,104,200) 
 (405,700) 
  5,011,900   
622,000   
(726,700) 
(152,900)  
  4,754,300   
643,100   
  (1,255,600) 
 (33,800) 
 4,108,000  

average
exercise
price*

$ 16.37
 37.97
13.85
21.77
 19.45
 48.17
  15.73
29.37
 23.46
 48.34
  16.72
43.70
$ 29.25

  For options exercised, the aggregate difference 
between the strike price and market price on the date 
of exercise was $43.2 in 2006, $23.8 in 2005 and $29.4 
in 2004. 

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions  except  share  amounts)

48

R .   S T O C K H O L D E R S ’   E Q U I T Y

Stockholder Rights Plan: The plan provides one right 
for each share of PACCAR common stock outstanding. 
Rights become exercisable if a person publicly 
announces the intention to acquire 15% or more of 
PACCAR’s common stock or if a person (Acquiror) 
acquires such amount of common stock. In all cases, 
rights held by the Acquiror are not exercisable. When 
exercisable, each right entitles the holder to purchase 
for two hundred dollars a fractional share of Series A 
Junior Participating Preferred Stock. Each fractional 
preferred share has dividend, liquidation and voting 
rights which are no less than those for a share of 
common stock. Under certain circumstances, the 
rights may become exercisable for shares of PACCAR 
common stock or common stock of the Acquiror 
having a market value equal to twice the exercise price 
of the right. Also under certain circumstances, the 
Board of Directors may exchange exercisable rights, in 
whole or in part, for one share of PACCAR common 
stock per right. The rights, which expire in the year 
2009, may be redeemed at one cent per right, subject 
to certain conditions. For this plan, 50,000 preferred 
shares are reserved for issuance. No shares have 
been issued.

  Accumulated Other Comprehensive Income: 
Following are the components of accumulated other 
comprehensive income:

Unrealized (loss) gain on

investments 
Deferred tax asset 

(liability) 

Unrealized gain (loss) on
  derivative contracts 
Deferred tax (liability)
  asset 

2006 

2005 

2004

$  (2.2) 

$  (1.6) 

$ 

 .5

.9 
(1.3) 

 .6 
  (1.0) 

(.2) 
 .3

  28.5 

  32.7 

  (5.4)

  (10.9) 
  17.6 

 (12.0) 
  20.7 

  1.3
  (4.1)

Pension and postretirement:
  Minimum pension

  liability adjustment 

  (33.2) 

 (13.0)

 (225.2)
  (25.3)
(4.4)
  90.1 
(164.8) 

  Unrecognized:
  Actuarial loss 
  Prior service cost 
  Net initial obligation   

  Deferred tax asset 

Currency translation
  adjustment 

Accumulated other
comprehensive 
income 

  12.4 
 (20.8) 

  4.5
  (8.5)

304.7 

 155.8 

 323.4

$ 156.2 

$ 154.7 

$ 311.1

  Other Capital Stock Changes: During 2006, the 
Company retired 5.0 million of its common shares, 
of which 4.5 million were acquired during the year. 
During 2005, the Company acquired 5.5 million of its 
common shares, of which 5.0 million were retired. In 
2004, the Company acquired and retired 2.0 million of 
its out standing common shares.
  At December 31, 2006, PACCAR had 32,873 treasury 
shares.
  Stock Dividend: A 50% common stock dividend was 
paid in August, 2006, with fractional shares paid in 
cash. This resulted in the issuance of 83,104,090 addi-
tional shares and 543 fractional shares paid in cash.

 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

December  31,  2006,  2005  and  2004  (currencies  in  millions)

S .   S E G M E N T   A N D   R E L AT E D   I N F O R M AT I O N

PACCAR operates in two principal segments, Truck 
and Financial Services.
  The Truck segment includes the manufacture of 
trucks and the distribution of related aftermarket parts, 
both of which are sold through a network of company-
appointed dealers. This segment derives a large 
propor tion of its revenues and operating profits 
from operations in North America and Europe.
  The Financial Services segment is composed of 
finance and leasing products and services provided 
to truck customers and dealers. Revenues are primarily 
generated from operations in North America and 
Europe.

Included in All Other is PACCAR’s industrial winch 
manufacturing business. Also within this category are 
other sales, income and expenses not attributable to 
a reportable segment, including a portion of corporate 
expense. Intercompany interest income on cash advances 
to the financial services companies is included in All 
Other and was $13.1, $15.7 and $10.8 for 2006, 2005 
and 2004. Geographic revenues from external customers 
are presented based on the country of the customer.
  PACCAR evaluates the performance of its Truck 
segment based on operating profits, which excludes 
investment income, other income and expense and 
income taxes. The Financial Services segment’s 
performance is evaluated based on income before 
income taxes.

Geographic Area Data 
Revenues:
  United States 
  Europe 
  Other 

2006 

2005 

2004

$  8,496.5  $  7,161.8  $  5,414.2
    4,589.8 
  3,725.9
  4,096.2 
    3,367.8 
  2,256.2
  2,799.4 
$ 16,454.1  $ 14,057.4  $ 11,396.3

Long-lived assets:
  Property, plant and equipment, net
  United States 
  The Netherlands 
  Other 

$  527.4  $ 
378.8 
441.0 

424.7
276.8
336.3
$  1,347.2  $  1,143.0  $  1,037.8

443.0  $ 
308.4 
391.6 

  Goodwill and other intangibles, net

Geographic Area Data 
  Equipment on operating leases, net

2006 

2005 

2004

49

  United States 
  United Kingdom   
  Germany 
  France 
  Other 

400.7  $ 

$  438.7  $ 
295.5 
172.8 
144.0 
400.3 

340.9
  278.8
  115.4
  157.0
  296.4
$  1,451.3  $  1,206.9  $  1,188.5

  206.6 
  111.3 
  130.7 
  357.6 

Business Segment Data
Net sales and revenues:
  Truck
  Total 
  Less intersegment   

(387.4) 
  External customers    15,367.3 
136.0 
  All Other  
  15,503.3 
950.8 

  Financial Services 

$ 15,754.7  $ 13,559.4  $ 11,081.8
  (319.5)
 10,762.3
71.4
 10,833.7
  562.6
$ 16,454.1  $ 14,057.4  $ 11,396.3

  (363.3) 
 13,196.1 
  102.3 
 13,298.4 
  759.0 

Income before income taxes:
  Truck 
  All Other 

  Financial Services 

Investment income   

(2.2) 
  1,846.6 
247.4 
81.3 

$  1,848.8  $  1,520.2  $  1,145.0
(5.1)
 1,139.9
  168.4
59.9
$  2,175.3  $  1,773.6  $  1,368.2

(3.4) 
  1,516.8 
  199.9 
56.9 

Depreciation and amortization:
  Truck 
  Financial Services 
  All Other 

$  218.8  $ 
203.3 
12.5 
$  434.6  $ 

190.3  $ 

182.1
  166.6 
  124.0
8.9
 13.2 
370.1  $  315.0

Expenditures for long-lived assets:
  Truck 
  Financial Services 
  Other 

$  447.5  $ 
494.2 
12.6 
$  954.3  $ 

419.3  $  222.7
  386.1
  413.7 
15.5 
24.7
848.5  $  633.5

Segment assets:
  Truck 
  Other  
  Cash and marketable

$  3,480.1  $  2,955.8  $  2,889.3
  174.5

  187.9 

188.1 

  The Netherlands  $ 
  Other 

$ 

115.9 
1.3 
$  117.2  $ 

 105.7  $ 
1.3 
 107.0  $ 

122.7
1.3
124.0

  securities  

  Financial Services 

  2,628.0 
 2,184.1
  6,296.2 
 5,247.9 
  9,811.2 
 6,980.1
$ 16,107.4  $ 13,715.4  $ 12,228.0

  2,215.8 
  5,359.5 
  8,355.9 

PACCAR Inc and Subsidiaries

 
 
 
 
   
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   R E P O R T   O N   I N T E R N A L   C O N T R O L   O V E R 
F I N A N C I A L   R E P O R T I N G

50

The management of PACCAR Inc (the Company) is responsible for establishing and maintaining satisfactory 
internal control over financial reporting. Internal control over financial reporting is a process designed to provide 
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements 
for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting may not prevent or detect misstatements because of its inherent 
limitations. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls 
may become inadequate because of changes in conditions, or that the degree of compliance with the policies 
and procedures may deteriorate.
  Management assessed the Company’s internal control over financial reporting as of December 31, 2006, 
based on criteria for effective internal control over financial reporting described in Internal Control—Integrated 
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this 
assessment, we concluded that the Company maintained effective internal control over financial reporting as of 
December 31, 2006.
  Management’s assessment of the effectiveness of the Company’s internal control over financial reporting has 
been audited by Ernst & Young LLP, an Independent Registered Public Accounting Firm, as stated in their report.

Mark C. Pigott
Chairman and Chief Executive Officer

R E P O R T   O F   I N D E P E N D E N T   R E G I S T E R E D   P U B L I C   A C C O U N T I N G   F I R M 
O N   T H E   C O M P A N Y ’ S   C O N S O L I D A T E D   F I N A N C I A L   S T A T E M E N T S

Board of Directors and Stockholders
PACCAR Inc

We have audited the accompanying consolidated balance sheets of PACCAR Inc as of December 31, 2006 and 
2005, and the related consolidated statements of income, stockholders’ equity, comprehensive income and cash 
flows for each of the three years in the period ended December 31, 2006. These financial statements are the 
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial 
statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board 
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about 
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing 
the accounting principles used and significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consoli-

dated financial position of PACCAR Inc at December 31, 2006 and 2005, and the consolidated results of its 
operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity 
with U.S. generally accepted accounting principles.
  As discussed in Note A to the financial statements, in 2006 the Company changed its method of accounting 
for defined benefit pension and other postretirement plans in accordance with FASB statement No. 158.
  We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board 
(United States), the effectiveness of PACCAR Inc’s internal control over financial reporting as of December 31, 
2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of 
Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2007 expressed an 
unqualified opinion thereon.

Seattle, Washington
February 16, 2007

 
 
 
 
R E P O R T   O F   I N D E P E N D E N T   R E G I S T E R E D   P U B L I C   A C C O U N T I N G 
F I R M   O N   T H E   C O M P A N Y ’ S   I N T E R N A L   C O N T R O L S

Board of Directors and Stockholders
PACCAR Inc

51

We have audited management’s assessment, included in the accompanying Management’s Report on Internal 
Control over Financial Reporting, that PACCAR Inc maintained effective internal control over financial reporting 
as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by 
the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). PACCAR Inc’s 
management is responsible for maintaining effective internal control over financial reporting and for its assess-
ment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion 
on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial 
reporting based on our audit.
  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight 
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance 
about whether effective internal control over financial reporting was maintained in all material respects. Our 
audit included obtaining an understanding of internal control over financial reporting, evaluating management’s 
assessment, testing and evaluating the design and operating effectiveness of internal control, and performing 
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a 
reasonable basis for our opinion.
  A company’s internal control over financial reporting is a process designed to provide reasonable assurance 
regarding the reliability of financial reporting and the preparation of financial statements for external purposes 
in accordance with generally accepted accounting principles. A company’s internal control over financial reporting 
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, 
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable 
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance 
with generally accepted accounting principles, and that receipts and expenditures of the company are being 
made only in accordance with authorizations of management and directors of the company; and (3) provide 
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition 
of the company’s assets that could have a material effect on the financial statements.
  Because of its inherent limitations, internal control over financial reporting may not prevent or detect 
misstate ments. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that 
controls may become inadequate because of changes in conditions, or that the degree of compliance with the 
policies or procedures may deteriorate.

In our opinion, management’s assessment that PACCAR Inc maintained effective internal control over financial 
reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in 
our opinion, PACCAR Inc maintained, in all material respects, effective internal control over financial reporting 
as of December 31, 2006, based on the COSO criteria.
  We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board 
(United States), the consolidated balance sheets of PACCAR Inc as of December 31, 2006 and 2005, and the 
related consolidated statements of income, stockholders’ equity, comprehensive income and cash flows for each 
of the three years in the period ended December 31, 2006 of PACCAR Inc and our report dated February 16, 2007 
expressed an unqualified opinion thereon.

Seattle, Washington
February 16, 2007

PACCAR Inc and Subsidiaries

 
S E L E C T E D   F I N A N C I A L   D A T A

52

2006 

2005 

2004 

2003 

2002

(millions except per share data)

Truck and Other Net Sales 

  and Revenues 

$  15,503.3 

$ 13,298.4 

$ 10,833.7 

$  7,721.1 

$  6,786.0

Financial Services Revenues 

950.8 

759.0 

562.6 

473.8 

432.6

Total Revenues 

Net Income 

Net Income Per Share:

  Basic 

  Diluted  

  Cash Dividends Declared  

Total Assets:

  Truck and Other  

  Financial Services 

Truck and Other Long-Term Debt 

Financial Services Debt 

Stockholders’ Equity 

$  16,454.1 

$ 14,057.4 

$ 11,396.3 

$  1,496.0 

$  1,133.2 

$ 

906.8 

$  8,194.9 

$  526.5 

$  7,218.6

$  372.0

5.98 

5.95 

2.77 

6,296.2 

9,811.2 

20.2 

7,259.8 

4,456.2 

4.40 

4.37 

1.91 

3.46 

3.44 

1.83 

2.01 

1.99 

.92 

  5,359.5 

  8,355.9 

20.2 

  6,226.1 

  3,901.1 

  5,247.9 

  6,980.1 

27.8 

  4,788.6 

  3,762.4 

  4,334.2 

  5,605.4 

33.7 

  3,786.1 

  3,246.4 

1.43

1.42

.67

  3,590.2

  5,112.3

33.9

  3,527.6

  2,600.7

All per share amounts have been restated to give effect to a 50% stock dividend paid in August 2006.

C O M M O N   S T O C K   M A R K E T   P R I C E S   A N D   D I V I D E N D S

Common stock of the Company is traded on the NASDAQ Global Select Market under the symbol PCAR. The table 
be low reflects the range of trading prices as reported by NASDAQ and cash dividends declared. All amounts have 
been restated to give effect to a 50% stock dividend paid in August 2006. There were 2,138 record holders of the 
common stock at December 31, 2006.

quarter 

First 
Second 
Third 
Fourth 
Year-End Extra 

cash dividends 
declared 

$   .17 
.20 
.20 
.20 
 2.00 

2006 

stock price 

high 

$50.05 
55.26 
58.90 
69.25 

low 

$45.19 
46.36 
50.90 
56.68 

cash dividends 
declared 

$  .13 
.14 
.14 
.17 
1.33 

2005

stock price

high 

$54.25 
49.36 
51.07 
49.06 

low

$45.67
42.56
44.14
42.20

The Company expects to continue paying regular cash dividends, although there is no assurance as to future 
dividends because they are dependent upon future earnings, capital requirements and financial conditions.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
Q U A R T E R L Y   R E S U L T S   ( U N A U D I T E D )

2006
Truck and Other Net Sales and Revenues 

Truck and Other Gross Profit (Before SG&A and Interest) 

Financial Services Revenues 

Financial Services Gross Profit (Before SG&A) 

Net Income  

Net Income Per Share (1):
  Basic 
  Diluted 

2005
Truck and Other Net Sales and Revenues 

Truck and Other Gross Profit (Before SG&A and Interest) 

Financial Services Revenues 

Financial Services Gross Profit (Before SG&A) 

Net Income (2) 

Net Income Per Share (1):
  Basic 
  Diluted 

first 

second 

third 

fourth

quarter

(millions  except  per  share  data)

53

$3,639.2 

$3,936.6 

$3,959.2 

$3,968.3

540.3 

212.5 

84.6 

342.0 

582.7 

231.4 

92.5 

369.9 

594.3 

246.2 

97.3 

403.6 

586.3

260.7

102.7

380.5

$   1.36 
1.35 

$   1.48 
1.47 

$   1.62 
1.61 

$   1.53
1.52

$3,154.6 

$3,372.9 

$3,345.4 

$3,425.5

464.9 

171.4 

75.1 

274.0 

496.5 

182.5 

80.0 

241.5 

502.9 

195.6 

83.2 

304.8 

493.6

209.5

86.9

312.9

$  1.05 
1.04 

$   .93 
 .92 

$  1.19 
1.18 

$  1.23
1.22

  Net income per share amounts have been restated to give effect to a 50% stock dividend paid in August 2006.

(1) The sum of quarterly per share amounts may not equal per share amounts reported for year-to-date periods. 

This is due to changes in the number of weighted shares outstanding and the effects of rounding for each period.

(2) Second quarter net income includes a $64.0 income tax provision for repatriation of foreign earnings.

PACCAR Inc and Subsidiaries

 
 
 
 
 
 
 
M A R K E T   R I S K S   A N D   D E R I V A T I V E   I N S T R U M E N T S

(currencies  in  millions)

54

Interest Rate Risks – See Note P for a description of the Company’s hedging programs and exposure to interest rate 
fluctuations. The Company measures its interest rate risk by estimating the amount by which the fair value of 
interest rate sensitive assets and liabilities, including derivative financial instruments, would change assuming 
an immediate 100 basis point increase across the yield curve as shown in the following table:

Fair Value Gains (Losses)  

C O N S O L I D AT E D :
Assets
Cash equivalents and marketable securities 
T R U C K   A N D   O T H E R :
Liabilities
Borrowings and related swaps:

2006 

2005

$ (12.2) 

$ (6.1)

Long-term debt 
Interest rate swaps related to commercial paper classified as long-term debt 

.6 

.6
(.1)

F I N A N C I A L   S E RV I C E S :
Assets

Loans and wholesale financing, net of unearned interest, 

less allowance for losses 

Liabilities
  Term debt 

Interest rate swaps related to financial services debt 

Total 

  (59.6) 

  (46.7)

.5 
  72.7 
$  2.0 

.9
  54.6
$  3.2

Currency Risks – The Company enters into foreign exchange forward contracts to hedge its exposure to exchange 
rate fluctuations of foreign currencies, particularly the Canadian dollar, the euro, the British pound and the 
Mexican peso (See Note P for additional information concerning these hedges). The Company uses a sensitivity 
analysis to evaluate its exposure to foreign currency exchange rate fluctuations. The potential loss in fair value for 
such financial instruments from a 10% unfavorable change in quoted foreign currency exchange rates would be a 
loss of $24.2 related to contracts outstanding at December 31, 2006, compared to a loss of $31.3 at December 31, 
2005. These amounts would be largely offset by changes in the values of the underlying hedged exposures.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
O F F I C E R S

Mark C. Pigott
Chairman and 
  Chief Executive Officer

Michael A. Tembreull
Vice Chairman

Thomas E. Plimpton
President

James G. Cardillo
Executive Vice President

Kenneth R. Gangl
Senior Vice President

Daniel D. Sobic
Senior Vice President

O F F I C E R S   A N D   D I R E C T O R S

55

Ronald E. Armstrong
Vice President

Robert J. Christensen
Vice President

Aad Goudriaan
Vice President

William D. Jackson
Vice President

Michael T. Barkley
Vice President and Controller

Timothy M. Henebry
Vice President

Janice B. Skredsvig
Vice President and
  Chief Information Officer

George E. West, Jr.
Vice President 

David C. Anderson
Vice President and 
  General Counsel

Richard E. Bangert, II
Vice President

Richard T. Gorman
Vice President

Thomas A. Lundahl
Vice President

Helene N. Mawyer
Vice President

Robin E. Easton
Treasurer

Janice M. D’Amato
Secretary

D I R E C T O R S

Mark C. Pigott
Chairman and 
  Chief Executive Officer
PACCAR Inc (3)

Alison J. Carnwath
Chairman, Management Board
ISIS Equity Partners, LLP (2)

John M. Fluke, Jr.
Chairman
Fluke Capital Management, L.P. (1,2)

Stephen F. Page
Retired Vice Chairman and
  Chief Financial Officer
United Technologies Corporation (1,4)

William G. Reed, Jr.
Retired Chairman
Simpson Investment Company (1,3)

Robert T. Parry
Retired President and
  Chief Executive Officer
Federal Reserve Bank 
  of San Francisco (2)

James C. Pigott
President
Pigott Enterprises, Inc. (3,4)

Michael A. Tembreull
Vice Chairman
PACCAR Inc

Harold A. Wagner
Retired Chairman 
Air Products and Chemicals, Inc. (1,4)

Charles R. Williamson
Retired Chairman and
  Chief Executive Officer
Unocal Corporation (2)

C O M M I T T E E S   O F   T H E   B O A R D

( 1 )   A U D I T   C O M M I T T E E
( 2 )   C O M P E N S A T I O N   C O M M I T T E E
( 3 )   E X E C U T I V E   C O M M I T T E E
( 4 )   N O M I N A T I N G   A N D   G O V E R N A N C E   C O M M I T T E E

PACCAR Inc and Subsidiaries

D I V I S I O N S   A N D   S U B S I D I A R I E S

56

T R U C K S

Kenworth Truck Company
Division Headquarters:
10630 N.E. 38th Place
Kirkland, Washington 98033

Factories:
Chillicothe, Ohio
Renton, Washington

Peterbilt 
Motors Company
Division  Headquarters:
1700 Woodbrook Street
Denton, Texas 76205

Factories:
Denton, Texas
Madison, Tennessee

PACCAR of Canada Ltd.
Markborough Place I
6711 Mississauga Road N. 
Mississauga, Ontario
L5N 4J8 Canada

Leyland Trucks Ltd.
Croston Road
Leyland, Preston
Lancs PR26 6LZ
United Kingdom

Factory:
Leyland, Lancashire

Kenworth Méxicana, 
S.A. de C.V.
Calzada Gustavo Vildósola 
  Castro 2000
Mexicali, Baja California 
Mexico

Factory:
Mexicali, Baja California

PACCAR
Australia Pty. Ltd.
Kenworth Trucks
Division  Headquarters:
64 Canterbury Road
Bayswater, Victoria 3153 
Australia

Factory:
Ste-Thérèse, Quebec

Factory:
Bayswater, Victoria

T R U C K   P A R T S 
A N D   S U P P L I E S

PACCAR Parts
Division  Headquarters:
750 Houser Way N.
Renton, Washington 98055

Dynacraft
Division Headquarters:
650 Milwaukee Avenue N.
Algona, Washington 98001

Canadian Kenworth 
Company
Division  Headquarters:
Markborough Place I
6711 Mississauga Road N.
Mississauga, Ontario
L5N 4J8 Canada

Peterbilt of Canada
Division  Headquarters:
Markborough Place I
6711 Mississauga Road N. 
Mississauga, Ontario
L5N 4J8 Canada

DAF Trucks N.V.
Hugo van der Goeslaan 1
P.O. Box 90065
5600 PT Eindhoven
The Netherlands

Factories:
Eindhoven, 

The Netherlands

Westerlo, Belgium

PacLease Méxicana 
S.A. de C.V.
Calzada Gustavo Vildósola 
  Castro 2000
Mexicali, Baja California 
Mexico

PACCAR Financial 
Services Ltd.
Markborough Place I
6711 Mississauga Road N. 
Mississauga, Ontario
L5N 4J8 Canada

PACCAR Financial 
Pty. Ltd.
64 Canterbury Road
Bayswater, Victoria 3153
Australia

PACCAR Leasing Company
Division of PACCAR 
Financial Corp.
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington 98004

E X P O R T   S A L E S

PACCAR International
Division  Headquarters:
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington 98004

Offices:
Beijing, Shanghai, People’s 
     Republic of China
Jakarta, Indonesia
Manama, Bahrain
Miami, Florida

W I N C H E S

PACCAR Winch Division
Division  Headquarters:
800 E. Dallas Street
Broken Arrow, Oklahoma 
74012

Factories:
Broken Arrow, Oklahoma
Okmulgee, Oklahoma

P R O D U C T   T E S T I N G , 
R E S E A R C H   A N D 
D E V E L O P M E N T

PACCAR Technical Center
Division  Headquarters:
12479 Farm to Market Road
Mount Vernon, Washington 
98273

DAF Trucks Test Center
Weverspad 2
5491 RL St. Oedenrode
The Netherlands

P A C C A R   F I N A N C I A L 
S E R V I C E S   G R O U P

PACCAR Financial Corp.
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington 98004

PACCAR Financial 
Europe B.V.
Hugo van der Goeslaan 1
P.O. Box 90065
5600 PT Eindhoven
The Netherlands

PACCAR Capital 
México S.A. de C.V.
Calzada Gustavo Vildósola 
  Castro 2000
Mexicali, Baja California 
Mexico

 
 
 
S T O C K H O L D E R S ’

  I N F O R M A T I O N

Corporate Offices
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington
98004

Mailing Address
P.O. Box 1518
Bellevue, Washington
98009

Telephone
425.468.7400

Facsimile
425.468.8216

Homepage
http://www.paccar.com

Stock Transfer 
and Dividend 
Dispersing Agent
Wells Fargo Bank 
Minnesota, N.A.
Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 
55164-0854
800.468.9716
www.wellsfargo.com/
shareownerservices

PACCAR’s transfer agent 
maintains the company’s 
shareholder records, issues 
stock certificates and 
distributes dividends and 
IRS Form 1099. Requests 
concerning these matters 
should be directed to 
Wells Fargo.

Online Delivery of 
Annual Report and Proxy 
Statement
PACCAR’s 2006 Annual 
Report and the 2007 Proxy 
Statement are available 
on PACCAR’s Web site at 
www.paccar.com/investors/
investor_resources.asp 

Registered stockholders 
can sign up to receive future 
proxy statements and annual 
reports in electronic format, 
instead of receiving paper 
documents, by visiting 
www.econsent.com/pcar/  

Stockholders who hold 
PACCAR stock in street 
name may inquire of their 
bank or broker about the 
availability of electronic 
delivery of annual 
meeting documents. 

Braden, Carco, 
ComfortClass, DAF, Foden, 
Gearmatic, Kenmex, 
Kenworth, Kenworth Clean 
Power, Leyland, PACCAR, 
PacLease, PacTrac, Peterbilt, 
TRP, Ultracab, and Unibilt 
are trademarks owned 
by PACCAR Inc and its 
subsidiaries. 

Independent Auditors
Ernst & Young LLP
Seattle, Washington

SEC Form 10-K
PACCAR’s annual report 
to the Securities and 
Exchange Commission 
will be furnished to 
stockholders on request 
to the Corporate 
Secretary, PACCAR Inc, 
P.O. Box 1518, Bellevue, 
Washington 98009. It is 
also available online at 
www.paccar.com/investors/
investor_resources.asp, 
under SEC Filings.

Annual Stockholders’
Meeting
April 24, 2007, 10:30 a.m. 
Meydenbauer Center
11100 N.E. Sixth Street
Bellevue, Washington
98004

An Equal Opportunity 
Employer

This report was printed
on recycled paper.