PACCAR 2010 Annual Report Download - page 42

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Financial Services
The Company funds its financial services activities primarily from collections on existing finance receivables and
borrowings in the capital markets. An additional source of funds is loans from other PACCAR companies.
The primary sources of borrowings in the capital markets are commercial paper and medium-term notes issued in
the public markets and, to a lesser extent, bank loans.
The 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:
Maturity
Within More than
1 Year 1-3 Years 3-5 Years 5 Years Total
Borrowings* $ 3,391.9 $ 1,240.6 $ 633.8 $ 5,266.3
Interest on term debt** 97.8 96.2 8.2 202.2
Operating leases 18.1 18.4 6.8 $ .8 44.1
Purchase obligations 159.1 115.5 274.6
Other obligations 9.1 4.4 2.4 17.2 33.1
$ 3,676.0 $ 1,475.1 $ 651.2 $ 18.0 $ 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.
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