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Consolidated pretax return on revenues was 6.4% in 2010 compared to 2.2% in 2009. The increase was primarily due to higher returns in foreign operations. Foreign income before income taxes was $474.0 million in 2010 compared to $95.9 million in 2009. The ratio of foreign income before tax to revenues was 7.8% in 2010 compared to 2.1% in 2009. The improvement was primarily due to a higher return on revenues in foreign truck operations. 

## LIQUIDITY AND CAPITAL RESOURCES: 

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The Company’s total cash and marketable debt securities increased $525.5 million at December 31, 2011 primarily from an increase in marketable debt securities of $459.6 million. 

The change in cash and cash equivalents is summarized below: 

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## 2011 Compared to 2010: 

Operating activities:  Cash provided by operations increased $41.2 million to $1.59 billion in 2011. The higher operating cash flow was primarily due to higher net income of $584.7 million and $363.7 million from higher purchases of goods and services in accounts payable and accrued expenses greater than payments compared to 2010. In addition, $141.0 million of additional operating cash flow was provided from higher current income tax provisions compared to payments in 2011 as opposed to a decrease in current income tax provisions compared to payments in 2010. Higher operating cash flow of $83.6 million was provided by higher warranty expenses than payments in 2011, reflecting increased truck production. These were partially offset by $366.1 million lower amount of cash provided from Truck segment trade receivables as billings exceeded collections reflecting normal trade terms on higher truck sales. In addition, $758.4 million of operating cash flow was used for increased Financial Services segment wholesale receivables, sales-type finance leases and dealer direct loans in 2011 reflecting higher truck sales compared to 2010. 

Investing activities : Cash used in investing activities of $2.42 billion in 2011 increased $1.95 billion from the $467.1 million used in 2010. In 2011, there were higher new loan and lease originations of $942.7 million in the Financial Services segment due to increased retail sales from higher new truck demand. In addition, there were higher acquisitions of equipment on operating leases of $591.2 million from higher new truck demand. Net purchases of marketable securities were $238.1 million higher as the Company increased returns on available cash by investing in marketable debt securities with higher yields. Proceeds from asset disposals were $53.1 million lower in 2011, reflecting fewer used truck unit sales. 

