PACCAR 2009 Annual Report Download - page 54

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PACCAR Inc and Subsidiaries
51
I. PRODUCT SUPPORT LIABILI T I ES
Product support liabilities include reserves related to product warranties and optional extended warranties and
repair and maintenance (R&M) contracts. The Company generally offers one-year warranties covering most of its
vehicles and related aftermarket parts. Specific terms and conditions vary depending on the product and the country
of sale. Optional extended warranty and R&M contracts can be purchased for periods which generally range up to
five years. Warranty expenses and reserves are estimated and recorded at the time products or contracts are sold based
on historical data regarding the source, frequency and cost of claims, net of any recoveries. PACCAR periodically
assesses the adequacy of its recorded liabilities and adjusts them as appropriate to reflect actual experience.
Changes in warranty and R&M reserves are summarized as follows:
At December 31, 2009 2008 2007
Beginning balance $ 450.4 $ 483.3 $ 458.3
Cost accruals and revenue deferrals 169.0 312.3 339.2
Payments and revenue recognized (245.6) (304.6) (345.1)
Currency translation 12.6 (40.6) 30.9
$ 386.4 $ 450.4 $ 483.3
Warranty and R&M reserves are included in the accompanying consolidated balance sheets as follows:
At December 31, 2009 2008
Truck and Other:
Accounts payable, accrued expenses and other $ 230.8 $ 298.6
Other liabilities 84.3 83.9
Financial Services:
Deferred taxes and other liabilities 71.3 67.9
$ 386.4 $ 450.4
J. BORROWINGS AND CREDIT ARRANGEMENTS
Truck and Other long-term debt at December 31, 2009, consisted of $150.0 of notes bearing interest at 6.9% which
mature in 2014 and $22.3 of non-interest bearing notes which mature in 2011. In 2008, long-term debt consisted of
non-interest bearing notes of $19.3.
Financial Services borrowings include the following:
effective
At December 31, rate 2009 2008
Commercial paper 2.8% $ 2,695.6 $ 3,332.6
Bank loans:
Short-term 50.4
Medium-term 7.6% 315.6 193.2
3,011.2 3,576.2
Term notes 4.8% 2,889.3 3,889.3
$ 5,900.5 $ 7,465.5
The term notes of $2,889.3 at December 31, 2009, include an increase in fair value of $19.6 for notes designated to
fair value hedges. The effective rate is the weighted average rate as of December 31, 2009, and includes the effects of
interest rate contracts.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007 (currencies in millions)