2 0 0 9 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 5-7 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 the world 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
Financial Highlights
Message to Shareholders
6
PACCAR Operations
Financial Charts
3 Stockholder Return Performance Graph
68 Management’s Report on Internal Control
Over Financial Reporting
68 Report of Independent Registered Public
Accounting Firm on the Company’s
Consolidated Financial Statements
4 Management’s Discussion and Analysis
69 Report of Independent Registered Public
39 Consolidated Statements of Income
40 Consolidated Balance Sheets
Accounting Firm on the Company’s
Internal Controls
42 Consolidated Statements of Cash Flows
70 Selected Financial Data
43 Consolidated Statements
of Stockholders’ Equity
44 Consolidated Statements
of Comprehensive Income
70 Common Stock Market Prices and Dividends
71 Quarterly Results
72 Market Risks and Derivative Instruments
73 Officers and Directors
44 Notes to Consolidated Financial Statements
74 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
Web site
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 2009 Annual
Report and the 2010 Proxy
Statement are available
on PACCAR’s Web site at
www.paccar.com/
2010annualmeeting/
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.
AeroCab, AERODYNE,
Air Leaf, Braden, Carco,
ComfortClass, Connect,
DAF, Dynacraft, Gearmatic,
Kenmex, Kenworth,
Kenworth Clean Power,
Leyland, Magnum, MAX-
card, PACCAR, PACCAR
MX, PACCAR PX, PacLease,
PacTrac, Peterbilt, PX-6,
PX-8, The World's Best,
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 20, 2010, 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.
I n d u s t r y A w A r d s
PACCAR is a global technology company with a 104-year tradition of
excellence. The company has achieved a remarkable 71 consecutive
years of net income and has paid a dividend every year since 1941.
The company has a strong balance sheet and excellent S&P credit
rating of AA-. PACCAR has delivered an annualized return to
shareholders of 19.1% for the last decade.
J . d . P o w e r A w A r d s
Kenworth, Peterbilt and DAF are the
established quality leaders in their
markets. In 2009, Kenworth and
Peterbilt earned the majority of
industry J.D. Power customer
satisfaction awards. PACCAR has
earned 30 total J.D. Power awards.
In addition, PACCAR was honored
to receive the J.D. Power Founder’s
Award for 25 years of corporate quality excellence in its major markets.
e n v I r o n m e n t A l
l e A d e r s h I P
PACCAR is an environmental
leader. PACCAR offers a vast array
of “green” powertrain options,
including diesel-electric hybrid, LNG,
CNG and other fuel-efficient vehicles.
Many PACCAR facilities have
achieved “Zero Waste to Landfill”
and all PACCAR facilities have
achieved ISO 14001 environmental certification. Kenworth was the
first commercial vehicle manufacturer to earn the prestigious Clean
Air Excellence Award from the Environmental Protection Agency (EPA).
t e c h n o l o g y A w A r d s
PACCAR Information Technology
Division (ITD) continues to be
recognized for its technological
leadership. STAR (Standards for
Technology in Automotive Retail)
recognized PACCAR ITD with the
2009 First Place Implementation
Award. Information Week
recognized PACCAR ITD as a
leading information technology innovator and the best automotive
company in the industry.
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
$7,076.7
$13,709.6
2009
2008
(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
1,009.8
8,086.5
111.9
6,137.7
8,431.3
172.3
5,900.5
5,103.7
1,262.9
14,972.5
1,017.9
6,219.4
10,030.4
19.3
7,465.5
4,846.7
$ 0.31
$
$
0.31
0.54
2.79
2.78
0.82
R E V E n U E s
R E V E N U E S
billions of dollars
billions of dollars
n E t i n c o m E
N E T I N C O M E
billions o f do l lar s
billions of dollars
s t o c k h o l d E R s ’ E q U i t y
S T O C K H O L D E R S ’ E Q U I T Y
billions of dollars
billions of dollars
17.5
10%
1.5
40%
14.0
8%
1.2
32%
10.5
6%
0.9
24%
7.0
4%
0.6
16%
3.5
2%
0.3
8%
00
01
02 03
04
05
06
07 08
09
00
01
02
03
04
05
06
07
08
09
00
01
02
03
04
05
06
07
08
09
0.0
0%
0.0
0%
Return on Revenues (percent)
Return on Equity (percent)
5.5
4.4
3.3
2.2
1.1
0
PACCAR Inc and Subsidiaries
t o o u r s h a r e h o l d e r s
PaCCar had a reasonably successful year in 2009, even as the worst recession in
2
decades had a negative impact on the company’s financial results. the company has
earned an impressive 71 consecutive years of net income. this remarkable achievement
was due to our 15,000 outstanding employees who delivered industry-leading product
quality, innovation and outstanding operating efficiency. PaCCar benefited from its
global diversification, superior financial strength and good results from aftermarket
parts and financial services. PaCCar’s $327 million of capital investments and research
and development in 2009 enhanced its manufacturing capability and new product
introductions, such as PaCCar’s MX engine for the North america market. PaCCar
delivered 61,000 trucks to its customers and sold $1.9 billion of aftermarket parts.
PaCCar maintained its excellent s&P credit rating of aa- as a result of consistent
profitability, a strong balance sheet and good cash flow. looking ahead to 2010,
underlying economic indicators, impacted by high unemployment, low auto production
and weak home construction, will result in a challenging year for our industry. there may
be some sales improvement due to aging of the truck fleet, modest economic growth and
the positive impact of new engine emission regulations in the u.s. and Canada.
Net income of $111.9 million on revenues of $8.1 billion was a significant
accomplishment in the very difficult economy. PaCCar declared regular dividends of
$.54 per share. regular quarterly cash dividends have increased over 240% in the last
10 years. shareholder equity increased to a record $5.1 billion.
Industry Class 8 truck sales in North America, including
the recession caused the industry to abruptly decline in
Mexico, declined to 119,000 vehicles compared to
the fourth quarter of 2008. Many of our competitors
179,000 the prior year. This is the lowest truck market
are aggressively discounting their vehicles to survive in
since 1991. Over 1,700 fleets went out of business due
the challenging market.
to lower freight volume and rates, reduced credit and
PACCAR’s financial performance in 2009 was
the recession. The European heavy truck market in 2009
constrained due to lower sales and margins even though
was 168,000 vehicles, compared to 330,000 in 2008, as
the company proactively implemented comprehensive
cost reductions. After-tax return on beginning
SIX SIGMA — Six Sigma is integrated into all business
shareholder equity (ROE) was 2.3% in 2009, compared
activities at PACCAR and has been adopted at 190 of
to 20.3% in 2008. The company’s 2009 after-tax return
the company’s suppliers and many of the company’s
on revenues was 1.4%. PACCAR’s long-term financial
dealers and customers. Its statistical methodology is
3
performance, even in a turbulent, cyclical market, has
critical in the development of new product designs,
enabled the company to distribute over $3.6 billion
customer services and manufacturing processes. Since
in dividends during the last 10 years and increase
inception, Six Sigma has delivered over $1.4 billion in
shareholder equity to $5.1 billion. PACCAR’s average
cumulative savings in all facets of the company. Over
annual total shareholder return was 19.1% over the last
10,000 employees have been trained in Six Sigma and
decade, versus a negative 1.0% for the Standard & Poor’s
12,000 projects have been implemented since its
500 Index. The fragility of global financial institutions
inception. Six Sigma, in conjunction with Supplier
provided a timely reminder of the merits and strength
Quality, has been vital to improving logistics performance
of PACCAR’s conservative business approach, quality
and component quality from company suppliers.
products and customer service focus.
INFORMATION TECHNOLOGY — PACCAR’s
INVESTING FOR THE FUTURE — PACCAR’s excellent
Information Technology Division (ITD) and its 639
long-term profits, strong balance sheet, and intense focus
innovative employees are an important competitive
on quality, technology and productivity enhancements
asset for the company. PACCAR’s use of information
have allowed the company to invest $3.8 billion since
technology is centered on developing and integrating
2000 in capital projects, new products and processes.
software and hardware that enhance the quality and
Productivity and efficiency improvement of 5-7%
efficiency of all products and operations throughout the
annually and capacity improvements of over 100% in
company. In 2009, ITD provided innovative advancements
the last five years have enhanced the capability of the
in new engine manufacturing software and infrastructure
company’s manufacturing and parts facilities. PACCAR
capacity upgrades. Over 20,000 dealers, customers,
is recognized as one of the leading applied technology
suppliers and employees have experienced the company’s
companies in the industry, and innovation continues to
Technology Centers highlighting surface computing,
be a cornerstone of its success. PACCAR has integrated
tablet PCs, an electronic leasing and finance office, and
new technology to profitably support its business, as
an electronic service analyst.
well as its dealers, customers and suppliers.
TRUCKS — U.S. and Canadian Class 8 industry retail
Capital investments were $128 million in 2009.
sales in 2009 were 108,000 units, and the Mexican market
One exciting multi-year initiative was completion of
totaled 11,000. The European Union (EU) industry
construction of PACCAR’s engine plant in Mississippi.
heavy truck sales were 168,000 units.
The installation of the machining and assembly lines is
PACCAR’s Class 8 retail sales in the U.S. and Canada
underway. Other major capital projects during the year
achieved a market share of 25.1% in 2009 compared to
included investments to meet the exacting 2010 EPA
26.0% the prior year. DAF achieved a record 14.8%
engine emission regulations, expansion of PACCAR
share in the 15+ tonne truck market in Europe. Industry
Australia’s manufacturing and parts distribution capacity,
Class 6 and 7 truck retail sales in the U.S. and Canada
and installation of Technology Centers in our assembly
were 40,000 units, a 36% decrease from the previous
facilities.
year. In the EU, the 6- to 15-tonne market was 51,000
PACCAR continues to examine business opportunities
units, down 36% from 2008. PACCAR’s North American
in Asia, with its primary focus on China and India.
and European market shares in the medium duty truck
PACCAR is increasing its component purchases and
segment were very good, as the company delivered
powertrain sales in China as a result of its Shanghai and
12,900 medium duty trucks and tractors in 2009.
Beijing offices. The PACCAR MX engine has been
A tremendous team effort by the company’s
honored as best-in-class at the Shanghai Bus Show three
purchasing, materials, engineering and production
years in a row.
employees contributed to improved product quality and
manufacturing efficiency during the recession. The teams
PACCAR’s dealers around the world. In the industry,
performed admirably and exceeded customer expectations
there are over six million heavy duty trucks operating in
by delivering the highest-quality products and services
North America and Europe, and the average age of
4
in our history. The Peterbilt Nashville plant was
North American vehicles is estimated to be over six years.
permanently closed to align production capacity with
The large vehicle parc creates the opportunity for
market demand.
excellent demand for parts and service and moderates
PACCAR’s product quality continued to be recognized
the cyclicality of truck sales.
as the industry leader in 2009. Kenworth dominated
PACCAR Parts expanded current facilities to enhance
customer satisfaction awards in the Class 8 markets.
logistics performance to dealers and customers. PACCAR
Peterbilt earned the medium duty customer satisfaction
Parts continues to lead the industry with technology that
award and the DAF CF was the 2009 “Fleet Truck of the
offers competitive advantages at PACCAR dealerships.
Year” in the U.K. for the ninth time.
PACCAR Parts enhanced its Connect program, a software
Over 50% of PACCAR’s revenue was generated
solution for customer fleet-maintenance management
outside the United States, and the company realized
and expanded national parts pricing and invoicing.
excellent synergies globally in product development, sales
FINANCIAL SERVICES — PACCAR Financial Services’
and finance activities, purchasing and manufacturing.
(PFS) conservative business approach, coupled with
DAF achieved good results in reducing dealer new
PACCAR’s superb S&P credit rating of AA- and the
truck inventory and was a leader in the development of
strength of the dealer network, enabled PFS to earn
the PACCAR MX engine for North America.
good results in 2009 despite turbulent worldwide
Leyland Trucks is the United Kingdom’s leading truck
financial markets. The PACCAR Financial Services group
manufacturer. Leyland grew its innovative body-
of companies has operations covering three continents
building program by expanding its specifications to
and 20 countries. The global breadth of PFS and its
include curtain-sided trailers and an additional range of
rigorous credit application process supported a portfolio
tailgate options.
of 143,000 trucks and trailers, with total assets of $8.4
PACCAR Mexico (KENMEX) had a challenging year
billion that earned a pretax profit of $85 million.
as the Mexican economy slowed and truck fleets were
PACCAR Financial Corp. (PFC) is the preferred funding
reduced. Its manufacturing facility continues to deliver
source in North America for Peterbilt and Kenworth
improved efficiency and product quality.
trucks, financing 23% of dealer Class 8 sales in the U.S.
PACCAR Australia achieved good results in 2009, as
and Canada in 2009.
the country avoided the worst of the global recession.
The unsettled financial markets and resulting “credit
The introduction of new Kenworth models and expansion
crunch” presented a daily challenge that increased
of the DAF product range in Australia combined for a
funding costs for our customers and prompted a
20.9% heavy duty market share in 2009.
contraction in our finance companies’ assets. Special
PACCAR International (PACCINT) exports trucks
praise is merited for PACCAR’s treasury and finance
and parts to over 100 countries and had a good year due
teams who diligently, creatively and positively managed
to sales buoyed by global natural resource exploration.
the company through a very challenging market in 2009.
PACCINT expanded its product range in South America
PACCAR issued $1.3 billion in medium-term notes at
by launching the full range of DAF vehicles for on-
attractive rates during the year.
highway customers.
PACCAR Financial Europe (PFE) completed its eighth
AFTERMARKET CUSTOMER SERVICES — PACCAR
year of operation, focusing on the financing of new and
Parts had a good year in 2009, even though dealers and
used DAF trucks. PFE provides wholesale and retail
customers reduced inventory and delayed vehicle
financing for DAF dealers and customers in 16 European
maintenance. With sales of $1.9 billion, PACCAR Parts
countries and financed 16% of DAF’s vehicle sales in 2009.
is the primary source for aftermarket parts for PACCAR
PACCAR Leasing (PacLease) had a good year and
products, and supplies parts for other truck brands to
placed 3,800 new PACCAR vehicles in service in 2009.
The North American lease market was lower, and PacLease
2010 appears mixed as the economy generates limited
Europe suffered due to the recession in the German truck
growth in North America, and perhaps no growth in
market. The PacLease fleet is over 30,000 vehicles. Twenty
Europe. There will continue to be challenges until
percent of the North American Class 6-8 customers select
major economic indicators significantly improve, which
5
full-service leasing to satisfy their equipment needs.
will prompt increased freight tonnage and renewed
PacLease continued to increase its market presence in
truck demand. The company has taken proactive steps
2009, growing its global network to over 400 locations,
to adjust production rates as well as structurally reduce
and represents one of the largest full-service truck rental
costs throughout the organization. PACCAR is well
and leasing operations in North America.
positioned and committed to maintaining the profitable
ENViroNmENtaL LEaDErSHip — PACCAR is a global
results its shareholders expect, by delivering industry-
environmental leader. A significant accomplishment
leading products and services globally.
during the year was earning ISO 14001 environmental
PACCAR and its employees are proud of the
certification at all PACCAR manufacturing facilities in
remarkable achievement of 71 consecutive years of net
Europe and North America. PACCAR introduced
profit. PACCAR plans for the long term, and our
medium duty diesel-electric hybrid vehicles, which can
shareholders have benefited from that approach. The
achieve up to a 30% fuel economy improvement. Many
embedded principles of integrity, quality and consistency
of the company’s manufacturing facilities achieved “Zero
of purpose continue to define the course in PACCAR’s
Waste to Landfill” status during the year. PACCAR
operations. The proven business strategy — deliver
employees are environmentally conscious and utilize
technologically advanced premium products and an
van pools, car pools and bus passes for 30% of their
extensive array of tailored aftermarket customer services
business commuting.
— enables PACCAR to pragmatically approach growth
a Look aHEaD — PACCAR’s 15,000 employees enabled
opportunities with a long-term focus. PACCAR is
the company to distinguish itself as a global leader in
enhancing its stellar reputation as a leading technology
the technology, capital goods, financial services and
company in the capital goods and financial service
aftermarket parts businesses. Superior product quality,
marketplace.
technological innovation and balanced global
diversification are three key operating characteristics
that define PACCAR’s business philosophy.
The ongoing recession will continue to have a negative
impact on the North American and European truck
markets in 2010. Current estimates for Class 8 trucks in
m a r k c . p i g o t t
Chairman and Chief Executive Officer
North America indicate that yearly industry sales could
Februar y 20, 2010
be similar to 2001, and range from 125,000-150,000
units. This is one of the lowest sales levels in the last
10 years. Sales for Class 6-7 trucks are expected to be
between 35,000-45,000 vehicles. The European heavy
duty truck market, which had a weak year in 2009, could
decline again as European government stimulus programs
wane. It is estimated that the 15+ tonne market for
2010 will be in the range of 150,000-180,000 trucks,
while demand for medium trucks should range from
45,000-55,000 units.
PACCAR had a reasonably successful year in 2009,
with several operating divisions achieving good results,
paccar Executive committee
Seated Left to Right: Tom Plimpton, Mark Pigott, Jim Cardillo,
Dan Sobic; Standing Left to Right: Ron Armstrong, Michael
Barkley, Aad Goudriaan, Bob Christensen, Dave Anderson,
though some divisions recorded losses. The outlook for
Kyle Quinn
D A F T R U C K S
DAF Trucks N.V. strengthened its position as one of Europe’s leading commercial vehicle
manufacturers in 2009, increasing its market share in the over-15-tonne segment to a
7
record 14.8% and reinforcing its industry quality leadership.
In the highly competitive European truck market DAF garnered several awards in 2009 that reinforce its
industry-leading reputation for product quality, innovation and customer satisfaction. DAF’s flagship XF105 was
voted “Best Truck Ever” by the leading British trade magazine Truck and Driver. The CF85 was awarded “Fleet
Truck of the Year” for the second consecutive year at the Motor Transport Awards in London — the ninth time
that the DAF CF has won this accolade.
DAF also earned “Best Engine Producer of the Year 2009” honors at Bus World Asia in Shanghai as a result
of the reliability, durability and performance of the PACCAR 9.2- and 12.9-liter engines. This is the third
consecutive year PACCAR engines have received this honor.
The light-duty LF series with its modern and spacious cab, low unladen weight and tight turning radius is the
perfect choice for intra-city distribution applications. Driver
comfort is enhanced through the ease of cab entry and exit
and the road-handling performance of a passenger car. The
2009 LF Series features a new interior that ensures a premium
level of driver comfort while powertrain enhancements
improve operating efficiencies.
DAF Telematics — the state-of-the-art data communication
system that enables operators to further optimize fuel management and business processes — became available
in ten more European countries, allowing long-distance haulers to improve performance along their entire route.
The “DAF Experience 2009” enabled thousands of visitors to tour DAF’s modern production facilities and
new engine test center. Visitors experienced the PACCAR Technology Center, which is an interactive showplace
highlighting modern production technologies and DAF’s range of premium trucks and services, including
PACCAR Financial and PACCAR Parts.
The PACCAR Production System (PPS) integration enhanced DAF’s manufacturing efficiency and product
quality. The 50-PPM (Parts Per Million) Initiative introduced in all PACCAR manufacturing plants set a new
standard for supplier operational excellence. DAF was the first manufacturer to offer Enhanced Environmentally
friendly Vehicles (EEV) in its entire product range. In 2009, DAF became the first company that Lloyd’s Register
verified and officially qualified as “Zero Waste to Landfill.” The DAF engine design team was instrumental in the
2010 launch of the PACCAR MX engine in North America.
DAF’s CF series has won “Fleet Truck of the Year” honors an unprecedented nine times. The
CF has proven its value in a myriad of applications, offering customers superior product
quality, ergonomics, comfort and operating efficiency.
P e t e r b i l t m o t o r s c o m P a n y
Peterbilt earned the highest ranking in the J.D. Power and associates 2009 medium Duty
truck customer satisfaction studysm in the conventional medium Duty truck segment*
9
due to its superior product quality and outstanding customer support.
Peterbilt celebrated its 70th anniversary in 2009, building on the heritage of “Class Pays” by introducing new
products focused on low cost of ownership, increased performance and environmental responsibility.
Peterbilt Models 386 and 384 were updated to include contemporary new interiors and industry-leading
aerodynamics for more efficient operation and exceptional customer value. The Model 384 joined the Model
386 and 387 as EPA SmartWaySM certified vehicles, offering 10-20% fuel savings and 8% lower greenhouse
gas emissions.
Peterbilt’s conventional Models 389 and 388 were offered with a Fuel Efficiency Package that reduces vehicle
drag by up to 24%, delivering a customer benefit of $5,600 in average annual fuel savings.
Peterbilt set a retail market share record by capturing 7.3%
of the medium duty market in the U.S. and Canada. Peterbilt
introduced new medium duty Models 337 and 348 to serve an
expanded range of customers in the Class 6-7 market. The
medium duty product range introduced a new interior and dash
design that incorporates convenient, easy-to-read LED-backlit
gauges; ergonomically designed operating controls; and a
Peterbilt GPS Navigation System that incorporates a five-inch touch screen and an MP3 audio player. All
Peterbilt medium duty vehicles are equipped exclusively with the fuel-efficient PACCAR PX engine.
Peterbilt expanded its range of alternative fuel vehicles in 2009. The new Class 7 Model 337 diesel-electric
hybrid tractor provides customers in the beverage, produce and short haul distribution markets with up to 30%
improved fuel economy. Peterbilt’s low-cab-forward Model 320 Hydraulic Hybrid, designed for vocational urban
applications such as refuse collection, utilizes Hydraulic Launch Assist (HLA) technology to achieve up to 20%
fuel savings and reduced annual maintenance costs. Peterbilt launched new Models 384 and 365, which are
powered by compressed or liquefied natural gas. Peterbilt’s natural gas powered vehicles reduce emissions by
12% and have established the standard for industry quality, durability, productivity and environmental
responsibility.
Peterbilt opened its state-of-the-art PACCAR Technology Center in its Denton, Texas, manufacturing facility
this year. Over 5,000 visitors toured the Technology Center to view Peterbilt vehicles, customer services and
innovative technologies. The exhibit includes PACCAR Winch, PACCAR International, ITD, PacLease, PACCAR
Parts, Dynacraft and PACCAR Financial.
The Peterbilt dealer network expanded to a record 249 locations throughout the U.S. and Canada.
The Model 386 successfully merges iconic Peterbilt styling with outstanding aerodynamic
performance. It has been recognized as fuel efficient and environmentally friendly by the EPA’s
SmartWay program. The introduction of the PACCAR MX engine in Peterbilt vehicles in summer
2010 will enhance Peterbilt’s industry-leading performance.
* Peterbilt received the highest numerical score among conventional medium duty trucks in the proprietary J.D. Power and Associates 2009 Medium Duty Truck Customer Satisfaction
StudySM. Study based on 1,613 total responses measuring 9 manufacturers. Survey was of principal maintainers and owner operators and measures opinions of primary maintainers
of two-year-old (by model year) medium duty (Class 5, 6 and 7) trucks. Proprietary study results are based on experiences and perceptions of consumers surveyed in June-July
2009. www.jdpower.com
k e n w o r t h t r u c k c o m p a n y
kenworth achieved the highest ranking in the J.D. power and associates 2009 heavy
Duty truck customer Satisfaction StudySm among class 8 truck owners in the over the
11
road and pickup and Delivery segments and in Dealer Service.*
Kenworth, “The World’s Best®,” has earned the J.D. Power customer satisfaction Over the Road award for
five consecutive years and captured an industry-leading 16 customer satisfaction awards since 2003.
Kenworth Chillicothe celebrated its 35th anniversary in 2009. One of the most technologically advanced
truck plants in the industry, the Chillicothe facility has produced more than 330,000 Kenworth trucks since it
opened in 1974. Kenworth Chillicothe enhanced its robotic paint line in 2009.
Kenworth Renton installed a modified production line to build off-highway vehicles
to improve efficiency and quality.
Kenworth became the first truck manufacturer to be honored with the prestigious
Clean Air Excellence award presented by the U.S. Environmental Protection Agency
(EPA). Kenworth was recognized for its diesel-electric hybrids that offer up to 30%
better fuel economy; its T800 trucks powered by liquefied natural gas (LNG) that
help reduce greenhouse gas emissions by 20%; and its Clean Power option that
improves fleet fuel efficiency by 8%.
Kenworth expanded its product range with the launch of two exceptionally
versatile models in new market segments. The T440, powered by the PACCAR PX-8
engine, offers excellent productivity and fuel efficiency to regional delivery and
vocational customers. The T470 delivers Kenworth durability and performance to
snowplow, winch and other municipal work truck applications. In addition,
Kenworth introduced new features to enhance driver comfort and productivity. A 38-inch AeroCab® sleeper
was added for the off-highway Kenworth C500, and an in-cab workstation, already popular in medium duty
products, is now available for Class 8 models.
Kenworth achieved record medium duty retail market share in 2009 of 8.0% due to the superior quality, ease
of handling and reliability of the Class 6 KW T270 and Class 7 KW T370 models.
Kenworth manufacturing facilities in Chillicothe, Ohio, and Renton, Washington, unveiled new PACCAR
Technology Centers, which provide visitors with hands-on displays featuring Kenworth trucks, support services
and technology. These interactive exhibits present PACCAR engines, technology demonstrations and information
on PACCAR Financial, PacLease, PACCAR Parts, PACCAR Winch and Dynacraft.
Kenworth dealers increased the number of service locations to 302 in the U.S. and Canada.
The T660 AeroCab AERODYNE is Kenworth’s most aerodynamic model, unsurpassed for fuel-squeezing
economy and long-haul luxury. The introduction of the PACCAR MX engine in Kenworth vehicles in
summer 2010 will enhance Kenworth’s industry-leading performance.
* Kenworth received the highest numerical score among pickup & delivery and over-the-road Class 8 trucks and heavy duty truck dealer service among heavy duty truck manufacturers
in the proprietary J.D. Power and Associates 2009 Heavy Duty Truck Customer Satisfaction StudySM. Study based on 2,492 total responses measuring 4 (over-the-road), 5 (pickup
& delivery) and 8 (dealer service) manufacturers and measures opinions of principal maintainers. Proprietary study results are based on experiences and perceptions of consumers
surveyed in February-March 2009. 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 in 2009 as Kenworth
12
remained the most revered nameplate on the continent — a reflection of the brand’s
unmatched reputation for custom-built quality and superior reliability.
Kenworth is the leading producer of commercial vehicles in Australia. Kenworth captured 46% of the high-
horsepower segment in 2009. PACCAR Australia expanded its Class 8 product range with the introduction of
the Kenworth T402. The T402 delivers industry-leading productivity, comfort and fuel efficiency for distribution
in single-trailer, vocational B-double and rigid applications.
PACCAR Australia reinforced PACCAR’s global environmental leadership by delivering the country’s first
liquefied natural gas (LNG) cab over model. The Kenworth LNG K108 hauls 150,000 pounds and reduces
greenhouse emissions by over 20%.
PACCAR Australia extended its Bayswater manufacturing site by 69,500 square feet with the purchase of an
adjoining property. The acquisition provides additional office, parts warehouse and factory capacity. The
increased capacity enables PACCAR Australia to support the record number of Kenworth vehicles on the road in
Australia and meet truck demand from the growing natural resource industry.
Kenworth vehicles define heavy duty trucking in Australia, delivering custom-built quality and superior reliability.
PACCAR Australia’s T608 offers class-leading aerodynamics and enhanced fuel efficiency while hauling 100,000-pound
road-train loads.
p a c c a r m e x i c o
paccar m exico (KeN mex) celebrated 50 years of leadership in the mexican
transportation industry in 2009, capturing 36% of the class 8 market and achieving a
13
record class 7 medium duty market share of 30%.
KENMEX has manufactured over 169,000 vehicles since 1959 in its 590,000-square-foot production facility in
Mexicali, Baja California. In Mexico, 85% of all goods are transported by road, and for half a century Kenworth
has earned its legendary reputation for product quality, reliability, innovation and customer support.
This year, KENMEX expanded its product range by introducing the new Kenworth T460 designed specifically
for Mexico’s vocational applications and became the first manufacturer to offer diesel-electric hybrid commercial
vehicles in Mexico. The Kenworth medium duty hybrid models T270 and T370 achieve fuel efficiency gains of
up to 30% in metropolitan markets.
KENMEX has 121 dealer locations that offer the most extensive parts and service network in the country.
Kenworth earned every customer service excellence award for commercial vehicles presented by the National
Association of Automotive Distributors (NAAD) in 2009.
The new Kenworth T460 has been developed with a robust powertrain and contemporary styling for the vocational
markets in Mexico, Central and South America.
l e y l a n d t r u c k s
leyland, the united kingdom’s leading truck manufacturer, celebrated its eleventh
14
anniversary as a Paccar company. leyland delivered 8,100 vehicles to customers in
europe, australia, africa and north america.
Leyland’s highly efficient 710,000-square-foot manufacturing facility incorporates an innovative robotic
chassis paint facility, an in-house body design and a state-of-the-art production system that builds the entire
DAF product range — LF, CF and XF — for right- and left-hand drive markets.
Leyland introduced the Euro 5 DAF truck range during 2009, incorporating lower emissions with improved
fuel economy, enhanced braking systems and advanced software diagnostics. The plant expanded its body building
program to offer more customer-specific options, resulting in higher market share and improved profitability.
Unveiled in 2009, Leyland’s Product and Technology Center showcases PACCAR products, technologies and
services in an interactive environment designed to increase customer awareness of the company’s quality leadership.
Leyland was honored during the year by earning the Manufacturing Excellence (MX) Award presented by the
Institute of Mechanical Engineers. Leyland also earned the prestigious Queen’s Award for Enterprise: International
Trade 2009.
Leyland enhanced delivery schedules for customers of DAF vehicles by offering factory-installed high-quality van bodies. Leyland
expanded the innovative program to incorporate more specialized, application-specific options that will launch the vans into more
market segments.
p a c c a r i n t e r n a t i o n a l
paccar international distributes DaF, peterbilt and Kenworth trucks and parts to
customers in over 100 countries. paccar vehicles are recognized globally for their
15
premium quality, world-class performance and outstanding customer support.
PACCINT sales in Latin America were strong due to demand for municipal, construction, dump and refuse
trucks. Higher commodity prices contributed to sales of the Kenworth 963 and K500 models used in oilfield
exploration, mining and servicing sectors. Both models feature new modern cabs on severe service chassis,
which provide excellent driver comfort and superb mobility over rough terrain.
In Asia, PACCAR MX engines have established an excellent reputation among luxury coach producers — an
important and substantial market. PACCAR was awarded the “Best Engine Producer of the Year” at the Bus
World Asia exhibition for the third consecutive year, in recognition of the PACCAR MX engine’s industry-
leading reliability, durability and fuel efficiency.
PACCINT expanded its global distribution network in 2009 with 15 new service locations in Russia, the
Middle East and Southeast Asia.
PACCAR International utilizes its extensive knowledge of overseas markets and PACCAR’s unrivaled engineering
and manufacturing resources to deliver superior quality transportation solutions globally. The award-winning
DAF XF is popular in many markets worldwide.
P A C C A R P A R t s
PACCAR Parts achieved record market share in 2009, delivering 1.2 million parts
16
shipments worldwide to over 1,900 Kenworth, Peterbilt and DAF dealer locations.
PACCAR Parts successfully launched the TRP brand in North America. TRP consolidates seven brands under
a single aftermarket brand focused on servicing the needs of commercial vehicles. Customers are rewarded with
high quality, cost-effective choices for everyday repair and maintenance parts.
There are 300,000 registered PACCAR customers enjoying the advantages of monthly parts and service
programs by using loyalty cards in North America, Europe and Australia. The Peterbilt Preferred, Kenworth
Privileges and DAF “MAX” loyalty cards celebrated their one millionth customer redemption in 2009. Loyalty
card retail sales tripled in 2009 versus 2008.
PACCAR Parts launched an enhanced fleet service program in 2009 that provides guaranteed national pricing,
customized reporting and centralized billing for fleet customers through Kenworth PremierCare and Peterbilt
TruckCare services.
The PACCAR Call Center (PCC) in North America celebrated ten years of roadside service — enabling
professional drivers to return to operation quickly and reliably. PCC offers 24/7 roadside support throughout
North America and Europe, managing 1.6 million calls annually.
PACCAR Parts’ global operations employ state-of-the-art technologies — wireless voice recognition, integrated logistic systems and
tablet PCs — and cutting-edge dealer inventory management tools to support aftermarket customers.
P A c c A r W i n c h
PAccAr Winch, the premier full-line producer of industrial winches globally, increased
sales into new overseas markets and enhanced its innovative customer support.
17
PACCAR Braden recovery winches, hoists and drives, Gearmatic planetary winches, and Carco tractor
winches are recognized for superior engineering and dependable performance in rugged applications and harsh
environments — from freezing North Sea oil platforms to the logging forests of Southeast Asia.
PACCAR Winch introduced the Magnum line, a robust and efficient winch for oilfield applications. A new
35,000 pound winch, the HP35, offers oilfield customers a 30% savings in preventative maintenance costs with
an innovative design that allows improved access for periodic component reviews.
PACCAR Winch also launched the new GH30 winch for demanding logging applications. This proprietary
30,000-pound winch delivers superior performance in both line pull and speed — improving log retrieval time
by 50%.
The PACCAR Winch manufacturing facilities in Broken Arrow and Okmulgee, Oklahoma, achieved an
impressive environmental goal of “Zero Waste to Landfill.” The company saved 20% of total plant energy
consumption by strategic environmental initiatives.
PACCAR Winch Division’s Braden, Carco and Gearmatic nameplates — recognized for superior design and reliability even under the
toughest operating conditions — pace the market in a broad range of key industries throughout the world.
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 (pfs) companies, which support the sale of paccar trucks
18
worldwide, achieved good results in 2009, reporting pre-tax profits of $85 million. The
pfs portfolio is comprised of 143,000 trucks and trailers, with total assets of $8.4 billion.
PACCAR’s excellent balance sheet, complemented by its reaffirmed AA- credit rating, enabled PACCAR to
issue $1.3 billion in two-, three- and five-year notes in the public debt markets during 2009. Ongoing access
to the capital markets at excellent rates enables PFS to profitably support the sale of PACCAR vehicles in 20
countries on three continents. PFS strengthened its market leadership in 2009, achieving retail market share of
26%, while the global recession caused many lenders to exit the transportation finance business.
PACCAR Financial Europe (PFE) has $2.4 billion in assets and is the leading financial services provider to
DAF dealers and customers in 16 Western and Central European countries. PFE and DAF developed innovative
sales programs to reduce dealer new truck inventories by 50% and strengthen dealers’ balance sheets in 2009.
PFS utilized its dedicated used truck sales facilities in Europe and North America — including its recently
opened used truck center in South Carolina — to remarket a record 12,000 pre-owned PACCAR trucks.
PACCAR Financial offers an industry-leading spectrum of creative, flexible products, services and information
technologies to facilitate the sale of premium-quality PACCAR vehicles throughout the world.
p a c c a r L e a s i n g c o m p a n y
paccar Leasing achieved a record 404 full-service lease locations and increased
market share in 2009 — delivering more than 3,800 new Kenworth, peterbilt and DaF
19
trucks to its network. The pacLease fleet totals over 30,000 vehicles.
PacLease offers only premium-quality PACCAR vehicles, which are valued for their reliability, superior fuel
efficiency and residual values that are 15-25% higher than competitive models. PacLease was the first full-service
leasing company to offer diesel-electric hybrid vehicles to its customers.
PacLease Sales Suite 2.0 was launched in 2009. This sophisticated electronic software streamlines the
generation of customer purchase and leasing documents. It is 10 times faster than the previous tool and enables
real-time communication between the dealership, customer and PacLease sales team to enhance sales and support.
PacLease established itself as a leading truck rental and leasing company in Germany through an acquisition
in 2007. PacLease Europe has a fleet of over 3,600 units, and its expanding presence in the full-service lease
segment helped DAF achieve a record share of the German truck market in 2009.
One of the most innovative truck leasing networks in the industry, PacLease added a record number of outlets in 2009 and
increased its share of the medium duty market. PacLease expanded its fleet of premium-quality Class 6-7 trucks with
vehicles such as this popular Peterbilt Model 335.
p a c c a r T E c H N I c a L c E N T E r S
paccar’s Technical centers utilize world-class testing facilities and advanced
20
simulation technologies to accelerate product development and ensure that paccar
continues to deliver the highest-quality products in the industry.
PACCAR’s world-class Technical Centers in Europe and North America are equipped with state-of-the-art
product test and validation capabilities and staffed with technical experts in powertrain and vehicle development.
Sophisticated computer simulations and advanced analysis of engine and vehicle control systems are used to
optimize vehicle efficiency while meeting strict emission regulations. Vehicle laboratories utilize sophisticated
hydraulic digital technology, coupled with PACCAR proprietary road simulators to replicate truck durability
testing equivalent to one million miles, in months rather than years.
In 2009, the North American Technical Center completed validation of the PACCAR MX engine’s compliance
with 2010 EPA emissions regulations. The engine test cells complement chassis development by evaluating
engine cooling, electrical systems and exhaust after-treatment. This interactive approach reduces development
time and ensures optimal performance of Kenworth, Peterbilt and DAF vehicles.
PACCAR’s Technical Centers in Europe and North America accelerate product development cycles through the application of highly
advanced engineering analysis, simulation and rapid prototyping technologies.
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 technologies. ITD enhances the quality of all
21
PACCAR operations and electronically integrates dealers, suppliers and customers.
For the sixth consecutive year, ITD was recognized by the prestigious Information Week magazine as a leading
innovator of cost-effective information technologies. PACCAR was recognized for integrating order processing
and dealer business systems to double the speed of electronic transactions for sales and production.
ITD’s 639 employees collaborate with PACCAR divisions to use technology to enhance manufacturing, financial
services and engineering design. This year ITD partnered with the PACCAR Engine Company to design and
implement the operating framework for the logistics and manufacturing automation utilized in PACCAR’s
Columbus, Mississippi, engine facility.
ITD, Kenworth and Peterbilt developed and introduced the Electronic Service Analyst (ESA 3.0) for vehicle
performance evaluation and remote service analysis. New features include Bluetooth wireless communication,
vehicle parametric programming and diagnostic monitoring.
One of the most innovative information technology organizations in the world, PACCAR ITD partners with leading-edge hardware and
software companies to enhance PACCAR’s competitiveness, manufacturing efficiency, product quality, customer service and profitability.
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
W E S T E R N A N D C E N T R A L E U R O P E
WEstErn and cEntral EUrOPE
> 1 5 T M A R K E T S H A R E
> 15t markEt sharE
U . S . A N D C A N A D A C L A S S 8 T R U C K M A R K E T S H A R E
U.s. and canada class 8 trUck markEt sharE
registrations
registrations
15%
trucks (000)
trucks (000)
350
retail sales
retail sales
28%
trucks (000)
trucks (000)
325
13%
11%
9%
7%
5%
280
26%
210
24%
140
22%
70
0
20%
18%
260
195
130
65
0
00
01
02
03
04
05
06
07
08
09
00
01
02
03
04
05
06
07
08
09
■ Total Western and Central Europe
>15T Units
■ Total U.S. and Canada Class 8 Units
PACCAR Market Share (percent)
PACCAR Market Share (percent)
t O ta l a s s E t s
T O TA L A S S E T S
b il lions o f do l lar s
billions of dollars
GEOGraPhic rEVEnUE
GEOGRAPHIC REVENUE
billions of dollars
billions of dollars
17.5
14.0
10.5
7.0
3.5
0.0
00
01
02
03
04
05
06
07
08
09
00
01
02
03
04
05
06
07
08
■ Truck and Other
■ Financial Services
■ United States
■ Rest of World
17.5
14.0
10.5
7.0
3.5
0.0
09
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 the industry peer group of companies identified in the graph (the Peer Group Index) for the last
five fiscal years ending December 31, 2009. 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 indices provides a better comparison than other indices available. The Peer Group Index
consists of Caterpillar Inc., Cummins Inc., Danaher Corporation, Deere & Company, Dover Corporation, Eaton
Corporation, Harley-Davidson, Inc., Honeywell International Inc., Illinois Tool Works Inc., Ingersoll-Rand Company
Ltd. and United Technologies Corporation. The comparison assumes that $100 was invested on December 31, 2004
in the Company’s common stock and in the stated indices and assumes reinvestment of dividends.
PACCAR Inc
Peer Group Index
S&P 500 Index
200
150
100
200
150
100
50
2004
2005
2006
2007
2008
50
2009
PACCAR Inc
S&P 500 Index
Peer Group Index
2004
100
100
100
2005
2006
2007
2008
2009
89.58
131.71
170.96
91.71
118.42
104.91
121.48
128.16
80.74
102.11
103.87
122.43
156.99
92.51
127.43
PACCAR Inc and Subsidiaries
M a n a g eM 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)
r e s u lt s o f o p e r at i o n s :
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
2009
2008
2007
$ 7,076.7
1,009.8
$ 8,086.5
$ 13,709.6
1,262.9
$ 14,972.5
$ 14,030.4
1,191.3
$ 15,221.7
$
68.1
84.6
22.3
(63.1)
$ 111.9
.31
$
$ 1,162.5
216.9
84.6
(446.1)
$ 1,017.9
2.78
$
$ 1,384.8
284.1
95.4
(537.0)
$ 1,227.3
3.29
$
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.
2009 Compared to 2008:
Consolidated net sales and revenues were $8.09 billion in 2009, compared to $14.97 billion in 2008, reflecting the
recessionary conditions that dampened demand for the Company’s products throughout the world.
PACCAR achieved net income for the 71st consecutive year in 2009 under very difficult business conditions. Net
income was $111.9 million ($.31 per diluted share) in 2009 compared to $1.02 billion ($2.78 per diluted share) in
2008. Net income included $41.5 million ($.11 per diluted share) of curtailment gains related to postretirement
health care plans ($66.0 million, pretax) and $11.4 million ($.03 per diluted share) of income tax expense from the
retroactive effects of a new income tax law in Mexico.
Net sales and revenues in the Truck and Other businesses of $7.08 billion in 2009 were 48% lower than the $13.71
billion in 2008. The decrease in sales and revenues for 2009 resulted from lower truck unit and parts sales in all
markets due to lower overall market demand.
Cost of sales and revenues in the Truck and Other businesses were $6.48 billion in 2009 compared to $11.74 billion
in 2008. Cost of sales and revenues declined primarily due to the decrease in worldwide truck deliveries. Cost of sales
included employee severance costs of $19.2 million in 2009 compared to severance costs of $13.1 million in 2008.
Research and development expenditures declined to $199.2 million in 2009 from $341.8 million in 2008 primarily
due to lower spending on engine development and reduced spending for new vehicle development.
Selling, general and administrative (SG&A) expense for Truck and Other declined to $348.4 million in 2009
compared to $470.2 million in 2008. The lower spending was a result of focused efforts to reduce costs in response
to the global economic recession and consisted primarily of reduced staffing, sales and marketing, and travel costs.
Foreign currency translation effects reduced SG&A by $10.8 million. Severance costs included in SG&A were $6.4
million in 2009 compared to $3.4 million in 2008. As a percentage of sales, SG&A increased to 4.9% in 2009 from
3.4% in 2008 due to lower sales volumes.
Interest and other expense, net in 2009 of $43.6 million includes $22.2 million of expense for changes in fair values
of economic hedges and $14.2 million of expense for foreign currency translation adjustments primarily in Mexico
and Canada.
Financial Services revenues decreased to $1.01 billion in 2009 from $1.26 billion in 2008. The decreased revenues in
2009 resulted from lower earning asset balances in all markets and lower yields in North America and Europe.
Financial Services income before income taxes was $84.6 million in 2009 compared to $216.9 million in 2008. The
decrease of $132.3 million was primarily due to lower finance margin from the reduced finance receivables and net
operating lease income partially offset by a decline in SG&A expense.
Investment income declined to $22.3 million in 2009 compared to $84.6 million in 2008 primarily due to lower
market interest rates.
The 2009 effective income tax rate was 36.1% compared to 30.5% in 2008. The higher rate in 2009 was primarily
due to the tax law change in Mexico. Excluding the retroactive effect of the Mexican tax law change the effective tax
rate was 29.5%.
The Company’s return on revenues was 1.4% in 2009 and 6.8% in 2008.
2008 Compared to 2007:
Consolidated net sales and revenues were $14.97 billion in 2008 compared to $15.22 billion in 2007, reflecting
strong but slowing demand for the Company’s high quality trucks in Europe. The U.S. and Canada truck markets
were lower but there was continued solid aftermarket parts and financial services revenues.
PACCAR achieved net income of $1.02 billion ($2.78 per diluted share) in 2008 compared to $1.23 billion ($3.29
per diluted share) in 2007, the fourth best result in the Company’s 103 year history. Net sales and revenues in the
Truck and Other businesses of $13.71 billion were slightly lower than the $14.03 billion in 2007 as an increase in
European truck sales was more than offset by decreased truck sales in North America and Australia.
Cost of sales and revenues in the Truck and Other businesses were $11.74 billion in 2008, down 1.5% compared to
$11.92 billion in 2007. Cost of sales and revenues declined primarily due to 6% lower truck deliveries partially
offset by the weaker U.S. dollar vs. the euro and higher material costs related to higher crude oil, copper, steel and
other commodities.
Research and development expenditures were $341.8 million in 2008, an increase of 34% from $255.5 million in
2007 due to spending in preparation for EPA engine emission requirements in the U.S. in 2010, expenses related to
the introduction of the Company’s proprietary 12.9 liter engine in North America and increased spending on
vehicle updates in the U.S. and Europe.
SG&A expense for Truck and Other declined to $470.2 million in 2008 compared to $491.4 million in 2007. This
was due to $35.5 million of reductions in worldwide spending partially offset by $14.3 million of foreign currency
translation effects, primarily the euro. The spending reductions resulted from staffing reductions, lower sales and
marketing costs and lower general and administrative spending in the fourth quarter in response to the global
recession. SG&A expense as a percent of revenues decreased to 3.4% in 2008 from 3.5% in 2007.
Financial Services revenues increased to $1.26 billion in 2008 from $1.19 billion in 2007 as increased revenues in
Europe and Mexico more than offset a decrease in the U.S. Financial Services income before taxes was $216.9
million compared to $284.1 million in 2007 as the additional finance margin from asset growth in Europe and
Mexico was reduced by higher provisions for credit losses in the U.S. and Europe.
Investment income declined to $84.6 million in 2008 compared to $95.4 million in 2007 due to lower invested
balances and interest rates.
The 2008 effective income tax rate of 30.5% was comparable to the 30.4% in 2007.
The Company’s return on revenues was 6.8% in 2008 and 8.1% in 2007.
PACCAR Inc and Subsidiaries
Truck
PACCAR’s truck segment, which includes the manufacture and distribution of trucks and related aftermarket parts,
accounted for 86%, 90% and 91% of revenues in 2009, 2008 and 2007, respectively. In North America, trucks
are sold under the Kenworth and Peterbilt nameplates and, in Europe, under the DAF nameplate.
2009 Compared to 2008:
Truck net sales and revenues:
U.S. and Canada
Europe
Mexico, Australia and other
Truck income before taxes
The Company’s new truck deliveries are summarized below:
United States
Canada
U.S. and Canada
Europe
Mexico, Australia and other
Total units
2009
2008
% change
$ 3,566.0
2,520.2
907.8
$ 6,994.0
25.9
$
2009
28,300
4,400
32,700
22,200
6,100
61,000
$ 4,823.7
6,624.8
2,098.9
$ 13,547.4
$ 1,156.5
2008
38,200
6,700
44,900
63,700
17,300
125,900
(26)
(62)
(57)
(48)
(98)
% change
(26)
(34)
(27)
(65)
(65)
(52)
PACCAR’s worldwide truck sales and revenues were $6.99 billion in 2009 compared to $13.55 billion in 2008 due to
lower market demand worldwide attributable to global recessionary conditions. 2009 truck net sales and revenues
and income before income taxes were also affected by the translation of weaker foreign currencies, primarily the
euro and British pound. The translation effect of all currencies decreased 2009 sales and revenues by $260.9 million
and income before income taxes by $30.9 million compared to 2008.
In the U.S. and Canada, 2009 net sales and revenues decreased to $3.57 billion compared to $4.82 billion in 2008.
Industry retail sales in the heavy duty market in U.S. and Canada declined 29% to 108,000 units in 2009 compared
to 153,000 units in 2008 and were at their lowest levels since 1991. The Company’s market share was 25.1% in 2009
and 26.0% in 2008. The medium duty market was 40,000 units in 2009 compared to 63,000 units in 2008. The
Company achieved record medium duty market share of 15.3% in 2009 compared to 14.1% in 2008.
In Europe, 2009 net sales and revenues decreased to $2.52 billion compared to $6.62 billion in 2008. The 15 tonne
and above truck market in Western and Central Europe was 168,000 units compared to 330,000 units in 2008. The
Company’s market share was a record 14.8% in 2009 compared to 14.2% in 2008. DAF market share in the 6 to 15
tonne market in 2009 was 9.3%, the same as in 2008. The 6 to 15 tonne market was 51,000 units in 2009, compared
to 79,000 units in 2008.
Net sales and revenues in Mexico, Australia and other countries outside the Company’s primary markets declined to
$.91 billion in 2009 from $2.10 billion in 2008 due to lower new truck deliveries reflecting lower overall market
demand.
Truck segment income before income taxes decreased to $25.9 million in 2009 from $1.16 billion in 2008 from
lower truck unit and aftermarket parts sales and margins in all markets, partially offset by lower research and
development spending as well as lower SG&A spending.
Net sales and revenues and gross margins for truck units and aftermarket parts are provided below. The aftermarket
parts gross margin includes direct revenues and costs, but excludes certain truck segment costs.
Truck net sales and revenues:
Trucks
Aftermarket parts
Gross margin:
Trucks
Aftermarket parts
Gross margin %:
Trucks
Aftermarket parts
2009
2008
% change
$ 5,103.3
1,890.7
$ 6,994.0
$
(46.6)
625.7
$ 579.1
(.9)%
33.1 %
8.3 %
$ 11,281.3
2,266.1
$ 13,547.4
$ 1,141.7
795.2
$ 1,936.9
10.1%
35.1%
14.3%
(55)
(17)
(48)
(104)
(21)
(70)
Total truck segment gross margins for 2009 decreased to 8.3% from 14.3% in 2008. The lower gross margins were
primarily the result of lower truck gross margins. Gross margins on trucks declined to negative .9% in 2009, reflecting
lower industry demand and reduced absorption of fixed costs resulting from the decline in truck production. 2009
parts gross margins declined from the prior year primarily due to a sales mix shift to lower margin replacement parts.
2008 Compared to 2007:
Truck net sales and revenues:
U.S. and Canada
Europe
Mexico, Australia and other
Truck income before taxes
The Company’s new truck deliveries are summarized below:
United States
Canada
U.S. and Canada
Europe
Mexico, Australia and other
Total units
2008
2007
% change
$ 4,823.7
6,624.8
2,098.9
$ 13,547.4
$ 1,156.5
2008
38,200
6,700
44,900
63,700
17,300
125,900
$ 5,648.8
5,859.6
2,345.9
$ 13,854.3
$ 1,352.8
2007
44,700
8,300
53,000
60,100
20,800
133,900
(15)
13
(11)
(2)
(15)
% change
(15)
(19)
(15)
6
(17)
(6)
PACCAR’s worldwide truck sales and revenues were $13.55 billion in 2008 compared to $13.85 billion in 2007 due to
higher demand for the Company’s trucks in Europe more than offset by lower demand in the U.S. and Canada, and
other international markets. The impact of a weaker U.S. dollar relative to the Company’s other currencies (primarily
the euro) increased revenues and pretax profit by approximately $445.0 million and $49.5 million, respectively.
In the U.S. and Canada, net sales and revenues decreased 15% to $4.82 billion from $5.65 billion in 2007 mainly as
a result of fewer new truck deliveries. In the U.S. and Canada, Peterbilt and Kenworth delivered 44,900 heavy and
medium duty trucks during 2008, a decrease of 8,100 units or 15% from 2007 primarily due to a lower truck market
size. The Class 8 market decreased 13% to 153,000 units in 2008 from 176,000 units in 2007. PACCAR’s market
share was 26.0% in 2008 compared to 26.4% in 2007. The medium duty market decreased 28% to 63,000 units.
PACCAR Inc and Subsidiaries
European net sales and revenues increased 13% to $6.62 billion from $5.86 billion in 2007 as DAF achieved higher
market share in a similar sized truck market to 2007. DAF trucks delivered a record 63,700 units during 2008, a
6% increase over 2007. The 15 tonne and above truck market in Western and Central Europe was 330,000 units
compared to 337,000 units in 2007. DAF’s 2008 market share of the 15 tonne and above market increased to 14.2%
compared to 13.9% in 2007. DAF market share in the 6 to 15 tonne market increased to 9.3% in 2008 from 8.3% in
2007. In Europe, demand was strong for the Company’s high-quality trucks and parts during the first nine months
of 2008, including growth in Central and Eastern Europe. Industry demand slowed throughout Europe in the
fourth quarter.
Net sales and revenues in Mexico, Australia and other countries outside the Company’s primary markets declined
11% to $2.10 billion in 2008 due to lower new truck deliveries. Truck unit deliveries in Mexico, Australia and other
countries outside the Company’s primary markets decreased 17%.
Truck income before taxes was $1.16 billion compared to $1.35 billion in 2007. The lower income reflects the effects
of lower truck production and gross margins from reduced demand and higher material costs, partially mitigated
by improved operating efficiency.
Net sales and revenues and gross margins for truck units and aftermarket parts are provided below. The aftermarket
parts gross margin includes direct revenues and costs, but excludes certain truck segment costs.
Truck net sales and revenues:
Trucks
Aftermarket parts
Gross margin:
Trucks
Aftermarket parts
Gross margin %:
Trucks
Aftermarket parts
2008
2007
% change
$ 11,281.3
2,266.1
$ 13,547.4
$ 1,141.7
795.2
$ 1,936.9
10.1%
35.1%
14.3%
$ 11,571.3
2,283.0
$ 13,854.3
$ 1,242.9
816.7
$ 2,059.6
10.7%
35.8%
14.9%
(3)
(1)
(2)
(8)
(3)
(6)
Truck segment gross margin as a percentage of net sales and revenues was 14.3% in 2008 and 14.9% in 2007. The
decrease in margin from 2007 resulted from the effects of weaker truck demand in North America and higher
material costs partially mitigated by strong demand for the Company’s products in Europe in the first nine months.
Truck Outlook
Worldwide recessionary economic conditions are expected to continue to affect demand for heavy duty trucks in
2010. The heavy duty truck sales in the U.S. and Canada are expected to be in the range of 110,000–140,000 units,
up slightly from 2009, reflecting general economic growth and an aging truck fleet. The current challenging
economic conditions in Europe are expected to continue in 2010 with the market size of above 15-tonne vehicles
expected to be in the range of 150,000–180,000 units. International markets are also expected to remain weak into
2010. Research and development spending in 2010 is expected to be between $225-$250 million, focusing on new
product development and manufacturing efficiency improvements. The Company will begin assembling PACCAR
MX engines at the Columbus, Mississippi engine production facility in mid 2010. See the Forward Looking
Statement section of Management’s Discussion and Analysis for factors that may affect this outlook.
Financial Services
The PACCAR Financial Services (PFS) segment, which includes wholly owned subsidiaries in the U.S., Canada,
Mexico, Europe and Australia, derives its earnings primarily from financing or leasing PACCAR products.
9
2009 Compared to 2008:
New loan and lease volume:
U.S. and Canada
Europe
Mexico and Australia
Average earning assets:
U.S. and Canada
Europe
Mexico and Australia
Average earning assets by product:
Loans and finance leases
Dealer wholesale financing
Equipment on lease and other
Revenues:
U.S. and Canada
Europe
Mexico and Australia
Revenue by product:
Loans and finance leases
Dealer wholesale financing
Equipment on lease and other
Income before taxes
2009
2008
% change
$ 1,175.0
433.5
306.1
$ 1,914.6
$ 4,795.5
2,535.9
1,321.9
$ 8,653.3
$ 5,141.0
1,221.2
2,291.1
$ 8,653.3
$ 501.8
318.5
189.5
$ 1,009.8
$ 449.3
52.5
508.0
$ 1,009.8
84.6
$
$ 1,674.0
947.6
728.6
$ 3,350.2
$ 5,692.4
3,065.6
1,621.0
$ 10,379.0
$ 6,295.3
1,693.0
2,390.7
$ 10,379.0
$
602.9
429.3
230.7
$ 1,262.9
$
567.3
116.1
579.5
$ 1,262.9
216.9
$
(30)
(54)
(58)
(43)
(16)
(17)
(18)
(17)
(18)
(28)
(4)
(17)
(17)
(26)
(18)
(20)
(21)
(55)
(12)
(20)
(61)
Revenues:
PFS revenues in 2009 declined 20% compared to 2008 due to lower average earning assets and lower yields
primarily in the U.S., Canada, and in Europe. Average earning assets declined in 2009 due to lower new loan and
lease volume in all markets and a reduction in dealer wholesale financing of new trucks. New loan and lease volume
declined due to lower new PACCAR truck production. PFS market share in 2009 was 26%, down from 28% in 2008
reflecting lower market share in the first half of 2009.
PACCAR Inc and Subsidiaries
30
At December 31,
Percentage of retail loan and lease accounts 30+ days past-due:
U.S. and Canada
Europe
Mexico and Australia
Total
2009
1.8%
4.4%
9.5%
3.8%
2008
2.6%
2.8%
6.2%
3.3%
Worldwide PFS accounts 30+ days past-due at December 31, 2009 were 3.8% of portfolio balances compared to 3.3%
at December 31, 2008, due to a decline in freight tonnage, freight rates and customer cash flows in Europe and Mexico.
Interest income and fees in 2009 declined from 2008 due to lower average earning assets and lower asset yields
summarized as follows:
Interest and fees – 2008
Lower average asset balances
Decrease in yield
Interest and fees – 2009
$683.4
(131.3)
(50.3)
$501.8
The decline in average earning assets was due to lower retail loan and lease business, as well as lower dealer wholesale
financing, as dealer inventory levels reduced in Europe. Yield declined due to lower market interest rates.
Operating lease, rental and other income in 2009 of $508.0 million declined from the $579.5 million in 2008 due to
lower average assets, lower rental utilization and a decrease in yields. The decline in average operating lease assets
was due to lower new business volume. The lower rental utilization reflected the weaker economic environment and
the decline in yields was due to lower market rates.
Expenses:
Interest and other borrowing expenses decreased in 2009 from 2008 due to lower average debt balances and lower
borrowing rates as summarized below:
Interest and other borrowing expenses – 2008
Lower average debt balances
Lower borrowing rates
Interest and other borrowing expenses – 2009
$394.1
(73.3)
(29.0)
$291.8
Average debt balances decreased due to the lower level of funding needed to fund the smaller financial services
portfolio. Lower borrowing rates resulted due to lower commercial paper rates.
2009 depreciation and other expenses increased to $442.5 million from $437.8 million in 2008. This resulted from
higher depreciation partially offset by lower costs from a smaller portfolio. 2009 depreciation increased to $331.2
million compared to $304.1 million in the prior year. The higher depreciation was from both an increase in
impairments on existing operating lease assets of $19.6 million, as well as higher losses on returned operating lease
assets of $20.1 million reflecting the impact of lower used truck prices.
SG&A expense of $86.5 million in 2009 declined by $24.7 million from $111.2 million in 2008. Lower spending was
a result of focused efforts to reduce costs in response to global economic conditions and consisted primarily of
lower staffing levels and travel costs.
The provision for losses on receivables is summarized below:
31
U.S. and Canada
Europe
Mexico and Australia
2009
Decrease in
allowance
$ (14.1)
(2.0)
(1.3)
$ (17.4)
Provision
for losses on
receivables
$ 49.8
41.6
13.0
$ 104.4
2008
Increase
(decrease) in
allowance
$ (5.8)
3.2
.7
$ (1.9)
Provision for
losses on
receivables
$ 79.9
15.0
8.0
$ 102.9
Net
Charge-offs
$ 85.7
11.8
7.3
$ 104.8
Net
Charge-offs
$ 63.9
43.6
14.3
$ 121.8
The provision for losses on receivables in 2009 of $104.4 million was comparable to 2008 as higher net portfolio
charge-offs in Europe, Mexico and Australia were offset by lower net charge-offs in the U.S. and Canada. There was
a decrease in the allowance for losses in all markets due to declining receivable portfolios.
2008 Compared to 2007:
New loan and lease volume:
U.S. and Canada
Europe
Mexico and Australia
Average earning assets:
U.S. and Canada
Europe
Mexico and Australia
Average earning assets by product:
Loans and finance leases
Dealer wholesale financing
Equipment on lease and other
Revenues:
U.S. and Canada
Europe
Mexico and Australia
Revenue by product:
Loans and finance leases
Dealer wholesale financing
Equipment on lease and other
Income before taxes
2008
2007
% change
$ 1,674.0
947.6
728.6
$ 3,350.2
$ 5,692.4
3,065.6
1,621.0
$ 10,379.0
$ 6,295.3
1,693.0
2,390.7
$ 10,379.0
$ 602.9
429.3
230.7
$ 1,262.9
$ 567.3
116.1
579.5
$ 1,262.9
$ 216.9
$ 2,195.6
923.5
812.1
$ 3,931.2
$ 6,517.1
2,360.9
1,279.6
$ 10,157.6
$ 6,461.9
1,507.3
2,188.4
$ 10,157.6
$ 682.8
320.2
188.3
$ 1,191.3
$ 561.5
111.3
518.5
$ 1,191.3
$ 284.1
(24)
3
(10)
(15)
(13)
30
27
2
(3)
12
9
2
(12)
34
23
6
1
4
12
6
(24)
PFS revenues increased 6% in 2008 to $1.26 billion from $1.19 billion in 2007 due to higher earning assets in all
markets outside the U.S. and Canada partially offset by lower market interest rates. Revenues in the U.S. and Canada
declined 12%, principally as a result of lower average assets. Total average assets declined in the U.S. and Canada due
to lower new business volume from fewer new trucks sold and lower finance market share which declined from
29% to 28%. The decline in share is due to competition from banks and independent finance companies. Revenues
PACCAR Inc and Subsidiaries
32
in Europe grew by 34% as average earning assets increased 30% from higher new loan and lease volume and
wholesale flooring growth attributed to higher DAF truck production. PFS revenues in Mexico and Australia
increased 23%, to $230.7 million, primarily due to increases in average earning assets which grew 27% as new loan
and lease volume exceeded repayments. This was partially offset by lower interest rates. Worldwide new business
volume was $3.35 billion in 2008 compared to $3.93 billion in 2007. Worldwide, PFS provided loan and lease
financing for 28% of PACCAR new trucks delivered in 2008 compared to 29% in 2007.
Interest and other borrowing expenses and Depreciation and other of $831.9 million increased 10% from the
$755.3 million in 2007. This was primarily due to higher depreciation expense on operating leases which increased
to $304.1 million in 2008 from $238.6 million in 2007 as a result of an increase in average operating lease assets in
service during 2008. Interest expense in 2008 was similar to 2007 as slightly higher average borrowings to support
portfolio growth were offset by lower average borrowing rates. Selling, general and administrative expenses of
$111.2 million were comparable to the prior year.
Income before taxes was $216.9 million in 2008 compared to $284.1 million in 2007 primarily due to a higher
provision for losses on receivables. Net portfolio charge-offs were $104.8 million compared to $25.8 million in 2007
due to recessionary conditions in the U.S. and Canada and to a lesser extent in Europe. At December 31, 2008, the
percentage of accounts 30+ days past-due was 3.3%, up from 2.0% at the end of 2007. The increase in the percentage
of past-due accounts reflected the difficult economic conditions worldwide. The increase in past-due accounts in
Mexico and Australia to 6.2% from 2.5% was primarily due to Mexico where a significant decline in the value of
the peso compared to the dollar in the fourth quarter of 2008 resulted in cash flow difficulty for some customers.
Financial Services Outlook
Financial Services segment results are dependent on the generation of loans and leases and the related spread
between the yields on loans and leases and borrowing costs, as well as access to liquidity to generate new business
and the level of credit losses. The asset base in 2010 is expected to be comparable to 2009 levels. Recessionary
economic conditions will continue to exert pressure on the profit margins of truck operators and challenge some
customers ability to make timely payments to the Company. Improvement in past-due accounts and used truck
values, fewer truck repossessions and voluntary truck returns are projected to benefit in 2010. See the Forward
Looking Statement section of Management’s Discussion and Analysis for factors that may affect this outlook.
Other Business
Included in Truck and Other is the Company’s winch manufacturing business. Sales from this business represent
approximately 1% of net sales for 2009, 2008 and 2007.
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 :
At December 31
Cash and cash equivalents
Marketable debt securities
2009
$ 1,912.0
219.5
$ 2,131.5
2008
$ 1,955.2
175.4
$ 2,130.6
2007
$ 1,858.1
778.5
$ 2,636.6
The Company’s total cash and marketable debt securities increased $.9 million for the year ended December 31,
2009, as a decrease in cash and cash equivalents of $43.2 million was more than offset by an increase in marketable
securities of $44.1 million.
The change in cash and cash equivalents is summarized below.
33
For Years Ended December 31
2009
2008
2007
Operating Activities:
Net Income
Net income items not affecting cash
Changes in operating assets and liabilities
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
$ 111.9
874.3
387.1
1,373.3
310.6
(1,816.2)
89.1
(43.2)
1,955.2
$ 1,912.0
$ 1,017.9
882.2
(595.2)
1,304.9
(251.9)
(868.1)
(87.8)
97.1
1,858.1
$ 1,955.2
$ 1,227.3
589.3
238.8
2,055.4
(1,296.8)
(838.5)
85.5
5.6
1,852.5
$ 1,858.1
2009 Compared to 2008:
Operating activities: The Company’s operating cash flow increased $68.4 million compared to 2008. A decrease in
net income of $906.0 million was more than offset by a reduction in receivables of $1,135.6 million primarily
related to $888.1 million of higher collections of wholesale receivables reflecting a reduction in funding of dealer
new truck inventory, predominately in Europe. In addition there was a reduction of trade receivables of $218.7
million as a result of lower sales levels.
Investing activities: Cash provided by investing activities increased by $562.5 million to $310.6 million in 2009
compared to 2008. Cash was provided by a larger decrease in the retail loan and lease portfolio of $539.8 million as
collections on outstanding balances exceeded net new loan and lease volume reflecting lower new truck sales.
Investments in capital equipment decreased $579.0 million, primarily due to reduced expenditures related to the
current economic environment offset by $614.9 million of lower cash provided by net purchases and sales of
marketable securities compared to 2008.
Financing activities: The cash used in financing activities increased $948.1 million to $1,816.2 million in 2009 due
to higher net debt repayments of $1,601.7 million related to lower funding needed to finance a smaller financial
services asset base. This was partially offset by no stock repurchases in 2009 compared to $230.6 million in 2008
and a lower dividend of $232.1 million compared to $629.2 million in 2008.
2008 Compared to 2007:
Operating activities: The Company’s operating cash flow of $1,304.9 million decreased $750.5 million compared to
2007. Net income in 2008 of $1,017.9 million decreased by $209.4 million compared to 2007. This was more than
offset by a $292.9 million increase relating to net income items not affecting cash to $882.2 million in 2008. This is
mainly from increased depreciation on higher depreciable assets and higher deferred taxes related to tax incentive
depreciation in the U.S. Changes in operating assets and liabilities were a net cash outflow in 2008 of $595.2 million
compared to an inflow of $238.8 million in 2007. The change of $834.0 million was due in part to purchasing
finished goods to secure inventory from a supplier exiting the business. In addition, $246.3 million of cash was used
for increased funding of dealer inventory by the Company’s Financial Services segment primarily in Europe due to
the abrupt market slowdown in the fourth quarter compared to a reduction of $81.3 million in 2007.
Investing activities: Cash used in investing activities decreased to $251.9 million in 2008 from $1,296.8 million in
2007. The Company liquidated $572.1 million of its marketable debt securities portfolio to improve liquidity due to
the more difficult credit markets. The Financial Services segment experienced lower new loan and lease originations
from lower demand for truck financing.
PACCAR Inc and Subsidiaries
34
Financing activities: 2008 financing cash outflow of $868.1 million was slightly higher than 2007 as the effect of
lower net borrowings from a declining financial services asset base was offset by $129.9 million of lower treasury
stock repurchases in 2008 and $107.5 million of lower cash dividends as a result of a smaller extra dividend in 2008.
Credit Lines and Other:
The Company has line of credit arrangements of $3.67 billion, of which $3.35 billion was unused at the end of
December 2009. Included in these arrangements are $3.0 billion of syndicated bank facilities. Of the $3.0 billion
bank facilities, $2.0 billion matures in June 2010 and $1.0 billion matures in June 2012. The Company intends to
replace these credit facilities as they expire with facilities of similar amounts and duration. These credit facilities are
maintained primarily to provide backup liquidity for commercial paper borrowings and maturing medium-term
notes. There were no borrowings under the syndicated bank lines for the year ended December 31, 2009.
PACCAR Inc periodically files shelf registrations under the Securities Act of 1933. The total amount of medium-
term notes outstanding for PACCAR Inc as of December 31, 2009 is $870.0 million. The current registration expires
in 2011 and does not limit the principal amount of debt securities that may be issued during the period.
The Company believes its strong liquidity position and AA- investment grade credit rating will continue to provide
financial stability and access to capital markets at competitive interest rates.
In October 2007, PACCAR’s Board of Directors approved the repurchase of $300 million of the Company’s
common stock. Through December 31, 2009, $292 million of shares have been repurchased. In July 2008, PACCAR’s
Board of Directors approved the repurchase of an additional $300 million of the Company’s common stock. No
shares have been repurchased pursuant to the July 2008 authorization.
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 totaled $172.3 million
as of December 31, 2009.
Expenditures for property, plant and equipment in 2009 totaled $127.7 million compared to $462.8 million in 2008
as the Company reduced its spending to reflect the current economic environment. Over the last ten years, the
Company’s combined investments in worldwide capital projects and research and development totaled $3.77 billion
which have significantly increased capacity, efficiency and quality of the Company’s premier products.
Capital spending in 2010 is expected to be approximately $175 to $200 million. Spending on research and
development in 2010 is expected to be $225 to $250 million. PACCAR’s will continue to focus on manufacturing
efficiency improvements, engine development and new product programs.
Financial Services
The Company funds its financial services activities primarily from collections on existing finance receivables and
borrowings in the capital markets. An additional source of funds is loans from other PACCAR companies.
The primary sources of borrowings in the capital markets 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).
In November 2009, PFC filed a shelf registration under the Securities Act of 1933. In December 2009, PFC issued
$250.0 million of fixed rate medium-term notes under this registration. The registration expires in 2012 and does
not limit the principal amount of debt securities that may be issued during the period. The total amount of
medium-term notes outstanding for PFC as of December 31, 2009, was $1,148.5 million.
35
In the third quarter of 2009, PACCAR’s European finance subsidiary, PACCAR Financial Europe, renewed the
registration of a €1.5 billion medium-term note program with the London Stock Exchange. On December 31, 2009,
€850 million remained available for issuance. This program is renewable annually through the filing of a new
prospectus.
In June 2008, PACCAR Mexico registered a 7.0 billion peso medium-term note program with the Comision Nacional
Bancaria y de Valores. The registration expires in 2012 and at December 31, 2009, 6.1 billion pesos remained available
for issuance.
PACCAR believes its Financial Services companies will be able to continue funding receivables, servicing debt and
paying dividends through internally generated funds, access to public and private debt markets and lines of credit.
Commitments
The following summarizes the Company’s contractual cash commitments at December 31, 2009:
Borrowings*
Interest on term debt**
Operating leases
Purchase obligations
Other obligations
Within
1 Year
$ 3,580.5
123.8
27.0
147.2
11.1
$ 3,889.6
Maturity
1-3 Years
$ 1,950.1
127.8
27.2
237.3
6.4
$ 2,348.8
3-5 Years
$ 522.6
39.3
8.8
2.0
2.2
$ 574.9
More than
5 Years
$
.5
17.4
$ 17.9
Total
$ 6,053.2
290.9
63.5
386.5
37.1
$ 6,831.2
* Borrowings also include commercial paper and other short-term debt.
** Includes interest on fixed- and floating-rate term debt. Interest on floating-rate debt is based on the applicable
market rates at December 31, 2009.
The Company had $6.83 billion of cash commitments. Of the total cash commitments for borrowings and interest
on term debt, $6.14 billion were related to the Financial Services segment. As described in Note J of the consolidated
financial statements, borrowings consist primarily of term notes 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. Purchase obligations are the Company’s contractual commitment to
acquire future production inventory and capital equipment. Other obligations include deferred cash compensation.
PACCAR Inc and Subsidiaries
36
The Company’s other commitments include the following at December 31, 2009:
Letters of credit
Loan and lease commitments
Equipment acquisition commitments
Residual value guarantees
Within
1 Year
$ 18.4
105.3
106.3
$ 230.0
Commitment Expiration
1-3 Years
$ 2.0
3-5 Years
.1
$
More than
5 Years
53.4
118.8
$ 174.2
72.9
$ 73.0
$ 10.0
$ 10.0
Total
$ 20.5
105.3
53.4
308.0
$ 487.2
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 guaranteed 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.
The Company is involved in various stages of investigations 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. Expenditures related to environmental activities in 2009, 2008 and 2007 were $1.3 million, $3.8 million and
$1.9 million, respectively. Management expects that these matters will not have a significant effect on the
Company’s consolidated cash flow, liquidity or financial condition.
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 statements, 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 management, are particularly sensitive and which, if actual results are different
from estimates used by management, 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 F of the consolidated financial statements. In determining 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. Operating lease terms generally range from three to seven years. The resulting residual values on
operating leases generally range between 30% and 50% of original equipment cost. If the sales price of the trucks
at the end of the term of the agreement differs from the Company’s estimate, a gain or loss will result.
Future market conditions, changes in government regulations and other factors outside the Company’s control could
impact the ultimate sales price of trucks returned under these contracts. Residual values are reviewed regularly and
adjusted if market conditions warrant. A decrease in the estimated equipment residual values would increase annual
depreciation expense over the remaining lease term.
During 2007 and 2008 market values on vehicles returning upon operating lease maturity were generally higher than
the residual values on these vehicles resulting in a decrease of depreciation expense of $15.5 million and $6.9 million,
respectively. During 2009, lower market values on trucks returning upon lease maturity, as well as impairments on
existing operating leases resulted in additional depreciation expense of $45.6 million.
37
At December 31, 2009, the aggregate residual value of equipment on operating leases in the Financial Services
segment and residual value guarantee on trucks accounted for as operating leases in the Truck segment was $1.14
billion. A 10% decrease in used truck values worldwide, expected to persist over the remaining maturities of the
Company’s operating leases, would reduce residual values estimates and result in the Company recording
approximately $30 million of additional depreciation per year.
Allowance for Credit Losses
The accounting for allowance for credit losses related to the Company’s loans and finance leases is discussed in
Note E of the consolidated financial statements. The Company determines the allowance for credit losses on
financial services retail and wholesale receivables based on historical loss information, using past-due account data,
current market conditions and expectations about the future. The allowance for credit losses consists of both a
specific reserve and a general reserve based on estimates, including assumptions regarding the likelihood of collecting
current and past-due accounts, repossession rates and the recovery rate on the underlying collateral based on used
truck values and other pledged collateral or recourse. The Company specifically evaluates large retail and wholesale
accounts with past-due balances or that otherwise are deemed to be at a higher risk of credit loss. All other past-due
customers, dealers and current accounts are evaluated as a group.
The Company has developed a range of specific loss estimates for each of its portfolios by country based on historical
experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A
projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is
determined as probable based on current market conditions and other factors impacting the creditworthiness of the
Company’s borrowers and their ability to repay. The projected amount is then compared to the allowance for credit
loss balance and an appropriate adjustment is made.
The adequacy of the allowance is evaluated quarterly based on the most recent information and expectations about
the future. As accounts become past due, the likelihood increases they will not be fully collected. The Company’s
experience indicates the probability of not fully collecting past-due accounts range between 20% and 80%. Over the
past three years, the Company’s year-end 30+ days past-due accounts have ranged between 2.0% and 3.8% of
average loan and lease receivables. Historically, a 100 basis point increase in the 30+ days past-due percentage has
resulted in an increase in future credit losses of 10 to 35 basis points of average receivables. Past-dues were 3.8% at
December 31, 2009. If past-dues were 100 basis points higher or 4.8% as of December 31, 2009, the Company’s
estimate of future credit losses would likely have increased by approximately $5 to $20 million depending on the extent
of the past-dues, the estimated value of the collateral as compared to amounts owed and general economic factors.
Product Warranty
The accounting for product warranty is discussed in Note I of the consolidated financial statements. 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, net of recoveries.
Management takes actions to minimize warranty costs through quality-improvement programs; however, actual claim
costs incurred could materially differ from the estimated amounts and require adjustments to the reserve. Historically
those adjustments have not been material. Over the past three years, the Company’s year-end warranty expense as a
percentage of net sales and revenues has ranged between 1.2% and 1.3%. For 2009, warranty expense was 1.2% of
net sales and revenues. If warranty expense were .2% higher as a percentage of truck net sales and revenues in 2009,
warranty expense would have increased by approximately $17 million.
PACCAR Inc and Subsidiaries
38
Pension Benefits
The Company’s accounting for employee pension benefit costs and obligations is based on management
assumptions about the future used by actuaries to estimate net costs and liabilities. These assumptions include
discount rates, long-term rates of return on plan assets, inflation rates, retirement rates, mortality rates and other
factors. Management bases these assumptions on historical results, the current environment and reasonable
estimates of future events.
The discount rate for pension benefits 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.
Because differences between actual results and the assumptions for returns on plan assets, retirement rates and
mortality rates are accumulated and amortized into expense over future periods, management does not believe
these differences or a typical percentage change in these assumptions worldwide would have a material effect on its
financial results in the next year. The most significant assumption which could negatively affect pension expense is
a decrease in the discount rate. If the discount rate was to decrease .5%, 2009 net pension expense would increase
to $36.8 million from $25.3 million, and the projected benefit obligation would increase $97.1 million to $1,421.9
million from $1,324.8 million.
Income Taxes
The accounting for income taxes is discussed in Note N of the consolidated financial statements. The Company
calculates income tax expense on pretax income based on current tax law. Deferred tax assets and liabilities are
recorded for future tax consequences on temporary differences between recorded amounts in the financial statements
and their respective tax basis. The determination of income tax expense requires management estimates and involves
judgment regarding indefinitely reinvested foreign earnings, jurisdictional mix of earnings and future outcomes
regarding tax law issues included in tax returns. The Company updates its assumptions based on all of these factors
each quarter as well as new information on tax laws and differences between estimated tax returns and actual returns
when filed. If the Company’s assessment of these matters changes, the effect is accounted for in earnings in the
period the change is made.
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
resulting in higher costs and/or sales restrictions; currency or commodity price fluctuations; lower used truck prices;
insufficient or under-utilization of manufacturing capacity; supplier interruptions; insufficient liquidity in the
capital markets; fluctuations in interest rates; changes in the levels of the Financial Services segment new business
volume due to unit fluctuations in new PACCAR truck sales; changes affecting the profitability of truck owners and
operators; price changes impacting equipment costs and residual values; 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. A more detailed description of these and other risks is included under the
heading Part 1, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009.
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
Research and development
Selling, general and administrative
Curtailment gain
Interest and other expense (income), net
Truck and Other Income Before Income Taxes
financial services:
Interest and fees
Operating lease, rental and other income
Revenues
Interest and other borrowing expenses
Depreciation 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.
2009
2008
2007
39
(millions except per share data)
$ 7,076.7
$13,709.6
$14,030.4
6,483.4
199.2
348.4
(66.0)
43.6
7,008.6
68.1
501.8
508.0
1,009.8
291.8
442.5
86.5
104.4
925.2
84.6
22.3
175.0
63.1
$ 111.9
11,736.9
341.8
470.2
(1.8)
12,547.1
1,162.5
683.4
579.5
1,262.9
394.1
437.8
111.2
102.9
1,046.0
216.9
84.6
1,464.0
446.1
$ 1,017.9
11,917.3
255.5
491.4
(18.6)
12,645.6
1,384.8
672.8
518.5
1,191.3
391.2
364.1
110.9
41.0
907.2
284.1
95.4
1,764.3
537.0
$ 1,227.3
$ .31
$ .31
$
$
2.79
2.78
$
$
3.31
3.29
363.8
364.9
364.2
365.9
371.1
373.3
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
40
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
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
2009
2008
(millions of dollars)
$ 1,836.5
554.7
219.5
632.1
224.3
3,467.1
503.8
1,757.7
409.1
6,137.7
$ 1,899.2
698.7
175.4
658.1
211.7
3,643.1
425.3
1,782.8
368.2
6,219.4
75.5
6,497.7
1,513.2
344.9
8,431.3
$14,569.0
56.0
8,036.4
1,534.8
403.2
10,030.4
$16,249.8
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
December 31
truck and other:
Current Liabilities
Accounts payable, accrued expenses and other
Dividend payable
Total Truck and Other Current Liabilities
Long‑term debt
Residual value guarantees and deferred revenues
Other liabilities
Total Truck and Other Liabilities
financial services:
Accounts payable, accrued expenses and other
Commercial paper and bank loans
Term notes
Deferred taxes and other liabilities
Total Financial Services Liabilities
stockholder’s equity
Preferred stock, no par value – authorized 1.0 million shares, none issued
Common stock, $1 par value – authorized 1.2 billion shares;
issued 364.4 million and 363.1 million shares
Additional paid‑in capital
Treasury stock – at cost
Retained earnings
Accumulated other comprehensive income (loss)
Total Stockholders’ Equity
See notes to consolidated financial statements.
2009
2008
(millions of dollars)
41
$ 1,490.0
1,490.0
172.3
547.2
405.3
2,614.8
215.2
3,011.2
2,889.3
734.8
6,850.5
$ 1,792.3
36.3
1,828.6
19.3
470.8
636.6
2,955.3
249.2
3,576.2
3,889.3
733.1
8,447.8
364.4
80.0
(17.4)
4,640.5
36.2
5,103.7
$14,569.0
363.1
46.1
(17.4)
4,724.7
(269.8)
4,846.7
$16,249.8
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 ws
42
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
Curtailment gain
Gain on sale of property
Deferred taxes
Other, net
Change in operating assets and liabilities:
Decrease (increase) 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
(Decrease) increase in liabilities:
Accounts payable and accrued expenses
Residual value guarantees and deferred revenues
Pension and post retirement contributions
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 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 Provided by (Used in) Investing Activities
financing activities:
Cash dividends paid
Purchase of treasury stock
Stock compensation transactions
Net decrease in commercial paper and short-term bank loans
Proceeds from long-term debt
Payments on long-term debt
Net Cash Used in Financing Activities
Effect of exchange rate changes on cash
Net (Decrease) 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.
2009
2008
2007
(millions of dollars)
$ 111.9
$1,017.9
$1,227.3
188.0
450.1
104.4
(66.0)
.9
159.7
37.2
163.2
641.8
81.6
53.4
8.1
(271.8)
48.2
(176.6)
(160.8)
1,373.3
(1,282.2)
2,285.5
3.5
(288.3)
245.5
(127.7)
(843.3)
317.6
310.6
(232.1)
17.6
(789.8)
1,373.0
(2,184.9)
(1,816.2)
89.1
(43.2)
1,955.2
$1,912.0
226.5
422.9
102.9
131.0
(1.1)
(55.5)
(246.3)
52.8
(85.2)
8.8
(239.3)
118.1
(68.0)
(80.6)
1,304.9
(2,307.5)
2,771.0
10.4
(667.3)
1,239.4
(462.8)
(1,087.2)
239.3
12.8
(251.9)
(629.2)
(230.6)
11.5
(482.0)
1,190.9
(728.7)
(868.1)
(87.8)
97.1
1,858.1
$1,955.2
196.4
330.0
41.0
(21.7)
38.3
5.3
143.6
81.3
40.3
114.4
16.8
(277.6)
85.1
(16.8)
51.7
2,055.4
(3,116.6)
2,837.3
13.7
(1,282.9)
1,345.5
(425.7)
(841.7)
240.1
(66.5)
(1,296.8)
(736.7)
(360.5)
30.8
(366.1)
879.5
(285.5)
(838.5)
85.5
5.6
1,852.5
$1,858.1
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, $1 par value:
Balance at beginning of year
Treasury stock retirement
50% stock dividend
Stock compensation
Balance at end of year
additional paid-in capital:
Balance at beginning of year
Treasury stock retirement
Stock compensation and tax benefit
Balance at end of year
treasury stock, at cost:
Balance at beginning of year
Purchases: (shares) 2008-5.1; 2007-5.1
Retirements
Balance at end of year
retained earnings:
Balance at beginning of year
Net income
Cash dividends declared on common stock,
per share: 2009-$.54; 2008-$.82; 2007-$1.65
Treasury stock retirement
50% stock dividend
Balance at end of year
accumulated other comprehensive income (loss):
Balance at beginning of year
Other comprehensive income (loss)
Balance at end of year
Total Stockholders’ Equity
See notes to consolidated financial statements.
2009
2008
2007
43
(millions except per share data)
$ 363.1
$ 368.4
(5.9)
1.3
364.4
46.1
33.9
80.0
(17.4)
(17.4)
.6
363.1
37.7
(14.0)
22.4
46.1
(61.7)
(230.6)
274.9
(17.4)
4,724.7
111.9
4,260.6
1,017.9
(196.1)
(298.8)
(255.0)
4,640.5
4,724.7
(269.8)
306.0
36.2
$ 5,103.7
408.1
(677.9)
(269.8)
$ 4,846.7
$ 248.5
(3.8)
122.8
.9
368.4
27.5
(33.8)
44.0
37.7
(2.1)
(359.6)
300.0
(61.7)
4,026.1
1,227.3
(607.6)
(262.4)
(122.8)
4,260.6
156.2
251.9
408.1
$ 5,013.1
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
44
Year Ended December 31
Net income
Other comprehensive income (loss):
Unrealized (losses) gains on derivative contracts
Losses arising during the period
Tax effect
Reclassification adjustment
Tax effect
Unrealized (losses) gains on investments
Net holding (loss) gain
Tax effect
Reclassification adjustment
Tax effect
Pension and postretirement
Gains (losses) arising during the period
Tax effect
Reclassification adjustment
Tax effect
Foreign currency translation gains (losses)
Net other comprehensive income (loss)
Comprehensive Income
See notes to consolidated financial statements.
2009
2008
2007
(millions of dollars)
$111.9
$1,017.9
$1,227.3
(71.6)
21.3
119.9
(35.7)
33.9
(.3)
.1
.7
(.2)
.3
73.0
(32.1)
11.2
(3.9)
48.2
223.6
306.0
$417.9
(85.5)
24.7
(17.4)
4.1
(74.1)
2.9
(.9)
(5.1)
1.8
(1.3)
(395.1)
144.7
6.0
(2.1)
(246.5)
(356.0)
(677.9)
$ 340.0
(32.5)
15.9
(14.8)
5.6
(25.8)
5.2
(2.1)
.2
(.1)
3.2
87.0
(32.2)
12.7
(4.6)
62.9
211.6
251.9
$1,479.2
n o t e s t o c o n s o l id 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, 2009, 2008 and 2007 (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 design, 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.
Trade and Other Receivables: The Company’s trade and other receivables are recorded at cost on the balance sheet
net of allowances.
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
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 tested for impairment on an annual basis. Impairment charges were insignificant
during the three years ended December 31, 2009.
45
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 shipments 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 F). 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.
Interest income from finance and other receivables is recognized using the interest method. Certain loan origination
costs are deferred and amortized to interest income over the expected life of the contracts, generally three to six
years, using the straight line method which approximates the interest method. For operating leases, rental revenue is
recognized on a straight-line basis over the lease term. Recognition 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. Payments received while the loan is in non-accrual status are applied to
interest and principal amounts in accordance with the contractual terms.
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 recorded in accumulated other
comprehensive income (loss), a component of stockholders’ equity. 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 and resulting adjustments are included in net income.
Earnings per Share: Basic earnings per common share are computed by dividing earnings by the weighted average
number of commons shares outstanding, plus the effect of any participating securities. Diluted earnings per
common share are computed assuming that all potentially dilutive securities are converted into common shares
under the treasury stock method. The dilutive and antidilutive options are shown separately in the table below.
Year Ended December 31,
Additional shares
Antidilutive options
2009
1,103,600
2,290,400
2008
1,721,300
1,397,800
2007
2,206,800
New Accounting Pronouncements: The Company adopted Statement No. 161, Disclosures about Derivative Instruments
and Hedging Activities (FAS 161) effective January 1, 2009. FAS 161 amends and expands the disclosure requirements
for derivative instruments and hedging activities. Accordingly, the Company’s disclosure in Note P has been updated
to comply with this standard.
The Company adopted Statement No. 165, Subsequent Events effective July 1, 2009, with no significant effect on the
financial statements.
The Company adopted FASB Staff Position FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan
Assets effective for the year ended December 31, 2009. FSP FAS 132(R)-1 requires additional disclosures relating to
investment of plan assets. Accordingly, the Company’s disclosure in Note M has been updated to comply with this
standard.
Subsequent Events: The Company has evaluated subsequent events through the date the financial statements were
issued on February 26, 2010.
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
46
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 gains or losses, net of tax, included as a component of accumulated other
comprehensive income. The proceeds from sales and maturities of marketable securities during 2009 were $245.5.
Gross realized gains and losses were $1.2, $5.1, and nil, and $.1, $.1 and $.1 for the years ended December 31, 2009,
2008 and 2007, respectively.
The cost of marketable debt securities is adjusted for amortization of premiums and accretion of discounts to
maturity. Amortization, accretion, 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:
2009
U.S. government and agency securities
U.S. tax-exempt securities
U.S. corporate securities
Non U.S. corporate securities
Non U.S. government securities
Other debt securities
2008
U.S. tax-exempt securities
Non U.S. corporate securities
Non U.S. government securities
amortized
cost
unrealized
gains
unrealized
losses
$ 6.5
141.2
22.0
22.0
12.2
14.2
$ 218.1
amortized
cost
$ 167.2
4.3
2.9
$ 174.4
$ 1.3
.2
$
.1
$ 1.5
$
.1
unrealized
gains
$ 1.7
unrealized
losses
$
.4
.3
$ 1.7
$
.7
fair
value
$ 6.5
142.5
22.1
22.0
12.2
14.2
$ 219.5
fair
value
$ 168.5
4.0
2.9
$ 175.4
The fair value of marketable debt securities that have been in a continuous unrealized loss position for 12 months
or greater at December 31, 2009 and 2008, were $27.4 and $16.7, and their unrealized losses were $.1 and $.6,
respectively.
Contractual maturities at December 31, 2009, were as follows:
Maturities:
Within one year
One to five years
Ten or more years
amortized
cost
$ 99.7
104.5
13.9
$ 218.1
fair
value
$ 100.3
105.3
13.9
$ 219.5
Marketable debt securities included $11.6 and $65.9 of variable-rate demand obligations (VRDOs) at December 31,
2009 and 2008, respectively. VRDOs are debt instruments with long-term scheduled maturities which have interest
rates that reset periodically.
n o t e s t o c o n s o l i D a t eD F i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
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
47
2009
$ 312.5
487.5
800.0
(167.9)
$ 632.1
2008
$ 394.3
421.7
816.0
(157.9)
$ 658.1
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 58% and 52% of consolidated inventories
before deducting the LIFO reserve at December 31, 2009 and 2008.
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
Finance and other receivables include the following:
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 (see Note E)
Loans, leases and other
Dealer wholesale
2009
$ 2,875.2
2,260.0
764.9
1,015.2
109.6
(359.6)
6,665.3
(157.1)
(10.5)
$ 6,497.7
2008
$ 3,506.7
2,558.4
817.9
1,635.0
127.3
(430.6)
8,214.7
(167.1)
(11.2)
$ 8,036.4
Loans represent fixed- or floating-rate loans to customers collateralized by the vehicles purchased. Retail direct
financing and sales-type finance leases are contracts that lease equipment to retail customers and dealers, respectively.
These leases are reported as the sum of minimum lease payments receivable and estimated residual value of the
property subject to the contracts, reduced by unearned interest on finance leases which is shown separately. Dealer
wholesale financing represents floating-rate wholesale loans to PACCAR dealers for new and used trucks. The loans
are collateralized by the trucks being financed. Interest and other receivables are interest due on loans and leases
and other amounts due in the normal course of business.
PACCAR Inc and Subsidiaries
n o tE s t o c o n s o l i DA t E D f i nA n c iA l s t A t E m E n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
48
Annual minimum payments due on loans and leases are as follows:
Beginning January 1, 2010
2010
2011
2012
2013
2014
Thereafter
loans
$ 1,123.3
817.1
525.4
283.3
108.0
18.1
$ 2,875.2
finance
leases
$ 984.7
792.0
527.4
309.8
141.3
82.9
$ 2,838.1
dealer
wholesale
$ 815.3
199.9
$ 1,015.2
Included in Loans are dealer direct loans on the sale of new trucks of $143.7 and $171.6 as of December 31, 2009
and 2008. Estimated residual values included with finance leases amounted to $186.8 in 2009 and $190.6 in 2008.
Repayment experience indicates that some loan and lease receivables will be paid prior to contract maturity, while
others may be extended or revised. Experience also indicates that the majority of dealer wholesale financing will be
repaid within one year. Items included in Interest and other receivables are all due within one year. 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.
E . A l l o wA n c E f o r l o s s E s
Allowance for losses for loans, leases and other are evaluated together as a group since they relate to a similar
customer base and their contractual terms require regular payment of principal and interest principally over 36 to
60 months and they are secured by the same type of collateral. The allowance for credit losses consists of both a
specific reserve and a general reserve.
Receivables are charged to the allowance for losses when, in the judgment of management, they are considered
uncollectible (generally upon repossession of the collateral). The provision for losses on finance, trade and other
receivables is charged to income based on management’s estimate of incurred credit losses, net of recoveries,
inherent in the portfolio.
The allowance for losses is summarized as follows:
Balance, December 31, 2006
Provision for losses
Net charge-offs
Acquisitions
Currency translation
Balance, December 31, 2007
Provision for losses
Net charge-offs
Currency translation
Balance, December 31, 2008
Provision for losses
Net charge-offs
Currency translation
Balance, December 31, 2009
truck
and other
$
$
5.7
.2
(.5)
.2
1.9
7.5
(.3)
(2.0)
(.3)
4.9
1.1
(1.8)
.1
4.3
financial
services
$ 169.0
41.0
(25.8)
1.8
7.4
193.4
102.9
(104.8)
(13.2)
178.3
104.4
(121.8)
6.7
$ 167.6
The Company’s customers are principally concentrated in the transportation industry in North America and
Europe. There are no significant concentrations of credit risk in terms of a single customer. Generally, receivables
are collateralized by the related equipment and parts.
n o tE s t o c o n s o l i D a tE D F i n a n c i a l s t a tE m E n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
Impaired finance and other receivables include accounts that may or may not have a specific reserve and certain
accounts that are placed on non-accrual status. The majority of the loans that have a specific reserve are also on
non-accrual status.
49
The Company’s Financial Services segment information on impaired finance and other receivables is as follows:
As of and for the Years Ended December 31,
Finance receivables on non-accrual status
Impaired receivables with specific reserve
Impaired receivables with no specific reserve
Specific loss reserves on impaired receivables
Average balance of impaired receivables
Interest recognized on impaired receivables
$
2009
88.4
38.3
29.1
7.3
84.9
4.3
$
2008
59.8
28.5
34.5
4.8
80.0
2.6
The Company repossesses vehicles which serve as collateral for loans and finance leases and records the vehicles as
used truck inventory included in Financial Services Other Assets on the balance sheet. The Company repossessed
collateral valued at $203.0 and recorded $106.5 of credit losses upon repossession in 2009. Repossessed assets are
typically disposed of promptly after repossession with differences between the estimated market value and the
ultimate sales price resulting in an adjustment to credit losses. The Company sold $213.1 of repossessed assets and
recorded an additional loss of $10.6 in 2009. As of December 31, 2009 and 2008, a total of $28.5 and $41.9
respectively, of repossessed assets were held for sale.
F. 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
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 eight years. The Company reviews residual
values of equipment on operating leases periodically to determine that recorded amounts are appropriate.
A summary of equipment on operating leases for the Truck and Other segment and for the Financial Services
segment is as follows:
At December 31,
Equipment on operating leases
Less allowance for depreciation
truck & other
financial services
2009
$ 730.6
(226.8)
$ 503.8
2008
$ 610.6
(185.3)
$ 425.3
2009
$ 2,090.8
(577.6)
$ 1,513.2
2008
$ 2,053.4
(518.6)
$ 1,534.8
Annual minimum lease payments due on financial services operating leases beginning January 1, 2010, are $383.0,
$254.6, $157.0, $79.7, $27.9 and $2.9 thereafter.
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 guarantees
Total
truck & other
2009
$ 239.2
308.0
$ 547.2
2008
$ 204.8
266.0
$ 470.8
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l id 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, 2009, 2008 and 2007 (currencies in millions)
50
The deferred lease revenue is amortized on a straight-line basis over the RVG contract period. At December 31, 2009,
the annual amortization of deferred revenues beginning January 1, 2010, is $82.5, $53.4, $39.0, $40.8, $15.6 and
$7.9 thereafter. Annual maturities of the residual value guarantees beginning January 1, 2010, are $106.3, $68.7,
$50.1, $52.7, $20.2 and $10.0 thereafter.
g . 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 are stated at cost. Depreciation is computed principally by the straight-line method
based on the estimated useful lives of the various classes of assets. Certain production tooling is amortized on a
unit of production basis. Property, plant and equipment include the following:
At December 31,
Land
Buildings and improvements
Machinery, equipment and production tooling
Less allowance for depreciation
useful lives
10-40 years
3-12 years
2009
$ 206.3
1,007.6
2,489.0
3,702.9
(1,945.2)
$ 1,757.7
2008
$ 186.8
951.1
2,355.2
3,493.1
(1,710.3)
$ 1,782.8
h . a c c o u n t s paya b l e , a c c r u e d e x p e n s e s a n d o t h e r
Accounts payable, accrued expenses and other include the following:
At December 31,
Truck and Other:
Accounts payable
Accrued expenses
Salaries and wages
Product support reserves
Other
2009
2008
$ 622.5
226.0
132.9
230.8
277.8
$ 1,490.0
$ 617.9
388.4
168.7
298.6
318.7
$ 1,792.3
n o t e s t o c o n s o lI da t e d fI
n a n cI a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
I . P r o d u c t s u P P o rt l I a b I l I t I e s
51
Product support liabilities include reserves related to product warranties and 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, net of any recoveries. PACCAR periodically
assesses the adequacy of its recorded liabilities and adjusts them 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
2009
$ 450.4
169.0
(245.6)
12.6
$ 386.4
2008
$ 483.3
312.3
(304.6)
(40.6)
$ 450.4
2007
$ 458.3
339.2
(345.1)
30.9
$ 483.3
Warranty and R&M reserves are included in the accompanying consolidated balance sheets as follows:
At December 31,
Truck and Other:
Accounts payable, accrued expenses and other
Other liabilities
Financial Services:
Deferred taxes and other liabilities
2009
2008
$ 230.8
84.3
71.3
$ 386.4
$ 298.6
83.9
67.9
$ 450.4
J . 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
Truck and Other long‑term debt at December 31, 2009, consisted of $150.0 of notes bearing interest at 6.9% which
mature in 2014 and $22.3 of non‑interest bearing notes which mature in 2011. In 2008, long‑term debt consisted of
non‑interest bearing notes of $19.3.
Financial Services borrowings include the following:
At December 31,
Commercial paper
Bank loans:
Short‑term
Medium‑term
Term notes
effective
rate
2.8%
7.6%
4.8%
2009
$ 2,695.6
315.6
3,011.2
2,889.3
$ 5,900.5
2008
$ 3,332.6
50.4
193.2
3,576.2
3,889.3
$ 7,465.5
The term notes of $2,889.3 at December 31, 2009, include an increase in fair value of $19.6 for notes designated to
fair value hedges. The effective rate is the weighted average rate as of December 31, 2009, and includes the effects of
interest rate contracts.
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
52
The annual maturities of the financial services borrowings are as follows:
Beginning January 1, 2010
2010
2011
2012
2013
2014
commercial
paper
$ 2,695.6
bank
loans
$ 95.1
154.7
43.2
22.6
$ 2,695.6
$ 315.6
term
notes
$ 789.8
1,109.9
620.0
350.0
$ 2,869.7
total
$ 3,580.5
1,264.6
663.2
22.6
350.0
$ 5,880.9
Interest paid on borrowings was $267.6, $327.1 and $339.0 in 2009, 2008 and 2007. The weighted average interest
rate on consolidated commercial paper and short-term bank loans was 2.8% and 3.8% at December 31, 2009 and
2008, respectively.
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 Inc, PACCAR Financial Corp. (PFC), PACCAR Financial Europe
and PACCAR Mexico.
PACCAR Inc intends to periodically file shelf registrations under the Securities Act of 1933. The total amount of
medium-term notes outstanding for PACCAR Inc as of December 31, 2009, is $870.0. The current registration
expires in 2011 and does not limit the principal amount of debt securities that may be issued during the period.
In November 2009, the Company’s U.S. finance subsidiary, PFC, filed a shelf registration under the Securities Act of
1933. In December 2009, PFC issued $250.0 of fixed rate medium-term notes under this registration. The total
amount of medium-term notes outstanding for PFC as of December 31, 2009, was $1,148.5. The registration expires
in 2012 and does not limit the principal amount of debt securities that may be issued during the period.
At December 31, 2009, PACCAR’s European finance subsidiary, PACCAR Financial Europe, had €850.0 available for
issuance under a €1,500.0 medium-term note program registered with the London Stock Exchange. The program
was renewed in the third quarter of 2009 and is renewable annually.
In June 2008, PACCAR Mexico registered a 7,000 peso medium-term note program with the Comision Nacional
Bancaria y de Valores. The registration expires in 2012 and at December 31, 2009, 6,100 pesos remained available
for issuance.
The Company has line of credit arrangements of $3,668.2, of which $3,352.6 was unused at the end of December
2009. Included in these arrangements is $3,000.0 of syndicated bank facilities. Of the $3,000.0 bank facilities,
$2,000.0 matures in June 2010 and $1,000.0 matures in June 2012. The Company intends to replace these credit
facilities as they expire with facilities of similar amounts and duration. These credit facilities are maintained
primarily to provide backup liquidity for commercial paper borrowings and maturing medium-term notes. There
were no borrowings under the syndicated bank lines for the year ended December 31, 2009.
n o t e s t o c o n s oL i d a t e d f i n a n c i aL s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
K . L e a s e s
53
The Company leases certain facilities, computer equipment and aircraft under operating leases. Leases expire at
various dates through the year 2017. Annual minimum rent payments under non-cancelable operating leases having
initial or remaining terms in excess of one year at January 1, 2010, are $27.0, $17.5, $9.7, $6.1, $2.7 and $.5
thereafter. Total rental expenses under all leases amounted to $40.6, $43.3 and $41.1 for 2009, 2008 and 2007,
respectively.
L . 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
The Company is involved in various stages of investigations 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 environmen tal 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. Expenditures related to environmental activities in 2009, 2008 and 2007 were $1.3, $3.8, and $1.9, respectively.
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 consolidated
financial position.
At December 31, 2009, PACCAR had standby letters of credit of $20.5, which guarantee various insurance and
financing activities. The Company is committed, under specific circumstances, to purchase equipment at a cost of
$53.4 in 2011. At December 31, 2009, PACCAR’s financial services companies, in the normal course of business, had
outstanding commitments to fund new loan and lease transactions amounting to $105.3. The commitments
generally expire in 90 days. At December 31, 2009, the Company had commitments related to the construction of
its engine facility in Columbus, Mississippi of $11.4 in 2010 and $56.2 thereafter. The Company had other
commitments, primarily to purchase production inventory, amounting to $113.7 in 2010 and $183.1 thereafter.
PACCAR is a defendant in various legal proceedings and, in addition, there are various other contingent liabilities
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.
m . e m p L o y e e b e n e f i t s
Severance Costs: During 2009 and 2008, the Company incurred severance costs as summarized below. These costs
were the result of work force adjustments reflecting low truck demand, primarily in Europe.
Truck and Other:
Cost of sales and revenues
Sales, general and administrative
Financial Services:
Sales, general and administrative
Total Severance Costs
2009
$ 19.2
6.4
$ 25.6
.3
$ 25.9
2008
$ 13.1
3.4
$ 16.5
.8
$ 17.3
At December 31, 2009, the Company had $3.6 accrued for future severance payments expected in the next year,
compared to an accrual of $4.6 at December 31, 2008.
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
54
Employee Benefit Plans: 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 $173.4 to its pension plans in 2009 and $63.9 in 2008. The Company expects to contribute in the range
of $25.0 to $75.0 to its pension plans in 2010 of which $10.3 is estimated to satisfy minimum funding requirements.
Annual benefits expected to be paid beginning January 1, 2010, are $55.6, $58.8, $64.9, $68.7, $75.8 and for the five
years thereafter, a total of $433.6.
Plan assets are invested in global equity and debt securities through professional investment managers with the
objective to achieve targeted risk adjusted returns and maintain liquidity sufficient to fund current benefit payments.
Typically, each defined benefit plan has an investment policy that includes a target for asset mix including maximum
and minimum ranges for allocation percentages by investment category. The actual allocation of assets may vary at
times based upon rebalancing policies and other factors. The Company periodically assesses the target asset mix by
evaluating external sources of information regarding the long-term historical return, volatilities and expected future
returns for each investment category. In addition, the long-term rates of return assumptions for pension accounting
are reviewed annually to ensure they are appropriate. Target asset mix and forecast long-term returns by asset
category are considered in determining the assumed long-term rates of return, although historical returns realized
are given some consideration.
The following information details the allocation of plan assets by investment type. See Note Q for definitions of fair
value levels.
At December 31, 2009
Equity Funds:
U.S. equity funds
Global equity funds
Total equity funds
Fixed Income Funds:
U.S. fixed income funds
Non U.S. fixed income funds
Total fixed income funds
Cash and other
Total plan assets
target
level 1
level 2
total
$ 29.2
50-70%
29.2
30-50%
303.2
13.8
317.0
5.6
$ 351.8
$ 374.2
311.4
685.6
109.3
102.4
211.7
27.2
$ 924.5
$ 403.4
311.4
714.8
412.5
116.2
528.7
32.8
$ 1,276.3
The following additional data relates 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
2009
5.9%
3.9%
7.4%
2008
6.2%
4.3%
7.4%
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
The components of the Change in Projected Benefit Obligation and Change in Plan Assets are as follows:
55
2009
2008
Change in Projected Benefit Obligation:
Benefit obligation at January 1
Service cost
Interest cost
Benefits paid
Actuarial loss
Curtailment gain
Currency translation
Participant contributions
Projected benefit obligation at December 31
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
Amounts Recorded in Balance Sheet:
Other noncurrent assets
Other liabilities
Accumulated other comprehensive loss:
Actuarial loss
Prior service cost
Net initial transition amount
$ 1,196.4
36.2
71.1
(59.6)
46.7
(.1)
31.0
3.1
$ 1,324.8
$ 913.8
173.4
215.9
(59.6)
29.7
3.1
1,276.3
$ (48.5)
2009
$
59.9
(108.4)
291.0
9.5
.5
$ 1,201.0
46.6
73.9
(48.8)
3.0
(3.3)
(80.9)
4.9
$ 1,196.4
$ 1,312.5
63.9
(336.4)
(48.8)
(82.3)
4.9
913.8
$ (282.6)
2008
$
5.5
(288.1)
334.5
10.1
1.0
Of the December 31, 2009, amounts in accumulated other comprehensive loss, $14.8 of unrecognized actuarial loss,
$1.8 of unrecognized prior service cost and $.1 of unrecognized net initial transition amount are expected to be
amortized into net pension expense in 2010.
The accumulated benefit obligation for all pension plans of the Company, except for certain multi-employer and
foreign-insured plans was $1,214.0 at December 31, 2009, and $1,037.6 at December 31, 2008.
Information for all plans with accumulated benefit obligation in excess of plan assets is as follows:
At December 31,
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2009
$ 429.0
418.9
322.9
2008
$ 933.7
791.9
650.9
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
56
Year Ended December 31,
2009
2008
2007
Components of Pension Expense:
Service cost
Interest on projected benefit obligation
Expected return on assets
Amortization of prior service costs
Recognized actuarial loss
Curtailment (gain) loss
Net pension expense
$ 36.2
71.1
(93.1)
1.7
9.5
(.1)
$ 25.3
$ 46.6
73.9
(92.8)
2.4
3.0
.9
$ 34.0
$ 49.7
68.7
(89.7)
2.9
8.4
2.7
$ 42.7
Pension expense for multi-employer and foreign-insured plans was $41.2, $45.8 and $37.9 in 2009, 2008 and 2007.
The Company has certain defined contribution benefit plans whereby it generally matches employee contributions
up to 5% of base wages. In 2009, the Company match was 1% of base wages and 5% in 2008 and 2007. The majority
of participants in these plans are non-union employees located in the United States. Expenses for these plans were
$6.8, $22.1 and $22.6 in 2009, 2008 and 2007.
During the second quarter of 2009, the Company discontinued subsidizing postretirement medical costs for the
majority of its U.S. employees and recognized a curtailment gain of $47.7. The Company also recognized a
curtailment gain of $18.3 in the third quarter for the discontinuation of postretirement healthcare related to the
permanent closure of the Peterbilt facility in Madison, Tennessee.
The following data relates to unfunded postretirement medical and life insurance plans:
Change in Projected Benefit Obligation:
Benefit obligation at January 1
Service cost
Interest cost
Benefits paid
Curtailment gain
Actuarial gain
Projected benefit obligation at December 31
Unfunded Status at December 31
Amounts Recorded in Balance Sheet:
Other liabilities
Accumulated other comprehensive (income) loss:
Actuarial (gain) loss
Prior service cost
Net initial transition amount
Year Ended December 31,
Components of Retiree Expense:
Service cost
Interest cost
Recognized actuarial loss
Recognized prior service cost
Curtailment gain
Recognized net initial obligation
Net retiree (income) expense
2009
2008
$ 80.9
.5
(3.2)
(66.0)
(5.5)
6.7
$ (6.7)
$ 88.0
3.2
4.7
(4.1)
(10.9)
80.9
$ (80.9)
$ (6.7)
$ (80.9)
(.9)
2009
2008
$
.5
(66.0)
$ (65.5)
$ 3.2
4.7
.1
.4
$ 8.4
1.8
.1
.8
2007
$ 4.8
5.2
.9
.1
.4
$ 11.4
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
n . i n c o m e ta x e s
57
The Company’s tax rate is based on income and statutory tax rates in the various jurisdictions in which the Company
operates. Tax law requires items to be included in the Company’s tax returns at different times than the items
reflected in the Company’s financial statements. As a result, the Company’s annual tax rate reflected in its financial
statements is different than that reported in its tax returns. Some of these differences are permanent, such as expenses
that are not deductible in the Company’s tax return, and some differences reverse over time, such as depreciation
expense. These temporary differences create deferred tax assets and liabilities. The Company establishes valuation
allowances for its deferred tax assets if, based on the available evidence, it is more likely than not that some portion
or all of the deferred tax assets will not be realized.
The components of the Company’s income before income taxes include the following:
Year Ended December 31,
Domestic
Foreign
2009
$ 79.1
95.9
$ 175.0
2008
$
96.0
1,368.0
$ 1,464.0
2007
$ 419.1
1,345.2
$ 1,764.3
The components of the Company’s provision for income taxes include the following:
Year Ended December 31,
Current provision (benefit):
Federal
State
Foreign
Deferred provision (benefit):
Federal
State
Foreign
2009
2008
2007
$ (102.4)
(2.5)
8.3
(96.6)
125.4
8.2
26.1
159.7
$ 63.1
$ (24.7)
(7.9)
347.7
315.1
123.7
12.5
(5.2)
131.0
$ 446.1
$ 120.5
11.1
367.1
498.7
41.9
3.6
(7.2)
38.3
$ 537.0
Tax benefits recognized for net operating loss carryforwards were $27.8, $4.7 and $21.2 for the years ended 2009,
2008 and 2007. Tax expense for the year ended December 31, 2009, includes a charge of $11.4 resulting from the
retroactive effects of a Mexican tax law enacted in December 2009.
A reconciliation of the statutory U.S federal tax rate to the effective income tax rate is as follows:
Statutory rate
Effect of:
Mexican tax law change
Qualified dividends to defined contribution plan
Research and development credit
Tax on foreign earnings
Tax contingencies
Other, net
2009
35.0%
6.5
(2.3)
(2.1)
.8
2.2
(4.0)
36.1%
2008
35.0%
2007
35.0 %
(.4)
(.4)
(4.6)
(.3)
1.2
30.5%
(.7)
(.3)
(4.1)
(.1)
.6
30.4%
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
58
U.S. 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, 2009, the amount of undistributed earnings which are
considered to be indefinitely reinvested is $3,117.8.
At December 31, 2009, the Company had net operating loss carryforwards of $365.7, of which $209.0 were in
foreign subsidiaries and $156.7 were in the U.S. The related deferred tax asset was $70.9. The carryforward periods
range from five years to indefinite, subject to certain limitations under applicable laws. At December 31, 2009, the
Company has U.S. tax credit carryforwards of $68.4, most of which expire in 2018 and 2019. The future tax benefits
of net operating loss and credit carryforwards are evaluated on a regular basis, including a review of historical and
projected operating results.
The tax effects of temporary differences representing deferred tax assets and liabilities are as follows:
At December 31,
Assets:
Accrued expenses
Net operating loss carryforwards
Tax credit carryforwards
Allowance for losses on receivables
Postretirement benefit plans
Other
Valuation allowance
Liabilities:
Financial Services leasing depreciation
Depreciation and amortization
Other
Net deferred tax liability
2009
2008
$ 123.2
70.9
68.4
54.4
15.6
98.7
431.2
(4.0)
427.2
(524.1)
(167.9)
(16.9)
(708.9)
$ (281.7)
$ 156.4
54.0
58.0
124.3
152.1
544.8
(5.4)
539.4
(524.1)
(116.4)
(55.1)
(695.6)
$ (156.2)
The balance sheet classification of the Company’s deferred tax assets and liabilities are as follows:
At December 31,
Truck and Other:
Other current assets
Other noncurrent assets
Accounts payable, accrued expenses and other
Other liabilities
Financial Services:
Other assets
Deferred taxes and other liabilities
Net deferred tax liability
2009
2008
$ 76.9
135.8
(.1)
(35.0)
68.0
(527.3)
$ (281.7)
$ 83.5
195.3
(13.3)
(13.1)
56.4
(465.0)
$ (156.2)
Cash paid for income taxes was $67.3, $452.0 and $412.9 in 2009, 2008 and 2007.
n o t eS t o c o nS o l id a t e d f i n a n c i a l S t a t e m e n tS
December 31, 2009, 2008 and 2007 (currencies in millions)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
59
Balance at January 1
Additions based on tax positions and settlements
related to the current year
Additions based on tax positions and settlements
related to the prior year
Reductions for tax positions of prior years
Lapse of statute of limitations
2009
$ 37.1
2008
$ 57.9
1.1
14.9
(6.5)
(2.5)
7.1
2.6
(20.7)
(9.8)
2007
$ 54.3
11.4
8.7
(11.6)
(4.9)
Balance at December 31
$ 44.1
$ 37.1
$ 57.9
The Company had $21.8 and $15.3 of related assets at December 31, 2009 and 2008. All of the unrecognized tax
benefits and related assets would impact the effective tax rate if recognized. Based on the resolution of certain tax
examinations in January 2010, the Company anticipates a decrease of $11.3 to its unrecognized tax benefits during
the first quarter of 2010.
Interest and penalties are classified as income taxes in the accompanying statements of income and were not
significant during any of the three years ended December 31, 2009, 2008 and 2007. Amounts accrued for the
payment of penalties and interest at December 31, 2009 and 2008 were also not significant.
As of December 31, 2009, the United States Internal Revenue Service has completed examinations of the Company’s
tax returns for all years through 2004. The Company’s tax returns for other major jurisdictions remain potentially
subject to examination for the years ranging from 2003 through 2009.
o . S t o c k h o l d e r S ’ e q u i t y
Accumulated Other Comprehensive Income (Loss): Following are the components of accumulated other
comprehensive income:
At December 31,
Unrealized gain on investments
Tax effect
Unrealized loss on derivative contracts
Tax effect
Pension and postretirement:
Unrecognized:
Actuarial loss
Prior service cost
Net initial obligation
Tax effect
Currency translation adjustment
Accumulated other comprehensive income (loss)
$
2009
1.4
(.5)
.9
(73.4)
25.0
(48.4)
(444.7)
(14.7)
(.6)
159.9
(300.1)
383.8
$ 36.2
$
2008
1.0
(.4)
.6
(121.7)
39.4
(82.3)
(525.9)
(16.0)
(2.3)
195.9
(348.3)
160.2
$ (269.8)
2007
$ 3.2
(1.3)
1.9
(18.8)
10.6
(8.2)
(131.6)
(20.0)
(3.5)
53.3
(101.8)
516.2
$ 408.1
Other Capital Stock Changes: PACCAR had 409,000 treasury shares at December 31, 2009, and 2008, and 1,278,900
treasury shares at December 31, 2007.
Stock Dividend: A 50% common stock dividend was paid in October 2007. This resulted in the issuance of
122,775,211 additional shares and 613 fractional shares paid in cash.
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
60
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 to hedge exposures to fluctuations in interest rates and foreign currency
exchange rates. Certain derivative instruments designated as either cash flow hedges or fair value hedges are subject
to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as economic hedges.
The Company’s policies prohibit the use of derivatives for speculation or trading. At inception of each hedge
relationship, the Company documents its risk management objectives, procedures and accounting treatment.
Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company
had no material exposures to default at December 31, 2009.
Interest-Rate Contracts: The Company enters into various interest-rate contracts, including interest-rate swaps and
cross currency interest-rate swaps. Interest-rate swaps involve the exchange of fixed for floating rate or floating for
fixed rate interest payments based on the contractual notional amounts in a single currency. Cross currency
interest-rate swaps involve the exchange of notional amounts and interest payments in different currencies. These
contracts are used to manage exposures to fluctuations in interest rates and foreign currency exchange rates. Net
amounts paid or received are reflected as adjustments to interest expense.
At December 31, 2009, the notional amount of the Company’s interest-rate contracts was $3,541.2. Notional
maturities for all interest-rate contracts are $1,396.0 for 2010, $1,148.9 for 2011, $826.5 for 2012, $29.3 for 2013
and $140.5 for 2014. 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.
Foreign-Exchange Contracts: The Company enters into foreign-exchange contracts to hedge certain anticipated
transactions and assets and liabilities denominated in foreign currencies, particularly the Canadian dollar, the euro,
the British pound, the Australian dollar and the Mexican peso. At December 31, 2009, the notional amount of the
outstanding foreign-exchange contracts was $155.1. Foreign-exchange contracts mature within one year.
The following table presents the balance sheet locations and fair value of derivative financial instruments:
At December 31, 2009
Derivatives designated under hedge accounting:
Interest-rate contracts:
Financial Services:
Other assets
Deferred taxes and other liabilities
Foreign-exchange contracts:
Truck and Other:
Deferred taxes and other current assets
Accounts payable and accrued expenses
Total
Economic hedges:
Interest-rate contracts:
Financial Services:
Other assets
Deferred taxes and other liabilities
Foreign-exchange contracts:
Truck and Other:
Accounts payable, accrued expenses and other
Financial Services:
Other assets
Deferred taxes and other liabilities
Total
assets
liabilities
$ 10.8
.1
$ 10.9
$
.4
.3
$
.7
$ 107.1
.2
$ 107.3
$ 9.0
.2
.1
$ 9.3
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
Substantially all of the Company’s interest-rate contracts and some foreign-exchange contracts have been designated
as cash flow hedges. The Company uses regression analysis to assess and measure effectiveness of interest-rate
contracts. For foreign-exchange contracts, the Company performs quarterly assessments to ensure that critical terms
continue to match. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in
earnings and were immaterial for 2009. Hedge accounting is discontinued prospectively when the Company
determines that a derivative financial instrument has ceased to be a highly effective hedge.
61
Fair Value Hedges: Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings
together with the changes in fair value of the hedged item attributable to the risk being hedged. In 2009, the
Company recognized income of $3.6 on interest rate swaps designated as fair value hedges which was offset by $3.9
of expense on the fixed-rate term notes being hedged. Both the income and expense were recorded in the Financial
Services segment in Interest and other borrowing expenses.
Cash Flow Hedges: Changes in the fair value of derivatives designated as cash flow hedges are recorded in
accumulated other comprehensive income to the extent such hedges are considered effective. 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 interest-rate contracts are recognized as an
adjustment to interest expense. 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.
The following table presents the pre-tax effects of derivative instruments recognized in earnings and Other
Comprehensive Income (OCI):
Year Ended December 31, 2009
(Gain) loss recognized in OCI:
Truck and Other
Financial Services
Total
(Income) expense reclassified from Accumulated OCI into income:
Truck and Other:
Cost of sales and revenues
Interest and other expense (income), net
Financial Services:
Interest and other borrowing expenses
Total
interest-rate
contracts
$ 72.0
$ 72.0
foreign-
exchange
contracts
$ (.6)
.2
$ (.4)
$ (10.0)
(1.7)
.2
$ (11.5)
$ 131.4
$ 131.4
Of the $48.4 accumulated net loss on derivative contracts included in accumulated other comprehensive income as
of December 31, 2009, $39.3, net of taxes, is expected to be reclassified to interest expense or cost of sales in the
following 12 months. 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 risk management strategy.
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
62
Economic Hedges: Changes in the fair value of economic hedges are recorded in earnings in the period in which the
change occurs.
The (income) or expense recognized in earnings related to economic hedges is as follows:
Year Ended December 31, 2009
Truck and Other:
Cost of sales and revenues
Interest and other expense (income), net
Financial Services:
Interest and other borrowing expenses
Total
q . fa i r va l u e m e a s u r e m e n t s
interest-rate
contracts
foreign
exchange
contracts
$ 6.1
4.0
$ 10.1
$ (14.4)
18.3
2.3
$ 6.2
Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The hierarchy of fair value measurements is
described below.
Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded
markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and
regularly available in an active market or exchange traded market, valuation of these instruments does not
require a significant degree of judgment.
Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active, and model-based valuation techniques for which
all significant assumptions are observable in the market.
Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained
from indirect market information that is significant to the overall fair value measurement and which require a
significant degree of management judgment. The Company has no financial instruments requiring Level 3
valuation.
The Company uses the following methods and assumptions to measure fair value for assets and liabilities subject to
recurring fair value measurements.
Marketable Securities: The Company’s marketable debt securities consist of municipal bonds, government
obligations and investment-grade corporate bonds. The fair value of government obligations is based on quoted
prices in active markets. These are categorized as Level 1. The fair value of municipal bonds and corporate bonds
are estimated using recent transactions, market price quotations and pricing models that consider, where applicable,
interest rates and other observable market information. These bonds are categorized as Level 2.
Derivative Financial Instruments: The Company’s derivative contracts consist of interest rate contracts and foreign
currency exchange contracts. These derivative contracts are over the counter and their fair value is determined using
modeling techniques that include market inputs such as interest rates, yield curves and currency exchange rates.
These contracts are categorized as Level 2. A portion of the Company’s fixed-rate term notes has been converted to
variable-rate term notes using fair value hedges for interest-rate risk. Fair value is determined using modeling
techniques that include market inputs for interest rates.
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
PACCAR’s assets and liabilities subject to recurring fair value measurements, are either Level 1 or Level 2 as follows:
63
At December 31, 2009
Assets:
Marketable debt securities
Derivative contracts
Liabilities:
Derivative contracts
At December 31, 2008
Assets:
Marketable debt securities
Derivative contracts
Liabilities:
Derivative contracts
level 1
level 2
$ 6.5
$ 213.0
11.6
116.6
level 1
level 2
$ 6.9
$ 168.5
60.4
173.0
Other nonfinancial assets that are measured at fair value on a nonrecurring basis are as follows:
At December 31,
Used trucks held for sale:
Truck and Other
Financial Services
2009
level 2
$ 28.1
124.7
$ 152.8
total
$ 219.5
11.6
116.6
total
$ 175.4
60.4
173.0
2008
level 2
$ 27.9
96.6
$ 124.5
The carrying amount of used trucks held for sale is written down when appropriate to reflect their fair value. The
fair value of used trucks is determined based on management’s evaluation of factors such as recent sales prices of
comparable units, the condition of the vehicles and the number of similar units to be sold. Used truck write-downs
during 2009 were $34.7. Of the $34.7 recorded in 2009, $18.0 was recorded in cost of sales in the truck segment and
$16.7 was recorded in the financial services segment (credit losses of $4.7 and depreciation and other expense of
$12.0). The amount of used truck write-downs was $23.5 for the year ended December 31, 2008 of which $12.1 was
recorded in cost of sales in the truck segment and $11.4 was recorded in the financial services segment (credit losses
of $9.2 and depreciation and other expense of $2.2).
The Company used the following methods and assumptions to determine the fair value of financial instruments
that are not recognized at fair value as described below.
Cash and Cash Equivalents: Carrying amounts approximate fair value.
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 have been
excluded from the accompanying table.
Debt: The carrying amounts of financial services commercial paper, variable-rate bank loans and variable-rate term
notes approximate fair value. For fixed-rate debt, fair values are estimated using discounted cash flow analysis based
on current rates for comparable debt.
Trade Receivables and Payables: Carrying amounts approximate fair value.
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
64
Fixed-rate loans that are not carried at approximate fair value are as follows:
At December 31,
Assets:
Financial Services fixed-rate loans
Liabilities:
Truck and Other fixed-rate debt
Financial Services fixed-rate debt
r . s t o c k c o m p e n s at i o n p l a n s
2009
2008
carrying
amount
fair
value
carrying
amount
fair
value
$ 2,491.1
$ 2,539.0
$ 3,011.1
$ 3,030.8
172.3
1,645.4
192.4
1,746.7
19.3
752.7
18.6
788.1
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. Non-employee directors and certain officers 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 46.7 million, and as of December 31, 2009, the
maximum number of shares available for future grants was 17.7 million. Options 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 ten years from the grant date and generally vest within three years. Stock option
activity is summarized below:
Outstanding at 12/31/06
Granted
Exercised
Cancelled
Outstanding at 12/31/07
Granted
Exercised
Cancelled
Outstanding at 12/31/08
Granted
Exercised
Cancelled
Outstanding at 12/31/09
*Weighted Average
number
of shares
6,162,000
824,200
(1,168,200)
(109,000)
5,709,000
734,300
(403,000)
(241,000)
5,799,300
1,182,800
(1,181,900)
(232,500)
5,567,700
exercise
price*
$ 19.50
44.56
14.79
34.80
23.79
45.74
16.95
39.50
26.39
30.81
14.99
41.36
$ 29.12
For options exercised, the aggregate difference between the market price and strike price on the date of exercise was
$22.7 in 2009, $10.8 in 2008 and $40.4 in 2007.
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
The following tables summarize information about options outstanding at December 31, 2009:
65
range of exercise prices
Exercisable:
$ 8.25-10.20
12.54-13.96
25.31
32.11-32.23
Not Exercisable:
44.56
45.74
30.81
*Weighted Average
number
of shares
remaining
contractual
life in years
average
exercise
price*
464,600
958,300
437,800
1,340,700
3,201,400
624,400
601,700
1,140,200
2,366,300
5,567,700
1.1
2.6
4.0
5.6
3.8
7.1
8.1
9.1
8.3
5.7
$ 10.16
13.28
25.31
32.17
22.39
44.56
45.74
30.81
38.23
$ 29.12
The fair value of restricted stock awards was determined based on the stock price at the award date. Certain
restricted stock awards granted in 2008 and 2007 contain conditions tied to the Company’s performance over a five
year period. Compensation expense for awards with performance conditions is recorded only when it is probable
that the requirements will be achieved. Compensation expense related to restricted stock awards with only service
conditions is recognized over the requisite service period.
Realized tax benefits for 2009 of $7.1 and 2008 of $3.7 related to the excess of deductible amounts over compensation
costs recognized have been classified as a financing cash flow. Stock based compensation expense was $9.5, $10.2 and
$12.3 in 2009, 2008 and 2007 respectively. As of December 31, 2009, there was $7.7 of unrecognized compensation
cost related to unvested stock options, which is expected to be recognized over a remaining weighted-average
vesting period of 1.7 years. Unrecognized compensation cost at December 31, 2009, related to unvested restricted
stock awards of $1.0 is expected to be recognized over a remaining weighted-average vesting period of 2.2 years.
The estimated fair value of stock options granted during 2009, 2008 and 2007 was $8.47, $8.58 and $10.10 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
2009
2.00%
39%
3.0%
5 years
2008
2.86%
29%
4.0%
5 years
2007
4.80%
30%
4.0%
5 years
PACCAR Inc and Subsidiaries
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
66
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 independent dealers. This segment derives a large proportion 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
nil, $17.2 and $24.9 for 2009, 2008 and 2007, respectively. Included in All Other income before income taxes of
$42.2 in 2009 was $66.0 of curtailment gains and $22.2 of expense related to economic hedges. 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
Property, plant and equipment, net:
United States
The Netherlands
Other
Equipment on operating leases, net:
United States
Germany
United Kingdom
Mexico
Other
Business Segment Data
Net sales and revenues:
Truck
Total
Less intersegment
Net Truck
All Other
Truck and Other
Financial Services
2009
2008
2007
$ 3,594.4
2,828.3
1,663.8
$ 8,086.5
$ 814.6
452.8
490.3
$ 1,757.7
$ 686.6
362.7
349.7
186.7
431.3
$ 2,017.0
$ 4,765.6
7,023.4
3,183.5
$ 14,972.5
$
820.7
467.3
494.8
$ 1,782.8
$
634.9
358.4
290.9
212.4
463.5
$ 1,960.1
$ 5,517.5
6,159.6
3,544.6
$ 15,221.7
$
621.1
480.7
540.8
$ 1,642.6
$
464.4
243.3
342.8
186.6
570.8
$ 1,807.9
2009
2008
2007
$ 7,388.6
(394.6)
6,994.0
82.7
7,076.7
1,009.8
$ 8,086.5
$ 14,142.7
(595.3)
13,547.4
162.2
13,709.6
1,262.9
$ 14,972.5
$ 14,295.7
(441.4)
13,854.3
176.1
14,030.4
1,191.3
$ 15,221.7
n o t e s t o c o n s o l i D a t eD f i n a n c i a l s t a t e m e n t s
December 31, 2009, 2008 and 2007 (currencies in millions)
Business Segment Data
Income before income taxes:
Truck
All Other
Financial Services
Investment income
Depreciation and amortization:
Truck
Financial Services
All Other
Expenditures for long-lived assets:
Truck
Financial Services
All Other
Segment assets:
Truck
Other
Cash and marketable securities
Financial Services
2009
25.9
42.2
68.1
84.6
22.3
175.0
277.2
350.8
10.1
638.1
324.2
646.0
.8
971.0
$
$
$
$
$
$
$ 3,849.1
232.6
2,056.0
6,137.7
8,431.3
$ 14,569.0
2008
2007
67
$ 1,156.5
6.0
1,162.5
216.9
84.6
$ 1,464.0
$
$
309.0
329.4
11.0
649.4
$
671.6
859.4
19.0
$ 1,550.0
$ 3,939.3
205.5
2,074.6
6,219.4
10,030.4
$ 16,249.8
$ 1,352.8
32.0
1,384.8
284.1
95.4
$ 1,764.3
$
$
261.4
252.7
12.3
526.4
$
562.3
671.7
33.4
$ 1,267.4
$ 3,846.7
238.2
2,515.0
6,599.9
10,710.3
$ 17,310.2
PACCAR Inc and Subsidiaries
M a n a g eM 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
68
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, 2009, 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, 2009.
Ernst & Young LLP, the Independent Registered Public Accounting Firm that audited the financial statements
included in this Annual Report, has issued an attestation report on the Company’s internal control over financial
reporting. The attestation report is included on page 69.
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 rM
o n t h e c oM 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 eM e n t s
The Board of Directors and Stockholders of PACCAR Inc
We have audited the accompanying consolidated balance sheets of PACCAR Inc as of December 31, 2009 and 2008,
and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2009. 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 consolidated
financial position of PACCAR Inc at December 31, 2009 and 2008, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), PACCAR Inc’s internal control over financial reporting as of December 31, 2009, 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 26, 2010 expressed an unqualified opinion thereon.
Seattle, Washington
February 26, 2010
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
The Board of Directors and Stockholders of PACCAR Inc
69
We have audited PACCAR Inc’s internal control over financial reporting as of December 31, 2009, 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 assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on 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, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, 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
misstatements. 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, PACCAR Inc maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, 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, 2009 and 2008 and the related
consolidated statements of income, comprehensive income, stockholders’ equity, cash flows for each of the three
years in the period ended December 31, 2009 and our report dated February 26, 2010 expressed an unqualified
opinion thereon.
Seattle, Washington
February 26, 2010
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
70
2009
2008
2007
2006
2005
Truck and Other Net Sales
and Revenues
Financial Services Revenues
$ 7,076.7
1,009.8
$ 13,709.6
1,262.9
$ 14,030.4
1,191.3
$ 15,503.3
$ 13,298.4
950.8
759.0
Total Revenues
$ 8,086.5
$ 14,972.5
$ 15,221.7
$16,454.1
$ 14,057.4
(millions except per share data)
Net Income
Net Income Per Share:
Basic
Diluted
Cash Dividends Declared Per Share
Total Assets:
Truck and Other
Financial Services
Truck and Other Long-Term Debt
Financial Services Debt
Stockholders’ Equity
Ratio of Earnings to Fixed Charges
$
111.9
$ 1,017.9
$ 1,227.3
$ 1,496.0
$ 1,133.2
.31
.31
.54
6,137.7
8,431.3
172.3
5,900.5
5,103.7
1.57x
2.79
2.78
.82
6,219.4
10,030.4
19.3
7,465.5
4,846.7
4.58x
3.31
3.29
1.65
6,599.9
10,710.3
23.6
7,852.2
5,013.1
5.36x
3.99
3.97
1.84
6,296.2
9,811.2
20.2
7,259.8
4,456.2
7.78x
2.93
2.92
1.28
5,359.5
8,355.9
20.2
6,226.1
3,901.1
9.62x
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 The NASDAQ Stock Market LLC, and cash dividends declared.
There were 2,273 record holders of the common stock at December 31, 2009.
2009
2008
stock price
stock price
quarter
First
Second
Third
Fourth
Year-End Extra
dividends
declared
$ .18
.18
.09
.09
high
$32.04
35.83
39.74
39.68
low
$20.89
26.14
29.13
35.31
dividends
declared
$ .18
.18
.18
.18
.10
high
$55.54
53.81
45.95
37.99
low
$41.14
41.36
36.22
21.96
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 )
first
second
third
quarter
(millions except per share data)
fourth
71
2009
Truck and Other:
Net sales and revenues
Cost of sales and revenues
Research and development
Financial Services:
Revenues
Interest and other borrowing expenses
Depreciation and other
Net Income
Net Income Per Share (1):
Basic
Diluted
2008
Truck and Other:
Net sales and revenues
Cost of sales and revenues
Research and development
Financial Services:
Revenues
Interest and other borrowing expenses
Depreciation and other
Net Income
Net Income Per Share (1):
Basic
Diluted
$1,730.4
$1,602.3
$1,758.5
$1,985.5
1,561.1
1,492.8
1,646.5
1,783.0
52.3
52.8
43.4
50.7
255.8
91.3
102.9
26.3
$ .07
.07
246.6
73.0
107.6
26.5
$ .07
.07
252.5
66.7
120.0
13.0
$ .04
.04
254.9
60.8
112.0
46.1
$ .13
.13
$3,621.0
$3,782.0
$3,682.1
$2,624.5
3,079.3
3,202.2
3,113.5
2,341.9
82.9
90.7
88.1
80.1
317.4
95.7
107.9
292.3
$ .80
.79
330.5
104.9
112.5
313.5
$ .86
.86
322.8
102.1
113.1
299.0
$ .82
.82
292.2
91.4
104.3
113.1
$ .31
.31
(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.
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)
72
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
Fixed-rate long-term debt
F i n a n c i a l s e rv i c e s :
Assets
Fixed-rate loans
Liabilities
Fixed-rate term debt
Interest-rate swaps related to financial services debt
Total
2009
2008
$ (2.4)
$ (1.4)
6.8
.5
(40.1)
(50.0)
39.7
30.8
$ 34.8
14.8
51.8
$ 15.7
Currency Risks – The Company enters into foreign currency exchange 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). Based on the Company’s sensitivity
analysis, 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 $24.0 related to contracts outstanding at December 31, 2009,
compared to a loss of $103.0 at December 31, 2008. These amounts would be largely offset by changes in the values
of the underlying hedged exposures.
o f f i c e r s a n d d i r e c t o r s
73
o f f i c e r s
Mark C. Pigott
Chairman and
Chief Executive Officer
Thomas E. Plimpton
Vice Chairman
James G. Cardillo
President
Daniel D. Sobic
Executive Vice President
Ronald E. Armstrong
Senior Vice President
Robert J. Christensen
Senior Vice President
d i r e c t o r s
Mark C. Pigott
Chairman and
Chief Executive Officer
PACCAR Inc (3)
Alison J. Carnwath
Chairman
MF Global Ltd. (2, 4)
John M. Fluke, Jr.
Chairman
Fluke Capital Management, L.P. (1, 3, 4)
Kirk S. Hachigian
Chairman and
Chief Executive Officer
Cooper Industries, plc (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
David C. Anderson
Vice President and
General Counsel
Michael T. Barkley
Vice President and Controller
T. Kyle Quinn
Vice President and
Chief Information Officer
Richard E. Bangert, II
Vice President
Robert A. Bengston
Vice President
Richard T. Gorman
Vice President
Timothy M. Henebry
Vice President
William D. Jackson
Vice President
William R. Kozek
Vice President
Jack K. LeVier
Vice President
Thomas A. Lundahl
Vice President
Helene N. Mawyer
Vice President
George E. West, Jr.
Vice President
Robin E. Easton
Treasurer
Janice M. D’Amato
Secretary
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 (1)
John M. Pigott
Partner
Beta Business Ventures LLC
Thomas E. Plimpton
Vice Chairman
PACCAR Inc
Gregory M. E. Spierkel
Chief Executive Officer
Ingram Micro Inc. (2)
Warren R. Staley
Retired Chairman and
Chief Executive Officer
Cargill Inc. (4)
Charles R. Williamson
Chairman
Weyerhaeuser Company and
Chairman
Talisman Energy Inc. (2)
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
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:
Bayswater, Victoria
t r u c k p a r t s
a n d s u p p l i e s
PACCAR Engine Company
1000 PACCAR Drive
Columbus, Mississippi 39701
PACCAR Parts
Division Headquarters:
750 Houser Way N.
Renton, Washington 98055
Dynacraft
Division Headquarters:
650 Milwaukee Avenue N.
Algona, Washington 98001
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
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, People’s Republic
of China
Jakarta, Indonesia
Manama, Bahrain
Miami, Florida
Moscow, Russia
74
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
Factory:
Denton, Texas
PACCAR of Canada Ltd.
Markborough Place I
6711 Mississauga Road N.
Mississauga, Ontario
L5N 4J8 Canada
Factory:
Ste-Thérèse, Quebec
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
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 5-7 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 the world 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
Financial Highlights
Message to Shareholders
6
PACCAR Operations
Financial Charts
3 Stockholder Return Performance Graph
68 Management’s Report on Internal Control
Over Financial Reporting
68 Report of Independent Registered Public
Accounting Firm on the Company’s
Consolidated Financial Statements
4 Management’s Discussion and Analysis
69 Report of Independent Registered Public
39 Consolidated Statements of Income
40 Consolidated Balance Sheets
Accounting Firm on the Company’s
Internal Controls
42 Consolidated Statements of Cash Flows
70 Selected Financial Data
43 Consolidated Statements
of Stockholders’ Equity
44 Consolidated Statements
of Comprehensive Income
70 Common Stock Market Prices and Dividends
71 Quarterly Results
72 Market Risks and Derivative Instruments
73 Officers and Directors
44 Notes to Consolidated Financial Statements
74 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
Web site
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 2009 Annual
Report and the 2010 Proxy
Statement are available
on PACCAR’s Web site at
www.paccar.com/
2010annualmeeting/
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.
AeroCab, AERODYNE,
Air Leaf, Braden, Carco,
ComfortClass, Connect,
DAF, Dynacraft, Gearmatic,
Kenmex, Kenworth,
Kenworth Clean Power,
Leyland, Magnum, MAX-
card, PACCAR, PACCAR
MX, PACCAR PX, PacLease,
PacTrac, Peterbilt, PX-6,
PX-8, The World's Best,
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 20, 2010, 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.
2 0 0 9 a n n u a l r e p o r t