PACCAR 2012 Annual Report Download - page 33

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The major factors for the change in operating lease, rental and other income, depreciation and other expense and
related margin for the year ended December 31, 2012 are outlined in the table below:
OPERATING LEASE, RENTAL DEPRECIATION
($ in millions) AND OTHER INCOME AND OTHER MARGIN
2011 $ 606.2 $ 476.2 $ 130.0
Increase (decrease)
Operating lease impairments (.6) .6
Used truck sales and other 20.0 24.1 (4.1)
Results on returned lease assets 5.7 (5.7)
Average operating lease assets 34.9 28.2 6.7
Currency translation and other (16.0) (16.2) .2
Total increase (decrease) 38.9 41.2 (2.3)
2012 $ 645.1 $ 517.4 $ 127.7
• Used truck sales and other revenues increased operating lease, rental and other income by $20.0 million and
depreciation and other by $24.1 million, reflecting a higher number of used truck trade units sold and lower
gains on sale.
• Results on returned lease assets reflect a decrease in used truck values in Europe.
• Average operating lease assets increased $184.2 million in 2012, which increased income by $34.9 million and
related depreciation and other expense by $28.2 million, as a result of a higher volume of equipment placed in
service from higher demand for leased vehicles.
• Currency translation and other primarily results from a decrease in the value of the euro compared to the U.S. dollar.
The following table summarizes the provision for losses on receivables and net charge-offs:
($ in millions) 2012 2011
PROVISION FOR PROVISION FOR
LOSSES ON NET LOSSES ON NET
RECEIVABLES CHARGE-OFFS RECEIVABLES CHARGE-OFFS
U.S. and Canada $ 4.6 $ 15.2 $ 3.8 $ 6.7
Europe 9.9 9.2 17.9 15.3
Mexico and Australia 5.5 6.9 19.7 23.0
$ 20.0 $ 31.3 $ 41.4 $ 45.0
The provision for losses on receivables and net charge-offs for 2012 declined compared to 2011 primarily due to
decreases in Europe, Mexico and Australia from improving portfolio quality. The higher charge-offs in the U.S. and
Canada of $15.2 million in 2012 compared to $6.7 million in 2011 primarily reflects the charge-off of one large
account in the U.S.
The Company modifies loans and finance leases as a normal part of its Financial Services operations. The Company
may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial
reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant
delays are modifications extending terms up to three months for customers experiencing some short term financial
stress but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms
for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more
time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When
considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of
the customers and modifies those accounts that the Company considers likely to perform under the modified terms.
When the Company modifies loans and finance leases for credit reasons and grants a concession, the modifications
are classified as troubled debt restructurings.