PACCAR 2009 Annual Report Download - page 35

in Europe grew by 34% as average earning assets increased 30% from higher new loan and lease volume and
wholesale flooring growth attributed to higher DAF truck production. PFS revenues in Mexico and Australia
increased 23%, to $230.7 million, primarily due to increases in average earning assets which grew 27% as new loan
and lease volume exceeded repayments. This was partially offset by lower interest rates. Worldwide new business
volume was $3.35 billion in 2008 compared to $3.93 billion in 2007. Worldwide, PFS provided loan and lease
financing for 28% of PACCAR new trucks delivered in 2008 compared to 29% in 2007.
Interest and other borrowing expenses and Depreciation and other of $831.9 million increased 10% from the
$755.3 million in 2007. This was primarily due to higher depreciation expense on operating leases which increased
to $304.1 million in 2008 from $238.6 million in 2007 as a result of an increase in average operating lease assets in
service during 2008. Interest expense in 2008 was similar to 2007 as slightly higher average borrowings to support
portfolio growth were offset by lower average borrowing rates. Selling, general and administrative expenses of
$111.2 million were comparable to the prior year.
Income before taxes was $216.9 million in 2008 compared to $284.1 million in 2007 primarily due to a higher
provision for losses on receivables. Net portfolio charge-offs were $104.8 million compared to $25.8 million in 2007
due to recessionary conditions in the U.S. and Canada and to a lesser extent in Europe. At December 31, 2008, the
percentage of accounts 30+ days past-due was 3.3%, up from 2.0% at the end of 2007. The increase in the percentage
of past-due accounts reflected the difficult economic conditions worldwide. The increase in past-due accounts in
Mexico and Australia to 6.2% from 2.5% was primarily due to Mexico where a significant decline in the value of
the peso compared to the dollar in the fourth quarter of 2008 resulted in cash flow difficulty for some customers.
Financial Services Outlook
Financial Services segment results are dependent on the generation of loans and leases and the related spread
between the yields on loans and leases and borrowing costs, as well as access to liquidity to generate new business
and the level of credit losses. The asset base in 2010 is expected to be comparable to 2009 levels. Recessionary
economic conditions will continue to exert pressure on the profit margins of truck operators and challenge some
customers ability to make timely payments to the Company. Improvement in past-due accounts and used truck
values, fewer truck repossessions and voluntary truck returns are projected to benefit in 2010. See the Forward
Looking Statement section of Management’s Discussion and Analysis for factors that may affect this outlook.
Other Business
Included in Truck and Other is the Company’s winch manufacturing business. Sales from this business represent
approximately 1% of net sales for 2009, 2008 and 2007.
LIQUIDITY AND CAPITAL RESOURCES:
At December 31 2009 2008 2007
Cash and cash equivalents $ 1,912.0 $ 1,955.2 $ 1,858.1
Marketable debt securities 219.5 175.4 778.5
$ 2,131.5 $ 2,130.6 $ 2,636.6
The Company’s total cash and marketable debt securities increased $.9 million for the year ended December 31,
2009, as a decrease in cash and cash equivalents of $43.2 million was more than offset by an increase in marketable
securities of $44.1 million.
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