PACCAR 2012 Annual Report Download - page 46

 Of the $8.05 billion total cash commitments for borrowings and interest on term debt, $7.89 billion were related to
the Financial Services segment. As described in Note I of the consolidated financial statements, borrowings consist
primarily of term notes and commercial paper issued by the Financial Services segment. The Company expects to
fund its maturing Financial Services debt obligations principally from funds provided by collections from customers
on loans and lease contracts, as well as from the proceeds of commercial paper and medium-term note borrowings.
Purchase obligations are the Company’s contractual commitment to acquire future production inventory and capital
equipment. Other obligations include deferred cash compensation.
The Company’s other commitments include the following at December 31, 2012:
($ in millions) COMMITMENT EXPIRATION
WITHIN MORE THAN
1 YEAR 1-3 YEARS 3-5 YEARS 5 YEARS TOTAL
Loan and lease commitments $ 365.1 $ 365.1
Residual value guarantees 120.8 $ 250.2 $ 112.8 $ 12.5 496.3
Letters of credit 17.2 .3 .2 17.7
$ 503.1 $ 250.5 $ 112.8 $ 12.7 $ 879.1
Loan and lease commitments are for funding new retail loan and lease contracts. 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.
IM PA CT OF ENVIR O N ME N TA L MAT T ER 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 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 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 the years ended December 31, 2012, 2011 and 2010 were
$1.7 million, $1.2 million and $1.3 million, respectively. Management expects that these matters will not have a
significant effect on the Company’s consolidated cash flow, liquidity or financial condition.
CR I T I CA L AC C O UN T I N G POLI C I ES :
The Company’s significant accounting policies are disclosed in Note A of the consolidated financial statements.
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.