2 0 1 0 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, 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.
C O N T E N T S
Financial Highlights
Message to Shareholders
6 PACCAR Operations
Financial Charts
3 Stockholder Return Performance Graph
76 Management’s Report on Internal Control
Over Financial Reporting
76 Report of Independent Registered Public
Accounting Firm on the Company’s
Consolidated Financial Statements
4 Management’s Discussion and Analysis
77 Report of Independent Registered Public
43 Consolidated Statements of Income
44 Consolidated Balance Sheets
Accounting Firm on the Company’s
Internal Control Over Financial Reporting
46 Consolidated Statements of Cash Flows
78 Selected Financial Data
47 Consolidated Statements
of Stockholders’ Equity
48 Consolidated Statements
of Comprehensive Income
78 Common Stock Market Prices and Dividends
79 Quarterly Results
80 Market Risks and Derivative Instruments
81 Officers and Directors
48 Notes to Consolidated Financial Statements
82 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 2010 Annual
Report and the 2011 Proxy
Statement are available
on PACCAR’s Web site at
www.paccar.com/
2011annualmeeting/
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.
DAF, Kenmex, Kenworth,
Leyland, NavPlus, PACCAR,
PACCAR MX, PACCAR PR,
PACCAR PX, PacLease,
Peterbilt, SmartNav,
SmartSound and TRP 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, 2011, 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.
P A C C A R L e A d e R s h i P
PACCAR is a global technology company with a 105-year tradition
of excellence. The company has achieved a remarkable 72 consecutive
years of net income and has paid a dividend every year since 1941.
PACCAR’s excellent balance sheet, strong cash flow and A+/A1
credit ratings enable capital investments that enhance operating
efficiency and the development of innovative new products. PACCAR
has delivered an annualized return to shareholders of 23% for the
last decade.
G L o b A L G R o w t h
PACCAR sells its trucks in over
100 countries. The company is
expanding its investment in the
emerging BRIC markets. PACCAR
offices in Beijing and Shanghai
expanded the company’s business in
China, and the company plans to
construct a DAF manufacturing
facility in Brazil.
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 an 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).
P R o d u C t Q u A L i t y &
t e C h N o L o G y
Kenworth, Peterbilt and DAF are the
established quality leaders in their
markets. PACCAR has earned 31 J.D.
Power awards and the International
Truck of the Year three times.
PACCAR was awarded the J.D. Power
Founder’s Award for 25 years of
corporate quality excellence.
Information Week recognized PACCAR ITD as a leading information
technology innovator.
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
$ 9,325.1 $ 7,076.7
2010
2009
(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
967.8
10,292.9
457.6
6,355.9
7,878.2
173.5
5,102.5
5,357.8
1,009.8
8,086.5
111.9
6,137.7
8,431.3
172.3
5,900.5
5,103.7
$ 1.25
$
0.31
1.25
0.69
0.31
0.54
R E V E n U E s
billions of dollars
17.5
14.0
10.5
7.0
3.5
0.0
1.5
1.2
0.9
0.6
0.3
0.0
n E t i n c o m E
billions of dollars
s t o c k h o l d E R s ’ E q U i t y
billions of dollars
10%
5.5
40%
8%
4.4
6%
3.3
4%
2.2
2%
1.1
0%
0.0
32%
24%
16%
8%
0%
01
02
03 04
05
06
07
08 09
10
01
02
03
04
05
06
07
08
09
10
01
02
03
04
05
06
07
08
09
10
Return on Revenues (percent)
Return on Equity (percent)
t o o u r s h a r e h o l d e r s
PaCCar had a good year in 2010, as our primary markets began recovering
2
from the challenges of the recession. the company has earned an impressive 72
consecutive years of net income. this remarkable achievement was due to our
17,700 employees delivering 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 $407 million of capital investments and research and
development in 2010 enhanced its manufacturing capability and new product
introductions, such as PaCCar’s MX engine for the North america market. PaCCar
delivered 78,800 trucks to its customers and sold $2.2 billion of aftermarket parts.
PaCCar has an excellent s&P credit rating of a+ as a result of consistent
profitability, a strong balance sheet and good cash flow. looking ahead to 2011, a
rebound is expected in the european and North american truck markets due to
positive economic indicators.
Net income of $457.6 million on revenues of $10.3 billion was a significant
accomplishment in the uneven global economy. PaCCar declared cash dividends
of $.69 per share, including a special dividend of $.30 per share. regular quarterly
cash dividends have increased over 100% in the last 10 years. shareholder equity
grew to a record $5.4 billion.
Industry Class 8 truck sales in North America, including
sales and margins. After-tax return on beginning
Mexico, rose to 141,000 vehicles compared to 119,000
shareholder equity (ROE) was 9.0% in 2010, compared
the prior year. The European heavy truck market in
to 2.3% in 2009. The company’s 2010 after-tax return
2010 improved to 183,000 vehicles, compared to 168,000
on revenues was 4.4%. PACCAR’s long-term financial
in 2009. Fleets are generating higher profits due to
performance, even in a turbulent, cyclical market, has
increased freight, which is translating into higher
enabled the company to distribute over $3.6 billion in
industry truck orders.
dividends during the last 10 years. PACCAR’s average
PACCAR’s financial performance in 2010 resulted
annual total shareholder return over the last decade was
from proactive cost reductions, coupled with higher
23.0%, versus 1.4% for the Standard & Poor’s 500 Index.
The three-year recession provided a timely reminder of
inception. Six Sigma, in conjunction with Supplier
the merits and strength of PACCAR’s conservative
Quality, has been vital to improving logistics performance
business approach, quality products and customer
and component quality from company suppliers.
service focus.
INFORMATION TECHNOLOGY — PACCAR’s
3
INVESTING FOR THE FUTURE — PACCAR’s excellent
Information Technology Division (ITD) and its over
long-term profits, strong balance sheet, and intense
650 innovative employees are an important competitive
focus on quality, technology and productivity have
asset for the company. PACCAR’s use of information
allowed the company to invest $3.9 billion since 2001 in
technology is centered on developing and integrating
capital projects, new products and processes. Productivity
software and hardware that enhance the quality and
and efficiency improvement of 5-7% annually and
efficiency of all products and operations throughout the
capacity improvements of over 40% in the last five years
company. In 2010, ITD provided innovative engine
have enhanced the capability of the company’s
manufacturing software for the Mississippi factory, as
manufacturing and parts facilities. PACCAR is
well as infrastructure capacity upgrades. Over 23,000
recognized as one of the leading applied technology
dealers, customers, suppliers and employees have
companies in the industry, and innovation continues to
experienced the company’s Technology Centers
be a cornerstone of its success. PACCAR has integrated
highlighting surface computing, tablet PCs, an
new technology to profitably support its business, as
electronic leasing and finance office, and an electronic
well as its dealers, customers and suppliers.
service analyst.
Capital investments were $168 million in 2010. An
TRUCKS — U.S. and Canadian Class 8 industry retail
important transformational multi-year investment was
sales in 2010 were 126,000 units, and the Mexican
the opening of PACCAR’s engine plant in Mississippi.
market totaled 15,000 units. European Union (EU)
Over 10,000 PACCAR engines have been ordered for
industry heavy truck sales were 183,000 units.
Kenworth and Peterbilt trucks – the first time PACCAR
PACCAR’s Class 8 retail sales in the U.S. and Canada
has installed its own engines in North America. Other
achieved a market share of 24.1% in 2010. DAF
major capital projects during the year included the
achieved a record 15.2% share in the 15+ tonne truck
launch of new Peterbilt, Kenworth, and DAF vehicles
market in Europe. Industry Class 6 and 7 truck retail
and the opening of a new parts distribution center
sales in the U.S. and Canada were 41,000 units, a slight
(PDC) in Santiago, Chile.
increase from the previous year. In the EU, the 6- to
PACCAR continues to examine manufacturing, IT
15-tonne market was 51,000 units, the same as 2009.
and engineering opportunities in Asia, with the primary
PACCAR’s North American and European market shares
focus being China and India. PACCAR is increasing its
in the medium duty truck segment were very good, as
component purchases and powertrain sales in China as a
the company delivered 14,500 medium duty trucks and
result of its Shanghai and Beijing offices. The PACCAR
tractors in 2010.
MX engine has been honored as best-in-class at the
A tremendous team effort by the company’s
Shanghai Bus Show four years in a row.
purchasing, materials, engineering and production
SIX SIGMA — Six Sigma is integrated into all business
employees contributed to improved product quality and
activities at PACCAR and has been adopted at 230 of
manufacturing efficiency during the year. The teams
the company’s suppliers and many of the company’s
performed admirably and exceeded customer
dealers and customers. Its statistical methodology is
expectations by delivering the highest-quality products
critical in the development of new product designs,
and services in our history. The Peterbilt Nashville
customer services and manufacturing processes. Since
plant was sold to align production capacity with
inception, Six Sigma has delivered over $1.5 billion in
market demand.
cumulative savings in all facets of the company. Over
PACCAR’s product quality continued to be
11,000 employees have been trained in Six Sigma and
recognized as the industry leader in 2010. Kenworth
14,500 projects have been implemented since its
earned the J.D. Power Medium Duty Customer
Satisfaction Award for dealer service. Peterbilt’s Model
be over seven years. The large vehicle parc creates
384 earned the American Truck Dealer Association’s
excellent demand for parts and service and moderates
heavy duty “Commercial Truck of the Year” award and
the cyclicality of truck sales.
4
the DAF CF was the 2010 “Fleet Truck of the Year” in
PACCAR Parts expanded its facilities to enhance
the U.K. for the tenth time.
logistics performance to dealers and customers.
Over 59% of PACCAR’s revenue was generated
PACCAR Parts continues to lead the industry with
outside the United States, and the company realized
technology that offers competitive advantages at
excellent synergies globally in product development, sales
PACCAR dealerships. PACCAR Parts enhanced its TRP
and finance activities, purchasing and manufacturing.
program, an all-brands merchandise initiative targeted
DAF continued as one of the leaders in the
at competitors’ vehicles.
European tractor market and expanded its product
FINANCIAL SERVICES — PACCAR Financial Services’
offerings to grow share in the vocational truck
(PFS) conservative business approach, coupled with
segment. DAF’s engineering team provided superb
PACCAR’s superb S&P credit rating of A+ and the
leadership in the development of the PACCAR MX
strength of the dealer network, enabled PFS to earn
engine for North America.
good results in 2010 as worldwide financial markets
Leyland Trucks is the United Kingdom’s leading truck
steadily improved. The PACCAR Financial Services
manufacturer. Leyland expanded its innovative body-
group of companies has operations covering three
building program by introducing new curtain-sided
continents and 20 countries. The global breadth of PFS
trailers and an additional range of tailgate options,
and its rigorous credit application process support a
selling over 530 van bodies during the year.
portfolio of over 133,000 trucks and trailers, with total
PACCAR Mexico (KENMEX) had a good year as the
assets of $7.9 billion that earned a pretax profit of
Mexican economy improved and truck fleets expanded.
$153.5 million. PACCAR Financial Corp. (PFC) is the
Its manufacturing facility continues to deliver
preferred funding source in North America for Peterbilt
outstanding product quality.
and Kenworth trucks, financing 25% of dealer Class 8
PACCAR Australia achieved strong results in 2010, as
sales in the U.S. and Canada in 2010. PFC began
the country benefited from increased commodity prices.
construction of a third used truck center in Salt Lake
The introduction of new Kenworth models and expansion
City. Interactive webcasts and target marketing enabled
of the DAF product range in Australia combined for a
PFS to sell over 11,300 used trucks worldwide. PACCAR
record 25.7% heavy duty market share in 2010.
issued $680 million in medium-term notes at attractive
PACCAR International (PACCINT) exports trucks
rates during the year.
and parts to over 100 countries and achieved increased
PACCAR Financial Europe (PFE) completed its
sales buoyed by global natural resource exploration.
ninth year of operation, focusing on the financing of
PACCINT expanded its product range in South America
new and used DAF trucks. PFE provides wholesale and
by launching the full range of DAF vehicles for
retail financing for DAF dealers and customers in 16
customers west of the Andes.
European countries and financed 19% of DAF’s vehicle
AFTERMARKET CUSTOMER SERVICES — PACCAR
sales in 2010.
Parts had an excellent year in 2010, as dealers and
PACCAR Leasing (PacLease) had a good year and
customers embraced vehicle maintenance programs and
placed 4,000 new PACCAR vehicles in service in 2010.
integrated customer logistics and billing systems.
The North American lease market was stronger and
With sales of $2.2 billion, PACCAR Parts is the primary
PacLease Europe grew its lease and rental fleet as the
source for aftermarket parts for PACCAR products, and
German truck market strengthened. The PacLease fleet
supplies parts for other truck brands to PACCAR’s
is over 31,000 vehicles. Twenty-four percent of North
dealers around the world. Over six million heavy duty
American Class 6-8 customers select full-service leasing
trucks operate in North America and Europe, and the
to satisfy their equipment needs. PacLease represents
average age of North American vehicles is estimated to
one of the largest full-service truck rental and leasing
operations in North America and continued to increase
PACCAR recognizes two significant retirements.
its market presence in 2010, growing its global network
President Jim Cardillo retired upon completion of 20
to 470 locations.
years of exemplary service, in which he was instrumental
ENVIRONMENTAL LEADERSHIP — PACCAR is a global
in the establishment of the PACCAR engine program in
5
environmental leader. A significant achievement was
North America and the integration of DAF into
earning ISO 14001 environmental certification at all
PACCAR. Gary Reed is retiring after 13 years on the
PACCAR manufacturing facilities in Europe and North
Board of Directors. Gary’s strong analytical insight and
America. DAF introduced its medium duty diesel-
dedication to uncompromising strategic evaluation
electric LF hybrid vehicles, which can achieve up to a
contributed to PACCAR’s success. We thank Jim and
30% fuel economy improvement. The company’s
Gary for their dedication and wish both happy and
manufacturing facilities enhanced their “Zero Waste
healthy retirements.
to Landfill” programs during the year. PACCAR
PACCAR and its employees are proud of the
employees are environmentally conscious and utilize
remarkable achievement of 72 consecutive years of net
van pools, car pools and bus passes for 30% of their
profit. PACCAR embraces a long-term view of its
business commuting.
businesses, and our shareholders have benefited from
A LOOK AHEAD — PACCAR’s 17,700 employees
that approach. The embedded principles of integrity,
enabled the company to distinguish itself as a global
quality and consistency of purpose continue to define
leader in the technology, capital goods, financial services
the course in PACCAR’s operations. The proven
and aftermarket parts businesses. Superior product
business strategy — deliver technologically advanced
quality, technological innovation and balanced global
premium products and an extensive array of tailored
diversification are three key operating characteristics
aftermarket customer services — enables PACCAR to
that define PACCAR’s business philosophy.
pragmatically approach growth opportunities with a
The improving economy will have a positive impact
long-term focus. As our major markets emerge from a
on the North American and European truck markets in
difficult recession, PACCAR is enhancing its stellar
2011. Current estimates for Class 8 trucks in North
reputation as a leading technology company in the
America indicate that yearly industry sales could range
capital goods and financial services marketplace.
from 200,000-220,000 units. Sales for Class 6-7 trucks
are expected to be between 45,000-55,000 vehicles.
The European 15+ tonne market in 2011 is estimated to
be in the range of 220,000-240,000 trucks, while
demand for medium trucks are projected to range from
M A R K c . P I g O T T
55,000-65,000 units.
PACCAR had a good year in 2010, with most
operating divisions achieving improved results and some
achieving record revenues and profits. The outlook for
2011 is brighter as the economy is forecast to grow over
3% in North America and 1-2% in Europe. There are
opportunities for PACCAR to grow its business in its
current markets and in the emerging BRIC markets.
We are examining strategic plans that focus on
manufacturing, distribution and aftermarket services.
PACCAR is well positioned and committed to
Chairman and Chief Executive Officer
Februar y 21, 2011
PAccAR Executive committee
maintaining the profitable results its shareholders
Seated Left to Right: Tom Plimpton, Mark Pigott, Ron Armstrong,
expect, by delivering industry-leading products and
services globally.
Dan Sobic; Standing Left to Right: Michael Barkley, Sam Means,
Harrie Schippers, Bob Christensen, Dave Anderson, Bob Bengston,
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 2010, increasing its market share in the 15+ tonne segment to a record
7
15.2% and reinforcing its industry quality leadership.
In the highly competitive European truck market, DAF earned several awards in 2010 that reinforce its
industry-leading reputation for product quality, innovation and customer satisfaction. In Germany, the DAF LF,
a distribution truck, was voted “Best 7.5 Tonne Imported Truck” by readers of ETM-Verlag, a leading publisher
of transport magazines. The CF85 was awarded “Fleet Truck of the Year” for an unprecedented third consecutive
year at the Motor Transport Awards in London — the tenth time that the DAF CF has won this accolade.
DAF earned honors as best engine producer of the year at Bus World Asia in Shanghai as a result of the
reliability, durability and performance of the PACCAR PR 9.2-liter and MX 12.9-liter engines. This is the fourth
consecutive year PACCAR engines have earned this award at Bus World Asia.
In 2010, DAF Trucks was the first European truck manufacturer to offer all of its engine ratings with the ultra
clean Enhanced Environmental Vehicle (EEV) option. EEVs
feature particulate emissions that are 50% lower than the
stringent Euro 5 emissions standard. DAF reinforced its
leading position as a provider of environmentally friendly
transport solutions by introducing the LF Hybrid, a 12-tonne
distribution truck with a parallel hybrid system. The use of
hybrid technology reduces fuel consumption and CO2
emissions by up to 30%, depending on the application. DAF is one of the first European truck manufacturers to
begin production of a hybrid truck.
The “DAF Experience 2010” enabled thousands of visitors to tour DAF’s modern production facilities and
state-of-the-art engine test center. Visitors experienced the PACCAR Technology Center, 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) further enhanced DAF’s manufacturing efficiency and product quality
and supported a 50% increase in production output compared to 2009.
In 2010, DAF further expanded its extensive distribution network with over 50 new dealer facilities opened.
New locations were added in Western and Central Europe, Russia and South Africa. DAF began planning for the
introduction of DAF vehicles in South America, including the construction of a manufacturing facility in Brazil.
The DAF engine design and manufacturing teams were instrumental in opening the PACCAR engine facility
in Columbus, Mississippi, and the successful launch of the PACCAR MX engine in North America.
The DAF CF captured “Fleet Truck of the Year” honors for the tenth time – and an
unequalled third year in a row. The CF combines contemporary styling with best-in-class
standards in ergonomics, productivity, operating efficiency and comfort.
P e t e r b i l t m o t o r s c o m P a n y
Peterbilt’s model 384 earned the 2010 commercial truck of the year” award from
“
the american truck Dealers association for its ease of operation and exceptional
9
fuel efficiency.
Peterbilt Denton celebrated its 30th anniversary in 2010. This highly efficient manufacturing facility
incorporates an innovative robotic chassis paint facility and the state-of-the-art PACCAR Production System (PPS).
The Denton facility has produced over 330,000 Peterbilt trucks since it opened in 1980.
In 2010 Peterbilt introduced many new products delivering low cost of ownership, exceptional fuel efficiency
and environmental responsibility. The Model 384 earned the Environmental Protection Agency’s (EPA)
environmental certification, SmartWay®. Peterbilt unveiled the Model 587, featuring a contoured hood that
improves fuel economy up to 2%, advanced technology headlamps that increase nighttime visibility by
35%, and a new chassis design that improves maneuverability by 12%.
The proprietary, fuel efficient PACCAR MX 12.9 liter engine
was integrated into all Peterbilt heavy duty vehicles, providing
customers longer service intervals, increased uptime and lower
operating costs. Peterbilt launched the PACCAR MX engine
with a North American Tour at 100 dealer locations with over
17,000 customers experiencing this innovative engine.
Peterbilt expanded its range of natural gas vehicles by offering
liquid and compressed natural gas configurations in its Models 365 and 384. Peterbilt’s natural gas powered
vehicles reduce greenhouse gas emissions by 20%.
Peterbilt launched the new Model 382 for short haul distribution and regional delivery markets. The
Model 382 is a lightweight vehicle with aerodynamic styling offering excellent fuel efficiency and outstanding
productivity for customers.
Peterbilt’s medium duty Models 337 and 348 now offer all-wheel drive (4x4) for utility and municipal
customers. These vehicles feature a state-of-the-art multiplex electrical system, easy-to-read LED backlit gauges
and outstanding side-to-side visibility. All Peterbilt medium duty vehicles are powered exclusively with the fuel-
efficient PACCAR PX engine.
Peterbilt developed SmartNav, an in-dash computer with the industry’s first true truck navigation system,
Internet access, vehicle diagnostics and audio in a single touch screen that enhances driver productivity.
Peterbilt developed innovative cab comfort features including SmartSound, a noise dampening system that
reduces noise levels by over 50% — making Peterbilt cab interiors some of the most quiet on the road today.
Peterbilt also launched an extended cab option for vocational vehicles that increases cab interior space by
10 inches providing added storage and more room for the driver.
The Peterbilt dealer network expanded to a record 254 locations throughout the U.S. and Canada.
The Peterbilt Model 587 — SmartWay® certified by the EPA — sets new standards in
operating efficiency, driver comfort and safety for on-highway trucks. The Model 587 is
innovatively designed for long-haul operators who demand uncompromising quality and
maximum aerodynamic performance.
k e n w o r t h t r u c k c o m p a n y
kenworth earned the J.D. power and associates 2010 medium Duty truck customer
Satisfaction StudySm award in the medium Duty Dealer Service Segment.*
11
Kenworth has captured an industry-leading 20 J.D. Power customer satisfaction awards since 2003.
Kenworth unveiled the T700 — the most aerodynamic heavy duty truck in its history. The T700 reduces
aerodynamic drag by 3.5% versus the closest competitor, which results in a fuel consumption saving of over
$1,000 per vehicle per year. Features of the T700 include a sleeper with an 8-foot cathedral ceiling and over 60
cubic feet of storage space. The T700 has earned the EPA SmartWay® certification.
The new PACCAR MX engine is standard in Kenworth models and the perfect complement to Kenworth’s
leading edge aerodynamics. The PACCAR MX has a horsepower range of 380 to
485 and delivers peak torque output of up to 1,750 lb-ft., enhancing performance,
reliability, durability and operating efficiency. The new PACCAR MX engine has
grown to 25% of Kenworth sales since its mid 2010 introduction.
Kenworth expanded its industry-leading product range with the T440 natural
gas truck for local and regional haul and vocational applications. The new T440
operates on compressed natural gas or liquefied natural gas, which reduce nitrogen
oxide by approximately 40% and greenhouse gas emissions by up to 20%.
The versatility of the Kenworth medium duty range expanded with the addition
of a factory-installed 16,000 lb. rated front drive axle, an important option for utility
service, construction vehicles and boom trucks. Kenworth launched its dashboard
mounted Driver Information Center for increased performance, serviceability, and
fuel efficiency awareness.
Kenworth’s proprietary NavPlus enhances the driving experience for Class 5–8
commercial vehicles. NavPlus is the truck industry’s first in-dash computer system designed for truck
navigation, real time vehicle data, hands-free phone, audio and camera controls, roadside assistance and optional
Internet access.
Kenworth’s “Right Choice” events enabled thousands of visitors to tour Kenworth’s state of the art production
plants in Chillicothe, Ohio, and Renton, Washington, and the PACCAR plant in Ste. Thérèse, Québec. Visitors
experienced interactive product displays featuring the entire line of new Kenworth models, innovative technology
and the PACCAR engine range. The environmental footprint at the three plants was reduced due to an 80%
reduction in dunnage through use of recycling bins, returnable shipping containers and reduced packaging.
The Kenworth dealer network operates 300 locations in the U.S. and Canada.
The new T700 features the lowest aerodynamic drag of any Kenworth, resulting in a fuel
efficiency advantage that can save on-highway customers over $1,000 per vehicle annually
when compared to its closest competitor. The driving performance and cab ergonomics are
unequaled in the industry for productivity, luxury, storage and amenities.
* Kenworth received the highest numerical score for medium-duty truck dealer service in the proprietary J.D. Power and Associates 2010 Medium Duty Truck Customer Satisfaction
StudySM. Study based on responses from 1,258 respondents measuring 8 manufacturers. Survey was of primary maintainers and owner operators and measures overall service quality
of new medium-duty (Class 5, 6, and 7) trucks. Proprietary study results are based on experiences and perceptions of consumers surveyed in June-August 2010. www.jdpower.com
P A C C A R A u s t R A l i A
PACCAR Australia increased overall market share to a record 25.7% in 2010, a reflection
12
of the brand’s superior reliability in one of the toughest operating environments in
the world.
Kenworth is the leading producer of heavy commercial vehicles in Australia. This year PACCAR Australia
launched a new generation of Kenworth vehicles. Nine new models, including the versatile T3 series, the
workhorse T4 series and the powerful T909, meet Australian 2011 emission requirements which reduce exhaust
particulates by 90%. The new models deliver industry-leading features for driver comfort, safety and cooling
efficiency. The DAF CF85 with a Euro 5 PACCAR MX 12.9 liter engine was introduced into the Australian
market for regional transport customers.
PACCAR Parts delivered record sales, and it expanded warehouse capacity by 20,000 square feet to meet
growing demand and add new parts programs.
PACCAR Australia’s dealers continued to expand their facilities to meet growing market demand in Northeast
Australia and to service the fast growing mining industry. The total number of DAF and Kenworth dealer
locations in the country is 37.
Kenworth trucks are renowned in Australia for their reliability under the most challenging operating conditions. This
Model K200 has been specifically designed to haul loads of 200 tonnes over vast distances and rugged terrain – while
maintaining Kenworth’s unmatched reputation for superior product quality, comfort and fuel efficiency.
p a c c a r m e x i c o
paccar mexico (KeNmex) celebrated 51 years of leadership in the mexican
transportation industry capturing 42% of the class 8 truck market.
13
KENMEX produces Kenworth Class 5 – 8 vehicles for the Mexican and export markets in its state-of-the-art
590,000-square-foot production facilities in Mexicali, Baja California. Since its founding in 1959, KENMEX has
manufactured 180,000 vehicles.
This year KENMEX expanded its product range by introducing the new Kenworth T460, designed for Mexico’s
vocational applications. The T460 features a fuel efficient powertrain that lowers maintenance costs 15% and
delivers 20% better braking. A T460 tractor version is offered for regional delivery operations.
Kenworth 2010 sales to Latin America more than doubled compared to 2009 with Kenworth’s T460 and
aerodynamic T660 vehicles gaining increased market share.
KENMEX’s 125 dealer locations offer the most extensive parts and service network in the country, a major
factor that differentiates Kenworth in the marketplace.
The robust Kenworth T460, featuring a set-back front axle, a tight turning radius and an optional automatic transmission,
is agile, comfortable and easy to operate – perfect for Mexico’s vocational applications.
l e y l a n d t r u c k s
leyland, the united kingdom’s leading truck manufacturer, celebrated its twelfth
14
anniversary as a Paccar company. leyland delivered 9,200 daF vehicles to customers
in europe, australia, africa and north america — a 15% increase over 2009.
Leyland’s highly efficient 710,000-square-foot manufacturing facility incorporates an innovative robotic
chassis paint facility, 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.
For the second consecutive year, Leyland was honored as the overall winner in the U.K.’s prestigious
Manufacturing Excellence awards. Leyland became the first automotive company in the United Kingdom to
achieve the ISO 14064 standard, which specifies the measurement and reporting of greenhouse gas emissions.
Reflecting the logistical advantages of “one-stop shopping,” Leyland delivered its 1,300th DAF LF vehicle with
a factory-installed body. In addition, Leyland unveiled a series of innovative new van body features and options,
including lightweight side panels, aluminum substructures and patent-pending aerodynamic designs.
Leyland introduced the 12-tonne LF Hybrid in 2010, delivering a number of the vehicles to customers in Western
Europe. The DAF Hybrid delivers 20-30% fuel economy savings depending on the application.
The award-winning DAF LF is now available in a Leyland-produced diesel-electric hybrid version that can improve fuel economy by
as much as 30% over conventionally powered vehicles. This technology is designed for stop-and-go, urban pickup and delivery
applications.
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. there are over 1.5 million DaF, Kenworth and peterbilt
15
trucks operating worldwide.
PACCINT sales in Latin America were strong due to demand for municipal, construction, dump and refuse
trucks. PACCAR plans to increase its presence in the buoyant South American market by constructing a DAF
manufacturing facility in Brazil. The Brazilian 10+ tonne market was 125,000 vehicles in 2010, comparable to
the U.S. and Canadian heavy duty truck market. The Brazil truck market is expanding to support the world’s
seventh largest economy.
A new parts distribution center opened in Santiago, Chile, in 2010 to support the 10,000 Kenworth vehicles
operating in the region and to support the introduction of DAF models in South America.
PACCAR engines have established an excellent reputation among luxury coach producers in Asia, winning
best coach engine manufacturer honors at the Bus World Asia exhibition for the fourth year in a row in 2010.
PACCINT expanded its global distribution network in 2010 by appointing nine new service locations in
Russia, South Africa, and Singapore.
The K500 features ten driving wheels for sure-footed mobility over rough terrain, and is destined for delivery to
the largest oil production and drilling company in Russia. It will be deployed in a critical role in well servicing
operation in remote, rugged oil fields.
P A C C A R P A R t s
PACCAR Parts achieved record North American revenue in 2010 — delivering 1.3 million
16
parts shipments worldwide to over 1,900 Kenworth, Peterbilt and DAF dealer locations.
Strengthening freight volumes and aging fleets — especially in North America and Western Europe — increased
demand for aftermarket truck parts. PACCAR Parts expanded its offerings by providing fleet customers with
guaranteed national pricing, centralized billing and diagnostic scheduling of maintenance.
With the launch of the PACCAR MX engine, PACCAR Parts expanded the PACCAR Call Center (PCC) in North
America to offer 24/7 technical and diagnostic engine support. In an industry first, PCC is staffed by certified
engine technicians and uses innovative remote engine diagnostic technologies. PCC offers 24/7 roadside support
throughout North America and Europe, managing 1.7 million calls annually.
PACCAR Parts’ successful aftermarket brand, TRP, which includes parts for all truck makes and models,
expanded to 40,000 part numbers and now includes bus and trailer parts. TRP rewards customers with the
highest quality parts and cost-effective choices for vehicle repair and maintenance.
PACCAR Parts expanded to 14 worldwide parts distribution centers (PDC) during 2010, opening a state-of-the-
art 25,000-square-foot PDC in Santiago, Chile. The center will serve the Andean countries of South America —
including Chile, Peru and Ecuador.
PACCAR Parts’ global operation employs state-of-the-art technologies – wireless voice recognition, integrated logistic systems, tablet PCs
and dealer inventory management tools – to support aftermarket customers. A new 25,000 square foot PDC in Santiago, Chile, joined the
network in 2010 to support expansion in South America.
P A c c A r E n g i n E c o m P A n y
PAccAr has designed diesel engines for 50 years and has produced over one million
engines. The PAccAr mX 12.9 liter engine was introduced in the U.S. and canada in
17
2010 and is being installed in 25% of Kenworth and Peterbilt vehicles.
PACCAR opened its 400,000-square-foot diesel engine production facility in Columbus, Mississippi, during
2010, producing the PACCAR MX 12.9 liter engine — the standard engine in Kenworth and Peterbilt vehicles.
PACCAR developed and constructed two advanced engine factories and added 40 sophisticated engine test cells
in the last ten years to enhance its capacity.
The PACCAR MX engine incorporates precision manufacturing, advanced design and premium materials to
deliver best-in-class performance, durability and operating efficiency. PACCAR actively optimizes its vehicle
powertrain by seamlessly integrating engines, transmissions and axles.
In addition to superior performance and fuel efficiency, the PACCAR MX engine reinforces PACCAR’s legacy
of environmental leadership. The MX engine achieved certification by the Environmental Protection Agency
(EPA) and the California Air Resources Board (CARB) to their stringent 2010 emission standards.
One of the most technologically advanced commercial vehicle diesel engine factories, the PACCAR Columbus engine plant began
production in 2010. PACCAR MX engines are assembled at the plant and installed in Kenworth and Peterbilt Class 8 trucks.
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), which supports the sale of paccar trucks worldwide,
18
achieved good results in 2010, with pretax profits of $153.5 million. The pfs portfolio is
comprised of 133,000 trucks and trailers, with total assets of $7.9 billion.
PACCAR’s excellent balance sheet, complemented by its A+/A1 credit ratings, enabled PACCAR Financial
Services companies to issue $680 million in three and five year notes in 2010. Ongoing access to the capital
markets at excellent rates allowed PFS to support the sale of Kenworth, Peterbilt and DAF trucks in 20 countries
on three continents. PFS achieved retail market share of 28% in 2010.
PACCAR Financial Europe (PFE) has $1.9 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 introduced a business
generation program that provides DAF customers enhanced services including sales quotations, streamlined
credit applications and contract processing. PFS unveiled an innovative web-based customer portal that delivers
financial data online, including electronic payment and monthly transaction summaries.
PFS sold more than 11,300 pre-owned PACCAR trucks worldwide in 2010. PFS began construction of a third
used truck center in the U.S., which complements PACCAR’s used truck online auction technology.
PACCAR Financial facilitates the sale of premium-quality PACCAR vehicles worldwide by offering a full
spectrum of creative, flexible financial products and value-added services specifically tailored to the
transportation industry.
p a c c a r l e a s i n g c o m p a n y
paccar leasing celebrated 30 years of excellent customer service in 2010. it improved
profits and expanded its worldwide network to a record 470 full-service lease locations.
19
The paclease fleet totals over 31,000 vehicles.
PacLease offers only premium-quality Kenworth, Peterbilt and DAF 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 hybrid vehicles. In 2010, PacLease delivered 4,000 new
Kenworth, Peterbilt and DAF trucks to customers.
PacLease introduced new technologies to enhance customer operating efficiency, including the PACCAR MX
engine, hybrid vehicles and on-board telematics. PACCAR MX-powered vehicles represent 40% of PacLease orders,
due to the engine’s exceptional productivity, reliability and increased fuel efficiency.
PacLease Europe has a fleet of over 3,900 trucks and trailers and has expanded to 40 service locations in
Germany. PacLease Europe registered a record 787 DAF trucks, and its expanding presence in the full-service
lease segment helped DAF achieve a record share of the German truck market in 2010.
PacLease provides customers with value-added transportation services and premium-quality Kenworth, Peterbilt and DAF
vehicles. It is one of the fastest-growing and most innovative global leasing networks in the industry.
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 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. Proprietary
road simulators replicate millions of miles of truck testing in weeks, instead of years. Rigorous real-world testing
conditions provide comprehensive operating data utilized in optimizing component design. Sophisticated
computer simulations and advanced analysis of engine and vehicle control systems operate on powerful
supercomputers to optimize vehicle efficiency and meet strict engine emission regulations.
PACCAR Technical Centers partner with government agencies and academic institutions to evaluate future
vehicle technologies and regulatory guidelines. PACCAR, in cooperation with the U.S. Department of Energy’s
SuperTruck program, is investigating innovative truck configurations and designs that will further improve the
industry-leading fuel efficiency of Kenworth, Peterbilt and DAF trucks.
PACCAR Technical Centers in Europe and North America advance the quality and competitiveness of PACCAR products worldwide.
Equipped with state-of-the-art product test and validation capabilities and staffed with technical experts in powertrain and vehicle
development, these world-class facilities accelerate development cycles.
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 seventh consecutive year, ITD was recognized by the prestigious InformationWeek (IW) magazine as
a leading innovator of cost-effective information technologies. PACCAR was recognized for industry-leading
implementation of cloud technology to improve email and Internet security.
ITD’s 650 employees collaborate with PACCAR divisions on using technology to enhance manufacturing,
financial services and engineering design. This year ITD partnered with the PACCAR Engine Company to
implement integrated engineering, production and aftermarket systems for the North American launch of the
PACCAR MX engine.
ITD introduced new customer sales tools for dealers in Latin America, as PACCAR expands truck and parts
sales in the region. ITD also introduced Digital Signage — a new wireless communication marketing display for
Kenworth, Peterbilt and DAF dealerships. This real-time electronic system presents PACCAR aftermarket parts
and service promotions and marketing materials to dealership customers.
PACCAR ITD is recognized as one of the most innovative technology organizations in the world. Collaborating with PACCAR divisions
and leading-edge hardware and software developers, ITD enhances the company’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
WEstErn and cEntral EUrOPE
> 15t markEt sharE
U.s. and canada class 8 trUck markEt sharE
registrations
16%
trucks (000)
350
retail sales
28%
trucks (000)
325
14%
12%
10%
8%
6%
17.5
14.0
10.5
7.0
3.5
0.0
280
26%
210
24%
140
22%
70
0
20%
18%
260
195
130
65
0
01
02
03
04
05
06
07
08
09
10
01
02
03
04
05
06
07
08
09
10
■ 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
billions of dollars
GEOGraPhic rEVEnUE
billions of dollars
17.5
14.0
10.5
7.0
3.5
0.0
01
02
03
04
05
06
07
08
09
10
01
02
03
04
05
06
07
08
09
10
■ Truck and Other
■ Financial Services
■ United States
■ Rest of World
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, 2010. 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, 2005
in the Company’s common stock and in the stated indices and assumes reinvestment of dividends.
PACCAR Inc
S&P 500 Index
Peer Group Index
250
200
150
100
250
200
150
100
50
2005
2006
2007
2008
2009
50
2010
PACCAR Inc
S&P 500 Index
Peer Group Index
2005
100
100
100
2006
2007
2008
2009
2010
147.02
190.84
102.37
132.19
212.01
115.79
122.16
76.96
97.33
111.99
117.86
151.14
89.06
122.68
171.86
M a n a g E M E n t ’ s d I s c u s s I O n a n d a n a l y s I s O f f I n a n c I a l
c O n d I t I O n a n d R E s u l t s O f O p E R a t I O n s
(tables in millions, except truck unit and per share data)
O V E RV I E W:
PACCAR is a global technology company whose Truck segment includes the design, manufacture and distribution
of high-quality, light-, medium- and heavy-duty commercial trucks and related aftermarket parts. In North America,
trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Australia
under the Kenworth and DAF nameplates. The Company’s Financial Services segment (PFS) derives its earnings
primarily from financing or leasing PACCAR products in the U.S., Canada, Mexico, Europe and Australia. The
Company’s Other business is the manufacturing and marketing of industrial winches.
Consolidated net sales and revenues were $10.29 billion in 2010, an increase from the $8.09 billion in 2009, due
to higher truck deliveries and aftermarket parts sales as the Company’s primary markets began to recover from
economic recession. Truck unit sales increased in 2010 to 79,000 units from 61,000 units in 2009, still well below
the record levels achieved in 2006 of 167,000 due to uneven economic conditions around the world.
In 2010, PACCAR achieved net income for the 72nd consecutive year due to higher sales and margins in the Truck
segment and improved Financial Services segment results. Net income in 2010 was $457.6 million ($1.25 per diluted
share) an increase from $111.9 million ($.31 per diluted share) in 2009. Included in 2009 net income was $41.5
million ($.11 per diluted share) of curtailment gains related to postretirement health care plans ($66.0 million
pretax included in Other income before income taxes).
PACCAR enhanced its manufacturing capability with the opening of the new engine plant in Columbus, Mississippi.
This world-class facility provides a North American platform for the manufacture of the 12.9 liter MX diesel engine.
The Company also introduced a new MX engine for the North America market that is fully compliant with new
2010 EPA emissions standards. Over 10,000 orders for Kenworth and Peterbilt trucks equipped with the new MX
engine have been received since the introduction in June 2010. This is the first time PACCAR has installed its own
engines in North America. The Company sold its truck assembly plant in Tennessee to align production capacity
with market demand. Other projects included the launch of new Peterbilt, Kenworth and DAF trucks and the
opening of a new parts distribution center (PDC) in Santiago, Chile. The Company now has fourteen PDCs
strategically located in North America, Europe, Australia and South America.
The PACCAR Financial Services group of companies has operations covering three continents and 20 countries. The
global breadth of PFS and its rigorous credit application process support a portfolio of loans and leases with total
assets of $7.9 billion that earned a pretax profit of $153.5 million. PACCAR issued $683.4 million in medium-term
notes during the year.
Truck Outlook
Heavy duty truck industry sales in 2011 in the U.S. and Canada are expected to be in the range of 180,000–200,000
units, up 40% to 60% from 2010, reflecting continued economic recovery, increased freight movement and an aging
truck fleet. In Europe, the 2011 annual market size of above 15-tonne vehicles is expected to be in the range of
220,000–240,000 units, up 20% to 30% from 2010, also reflecting continued economic recovery. Capital spending
in 2011 is expected to increase to approximately $400 to $500 million, accelerating product development programs
and South American expansion. Spending on research and development (R&D) in 2011 is expected to be $250 to
$300 million, focusing on manufacturing efficiency improvements, engine development and new product programs.
See the Forward Looking Statement section of Management’s Discussion and Analysis for factors that may affect
this outlook.
Financial Services Outlook
Earning assets in 2011 are expected to increase approximately 5-10% from increased new business financing from
higher truck sales due to improving global truck markets. Economic conditions are recovering and contributing to
improving freight rates and freight tonnage hauled. This is improving the profit margins of truck operators and
customers’ ability to make timely payments to the Company. If economic conditions continue to improve, it should
lead to lower levels of past-due accounts, truck repossessions and net charge-offs. See the Forward Looking
Statement section of Management’s Discussion and Analysis for factors that may affect this outlook.
R e s u lt s o f o p e R at i o n s
Net sales and revenues:
Truck
Other
Truck and Other
Financial Services
Income/(loss) before income taxes:
Truck
Other
Truck and Other
Financial Services
Investment income
Income taxes
Net Income
Diluted Earnings Per Share
2010
2009
2008
$ 9,237.3
87.8
9,325.1
967.8
$ 10,292.9
$
$
$
501.0
(15.3)
485.7
153.5
21.1
(202.7)
457.6
1.25
$ 6,994.0
82.7
7,076.7
1,009.8
$ 8,086.5
$
25.9
42.2
68.1
84.6
22.3
(63.1)
$ 111.9
.31
$
$ 13,547.4
162.2
13,709.6
1,262.9
$ 14,972.5
$ 1,156.5
6.0
1,162.5
216.9
84.6
(446.1)
$ 1,017.9
2.78
$
Return on Revenues
4.4%
1.4%
6.8%
The following provides an analysis of the results of operations for the two reportable segments. Where possible, the
Company has quantified the factors identified in the following discussion and analysis. In cases where it is not
possible to quantify the impact of factors, the Company lists them in estimated order of importance. Factors for
which the Company is unable to specifically quantify the impact include market demand, fuel prices, freight tonnage
and economic conditions affecting the Company’s results of operations.
2010 Compared to 2009:
Truck
PACCAR’s Truck segment accounted for 90% and 86% of revenues in 2010 and 2009, respectively.
Truck net sales and revenues:
U.S. and Canada
Europe
Mexico, Australia and other
Truck income before income taxes
*Percentage not meaningful
2010
2009
% change
$ 4,419.2
3,190.2
1,627.9
$ 9,237.3
501.0
$
$ 3,566.0
2,520.2
907.8
$ 6,994.0
25.9
$
24
27
79
32
*
PACCAR’s worldwide truck sales and revenues increased to $9.24 billion in 2010 from $6.99 billion in 2009 due to
higher market demand in all markets attributable to improving global economic conditions.
Truck segment income before income taxes increased to $501.0 million in 2010 from $25.9 million in 2009 from
higher truck unit and aftermarket parts sales and margins in all markets, partially offset by increased R&D and
higher selling, general and administrative (SG&A) spending. 2010 truck income before income taxes was also
affected by the translation of stronger foreign currencies, primarily the Canadian and Australian dollars offset by a
weaker euro and British pound. The translation effect of all currencies increased 2010 income before income taxes
by $15.1 million compared to 2009.
The Company’s new truck deliveries are summarized below:
United States
Canada
U.S. and Canada
Europe
Mexico, Australia and other
Total units
2010
29,100
6,100
35,200
31,200
12,400
78,800
2009
28,300
4,400
32,700
22,200
6,100
61,000
% change
3
39
8
41
103
29
In the U.S. and Canada, 2010 net sales and revenues increased to $4.42 billion from $3.57 billion in 2009. Industry
retail sales in the heavy-duty market in U.S. and Canada increased 17% to 126,000 units in 2010 compared to
108,000 units in 2009. The Company’s market share was 24.1% in 2010 and 25.1% in 2009. The medium-duty
market was 41,000 units in 2010 and 2009. The Company’s medium-duty market share was 13.5% in 2010
compared to a 15.9% in 2009.
In Europe, 2010 net sales and revenues increased to $3.19 billion from $2.52 billion in 2009. The 15-tonne and above
truck market in Western and Central Europe was 183,000 units compared to 168,000 units in 2009. The Company’s
market share was 15.2% in 2010 compared to 14.8% in 2009. DAF market share in the 6- to 15-tonne market in 2010
was 7.7%, compared to 9.3% in 2009. The 6- to 15-tonne market in 2010 was 51,000 units, comparable to 2009.
Net sales and revenues in Mexico, Australia and other countries outside the Company’s primary markets increased
to $1.63 billion in 2010 from $.91 billion in 2009 primarily due to higher sales from new truck deliveries in Mexico
($.44 billion) and Australia ($.19 billion) reflecting higher market demand.
The major factors for the change in net sales and revenues, cost of sales and revenues and gross margin between
2010 and 2009 follow:
2009
Increase/(decrease)
Truck delivery volume
Average truck sales prices
Average per truck material, labor, and other direct costs
Factory overhead, warehouse and other indirect costs
Aftermarket parts volume
Average aftermarket parts sales prices
Average aftermarket parts direct costs
Currency translation
Total increase
Net
Sales
Cost
of Sales
Gross
Margin
$ 6,994.0
$ 6,414.9
$ 579.1
1,410.7
523.1
266.7
51.3
(8.5)
2,243.3
1,189.3
256.5
89.7
176.0
12.5
(13.4)
1,710.6
221.4
523.1
(256.5)
(89.7)
90.7
51.3
(12.5)
4.9
532.7
2010
$ 9,237.3
$ 8,125.5
$ 1,111.8
Truck delivery volume increased to 78,800 units in 2010 compared to 61,000 units in 2009 which resulted in $1.41
billion in higher sales and $1.19 billion in higher cost of sales. The higher truck delivery volume reflects improved
market demand which also resulted in an increase of $523.1 million from higher average truck sales prices. In
addition, there was an increase in cost of sales of $256.5 million due to a higher average cost per truck, primarily from
the effect of higher content EPA 2010 emission vehicles in the U.S. and Canada. Factory overhead, warehouse and
other indirect costs increased $89.7 million primarily due to higher supplies and maintenance ($38.6 million) and
salaries and related costs ($16.5 million) to support higher production levels. Higher market demand also improved
aftermarket parts sales volume by $266.7 million and related cost of sales by $176.0 million. Average aftermarket
parts sales prices increased by $51.3 million reflecting improved price realization. The currency translation effect on
sales and cost of sales was not significant as a weaker euro and British pound was offset by stronger Canadian and
Australian dollars.
Net sales and revenues and gross margins for truck units and aftermarket parts are summarized below. The
aftermarket parts gross margin includes direct revenues and costs, but excludes certain truck costs.
Truck net sales and revenues:
Trucks
Aftermarket parts
Gross margin:
Trucks
Aftermarket parts
Gross margin %:
Trucks
Aftermarket parts
*Percentage not meaningful
2010
2009
% change
$ 7,042.9
2,194.4
$ 9,237.3
$ 366.1
745.7
$ 1,111.8
5.2%
34.0%
12.0%
$ 5,103.3
1,890.7
$ 6,994.0
$ (46.6)
625.7
$ 579.1
(.9)%
33.1%
8.3%
38
16
32
*
19
92
Total Truck segment gross margins for 2010 increased to 12.0% from 8.3% in 2009, primarily the result of higher
truck gross margins. Gross margins on trucks increased to 5.2% in 2010, reflecting higher average truck selling
prices from increased market demand and increased absorption of fixed costs resulting from the increase in truck
production. 2010 aftermarket parts gross margins of 34.0% increased from the 33.1% in the prior year primarily
due to improved price realization.
Truck R&D expenditures increased to $238.2 million in 2010 from $198.5 million in 2009. The higher spending
reflects increased new product development activities, primarily new truck products for North America and Europe.
Truck SG&A was $368.3 million in 2010 compared to $341.3 million in 2009. The higher spending is primarily due
to higher salaries and related expenses ($22.8 million) and sales and marketing activities ($3.4 million), partially
offset by lower severance costs ($5.0 million). As a percentage of sales, SG&A decreased to 4.0% in 2010 from 4.9%
in 2009 due to higher sales volumes.
Financial Services
2010
2009
% change
New loan and lease volume:
U.S. and Canada
Europe
Mexico and Australia
New loan and lease volume by product:
Loans and finance leases
Equipment on operating lease
New loan and lease unit volume:
Loans and finance leases
Equipment on operating lease
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 operating lease
Revenues:
U.S. and Canada
Europe
Mexico and Australia
Revenue by product:
Loans and finance leases
Dealer wholesale financing
Equipment on operating lease and other
Income before income taxes
$ 1,409.4
593.7
473.0
$ 2,476.1
$ 1,975.1
501.0
$ 2,476.1
24,046
5,632
29,678
$ 4,320.6
1,944.5
1,303.2
$ 7,568.3
$ 5,119.9
899.1
1,549.3
$ 7,568.3
$ 491.6
286.6
189.6
$ 967.8
$ 383.8
37.8
546.2
$ 967.8
$ 153.5
$ 1,175.0
433.5
306.1
$ 1,914.6
$ 1,395.1
519.5
$ 1,914.6
18,295
5,928
24,223
$ 4,795.5
2,535.9
1,321.9
$ 8,653.3
$ 5,904.1
1,221.2
1,528.0
$ 8,653.3
$ 501.8
318.5
189.5
$ 1,009.8
$ 449.3
52.5
508.0
$ 1,009.8
84.6
$
20
37
55
29
42
(4)
29
31
(5)
23
(10)
(23)
(1)
(13)
(13)
(26)
1
(13)
(2)
(10)
(4)
(15)
(28)
8
(4)
81
In 2010, new loan and lease volume increased to $2.48 billion from $1.91 billion in 2009 primarily due to higher
retail truck sales ($313.4 million) as well as higher average amounts financed per unit ($130.3 million). PFS
increased its finance market share on new PACCAR trucks to 28% in 2010 from 26% in the prior year.
Financial Services revenues decreased to $.97 billion in 2010 from $1.01 billion in 2009. The decreased revenues in
2010 primarily resulted from lower average earning asset balances in all markets. Financial Services income before
income taxes increased to $153.5 million in 2010 compared to $84.6 million in 2009. The increase of $68.9 million
was primarily due to higher lease margin of $42.7 million and a lower provision for losses on receivables of $29.8
million.
The change in finance and lease margin is outlined in the tables below:
9
2009
Increase/(decrease)
Average finance receivables
Yields
Average debt balances
Borrowing rates
Currency translation
Total decrease
2010
Interest
and fees
Interest and
other borrowing
expenses
Finance
margin
$ 501.8
$ 291.8
$ 210.0
(86.2)
(3.0)
9.0
(80.2)
$ 421.6
(58.9)
(23.9)
4.0
(78.8)
$ 213.0
(86.2)
(3.0)
58.9
23.9
5.0
(1.4)
$ 208.6
Lower average finance receivables in 2010 ($1.11 billion) resulted in $86.2 million of lower interest and fee income.
The lower finance receivables results from retail portfolio repayments exceeding new business volume as well as a
decrease in average wholesale financing ($322.1 million) due to lower dealer inventory balances. Average debt balances
declined in 2010 by $1.35 billion, resulting in $58.9 million of lower interest and other borrowing expenses. The lower
average debt balances reflect a lower level of funding needed for a smaller financial services portfolio. Borrowing rates
declined in 2010 due to lower market interest rates. Currency translation, primarily the stronger Australian and
Canadian dollars, increased interest and fees by $9.0 million and interest and other borrowing expense by $4.0
million, respectively. Overall, 2010 finance margin decreased $1.4 million to $208.6 million primarily due to lower
average finance receivables, partially offset by lower average debt and lower interest rates on borrowings.
2009
Increase/(decrease)
Operating lease impairments
Losses on returned lease assets
Used trucks taken on trade package
Average operating lease assets
Revenue and cost per asset
Currency translation
Insurance and other
Total increase
2010
Operating lease,
rental and
other income
Depreciation
and other
Lease
margin
$ 508.0
$ 456.1
$ 51.9
12.7
3.4
29.7
(5.6)
(2.0)
38.2
$ 546.2
(23.9)
(16.3)
12.6
2.9
27.4
(4.6)
(2.6)
(4.5)
$ 451.6
23.9
16.3
.1
.5
2.3
(1.0)
.6
42.7
$ 94.6
Operating lease impairments decreased $23.9 million in 2010 due to improving used truck prices ($17.5 million)
and fewer losses on repossessed operating lease equipment ($6.4 million). Losses on sales of trucks returned from
leases decreased $16.3 million in 2010 also reflecting higher used truck prices as a result of the increased demand
for used trucks in an improving global economy. The $12.7 million increase in trucks taken on trade and associated
cost of $12.6 million are due to an increase in the volume of trucks sold. Higher average operating lease assets in 2010
($21.3 million) increased income by $3.4 million and related depreciation on operating leases by $2.9 million.
Higher truck market demand resulted in an increase in revenues per asset in 2010 of $29.7 million. The increase in
revenue consisted of higher asset utilization (the proportion of available operating lease units that are being leased)
of $13.5 million, higher lease rates of $10.7 million and higher fuel and service revenue of $5.5 million. The 2010
increase in costs per asset of $27.4 million is due to higher vehicle operating expenses, including higher fuel costs
and variable costs from higher asset utilization levels. Overall, 2010 lease margin increased $42.7 million to $94.6
million from $51.9 million in 2009 primarily due to lower operating lease impairments and lower losses on the sale
of returned lease assets.
30
The following tables summarize the provision for losses on receivables and net charge-offs.
U.S. and Canada
Europe
Mexico and Australia
2010
2009
Net
Charge-offs
$ 35.7
27.2
20.4
$ 83.3
Provision for
losses on
receivables
$ 21.0
20.9
19.1
$ 61.0
Net
Charge-offs
$ 63.1
30.8
14.3
$ 108.2
Provision for
losses on
receivables
$ 49.0
28.8
13.0
$ 90.8
The provision for losses on receivables for 2010 of $61.0 million declined $29.8 million, compared to 2009 primarily
from improvements in portfolio quality as well as a decline in the receivable balances. Charge-offs declined in the
U.S. and Canada and Europe due to improvements in economic conditions. Charge-offs increased in Mexico and
Australia due to weakness in the transport industry in Mexico during much of the year. Past-due percentages are
noted below.
At December 31,
Percentage of retail loan and lease accounts 30+ days past-due:
U.S. and Canada
Europe
Mexico and Australia
Total
2010
2.1%
2.5%
5.8%
3.0%
2009
1.8%
4.4%
9.5%
3.8%
Worldwide PFS accounts 30+ days past-due at December 31, 2010 of 3.0% improved from 3.8% at December 31, 2009,
reflecting improvements in Europe, Mexico and Australia, partially offset by a slight increase in the U.S. and Canada.
Included in the U.S. and Canada past-due percentage of 2.1% is 1.1% from one large customer. Excluding that
customer, worldwide PFS accounts 30+ days past-due at December 31, 2010 would have been 2.3%. At December 31,
2010, the Company had $34.9 million of specific loss reserves for this large customer and other accounts considered
to have a high risk of loss. The Company continues to focus on reducing past-due balances. Improving economic
conditions will likely result in slightly lower past-due balances in 2011. When the Company modifies a 30+ days
past-due account, the customer is considered current under the revised contractual terms. The effect on total 30+
days past-dues from such modifications was not significant at December 31, 2010 and 2009.
The Company’s 2010 pretax return on revenue for financial services increased to 15.9 % from 8.4% in 2009 primarily
due to higher lease margin from lower operating lease impairments, a decline in losses on the sale of lease returns
and a lower provision for losses from improving portfolio quality.
Other
Other includes the winch business as well as sales, income and expenses not attributable to a reportable segment,
including a portion of corporate expense. Sales represent approximately 1% of consolidated net sales and revenues
for 2010 and 2009. Other SG&A was $24.5 million in 2010 and $7.1 million in 2009. The increase is primarily due
to higher salaries and related expenses ($5.7 million), higher charitable contributions ($5.2 million), increased
professional fees ($2.7 million) and higher travel and related costs of ($1.2 million). Other income (loss) before tax
was a loss of $15.3 million in 2010 compared to income of $42.2 million in 2009, primarily due to a one-time $66.0
million gain from the curtailment of postretirement benefits, partially offset by higher expense from economic
hedges of $21.2 million in 2009 and higher SG&A in 2010.
31
The 2010 effective income tax rate was 30.7% compared to 36.1% in 2009. In 2009, a retroactive tax law change in
Mexico increased income tax expense by $11.4 million and the effective tax rate by 6.6 percentage points. Excluding
the Mexican tax law change, the effective tax rate in 2009 was 29.5%. The higher rate in 2010 reflects a lower
proportion of tax benefits for research and development and other permanent differences.
Consolidated pretax return on revenues was 6.4% in 2010 compared to 2.2% in 2009. The increase was primarily
due to higher returns in foreign operations. Foreign income before income taxes was $474.0 million in 2010
compared to $95.9 million in 2009. The ratio of foreign income before tax to revenues was 7.8% in 2010 compared
to 2.1% in 2009. The improvement was primarily due to a higher return on revenues in foreign truck operations.
2009 Compared to 2008:
In 2009, consolidated net sales and revenues were $8.09 billion compared to $14.97 billion in 2008. The lower net
sales and revenues reflected the severe economic recession that dampened demand for the Company’s products
throughout the world.
In 2009, net income of $111.9 million ($.31 per diluted share) declined from $1.02 billion ($2.78 per diluted share)
in 2008. 2009 net income included $41.5 million ($.11 per diluted share) of curtailment gains related to postretirement
healthcare 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.
Truck
PACCAR’s Truck segment accounted for 86% and 90% of revenues in 2009 and 2008, respectively.
Truck net sales and revenues:
U.S. and Canada
Europe
Mexico, Australia and other
Truck income before income taxes
2009
2008
% change
$ 3,566.0
2,520.2
907.8
$ 6,994.0
25.9
$
$ 4,823.7
6,624.8
2,098.9
$ 13,547.4
$ 1,156.5
(26)
(62)
(57)
(48)
(98)
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.
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 R&D spending as
well as lower SG&A spending.
32
The Company’s new truck deliveries are summarized below:
United States
Canada
U.S. and Canada
Europe
Mexico, Australia and other
Total units
2009
28,300
4,400
32,700
22,200
6,100
61,000
2008
38,200
6,700
44,900
63,700
17,300
125,900
% change
(26)
(34)
(27)
(65)
(65)
(52)
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 41,000 units in 2009 compared to 63,000 units in 2008. The
Company achieved record medium-duty market share of 15.9% 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.
The major factors for the change in net sales and revenues, cost of sales and revenues and gross margin between
2009 and 2008 follow:
2008
Increase/(decrease)
Truck delivery volume
Average truck sales prices
Average per truck material, labor, and other direct costs
Factory overhead, warehouse and other indirect costs
Aftermarket parts sales and direct costs
Currency translation
Total decrease
Net
Sales
Cost
of Sales
Gross
Margin
$ 13,547.4
$ 11,610.5
$ 1,936.9
(5,666.7)
(321.5)
(304.3)
(260.9)
(6,553.4)
(4,518.3)
(8.6)
(283.9)
(187.2)
(197.6)
(5,195.6)
(1,148.4)
(321.5)
8.6
283.9
(117.1)
(63.3)
(1,357.8)
2009
$ 6,994.0
$ 6,414.9
$ 579.1
Lower market demand in all the Company’s primary markets related to the global economic recession resulted in
lower truck deliveries including decreases of 65% in Europe, 27% in the combined U.S. and Canadian markets and
65% in the Company’s other markets. The lower market demand also resulted in lower average truck selling prices
and lower aftermarket part sales. Factory overhead, warehouse and other indirect costs decreased due to lower
staffing ($157.7 million), supplies and maintenance ($90.7 million), utilities ($28.8 million) and other indirect costs
needed to support lower production volumes. Currency translation reduced sales and cost of sales primarily due to
a weaker euro relative to the U.S. dollar.
33
Net sales and revenues and gross margins for truck units and aftermarket parts are summarized 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 aftermarket parts gross margins declined from the prior year primarily due to a sales mix shift to
lower margin maintenance parts due to efforts by customers to limit costs during recessionary economic conditions.
Truck R&D expenditures declined to $198.5 million in 2009 from $341.3 million in 2008, primarily due to lower
spending on engine development and reduced spending for new vehicle development.
Truck SG&A expense in 2009 declined to $341.3 million compared to $442.7 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 of $36.6 million, sales and marketing of $28.8 million and travel costs of $7.1 million. Foreign
currency translation effects reduced SG&A by $10.7 million. Severance costs included in SG&A were $5.7 million in
2009 compared to $2.6 million in 2008. As a percentage of sales, SG&A increased to 4.9% in 2009 from 3.3% in
2008 due to lower sales volumes.
34
Financial Services
2009
2008
% change
New loan and lease volume:
U.S. and Canada
Europe
Mexico and Australia
New loan and lease volume by product:
Loans and finance leases
Equipment on operating lease
New loan and lease unit volume:
Loans and finance leases
Equipment on operating lease
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 operating lease
Revenues:
U.S. and Canada
Europe
Mexico and Australia
Revenue by product:
Loans and finance leases
Dealer wholesale financing
Equipment on operating lease and other
Income before income taxes
$ 1,175.0
433.5
306.1
$ 1,914.6
$ 1,395.1
519.5
$ 1,914.6
18,295
5,928
24,223
$ 4,795.5
2,535.9
1,321.9
$ 8,653.3
$ 5,904.1
1,221.2
1,528.0
$ 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
$ 2,607.7
742.5
$ 3,350.2
31,547
8,543
40,090
$ 5,692.4
3,065.6
1,621.0
$ 10,379.0
$ 7,139.1
1,693.0
1,546.9
$ 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)
(47)
(30)
(43)
(42)
(31)
(40)
(16)
(17)
(18)
(17)
(17)
(28)
(1)
(17)
(17)
(26)
(18)
(20)
(21)
(55)
(12)
(20)
(61)
In 2009, new loan and lease volume was $1.91 billion compared to $3.35 billion in 2008 primarily due to lower
retail truck sales ($1.24 billion) from worldwide recessionary conditions. PFS finance market share was 26% in 2009
compared to 28% in 2008.
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 of $79.3 million and lease margin of $86.1
million, partially offset by a decline in SG&A expense of $24.7 million from cost reduction efforts from the global
economic recession consisting primarily of lower staffing and travel costs.
The change in finance and lease margin is outlined in more detail in the tables below:
35
2008
Increase/(decrease)
Average finance receivables
Yields
Average debt balances
Borrowing rates
Currency translation
Total decrease
2009
Interest
and fees
Interest and
other borrowing
expenses
Finance
margin
$ 683.4
$ 394.1
$ 289.3
(113.4)
(53.4)
(14.8)
(181.6)
$ 501.8
(67.6)
(26.8)
(7.9)
(102.3)
$ 291.8
(113.4)
(53.4)
67.6
26.8
(6.9)
(79.3)
$ 210.0
The lower average finance receivables reflect portfolio runoff from decreased retail loan and finance lease new
business volume resulting from fewer retail sales of trucks, as well as lower dealer wholesale financing from dealer
inventory reductions in Europe. Average debt balances declined reflecting a lower level of funding needed to fund
the smaller financial services portfolio. Yields and borrowing rates declined due to lower market interest rates.
Currency translation effects resulted primarily from a lower euro vs. the U.S. dollar. Overall, 2009 finance margin
decreased to $210 million primarily due to lower average finance receivables and lower market interest rates.
2008
Increase/(decrease)
Operating lease impairments
(Gains) losses on returned lease assets
Used trucks taken on trade package
Average operating lease assets
Revenue and cost per asset
Currency translation
Insurance and other
Total (decrease)/increase
2009
Operating lease,
rental and
other income
Depreciation
and other
Lease
margin
$ 579.5
$ 441.5
$ 138.0
(9.1)
12.7
(3.7)
(36.0)
(14.5)
(20.9)
(71.5)
$ 508.0
29.5
20.1
16.3
(3.1)
(17.4)
(12.6)
(18.2)
14.6
$ 456.1
(29.5)
(29.2)
(3.6)
(.6)
(18.6)
(1.9)
(2.7)
(86.1)
$ 51.9
Operating lease impairments increased $29.5 million in 2009 due to declining used truck prices ($19.6 million) and
higher losses on repossessed operating lease equipment ($9.9 million). There were lower gains on sales of trucks
returned from leases ($9.1 million) and higher losses on sales of trucks returned from leases of $20.1 million due to
lower used truck prices as a result of the global economic recession. In 2009, the Financial Services segment began
taking used trucks on trade packages resulting in higher revenues of $12.7 million from the sale of these trucks. The
loss of $3.6 million is due to declining used truck prices and higher than anticipated costs to sell. Revenue and
depreciation from operating leases decreased from lower average assets in the operating lease portfolio. Lower
market demand resulted in a decrease in revenues and cost per asset of $36.0 million and $17.4 million, respectively.
The decrease in revenue consisted of lower asset utilization (the proportion of available operating lease units that
are being leased) of $10.2 million, lower lease rates of $13.2 million and lower fuel and service revenue of $12.6
million. The decrease in costs per asset are due to lower vehicle operating expenses (including lower fuel costs of
$8.3 million) reflecting lower asset utilization levels. Currency translation effects resulted primarily from a lower
euro vs. the U.S. dollar. Insurance and other revenues and costs decreased primarily due to a reduction in the
insurance portfolio. Overall, lease margin declined $86.1 million to $51.9 million from $138.0 million in 2008.
36
The following table summarizes the provision for losses on receivables and net charge-offs.
U.S. and Canada
Europe
Mexico and Australia
2009
2008
Net
Charge-offs
$ 63.1
30.8
14.3
$ 108.2
Provision for
losses on
receivables
$ 49.0
28.8
13.0
$ 90.8
Net
Charge-offs
$ 85.4
8.4
7.3
$ 101.1
Provision for
losses on
receivables
$ 79.6
11.6
8.0
$ 99.2
The provision for losses on receivables in 2009 of $90.8 million decreased from $99.2 million in 2008 as higher net
charge-offs were mostly offset by a decline in the receivable balances. Higher net portfolio charge-offs in Europe,
Mexico and Australia were somewhat offset by lower net charge-offs in the U.S. and Canada.
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. When the Company modifies a 30+ days past-due account, the customer is considered current under
the revised contractual terms. The effect on total 30+ days past-dues from such modifications was not significant at
December 31, 2009 and 2008.
The Company’s 2009 percentage pretax return on revenue for financial services decreased to 8.4% from 17.2% in
2008 primarily due to higher impairment charges and losses on the sale of operating lease assets and a higher
provision for losses on receivables.
Other
Other includes the winch business as well as sales, income and expenses not attributable to a reportable segment,
including a portion of corporate expense. Other SG&A was $7.1 million in 2009 and $27.5 million in 2008. The
decrease is primarily due to lower salaries and related expenses of $21.3 million due to cost cutting efforts from the
difficult economic recession. Sales of the Winch business represent approximately 1% of consolidated net sales and
revenues for 2009 and 2008. Other income before income tax was $42.2 million in 2009 and $6.0 million in 2008.
The increase was primarily due to a $66.0 million gain from the curtailment of postretirement benefits partially
offset by $23.0 million higher expense from changes in fair value of economic hedges.
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 Mexico tax law change, the effective tax rate was 29.5%.
Consolidated pretax return on revenues was 2.2% in 2009 compared to 9.8% in 2008. The decrease was primarily due
to lower returns in foreign operations. Foreign income before income taxes was $95.9 million in 2009 compared to
$1,368.0 million in 2008. The ratio of foreign income before tax to revenues was 2.1% in 2009 compared to 13.4%
in 2008. The decrease was primarily due to a lower return on revenues in foreign truck operations.
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
2010
$ 2,040.8
450.5
$ 2,491.3
2009
$ 1,912.0
219.5
$ 2,131.5
2008
$ 1,955.2
175.4
$ 2,130.6
37
The Company’s total cash and marketable debt securities increased $359.8 million for the year ended December 31, 2010
from increases in both cash and cash equivalents of $128.8 million and marketable securities of $231.0 million.
The change in cash and cash equivalents is summarized below:
For Years Ended December 31,
2010
2009
2008
Operating Activities:
Net Income
Net income items not affecting cash
Changes in operating assets and liabilities
Net cash provided by operating activities
Net cash (used in) provided by investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
$ 457.6
742.1
351.7
1,551.4
(467.1)
(960.4)
4.9
128.8
1,912.0
$ 2,040.8
$ 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
2010 Compared to 2009:
Operating activities: Cash provided by operations increased $178.1 million to $1,551.4 million in 2010 compared to
$1,373.3 million in 2009. The higher operating cash flow was primarily due to higher net income of $345.7 million
and $493.1 million from higher purchases of goods and services in accounts payable and accrued expenses greater
than payments compared to 2009. Also, due to the improved funded status of its pension plans pension contributions
in 2010 were $112.7 million lower than in 2009. In addition, $113.3 million of additional operating cash flow was
provided from higher income tax liabilities compared to payments in 2010 as opposed to a decrease in income tax
liabilities compared to payments in 2009. This was partially offset by a lower amount of cash provided from Truck
segment trade receivables ($205.5 million) and Financial Services segment wholesale receivables ($642.9 million) in
2010 reflecting higher truck production compared to 2009.
Investing activities: Cash used in investing activities of $467.1 million in 2010 decreased $777.7 million from the
$310.6 million provided in 2009. In 2010, there were higher new loan and lease originations of $507.0 million in
the Financial Services segment compared to the prior year due to increased new truck demand. In addition, proceeds
from asset disposals were $128.0 million lower in 2010, reflecting fewer used truck unit sales, and net purchases of
marketable securities were $190.9 million higher in 2010 compared to the prior year.
Financing activities: The cash outflow from financing activities in 2010 of $960.4 million was $855.8 million lower
than in 2009. This was primarily due to lower repayments of long term debt of $1,295.3 million and net repayments
of commercial paper and bank loans of $241.7 million, partially offset by lower proceeds from term debt of $666.0
million. The lower overall cash outflow in financing reflects a smaller funding reduction in the financial services
asset portfolio.
38
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 $491.6 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.
Credit Lines and Other:
The Company has line of credit arrangements of $3.65 billion, of which $3.40 billion was unused at the end of
December 2010. Included in these arrangements are $3.0 billion of syndicated bank facilities. Of the $3.0 billion
bank facilities, $1.0 billion matures in June 2011, $1.0 billion matures in June 2012 and $1.0 billion matures in June
2013. 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 facilities for
the year ended December 31, 2010.
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, 2010 is $870.0 million. The current registration expires
in the fourth quarter of 2011 and does not limit the principal amount of debt securities that may be issued during
the period.
In October 2007, PACCAR’s Board of Directors approved the repurchase of $300 million of the Company’s common
stock. Through December 31, 2010, $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 $173.5 million as
of December 31, 2010, of which $23.5 million is due in September 2011.
Expenditures for property, plant and equipment in 2010 totaled $168.4 million compared to $127.7 million in
2009 as the Company increased its spending for new products. Over the last ten years, the Company’s combined
investments in worldwide capital projects and research and development totaled $3.93 billion which have
significantly increased capacity, efficiency and quality of the Company’s premium products.
Capital spending in 2011 is expected to increase to approximately $400 to $500 million. The increased capital
spending will accelerate comprehensive product development programs, including South American expansion.
Spending on research and development in 2011 is expected to be $250 to $300 million. PACCAR will continue to
focus on new product programs, engine development and manufacturing efficiency improvements.
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.
39
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 Company issues commercial paper for a portion of its funding in its Financial Services segment. Some of this
commercial paper is converted to fixed interest rate debt through the use of interest rate swaps, which are used to
manage interest rate risk. In the event of future disruption in the financial markets, the Company may not be able
to issue replacement commercial paper. As a result, the Company is exposed to liquidity risk from the shorter
maturity of short-term borrowings paid to lenders compared to the longer timing of receivable collections from
customers. The Company believes its cash balances and investments, syndicated bank lines and current investment-
grade credit ratings of A+/A1 will continue to provide it with sufficient resources and access to capital markets at
competitive interest rates and therefore contribute to the Company maintaining its liquidity and financial stability.
A decrease in these credit ratings could negatively impact the Company’s ability to access capital markets at
competitive interest rates and the Company’s ability to maintain liquidity and financial stability.
In November 2009, the Company’s U.S. finance subsidiary, PACCAR Financial Corp. (PFC), filed a shelf registration
under the Securities Act of 1933. The total amount of medium-term notes outstanding for PFC as of December 31, 2010
was $1,123.5 million. The registration expires in 2012 and does not limit the principal amount of debt securities
that may be issued during the period.
As of December 31, 2010, the Company’s European finance subsidiary, PACCAR Financial Europe, had €900 million
available for issuance under a €1.5 billion medium-term note program registered with the London Stock Exchange.
The program was renewed in the fourth quarter of 2010 and 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, 2010, 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, 2010:
Borrowings*
Interest on term debt**
Operating leases
Purchase obligations
Other obligations
Within
1 Year
$ 3,391.9
97.8
18.1
159.1
9.1
$ 3,676.0
Maturity
1-3 Years
$ 1,240.6
96.2
18.4
115.5
4.4
$ 1,475.1
3-5 Years
$ 633.8
8.2
6.8
2.4
$ 651.2
More than
5 Years
$
.8
17.2
$ 18.0
Total
$ 5,266.3
202.2
44.1
274.6
33.1
$ 5,820.3
* 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, 2010.
40
The Company had $5.82 billion of cash commitments. Of the total cash commitments for borrowings and interest
on term debt, $5.26 billion were related to the Financial Services segment. As described in Note I 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.
The Company’s other commitments include the following at December 31, 2010:
Letters of credit
Loan and lease commitments
Equipment acquisition commitments
Residual value guarantees
Within
1 Year
$ 19.7
157.9
53.4
80.3
$ 311.3
Commitment Expiration
3-5 Years
More than
5 Years
1-3 Years
.1
$
135.2
$ 135.3
$ 85.1
$ 85.1
$ 12.6
$ 12.6
Total
$ 19.8
157.9
53.4
313.2
$ 544.3
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 investi gations and cleanup actions in different countries related to
environmental matters. In certain of these matters, the Company has been designated as a “potentially responsible
party” by domestic and foreign environmental agencies. The Company has provided an accrual for the estimated
costs to investigate and complete cleanup actions where it is probable that the Company will incur such costs in the
future. Expenditures related to environmental activities in 2010, 2009 and 2008 were $1.3 million, $1.3 million and
$3.8 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 E 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.
41
During 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 $3.2 million. During 2009 and
2010 lower market values on trucks returning upon lease maturity, as well as impairments on existing operating
leases resulted in additional depreciation expense of $59.2 million and $13.1 million, respectively.
At December 31, 2010, 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 $1.15 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 A of the consolidated financial statements. The Company collectively and individually evaluates its finance
receivables and the allowance for credit losses consists of both a general and specific reserve. The Company
individually evaluates certain finance receivables for impairment. Finance receivables which are evaluated individually
consist of customers on non-accrual status, all wholesale accounts and certain large retail accounts with past-due
balances or that otherwise are deemed to be at a higher risk of credit loss and loans which have been modified as
troubled debt restructurings. A receivable is considered impaired if it is probable the Company will be unable to
collect all contractual interest and principal payments as scheduled. Impaired receivables are individually evaluated to
determine the amount of impairment and these receivables are considered collateral dependent. Accordingly, the
evaluation of individual reserves is based on the fair value less costs to sell the associated collateral. When the
underlying collateral fair value exceeds the Company’s loss exposure, no individual reserve is recorded. The Company
uses a pricing model to value the underlying collateral on a quarterly basis. The fair value of the collateral is
determined based on management’s evaluation of numerous factors such as the make, model and year of the
equipment, overall condition of the equipment, primary method of distribution for the equipment, recent sales
prices of comparable equipment and economic trends effecting used equipment values.
For finance receivables that are evaluated collectively, the Company determines the allowance for credit losses for
both retail and wholesale receivables based on historical loss information, using past due account data and current
market conditions. Information used includes assumptions regarding the likelihood of collecting current and past-
due accounts, repossession rates and the recovery rate on the underlying collateral based on used truck values and
other pledged collateral or recourse. The Company has developed a range of loss estimates for each of its country
portfolios 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. 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 3.0% 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 3.0% at December 31, 2010.
If past-dues were 100 basis points higher or 4.0% as of December 31, 2010, 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.
42
Product Warranty
The accounting for product warranty is discussed in Note H 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, warranty expense as a
percentage of net sales and revenues has ranged between 1.1% and 1.2%. For 2010, warranty expense was 1.1% of
net sales and revenues. If warranty expense were .2% higher as a percentage of truck net sales and revenues in 2010,
warranty expense would have increased by approximately $22 million.
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%, 2010 net pension expense would increase
to $44.8 million from $32.3 million, and the projected benefit obligation would increase $109.1 million to $1,594.7
million from $1,485.6 million.
Income Taxes
The accounting for income taxes is discussed in Note M 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, 2010.
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.
2010
2009
2008
43
(millions except per share data)
$ 9,325.1
$ 7,076.7
$13,709.6
8,198.8
238.5
392.8
9.3
8,839.4
485.7
421.6
546.2
967.8
213.0
451.6
88.7
61.0
814.3
153.5
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
456.1
86.5
90.8
925.2
84.6
21.1
660.3
202.7
$ 457.6
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
441.5
111.2
99.2
1,046.0
216.9
84.6
1,464.0
446.1
$ 1,017.9
$ 1.25
$ 1.25
$ .31
$ .31
$
$
2.79
2.78
365.0
366.2
363.8
364.9
364.2
365.9
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
44
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
2010
2009
(millions of dollars)
$ 1,982.0
610.4
450.5
534.0
218.6
3,795.5
536.2
1,673.7
350.5
6,355.9
$ 1,836.5
554.7
219.5
632.1
224.3
3,467.1
503.8
1,757.7
409.1
6,137.7
58.8
6,070.9
1,483.1
265.4
7,878.2
$14,234.1
75.5
6,497.7
1,513.2
344.9
8,431.3
$14,569.0
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
Current portion of long-term debt
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
stockholders’ equity
Preferred stock, no par value – authorized 1.0 million shares, none issued
Common stock, $1 par value – authorized 1.2 billion shares;
issued 365.3 million and 364.4 million shares
Additional paid-in capital
Treasury stock, at cost – 2009 – .4 million shares
Retained earnings
Accumulated other comprehensive income
Total Stockholders’ Equity
See notes to consolidated financial statements.
2010
2009
(millions of dollars)
45
$ 1,676.5
23.5
1,700.0
150.0
563.8
370.3
2,784.1
275.9
2,371.7
2,730.8
713.8
6,092.2
365.3
105.1
4,846.1
41.3
5,357.8
$14,234.1
$ 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
364.4
80.0
(17.4)
4,640.5
36.2
5,103.7
$14,569.0
c o n s o l i d a t e d s t a t e m e n t s o f c a s h f l o w s
46
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
Deferred taxes
Other, net
Change in operating assets and liabilities:
(Increase) decrease in assets other than cash and equivalents:
Receivables:
Trade and other
Wholesale receivables on new trucks
Sales-type finance leases and dealer direct loans on
new trucks
Inventories
Other, net
Increase (decrease) in liabilities:
Accounts payable and accrued expenses
Residual value guarantees and deferred revenues
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 (Used in) Provided by 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 Increase (Decrease) 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.
2010
2009
2008
(millions of dollars)
$ 457.6
$ 111.9
$1,017.9
189.9
433.3
61.0
46.3
11.6
(42.3)
(1.1)
67.1
96.6
(48.2)
221.3
79.8
(63.9)
42.4
1,551.4
(1,789.2)
2,039.3
8.2
(757.5)
523.8
(168.4)
(715.4)
392.1
188.0
463.7
90.8
(66.0)
159.7
38.1
163.2
641.8
81.6
53.4
8.1
(271.8)
48.2
(176.6)
(160.8)
1,373.3
(1,282.2)
2,083.0
3.5
(288.3)
245.5
(127.7)
(843.3)
520.1
(467.1)
310.6
(251.7)
(232.1)
22.0
(548.1)
707.0
(889.6)
(960.4)
4.9
128.8
1,912.0
$2,040.8
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
426.6
99.2
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)
2,616.7
10.4
(667.3)
1,239.4
(462.8)
(1,087.2)
393.6
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
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, $1 par value:
Balance at beginning of year
Treasury stock retirement
Stock compensation
Balance at end of year
additional paid-in capital:
Balance at beginning of year
Treasury stock retirement
Stock compensation and tax benefit
Balance at end of year
treasury stock, at cost:
Balance at beginning of year
Purchases, shares 2008-5.1
Retirements
Balance at end of year
retained earnings:
Balance at beginning of year
Net income
Cash dividends declared on common stock,
per share: 2010-$.69; 2009-$.54; 2008-$.82
Treasury stock retirement
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.
2010
2009
2008
47
(millions except per share data)
$ 364.4
(.4)
1.3
365.3
$ 363.1 $ 368.4
(5.9)
.6
363.1
1.3
364.4
80.0
(17.0)
42.1
105.1
(17.4)
17.4
46.1
33.9
80.0
(17.4)
(17.4)
4,640.5
457.6
4,724.7
111.9
(252.0)
(196.1)
4,846.1
4,640.5
36.2
5.1
41.3
$ 5,357.8
(269.8)
306.0
36.2
$ 5,103.7
37.7
(14.0)
22.4
46.1
(61.7)
(230.6)
274.9
(17.4)
4,260.6
1,017.9
(298.8)
(255.0)
4,724.7
408.1
(677.9)
(269.8)
$ 4,846.7
c o n s o l i d a t e d s t a t e m e n t s o f c o m p r e h e n s i v e i n c o m e
48
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
(Losses) gains arising during the period
Tax effect
Reclassification adjustment
Tax effect
Foreign currency translation (losses) gains
Net other comprehensive income (loss)
Comprehensive Income
See notes to consolidated financial statements.
2010
2009
2008
$457.6
(millions of dollars)
$111.9
$1,017.9
(76.8)
26.2
123.1
(42.0)
30.5
(1.2)
.5
.6
(.3)
(.4)
(35.9)
12.7
16.5
(5.6)
(12.3)
(12.7)
5.1
$462.7
(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
n o t e s t o c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (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
principal segments: (1) the design, manufacture and distribution of light-, medium- and heavy-duty commercial
trucks and related aftermarket parts, “Truck” and (2) finance and leasing products and services provided to
customers and dealers, “Financial Services”. PACCAR’s sales and revenues are derived primarily from North America
and Europe. The Company also operates in Australia and South America and sells trucks and parts outside its
primary markets to customers in Asia and Africa.
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.
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
Revenue Recognition:
Truck and Other: 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 E). 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.
49
Financial Services: 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 36 to 60 months, using the straight-line method which approximates the interest method. For operating
leases, rental revenue is recog nized on a straight-line basis over the lease term. Recognition of interest income and
rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the
contractual due date or earlier if some other event causes the Company to determine that collection is not probable.
Recognition is resumed if the receivable becomes contractually current by the payment of all amounts due under the
terms of the existing contract and collection of remaining amounts is considered probable (if not modified), or after
the customer has made scheduled payments for three months and collection of remaining amounts is considered
probable (if contractually modified). Payments received while the finance receivable is impaired or on non-accrual
status are applied to interest and principal in accordance with the contractual terms.
Cash and Cash Equivalents: Cash equivalents consist of liquid investments with a maturity at date of purchase of
three months or less.
Marketable Securities: 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.
Receivables:
Trade and Other Receivables: The Company’s trade and other receivables are recorded at cost on the balance sheet
net of allowances.
Finance and Other Receivables:
Loans – Loans represent fixed- or floating-rate loans to customers collateralized by the vehicles purchased and are
recorded at amortized cost.
Financing leases – Finance leases represent retail direct financing and sales-type finance lease 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 which is shown separately.
Dealer wholesale financing – Dealer wholesale financing represents floating-rate wholesale loans to PACCAR dealers
for new and used trucks and are recorded at amortized cost. The loans are collateralized by the trucks being financed.
Interest and other – Interest and other receivables are interest due on loans and leases and other amounts due in the
normal course of business and are due within one year.
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
50
Allowance for Credit Losses:
Truck and Other: The Company historically has not experienced significant losses related to trade and other
receivables in its Truck and Other businesses. The allowance for credit losses for Truck and Other was $3.5 and $4.3
for the years ended December 31, 2010 and 2009, respectively and net charge-offs were $.2, $1.8 and $2.0 for the
years ending December 31, 2010, 2009 and 2008, respectively.
Financial Services: The Company continuously monitors the performance of all its finance receivables, by reviewing
payment performance. In addition, for large customers and dealer wholesale financing accounts, the Company
regularly monitors their financial statements and makes appropriate customer contact. If the Company becomes
aware of circumstances with those customers or dealers that could lead to financial difficulty, whether or not they
are past-due, the accounts are placed on a watch list. In determining the allowance for credit losses, loans and
finance leases are evaluated together since they relate to a similar customer base and their contractual terms require
regular payment of principal and interest generally over 36 to 60 months and they are secured by the same type of
collateral. The Company collectively and individually evaluates its finance receivables and the allowance for credit
losses consists of both a general and specific reserve.
The Company individually evaluates certain finance receivables for impairment. Finance receivables which are
evaluated individually consist of customers on non-accrual status, all wholesale accounts and certain large retail
accounts with past-due balances or that otherwise are deemed to be at a higher risk of credit loss and loans which
have been modified as troubled debt restructurings. A receivable is considered impaired if it is probable the
Company will be unable to collect all contractual interest and principal payments as scheduled. Impaired receivables
are individually evaluated to determine the amount of impairment and these receivables are considered collateral
dependent. Accordingly, the evaluation of individual reserves is based on the fair value less costs to sell the
associated collateral. When the underlying collateral fair value exceeds the Company’s loss exposure no individual
reserve is recorded. The Company uses a pricing model to value the underlying collateral on a quarterly basis. The
fair value of the collateral is determined based on management’s evaluation of numerous factors such as the make,
model and year of the equipment, overall condition of the equipment, primary method of distribution for the
equipment, recent sales prices of comparable equipment and economic trends affecting used equipment values.
For finance receivables that are evaluated collectively, the Company determines the allowance for credit losses for both
retail and wholesale receivables based on historical loss information, using past-due account data and current
market conditions. Information used includes assumptions regarding the likelihood of collecting current and past-
due accounts, repossession rates and the recovery rate on the underlying collateral based on used truck values and
other pledged collateral or recourse. The Company has developed a range of loss estimates for each of its country
portfolios 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 provision for losses on finance receivables is charged to income based on management’s estimate of incurred
credit losses, net of recoveries, inherent in the portfolio. Accounts are charged-off against the allowance for credit
losses when, in the judgment of management, they are considered uncollectable (generally upon repossession of the
collateral). Typically the timing between the repossession process and when a receivable is charged-off is not
significant. In cases where repossession is delayed (i.e. for legal reasons), the Company will record partial charge-
offs. The charge-off is determined by comparing the fair value of the collateral less costs to sell to the recorded
investment.
Inventories: 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.
Equipment on Operating Leases: 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
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
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.
51
Property, Plant and Equipment: 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.
Long-lived Assets, Goodwill and Other Intangible Assets: The Company evaluates the carrying value of property,
equipment and other intangible assets when events and circumstances warrant such a review. Goodwill is tested
for impairment at least on an annual basis. Impairment charges were insignificant during the three years ended
December 31, 2010.
Derivative Financial Instruments: 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, 2010.
The Company uses regression analysis to assess effectiveness of interest-rate contracts on a quarterly basis. For
foreign-exchange contracts, the Company performs quarterly assessments to ensure that critical terms continue to
match. All components of the derivative instrument’s gain or loss are included in the assessment of hedge
effectiveness. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings.
Hedge accounting is discontinued prospectively when the Company determines that a derivative financial
instrument has ceased to be a highly effective hedge.
Foreign Currency Translation: For most of PACCAR’s foreign subsidiaries, the local currency is the functional
currency. All assets and liabilities are translated at year-end exchange rates and all income statement amounts are
translated at the weighted average rates for the period. Translation adjustments are record ed in accumulated other
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
2010
1,339,300
1,642,600
2009
1,103,600
2,290,400
2008
1,721,300
1,397,800
Reclassifications: The Company has made the following reclassifications to prior years to conform to the 2010
presentation. The Company has reclassified the impairment losses related to repossessed equipment on operating
lease in the Financial Services segment from “Provision for losses on receivables” to “Depreciation and other” in
the Consolidated Statements of Income and Consolidated Statements of Cash Flows. In addition, the Company has
reclassified proceeds for the sale of repossessed assets relating to finance receivables from “Collections on retail
loans and direct financing leases” to “Proceeds from asset disposals” in the Consolidated Statements of Cash Flows.
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
52
The changes are outlined on the following table:
Consolidated Statements of Income
Depreciation and other
Provision for losses on receivables
Consolidated Statements of Cash Flows
Operating Activities:
Depreciation on equipment on operating
leases and other
Provision for losses on receivables
Investing Activities:
Collections on retail loans and direct
financing leases
Proceeds from asset disposals
2009
2008
Before
After
Before
After
$ 442.5
104.4
$ 456.1
90.8
$ 437.8
102.9
$ 441.5
99.2
$ 450.1
104.4
$ 463.7
90.8
$ 422.9
102.9
$ 426.6
99.2
$ 2,285.5
317.6
$ 2,083.0
520.1
$ 2,771.0
239.3
$ 2,616.7
393.6
New Accounting Pronouncements: The Company adopted Accounting Standards Update (ASU) 2010-06 Improving
Disclosures about Fair Value Measurements as of January 1, 2010 with no significant disclosure effect on the financial
statements. The ASU requires disclosing the amounts of significant transfers in and out of Levels 1 and 2 of the fair
value hierarchy and describing the reasons for the transfers, fair value information by class of assets and liabilities,
and descriptions of valuation techniques and inputs for Level 2 and 3 measurements. The Company’s disclosure in
Note P has been updated to comply with this standard.
In July 2010, the FASB issued ASU No. 2010-20 Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses. ASU 2010-20 amends FASB Accounting Standards Codification topic 310 – Receivables
and expands disclosures about the credit quality of a company’s financing receivables and allowance for credit
losses. ASU 2010-20 was effective for reporting periods ending after December 15, 2010. The Company’s disclosure
in Note D has been updated to comply with this standard.
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
Marketable debt securities consisted of the following at December 31:
2010
U.S. government and agency securities
U.S. tax-exempt securities
U.S. corporate securities
Non U.S. corporate securities
Other debt securities
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
amortized
cost
unrealized
gains
unrealized
losses
$
2.7
364.9
27.3
37.0
17.8
$ 449.7
$
.8
.3
$
.3
$
1.1
$
.3
amortized
cost
unrealized
gains
unrealized
losses
$
6.5
141.2
22.0
22.0
12.2
14.2
$ 218.1
$
1.3
.2
$
.1
$
1.5
$
.1
fair
value
$
2.7
365.4
27.6
37.0
17.8
$ 450.5
fair
value
$
6.5
142.5
22.1
22.0
12.2
14.2
$ 219.5
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
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. The proceeds from
sales and maturities of marketable securities during 2010 were $523.8. Gross realized gains were $.7, $1.2, and $5.1,
and gross realized losses were $.1, $.1 and $.1 for the years ended December 31, 2010, 2009 and 2008, respectively.
53
The Company evaluates its investments in marketable securities at the end of each reporting period to determine if
a decline in fair value is other than temporary. The fair value of marketable debt securities that have been in an
unrealized loss position for 12 months or greater at December 31, 2010 and at December 31, 2009 was nil and
$27.4, respectively and their unrealized losses were nil and $.1, respectively.
Contractual maturities at December 31, 2010 were as follows:
Maturities:
Within one year
One to five years
Ten or more years
amortized
cost
$ 182.9
254.6
12.2
$ 449.7
fair
value
$ 183.2
255.1
12.2
$ 450.5
Marketable debt securities included $12.2 and $11.6 of variable-rate demand obligations (VRDOs) at December 31,
2010 and 2009, respectively. VRDOs are debt instruments with long-term scheduled maturities which have interest
rates that reset periodically.
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
2010
$ 370.1
322.2
692.3
(158.3)
$ 534.0
2009
$ 312.5
487.5
800.0
(167.9)
$ 632.1
Inventories valued using the LIFO method comprised 38% and 58% of consolidated inventories before deducting
the LIFO reserve at December 31, 2010 and 2009. During 2010 inventory quantities declined which provided a
pretax favorable income effect from the liquidation of LIFO inventory of $15.0.
n O t e s t O c O n s O l i D a t e D F i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
54
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:
Loans, leases and other
Dealer wholesale financing
2010
$ 2,713.9
2,005.0
703.6
983.4
109.3
(299.3)
6,215.9
(137.5)
(7.5)
$ 6,070.9
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
The net activity of sales-type finance leases, dealer direct loans and wholesale financing on new trucks is shown in
the operating section of the Consolidated Statements of Cash Flows since they finance the sale of Company
inventory.
Annual minimum payments due on finance receivables are as follows:
2011
2012
2013
2014
2015
Thereafter
loans
$ 1,041.7
736.0
496.5
275.2
144.0
20.5
$ 2,713.9
finance
leases
$ 1,086.8
633.5
418.2
248.7
117.4
38.7
$ 2,543.3
Estimated residual values included with finance leases amounted to $165.3 in 2010 and $186.8 in 2009. Repayment
experience indicates the majority of dealer wholesale financing will be repaid within one year. In addition, repayment
experience indicates that some loans, leases and other finance receivables will be paid prior to contract maturity,
while others may be extended or modified. The Company may modify loans and finance leases for commercial
reasons or for credit reasons for customers experiencing difficulty making payments under the contract terms.
When customer accounts are modified the Company thoroughly evaluates the credit worthiness of the customer
and only modifies accounts that the Company considers likely to perform under the modified terms. On average
modifications resulted in contractual terms being extended approximately three months. Modifications did not have
a significant effect on the weighted average term or interest rate of the portfolio. When granting modifications the
Company rarely forgives principal or interest, or reduces interest rates below market rates. Accordingly, very few
modifications result in a troubled debt restructuring (TDR). The balance of loans accounted for as TDRs was $6.5
at December 31, 2010.
Allowance for Credit Losses
The Company’s allowance for credit losses is segregated into two portfolio segments, wholesale and retail. A
portfolio segment is the level at which the Company develops a systematic methodology for determining its
allowance for credit losses. The wholesale segment includes flooring loans to dealers that are collateralized by the
trucks being financed. The retail segment includes retail loans, and direct and sales-type finance leases, net of
unearned interest.
55
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
The allowance for credit losses is summarized as follows:
The allowance for credit losses is summarized as follows:
2010
2010
$
$
Total
Total
$ 167.6
61.0
$ 167.6
61.0
(97.8)
(97.8)
14.5
(.3)
14.5
(.3)
$ 145.0
$ 145.0
Retail
Retail
$ 157.1
60.8
$ 157.1
60.8
(94.9)
(94.9)
14.2
.3
14.2
.3
$ 137.5
$ 137.5
2009
Total
2009
Total
$ 178.3
90.8
$ 178.3
90.8
(115.2)
(115.2)
7.0
6.7
7.0
6.7
$ 167.6
$ 167.6
Wholesale
Wholesale
10.5
.2
10.5
.2
(2.9)
(2.9)
.3
(.6)
.3
(.6)
7.5
7.5
2008
Total
2008
Total
$ 193.4
Balance at January 1,
99.2
Provision for losses
$ 193.4
Balance December 31, 2009
99.2
Provision for losses
(104.8)
Charge-off
(104.8)
Charge-off
3.7
Recoveries
(13.2)
Currency translation
3.7
Recoveries
(13.2)
Currency translation
$ 178.3
Balance December 31,
$ 178.3
Balance December 31, 2010
As described in Note A, the Company reclassified impairment losses on repossessed equipment on operating leases to
Depreciation and other. As a result, the Provision for losses decreased to $90.8 and $99.2 for the years ended
As described in Note A, the Company reclassified impairment losses on repossessed equipment on operating leases to
December 31, 2009 and 2008 from $104.4 and $102.9, respectively. Charge-offs (net of recoveries) decreased to
Depreciation and other. As a result, the Provision for losses decreased to $90.8 and $99.2 for the years ended
$108.2 and $101.1 for the years ended December 31, 2009 and 2008 from $121.8 and $104.8, respectively.
December 31, 2009 and 2008 from $104.4 and $102.9, respectively. Charge-offs (net of recoveries) decreased to
$108.2 and $101.1 for the years ended December 31, 2009 and 2008 from $121.8 and $104.8, respectively.
Information regarding finance receivables summarized by those evaluated collectively and individually is as follows:
Information regarding finance receivables summarized by those evaluated collectively and individually is as follows:
Total
At December 31, 2010
Total
At December 31, 2010
$ 153.4
Recorded investment for impaired finance receivables evaluated individually
34.9
Allowance for finance receivables evaluated individually
$ 113.1
Allowance for finance receivables evaluated collectively
31.9
Allowance for finance receivables evaluated individually
Wholesale
Wholesale
$ 3.4
1.3
6.2
$
1.3
Retail
Retail
$ 150.0
33.6
$ 106.9
30.6
$
$
$ 4,973.2
$ 4,985.8
103.9
137.4
$ 980.0
$ 980.7
6.2
2.7
Recorded investment for finance receivables evaluated collectively
Recorded investment for finance receivables evaluated collectively
Allowance for finance receivables evaluated collectively
Recorded investment for finance impaired receivables evaluated individually
The recorded investment of finance receivables that are on non-accrual status in the wholesale, fleet and owner/
operator portfolio classes as of December 31, 2010 are $3.4, $72.2 and $33.9, respectively. The recorded investment
The recorded investment of finance receivables that are on non-accrual status in the wholesale, fleet and owner/
of finance receivables on non-accrual status as of December 31, 2009 was $88.4.
operator portfolio classes as of December 31, 2010 are $2.5, $62.1 and $27.5, respectively. The recorded investment
of finance receivables on non-accrual status as of December 31, 2009 was $88.4.
Impaired Loans
The Company’s impaired loans are segregated by portfolio class. A portfolio class of receivables is a subdivision of a
Impaired Loans
portfolio segment with similar measurement attributes, risk characteristics and common methods to monitor and
The Company’s impaired loans are segregated by portfolio class. A portfolio class of receivables is a subdivision of a
assess credit risk. The Company’s retail segment is subdivided into the fleet and owner/operator classes. Fleet
portfolio segment with similar measurement attributes, risk characteristics and common methods to monitor and
consists of retail accounts with customers operating more than five trucks. All others are owner/operator. All
assess credit risk. The Company’s retail segment is subdivided into the fleet and owner/operator classes. Fleet
impaired loans have a specific reserve and are summarized as follows:
consists of retail accounts with customers operating more than five trucks. All others are owner/operator. All
impaired loans have a specific reserve and are summarized as follows:
$ 5,953.2
$ 5,966.5
110.1
140.1
At December 31,
At December 31,
Impaired loans with specific reserve
Associated allowance
Impaired loans with specific reserve
Associated allowance
Net carrying amount of impaired loans
Net carrying amount of impaired loans
Unpaid principal balance
Unpaid principle balance
Average recorded investment
Average carrying amount
Interest income recognized
Interest income recognized
$
$
$
$
Wholesale
Wholesale
3.4
(1.3)
2.7
(1.3)
2.1
1.4
3.4
2.7
7.8
7.8
.1
.1
$
$
$
$
Fleet
Fleet
21.5
(4.4)
33.1
(4.4)
17.1
28.7
21.5
33.1
31.7
43.9
1.7
1.3
2010
2010
Owner/
Operator
Owner/
Operator
17.8
$
(3.8)
17.8
$
(3.8)
14.0
$
14.0
$
17.8
17.8
18.8
18.8
.2
.2
2009
$
$
$
$
2009
Total
Total
67.2
(12.0)
67.2
(12.0)
55.2
55.2
67.2
67.2
63.4
63.4
3.6
3.6
$
$
$
$
Total
Total
42.7
(9.5)
53.6
(9.5)
33.2
44.1
42.7
53.6
58.3
70.5
2.0
1.6
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
56
Credit Quality
The Company’s customers are principally concentrated in the transportation industry in North America, Europe and
Australia. On a geographic basis, there is a proportionate concentration of credit risk in each area. The Company
retains as collateral a security interest in the related equipment.
At the inception of each contract the Company considers the credit risk based on a variety of credit quality indicators
including, prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value
ratios, and other internal metrics. On an ongoing basis the Company monitors the credit exposure based on past-due
status and collection experience as the Company has found a meaningful correlation between the past-due status of
customers and the risk of loss.
The table below summarizes the Company’s financing receivables by credit quality indicator and portfolio class.
Performing accounts are paying in accordance with the contractual terms and are not considered to be of high risk.
Watch accounts include past-due and large high risk accounts that are not impaired. At-risk includes customer
accounts that are impaired.
At December 31, 2010
Performing
Watch
At-risk
Wholesale
$ 966.2
13.8
3.4
$ 983.4
Fleet
$ 3,544.0
46.6
115.1
$ 3,705.7
Owner/
Operator
$ 1,359.4
23.2
34.9
$ 1,417.5
Total
$ 5,869.6
83.6
153.4
$ 6,106.6
The Company uses historical data and impairment assessment of the condition of its customers and the economy
to estimate default rates for each credit quality indicator as of December 31, 2010.
The table below summarizes the Company’s financing receivables by aging category:
At December 31, 2010
Current and up to 30 days past-due
31-60 days past-due
Greater than 60 days past-due
Wholesale
$ 966.2
7.7
9.5
$ 983.4
Fleet
$ 3,581.1
48.5
76.1
$ 3,705.7
Owner/
Operator
$ 1,359.5
19.7
38.3
$ 1,417.5
Total
$ 5,906.8
75.9
123.9
$ 6,106.6
Repossessions
When the Company determines a customer is not likely to meet their contractual commitments, the Company
repossesses the vehicles which serve as collateral for loans, finance leases and equipment on operating lease.
The Company records the vehicles as used truck inventory included in Financial Services Other Assets on the
Consolidated Balance Sheets. The balance of repossessed inventory at December 31, 2010 and 2009 is $15.6
and $28.5 respectively. Proceeds from the sales of repossessed assets were $135.3, $202.5 and $154.3 for the
years ended December 31, 2010, 2009 and 2008, respectively. These amounts are included in “Proceeds from
asset disposals” on the Consolidated Statements of Cash Flows. Write-downs of repossessed equipment on
operating leases are recorded as impairments and included in Financial Services “Depreciation and other” on
the Consolidated Statements of Income.
n o t E s t o c o n s o l i d a t E d F i n a n c i a l s t a t E m E n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
E . 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
A summary of equipment on operating leases for the Truck and Other segment and for the Financial Services
segment is as follows:
57
At December 31,
Equipment on operating leases
Less allowance for depreciation
truck & other
financial services
2010
$ 776.8
(240.6)
$ 536.2
2009
2010
$ 730.6
(226.8)
$ 503.8
$ 2,118.6
(635.5)
$ 1,483.1
2009
$ 2,090.8
(577.6)
$ 1,513.2
Annual minimum lease payments due on Financial Services operating leases beginning January 1, 2011 are $393.6,
$241.6, $152.0, $75.0, $17.4 and $3.0 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
truck & other
2010
$ 250.6
313.2
$ 563.8
2009
$ 239.2
308.0
$ 547.2
The deferred lease revenue is amortized on a straight-line basis over the RVG contract period. At December 31, 2010,
the annual amortization of deferred revenues beginning January 1, 2011 is $64.2, $47.4, $60.9, $44.3, $23.8 and
$10.0 thereafter. Annual maturities of the residual value guarantees beginning January 1, 2011 are $80.3, $59.2,
$76.0, $55.4, $29.7 and $12.6 thereafter.
F. p r o p E rt y, p l a n t a n d E q u i p m E n t
Property, plant and equipment include the following:
At December 31,
Land
Buildings and improvements
Machinery, equipment and production tooling
Less allowance for depreciation
useful lives
10-40 years
3-12 years
2010
$ 200.7
970.5
2,481.0
3,652.2
(1,978.5)
$ 1,673.7
2009
$ 206.3
1,007.6
2,489.0
3,702.9
(1,945.2)
$ 1,757.7
g . 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
2010
2009
$ 707.4
224.9
171.8
231.3
341.1
$ 1,676.5
$ 622.5
226.0
132.9
230.8
277.8
$ 1,490.0
n o t e s t o c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
58
H . P r o d u c t s u P P o rt l i a b i l i t i e s
Product support liabilities include reserves related to product warranties, 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
2010
$ 386.4
172.4
(171.3)
(15.3)
$ 372.2
2009
$ 450.4
169.0
(245.6)
12.6
$ 386.4
2008
$ 483.3
312.3
(304.6)
(40.6)
$ 450.4
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
2010
2009
$ 231.3
83.2
57.7
$ 372.2
$ 230.8
84.3
71.3
$ 386.4
i . 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, 2010 and 2009 consisted of $150.0 of notes with an effective
interest rate of 6.9% which mature in 2014 and $23.5 and $22.3, respectively of non‑interest bearing notes which
mature in September 2011.
Financial Services borrowings include the following:
At December 31,
Commercial paper
Bank loans:
Medium‑term
Term notes
effective
rate
2.2%
7.8%
4.6%
3.8%
2010
$ 2,126.4
245.3
2,371.7
2,730.8
$ 5,102.5
effective
rate
2.8%
7.6%
4.8%
4.0%
2009
$ 2,695.6
315.6
3,011.2
2,889.3
$ 5,900.5
The term notes of $2,730.8 at December 31, 2010 and $2,889.3 at December 31, 2009 include an increase in fair
value of $9.6 and $19.6, respectively, for notes designated to fair value hedges. The effective rate is the weighted
average rate as of December 31, 2010 and 2009, and includes the effects of interest rate contracts.
n o t e s t o c o n s o L i D a t e D f i n a n c i a L s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
The annual maturities of the financial services borrowings are as follows:
59
Beginning January 1, 2011
2011
2012
2013
2014
2015
commercial
paper
$ 2,126.4
bank
loans
$ 174.7
51.1
19.4
.1
$ 2,126.4
$ 245.3
term
notes
$ 1,067.3
620.0
550.0
350.0
133.9
$ 2,721.2
total
$ 3,368.4
671.1
569.4
350.1
133.9
$ 5,092.9
Interest paid on borrowings was $230.2, $267.6 and $327.1 in 2010, 2009 and 2008, respectively. For the years ended
December 31, 2010, 2009 and 2008 the Company capitalized interest of $10.3, $2.3 and nil, respectively in Truck
and Other.
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, 2010 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. The total amount of medium-term notes outstanding for PFC as of December 31, 2010 was $1,123.5. 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, 2010, PACCAR’s European finance subsidiary, PACCAR Financial Europe, had €900.0 available for
issuance under a €1,500.0 medium-term note program registered with the London Stock Exchange. The program
was renewed in the fourth quarter of 2010 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, 2010, 6,100 pesos remained available
for issuance.
The Company has line of credit arrangements of $3,646.9, of which $3,401.6 was unused at the end of December
2010. Included in these arrangements is $3,000.0 of syndicated bank facilities, of which, $1,000.0 matures in June
2011, $1,000.0 matures in June 2012 and $1,000.0 matures in June 2013. 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 facilities for the year ended December 31, 2010.
J . L e a s e s
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, 2011 are $18.1, $10.8, $7.6, $4.1, $2.7 and $.8
thereafter. Total rental expenses under all leases amounted to $29.7, $40.6 and $43.3 for 2010, 2009 and 2008,
respectively.
n o t e s t o c o n s o L i d a t e d f i n a n c i a L s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
60
K . 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 2010, 2009 and 2008 were $1.3, $1.3, and $3.8, 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, 2010, PACCAR had standby letters of credit of $19.8, 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, 2010, PACCAR’s financial services companies, in the normal course of business, had
outstanding commitments to fund new loan and lease transactions amounting to $157.9. The commitments generally
expire in 90 days. At December 31, 2010, the Company had commitments related to the construction of its engine
facility in Columbus, Mississippi of $25.9 in 2011 and $12.5 thereafter. The Company had other commitments,
primarily to purchase production inventory, amounting to $139.0 in 2011 and $103.0 thereafter.
On October 28, 2010, a National Labor Relations Board (NLRB) administrative law judge issued a decision that since
the Company did not provide certain information to the union representing employees at Peterbilt’s former truck
assembly plant in Madison, Tennessee, during collective bargaining negotiations in 2008, the employer-directed work
stoppage was not in conformity with certain provisions of the National Labor Relations Act from July 16, 2008 and
that the Company should reimburse approximately 300 plant employees, with interest, for wage and benefit losses
incurred during the work stoppage which ended on April 6, 2009. The Company disagrees with this decision and
filed its exceptions with the NLRB. The Company believes the range of possible outcomes is between nil and $15.0.
No reserve has been provided as the Company believes it will ultimately prevail in the matter.
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.
L . e m p L o y e e b e n e f i t s
Severance Costs: The Company did not incur any significant severance expense in 2010 and had $.3 accrued for
future severance payments at December 31, 2010. During the years ended December 31, 2009 and 2008 the
Company incurred severance costs of $25.9 and $17.3, respectively. These costs were the result of work force
adjustments reflecting low truck demand, primarily in Europe.
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 $61.8 to its pension plans in 2010 and $173.4 in 2009. The Company expects to contribute in the range
of $20.0 to $50.0 to its pension plans in 2011 of which $18.5 is estimated to satisfy minimum funding requirements.
Annual benefits expected to be paid beginning January 1, 2011 are $57.3, $62.9, $67.7, $73.2, $76.5 and for the five
years thereafter, a total of $453.7.
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
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 P for definitions of fair
value levels.
61
At December 31, 2010
Equities:
U.S. equities
Global equities
Total equities
Fixed Income:
U.S. fixed income
Non U.S. fixed income
Total fixed income
Cash and other
Total plan assets
At December 31, 2009
Equities:
U.S. equities
Global equities
Total equities
Fixed Income:
U.S. fixed income
Non U.S. fixed income
Total fixed income
Cash and other
Total plan assets
target
level 1
level 2
total
50-70%
30-50%
$ 38.1
38.1
208.5
208.5
2.7
$ 249.3
$ 431.3
394.8
826.1
172.1
171.0
343.1
26.9
$ 1,196.1
$ 469.4
394.8
864.2
380.6
171.0
551.6
29.6
$ 1,445.4
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
2010
5.4%
3.9%
7.2%
2009
5.9%
3.9%
7.4%
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
62
The components of the Change in Projected Benefit Obligation and Change in Plan Assets are as follows:
2010
2009
Change in Projected Benefit Obligation:
Benefit obligation at January 1
Service cost
Interest cost
Benefits paid
Actuarial loss
Currency translation and other
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 and other
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
$ 1,324.8
37.5
76.5
(56.2)
99.7
.4
2.9
$ 1,485.6
$ 1,276.3
61.8
162.6
(56.2)
(2.0)
2.9
1,445.4
$ (40.2)
$
2010
47.1
(87.3)
303.3
9.0
.6
$ 1,196.4
36.2
71.1
(59.6)
46.7
30.9
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
Of the December 31, 2010 amounts in accumulated other comprehensive loss, $22.2 of unrecognized actuarial loss,
$1.5 of unrecognized prior service cost are expected to be amortized into net pension expense in 2011.
The accumulated benefit obligation for all pension plans of the Company, except for certain multi-employer and
foreign-insured plans was $1,350.3 at December 31, 2010 and $1,214.0 at December 31, 2009.
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
2010
$ 266.5
253.7
193.9
2009
$ 429.0
418.9
322.9
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
Year Ended December 31,
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
2010
2009
2008
63
$ 37.5
76.5
(98.2)
1.8
14.7
$ 32.3
$ 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
Pension expense for multi-employer and foreign-insured plans was $33.8, $41.2, and $45.8 in 2010, 2009 and 2008.
The Company has certain defined contribution benefit plans whereby it generally matches employee contributions
up to 5% of base wages. The Company match was 3%, 1% and 5% in 2010, 2009 and 2008, respectively. The
majority of participants in these plans are non-union employees located in the United States. Expenses for these
plans were $13.8, $6.8 and $22.1 in 2010, 2009 and 2008, respectively.
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 of 2009 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
Interest cost
Benefits paid
Curtailment gain
Actuarial loss (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
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 expense (income)
2010
2009
$ 6.7
.3
(2.1)
.6
5.5
$ (5.5)
$ 80.9
.5
(3.2)
(66.0)
(5.5)
6.7
$ (6.7)
$ (5.5)
$ (6.7)
(.5)
2009
2010
$
.3
$
.5
(66.0)
$
.3
$ (65.5)
(.9)
2008
$ 3.2
4.7
.1
.4
$ 8.4
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e M e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
64
M . i n c o M e ta x e s
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
2010
$ 186.3
474.0
$ 660.3
2009
$ 79.1
95.9
$ 175.0
2008
$ 96.0
1,368.0
$ 1,464.0
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
2010
2009
2008
$ 24.5
8.2
123.7
156.4
24.6
(7.1)
28.8
46.3
$ 202.7
$ (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
Tax benefits recognized for net operating loss carryforwards were $9.0, $27.8 and $4.7 for the years ended 2010,
2009, and 2008, respectively.
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
2010
35.0%
2009
35.0%
2008
35.0%
(.7)
(.5)
(3.9)
(.8)
1.6
30.7%
6.5
(2.3)
(2.1)
.8
2.2
(4.0)
36.1%
(.4)
(.4)
(4.6)
(.3)
1.2
30.5%
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
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, 2010, the amount of undistributed earnings which are
considered to be indefinitely reinvested is $3,146.3. Included in domestic taxable income for 2010, 2009 and 2008
are $169.0, $31.4 and $456.8 of foreign earnings, respectively, which are not indefinitely reinvested, for which
domestic taxes of $16.5, $3.7 and $69.1, respectively, were provided as the difference between the domestic and
foreign rate on those earnings.
65
At December 31, 2010, the Company had net operating loss carryforwards of $351.5, of which $222.1 were in
foreign subsidiaries and $129.4 were in the U.S. The related deferred tax asset was $68.2. The carryforward periods
range from five years to indefinite, subject to certain limitations under applicable laws. At December 31, 2010, the
Company has U.S. tax credit carryforwards of $57.5, most of which expire in 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
2010
2009
$ 112.8
68.2
57.5
47.3
15.8
80.9
382.5
(12.4)
370.1
(538.7)
(156.0)
(4.7)
(699.4)
$ (329.3)
$ 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)
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
2010
2009
$ 98.8
79.2
(26.7)
48.9
(529.5)
$ (329.3)
$ 76.9
135.8
(.1)
(35.0)
68.0
(527.3)
$ (281.7)
Cash paid for income taxes was $82.9, $67.3 and $452.0 in 2010, 2009 and 2008, respectively.
N o t e S t o c o N S o l i d a t e d f i N a N c i a l S t a t e m e N t S
December 31, 2010, 2009 and 2008 (currencies in millions)
66
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
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
2010
$ 37.0
2009
$ 33.0
2008
$ 48.7
2.5
23.5
(10.7)
(9.2)
1.1
11.5
(7.2)
(1.4)
7.1
3.3
(19.5)
(6.6)
Balance at December 31
$ 43.1
$ 37.0
$ 33.0
The Company had $40.6 and $20.8 of related assets at December 31, 2010 and 2009. All of the unrecognized tax
benefits and related assets would impact the effective tax rate if recognized.
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, 2010, 2009 and 2008. Amounts accrued for the
payment of penalties and interest at December 31, 2010 and 2009 were also not significant.
As of December 31, 2010, the United States Internal Revenue Service has completed examinations of the Company’s
tax returns for all years through 2006. The Company’s tax returns for other major jurisdictions remain potentially
subject to examination for the years ranging from 2004 through 2010.
N . 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)
$
2010
.8
(.3)
.5
(27.1)
9.2
(17.9)
(465.1)
(13.9)
(.7)
167.3
(312.4)
371.1
$ 41.3
$
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)
Other Capital Stock Changes: In April 2010, the Company retired 409,000 of its common shares held as treasury
stock. PACCAR had 409,000 treasury shares at December 31, 2009 and 2008.
n O t e s t O c O n s O l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
O . 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
67
As part of its risk management strategy, the Company enters into derivative contracts to hedge against interest rate
and foreign currency risk.
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. The
Company is exposed to interest rate and exchange rate risk caused by market volatility as a result of its borrowing
activities. The objective of these contracts is to mitigate the fluctuations on earnings, cash flows and fair value of
borrowings. Net amounts paid or received are reflected as adjustments to interest expense.
At December 31, 2010, the notional amount of the Company’s interest-rate contracts was $2,780.7. Notional
maturities for all interest-rate contracts are $1,138.4 for 2011, $722.8 for 2012, $373.8 for 2013, $339.9 for 2014,
$196.4 for 2015 and $9.4 thereafter. 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. The objective is to reduce fluctuations in earnings and
cash flows associated with changes in foreign currency exchange rates. At December 31, 2010, the notional amount
of the outstanding foreign-exchange contracts was $339.3. 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,
2010
2009
assets
liabilities
assets
liabilities
Derivatives designated under hedge accounting:
Interest-rate contracts:
Financial Services:
Other assets
Deferred taxes and other liabilities
Foreign-exchange contracts:
Truck and Other:
Other current assets
Accounts payable, accrued expenses and other
$ 9.1
$ 10.8
$ 107.5
.9
1.1
.1
Total
$ 10.0
$ 108.6
$ 10.9
Economic hedges:
Interest-rate contracts:
Financial Services:
Other assets
Deferred taxes and other liabilities
Foreign-exchange contracts:
Truck and Other:
Other current assets
Accounts payable, accrued expenses and other
Financial Services:
Other assets
Deferred taxes and other liabilities
Total
$
.1
$
.1
$ 3.5
.3
.2
$ 4.0
$
.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 e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
68
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. The (income) or
expense recognized in earnings related to fair value hedges was included in Interest and other borrowing expense in
the Financial Services segment as follows:
Year Ended December 31,
Interest-rate swaps
Term notes
2010
$ (1.0)
.9
2009
$ (3.6)
3.9
Cash Flow Hedges: Substantially all of the Company’s interest-rate contracts and some foreign-exchange contracts
have been designated as 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. For
the periods ended December 31, 2010 and 2009 the Company recognized gains on the ineffective portion of $2.3
and $.2, respectively.
The following table presents the pre-tax effects of derivative instruments recognized in earnings and Other
Comprehensive Income (OCI):
interest-rate
contracts
2010
foreign-
exchange
contracts
interest-rate
contracts
2009
foreign-
exchange
contracts
Year Ended December 31,
(Gain) loss recognized in OCI:
Truck and Other
Financial Services
Total
$ 77.0
$ 77.0
(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
$ 123.5
$ 123.5
$ (.2)
$ (.2)
$ (.4)
$ (.4)
$ 72.0
$ 72.0
$ 131.4
$ 131.4
$
$
(.6)
.2
(.4)
$ (10.0)
(1.7)
.2
$ (11.5)
Of the $17.9 accumulated net loss on derivative contracts included in accumulated other comprehensive income as
of December 31, 2010, $35.7, before tax effects, 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.
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
Economic Hedges: For other risk management purposes, the Company enters into derivative instruments not
designated as hedges that do not qualify for hedge accounting. These derivative instruments are used to mitigate the
risk of market volatility arising from borrowings and foreign currency denominated transactions. Changes in the
fair value of economic hedges are recorded in earnings in the period in which the change occurs.
69
The (income) or expense recognized in earnings related to economic hedges is as follows:
Year Ended December 31,
interest-rate
contracts
2010
foreign-
exchange
contracts
interest-rate
contracts
2009
foreign-
exchange
contracts
Truck and Other:
Cost of sales and revenues
Interest and other expense (income), net
Financial Services:
Interest and other borrowing expenses
Total
$
.6
(7.8)
$ (7.2)
$ .2
8.0
$ 8.2
$ 6.1
4.0
$ 10.1
$ (14.4)
18.3
2.3
$ 6.2
P. fa i r va l u e m e a s u r e m e n t s
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 valued under Level 3
criteria.
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, investment-grade corporate obligations, commercial paper, asset-backed securities and term deposits.
The fair value of U.S. government obligations is based on quoted prices in active markets. These are categorized as
Level 1. The fair value of non U.S. government bonds, municipal bonds, corporate bonds, asset-backed securities,
commercial paper and term deposits is estimated using an industry standard valuation model, which is based on
the income approach. The significant inputs into the valuation model include quoted interest rates, yield curves,
credit rating of the security and other observable market information. These are categorized as Level 2.
Derivative Financial Instruments: The Company’s derivative contracts consist of interest-rate swaps, cross currency
swaps and foreign currency exchange contracts. These derivative contracts are over the counter and their fair value
is determined using industry standard valuation models, which are based on the income approach. The significant
inputs into the valuation models include market inputs such as interest rates, yield curves, currency exchange rates,
credit default swap spreads and forward spot rates. These contracts are categorized as Level 2.
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
70
PACCAR’s assets and liabilities subject to recurring fair value measurements are either Level 1 or Level 2 as follows:
At December 31, 2010
Assets:
Marketable debt securities
U.S. government securities
U.S. tax-exempt securities
U.S. corporate securities
Non U.S. corporate securities
Other debt securities
Total marketable debt securities
Derivatives
Interest-rate swaps
Cross currency swaps
Foreign-exchange contracts
Total derivative assets
Liabilities:
Derivatives
Interest-rate swaps
Cross currency swaps
Foreign-exchange contracts
Total derivative liabilities
At December 31, 2009
Assets:
Marketable debt securities
U.S. government securities
U.S. tax-exempt securities
U.S. corporate securities
Non U.S. corporate securities
Non U.S. government securities
Other debt securities
Total marketable debt securities
Derivatives
Interest-rate swaps
Cross currency swaps
Foreign-exchange contracts
Total derivative assets
Liabilities:
Derivatives
Interest-rate swaps
Cross currency swaps
Foreign-exchange contracts
Total derivative liabilities
level 1
level 2
total
$ 2.7
$ 2.7
$ 365.4
27.6
37.0
17.8
$ 447.8
$ 5.8
3.3
1.0
$ 10.1
$ 37.2
73.8
1.6
$ 112.6
$ 2.7
365.4
27.6
37.0
17.8
$ 450.5
$ 5.8
3.3
1.0
$ 10.1
$ 37.2
73.8
1.6
$ 112.6
level 1
level 2
total
$ 6.5
$ 6.5
$ 142.5
22.1
22.0
12.2
14.2
$ 213.0
$ 5.3
5.9
.4
$ 11.6
$ 82.2
33.9
.5
$ 116.6
$ 6.5
142.5
22.1
22.0
12.2
14.2
$ 219.5
$ 5.3
5.9
.4
$ 11.6
$ 82.2
33.9
.5
$ 116.6
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
Other nonfinancial assets that are measured at fair value on a nonrecurring basis are as follows:
71
At December 31,
Impaired loans:
Financial Services
Used trucks held for sale:
Truck and Other
Financial Services
2010
level 2
2009
level 2
$ 33.2
$ 55.2
$ 20.0
38.2
$ 58.2
$ 28.1
124.7
$ 152.8
The carrying amount of used trucks held for sale and collateral dependent impaired loans are adjusted when
appropriate to reflect their fair value. The fair value of used trucks and collateral dependent impaired loans are
determined from a matrix pricing model, which is based on the market approach. The significant observable inputs
into the valuation model are recent sales prices of comparable units, the condition of the vehicles and the number
of similar units to be sold.
For the year ended December 31, 2010 used truck write-downs were $5.3 recorded as Depreciation and other in the
Financial Services segment. The amount of used truck write-downs was $34.7 for the year ended December 31,
2009, of which $18.0 was recorded in cost of sales in the Truck segment and $16.7 was recorded in the Financial
Services segment (Provision for losses on receivables of $4.7 and Depreciation and other expense of $12.0).
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.
Fixed-rate loans and debt 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
2010
2009
carrying
amount
fair
value
carrying
amount
fair
value
$ 2,444.1
$ 2,483.3
$ 2,491.1
$ 2,539.0
173.5
1,870.7
196.9
1,967.9
172.3
1,645.4
192.4
1,746.7
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions except per share amounts)
72
Q . s t o c k c o m p e n s at i o n p l a n s
PACCAR has certain plans under which officers and key employees may be granted options to purchase shares of
the Company’s authorized but unissued common stock under plans approved by stockholders. Non-employee
directors and certain officers may be granted restricted shares of the Company’s common stock under plans
approved by stockholders. 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 after three years. Restricted stock awards generally vest after three years.
The Company recognizes compensation cost on these options and restricted stock awards on a straight line basis
over the requisite period the employee is required to render service. 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, 2010,
the maximum number of shares available for future grants was 18.5 million.
The estimated fair value of each option award is determined on the date of grant using the Black-Scholes-Merton
option pricing model that uses assumptions noted in the following table. The risk free interest rate is based on the
U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on historical volatility. The
dividend yield is based on an estimated future dividend yield using projected net income for the next five years,
implied dividends and Company stock price. The expected term is based on the period of time that options granted
are expected to be outstanding based on historical experience.
Risk-free interest rate
Expected volatility
Expected dividend yield
Expected term
Weighted average grant date fair value of options per share
2010
2.48%
44%
2.5%
5 years
$11.95
2009
2.00%
39%
3.0%
5 years
$8.47
2008
2.86%
29%
4.0%
5 years
$8.58
The fair value of options granted was $11.7, $10.0 and $6.3 for the years ended December 31, 2010, 2009 and 2008,
respectively.
A summary of activity under the Company’s stock plans is presented below.
Intrinsic value of options exercised
Cash received from stock option exercises
Tax benefit related to stock option exercises
Stock based compensation
Tax benefit related to stock based compensation
2010
$33.7
22.0
10.8
8.5
3.2
2009
$22.7
17.6
7.1
9.5
3.5
2008
$10.8
11.5
3.7
10.2
3.8
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions except per share amounts)
The summary of options as of December 31, 2010, and changes during the year then ended is presented below.
73
Options outstanding at January 1
Granted
Exercised
Cancelled
Options outstanding at December 31
Vested and expected to vest at December 31
Exercisable at December 31
*Weighted Average
number
of shares
5,567,700
975,500
(1,118,000)
(142,900)
5,282,300
5,091,300
2,686,100
exercise
price*
$ 29.12
36.12
19.72
37.50
$ 32.18
$ 32.11
$ 28.47
remaining
contractual
life in years*
aggregate
intrinsic
value
6.01
5.91
3.84
$ 132.9
$ 128.4
$ 77.5
The fair value of restricted shares is determined based upon the stock price on the date of grant. The summary of
nonvested restricted shares as of December 31, 2010 and changes during the year then ended is presented below:
nonvested shares
Nonvested awards outstanding at January 1
Granted
Vested
Forfeited
Nonvested awards outstanding at December 31
*Weighted Average
number
of shares
grant date
fair value*
182,900
24,600
(62,000)
(2,900)
142,600
$ 39.25
36.61
40.69
35.22
$ 38.25
As of December 31, 2010, there was $9.7 million of total unrecognized compensation cost related to nonvested
stock options, which is recognized over a remaining weighted average vesting period of 1.45 years. Unrecognized
compensation cost related to nonvested restricted stock awards of $.8 million is expected to be recognized over a
remaining weighted average vesting period of 1.1 years.
A total of 187,500 performance based restricted stock awards were granted in 2008 and 2007 at a weighted-average
fair value of $43.61. These awards vest after five years if the Company’s earnings per share growth over the same
five year period meet or exceed certain performance goals. No matching shares were granted under this program in
2010 or 2009.
The fair value of the performance based restricted stock awards were determined based on the stock price on the
grant date. Compensation expense for awards with performance conditions is recorded only when it is probable
that the requirements will be achieved. As of December 31, 2010, 2009 and 2008, the attainment of the conditions
of the awards was not considered probable.
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
74
R . 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 for 2010 and 2009 and $17.2 in 2008. 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
2010
2009
2008
$ 4,195.8
3,472.3
2,624.8
$ 10,292.9
$
846.4
381.6
445.7
$ 1,673.7
$
666.9
334.0
384.9
200.4
433.1
$ 2,019.3
$ 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
n o t e s t o c o n s o l i D a t e D f i n a n c i a l s t a t e m e n t s
December 31, 2010, 2009 and 2008 (currencies in millions)
Business Segment Data
Net sales and revenues:
Truck
Less intersegment
Net Truck
All Other
Truck and Other
Financial Services
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
2010
2009
2008
75
$ 9,591.3
(354.0)
9,237.3
87.8
9,325.1
967.8
$ 10,292.9
$
$
$
$
$
$
501.0
(15.3)
485.7
153.5
21.1
660.3
276.7
337.5
9.0
623.2
373.9
505.6
4.3
883.8
$ 3,742.2
181.2
2,432.5
6,355.9
7,878.2
$ 14,234.1
$ 7,388.6
(394.6)
6,994.0
82.7
7,076.7
1,009.8
$ 8,086.5
$
$
$
$
$
$
25.9
42.2
68.1
84.6
22.3
175.0
277.2
364.4
10.1
651.7
324.2
646.0
.8
971.0
$ 3,849.1
232.6
2,056.0
6,137.7
8,431.3
$ 14,569.0
$ 14,142.7
(595.3)
13,547.4
162.2
13,709.6
1,262.9
$ 14,972.5
$ 1,156.5
6.0
1,162.5
216.9
84.6
$ 1,464.0
$
$
309.0
333.1
11.0
653.1
$
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
M a n a g e M e n t ’ s r e p o r t o n i n t e r n a l c o n t r o l o v e r
f i n a n c i a l r e p o r t i n g
76
The management of PACCAR Inc (the Company) is responsible for establishing and maintaining adequate 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, 2010, 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, 2010.
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 77.
Mark C. Pigott
Chairman and Chief Executive Officer
r e p o r t o f i n d e p e n d e n t r e g i s t e r e d p u b l i c a c c o u n t i n g f i r M
o n t h e c o M p a n y ’ s c o n s o l i d a t e d f i n a n c i a l s t a t e M e n t s
The Board of Directors and Stockholders of PACCAR Inc
We have audited the accompanying consolidated balance sheets of PACCAR Inc as of December 31, 2010 and 2009,
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, 2010. 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, 2010 and 2009, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 2010, 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, 2010, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated March 1, 2011 expressed an unqualified opinion thereon.
Seattle, Washington
March 1, 2011
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 o v e r
f i n a n c i a l r e p o r t i n g
The Board of Directors and Stockholders of PACCAR Inc
77
We have audited PACCAR Inc’s internal control over financial reporting as of December 31, 2010, 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, 2010, 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, 2010 and 2009, 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, 2010 and our report dated March 1, 2011 expressed an unqualified
opinion thereon.
Seattle, Washington
March 1, 2011
s e l e c t e d f i n a n c i a l d a t a
78
2010
2009
2008
2007
2006
Truck and Other Net Sales
and Revenues
Financial Services Revenues
$ 9,325.1
967.8
$ 7,076.7
1,009.8
$ 13,709.6
1,262.9
$ 14,030.4
1,191.3
$ 15,503.3
950.8
Total Revenues
$ 10,292.9
$ 8,086.5
$ 14,972.5
$ 15,221.7
$16,454.1
(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
$
457.6
$
111.9
$ 1,017.9
$ 1,227.3
$ 1,496.0
1.25
1.25
.69
6,355.9
7,878.2
173.5
5,102.5
5,357.8
4.07x
.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
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 2,159 record holders of the common stock at December 31, 2010.
2010
2009
quarter
First
Second
Third
Fourth
Year-End Extra
dividends
declared
$ .09
.09
.09
.12
.30
stock price
stock price
high
$43.64
47.81
47.90
57.49
low
$33.79
38.66
38.95
47.32
dividends
declared
$ .18
.18
.09
.09
high
$32.04
35.83
39.74
39.68
low
$20.89
26.14
29.13
35.31
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
79
2010
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 (a)
Net Income
Net Income Per Share:
Basic
Diluted
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 (a)
Net Income
Net Income Per Share:
Basic
Diluted
$1,984.3
$2,224.8
$2,304.2
$2,811.8
1,767.8
1,954.9
2,019.2
2,456.9
54.8
58.4
59.9
65.4
246.4
57.1
121.3
68.3
$ .19
.19
239.3
54.5
110.9
99.6
$ .27
.27
238.3
51.8
110.3
119.9
$ .33
.33
243.8
49.6
109.1
169.8
$ .46
.46
$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
105.3
26.3
$ .07
.07
246.6
73.0
112.8
26.5
$ .07
.07
252.5
66.7
123.6
13.0
$ .04
.04
254.9
60.8
114.4
46.1
$ .13
.13
(a) Amounts reflect certain reclassifications to conform with current year presentation. See Note A in the notes to the
consolidated financial statements.
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)
80
Interest-Rate Risks – See Note O 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
2010
2009
$ (5.7)
$ (2.4)
5.2
6.8
(40.2)
(40.1)
30.9
37.0
$ 27.2
39.7
30.8
$ 34.8
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 O 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 $15.0 related to contracts outstanding at December 31, 2010,
compared to a loss of $24.0 at December 31, 2009. 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
81
T. Kyle Quinn
Vice President and
Chief Information Officer
Harrie C.A.M. Schippers
Vice President
Richard E. Bangert, II
Vice President
Robert A. Bengston
Vice President
D. Craig Brewster
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
Samuel M. Means III
Vice President
Darrin C. Siver
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)
o f f i c e r s
Mark C. Pigott
Chairman and
Chief Executive Officer
Thomas E. Plimpton
Vice Chairman
Ronald E. Armstrong
President
Robert J. Christensen
Executive Vice President
Daniel D. Sobic
Executive Vice President
David C. Anderson
Vice President and
General Counsel
Michael T. Barkley
Vice President and Controller
d i r e c t o r s
Mark C. Pigott
Chairman and
Chief Executive Officer
PACCAR Inc (3)
Alison J. Carnwath
Chairman
Land Securities, plc (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
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
Factory:
Columbus, Mississippi
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
Shanghai, People’s Republic
of China
Jakarta, Indonesia
Manama, Bahrain
Miami, Florida
Moscow, Russia
82
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, 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.
C O N T E N T S
Financial Highlights
Message to Shareholders
6 PACCAR Operations
Financial Charts
3 Stockholder Return Performance Graph
76 Management’s Report on Internal Control
Over Financial Reporting
76 Report of Independent Registered Public
Accounting Firm on the Company’s
Consolidated Financial Statements
4 Management’s Discussion and Analysis
77 Report of Independent Registered Public
43 Consolidated Statements of Income
44 Consolidated Balance Sheets
Accounting Firm on the Company’s
Internal Control Over Financial Reporting
46 Consolidated Statements of Cash Flows
78 Selected Financial Data
47 Consolidated Statements
of Stockholders’ Equity
48 Consolidated Statements
of Comprehensive Income
78 Common Stock Market Prices and Dividends
79 Quarterly Results
80 Market Risks and Derivative Instruments
81 Officers and Directors
48 Notes to Consolidated Financial Statements
82 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 2010 Annual
Report and the 2011 Proxy
Statement are available
on PACCAR’s Web site at
www.paccar.com/
2011annualmeeting/
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.
DAF, Kenmex, Kenworth,
Leyland, NavPlus, PACCAR,
PACCAR MX, PACCAR PR,
PACCAR PX, PacLease,
Peterbilt, SmartNav,
SmartSound and TRP 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, 2011, 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 1 0 a n n u a l r e p o r t